ABB shares down 5% on news that restructuring CEO Kindle has quit

ABB, the Swiss engineering giant, shocked investors yesterday by announcing the immediate departure of Fred Kindle, the chief executive credited with reviving the company after several harrowing years that brought it close to bankruptcy.

Coming as the world's biggest maker of power networks announced record earnings and profits, the timing and suddenness of Mr Kindle's departure was odd. Shareholders punished the company's stock, sending it down 5.1 per cent after being informed that Mr Kindle's exit was caused by "irreconcilable differences about how to lead the company". The reaction reflected concerns in the market that Mr Kindle's exit would increase uncertainty about the direction of a company that not long ago emerged from a painful restructuring to return to profits and issuing dividends.

Its chairman Hubertus von Grünberg acknowledged that it was a "sudden and unexpected turn of events" but declined to elaborate on the reasons. "Mr Kindle and the board agreed on how they would phrase this because these are not normal circumstances," he said. "You can ask from 150 directions but you will not get more out of me than water and blood by squeezing a stone."

ABB had record annual profits of $4bn (£2bn) unveiled yesterday on turnover of more than $29bn. Mr von Grünberg said ABB would begin a search for Mr Kindle's replacement immediately. In the meantime, chief financial officer Michel Demare has stepped in to run the company.

Analysts speculated that the shake-up may have been the result of a disagreement over how best to use the $10bn to $15bn war chest the company has at its disposal. Mr von Grünberg is known for his penchant for transformation through acquisition. As chief executive and now chairman of Continental, he transformed the tyre manufacturer into an integrated automotive supplier through a series of deals. Mr Kindle, a former McKinsey & Co consultant from Lichtenstein, was appointed in 2005 from Sulzer, a smaller engineer that he turned around. He took over from Jürgen Dormann, a restructuring specialist who had already done much of the heavy lifting that brought ABB back from the brink of bankruptcy after years of profligate deal-making and asbestos-related liabilities.

"Kindle came in and was able to ride the wave. But he was facing his biggest ever decision over how to spend that money," said James Stettler, an analyst at Dresdner Kleinwort. "They looked at a lot of things, but couldn't quite see anything that they could buy. I think that's the debate now going on in the company."

Mr Kindle's forte was sharpening the focus of the organisation and streamlining it rather than bulking up through acquisitions. He sold oil services unit Lummus to Chicago Bridge & Iron last summer for $950m, and settled a $1.4bn asbestos claim against the company a year before. He was seen in the market, however, as more conservative than Mr von Grünberg, and had repeatedly put off doing major deals that he deemed would be too expensive.

In a recent note putting his "buy" rating on the stock under review, Mr Stettler wrote: "The CEO is under rising pressure to releverage the balance sheet. While the multiples of potential targets (Rockwell, Eaton, Legrand) have contracted, we would not expect a larger acquisition to support ABB's multiple. We also doubt that the CEO will commit to a large cash return at this stage."

Mr Demare, the acting chief executive, announced yesterday that ABB would begin a $2bn buyback programme. The relatively small size of the buyback scheme – ABB has a market value of about $50bn – led analysts to believe the company has one or several significant transactions in mind. "Two billion is a token amount. That tells the market that they don't want to give the money back. They want to spend it," Mr Stettler said.

Mr Demare and Mr von Grünberg were eager to calm investor nerves about the implications of the shake-up. Mr von Grünberg said it changed nothing in the group's strategy and that its "future today is as bright now as it ever was". Losing a chief executive is not new to Mr von Grünberg. In 2001, Stephan Kessel left Continental over "differences of opinion" with the chairman.