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Siemens takes over parts of Parsons

A thousand engineering jobs were salvaged yesterday after the German engineering giant Siemens paid Rolls-Royce pounds 30m to take over parts of its Parsons steam turbine generation business in Newcastle.

The takeover will increase Siemens workforce in the North -east to more than 2,000, making it one of the most important employers in the area. It already has a silicon chip plant in the North-east which will start deliveries in August.

But the deal will also mark the demise of Parsons - one of the most illustrious names in British industrial history, founded in 1889 by Sir Charles Parsons, the inventor of the steam turbine.

Siemens is to take on Parsons' spares business and some of its manufacturing and engineering operations employing a total of 880 people. A further 120 Parsons employees are being relocated to other Rolls-Royce divisions in the North-east.

But the future of the 300 employees working on Parsons' two remaining power station contracts in India looks bleak. If they are made redundant when the contracts are complete early next year then 1,100 workers will have lost their jobs since Rolls announced it was pulling out of the heavy steam turbine business last summer at a cost of pounds 248m.

Barney McGill, works convenor at Parsons, said he was delighted at the announcement though he remained disappointed that more jobs had not been saved. He said: "This was a good day on the whole. There was a real possibility the company could have been lost forever so we're delighted it's been saved. The negatives are that we've lost so many jobs, but even the people who've been made redundant have said they hope above all that Parsons carries on."

Siemens intends to use the Parsons factory to manufacture components for its main steam turbine generator factory in Mulheim, Germany and parts for existing customers.

But it will never again manufacture steam turbines bearing the Parsons name and Parsons Power Generation Systems is being subsumed into Siemens' existing UK power generation sales arm to form a new company, Siemens Power Generation.

Jurgen Gehrels, chief executive of Siemens in the UK, said he felt sad that one of the "pioneers of power generation" would be no more. But he added: "We are a global player in power generation and Parsons wasn't, that was one of its weaknesses. I hope the name will not disappear completely. I hope we can use it in some form."

Mr Gehrels also cautioned that there was no absolute guarantee of a job for any of the workers it was taking on. "We have not taken on 880 people to make them redundant but the only way to guarantee jobs is to improve competitiveness all the time and we have a long way to go in Newcastle."

The turnover of the business being taken over by Siemens was pounds 60m last year compared with Parsons' total sales of pounds 150m. In total there are 57,000 megawatts of Parsons-built turbines in operation around the world.

Although Siemens is far larger in power generation with 150,000 megawatts of installed capacity, sales last year of DM8bn and new orders totalling DM9bn, Mr Gehrels said that Parsons' customer base would give it access to new markets.

Despite the fact that there is overcapacity in the heavy steam turbine generation market, he also said that Siemens needed the manufacturing facilities that Parsons has in the North-east.