Siemens Board Member Johannes Feldmayer Arrested for Paying Off Labor Organization

IDG News Service — The arrest of a top-ranking Siemens AG official responsible for its IT services business will not affect daily operations at the unit, according to a company spokesman, but the publicity could hardly have come at a worse time.

The arrest of board member Johannes Feldmayer will have no impact on the day-to-day operations of Siemens IT Solutions and Services (SIS), according to Siemens spokesman Marc Langendorf. "We have a very decentralized structure," Langendorf said Wednesday. "Board member Feldmayer has several areas of responsibility, including SIS, where he is in charge of strategic planning. The unit is managed by Christoph Kollatz."

Police detained Feldmayer on Tuesday as part of an investigation into payments from Siemens to the head of the AUB labor organization. The German electronics and engineering company has confirmed the payments. Feldmayer has asked to be temporarily released from his duties.

The case is not related to the much larger investigation of corruption in the company’s communications division, which is being merged into a new networking venture with Nokia Corp. Siemens has confirmed a flow of transactions that may have been used in bribes.

The allegations of corruption come at a bad time for Siemens CEO Klaus Kleinfeld, who is trying to win the support of customers, investors and technology partners for a new focus at the company. Siemens is moving away from low-margin manufacturing areas, such as telecommunications equipment, computers and chips, to areas it views as potentially more profitable, including factory automation, power generation and automotive systems.

IT services is also part of that strategy. Kleinfeld has bundled all of Siemens’ worldwide IT services and software activities, including the former money-losing Siemens Business Services (SBS), into the new entity. His argument is that by combining all IT services and software development across Siemens, the new unit will be in a stronger position to provide comprehensive and complex systems and services from a single source.

Outsourcing, a core business of SIS, accounts for nearly 60 percent of sales in the new group, followed by IT services, such as systems integration and SAP software implementation, at 35 percent. Software development generates the rest of the group’s sales of around €5 billion (US$6.7 billion).

The new joint venture Nokia Siemens Networks will officially launch on April 1, Langendorf confirmed.

The launch of the new company had been pushed back a couple of times as the result of the corruption probe against executives at Siemens’ networking division over accusations of bribes offered to secure business.

The company will have a combined customer base of around 600 companies, with half of them mobile operators and the other half fixed-line operators.