December 12, 2012 Slide 1 Tom Rodriguez & Jukka Salmi ABB Global Casting Strategy Motors and Generators
Mission Statement is to be the best (as determined by our customers) marketers, designers and manufacturers of industrial electric motors, mechanical power transmission products, drives and generators December 2 12, 2012 Slide 2
ABB Value Statement To produce the highest-quality, energy-efficient products available in the marketplace and sell them to a broad base of value-minded customers Vp = perceived Value Qp = perceived Quality Sp = perceived Service C = Cost T = Time December 12, 2012 Slide 3
Agenda ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 4
ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 5
ABB Overview A global leader in power and automation technologies 145,000 employees in about 100 countries $38 billion in revenue (2011) Formed in 1988 merger of Swiss and Swedish engineering companies Predecessors founded in 1883 and 1891 Publicly owned company with head office in Switzerland December 12, 2012 Slide 6
How ABB is Organized Five Global Divisions Power Products $10.3 billion 35,000 employees Power Systems $7.7 billion 19,500 employees (2011 revenues, consolidated) Discrete Automation and Motion $8.4 billion 29,000 employees Low Voltage Products $5.0 billion 21,000 employees Process Automation $7.8 billion 28,500 employees ABB s portfolio covers: Electricals, automation, controls and instrumentation for power generation and industrial processes Power transmission Distribution solutions Low-voltage products Motors and drives Intelligent building systems Robots and robot systems Services to improve customers productivity and reliability December 12, 2012 Slide 7
ABB Structure Discrete Automation & Motion Division LV Drives MV Drives Motors & Generators Robotics Revenues - $8.4 billion Total employees 29,000 Sales in more than 100 countries More than 70 manufacturing sites December 12, 2012 Slide 8
ABB-DMMG Structure Motors & Generators Business Unit (DMMG) Baldor LAC Motors LV IEC Motors Generators Service World s leading manufacturer of LV, MV and HV motors and generators, and mechanical power transmission products, serving all industries and applications, throughout all markets December 12, 2012 Slide 9 $4 billion revenue 15 000 people, 45 factories in 13 countries Complete product offering from sub-fractional HP up to 70 MW LV, MV and HV induction motors and generators Synchronous and permanent magnet motors and generators DC motors, servomotors, gear motors Mechanical power transmission products
BU Motors and Generators Unmatched ability to serve global and local customers Total offering NEMA LV ABB + Baldor = ABB + Baldor IEC LV Motors Large < 11000 kw 15000 hp Large > Gear 11000 kw 15000 hp Small generators Generators Large generators Gen sets Mechanical power transmission Service December 12, 2012 Slide 10
BU Motors and Generators Manufacturing and logistic center locations Manufactuing location Logistic center location December 12, 2012 Slide 11
ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 12
How DMMG Motors and Generators is organized Five Global Product Groups Large AC Motors Service BU Baldor (NEMA & Dodge) Generators LV IEC December 12, 2012 Slide 13
DMMG - BU Organization and Structure BU SCM Sourcing Team Castings and Fabrications Castings Iron Aluminum Aluminum Extrusions Welded Structures Thin plate Coolers Machined Shafts Forged Shafts Forgings Barstock Accessories Raw Materials Copper Electrical Steel Insulation Bearings Emerging Markets East Asia South Asia Eastern Europe December 12, 2012 Slide 14
DMMG - BU Organization and Structure BU SCM Castings & Fabrication Team Category Castings and Fabrications Category Manager Doug Bushey Commodity Accessories Welded constructions, machined frames, & endshields (8mm +) Cast Iron raw & machined castings (large) >76KG (150 lbs) + Cast Iron raw & machined castings (small) <76KG (150 lbs) Aluminum Castings & Extrusions Hot rolled shafts, shaft & ring forgings including machining, and bar stock Thin Plate constructions, Coolers & Fabricated Fans (< 8mm) Commodity Mgr Roman Szczesniak Open Jukka Salmi Tom Rodriguez Tom Rodriguez Skip Martin Sisko Qu December 12, 2012 Slide 15
ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 16
BU SCM Commodity Strategy Keep Production Running Global Market Forecasts & Trends Manage Supplier Performance Manage & Leverage Entire Supply Base Manage Costs Manage Assets December 12, 2012 Slide 17
SCM Strategy Keep production running Ensure availability components Multiple sourcing Strategic sourcing Manage supplier performance Understand supplier capabilities Improve quality Reduce Lead Times Improve OTD Ensure ethical standards of practice are being met Supplier agreements that address these specific items December 12, 2012 Slide 18
SCM Strategy (con t) Manage our costs and assets Cost structures related to similar parts All Markets (Americas, Europe, China, India) Secure Supply Chains from Domestic and Emerging Market sources Reduce costs while supporting Production Units Manage & Leverage Total Supply Base Strategically rationalize our supplier base Increase Emerging Market spend Constant communication between all Commodity Teams (Americas, Europe, China, & India) Global Market Forecasts & Trends Cost structure of each region Track trends in raw material, energy, and scales of economy December 12, 2012 Slide 19
ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 20
Casting Overview Spend Data Iron 2012 Iron Casting Spend is expected to be 200+ MUSD 80% of our spend is with 20% of our Foundries Multiple sourcing of parts Raw material prices continue to trend downward since Q1 2012 Based on Indexes Decline: Brazilian Grade Pig Iron, Chicago Busheling (Scrap), Energy U.S. Foundries Running at 90%+ Capacity Automotive, Agriculture, Construction, Oil & Gas all compete for this capacity Foundry Capacity continues to shrink in the U.S. Spend Data Aluminum 2012 Aluminum Casting Spend is expected to be 15+ MUSD 80% of our spend is with 20 Foundries December 12, 2012 Slide 21
ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 22
December 12, 2012 Slide 23 Supplier Performance Enter into contractual agreements addressing and defining clearly the expectations between ABB and Supplier Supplier Performance is measured in 3 critical areas Cost Review Global Markets Payment terms On Time Delivery (OTD) -3 days, + 0 days Suppliers OTD Target = 100% Quality Suppliers Quality Target = 100%
ABB Structure ABB BU SCM Structure BU SCM Strategy BU Casting Overview Supplier Performance Cost Improvement & Development December 12, 2012 Slide 24
Cost Improvement & Development Continual review of all parts and suppliers Supplier recommendations for re-design of existing parts Supplier recommendations on new designs Consignment and/or Supplier Stocking Programs Review of payment terms Reserved capacity Lead time reduction Strategically rationalize the supply base Global Commodity teams Cross communication between PG s New standard quote template for more consistent quoting Synergy Savings Programs to bring reduce cost Database of ABB approved Global Suppliers (ProSupply) December 12, 2012 Slide 25
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