Swiss engineering group Asea Brown Boveri (ABB) has said on Friday that it will take an $850-million charge during the fourth quarter to cover costs of a regulatory probe in the US and Europe. It also announced a $1-billion cost-cutting programme to offset a weaker global market.

ABB had previously disclosed the investigations that are looking into suspected payments and alleged anti-competitive practices. The charge will also cover the possible impact of a tax dispute and write-downs pertaining to the depressed business environment.

The company said that its order intake for October and November 2008 had been hit by the global economic slowdown, and therefore it was moving to cut costs.

EU antitrust regulators had said last week they had charged several unnamed makers of electricity generation equipment with forming a price-fixing cartel.

Reports in the media said that Germany's Siemens AG, France's Areva and ABB had acknowledged receipt of these charges. Toshiba Corp. has also been faced with similar accusations. Power transformers are key components in electricity transmission, which step up or step down the voltage in an electrical circuit.

Under EU regulations, cartel fines can cost a company up to 10 per cent of its global annual revenue for each year that it violated antitrust rules. Most often the amount runs into hundreds of millions of euros.

"Given the uncertainty surrounding the global economy, we must be sensible and prudent from an early stage and ensure that ABB's cost base is in line with weaker market conditions," said Joe Hogan, chief executive officer of ABB. Hogan took over as CEO in September.

"Although the economic environment is currently quite challenging, ABB remains in a very solid financial position, with a strong order backlog, and over the long term, fundamentally sound demand for infrastructure investment and measures to improve energy efficiency," said Hogan.

Reports said that ABB intends to move more production to emerging markets where growth in orders continues to outpace mature markets. ABB is facing over five investigations into alleged anti-competitive practices, including bribery and fixing prices for large-scale transformers used in power grids.