JimPinto.com - Connections for Growth & Success™
No. 109 : January 20, 2003

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

  • The world's conscience awakens
  • Automation commentary:
    • When will Eaton buy Rockwell?
    • Emerson: Strong management drives performance
    • Yokogawa strategy: Good products + low price
  • Peter Drucker book: Managing in the Next Society
  • Pinto's List - 10 Technologies for Automation Success
  • eFeedback:
    • New Year's thoughts from Dick Morley
    • The quest for continued growth - to what end?
    • Insights on Groupe Schneider in Germany

The world's conscience awakens

Heading to war with Iraq is a grave mistake. It can only lead to catastrophic consequences around the world. There must be other ways to eliminate Saddam Hussein, if that is the objective.

Bombing Iraq, just like bombing Afghanistan, is not going to protect us from further terrorist attacks; indeed, it will inflame millions more around the world against us and guarantee further terrorism. There are a dozen more countries that could erupt into violence and precipitate an ever-larger global war.

War is not moral strength. It is violence and destructive brutality. It is a symptom of human selfishness and fear. It can and must be abolished by a change of spirit. The US must be defined not by the wars we start, but by the peace we embrace.

Thousands of protesters around the world took to the streets to demonstrate against war in Iraq. The biggest demonstrations took place in the US, UK, Japan, Russia, Germany and Pakistan, all protesting the buildup of US military forces in the Gulf region.

At the two largest peace rallies (Washington, DC and San Francisco) the speakers were from many different groups - international peace activists, religious leaders, members of Congress, actors and musicians.

At least tens of thousands of people rallied at the Mall in Washington and followed with a march through the streets of the capital. The "silent majority" is starting to recognize that the right questions need to be asked, and shouted out until answers are given.

Peace is the natural and sincere wish of every normal man and woman, something that comes equally from the heart and the mind. The world's conscience is awakening to make a universal appeal in this hour of the world's dilemma.

War is not inevitable and we must not acquiesce to it. Every living, thinking human being has a duty to do what they can to STOP it!

I have one simply thought-of-the-day for you:

    "What does it take for MY conscience to awaken, for ME to break my routine and DO something?"

Click CNN - Anti-war protests sweep the world

Click The world's conscience

Click Make Noise Now: War is Not Inevitable!

Automation Commentary

When will Eaton buy Rockwell?

We had previously announced that Eaton would buy Rockwell sometime this month. Still, a week or so remains.

Eaton recently announced the appointment of Tom Gross (a 20 yr. Rockwell veteran) to the newly created position of VP, Eaton Business System, effective Jan. 6, 2003, reporting directly to Alex (Sandy) Cutler, Eaton Chairman and CEO, located in Cleveland. This made some people even more certain that Eaton was moving to acquire Rockwell.

Weblog comment:

    "This appointment has got acquisition written all over it! If Tom Gross has made this jump from Danaher, where he sat on the board and was instrumental in the creation of their motion division, you can feel pretty certain he's been brought on to provide the valuable insight needed to run Rockwell, along with the other ex-Rockwell high-ups that call now Cutler-Hammer home."
Then came a Rockwell weblog:
    "The Eaton deal is going to happen - but not until June 2003, in that the tax liability is in effect from the original Collins sale date, which according to Rockwell insiders was final in June 2002. So, the deal will go through in June 2003."
This brought the response:
    "If indeed the deal won't be done till the date you suggest, then Eaton would not have brought Tom Gross on board six months earlier than needed. Tom doesn't move until all the chips are in place. If they are not, he would not have moved. It's that simple."
As of the time this eNews was clicked off to you, I have not had any confirmation (or denial) from either Eaton or Rockwell management. For acquisitions like this, nobody from either side wants to talk. They keep stalling - saying it may happen, it's possible, etc. And then boom - the announcement is made. So, stay tuned.....

Click Rockwell weblog

Emerson - strong management drives performance

In a flat market, Emerson continues to show good profit, and even some growth. With revenue of $13.8b, profit 7.7% (operating margin 11.3%), consistent growth rate of 5-7% and current market-cap of $21.4b, this is consistently the best-managed industrial automation leader.

The primary segments of Emerson's business are: Process Control 24%; Industrial Automation 18%; Appliance & tools 24%; Electronics & Telecomm 18%; HVAC 18%. The process controls & industrial automation segments are expected to decline slightly (2-3%) during the next year (2003) though they will remain profitable (about 11%) - a sign of strong management. In an uncertain and even turbulent economy, where all others are showing poor performance, Emerson continues to demonstrate excellent strategic planning strengths and strong tactical implementation.

At an Emerson meeting in in St Louis on January 16, 03 to review Q1 03 (fiscal year Sept.) analysts came away fairly impressed. In the near term, Emerson continues to focus on restructuring, margin improvement and improving ROTC (return on total capital).

Highlights of the analysts meeting:

  • Emerson remains very cautious on the economic outlook and expects minimal revenue growth in 2003.
  • Transforming from components to solutions supplier.
  • With no economic recovery, Emerson remains focused on "self-help" for growth. During 2003, profit will be driven by restructuring, new products, and re-location to low-cost countries.
  • Aggressive investment continues despite the downturn. This will bring gains over competitors (many are distressed) when the recovery eventually comes.
  • Target 5-7% organic growth.
  • Strategic themes - technology investment to drive growth, driving sales by creating more value for the customer.
  • Increasing proportion of global manufacturing base will be in low cost countries, especially China.
Pinto Prognostications:

Emerson was run for 27 years by Chuck Knight, legendary for his tough management style (striking terror into managers who were not prepared; he admits he was "carried away" sometimes). But he is most remembered for his leadership in maintaining Emerson's remarkable record of 43 straight years of earnings increases. At 66, he remains Chairman and has handed over the CEO reins to David Farr, 47, previously COO, 22 years with Emerson.

Emerson is the quintessential management-driven company. Key people always have direct operating background and hands-on experience. David Farr has been VP planning & development, president of the Ridge Tool subsidiary, group VP for the industrial components and equipment business, president of Emerson Electric Asia-Pacific, CEO of Emerson's Astec joint venture and executive VP for the process control business. He's a good manager, not just a bean-counter.

Many people have asked me, "Emerson is strong - so why don't they buy Rockwell, or Honeywell IS, or Foxboro?"

My response, "Strategic business management. Emerson is not interested in growth for its own sake. They divest when profit is poor (eg: Intellution). They don't buy into declining businesses or markets, and only acquire pieces that represent a strategic fit."

Click Emerson website

Click Emerson comfortable with estimates

Click Send me your Emerson weblog comments

Yokogawa strategy: Good products + low price

With revenues of about $ 2.8b (automation about 50% of that) Yokogawa is one of the automation majors. Although there is a weblog on Yokogawa and the Japanese automation companies (Omron, etc.) and we have already published some articles on the company (see weblinks below), there have been many requests for Pinto commentary - beyond the polite, parroting press releases that proliferate in the trade journals.

About 70% of Yokogawa's total revenues are from Japan. Market segments are 50% industrial automation, 20% test & measurement (including a recent acquisition of Ando Electric), 10% information processing and 20% miscellaneous. With slumping demand in domestic Japanese markets, the company shows slim growth in foreign markets, though this seems to be generated through significant price reductions, contributing to losses (Y/E March 03). Yokogawa's market cap is $ 1.6b, about 60% of sales; its poor performance would not support its stock price in any other market than Japan.

Here are some objective Pinto business comments:

Yokogawa's products are good, especially the field instruments; but in a flat market there is little or no real product differentiation. So, Yokogawa's strategy seems to be to market penetration through low-price. In selected target geographies (including the US) they cut prices (often as much as 75-80% off list), and certainly not based on lower costs. Their aggressive pricing is far below the level of any US or European competitors, who simply cannot offer comparable discounts. For selected products, this makes operating profits woefully inadequate and ruins the market.

Recall that America was once the leading supplier of automotive, steel, radios, television sets, shoes etc. The reputedly 'long-sighted' Japanese approach then (and now) was (and is) to come in low, eliminate the competition and then slowly raise prices.

Historically, Japanese tactics have been helped by two factors:

  1. The lower profit expectations of Japanese stock holders and banks, with tolerance for losses - even extended losses. The Japanese government supports these tactics as long-term business wisdom, to counteract (in their view) American business short-sightedness.
  2. There is a price differential between products sold in Japan vs. the price outside Japan. For example, it seems clear that control and measurement products sold by Yokogawa in Japan have been priced as much as 2-3 time higher than those same products sold outside Japan. This price difference has been reduced somewhat because Japan itself is in an economic slump and the safety-net of high priced domestic sales has dwindled.
It must be recognized that it is illegal to sell imports below cost - that's called "dumping"! However, punitive action is always difficult to accomplish and slow in coming; it seems as if the complaints are simply about superior Japanese prowess. The steel industry was the only industry that ever got some action over price-dumping, but it was too little and too late; the steel business was already destroyed for US competitors.

Yokogawa will continue to be a major automation player, though their strategy is flawed. They still suffer from the outdated and mistaken perception that good products and low pricing is all that is needed. In a fast-moving new-age environment, that may be a very bad mistake.

Click Industrial Automation players - Yokogawa and others

Click Yokogawa's home page

Click Weblog - Yokogawa & the Japanese players

Peter Drucker book: Managing in the Next Society

Peter Drucker is 93 - born 1909. Since his first book ("The End of Economic Man", 1939) he has been recognized as the world's foremost management guru. Many of the 30 or so books he has written on management, economics and trends in society, are still best-sellers in their umpteenth printings.

In Managing in the Next Society, perhaps his last book ever, Peter Drucker covers technology and society trends, emerging industries, management and sociological changes. He tracks US business movement away from manufacturing to service and distribution, with new discussions on emerging biotechnology and knowledge management. Drucker provides valuable insights into a fast-changing society, and his depth and wisdom shine through.

The book is a collection of interviews and essays, all of which have appeared within the past few years in well-known journals and magazines. It's an easy read - like talking personally with the guru himself. Read it to gain a broad perspective on the changes that are flooding over this new century.

Drucker's other recent book (Managing in the 21st Century, 2000) includes new and revolutionary ideas and perspectives on the central management issues of the new century. In that book he incisive, challenging and mind-stretching, forward-looking and forward thinking, more than ever. This book is for those who wish to prepare themselves for today's tough challenges, to be the new leaders of tomorrow. If you are in management of any kind, you must read this book!

You might also like to listen to the audio-cassettes that are based on these books. I listened to Drucker's Managing in the 21st Century tapes repeating in my car for a month, which helped me to give some of my best speeches on the subject.

Click Business 2.0 - Peter Drucker interview

Click Drucker - Managing in the Next Society

Click Drucker - Management Challenges for the 21st Century

Pinto's List: 10 new technologies for industrial automation

Most new technologies originate from developments in the military (low volume, high cost) or commercial (high volume, low cost) markets. For industrial automation markets, products typically involve medium volume and medium cost. Hence, automation products should take advantage of new technology from both military and commercial markets to utilize in industrial applications.

From a review of various forecasts, here is my list of 10 technologies that industrial automation products and systems could and should utilize:

  • Wireless networks: Lots of small, cheap, low-power wireless devices proliferating in the plant and connecting all traditional "field" instruments.
  • MEMS-tiny, low-cost, low-power sensors: Battery-powered sensors that (coupled with wireless networks) monitor products, processes, machines, and almost everything else in the factory.
  • Wireless PDAs: For everything in the factory, plant, or process - communications, calibration, diagnostics, maintenance, windows to the plant network.
  • RFID: Physical items with cheap chip labels you can read from up to 60 feet away, used for all kinds of factory ID, inventory tracking, logistics.
  • Robotics and mechatronics: Labor-saving mechanisms for the factory and plant environments, cheaper and more affordable.
  • Displays: More LCD displays in automation products of all kinds for easier programming and user diagnostics; built-in HMI.
  • Lighting: LEDs producing more and purer light, changing color, using a tenth as much power, and lasting thousands of times longer than incandescent lights. Many more applications in sensors, actuators, and a variety of automation products.
  • Telematics: Some automobile gadgets extending to automation products in the factory and process plant.
  • Peer-to-peer and grid computing: Sharing unused computing power, significant growth of peer-to-peer I/O.
  • Solar power: Organic compounds that mix up and spread out like paint-used in tank farms and outdoor equipment.

Click InTech News: Technologies to watch in 2003

Click Information Week's Outlook 2003

Click Red Herring's Top Ten Trends 2003


Most people know me as a wild optimist. My "best I can muster" New Year wish was uncharacteristically negative, and many friends rallied to point out the good things that are happening.

I'd like to share with you the response from someone whose optimism and insights have helped me greatly over the years - my friend Dick Morley [morley@barn.org]:

    "It is not what others do, but what we ourselves do, that counts. We're alive, I've plowed some snow. I am happy to have three 9-year-old children circling the barn and staying with us, one of them for a week over the holidays. I will continue to support children, start companies, make jobs, spread the word about technology benefits and try to make the technology beneficial. Rather than complain, let's change the world!

    "History says that all of the ages could be looked at negatively, but evil does not persist. The natural corrective process works. The fascist liberals and the ultra conservatives are both extremes that seem to have circled around to meet each other.

    "I tell people I'm a Harley guy and they always think of me as a 'Hell's Angel'. In reality, most Harley guys are engineers and accountants. One wonders whether a lawyers convention is more dangerous than a meeting of motorcycle riders. I would choose the bike guys over the lawyers anytime. The Harley web site used to sell a rifle sheath for your motorcycle - it gave the illusion of power. Now, they have a laptop sheath. I have one, and it fits on my bike. That's where the power lies today."

Neil Taylor [ntaylor@taylor.com] gave us his view of these uncertain times:
    "Your 'philosopher's corner' message was interesting, this time particularly. I just went with my daughter to see and listen to Dr. David Suzuki, http://www.davidsuzuki.org, talking last night with a message not unlike yours.

    "Something that I have been feeling for a long time is the un-sustainability of our social and economic model. The myth of the our business world is that we should work hard, make as much money as we can, accumulate stuff and then retire to enjoy it. During retirement I guess we are supposed to regain our damaged health, after working too hard, and then reconnect with family and friends?

    "The premise of the economy is that a country had to grow each and every year to be successful. In the chase for GDP growth, not much concern is given now to physical and mental health of the population. Have any of our leaders figured out that we can't have continuous growth of economy, population and manufactured goods for much longer? I have a feeling that the general population is indeed beginning to understand that."

I have indeed received some commentary on Groupe Schneider and the weblog is still brewing. Some people pointed out that I really do not have enough background knowledge on the French group, which I admit. Steve Jennings [steven.jennings@boschrexroth.de] from Rexroth Indramat in Germany sent these valuable insights:
    "The Schneider operation in Germany (the old AEG) has been going nowhere for a few years now. It has reached such a low ebb that they don't even release the sales figures to the internal middle management anymore. Schneider doesn't want to be seen to be pulling out of the world's third biggest automation market, so they just carry on carrying on. The question is: How long can the French organization finance the failed German one?

    "Schneider bought SIG-Positec for a wildly-over-the-top-price recently, in an attempt to get some motors & drives and create some internal competition. Unfortunately, SIG-Positec (Berger Lahr) is a stepper motor manufacturer with no servo business worth mentioning, no controls business and no market outside Germany. So there is no fit. Those responsible for orchestrating the debacle were quickly promoted to senior positions in the USA. If you think that the Germans are bad at integrating companies, then you should take a look at the French!

    "Schneider may be in a strong position in switchgear and automation in France, but that's it. Dick Caro is correct in his analysis of the automation industry; it is looking old and tired, and suffers from an overwhelming surplus of mediocre management. The whole industry looks like a cash cow for senior management. All the good guys have gone to where the growth is - telecomms."

Click Send me your Schneider weblog comments

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