ABB must push automation offering to thrive in India

ABB chief executive Joe Hogan, who has climbed Kilimanjaro, is facing an uphill battle of a different sort in India.                         
 

The Swiss-listed engineering group just spent nearly $1 billion on its local subsidiary ABB India with the hope of using it as a production hub.                                           

But the move will not help it deal with another problem -- its power sector orders have plummeted because rivals including Chinese groups TBEA and Baoding are offering lower-cost products.        
 

To offset this slump, analysts say ABB should push its automation offering and launch a secondary line of products to draw more business from telecoms, pharma and chemicals companies. 
 

"The company can look to strengthening its automation business, where competition from local players is not as high and the group has strong technology advantage," said Chirag Muchhala, analyst at Mumbai brokerage Jaypee Capital.                                           

ABB's two main areas are automation and power, each of which constitutes about 50 percent of global revenue. The power divisions make things like circuit breakers, while automation products include things such as industrial robots and software for managing production in a factory.                                           
 

Hogan, an avid swimmer and jogger, has described India as a challenge after second-quarter group orders there plunged 41% from an already softer year-ago quarter. In the second quarter 2010, profit at the Mumbai-listed subsidiary ABB India fell 54%.

"India is not performing the way I'd like to see it right now. I'd like to see more growth in the automation side," Hogan said in a conference call in late July.                                           

The India slide follows a drop in China, where governments often favour locally made goods for infrastructure projects.