The Swiss-Swedish engineering group ABB has cut its earnings targets and warned that it may seek bankruptcy protection for its asbestos-hit US unit.
Chairman and CEO Jürgen Dormann refused to give an updated earnings outlook, saying only that he did not expect the markets to recover before the third quarter of 2003.
The news sent ABB's shares plummeting by 50 per cent in early trading to SFr2.80 on Tuesday.
"The early signs of economic recovery that we saw in the first of the year have not materialised," Dormann said.
He added that market weakness was lingering and the benefits of a cost reduction programme were taking longer than expected.
"I can only apologise," said Dormann. "We have misread the market development and we have not brought our processes right in speed as we had to."
He said the company was sticking to its goals of cutting debt by $1.5 billion (SFr2.26 billion) from $4.1 billion at the end of 2002.
ABB said it was considering what to do with its United States-based Combustion Engineering subsidiary because asbestos liabilities would likely be higher than the assets of the unit, which were $812 million at the end of September.
ABB, which has put aside some $950 million for asbestos liabilities, is considering Chapter 11 bankruptcy protection for the unit.
The company bought the unit in 1990, and is being sued by former workers in the US for the use of asbestos in the decades before that.
Dormann said the asbestos claims would only affect Combustion Engineering, and did not threaten the group as a whole.
"It is ABB's position that CE's asbestos-related liability can only be asserted against CE. ABB will not go bust."
The group is to report third quarter earnings on Thursday and plans to announce a new round of cost cutting measures.
The company has seen its share price drop by about two-thirds this year.
swissinfo with agencies
The company is facing over 100,000 asbestos claims.
ABB posted net profits of $101 million in the first half of 2002.
The company's share price dropped about two-thirds in value this year.