Executive Briefings

ABB To Cut Costs to Counter Market Volatility

Swiss manufacturer ABB has said it will focus on reducing cost to offset economic uncertainty. In order to combat the sluggish global economy that has damaged sales for many providers of industrial equipment, ABB has focused on the bottom line. "In the short term, there are still a lot of questions around the pace of growth in Europe and the U.S. and the timing of the rebound in China," said Joe Hogan, chief executive officer of ABB.

The statement came after ABB posted better-than-expected profit and orders in the fourth quarter. Despite the boost, which comes in the context of a market where rivals are flagging, Hogan said the group would continue to be "conservative on costs while making sure we are in position to outperform as the market environment improves".

"We have to make sure that we balance that cost and growth piece very carefully," Hogan said in a video posted online, adding that ABB will cap capital expenditures "pretty much at inflation rate" after they grew about 70 percent in the past three years. ABB cut costs by $1.1bn in 2012 to exceed a targeted savings plan.

The company, which also makes components for the oil and gas industry, said it was targeting cost savings and productivity improvements equivalent to 3 percent to 5 percent of cost sales every year.

The trend among European industrial manufacturers was echoed in Siemens announcement in November that it would be seeking to take €6bn out of its cost base by 2014, with a sharp focus on improved procurement cuts in its supply chain. In a statement the group cited recession in the Eurozone and weakness in China as the driver behind the program.

ABB, which also makes components for the oil and gas industry, said it expected industrial production growth and government policy to be the main levers of demand in 2013.

Source: Procurement Leaders

The statement came after ABB posted better-than-expected profit and orders in the fourth quarter. Despite the boost, which comes in the context of a market where rivals are flagging, Hogan said the group would continue to be "conservative on costs while making sure we are in position to outperform as the market environment improves".

"We have to make sure that we balance that cost and growth piece very carefully," Hogan said in a video posted online, adding that ABB will cap capital expenditures "pretty much at inflation rate" after they grew about 70 percent in the past three years. ABB cut costs by $1.1bn in 2012 to exceed a targeted savings plan.

The company, which also makes components for the oil and gas industry, said it was targeting cost savings and productivity improvements equivalent to 3 percent to 5 percent of cost sales every year.

The trend among European industrial manufacturers was echoed in Siemens announcement in November that it would be seeking to take €6bn out of its cost base by 2014, with a sharp focus on improved procurement cuts in its supply chain. In a statement the group cited recession in the Eurozone and weakness in China as the driver behind the program.

ABB, which also makes components for the oil and gas industry, said it expected industrial production growth and government policy to be the main levers of demand in 2013.

Source: Procurement Leaders