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. Last Updated: 07/27/2016

Siemens Names New CEO Amid Scandal

MUNICH, Germany -- Siemens, Europe's largest engineering company, named Merck's Peter Loscher as chief executive officer to succeed Klaus Kleinfeld, who resigned after less than three years at the helm because of a bribery investigation.

Loscher, president of Merck's Global Human Health unit, will start his new job July 1, Munich-based Siemens said in a statement Sunday. Kleinfeld will step down as CEO June 30. Loscher will be the 12th CEO in the 160-year history of Siemens and will have to restore the reputation of a company battered by a months-long bribery investigation.

Siemens first informed investors about the allegations Nov. 15 after police searched company buildings and the homes of employees at 30 German locations.

Since then, the investigation has spread to other countries including Italy and Luxembourg, grabbed the attention of the Securities and Exchange Commission and led to the departure of Kleinfeld and chairman Heinrich von Pierer.

The bribery probe also forced Siemens to review more than 420 million euros ($567 million) of payments and led to the temporary incarceration of former board member Thomas Ganswindt and acting board member Johannes Feldmayer.

Kleinfeld April 25 said he would quit when his contract runs out at the end of September after the supervisory board balked at renewing his term.

The new CEO will need to oversee the business performance of 10 different divisions, after Kleinfeld raised the earnings target for most of the subsidiaries. Siemens is also working on the initial public offering of the VDO automotive unit, which will help fund an expansion into faster growing areas such as medical technology and power supply.

The new CEO will also have to complete the integration of several companies purchased under Kleinfeld for more than $12 billion since early 2005. Investors will demand he continue to lower labor costs in Germany, where the company still employs 38 percent of its 475,000 strong global workforce.

"A new CEO is most likely to stick to the new profitability targets,'' Credit Suisse analyst Julian Mitchell wrote in a note before the announcement. "We also expect an ongoing focus on investments, not just acquisitions.'' Credit Suisse has an "outperform'' rating on Siemens shares.

Besides improving Siemens' business performance, the new CEO will need to restore a company reputation that has been tarnished by the bribery investigation. Both von Pierer and Kleinfeld have said they knew nothing of payments linked to fictitious consultancy contracts at the telecommunications division.

Kleinfeld and von Pierer, who led the company as CEO between from 1992 to 2005 and resigned as chairman April 19, said in January that Siemens likely fell victim to a "sophisticated'' criminal scheme by rogue employees in the telecommunications division.