CASE STUDY

REMAKING ABX

ABX reported record losses in its 86-year history of Rs. 1.83 billion in 1996, compared to earnings of Rs.

598 million in 1995. Chairman R. D. Mehta can claim to have brought ABX through its most treacherous

year by ending a six-month steel strike and fending off, for the time being, raider C. C. Madan.

Mehta is studying some of the largest Indian companies in an effort to find acquisitions that will offset the

uncertain prospects for steel. As a result of one acquisition, ABX is now considered more of an oil and gas

company. Mehta has announced that ABX plans to convert its steel operations into a wholly owned

subsidiary in order to give the company the flexibility to sell off its steel segment. But for now the major

challenge is to turn its steel unit around, with its goal to earn a consistent return equal to that of the

average manufacturing company.

CHANGES

Since becoming Chairman in 1989, Mehta has imposed more change in ABX than the company has ever

seen. He has made three central changes :

1. Tried to Change the Culture : Mehta, who came up through the company's finance ranks, is

irreverently called "the top bean counter." He has stunned production-minded managers with his

"no scared cow" edict that profitability is more important than preserving the original empire.

2. Cut Costs and Inefficiencies : Under Mehta's leadership, ABX has shrunk dramatically. By 1995

he had shut down more than 150 plants and facilities, reducing steel-making capacity by more than

30 per cent. He cut white-collar jobs by 54 per cent. And by early 1997 he had cut capacity another

27 per cent. That reduction translated into about 5,000 fewer employees, who joined the 23,000

workers already on indefinite lay-off.

3. Acquired New Companies : In one of his boldest moves, Mehta acquired Marathon Oil Co. for Rs.

5.9 billion, thus recasting the ABX image into more of an oil company than a steel producer. The

change in name from A. B. Steel to ABX was to help alter the public and employee's perception of

what the company was all about.

But for all the changes Mehta brought about, ABX is still confronted by the inefficiencies, poor

management, and hostile labour relations that troubled it for decades.

Mehta's central challenge is to transform one of corporate India's most hierarchical, bureaucratic

managements into a lean, aggressive, market-driven team. Among his challenge include.

1. Changes : For his part, Mehta contends that he is on his way to creating a new A. B. Steel." Adds

Abhay Lal, Executive Vice-president for employee relations "We've been required to shed

yesterday."

2. Culture : Altering a culture cast over 75 years could take a decade, if not a generation.

3. Management Style : A "militaristic" management style has blocked change. The small amount of

feedback that existed was often lost as it passed through a labyrinth of bureaucracy.

In summary, ABX is faced with changing an ingrained, old-fashioned corporate culture.

Questions :

(1) Do you agree with Mehta that ABX needs to make changes ?

(2) Would organisation development be appropriate in a situation like this ?

(3) problem statement of the case and also suggest the problem solution of the case