ABB Wants to Sell Oil, Gas Business After Loss Widens 
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Published November 01, 2002

ABB Ltd., which this week abandoned a profit goal and said asbestos 
claims are mounting, plans to sell units that account for a third of 
annual sales after losses widened.

"ABB is a tragic story," said Peter Gachnang, who helps manage a fund of
small and mid-sized Swiss companies at Swissca Holding AG.  He doesn't 
own ABB shares. "This is going to be an entirely different company if it
wants to survive."

ABB, which bought more than 200 companies over the past decade in a bid 
to rival General Electric Co., will sell its oil, gas and petrochemicals
unit.  The Swiss company has already put its building-service and 
financial divisions up for sale.  The Swiss company will generate $18 
billion in annual revenue, less than half the $50 billion target ABB 
aimed for three years ago.

The third-quarter loss widened to $183 million from $13 million in the 
previous three-month period because of falling sales and cost overruns, 
Chief Executive Officer Juergen Dormann said on a conference call.  Mr. 
Dormann plans to cut costs by $800 million over the next 18 months from 
merging its main businesses into two units to help pay off debt, which 
doubled last year. "There are enough areas where we can still dig in and
where we see room for improvement," he said.  "A key element means the 
reduction of people."

He declined to say how jobs would be cut and pledged to give more 
details at a Nov. 8 meeting in Zurich.  As many as 40,000 workers may 
lose their jobs, the Financial Times reported, without citing anyone. 
The 62-year-old former CEO of French drug company Aventis SA, who 
replaced Joergen Centerman as CEO on Sept. 5, said ABB may pay a similar
amount for the cost savings, without giving a timeframe.

The company is already spending $500 million to shed 13,000 jobs, 
bringing the number of workers to 146,000.  The shares jumped 30 
centimes, or 18 percent, to 1.93 francs as of 2:42 p.m. Swiss time, 
reducing the decline this year to 88 percent.

ABB, formed in a 1988 merger between Sweden's Asea AB and Brown Boveri 
Co. of Switzerland, became a business model in the 1990s as former CEO 
Percy Barnevik boosted sales to more than $33 billion with a workforce 
of 214,000.  Mr. Barnevik attracted billionaire Martin Ebner, who joined
the board in 1999 and bought 11 percent of ABB, which at the time was 
worth 57 billion francs.

Mr. Barnevik quit last November amid a rift over $140 million in pension
payments ABB said hadn't been properly approved. Mr. Ebner resigned this
month as the value of his stake fell to less than 180 million francs.  
ABB will combine its six divisions, including those that make control 
devices for factories and cruise ships as well as transformers for power 
stations, into two units, automation and power technologies.

The oil, gas and petrochemicals unit, which the company wants to sell in
the next 12 months, is the company's second least profitable, producing 
$33 million in quarterly earnings.  As recently as Sept. 11, Mr. Dormann
had said the company wouldn't sell entire divisions.

Debt, which rose to $5.5 billion from $5.2 billion in the will fall if 
the company gets approval to sell part of a finance unit to General 
Electric for $2.3 billion. ABB has also put up for sale a building-
maintenance unit, which has annual sales of $2.5 billion, and an equity 
ventures business, which Dormann said has a book value of $500 million 
to $600 million.

ABB paid out $54 million for asbestos-related claims against a U.S. unit,
compared with $55 million in the previous three-month period, as pending
lawsuits rose 8 percent to 111,000. The company had $3.9 billion in cash
Sept. 30, down from $4.6 billion. 

Mr. Dormann said earlier this week that ABB may place U.S.-based 
Combustion Engineering Inc. into creditor protection after payouts for 
claims exceeded its assets.  ABB has set aside $940 million to cover 
lawsuits.

"The big question remains asbestos," said Dieter Buchholz, a fund manager
at BNP Paribas SA who helps manage 4 billion francs. He doesn't own ABB 
shares.  "If the company can isolate Combustion Engineering, it has a 
good chance for survival."


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