In Nordic noir mysteries, cases are solved after many twists and not a few bleakly horrific scenes. The fall of Ulrich Spiesshofer, deposed on Wednesday as boss of Swiss industrial group ABB, is easier to explain. Sweden’s Wallenberg family, which holds an 11 per cent stake, had tired of losing money on a decades-old investment. Since early last year, the share price has fallen a quarter. ABB may require more deft moves before the stock earns a decent return again.
Mr Spiesshofer made his reputation reviving the robots division of a sprawling Swiss-Swedish conglomerate created in the late 1980s. Under his leadership, ABB avoided the mistakes of General Electric, which overpaid for acquisitions and fell victim to management hubris. But as at German rival Siemens, the weaknesses of a conglomerate structure were cruelly obvious at ABB.
The former management consultant Mr Spiesshofer cut bureaucracy and pushed into growth areas such as electric car technologies. He failed to deliver sales growth or profit margin improvements. Swedish activist investor Cevian bought an initial 3 per cent stake in 2015 and went public with calls for a shake up. Still the Wallenbergs waited.
The trigger for Mr Spiesshofer’s eventual downfall was last December’s strategy revamp. ABB would sell its power grids division to Japan’s Hitachi. More crucially, it would shift to a leaner, decentralised operation with four units under a holding company. The moves made sense. Investors had lost faith in a turnround, however. The shares fell further.
Stand-in chief executive Peter Voser, ABB’s chairman and a former Shell CEO, promises “cultural” rather than strategic changes. That avoids admitting mistakes. Improvements look achievable and would help the share price. In electrification, for instance, ABB’s 12.4 per cent operating margins compare with almost 20 per cent at France’s Legrand.
Decentralisation will cut costs and free managers to invest, in artificial intelligence for instance, where ABB has lagged. It should not be the end of the story, however. On a sum of the parts basis, the shares are worth about SFr24, a fifth higher than Tuesday’s close, Deutsche Bank reckons. Cevian has said they could be at SFr35. ABB still mixes businesses that need not belong together. A break-up may be the best way to realise their value.
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