Note 21 Restructuring and related expenses

Restructuring-related activities

In 2011, the Company executed minor restructuring-related activities and incurred costs of $164 million which were mainly recorded in total cost of sales. These costs related to employee severance ($83 million), estimated contract settlement, loss order and other costs ($53 million) as well as inventory and long-lived asset impairments ($28 million).

At December 31, 2011 and 2010, the balance of restructuring and related liabilities is primarily included in “Provisions and other current liabilities”.

Cost take-out program

In December 2008, the Company announced a two-year cost take-out program that aimed to sustainably reduce the Company’s cost of sales and general and administrative expenses. The savings have been derived from initiatives such as internal process improvements, low-cost sourcing, and further measures to adjust the Company’s global manufacturing and engineering footprint to shifts in customer demand. As of December 31, 2010, the Company had substantially completed the cost take-out program.

The Company recorded the following expenses under this program:

(XLS:)

($ in millions)

Cumulative costs
2008 to 2010

2010

2009

Employee severance costs

536

95

342

Estimated contract settlement, loss order and other costs

230

98

129

Inventory and long-lived asset impairments

70

20

45

Total

836

213

516

These expenses were recorded as follows:

(XLS:)

($ in millions)

Cumulative costs
2008 to 2010

2010

2009

Total cost of sales

475

110

293

Selling, general and administrative expenses

143

36

75

Other income (expense), net

218

67

148

Total

836

213

516

Costs incurred under the program, per operating segment, were as follows:

(XLS:)

($ in millions)

Cumulative costs incurred up to
December 31, 2010

Power Products

122

Power Systems

139

Discrete Automation and Motion

256

Low Voltage Products

114

Process Automation

183

Corporate and Other

22

Total

836

The most significant individual exit plans within this program related to the Robotics reorganization, the downsizing of the former Automation Products business in France and Germany, as well as the Power Systems business in Germany.

Financial review

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