Re-engineering ABB Not As Simple As ABC

Dec. 21, 2004
Still, CEO Dormann foresees 'stronger position' by year-end.
Ten years ago Zurich-based ABB Ltd. was a business conglomerate often favorably compared with Jack Welch's General Electric Co. Not now. Since September 2002, Jrgen Dormann, ABB's CEO and president and former chairman of pharmaceutical firm Aventis SA, has been re-engineering ABB, downsizing it to just two industrial divisions with fewer than 100,000 employees.IW: What are the critical elements in ABB's comeback plan? Dormann: We are now focusing the business systematically on our core activities in automation and power technology. As a consequence, we are selling all non-core activities such as our Oil, Gas and Petrochemicals (OGP) division, the Building Systems business and the remainder of our former Financial Services division. We need to continue to improve the operational performance of ABB by making further progress with our cost-reduction program. Earlier this year we revised our savings targets upwards to US$900 million from the $800 million originally planned. The first positive operational improvements became visible in the first half of 2003. The ABB core businesses reached operating profit margins of around 7.5% and contributed some $380 million in cash. Another important element for ABB is to strengthen our balance sheet and reduce our debt. I can confirm that we are on track to sell the OGP division and most of the Building Systems business by year-end. Together with some remaining parts of our former Financial Services business, we aim for proceeds of some $2 billion. Finally, we need to resolve the asbestos issue . . . . IW: What do you expect ABB to have achieved by year-end 2003? Dormann: By year-end ABB will be in a stronger position than it has been for a long time. We will have a focused business portfolio and a strongly improved balance sheet. The company will also have an improved cost base. In addition, we are optimistic that the asbestos issue will be settled for good. IW: How has your Aventis experience helped in restructuring and repositioning ABB? Dormann: Aventis, of course, was never in a crisis situation. However, in order to be successful over a long time in business, one needs to have a certain skill set. This includes, for example, a sound understanding of strategic portfolio management, but it also requires working in a systematic manner to improve the operational performance of a business. And one should not underestimate the benefit of experience in how to communicate externally and internally, especially during turbulent times. One important insight was that it pays to have a good team. When I took over as CEO, among the first initiatives was to roughly halve the number of executive committee members in order to streamline the decision process and form a strong, focused team. It was also important to bring in outside people with a new perspective. . . . Three of the five present executive committee members, including me, come from outside ABB.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

 John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.
      
      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).
      
      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.
      
      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”
      
      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.
      
      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.
      

 

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