Parsons loses a name and gains a saviour

The new German owners of Rolls-Royce’s ailing steam turbine builder plan to increase efficiency

Siemens put Rolls-Royce out of its misery last week and signed a £30m deal to buy Parsons, the steam turbine generating business.

The Newcastle plant will manufacture Siemens steam turbines, and absorb extra spares and subcontract work from Siemens in Germany.

The historic name of Parsons, the steam turbine’s inventor in 1884, has gone. Once the German authorities clear the deal in the next few weeks, Parsons will be known as Siemens Power Generation, and the site will become the operation’s UK headquarters.

For Siemens it is an astute deal. Although Parsons does not contribute much to its market share – it had less than 1% of the 30-880MW steam turbine generator market, compared with Siemens’ 8% – it does give Siemens half the power generation in Canada, a lucrative market in terms of spares and servicing, with a £60m turnover.

It would have cost Siemens around £100m to set up a similar service and spares manufacturing plant elsewhere in Europe. It had been subcontracting the work across Germany, and the plant will, in the long run, provide considerable savings.

Siemens will not take on the few outstanding contracts at Parsons: three contracts are still under warranty, and two are under construction in Asia. It was this paltry order book, combined with small market share, that accelerated the company’s eventual sale.

The unions are satisfied. They had been bending over backwards to make the staff attractive to a potential buyer, and there will be only a few immediate redundancies. Of the 1,300 staff still there, Siemens will keep around 900; another 300 will be kept on by Rolls-Royce to complete outstanding contracts until early next year. The remaining 100 will be absorbed back into Rolls-Royce.

In the short term, Siemens aims to make the plant more productive. Many staff were underemployed because of declining orders: subcontract work from Germany will put a stop to low productivity.

Siemens also expects to expand the highly lucrative service and maintenance side of the business, a policy that it has adopted elsewhere.

General efficiency will also be a target. The new management hopes to run workshops to find out what is wrong with the company, and in the short term will invest £5m in upgrading machine tools.

`By taking over Parsons, Siemens will provide greater security of employment than the staff have had for many years,’ says Bob Hepburn, the new deputy managing director. He will assist Horst Munstermann, the new managing director from Germany.

The purchase confirms the German firm’s continuing investment in Tyneside, following the construction of its semiconductor factory.

Parsons’ smaller sister company, International Combustion, the Derby-based boilermaker which employs just under 900 staff, has not yet found its saviour.

By Melanie Tringham