Siemens AG (NYSE: SI; Frankfurt: SIE) is planning to relocate thousands of jobs outside its German homeland in an effort to reduce labor costs, and its telecom units are set to be affected.

The future of about 5,000 jobs is being weighed as Siemens feels the pinch from competitors that already have manufacturing facilities in countries and regions with lower average earnings, such as India, China, and Eastern Europe.

A spokesman says discussions are underway with employee representatives, and that jobs at Siemens Information and Communications Networks Inc. and Siemens Information and Communication Mobile Group could be affected. Final decisions are expected to be reached within weeks.

Of the estimated 5,000 posts under consideration, about 2,500 are being considered for relocation, while the rest are set to be affected by the consolidation of facilities in Germany and long-term cost-cutting measures (also known as job cuts).

Cost-cutting measures are unlikely to include outsourcing manufacturing, to judge from remarks made recently by Thomas Ganswindt, group president of Siemens ICN. "I'm convinced that I can do better than the contract manufacturers. I view them as my competitors," Ganswindt said at a meeting of analysts in February.

Only last week, Siemens hit out at suggestions that it was to relocate 10,000 jobs and issued a press release quoting CEO Heinrich Pierer as saying: "We will not stand idly by while one job after another is lost to Germany for competitive reasons. We are therefore fighting to keep the jobs in question."

Siemens currently employs about 170,000 in Germany.

Today's news follows the unveiling of a similar strategy at Infineon Technologies AG (NYSE/Frankfurt: IFX), which contributed to the recent departure of its CEO, Ulrich Schumacher.

The notion of major employers relocating jobs outside Germany has become a political hot potato, with the country's Chancellor Gerhard Schröder reportedly describing the tactic as unpatriotic.

— Ray Le Maistre, International Editor, Boardwatch