ABB thriving in global sweet spot

ABB today faces a perfect storm of a different type. Its focus on power and productivity puts it squarely in the frenzied center of global industrial and infrastructure investment.

By Keith Larson

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By Keith Larson, VP Content, Putman Media

Keith LarsonIt’s hard to believe that only a few years ago ABB was on the brink of insolvency. The last manufacturing recession, together with asbestos liabilities arising from its 1990s acquisition of Combustion Engineering, threatened to overwhelm the European engineering giant that had stitched together dozens of brands to become a worldwide leader in the automation business.

Fast forward to today, and ABB faces a perfect storm of a different type. Its focus on power and productivity puts it squarely in the frenzied center of global industrial and infrastructure investment. Combine the massive 2003 electrical grid failure in the northeastern United States with high energy prices worldwide, and the types of products ABB sells—from power transmission equipment to electricity-saving variable-speed drives—are moving briskly.

“Environment, energy, productivity—we’re in a sweet spot,” said Dinesh Paliwal, chairman and CEO of ABB North America, addressing some 2,500 industry professionals gathered for the company’s ABB Automation World user conference, held in late March in Orlando, Fla. Indeed, the company booked record revenues of $24.4 billion in 2006, following its first profitable year in North America in 2005, Paliwal said. The Automation World conference, which has become ABB’s largest event, also set a new attendance record, despite not being held in Houston, in proximity to its greatest concentration of end users in the U.S. Customers from some 37 different countries were represented at the conference.

The three-day event featured a variety of technical workshops—many hosted by customers, independent industry experts and technology partners. The 40,000 sq ft exhibition hall demonstrated how, by applying ABB automation technologies, customers could improve the overall productivity, profitability and energy efficiency of their operations. Several technology areas, including a Wireless Pavilion, showcased the range of ABB’s offerings and their practical applications.

ABB Automation World also was unique among other user conferences I’ve attended in the participation and attention given it by Fred Kindle (pronounced Kind-LEE), president and CEO of parent company ABB Ltd. Kindle spent the full week among the faithful, moving effortlessly from keynote presenter to leader of a small workshop discussion on global trends, and even attending the group hospitality event at Universal Studios, one of the local Orlando attractions. By week’s end, I found that his personal affability is accompanied by a keen, articulate intellect capable of leading the $24-billion global enterprise ABB has become.

Under the conference theme of “Collaborate for Results,” Kindle explored in his keynote address the key issues facing industry. Globalization, consolidation and the twin drives to decrease costs and increase capital efficiency make up the landscape where companies must compete, Kindle explained. With the increasing role of the capital markets, “You have to generate returns or surrender,” he said. “The world is rich with opportunity,” Kindle added, singling out the rapidly expanding economies of China, India, Brazil and Russia.

Key wildcards in global economic development are the environment and increasingly scarce resources, Kindle believes. Scarcity of resources is a growing issue beyond just people, he said, citing as an example, the tripling of copper prices over the past few years. The increase in global free trade over the past decades doesn’t mean free markets will continue to expand, he warned. “Will scarce resources give rise to protectionism,” he asked, “to a kind of resource nationalism?”

On the issue of climate change, Kindle said, “Personally, I believe it is happening. But in a way it doesn’t matter if it’s real—the more people believe it, the more politicians will act on it, and it will impact our business.”

“Collaboration, not competition, is critical to success today,” Kindle added. The traditional business-school fare of how to exploit your customers and suppliers is no longer sufficient, he said. “We have to move past transactions to interactions.”

“The world is an increasingly uncertain place,” Kindle concluded, “but we believe that through collaboration and partnering we can help reduce that uncertainty.”

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