Table of Contents

As filed with the Securities and Exchange Commission on March 17, 2011

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 20-F


o

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010
OR
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-16429



ABB Ltd
(Exact name of registrant as specified in its charter)

Switzerland
(Jurisdiction of incorporation or organization)
Affolternstrasse 44
CH-8050 Zurich
Switzerland
(Address of principal executive offices)
Richard A. Brown
Affolternstrasse 44
CH-8050 Zurich
Switzerland
Telephone: +41-43-317-7111
Facsimile: +41-43-317-7992
(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)

          Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class   Name of each exchange on which registered
American Depositary Shares,
each representing one Registered Share
Registered Shares, par value CHF 1.03
  New York Stock Exchange

New York Stock Exchange*



          Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

          Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

          Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 2,283,464,611 Registered Shares



          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o

          If this is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o    No ý

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

          Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o

          Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ý International Financial Reporting Standards as issued by the International Accounting Standards Board o    Other o

          If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. item 17 o    item 18 o

          If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý


*
Listed on the New York Stock Exchange not for trading or quotation purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.


Table of Contents

TABLE OF CONTENTS

 
  Page

PART I

  3

Item 1. Identity of Directors, Senior Management and Advisers

 
3

Item 2. Offer Statistics and Expected Timetable

 
3

Item 3. Key Information

 
3

Item 4. Information on the Company

 
16

Item 4A. Unresolved Staff Comments

 
34

Item 5. Operating and Financial Review and Prospects

 
34

Item 6. Directors, Senior Management and Employees

 
80

Item 7. Major Shareholders and Related Party Transactions

 
97

Item 8. Financial Information

 
98

Item 9. The Offer and Listing

 
100

Item 10. Additional Information

 
101

Item 11. Quantitative and Qualitative Disclosures About Market Risk

 
114

Item 12. Description of Securities Other than Equity Securities

 
116

PART II

 
117

Item 13. Defaults, Dividend Arrearages and Delinquencies

 
117

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

 
117

Item 15. Controls and Procedures

 
117

Item 15T. Controls and Procedures

 
118

Item 16A. Audit Committee Financial Expert

 
118

Item 16B. Code of Ethics

 
118

Item 16C. Principal Accountant Fees and Services

 
118

Item 16D. Exemptions from the Listing Standards for Audit Committees

 
119

Item 16E. Purchase of equity securities by Issuer & Affiliated Purchases

 
119

Item 16F. Change in Registrant's Certifying Accountant

 
120

Item 16G. Corporate Governance

 
120

PART III

 
120

Item 17. Financial Statements

 
120

Item 18. Financial Statements

 
120

Item 19. Exhibits

 
121

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INTRODUCTION

        ABB Ltd is a corporation organized under the laws of Switzerland. In this Annual Report, "the ABB Group," "ABB," the "Company," "we," "our" and "us" refer to ABB Ltd and its consolidated subsidiaries (unless the context otherwise requires). We also use these terms to refer to ABB Asea Brown Boveri Ltd and its subsidiaries prior to the establishment of ABB Ltd as the holding company for the entire ABB Group in 1999, as described in this Annual Report under "Item 4. Information on the Company—Introduction—History of the ABB Group." Our American Depositary Shares (each representing one registered share of ABB Ltd) are referred to as "ADSs." The registered shares of ABB Ltd are referred to as "shares." Our principal corporate offices are located at Affolternstrasse 44, CH-8050 Zurich, Switzerland, telephone number +41-43-317-7111.

FINANCIAL AND OTHER INFORMATION

        ABB Ltd has prepared its statutory unconsolidated financial statements in accordance with the Swiss Code of Obligations. The Consolidated Financial Statements of ABB Ltd, including the notes thereto, as of December 31, 2010 and 2009 and for each of the years in the three-year period ended December 31, 2010 (our Consolidated Financial Statements) have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP).

        In this Annual Report: (i) "$," "U.S. dollar" and "USD" refer to the lawful currency of the United States of America; (ii) "CHF" and "Swiss franc" refer to the lawful currency of Switzerland; (iii) "EUR" and "euro" refer to the lawful currency of the participating member states of the European Economic and Monetary Union (Eurozone); (iv) "SEK" and "Swedish krona" refer to the lawful currency of Sweden; (v) "GBP" and "pound sterling" refer to the lawful currency of the United Kingdom; (vi) "Indian rupee" refers to the lawful currency of India; and (vii) "Chinese renminbi" refers to the lawful currency of the People's Republic of China.

        Except as otherwise stated, all monetary amounts in this Annual Report are presented in U.S. dollars. Where specifically indicated, amounts in Swiss francs have been translated into U.S. dollars. These translations are provided for convenience only, and they are not representations that the Swiss franc could be converted into U.S. dollars at the rate indicated. These translations have been made using the twelve o'clock buying rate in the City of New York for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York as of December 30, 2010, unless otherwise indicated. The twelve o'clock buying rate for Swiss francs on December 30, 2010 was $1.00 = CHF 0.9369. The twelve o'clock buying rate for Swiss francs on March 11, 2011 was $1.00 = CHF 0.9276.

FORWARD-LOOKING STATEMENTS

        This Annual Report includes forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes," "estimates," "anticipates," "expects," "intends," "may," "will," or "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Annual Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, dispositions, strategies and the countries and industries in which we operate.

        These forward-looking statements include, but are not limited to the following:

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        By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the countries and industries in which we operate, may differ materially from those described in or suggested by the forward-looking statements contained in this Annual Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the countries and industries in which we operate, are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from our expectations are contained in cautionary statements in this Annual Report and include, without limitation, the following:

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        We urge you to read the sections of this Annual Report entitled "Item 3. Key Information—Risk Factors," "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" for a more complete discussion of the factors that could affect our future performance and the countries and industries in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking circumstances described in this Annual Report and the assumptions underlying them may not occur.

        Except as required by law or applicable stock exchange rules or regulations, we undertake no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Annual Report.


PART I

Item 1.    Identity of Directors, Senior Management and Advisers

        Not applicable

Item 2.    Offer Statistics and Expected Timetable

        Not applicable

Item 3.    Key Information

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SELECTED FINANCIAL DATA

        The following table presents our selected financial and operating information at the dates and for each of the periods indicated. You should read the following information together with the information contained in "Item 5. Operating and Financial Review and Prospects," as well as our Consolidated Financial Statements and the Notes thereto, included elsewhere in this Annual Report.

        Our selected financial data are presented in the following tables in accordance with U.S. GAAP and have been derived from our published Consolidated Financial Statements. Our Consolidated Financial Statements as of and for each of the years ended December 31, 2010, 2009, 2008, 2007 and 2006 were audited by Ernst & Young AG.

INCOME STATEMENT DATA(1):

($ in millions, except per share data in $)
  2010   2009   2008   2007   2006  

Total revenues

    31,589     31,795     34,912     29,183     23,281  

Total cost of sales

    (22,060 )   (22,470 )   (23,972 )   (20,215 )   (16,537 )

Gross profit

    9,529     9,325     10,940     8,968     6,744  

Selling, general and administrative expenses

    (4,615 )   (4,491 )   (4,795 )   (4,104 )   (3,568 )

Non-order related research and development expenses

    (1,082 )   (1,037 )   (1,027 )   (871 )   (758 )

Other income (expense), net

    (14 )   329     (566 )   30     139  

Earnings before interest and taxes

    3,818     4,126     4,552     4,023     2,557  

Interest and dividend income

    95     121     315     273     147  

Interest and other finance expense(2)

    (173 )   (127 )   (349 )   (383 )   (307 )

Income from continuing operations before taxes and cumulative effect of accounting change

    3,740     4,120     4,518     3,913     2,397  

Provision for taxes

    (1,018 )   (1,001 )   (1,119 )   (595 )   (686 )

Income from continuing operations before cumulative effect of accounting change, net of tax

    2,722     3,119     3,399     3,318     1,711  

Income (loss) from discontinued operations, net of tax(3)

    10     17     (21 )   586     (142 )

Income before cumulative effect of accounting change, net of tax

    2,732     3,136     3,378     3,904     1,569  

Cumulative effect of accounting change, net of tax(2)

                (49 )    

Net income

    2,732     3,136     3,378     3,855     1,569  

Net income attributable to noncontrolling interests

    (171 )   (235 )   (260 )   (244 )   (179 )

Net income attributable to ABB

    2,561     2,901     3,118     3,611     1,390  

Amounts attributable to ABB shareholders:

                               
 

Income from continuing operations before cumulative effect of accounting change, net of tax

    2,551     2,884     3,142     3,083     1,544  
 

Net income

    2,561     2,901     3,118     3,611     1,390  

Basic earnings per share attributable to ABB shareholders:

                               
 

Income from continuing operations before cumulative effect of accounting change, net of tax

    1.12     1.26     1.37     1.37     0.73  
 

Net income

    1.12     1.27     1.36     1.60     0.65  

Diluted earnings per share attributable to ABB shareholders:

                               
 

Income from continuing operations before cumulative effect of accounting change, net of tax

    1.11     1.26     1.37     1.34     0.70  
 

Net income

    1.12     1.27     1.36     1.57     0.63  

Weighted-average number of shares outstanding (in millions) used to compute:

                               
 

Basic earnings per share attributable to ABB shareholders

    2,287     2,284     2,287     2,258     2,128  
 

Diluted earnings per share attributable to ABB shareholders

    2,291     2,288     2,296     2,308     2,248  

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BALANCE SHEET DATA(1):

 
  December 31,  
($ in millions)
  2010   2009   2008   2007   2006  

Cash and equivalents

    5,897     7,119     6,399     4,650     4,198  

Marketable securities and short-term investments

    2,713     2,433     1,354     3,240     351  

Total assets

    36,295     34,728     33,011     30,841     24,922  

Long-term debt

    1,139     2,172     2,009     2,138     3,160  

Total debt(4)

    2,182     2,333     2,363     2,674     3,282  

Capital stock and additional paid-in capital

    1,454     3,943     4,841     5,780     4,514  

Total stockholders' equity (including noncontrolling interests)

    15,458     14,473     11,770     11,549     6,489  

CASH FLOW DATA(1):

($ in millions)
  2010   2009   2008   2007   2006  

Net cash provided by operating activities

    4,197     4,027     3,958     3,054     1,939  

Net cash provided by (used in) investing activities

    (2,747 )   (2,172 )   114     (2,291 )   (694 )

Net cash used in financing activities

    (2,530 )   (1,349 )   (2,119 )   (625 )   (392 )

(1)
Certain amounts reported in prior years have been reclassified to conform to the current year's presentation. These changes primarily relate to the presentation of non-order related research and development expenses as a separate line in the Consolidated Income Statements and the reclassification from investing activities to financing activities in the Consolidated Statements of Cash Flows of cash paid for the acquisition of noncontrolling interests.

(2)
In 2009, we adopted a new accounting standard that changed the accounting for convertible debt instruments that contained cash settlement features. Although we did not have any convertible debt instruments outstanding at December 31, 2009, 2008 and 2007, we adopted the provisions of this new standard on a retroactive basis to January 1, 2007, as they related to our 1 billion Swiss francs 3.5% convertible bonds (issued 2003) fully converted by bondholders in 2007. The impact on our Consolidated Income Statement in 2007 was (i) a loss of $49 million from the effect of the accounting change and (ii) a loss of $97 million from the conversion of bonds and amortization of discount, recorded in "Interest and other finance expense". As permitted under this standard, we elected to apply the provisions of the standard only to those convertible instruments outstanding at any time during the periods presented in our Consolidated Financial Statements as of and for the each of the three years ended December 31, 2009. Consequently, the provisions of this standard have not been applied to the above selected financial data for 2006.

(3)
Income (loss) from discontinued operations, net of tax, included costs related to the asbestos obligations of our U.S. subsidiary Combustion Engineering Inc, as well as various other minor gains and losses related to business divestments. Income from discontinued operations in 2007 primarily related to the gain of $530 million realized on the sale of the downstream oil and gas business.

(4)
Total debt is equal to the sum of short-term debt (including current maturities of long-term debt) and long-term debt.

DIVIDENDS AND DIVIDEND POLICY

        Payment of dividends is subject to general business conditions, ABB's current and expected financial condition and performance and other relevant factors including growth opportunities. ABB's current dividend policy is to pay a steadily rising, sustainable annual dividend over time.

        Dividends may be paid only if ABB Ltd has sufficient distributable profits from previous fiscal years or sufficient free reserves to allow the distribution of a dividend. In addition, at least 5 percent of ABB Ltd's annual net profits must be retained and booked as legal reserves (which is comprised of ordinary reserves, capital contribution reserve and reserve for own shares), unless these reserves already amount to 20 percent of ABB Ltd's share capital. As a holding company, ABB Ltd's main sources of income are dividend and interest from its subsidiaries. At December 31, 2010, of the CHF 12,493 million of stockholders' equity recorded in the unconsolidated statutory financial

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statements of ABB Ltd prepared in accordance with Swiss law, CHF 2,378 million was attributable to share capital, CHF 4,425 million was attributable to the capital contribution reserve (approximately 90 percent of which are available for distribution), CHF 532 million was attributable to the reserve for own shares, and CHF 5,158 million represents net income and retained earnings available for distribution.

        ABB Ltd may only pay out a dividend if it has been proposed by a shareholder or the board of directors of ABB Ltd and approved at a general meeting of shareholders, and the auditors confirm that the dividend conforms to statutory law and the Articles of Incorporation of ABB Ltd. In practice, the shareholders' meeting usually approves dividends as proposed by the board of directors, if the board of directors' proposal is confirmed by the statutory auditors.

        Dividends are usually due and payable no earlier than three trading days after the shareholders' resolution, and when paid by way of a nominal value reduction after a two month period from public calls to creditors and certain subsequent actions as required under Swiss law. Dividends not collected within five years after the due date accrue to ABB Ltd and are allocated to its other reserves. For information about the deduction of withholding taxes from dividend payments, see "Item 10. Additional Information—Taxation."

        We have established a dividend access facility for shareholders who are resident in Sweden under which these shareholders may register with Euroclear Sweden AB, as a holder of up to 600,004,716 shares, and receive dividends in the Swedish kronor equivalent to the dividend paid in Swiss francs without deduction of Swiss withholding tax. For further information, see "Item 10. Additional Information—Taxation."

        Because ABB Ltd pays cash dividends, if any, in Swiss francs (subject to the exception for certain shareholders in Sweden described above), exchange rate fluctuations will affect the U.S. dollar amounts received by holders of ADSs upon conversion of those cash dividends by Citibank, N.A., the depositary, in accordance with the Amended and Restated Deposit Agreement dated May 7, 2001.

        With respect to the year ended December 31, 2006, ABB Ltd paid a dividend of CHF 0.24 (USD 0.20) per share. With respect to each of the years ended December 31, 2007 and 2008, ABB Ltd paid a dividend of CHF 0.48 (USD 0.46 for 2007 and USD 0.45 for 2008) and with respect to the year ended December 31, 2009, CHF 0.51 (USD 0.48 for 2009) per share. The dividends with respect to each of the years ended December 31, 2007, 2008 and 2009, were paid by way of a nominal value reduction (reduction in the par value of each share). The USD amounts for each of the foregoing dividend payments made in CHF have been translated using the average rates of the month in which the dividends were paid.

        With respect to the year ended December 31, 2010, ABB Ltd's board of directors has proposed to pay a dividend of CHF 0.60 per share out of the capital contribution reserve, subject to approval by shareholders at ABB's 2011 Annual General Meeting.

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RISK FACTORS

        You should carefully consider all of the information set forth in this Annual Report and the following description of risks and uncertainties that we currently believe may exist. Our business, financial condition or results of operations could be adversely affected by any of these risks. Additional risks of which we are unaware or that we currently deem immaterial may also impair our business operations. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those described below and elsewhere in this Annual Report. See "Forward-Looking Statements."

Our business is exposed to risks associated with the volatile global economic environment and political conditions.

        Adverse changes in economic or political conditions, both inside and outside the U.S., could have a material adverse effect on our business, financial condition, results of operations and liquidity. Volatility in the global financial markets continues to be at high levels. Volatile oil prices, equity market values, weakened consumer confidence, risks of increased inflation and deflation and increased unemployment rates have created fears of a severe recession. These disruptions may continue to have an ongoing adverse effect on the world economy. Continuing economic volatility and financial market disruptions may adversely impact the demand for our products and services. For example, the current lack of confidence and the shortage of credit in the financial markets may prevent our customers and suppliers from obtaining the financing required to pursue their business activities as planned, which may force them to modify, delay or cancel plans to purchase or supply our products or services. Payment terms, especially the level of advance payments in large orders, may become less favorable. In addition, if our customers do not generate sufficient revenue, or fail to obtain access to the capital markets, they may not be able to pay, or may delay payment of, the amounts they owe us. Customers with liquidity issues may lead to additional bad debt expense for us, which may adversely affect our results of operations and cash flows. We are also subject to the risk that the counterparties to our credit agreements and hedging transactions may go bankrupt if they suffer catastrophic demand on their liquidity that prevents them from fulfilling their contractual obligations to us.

        Apart from the effects of the credit crisis and the economic slowdown that it entailed, our business environment is influenced by numerous other economic or political uncertainties which will affect the global economy and the international capital markets. In periods of slow economic growth or decline, our customers are more likely to decrease expenditures on the types of products and systems we supply and we are more likely to experience decreased revenues as a result. Our power technology divisions are affected by the level of investments by utilities, and our automation technology divisions are affected by conditions in a broad range of industries, including the automotive, pharmaceutical, pulp and paper, marine, metals and minerals and manufacturing and consumer industries. At various times during the last several years, we also have experienced, and may experience in the future, gross margin declines in certain businesses, reflecting the effect of items such as competitive pricing pressures, inventory write-downs, charges associated with the cancellation of planned expansion, increases in pension and postretirement benefit expenses, and increases in component and manufacturing costs resulting from higher labor and material costs borne by our manufacturers and suppliers that, as a result of competitive pricing pressures or other factors, we are unable to pass on to our customers. Economic downturns also may lead to restructuring actions and associated expenses. Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments.

        In addition, we are subject to the risks that our business operations in or with certain countries, including those identified by the U.S. government as state sponsors of terrorism, may be adversely affected by trade or economic sanctions or other restrictions imposed on these countries and that

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actual or potential investors that object to these business operations may adversely affect the price of our shares by disposing of, or deciding not to, purchase our shares.

Illegal behavior by any of our employees or agents could have a material adverse impact on our consolidated operating results, cash flows, and financial position as well as on our reputation and our ability to do business.

        Certain of our employees or agents have taken, and may in the future take, actions that violate or are alleged to violate the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), legislation promulgated pursuant to the 1997 Organisation for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, applicable antitrust laws and other applicable laws or regulations. For more information regarding investigations of past actions taken by certain of our employees, see "Item 8. Financial Information—Legal Proceedings." Such actions have resulted, and in the future could result, in governmental investigations, enforcement actions and civil and criminal penalties, including monetary penalties and other sanctions. It is possible that any governmental investigation or enforcement action arising from such matters could conclude that a violation of applicable law has occurred and the consequences of any such investigation or enforcement action may have a material adverse impact on our consolidated operating results, cash flows and financial position. In addition, such actions, whether actual or alleged, could damage our reputation and ability to do business.

        Further, detecting, investigating and resolving such actions could be expensive and could consume significant time and attention of our senior management. While we are committed to conducting business in a legal and ethical manner, our internal control systems have not been, and in the future may not be, completely effective to prevent and detect such improper activities by our employees and agents.

Our operations in emerging markets expose us to risks associated with conditions in those markets.

        A significant amount of our operations is conducted in the emerging markets of Latin America, Asia, the Middle East and Africa. In 2010, approximately 50 percent of our consolidated revenues were generated from these emerging markets. Operations in emerging markets can present risks that are not encountered in countries with well-established economic and political systems, including:

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        Additionally, political and social instability resulting from increased violence in certain countries in which we do business has raised concerns about the safety of our personnel. These concerns may hinder our ability to send domestic personnel abroad and to hire and retain local personnel. Such concerns may require us to increase security for personnel traveling to such facilities or to conduct more operations from our other facilities rather than from facilities located in these political and socially unstable countries, which may negatively impact our operations and result in higher costs and inefficiencies.

        In addition, the legal and regulatory systems of many emerging market countries are less developed and less well-enforced than in industrialized countries. Therefore, our ability to protect our contractual and other legal rights in these countries could be limited. Consequently, our exposure to the conditions in or affecting emerging markets may adversely affect our business, financial condition, results of operations and liquidity.

Undertaking long-term, fixed price or turnkey projects exposes our businesses to risk of loss should our actual costs exceed our estimated or budgeted costs.

        We derive a portion of our revenues from long-term, fixed price or turnkey projects that are awarded on a competitive basis and can take many months, or even years, to complete. Such contracts involve substantial risks, including the possibility that we may underbid and the fact that we typically assume substantially all of the risks associated with completing the project and the post-completion warranty obligations. These risks include the project's technical risk, meaning that we must tailor our products and systems to satisfy the technical requirements of a project even though, at the time we are awarded the project, we may not have previously produced such a product or system. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from our original projections because of changes in conditions, including but not limited to:

        These risks are exacerbated if the duration of the project is extended because then there is an increased risk that the circumstances upon which we originally bid and quoted a price change in a manner that increases our costs. In addition, we sometimes bear the risk of delays caused by unexpected conditions or events. Our project contracts often make us subject to penalties if we cannot complete portions of the project in accordance with agreed-upon time limits and guaranteed performance levels.

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Our international operations expose us to the risk of fluctuations in currency exchange rates.

        Exchange rate fluctuations have had, and could continue to have, a material impact on our operating results, the comparability of our results between periods, the value of assets or liabilities as recorded on our Consolidated Balance Sheet and the price of our securities. The global financial crisis has led to increased volatility in exchange rates, which makes it harder to predict exchange rates and thus do accurate financial planning. Changes in exchange rates can unpredictably and adversely affect our consolidated operating results, and could result in exchange losses.

        Currency Translation Risk.    The results of operations and financial position of most of our non-U.S. companies are initially recorded in the currency, which we call "local currency," of the country in which the respective company resides. That financial information is then translated into U.S. dollars at the applicable exchange rates for inclusion in our Consolidated Financial Statements. The exchange rates between local currencies and the U.S. dollar can fluctuate substantially, which could have a significant translation effect on our reported consolidated results of operations and financial position.

        Increases and decreases in the value of the U.S. dollar versus local currencies will affect the reported value of our local currency assets, liabilities, revenues and costs in our Consolidated Financial Statements, even if the value of these items has not changed in local currency terms. These translations could significantly and adversely affect our results of operations and financial position from period to period.

        Currency Transaction Risk.    Currency risk exposure also affects our operations when our sales are denominated in currencies that are different from those in which our manufacturing or sourcing costs are incurred. In this case, if after the parties agree on a price, the value of the currency in which the price is to be paid were to weaken relative to the currency in which we incur manufacturing or sourcing costs, there would be a negative impact on the profit margin for any such transaction. This transaction risk may exist regardless of whether or not there is also a currency translation risk as described above.

        Currency exchange rate fluctuations in those currencies in which we incur our principal manufacturing expenses or sourcing costs may adversely affect our ability to compete with companies whose costs are incurred in other currencies. If our principal expense currencies appreciate in value against such other currencies, our competitiveness may be weakened.

Our hedging activities may not protect us against the consequences of significant fluctuations in exchange rates, interest rates or commodity prices on our earnings and cash flows.

        Our policy is to hedge material currency exposures by entering into offsetting transactions with third party financial institutions. Given the effective horizons of our risk management activities and the anticipatory nature of the exposures intended to be hedged, there can be no assurance that our currency hedging activities will fully offset the adverse financial impact resulting from unfavorable movements in foreign exchange rates. In addition, the timing of the accounting for recognition of gains and losses related to a hedging instrument may not coincide with the timing of gains and losses related to the underlying economic exposures.

        As a resource-intensive operation, we are exposed to a variety of market and asset risks, including the effects of changes in commodity prices and interest rates. We monitor and manage these exposures as an integral part of our overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially adverse effects on our business. Nevertheless, changes in commodity prices and interest rates cannot always be predicted or hedged.

        If we are unable to successfully manage the risk of changes in exchange rates, interest rates or commodity prices or if our hedging counterparties are unable to perform their obligations under our

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hedging agreements with them, then changes in these rates and prices could have an adverse effect on our financial condition and results of operations.

Increases in costs or limitation of supplies of raw materials may adversely affect our financial performance.

        We purchase large amounts of commodity-based raw materials, including steel, copper, aluminum, and oil. Prevailing prices for such commodities are subject to fluctuations due to changes in supply and demand and a variety of additional factors beyond our control, such as global political and economic conditions. Historically, prices for some of these raw materials have been volatile and unpredictable, and such volatility is expected to continue. Therefore, commodity price changes may result in unexpected increases in raw material costs, and we may be unable to increase our prices to offset these increased costs without suffering reduced volumes, revenues or operating income. We do not fully hedge against changes in commodity prices and our hedging procedures may not work as planned.

        We depend on third parties to supply raw materials and other components and may not be able to obtain sufficient quantities of these materials and components, which could limit our ability to manufacture products on a timely basis and could harm our profitability. For some raw materials and components, we rely on a single supplier or a small number of suppliers. If one of these suppliers were unable to provide us with a raw material or component we need, our ability to manufacture some of our products could be adversely affected until we are able to establish a new supply arrangement. We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if at all. If our suppliers are unable to deliver sufficient quantities of materials on a timely basis, the manufacture and sale of our products may be disrupted, we might have obligations under our performance guarantees and our sales and profitability could be materially adversely affected.

The weakening or unavailability of our intellectual property rights could adversely affect our business.

        Our intellectual property rights are fundamental to all of our businesses. We generate, maintain, utilize and enforce a substantial portfolio of trademarks, trade dress, patents and other intellectual property rights. We use our intellectual property rights to protect the goodwill of our products, promote our product recognition, protect our proprietary technology and development activities, enhance our competitiveness and otherwise support our business goals and objectives. However, there can be no assurance that the steps we take to obtain, maintain and protect our intellectual property rights will be adequate. Our intellectual property rights may fail to provide us with significant competitive advantages, particularly in foreign jurisdictions that do not have, or do not enforce, strong intellectual property rights. The weakening or unavailability of our trademarks, trade dress, patents and other intellectual property rights could adversely affect our business.

We operate in very competitive markets and could be adversely affected if we fail to keep pace with technological changes.

        We operate in very competitive environments in particular with respect to product performance, developing integrated systems and applications that address the business challenges faced by our customers, pricing, new product introduction time and customer service. The relative importance of these factors differs across the geographic markets and product areas that we serve. The markets for our products and services are characterized by evolving industry standards (particularly for our automation technology products and systems), rapidly changing technology and increased competition as a result of privatization (particularly for our power products and systems). For example, for a number of years, power transmission and distribution providers throughout the world have been undergoing substantial privatization. This has increased their need for timely product and service innovations that increase efficiency and allow them to compete in a deregulated environment. Additionally, the continual development of advanced technologies for new products and product

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enhancements is an important way in which we maintain acceptable pricing levels. If we fail to keep pace with technological changes in the industrial sectors that we serve, we may experience price erosion and lower margins.

        The principal competitors for our automation technology products, systems and services include Emerson, Honeywell, Invensys, Schneider and Siemens. We primarily compete with Areva, Schneider and Siemens in sales of our power technology products and systems. All of our primary competitors are sophisticated companies with significant resources that may develop products and services that are superior to our products and services or may adapt more quickly than we do to new technologies, industry changes or evolving customer requirements. We are also facing increased competition from competitors in emerging markets, which may give rise to increased pressure to reduce our prices. Our failure to anticipate or respond quickly to technological developments or customer requirements could adversely affect our business, results of operations, financial condition and liquidity.

Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our profitability and future prospects.

        We design, develop and manufacture technologically advanced and innovative products and services applied by our customers in a variety of environments. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and patent rights, labor, learning curve assumptions or materials and components could prevent us from achieving contractual requirements.

        In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen problems. Examples of unforeseen problems that could negatively affect revenue and profitability include premature failure of products that cannot be accessed for repair or replacement, problems with quality, country of origin, delivery of subcontractor components or services and unplanned degradation of product performance. Among the factors that may affect revenue and profits could be unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen problems, loss of follow-on work, and, in the case of certain contracts, repayment to the customer of contract cost and fee payments we previously received.

Industry consolidation could result in more powerful competitors and fewer customers.

        Competitors in the industries in which our business divisions operate are consolidating. In particular, the automation industry is undergoing consolidation that is reducing the number but increasing the size of companies that compete with us. As our competitors consolidate, they likely will increase their market share, gain economies of scale that enhance their ability to compete with us and/or acquire additional products and technologies that could displace our product offerings.

        Our customer base also is undergoing consolidation. Consolidation within our customers' industries (such as the marine and cruise industry, the automotive, aluminum, steel, pulp and paper, pharmaceutical industries and the oil and gas industry) could affect our customers and their relationships with us. If one of our competitors' customers acquires any of our customers, we may lose that business. Additionally, as our customers become larger and more concentrated, they could exert pricing pressure on all suppliers, including us. For example, in an industry such as power transmission, which historically has consisted of large and concentrated customers such as utilities, price competition can be a factor in determining which products and services will be selected by a customer.

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We are subject to environmental laws and regulations in the countries in which we operate. We incur costs to comply with such regulations, and our ongoing operations may expose us to environmental liabilities.

        Our operations are subject to U.S., European and other laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Our manufacturing facilities use and produce paint residues, solvents, metals, oils and related residues. We use petroleum-based insulation in transformers, polyvinylchloride (PVC) resin to manufacture PVC cable and chloroparaffin as a flame retardant. We have manufactured and sold, and we are using in some of our factories, certain types of transformers and capacitors containing polychlorinated biphenyls (PCBs). These are considered to be hazardous substances in many jurisdictions in which we operate. We may be subject to substantial liabilities for environmental contamination arising from the use of such substances. All of our manufacturing operations are subject to ongoing compliance costs in respect of environmental matters and the associated capital expenditure requirements.

        In addition, we may be subject to significant fines and penalties if we do not comply with environmental laws and regulations including those referred to above. Some environmental laws provide for joint and several strict liability for remediation of releases of hazardous substances, which could result in us incurring a liability for environmental damage without regard to our negligence or fault. Such laws and regulations could expose us to liability arising out of the conduct of operations or conditions caused by others, or for our acts which were in compliance with all applicable laws at the time the acts were performed. Additionally, we may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. Changes in the environmental laws and regulations, or claims for damages to persons, property, natural resources or the environment, could result in substantial costs and liabilities to us.

We may be the subject of product liability claims.

        We may be required to pay for losses or injuries purportedly caused by the design, manufacture or operation of our products and systems. Additionally, we may be subject to product liability claims for the improper installation of products and systems designed and manufactured by others.

        Product liability claims brought against us may be based in tort or in contract, and typically involve claims seeking compensation for personal injury or property damage. If the claimant runs a commercial business, claims are often made also for financial losses arising from interruption of operations. Based on the nature and application of many of the products we manufacture, a defect or alleged defect in one of these products could have serious consequences. For example:

        If we were to incur a very large product liability claim, our insurance protection might not be adequate or sufficient to cover such a claim in terms of paying any awards or settlements, and/or paying for our defense costs. Further, some claims may be outside the scope of our insurance coverage. If a litigant were successful against us, a lack or insufficiency of insurance coverage could result in an adverse effect on our business, financial condition, results of operations and liquidity. Additionally, a

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well-publicized actual or perceived problem could adversely affect our market reputation which could result in a decline in demand for our products.

We may encounter difficulty in managing our business due to the global nature of our operations.

        We operate in approximately 100 countries around the world and, as of December 31, 2010, employed approximately 116,500 people. As of December 31, 2010, approximately 50 percent of our employees were located in Europe, approximately 15 percent in the Americas, approximately 27 percent in Asia and approximately 8 percent in the Middle East and Africa. In order to manage our day-to-day operations, we must overcome cultural and language barriers and assimilate different business practices. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with the laws of multiple countries. We also must communicate and monitor group-wide standards and directives across our global network. Our failure to manage successfully our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with group-wide standards and procedures.

If we are unable to obtain performance and other guarantees from financial institutions, we may be prevented from bidding on, or obtaining, some contracts, or our costs with respect to such contracts could be higher.

        In the normal course of our business and in accordance with industry practice, we provide a number of guarantees including bid-bonds, advance payment guarantees and performance guarantees, which guarantee our own performance. These guarantees may include guarantees that a project will be completed or that a project or particular equipment will achieve defined performance criteria. If we fail to attain the defined criteria, we must make payments in cash or in kind. Performance guarantees frequently are requested in relation to large projects in our core power and automation businesses.

        Some customers require that performance guarantees be issued by a financial institution. In considering whether to issue a guarantee on our behalf, financial institutions consider our credit ratings. In addition, the global financial crisis has made it more difficult and expensive to obtain these guarantees. If, in the future, we cannot obtain such a guarantee from a financial institution on reasonable terms, we could be prevented from bidding on, or obtaining, some contracts, or our costs with respect to such contracts could be higher, which would reduce the profitability of the contracts. If we cannot obtain guarantees on commercially reasonable terms from financial institutions in the future, there could be a material impact on our business, financial condition, results of operations or liquidity.

Examinations by tax authorities and changes in tax regulations could result in lower earnings and cash flows.

        We operate in approximately 100 countries and therefore are subject to different tax regulations. Changes in tax law could result in higher tax expense and payments. Furthermore, this could materially impact our tax receivables and liabilities as well as deferred tax assets and deferred tax liabilities. In addition, the uncertainty of tax environment in some regions could limit our ability to enforce our rights. As a globally operating organization, we conduct business in countries subject to complex tax rules, which may be interpreted in different ways. Future interpretations or developments of tax regimes may affect our tax liability, return on investments and business operations. We are regularly examined by tax authorities in various jurisdictions.

If we are unable to attract and retain qualified management and personnel then our business may be adversely affected.

        Our success depends in part on our continued ability to hire, assimilate and retain our highly qualified personnel, particularly our senior management team and key employees. Competition for highly qualified management and technical personnel remains intense in the industries and regions in

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which we operate. If we are unable to attract and retain members of our senior management team and key employees this could have an adverse effect on our business.

Anticipated benefits of mergers, acquisitions, joint ventures or strategic alliances may not be realized.

        As part of our overall strategy, we may, from time to time, merge with or acquire businesses or interests in businesses, including noncontrolling interests, or form joint ventures or create strategic alliances. Whether we realize the anticipated benefits from these transactions depends, in part, upon the integration between the businesses involved, the performance and development of the underlying products, capabilities or technologies, our correct assessment of assumed liabilities and the management of the transacted operations. Accordingly, our financial results could be adversely affected from unanticipated performance and liability issues, transaction-related charges, amortization related to intangibles, charges for impairment of long-term assets and partner performance. Although we believe that we have established appropriate and adequate procedures and processes to identify and mitigate these risks, there is no assurance that these transactions will be successful.

We could be affected by future laws or regulations enacted to address climate change concerns as well as the physical effects of climate change.

        Although we do not believe existing or pending laws and regulations intended to address climate change concerns will materially adversely affect our current business or operations, such laws and regulations could materially affect us in the future. We may need to incur additional costs to comply with these laws and regulations. We could also be affected indirectly by increased prices for goods or services provided to us by companies that are directly affected by these laws and regulations and pass their increased costs through to their customers. At this time, we cannot estimate what impact such costs may have on our business, results of operations or financial condition. We could also be affected by the physical consequences of climate change itself, although we cannot estimate what impact those consequences might have on our business or operations.

Increased information technology (IT) security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, solutions and services.

        We have observed a global increase in IT security threats and more sophisticated and targeted computer crime, which pose a risk to the security of systems and networks and the confidentiality, availability and integrity of our data. While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems such as firewalls and virus scanners, our systems, networks, products, solutions and services remain potentially vulnerable to attacks. Depending on their nature and scope, such attacks could potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and supply shortages, which in turn could adversely affect our reputation, competitiveness and results of operations.

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Item 4.    Information on the Company

INTRODUCTION

About ABB

        We are a global leader in power and automation technologies aimed at improving performance and lowering the environmental impact for our utility and industrial customers. We provide a broad range of products, systems, solutions and services that are designed to improve power grid reliability, increase industrial productivity and enhance energy efficiency. Our power businesses focus on power transmission, distribution and power-plant automation and serve electric, gas and water utilities, as well as industrial and commercial customers. Our automation businesses serve a full range of industries with measurement, control, protection and process optimization applications.

History of the ABB Group

        The ABB Group was formed in 1988 through a merger between Asea AB and BBC Brown Boveri AG. Initially founded in 1883, Asea AB was a major participant in the introduction of electricity into Swedish homes and businesses and in the development of Sweden's railway network. In the 1940s and 1950s, Asea AB expanded into the power, mining and steel industries. Brown Boveri and Cie. (later renamed BBC Brown Boveri AG) was formed in Switzerland in 1891 and initially specialized in power generation and turbines. In the early to mid 1900s, it expanded its operations throughout Europe and broadened its business operations to include a wide range of electrical engineering activities.

        In January 1988, Asea AB and BBC Brown Boveri AG each contributed almost all of their businesses to the newly formed ABB Asea Brown Boveri Ltd, of which they each owned 50 percent. In 1996, Asea AB was renamed ABB AB and BBC Brown Boveri AG was renamed ABB AG. In February 1999, the ABB Group announced a group reconfiguration designed to establish a single parent holding company and a single class of shares. ABB Ltd was incorporated on March 5, 1999, under the laws of Switzerland. In June 1999, ABB Ltd became the holding company for the entire ABB Group. This was accomplished by having ABB Ltd issue shares to the shareholders of ABB AG and ABB AB, the two companies that formerly owned the ABB Group. The ABB Ltd shares were exchanged for the shares of those two companies, which, as a result of the share exchange and certain related transactions, became wholly-owned subsidiaries of ABB Ltd. ABB Ltd shares are currently listed on the SIX Swiss Exchange, the NASDAQ OMX Stockholm Exchange and the New York Stock Exchange (in the form of American Depositary Shares).

Organizational structure

        Our business is international in scope and we generate revenues in numerous currencies. We operate in approximately 100 countries and have structured our global organization into four regions: Europe, the Americas, Asia, and the Middle East and Africa (MEA). We are headquartered in Zurich, Switzerland.

        We manage our business based on a divisional structure. As of January 1, 2010, our automation divisions—primarily the former Automation Products and Robotics divisions—were reorganized to align their activities more closely with those of our customers, in order to better capture growth opportunities in service, expand our presence in the discrete manufacturing sector and better respond to the increasing demand for energy efficient solutions. Under the realignment, the Automation Products division and the Robotics division were regrouped into two new divisions—the Discrete Automation and Motion division and the Low Voltage Products division. The Process Automation division remained unchanged except for the addition of the instrumentation business from the Automation Products division. Consequently, in 2010, our business comprised five divisions: Power Products, Power Systems, Discrete Automation and Motion, Low Voltage Products and Process Automation. For a breakdown of our consolidated revenues (i) by operating division and (ii) derived

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from each geographic region in which we operate, see "Item 5. Operating and Financial Review and Prospects—Analysis of Results of Operations—Revenues."

        Our principal corporate offices are located at Affolternstrasse 44, CH-8050 Zurich, Switzerland, telephone number +41-43-317-7111. Our agent for U.S. federal securities law purposes is ABB Holdings Inc., located at 12040 Regency Parkway, Suite 200, Cary, North Carolina 27518.

BUSINESS DIVISIONS

Industry Background

        Our five divisions operate across two key markets: the power market and the automation market. Revenue figures presented in this Business Divisions section are before interdivisional eliminations.

        The power market uses products, systems and services designed primarily to deliver electricity. Electricity is generated in power stations and is then fed into an electricity grid, through which it is transmitted and distributed to consumers. The parts of an electricity grid that operate at the highest voltages (110 kilovolts and above) are "transmission" systems, while those that operate at lower voltages (below 110 kilovolts) are "distribution" systems. Transmission systems link power generation sources to distribution systems, often over long distances. Distribution systems then branch out over shorter distances to carry electricity from the transmission system to end users. These electricity networks incorporate sophisticated devices to control and monitor operations and to prevent damage from failures or stresses.

        The primary demand drivers in the power market are the growing need for reliable electricity supplies to support economic growth in all parts of the world, and the global climate change challenge which has created increased demand for renewable energy and high-efficiency power systems and equipment. Additional drivers vary by region. In North America the focus is on replacing aged infrastructure and improving grid reliability. In Europe the focus is on replacing aged infrastructure, integrating renewable energy sources, such as wind power, into existing grids, and connecting grids between countries to allow energy trading and more efficient use of existing power generation capacity. In both North America and in Europe, improving energy efficiency also stimulates power investment. In the Middle East, a high level of investments is driven by large infrastructure projects and the related need for electricity. In emerging markets, including most parts of Asia, there is a need for electricity grid increases to cope with rising energy needs.

        Furthermore, as more disturbance-sensitive loads, such as data processing and telecommunications, have been added to networks, demand has increased for reliable, high-quality electricity and technologies that allow utility customers, for example, to automate their grids, service their power assets remotely, measure and process consumption and load data and store electrical energy to compensate power outages. Power suppliers can achieve this efficiency and reliability in a number of ways, including the following:

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        We strive to meet these customer needs through our two power divisions—Power Products and Power Systems—which are discussed in more detail below.

        The automation market uses products, systems and services designed primarily to improve product quality, energy efficiency and productivity in industrial and manufacturing applications. The automation market can be divided into three sectors:

        Our three automation divisions—Process Automation, Discrete Automation and Motion, and Low Voltage Products—serve these markets through a global production, engineering and service base. These divisions are discussed in more detail below.

Power Products Division

        Our Power Products division primarily serves electric utilities, as well as gas and water utilities and industrial and commercial customers, with a broad range of products and services to facilitate power generation, transmission and distribution. Direct sales account for a majority of the division's total product sales, and sales through external channel partners, such as wholesalers, distributors and original equipment manufacturers (OEMs), account for the remainder. Key technologies include high- and medium-voltage switchgear, circuit breakers for a range of current ratings and voltage levels, power, distribution, traction and other special transformers, as well as products to help control electrical networks. The division had approximately 32,500 employees as of December 31, 2010 and generated $10.2 billion of revenues in 2010.

        Our Power Products division manufactures products that can be placed in three broad categories: high-voltage products, medium-voltage products and transformers. The division sells primarily to utilities and also through channels such as distributors, wholesalers, installers and OEMs. Some of the division's products are also integrated into the turnkey offerings of the Power Systems and Process Automation divisions or sold through engineering, procurement and construction (EPC) firms.

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        The transformers business of the division designs and manufactures power transformers (72.5 to 1,000 kilovolts) for utility and industrial customers as well as transformer components and insulation material, such as bushings and tap changers. Generator transformers are used in power generation to increase power voltage from a power plant and enable transmission over long-distances with low losses. It also manufactures a wide range of distribution transformers (up to 72.5 kilovolts) for use in the power distribution sector, industrial facilities and commercial buildings. These transformers are designed to step down electrical voltage bringing it to consumption levels. They can be oil or dry-type and, although oil-type transformers are more commonly used, demand for dry-type transformers is growing because they minimize fire hazards and have applications in high-density office buildings, windmills, offshore drilling platforms, marine vessels and large industrial plants. The business also produces traction transformers for use in electric locomotives and other special application transformers. It also offers a wide range of service and retrofit solutions for utilities and industry customers.

        The high voltage products business provides high-voltage equipment, ranging from 50 to 1,000 kilovolts, mainly to serve power transmission utilities. This equipment primarily enables the transmission grid to operate more reliably and efficiently, minimizing environmental impact at the same time—all significant focus areas for our customers and the power sector. As part of its portfolio, this business designs and manufactures a range of air- and gas-insulated switchgear, capacitors, high-voltage circuit breakers, surge arresters, instrument transformers, cable accessories and a variety of high voltage components.

        The medium-voltage business offers products and solutions that largely serve the power distribution sector, often serving as the link between high voltage transmission systems and lower voltage users. Medium-voltage products help utility and industrial customers to improve power quality and control, reduce outage time and enhance operational reliability and efficiency. This business reaches customers directly and through distributors and OEMs with a comprehensive line of medium-voltage equipment (1 to 50 kilovolts), including products such as indoor and outdoor circuit breakers, reclosers, fuses, contactors, instrument transformers, sensors, motor control centers, ring main units for primary and secondary distribution, as well as a range of air- and gas-insulated switchgear. It also produces indoor and outdoor modular systems and other solutions to facilitate power distribution.

        The Power Products division's principal customers are electric utilities. This includes owners and operators of power generating plants as well as power transmission and distribution networks. Other customers include gas, water and other utilities and industrial and commercial customers, including operators of heavy industrial plants and large commercial buildings.

        The Power Products division sells its products individually and as part of larger systems through our Power Systems and Process Automation divisions. Direct sales account for a majority of the division's business but a significant amount of products also go through external channel partners, such as wholesalers, distributors, system integrators, EPCs and OEMs. As the Power Products and Power Systems divisions share many of the same customers and technologies and are influenced by similar market drivers, they also have a common front-end sales organization that helps maximize market synergies across countries and regions.

        On a global basis, the main competitors for the Power Products division are Siemens, Alstom (which also includes the former transmission portfolio of Areva), and Schneider Electric (which also includes the former distribution portfolio of Areva). The division also faces global competition specific

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to particular products from South Korean, Chinese, Indian and Brazilian companies. It also competes in specific geographies with companies such as Cooper, Eaton Corporation, Hyundai, Hyosung, Crompton Greaves, Larsen and Toubro, and Bharat Heavy Electricals.

        The Power Products division's capital expenditures for property, plant and equipment totaled $200 million in 2010, compared to $272 million and $305 million in 2009 and 2008, respectively. Principal investments in 2010 were in China, Sweden, Germany and the Unites States. Geographically, in 2010, Europe represented 52 percent of the capital expenditures, followed by Asia (20 percent), the Americas (20 percent) and the Middle East and Africa (8 percent).

Power Systems Division

        Our Power Systems division serves utilities, industrial and commercial customers with system solutions and services for the generation, transmission and distribution of electricity. Turnkey solutions include power plant electrification and automation, bulk power transmission, substations and network management. The division had approximately 17,300 employees in more than 80 countries as of December 31, 2010 and generated $6.8 billion of revenues in 2010.

        Our Power Systems division delivers solutions through four businesses: power generation, grid systems, substations and network management, primarily serving utilities and EPC companies. The scope of work in a typical turnkey contract includes design, system engineering, supply, installation, commissioning and testing of the system. As part of the business model, the Power Systems division integrates products from both the Power Products division and external suppliers.

        Our power generation business is a leading provider of integrated power and automation solutions for all types of power generation plants, including coal, gas, combined-cycle, nuclear, waste-to-energy and a range of renewables including hydro, solar, and bio-mass. With an extensive offering that includes electrical balance of plant and instrumentation and control systems, ABB technologies help optimize performance, improve reliability, enhance efficiency and minimize environmental impact throughout the plant life-cycle. The business also serves the water industry, including applications such as pumping stations and desalination plants.

        As part of the grid systems business, ABB provides a comprehensive offering of alternating current (AC) and direct current (DC) transmission systems, which help customers to reduce transmission losses, maximize efficiency and improve grid reliability. ABB pioneered HVDC (high-voltage direct current) technology more than 50 years ago. HVDC technology is designed for high-efficiency power transmission via overhead transmission lines and underground or submarine cables. HVDC is also widely used for grid interconnections. HVDC Light®, a more compact form of ABB's classic HVDC technology, is ideal for linking offshore installations, such as wind farms or oil and gas platforms, to mainland grids. It is used to overcome limitations of distance and grid incompatibility, while ensuring robust performance and minimal electrical losses. The environmental benefits of HVDC Light®, include neutral electromagnetic fields, oil-free cables and compact converter stations.

        Also part of the grid systems offering, FACTS (flexible alternating current systems) technologies improve power quality and can significantly increase the capacity of existing AC transmission lines—by as much as 50 percent—while maintaining or improving the system's reliability. FACTS technologies also boost transmission efficiency, relieve bottlenecks and can be used for the safe integration of unpredictable power sources, such as wind and solar, into the grid. By enhancing the capacity of existing transmission infrastructure, FACTS solutions can alleviate the need for capital investment, reducing the time, cost and environmental impact associated with the construction of new generating

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facilities and transmission lines. By improving efficiency, FACTS technologies help to deliver more power to consumers, reducing the need for more electricity generation, improving power supply and quality. ABB has more than 700 FACTS installations in operation or under construction around the world.

        ABB also offers a comprehensive range of land and submarine cables through its grid systems business, as well as accessories and services for a range of applications from medium- to high-voltage AC and DC systems. The portfolio includes high-performance XLPE (cross-linked polyethylene) insulated cables for high efficiency transmission systems at voltages up to 500 kilovolts. ABB has delivered more than 7,000 kilometers of XLPE cables for voltages in excess of 100 kilovolts for projects around the world. When it comes to transmission grid solutions, ABB manufactures its own power semiconductors, which is a key enabler for HVDC, FACTS and other technologies, serving a range of industries including transportation and wind.

        Substations are key installations in the power grid that facilitate the efficient transmission and distribution of electricity. They perform the vital function of monitoring and controlling power flows, feeding power from generating stations into the grid and providing the link between transmission and distribution networks as well as end consumers. ABB has successfully delivered air- and gas-insulated substations in all kinds of environments, from deserts and mountains to offshore rigs and crowded city centers. ABB's substation automation offering is compliant with IEC 61850, the open communication standard, which provides a common framework for substation control and protection and facilitates interoperability across devices and systems. ABB's substation offering covers a range of voltage levels up to 1,100 kilovolts.

        ABB's network management business offers solutions to help manage power networks. The offering covers network management and utility communications solutions to monitor, control, operate and protect power systems. These solutions are designed to ensure the reliability of electricity supplies and enable real-time management of power plants, transmission grids, distribution networks and energy trading markets. The portfolio includes control and protection systems for power generation, transmission and distribution, supervisory control and data acquisition (SCADA) systems, as well as software solutions for central electricity markets and mixed utilities (electricity, district heating, gas and water). The portfolio also includes wireless and fixed communication systems for power, water and gas utilities, including both operational and corporate communication networks. It includes fiber optics, microwave radio and power line applications for data networking and broadband network management, as well as teleprotection and substation communication networks and voice switching management systems.

        Network management systems are a key smart-grid component enabling highly automated power systems to incorporate and manage centralized and distributed power generation, intermittent sources of renewable energy, real-time pricing and load-management data. With the recent addition of Ventyx, ABB provides an end-to-end software offering in addition to a comprehensive range of operational technologies—a valuable combination for the development of smart grids.

        In addition, the Power Systems division offers a range of services aimed at optimizing operations and reducing maintenance requirements of customers, across the value chain. These services range from support agreements and retrofits to spare parts, service, consulting and training. The division also undertakes analyses and design of new transmission and distribution systems as well as asset optimization based on technical, economic and environmental considerations.

        The Power Systems division's principal customers include power generation utilities and companies, transmission and distribution utilities, owners and operators as well as industrial and commercial customers. Other customers include gas and water utilities including multi-utilities, which are involved in the transmission or distribution of more than one commodity.

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        The Power Systems division sells its offering primarily through a direct sales force of specialized sales engineering teams. Some sales are also handled through third-party channels, such as EPC firms, OEMs and system integrators. As the Power Products and Power Systems divisions share many of the same customers and technologies and are influenced by similar market drivers, they also have a common front-end sales organization that helps maximize market synergies across countries and regions.

        On a global basis, the Power Systems division faces competition mainly from Siemens and Alstom (which also includes the former transmission portfolio of Areva). Emerson Electric, General Electric and Invensys are additional competitors seen in parts of the business. The division also faces competitors from emerging countries in specific regions.

        The Power Systems division's capital expenditures for property, plant and equipment totaled $119 million in 2010, compared to $131 million and $89 million in 2009 and 2008, respectively. Principal investments in 2010 were related to capacity expansion in our semiconductor and cable facilities in Switzerland and Sweden, respectively, primarily related to machinery and equipment. Geographically, in 2010, Europe represented 87 percent of the capital expenditures, followed by the Middle East and Africa (6 percent), the Americas (5 percent) and Asia (2 percent).

Discrete Automation and Motion Division

        The Discrete Automation and Motion division's offering covers a wide range of products and services including drives, motors, generators, power electronics systems, rectifiers, power quality products, photovoltaic inverters, programmable logic controllers (PLCs), and robots. These products help customers to improve productivity, save energy, improve quality, and generate energy from renewable sources. Key applications include energy conversion, data acquisition and processing, actuation, automation, standardized manufacturing cells for applications such as machine tending, welding, cutting, painting, finishing and packing, and engineered systems for the automotive industry. The majority of these applications are for industrial applications, with others provided for building construction, rail transportation, and utilities. The division also provides a full range of life-cycle services, from product and system maintenance to system design, including energy appraisals and preventive maintenance services.

        Revenues are generated both from direct sales to end users as well as from indirect sales through distributors, machine builders and OEMs, system integrators, and panel builders.

        The Discrete Automation and Motion division had approximately 18,300 employees worldwide as of December 31, 2010, and generated $5.6 billion of revenues in 2010 through sales activities in more than 100 countries. In January 2011, ABB completed the acquisition of Baldor Electric Company (Baldor), a North American leader in industrial motors, based in Fort Smith, Arkansas, U.S.A. Baldor, which is being integrated into the Discrete Automation and Motion division, reported net sales in 2009 of approximately $1.5 billion and employed approximately 7,000 people.

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        The Discrete Automation and Motion division provides low-voltage and medium-voltage AC drive products and systems for industrial, commercial and residential applications. Drives provide motion and torque while adding control and efficiency to equipment such as fans, pumps, compressors, conveyors, kilns, centrifuges, mixers, hoists, cranes, extruders, printing machinery and textile machines. Our drives are used in the building automation, marine, power, transportation and manufacturing industries, among others.

        The division also produces a range of power electronics products. These include static excitation and synchronizing systems that provide stability for power stations, as well as high power rectifiers that convert AC power to DC power for very high-amperage applications such as furnaces in zinc plants and aluminum and magnesium smelters. The division also manufactures frequency converters that use semiconductor technology to convert electrical power into the type and frequency required by individual customers.

        Further, the division supplies a comprehensive range of electrical motors and generators, including high-efficiency motors that conform to leading environmental and efficiency standards. Efficiency is an important criterion for selection by customers, because electric motors account for nearly two-thirds of the electricity consumed by industrial plants. The Discrete Automation and Motion division manufactures synchronous motors for the most demanding applications and a full range of low and high-voltage induction motors.

        The Discrete Automation and Motion division offers robot products, systems and services for the automotive manufacturers and their sub-suppliers as well as for general manufacturing industries, to improve product quality, productivity and consistency in manufacturing processes. Robots are also used in inhospitable environments which may be hazardous to employee health and safety, such as repetitive lifting, cold rooms or painting booths. In the automotive industry, the robot products and systems are used in such areas as press shop, body shop, paint shop, power train assembly, trim and final assembly. General industry segments in which robotics solutions are used range from metal fabrication, foundry, plastics, food and beverage, chemicals and pharmaceuticals to consumer electronics, solar and wood. Typical general industry applications include welding, material handling, painting, picking, packing and palletizing.

        The division also offers services that complement its products, including design and project management, engineering, installation, training and life-cycle care, energy appraisals and preventive maintenance.

        The Discrete Automation and Motion division serves a wide range of customers. Customers include machinery manufacturers, process industries such as pulp and paper, oil and gas and metals and mining companies, rail equipment manufacturers, discrete manufacturing companies, utilities and renewable energy suppliers, particularly in the wind and solar sectors, as well as customers in the automotive industry.

        Sales are made both through direct sales forces as well as through third-party channel partners, such as distributors, wholesalers, installers, machine builders and OEMs, system integrators, and panel builders. The proportion of direct sales compared to channel partner sales varies among the different industries, product technologies and geographic markets.

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        The Discrete Automation and Motion division's principal competitors vary by product line but include Alstom, Fanuc Robotics, Kuka Robot Group, Rockwell, Schneider, Siemens, Yaskawa, and WEG Industries.

        The Discrete Automation and Motion division's capital expenditures for property, plant and equipment totaled $98 million in 2010, compared to $119 million and $148 million in 2009 and in 2008, respectively. Principal investments in 2010 were primarily related to ongoing replacements of machinery and equipment, mainly in China and Finland. Geographically, in 2010, Europe represented 60 percent of the capital expenditures, followed by Asia (26 percent), the Middle East and Africa (9 percent) and the Americas (5 percent).

Low Voltage Products Division

        The Low Voltage Products division helps customers to improve productivity, save energy and increase safety. The division offers a wide range of products and systems, with related services, that provide protection, control and measurement for electrical installations, enclosures, switchboards, electronics and electromechanical devices for industrial machines and plants. The main applications are in industry, building, infrastructures, rail and sustainable transportation, renewable energies and e-mobility applications.

        The Low Voltage Products division had approximately 19,800 employees worldwide as of December 31, 2010, and generated $4.6 billion of revenues in 2010 through sales activities in more than 100 countries.

        A majority of the division's revenues comes from sales through distributors, wholesalers, OEMs, system integrators, and panel builders, although a portion of the division's revenues comes from direct sales to end users and utilities.

        The Low Voltage Products division offering covers a wide range of products and services including low voltage switchgears, breakers, switches, control products, DIN-rail components, automation and distribution enclosures, wiring accessories and installation material for any kind of application.

        The division offers solutions for restoring service rapidly in case of a fault and providing optimum protection of the electrical installation. The product offering ranges from miniature circuit-breakers to high-capacity molded-case and air circuit-breakers, and includes safety switches used for power distribution in factories and buildings, fuse gear systems for short circuit and overload protection as well as cabling and connection components.

        The Low Voltage Products division also offers terminal blocks and printed circuit board connectors used by panel builders and OEMs to produce standard distribution and control panels as well as specialized applications in industries such as traction, energy, maritime, explosive atmospheres or electronics. In addition, the division offers a range of contactors, soft starters, starters, proximity sensors, safety products for industrial protection, limit switches, manual motor starters, along with electronic relays and overload relays.

        The division provides smart home and intelligent building control systems, also known as KNX protocol, a complete system for all energy reducing building application areas such as lighting and

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shutters, heating, ventilation, cooling and security. In addition, the division's IEC (International Electrotechnical Commission) and NEMA (National Electrical Manufacturers Association) compliant switchgear technology integrates intelligent motor and feeder control solutions to enhance protection, digital control, condition monitoring and plant wide data access by process control systems, electrical control systems and other plant computers.

        The Low Voltage Products Division has also developed a range of products for new markets, such as those used by electric vehicles (e-mobility) and in photovoltaic, solar and wind applications. These include energy meters, switch-disconnectors, residual current-operated circuit-breakers, interface relays and other products designed for outdoor installation.

        The Low Voltage Products division serves a wide range of customers, including residential and commercial building contractors, process industries, rail equipment manufacturers, manufacturing companies, utilities and renewable energy suppliers, particularly in the wind and solar sectors.

        Sales are made both through direct sales forces as well as through third-party channel partners, such as distributors, wholesalers, installers, machine builders and OEMs, system integrators, and panel builders. The proportion of direct sales compared to channel partner sales varies among the different industries, product technologies and geographic markets.

        The Low Voltage Products division's principal competitors vary by product line but include Eaton Corporation, Legrand, Mitsubishi, Schneider, Siemens, Leviton and Rittal.

        The Low Voltage Products division's capital expenditures for property, plant and equipment totaled $100 million in 2010, compared to $150 million and $174 million in 2009 and 2008, respectively. Principal investments in 2010 included replacement of existing equipment in Germany and Italy and capacity expansion in China. Geographically, in 2010, Europe represented 72 percent of the capital expenditures, followed by Asia (20 percent), the Middle East and Africa (7 percent) and the Americas (1 percent).

Process Automation Division

        The Process Automation division provides products, systems, and services for the automation and optimization of industrial processes. Our main offerings are process automation, plant electrification and quality control systems, analytical measurement devices, turbochargers and marine propulsion systems. Our key end markets are the oil and gas, pulp and paper, metals and minerals, chemicals and pharmaceuticals, turbocharging and marine industries. The division had approximately 26,700 employees as of December 31, 2010, and generated revenues of $7.4 billion in 2010.

        The Process Automation division offers its products both as separately sold devices and as part of a total automation system. Our technologies are marketed both through direct sales forces and third party channels.

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        The Process Automation division offers integrated process control and instrumentation systems, plant electrification systems, information management systems and industry-specific application knowledge for a variety of industries, primarily pulp and paper, minerals and mining, metals, chemicals and pharmaceuticals, oil and gas, turbocharging, power and the marine industry. Some of the Discrete Automation and Motion, Power Products and Low Voltage Products divisions' products are integrated into the offering of the Process Automation division.

        Our control systems are used in applications such as batch management, asset optimization, energy management and safety control. They are the hubs that link instrumentation, devices and systems for control and supervision of industrial processes and enable customers to integrate their production systems with their enterprise, resource and planning systems, thereby providing a link to their ordering, billing and shipping processes. This link allows customers to manage their entire manufacturing and business process based on real-time access to plant information. Additionally, it allows customers to increase production efficiency, optimize their assets and reduce environmental waste.

        The division's offering focuses on Open Control Systems, including batch control systems, supervisory control and data acquisition systems, and, to a lesser extent, programmable logic controls and remote terminal units.

        Batch control systems control the production of a variety of products in shorter runs, such as certain pharmaceutical and food and beverage products. Supervisory control and data acquisition systems are used to collect and manage data over wide areas or long distances such as those involved in operating electric power networks.

        A key element of this division's product offering is its System 800xA process automation platform. This product extends the capability of traditional process control systems, introducing advanced functions such as batch management, asset optimization and field device integration which "plug in" to a common user environment. The same user interface may also be used to manage components of existing multiple ABB control systems that have been installed in the market over approximately the past 20 years. In this way, System 800xA gives customers a way to migrate to new functions one step at a time, rather than having to make a large-scale capital investment to replace their entire control system. By creating a common user interface that can be used to manage multiple systems, the System 800xA also reduces the research and development investment needed to achieve a "one size fits all" solution across our large installed systems base. The division also offers a full line of instrumentation and analytical products to actuate, measure, record and control industrial and power processes.

        The division's product offerings for the pulp and paper industries include quality control systems for pulp and paper mills, control systems, drive systems, on-line sensors, actuators and field instruments. On-line sensors measure product properties, such as weight, thickness, color, brightness, moisture content and additive content. Actuators allow the customer to make automatic adjustments during the production process to improve the quality and consistency of the product. Field instruments measure properties of the process, such as flow rate, chemical content and temperature.

        We offer our customers in the metals and minerals industries specialized products and services, as well as total production systems. We design, plan, engineer, supply, erect and commission electric equipment, drives, motors and equipment for automation and supervisory control within a variety of areas including mining, mineral handling, aluminum smelting, hot and cold steel applications and cement production.

        In the oil and gas sector, we provide solutions for onshore and offshore production and exploration, refining, and petrochemical processes, and oil/gas transportation and distribution. In the

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pharmaceuticals and fine chemicals areas, we offer applications to support manufacturing, packaging, quality control and compliance with regulatory agencies.

        In the marine field, we provide global shipbuilders with power and automation technologies for luxury cruise liners, ferries, tankers, offshore oil rigs and special purpose vessels. We design, engineer, build, supply and commission electrical systems for marine power generation, power distribution and diesel electric propulsion, as well as turbochargers to improve efficiency for diesel and gasoline engines.

        We also offer full-service contracts across all of our customer segments, in which we take over in-house maintenance activities for customers and apply strategies to reduce overall maintenance costs and help optimize these investments. Demand for our process automation services is increasing as our customers seek to increase productivity by improving the performance of existing assets.

        The Process Automation division's end customers are primarily companies in the oil and gas, minerals and mining, metals, pulp and paper, chemicals and pharmaceuticals, turbocharging and the marine industries.

        The Process Automation division uses a direct sales force as well as third-party channel partners, such as distributors, system integrators and OEMs. For the division as a whole, the majority of revenues are derived through the division's own direct sales channels.

        The Process Automation division's principal competitors vary by industry or product line but include Emerson, Honeywell, Invensys, Metso Automation, Rockwell, Schneider, Siemens, Voith, Aspen Technologies, and Yokogawa Electric Corporation.

        The Process Automation division's capital expenditures for property, plant and equipment totaled $76 million in 2010, compared to $99 million and $90 million in 2009 and 2008, respectively. Principal investments in 2010 were to our turbocharging production facilities in Switzerland and China, our pulp and paper business in China, and our oil and gas business in Algeria. Geographically, in 2010, Europe represented 66 percent of the capital expenditures, followed by Asia (19 percent), the Americas (9 percent) and the Middle East and Africa (6 percent).

CAPITAL EXPENDITURES

        Total capital expenditures for property, plant and equipment including intangible assets not acquired through a business combination amounted to $840 million, $967 million and $1,171 million in 2010, 2009 and 2008, respectively. Compared to the corresponding depreciation expense of the respective year, capital expenditures were 20 percent higher in 2010, 48 percent higher in 2009 and 77 percent higher in 2008.

        Due to the current geographic distribution of our production facilities, capital expenditures in 2010 remained at a significant level in mature markets, about the same as the previous year's level. Capital expenditures in Europe were primarily driven by maintenance and upgrades of existing production facilities to improve productivity, mainly in Switzerland, Sweden and Germany. Capital expenditures in emerging markets decreased from 2009. Expenditures were highest in China, India and Poland. Capital expenditures in emerging markets were mostly made to expand or build new facilities to increase the

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production capacity. The share of emerging markets capital expenditures as a percentage of total capital expenditures was 31 percent in 2010.

        The carrying value of property, plant and equipment sold amounted to $8 million, $22 million and $50 million in 2010, 2009 and 2008, respectively.

        The sales of property, plant and equipment in 2010 related to real estate properties in various locations. Of the total sales of property, plant and equipment in 2009, a significant portion was related to real estate properties, mainly in Norway, France, Brazil and Switzerland. The remainder was related to machinery and equipment in various locations. Of the total sales of property, plant and equipment in 2008, the majority related to real estate properties in Switzerland, Brazil, Mexico, Poland and Italy.

        Construction in progress for property, plant and equipment at December 31, 2010, was $447 million, mainly in Switzerland, Sweden, Germany, the United States, China and Poland. Construction in progress for property, plant and equipment at December 31, 2009, was $564 million, mainly in Switzerland, Sweden, Germany, China, India and Poland. Construction in progress for property, plant and equipment at December 31, 2008, was $534 million, mainly in Sweden, the United States, Switzerland, China and Germany.

        In 2011, we plan to increase our capital expenditures and estimate the amount will be higher than our annual depreciation and amortization charge. We anticipate investments to be higher in the Americas and Asia but to remain at approximately the same level in Europe.

SUPPLIES AND RAW MATERIALS

        We purchase a variety of raw materials for use in our production and project execution processes. The primary materials used in our products, by weight, are steel, copper, aluminum, mineral oil and various plastics. We also purchase a wide variety of fabricated products and electronic components. We operate a worldwide supply chain management network with employees dedicated to this function in business units and key countries. Over twenty global, and many divisional, commodity teams take advantage of opportunities to leverage the scale of ABB, to optimize the efficiency of our supply networks, and to capture lowest possible costs worldwide.

        Our supply chain management organization's activities have continued to expand in recent years, to:

        The price of raw materials is highly volatile, and has varied substantially, from year to year. For many commodities we purchase, such as steel, copper, aluminum and products derived from crude oil, continuing global economic growth in China and other emerging economies, coupled with the uncertainty of volatility in foreign exchange rates, led to significant fluctuations in raw material costs over the last few years. While some market volatility will be offset through the use of either long-term contracts or hedging, we expect global commodity prices to remain highly volatile.

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        We mitigate the majority of our exposure to commodity risk arising from changes in prices of raw materials by entering into hedges. For example, we manage copper and aluminum price risk using principally swap contracts based on prices for these commodities quoted on leading exchanges. Our hedging policy is designed to minimize price volatility and create a stable cost base. Hedging has the effect of minimizing the unfavorable impact of price increases in commodities, but it also limits the favorable impact of decreasing prices. Certain gains and losses derived from our commodity hedging transactions are deferred and reflected in the cost of goods sold when the underlying physical transaction affects cost of goods sold. In addition to using hedging to reduce our exposure to fluctuations in raw materials prices, in some cases we can reduce this risk by incorporating changes in raw materials prices into the prices of our products.

        The costs for our electronic components, subassemblies and fabricated products, in many cases, reduced compared to 2009, in line with our cost reduction initiatives. Procurement personnel in the business units, and in the countries in which we operate, along with the global commodities teams, continued to focus on component cost reduction efforts in all areas, while maintaining and improving quality and delivery performance.

PATENTS AND TRADEMARKS

        We believe that intellectual property is as important as tangible assets for a technology group such as ABB. Over the past ten years, we have almost doubled our total number of first patent filings, and we intend to continue our aggressive approach to seeking patent protection. Currently, we have about 21,000 patent applications and registrations, of which more than 9,000 are pending applications. In 2010, we filed patent applications for approximately 800 new inventions. Based on our existing intellectual property strategy, we believe that we have adequate control over our core technologies. The "ABB" trademarks and logo are protected in all of the countries in which we operate. We aggressively defend the reputation associated with the ABB brand.

SUSTAINABILITY ACTIVITIES

        Sustainability management is one of our highest business priorities. We seek to address sustainability issues in all our business operations in order to improve our social, safety and environmental performance continuously, and to enhance the quality of life in the communities and countries where we operate.

        Our social and environmental efforts include:

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        To manage environmental aspects of our own operations, we have implemented environmental management systems according to the ISO 14001 standard at our manufacturing and service sites. For non-manufacturing sites we have implemented an adapted environmental management system in order to ensure management of environmental aspects and continual improvement of performance. Almost all of these sites currently work in compliance with the requirements of the standard (approximately 360 sites and offices) and our environmental management program now covers operations in 59 countries.

        We have Environmental Product Declarations to communicate the environmental performance of our core products. These describe the significant environmental aspects and impacts of a product line, viewed over its complete life cycle. Declarations are based on Life Cycle Assessment studies, created according to the international standard ISO/TR 14025. More than 70 declarations for major product lines are published on our Web site (www.abb.com), some of which have been externally certified by agencies such as Det Norske Veritas (DNV) of Norway and the RINA Management System Certification Society in Italy.

        In 2010, a total of 87 percent of our employees were covered by confirmed data gathered through ABB's formal environmental reporting system that is verified by an independent verification body. The parts of our business that are not yet covered by our reporting system, mainly sales offices in countries where we do not perform manufacturing, have very limited environmental exposure. A total of seven environmental incidents were reported in 2010, none of which had a material environmental impact.

        In 2010, a total of 95 percent of employees were covered by confirmed data gathered through ABB's formal social reporting system that is verified by an independent verification body. The parts of our business that are not yet covered by our reporting system, mainly sales offices in countries where we do not perform manufacturing, have very limited social exposure.

        One of our corporate objectives is to phase out the use of the hazardous substances that are recorded on our list of "restricted" substances. Priorities for replacement are set by each business using criteria such as the environmental aspects of alternatives, the risk of the substance escaping into the environment, how hazardous the substance is, whether we can use the substance under strict control and whether there are any technically acceptable alternatives.

        We retained liability for environmental remediation costs at two sites in the United States that were operated by our former nuclear business, which we have sold to BNFL. The primary environmental liabilities associated with these sites relate to the costs of remediating radiological contamination upon decommissioning the facilities. In February 2011, we agreed to settle with Westinghouse Electric Company LLC (BNFL's former subsidiary, overseeing remediation activities at

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one of the sites) and were released from our continuing environmental obligations at this one site. See "Note 15 Commitments and contingencies" to our Consolidated Financial Statements.

REGULATION

        Our operations are subject to numerous governmental laws and regulations including those governing antitrust and competition, corruption, the environment, securities transactions and disclosures, import and export of products, currency conversions and repatriation, taxation of foreign earnings and earnings of expatriate personnel and use of local employees and suppliers.

        As a reporting company under Section 12 of the U.S. Securities Exchange Act of 1934, we are subject to the FCPA's antibribery provisions with respect to our conduct around the world.

        Our operations are also subject to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The convention obliges signatories to adopt national legislation that makes it a crime to bribe foreign public officials. As of December 31, 2010, those countries which have adopted implementing legislation and have ratified the convention include the United States and several European nations in which we have significant operations.

        We conduct business in certain countries known to experience governmental corruption. While we are committed to conducting business in a legal and ethical manner, our employees or agents have taken, and in the future may take, actions that violate the U.S. FCPA, legislation promulgated pursuant to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, antitrust laws or other laws or regulations. These actions have resulted and could result in monetary or other penalties against us and could damage our reputation and, therefore, our ability to do business. For more information, see "Item 8. Financial Information—Legal Proceedings."

SIGNIFICANT SUBSIDIARIES

        ABB Ltd, Switzerland, is the ultimate parent company of the ABB Group, which comprises 298 consolidated operating and holding subsidiaries worldwide as of February 28, 2011. ABB Ltd's shares are listed on the SIX Swiss Exchange, the NASDAQ OMX Stockholm Exchange and the New York Stock Exchange (where its shares are traded in the form of ADS—each ADS representing one registered ABB share).

        The only consolidated subsidiary in the ABB Group with listed shares is ABB Limited, Bangalore, India, which is listed on the Bombay Stock Exchange and the National Stock Exchange of India.

        The following table sets forth, as of February 28, 2011, the name, country of incorporation and ownership interest of ABB Ltd, Switzerland, in its significant subsidiaries:

Company name & location
  Country   ABB Group
interest %
 

ABB S.A., Buenos Aires

  ARGENTINA     100.00  

ABB Australia Pty Limited, Sydney

 

AUSTRALIA

   
100.00
 

ABB AG, Vienna

 

AUSTRIA

   
100.00
 

ABB N.V., Zaventem

 

BELGIUM

   
100.00
 

ABB Ltda., Osasco

 

BRAZIL

   
100.00
 

ABB Bulgaria EOOD, Sofia

 

BULGARIA

   
100.00
 

ABB Inc., St. Laurent, Quebec

 

CANADA

   
100.00
 

ABB (China) Ltd., Beijing

 

CHINA

   
100.00
 

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Company name & location
  Country   ABB Group
interest %
 

Asea Brown Boveri Ltda., Bogotá

 

COLOMBIA

    99.99  

ABB Ltd., Zagreb

 

CROATIA

   
100.00
 

ABB s.r.o., Prague

 

CZECH REPUBLIC

   
100.00
 

ABB A/S, Skovlunde

 

DENMARK

   
100.00
 

ABB Equador S.A., Quito

 

ECUADOR

   
96.87
 

Asea Brown Boveri S.A.E., Cairo

 

EGYPT

   
100.00
 

ABB AS, Tallinn

 

ESTONIA

   
100.00
 

ABB Oy, Helsinki

 

FINLAND

   
100.00
 

ABB S.A., Rueil-Malmaison

 

FRANCE

   
100.00
 

ABB AG, Mannheim

 

GERMANY

   
100.00
 

ABB Automation GmbH, Mannheim

 

GERMANY

   
100.00
 

ABB Automation Products GmbH, Ladenburg

 

GERMANY

   
100.00
 

ABB Beteiligungs- und Verwaltungsges. mbH, Mannheim

 

GERMANY

   
100.00
 

ABB Stotz-Kontakt GmbH, Heidelberg

 

GERMANY

   
100.00
 

Busch-Jaeger Elektro GmbH, Mannheim/Lüdenscheid

 

GERMANY

   
100.00
 

Asea Brown Boveri S.A., Metamorphossis Attica

 

GREECE

   
100.00
 

ABB (Hong Kong) Ltd., Hong Kong

 

HONG KONG

   
100.00
 

ABB Engineering Trading and Service Ltd., Budapest

 

HUNGARY

   
100.00
 

ABB Limited, Bangalore

 

INDIA

   
75.00
 

ABB Ltd, Dublin

 

IRELAND

   
100.00
 

ABB Technologies Ltd., Tirat Carmel

 

ISRAEL

   
99.99
 

ABB S.p.A., Milan

 

ITALY

   
100.00
 

ABB K.K., Tokyo

 

JAPAN

   
100.00
 

ABB Ltd., Seoul

 

KOREA, REPUBLIC OF

   
100.00
 

ABB Holdings Sdn. Bhd., Subang Jaya

 

MALAYSIA

   
100.00
 

Asea Brown Boveri S.A. de C.V., Tlalnepantla

 

MEXICO

   
100.00
 

ABB BV, Rotterdam

 

NETHERLANDS

   
100.00
 

ABB Finance B.V., Amsterdam

 

NETHERLANDS

   
100.00
 

ABB Holdings BV, Amsterdam

 

NETHERLANDS

   
100.00
 

ABB Investments B.V. 

 

NETHERLANDS

   
100.00
 

ABB Limited, Auckland

 

NEW ZEALAND

   
100.00
 

ABB Holding AS, Billingstad

 

NORWAY

   
100.00
 

ABB S.A., Lima

 

PERU

   
80.60
 

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Company name & location
  Country   ABB Group
interest %
 

ABB Inc., Paranaque, Metro Manila

 

PHILIPPINES

    100.00  

ABB Sp. z o.o., Warsaw

 

POLAND

   
99.89
 

ABB (Asea Brown Boveri), S.A., Paco de Arcos

 

PORTUGAL

   
100.00
 

Asea Brown Boveri Ltd., Moscow

 

RUSSIAN FEDERATION

   
100.00
 

ABB Contracting Company Ltd., Riyadh

 

SAUDI ARABIA

   
65.00
 

ABB Holdings Pte. Ltd., Singapore

 

SINGAPORE

   
100.00
 

ABB Holdings (Pty) Ltd., Sunninghill

 

SOUTH AFRICA

   
80.00
 

Asea Brown Boveri S.A., Madrid

 

SPAIN

   
100.00
 

ABB AB, Västerås

 

SWEDEN

   
100.00
 

ABB Norden Holding AB, Västerås

 

SWEDEN

   
100.00
 

ABB Asea Brown Boveri Ltd, Zurich

 

SWITZERLAND

   
100.00
 

ABB Schweiz AG, Baden

 

SWITZERLAND

   
100.00
 

ABB LIMITED, Bangkok

 

THAILAND

   
100.00
 

ABB Holding A.S., Istanbul

 

TURKEY

   
99.95
 

ABB Ltd., Kiev

 

UKRAINE

   
100.00
 

ABB Industries (L.L.C.), Dubai

 

UAE

   
49.00
 

ABB Holdings Limited, Warrington

 

UNITED KINGDOM

   
100.00
 

ABB Limited, Warrington

 

UNITED KINGDOM

   
100.00
 

ABB Holdings Inc., Cary, NC

 

UNITED STATES

   
100.00
 

ABB Inc., Cary, NC

 

UNITED STATES

   
100.00
 

Baldor Electric Company, MO

 

UNITED STATES

   
100.00
 

Kuhlman Electric Corporation, Crystal Springs, MS

 

UNITED STATES

   
100.00
 

DESCRIPTION OF PROPERTY

        As of December 31, 2010, we occupied real estate in more than 100 countries throughout the world. The facilities consist mainly of manufacturing plants, office buildings, research centers and warehouses. A substantial portion of our production and development facilities are situated in Germany, Sweden, the United States, Switzerland, China, Finland, India and Italy. We also own or lease other properties, including office buildings, warehouses, research and development facilities and sales offices in many countries. We own essentially all of the machinery and equipment used in our manufacturing operations.

        From time to time, we have a surplus of space arising from acquisitions, production efficiencies and/or restructuring of operations. Normally, we seek to sell such surplus space which may involve leasing property to third parties for an interim period.

        The net book value of our property, plant and equipment at December 31, 2010, was $4,356 million, of which machinery and equipment represented $1,944 million, land and buildings represented $1,965 million and construction in progress represented $447 million. We believe that our

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current facilities are in good condition and are adequate to meet the requirements of our present and foreseeable future industrial operations.

Item 4A.    Unresolved Staff Comments

        Not applicable.

Item 5.    Operating and Financial Review and Prospects

MANAGEMENT OVERVIEW

        During 2010, we continued to deliver power and automation solutions that help our customers meet the challenges of a rapidly-changing world. Foremost among these are climate change and the need to use electrical energy more efficiently and with less impact on the environment. We achieved this in several ways.

        One is a long-term commitment to technology leadership in areas such as high-efficiency power transmission; automation and control systems to manage complex industrial processes using less energy; and technologies to capture the full potential of renewable energies, such as wind and solar power. In 2010, for example, we were awarded orders to connect offshore wind farms to Germany's mainland power grids, to automate a new copper mine in Peru, and to build a subsea power link between Sweden and Lithuania.

        Another is our presence in more than 100 countries around the world. This allows us to meet the needs of our customers faster and with solutions that are best suited to their local requirements. It positions us to benefit from the rapid growth expected in the emerging markets in the coming years while also supporting our large and important markets in the world's mature economies. Furthermore, our geographic scope provides us with access to a large pool of talented and highly qualified people from very diverse cultural and business backgrounds—a key competitive advantage. In 2010, we generated approximately half of our revenues from emerging markets while also recording order increases of more than 10 percent in countries such as Germany, Sweden and the United States.

        A third way is our ability to combine both power and automation technologies into packaged solutions that meet the new needs of emerging growth sectors, such as integrating renewable energy into existing power grids, delivering high-quality "mission-critical" power to data centers and hospitals, and providing the infrastructure needed to rapidly charge electric vehicles. For example, in 2010 we embarked on a project to build a smart grid in Helsinki, Finland; delivered fast direct-current charging stations for an e-mobility project in Hong Kong; and launched a type of solar inverter from our Discrete Automation and Motion division that is used in large-scale solar power generation. We view this convergence of power and automation technologies as a long-term trend for which ABB is well positioned.

        Despite uncertainties surrounding the economic situation in 2010, we continued to benefit from the broad scope of our business portfolio. For example, we saw a recovery during the year in some of our early-cycle businesses, such as Low Voltage Products, which are more exposed to consumer demand and which respond early to increases in economic activity. This recovery helped to offset continued low levels of demand in some of our later-cycle businesses, such as parts of our Power Products and Process Automation divisions, which depend more on large capital expenditures by our utility and industrial customers that generally come later in the economic cycle. Our strong positions in emerging markets, our flexible global production base and our technological leadership, as well as the operational improvements we continue to make in our businesses, also supported our business in 2010.

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        Foremost among these improvements was the successful reduction of costs to adapt to changing demand. Savings were principally achieved in four areas: making better use of global sourcing opportunities; reducing general and administrative expenses; eliminating operational and process inefficiencies; and optimizing our global footprint in order to match the geographic scope of our business with changing demand patterns, such as rapid growth in emerging markets. Our cost reduction program was key to maintaining profitability in a challenging environment.

Outlook

        For 2011, we expect continued demand growth in all regions for power and automation solutions that help customers build and upgrade power infrastructure and improve industrial efficiency and productivity.

        Emerging markets will again be significant drivers of growth as they build up their electrical grids and expand industrial production with a major focus on improving energy efficiency and industrial process quality. An important demand driver in these countries is the development of power resources, such as hydro and wind, which are often long distances from end users and require reliable, high-efficiency power transmission technologies. Demand for commodities to fuel economic growth and the need to become more globally competitive in product quality is expected to drive demand for industrial automation solutions in the emerging markets.

        Demand in mature markets is also expected to improve. Utilities are expected to continue investments in grid interconnections, the integration of renewable energies into existing grids, the replacement and refurbishment of existing grid assets, and smart grid technologies. Following two years of lower capital investment in power transmission in many regions, we expect an increase in utility spending on standard power transmission products, most likely beginning in the second half of the year.

        Industrial customers in the mature economies are also expected to invest further in improving the productivity of their existing manufacturing assets. Increased construction activity in parts of northern Europe and the trend towards intelligent buildings are further demand drivers for our automation solutions in mature markets.

        At the same time, recent competitive trends are expected to continue through 2011 and beyond. Increased capacity in the power equipment sector over the past several years will continue to exert price pressure on suppliers. This pressure is expected to persist for several quarters after demand begins to recover. Emerging market players are expected to continue to expand beyond their home markets with competitive products aimed mainly at the mid-quality segment and primarily in power equipment.

        Therefore, in 2011 we will focus on taking advantage of the significant growth opportunities that are emerging across our technology and geographic portfolio. We intend to increase our capital expenditures, again with a focus on building our position in emerging markets. Investment in sales and research and development activities will also increase to support both growth and profitability. Cost control will also remain a high priority to ensure both our competitiveness in the market as well as securing profitability within our target ranges.

        This outlook section does not reflect the recent earthquake and related developments in Japan, the impact of which is too early to assess.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

General

        We prepare our Consolidated Financial Statements in accordance with U.S. GAAP and present the same in United States dollars unless otherwise stated.

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        The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including, but not limited to, those related to: costs expected to be incurred to complete projects; costs of product guarantees and warranties; provisions for bad debts; recoverability of inventories, investments, fixed assets, goodwill and other intangible assets; the fair values of assets and liabilities assumed in business combinations; income tax related expenses and accruals; provisions for restructuring; gross profit margins on long-term construction-type contracts; pensions and other postretirement benefit assumptions and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our estimates and assumptions.

        We deem an accounting policy to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that reasonably could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Consolidated Financial Statements. We also deem an accounting policy to be critical when the application of such policy is essential to our ongoing operations. We believe the following critical accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. These policies should be considered when reading our Consolidated Financial Statements.

Revenues and cost of sales recognition

        We generally recognize revenues for the sale of goods when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, and collectability is reasonably assured. Delivery is considered to occur upon transfer of title and risks and rewards of ownership.

        Revenues under long-term construction-type contracts are generally recognized using the percentage-of-completion method of accounting. We principally use the cost-to-cost method to measure progress towards completion on contracts. Under this method, progress of contracts is measured by actual costs incurred in relation to management's best estimate of total estimated costs, which are reviewed and updated routinely for contracts in progress. The cumulative effects of such adjustments are reported in the current period.

        The percentage-of-completion method of accounting involves the use of assumptions and projections, principally relating to future material, labor and overhead costs. As a consequence, there is a risk that total contract costs will exceed those we originally estimated and the margin will decrease. This risk increases if the duration of a contract increases because there is a higher probability that the circumstances upon which we originally developed estimates will change, resulting in increased costs that we may not recover. Factors that could cause costs to increase include:

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        Changes in our initial assumptions, which we review on a regular basis between balance sheet dates, may result in revisions to estimated costs, current earnings and anticipated earnings. We recognize these changes in the period in which the changes in estimates are determined. By recognizing changes in estimates cumulatively, recorded revenue and costs to date reflect the current estimates of the stage of completion of each project. Additionally, losses on long-term contracts are recognized in the period when they are identified and are based upon the anticipated excess of contract costs over the related contract revenues.

        Short-term construction-type contracts, or long-term construction-type contracts for which reasonably dependable estimates cannot be made or for which inherent hazards make estimates difficult, are accounted for under the completed-contract method. Revenues under the completed-contract method are recognized upon substantial completion—that is: acceptance by the customer, compliance with performance specifications demonstrated in a factory acceptance test or similar event.

        For non construction-type contracts that contain customer acceptance provisions, revenue is deferred until customer acceptance occurs or we have demonstrated the customer-specified objective criteria have been met or the contractual acceptance period has lapsed.

        Revenues from service transactions are recognized as services are performed. For long-term service contracts, revenues are recognized on a straight-line basis over the term of the contract or, if the performance pattern is other than straight-line, as the services are provided. Service revenues reflect revenues earned from our activities in providing services to customers primarily subsequent to the sale and delivery of a product or complete system. Such revenues consist of maintenance-type contracts, field service activities that include personnel and accompanying spare parts, and installation and commissioning of products as a standalone service or as part of a service contract.

        We offer multiple solutions to meet our customers' needs. These solutions may involve the delivery of multiple products and/or performance of services and the delivery and/or performance may occur at different points in time or over different periods of time. In such circumstances, if certain criteria are met, we allocate revenues to each delivery of product or performance of service based on the individual elements' relative fair value. If there is no evidence for the fair value of the delivered item, the revenue is allocated based on the residual method, provided that the elements meet the criteria for treatment as a separate unit of accounting.

        Taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions between us and our customers, such as sales, use, value-added and some excise taxes are presented on a net basis (excluded from revenues).

        These revenue recognition methods require the collectability of the revenues recognized to be reasonably assured. When recording the respective accounts receivable, allowances are calculated to estimate those receivables that will not be collected. These reserves assume a level of default based on historical information, as well as knowledge about specific invoices and customers. The risk remains that a different number of defaults will occur than originally estimated. As such, the amount of revenues recognized might exceed or fall below that which will be collected, resulting in a change in earnings in the future. The risk of deterioration is likely to increase during periods of significant negative industry or economic trends.

        As a result of the above policies, judgment in the selection and application of revenue recognition methods must be made.

Contingencies

        As more fully described in the section below entitled "Environmental liabilities", in "Item 8. Financial Information—Legal Proceedings" and in "Note 15 Commitments and contingencies" to our Consolidated Financial Statements, we are subject to proceedings, litigation or threatened litigation and

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other claims and inquiries related to taxes other than income tax, environmental, labor, product, regulatory and other matters. We are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the provision required, if any, for these contingencies is made after analysis of each individual issue, often with assistance from both internal and external legal counsel and technical experts. The required amount of a provision for a contingency of any type may change in the future due to new developments in the particular matter, including changes in the approach to its resolution.

        We record provisions for our contingent obligations when it is probable that a loss will be incurred and the amount can be reasonably estimated. Any such provision is generally recognized on an undiscounted basis using our best estimate of the amount of loss incurred or at the lower end of an estimated range when a single best estimate is not determinable. In some cases, we may be able to recover a portion of the costs relating to these obligations from insurers or other third parties; however, we record such amounts only when it is probable that they will be collected.

        We provide for anticipated costs for warranties when we recognize revenues on the related products or contracts. Warranty costs include calculated costs arising from imperfections in design, material and workmanship in our products. We generally make individual assessments on contracts with risks resulting from order-specific conditions or guarantees and assessments on an overall, statistical basis for similar products sold in larger quantities. There is a risk that actual warranty costs may exceed the amounts provided for, which would result in a deterioration of earnings in the future when these actual costs are determined.

        We may have a legal obligation to perform environmental clean-up activities as a result of the normal operation of our business or have other asset retirement obligations. In some cases, the timing or the method of settlement, or both are conditional upon a future event that may or may not be within our control, but the underlying obligation itself is unconditional and certain. We recognize a provision for these and other asset retirement obligations when a liability for the retirement or clean-up activity has been incurred and a reasonable estimate of its fair value can be made. These provisions are initially recognized at fair value, and subsequently adjusted for accrued interest and changes in estimates. Provisions for environmental obligations are not discounted to their present value when the timing of payments cannot be reasonably estimated.

Pension and postretirement benefits

        As more fully described in "Note 17 Employee benefits" to our Consolidated Financial Statements, we have a number of defined benefit pension and other postretirement plans and recognize an asset for such a plan's overfunded status or a liability for such a plan's underfunded status in our Consolidated Balance Sheets. Additionally, we measure such a plan's assets and obligations that determine its funded status as of the end of the year and recognize the changes in the funded status in the year in which the changes occur. Those changes are reported in "Accumulated other comprehensive loss" and as a separate component of stockholders' equity.

        We use actuarial valuations to determine our pension and postretirement benefit costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates, mortality rates and expected return on plan assets. Under U.S. GAAP, we are required to consider current market conditions in making these assumptions. In particular, the discount rates are reviewed annually based on changes in long-term, highly-rated corporate bond yields. Decreases in the discount rates result in an increase in the projected benefit obligation to employees (PBO) and in pension costs. Conversely, an increase in the discount rates results in a decrease in the PBO and in pension costs. The mortality assumptions are reviewed annually by management. Decreases in mortality rates result in an increase in the PBO and in pension costs. Conversely, an increase in mortality rates results in a decrease in the PBO and in pension costs.

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        Holding all other assumptions constant, a 0.25 percentage point decrease in the discount rate would have increased the PBO related to our pension plans by approximately $287 million, while a 0.25 percentage point increase in the discount rate would have decreased the PBO related to our pension plans by approximately $267 million.

        The expected return on plan assets is reviewed regularly and considered for adjustment annually based on current and expected asset allocations and represents the long-term return expected to be achieved. Decreases in the expected return on plan assets result in an increase to pension costs. An increase or decrease of 0.25 percent in the expected long-term rate of asset return would have decreased or increased, respectively, the net periodic benefit cost in 2010 by approximately $20 million.

        Under U.S. GAAP, we accumulate and amortize over future periods any difference between actual results and the assumptions used. Therefore, actual results generally affect our recognized expense for pension and other postretirement benefit obligations in future periods.

        The funded status, which can increase or decrease based on the performance of the financial markets or changes in our assumptions regarding rates, does not represent a mandatory short-term cash obligation. Instead, the funded status of a pension plan is the difference between the PBO and the fair value of the plan assets. At December 31, 2010, our pension plans were $327 million underfunded compared to an underfunding of $765 million at December 31, 2009. Our other postretirement plans were underfunded by $214 million and $219 million at December 31, 2010 and 2009, respectively.

        We have multiple non-pension postretirement benefit plans. Our health care plans are generally contributory with participants' contributions adjusted annually. For purposes of estimating our health care costs, we have assumed health care cost increases to be 7.93 percent per annum for 2011, gradually declining to 5 percent per annum by 2017 and to remain at that level thereafter.

Income taxes

        In preparing our Consolidated Financial Statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. We account for deferred taxes by using the asset and liability method. Under this method, we determine deferred tax assets and liabilities based on temporary differences between the financial reporting and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We recognize a deferred tax asset when it is more likely than not that the asset will be realized. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based upon historical losses, projected future taxable income and the expected timing of the reversals of existing temporary differences. To the extent we increase or decrease this allowance in a period, we recognize the change in the allowance within "Provision for taxes" in the Consolidated Income Statements unless the change relates to discontinued operations, in which case the change is recorded in "Income (loss) from discontinued operations, net of tax". Unforeseen changes in tax rates and tax laws, as well as differences in the projected taxable income as compared to the actual taxable income, may affect these estimates.

        We operate in numerous tax jurisdictions and, as a result, are regularly subject to audit by tax authorities. We provide for tax contingencies, including potential tax audits, on the basis of the technical merits of the contingency, including applicable tax law, OECD guidelines, as well as on items relating to potential audits by tax authorities based on our evaluations of facts and circumstances. Changes in the facts and circumstances could result in a material change to the tax accruals. We provide for tax contingencies whenever it is deemed more likely than not that a tax asset has been impaired or a tax liability has been incurred for events such as tax claims or changes in tax laws. Although we believe that our tax estimates are reasonable and that appropriate tax reserves have been made, the final determination of tax audits and any related litigation could be different than that which is reflected in our income tax provisions and accruals.

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        An estimated loss from a tax contingency must be accrued as a charge to income if it is more likely than not that a tax asset has been impaired or a tax liability has been incurred and the amount of the loss can be reasonably estimated. We apply a two-step approach to recognize and measure uncertainty in income taxes. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50 percent likely of being realized upon ultimate settlement. The required amount of provisions for contingencies of any type may change in the future due to new developments.

Goodwill and other intangible assets

        We review goodwill for impairment annually as of October 1, or more frequently if events or circumstances indicate the carrying value may not be recoverable. We perform a two-step impairment test on a reporting unit level.

        Our reporting units are the same as our divisions for Power Systems, Discrete Automation and Motion, and Low Voltage Products. For Power Products and Process Automation, we determined that the reporting units are one level below the division, as the different products produced or services provided by these divisions do not share sufficiently similar economic characteristics to permit testing of goodwill on a total operating segment level. In the case of Power Products, there are separate reporting units based on the category of product produced—High-Voltage Products, Medium-Voltage Products and Transformers. In the case of Process Automation, we have determined that there are two reporting units, the Turbocharger product business and the remainder of Process Automation.

        In the first step of the impairment test, we compare the fair value of each reporting unit to its carrying value. The fair value of each reporting unit is calculated using an income approach, whereby the fair value is calculated based on the present value of future cash flows, applying a discount rate that represents our weighted-average cost of capital. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further testing is performed. We assess the reasonableness of the fair value calculations of our reporting units by reconciling the sum of the fair values for all our reporting units to our total market capitalization. On October 1, 2010, the calculated fair values for each of our reporting units exceeded their respective carrying values and we concluded that none was "at risk" of failing the goodwill impairment test. Consequently, the second step of the impairment test was not performed. The assumptions used in the fair value calculation are challenged each year (through the use of sensitivity analysis) to determine the impact on the resulting fair value of the reporting units. Our sensitivity analysis in 2010 showed no significant change in fair values if the assumptions change (a 1 percentage-point increase in the discount rate would reduce the calculated fair values by approximately 12 percent).

        However, if the carrying value of the net assets assigned to the reporting unit were to exceed its fair value, then we would perform the second step to determine the implied fair value of the reporting unit's goodwill and compare it to the carrying value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill were to exceed its implied fair value, then we would record an impairment loss equal to the difference. Any goodwill impairment losses would be recorded as a separate line item in the income statement in continuing operations, unless related to a discontinued operation, in which case the losses would be recorded in "Income (loss) from discontinued operations, net of tax". There were no goodwill impairment charges in 2010, 2009 and 2008.

        We review intangible assets for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable upon the occurrence of certain triggering events, such as a decision to divest a business or projected losses of an entity. We record impairment charges in "Other income (expense), net", in our Consolidated Income Statements, unless they relate to a

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discontinued operation, in which case the charges are recorded in "Income (loss) from discontinued operations, net of tax".

        Cash flow models used in evaluating impairments are dependent on a number of factors including estimates of future cash flows and other variables and require that we make significant estimates and judgments, involving variables such as sales volumes, sales prices, sales growth, production and operating costs, capital expenditures, market conditions and other economic factors. Further, discount rates used in discounted cash flow models to calculate fair values require the determination of variables such as the risk-free rates and equity market risk premiums. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

        For a description of accounting changes and recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements, see "Note 2 Significant accounting policies" to our Consolidated Financial Statements.

RESEARCH AND DEVELOPMENT

        Each year, we invest significantly in research and development. Our research and development area focuses on developing and commercializing the technologies of our businesses that are of strategic importance to our future growth. In 2010, 2009 and 2008, we invested $1,082 million, $1,037 million and $1,027 million, respectively, or approximately 3.4 percent, 3.3 percent, and 2.9 percent of annual consolidated revenues, respectively, on research and development activities. We also had expenditures of $253 million, $265 million and $214 million, respectively, or approximately 0.8 percent, 0.8 percent and 0.6 percent, respectively, of annual consolidated revenues in 2010, 2009 and 2008, on order-related development activities. These are customer- and project-specific development efforts that we undertake to develop or adapt equipment and systems to the unique needs of our customers in connection with specific orders or projects. Order-related development amounts are initially recorded in inventories as part of the work in process of a contract and then are reflected in cost of sales at the time revenue is recognized in accordance with our accounting policies.

        In addition to continuous product development, and order-related engineering work, we develop platforms for technology applications in our automation and power businesses in our Group research and development laboratories, which operate on a global basis. Through active management of our investment in research and development, we seek to maintain a balance between short-term and long-term research and development programs and optimize our return on investment.

        Our research and development strategy focuses on three objectives:

        Universities are the incubators of future technology, and a central task of our research and development team is to transform university research into industry-ready technology platforms. We collaborate with a number of universities and research institutions to build research networks and foster new technologies. We believe these collaborations shorten the amount of time required to turn basic ideas into viable products, and they additionally help us recruit and train new personnel. We have built

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more than 50 university partnerships in the U.S., Europe and Asia, including long-term, strategic relationships with Stanford University, the Massachusetts Institute of Technology, Carnegie Mellon University, Cambridge University, ETH Zurich and Imperial College London. Our collaborative projects include research on materials, sensors, micro-engineered mechanical systems, robotics, controls, manufacturing, distributed power and communication. Common platforms for power and automation technologies are developed around advanced materials, efficient manufacturing, information technology and data communication, as well as sensor and actuator technology.

        Common applications of basic power and automation technologies can also be found in power electronics, electrical insulation, and control and optimization. Our power technologies, including our insulation technologies, current interruption and limitation devices, power electronics, flow control and power protection processes, apply as much to large, reliable, blackout-free transmission systems as they do to everyday household needs. Our automation technologies, including our control and optimization processes, power electronics, sensors and microelectronics, mechatronics and wireless communication processes, are designed to improve efficiency in plants and factories around the world, including our own.

ACQUISITIONS, INVESTMENTS AND DIVESTITURES

Acquisitions

        During 2010, 2009 and 2008, ABB invested $1,275 million, $159 million and $651 million in 9, 8 and 7 new businesses and joint ventures, respectively. The amounts exclude changes in cost and equity investments.

        The principal acquisition in 2010 was that of the Ventyx group. In June, 2010, we acquired all of the shares of Ventyx Inc., Ventyx Software Inc. and Ventyx Dutch Holding B.V., representing substantially all of the revenues, assets and liabilities of the Ventyx group. Ventyx provides software solutions to global energy, utility, communications and other asset-intensive businesses and was integrated into the network management business within the Power Systems division to form a single unit for energy management software solutions. During 2009 and 2008, acquisitions were not significant either individually or in aggregate. The principal acquisition in 2008 was that of Kuhlman Electric Corporation (Kuhlman), a U.S.-based transformer company. Kuhlman manufactures a wide range of high-quality transformers for the industrial and electric utility sectors and has a strong reputation for innovative products and solid, long-term customer relationships. The acquisition was integrated into our Power Products division in North America and complements both our product range and geographical presence.

Increase in controlling interests in India

        In 2010, we increased our ownership interest in ABB Limited, India (our publicly-listed subsidiary in India) from approximately 52 percent to 75 percent. Cash paid up to December 31, 2010, including transaction costs, amounted to $956 million. The offer of 900 rupees per share resulted in a charge to "Capital stock and additional paid-in capital" of $838 million, including expenses related to the transaction.

Baldor

        In January 2011, we completed the acquisition of Baldor Electric Company (Baldor) for $63.50 per share in cash. Baldor markets, designs and manufactures industrial electric motors, mechanical power transmission products, drives and generators and employs approximately 7,000 people. In 2009, Baldor had net sales of $1,524 million and an operating profit of $181 million. The resulting cash outflows for ABB in the first quarter of 2011 amount to approximately $4.2 billion, representing approximately

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$3 billion for the purchase of the shares and approximately $1.2 billion for the repayment of debt assumed upon acquisition.

        For more information on our acquisitions, see "Note 3 Acquisitions, divestments and discontinued operations" to our Consolidated Financial Statements.

Divestitures of businesses and equity-accounted companies

        In 2010, 2009 and 2008, we received cash, net of cash disposed, from sales of businesses and equity-accounted companies of $83 million, $16 million and $27 million, respectively. In relation to transactions included in continuing operations, we recognized gains (losses) in 2010, 2009 and 2008, in "Other income (expense), net", of $12 million, $(1) million and $24 million, respectively. We also recognized gains (losses) from dispositions, net of tax, in 2010, 2009 and 2008, in "Income (loss) from discontinued operations, net of tax", of $(2) million, $18 million and $9 million, respectively. Included in the $9 million gain from dispositions, net of tax, in 2008, was a gain of $11 million on the sale of our 50 percent stake in ABB Powertech Transformers, located in South Africa, to Powertech, a wholly-owned subsidiary of the Altron Group. This business was part of our Power Products division prior to being reclassified to discontinued operations. In 2008, this business had revenues and income of $29 million and $2 million, respectively, recorded in "Income (loss) from discontinued operations, net of tax". All revenues and income reported in the year of sale are through the date of divestment.

EXCHANGE RATES

        We report our financial results in U.S. dollars. Due to our global operations, a significant amount of our revenues, expenses, assets and liabilities are denominated in other currencies. As a consequence, movements in exchange rates between currencies may affect:

        We translate non-USD denominated results of operations, assets and liabilities to USD in our Consolidated Financial Statements. Balance sheet items are translated to USD using year-end currency exchange rates. Income statement and cash flow items are translated to USD using the average currency exchange rate over the relevant period.

        Increases and decreases in the value of the USD against other currencies will affect the reported results of operations in our Consolidated Income Statements and the value of certain of our assets and liabilities in our Consolidated Balance Sheets, even if our results of operations or the value of those assets and liabilities have not changed in their original currency. Because of the impact foreign exchange rates have on our reported results of operations and the reported value of our assets and liabilities, changes in foreign exchange rates could significantly affect the comparability of our reported results of operations between periods and result in significant changes to the reported value of our assets, liabilities and shareholders' equity, as has been the case during the period from 2008 through 2010.

        While we operate globally and report our financial results in USD, exchange rate movements between the USD and both the euro and the Swiss franc are of particular importance to us due to (i) the location of our significant operations and (ii) our corporate headquarters being in Switzerland.

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        The exchange rates between the USD and the EUR and the USD and the CHF at December 31, 2010, 2009 and 2008, were as follows:

Exchange rates into $
  2010   2009   2008  

EUR 1.00

    1.34     1.44     1.40  

CHF 1.00

    1.07     0.97     0.94  

        The average exchange rates between the USD and the EUR and the USD and the CHF for the years ended December 31, 2010, 2009 and 2008, were as follows:

Exchange rates into $
  2010   2009   2008  

EUR 1.00

    1.33     1.40     1.47  

CHF 1.00

    0.97     0.93     0.93  

        When we incur expenses that are not denominated in the same currency as the related revenues, foreign exchange rate fluctuations could affect our profitability. To mitigate the impact of exchange rate movements on our profitability, it is our policy to enter into forward foreign exchange contracts to manage the foreign exchange transaction risk of our operations.

        In 2010, approximately 89 percent of our consolidated revenues were reported in currencies other than USD. Of that amount, the following percentages were reported in the following currencies:

        In 2010, approximately 89 percent of our cost of sales and selling, general and administrative expenses were reported in currencies other than USD. Of that amount, the following percentages were reported in the following currencies:

        We also incur expenses other than cost of sales and selling, general and administrative expenses in various currencies.

        The results of operations and financial position of many of our subsidiaries outside of the United States are reported in the currencies of the countries in which those subsidiaries are located. We refer to these currencies as "local currencies." Local currency financial information is then translated into USD at applicable exchange rates for inclusion in our Consolidated Financial Statements.

        The discussion of our results of operations below provides certain information with respect to orders, revenues, earnings before interest and taxes and other measures as reported in USD (as well as in local currencies). We measure period-to-period variations in local currency results by using a constant foreign exchange rate for all periods under comparison. Differences in our results of

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operations in local currencies as compared to our results of operations in USD are caused exclusively by changes in currency exchange rates.

        While we consider our results of operations as measured in local currencies to be a significant indicator of business performance, local currency information should not be relied upon to the exclusion of U.S. GAAP financial measures. Instead, local currencies reflect an additional measure of comparability and provide a means of viewing aspects of our operations that, when viewed together with the U.S. GAAP results and our reconciliations, provide a more complete understanding of factors and trends affecting the business. Because local currency information is not standardized, it may not be possible to compare our local currency information to other companies' financial measures that have the same or a similar title. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

ORDERS

        We book and report an order when a binding contractual agreement has been concluded with the customer covering, at a minimum, the price and scope of products or services to be supplied, the delivery schedule and the payment terms. The reported value of an order corresponds to the undiscounted value of revenues that we expect to recognize following delivery of the goods or services subject to the order, less any trade discounts and excluding any value added or sales tax. The value of orders received during a given period of time represents the sum of the value of all orders received during the period, adjusted to reflect the aggregate value of any changes to the value of orders received during the period and orders existing at the beginning of the period. These adjustments, which may in the aggregate increase or decrease the orders reported during the period, may include changes in the estimated order price up to the date of contractual performance, changes in the scope of products or services ordered and cancellations of orders.

        The undiscounted value of revenues we expect to generate from our orders at any point in time is represented by our order backlog. Approximately 17 percent of the value of total orders we recorded in 2010 were "large orders," which we define as orders from third parties involving a value of at least $15 million for products or services. Approximately 67 percent of the large orders in 2010 were recorded by our Power Systems division and 23 percent in our Process Automation division. The Power Products and Discrete Automation and Motion divisions accounted for the remainder of the total large orders recorded during 2010. The remaining portion of total orders recorded in 2010 was "base orders," which we define as orders from third parties with a value of less than $15 million for products or services.

        The level of orders fluctuates from year to year. Arrangements included in any particular order can be complex and unique to that order. Portions of our business involve orders for long-term projects that can take months or years to complete and many large orders result in revenues in periods after the order is booked. However, the level of large orders and orders generally cannot be used to accurately predict future revenues or operating performance. Orders that have been placed can be cancelled, delayed or modified by the customer. These actions can reduce or delay any future revenues from the order or may result in the elimination of the order.

PERFORMANCE MEASURES

        We evaluate the performance of our divisions primarily based on orders received, revenues, earnings before interest and taxes (EBIT) and EBIT as a percentage of revenues (EBIT margin). EBIT is the amount resulting from the subtraction of our cost of sales, selling, general and administrative expenses, non-order related research and development expenses, and other income (expense), net, from our revenues.

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ANALYSIS OF RESULTS OF OPERATIONS

        Our consolidated results from operations were as follows:

($ in millions, except per share data in $)
  2010   2009   2008  

Orders

    32,681     30,969     38,282  

Order backlog at December 31,

    26,193     24,771     23,837  

Revenues

   
31,589
   
31,795
   
34,912
 

Cost of sales

    (22,060 )   (22,470 )   (23,972 )
               

Gross profit

    9,529     9,325     10,940  

Selling, general and administrative expenses

    (4,615 )   (4,491 )   (4,795 )

Non-order related research and development expenses

    (1,082 )   (1,037 )   (1,027 )

Other income (expense), net

    (14 )   329     (566 )
               

Earnings before interest and taxes

    3,818     4,126     4,552  

Net interest and other finance expense

    (78 )   (6 )   (34 )

Provision for taxes

    (1,018 )   (1,001 )   (1,119 )
               

Income from continuing operations, net of tax

    2,722     3,119     3,399  

Income (loss) from discontinued operations, net of tax

    10     17     (21 )
               

Net income

    2,732     3,136     3,378  

Net income attributable to noncontrolling interests

    (171 )   (235 )   (260 )
               

Net income attributable to ABB

    2,561     2,901     3,118  
               

Amounts attributable to ABB shareholders:

                   
 

Income from continuing operations, net of tax

    2,551     2,884     3,142  
 

Net income

    2,561     2,901     3,118  

Basic earnings per share attributable to ABB shareholders:

                   
 

Income from continuing operations, net of tax

    1.12     1.26     1.37  
 

Net income

    1.12     1.27     1.36  

Diluted earnings per share attributable to ABB shareholders:

                   
 

Income from continuing operations, net of tax

    1.11     1.26     1.37  
 

Net income

    1.12     1.27     1.36  

        A more detailed discussion of the orders, revenues and EBIT for our divisions follows in the sections below entitled "Power Products," "Power Systems," "Discrete Automation and Motion", "Low Voltage Products," "Process Automation" and "Corporate and Other." Orders and revenues of our divisions include interdivisional transactions which are eliminated in the "Corporate and Other" line in the tables below.

Orders

 
   
   
   
  % Change  
($ in millions)
  2010   2009   2008   2010   2009  

Power Products

    9,778     10,940     13,627     (11 )%   (20 )%

Power Systems

    7,896     7,830     7,408     1 %   6 %

Discrete Automation and Motion

    5,862     4,702     7,129     25 %   (34 )%

Low Voltage Products

    4,686     4,079     4,865     15 %   (16 )%

Process Automation

    7,383     6,684     9,244     10 %   (28 )%
                           

Operating divisions

    35,605     34,235     42,273     4 %   (19 )%

Corporate and Other(1)

    (2,924 )   (3,266 )   (3,991 )   n.a.     n.a.  
                           

Total

    32,681     30,969     38,282     6 %   (19 )%
                           

(1)
Includes interdivisional eliminations

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        Total orders in 2010 increased by 6 percent (4 percent in local currencies) compared to 2009 as the global economy began to recover, as reflected in increased spending by industrial customers in energy-efficient automation and power solutions to increase productivity and quality. Investments by utilities in large power transmission projects, however, remained cautious.

        In 2010, orders in our Power Products division decreased by 11 percent (13 percent in local currencies) as transmission spending remained low, resulting in lower order volumes, especially in large power transformers and high voltage equipment. The economic recovery however did lead to an increase in the power distribution segments with higher orders in the medium voltage product lines. Orders in our Power Systems division were up 1 percent (down 1 percent in local currencies). Large orders were down, while the division has seen a large increase in base orders in substations and power generation due to an ongoing focus on renewable energy and grid reliability. Orders in our automation divisions, which are typically earlier in the business cycle, have benefited from increased investments by industrial customers on the back of an upturn in the global economy. Discrete Automation and Motion orders grew by 25 percent (23 percent in local currencies) as industrial customers increased investments in automation solutions to increase productivity and energy efficiency. Within the Discrete Automation and Motion division, order growth was especially strong in the robotics business, which experienced a turnaround, and in the low voltage drives business. Towards the end of 2010, mid- to late-cycle businesses also began seeing order growth. Orders in the Low Voltage Products division increased by 15 percent (15 percent in local currencies) as demand from general industry and construction improved in most regions. In our Process Automation division, orders grew by 10 percent (7 percent in local currencies) as investments in the energy and commodity-based sectors recovered and activity in the marine business also improved, however from low levels.

        As base orders began recovering on the upturn in the global economy, we continued to see for the first half of 2010 that large scale investments in both industry and utilities were delayed as customers assessed the stability of the recovery. Later in 2010 customers became more optimistic, which materialized into a number of large order awards in the fourth quarter of 2010. However, this attitude shift was not enough to compensate the low levels of large orders in the first half of 2010. Consequently, large orders were down 17 percent (20 percent in local currencies).

        Total orders in 2009 decreased 19 percent (13 percent in local currencies) compared to 2008 due to (i) the global economic downturn which had significantly weakened demand particularly in the industrial and construction related markets and (ii) price erosion in both utilities and industrial sectors in many geographical markets.

        In 2009, orders in our Power Products division declined 20 percent (14 percent in local currencies) as most customers held back their investment plans as a response to market uncertainties amid the global financial crisis. The government-funded stimulus programs for funding electric power investments had not had a significant impact on orders in this division. Orders declined across all product lines in the medium-voltage products, high-voltage products and transformers businesses. Orders in our Power Systems division increased 6 percent (17 percent in local currencies), benefiting from strong demand in the power generation and transmission sectors where infrastructure projects, addressing the integration of renewals, energy efficiency improvement and environmental concerns, were realized. Orders in our Discrete Automation and Motion Products division declined 34 percent (30 percent in local currencies), on weak demand in the automotive and industrial sectors. The Low Voltage Products division orders declined 16 percent (11 percent in local currencies) primarily as a result of contraction in industrial markets particularly the building, residential and commercial construction markets. In our Process Automation division, orders declined 28 percent (22 percent in local currencies) as investments in the process automation sector have mostly been delayed due to limited access to capital and increased uncertainty of future demand.

        In spite of the weakened economic conditions in many countries around the world, large orders increased as power utilities continued to realize their high-priority project commitments particularly in

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the grid systems and substations sectors. Large orders in the industrial sectors however remained weak, as large scale investments in this area were mostly delayed due to unstable global demand.

        Driven by higher investments in large scale utilities projects, large orders in 2009 increased 10 percent (25 percent in local currencies) to $6,603 million, compared to the 5 percent increase (flat in local currencies) reported in 2008. The share of large orders compared to total orders increased from 16 percent in 2008 to 21 percent in 2009. The increase in the share of large orders in 2009 was driven not only by growth in large orders volume, but also by a decline in base orders whose volume during the year decreased by 25 percent (20 percent in local currencies).

        We determine the geographic distribution of our orders based on the location of the customer, which may be different from the ultimate destination of the products' end use. The geographic distribution of our consolidated orders was as follows:

 
   
   
   
  % Change  
($ in millions)
  2010   2009   2008   2010   2009  

Europe

    13,781     11,983     16,633     15 %   (28 )%

The Americas

    6,223     5,996     7,235     4 %   (17 )%

Asia

    8,720     8,197     10,242     6 %   (20 )%

Middle East and Africa

    3,957     4,793     4,172     (17 )%   15 %
                           

Total

    32,681     30,969     38,282     6 %   (19 )%
                           

        In 2010, order volumes grew in all markets except in the Middle East and Africa which were down 17 percent (19 percent in local currencies), where we were unable to repeat the large order intake of 2009 from utility and oil and gas customers in Algeria, Kuwait and Saudi Arabia. Orders from Europe grew 15 percent (16 percent in local currencies) as a result of large order awards to the Power Systems division from Belgium, Germany, Norway and Sweden as well as a turnaround in the robotics business of the Discrete Automation and Motion division. In the Americas, orders increased 4 percent (down 1 percent in local currencies) on strong growth in the automation divisions, while Power Systems' orders were down as the level of large orders in Brazil in 2009 could not be matched in 2010. Orders received in the Power Products division in the Americas remained at the same level as 2009 as lower volumes in the transformer business were offset by growth in high and medium voltage equipment. Orders in Asia increased 6 percent (2 percent in local currencies) as growth in the automation divisions offset lower volumes in the transformer business in China.

        Orders from Europe in 2009 were down 28 percent (20 percent in local currencies) as growth in the Power Systems division, driven mainly by power grid upgrades in Western Europe, was more than offset by broad declines in all other divisions, reflecting the generally weak economic environment. Orders in the Americas decreased 17 percent (11 percent in local currencies) driven by a 33 percent decline in the United States on account of weak demand in the utilities and industrial sectors. Orders however grew significantly in South America due to strong demand in the utilities sector particularly in Brazil. Orders in Asia were down 20 percent (16 percent in local currencies), mainly due to lower demand in all sectors in countries across the region especially for the Process Automation business. Orders in MEA increased 15 percent (22 percent in local currencies) resulting from higher investment in the utility and oil and gas sectors. In this region, orders grew strongly in Algeria driven primarily by a very large Process Automation project. Orders also increased significantly in Kuwait and Saudi Arabia as these countries benefited from higher investment in power infrastructure.

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Order backlog

 
  December 31,   % Change  
($ in millions)
  2010   2009   2008   2010   2009  

Power Products

    7,930     8,226     7,977     (4 )%   3 %

Power Systems

    10,929     9,675     7,704     13 %   26 %

Discrete Automation and Motion

    3,350     3,046     3,595     10 %   (15 )%

Low Voltage Products

    838     734     710     14 %   3 %

Process Automation

    5,530     5,523     6,230     0 %   (11 )%
                           

Operating divisions

    28,577     27,204     26,216     5 %   4 %

Corporate and Other(1)

    (2,384 )   (2,433 )   (2,379 )   n.a.     n.a.  
                           

Total

    26,193     24,771     23,837     6 %   4 %
                           

(1)
Includes interdivisional eliminations

        Order backlog increased 6 percent (4 percent in local currency) compared to 2009, following the growth in orders received. Growth of order backlog in the Power Systems division continued to be driven by large orders which typically have longer execution times. Order backlog also increased in the Discrete Automation and Motion and Low Voltage Products divisions as orders received grew faster than revenues reflecting market recovery in the industrial sector. Orders backlog was flat in the Process Automation division and in the Power Products division backlog declined, primarily due to weak orders in the transmission sector.

        Changes in the order backlog balance at the end of 2009 as compared to the end of 2008 were mainly due to foreign currency exchange fluctuations. The order backlog in the Power Systems division, however, increased due to the high volume of large orders booked throughout 2009.

Revenues

 
   
   
   
  % Change  
($ in millions)
  2010   2009   2008   2010   2009  

Power Products

    10,199     11,239     11,890     (9 )%   (5 )%

Power Systems

    6,786     6,549     6,912     4 %   (5 )%

Discrete Automation and Motion

    5,617     5,405     6,588     4 %   (18 )%

Low Voltage Products

    4,554     4,071     4,747     12 %   (14 )%

Process Automation

    7,432     7,839     8,397     (5 )%   (7 )%
                           

Operating divisions

    34,588     35,103     38,534     (1 )%   (9 )%

Corporate and Other(1)

    (2,999 )   (3,308 )   (3,622 )   n.a.     n.a.  
                           

Total

    31,589     31,795     34,912     (1 )%   (9 )%
                           

(1)
Includes interdivisional eliminations

        Revenues in 2010 declined 1 percent (2 percent in local currencies) due primarily to the impact of lower orders received in the prior year. The short-cycle business improvement in the second half of the year and the good large order execution in 2010 could not compensate for the impact of weak revenues generated at the beginning of the year.

        Revenues in the Power Products division decreased 9 percent (11 percent in local currencies) due to lower opening backlog and continued weak orders in high voltage and transformers products. The Power Systems division's revenues increased 4 percent (2 percent in local currencies) on order execution especially in substations and power generation projects. Revenues in the Discrete Automation and Motion division increased 4 percent (3 percent in local currencies) driven by a turnaround in the robotics business, as well as growth in industrial and commercial sectors in many countries around the world. Revenues rose 12 percent (13 percent in local currencies) in the Low Voltage Products division

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reflecting a strong recovery of our short-cycle business. In the Process Automation division, revenues decreased 5 percent (6 percent in local currencies) mainly due to a decline of orders in the metal, marine and full services businesses.

        Revenues in 2009 declined 9 percent (4 percent in local currencies), primarily driven by lower orders received in the shorter-cycle product business, price erosion, and to a lesser extent, delivery delays triggered by customer schedule changes.

        Revenues in the Power Products division decreased 5 percent (1 percent in local currencies) despite a double-digit decline in orders, as the division benefited from high initial backlog, particularly in transformers and high-voltage products. The Power Systems division reported a decline in revenues of 5 percent (1 percent increase in local currencies) where a significant increase of revenues from project implementation in grid systems mostly offset the decline of revenues in substations projects. Revenues in the Discrete Automation and Motion division decreased 18 percent (14 percent in local currencies) driven by (i) lower orders received, as the division generated a significant portion of its revenues from the book-and-bill orders of standard products and (ii) a decline of revenues in robotics due to declining orders and a weak backlog. Revenues in the Low Voltage Products division declined 14 percent (9 percent in local currencies) driven by lower orders in all business units. Revenues in the Process Automation division declined 7 percent (1 percent in local currencies) as a result of declining backlog in pulp and paper, process industries products and turbocharging. Revenues, however, increased in the oil and gas and in the minerals businesses of the Process Automation division upon execution of large projects.

        We determine the geographic distribution of our revenues based on the location of the customer, which may be different from the ultimate destination of the products' end use. The geographic distribution of our consolidated revenues was as follows:

 
   
   
   
  % Change  
($ in millions)
  2010   2009   2008   2010   2009  

Europe

    12,378     13,093     15,815     (5 )%   (17 )%

The Americas

    6,213     6,049     6,428     3 %   (6 )%

Asia

    8,872     8,684     8,967     2 %   (3 )%

Middle East and Africa

    4,126     3,969     3,702     4 %   7 %
                           

Total

    31,589     31,795     34,912     (1 )%   (9 )%
                           

        In 2010, revenues in Europe decreased 5 percent (4 percent in local currencies) driven mainly by weak revenue generation from the utilities sector in Germany, Spain and also the industrial sector in Finland, Denmark and Norway. Revenues in other major countries in the region were slightly lower or nearly flat compared to 2009 except in Italy and Netherlands where revenues increased in all divisions. Revenues from the Americas increased 3 percent (decreased 1 percent in local currencies) as a result of higher invoicing from the execution of large orders in Brazil which more than offset lower revenues in the U.S. transmission and distribution market. Revenues from Asia increased 2 percent (decreased 2 percent in local currencies) as revenues increased in China, triggered by growth in the industrial sector and decreased in India (in local currencies) on account of weak orders in both utilities and industrial sectors. Revenues in MEA increased 4 percent (4 percent in local currencies) driven by the execution of large orders in system businesses in Kuwait, Iraq, Saudi Arabia and Algeria which were partly offset by lower revenues in Congo and Qatar.

        In 2009, revenues in Europe decreased 17 percent. Revenues were lower in all major countries within the region including Germany and Switzerland due to weak orders and declining backlog especially in the industrial sector. Revenues from the Americas were down 6 percent driven by lower orders in the U.S. market. Revenues however increased in Brazil and Canada on the execution of large projects in the power utilities sector. Revenues from Asia decreased 3 percent with growth in China and South Korea offset by declines in India, Australia and Japan. Revenues from MEA increased

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7 percent backed by strong orders and high initial backlog of large projects in the Power Products, Power Systems and Process Automation divisions.

Cost of sales

        Cost of sales consists primarily of labor, raw materials and components but also includes expenses for warranty, contract losses and project penalties, as well as order-related development expenses incurred in connection with projects for which corresponding revenues were recognized.

        In 2010, cost of sales decreased 2 percent (3 percent in local currencies) to $22,060 million in line with the decline in revenues volume. Cost of sales, as a percentage of revenues, decreased to 69.8 percent from 70.7 percent in 2009. The reduction in cost of sales reflected measures mainly taken in the areas of supply management, global footprint and operational excellence as part of the cost take-out program. Restructuring programs implemented in many countries also helped to reduce costs as our operations benefited from higher production utilization. Savings from these programs were however partly offset by cost overruns in our cables business in our Power Systems division (see "Item 5. Operating and Financial Review and Prospects—Analysis of Results of Operations—Power Systems"). Improvement in the cost of sales as a percentage of revenues in 2010 was also limited by the continued impact of price erosion.

        Cost of sales decreased 6 percent to $22,470 million in 2009, mainly due to lower revenues. However, as a percentage of revenues, cost of sales increased to 70.7 percent from 68.7 percent in 2008. This increase was primarily attributable to higher under-absorption costs arising from lower business volumes, the impact of price erosion, higher restructuring-related charges, and changes in business and product mix (the proportion of revenues from high margin businesses is relatively lower in 2009). The impact of these factors was partly offset by savings realized from measures taken in the areas of supply management, global footprint and operational excellence.

Selling, general and administrative expenses

        The components of selling, general and administrative expenses were as follows:

($ in millions)
  2010   2009   2008  

Selling expenses

    (2,947 )   (2,868 )   (2,943 )

Selling expenses as a percentage of orders received

    9.0 %   9.3 %   7.7 %

General and administrative expenses

    (1,668 )   (1,623 )   (1,852 )

General and administrative expenses as a percentage of revenues

    5.3 %   5.1 %   5.3 %
               

Total selling, general and administrative expenses

    (4,615 )   (4,491 )   (4,795 )
               

Total selling, general and administrative expenses as a percentage of revenues

    14.6 %   14.1 %   13.7 %

Total selling, general and administrative expenses as a percentage of the average of orders received and revenues

    14.4 %   14.3 %   13.1 %

        In 2010, selling expenses increased 3 percent (2 percent in local currencies) due to (i) expenses from newly acquired companies, (ii) more sales resources employed, especially in emerging markets to support order growth and (iii) an increase in variable selling expenses, such as commissions and the costs associated with pursuing orders. Due to the higher orders volume, selling expenses as a percentage of orders received decreased to 9.0 percent from 9.3 percent in 2009.

        Selling expenses in 2009 decreased 3 percent from 2008 (but increased 3 percent in local currencies). The local currency increase was the result of an increase in doubtful debt allowance, higher expenses associated with longer tender phases in our systems business, offset in part by strict cost controls leading to a reduction of expenses and lower volume-related expenses such as sales commissions. Expressed as a percentage of orders received, selling expenses increased 1.6 percentage-points in 2009, mainly the result of lower orders received.

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        In 2010, general and administrative expenses increased 3 percent (2 percent in local currencies) compared to 2009. Excluding expenses from newly acquired companies, general and administrative expenses were flat (decreased 1 percent in local currencies).

        In 2009, general and administrative expenses decreased 12 percent, reflecting savings achieved from our cost take-out program. Total general and administrative expenses, as a percentage of revenues, decreased to 5.1 percent from 5.3 percent in 2008.

Non-order related research and development expenses

        In 2010, non-order related research and development expenses increased 4 percent (4 percent in local currencies) to $1,082 million in line with our commitment to maintain a high level of research and development activity.

        In 2009, non-order related research and development expenses increased 1 percent (6 percent in local currencies) compared to 2008.

        Non-order related research and development expenses as a percentage of revenues increased to 3.4 percent in 2010 after increasing to 3.3 percent in 2009 from 2.9 percent in 2008.

Other income (expense), net

($ in millions)
  2010   2009   2008  

Restructuring expenses(1)

    (54 )   (111 )   (5 )

Capital gains, net

    51     14     73  

Asset write-downs

    (57 )   (50 )   (11 )

Income from licenses, equity-accounted companies and other income (expense)

    46     476     (623 )
               

Total

    (14 )   329     (566 )
               

(1)
Excluding asset write-downs

        "Other income (expense), net", typically consists of restructuring expenses, gains or losses from the sale of businesses, gains or losses from the sale or disposal of property, plant and equipment, asset write-downs, our share of income or loss from equity-accounted companies and license income.

        Restructuring and related expenses are recorded in various lines within the Consolidated Income Statements depending on the nature of the charges. In 2010, restructuring expenses reported in "Other income (expense), net" were incurred for restructuring projects across all our divisions, principally in the Process Automation, Discrete Automation and Motion as well as the Power Products divisions. In 2009, restructuring expenses reported in "Other income (expense), net" were incurred for restructuring projects in all of our divisions but mainly in the Discrete Automation and Motion and Process Automation divisions. In 2008, restructuring expenses reported in "Other income (expense), net" were incurred for restructuring projects mainly in the Power Products and Process Automation divisions.

        In 2010, "Capital gains, net" consisted mainly of $35 million in gains on the sale of land and buildings, mainly in Sweden, Norway and Austria, as well as a $13 million gain on the sale of an equity-accounted company in Colombia. In 2009, "Capital gains, net" consisted primarily of gains from the sale of real estate properties, mainly in Norway, France, Switzerland and the Netherlands. In 2008, "Capital gains, net" consisted mainly of $14 million in gains from the sale of shares and participations, $10 million income from the release of a provision from a legal claim settlement related to the sold Air Handling business and $47 million capital gains from the sale of real estate properties, mainly in Switzerland, Brazil, Italy, Norway, the United Kingdom, Mexico, and Poland. Additionally, in 2008, we

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recorded adjustments to the gain on the sale of Jorf Lasfar and Neyveli (two power plants in which we held a 50 percent stake) of $16 million related to the favorable outcome on an outstanding tax case.

        In 2010, "Asset write-downs" included $23 million for the impairment prior to the sale of two equity-accounted companies in the Ivory Coast, and other impairments and write-downs of tangible and intangible assets primarily related to Russia, Thailand, Czech Republic and the United States. Asset write-downs in 2009 included the impairment of certain fixed assets in the United States ($10 million) and other impairments and write-downs of tangible and intangible assets primarily relating to ongoing restructuring programs in various countries. Asset write-downs in 2008 mainly related to the distributed energy business in Great Britain and other minor impairments.

        In 2010, "Income from licenses, equity-accounted companies and other income (expense)" primarily consist of a $22 million release of provisions and income of $13 million from a break-fee related to the withdrawn bid to acquire Chloride Group PLC. In 2009, "Income from licenses, equity-accounted companies and other income (expense)" primarily consisted of the partial release of provisions related to the investigations in the power transformers business after the European Commission imposed a fine of 33.75 million euros (equivalent to $49 million on date of payment) in October 2009. Additionally, license income of approximately $5 million, mainly from Switzerland and Germany, was included in this line item. In 2008, "Income from licenses, equity-accounted companies and other income (expense)" primarily consisted of provisions for the ongoing investigations in the power transformers business by the European Commission, the German Federal Cartel Office, as well as the investigations by the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DoJ) which were recorded in Corporate and Other (see "Note 15 Commitments and contingencies" to our Consolidated Financial Statements). Income from equity-accounted companies in 2008 was generated from our equity ventures investment in Colombia and other investments in Italy, Finland and Germany and license income was generated mainly from Japan.

Earnings before interest and taxes

 
   
   
   
  % Change  
($ in millions)
  2010   2009   2008   2010   2009  

Power Products

    1,622     1,969     2,100     (18 )%   (6 )%

Power Systems

    111     388     592     (71 )%   (34 )%

Discrete Automation and Motion

    926     557     1,066     66 %   (48 )%

Low Voltage Products

    806     519     819     55 %   (37 )%

Process Automation

    755     643     958     17 %   (33 )%
                           

Operating divisions

    4,220     4,076     5,535     4 %   (26 )%

Corporate and Other

    (402 )   50     (983 )   n.a.     n.a.  
                           

Total

    3,818     4,126     4,552     (7 )%   (9 )%
                           

        In 2010 EBIT decreased 7 percent (8 percent in local currencies) while in 2009, EBIT decreased 9 percent (8 percent in local currencies) as a result of the factors discussed above.

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        EBIT margins were as follows:

(in %)
  2010   2009   2008  

Power Products

    15.9     17.5     17.7  

Power Systems

    1.6     5.9     8.6  

Discrete Automation and Motion

    16.5     10.3     16.2  

Low Voltage Products

    17.7     12.7     17.3  

Process Automation

    10.2     8.2     11.4  

Operating divisions

    12.2     11.6     14.4  

Total

    12.1     13.0     13.0  

        In 2010, EBIT margin in the operating divisions increased, driven by a strong recovery in the short-cycle business, particularly in our automation divisions. Price pressures continued in 2010; however the impact on earnings was more than offset by savings generated from the cost take-out program. EBIT margin in 2010 was lower in Power Products compared to 2009, mainly due to lower revenues (see "Item 5. Operating and Financial Review and Prospects—Analysis of Results of Operations—Power Products"), while in Power Systems EBIT margin declined as a result of losses in the cables business (see "Item 5. Operating and Financial Review and Prospects—Analysis of Results of Operations—Power Systems").

        In 2009, EBIT margins in the divisions were negatively impacted by restructuring-related costs, price pressures mainly in our short-cycle businesses, lower volume and decreased capacity utilization, and lower revenues from higher-margin product businesses. These impacts were partly offset by cost savings in sourcing, general and administrative expenses as well as footprint adjustments and operational excellence initiatives. The release of compliance provisions recorded in "Corporate and Other" positively impacted the consolidated margin in 2009 compared to 2008.

Net interest and other finance expense

        Net interest and other finance expense consists of "Interest and dividend income" offset by "Interest and other finance expense".

        "Interest and other finance expense" includes interest expense on our debt, the amortization of upfront costs associated with our credit facility and our debt securities, commitment fees on our bank facility and exchange losses on financial items, offset by gains on marketable securities and exchange gains on financial items.

($ in millions)
  2010   2009   2008  

Interest and dividend income

    95     121     315  

Interest and other finance expense

    (173 )   (127 )   (349 )
               

Net interest and other finance expense

    (78 )   (6 )   (34 )
               

        "Interest and dividend income" decreased in 2010 compared to 2009. This decrease is primarily due to the lower level of interest rates during 2010 as a whole, compared to 2009. During the first six months of 2009, interest rates on euro-denominated balances, which constitute a significant portion of our total "Cash and equivalents" and "Marketable securities and short-term investments" balances, were higher than during the rest of 2009 and 2010.

        "Interest and dividend income" decreased in 2009 compared to 2008 due to the continued fall in market interest rates and despite the increase of $1,829 million in our net cash (defined as "Cash and equivalents" and "Marketable securities and short-term investments" less the sum of "Short-term debt and current maturities of long-term debt" and "Long-term debt"—see "Liquidity and Capital Resources" for further discussion).

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        "Interest and other finance expense" increased in 2010 compared to 2009. However, the 2009 figure of $127 million includes the realization of foreign exchange gains on certain government bonds that were recorded in "Accumulated other comprehensive loss" at December 31, 2008 (as described below). If these gains are excluded to allow comparability between 2009 and 2008, "Interest and other finance expense" decreased compared to 2009, reflecting the continued low level of interest rates throughout 2010.

        "Interest and other finance expense" decreased in 2009 compared to 2008 primarily due to certain one-off items described below and the overall fall in market interest rates over the period. Firstly, in 2008, we recorded a $20 million other-than-temporary impairment on available-for-sale equity fund securities held by our captive insurance business, as we did not expect the market values of these securities to recover to their cost basis in the near term, given the market conditions at that time. Secondly, at December 31, 2008, we recorded $102 million in foreign exchange losses on the remeasurement into U.S. dollars of funding (in euro) of our euro-denominated investment in government bonds, designated as available-for-sale securities. The corresponding foreign exchange gains on these securities were part of their change in market values recorded in "Accumulated other comprehensive loss" in equity at December 31, 2008 and were the result of the significant move in the EUR/USD exchange rate in the month of December 2008 and the amount of the EUR-denominated funding of these securities (1.06 billion euro). The foreign exchange gains on the government bonds were released to the income statement in 2009, when these securities matured and contributed to the reduction in the total "Interest and other finance expense" in 2009 compared to 2008.

Provision for taxes

($ in millions)
  2010   2009   2008  

Income from continuing operations, before taxes

    3,740     4,120     4,518  

Provision for taxes

    (1,018 )   (1,001 )   (1,119 )

Effective tax rate for the year

    27.2 %   24.3 %   24.8 %

        The provision for taxes in 2010 represented an effective tax rate of 27.2 percent and included:

        The provision for taxes in 2009 represented an effective tax rate of 24.3 percent and included:

        Certain provisions recorded as an expense in 2008 and the release of certain of these provisions in 2009, primarily related to alleged anti-competitive practices, originated in jurisdictions with a tax rate other than the weighted-average tax rate.

        The provision for taxes in 2008 represented an effective tax rate of 24.8 percent and included:

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Income from continuing operations, net of tax

        As a result of the factors discussed above, income from continuing operations, net of tax, decreased by $397 million to $2,722 million in 2010 compared to 2009, and decreased by $280 million to $3,119 in 2009 compared to 2008.

Income (loss) from discontinued operations, net of tax

        "Income (loss) from discontinued operations, net of tax" was as follows:

($ in millions)
  2010   2009   2008  

Downstream Oil and Gas business sold in 2007

    (13 )   21     (5 )

Transformer business in South Africa sold in 2008

            13  

Asbestos

            (31 )

Other

    23     (4 )   2  
               

Total

    10     17     (21 )
               

        The $23 million net income in "Other" in 2010 included $29 million related to the release of provisions for certain environmental obligations that were subsequently settled in February 2011, offset by several insignificant expenses. For further discussion on the discontinued operations see "Note 3 Acquisitions, divestments and discontinued operations" and "Note 15 Commitments and contingencies" to our Consolidated Financial Statements.

Net income attributable to ABB

        As a result of the factors discussed above, net income attributable to ABB decreased by $340 million to $2,561 million in 2010 compared to 2009 and decreased by $217 million to $2,901 million in 2009 compared to 2008.

Earnings (loss) per share attributable to ABB shareholders

(in $)
  2010   2009   2008  

Income from continuing operations, net of tax:

                   
 

Basic

    1.12     1.26     1.37  
 

Diluted

    1.11     1.26     1.37  

Net income attributable to ABB:

                   
 

Basic

    1.12     1.27     1.36  
 

Diluted

    1.12     1.27     1.36  

        Basic earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year. Diluted earnings (loss) per share is calculated by dividing income (loss) by the weighted-average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive. Potentially dilutive securities comprise: outstanding written call options; outstanding options and shares granted subject to certain conditions

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under our share-based payment arrangements. See "Note 20 Earnings per share" to our Consolidated Financial Statements.

Divisional analysis

Power Products

        The financial results of our Power Products division were as follows:

 
   
   
   
  % Change  
($ in millions except EBIT Margin %)
  2010   2009   2008   2010   2009  

Orders

    9,778     10,940     13,627     (11 )%   (20 )%

Order backlog at December 31,

    7,930     8,226     7,977     (4 )%   3 %

Revenues

    10,199     11,239     11,890     (9 )%   (5 )%

EBIT

    1,622     1,969     2,100     (18 )%   (6 )%

EBIT Margin %(1)

    15.9 %   17.5 %   17.7 %   n.a.     n.a.  

(1)
EBIT Margin % is calculated as EBIT divided by revenues

Orders

        In 2010, orders were down 11 percent (13 percent in local currencies) primarily due to lower large orders in the transmission sector, which could not be compensated by an improvement in the distribution and industrial sectors. Order intake was further impacted by lower price levels due to weaker market conditions and increased competition.

        In 2009, orders were down 20 percent (14 percent in local currencies) primarily due to lower demand from industrial and construction-related markets as well as from the distribution sector. Order intake was further impacted by lower price levels due to weaker market conditions and the pass-through of reduced commodity costs.

        The geographic distribution of orders as a percentage of total orders for our Power Products division was as follows:

(in %)
  2010   2009   2008  

Europe

    35     34     38  

The Americas

    26     23     24  

Asia

    29     33     30  

Middle East and Africa

    10     10     8  
               

Total

    100     100     100  
               

        In 2010, the share of orders from Europe and the Americas improved despite declining order intake due to lower volumes in emerging markets. We saw a significant slowdown in China, resulting from local buying preference, and also in India. MEA remained flat as a percentage of total orders but declined in volume terms due to less large orders.

        In 2009, the share of orders from Europe and the Americas decreased due to unfavorable macro-economic conditions. However, these regions continued to generate over 50 percent of our order volume. Meanwhile, emerging markets in Asia and MEA showed relatively greater resilience and continued to invest in infrastructure projects, leading to an increase in their share of the total order volume.

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Order backlog

        In 2010, order backlog decreased 4 percent (5 percent in local currencies) after increasing 3 percent (decreased 2 percent in local currencies) in 2009. This was mainly the result of the lower large order intake in the transmission sector which forms a significant part of the order backlog.

Revenues

        In 2010, revenues decreased 9 percent (11 percent in local currencies) due to the slower conversion cycle of large projects in the order backlog. However, the short and mid-cycle businesses (for example, medium-voltage equipment and distribution transformers), increased their contribution as a result of the revival in the distribution and industrial sectors.

        Revenues decreased 5 percent (1 percent in local currencies) in 2009 due to the lower contribution of shorter-cycle businesses mainly related to the industrial and construction sectors, as reflected in the order intake. This includes businesses such as medium-voltage equipment and distribution transformers.

        The geographic distribution of revenues for our Power Products division was as follows:

(in %)
  2010   2009   2008  

Europe

    34     35     38  

The Americas

    26     25     24  

Asia

    31     31     30  

Middle East and Africa

    9     9     8  
               

Total

    100     100     100  
               

        In 2010, the geographical distribution of revenues followed similar trends as orders but revenues were down in all the regions. Europe's share declined marginally due to slower order backlog conversion of large projects and the Americas' share improved due to increased book and bill revenues from the distribution related businesses. In Asia and MEA the share of revenues remained at similar levels as the previous year.

        In 2009, the geographical distribution of revenues followed similar trends as orders but Europe's share declined slightly due to lower revenues in Russia and a challenging market environment. The Americas reported marginally positive growth in local currencies mainly due to increased revenues from transmission sector related products which compensated for the lower sales of distribution related products. In Asia, revenues dipped marginally due to delays in customer acceptance of deliveries due to the slowdown in execution of infrastructure projects in a weaker market environment. MEA recorded positive growth in revenues, as several large projects were executed during the year.

Earnings before interest and taxes

        Lower EBIT and EBIT margin in 2010 were mainly the result of lower cost absorption on the basis of lower revenues as well as the impact of price declines in certain emerging markets. In 2009, EBIT and EBIT margin were lower, mainly due to reduced revenues and a lower share of higher-margin short-cycle product revenues compared to 2008. Total restructuring-related charges in 2010 and 2009 amounted to $44 million and $77 million, respectively. In 2008, the transformer consolidation program was completed and $46 million of charges were recorded.

Fiscal year 2011 outlook

        We see signs of improvement in the power distribution and industrial sectors, which is reflected in our distribution related businesses such as medium voltage products and distribution transformers. Investments in power transmission are expected to pick up in the second half of 2011. The medium and long-term growth drivers for this business remain intact. This includes the buildup of capacity in

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emerging markets, increasing focus on renewables, energy efficiency, development of smarter, more reliable and flexible grids as well as economic stimulus packages targeted at strengthening power infrastructure.

Power Systems

        The financial results of our Power Systems division were as follows:

 
   
   
   
  % Change  
($ in millions except EBIT Margin %)
  2010   2009   2008   2010   2009  

Orders

    7,896     7,830     7,408     1 %   6 %

Order backlog at December 31,

    10,929     9,675     7,704     13 %   26 %

Revenues

    6,786     6,549     6,912     4 %   (5 )%

EBIT

    111     388     592     (71 )%   (34 )%

EBIT Margin %(1)

    1.6 %   5.9 %   8.6 %   n.a.     n.a.  

(1)
EBIT Margin % is calculated as EBIT divided by revenues

Orders

        Order intake in 2010 increased 1 percent (decreased 1 percent in local currencies). Strong growth in base orders, seen in industrial and distribution markets, more than compensated for a decrease in large orders resulting from the timing of large scale transmission infrastructure investments. The demand drivers for power systems business remain favorable, as the focus on renewable energy, interconnections and grid reliability is expected to continue. Large orders secured in 2010 included HVDC Light® transmission links connecting three North Sea wind farms to the German power grid (project DolWin with value of approximately $700 million), and another between the Nordic and Baltic regions (project NordBalt with value of approximately $580 million). Continuous price pressure in some of our key geographical markets negatively impacted orders in 2010. Orders in 2010 included $97 million from Ventyx, a software provider and key player in the field of energy management that was acquired in the second quarter of 2010.

        Order intake in 2009 increased 6 percent (17 percent in local currencies), compared to 2008, with power transmission orders from utility customers compensating for lower demand in the industrial and power distribution sectors. A slow-down in base orders was more than offset by strong growth in large orders. Large orders secured in 2009 included the $550 million EirGrid power link project where our HVDC Light® technology will facilitate the integration of renewable energy and enhance capacity and stability of both the Irish and the U.K. transmission grids. A $540 million HVDC contract was received for the world's longest power transmission link (project Rio Madeira) to be constructed in Brazil, bringing remote hydro power to urban centers around São Paulo. Orders in 2009 also included a $400 million substation project in Kuwait to further enhance the country's electrical transmission grid.

        The geographic distribution of orders as a percentage of total orders for our Power Systems division was as follows:

(in %)
  2010   2009   2008  

Europe

    47     33     39  

The Americas

    14     22     16  

Asia

    15     16     20  

Middle East and Africa

    24     29     25  
               

Total

    100     100     100  
               

        In 2010, Europe remained the largest region in terms of order intake. As in 2009, the strong political commitment in Europe to increase the share of renewables and adapt the grids to make them

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"smarter" and more reliable was increasingly being translated into actions and hence orders. MEA continued to be our second largest region in terms of orders in 2010, despite a lower order intake than in 2009. The order share from the Americas decreased as a drop in large orders offset a growth in base orders. Lower orders from Asia mainly reflected an order decline in India from a high level the year before, relating to the timing of large order awards.

        Europe was the largest region in terms of order intake in 2009, followed by MEA, where demand growth in several countries in the Middle East, led by Kuwait and Saudi Arabia, more than offset a slower order intake in Southern Africa. Significant growth in the Americas was helped by the large order intake in Brazil. Orders also grew in Mexico as further investments were made to meet the rising demand for energy and enhance grid reliability and efficiency. The share of orders from Asia decreased as lower volumes in China and Australia could not be fully compensated by a higher order intake in India.

Order backlog

        Order backlog at December 31, 2010, increased 13 percent (12 percent in local currencies), resulting mainly from a further increase in the share of large orders as a proportion of total orders. Large projects stay longer in the order backlog than base orders, as the project execution time is considerably longer.

        Order backlog at December 31, 2009, increased 26 percent (20 percent in local currencies), due mainly to the strong growth in large order intake.

Revenues

        In 2010, revenues increased 4 percent (2 percent in local currencies). Among our businesses, the revenue growth was led by power generation, reflecting the strong order backlog at the beginning of the year and a higher book and bill ratio in 2010 than in 2009 (orders that can be converted to revenues within the same calendar year). Revenues in 2010 included $97 million from Ventyx since the date of acquisition.

        Revenues decreased 5 percent (increased 1 percent in local currencies) in 2009 as compared with 2008. The revenue development in 2009 mainly reflected the scheduled project execution of the order backlog. The lower share of base orders led to a lower book and bill ratio in 2009 than in 2008.

        The geographic distribution of revenues for our Power Systems division was as follows:

(in %)
  2010   2009   2008  

Europe

    34     39     42  

The Americas

    21     15     14  

Asia

    17     18     18  

Middle East and Africa

    28     28     26  
               

Total

    100     100     100  
               

        Europe continued to be the largest region in terms of revenues in 2010, even though revenues from the region were lower than in 2009, mainly reflecting scheduled project execution. The share of revenues from the MEA region remained largely unchanged, while revenues from the Americas increased, led by growth in Brazil. Revenues were flat in Asia, as an increase in India helped offset lower revenues from other parts of the region.

        2009 revenues in Europe were lower than in 2008, reflecting the project execution scheduled, as well as lower book and bill volumes. There was a small increase in revenues in the Americas, led by growth in Mexico and Brazil. In the MEA region, revenues increased on project progress particularly in

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Namibia, Saudi Arabia and Kuwait, which more than compensated for the postponements of a few projects in the United Arab Emirates.

Earnings before interest and taxes

        EBIT for the Power Systems division decreased 71 percent (77 percent in local currencies) in 2010, compared with a decrease of 34 percent (29 percent in local currencies) in 2009. The EBIT margin for the division decreased to 1.6 percent in 2010, compared with 5.9 percent and 8.6 percent in 2009 and 2008, respectively.

        The decrease in EBIT and EBIT margin in 2010 was primarily attributable to cost overruns exceeding $200 million in a small number of subsea cable projects. The cost overruns mainly related to cable laying and trenching activities. Lower prices on past orders, now flowing through to revenues, negatively impacted the gross margin and the EBIT margin. EBIT was also impacted by increased sales expenses, following high tendering activity, as well as increased spending for research and development. Amortization expenses increased, mainly following the acquisition of Ventyx. These negative EBIT impacts were partly offset by savings from the cost take-out program and the release of provisions related to the business in Russia and settlements with the U.S. Securities and Exchange Commission and Department of Justice. Restructuring-related expenses in 2010 were $48 million compared to $90 million in 2009, but remained at a relatively high level.

        The lower EBIT and EBIT margin in 2009, compared to 2008, were primarily the result of restructuring-related charges, lower revenues, higher research and development spending, as well as increased sales cost from higher tendering activity.

Fiscal year 2011 outlook

        While we already see the revival of the distribution and industrial sectors, transmission activity is expected to pick up towards the second half of 2011. Key market drivers for the Power Systems division continue to be economic growth and power infrastructure investment on new capacities in emerging markets, integration of renewable energy sources, upgrades of aging infrastructure, energy efficiency, and the development of more reliable, flexible and smarter grids.

Discrete Automation and Motion

        The financial results of our Discrete Automation and Motion division were as follows:

 
   
   
   
  % Change  
($ in millions except EBIT Margin %)
  2010   2009   2008   2010   2009  

Orders

    5,862     4,702     7,129     25 %   (34 )%

Order backlog at December 31,

    3,350     3,046     3,595     10 %   (15 )%

Revenues

    5,617     5,405     6,588     4 %   (18 )%

EBIT

    926     557     1,066     66 %   (48 )%

EBIT Margin %(1)

    16.5 %   10.3 %   16.2 %   n.a.     n.a.  

(1)
EBIT Margin % is calculated as EBIT divided by revenues

Orders

        Orders grew strongly in 2010, due to increased market demand compared to the low level of 2009. Orders in low-voltage (LV) drives and LV motors increased in 2010 as a result of increased demand in process industries segment and investments in renewable energy sectors such as wind and solar. The automotive industry recovered from the low level of 2009 and increased investments made by car manufacturers as well as general industry customers led to strong order growth for our robotics business.

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        In 2009, orders declined by 34 percent due to the economic downturn worldwide. All businesses reported lower orders as most market segments and regions were negatively affected by the worldwide economic recession. Our robotics business decreased 54 percent as the automotive industry postponed or cancelled many investments.

        The geographic distribution of orders as a percentage of total orders for our Discrete Automation and Motion division was as follows:

(in %)
  2010   2009   2008  

Europe

    46     49     57  

The Americas

    16     13     15  

Asia

    34     33     25  

Middle East and Africa

    4     5     3  
               

Total

    100     100     100  
               

        Orders grew in most of the regions in 2010, with the most significant increases being in Asia and the Americas. A strong recovery in the automotive and process industry markets in the United States contributed to the high increase in the Americas. Orders in China grew 44 percent, mainly driven by the robotics and LV drives businesses. In Europe orders increased 18 percent due to improved market demand but Europe's share of total orders decreased as other regions grew more.

        In 2009, the share of orders from Europe and the Americas declined as the recession affected these regions more than the emerging markets in Asia. Orders in China and India increased, albeit at a lower rate than prior years.

Order backlog

        Order backlog in 2010 increased 10 percent as orders were higher than revenues for most businesses, especially in the LV drives, robotics and LV motors businesses. Order backlog in the machines business decreased as large orders were delivered during the year.

        The backlog was substantially reduced in 2009 following the weak order intake for products due to the recession. The reduction of order backlog in 2009 was also the result of high shipments by businesses with longer delivery times such as power electronics.

Revenues

        Revenues in 2010 increased 4 percent as a result of the high order growth for products such as LV drives, robotics and LV motors. Longer-cycle businesses such as power electronics and machines reported lower revenues due to weak backlog at the beginning of the year.

        Revenues declined 18 percent in 2009 mainly due to weak order intake. Robotics declined 41 percent as projects were postponed or cancelled. Also LV drives, machines and LV motors had lower revenues due to the weak business environment. However, power electronics and MV drives increased revenues due to a strong order backlog at the start of 2009.

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        The geographic distribution of revenues for our Discrete Automation and Motion division was as follows:

(in %)
  2010   2009   2008  

Europe

    48     54     58  

The Americas

    14     14     15  

Asia

    34     29     24  

Middle East and Africa

    4     3     3  
               

Total

    100     100     100  
               

        Favorable market development and a focused build-up of local activities have contributed to the increased share from Asia. Europe's share declined in 2010 due to low order backlog at the beginning of the year caused by the weak order intake in 2009.

        In 2009, Europe's share of revenues was reduced as most mature markets were negatively affected by the global recession. Revenue growth in China and India contributed to the increase in Asia's share of total revenues.

Earnings before interest and taxes

        In 2010, EBIT improved substantially as a result of cost savings and a turnaround in the robotics business. LV drives further increased EBIT, while LV motors recovered from the low level of 2009. The robotics business returned to profitability in 2010, on the basis of higher revenues, supported by executed restructuring initiatives and cost saving measures. EBIT in the machines and power electronics business and MV drives business deteriorated in 2010, due to lower capacity utilization and the project mix.

        EBIT in 2009 decreased 48 percent due to lower revenues, reduced capacity utilization and restructuring-related costs to adapt to weaker demand. Negative EBIT in the robotics business was caused by low factory loadings, declining service revenues and capacity adjustments. Lower EBIT in LV drives was mainly due to decreased revenues while LV motors and machines experienced low capacity utilization. Power electronics and MV drives increased EBIT as a result of higher revenues due to a high opening backlog.

Fiscal year 2011 outlook

        Excluding the impact from the acquisition of Baldor, we expect continued growth in orders and revenues, especially in emerging markets, led by China and India. Key market drivers for the Discrete Automation and Motion division include the need for improved energy efficiency and productivity in a wide range of industries, demand for reliable and high-quality power supply to industry and commercial facilities, and demand for automation solutions that make better use of renewable energies.

Low Voltage Products

        The financial results of our Low Voltage Products division were as follows:

 
   
   
   
  % Change  
($ in millions except EBIT Margin %)
  2010   2009   2008   2010   2009  

Orders

    4,686     4,079     4,865     15 %   (16 )%

Order backlog at December 31,

    838     734     710     14 %   3 %

Revenues

    4,554     4,071     4,747     12 %   (14 )%

EBIT

    806     519     819     55 %   (37 )%

EBIT Margin %(1)

    17.7 %   12.7 %   17.3 %   n.a.     n.a.  

(1)
EBIT Margin % is calculated as EBIT divided by revenues

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Orders

        Orders increased 15 percent (15 percent in local currencies) in 2010 and decreased 16 percent (11 percent in local currencies) in 2009. In 2010 orders grew on higher demand from industrial customers, the solar energy market and construction-related sectors. Strong order growth was recorded across all product businesses, whereas the system business was affected by weaker market conditions in the beginning of 2010 which gradually recovered during the second half of 2010. In 2009, the demand in industrial and construction markets deteriorated leading to a decline in orders across most regions and all product lines. However, the order trend improved at the end of 2009 for some standard products such as wiring accessories, as the construction markets started recovering from a low level.

        The geographic distribution of orders as a percentage of total orders for our Low Voltage Products division was as follows:

(in %)
  2010   2009   2008  

Europe

    56     60     64  

The Americas

    9     8     9  

Asia

    26     23     20  

Middle East and Africa

    9     9     7  
               

Total

    100     100     100  
               

        In 2010, orders grew across all regions as market conditions improved. The share of orders from Europe, the largest region, continued to decrease as the share from Asia increased, led by strong growth in China. Orders from the Americas increased as South America continued to grow strongly, particularly from the key market of Brazil. The share of orders from MEA remained stable, although orders grew in absolute terms. The share of orders from Europe in 2009 decreased due to the weak construction market, particularly in Western Europe. The share of orders in the Americas remained stable as order growth in South America compensated for the weakening construction sector in the United States. The share of orders from Asia increased as a result of industrial infrastructure investments in China and India.

Order backlog

        Order backlog in 2010 increased 14 percent (14 percent in local currencies) as orders were higher than revenues across all businesses, especially in the LV system business which typically has longer delivery schedules than the product business. Order backlog in 2009, compared to 2008, increased 3 percent (decreased 1 percent in local currencies) which was mainly influenced by weak demand in the LV system business.

Revenues

        Revenues in 2010 increased 12 percent (13 percent in local currencies), as the strong order growth and the short execution cycle in the product business was converted to revenues. Revenues grew across all product businesses, whereas revenues in the LV system business decreased due to a weak opening backlog. Revenues in 2009 decreased 14 percent (9 percent in local currencies), due to low demand from industrial and construction markets as reflected in the order intake. Revenues declined across all product businesses as well as in the LV system business where the decrease was slightly offset by backlog execution.

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        The geographic distribution of revenues for our Low Voltage Products division was as follows:

(in %)
  2010   2009   2008  

Europe

    57     60     65  

The Americas

    9     8     9  

Asia

    26     24     19  

Middle East and Africa

    8     8     7  
               

Total

    100     100     100  
               

        In 2010, all regions recorded growth in revenues compared to the previous year, as the demand from the construction market started to recover from low levels. Despite positive growth, the share of revenues from Europe continued to decrease as growth rates were higher in Asia and the Americas. The increased share of revenues from Asia was the result of order growth and the build-up of local resources in sales, service and production in this region. In 2009, the geographical distribution of revenues followed a similar trend to orders. The share of revenues from Europe decreased due to weak order development and short execution cycle in the product business. The Americas and MEA remained stable, whereas the share of revenues from Asia increased as a result of high order intake, as well as strong backlog in China.

Earnings before interest and taxes

        In 2010, EBIT increased 55 percent (58 percent in local currencies) as a result of higher revenues, a favorable product mix and the positive effects of cost reduction initiatives including restructuring measures. In 2009, EBIT decreased 37 percent (33 percent in local currencies) as a result of lower revenues, reduced capacity utilization and restructuring-related costs to adapt to weaker demand.

Fiscal year 2011 outlook

        We expect continued growth in Asia and South America, as well as an increased focus in the areas of renewable energy and energy efficiency applications which will benefit the Low Voltage Products division in 2011.

Process Automation

        The financial results of our Process Automation division were as follows:

 
   
   
   
  % Change  
($ in millions except EBIT Margin %)
  2010   2009   2008   2010   2009  

Orders

    7,383     6,684     9,244     10 %   (28 )%

Order backlog at December 31,

    5,530     5,523     6,230     0 %   (11 )%

Revenues

    7,432     7,839     8,397     (5 )%   (7 )%

EBIT

    755     643     958     17 %   (33 )%

EBIT Margin %(1)

    10.2 %   8.2 %   11.4 %   n.a.     n.a.  

(1)
EBIT Margin % is calculated as EBIT divided by revenues

Orders

        Orders grew in 2010 despite continued uncertainty in the market regarding the strength of the industrial recovery. Base orders grew significantly recording a double-digit growth compared to 2009. Order growth was led by marine, minerals and pulp and paper reflecting ongoing investments in the energy and commodity based sectors. Orders in oil and gas were down as large orders booked in the previous year were not repeated, while the base order business remained at a similar level. Life cycle

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services orders also increased as customers brought existing capacity back online following the business downturn of 2009.

        In 2009, orders decreased 28 percent (22 percent in local currencies) as both large orders and base orders were down during 2009 compared with the strong performance in 2008. The market slowdown in the fourth quarter of 2008 continued during 2009 with some stabilization of orders at the end of the year. The market was still driven by cost savings and energy and production efficiency requirements.

        Lower orders in 2009, was the result of lower investments in the marine, minerals, metals, and pulp and paper markets, as due to the financial crisis, customers reduced investments due to uncertainty of future demand and limited access to project financing. Orders from the oil and gas sector remained strong in 2009 and grew 16 percent due to several large orders from the MEA region. The performance services business grew due to the joint venture formed with Stora Enso to provide maintenance operations and improve efficiency at six pulp, paper and board mills in Finland.

        The geographic distribution of orders as a percentage of total orders for our Process Automation division was as follows:

(in %)
  2010   2009   2008  

Europe

    39     40     41  

The Americas

    22     19     19  

Asia

    29     22     29  

Middle East and Africa

    10     19     11  
               

Total

    100     100     100  
               

        In 2010, order growth was led by the emerging markets in Asia and South America. In South America, order growth was led by investments in the minerals sector in Chile and Peru, whereas in Asia, demand increased from the minerals sector in China and the marine sector in South Korea. Orders also increased in mature markets in Europe and North America.

        In 2009, European orders were down due to lower investments in the marine and minerals markets; however the region continued to represent the largest share of orders for Process Automation. In the Americas, the higher demand in Peru and Colombia was insufficient to offset the lower order intake from the United States, Brazil, Canada and Mexico. The strong growth in Asia during 2008 could not be repeated during 2009 due to lack of large orders from the marine, metals and pulp and paper market sectors. MEA recorded significant order growth during 2009 led by strong oil and gas investments in Algeria.

Order backlog

        Order backlog at December 31, 2010 remained at the same level as the previous year. Order backlog at December 31, 2009, decreased 11 percent (17 percent in local currencies) compared to a year earlier. This reduction was the result of lower order intake combined with strong execution of projects in our opening backlog, principally in the marine, minerals and metals business sectors. Order cancellations of approximately $300 million were received from customers in 2009, reducing our orders received and order backlog correspondingly.

Revenues

        Revenues in 2010 were down significantly in the systems business as a result of a lower backlog, whereas revenues in products and life-cycle services grew. In the systems business, revenues were down in the metals, marine and minerals sectors, whereas the pulp and paper sector recorded an increase, reflecting the ongoing execution of projects from order backlog. Revenues in 2009 from our systems business decreased 2 percent. The increase was led by minerals and oil and gas due to the strong

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backlog built up in the systems business during 2008. Revenues in pulp and paper were down due to the low activity levels in the market already prior to the financial crisis with several customers shutting down mills in America and Europe. Service revenues were approximately at the same level as a year earlier in local currencies, due to the strong installed base and the contribution from the newly formed joint venture with Stora Enso. The products business was lower across all product lines during 2009 due to the short revenue conversion cycle (from orders received into revenues). Higher operational expenditure in the maintenance areas supported revenue growth in marine and metals services.

        The geographic distribution of revenues for our Process Automation division was as follows:

(in %)
  2010   2009   2008  

Europe

    39     42     45  

The Americas

    19     19     19  

Asia

    27     27     27  

Middle East and Africa

    15     12     9  
               

Total

    100     100     100  
               

        In 2010, revenues were lower in most parts of Europe with the exception of Italy. In the Americas, the United States recorded revenue growth, although the region overall recorded a decline. In Asia, South Korea recorded double-digit growth, while India and China recorded a decrease. MEA recorded growth in revenues primarily reflecting ongoing execution of the El Merk project in Algeria. Higher revenues in 2009 from Finland and Norway were insufficient to maintain the same high level of revenues recorded in 2008 in Europe, as revenues were lower in the United Kingdom, Germany and Russia. Revenues in the Americas were slightly lower when compared with a strong performance a year earlier; Canada and Chile recorded significant growth while revenues from the United States and Brazil were lower. In Asia, revenues were down mainly in Japan, Australia and Vietnam while Singapore experienced double-digit growth. Revenues in 2009 from MEA recorded significant growth due to the execution of several large projects in Congo, Qatar and Pakistan.

Earnings before interest and taxes

        Despite lower revenues, EBIT and EBIT margin increased in 2010, partly reflecting the successful implementation of cost reduction measures and a higher share of revenues from products and services business, which usually carries higher margin than the systems business. Improved project execution and project cost control also contributed to the strong result. EBIT for the Process Automation division decreased 33 percent (29 percent in local currencies) in 2009. EBIT in 2009 included restructuring-related charges of $114 million, compared with $25 million recorded during 2008.

Fiscal year 2011 outlook

        Most process industries are showing signs of recovery, but because capital expenditure in these sectors typically occurs later in the economic cycle we expect a continued challenging market environment in 2011 with customer decision making being slow and continuing price pressure in certain sectors. Order growth will be primarily driven by energy and commodity-based segments. Our life-cycle services business is also expected to grow in 2011.

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Corporate and Other

        EBIT for Corporate and Other was as follows:

($ in millions)
  2010   2009   2008  

Corporate headquarters and stewardship

    (296 )   (296 )   (277 )

Corporate research and development

    (120 )   (115 )   (118 )

Corporate real estate

    48     30     49  

Equity investments

    (11 )   (8 )   (1 )

Other

    (23 )   439     (636 )
               

Total Corporate and Other

    (402 )   50     (983 )
               

        In 2010, Corporate headquarters and stewardship costs remain flat as a result of continued focus on cost control. Corporate costs in countries decreased and the savings generated were used to finance global corporate initiatives to support growth. In 2009, Corporate headquarters and stewardship costs increased mainly due to higher pension funding costs related to divested business. This increase was partly offset by lower expenses for our executive committee, lower corporate costs in the countries and an improved result in our captive insurance company.

        In 2010, Corporate research and development costs increased slightly, in line with the strategy to maintain a high focus in this area. Corporate research and development costs in 2009 remained at a similar level as in 2008.

        Corporate real estate consists primarily of rental income. In addition, in 2010, Corporate real estate reported gains of $33 million from the sale of land and buildings, mainly in Sweden, Norway, Austria and Venezuela. In 2009, gains of $12 million from the sale of facilities mainly in Switzerland, the Netherlands and Norway were offset by a $10 million asset impairment charge in the United States. EBIT of real estate operations in 2008 included a $33 million gain from the sale of properties mainly in Switzerland, Brazil, Italy, Mexico and Poland.

        In 2010, EBIT from Equity investments resulted in a loss of $11 million, primarily due to an impairment of $23 million of two equity-accounted companies in the Ivory Coast that were subsequently sold, and a net gain of $13 million on the sale of an equity-accounted company in Colombia. In 2009, EBIT from equity investments was an $8 million loss, primarily representing an operating loss of our equity investment in a power plant in Colombia. EBIT from Equity investments decreased in 2008 as most investments were sold in previous years.

        In 2010, EBIT from "Other" included $9 million operational costs of our Global Treasury Operations and $5 million losses from our distributed energy business in Great Britain which is currently in the divestment process. In 2009, EBIT from "Other" of $439 million included primarily the partial release of provisions (related to the investigations into our Power Transformers business) following the European Commission's decision to impose a fine in October 2009. It also included the costs of our Group Treasury Operations. The negative EBIT from "Other" in 2008 was the result of provisions related to the investigations into our Power Transformers business and the voluntary disclosures to the SEC and DoJ regarding suspect payments (see "Note 15 Commitments and contingencies" to our Consolidated Financial Statements). Also included are the costs of our Group Treasury Operations of $10 million in 2008. Furthermore, "Other" in 2008 included $7 million in losses mainly related to the write-down of assets of our distributed energy business in Great Britain.

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Restructuring programs

Cost take-out program

        In December 2008, we announced a two-year cost take-out program to adjust our cost base to rapidly changing market conditions and protect our profitability. The program's original target was to reduce our costs—comprising both cost of sales and general and administrative expenses—from 2008 levels by a total of $1.3 billion by the end of 2010. As a result of the ongoing deterioration of ABB's markets over most of 2009, the cost take-out goal was expanded to $3 billion. The savings were focused on low-cost sourcing, reduced general and administrative expenses, internal process improvements and adjustments to our global manufacturing and engineering footprint.

        Cost reductions for 2009 were significantly ahead of plan and exceeded $1.5 billion. In 2010, the cost take-out goal was achieved and total cost reductions for the whole program exceeded $3.3 billion. Approximately 50 percent of these savings were achieved by optimizing global sourcing (excluding changes in commodity prices). The remainder was achieved through reductions to general and administrative expenses, as well as global footprint and operational excellence measures.

        We have substantially completed the cost take-out program with total charges of $836 million.

        The following table outlines the total costs incurred in 2010 and the cumulative amount of costs incurred to December 31, 2010, under the program.

($ in millions)
  Costs
incurred in
2010
  Cumulative costs
incurred to
December 31, 2010
 

Power Products

    44     122  

Power Systems

    48     139  

Discrete Automation and Motion

    35     256  

Low Voltage Products

    36     114  

Process Automation

    44     183  

Corporate and Other

    6     22  
           

Total

    213     836  
           

        For details of the nature of the costs incurred and their impact on the Consolidated Financial Statements, see "Note 21 Restructuring and related expenses" to our Consolidated Financial Statements.

        The majority of the remaining cash outlays, primarily for employee severance benefits, are expected to occur in 2011 as the employees leave ABB. We expect to finance these restructuring activities from our cash flow from operations.

LIQUIDITY AND CAPITAL RESOURCES

Principal sources of funding

        In 2010, 2009 and 2008, we met our liquidity needs principally using cash from operations and bank borrowings.

        During 2010, 2009 and 2008, our financial position was strengthened by the positive cash flow from operating activities of $4,197 million, $4,027 million and $3,958 million, respectively.

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        Our financial position is shown in the table below:

 
  December 31,  
($ in millions)
  2010   2009  

Cash and equivalents

    5,897     7,119  

Marketable securities and short-term investments

    2,713     2,433  

Short-term debt and current maturities of long-term debt

    (1,043 )   (161 )

Long-term debt

    (1,139 )   (2,172 )
           

Net cash (defined as the sum of the above lines)

    6,428     7,219  
           

        Net cash at December 31, 2010, decreased compared to the balance at December 31, 2009, primarily due to the cash outflow for the acquisition of businesses ($1,313 million), the increase in our ownership interest in our Indian publicly-listed subsidiary from approximately 52 percent to 75 percent ($956 million) and the dividends paid in the form of a nominal value reduction ($1,112 million). Net cash therefore decreased compared to the balance at December 31, 2009, despite the cash generated by operations during 2010 of $4,197 million. See "Financial Position", "Net cash provided by (used in) investing activities" and "Net cash used in financing activities" for further details.

        Our Group Treasury Operations is responsible for providing a range of treasury management services to our group companies and is also responsible for investing cash in excess of current business requirements. At December 31, 2010 and 2009, the proportion of our aggregate "Cash and equivalents" and "Marketable securities and short-term investments" managed by our Group Treasury Operations amounted to 71 percent and 78 percent, respectively.

        In 2010, the overall investment strategy of maintaining diversification and flexibility in our investment portfolio continued with a mix of government securities, highly-rated corporate short-dated paper and time deposits of short duration with banks. During the second quarter of 2010, we began to invest in AAA-rated liquidity (money market) funds in order to diversify our investment base and increase the yield on our investments. At December 31, 2010, such investment represented $1,789 million of the total marketable securities and short-term investments balance of $2,713 million in table above.

        In January 2011, we sold the $1,789 million money market funds. Also in January 2011, we used $4.2 billion of our cash in connection with the purchase of Baldor Electric Company and the repayment of debt assumed upon acquisition.

        In the first half of 2009, the market in general rebounded and with investors' risk appetites returning; equities improved and credit spreads tightened. Consequently, we increased our investments in corporate papers and extended the duration on our time deposits with banks to enhance the return on our investments. Towards the end of 2009, we again invested in government securities, as better returns could be made than with some banks who were offering low rates due to the amount of liquidity in the market.

        We actively monitor credit risk in our investment portfolio and hedging activities. Credit risk exposures are controlled in accordance with policies approved by our senior management to identify, measure, monitor and control credit risks. We closely monitor developments in the credit markets and make appropriate changes to our investment policy as deemed necessary. The rating criteria we require for our counterparts have remained unchanged during 2010 as follows—a minimum of A rating for our banking counterparts, while the minimum required rating for investments in short-term corporate paper is A-1/P-1. In addition to rating criteria, we have specific investment criteria and restrictions on the sectors we invest in. These parameters are closely monitored on an ongoing basis and amended as we consider necessary.

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        We believe the cash flows generated from our business are sufficient to support business operations, capital expenditures, business acquisitions, the payment of dividends to shareholders and contributions to pension plans. Due to the nature of our operations, our cash flow from operations generally tends to be weaker in the first half of the year than in the second half of the year. We have the ability to supplement this near-term liquidity, if necessary, through access to the capital markets (including short-term commercial paper) and credit facilities. Consequently, we believe that our ability to obtain funding from these sources will continue to provide the cash flows necessary to satisfy our working capital and capital expenditure requirements, as well as meet our debt repayments and other financial commitments for the next 12 months. See "Contractual obligations".

Debt and interest rates

        Total outstanding debt was as follows:

 
  December 31,  
($ in millions)
  2010   2009  

Short-term debt including current maturities of long-term debt (including bonds)

    1,043     161  

Long-term debt:

             

—bonds (excluding portion due within one year)

    946     1,961  

—other long-term debt

    193     211  
           

Total debt

    2,182     2,333  
           

        The decrease in debt in 2010 was primarily due to exchange rate movements.

        Our debt has been obtained in a range of currencies and maturities and on various interest rate terms. We use derivatives to reduce the interest rate exposures arising on our debt. For example, we use interest rate swaps to effectively convert fixed rate debt into floating rate liabilities.

        After considering the effects of interest rate swaps, the effective average interest rate on our floating rate long-term debt (including current maturities) of $1,919 million and our fixed rate long-term debt (including current maturities) of $139 million was 3.2 percent and 5.6 percent, respectively. This compares with an effective rate of 3.0 percent for floating rate long-term debt of $2,072 million and 5.0 percent for fixed-rate long-term debt of $133 million at December 31, 2009.

        For a discussion of our use of derivatives to modify the characteristics of our individual bond issuances, see "Note 12 Debt" to our Consolidated Financial Statements.

Credit facilities

        During 2010, we amended our $2 billion multicurrency revolving credit facility, extending its maturity to 2015 and reducing the costs and fees related to it. For further details of this credit facility, see "Note 12 Debt" to our Consolidated Financial Statements.

        No amount was drawn under the facility at December 31, 2010 and 2009. The facility is for general corporate purposes and will serve as a back-stop facility to our commercial paper programs in the event that we issue commercial paper under the programs described below. The facility contains cross-default clauses whereby an event of default would occur if we were to default on indebtedness, as defined in the facility, at or above a specified threshold.

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Commercial paper

        We have in place 3 commercial paper programs:

        At December 31, 2010 and 2009, no amounts had been issued or were outstanding under these commercial paper programs.

Medium Term Note Program (MTN)

        At December 31, 2010 and 2009, $1,828 million and $1,961 million, respectively, of our total debt outstanding, were debt issuances under the MTN Program that allows the issuance of up to (the equivalent of) $5,250 million in certain debt instruments. The terms of the MTN Program do not obligate any third party to extend credit to us and the terms and possibility of issuing any debt under the MTN Program are determined with respect to, and as of the date of issuance of, each debt instrument. At December 31, 2010, it was more than 12 months since the Program was last updated. New bonds could be issued under the Program but could not be listed without us formally updating the Program.

Credit ratings

        Credit ratings are assessments by the rating agencies of the credit risk associated with ABB and are based on information provided by us or other sources that the rating agencies consider reliable. Higher ratings generally result in lower borrowing costs and increased access to capital markets. Our ratings are of "investment grade" which is defined as Baa3 (or above) from Moody's and BBB- (or above) from Standard & Poor's.

        At December 31, 2010, our long-term company ratings were A3 and A from Moody's and Standard & Poor's, respectively, compared to A3 and A- at December 31, 2009.

Limitations on transfers of funds

        Currency and other local regulatory limitations related to the transfer of funds exist in a number of countries where we operate, including Algeria, China, Egypt, India, Korea, Kuwait, Malaysia, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and Venezuela. Funds, other than regular dividends, fees or loan repayments, cannot be readily transferred offshore from these countries and are therefore deposited and used for working capital needs locally. In addition, there are certain countries where, for tax reasons, it is not considered optimal to transfer the cash offshore. As a consequence, these funds are not available within our Group Treasury Operations to meet short-term cash obligations outside the relevant country. The above described funds are reported as cash in our Consolidated Balance Sheets, but we do not consider these funds immediately available for the repayment of debt outside the respective countries where the cash is situated, including those described above. At December 31, 2010 and 2009, the balance of "Cash and equivalents" and "Marketable securities and other short-term investments" under such limitations (either regulatory or sub-optimal from a tax perspective) totaled approximately $1,745 million and $1,460 million, respectively.

        During 2010, we continued to direct our subsidiaries in countries with restrictions to place such cash with our core banks or investment grade banks, in order to minimize credit risk on such cash positions. Consequently, cash placed with non-rated or sub-investment grade banks has remained at less than 5 percent of cash outside of our Group Treasury Operations. We continue to closely monitor the situation to ensure bank counterparty risks are minimized.

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FINANCIAL POSITION

Balance sheet

 
  December 31,  
($ in millions)
  2010   2009  

Current assets

             

Cash and equivalents

    5,897     7,119  

Marketable securities and short-term investments

    2,713     2,433  

Receivables, net

    9,970     9,451  

Inventories, net

    4,878     4,550  

Prepaid expenses

    193     236  

Deferred taxes

    896     900  

Other current assets

    801     540  
           

Total current assets

    25,348     25,229  
           

        For a discussion on cash and equivalents and marketable securities and short-term investments, see "Liquidity and capital resources—Principal sources of funding" for further details.

        Receivables, net, at the end of 2010, increased from the end of 2009 by approximately 5.5 percent (5.9 percent in local currencies). The increase was primarily driven by higher revenues in the automation businesses and higher project-related sales in the Power Systems division. These increases were partially offset by lower levels of receivables in the Power Products division, which saw a 9 percent decline in revenues in 2010 compared to 2009.

        Inventories, net, increased 7.2 percent compared to the level at the end of 2009 (7.6 percent in local currencies). Inventories increased across most divisions largely driven by the increasing order volumes.

        For a discussion on deferred taxes see "Note 16 Taxes" to our Consolidated Financial Statements.

        Other current assets include derivative and embedded derivative assets and income tax receivables. The increase primarily reflects higher derivative market values.

 
  December 31,  
($ in millions)
  2010   2009  

Current liabilities

             

Accounts payable, trade

    4,555     3,853  

Billings in excess of sales

    1,730     1,623  

Employee and other payables

    1,526     1,326  

Short-term debt and current maturities of long-term debt

    1,043     161  

Advances from customers

    1,764     1,806  

Deferred taxes

    357     327  

Provisions for warranties

    1,393     1,280  

Provisions and other current liabilities

    2,726     2,603  

Accrued expenses

    1,644     1,600  
           

Total current liabilities

    16,738     14,579  
           

        Total current liabilities at December 31, 2010, increased 14.8 percent (15.1 percent in local currencies) compared to December 31, 2009, primarily driven by the reclassification of EUR 650 million bonds from long-term debt as they will become due in November 2011. The increase is also due to higher trade accounts payable as a result of the build-up of inventories resulting from increased orders received in 2010. Similarly, billings in excess of sales have increased with the higher order

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volumes. Provisions for warranties have increased across all divisions, reflecting an ongoing assessment of our warranty accruals on both new product launches and existing products.

        The increase in provisions and other current liabilities is largely due to a reclassification of environmental liabilities from other non-current liabilities and higher provisions for loss orders. Partially offsetting the increase is a net reduction in restructuring provisions, largely due to usage of provision related to the cost take-out program. Also partially driving the reduction were payments made to settle certain asbestos obligations.

 
  December 31,  
($ in millions)
  2010   2009  

Non-current assets

             

Financing receivables, net

    420     452  

Property, plant and equipment, net

    4,356     4,072  

Goodwill

    4,085     3,026  

Other intangible assets, net

    701     443  

Prepaid pension and other employee benefits

    173     112  

Investments in equity method companies

    19     49  

Deferred taxes

    846     1,052  

Other non-current assets

    347     293  
           

Total non-current assets

    10,947     9,499  
           

        Property, plant and equipment, net, increased 7.0 percent (5.5 percent in local currencies) between December 31, 2009 and December 31, 2010. The major capital expenditures during 2010 were for investments in Sweden, Switzerland and China.

        The increase in goodwill and other intangible assets, net was mainly due to the Ventyx acquisition (see "Note 3 Acquisitions, divestments and discontinued operations" and "Note 11 Goodwill and other intangible assets" to our Consolidated Financial Statements). The increase in prepaid pension and other employee benefits reflects the change in the funded status of our overfunded pension plans. See "Note 17 Employee benefits" to our Consolidated Financial Statements.

        For an explanation on the reduction in Deferred taxes, refer to "Note 16—Taxes" to our Consolidated Financial Statements.

        Other non-current assets mainly include derivative and embedded derivative assets.

 
  December 31,  
($ in millions)
  2010   2009  

Non-current liabilities

             

Long-term debt

    1,139     2,172  

Pension and other employee benefits

    831     1,179  

Deferred taxes

    411     328  

Other non-current liabilities

    1,718     1,997  
           

Total non-current liabilities

    4,099     5,676  
           

        The decrease in our long-term debt was largely due to the reclassification of the EUR 650 million bonds to current maturities of short-term debt as these bonds mature in November 2011. Also influencing the changes in long-term debt were: (i) foreign exchange movements on outstanding debt (a large part being bonds denominated in euros), (ii) fair value hedge adjustments on our outstanding bonds and (iii) decreases in bank debt in certain countries. See "Liquidity and Capital Resources—Debt and interest rates".

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        The decrease in pension and other employee benefits substantially reflects the remeasurement of benefit obligations for updated assumptions and plan assets to fair value of our defined benefit pension plans, partly offset by employer contributions, see "Note 17 Employee benefits" to our Consolidated Financial Statements.

        Other non-current liabilities decreased primarily due to the reclassification of provisions for environmental liabilities to current provisions, as well as a reduction in tax contingencies.

Cash flows

        In the Consolidated Statements of Cash Flows, the effects of discontinued operations are not segregated.

        The Consolidated Statements of Cash Flows can be summarized as follows:

($ in millions)
  2010   2009   2008  

Net cash provided by operating activities

    4,197     4,027     3,958  

Net cash provided by (used in) investing activities

    (2,747 )   (2,172 )   114  

Net cash used in financing activities

    (2,530 )   (1,349 )   (2,119 )

Effects of exchange rate changes on cash and equivalents

    (142 )   214     (230 )

Adjustment for the net change in cash and equivalents in assets held for sale and in discontinued operations

            26  
               

Net change in cash and equivalents—continuing operations

    (1,222 )   720     1,749  
               

Net cash provided by operating activities

        In 2010, operating activities provided net cash of $4,197 million, an increase of 4 percent on the prior year, reflecting our working capital management. Stable levels of working capital were achieved despite increasing order volumes, as cash outlays for higher inventories and trade receivables could be offset through increased levels of trade payables.

        Operating activities in 2009 provided net cash of $4,027 million. Net cash provided by operating activities included a $135 million cash outflow related to our ongoing restructuring-related activities. Net cash provided by operating activities was particularly high in our Power Products division (with the Discrete Automation and Motion and Low Voltage Products divisions also showing an increase), mainly due to lower inventories and improved cash collection. This was partially offset by lower advance payments from customers in the wake of decreasing orders.

        Net cash provided by operating activities in 2008 included $100 million of asbestos payments (see "Note 15 Commitments and contingencies" to our Consolidated Financial Statements).

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Net cash provided by (used in) investing activities

($ in millions)
  2010   2009   2008  

Changes in financing receivables, net

    (7 )   (7 )   7  

Purchases of marketable securities (available-for-sale)

    (3,391 )   (243 )   (1,081 )

Purchases of marketable securities (held-to-maturity)

    (65 )   (918 )    

Purchases of short-term investments

    (2,165 )   (3,824 )   (2,512 )

Purchases of property, plant and equipment and intangible assets

    (840 )   (967 )   (1,171 )

Acquisitions of businesses (net of cash acquired) and changes in cost and equity investments

    (1,313 )   (161 )   (653 )

Proceeds from sales of marketable securities (available-for-sale)

    807     79     110  

Proceeds from maturity of marketable securities (available-for-sale)

    531     855      

Proceeds from maturity of marketable securities (held-to-maturity)

    290     730      

Proceeds from short-term investments

    3,276     2,253     5,305  

Proceeds from sales of property, plant and equipment

    47     36     94  

Proceeds from sales of businesses and equity-accounted companies (net of cash disposed)

    83     16     46  

Other

        (21 )   (31 )
               

Net cash provided by (used in) investing activities

    (2,747 )   (2,172 )   114  
               

        Investing activities include accounts receivable from leases and third-party loans (financing receivables), net investments in marketable securities that are not held for trading purposes, asset purchases, net of disposals and acquisitions of, investments in, and divestitures of businesses.

        Net cash used in investing activities during 2010 was $2,747 million. Aggregate purchases of marketable securities and short-term investments amounted to $5,621 million in 2010. Compared to 2009, there has been an increase in the purchases of marketable securities (available-for-sale), while at the same time a reduction in the purchases of marketable securities (held-to-maturity) and short-term investments. Aggregate proceeds from the sales and maturities of marketable securities and short-term investments during 2010 amounted to $4,904 million.

        Total cash disbursements for the purchase of property, plant and equipment and intangibles in 2010 amounted to $840 million, including $164 million for the purchase of machinery and equipment, $175 million for the purchase of land and buildings, $54 million for the purchase of intangible assets and $447 million capital expenditures for construction in progress.

        Acquisitions of businesses (net of cash acquired), in 2010, primarily related to the acquisition of Ventyx and certain smaller acquisitions such as K-TEK in the United States and the Jokab Safety in Sweden.

        Net cash used in investing activities during 2009 was $2,172 million. Aggregate purchases of marketable securities and short-term investments amounted to $4,985 million in 2009.

        Total cash disbursements for the purchase of property, plant and equipment and intangibles in 2009 amounted to $967 million reflecting capital expenditures to expand our manufacturing footprint in emerging markets and selective expenditures to refocus our facilities in mature markets. Capital expenditures in 2009 included $258 million for the purchase of machinery and equipment, $48 million for the purchase of land and buildings, $77 million for the purchase of intangible assets and $584 million capital expenditures for construction in progress.

        Acquisitions of businesses (net of cash acquired), in 2009, mainly included the acquisition of Comem and the purchase of the remaining shares in Ensto Busch-Jaeger in Finland, a company in which ABB previously had a noncontrolling ownership stake.

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        Aggregate proceeds from the sales of marketable securities and short-term investments during 2009 amounted to $3,917 million as compared with $5,415 million for 2008. The decrease reflects the change in investment strategy discussed under "Liquidity and Capital Resources".

        Cash received from the sale of property, plant and equipment during 2009 included $23 million of proceeds from the sale of real estate properties, mainly in Norway, France, Brazil and Switzerland, and $13 million from the sale of machinery and equipment in various locations.

        In 2009, net cash inflows from the sale of businesses and equity-accounted companies amounted to $16 million, which included approximately $8 million net proceeds from the sale of the mechanical marine thruster business in Poland.

        Net cash flow provided by investing activities during 2008 was $114 million. Aggregate purchases of marketable securities and short-term investments amounted to $3,593 million in 2008.

        Total cash disbursements for the purchase of property, plant and equipment and intangibles amounted to $1,171 million, reflecting high capital expenditures due to new growth projects and increasing capacity requirements. Capital expenditures in 2008 included $308 million for the purchase of machinery and equipment, $78 million for the purchase of land and buildings, $134 million for the purchase of intangible assets, mainly software, and $651 million capital expenditures for construction in progress.

        Acquisitions and divestments, net, in 2008, mainly included the acquisition of Kuhlman in the United States. The preliminary purchase price for Kuhlman was $520 million including assumed debt, which was subsequently adjusted in 2009.

        Aggregate proceeds from sales of marketable securities and short-term investments during 2008 amounted to $5,415 million.

        Cash received from the sale of property, plant and equipment during 2008 included $78 million proceeds from the sale of real estate properties, mainly in Switzerland, Italy, Mexico and Poland and $15 million from the sale of machinery and equipment in various locations.

        Net cash inflows from the sale of businesses and equity-accounted companies amounted to $46 million in 2008. This net inflow included approximately $14 million net proceeds from the sale of the distributed energy business in Germany, $16 million net proceeds from the sale of the ABB Powertech Transformer business in South Africa, as well as $11 million net proceeds from two businesses in Norway, $10 million net proceeds from the sale of the lighting business in the United Kingdom, and approximately $15 million net proceeds from the sale of other minor businesses during 2008. These inflows were partly offset by a claim settlement payment of approximately $20 million related to the former air-handling business that was sold in 2002.

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Net cash used in financing activities

($ in millions)
  2010   2009   2008  

Net changes in debt with maturities of 90 days or less

    52     (59 )   (10 )

Increase in debt

    277     586     458  

Repayment of debt

    (497 )   (705 )   (786 )

Issuance of shares

    16     89     49  

Transactions in treasury shares

    (166 )       (621 )

Dividends paid in the form of nominal value reduction

    (1,112 )   (1,027 )   (1,060 )

Acquisition of noncontrolling interests

    (956 )   (48 )    

Dividends paid to noncontrolling shareholders

    (193 )   (193 )   (152 )

Other

    49     8     3  
               

Net cash used in financing activities

    (2,530 )   (1,349 )   (2,119 )
               

        Our financing activities primarily include debt, both from the issuance of debt securities and borrowings directly from banks, capital and treasury stock transactions and dividends paid.

        The cash inflows from increases in debt primarily relate to short-term borrowings.

        During 2010, $497 million of debt was repaid at maturity. During 2009, $705 million of bonds and other debt was repaid at maturity, including the 108 million Swiss francs of 3.75% CHF bonds, due 2009, (equivalent to $105 million at date of repayment) and 20 million pounds sterling 10% GBP Instruments, due 2009, (equivalent to $33 million at date of repayment, excluding the effect of cross-currency swaps). During 2008, $786 million of bonds and other debt was repaid at maturity, including the remaining (77 million euro) 9.5% EUR Instruments, due 2008, as well as several private placements and short-term debt upon maturity.

        During 2010, we purchased, on the open market, 12.1 million of our own shares for use in connection with our employee share-based programs, resulting in a cash outflow of $228 million. This cash outflow was offset by cash inflow of $62 million from the issuance of 3.2 million shares out of treasury stock to employees in connection with our employee share acquisition plan (ESAP). During 2008, we purchased 22.675 million ABB shares at a cost of $621 million in connection with the share buyback program launched in 2008. These shares were subsequently cancelled in July 2010. During 2009, there were no purchases or sales of treasury stock.

        Dividends paid in the form of a nominal value reduction in 2010, 2009 and 2008 represented a reduction in nominal value of CHF 0.51 per share in 2010 and CHF 0.48 per share in each of 2009 and 2008. As a result of these nominal value reductions, the par value of each of our shares was reduced from CHF 2.02 in 2008 to CHF 1.54 in 2009 and to CHF 1.03 in 2010.

        The acquisition of noncontrolling interests in 2010 of $956 million represented the cost of increasing our ownership interest in ABB Limited, India (our publicly-listed subsidiary in India) from approximately 52 percent to 75 percent. In 2009, the $48 million represents an increase in ownership interests, primarily in China.

Disclosures about contractual obligations and commitments

        The contractual obligations presented in the table below represent our estimates of future payments under fixed contractual obligations and commitments. The amounts in the table may differ from those reported in our Consolidated Balance Sheet at December 31, 2010. Changes in our business needs, cancellation provisions and changes in interest rates, as well as actions by third parties and other factors, may cause these estimates to change. Therefore, our actual payments in future periods may vary from those presented in the table. The following table summarizes certain of our contractual

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obligations and principal and interest payments under our debt instruments, leases and purchase obligations at December 31, 2010:

($ in millions)
  Total   Less
than 1 year
  1-3
years
  3-5
years
  More than
5 years
 

Payments due by period

                               

Long-term debt obligations

    2,058     919     1,023     27     89  

Interest payments related to long-term debt obligations

    316     115     112     21     68  

Operating lease obligations

    2,201     463     752     571     415  

Capital lease obligations(1)

    257     33     52     36     136  

Purchase obligations

    4,887     3,635     987     187     78  
                       

Total

    9,719     5,165     2,926     842     786  
                       

(1)
Capital lease obligations represent the total cash payments to be made in the future and include interest expense of $127 million and executory cost of $6 million.

        We have determined the interest payments related to long-term debt obligations by reference to the payments due under the terms of our debt obligations at the time such obligations were incurred. However, we use interest rate swaps to modify the characteristics of certain of our debt obligations. The net effect of these swaps may be to increase or decrease the actual amount of our cash interest payment obligations, which may differ from those stated in the above table. For further details on our debt obligations and the related hedges, see "Note 12 Debt" to our Consolidated Financial Statements.

        Of the total of $870 million unrecognized tax benefits (net of deferred tax assets) at December 31, 2010, it is expected that $72 million will be paid within less than a year. However, we cannot make a reasonably reliable estimate as to the related future payments for the remaining amount.

Off balance sheet arrangements

Commercial commitments

        For certain guarantees issued or modified after December 31, 2002, a liability equal to the fair value of the guarantee is recorded.

        We disclose the maximum potential exposure of certain guarantees, as well as possible recourse provisions that may allow us to recover from third parties amounts paid out under such guarantees. The maximum potential exposure does not allow any discounting of our assessment of actual exposure under the guarantees. The information below reflects our maximum potential exposure under the guarantees, which is higher than our assessment of the expected exposure.

Guarantees

        The following table provides quantitative data regarding our third-party guarantees. The maximum potential payments represent a worst-case scenario, and do not reflect our expected results.

 
  December 31,  
($ in millions)
  2010   2009  
 
  Maximum potential payments  

Performance guarantees

    125     214  

Financial guarantees

    84     91  

Indemnification guarantees

    203     282  
           

Total

    412     587  
           

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        The carrying amounts of liabilities recorded in the Consolidated Balance Sheets in respect of the above guarantees, were not significant at December 31, 2010 and 2009 and reflect our best estimate of future payments, which we may incur as part of fulfilling our guarantee obligations.

        For additional descriptions of our performance, financial and indemnification guarantees see "Note 15 Commitments and contingencies" to our Consolidated Financial Statements.

ENVIRONMENTAL LIABILITIES

        We are engaged in environmental clean-up activities at certain sites principally in the United States, arising under various United States and other environmental protection laws and under certain agreements with third parties. In some cases, these environmental remediation actions are subject to legal proceedings, investigations or claims, and it is uncertain to which extent we are actually obligated to perform. Provisions for these unresolved matters have been set up if it is probable that we have incurred a liability and the amount of loss can be reasonably estimated. If a provision has been recognized for any of these matters we record an asset when it is probable that we will recover a portion of the costs expected to be incurred to settle them. We are of the opinion, based upon information presently available, that the resolution of any such obligations and non-collection of recoverable costs would not have a further material adverse effect on our Consolidated Financial Statements.

Contingencies related to former Nuclear Technology business

        We retained liabilities for certain specific environmental remediation costs at two sites in the United States that were operated by our former subsidiary, ABB CE-Nuclear Power Inc., which we sold to British Nuclear Fuels PLC (BNFL) in 2000.

        We established a provision of $300 million in "Income (loss) from discontinued operations, net of tax" in 2000 for our estimated share of the remediation costs for these sites. At December 31, 2010 and 2009, we have recorded in current and non-current other liabilities provisions of $181 million and $230 million, respectively, net of payments from inception of $85 million and $65 million, respectively, as well as certain adjustments. Expenditures charged against the provision were $20 million, $11 million and $4 million during 2010, 2009 and 2008, respectively. We have estimated that during 2011 we will charge expenditures of approximately $148 million to the provision.

        For a detailed description of these and other contingencies see "Note 15 Commitments and contingencies" to our Consolidated Financial Statements.

Item 6.    Directors, Senior Management and Employees

Principles of Corporate Governance

General principles

        ABB is committed to the highest international standards of corporate governance, and supports the general principles as set forth in the Swiss Code of Best Practice for Corporate Governance, as well as those of the capital markets where its shares are listed and traded.

        In addition to the provisions of the Swiss Code of Obligations, ABB's key principles and rules on corporate governance are set out in ABB's Articles of Incorporation, the ABB Ltd Board Regulations and Corporate Governance Guidelines (which includes the regulations of ABB's board committees and the ABB Ltd Related Party Transaction Policy), and the ABB Code of Conduct and the Addendum to the ABB Code of Conduct for Members of the Board of Directors and the Executive Committee. It is the duty of ABB's Board of Directors (the Board) to review and amend or propose amendments to those documents from time to time to reflect the most recent developments and practices, as well as to ensure compliance with applicable laws and regulations.

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        This section of the Annual Report is based on the Directive on Information Relating to Corporate Governance published by the SIX Swiss Exchange. Where an item listed in the directive is not addressed in this report, it is either inapplicable to or immaterial for ABB.

        In accordance with the requirements of the New York Stock Exchange (NYSE), a comparison of how the corporate governance practices followed by ABB differ from those required under the NYSE listing standards can be found in the section "Corporate governance" at www.abb.com/investorrelations

Duties of directors and officers

        The directors and officers of a Swiss corporation are bound, as specified in the Swiss Code of Obligations, to perform their duties with all due care, to safeguard the interests of the corporation in good faith and to extend equal treatment to shareholders in like circumstances.

        The Swiss Code of Obligations does not specify what standard of due care is required of the directors of a corporate board. However, it is generally held by Swiss legal scholars and jurisprudence that the directors must have the requisite capability and skill to fulfill their function, and must devote the necessary time to the discharge of their duties. Moreover, the directors must exercise all due care that a prudent and diligent director would have taken in like circumstances. Finally, the directors are required to take actions in the best interests of the corporation and may not take any actions that may be harmful to the corporation.

Exercise of powers

        Directors, as well as other persons authorized to act on behalf of a Swiss corporation, may perform all legal acts on behalf of the corporation which the business purpose, as set forth in the articles of incorporation of the corporation, may entail. Pursuant to court practice, such directors and officers can take any action that is not explicitly excluded by the business purpose of the corporation. In so doing, however, the directors and officers must still pursue the duty of due care and the duty of loyalty described above and must extend equal treatment to the corporation's shareholders in like circumstances. ABB's Articles of Incorporation do not contain provisions concerning a director's power, in the absence of an independent quorum, to vote on the compensation to themselves or any members of their body.

Conflicts of interest

        Swiss law does not have a general provision on conflicts of interest and our Articles of Incorporation do not limit our directors' power to vote on a proposal, arrangement or contract in which the director or officer is materially interested. However, the Swiss Code of Obligations requires directors and officers to safeguard the interests of the corporation and, in this connection, imposes a duty of care and loyalty on directors and officers. This rule is generally understood and so recommended by the Swiss Code of Best Practice for Corporate Governance as disqualifying directors and officers from participating in decisions, other than in the shareholders' meeting, that directly affect them.

Confidentiality

        Confidential information obtained by directors and officers of a Swiss corporation acting in such capacity must be kept confidential during and after their term of office.

Sanctions

        If directors and officers transact business on behalf of the corporation with bona fide third parties in violation of their statutory duties, the transaction is nevertheless valid, as long as it is not explicitly excluded by the corporation's business purpose as set forth in its articles of incorporation. Directors and officers acting in violation of their statutory duties—whether transacting business with bona fide

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third parties or performing any other acts on behalf of the company—may, however, become liable to the corporation, its shareholders and its creditors for damages. The liability is joint and several, but the courts may apportion the liability among the directors and officers in accordance with their degree of culpability.

        In addition, Swiss law contains a provision under which payments made to a shareholder or a director or any person(s) associated therewith, other than at arm's length, must be repaid to the company if the shareholder or director or any person associated therewith was acting in bad faith.

        If the board of directors has lawfully delegated the power to carry out day-to-day management to a different corporate body, e.g., the executive committee, it is not liable for the acts of the members of that different corporate body. Instead, the directors can be held liable only for their failure to properly select, instruct and supervise the members of that different corporate body.

Board of Directors

Responsibilities and organization

        The Board defines the ultimate direction of the business of ABB and issues the necessary instructions. It determines the organization of the ABB Group and appoints, removes and supervises the persons entrusted with the management and representation of ABB.

        The internal organizational structure and the definition of the areas of responsibility of the Board, as well as the information and control instruments vis-à-vis the Group Executive Committee, are set forth in the ABB Ltd Board Regulations and Corporate Governance Guidelines, a copy of which can be found in the section "Corporate governance" at www.abb.com/investorrelations

        The Board meets as frequently as needed but at least four times per annual Board term. Board meetings are convened by the chairman or upon request by a director or the chief executive officer (CEO). Written documentation covering the various items of the agenda for each Board meeting is sent out in advance to each Board member in order to allow each member time to study the covered matters prior to the meetings. Decisions made at the Board meetings are recorded in written minutes of the meetings.

        The CEO shall regularly, and whenever extraordinary circumstances so require, report to the Board about ABB's overall business and affairs. Further, Board members are entitled to information concerning ABB's business and affairs. Additional details are set forth in the ABB Ltd Board Regulations and Corporate Governance Guidelines.

Term and members

        The members of the Board are elected individually at the ordinary general meeting of the shareholders for a term of one year; re-election is possible. Our Articles of Incorporation, a copy of which can be found in the section "Corporate governance" at www.abb.com/investorrelations, do not provide for the retirement of directors based on their age. However, an age limit for members of the Board is set forth in the ABB Ltd Board Regulations and Corporate Governance Guidelines (although waivers are possible and subject to Board discretion), a copy of which can be found in the section "Corporate governance" at www.abb.com/investorrelations

        As at December 31, 2010, the members of the Board (Board term April 2010 to April 2011) were:

        Hubertus von Grünberg has been a member and chairman of ABB's Board of Directors since May 3, 2007. He is a member of the supervisory boards of Allianz Versicherungs AG and Deutsche Telekom AG (both Germany). He is a member of the board of directors of Schindler Holding AG (Switzerland). Mr. von Grünberg was born in 1942 and is a German citizen.

        Roger Agnelli has been a member of ABB's Board of Directors since March 12, 2002. He is the president and chief executive officer of Vale S.A. (Brazil). Mr. Agnelli was born in 1959 and is a Brazilian citizen.

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        Louis R. Hughes has been a member of ABB's Board of Directors since May 16, 2003. Mr. Hughes is the chairman and chief executive officer of InZero Systems (formerly GBS Laboratories LLC) (U.S.). He is also a member of the boards of directors of Akzo Nobel (The Netherlands) and Alcatel Lucent (France). Mr. Hughes was born in 1949 and is an U.S. citizen.

        Hans Ulrich Märki has been a member of ABB's Board of Directors since March 12, 2002. He is the retired chairman of IBM Europe, Middle East and Africa (France), and a member of the board of directors of Mettler-Toledo International (U.S.) and Swiss Re and Menuhin Festival Gstaad AG (both Switzerland). He is also a member of the foundation board of Schulthess Klinik, Zurich (Switzerland) and the board of trustees of the Hermitage Museum, St. Petersburg (Russia). Mr. Märki was born in 1946 and is a Swiss citizen.

        Michel de Rosen has been a member of ABB's Board of Directors since March 12, 2002. He is the chief executive officer of and member of the board of directors of Eutelsat Communications (France). Mr. de Rosen was born in 1951 and is a French citizen.

        Michael Treschow has been a member of ABB's Board of Directors since May 16, 2003. He is the chairman of the boards of directors of Ericsson (Sweden), Unilever NV (The Netherlands), and Unilever PLC (U.K.). He is also a member of the board of directors of the Knut and Alice Wallenberg Foundation (Sweden). Mr. Treschow was born in 1943 and is a Swedish citizen.

        Bernd W. Voss has been a member of ABB's Board of Directors since March 12, 2002. He is a member of the supervisory boards of Continental AG and Wacker Chemie (both Germany). Mr. Voss was born in 1939 and is a German citizen.

        Jacob Wallenberg has been a member of ABB's Board of Directors since June 26, 1999. From March 1999 to June 1999, he served as a member of the board of directors of ABB Asea Brown Boveri Ltd, the former parent company of the ABB Group. He is the chairman of the board of directors of Investor AB (Sweden). He is vice chairman of SEB Skandinaviska Enskilda Banken, Atlas Copco AB and SAS AB (all Sweden). He is also a member of the boards of directors of the Knut and Alice Wallenberg Foundation and the Stockholm School of Economics (both Sweden), and The Coca-Cola Company (U.S.). Mr. Wallenberg was born in 1956 and is a Swedish citizen.

        As of December 31, 2010, all Board members were non-executive and independent directors (see also "Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions"), and none of ABB's Board members held any official functions or political posts. Further information on ABB's Board members can be found by clicking on the ABB Board of Directors CV link in the section "Corporate governance" at www.abb.com/investorrelations

Board committees

        From among its members, the Board has appointed two Board committees: the Governance, Nomination and Compensation Committee (GNCC) and the Finance, Audit and Compliance Committee (FACC). The duties and objectives of the Board committees are set forth in the ABB Ltd Board Regulations and Corporate Governance Guidelines, a copy of which can be found in the section "Corporate governance" at www.abb.com/investorrelations. These committees assist the Board in its tasks and report regularly to the Board. The members of the Board committees are required to be independent.

Governance, Nomination and Compensation Committee

        The GNCC is responsible for (1) overseeing corporate governance practices within ABB, (2) nominating candidates for the Board, the role of CEO and other positions on the Group Executive Committee, and (3) succession planning, employment and compensation matters relating to the Board and the Group Executive Committee. The GNCC is also responsible for maintaining an orientation program for new Board members and an ongoing education program for existing Board members.

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        The GNCC must comprise three or more independent directors. The chairman of the Board and, upon invitation by the committee's chairman, the CEO or other members of the Group Executive Committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained.

        As at December 31, 2010, the members of the GNCC were:

Finance, Audit and Compliance Committee

        The FACC is responsible for overseeing (1) the integrity of ABB's financial statements, (2) ABB's compliance with legal, tax and regulatory requirements, (3) the independent auditors' qualifications and independence, (4) the performance of ABB's internal audit function and external auditors and (5) ABB's capital structure, funding requirements and financial risk policies.

        The FACC must comprise three or more independent directors who have a thorough understanding of finance and accounting. The chairman of the Board and, upon invitation by the committee's chairman, the CEO or other members of the Group Executive Committee may participate in the committee meetings, provided that any potential conflict of interest is avoided and confidentiality of the discussions is maintained. In addition, the Chief Integrity Officer, the Head of Internal Audit and the external auditors participate in the meetings as appropriate. As required by the U.S. Securities and Exchange Commission (SEC), the Board has determined that Bernd W. Voss is an audit committee financial expert.

        As at December 31, 2010, the members of the FACC were:

Meetings and attendance

        The Board and its committees have regularly-scheduled meetings throughout the year. These meetings are supplemented by additional meetings (either in person or by conference call), as necessary. The average planned duration of each regularly-scheduled Board, GNCC and FACC meeting is 7 hours, 3 hours and 4 hours, respectively.

        The table below shows the number of meetings held during 2010 by the Board and its committees, their average duration, as well as the attendance of the individual Board members. In addition, members of the Board and the Group Executive Committee participated in a two-day strategic retreat.

 
  Board    
   
 
 
  GNCC   FACC  
 
  Regular   Additional  
Meetings and attendance
   
   
 

Average duration (hours)

    7.1     1.2     3     2.8  

Number of meetings

    5     8     5     7  

Meetings attended:

                         
 

Hubertus von Grünberg

    5     8          
 

Roger Agnelli

    3     7     2      
 

Louis R. Hughes

    5     8         7  
 

Hans Ulrich Märki

    5     8     5      
 

Michel de Rosen

    5     7     5      
 

Michael Treschow

    5     7          
 

Bernd W. Voss

    5     8         7  
 

Jacob Wallenberg

    5     8         6  

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5.7 Secretary to the Board

        Diane de Saint Victor is the secretary to the Board.

Group Executive Committee

Responsibilities and organization

        The Board has delegated the executive management of ABB to the CEO and the other members of the Group Executive Committee. The CEO and under his direction the other members of the Group Executive Committee are responsible for ABB's overall business and affairs and day-to-day management.

        The CEO reports to the Board regularly, and whenever extraordinary circumstances so require, on the course of ABB's business and financial performance and on all organizational and personnel matters, transactions and other issues relevant to the Group.

        Each member of the Group Executive Committee is appointed and discharged by the Board.

Members of the Group Executive Committee

        As at December 31, 2010, the members of the Group Executive Committee were:

        Joe Hogan joined ABB's Group Executive Committee as Chief Executive Officer in September 2008. Before joining ABB, Mr. Hogan was the CEO and President of General Electric's GE Healthcare unit from 2000 to 2008. From 1985 to 2000, Mr. Hogan held various positions at General Electric. Mr. Hogan was born in 1957 and is an U.S. citizen.

        Michel Demaré joined ABB's Group Executive Committee as Chief Financial Officer in January 2005, and he assumed responsibilities as Head of Global Markets in October 2008. From February 2008 to August 2008 he was appointed interim CEO in addition to his duties as CFO. He is also vice chairman of the board of directors of UBS AG and a board member of IMD Foundation (all Switzerland). From 2002 until 2004 Mr. Demaré was vice president and chief financial officer of Baxter Europe. From 1984 until 2002, he held various positions within Dow Chemical (U.S.). Mr. Demaré was born in 1956 and is a Belgian citizen.

        Gary Steel joined ABB's Group Executive Committee as Head of Human Resources in January 2003. Mr. Steel is a member of the board of directors of Harman International Industries Inc. (U.S.) and a non-executive director of Aquamarine Power, UK. In 2002, he was the human resources director, group finance at Royal Dutch Shell (Netherlands). Between 1976 and 2002, he held several human resources and employee relations positions at Royal Dutch Shell. Mr. Steel was born in 1952 and is a British citizen.

        Diane de Saint Victor joined ABB' Group Executive Committee as General Counsel in January 2007. From 2004 to 2006, she was general counsel of European Aeronautic Defence and Space, EADS (France/Germany). From 2003 to 2004, she was general counsel of SCA Hygiene Products (Germany). From 1993 to 2003, she held various legal positions with Honeywell International (France/ Belgium). From 1988 to 1993, she held various legal positions with General Electric (U.S.). Ms. de Saint Victor was born in 1955 and is a French citizen.

        Brice Koch was appointed Executive Committee member responsible for Marketing and Customer Solutions in January 2010. From 2007 to 2009 he was the Manager of ABB in China and of ABB's North Asia Region. Between 1994 and 2006 he held several management positions with ABB. He is also member of the board of directors of Rector S.A., France. Mr. Koch was born in 1964 and is a French citizen.

        Bernhard Jucker was appointed Executive Committee member responsible for the Power Products division in January 2006. From 2003 to 2005, he was ABB's country manager for Germany. From 1980 to 2003 he held various positions in ABB. Mr. Jucker was born in 1954 and is a Swiss citizen.

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        Peter Leupp was appointed Executive Committee member responsible for the Power Systems division in January 2007. He is also a member of the board of directors of Gurit Holding AG (Switzerland). From 2005 to 2006, he was ABB's regional manager for North Asia and from 2001 to 2006 he was ABB's country manager for China. From 1989 to 2001, he held various positions in ABB. Mr. Leupp was born in 1951 and is a Swiss citizen.

        Ulrich Spiesshofer was appointed Executive Committee member responsible for the Discrete Automation and Motion division in January 2010. He joined ABB in November 2005 as Executive Committee member responsible for Corporate Development. From 2002 until he joined ABB, he was senior partner, global head of operations practice at Roland Berger AG. Prior to 2002, he held various positions with A.T. Kearney Ltd. and its affiliates. Mr. Spiesshofer was born in 1964 and is a German citizen.

        Tarak Mehta was appointed Executive Committee member responsible for the Low Voltage Products division in October 2010. From 2007 to 2010 he was head of the Transformers business. Between 1998 and 2006 he held several management positions with ABB. Mr. Mehta was born in 1966 and is an U.S. citizen.

        Veli-Matti Reinikkala was appointed Executive Committee member responsible for the Process Automation division in January 2006. He is a member of the board of directors of UPM-Kymmene (Finland). In 2005, he was the head of the Process Automation business area. From 1993 to 2005, he held several positions with ABB. Mr. Reinikkala was born in 1957 and is a Finnish citizen.

        In addition, as of March 1, 2011, Frank Duggan was appointed Executive Committee member responsible for Global Markets in March 2011. He remains ABB's region manager for India, Middle East and Africa, a position he has held since 2008. In addition, from 2008 to 2011 Mr. Duggan was ABB's country manager for the United Arab Emirates. From 2004 to 2007 he was head of ABB's Group Account Management and ABB's country manager for Ireland. Between 1986 and 2004 he held several management positions with ABB. Mr. Duggan was born in 1959 and is an Irish citizen.

        Further information about the members of the Group Executive Committee can be found by clicking on the Group Executive Committee CV link in the section "Corporate governance" at www.abb.com/investorrelations

Management contracts

        There are no management contracts between ABB and companies or natural persons not belonging to the ABB Group.

Employee Participation Programs

Incentive plans linked t