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Competition

Siemens vs. GE - longstanding rivals

Industrial giants Siemens and General Electric have been competing for decades with one another. Both are now involved in a bidding war centered on acquiring French energy company Alstom.

Locked in a competition, Siemens and General Electric (GE) resemble each other in many respects. Both companies were founded by inventors in the 19th century, and both are global giants in industry today.

Werner von Siemens and Johann Georg Halske founded their company in Berlin in 1847 to manufacture telegraph machines, laying the foundation for today's company, which has its headquarters in Munich. The roots of the US company GE go back to Thomas Edison. The inventor of the light bulb founded General Electric Company in 1890.

Now it looks like GE is set to take over French energy company Alstom. French daily "Le Figaro" reported that Alstom's board voted on Tuesday to approve a takeover bid by GE.

GE: bigger, more profitable

Thomas Alva Edison

American inventor Thomas Edison founded GE

GE and Siemens' areas of business cover a wide array, ranging from turbines and power plant construction to infrastructure and medical technology. They're also active in financial services. In terms of industrial earnings, each company annually takes in around 75 billion euros ($103.55 billion) gross. But thanks to its significantly larger financial unit, GE Capital, General Electric reaches around 100 billion euros in annual profits.

At a net profit of 9.5 billion euros, GE nearly doubles Siemens (4.3 billion euros). GE's greater profitability is reflected in its market value. By market capitalization, GE is the world's ninth-largest company, while "Forbes" magazine ranks Siemens at 50th place.

General Electric has a significantly longer tradition of focusing on its market value than Siemens does. Starting in 1981, former GE head Jack Welch focused heavily on the company's profits during his 20-year tenure. His goals included reaching either of the top two positions in each of the company's areas of business - and ending enterprises that didn't stack up. Welch's strategy of firing the 10 percent of his managers each year whose success didn't measure up reflects the company's extremely competition-oriented.

Mutual admirers

Werner von Siemens

German engineer Werner von Siemens

The outlook at Siemens was much different.

"People at Siemens never got along with GE's 'fix it or close it' approach," said former Siemens boss Manfred Hoefle. "That's thanks to Siemens sense of family - of every one being part of a community. That was fostered over a long period."

But that changed once Siemens' rival became more and more profitable in the 1980s. "Starting then, GE was constantly discussed by staff, consultants and analysts as being a role model for Siemens," Hoefle told DW. "That's when Siemens' restructuring began."

As a result, Siemens became more similar to its American competitor. But Hoefle, who founded an initiative focusing on responsible company management, is critical on that point. He said such developments came at the cost of the company's unique engineering culture, which had made it great.

Jeffrey Immelt, who took over GE from Welch in 2001, has also tried to learn from Siemens. The American multinational found itself in dangerous financial distress due to its GE Capital subsidiary during the financial crisis - a situation Immelt had to address. He parted with his predecessor's approach of employing GE managers as generalists in constantly varying departments because he feared a loss of technical expertise. Furthermore, Immelt opened a research center in Munich, where Siemens is headquartered, in which GE has since invested 100 million euros.

Siemens' Alstom bid has met with protests

Lack of competition?

The two companies have grown more similar in recent years, but their interest in the French company Alstom stemmed from divergent motivations. For GE, buying the company represents a chance to achieve a stronger presence in Siemens' home region. The American giant earns just 17 percent of its revenue in Europe, while Siemens draws 30 percent of its profits from the United States.

If the buyout goes through for GE, Alstom can expect to part with its independence quickly, said Stefan Schöppner, an analyst at Germany's Commerzbank: "After a successful completion of the transaction, GE would thoroughly restructure its French subsidiary."

If Siemens is able to block GE's takeover with its own offer, the company would be rid of one headache it has had for a while by exchanging part of its transportation unit for Alstom's energy technology.

"In the past, there have been repeated reports of crises here," Schöppner told German broadcaster ARD. "[Siemens'] streetcars were causing problems, and its ICE trains weren't going out - that's exactly the area that Siemens wants to pass on to Alstom."

However, European competition authorities might not approve this exchange. French and German politicians have already expressed enthusiasm for having two new "European champions" - one specialized on energy technology, and the other on transportation. But ex-Siemens head Manfred Hoefle noted that these divisions already have very little competition in Europe. "Does it make sense in terms of industry politics to strengthen what's already an oligopoly by taking one of the competitors out of the market?"

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