Restructuring and other cost savings initiatives

White collar productivity program

In September 2015, we announced a two-year program aimed at making ABB leaner, faster and more customer-focused. Planned productivity improvements include the rapid expansion and use of regional shared service centers as well as the streamlining of global operations and head office functions, with business units moving closer to their respective key markets. During the course of this program, we will implement and execute various restructuring initiatives across all operating segments and regions.

On completion of the program, ABB expects to realize annual cost savings of approximately $1 billion. These savings are expected to mainly impact Cost of sales, Selling, general and administrative expenses and Non-order related research and development expenses.

The following table outlines the cumulative amount of costs incurred to date and the total amount of costs expected to be incurred under the program.

($ in millions)

Cumulative costs incurred up to December 31, 2015

Total expected costs

Discrete Automation and Motion

45

169

Low Voltage Products

60

126

Process Automation

91

137

Power Products

42

155

Power Systems

46

82

Corporate and Other

86

183

Total

370

852

For details of the nature of the costs incurred and their impact on the Consolidated Financial Statements, see ‘‘Note 22 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 2016 and 2017. We expect that our cash flow from operating activities will be sufficient to cover any obligations under this restructuring program.

Other restructuring-related activities and cost savings initiatives

In 2015, 2014 and 2013, we also executed other restructuring-related and cost saving measures to sustainably reduce our costs and protect our profitability. Costs associated with these other measures amounted to $256 million, $235 million and $252 million in 2015, 2014 and 2013, respectively. Estimated cost savings amounted to approximately $1.2 billion in 2015, $1.1 billion in 2014 and $1.2 billion in 2013. These savings were achieved by optimizing global sourcing (excluding changes in commodity prices), through operational excellence improvements, as well as adjustments to our global manufacturing and engineering footprint.