By Katherine Tweed
There are a lot of issues that could keep Joe Hogan up at night. As the CEO of ABB Group, one of the world leaders in power electronics and automation, he's keeping his eye on the strife in the Middle East, the price of copper and oil, where future engineers will come from, the opportunities and threats in China -- not to mention his own company's balance sheets. The good news on the latter is that ABB is looking strong, with $31 billion in revenue in 2010 and a renewed focus in mergers and acquisitions.
At ABB Automation & Power World in Orlando, Hogan spoke about how the world's need for new infrastructure and increasing automation gives ABB a strong position -- even in the face of climbing prices for commodities and a volatile financial economy. "When you build infrastructure, you build wealth," he said. Hogan pointed to a few key areas where ABB is well positioned as the markets expand:
- Wind. ABB saw record growth in China of 40 percent in 2010, and the speed at which Chinese manufacturers can ramp up production makes it a very dynamic opportunity, according to Hogan. He pointed to their already-strong presence in China working with OEMs and noted that they expect that to only continue into 2011 and beyond.
- Rail. Putting aside the U.S., "Rail is very exciting," said Hogan. He pointed to the sophistication of controls and traction drives, not to mention the trains themselves (which ABB does not make), and observed that it's a high-tech market with a lot more players getting into the game as countries like China and Brazil expand high-speed rail plans.
- Water. ABB isn't in the business of desalinization, but it is in the business of pumping water. As this irreplaceable resource becomes even scarcer, efficiency in water will only continue to rise in importance. ABB is not alone, as every other global giant -- from both the hardware and software side -- is trying to be a player in this overdue market.
- Solar. ABB is growing in solar, especially when looking at the entire value chain of how the power is converted coming off the solar cell, according to Hogan. He sees solar as the second-fastest-growing segment for ABB after wind, with $350 million in orders in 2010.
But even with good positioning in the global market, Hogan and other executives at ABB see the risks on the horizon. One is security. "We're sleeping on a huge mine field with automation," he said. That's why ABB has invested in cyber security companies like Industrial Defender. (Interestingly, despite some major acquisitions, including Ventyx, Hogan said ABB's focus was still to grow the company organically from the inside.)
Besides cyber security, there are a lot of issues for a global conglomerate to watch out for. From a corporate perspective of risk, ABB senior management was asked to define which ones were front and center.
- Despite the fact that ABB weathered the financial meltdown pretty well, the ongoing financial crisis around the world led the pack, with 26 percent of ABB executives defining it as the largest risk factor to their business.
- Just behind financial meltdowns, the price of oil came in at 24 percent of respondents saying this was a macro risk factor. In fact, half of those same executives saw oil rising to $150 a barrel in 2015.
- The overheating of the Chinese market came in third at 19 percent. Inflation was another concern, with 14 percent thinking it would be a risk factor.
- More than half of ABB senior managers predict the price of copper in 2015 to be at $12,500 per metric ton.
Although it's a world filled with risk factors, Hogan likes the long-term outlook for energy efficiency and automation -- and ABB's place in the market. "We believe in automation," he said, "and we think the world is moving our way."