Automation and engineering giant ABB announced that it will reorganize its automation divisions in an attempt to align its discrete manufacturing and energy-efficient offerings with its reseller channel and its customers.
Effective Jan. 1, 2010, the Automation Products and Robotics divisions will be regrouped into two new businesses: The Discrete Automation and Motion division, run by Ulrich Spiesshofer, currently responsible for corporate development on the ABB executive committee; and the Low Voltage Products division, headed by Tom Sjokvist, who currently leads ABB Automation products.
The Process Automation business will remain as is, the company said late last week, except for the addition of ABB’s instrumentation business (currently part of the Automation Products division). According to ABB CEO Joe Hogan, moving the instrumentation unit into the process business “makes sense,” as manufacturers typically look for a synchronized solution of process automation and instrumentation. “Our competitors align instrumentation in the same way, and it is more in line with what customers expect,” he said during a conference call with media and analysts last week.
Similarly, Hogan aims to emphasize ABB’s strong discrete business as he aligns technologies, channels, and service models. For example, the new Discrete Automation and Motion division wraps robotics, programmable logic controllers (PLCs), and motors and drives together. “We have never approached a marketplace as a discrete automation company,” Hogan said. “It’s always been in pieces, sold separately.”
And, despite the fact that ABB’s robotics division is tightly connected to the anguished automotive industry, which helped produce a 51% decline in robot revenue for ABB’s third quarter of fiscal 2009, Hogan is anticipating growth opportunities in food and beverage, pharmaceuticals, and any industry that requires material handling. To that end, within the next 18 months, ABB will launch smaller, faster robots, perhaps outfitted with an onboard controller that also acts as a PLC, he said.
The new Low Voltage products division also better aligns the electrical equipment that ABB sells to wholesalers, OEMs, and systems integrators.
Overall, the reorganization of the company’s automation business does not indicate a major shift in direction, Hogan said. Rather, it streamlines solutions and aligns ABB’s activities with customer needs.
“This is not big change in a strategic sense, but a reflection of my ambitions to make ABB more customer-focused and more sensitive to the needs of the market,” he said on the conference call. “The current automation products divisions are extremely broad and difficult for customers to understand. … [This] makes it easier to execute our current strategy.”
Hogan said he has been thinking about the reorganization since he was hired in July 2008 to replace Fred Kindle, who stepped away from his role in February of that year. Yet, despite Hogan’s remarks that the reorganization “is not about acquisition,” the news seems to have reignited rumors that a major acquisition could be around the corner.
When Kindle resigned as CEO, citing “irreconcilable differences” over how to best direct the company’s strategy, the industry swirled with speculation that ABB would use its $5 billion in cash to make a major acquisition. . Several months later, the appointment of Hogan, a General Electric veteran known for his acquisition expertise, added more fuel to the fire. But his appointment corresponded with an economic downturn that turned into a cost-cutting recession, which left little room for major acquisitions.