Dormann replaces Centerman at ABB
The CEO of ABB, Jörgen Centerman, has resigned a day after the company announced it is to sell off much of its financing portfolio to slash debt.
Jürgen Dormann, ABB’s chairman, is to take the reins at the struggling Swiss-Swedish electrical engineering group.
ABB said in a statement on Thursday that the move was aimed at speeding up effective implementation of the company strategy.
“We wanted to speed up improvements and performance,” Dormann said in a conference call to reporters.
“We have to re-inject new energy,” said Dormann, who made a name for himself by restructuring German chemical group Hoechst in the late 1990s before merging it with France’s Rhone-Poulenc into what is now Aventis.
Dormann, who is 62, said Centerman decided to step down after “he found out that fresh new blood will be in the interest of ABB.”
It’s “personal”
Centerman said on Friday that his decision to resign was entirely due to a personal conflict with Dormann.
Swedish press reports quoted Centerman saying: “This is a pure relationship issue between me and Jurgen Dormann.
“I have drawn my conclusions from the relationship, and decided to leave. My decision is entirely related to Jurgen Dormann.”
The transfer of power is effective immediately. Centerman has also resigned as a member of the board of directors.
Centerman took over as CEO in January 2001. At the time he was seen as a new broom and was expected to turn around the fortunes of the ailing group. Since then its problems have got considerably worse.
Swiss takeover?
Some analysts see the removal of Centerman as evidence of a change in the balance of power between ABB’s Swiss and Swedish investors.
Sebastien Petit, an analyst at Barklays Private Clients, told swissinfo that Dormann’s takeover was being interpreted as an attempt to reverse the traditional dominance of Swedish executives within the company.
“With the company being run so far by the Swedes, it seems as if the Swiss shareholders have decided to take over… and to run it like they want it,” Petit told swissinfo.
Petit says the Swedes have been credited with diversifying ABB’s core business, and blamed for its subsequent over-expansion.
“We can expect the Swiss to try to refocus the company,” Petit says.
However, he warns that pressure on Dormann to perform remains high.
“The company is not out of the woods yet, and this acceleration in the restructuring is certainly needed. The weakening of the global economy will not allow ABB to take its time to restructure and transform the company,” he says.
News of the shakeup was greeted cautiously by the market, which pushed shares in the group down over 3 per cent to around SFr8 on Friday.
More problems?
Analysts immediately interpreted the news as proof of further troubles within ABB.
“This is another blow for the company,” Pierre Tissot, head of equity research at Lombard Odier Darier Hentsch in Geneva, told the “Wall Street Journal”.
“Just as the company had begun to clear up its balance sheet, it has now sprung this surprise, which raises new questions about its operations.”
According to the newspaper, some analysts are also questioning whether Dormann is the right man to take over.
Dormann reportedly intends to remain chairman of Aventis and is also a member of the board of International Business Machines Corp. and Allianz AG Holding, and the fear is that he could be overstretching himself.
“This raises the question whether he’ll have enough time for his new job,” said Thomas Ringkvist, an analyst at PNB Paribas.
Mountain of debt
On Wednesday, ABB announced its plans to slash its debt mountain by $2.3 billion with the sell-off of much of its financing portfolio to General Electric (GE).
ABB is to sell most of its Structured Finance activities, which deal with the financing and leasing of equipment for companies, to General Electric Commercial Finance for $3.5 billion in cash and debt.
ABB’s chief financial officer, Peter Voser, said the sale would help the company “reach our target of reducing net debt by at least $1.5 billion this year”.
He added that more sell-offs, including real estate, were planned in second half of the year, and that the company was confident that it could meet its debt reduction targets for the year.
The company had earlier announced its intention to sell all or most of the business before the end of September as a way of relieving its net debt, which stood at $5.2 billion at the end of June.
The widely predicted deal includes the sale of ABB’s Export Bank, ABB’s Financial Advisory Services, its 35 per cent stake in Swedish Export Credit Corporation and its aircraft leasing business.
The deal is subject to the usual regulatory approvals.
swissinfo with agencies
In January 2001, Centerman took over leadership.
Dormann has had a seat on ABB’s board since 1998.
Most of ABB’s financing portfolio has been sold to GE.
Proceeds from the sale will be used to cut the debt mountain.
Debt at end of second quarter stood at $5.2 billion.
More sell-offs are planned by the end of the year.
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