Reorganized Siemens well-placed to ride out storm

Siemens has not as yet seen a significant decline in its automation business in the U.K. during the current downturn, Industrial Automation Systems general manager Brian Holliday told a lunch for the process and automation press. Maybe it was to convince us that PR consultants McCann Erickson chose as the venue Rhodes24, one of the City of London’s swankier eateries located half way up what used to be called the NatWest Tower, but which, in these bank averse times, has been prudently renamed the somewhat Orwellian sounding Tower 42.

Perhaps because of its greater diversity of markets, the complete standstill in automotive industry investment in mainland Europe and the U.K. has not had the same impact on Siemens as the problems in the U.S. automotive industry have had on Rockwell, said Holliday. Although there had been some slow down in small-scale orders, there has been no significant sign of a decline or even rescheduling of large scale projects. That pattern seems to have favored the U.K. which lacks the large number of small-to- medium sized specialist machine builders which are found, for example, in northern Italy and, to a lesser extent, in Germany.

Utilities Still Investing

In the U.K.,  Holliday said, there is no discernible slackening in the ongoing program of investment by utilities, including water companies and energy companies, the latter particularly in renewables. Indeed, he argued, with the volatility in other parts of the economy, utilities are increasingly seen as an attractive, long-term investment, ensuring that they can rely on continued access to funding for capital projects. Surprisingly, given the media focus on the banks’ current inability or unwillingness to lend, he has actually seen little if any evidence of companies cancelling or delaying projects because of a shortage of capital. Rather, where there has been a reluctance to commit to well defined projects, it has been because of an inability to guarantee that the predicted ROI will, in fact, be realized.

Holliday also believes that there are indications that more forward-thinking manufacturing companies are using the current downturn to restructure their operations and to implement projects at the MES level to ensure that they emerge from the recession with significant competitive advantage. “There’s a real focus now on MES and a definite trend for investment to move down from the ERP level into MES,” he says.

Last year’s restructuring, which saw Siemens reorganizing into three “sectors” focussing on industry, energy and healthcare, and disposing of businesses which were non-core to any of them, has, says Holliday, left the company better placed to weather the economic storm than many of its competitors. In particular, he says, it has led to much more efficient internal communication across disciplines and both within and between sectors, enhancing his sector’s ability, for example, to promote the energy-saving potential of variable-speed drives. That particular issue continues to be a source of considerable frustration as companies, or at least their CFOs, continue to fail to appreciate just how rapid the payback can be if they invest in such technology.

However, one possible happier outcome of the recession, Holliday suggests, could be that the dominance of short-term financial considerations to the exclusion of almost all other factors in corporate decision making could be diminished, and that engineers could thereby gain a greater voice in promoting technological solutions offering greater profitability and sustainability in the longer term. He’s also looking for improvements in procurement practices to take into account the longer-term benefits of single-source solutions, rather than focussing on a relentless pursuit of lowest cost at the component level.

Fifty Years of Simatic

With Siemens set to celebrate the 50th anniversary of its Simatic brand in 2009 ― it was first introduced on a machine tool controller back in 1959 ― Holliday is concerned that the impression of the economy, as presented in the media, is at variance with the real economy, at least as it appears when viewed from Manchester. “I think there’s a danger of making things worse by focussing so exclusively on the bad news,” he says.

Let’s hope that by the end of 2009 he and the rest of the industry will still have some good news to present.

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