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ABB plans to sell its Dodge power transmission arm

19 November, 2020

ABB has announced plans to sell off its Dodge mechanical power transmission division following a strategic review of its portfolio. It is also planning to dispose of its Turbocharging and Power Conversion divisions. Together the three divisions represent about $1.75bn of combined annual revenues, or about 6% of ABB’s total revenues.

Announcing the plans, ABB’s CEO, Björn Rosengren (who joined the company from Sandvik in March), said that “all three divisions are high-quality businesses, with operational EBITA margins above the group’s target margin corridor. In this process, we will seek the best value-accretive solution for ABB and those businesses and not put ourselves under time pressure.” Further portfolio reviews “will continue to be a key element of the ABB Way,” he added.

ABB acquired the Dodge mechanical power transmission division in 2011 as part of its $4.2bn purchase of Baldor Electric (which had, itself, bought Dodge – along with Reliance Electric motors – for $1.8bn from Rockwell Automation in 2006).

In 2019, the Dodge business generated revenues worth around $575m for ABB, representing about 9% of its Motion business income. ABB says that Dodge is among the top five suppliers of mounted bearings, enclosed gearing and other components in many markets, and that more than 90% of its sales are in the Americas.

According to a report from Bloomberg, ABB has already received “preliminary interest” from potential purchasers of the Dodge division. Another report, from Reuters, suggests that the three divisions being sold could together be worth 3-4bn Swiss francs ($3.3-4.4bn), with the Dodge division alone being worth 1–1.15bn francs ($1.1-1.26bn).

ABB is also splitting its Motors and Generators division to create three new divisions – IEC LV motors, Nema motors, and large motors and generators – as part of its Motion business. The three divisions will have different priorities. The changes will take place on 1 January, 2021 and will bring ABB’s total number of divisions to 20.

ABB CEO Björn Rosengren: no time pressure

In another change, ABB is renaming its Industrial Automation business Process Automation to better reflect its customer base.

ABB has also been reviewing its digital strategy under its ABB Ability brand of software-enabled products and systems. It plans to accelerate the expansion of this offering, tailored to specific sectors and applications. It will achieve this by increasing r&d and investments to about 5% of revenues per year. The aim is to create superior value for customers and to drive “higher quality” revenues. ABB will also continue to pursue strategic partnerships in the digital area, as well as bolt-on acquisitions.

Speaking at ABB’s Capital Markets Day, the company’s CFO, Timo Ihamuotila, revealed that that the company is planning to make at least five small-to-medium size bolt-on acquisitions per year.

Mika Kulju, president of the drives products division reported that the diviison had generated revenues of $1.3bn in 2019 and was proving “highly resilient” in 2020, despite the Covid-19 pandemic. ABB is aiming to raise its share of the $10bn global drives business from 14% this year to at least 15% by 2023 (when it reckons the market will be worth more than $11bn – representing a CAGR for the sector of more than 4%).

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