Comment

May 2009

ABB N.A. chief:

Recovery will come in pieces

EDITOR’S NOTE: At ABB Automation World 2009 in March, Enrique Santacana, president and chief executive of ABB Inc., region manager of ABB North America, sat down with InTech Editor Gregory Hale to discuss how issues like the economy is affecting manufacturers. This is the first of a two-part conversation.

InTech: Do you see the recessionary times across the globe ending soon? We have heard some experts saying you should write off this year and some even say next year, what do you think?
Santacana: I wouldn’t put it like that. I would say there are sectors of the economy that will be recovering much sooner than others. This stimulus package, at least the energy portion of the stimulus package in the U.S., I think by the end of this year, certainly in the fourth quarter, we will see the benefit of that. By this I mean certain power businesses, conservation businesses, certainly anything dealing with renewables. Certainly, automation doing business with renewables. The part of our business that is working with renewable power, electronics, generation, and on the power side transformers and switch gears—by the first quarter of next year we will see a big boost there. It is very clear there is a sense of urgency from the Obama administration to deploy these plans because the main issue is jobs. Where I am a little less optimistic is the housing sector in residential construction.

InTech: That is through your forecasting?
Santacana: That is from talking to customers. You find your customers have a good feel for their rebound. It depends on the sector of the economy. I am pessimistic that we will have to go into 2011 to get out of this. What has to happen is, and (the U.S.) took a big step this week (week of 23 March), is the credit has to start flowing again. The banking crisis has to be solved first. That has to be the number one priority.

InTech: Do you see the U.S. coming out of this first, or will the major economies across the globe all come out around the same time?
Santacana: I think it will be the U.S. first. It is just because of the tremendous amount of resources being thrown at this from the government. The world sinks with us and swims with us. Once some of our major banks can start breathing again and credit is flowing and the rest of the world regains its confidence in American financial institutions, then I think you will see the world following up on our recovery here.

InTech: How has the banking issue affected ABB, directly or indirectly?
Santacana: Indirectly. We came into 2009 with a very strong balance sheet and a very strong cash position and a very strong back log. Indirectly, many of our customers have been affected. We have seen project delays and project cancellations in the areas of oil and gas, in mining. In the renewables sector, the lack of credit and financing have been affecting many of our customers.

InTech: Are any of your customer segment areas doing well at this point?
Santacana: The utility sector in the U.S. The transmission part of the industry not exposed to the housing sector is doing very well. The investment in aging infrastructure and energy reliability keeps going on. The utility business on the distribution side is doing well. In Canada, the utility investments continue at a very high level and in Mexico. Actually, Mexico and Canada are doing better in the fist quarter of 2009 than in 2008. That is driven by the utility business.

InTech: The theme of the conference here is bringing together power and automation. Are those two areas working together more and more?
Santacana: Under the umbrella of energy, under energy reduction and energy reliability, we see the fields of power and automation coming closer and closer to each other. Take a wind farm for example: The automation business will supply generators, power electronics, drives, motors; the power business is providing to the same customers transformers and switch gears. So, for the oil and gas customers, the same thing holds true. Electrification and automation and process control are coming together more and more. 

InTech: Is it new to have the umbrella approach?
Santacana: It is relatively new. This energy issue of reduction in the cost of energy, energy reliability, and the impact on the environment came up about two years ago, and it is gaining speed at a very fast pace. Utilizing that market trend is a way to strengthen that business. Organizationally, we don’t have to combine them, but we can operate as one ABB and bring the resources of both organizations to work with the customers as one ABB within the umbrella of energy.