ABB Revival Ready for Its Rivals

Siemens, GE and and other industrial groups should brace themselves for tougher competition from Swiss rival ABB. After three years of restructuring, its CEO tells Handelsblatt he's ready to reenter the fray.
ABB CEO Ulrich Spiesshofer is ready to take on Siemens and GE.

ABB’s Chief Executive Ulrich Spiesshofer is convinced his company's time has arrived: After three years of looking inward, the Swiss maker of robots, power converters and turbochargers has never been so well positioned to take on its two biggest rivals: Germany's Siemens and US conglomerate General Electric.

"We have undergone substantial change over the past three years,” Mr. Spiesshofer told Handelsblatt on the sidelines of the annual Hannover fair, the world's largest industrial trade fair. “ABB currently is a different company than in 2014. We now have four market-leading divisions, which act with an entrepreneurial spirit and benefit from one another," he added.

ABB could use a boost – especially as its rivals have been pulling away of late. Germany's Siemens showed exceptional growth last year, posting record operating profits on a turnover of €79.6 billion. GE earned a net profit of $8.2 billion on a turnover of $123.7 billion. ABB’s performance, on the other hand, has been sluggish since 2014. Last year, ABB’s revenue slid from $36.4 billion to $33.4 billion, partly through currency effects, while overall profits fell slightly to $1.9 billion.

True, it's not quite an apple-to-apple comparison since ABB isn't present in some areas Siemens and GE are active in, such as medical equipment. But when it comes to industry, the German-born Mr. Spiesshofer insists he's taken steps to level the playing field – and he's betting on strengths like automation and robotics to do it.

The acquisition of B&R makes us the only company offering a complete portfolio in industrial automation. Ulrich Spiesshofer, chief executive, ABB

Steps to reenter the fray include the takeover of Austrian industrial automation firm B&R, estimated to cost $2 billion, or €1.8 billion, and announced earlier this month. The move should allow ABB to be one of the growth drivers in the automation sector. Furthermore, a new digital platform, called ABB Ability, could add as much as $20 billion, or €18.4 billion, to the industrial giant's coffers, according to Mr. Spiesshofer, a former A.T. Kearney consultant.

The B&R takeover marked something of a return to the fray for ABB, and Mr. Spiesshofer left open the possibility for further acquisitions down the road: “We keep our eyes open, but we’ll do it in a disciplined, very careful way. In financial terms, a multi-billion-dollar takeover is not a problem for us – we generate plenty of cash. What is crucial is the correct potential for integration,” he said.

Winning is not about overall size but clout within specific sectors. Mr. Spiesshofer said that the takeover of B&R allows ABB to close gaps in its product portfolio, boosting its capacity to build on its “strong number two” position in industrial automation. B&R was a cutting-edge innovator that has shown double-digit growth figures for a number years.

“That acquisition now makes us the only company offering a complete portfolio in industrial automation,” he added, pointing out that ABB now has $15 billion in revenues in the sector, far ahead of rivals like GE and Honeywell.

ABB’s restructuring was not just about cost-cutting. It was a process of complete transformation, making the company leaner and fitter for the fight for market share. As a result, he added, the company has quietly returned to organic growth in the last two quarters.

Any comparison with its competitors has to go beyond headline figures to look at divisional strengths, the 51-year-old German executive said. Siemens is currently strong in machine and factory automation, for example, whereas ABB has particular strength in process industries, like oil and gas. In robotics, ABB is far ahead of Siemens and GE, according to Mr. Spiesshofer. Instead, German robotics maker Kuka, bought by China's appliances maker Midea last year, is the major rival of ABB when it comes to automation machines.

ABB hopes for annual growth in automation to top 10 percent, along with substantial growth from its ABB Ability platform. Mr. Spiesshofer said the software, which uses artificial intelligence and data analysis to control and improve industrial processes, could save a total of $1 trillion per year if implemented by all of ABB’s clients. He also suggested that possible revenues of $20 billion were a conservative estimate. If that comes to pass, ABB may truly be back on Siemens' radar screen.

 

Grischa Brower-Rabinowitsch leads Handelsblatt's coverage of companies and markets. Axel Höpner is head of the Handelsblatt office in Munich. To contact the authors: [email protected], [email protected].