ABB to take $850 million hit, plans cost cuts

20 December 2008

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.