CEO Hogan Bullish on ABB Outlook

ABB Leadership Expresses Optimism at Opening of ABB Automation & Power World 2013

By Jim Montague

ABB Automation & Power World 2013

Commitment, investment and integrity beat uncertainty every time.

To fight all the economic, political and technical turmoil battering people, companies, governments and regions worldwide, ABB Group and ABB North America's leaders stressed their unwavering commitment to serving their customers and increasing organic growth, continuing aggressive investment in R&D and disciplined acquisitions, and maintaining the personal integrity to keep these promises in today's keynote address to the more than 4,800 attendees gathered in Orlando, Fla., for ABB Automation & Power World 2013.

"This is the fifth time I've addressed Automation & Power World, and I come back to the United States now with more optimism than ever before," said ABB Group CEO Joe Hogan. "We're investing more and doing it more aggressively because we're a power and automation company, and we know there are huge synergies to be gained by combining them, and that automation is at the nexus of a lot of these technologies coming together. Many jobs are coming back to the U.S., but they aren't the same as the ones that left. These new jobs will be much more automated. This is an exciting time of rebirth in the U.S."

Earlier in their joint presentation, ABB North America president, CEO and region manager Enrique Santacana laid out some of the daunting challenges and persistent headwinds that the industry is facing. "China is experiencing slower growth, Europe is still in recession with high unemployment and debt burdens, and the Middle East is still highly unstable with events that could skyrocket oil prices and cause economic problems worldwide," says Santacana. "And, even though the potential U.S. government shutdown has been put off until September, we're still in the middle of the sequester crisis, debating the debt ceiling and dealing with poor monetary policies. In addition, we've got regulation overload and persistent high unemployment. And, if the U.S. Federal Reserve takes out the market's liquidity, what's going to happen to the bond markets, interest rates, our economy and all of our businesses?"

On the other hand, Santacana added there are some tailwinds helping to propel ABB towards reaching its goals and fulfilling its mission. "The U.S. housing market is getting stronger, and there is strong investment in many industries such as mining, manufacturing, oil and gas, and the common thread is they're all investing in increasing productivity by employing energy efficiency and automation," explains Santacana. "Of course, the brightest star in the U.S. economy right now is energy, especially shale oil and gas plays, upcoming grid modernization and development of renewable energy sources. Data center technologies and the digital age are also upon us, including exploding numbers of apps and cloud-based computing services, and these are transforming all of our lives."

"We don't know how all of the headwinds and tailwinds are going to play out, so we have to proceed with caution," continues Santacana. "The good news is that all of the tailwinds I talked about are right in ABB's power and automation sweet spot, and that sweet spot is also growing bigger thanks to our organic growth and our recent acquisitions of Thomas & Betts, Baldor, Ventyx, Tropos and APS. In fact, our footprint doubled between 2009 and 2011 because of Baldor, and grew another 50% by 2013 thanks to Thomas & Betts and our organic growth. As a result, we now have 27,000 employees in North America, and we're fully committed to becoming indispensable to our customers and their value chains."  

To update ABB's overall profile and recent performance, Hogan reported the company now has more than 145,000 employees, more than 400 facilities in 100 countries, and  earned $40 billion in revenues in 2012, with a market capitalization of more than $50 billion. Later, during the ABB Automation & World's media briefing with ABB's executive team, it was announced that ABB North America achieved a record 26% increase in revenues to a total of $6.7 billion for 2012.

"ABB is a truly international company — not just one that's headquartered in one place and exports to others," explains Hogan. "However, to accomplish this, we must go beyond just selling to get involved with the manufacturing, engineering and even the politics of each local country and its markets. We may be a large organization, but we have to think, act and get small enough to work with all these customers. 

Hogan added ABB's five primary strategies leading to 2015 include:

•    Driving competitiveness and staying relevant in present markets;

•    Capitalizing on megatrends by anticipating and participating in key markets;

•    Aggressively expanding its core businesses;

•    Seeking and conducting disciplined mergers and acquisitions; and

•    Exploiting disruptive opportunities that can change existing markets, and even create entirely new markets.

"We've invested aggressively for the past five years because we believe these economies worldwide will recover, and so we'll be able to compete and grow in them," adds Hogan. "For instance, despite the dysfunction of the U.S. political system at the federal level, there is a lot of legislative innovation at the state levels. So, the United States is still a great place to be and its economy will continue to grow as well. This is why we've invested $12 billion in it over the past four or five years, including opening our new Smart Grid Center in Raleigh, N.C., and our new cable plant in Huntersville, N.C."

Hogan reported that one demonstration of ABB's commitment is its spending on R&D has increased 70% since 2009 to about $1.5 billion. In fact, he added ABB's acquisition of Thomas & Betts has also provided benefits on the component side. "With help from Thomas & Betts, we've developed circuit breakers that are 40% to 50% smaller than their competitors," says Hogan. "This is because our engineers better understand the plasma physics involved and can apply that knowledge."

Likewise, ABB also has been pioneering the development and application of high-voltage DC cabling, which only loses about 2% to 3% of its initial power over long distances, and is planning to deploy them to send 1,100 kV of ultra-high-voltage DC (UHVDC) over the 2,500 miles between Three Gorges Dam and Shanghai in China. To aid this effort, he added ABB has also created its new Hybrid HVDC breaker, which will be essential in managing power, isolating faults and performing other jobs crucial to these new grids.

"Previously separating islands of automation are coming together around automation, and power and users are adding an enterprise system on top to anticipate issues, improve productivity and optimize their businesses," says Hogan. "This is also why it is so important for us to move closer to our customers and listen more closely to them, but then also engage with integrity and live up to the promises we make. They have to be sure that we will do what we say we're going to do, and we will."