Siemens Energy CEO Christian Bruch said on Monday that the company needs to slow down in launching new products, following a 2.2 billion euro ($2.4 billion) loss due to quality problems at its wind turbine unit, the company said on August 7th.
In June, Siemens Energy dropped its earnings forecasts and warned that wind turbine subsidiary Siemens Gamesa could be dragged down by costly failures in the coming years, leading to a fall in its share price.
Siemens Gamesa’s board of directors is currently reviewing quality issues, which some analysts believe may be widespread across the industry.
Bruch said on Monday, “The quality issues have really been caused in the past, but I think we launched the market too quickly with the platform.” He added: “It’s not a cost issue, it’s a quality issue in launching new products too quickly. On the other hand, obviously it’s important to stabilize the business now and gradually move forward with the new plant.”
Although well below worst-case estimates, Siemens Energy said the €2.2 billion hit would increase its net loss for the year to about €4.5 billion, substantially worsening previous expectations.
On the positive side, however, Siemens Energy – the gas and power sector spinoff born out of German conglomerate Siemens – posted strong growth in orders and revenues in its third-quarter earnings report on Wednesday, and a record record order backlog of 109 billion euros.
Bruch added: “I continue to believe that the market itself, as shown by the €7.5 billion of orders we received in the quarter in our wind business, is a very attractive growth market. However, this has to be set up in a way that enables the operation of a profitable business and ensuring that we slow down this rapid pace of new product launches is a key element of this.”