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New start for ABB? The end of the hard times seems in sight for Swiss-Swedish engineering technology group, ABB, says the company's chairman and chief executive, Jurgen Dormann.

Once the jewel in the crown of Switzerland's heavy industry, engineering technology group ABB lost something of its lustre over recent years as loses mounted.

The company traces its history back to 1988 when it was formed by the merger of Sweden's Asea and Brown Boveri of Switzerland.

Changing Times

The company then benefited from the economic boom of the '90s, expanding its operations rapidly, only to founder under a mountain of debts in 2002, recording a loss of $787 million.

Now ABB seems to be one of the most talked about recover), stocks after the company's newly appointed management team--headed by Dormann--embarked on an executive cost-cutting plan.

ABB spokesman, Thomas Schmidt tells Swiss News that the group has certainly learned a number of things from the recent bout of tough times.

"First, the group's business portfolio was too broad and complex for our resources and needed to be simplified," explains Schmidt. "Jurgen Dormann and ABB's senior management team have streamlined operations."

The six business divisions that existed in 2002 have been cut to two core divisions--Power Technologies and Automation Technologies (with a third division--Oil, Gas and Petrochemicals in the process of being divested).

So, it seems that ABB is concentrating on what it does best, focusing on the business areas where it remains a market leader.

ABB currently holds more than 50 per cent of the US power transmission market and is one of the world's leading producers of industrial robots.

Taking on Tough Times

It's difficult to avoid the fact that debts of around $7.3 billion (estimated end-2003) have put the company under great pressure, but still, ABB has been opening up procedures and seems to be dealing with these issues head-on.

"ABB ms an industrial company needed a stronger balance sheet," says Schmidt. "We are building a much stronger financial base to be in a good position to take advantage of the economic upturn when it comes."

"ABB will reduce its debt through divestments' proceeds, our new capital, and cash from the successful core business. This will allow us to achieve a sound balance sheet for an industrial company. We have a clear target to achieve a debt/equity gearing of 50/50 in 2005."

A major part of the group's restructuring has translated into large-scale job losses. Announced in late 2002, the cost-cutting programme aims to cut the annual cost base of the company by $900 million by mid-2004.

ABB announced that the number of jobs being cut under the programme would be between 10,000 and 12,000. Also many other people will be leaving the ABB-fold through the programme of divestments, which means that a company that employed 140,000 people in 2002 will have around 100,000 employees at the start of 2004.

Obviously, a major period of transformation is difficult for any group to go through. But Thomas Schmidt is clear that according to internal surveys morale in ABB is good.

"Employees can see that the group's strategy is working. It is yielding good results in the core divisions, and they (the employees) know that external financial analysts have become much more optimistic about ABB's direction and future," notes Schmidt. "The share price has surged in 2003 after falling sharply in 2002--it's another external sign that ABB is on the right track."

ABB has also placed a good deal of weight on increasing communications and transparently, both internally and externally.

Chairman and chief executive, Jurgen Dormann, writes employees a no-frills weekly letter, published on the company's intranet, which is designed to increase transparency and inform employees of the thinking behind the overall strategy.

Analysts were disappointed by the company's third-quarter loss in 2003 of $279 million, which was bigger than most had expected.

And in troth, ABB is unlikely to return to a profit early 2004 with much still depending on challenging market conditions and when there is an economic upturn.

However, an air of confidence has returned to ABB as the company continues to put in place measures to strengthen its focus and finances.

So it seems that some of the lustre is returning to ABB, with Jurgen Dormann pronouncing that provided everything develops positively ABB can return to profitability in 2004.
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Title Annotation:Money
Author:O'Brien, Tom
Publication:Swiss News
Date:Jan 1, 2004
Words:702
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