Blow to Tyneside as Siemens rules out bid for Parsons

Siemens, the German industrial giant, yesterday dealt a double blow to job hopes on Tyneside. It emerged that Siemens has ruled out any possibility of bidding for the Parsons steam turbine business put up for sale by Rolls- Royce, and confirmed recent reports that it was delaying plans to expand its high profile computer chip plant.

The news about Parsons is likely to stun its 1,700 employees and unions, who had believed Siemens was one of the companies negotiating to buy the company. Protective redundancy notices were served on the workers' last month and also on a further 500 staff in Rolls-Royce's large boiler-making factory at Derby, which is also earmarked for sale or possible closure. The group has already put aside pounds 70m to cover redundancy costs out of total write-offs for the two plants of some pounds 250m.

Parsons is one of the most famous names in the heavy engineering industry, and is best known for developing the first steam turbine technology late last century. In recent weeks John Rose, chief executive of Rolls-Royce, is understood to have suggested privately that several companies were undertaking a due diligence review of Parsons with the possibility that there could be competition to buy the plant.

However, a source close to Siemens said yesterday: "This business is covered in red ink. They may sell it in pieces, but I don't see much chance of selling it as a whole. There's just too much overcapacity in the industry. People are closing factories rather than buying them, and small players like Parsons are being squeezed out."

Unions have been lobbying the Rolls-Royce board to keep the factory open but even senior managers based at the site have been kept at a distance from confidential discussions with interested parties. However, Chris Avery, an aerospace analyst with the French banking group Paribas, suggested the news from Siemens was not necessarily terminal for Parsons.

He said: "I still believe that there are several other companies which are currently very interested in Parsons. And the lack of interest from Siemens doesn't worry me too much."

The most likely bidders for all or part of the company are thought to be industrial power businesses from the Far East looking to gain a foothold in Europe, although a European group could buy the factory as a defensive move to block a potential Asian bidder.

Meanwhile, Siemens said it was delaying development of its high profile computer chip plant due to the world-wide collapse in semiconductor prices.

The pounds 1.1bn investment was originally planned to create 1,800 jobs with work due to be completed in two phases. However, almost as soon as builders arrived on the site, Siemens put its entire semiconductor operations under review as the price of some computer chips crashed by 80 per cent.

Heinrich von Pierer, Siemen's chief executive, said yesterday that the original timetable for the second phase of the north Tyneside site, which had always depended on future market conditions, had now slipped. He explained: "I don't know when we are going to start the next phase. The semiconductor market is really down at the moment so it does not make sense to build up further capacity".

The company refused to be drawn on a likely start date, though one source suggested it could be delayed beyond 2000 and could even be pushed back as far as 10 years from the start of work on the first stage of the factory.