ABB says reindustrializing America will help drive company's growth | Automation.com

ABB says reindustrializing America will help drive company's growth

May 112012
ABB says reindustrializing America will help drive company's growth
May 2012
 
By Jeanne Schweder, Freelance Editor
 
Predicting the reindustrialization of the U.S. over the next five years, Global CEO Joe Hogan told audiences at ABB’s annual Automation & Power World conference, April 23-26 in Houston, that the company is in the “sweet spot” to take advantage of the many megatrends driving the American economy.
 
The event, the company’s largest ever in North America, drew 5,000 customers and partners from more than 50 countries and included 130,000 square feet of product displays. It reflected ABB’s growing presence in its largest market, still the world’s largest economy by far, despite what Hogan described as the business barriers of “a 40 percent corporate tax rate and a lawyer behind every tree.”
 
Hogan also predicted the end of “labor arbitrage,” which over the last two decades has seen U.S. companies moving factories and jobs to China and other low-wage countries as their primary cost-reduction strategy. “Now the business focus has turned to increasing industrial productivity and reducing energy costs, which plays to ABB’s strengths in automation and power technologies,” he said.
 
ABB has nearly 19,000 employees working in the United States, Canada and Mexico and has invested $11 billion in North America over the past decade. It has used more than $100 million in venture capital to acquire new technologies, many of them developed by U.S. companies. It has also increased R&D spending by $500 million.
 
Many ABB factories are being expanded or built in North America, including a new high voltage wire plant in Huntersville, N.C.  ABB is also investing $10 million in a Smart Grid Center of Excellence at North Carolina State University in Raleigh.
 
In addition, North America has the largest installed base of ABB power transmission and distribution equipment, a major factor in driving the rapid growth of its services business.
 
He said the acquisition of Thomas & Betts, expected by the end of the second quarter, will give ABB a much stronger position in the low voltage market and add 9,400 employees and 6,000 distributor locations. “This is all part of our effort to push growth in North America.”
 
Hogan explained that ABB has divided its business into three regions: the Americas, Europe and Asia, the Middle East and Africa. Each region contains a mix of developed and developing economies, a structure he said allows ABB to tailor products and services for each region’s specific needs and that supports its strategy to increase local control, entrepreneurial behavior and responsiveness to customers. He also predicted that Africa would be the next area of the world for major development.
 
To succeed in the North American economic environment, Hogan outlined ABB’s primary business strategies:
 
  • Drive competitiveness and stay relevant in current markets
  • Capitalize on megatrends to anticipate, participate and lead in creating new solutions
  • Aggressively expand core businesses, particularly services for its large installed base of equipment
  • Disciplined approach to mergers and acquisitions, such as the Baldor and Ventyx purchases in 2011 and the anticipated merger with Thomas & Betts in second quarter 2012 
  • Leverage disruptive opportunities to create new markets, such as applying the energy-saving capabilities of direct current (DC) power in data centers
  • Continue to increase efficiency and reduce costs in all operations
North American region manager Enrique Santacana said the major megatrends that will contribute to ABB’s long-term growth include resource economics,
transportation mobility, green energy, electrification, urbanization, digital information and the power shift toward emerging economies.
 
Santacana said ABB expects a robust North American business climate in 2012 and beyond due to the need to increase industrial productivity, improve power grid reliability, eliminate transmission congestion and replace aging electrical infrastructure, the exponential growth in data-driven processes, the huge potential of shale gas and oil and the drive to increase energy efficiency.
 
Hogan pointed to a number of examples of what he called “disruptive technologies” that will allow ABB to be first to market with solutions because of its engineering culture and global experience in power-intensive industries. These include DC power systems for data centers, which he compared to “digital factories.”
 
Hogan noted that in just 48 hours, the world generates as much data as it did all throughout history through 2003, “and soon the same amount of data will be created in just 20 hours.” To store and communicate that information, data centers also consume huge amounts of energy. “Over half of the power ever created has been consumed in just the past 15 years,” he said.
 
By using DC power, Hogan said data centers could eliminate the 20 percent in energy losses that occur every time there’s a conversion from DC to alternating current (AC) power. “Although we were late to the game with solutions for data centers,” he admitted, “we’re on it now and just at the beginning of our innovations.”
 
Although DC won’t replace most AC power systems, Hogan said it is ideal for other applications as well, such as being able to recharge an electric car in 15 minutes,compared to four hours with an AC system. DC power also allows smaller and lighter components to be used on land or on ships, which further reduces costs and space requirements.
 
Hogan said ABB’s strength in power technologies is helping it develop solutions to help utilities compensate for voltage fluctuations in green energy systems such as wind or solar with reactive power and energy storage systems. And with its largeglobal presence in the oil, gas and mining industries, ABB is also active in enabling the fracking process for shale gas and oil, a source that promises to transform energy economics in North America.
 
Another area for ABB involvement, according to Hogan, is deep sea drilling, where the industry is looking to put drilling equipment on the ocean bottom rather than on floating platforms, with power supplied from shore.
 
ABB’s purchase of Baldor, the leading U.S. motor manufacturer, in 2011 is giving it new opportunities to increase energy efficiency and manufacturing productivity for American companies, Hogan said, explaining that it was the first time world class drives and motor companies have merged. “If drives were put on all equipment, the U.S. would save $40 billion a year in energy costs,” said Hogan.
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