Following is the transcript of a CNBC interview Ulrich Spiesshofer, CEO, ABB. The interview was broadcast on CNBC on 20 March 2017.
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Interviewed by Geoff Cutmore, Anchor, CNBC at China Development Forum 2017.
Geoff Cutmore: I want to start by asking you about growth in China, and just where currently the strategists and analysts are understanding the growth dynamic here.
Ulrich Spiesshofer: We have been in China for 110 years, and we're with the growth pattern here, have gone a long time with the country. China is an 11 trillion GDP economy last year. If that grows by 6, 6.5 percent… that's about one third of the global growth. So it's a very important growth opportunity for any industry. The pattern of growth is changing a lot of emphasis on quality on technology and innovation. ABB as a pioneering technology leader, is ideally positioned. We have here in China, 12 percent of our people are working at R&D. That means we have a very strong local footprint of designing, developing technologies innovation here in China, for China, and from China for the world, it's a pattern of success.
GC: China is moving up the value scale very quickly. It will begin to challenge some of the developed economies in Europe and of course North America, it's still only the second largest market for you though, when do you think it becomes the first?
Spiesshofer: When you look at the dynamic of China, where it's coming from 20 years ago, and where it is today, there's an admirable momentum to the overall dynamics. And I'm pretty certain in the future we will have a battle between the U.S. and China. Who is the biggest for us, in any market the growth path is very important for that both markets grow. I was just in the U.S. a couple of times in the last three weeks and the growth will be coming there. China is growing this year again. For us it's very important that we serve locally, the local demands. We have a strong footprint here. We are very established here. I think China is on a good path with the Made in China policy combined with the One Belt, One Road, where you basically you bring prosperity and infrastructure to neighboring countries, whilst importing demand for local work and prosperity in China. It's a smart policy, we are ideally positioned because we are strong here in China. We are strong at the receiving end of One Belt, One Road. In all the countries that are active, we've got a strong footprint, we've got service capabilities. So this is something that we played well, in partnership with Chinese companies. We can really benefit from.
GC: Couple of risks though. One is the limit on technology transfer from the EU. This reluctance to give China too much high tech. And the second one of course is Donald Trump's administration and the growing threat of wars around trade and currency. Do these keep you awake at night?
Spiesshofer: Look it's not about giving somebody technology or not, we are developing our own technology locally in China, with our 12 percent R&D people that we have here in China. We are developing the technology locally. And it's very important for a company like ours that we stay in front, that we write the book on new innovation and technology at a pace where everybody says, 'Wow I want ABB as a partner because they've got leading edge offering'. Whether that's the case here in China, or we have the same footprint in the U.S. we have invested more than 10 billion dollars in the last seven years in the U.S, strengthening our local footprint there as well. I think there are both strong markets, we have an incredibly strong team, with local value add, with local R&D and that's how we go about it.
GC: I know, I understand the ABB offering but be honest with me, you must be slightly concerned that you see an administration now in the United States that is talking about rolling back globalization and trade.
Spiesshofer: When I look at our global footprint and our local footprint in the U.S, we are producing mainly in the U.S. for the U.S.. So we've got a locally contained team. One thing is very clear, money will flow into infrastructure. ABB is for instance, number one in power grid with a strong local footprint in U.S.. There will be a lot of attempts to reshore jobs into the U.S.. ABB is the only global robotics with a full local footprint and local manufacturing of American robots for American customers. I think that the development will point towards growth, and we're strongly positioned to participate in that growth.
GC: How critical is it, then, that you pass the America First test with Donald Trump because you manufacture locally for the domestic market.
Spiesshofer: Look we've got about 70 manufacturing sites in the U.S, we've got 20,000 people. We got people in Arkansas, we got people in Memphis, we got people up in the Chicago Rust Belt, that are producing in the US, for the US, with plans that have been around for many, many years combined with the master plan of ABB, we're a strong local player there, and we're very open to the development that's coming.
GC: Yeah, but is it important that it is like that because of the Trump administration? You don't want to be on the naughty set do you?
Spiesshofer: I think it's very important that from an economic perspective in large economies like U.S., you have a strong local value-add, strong R&D. How the policy exactly develops, I leave that to the politicians. For me as an entrepreneur, I want to be in every strong market in the world, with a strong local offering and understanding precisely what the customers want. Developing exactly what they need and working with them jointly on a highly agile supply chain. That makes this economy competitive, and that's what it's all about.
GC: You are one of the pioneers in robotics, of course strong sales are already in that area. And yet there is shifting sands as far as the view on what this sector will do to employment of people. Bill Gates has come out and said he thinks taxing the robots is a good idea. Do you think that actually might hold back the development of robotics in the economy?
Spiesshofer: Let me start by saying taxing robotics is as intelligent as taxing software, they are both productivity tools. You should not tax the tools, you should tax the outcome that's coming. Robotics is one of the fastest growing technologies in the world. Robotics helps with making work safer, having less dull tasks, making less dangerous tasks for human beings. So first of all there's a significant contribution, if you look at economies with the lowest unemployment rates in the world and correlate it with robotics, Germany, Japan, South Korea have the highest robotics rates with more than 300 robots per 10,000 workers. And they have the lowest unemployment rates. So robotization and automation, wealth and prosperity go hand-in-hand. It drives competitiveness, it drives productivity and it creates jobs.
GC: You're not fearful then that there will be some backlash at some point? The populism is the watchword globally, and politics right now it's very easy to point to the robots and blame them for higher levels of unemployment.
Spiesshofer: As I said before, it would be very important to share with people and educate what really the right kind of industrial technology, whether it's a robot, whether it's software, whether its automation, that's to mankind. If you look at the last industrial revolution, people, they're always concerned about productivity enhancement, and I understand that, because something is changing. But the fact is also, that the jobs have changed, but the amount of work has never gone down.
We have more people employed today in the world than ever before. We have less people below the poverty line than ever before. And robotization, automation has made a major contribution to that. If we do this wisely going forward and addressing the challenges and opportunities of the Fourth Industrial Revolution in a good way, we will also succeed this time.
This time also however is slightly different. The pace of job changes so fast that education, training our people, and supporting the new coming jobs, whilst moving people from the old jobs that might disappear into the new world is a key task for anybody that acts responsibly. ABB takes its role very actively as well.
GC: Is this business getting too big for you to really have good control and oversight? Obviously shareholders will be very mindful of the scandals that have emerged recently in South Korea… SFO is looking at another situation involving the company. Is it just too unwieldy for you to actually control the business and know what's going on in individual units? What would you say to shareholders who are worried?
Spiesshofer: Look I agree fully with you. The tight control in good business practices should be on the horizon of any CEO that acts responsibly. When the criminal behavior came out in Korea, we have right away, launched a major investigation, have external resources to make sure we have objective neutral highly capable people in terms, available to add to our workforce, driving the investigation at full force. We made good progress there and when there's more to say, we will say more. The behavior, all together, in a large company is one that you always need to watch, you need to make sure you put the right balance between tight controls and entrepreneurial freedom in there.
The pattern that we have had is improving all the time. We are not perfect, our ambition is to become even better in the future and are taking the responsible steps for that.
GC: We'll take some comfort from the improving financial performance. Have you turned the corner now? Do you feel in terms of sales growth and what is the outlook really for 2017 in terms of sustainability of the improving glide path?
Spiesshofer: The transformation of ABB is progressing according to plan. We have really, well, in making this company more customer oriented, more agile, more technology driven and less complex than in the past. So the transformation is going very well. The markets are highly uncertain in '17, we have a lot of volatility. Some markets are very positive, some markets are more questionable. So what we need to do is we need to fly on side. In the fourth quarter, we had for the first time growth again. I am very happy about this, and what our team did. Our ambition going forward is to keep a growth pattern. Let's see what the market uncertainty gives us and what comes out at the end of the year.
GC: There's a note of caution that I'm surprised to hear. What is it in particular that is concerning you about customers continuing to order?
Spiesshofer: Now, if you take the global markets, we still have a lot of political uncertainty, we have elections coming up in Europe, which is one element of uncertainty. We have a change in commodity pricing. Steel, copper, silver have gone up in pricing, The impact of what that does to demand is at the moment not yet fully clear, so what we need to do is we need to drive full force for all the growth opportunities that are out there with our technology. But we're managing cost in a very careful way to make sure we safeguard the results of our group.