Turbocharging Activity report 2011
Turbocharging Activity report 2011
Rethinking the way we work
Our industry is focused on global economic and environmental issues. A lot more must be done to find answers. The need for innovative solutions is a conviction I share with all our customers.
Oliver Riemenschneider, what kind of a year was 2011? In many respects it was a record-breaking business year. Best ever figures were achieved in both the high- and lowspeed engine segments. But the Swiss Franc also broke records. Everything contributing to lower fuel consumption and emissions and to improved operational safety and reliability was well received in the marketplace. Accordingly, demand was strong for the A100 ®-L turbocharger, which enables fuel efficient engine operation at a range of ratings. That’s something with a very direct influence on our end users’ profits. And the high-speed segment also showed strong A100 sales and the first series deliveries of Power2® two stage turbo charging. This also benefits users by reducing fuel consumption, increasing power and keeping emissions low. We are also working with an engine builder to industrialize Valve Control Management, another system with a direct impact on emissions and performance. In short, our research and development is now translating into results in the market. This will also be the case with our current R & D projects, like the first successful testing of Exhaust Gas Recirculation in the medium-speed segment 2
and cooperation with Hug Engineering on ITSCR (Interturbine Selective Catalytic Reduction). The Swiss Franc parity was obviously a major challenge. Yes, and we responded immediately. On the customer side we offered to balance long-term partnerships against price adjustments. And on our side, we started additional productivity initiatives. Where do you see further challenges? Market volatility is presenting challenges to the entire organization. Availability at short notice is becoming even more relevant. Then there are the global forces currently affecting our industry like high fuel prices, increasing raw material prices and environmental regulations. The latter are becoming increasingly regionalized and a greater effort is called for to deal with them. We are also seeing our customers expand their global footprint. This makes it all the more important for us to secure and strengthen our profile accordingly. By having our own production plants in Switzerland and India, joint ventures in Japan and China and license cooperations in Korea, we are already well on the way, although we cannot take our eye off the ball.
How does the immediate future look? In the next 24 months we shall see some clarification with regard to IMO Tier III emissions solutions and how they could work in practice. We want to shift our focus from the lab to the field. We shall take different approaches. As well as primary measures like Power2 and VCM®, we also aim to offer secondary measures like EGR and ITSCR. We will see weakening of the marine market and other segments becoming increasingly difficult to predict, which places an extra strain on a supplier. Nevertheless, we see chances precisely here and with the lasting strength of the Swiss Franc we have to completely review the way we do things. Challenges always bring out the best in us. We have the ambition to take our global productivity to the next level and create new opportunities in the process.
Oliver Riemenschneider, Head of Business Unit Turbocharging at ABB, responsible for the worldwide turbocharging business.
3
Urs Gribi, Head of ABB Turbo Systems Ltd in Switzerland.
4
The confidence to take big steps
Long-term partnerships and staying power characterize our business. We are investing with confidence in innovative solutions that benefit our customers and the environment.
Urs Gribi, what was special about 2011 for ABB? Markets were good but somewhat unpredictable. The first half of the year exceeded expectations, then things slowed in the second half. We broke records without any feeling of euphoria. We have to look at things objectively, and we are learning to live with much more volatile markets. How do you see the situation? High-speed customers are feeling confident about their markets. Medium-speed customers differentiate between marine and power generation, with the positive news restricted to the power plant side. The 2-stroke market is suffering due to enormous overcapacity at engine builders, shipyards and above all in the number of ships in service. For us, the sudden appreciation of the Swiss Franc
was dramatic. Overnight, our prices rose by 20 %. One proactive step was our loyalty program tailored to our customers’ needs and promoting stable long-term partnerships. Another was to accelerate sustainable enhancements to our productivity. What does the future hold? Unpredictability is here to stay and the 2-stroke sector will be a major challenge for the next few years. There is great potential in all things connected to energy efficiency. From the engine operator’s standpoint, fuel is his largest cost factor and governments continue to issue regulations. Our innovations offer a lot of scope for improving fuel efficiency, whether we’re talking about new installations or upgrading existing plants. For example, with our Power2 two stage turbocharging there are many more
points in the system where we can make adjustments which optimize total system efficiency. But it requires expert knowledge to recognize which setting will have what effect. Thanks to our advanced simulation capabilities, we can identify available potentials and offer optimal solutions for our customers. And, as our development programs show, we are active beyond the field of turbocharging and engaged in important basic research. What can Switzerland do to assert itself as an industrial location? Innovation and invention have always been strengths of Switzerland and building on these strengths is the way ahead. Changes and readjustments occur constantly, but our future oriented actions will ensure that turbocharging remains one of the high value technologies in which Switzerland excels. We have set ourselves the target of reacting to risks with the confidence to take big steps and the strong Swiss Franc may be just the catalyst we needed to take a further quantum leap. That’s what we’re working on in several areas and progress to date is good.
5
Roland Schwarz, responsible for turbocharging activities in China.
6
Dynamism meets dynamism
Roland Schwarz, how did 2011 unfold in China? Demand for new turbochargers from engine builders slackened in the second half, but there are still immense prospects and we will consolidate our position and prepare for resumed growth. We were able to increase our revenues on turbocharger service thanks to our broad service offering and the increasing population of turbochargers in the marine industry, which were delivered during the boom period and now require service. What were 2011’s highlights? Just at the end of last year, Jiangjin manufactured and assembled what is both its first A100 turbocharger – our most advanced single stage type – and the first turbocharger for the 2-stroke segment to be produced in China. We also delivered the 1000th TPS® turbocharger for high-speed engines from Jiangjin and the 10,000th turbocharger overall from the factory since the operational start of the company in 2006.
The Jiangjin factory also became a center of excellence at a time when ABB Turbocharging’s supply and production network is becoming more globally integrated and we are to play a more important role. On the service side we were very successful in implementing our Original Parts and Original Service policy with major Chinese customers. Looking ahead, what will be the basis for the new growth? New engine production is set to expand in China, driven especially by plans to be the global number one in shipbuilding. This is leading to new engines from domestic producers, new licensees, new joint ventures, and many new engines with turbochargers to maintain, overhaul and repair. The Chinese Government also has a declared target to reduce fuel consumption, and emissions regulations are under consideration. The Chinese Railways are already implementing plans to improve fuel efficiency in their locomotive fleet
More foreign manufacturers are bringing new engines to China while demand for existing generations is still at a high level. It is a real challenge to manage this balancing act.
and we are in the qualification process with our TPR® turbochargers. It is also expected that emission legislations will be implemented for Chinese coastal and river shipping in the coming years. This brings new opportunities for more efficient new technology engines. How are you preparing? We continue to build up our service presence and competence in China to serve both domestic and international customers. Localizing A100 turbocharger technology was a clear demonstration that we will always meet sustainable demand from Chinese customers with our latest products. This is the most dynamic engine market anywhere and speed will be of the essence. We will differentiate our offering by showing we understand our customers’ business and respond rapidly to their needs with real added value. We will be flexible in our operations and aim to improve our local market intelligence and forecasting competencies. This will benefit our sales and stocking levels at the factory and, importantly, customer satisfaction via availability and ontime deliveries. This type of fine tuning, including quality and supply logistics, will be good preparation for Jiangjin taking a larger role in the ABB Turbo charging global supply and production network.
7
Records and realism
Axel Kettmann, what is your overall impression of the business year 2011? Unprecedented sales of turbochargers for low-speed engines was especially exciting. Our recovery had previously centered on turbochargers for mediumand high-speed engines. But in 2011 we did well in all segments, even though the medium-speed marine sector still has not recovered. In the high-speed segment we did extremely well on stationary gas engines, where we commercialized 30 of the first ever Power2 two stage turbocharging systems to be used on large engines anywhere in the world. On mediumspeed engines we continued to do well with turbochargers on heavy fuel, dualfuel and gas engines for large power plants and in the only marine applications to grow – special vessels for the offshore oil and gas business. Our service business result was also satisfactory, but we started to feel trends which create challenges for both service and new business. Marine freight rates fell at an unprecedented pace due to ship overcapacity. They came close to all time lows while fuel prices rose by 40 %. For ABB Turbocharging this was compounded in mid-year by the rise of the Swiss Franc, giving a perceived 20 % price increase for all our products and services. The cash stress on operators was a double-edged sword. It affected their ability to afford regular maintenance but also led them to order “mega” container ships as a way to lower their costs. The result was the record sales of our A100-L turbochargers, which are established fuel savers. But this driver has run its course. Last year’s low-speed ordering levels will not be repeated soon, but the situation on marine service will.
8
We had a really satisfactory year on both new turbochargers and service. With record sales for both high- and low-speed engines, our new turbocharger business rebounded from the 2009 slump in a fantastic way.
How are we addressing these challenges and what will drive our business in 2012 and beyond? Starting from a record year and as the market and technology leader, we are essentially well placed. We have responded creatively to the Swiss Franc parity with a global productivity drive and an exchange rate support scheme which has already cemented long-term customer relationships. On product technology, 2011 saw a shift of emphasis to even more fuel efficient engine solutions, replacing emissions as the central customer concern for the first time in 20 years. Having answers on emissions is now a given rather than a sales advantage. Similarly, attention shifted to CO 2 emissions which are directly related to both fuel consumption and fuel type. As we saw with the A100-L in 2011, our fuel efficiency enhancing products give us a competitive edge. We are thus also seeing great interest in our Power2 two stage turbocharging systems, which enable the attractive combination of low NOx, improved performance and better fuel efficiency on both diesel and gas engines.
Which regions and applications will deliver growth? China is the fastest growing engine building nation and we are responding with localization of our very latest products and an increased presence to meet the needs of 2-stroke licensees, local producers, joint ventures and western implants. As in Russia and India, China has also started initiatives to put state-of-the-art diesel technology on their new locomotives. We have successfully matched our dedicated TPR railway turbocharger to applications in all three countries. A major growth area will be applications arising from the spread of natural gas as a prime energy source in many countries. It is leading to more baseload power plants with gas engines and kickstarted an increase in the global LNG carrier fleet and gas engine powered gas compression plants for both pipeline transport and underground storage.
Axel Kettmann, Senior Vice President Sales, Marketing and Service.
9
Christoph Rofka, ABB Turbocharging’s Senior General Manager of New Turbocharger Sales.
10
Off into new markets
Christoph Rofka, how did new turbocharger business go in 2011? Overall it was a really good year, but very uneven ordering patterns created difficulties. Then came the collapse of the Euro at a time when our competition was playing catch-up which threatened to weaken our unique selling propositions. We stayed ahead by listening to our customers and redoubling our efforts to develop the next wave of solutions that bring them the benefits they need.
In spite of its long history, turbocharging never gets boring. Every time you think things have reached a point of perfection, we invent something new for our customers.
What were the other highlights over the year? The big surprise was the strength of the market for turbochargers on low-speed 2-strokes engines against a background of overcapacity in the ships that use them. But in the meantime everything has changed again. That’s how dynamic things are. The pendulum is swinging back? Undoubtedly, the question is only how far. Our challenge is to position ourselves correctly in the market and to offer the product performance, quality and reliability our customers seek. These are the enablers of the lowest possible costs of ownership for their engines and turbochargers.
Let’s look at the medium- and highspeed segments. The markets for both are growing. An example is the offshore industry, where investment is very strong globally. A dynamic sector for medium-speed in particular is turnkey power plants. Power generation using high-speed gas engines is also very active and we will grow with this market based on the technological lead we have built up with Power2. And we are in the process of gaining a strong foothold in turbochargers for locomotive engines. Of course, we are always prepared to move with the market into new fields of application. Part of this is expanding our scope-of-supply to include technologies that interact with our turbochargers, like our VCM variable valve train system. We do this with the aim of being a reliable supplier of attractive products that is always open for cooperations and partnerships. What are the other benefits of working with ABB Turbocharging? We are a development partner and supplier that is here to stay and we are an advancer of engine technology. We want to contribute to our customers’ success by enhancing the benefits of their products. We have the critical mass to not just survive lean times but to carry on investing in R & D when sales are low, as we showed in 2009. Essentially, we have the large engine industry’s most comprehensive and advanced turbocharging solutions combined with excellent application engineering, immense technical knowledge, true global presence and an excellent service organization.
11
Service that goes beyond 24 / 7
Our world is a village. Acting openly and fairly offers the best chance of long-term success. This has a long tradition at ABB and is something we can build on today.
Rolf Schweizer, what is the state of the service market today? Last year our turbocharger population in the field passed 200,000 so there is a huge market and many of those we sold in the boom before 2009 are due for their first overhauls. A question mark is the marine market. Shipowners are confronted with very low freight rates and an exponential increase in the price of fuel. This can lead to short-term thinking. How are we responding? With invention and innovation. We are adjusting our value propositions to counter any temptation for end users to delay service beyond what is sensible, or to experiment with non original parts and non original service. Our starting point is that we are the longest established in the business and have the knowledge only available to the turbo 12
charger manufacturer. Over 100 Service Stations in more than 50 countries mean we can really say that if there are engines there, we are there. And our know-how and field experience mean the Original Parts we fit restore a turbo charger to long-term top performance and reliability. Give some examples of the steps you are taking. Our initiatives build on this unique customer proximity and technical knowledge. For example, when an overhaul is due we have devised ways of upgrading turbochargers to the latest fuel saving technology as part of the process. Another aspect we are building on is our ATURB database, which we are constantly refining. ATURB charts the career of every ABB turbocharger so, uniquely, we can proactively offer to schedule maintenance
for our end users and when a customer calls we save precious time since we have a good idea what to pre-order and what equipment might be needed on site. We are also stressing long-term agreements and the benefits of our Original Parts fitted during our Original Service operations by our trained technicians. The focus on the agreements is both part of our response to the rise in the Swiss Franc, rewarding loyalty with favorable conditions, but also because customers who use our OPAC® or MMA delegated servicing schemes all report substantial savings. They can budget accurately for service each year as well as gaining peace of mind from knowing that our experts are protecting their assets to ensure the uptime and operational efficiency that help them to be successful in their businesses. There is a lot going on. Yes. At the center is customer-supplier loyalty based on openness and fairness. End users who commit to service agreements and hence to using only ABB Turbocharging Original Parts and Original Service will quickly see the benefits. And this will help us influence them to specify ABB the next time they buy engines.
Rolf Schweizer, responsible for the worldwide service business at ABB Turbocharging.
13
Maurizio Boschetti, Vice President, Head of Production Network and Supply.
14
Global productivity
Maurizio Boschetti, how did the year develop on the production side? Excellent work by our R & D and sales teams allowed us to come back strongly from the recession. This meant ramping up production very rapidly across all our factories in Switzerland, China and India and in our extensive global supply chain. Significantly, in 2011 we also had to cope with ordering patterns that had become far less predictable. While these exacting tasks were underway we could not neglect our commitment to continuously improve productivity and key factors like product quality, throughput times, costs and on-time deliveries. For example, we had already set ourselves stringent targets for product quality. As with ordering patterns, the expectations of our customers had changed, and we can definitely say that what was acceptable two or three years
ago is not good enough now. To compound an already difficult situation, by mid-year the Swiss Franc appreciated considerably against other currencies and it became clear that we would need to redouble our efforts to improve productivity. What specific measures were already in the pipeline and which were added in the course of 2011? Our key targets are productivity and flexibility and two natural focuses are new equipment and process optimization. With the aim of creating a state-of-the-art machine park, a major step was commissioning the “Mammut” multi-purpose machining center for large casings. This led to a considerable reduction in production times and costs for those parts. While specific investments of this kind continue, we are looking at the complete
global value chain across our network of plants in Switzerland, India and China as a route to higher total productivity. A priority is getting more flexibility into the system to meet the volatile ordering patterns which we now regard as the norm. We are approaching suppliers and working with them to achieve this flexibility. Naturally, the appreciation of the Swiss Franc accelerated these processes and led to a review of our total sourcing strategy, including potentials for procurement on a truly global basis, with emphasis on Asia and Eastern Europe. Overall, we are striving to achieve both the highest productivity in our industry as well as the greatest flexibility. This is excellent preparation for coping not only with short-term fluctuations but also the typical business cycles of the engine industry.
It was one of the most successful years for ABB Turbocharging. We made considerable steps forward in both the internationalization of our value chain and our longer term plans to be the most productive, quality-driven turbocharger manufacturer in the world.
15
Global sourcing
Markus Mühlethaler, how was 2011 in Supply Management ? Challenging! Key issues were delivery performance, quality of raw materials, currency fluctuations, globalization and increasing productivity. Our ability to deliver was tested early in 2011 by a sharp rise in orders. We kept pace, despite some problems with raw materials. Then there was the strong Swiss Franc, which brought the cost aspect into focus. We are meeting the challenges with a root-and-branch makeover of our supply chain, involving considerable investments in our supplier base. What will be your main concerns in the future? Supply Management’s role has changed. Its importance is growing, especially in view of the competitive advantage it can give you in a globalized world. Materials are the majority of a turbocharger’s costs, giving us considerable leverage in this area. Adjustments in sourcing can bring large savings. We intend to profit from this by developing new suppliers in emerging countries, especially in Asia, Eastern Europe and South America. In 2012, for example, the first turbine wheels and turbine blades will be delivered from emerging markets. The company was audited with good results, we are confident that quality and on-time delivery meet our high expectations. The challenge will be to establish this new supplier base as fast as possible at the lowest overall cost. The overall supplier base has to be optimized, raw material quality has to be increased as well as improving our already excellent on-time delivery record. 16
What about improvements resulting from better design? Design defines the majority of a new product’s costs and we are taking our design-to-cost philosophy to the next level. This focus is clearly visible in the development of our Power2 two stage turbochargers. Suppliers will be involved in the design process as early as possible and give their input for optimizing product design, material usage and production processes.
How will supplier relationships change? We see ourselves working much more as a team with all our suppliers. The trend towards global sourcing is irreversible and gives us the chance to optimize our sourcing according to each suppliers’ strengths. One area we need to address is the more complex requirements of the service business. The service network orders a huge range of Original Parts in relatively small quantities. We can increase our customer value and competitiveness by qualifying partners who can respond rapidly on small quantities while maintaining the expected high quality level. Given the total ordering volumes for Original Parts this is a great opportunity for suppliers prepared to embrace our new philosophies.
The international character of our business inspires and motivates us. Wherever you go in the world you’ll find that we have a good reputation. We want to be sure we live up to it.
Markus Mühlethaler, in charge of Supply Management at ABB Turbo Systems AG and in the network.
17
Planning, completing, extending
There were real achievements in 2011. A new team found its feet, we laid foundations for important future products, and we developed new customer benefits on existing turbochargers.
Christian Roduner, what were your 2011 highlights – in business terms and personally? I am very happy with the way we mastered several tasks simultaneously. This was a great proving ground for a new team of experienced colleagues in a new set-up. We kept pace with the ramp up of the A100-L single stage turbocharger for low-speed engines as the focus shifted from its TPL® -B predecessor. We got a high efficiency and fuel saving product to market at precisely the right time to capture record sales. Also, as we completed the A100 generation for medium- and high-speed engines we were already extending the range by adding versions giving considerable new customer benefits. For example, we designed higher performance compressors to fit existing A100 housings and hence increase power density. This means engine builders can now use fewer or smaller turbochargers for a given turbocharging performance. To meet market demands we also decided to complete the development of large, axial versions of the A100-M for the largest medium-speed engines.
18
Last but not least, we established the product objectives and cornerstone features for our major future offering, second generation Power2 two stage high pressure, high efficiency turbocharging. On the personal side, I think that the installation of the new management team went very well and the handover from Urs Gribi to myself reflected our close working relationship over several years. Tell us more about second generation Power2. The next generation of turbocharging systems will be enablers of ever lower engine fuel consumption to counter rising fuel prices, ever lower NOx and greenhouse gas emissions to counter legislation, and of higher and more flexible power from a given engine displacement. Second generation Power2 two stage turbocharging and our interacting VCM variable valve train system address all these objectives. VCM is now starting the process of industrialization with an engine builder and, illustrating the pace of the market, the second generation Power2 concept was finalized as the first generation was just entering commercial applications on diesel and gas engines.
The experience and know-how gained was thus immediately transferred to the new generation, which calls for a compact, rational design with a 50 % rise in pressure ratios to 12. Significantly, our concept takes account not only of aspects like product costs but also end user concerns about doubling the number of turbochargers per engine by designing in serviceability right from the start. What other new developments are in the pipeline? An important one is the new TPR 56 turbocharger which specifically targets energy efficiency on railway locomotives. A special aspect is that many of these turbochargers will use VTG variable turbine geometry, involving us in the electronic technology needed to control it as part of the engine’s overall management system. We can learn a lot for the more sophisticated turbocharging systems we will be developing in future.
Christian Roduner, Vice President, Head of Technology and Engineering.
19
www.abb.com/turbocharging
CHTUS-1001-1204-2000-EN
ABB Turbo Systems Ltd Bruggerstrasse 71 a CH-5401 Baden / Switzerland Phone: +41 58 585 7777 Fax: +41 58 585 5144 E-mail: [email protected]
© 2012 ABB Turbo Systems Ltd, Baden / Switzerland
Contact
Rethinking the way we work
Our industry is focused on global economic and environmental issues. A lot more must be done to find answers. The need for innovative solutions is a conviction I share with all our customers.
Oliver Riemenschneider, what kind of a year was 2011? In many respects it was a record-breaking business year. Best ever figures were achieved in both the high- and lowspeed engine segments. But the Swiss Franc also broke records. Everything contributing to lower fuel consumption and emissions and to improved operational safety and reliability was well received in the marketplace. Accordingly, demand was strong for the A100 ®-L turbocharger, which enables fuel efficient engine operation at a range of ratings. That’s something with a very direct influence on our end users’ profits. And the high-speed segment also showed strong A100 sales and the first series deliveries of Power2® two stage turbo charging. This also benefits users by reducing fuel consumption, increasing power and keeping emissions low. We are also working with an engine builder to industrialize Valve Control Management, another system with a direct impact on emissions and performance. In short, our research and development is now translating into results in the market. This will also be the case with our current R & D projects, like the first successful testing of Exhaust Gas Recirculation in the medium-speed segment 2
and cooperation with Hug Engineering on ITSCR (Interturbine Selective Catalytic Reduction). The Swiss Franc parity was obviously a major challenge. Yes, and we responded immediately. On the customer side we offered to balance long-term partnerships against price adjustments. And on our side, we started additional productivity initiatives. Where do you see further challenges? Market volatility is presenting challenges to the entire organization. Availability at short notice is becoming even more relevant. Then there are the global forces currently affecting our industry like high fuel prices, increasing raw material prices and environmental regulations. The latter are becoming increasingly regionalized and a greater effort is called for to deal with them. We are also seeing our customers expand their global footprint. This makes it all the more important for us to secure and strengthen our profile accordingly. By having our own production plants in Switzerland and India, joint ventures in Japan and China and license cooperations in Korea, we are already well on the way, although we cannot take our eye off the ball.
How does the immediate future look? In the next 24 months we shall see some clarification with regard to IMO Tier III emissions solutions and how they could work in practice. We want to shift our focus from the lab to the field. We shall take different approaches. As well as primary measures like Power2 and VCM®, we also aim to offer secondary measures like EGR and ITSCR. We will see weakening of the marine market and other segments becoming increasingly difficult to predict, which places an extra strain on a supplier. Nevertheless, we see chances precisely here and with the lasting strength of the Swiss Franc we have to completely review the way we do things. Challenges always bring out the best in us. We have the ambition to take our global productivity to the next level and create new opportunities in the process.
Oliver Riemenschneider, Head of Business Unit Turbocharging at ABB, responsible for the worldwide turbocharging business.
3
Urs Gribi, Head of ABB Turbo Systems Ltd in Switzerland.
4
The confidence to take big steps
Long-term partnerships and staying power characterize our business. We are investing with confidence in innovative solutions that benefit our customers and the environment.
Urs Gribi, what was special about 2011 for ABB? Markets were good but somewhat unpredictable. The first half of the year exceeded expectations, then things slowed in the second half. We broke records without any feeling of euphoria. We have to look at things objectively, and we are learning to live with much more volatile markets. How do you see the situation? High-speed customers are feeling confident about their markets. Medium-speed customers differentiate between marine and power generation, with the positive news restricted to the power plant side. The 2-stroke market is suffering due to enormous overcapacity at engine builders, shipyards and above all in the number of ships in service. For us, the sudden appreciation of the Swiss Franc
was dramatic. Overnight, our prices rose by 20 %. One proactive step was our loyalty program tailored to our customers’ needs and promoting stable long-term partnerships. Another was to accelerate sustainable enhancements to our productivity. What does the future hold? Unpredictability is here to stay and the 2-stroke sector will be a major challenge for the next few years. There is great potential in all things connected to energy efficiency. From the engine operator’s standpoint, fuel is his largest cost factor and governments continue to issue regulations. Our innovations offer a lot of scope for improving fuel efficiency, whether we’re talking about new installations or upgrading existing plants. For example, with our Power2 two stage turbocharging there are many more
points in the system where we can make adjustments which optimize total system efficiency. But it requires expert knowledge to recognize which setting will have what effect. Thanks to our advanced simulation capabilities, we can identify available potentials and offer optimal solutions for our customers. And, as our development programs show, we are active beyond the field of turbocharging and engaged in important basic research. What can Switzerland do to assert itself as an industrial location? Innovation and invention have always been strengths of Switzerland and building on these strengths is the way ahead. Changes and readjustments occur constantly, but our future oriented actions will ensure that turbocharging remains one of the high value technologies in which Switzerland excels. We have set ourselves the target of reacting to risks with the confidence to take big steps and the strong Swiss Franc may be just the catalyst we needed to take a further quantum leap. That’s what we’re working on in several areas and progress to date is good.
5
Roland Schwarz, responsible for turbocharging activities in China.
6
Dynamism meets dynamism
Roland Schwarz, how did 2011 unfold in China? Demand for new turbochargers from engine builders slackened in the second half, but there are still immense prospects and we will consolidate our position and prepare for resumed growth. We were able to increase our revenues on turbocharger service thanks to our broad service offering and the increasing population of turbochargers in the marine industry, which were delivered during the boom period and now require service. What were 2011’s highlights? Just at the end of last year, Jiangjin manufactured and assembled what is both its first A100 turbocharger – our most advanced single stage type – and the first turbocharger for the 2-stroke segment to be produced in China. We also delivered the 1000th TPS® turbocharger for high-speed engines from Jiangjin and the 10,000th turbocharger overall from the factory since the operational start of the company in 2006.
The Jiangjin factory also became a center of excellence at a time when ABB Turbocharging’s supply and production network is becoming more globally integrated and we are to play a more important role. On the service side we were very successful in implementing our Original Parts and Original Service policy with major Chinese customers. Looking ahead, what will be the basis for the new growth? New engine production is set to expand in China, driven especially by plans to be the global number one in shipbuilding. This is leading to new engines from domestic producers, new licensees, new joint ventures, and many new engines with turbochargers to maintain, overhaul and repair. The Chinese Government also has a declared target to reduce fuel consumption, and emissions regulations are under consideration. The Chinese Railways are already implementing plans to improve fuel efficiency in their locomotive fleet
More foreign manufacturers are bringing new engines to China while demand for existing generations is still at a high level. It is a real challenge to manage this balancing act.
and we are in the qualification process with our TPR® turbochargers. It is also expected that emission legislations will be implemented for Chinese coastal and river shipping in the coming years. This brings new opportunities for more efficient new technology engines. How are you preparing? We continue to build up our service presence and competence in China to serve both domestic and international customers. Localizing A100 turbocharger technology was a clear demonstration that we will always meet sustainable demand from Chinese customers with our latest products. This is the most dynamic engine market anywhere and speed will be of the essence. We will differentiate our offering by showing we understand our customers’ business and respond rapidly to their needs with real added value. We will be flexible in our operations and aim to improve our local market intelligence and forecasting competencies. This will benefit our sales and stocking levels at the factory and, importantly, customer satisfaction via availability and ontime deliveries. This type of fine tuning, including quality and supply logistics, will be good preparation for Jiangjin taking a larger role in the ABB Turbo charging global supply and production network.
7
Records and realism
Axel Kettmann, what is your overall impression of the business year 2011? Unprecedented sales of turbochargers for low-speed engines was especially exciting. Our recovery had previously centered on turbochargers for mediumand high-speed engines. But in 2011 we did well in all segments, even though the medium-speed marine sector still has not recovered. In the high-speed segment we did extremely well on stationary gas engines, where we commercialized 30 of the first ever Power2 two stage turbocharging systems to be used on large engines anywhere in the world. On mediumspeed engines we continued to do well with turbochargers on heavy fuel, dualfuel and gas engines for large power plants and in the only marine applications to grow – special vessels for the offshore oil and gas business. Our service business result was also satisfactory, but we started to feel trends which create challenges for both service and new business. Marine freight rates fell at an unprecedented pace due to ship overcapacity. They came close to all time lows while fuel prices rose by 40 %. For ABB Turbocharging this was compounded in mid-year by the rise of the Swiss Franc, giving a perceived 20 % price increase for all our products and services. The cash stress on operators was a double-edged sword. It affected their ability to afford regular maintenance but also led them to order “mega” container ships as a way to lower their costs. The result was the record sales of our A100-L turbochargers, which are established fuel savers. But this driver has run its course. Last year’s low-speed ordering levels will not be repeated soon, but the situation on marine service will.
8
We had a really satisfactory year on both new turbochargers and service. With record sales for both high- and low-speed engines, our new turbocharger business rebounded from the 2009 slump in a fantastic way.
How are we addressing these challenges and what will drive our business in 2012 and beyond? Starting from a record year and as the market and technology leader, we are essentially well placed. We have responded creatively to the Swiss Franc parity with a global productivity drive and an exchange rate support scheme which has already cemented long-term customer relationships. On product technology, 2011 saw a shift of emphasis to even more fuel efficient engine solutions, replacing emissions as the central customer concern for the first time in 20 years. Having answers on emissions is now a given rather than a sales advantage. Similarly, attention shifted to CO 2 emissions which are directly related to both fuel consumption and fuel type. As we saw with the A100-L in 2011, our fuel efficiency enhancing products give us a competitive edge. We are thus also seeing great interest in our Power2 two stage turbocharging systems, which enable the attractive combination of low NOx, improved performance and better fuel efficiency on both diesel and gas engines.
Which regions and applications will deliver growth? China is the fastest growing engine building nation and we are responding with localization of our very latest products and an increased presence to meet the needs of 2-stroke licensees, local producers, joint ventures and western implants. As in Russia and India, China has also started initiatives to put state-of-the-art diesel technology on their new locomotives. We have successfully matched our dedicated TPR railway turbocharger to applications in all three countries. A major growth area will be applications arising from the spread of natural gas as a prime energy source in many countries. It is leading to more baseload power plants with gas engines and kickstarted an increase in the global LNG carrier fleet and gas engine powered gas compression plants for both pipeline transport and underground storage.
Axel Kettmann, Senior Vice President Sales, Marketing and Service.
9
Christoph Rofka, ABB Turbocharging’s Senior General Manager of New Turbocharger Sales.
10
Off into new markets
Christoph Rofka, how did new turbocharger business go in 2011? Overall it was a really good year, but very uneven ordering patterns created difficulties. Then came the collapse of the Euro at a time when our competition was playing catch-up which threatened to weaken our unique selling propositions. We stayed ahead by listening to our customers and redoubling our efforts to develop the next wave of solutions that bring them the benefits they need.
In spite of its long history, turbocharging never gets boring. Every time you think things have reached a point of perfection, we invent something new for our customers.
What were the other highlights over the year? The big surprise was the strength of the market for turbochargers on low-speed 2-strokes engines against a background of overcapacity in the ships that use them. But in the meantime everything has changed again. That’s how dynamic things are. The pendulum is swinging back? Undoubtedly, the question is only how far. Our challenge is to position ourselves correctly in the market and to offer the product performance, quality and reliability our customers seek. These are the enablers of the lowest possible costs of ownership for their engines and turbochargers.
Let’s look at the medium- and highspeed segments. The markets for both are growing. An example is the offshore industry, where investment is very strong globally. A dynamic sector for medium-speed in particular is turnkey power plants. Power generation using high-speed gas engines is also very active and we will grow with this market based on the technological lead we have built up with Power2. And we are in the process of gaining a strong foothold in turbochargers for locomotive engines. Of course, we are always prepared to move with the market into new fields of application. Part of this is expanding our scope-of-supply to include technologies that interact with our turbochargers, like our VCM variable valve train system. We do this with the aim of being a reliable supplier of attractive products that is always open for cooperations and partnerships. What are the other benefits of working with ABB Turbocharging? We are a development partner and supplier that is here to stay and we are an advancer of engine technology. We want to contribute to our customers’ success by enhancing the benefits of their products. We have the critical mass to not just survive lean times but to carry on investing in R & D when sales are low, as we showed in 2009. Essentially, we have the large engine industry’s most comprehensive and advanced turbocharging solutions combined with excellent application engineering, immense technical knowledge, true global presence and an excellent service organization.
11
Service that goes beyond 24 / 7
Our world is a village. Acting openly and fairly offers the best chance of long-term success. This has a long tradition at ABB and is something we can build on today.
Rolf Schweizer, what is the state of the service market today? Last year our turbocharger population in the field passed 200,000 so there is a huge market and many of those we sold in the boom before 2009 are due for their first overhauls. A question mark is the marine market. Shipowners are confronted with very low freight rates and an exponential increase in the price of fuel. This can lead to short-term thinking. How are we responding? With invention and innovation. We are adjusting our value propositions to counter any temptation for end users to delay service beyond what is sensible, or to experiment with non original parts and non original service. Our starting point is that we are the longest established in the business and have the knowledge only available to the turbo 12
charger manufacturer. Over 100 Service Stations in more than 50 countries mean we can really say that if there are engines there, we are there. And our know-how and field experience mean the Original Parts we fit restore a turbo charger to long-term top performance and reliability. Give some examples of the steps you are taking. Our initiatives build on this unique customer proximity and technical knowledge. For example, when an overhaul is due we have devised ways of upgrading turbochargers to the latest fuel saving technology as part of the process. Another aspect we are building on is our ATURB database, which we are constantly refining. ATURB charts the career of every ABB turbocharger so, uniquely, we can proactively offer to schedule maintenance
for our end users and when a customer calls we save precious time since we have a good idea what to pre-order and what equipment might be needed on site. We are also stressing long-term agreements and the benefits of our Original Parts fitted during our Original Service operations by our trained technicians. The focus on the agreements is both part of our response to the rise in the Swiss Franc, rewarding loyalty with favorable conditions, but also because customers who use our OPAC® or MMA delegated servicing schemes all report substantial savings. They can budget accurately for service each year as well as gaining peace of mind from knowing that our experts are protecting their assets to ensure the uptime and operational efficiency that help them to be successful in their businesses. There is a lot going on. Yes. At the center is customer-supplier loyalty based on openness and fairness. End users who commit to service agreements and hence to using only ABB Turbocharging Original Parts and Original Service will quickly see the benefits. And this will help us influence them to specify ABB the next time they buy engines.
Rolf Schweizer, responsible for the worldwide service business at ABB Turbocharging.
13
Maurizio Boschetti, Vice President, Head of Production Network and Supply.
14
Global productivity
Maurizio Boschetti, how did the year develop on the production side? Excellent work by our R & D and sales teams allowed us to come back strongly from the recession. This meant ramping up production very rapidly across all our factories in Switzerland, China and India and in our extensive global supply chain. Significantly, in 2011 we also had to cope with ordering patterns that had become far less predictable. While these exacting tasks were underway we could not neglect our commitment to continuously improve productivity and key factors like product quality, throughput times, costs and on-time deliveries. For example, we had already set ourselves stringent targets for product quality. As with ordering patterns, the expectations of our customers had changed, and we can definitely say that what was acceptable two or three years
ago is not good enough now. To compound an already difficult situation, by mid-year the Swiss Franc appreciated considerably against other currencies and it became clear that we would need to redouble our efforts to improve productivity. What specific measures were already in the pipeline and which were added in the course of 2011? Our key targets are productivity and flexibility and two natural focuses are new equipment and process optimization. With the aim of creating a state-of-the-art machine park, a major step was commissioning the “Mammut” multi-purpose machining center for large casings. This led to a considerable reduction in production times and costs for those parts. While specific investments of this kind continue, we are looking at the complete
global value chain across our network of plants in Switzerland, India and China as a route to higher total productivity. A priority is getting more flexibility into the system to meet the volatile ordering patterns which we now regard as the norm. We are approaching suppliers and working with them to achieve this flexibility. Naturally, the appreciation of the Swiss Franc accelerated these processes and led to a review of our total sourcing strategy, including potentials for procurement on a truly global basis, with emphasis on Asia and Eastern Europe. Overall, we are striving to achieve both the highest productivity in our industry as well as the greatest flexibility. This is excellent preparation for coping not only with short-term fluctuations but also the typical business cycles of the engine industry.
It was one of the most successful years for ABB Turbocharging. We made considerable steps forward in both the internationalization of our value chain and our longer term plans to be the most productive, quality-driven turbocharger manufacturer in the world.
15
Global sourcing
Markus Mühlethaler, how was 2011 in Supply Management ? Challenging! Key issues were delivery performance, quality of raw materials, currency fluctuations, globalization and increasing productivity. Our ability to deliver was tested early in 2011 by a sharp rise in orders. We kept pace, despite some problems with raw materials. Then there was the strong Swiss Franc, which brought the cost aspect into focus. We are meeting the challenges with a root-and-branch makeover of our supply chain, involving considerable investments in our supplier base. What will be your main concerns in the future? Supply Management’s role has changed. Its importance is growing, especially in view of the competitive advantage it can give you in a globalized world. Materials are the majority of a turbocharger’s costs, giving us considerable leverage in this area. Adjustments in sourcing can bring large savings. We intend to profit from this by developing new suppliers in emerging countries, especially in Asia, Eastern Europe and South America. In 2012, for example, the first turbine wheels and turbine blades will be delivered from emerging markets. The company was audited with good results, we are confident that quality and on-time delivery meet our high expectations. The challenge will be to establish this new supplier base as fast as possible at the lowest overall cost. The overall supplier base has to be optimized, raw material quality has to be increased as well as improving our already excellent on-time delivery record. 16
What about improvements resulting from better design? Design defines the majority of a new product’s costs and we are taking our design-to-cost philosophy to the next level. This focus is clearly visible in the development of our Power2 two stage turbochargers. Suppliers will be involved in the design process as early as possible and give their input for optimizing product design, material usage and production processes.
How will supplier relationships change? We see ourselves working much more as a team with all our suppliers. The trend towards global sourcing is irreversible and gives us the chance to optimize our sourcing according to each suppliers’ strengths. One area we need to address is the more complex requirements of the service business. The service network orders a huge range of Original Parts in relatively small quantities. We can increase our customer value and competitiveness by qualifying partners who can respond rapidly on small quantities while maintaining the expected high quality level. Given the total ordering volumes for Original Parts this is a great opportunity for suppliers prepared to embrace our new philosophies.
The international character of our business inspires and motivates us. Wherever you go in the world you’ll find that we have a good reputation. We want to be sure we live up to it.
Markus Mühlethaler, in charge of Supply Management at ABB Turbo Systems AG and in the network.
17
Planning, completing, extending
There were real achievements in 2011. A new team found its feet, we laid foundations for important future products, and we developed new customer benefits on existing turbochargers.
Christian Roduner, what were your 2011 highlights – in business terms and personally? I am very happy with the way we mastered several tasks simultaneously. This was a great proving ground for a new team of experienced colleagues in a new set-up. We kept pace with the ramp up of the A100-L single stage turbocharger for low-speed engines as the focus shifted from its TPL® -B predecessor. We got a high efficiency and fuel saving product to market at precisely the right time to capture record sales. Also, as we completed the A100 generation for medium- and high-speed engines we were already extending the range by adding versions giving considerable new customer benefits. For example, we designed higher performance compressors to fit existing A100 housings and hence increase power density. This means engine builders can now use fewer or smaller turbochargers for a given turbocharging performance. To meet market demands we also decided to complete the development of large, axial versions of the A100-M for the largest medium-speed engines.
18
Last but not least, we established the product objectives and cornerstone features for our major future offering, second generation Power2 two stage high pressure, high efficiency turbocharging. On the personal side, I think that the installation of the new management team went very well and the handover from Urs Gribi to myself reflected our close working relationship over several years. Tell us more about second generation Power2. The next generation of turbocharging systems will be enablers of ever lower engine fuel consumption to counter rising fuel prices, ever lower NOx and greenhouse gas emissions to counter legislation, and of higher and more flexible power from a given engine displacement. Second generation Power2 two stage turbocharging and our interacting VCM variable valve train system address all these objectives. VCM is now starting the process of industrialization with an engine builder and, illustrating the pace of the market, the second generation Power2 concept was finalized as the first generation was just entering commercial applications on diesel and gas engines.
The experience and know-how gained was thus immediately transferred to the new generation, which calls for a compact, rational design with a 50 % rise in pressure ratios to 12. Significantly, our concept takes account not only of aspects like product costs but also end user concerns about doubling the number of turbochargers per engine by designing in serviceability right from the start. What other new developments are in the pipeline? An important one is the new TPR 56 turbocharger which specifically targets energy efficiency on railway locomotives. A special aspect is that many of these turbochargers will use VTG variable turbine geometry, involving us in the electronic technology needed to control it as part of the engine’s overall management system. We can learn a lot for the more sophisticated turbocharging systems we will be developing in future.
Christian Roduner, Vice President, Head of Technology and Engineering.
19
www.abb.com/turbocharging
CHTUS-1001-1204-2000-EN
ABB Turbo Systems Ltd Bruggerstrasse 71 a CH-5401 Baden / Switzerland Phone: +41 58 585 7777 Fax: +41 58 585 5144 E-mail: [email protected]
© 2012 ABB Turbo Systems Ltd, Baden / Switzerland
Contact
