The struggling ABB industrial engineering group is to cut around 10,000 jobs as part of a drastic restructuring and cost savings programme.This content was published on November 8, 2002 - 11:20
ABB, based in Zurich, on Friday scaled down its earnings targets for the next three years and said it aimed to cut its debts to $4 billion (SFr5.8 billion) by 2005.
ABB said that between 9,000 and 12,000 jobs would be cut - mostly abroad. In Switzerland no more than 550 jobs were expected to be lost.
The company currently employs some 146,000 worldwide.
The job cuts will make up two-thirds of an $800 million savings programme. ABB last year cut 12,000 jobs in a $500 million cost-cutting exercise.
The heavily indebted group also announced it would divest its Oil, Gas and Petrochemicals division, as well as Building Systems, next year.
Two weeks ago, ABB warned that it could not meet this year's target of earnings before interest and taxes (EBIT) of four to five per cent, which sent company shares tumbling yet again.
The group on Friday said it now expected an operating profit of 1.5 per cent this year on stagnating or slightly lower sales.
ABB, which has been selling off assets to raise cash, said it was aiming for an EBIT of four per cent in 2003 and eight per cent in 2005. The previous target had been nine to ten per cent.
"We need a rapid and radical change," said ABB chairman and chief executive Jörgan Dormann in a statement on Friday.
He later told a conference call he expected no help from the financial markets in the next year to 18 months in trying to put ABB back on course.
"Clear, decisive action is needed and that is what we will do," he said.
The plan to cut $800 million from the cost base, or four per cent of sales, is to take 18 months to complete and will start on January 1, the company said on Friday.
"The streamlining of our structure and the programme to lower the cost base by four per cent of revenues demonstrate our commitment to restoring profitability," Dormann commented.
The head of ABB Switzerland, Rolf Schaumann, said on Saturday it was expected that no more than 550 jobs would be lost in Switzerland.
His comments came after the union representing machine and electrical engineering workers in Switzerland warned of "great uncertainty" for Swiss employees of ABB.
ABB, which is putting its US unit Combustion Engineering under Chapter 11 creditor protection to try to contain the cost of asbestos liabilities, had net debts of $5.5 billion at the end of September.
It maintains its aim of cutting that to below $2.6 billion by the end of this year. Total debts stood at $9.3 billion at the end of September, down from $9.8 billion at the end of 2001.
Dormann, who made a name as a tough manager at the German Hoechst company, was appointed chairman at ABB last December. This followed the resignation of Percy Barnevik, who had led the group since the 1988 merger of Sweden's Asea with Switzerland's Brown Boveri.
Dormann took on the CEO position in September after the surprise resignation of Sweden's Jörgen Centerman.
swissinfo with agencies
ABB is to axe around 10,000 jobs.
The group has cut its earnings targets for the next three years.
It plans to reduce debts to $4 billion (SFr5.8 billion) by 2005.
ABB is divesting its Oil, Gas and Petrochemicals division.
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