JimPinto.com - Connections for Growth & Success™
No. 191 : 11 September 2005

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

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Automation & Process industries affected by Katrina hurricane

While it pales in comparison to the human toll of the storm, the manufacturing infrastructure in the Gulf Coast region continues to suffer from the impact of Hurricane Katrina. Many automation suppliers may find themselves working overtime to provide the products and services needed to mount the reconstruction effort.

This massive storm was significant because it affected all upstream, midstream, and downstream oil and gas, as well as the supporting infrastructure of utilities, including communications and power. Not only does industry have to deal with the potential damage and repairs to physical plants and facilities, but also the supply issue of human resources that are themselves suffering the effects of massive destruction of personal assets.

Production was hit hard in the Gulf region. Total production has ramped up from what was almost a total shutdown, and it is now at around 50% of total capacity. Natural gas production has resumed to almost 60% of total capacity.

The electric power generation, transmission, and distribution infrastructure will require substantial reconstruction. Many water treatment facilities also remain out of commission and must be rebuilt. The freight distribution and material handling sectors will require significant investment. The spike in natural gas prices is affecting the production of things like glass, plastics, and fertilizer. The impact will be felt through every conceivable element of the manufacturing infrastructure in the Gulf.

The impact will also be felt by manufacturers that must provide goods and services to aid in the reconstruction effort. Wood products companies and the cement industry, for example, will benefit from increased demand for construction materials. Many plant sites that were flooded also received extensive damage to their electrical substations and power infrastructure.

The effects of Katrina go beyond the regional impact on the Gulf coast oil and gas physical assets. The ripple effect on futures, regional inventories, and wholesale pricing are still in flux for all regions of the US as we enter the peak heating season.

For automation suppliers, the phone calls are already coming in from customers that have lost critical manufacturing infrastructure and need to rebuild as soon as possible. Control systems on offshore platforms need to be replaced. Instrumentation and valves need replacement and repair, and plants need to be restarted. The discrete side of manufacturing will need to rebuild also, as countless local businesses have been affected from small machine shops to larger plants. Automation suppliers will be faced with a short term spike in demand, while they also must continue to support their existing customers. Systems integrators and engineering firms will also be faced with a strain on resources in the region.

This summary was extracted from a special report from ARC Advisory Group (web link below). The ARC report says the hurricane will have a direct impact on the automation market place as rebuilding efforts will require considerable capital investment in replacement products and related services. This investment will clearly extend beyond the oil and gas industries as manufacturing and critical infrastructure is rebuilt.

Click ARC: Impact of Hurricane Katrina on US Oil & Gas Industry

Click AIN: Automation companies offer support

Click Automation World - Editor Gary Mintchell's weblog

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Pinto Editorial - 9/11, Iraq and Katrina

I write this on the anniversary of 9/11, a cataclysmic event that forever changed America's view of the world, and the world's view of America.

Today, 4 years later, the arch villains have not been brought to justice. Instead, Afghanistan was subjugated as a sign of America's retaliation against the injustice. And then Iraq was subjected to 'shock and awe' in a move motivated by the neo-conservative imperative that the US should have a secure foothold in the Middle East.

Former Secretary of State Colin Powell admitted publicly on ABC's 20/20 that his sham at the UN was forever a stain on his reputation - WMD was a trumped-up excuse. He also acknowledged publicly that there was no direct link between Iraq and Al Qaeda. Our allies warned, "Iraq will breed hundreds of new bin Ladens".

With almost a trillion dollars and the lives of 2,000 American soldiers invested in their democracy, Iraq will inevitably emerge as a secular state dominated by religious factions. But still, the US has no viable way to withdraw.

And then, as if to magnify the mistakes, just about four years after the terrorist disaster, the horrible hurricane hit a concentration of ports, rail lines, barge traffic and major highways which are one of the nation's major trade hubs.

Again, as in 9/11, the President hesitated. He was not attending a kindergarten class, but was on vacation. This time, the delay was not 7 minutes, but 5 days. The Federal Government's reprehensible response has been recognized by the world, but not by the President. The FEMA chief has not been fired - but re-called to Washington, probably to be given a medal for his services, like the one received by George Tenet, the CIA chief who admittedly misled in the Iraq intelligence fiasco.

When GW Bush was re-elected, I closed my coverage of the process with the statement that "America deserved the future it had chosen". I had not intended that this terrible vengeance should be meted out to our country.

Now our disregard of the poor is powerfully portrayed by media that cannot be censored. It will take many months for the country to show some semblance of recovery from this Katrina disaster. But the psychological marks on the character of our country cannot so easily be removed.

God bless America!

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Positive corporate re-structure at ABB

Last week, ABB outlined a new company structure that will take effect Jan. 2006. The 2 major divisions, Power Technologies and Automation Technologies, will be replaced by their five operating divisions, eliminating a layer of management.

A new function at the group level, Global Markets and Technology, is formed to help to drive execution of the strategy across national and regional borders. Says Fred Kindle (who became ABB CEO in Jan. 2005): "This is an evolution of our strategy, not a revolution. We remain focused on our core power and automation businesses."

ABB also announced new targets - a compound annual growth rate (CAGR) of over 5%, with an EBIT margin of over 10% for the 2006-09 period. The 2005 outlook for EBIT is 6-7%.

ABB outlined sales and margin targets for each of the new divisions for the 2006-09 period:

The new ABB divisions, 2004/2003 revenue, with 2005-2009 sales and margin targets:

ABB Division Revenue US $B Sales Growth Margin Growth
2004 2003 Target 2004 Target
Automation Products $5.378 $4.582 >5% 12.4% >14%
Process Automation $4.675 $4.046 >5% 6% >9%
Power Products $5.958 $4.927 6% 8.3% >11%
Power Systems $3.691 $3.516 >5% 3.2% >6%
Robotics $1.382 $1.417 >4% 6% >9%
Total ABB (adjusted) $20.721B $20.427B >5% 6-7% >10%

ABB's rising share price and the analyst response to the mid-term targets and corporate restructuring indicate industry support for CEO Kindle and his management team. ABB may even pay dividends this year, for the first time since 2000, a strong indicator the company is back on track for continued profitability and growth.

Dinesh Paliwal is widely acknowledged as having brought the North American operations to profitability for the first time this year. He has been appointed President of newly created Global Markets & Technologies, responsible for driving the execution of the new corporate strategy across national and regional borders. Among his many roles: Member of the ABB group executive committee, chairman of ABB India, Chairman and CEO of ABB (US) and regional manager for North America.

As of January 1, 2006, the Power Products, Power Systems and Automation Products divisions will be headquartered in Zurich, Switzerland. The Process Automation division will be based in Norwalk, Connecticut in the US, while the Robotics division will be based in Shanghai, China.

Click ABB announces mid-term targets to 2009

Click Dinesh Paliwal to head ABB Global Markets & Technologies

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Acceleration Change Conference 2005

Tell me, how would you like to meet Vernor Vinge, Ray Kurzweil, Esther Dyson, Steve Jurvetson, David Fogel, George Gilder - all in the same place at the same time?

I'm seeing them all next week, along with 40 other world-class speakers, at the Accelerating Change Conference 2005, in Palo Alto, California. AC2005 is organized by John Smart (yes, that's really his name) whose Singularity-com and futures-related ideas website I've discussed in past JimPinto.com eNews issues.

The theme of AC2005 is AIIA - Artificial Intelligence and Intelligence Amplification. The speakers will emphasize a mix of analysis, forecasting, and action plans and examples, using multidisciplinary inquiry and a synthesis of technical, entrepreneurial, and social development dialogs. What I like most about the program is there are in-between times when everyone gets to meet everyone else and talk. This year, there are more interactive networking opportunities than ever.

I've discussed internationally-renowned futurist Ray Kurzweil many times in eNews. Well, Ray is Keynote speaker and will present free signed advance copies of his upcoming book, "The Singularity is Near", which will be released nationally 4 days after the conference. One of 2005's most anticipated new books, this book makes the provocative case for accelerating and increasingly human-surpassing technological and computer advances in coming decades, and proposes a global "phase transition" circa 2040 where many forms of higher human thinking may be exceeded by global computing systems.

Robotics pioneer iRobot has donated five Roomba robot home-vacuum cleaners to Accelerating Change 2005. These will be given away for the best 100-word (or less) answers to the question "What's Next in Commercial or Consumer Robotics?" Of course, I already have a Roomba, and I'm pleased to report (after almost a year) that we're still happy with it.

Click There's still time to register for AC2005

Click Ray Kurzweil - The Singularity Is Near

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Book: Pinto's Points - management, marketing tips, tech-trends

My new book, Pinto's Points, has arrived and was shipped this past week to all those who ordered autographed copies. They went via US Priority Mail, or Global Priority Mail for all overseas shipments. You'll be receiving your copy this week.

"Pinto's Points: How to win in the automation business" covers management topics, globalization, sales and marketing, technology trends and futures, and far-out technology visions - and, of course, some of my poetry. There are 174 "points" in 6 different parts, each introduced by an industry guru.

The book is available on the ISA website, Amazon.com and other bookstores. Websites such as Automation.com and The Readout Instrumentation Signpost in Ireland will soon be carrying it too. You can order your own autographed copy NOW (web link below).

You know, it's likely that you won't read this 270-page book at once - it's not a thriller. But it does have lots of points that take up a page, or less. So after you've had your initial read you might consider using it as a "bathroom reader".

When you've had a chance to read at least some of it, I'll appreciate your comments and feedback. Thanks!


Click Buy an autographed copy of "Pinto's Points":

Click "Pinto's Points" - Read the complete Table of Contents

Click Buy "Pinto's Points" from Amazon.com

Click Buy "Pinto's Points" directly from ISA Online

Click Buy a "Pinto book bundle" (Points & Unplugged) from Automation.com

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David Rapley [david@rapley.net] was stimulated by Tom Friedman's book:
    "We just returned from a 4-week vacation in Canada. While driving back, we listened to "Harry Potter and the half-breed Prince". It was gripping. Then we listened to an audio version of 'The World is Flat'; it was scarier.

    "The topic is globalization and what we need to be doing - and the scary part is what we are NOT doing. Friedman lays out the events of the last 15 years or so from a technology and commerce view and it focused my view and changed my thinking. Even though one may not agree with everything advocated, it's worth the time to read it. It's one of the most significant books I've read in the past few years.

    "This has a feel of inevitability, but there some things we can or must do. Unfortunately we're not doing them: probably because it would require leadership from Washington and that's something that there appears to be a lack of from either party.

    "Of course knowledge of the problem is required to lead us in these challenging times. It would help if we had more folks in Washington who had some background in the sciences or engineering rather than law.

    "Incidentally, one of the things advocated in the book is a federal initiative for Energy Independence. Hallelujah!"

Click Look at Tom Friedman's "The World is Flat" on Amazon.com

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Jim Hetzer [Rezteh@aol.com] discusses ways for US companies to utilize local resources and complement with minimal cost and long-term benefits:

    "Very few companies are even thinking about their future resources. They just send work overseas to wherever it can be done cheaper. If companies used interns or entry level positions to do these tasks, we'd be developing new skills, and keeping these jobs locally.

    "I work with a company that supplies software solutions to clients. They now have a category of engineering that gets sent off shore to subdivisions in other countries with programming skills and low wages. This work is not the most demanding, and is typically able to be done with less interaction with the end customers.

    "Within this same company, there is an engineering manager that provides a different approach to lowering engineering costs. He uses co-ops in an internship program that develops their skills in areas related to their studies. This enables lowering the costs to provide solutions, and he has reaped the benefit of hiring several of the co-ops into permanent jobs when they finish their degree work.

    "When new graduates can't get jobs in their fields because they are 'unskilled', we need to set a priority on this type of internship approach to maintain our technical resources, and to develop new resources for the future. In the long term, the US is not going to remain an economic force if we don't have the intellectual skills resident in this country."

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Richard Walls [jock609@hotmail.com] provides a Westerner's insights on the competitive spirit in India, and developing countries:

    "Shreesha Chandra's points (eNews 2 Sept. 2005) make a lot of sense and reflect a lot of what I have experienced and observed. For the last four years I've been working in the Middle East and interacting, mainly with Indians, both here and in India. In the last two years I have visited Mumbai on a number of occasions to visit companies with which I have been doing business.

    "I've experienced and observed the downside of the rosy picture; there are a lot of negatives points that come along with this ultra-competitive situation. In these last two years I have experienced more lies, more exploitation, more fear, and more corruption than in my previous 28 years of working life. In talking with many other Westerners, I know I'm not alone.

    "The negative side seems to arise from a "dog eat dog" competitive spirit. It starts with the education system and is carried on into industry. I've observed this from little incidents such as people not sharing information (because it increases their own little power base), to signatures being forged on documents (not a one-time experience). I've seen day-to-day endemic lying, exploitation and general abuse of power. This I have personally experienced, not only at an individual level but also at an inter-company level.

    "When I've taken several people to task over their actions they don't think that they are doing anything wrong, and that I'm stupid not to be doing the same.

    "Perhaps these newly advancing countries have not had time to develop the business ethics to balance their aggressive, competitive spirit. Frankly, I would rather live in a poor, backward, honest society than in one that is rich and based on unethical business practices. This appears to be happening in many newly competitive, upwardly-mobile societies. They think that this is the way business is done. There is definitely a 'hidden cost' to India's burgeoning middle class.

    "Please don't take my comments as a criticism of Indians - indeed, I've enjoyed worked with many intelligent, hard working, upright and honest people in India."

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