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ABB to axe 12,000 jobs
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July 24, 2001: 2:37 a.m. ET
Europe's largest electrical engineer reacts to slump; UK rival warns again
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LONDON (CNN) - ABB, Europe's biggest electrical engineering group, on Tuesday posted a 40 percent fall in first-half profits and revealed plans to cut 12,000 jobs.
The Swiss-Swedish company said net income from continuing operations in the six months to June 30 fell to $329 million compared with $544 million for the first six months of 2000.
ABB's job cuts are the largest this year by an old-economy company based in western Europe during the present global economic slowdown and will affect 8 percent of the workforce.
UK rival Invensys (ISYS) also announced on Tuesday it was cutting another 1,000 jobs, bringing to 6,000 the number of cuts this year by the company, which makes automation systems for industry.
"Following trading statements from many of our customers and competitors and the latest output figures of the major economies, it is now obvious that we are seeing the worst recession in U.S. industrial production since the 1970s," Invensys said in its second profits warning this year.
The UK company, which said it now expected its £400 million first-half earnings forecast to be 30 percent below that figure, also announced that Chief Executive Alan Yurko is stepping down and would be replaced on October 1.
ABB, which makes products such as systems to power factories, electricity transmitters and pipelines and plant for the oil and petrochemical industries, said its job cuts will be over a period of 18 months.
ABB said net profits plunged 76 percent to $266 million, or $0.23 per share, from $1.09 billion, or $0.93 a share, the previous year when there were large one-time gains on the balance sheet.
"Our results reflect uncertainty in the investment climate as the U.S. slowdown spreads into Europe and Asia," said Chief Executive Joergen Centerman. He said the job cuts would cost $500 million to implement and result in annual cost savings of about the same amount.
Sales at ABB during the six months were stable at $11.09 billion compared with $11.06 billion, while new orders dropped 7 percent to $12.65 billion, the company said.
ABB also revised downwards its forecast for full-year income from continuing operations. The overall operating margin worsened in the second quarter and stood at 5.64 percent for the first half, compared with 6.2 percent in the first quarter, ABB said.
"Our goal to grow the business remains unchanged and we are taking action now to improve our competitiveness, as we expect challenging conditions over the next 12 months," Centerman said.
ABB shares fell to a three-year low last Thursday in Zurich to 22.30 Swiss francs. The stock has underperformed the benchmark SMI index by some 50 percent in the past year. 
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