Dormann, Jürgen 1940–
Education: University of Heidelberg, master's degree, 1963.
Family: Married Lizbeth (maiden name unknown); children: four.
Career: Hoechst, 1963–1964, management trainee; 1964–1973, head of fiber-sales department; 1973–1974, member of corporate staff; 1975–1979, overseer of all international personnel; 1980–1985, head of international department; 1986–1987, overseer of special-chemicals division and dyes operations and North American division; 1987–1993, CFO of information technology and head of Hoechst Celanese; 1994–1999, chairman and CEO; Aventis, 1999–2002, chairman of management board; 2002–, chairman of supervisory board; ABB, 2001–2002, chairman, 2002–2004, chairman, CEO, and president; 2004–, chairman.
Awards: Manager of the Year, Manager, 1995.
Address: ABB, Affolternstrasse 44, 8050 Zurich, Switzerland; http://www.abb.com.
■ Jürgen Dormann admitted that he would never run from a challenge; the two biggest challenges of his business career were rescuing both the chemical manufacturer Hoechst and—at a stage when most senior executives would have been contemplating retirement—the engineering company ABB from almost certain death following dramatic shifts in the economy, over expansion programs, and poor management. He identified and developed the corporations' core strengths, focused their Byzantine structures into clearly defined divisons, divested noncore businesses and under performers, demanded honesty and openness from his managers, and persevered through adversity.
FOCUS, FOCUS, FOCUS
Dormann began his almost 40-year career with Hoechst in 1963 immediately after obtaining his master's degree in economics from the University of Heidelberg. In 1987 he was placed in charge of American Hoechst, which that year merged with the American Celanese Corporation to create Hoechst Celanese, the fourth-largest chemical manufacturing company in the United States. The company underwent several years of solid financial growth under Dormann's leadership. When he was chosen in 1994 to head Hoechst's entire operations, Dormann became the first company chairman never to have been trained as a chemist. Hoechst had been struggling financially as a result of international market shifts and the enormous changes in the German economy that followed the fall of the Berlin Wall in 1990; Dormann's first priority would be to help resuscitate the company.
Dormann immediately made drastic changes at Hoechst, giving a speech entitled "New Beginnings" to the company's 170,000 employees indicating that henceforth the company would be less bureaucratic, more shareholder friendly, and more profitable, and that management would become more international—he soon appointed the first-ever non-German board member. He divested the company of its remaining industrial divisions, low-profit chemical divisions, and cosmetics business to concentrate on what he identified as Hoechst's core strengths: agricultural and pharmaceutical products. Managers were given a four-year time frame in which to turn their individual sectors into viable businesses that could compete in their respective fields; some companies were spun off to create independent entities. English was instituted as the company language to improve communication between international entities, and policies fostering corporate openness were put into place. Tens of thousands of jobs were cut in Germany, and the head offices were moved to a more modest location.
In the ensuing years Dormann rebuilt Hoechst by focusing almost solely on pharmaceuticals and agriculture. The company acquired other pharmaceutical giants, including Marion Merrell Dow for $7 billion, creating a new pharmaceutical division named Hoechst Marion Roussel (HMR). Dormann mandated that the division release several new products each year; HMR hit on a winner in the late 1990s with the nonsedative allergy medication Allegra. Dormann also initiated the manufacture of crop-protection chemicals in conjunction with the Berlin-based pharmaceutical manufacturer Schering; the joint venture was named AgrEvo.
As a result of the restructuring, the value of Hoechst shares nearly doubled between 1994 and the end of 1998. In 1999, in what was heralded as the most successful cross-border merger since World War II—though it was not entirely popular with his German colleagues—Dormann united his venerated German company with the French rival Rhone-Poulenc to form Aventis, the world's sixth-largest pharmaceutical company. He became the new company's chairman and divested it of its gases, fibers, and industrial-chemicals holdings in order to focus on its life-sciences operations, which included AgrEvo and HMR, becoming the world's second-largest life-sciences company. Dormann consequently earned a reputation as one of Europe's corporate superstars. Richard Tomlinson wrote in Fortune, "He was one CEO, investors on both sides of the Atlantic agreed, who got it" (November 18, 2002).
RISE AND FALL OF A GIANT
In the late 20th century ABB, once known as Asea Brown Boveri, was created when the two electrical engineering and equipment giants ASEA of Sweden and BBC Brown Boveri of Switzerland joined forces. In the unusual merger ASEA (which became ABB AB) and BBC (which became ABB AG) continued operating and trading as separate entities while equally sharing ownership of the parent ABB. Percy Barnevik became the company's CEO and began an aggressive expansion program, acquiring the American company Combustion Engineering in 1990. Within six years ABB gobbled up more than 150 companies worldwide; many began drawing comparisons between the successful ABB and General Electric (GE). However, many of the acquired businesses ultimately became drains on the company, and ambitious projects in Asia had excessively high risk and low profit margins; ABB was overextended.
Amid what Dormann described in Fortune as "a lot of friendly and less friendly questions" (November 18, 2002), Barnevik retired as CEO in 1997; he would stay on as chairman until 2001. He was succeeded as CEO by Goran Lindahl, an engineer who had worked his way up the ASEA ladder. Profits continued to drop, however, and Tomlinson summarized in Fortune what happened next: "Lindahl, the new CEO, led ABB into its ill-advised—and in retrospect ludicrous—attempt to reinvent itself as a high-tech services company" (November 18, 2002). Costs spiraled until Lindahl was pushed out in 2000; Dormann, who had been recruited to ABB's board by Barnevik in 1998, wielded significant influence in that move. Lindahl was replaced by the head of ABB's automotive business, Jörgen Centerman, in 2001.
The company soon faced serious economic slowdowns in its key markets and in July 2001 declared that it would cut its workforce by 8 percent—which amounted to 12,000 jobs—within 18 months. Then an unforeseen catastrophe hit: claims were made against Combustion Engineering, ABB's U.S. subsidiary, due to asbestos exposure from products supplied prior to the mid-1970s—well before the company's 1990 acquisition by ABB. A total of $952 million was set aside for asbestos-related litigation, significantly contributing to ABB's record net loss of $691 million in 2001. Amid the furor Barnevik resigned from his post as chairman.
To add to ABB's woes, a major controversy erupted surrounding the $88 million pension awarded to Barnevik and the $55 million received by Lindahl without full board approval. Although the awards were not technically illegal, they were most certainly disproportionate and seriously damaging to the company's reputation. Dormann quickly announced that the board had determined the approval procedures permitting the awards to have been unsatisfactory, and the company demanded restitution; the two former leaders agreed to pay back about $82 million. But the financial woes were still mounting: amid continuing industry slumps, the company found itself $4.4 billion in debt. ABB sold a portion of its financial-services unit to GE Commercial Finance for $2.3 billion, which Dormann noted should have kept the company afloat until the sale of its oils, gas, and petrochemicals division, which was slated for 2003.
INHERITS A MESS
The day following the GE deal Centerman resigned; as he had with Lindahl, Dormann played a key role in Centerman's departure. As reported by Fortune 's Tomlinson, in the only public remark about his retirement Centerman told a Swedish radio station, "My decision to resign is totally connected to Jürgen Dormann" (November 18, 2002). Dormann himself was subsequently chosen as CEO, taking office on September 9, 2002; though he had not expected to take over the helm at ABB, the board could find no one else they felt to be up to the job. Dormann remarked in Fortune, "I'm not saying I was the best candidate, but the best available candidate" (November 18, 2002).
Upon taking over, Dormann was still unaware of the full extent of the company's troubles. A month after his instatement he expressed complete confidence that ABB would hit their earnings targets and averred that liabilities surrounding the asbestos cases were under control. However, two weeks later he issued a warning that the company would not hit its earnings goals and would possibly need to seek bankruptcy protection for Combustion Engineering because of skyrocketing liability claims. Following a downgrading of ABB's debt by Moody's to the lowest possible rating, the company's shares plummeted by more than 40 percent. Dormann apologized to shareholders, but their confidence in ABB and its CEO had dropped as quickly as the company's share prices. The analyst Andreas Riede of Sarasin Bank in Zurich told Fortune, "He has lost our trust within one month" (November 18, 2002).
Amid concerns as to whether Dormann could regain that trust were questions as to why he had been deluded about the full extent of the company's problems. The answer he gave to Fortune was, "If you are the chairman, you do not have regular contact with the people doing the day-to-day business" (November 18, 2002). He further noted that just one week after becoming CEO he had called on his senior management team to justify their positive forecasts, and they had done so: "How could I say, 'Hey, guys, I don't believe you?'" (November 18, 2002). Dormann was in a tough spot. By February 2003 ABB's shares had dropped from the $33 of three years earlier to $2.86, and the company was carrying a debt load of $23 billion against market capitalization of only $3.2 billion. BusinessWeek reporters wrote, "If Dormann is over his head, then one of Europe's largest companies, with some $23 billion in sales and close to 150,000 employees, will probably be broken up" (February 10, 2003). When asked why, at the age of 62 and after a successful career with Hoechst, he had wanted to accept the job of trying to resurrect ABB, he replied without hesitation, "The way I was raised and trained, you don't runaway from a challenge" (February 10, 2003).
RESUSCITATING THE FALLEN
Dormann wasted no time in taking up that challenge. He wrote to his managers informing them that he no longer wanted to be inundated with flashy PowerPoint presentations when he asked for information; he wanted the facts, plain and simple. As quoted by Tomlinson, he wrote, "I don't want to be sold to when we are discussing real-life business issues within the company. I don't want self-promotion; I want someone to lay out the issues at hand so we can examine them and find solutions." Tomlinson noted: "It's a measure of ABB's dire straits that Dormann is losing his patience with those in the company who don't match his exacting standards" (November 18, 2002).
As he had done at Hoechst, Dormann focused. He had already sold off the structured-finance business for $2.3 billion, and in the following five months he identified ABB's high-producing areas and reorganized the previously sprawling corporation into two operating divisions: power and technology. He embarked upon a $1.3 billion cost-reduction program, filed for Chapter 11 bankruptcy for Combustion Engineering in order to protect the rest of the company from further litigation, and negotiated a $1.2 billion settlement that, if approved by all parties, would bring an end to the asbestos issue. By the end of the year he had reduced the company's debt by $1.5 billion, and the two core divisions combined showed 38 percent growth. However, net losses totaled $783 million—more than the $691 million of the year before that had primarily been due to the asbestos negotiations.
As quoted in the Guardian, ABB's finance director commented, "When I came here the debt mountain looked like the Himalayas to me. Now it's like the Matterhorn: still high, but it can and will be climbed"; in somewhat of an understatement Dormann attempted to reassure shareholders: "It's been a difficult year, but we've put the worst behind us. I am confident we can deliver on our growth targets and return to profitability in 2003" (February 28, 2003). Investors remained unconvinced, however, and share values dropped another 10 percent. Earlier in the year Dormann had indicated that the coming 12 to 18 months would determine whether ABB could remain independent; as seen by analysts, he had yet to improve the company's junk credit rating, sell the remainder of its noncore businesses, or boost the low revenue-per-employee ratio—all of which could lead to cuts of 30,000 jobs.
By February 2004, under Dormann's ongoing comeback plan, while ABB's worldwide workforce had been halved to 115,000, its two core units had turned in stronger-than-forecast returns, and the stock price had grown steadily, reaching $6.55. Despite a net loss of $767 million over 2003, first-quarter results in 2004 showed that Dormann's plan was taking effect: the company posted a net income of $4 million, as compared to the $388 million loss from the final quarter of 2003. Dormann said that 2003 was the company's turnaround year and that he expected to see continued growth through 2004. Indeed, in June 2004 ABB announced that it had won a bid worth upwards of $40 million to deliver process automation, drives, quality-control systems, electrification, and related services to China's Asia Pulp and Paper Company as well as a $390 million order to build a key power link to Shanghai from China's Three Gorges hydroelectric dam; the latter order was the world's largest power-transmission project in several years. As of June 2004 the company was still awaiting a ruling by the U.S. judge who had run the hearing over the asbestos issue; Dormann felt confident that his settlement proposal would be accepted.
Beneath his photograph on ABB's Web site, Dormann stated, "Two of ABB's enduring strengths are technology and the ability to innovate. These great assets are at the core of our customer relationships, and we should be proud of them." He announced that he would retire as CEO at the end of 2004 but would remain with ABB as chairman.
See also entry on Hoechst A.G. in International Directory of Company Histories.
sources for further information
"ABB Group Executive Committee," ABB Web site, http://www.abb.com/global/abbzh/abbzh251.nsf!OpenDatabase&db=/global/abbzh/abbzh252.nsf&v=76C6&.e=us&c=4E94D980FFFD6725C125670C003E0FAD.
Milner, Mark, "Asbestos Contributes to ABB's Record Loss," Guardian (UK), February 28, 2003.
Reed, Stanley, and Michael Arndt, "Work Your Magic, Herr Dormann ABB Faces Meltdown—So This CEO Isn't Wasting Any Time," February 10, 2003, BusinessWeek, p. 46.
Tomlinson, Richard, "Mission Impossible?" Fortune, November 18, 2002, p. 147.
—Marie L. Thompson