As a global technology company, ABB carries the weight of the world, which has its upside and its potential downside. "Size can be a killer sometimes," said ABB Group CEO Joe Hogan as he opened the company's Automation & Power World conference this week in Houston. "The bigger you get, the farther you are from your customers," he warned. "But at ABB, it's about dedication, trust and commitment. It's not about size."
Hogan, who came to ABB Group from General Electric almost two years ago, explained the recent changes in the 117,000-employee company which created new synergies within its divisions, including power products, power systems, discrete automation and motion, low-voltage products and process automation.
With $32 billion in 2009 revenue, 50% of orders came from emerging markets, explained Hogan. The United States is the third-largest market for ABB, behind China and Germany.
"We are in a recovery," said Hogan. "It's still very tenuous, but the world is at a much better economic standpoint than it was last year. In China and throughout Asia, they proved they can steer their own boats. They don't need the United States—China and India are maintaining GDP growth."
"If you go back to 1820, 50% of the world's GDP was in China and India—it basically fell along population lines," he explained. "It's wonderful that economic balance is coming back. And technology will play a major role in the ascendancies of these countries. It's important that we participate in that."
Hogan explained that ABB is currently running its business in a fashion that takes into account strong growth in emerging markets, a stimulus-driven economy with ballooning deficits in the United States, slow devaluation of the U.S. dollar, commodity-based inflation and a weak U.S. consumer sector. "Constrained global markets perpetually balance overall," he explained. "Greece has actually been insolvent for 50 of the past 130 years. But now its currency is euros, which makes it critical for the European government to address this."
Commodities and Energy
ABB has marveled at how quickly commodity levels have come back, explained Hogan. "Copper is almost back at pre-recession rates," he said. "It shows how strained the economies in the emerging markets are. There's going to be commodity inflation over the next 12 to 18 months."
World energy demand will continue to grow, added Hogan. "We haven't addressed the whole sustainability issue from a global perspective," he explained. "Demand for electricity is outpacing overall energy demand. And global demand will rise 76% by 2030."
While most of the world assumes renewable energy is the answer to climate change and carbon dioxide emissions, Hogan pointed out that 60% of the solution for greenhouse-gas reduction is in energy efficiency. "You'll see our ABB portfolio move more and more toward the energy-efficiency piece," he said. "That's the real key, short-term and long-term, from a sustainability standpoint. You lose 80% of energy along the value chain. From primary energy through transport and then generation, transmission and distribution, and then into industry through commercial and ultimately to residential, ABB can reduce those losses by 20% to 30%."
While 63% of electricity consumed in industry is used to run motors, 60% of those motors operated pumps and fans, explained Hogan. And half of those pumps and fans can use drives. "Fifty percent of energy that is consumed could be saved," he said.
The cement, aluminum and mining industries are the most energy-intensive sectors, which create a customer savings potential of around $40 billion a year, said Hogan. Cement also is responsible for 5% of global carbon dioxide emissions, he added.
"You can't pick up the paper without reading about the smart grid," said Hogan. "This is where power and automation come together. The keys are in two-way energy flow and communication, demand balancing and real-time protection and control. We're going to see massive investments in the power grid."
ABB's recent acquisition of Ventyx brings in the control piece of energy optimization and planning, explained Hogan. ABB will combine Ventyx with its related network-management business within the power systems division to form a single unit for energy management software solutions, providing ABB with broader access to the utility enterprise management market.