Siemens said it will consolidate its businesses from the current 1,800 separate legal entities to fewer than 1,000 and take its 70 regional companies and transform them into 20 regional clusters.
Siemens said the cuts were being made in an effort to reduce total costs by 1.2 billion euros ($1.8 billion) by 2010.
"The speed at which business is changing worldwide has increased considerably, and we're orienting Siemens accordingly," said chief executive Peter Loescher in a statement announcing the cuts, which had first been raised last month.
"Against the backdrop of a slowing economy, we have to become more efficient," he said.
Shares of Siemens were up 1.3 percent to 70.30 euros ($110.37) in Frankfurt trading.
Siemens said it was considering offering employees transfers to other companies and early retirement packages in a bid to avoid forced layoffs and dismissals.
Loescher said Siemens was conferring with unions and labor representatives on the matter and that it wanted to make the changes rapidly.
"We want to begin negotiations with the employee representatives quickly in order to make the cuts in a way that will be as socially responsible as possible," chief financial officer Siegfried Russwurm said. "Only as a last resort will we terminate employment contracts for operation reasons."
Werner Neugebauer, the regional director for the IG Metall union in Bavaria, where Siemens is based, criticized the plan, saying Siemens order book was full and it was financially sound.
"The planned job cuts are incomprehensible nor acceptable for these reasons, and in this extent, completely exaggerated," Neugebauer said in a statement.
The company said it would also reduce costs further by cutting back expenditures for information technology infrastructure and consultants, and the recent streamlining of its management structure and divisions.
For example, the management board has been reduced from 11 members to eight and the company's previous eight divisions have been reduced to just three divisions: energy, industry, and health care.
Alexander Koch, an economist with UniCredit in Munich, said European consumer demand in general was slowing and that, in turn, may lead to more job losses by industrial companies.
"On an economy wide level, the new orders trend is down and on a broad basis, demand is decelerating," Koch said. "The labor market is a lagging indicator," but "momentum could fade at the end of the year," he said.
The announcement comes as Siemens has faced a corruption and bribery scandal that emerged in 2006. The company has acknowledged dubious payments, totaling up to 1.3 billion euros ($2.04 billion), which were allegedly used by the company to secure business.
Siemens said 5,250 jobs will be cut in Germany - with operations in Erlangen, Munich, Nuremberg and Berlin bearing the brunt of the cuts. Siemens employs approximately 136,000 workers in Germany.
Siemens is not alone in announcing major job cuts. In the U.S., AMR Corp.'s American Airlines said last week it would cut 900 jobs starting Aug. 1, and 8 percent of its total work force, which could total about 7,000 jobs.
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