ABB to sell process arm

ABB is to sell its Lummus Global chemical engineering division along with the rest of its oil, gas and petrochemical businesses as chief executive Jürgen Dormann struggles to keep the company afloat.

Mere weeks after replacing ousted chief executive Jürgen Centermans, Dormann has a fight on his hands as asbestos liabilities and poor trading threaten to drag the company down.

The asbestos problems stem from a US subsidiary, Combustion Engineering. Embroiled in lawsuits, CE's expected liabilities now exceed its $812million assets, says ABB. Among the options under consideration is Chapter 11 bankruptcy protection.

ABB bought CE, which had previously manufactured boilers that were lined with asbestos, in 1990. Up to the end of last year, CE had already paid out $865million to claimants whose health was affected by the asbestos.

Meanwhile, ABB has seen orders and earnings tumble in the third quarter, as last year's cost-cutting program failed to bite. Earnings before interest and taxes plunged 64 per cent, to $47million, on a 3 per cent decline in sales, to $5.5billion, and an 8 per cent fall in orders. 'Given the weaker economic climate, many of our businesses performed well,' Dormann says, 'but it is clear that our overall cost base is much too high, and the benefits from our restructuring programme have been slower than expected.'

The firm is to reorganise its core businesses, power and automation technologies, into two divisions, while the oil, gas and petrochemicals division 'is kept as a separate unit and will take an active part in sector consolidation.' ABB has already been approached by several companies interested in buying all or part of the division, but it says that it is 'premature to predict the outcome and timing of further steps.'

It remains to be seen whether Dormann's changes will convince the market. On the announcement of the CE division's troubles, the markets wiped off two-thirds of ABB share value - and the company remains over $5billion in debt.