In the current financial downturn,
the falling tide has lowered all boats, and the stock of all the automation majors
had declined to less than 50% of recent levels. Lasting effects are hard to predict,
but clearly there will be some fallout.
As revenues continue to decline, consider
what happens: The bean-counters' cutback formulas result from simple spread-sheet
calculations. Managers are told, "Your budget must be cut by X%." Few managers eliminate
themselves, and so the next level in the hierarchy reviews and implements the cuts.
It takes a decisive marketing-orientated
business leader to stop a steady decline. Accountants (bean counters) cannot do
it. They simply track the decline with spreadsheets and matching cutbacks. Read
the JimPinto.com automation weblogs to note the troops' despair, plus the deadening
silence from top levels.
Meantime, what's happening at the
top? The Honeywell weblog reports (not directly confirmed, but not denied) that
CEO Dave Cote's 2008 compensation was $5 million, "up nearly 55% from 2007". Someone
then started an informal poll: "Will Dave Cote forego a pay increase in 2009?"
The Honeywell weblog compared David
Cote as CEO of a $35 billion company to David Farr as CEO of a $25 billion company,
and quoted a press release, saying, "How's this for leadership?":
"Emerson, started this year by cutting
the salaries of its top five senior executives, trimming bonuses and putting a six-month
delay on pay increases for salaried workers. Chairman, CEO and President David Farr
reduced his 2009 salary of nearly $1.23 million to its 2007 level of $1.15 million."
Andrew Bond's Automation Insider reported
that Yokogawa top brass took 40% pay cuts as third quarter net loss tops $400m and
orders plunged by 25%. Says Andrew,
"Yokogawa is finding itself the victim
of a triple-whammy comprised of plummeting domestic demand, rapidly contracting
overseas markets and a soaring yen which has appreciated by some 15% against the
US dollar since September."
The UK financial times reported,
"Rockwell made nearly 1 in 7 of its
staff redundant last year as the collapse in the UK construction market wiped off
more than 75% off pre-tax profits. But the company said the $17m in restructuring
costs it had taken last year, including the loss of 700 jobs, left it repositioned
to take advantage of its more profitable repairs and maintenance divisions. The
company's share price has yet to recover from the 50% fall it suffered in just one
day last November."
In March 2009, Rockwell stock declined
to below $20, less than 1/3 of its levels in 2008. Market-cap was at $3 billion,
making it vulnerable to takeover by ABB, or perhaps an offshore buyer.
When the recovery comes, as it inevitably
will, expect significant changes in the automation business. Many major players
will not weather the storm. There will be no bailouts, just buyouts. Acquired companies
will provide acquirers with opportunities for consolidations (and cost-cutting eliminations)
with an expanded customer base.
My old prediction will be finally
fulfilled: The ranks of the automation Big-10 will shrink to just 5.
Read the Automation Company weblogs
RIFs, Layoffs & Golden Handshakes - Robert's RIF Rules
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