Siemens Gamesa chief: 'We sold wind turbines that were not sufficiently tested'

CEO of parent Siemens Energy reveals upcoming strategy review will place 'stability and profitability before growth'

Siemens Gamesa sold wind turbines that ‘had not been sufficiently tested’ as it tried to get new products to the market too quickly, CEO Jochen Eickholt admitted, while the head of parent Siemens Energy, Christian Bruch, added that the manufacturer as part of an upcoming strategic review will place ‘stability and profitability before growth’.

The mea culpa came as Siemens Energy posted a net loss of €2.9bn ($3.18bn) in the first three quarters of its financial year that ended in June – mainly caused by a €2.56bn loss at Siemens Gamesa that originated in massive provisions for faulty onshore wind turbines and for delays in the ramp-up of offshore manufacturing sites.

Looking at the unit’s problems today, it became clear that “we tried very quickly to do lots of things at the same time. We sold turbines too quickly. They had not been sufficiently tested, we see the problems there with onshore,” Eckholt told journalists in a press call.

The issues that now cost the company billions also raise questions in the wider wind industry about how quickly the sector can grow to satisfy stepped-up targets for the energy transition, he added.

“How many new products can you launch at the same time without lead phases? … How quickly can this work? Let's take a look at our business and … make it stable,” Eickholt said.

“If we can stabilise things, then we will become profitable and grow. But you cannot have 50% more every year. That doesn't work.”

Eickholt said he can’t go into much detail on the quality issues affecting rotor blades and main bearings at the manufacturer’s 4.X and 5.X turbine series, because those were very complex. Also, the company doesn’t want its competitors to “have all that much insight” – but the CEO gave an example of issues detected at rotor blades.

“A rotor blade has more than 150 layers of glass fibres, and we found that in the production process, some of these layers had what we refer to as wrinkles and these lead to irregularities,” Eickholt explained.

“These wrinkles are detected only by means of x-rays because they're so small, and if you have such a complex design with such small parts, then wrinkles can make a difference and then you can have problems with regard to quality.”

While contractually guaranteed output of turbines to customers has not yet been affected, in the future Siemens Gamesa may face increased costs in order to achieve the contracted reliability, he said.

In main bearings of wind turbines, an investigation had found particles of unknown origin in raceways where rollers are moved and rotate, he added.

“Up until now, it seems that they come from external sources,” Eickholt said. “We will carry out further investigations to say where these particles come from and how we can eliminate them. But this is not an easy investigation.”

Measures to address the quality issues at part of the 2.100 4.X onshore turbines and 800 5.X units out in the field can be carried out during regular maintenance intervals, Eickholt said, “which means that production downtime for energy will be limited to a certain extent.”

Siemens Gamesa as a consequence of the quality issues has excluded certain unnamed suppliers and is even considering asking some of them for compensation payments.

Eickholt stressed that the situation in the OEM’s offshore wind business was quite different, and provisions there stemmed from the fact that all of the company’s production sites are in ramp-up mode to extend manufacturing capacity.

“Here, we see, if you like, that we're more or less the victim of our own ambitions.”

Siemens Gamesa, for example, is increasing its rotor blade capacity in Hull, England, by a factor of two, and ramping up its new plant in France, he added.

Wind strategy update

Siemens Energy at a capital markets day in November will update its strategy for Siemens Gamesa that will lay a greater focus on “stability and profitability before growth”, CEO Christian Bruch revealed at an analyst call.

The company already now is looking at new onshore orders in a very selective way, he added, and has also decided to not do certain offshore wind projects.

The pledge for profitability over growth mirrors that of (less troubled) rival Vestas which has repeatedly stressed it will go for revenue stability and abstain from throwing turbines with ever greater nameplate capacities on the market in short intervals.

Asked by analysts how Siemens Gamesa is dealing with a potential damage to its reputation given the massive quality problems, Bruch said the company is actually addressing issues very early on.

“We are proactively reaching out to customers and say, ‘hey, look, there could be something if you don't do anything’. … I think we can definitely manage the current situation in close collaboration with our customers.”