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ABB slims down to four divisions to save $1bn

09 September, 2015

ABB has announced plans to slim down from five divisions to four as part of a programme aimed at delivering $1bn of white-collar cost savings across its 140,000-strong workforce. The main change – which will take effect from January 2016 – is to combine most of its Power Products and Power Systems divisions into a new Power Grids Division.

A new Electrification Products division will combine ABB’s low- and medium-voltage businesses, while its Discrete Automation and Process Automation divisions will be “further aligned”. The DCS (distributed control systems) business for power generation will be transferred from Power Systems to Process Automation, which will also take over responsibility for PLCs from the Discrete Automation and Motion division.

The Electrification Products division will include ABB's MV products business as well as breakers and switches, control products, building products, LV systems and its Thomas & Betts activities. ABB believes that this combination will open up new growth opportunities by taking one of the industry's most complete ranges of LV and MV products and services to a broader customer base. The activities in the new division generated revenues worth around $10.6bn in 2014, with an operational EBITA of $1.7bn and an EBITA margin of 16.3%. The division will employ about 42,000 people.

Announcing the changes in London, ABB CEO Ulrich Spiesshofer said that “the actions we are announcing today will deliver additional value in a more focused way to customers through our unique power and automation offering.

“At the same time, we will become leaner, faster and more agile,” he added. “This will drive the shift of our centre of gravity towards higher growth, greater competitiveness and lower risk. With these actions, we address the rapidly changing market conditions and face the increased uncertainty in the world.”

Spiesshofer says that the new Power Grids division “will be number one globally in supplying power and automation solutions for power grid customers, serving transmission and distribution utilities in the future as a single business,” while the new Electrification Products division “will provide our customers with one of the broadest LV and MV offerings”.

ABB's new structure will shrink the five existing divisions into four

ABB has reduced its growth target for the period to 2020 from 4–7% to 3–6%. The company has been hit by the economic slowdown in China – ABB’s second-biggest market – and by the slump in the price of oil. Spiesshofer said that there are no major plans to divest any of ABB’s operations in the near future.

ABB’s Discrete and Motion division currently generates revenues of around $10.1bn (about a quarter of ABB’s total income) from a global market worth around $150bn. It employs about 31,000 people.

ABB is continuing to invest in $1.5bn a year in research and development – close to 4% of its revenues. Areas where it is investing at present include the Internet of Things to enable Web-based automation and control, and combining robotics, 3D printing and artificial intelligence.

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