The embattled Swiss-Swedish engineering group, ABB, says it intends to cut costs by a further $800 million after posting a third-quarter net loss of $183 million.This content was published on October 24, 2002 - 10:36
The company is to sell off its oil, gas and petrochemicals division and to restructure its core businesses in a bid to restore profitability.
ABB said earnings before interest and taxes (EBIT) fell 44 per cent to $405 million for the first nine months. The third quarter was particularly bad - net income plunged 64 per cent to a loss of $183 million.
The news comes after ABB warned on Monday that it would miss its financial targets for the year and said its US subsidiary, Combustion Engineering (CE) - which is overwhelmed by asbestos-related claims - may file for bankruptcy.
ABB denies it could be held liable for asbestos claims at CE, but analysts are not so sure. Most say ABB has to remove the threat of asbestos litigation, and urgently improve profitability, if it is to survive.
On Thursday, chairman and CEO Jörgen Dormann, unveiled a restructuring plan aimed at saving a further $800 million over the next 18 months. "It is clear that our overall cost base is still much too high and that the benefits from our restructuring programme have been slower than expected," he said.
The group plans to reorganise its activities into three divisions, from the current five, and sell off its oil, gas and petrochemicals division within 12 months. The remaining two divisions will focus on the core businesses of power and automation technologies.
The $800 million would be on top of the $500 million in costs that ABB has already cut, at the expense of 12,000 jobs. The company made no mention of how many more jobs would go with the further measures.
The Oil, gas and petrochemicals division employs about 12,000 people and had revenues of $3.5 billion last year.
Dormann said ABB was on track to reduce its net debt by $1.5 billion by year end from $4.1 billion at the end of 2001.
ABB has been hit by falling orders, as its main clients cut investment due to the sluggish global economy. The company said orders fell eight per cent in the nine months to September to $16.16 billion and sales were down two per cent to $16.04 billion.
Outstanding asbestos claims rose to 111,000 from 102.700 at the end of June.
swissinfo with agencies
Earnings before interest and taxes (EBIT) fell 44 per cent to $405 million for the first nine months.
ABB warned on Monday that it would miss its financial targets for the year, sending its stock plummeting.
The company plans to save $800 million in 18 months through restructuring.
It gave no details about possible job cuts - 12,000 have already gone out of a workforce of 150,000.
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