ABB boss

The Big Six Business Issues for 2016

ulrich Spiesshofer_ chief executive officer of ABB_Bloomberg
Ulrich Spiesshofer at the World Economic Forum in Davos last year.
  • Why it matters

    Why it matters

    Big European businesses are likely to be challenged by several issues this year, from oil prices to migration.

  • Facts

    Facts

    • ABB, a rival to Siemens and General Electric, has about a seventh of its business and employees in China.
    • The company is taking a cautious approach to doing business in Iran after the end of the West’s economic sanctions.
    • The sharp drop in the price of oil means many countries can now cancel their fuel subsidy programs and use the money for other purposes.
  • Audio

    Audio

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ABB, based in Switzerland, is an energy and automation technology group with €40 billion (€37 billion) in sales and about 140,000 employees in 100 countries. It competes with German industrial group Siemens and General Electric.

How does an international giant like ABB, with only 5 percent of its employees actually working in Switzerland, view the challenges of 2016? Handelsblatt fired six hot topics for the coming year at chief executive Ulrich Spiesshofer and asked him for quick responses to each. After all, time is money in Davos.

 

Industry 4.0 (Germany’s digital push towards full automation of its factories)?

Not a threat, but a huge opportunity for all of mankind, even though jobs will change. This doesn’t mean that there will be less work in the future, just different work. The automobile displaced the carriage and the washing machine the washerwoman. New professions arose instead. The reorganization doesn’t just mean new technology, but also a necessary transformation of corporate cultures. If everyone cooperates, it will certainly be possible to increase productivity by 20 to 30 percent. And, for the first time, an industrial revolution is now leaving the factory. Today, digitization already means that if an industrial robot made by ABB has only a minor problem somewhere in the world, our remote maintenance center in India analyzes it in real time and can initiate the repair and send out spare parts, all before anyone even notices that something is wrong. Industry 4.0 means more productivity, fewer breakdowns, lower costs, better service and more prosperity.

Emerging economies?

The picture differs, depending on the economic situation. India is now investing heavily in solar energy and industrialization. On the other hand, China, after years of strong growth, is now in a transformation phase. Investments are declining, partly because of overcapacity, while the consumer market is growing. Sharp declines in the stock markets have created uncertainties. We earn 15 percent of our revenues in China and have 20,000 employees there. In Russia, (President Vladimir) Putin has high approval numbers, but industry isn’t doing so well. The ruble continues to decline. Generally speaking, Brazil is the emerging market in the worst situation today, both politically and economically.

The end of the Iran sanctions?

This is an opportunity for a new beginning. We are currently examining the exact implications of the lifting of the economic embargo against Iran, and we will decide how to proceed in due course. A functioning banking system is still a big question mark. However, the country offers major opportunities, because after 30 years of being at more or less a standstill in industrial development, there is a tremendous need to catch up.

The oil price?

There are three aspects to this issue. The business of oil production has become extremely difficult, due to low prices. In our case, the business makes up about 10 percent of our revenue. Investments have declined sharply, perhaps more than ever before. On the other hand, the low prices also have positive effects. Our energy and raw material costs are low, which benefits us and many of our customers. Third, the world has spent about $500 billion a year on energy subsidies until now. In light of the very low prices, this support is no longer necessary. India, for example, spent €42 billion on these subsidies in 2013. Now the money could be invested elsewhere.

 

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Migration?

There are nine different nationalities in our own board of directors. Diversity is productive, both culturally and economically. Which brings us to the European refugee question. We too offer employment opportunities for migrants, not just in Germany. Of course, a company with such extensive global operations as ABB has a social responsibility and must do its part to improve integration, especially at a time when it increasingly appears that each country is going its own way. In the end, you have to address the issue of refugees where it arises. This is an enormous challenge for lawmakers. And it will also cost time and money. But this is the only way it will work, with dialogue and cooperative action.

The biggest challenge?

Globally speaking, it isn’t that everything has to get better, but just a little more predictable. We are growing very strongly in some areas, while in others we need to restructure and bring down costs. This applies both to our company and many others. In this challenging environment, we intend to prevail and will prevail, by focusing more heavily than ever on education, research and innovation.

 

Thomas Tuma is a deputy editor in chief at Handelsblatt. To contact the author: tuma@handelsblatt.com

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