ABB Wants to Sell Oil, Gas Business After Loss Widens ----------------------------------------------------- Published November 01, 2002 ABB Ltd., which this week abandoned a profit goal and said asbestos claims are mounting, plans to sell units that account for a third of annual sales after losses widened. "ABB is a tragic story," said Peter Gachnang, who helps manage a fund of small and mid-sized Swiss companies at Swissca Holding AG. He doesn't own ABB shares. "This is going to be an entirely different company if it wants to survive." ABB, which bought more than 200 companies over the past decade in a bid to rival General Electric Co., will sell its oil, gas and petrochemicals unit. The Swiss company has already put its building-service and financial divisions up for sale. The Swiss company will generate $18 billion in annual revenue, less than half the $50 billion target ABB aimed for three years ago. The third-quarter loss widened to $183 million from $13 million in the previous three-month period because of falling sales and cost overruns, Chief Executive Officer Juergen Dormann said on a conference call. Mr. Dormann plans to cut costs by $800 million over the next 18 months from merging its main businesses into two units to help pay off debt, which doubled last year. "There are enough areas where we can still dig in and where we see room for improvement," he said. "A key element means the reduction of people." He declined to say how jobs would be cut and pledged to give more details at a Nov. 8 meeting in Zurich. As many as 40,000 workers may lose their jobs, the Financial Times reported, without citing anyone. The 62-year-old former CEO of French drug company Aventis SA, who replaced Joergen Centerman as CEO on Sept. 5, said ABB may pay a similar amount for the cost savings, without giving a timeframe. The company is already spending $500 million to shed 13,000 jobs, bringing the number of workers to 146,000. The shares jumped 30 centimes, or 18 percent, to 1.93 francs as of 2:42 p.m. Swiss time, reducing the decline this year to 88 percent. ABB, formed in a 1988 merger between Sweden's Asea AB and Brown Boveri Co. of Switzerland, became a business model in the 1990s as former CEO Percy Barnevik boosted sales to more than $33 billion with a workforce of 214,000. Mr. Barnevik attracted billionaire Martin Ebner, who joined the board in 1999 and bought 11 percent of ABB, which at the time was worth 57 billion francs. Mr. Barnevik quit last November amid a rift over $140 million in pension payments ABB said hadn't been properly approved. Mr. Ebner resigned this month as the value of his stake fell to less than 180 million francs. ABB will combine its six divisions, including those that make control devices for factories and cruise ships as well as transformers for power stations, into two units, automation and power technologies. The oil, gas and petrochemicals unit, which the company wants to sell in the next 12 months, is the company's second least profitable, producing $33 million in quarterly earnings. As recently as Sept. 11, Mr. Dormann had said the company wouldn't sell entire divisions. Debt, which rose to $5.5 billion from $5.2 billion in the will fall if the company gets approval to sell part of a finance unit to General Electric for $2.3 billion. ABB has also put up for sale a building- maintenance unit, which has annual sales of $2.5 billion, and an equity ventures business, which Dormann said has a book value of $500 million to $600 million. ABB paid out $54 million for asbestos-related claims against a U.S. unit, compared with $55 million in the previous three-month period, as pending lawsuits rose 8 percent to 111,000. The company had $3.9 billion in cash Sept. 30, down from $4.6 billion. Mr. Dormann said earlier this week that ABB may place U.S.-based Combustion Engineering Inc. into creditor protection after payouts for claims exceeded its assets. ABB has set aside $940 million to cover lawsuits. "The big question remains asbestos," said Dieter Buchholz, a fund manager at BNP Paribas SA who helps manage 4 billion francs. He doesn't own ABB shares. "If the company can isolate Combustion Engineering, it has a good chance for survival." ----------------------------------------------------------- LitigationDataSource.com