Record profits, happier customers show success of ABB-Baldor integration

May 072012
Record profits, happier customers show success of ABB-Baldor integration
May 2012
 
Automation.com Exclusive Interview with Ron Tucker, President of Baldor
 
By Jeanne Schweder, Freelance Editor
 
“First, do no harm” sums up the approach global engineering giant ABB took to its January 2011 acquisition of Baldor, the leading U.S. motor manufacturer. Just over 12 months later, the success of that guiding philosophy has been proven in the best year in Baldor’s 91-year history, with record profits as well as profit-sharing for employees, and a 50 percent improvement in customer satisfaction rates by year’s end.
 
ABB’s Discrete Automation and Motion division, which contains Baldor, contributed 21 percent to the company’s revenues in first quarter 2012 alone. ABB now claims the world’s most extensive line of drives and motors, with solutions ranging from fractional to 100,000 HP.  Integrating power and automation systems to help companies achieve productivity gains and energy savings has become a major trend, underscoring the division’s potential for continuing growth.
 
“We learned the hard way how to destroy brands,” Enrique Santacana, region manager, North America, told customers at ABB’s Automation & Power World in Houston, April 23-26, referring to a number of troubled acquisitions in the company’s past. The change in approach to integration, which preserves both brands and business strengths, will serve as a model for ABB’s future acquisitions, including the purchase of Thomas & Betts, due to be completed in the second quarter.
 
The two acquisitions also give ABB a strong nationwide distribution network in what is now the company’s largest market.
 
To preserve Baldor’s unique advantages, Dr. Ulrich Spiesshofer, global head of the Discrete Automation & Motion division, established continuity and growth as the key principles for the Baldor integration. A former professional management consultant, Spiesshofer joined ABB seven years ago to assist in business strategy and mergers and acquisitions.
 
“We needed to preserve what made Baldor so special, which meant listening carefully and then giving them support where they needed it,” he said. That included paying off Baldor’s $1 billion debt and investing another $70 million in new and expanded factories.
 
It also meant maintaining Baldor’s unique go-to-market strategy using a nationwide network of 28 independent, commission-based manufacturers’ representatives, called district offices. The district offices handle sales, run product warehouses and support 4,000 Baldor distributors. As part of the integration process, ABB assessed each office and gave tailored assistance with business development and planning, training, infrastructure and process improvements where needed.
 
Integration of the sales team did not begin until nine months after the acquisition, when ABB transferred North American sales of drives and servomotors to Baldor. ABB is now adding a network of regional application engineers to support the district offices and distributors. Baldor will continue to handle its own marketing under its brand name.
 
Spiesshofer, who has been assisted in the Baldor integration effort by Greg Scheu, global head of marketing and customer solutions for ABB, created a five-point scorecard to measure the performance of both ABB and Baldor managers involved in the three-year integration project, dubbed “Warm Welcome.” Customer satisfaction, the retention of district offices and continuity in the ABB-Baldor management team account for 50 percent of their scores; revenue growth and cost efficiency make up the other half.  
 
Throughout the process, Spiesshofer has paid careful attention to what he calls the “say/do” ratio. “You have to be very careful about what you say, and the do of the say has to be very high,” he said. “Make fewer promises, but make sure you keep the promises you make.
 
“The visible successes of the first year,” he added, “including landing a global frame contract from Shell in the early days after the acquisition, which would not have been possible without the combined IEC and NEMA product offering, have made the integration much easier.”
 
Baldor president Ron Tucker, who was also recently named head of the Discrete Automation and Motion division for North America, said the acquisition has made it possible for Baldor to grow outside North America. “Debt constrained us from the next acquisition and we were at the mercy of the financial markets, but we knew we had to expand outside the NEMA market to keep growing. It would have been a very long process to do it alone,” he said.
 
In the more than 12 months of discussion that led up to the acquisition, Tucker said Baldor executives were reassured that ABB would respect what they had worked so long to build while giving them new opportunities to achieve a strong global presence. “They were the right partners for us.”
 
At the same time, Baldor gave ABB a stronger U.S. presence, adding 10,000 customers, including 6,000 OEMs, and a nationwide sales and customer support structure. With the U.S. economy reviving and more OEMs exporting their equipment, Tucker said Baldor’s OEM sales are now larger than its distribution business.
 
Tucker credited stabilizing material prices, declining lead times and continued high service levels for rising customer satisfaction in 2011. “We worked hard to make the acquisition transparent to customers, but many of them told us they were eager to access the wider product line and we’re now working closely with ABB to coordinate sales of total solutions.”
 
Baldor has long kept the Chinese and other competitors at bay with the diversity of its portfolio of small- and medium-size motors, with 5,500 different models and rapid-response capabilities. “ABB’s comprehensive line of drives and larger motors is complementary, giving us more solutions for customers and enabling us to reach larger companies,” Tucker said.
 
“We’ve also brought mechanical products to the ABB portfolio, which will be a focus for growth for the division worldwide in the year ahead.”
 
The breadth of the division’s offering was amply demonstrated at the Automation & Power World conference with more than 7,000 square feet of exhibit space for ABB and Baldor motors, drives, motion control, generators and mechanical products.

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