Comment

June 2009

ABB N.A. chief: Down times, yes, but true growth areas exist

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 second of a two-part conversation.

InTech: In this economy, users are not going out and buying new technology; does that mean there is more of an opportunity for you in services?

Santacana: The largest area of growth in North America for us was services. That is another area where we are placing a lot of focus and resources. You have the integration of power and automation under the energy umbrella and you have the service as another area of growth. In many ways they go hand in hand. Yes, there are many areas of the economy that are hurting, and they are hurting bad, but the world is not falling apart. We still have business going on.

InTech: When you go through your services unit, how do you ensure there is no channel conflict?

Santacana: We are very careful about that. When we have the opportunity for a service, we make the connection with our channel partner, and if there is a conflict, we will step back.

InTech: Your boss, (ABB Chief Executive) Joe Hogan, put the pressure on saying he wants to see bigger growth in the U.S. How do you go about doing that?

Santacana: The main thrust is organic growth. As Joe said, cash is king, and we like to have it in hand to have the operational flexibility that many other companies don’t have. So, if we make any acquisitions, it will be more of the bolt on kind that would fill a gap. But most of the resources we have are geared toward organic growth. I come back to the topic of energy; energy reliability, energy efficiency, how we can make our customers more environmentally friendly. Those are areas we are focused and are hiring people to work in those areas. The stimulus package here in the U.S. should help us later this year and in 2010.

InTech: So, ABB in a hiring mode right now?

Santacana: It depends on the business. Over all, we have announced a $1.3 billion cost reduction program worldwide. Obviously, people are part of the cost reduction. That is not across the board because it goes business by business. In the area of energy, we are hiring people in Mexico. We are hiring people in Calgary for the Tar Sands. In the United States, we are looking for people in business development in the area of energy and renewables. We are looking for people who know how to do business with the federal government because that will be a skill to know how to pull funds from the government. We are not going to pull the funds for us, but act as a facilitator for our customers. Those are areas that are very important for us, and we are adding people there. In other areas like distribution transformers, we have laid off people; we have laid off people in robotics. The automotive sector is a disaster. That is one area I don’t see recovering this year and in 2010. The automotive sector is very weak right now. Detroit has some issues to resolve before we see some recovery there. To the extent of how much help they get from the government that may help accelerate the recovery there.

InTech: One big issue last year was talking about Boomers leaving the industry, but with the economic issues facing America right now, do you see that issue being put on the back burner a bit?

Santacana: Yes, you and I are going to be working a little longer than we expected to. That will be the same for most people. I don’t think that is good. How that is going to affect the projection of people that were going to retire and the challenge we expected to have in hiring to replace those people retiring is certainly going to slow down. The urgency is still there, but not as much as before. That is what common sense tells me. I don’t have any statistical information, just common sense. So maybe this gives us a little more time to deal with the challenge of the knowledge exit from the industry and deal with it in a more gradual way.

InTech: Do you think the industry and the world is learning anything from this economic problem?

Santacana: I think the biggest lesson we have learned from this is the creation of wealth has to be much more tangible than something you just write on a piece of paper. All these sophisticated formulas leveraging the dollar 30, 40, 50 times to generate profitability out of thin air is a lesson that has been learned and learned in a hard way. I think society will remember this lesson for a long time. Do we believe the government in the U.S. and other nations will be responsible enough to put down safeguards so this doesn’t happen again? I certainly hope so. But as a society, that is our responsibility to elect people that will take care of that. I have learned a lesson.

InTech: In your travels around the industry, have you found users’ attitudes more like fighting and wanting to move forward or are they shell shocked?

Santacana: I think we have gone through the shell shocked phase, and we are coming out of it now. In general, we are beyond the shell shock, low morale, and anger, and we are now moving forward. We are now in the phase of this is what we have now and where do we go from here. I see that in our own company and with customers. That gives me optimism. It depends on the sector. In automotive, they are definitely not out of it, but in other sectors like power and energy where they are looking to the future and getting out of this mess.

InTech: Other than the economy, what technologies are users looking for?

Santacana: The problem for most of our customers is the energy issue; efficiency, reliability, availability. How can you help us save costs in this area? How can you help us become more environmentally friendly? People are hungry for energy efficient solutions. Customers want to be prepared for when a barrel of oil goes back to $100 a barrel.

InTech: Where does wireless stand in your customer’s discussion?

Santacana: In the power industry, it is extremely front of mind. In all the discussions of the smart grid, wireless is a key element of that discussion. When you are talking smart grid in the power field, you are talking about four things: communications, sensing technology, software, and information processing capability. Wireless is the center of this being able to communicate massive amounts of information in real time at the lowest possible cost.

InTech: Wireless is at that capability right now?

Santacana: Yes. It is just a matter of scale. The technology is there, and it just a matter of having it deployed. That is one of the good things of the stimulus package, to give a boost to the new technology fields, with wireless being one of them. In the automation side, wireless is going to be very important. But one of the areas we are still struggling with is the security of that information being communicated in a wireless fashion. There is a lot of effort and investment being placed on encryption technology.