ABB Asea Brown Boveri(ABB), the worlds largest power engineering group, said on Tuesday it was slashing 10,000 jobs in Western Europe and U.S. while expandng in Asia.
The Swiss-Swedish company said it would take an $850 million charge in the fourth quarter to cover restructuring and 1997 income would be hit by $100 million from the delay in Malaysias Bakun dam and another $100 million charge from its Adtranz 50-50 joint venture with Germanys Daimler-Benz.
Company Chief Executive Goran Lindahl said the restructuring plan was an aggressive response to the Asian currency turmoil, which in the short-term will sharpen global competition.
In the long-term, however, Lindahl said the depreciation of several Asian currencies will boost the competitiveness of those countries and ABBs 100 operations there.
This is an aggressive move to act early and ahead of the market, Lindahl told Reuters in a telephone interview.
Stock markets, however, were not impressed and the shares of ABBs Swiss-quoted parent dived 58 francs in early trade. By midday it had recovered in active trade to 1.8 percent, or 40 Swiss francs, down at 2,130.
In an ABB statement Lindahl said that by acting early, we reduce the threat of significantly larger employment effects in our Western operations over the longer term.
This initiative is expected to lead to the closure and downsizing of some of our facilities in higher-cost countries, resulting in the reduction of about 10,000 jobs, Lindhal said.
Some of these actions will be difficult in the short term, but the issue is not going to go away on its own, he said.
ABBs restructuring move continues the companys shift toward emerging markets. Between 1990 and 1996 it added 56,000 jobs in Eastern Europe and Asia while slashing 59,000 in Western Europe and North America. At end-1996, ABB employed 215,000 people worldwide, 33,000 of them in Asia. The 10,000 job losses, mainly in Germany, the U.S., Switzerland, Italy, Spain and Sweden, represent around 10 percent of ABBs workforce in these countries.
ABBs net income in the first nine months fell a surprising four percent to $774 million due to lower income from Adtranz and lower revenue from the power generation segment.
Nine-month sales also slipped to $22.5 billion from $23.5 billon, but orders grew 13 percent to $28.1 billion.
ABB also lowered its profit forecast for the full year and now sees 1997 income turning out somewhat lower than in 1996 when it reported a group net profit of $1,233 million.
Analysts had been expecting ABB to increase its profit by around five percent to $1,295 million.
The Adtranz rail joint venture said on Monday it would take a restructuring charge of around $200 million, split 50-50 between ABB and Daimler-Benz, and cut some 3,600 jobs. These job losses are in addition to the 10,000 announced by ABB.
Despite reports to the contrary, Lindahl said ABBs contract with the developer of Malaysias Bakun hydroelectric dam was still in force, but he expected a delay probably of one to two years.
The contract is in force and that will continue as far as we are informed, Lindahl said.
In September the Malaysian government delayed several large infra-structure projects, including Bakun, in light of the worsened economic situation.
The total value of the Bakun dam project is $6.18 billion and ABBs share amounts to more than $2.5 billion, the largest contract ever awarded to the company.
ABB said the economic situation in Western Europe showed signs of improvement and base orders had started to pick up. Demand for ABBs industrial and investment goods, which trail the economic cycle, is expected to improve in 1998.
The business environment in North America also continues to develop positively, especially in the service and retrofit sector, while demand for large projects continues to grow in Latin America, ABB added. Minneapolis daily cash grain prices - USDA
MINNEAPOLIS, Oct 21 (Reuters)- Daily cash grain prices, on track at location except where noted, in dlrs/bu. USDA
