1002 Activity Report 2009 - ABB Group · CPEX has two major benefits. First, it reduces costs and...
Transcript of 1002 Activity Report 2009 - ABB Group · CPEX has two major benefits. First, it reduces costs and...
ABB Turbo Systems LtdActivity Report 2009
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Editorial
In 2009 the pendulum swung back. Hastened by the troubles in the banking world,the boom conditions in the industries we serve came to a more abrupt end than expected, making 2009 a year of contrasts and challenges. This context addsweight to what we achieved in 2009 in adverse circumstances.
On the one hand, orders received fell to around the level of 2005 and 2006, the years before the upturn took off. Our sales performance in that period now represents the baseline from which we will judge future success.
On the other hand, the delivery of the high levels of orders won during the boommeant that in spite of cancellations, we turned in the second best annual result in our history for revenues from new turbochargers. On the service side innovativeofferings and the time, money and effort we invested in our aftermarket arrange-ments in the last few years and, not least, the concerted efforts of our employees,enabled us to come very close to the record we set for service order intake duringthe height of boom.
Of course, we knew that we would have to cope with a downturn sooner or later,what we didn’t expect was how hard the landing would be. In the event it was most severe in the marine segment, where all our customers and end users facedthe same challenges, deriving from lower freight volumes and even sharper falls infreight rates. All around the world customers cancelled or postponed orders forships on an unprecedented scale. The market for stationary engines proved moreresilient due to the frequent involvement of state investment, but financing difficultiesstill hampered otherwise viable projects. The rail traction segment was often in asimilar situation regarding public financing but, like shipping, also suffered from lower volumes of goods transported. The mining sector was hit by lower demandfor raw materials, translating into lower investments in mobile equipment.
In this situation the only course is to adapt to the pertaining market conditions andour best forecasts of medium term demand while continuing to take action aimed at ensuring future growth. On the production side this has meant assessing the rightsize for our facilities and implementing the necessary adjustment of resources.
Contents
Highlights in 2009 4 /5
What to expect in 2010 6 /7
Key figures 8 /9
Outlook 2010 10
Organization 11
The global economic crisis demanded a reassessment of strategy and flexible responses to developments in the marketplace.
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Perhaps our biggest opportunities for resumed growth with new turbochargers centreon emissions legislation. January 2011 sees the implementation of the InternationalMaritime Organisation’s second round of emissions limits. Together with high fuelprices, IMO Tier II dictates, and will continue to dictate a steady rise in the sophisti-cation of turbocharging equipment, as engine builders seek to combine emissionscompliance with optimized fuel consumption. In January 2016, the third stage of IMOlegislation prescribes a massive reduction in emissions from ships near environmen-tally sensitive areas and centers of population. Our new turbocharger generationtargeting Tier II is already gaining wide acceptance and our innovations for Tier IIIpromise a quantum leap in all the main areas of engine performance.
The knock-on effect of our efforts to remain the market and technology leader is to add to our already unrivalled population of turbochargers in the field and founda-tion of our service business. Always an important revenue stream, in a recession ourservice business takes on further significance as end users make a shift from newinvestments to prolonging the life of existing assets. We will continue to develop ourservice business in 2010, improving our capabilities and introducing the types ofinnovative offerings that bore fruit in 2009.
For some weeks now the media have reported that one major world economy after another has begun to grow again. It will take some time before this translatesinto orders for new turbochargers and service contracts. We are using the time to good effect by continuing to put ABB Turbo Systems on a firm footing to expandfrom our new, post boom baseline. The major roles will be played by the commit-ment of our employees, the support of our suppliers and, not least, the goodwill ofour customers. We take this opportunity to thank all these groups for their ongoingpartnership.
Daniel Arnet
From left to right: Axel Kettmann (Service), Darko Fux (Finance & Controlling), Willy Kuhn (Production), Daniel Arnet (President), Beat Kunz (Human Resources), Urs Gribi (Engineering), Bernhard Schönung (Test Center), Oliver Riemenschneider (Sales & Marketing), Rolf Schweizer (New Turbochargers).
Our major chancesfor new growth are the higher valueturbochargingsolutions neededby new emissionscompliant enginesand continueddevelopment of theservice business.
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Responding to market needs In the first quarter of 2009 we celebratedthe commissioning of additional pro-duction facilities. Two new works, one in Switzerland and one in China, plus anew warehouse in Switzerland, were primarily designed to assist the timelydelivery of our high backlog of outstand-ing orders. This we achieved and our on-time delivery quota is again near 100 %.Unfortunately, this is also attributable tothe downturn in demand for new turbo -chargers in 2009, which was felt to thelargest extent in the marine sector.
Charging ahead with the new generationWith our new A100 turbocharger gener-ation we have defined a new state-of-the-art and in 2009 we released threefurther sizes, the A130, A145 and A170.With the A130-H for high speed engineswe introduced the smallest turbochargerin the A100 series, thus completing thenew generation in the small turbochargersegment. Against the background oftightening exhaust emissions legislation,all A100 turbochargers offer the efficien-cies and pressure ratios engine buildersneed to achieve emissions complianceat optimized fuel consumption. At theend of 2009 some 200 turbochargersfrom the A100 series had been supplied.
Power2 on trackTwo-stage turbocharging is one of themost promising technologies everapplied on large combustion enginesand forms a major element in ABB Turbocharging’s product developmentstrategy. Mechanical qualification is well advanced and two sizes of systemprototype exist. In close cooperationwith leading engine builders, testing ofthe prototypes began. The trials havealready confirmed the viability of thetechnology, delivering significant reduc-tions in emissions and/or fuel consump-tion at increased power output. Ongoingdevelopment is now concentrating onrealizing the full development potentialof 2-stage turbocharging. According toABB Turbocharging’s sophisticated, well proven simulation programs, 2-stageturbo charging is capable of delivering atrue “quantum leap” in these vital aspectsof engine performance.
Highlights in 2009
New turbocharger generation for newmarket needs. New service products forhigher end user benefits. New ideas forfuture developments. Innovation as ourroute to renewed growth.
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Fine tuning the service organization With a global population of over190,000 ABB turbochargers in use“Excellence in Service” is a constantchallenge. In 2009 this aspiration took further shape via new service offerings, by means of organizationalimprovements and by a renewed focuson making count our “OEM Advantage”in terms of knowledge, technology and expertise.
A prominent addition to our service offer-ing was the CPEX exchange scheme for factory reconditioned parts. CPEXhas two major benefits. First, it reducescosts and downtime for customers by providing faster availability of frequentlyordered service parts at lower financialoutlay. Second, CPEX is a step towardsgreater sustainability since it recyclesthe overwhelming portion of the valueABB adds to turbo charger componentsduring their manufacture.
Further strengthening of the global network On the basis of being where we areneeded, the ABB Turbocharging globalnetwork was expanded and consoli-dated. Responding to the developmentof local demand, service stations atAgadir and Darwin were closed. How-ever, to give a net gain of six, the net-work was augmented with new outletsin Cagua, Venezuela; Barcelona, Spain;Naples, Italy; Douala, Cameroon; Dar Es Salaam, Tanzania; Haifa, Israel; Qingdao, China; and Limassol, Cyprus.
The process of reinforcing responsibilityfor sales and marketing at the service stations bore first fruits. Accordingly, thecontinuous training and qualification oflocal experts both at the service stationsand the new training center in Badenwas further developed to ensure thatthe service stations are fully capable ofmeeting all their commitments. With an availability level of over 98 %, thedependability of the service organizationwas further validated in 2009.
Real terms growth in a recession The expectation that the service busi-ness would continue to grow was notrealized in 2009, but only by the narrow-est of margins. We came within one percent of our declared target of match-ing 2008’s record service order intake,an excellent result in the prevailing market conditions. In the present stageof the turndown, where the industrieswe supply are still in recession but themajor world economies are beginning to record growth again, it should bepossible to increase our service business,especially in a period when end userslook to extend the life of their existingassets.
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What to expect in 2010Back on track for growth with creative solutions and focussed R&D.
Targeting the best The restructuring of our organization will make great demands on us. Theprogram started will be carried out withthe same care and attention we used when expanding our capacity during theupturn. Our special attention will bedirected at the alignment of staffing levelsto our new circumstances. The aim of all our initiatives is to be well positionedfor the time when demand picks up withthe right people on board and applyingestablished, proven processes. A majorpart of this will be consolidating the production network covering Switzerland,China and India.
New turbochargersIn 2010 the focus will lie on the qualifi-cation of new large turbochargers. Inthis segment the release of the A180-L,A185-L and A190-L is planned. Follow-ing these new sizes in our state-of-the-art setting A100 turbocharger genera-tion, the radial turbocharger portfolio willbe complemented by the developmentof the A150-M.
Two-stage turbocharging systems andtheir component parts will also make up a large proportion of our testingcommitments. At the end of the year we plan to release a first series unit and have commissioned a first pilotplant in the field.
The environmental imperative The January 2011 introduction of IMOTier II and the engine builders’ need togive shipyards and ship owners secureperspectives that compliant engines willbe available well ahead of the 2016implementation of IMO Tier III are anincentive to reassess our testing needsand devise new concepts. The constantquest for engines with lower emissions,greater operating economy, higher powerand enhanced tractability leads to awhole range of new opportunities andtechnological challenges. One is thedevelopment of a variable valve train(VVT) system for engines covered byABB turbochargers. This system will bean ideal complement to 2-stage turbo -charging, giving ABB’s customers accessto two of the three major technologiesof the engines of the future. In tandem, 2-stage turbocharging and VVT allowsignificant improvements in diesel engineemissions, fuel consumption and poweroutput across their complete operatingprofiles. The system will be developedand marketed in close cooperation withthe German Schaeffler group and isbased on the fully variable hydraulic valvetrain system produced by that companyfor smaller engines.
High performance for the lifetime of the product Extending the global reach and raisingthe competence and qualification of theABB Turbocharging service network is atrue process of continuous improvement.The service stations will further developtheir sales and marketing capabilities.This requires an expansion of local know-how and resources so that the stations
can assume the leading role in develop-ing and formulating service solutions tailored to the local market. Above all,the relationship between local servicestaff and customers will be reinforced,consolidated and leveraged. In this wayit will become a source of importantfeedback regarding both service andproduct performance. The deeperunderstanding which will be attainedregarding our day-to-day working and the long term challenges of ourcustomers will allow us to continue todevelop the new service offerings which precisely meet our customers’needs. Our position as the designer and builder and not merely the servicerof turbochargers gives us a significant“OEM Advantage” and we will continueto demonstrate that we are the bestsource of service for ABB turbochargers.
Staying in stepWith an expected emphasis on smallerand medium sized turbochargers for thetraction and power generation sectors,on-time delivery following relatively shortlead times will test our capabilities in2010. In our new turbocharger businesson-time deliveries above 95 % areessential. On the service side availabilitiesof over 98 % are a minimum requirementso that we can keep to our declared target for service performance. Ourefforts are already directed to these ends.
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Key figures 2009
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New baselines and benchmarks After a series of record years, in 2009order intake moved back to levels last seen around 2005 and 2006. Para-doxically, although order intake fell, due to the strong order backlog datingfrom the height of the boom years, new turbocharger revenues recordedtheir second highest figure ever. In the final quarter of 2009 cancellationsalso eased back to the more moderatelevels seen the previous year.
Demand for turbocharger serviceremained at virtually the same level as2008, when the boom was at its peak.Order intake almost matched thatrecord year, fully justifying our recentinvestments in the service network.
Investing in excellence Technologically, turbocharging hasmoved centre stage after a number ofyears where the engine builders’ devel-opment emphasis was on fuel injectionand electronics. To respond to this
renewed focus we continued to investheavily in new products, spending 8.9 %of revenues on research and develop-ment in 2009. Given the present busi-ness climate, this is a clear declarationof intent to remain at the forefront of turbocharger technology.
Investments in new production andservice facilities totalled CHF 32.2 million,another clear statement of purpose that we aim to remain the market leader.
The year 2009 turned back the clock in terms of new business but not in terms of service business and our readiness to invest.Sales and order intake were down by 14 percent and 38 percentrespectively but as a sign of our commitment to the future, weinvested almost 9 percent of revenues in research and development.
Marine (units)
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(All data refer to ABB Turbo Systems Ltd only)
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Production
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Outlook 2010
In 2010 we will adapt to our new busi-ness environment while further assertingour market and technology leadership.We will push ahead with the continuousimprovement of our service organizationand pursue the exciting new technolo-gies our customers and end users needto meet their growing economic andecological challenges.
Daniel Arnet, President
Growth potential needs to be translatedinto growth projects. To realize them weneed to look beyond our own horizonsand be open for cooperations.
Oliver Riemenschneider, Sales and Marketing
Impulses for growth are coming from the threshold countries. Demand forengine power will continue to increaseas their role in world trade increasesand their economies develop.
Rolf Schweizer, New Turbochargers
Knowing what the customer wants and knowing why he wants it. This is the route to innovative service solutionswhich quickly find a ready market.
Axel Kettmann, Service
Implementing the necessary realignmentof production capacity without negativeeffects on deliveries to the customer –that is the challenge we will address in2010.
Willy Kuhn, Production
We are forging ahead with technologicalsolutions which will reduce pollution and operating costs, as well as savingvaluable resources and contributing tothe stabilization of climate change.Enabling the benefits of the variableMiller Cycle on large engines is a majorthrust.
Urs Gribi, Technology
New trends in turbocharging demandnew approaches in testing and measur-ing technology. To achieve these we are extending our testing concepts andadapting our test equipment.
Bernhard Schönung, Test Center
How the world economy will develop in the medium term is not yet clear. Bymeans of targeted investments we arepreparing ourselves to exploit opportu-nities as they arise.
Darko Fux, Finance and Controlling
The adjustment of capacity demandsfrom all of us both more flexibility andmore versatility. There is no doubt thatwe will all rise to our new challenges inour customary manner.
Beat Kunz, Human Resources
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Organizationas of January 1, 2010
Board of Directors
Veli-Matti Reinikkala Chairman of the Board, President ABB Process Automation
Daniel Arnet Delegate, ABB Turbo Systems Ltd
Jasmin Staiblin Board Member, President and Country Manager ABB Switzerland
Yann Moor Board Member, Head Financial Services, ABB Switzerland
Management Committee
Daniel Arnet President
Oliver Riemenschneider Sales and Marketing
Darko Fux Finance and Controlling
Urs Gribi Engineering
Willy Kuhn Production
Beat Kunz Human Resources
Bernhard Schönung Test Center
Auditors
Ernst&Young AG, Basel
Ownership
ABB Turbo Systems Ltd is a wholly owned subsidiary of ABB Switzerland Ltd, Baden /Switzerland
Contact
ABB Turbo Systems LtdBruggerstrasse 71 aCH-5401 Baden/SwitzerlandPhone: +41 58 585 7777Fax: +41 58 585 5144E-mail: [email protected]
www.abb.com/turbocharging
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