ABB to restructure divisions as part of Next Level strategy

ABB has launched the second stage of its Next Level strategy with a divisional realignment aimed at driving organic growth by delivering more customer value in a better, more focused way from its combined power and automation offering. The company also intends to achieve $1 billion in white-collar cost savings, free up $2 billion in cash and become more active in value-creating acquisitions.

“We are now accelerating to Stage 2 of our Next Level strategy,” said CEO Ulrich Spiesshofer. “The actions we are announcing today will deliver additional value in a more focused way to customers through our unique power and automation offering. At the same time, we will become leaner, faster and more agile. This will drive the shift of our centre of gravity towards higher growth, greater competitiveness and lower risk. With these actions, we address the rapidly changing market conditions and face the increased uncertainty in the world.”

Effective 1 January 2016, ABB will operate in a streamlined set-up of four divisions. The new Power Grids division will focus on the changing needs of utility customers with ABB’s complete power and automation offering for transmission and distribution delivered from a single source — “power and automation for the grid”. ABB’s leading offering to industry, transport and infrastructure — “power and automation for the site” — will be provided by three divisions. The new Electrification Products division will combine ABB’s leading low- and medium-voltage businesses. The Discrete Automation and Motion and Process Automation divisions will be further aligned, addressing customer needs and operational efficiency. As a result, ABB’s new divisional structure will be streamlined from five divisions to four.

The Power Grids division will be fully focused on meeting the power and automation technology challenges of power grid utilities, such as the integration of renewable energies, growing network complexity, grid automation, and the development of smart grids and microgrids.

“Our new Power Grids division will be number one globally in supplying power and automation solutions for power grid customers, serving transmission and distribution utilities in the future as a single business,” Spiesshofer said. “We have initiated a strategic portfolio review of the Power Grids division to determine the best way to enhance its long-term success and create value for our customers and shareholders.

The Electrification Products division will include ABB’s medium-voltage products business as well as the breakers and switches, control products, building products, low-voltage systems and Thomas & Betts activities.

“The new Electrification Products division will provide our customers with one of the broadest low-voltage and medium-voltage offerings, driving value from our growing network of channel partners around the world,” he said.

All of ABB’s control solutions will be integrated into the Process Automation division and delivered across the company’s various end markets through focused front end customer interfaces. This includes the transfer of the DCS (distributed control system) business for power generation from the Power Systems division as well as the PLC (programmable logic controller) business from the Discrete Automation and Motion division.

ABB will accelerate the implementation of its previously announced 1000-day programs to drive white-collar productivity and working capital management. The company expects to deliver approximately $1 billion in structural cost savings by the end of 2017, in addition to the ongoing program aimed at reducing costs by the equivalent of 3–5% of cost of sales every year. Improved working capital management is expected to free up at least $2 billion in cash by the end of 2017 for investment in high-return capital expenditure, research and development, disciplined acquisitions and shareholder returns.

Focus areas include environmentally friendly solutions for high-efficiency power transmission, such as switchgear that uses insulating gas with significantly lower greenhouse gas impact. Another core area is the Internet of Things, Services and People that enable web-based automation and control solutions to improve productivity and quality. The company is also pioneering disruptive technology in areas like combining artificial intelligence and 3D printing with robotics solutions by teaming with innovative partners and providing seed capital through ABB Technology Ventures.

Originally published here.