'Slowing economy'

Peter Loescher, Siemens' chief executive, said: "The speed at which business is changing worldwide has increased considerably and we're orienting Siemens accordingly. Against the backdrop of a slowing economy, we have to become more efficient."

Among the measures announced by the company are plans to sell its Segment Industrie Montage Services information management division.

Siemens said the sale was "to ensure the continuation of the unit's service and assembly activities on a competitive basis".

Siegfried Russwurm, Siemens' personnel director, said: "We want to begin negotiations with the employee representatives quickly in order to make the cuts in a way that will be as socially responsible as possible.

"Only as a last resort will we terminate employment contracts for operational reasons."

Union anger

IG Metall, Germany's union of metalworkers, said the losses were unacceptable.

Werner Neugebauer, the head of its Bavarian section, said: "Siemens is in good shape, the order books are full. Against that background, the planned job cuts are neither comprehensible nor acceptable and cuts of this order are totally excessive."

Siemens employs about 400,000 people around the world [AFP]

But Loescher said that Siemens, which makes products ranging from light bulbs to power stations and trains, had to make up ground lost to rivals such as General Electric, its US rival.

He said he had already set a target of reducing administration and management costs by $1.9bn by 2010.

Loescher, an Austrian, previously worked at General Electric and was the first Siemens boss to be appointed from outside the company.

He took over last year to pull Siemens out of a corruption scandal over the acknowledged practice of paying kickbacks to obtain foreign contracts.

But his approach has rankled some, in particular trade unions that did not appreciate it when he once said Siemens was "too German".

Some unions say they might strike, arguing that the company's profits mainly benefit its shareholders.