The first job Björn Rosengren ever applied for was an internship at manufacturer Asea. He did not even get an interview. Now, at 61, he has been appointed to run the sprawling multinational it grew into: ABB.
For more than a decade, the Swiss-Swedish conglomerate, which created the first industrial robot in 1974, has been an ugly duckling among the top tier of high-tech industrial engineering companies.
ABB is a paradox: a business that is dominantly positioned in some of the highest growth — and sexiest — high-tech engineering markets, and yet has a share price that has only inched upwards while those of competitors have soared.
It is the market leader in making and selling industrial robots in China, yet it is also a company for which earnings per share have decreased by an average of 6 per cent annually every year since 2009.
“Many competitors have doubled their share price in the last 10 years,” said ABB’s new chief executive Mr Rosengren, in an interview with the Financial Times — his first since his management team unveiled its new strategic plan for the company this month.
“This is a big question mark for me: how can a company with such good technology, such good products, be underperforming for so long?”
Mandate for change
Mr Rosengren was appointed with a brief for radical change after years of shareholder disquiet. It adds to the size of the challenge facing him that his tenure started on February 1, as coronavirus began to shut down the global economy.
Global manufacturing PMI, a good proxy for the health of ABB’s customers, is at 42.4, according to data from IHS Markit — its fourth consecutive month indicating a contraction.
The Swede, a veteran of the engineering industry, is undeterred.
“When I look at the group, and the areas we are operating in, I would say that any company in the world would envy ABB for being positioned so well when it comes to taking advantage of [long-term] global trends which are taking place,” he said, citing themes such as automation, electrification and sustainability in which ABB excels.
He pointed to ABB’s three factories in Bergamo, the north Italian town that has been one of the single hardest-hit localities worldwide by the virus: “They have been at full speed during the whole crisis . . . Our factories are showcases,” he said. “The business opportunity is enormous.”
The substance of Mr Rosengren’s vision for ABB’s future, however, is about whipping the company into financial shape, rather than chasing visions of a technologically gleaming, and high growth, future. Past chief executives have lent hard on such promises — and failed to deliver.
“Delivering financial focus is priority number one,” he said.
To do so, he can draw comfort from the support of the company’s two biggest shareholders over his new strategy, not least because they devised it, to radically decentralise the group and look at spinning out some of the businesses in its sprawling empire.
Johan Forssell, chief executive of Investor AB, the investment vehicle of the Wallenberg family, which owns 12.1 per cent of the company, told the FT he was “fully supportive of ABB’s new strategic direction”.
Europe’s largest activist investor, Cevian Capital, which owns 5.9 per cent of the company, has meanwhile been pushing for changes since it bought into ABB in 2015, an investment it is yet to make a return on.
Cevian is understood to be closely involved in discussing with Mr Rosengren which divisions ABB should put on the market.
The investment group has already scored a victory in a decision taken by ABB two years ago to hive off its giant power grids business, an $11bn sale to Hitachi, which will close at the end of this month.
“Continued portfolio optimisation is vital,” Cevian co-founder Christer Gardell told the FT. Mr Rosengren, he said, was “one of the best industrial CEOs in Europe” and will rationalise ABB in a “fact-based and unemotional manner”.
The question is whether, as some analysts fear, such radical plans to refocus the business deprioritise growth for ABB at precisely the moment, in a post-Covid world, when the opportunities offered in areas such as automation and electrification are greatest.
“If I were the CEO of Siemens or Schneider Electric I would have opened a bottle of champagne,” said Andreas Willi, a veteran analyst of the capital goods industry at JPMorgan. “ABB is effectively saying it is not going to fight them in these growth areas for now but focus on financial performance.
“But by the time you have put your house in order,” he added, “it might be too late to compete.”
Mr Rosengren’s decentralisation plan is certainly radical, covering everything from marine technologies to datacentre power systems.
Copyright The Financial Times Limited 2020