JimPinto.com - Connections for Growth & Success
No. 54 : July 27, 2001
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- ABB in trouble - big layoffs
- Invensys after Yurko
- Automation in decline
- Clarifying Pinto Agenda
- "Project Unity" delayed or dead
- GE-Fanuc : Cimplicity Growth
All you technology-trends mavens, please bear with me.
Lots of time-sensitive news-and-view in industrial
automation in this issue of eNews.
Because our eNews list is growing rapidly, I'll be putting out a feedback
form shortly. Is your bias for industrial-automation news? Or, technology
trends? Or both?
Meantime, feel free to send email with your preferences.
ABB in trouble - big layoffs
ABB has just posted a 76% drop in first-half profit. The Swiss-Swedish
group has announced that it will slash 7% of its 163,000 global payroll
(12,000 people) over the next 18 months. This will bring annual savings of
$ 500m ($40K average per employee).
Management has "not yet finalized where the cuts will be" - which probably
makes worldwide employees feel like they are ALL being considered. ABB is
"hoping to achieve a third of the job reductions by natural wastage"; does
that mean when the good people (the ones who can easily find other jobs)
leave? Will the cuts (of those who don't leave voluntarily) come at the
bottom, middle or top?
Recently appointed ABB president and CEO Jörgen Centerman said the group is
scaling back its performance targets, cutting its earnings expectations.
Centermann says sensibly, "I want to break away from the image of ABB
having high targets and not meeting them."
The mounting problems at ABB have some investors wondering whether the
electrical-engineering giant - long considered one of Europe's best-run
companies - has lost its way. ABB stock has fallen more than 50% over the
past year and the bad news has kept the shares sliding in recent months,
despite a stock-buyback program.
Analysts have been speculating recently that ABB would cut jobs after
rivals such as Emerson Electric Co. and Rockwell International Corp.
announced layoffs and lowered profit forecasts due to the slowing world
One ardent eNews reader asked, "Has the whole Automation Industry gone mad?
Or did all the CEO's go to the same "How to restructure" seminar earlier in
Pinto Prognostications :
ABB is a good company, the second-largest in industrial automation (after
Siemens) struggling with decline of the worldwide automation business. As
well, they are digesting Elsag Bailey and other relatively unhealthy
previous acquisitions, made unwisely without a balanced market perspective.
They are now paying the piper for outdated business planning methods and
marketing vision with a rear-view mirror.
Previous eNews when Centermann was appointed: ABB blahs
Guardian UK - July 25, 2001: ABB to Cull UK factories
July 24, 2001 : The Wall Street Journal Online
Invensys after Yurko
After the Wednesday (July 25, 2001) Invensys annual meeting, The UK Times wrote (summarized here) -
read the complete article for yourself.
Either the global economic scene is worsening at an alarming rate, or some
executives are clutching at the R-word as a justification for abysmal
performance on their part.
Invensys profits are a 30% less than forecasted just 3 months ago, and the
fact that the CEO is resigning indicates an acceptance that the short-fall
may indeed be Invensys’s own making. Although that was not what Chairman
Marshall or the departing Allen Yurko were saying.
As if the merger of Siebe and BTR had not been unfortunate enough, bundling
Baan into the group compounded the problems. It may be that within Invensys
there is a strong, specialist automation business just waiting to storm
ahead as soon as the market improves, but Yurko failed to convince anyone
The new CEO Rick Haythornthwaite (45) was introduced to Marshall by Yurko
himself, just two weeks ago - there was no waiting-line for the role. The
remuneration package that he is still negotiating will hopefully tie his
rewards firmly into what he can achieve. Sticking to a one-year contract
will be evidence of his determination to avoid any charge of "fat-cattery".
How can Haythornthwaite realize some shareholder value out of this sorry
tale? A break-up of the business would certainly be tempting were it not
for the fact that prices at the moment would be of the knacker’s yard
variety. So he will try to impose new leadership and focus, while the
company goes through another miserable round of job cuts.
Yurko, although he leaves "without a cheque to ease his ignominious
departure", is hardly being consigned to poverty. A pension of close to
$500,000 a year for a man not yet 50 should provide a cushion of comfort.
If he opted to take a cash payment instead, he could be banking more than
$7 million - not bad for eight years’ work and the achievement of reducing
Siebe, once one of the great names in British engineering, to the muddle
that is now Invensys.
"Lord Marshall of Knightsbridge" who chaired the birth of Invensys, remains
as chairman. One wonders how long he will continue to oversee this debacle?
It will be interesting to see how he exits. If he had any class, he'd
recognize the part he played in the whole ignominious BTR-Siebe linkup and
remove himself. But, he is now busy pointing the finger at departing Yurko,
so perhaps that is too much to ask....
Invensys is in bad shape. Most analysts think the net asset value is far
below the already low stock. They expect Yurko to have taken a lot of
financial short-cuts, which the new CEO will quickly disclaim, to make
himself look "clean".
The major controls/automation companies are all interested - Emerson, Tyco,
Siemens, Schneider are capable of doing a deal of this size, but they will
NOT want all of Invensys, won't want to be doing the divesting of unwanted
pieces, and won't want to take the write-offs.
So, the only acquirers left are the "vultures" - the people who will buy
Invensys for the assets, and sell off piecemeal. Alchemy (who bought ICS,
failed bid for British Rover) is on the list - but there are others. And,
as the UK Times suggested, they'll pay "knacker's yard" prices.
Read for yourself : The Times (UK) dated July 25, 2001
Read the complete Invensys background analysis
Automation in decline
Yes, the world is in a recession, and industrial automation is in decline.
But, this is where well-managed companies show their worth.
Good managers (in any type of business) are conservative with their
resources and do NOT box themselves in by making fancy forecasts that they
cannot meet. A modicum of marketing vision would have seen this decline
coming and allowed balanced managers to act wisely, starting years ago.
There are cutters and there are builder; cutters are typically financial
wizards (like Allen Yurko of Invensys) with a good memory for facts,
figures and faces, who immediately tune in to stupidity and waste. But,
there is just so much waste you can cut, before you run out and start
cutting into the bone. A financially-orientated cutter does not invest in
R&D for the long-haul; compensation and bonus - and the kudos that come
with "instant results" - cannot wait for a fuzzy, long-haul payback.
You cannot cut your way out of a decline - you need to build, with a
different set of tools : employee ownership (to keep the best people); a
sensible level of R&D to generate new products for a new age; conservative
financial management accruals which anticipate a worst-case scenario with a
realistic plan; no short-run financial fiddling; long-haul commitment to
survival and success.
Those who know me, know that I am naturally a positive and enthusiastic
person, not one given to nay-saying and doomsday forecasting. My published
articles on "Automation in Decline" were intended to ring the bell on
changes that were occurring, starting years ago. I listed 6 specific,
important strategic factors that have changed over the past decade, causing
the automation market to decline. Not wishing to remain negative, I also
offered positive perspectives for growth and success - new technology, new
markets, new marketing and sales methods in a new millennium.
I believe - I KNOW - that management in Emerson, Siemens, Schneider, TYCO,
ABB and other excellent IA companies have read my stuff. I have discussed
(personally and via email) these things with them; indeed, some of the
ideas have come out of those discussions. But, the strategic marketing
people at some of the troubled companies have been strangely silent. It's
almost like a radar - one can actually sniff out stupidity by the lack of
Someone told me recently - Marketing is talking with your customers;
strategic marketing is talking with your customers' customers. Sadly, in
the industrial automation business, there is very little strategic
marketing being done.
You might like to review some of my past articles.
Why is industrial automation declining?
The Urge to Merge : 2000
Companies in Trouble
2001: Industrial Automation Outlook
My friend Jack Grenard [Jgrenard@aol.com] experienced editorial guru,
"Jim, some of your readers may know of your previous connection with
Invensys through Eurotherm. You might want to clarify your present status.
Does either company owe you money? Did you get stuck with a lot of Invensys
stock? These things might be seen as coloring your comments, but - whatever
it is - I think you owe it to your readers to make it clear."
Pinto clarifies :
I was founder and CEO of ACTION Instruments for 30 years. I sold it to
publicly-held Eurotherm (UK) in March '98. This was my choice - I knew and
respected the people and the company for many years, and would have taken
an active role. In July '98 - just a few months later - Eurotherm (then
about $350m annual-sales) was acquired by (then) $ 6b Invensys - NOT my
Interestingly enough, during my time at Action after acquisition, I
(personally) had no contact with anyone at Invensys, or gained any
inside-knowledge of the company whatsoever. Indeed, I have had more
contact and exchange with other major companies. I don't own any stock in
Invensys, my 3-year employment agreement was completed in March '01, and
obligations on both sides have been fulfilled, with goodwill and
Of course, over my many years in industrial automation, I have developed
many contacts at Foxboro, Eurotherm, Wonderware, APV and other companies
now part of Invensys, as I have at Emerson, Honeywell, Rockwell, ABB and
others in the industry. I continue to develop and cherish the friendships
that have developed over the years.
I have received a lotttt of feedback from Invensys employees - with
appreciation for my reporting of items that they would never otherwise be
told. Apparently, eNews has a "cluetrain" (forwarded email) circulation of
many, many times its growing subscriber list.
One Invensys IT employee asked :
"So now that Yurko is heading out, do you think that PROJECT UNITY will be
affected by the change of leadership at Invensys? This project
seemed to be Yurko's pet project, supported by all his senior management.
It would seem that if Invensys is to be sold off as pieces, sensible
management would take a different strategy on outsourcing to IBM or anyone
Pinto Pointer :
I have heard directly from senior people within Invensys (post Yurko) :
Gene Post [Gene.Post@gefanuc.com] Strategic Accounts at GE Fanuc Automation
gave this positive perspective :
- The IBM contract has not yet been signed, and will NOT be signed;
- The BAAN people are pleased, of course, about the BAAN software push within
Invensys companies, but they realize that this will probably become more of
a sales drive, rather than a demand;
- The outsourcing programs (Deloitte & Touche, etc.) will be "placed on hold" indefinitely
(which I take to mean "cancelled").
"Jim, Amongst all your general info about industrial automation etc I don't
recall seeing much about CIMPLICITY automation software, products or usage.
We have had double digit growth in sales and orders for the last several
years. The first half of this year saw over 20% growth in sales and almost
40% growth in orders, and we did this in a market that is realizing a
20%-30% down year, and while our competitors
Pinto Praise : Hooray ! Someone is growing !
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