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ASEA, can you see? A looking-ahead view from the top.

ASEA, can you see?

A looking-ahead view from the top

Happy New Year! Now that it's here and not much like the Orwellian prediction, 1984 is a good year for looking ahead. The other Tooling & Production editors are busy working on their March anniversary issue that will attempt to look 50 years into the future.

But not me. I've already had 50 good years. How many do you need?

By 50 years from now, I will have moved on to another planet, and I won't need a spaceship to do it.

But the young are looking ahead. A great example is a 42-year-old CEO I had lunch with last month in Vaster s, Sweden. Percy Barnevik is president and CEO of ASEA Group, a mega-collection of companies that resembles our own General Electric. Percy is a brilliant guy with lots of fresh ideas, and he's as informal an engineer as you would want to meet. (He gets kidded at times for looking too informal, too much like an engineer.)

After a bright career with Sandvik, much of it spent in the US, he took over at ASEA and quickly streamlined them for the world-market battles of the future in energy and electronics. (One of his first orders: all written correspondence will be in English.) By moving strongly into high tech and away from low tech, he has helped them increase world sales to 30 billion Krona ($4

billion) in '82. This, at a time when most of us were having a bad year.

Lunch chatter

First, some of his informal views I picked up at lunch:

ASEA is taking on the Japanese headon in robots by building them now in Japan. They feel they have a competitive edge in precision, the robot used as a tool, and expect to find enough precision applications in Japan to be producting 300 robots/yr there soon.

Russia is in big trouble. They don't have the money they need to develop their basic resources. This is cause for concern and even sadness on the part of the West, not joy, because who knows what the Russian leaders will do when things get worse.

Workers are getting younger, have fewer skills, and therefore things like maintenance must be built into the machine electronically. Remote machine diagnostics --ala the telephoned EKG in the medical profession--will also become important.

Due to Sweden's tax structure (50 percent income taxes and up), they have great difficulty importing technical people. With ASEA's world expansion programs, this means a net outflow of technical people of 700 to 800/yr and a shortage of technical skills in Sweden.

Development projects they're working on: throwaway weapons using glass-fiber reinforced barrels (where muzzle velocities are low), a joint venture with Volvo on ceramic gas-turbine engine rotors, and finding uses for a surprisingly conductive plastic they discovered.

The formal view

And now for a distillation of Percy's more formal remarks on the occasion of ASEA's 100th anniversary:

ASEA's future depends primarily on how we succeed in adapting to the increasingly rapid changes in our environment. Our success will depend on how well we use new technology, establish ourselves in growth markets, and extricate ourselves from areas of stagnation or unfavorable future prospects.

In the Western world during the next 20 years, we can anticipate: (1) increased governmental intervention and regulation, (2) stagflation--a flat economy with continued high or increasing inflation, (3) a smaller goods-producing industry (fewer industrial employees and a higher percentage of service jobs), (4) increased protectionism, and (5) rising debt problems in many countries.

The industrialization of the developing countries will continue at widely varying rates. In 1980, these countries (excluding China) accounted for approximately 10 percent of the world's industrial production. By 1995, their share may be about 20 percent.

This expansion will, however, be restrained by the large debt of the developing countries that will in many cases increase. The large debts of the state-economy countries will continue to lead to severe demands for reciprocal purchasing in their trade with the West and demands for favorable credits. This will restrict East-West trade.

We can expect that ASEA's major competitors during the next 20 years will be largely the same as today, and from the same countries. We may assume that countries like South Korea and Taiwan will develop in a manner similar to that experienced by Japan, and we also expect increasing competition from companies in countries like Brazil and India.

The big question is which route Japan will take. The Japanese have based their growth to a high degree on the expansion of their sheltered home market. Now, with a lower growth rate, the Japanese companies are being forced to either raise the percentage of their exports or they will have to reduce their production capacity. Our Japanese competitors will probably become more aggressive, as well as successful, but they will also become more vulnerable, since a declining share of their total sales will be in their relatively protected domestic market, and they will be forced to undertake more production outside Japan.


Rapid technological developments in microelectronics and computerization will be decisive in forcing changes in existing products, equipment, and production technology. The use of microelectronics to control processes is of special interest to ASEA.

Control systems will develop rapidly in the metallurgical and processing industries and become more sophisticated. Self-tuning and optimizing controllers will be common and "intelligent' systems will make breakthroughs.

The steel-industry processes will be controlled to obtain continuous flows, avoiding the cooling between steps and saving large amounts of energy. Entire process steps will be eliminated by making raw steel from iron ore and coal by direct reduction.

In manufacturing, the effort to achieve high-volume production will continue parallel with a substantial increase in demands for custom-tailored products. Longer production series mean increased use of special machines, transfer systems, and robots. Continuous production and unattended production will become more common. The greatest change will involve automation of assembly work and workhandling, which today account for nearly half of the labor costs in manufacturing.

To offer increased custom-tailoring of products while maintaining rational manufacturing methods will require integrated information handling--from customer specifications through design to production. This means wide use of CAD and CAM. In such systems, the production machinery has to be flexible and rapidly convertible, characteristics achieved through flexible NC machines and sophisticated robots.

People strategies

For people in production, the dangerous and environmentally unpleasant jobs will be increasingly eliminated. Factory jobs will increase in sophistication. Monitoring, maintenance, and service will become the new tasks.

The common characteristic of the scenarios we see developing is the substantial role of uncertainty. We must therefore develop a high degree of preparedness for change in our employee and organizational development as well as our planning of financing, technology, and marketing. Recruiting must be broadened and we must view the world as our recruiting area. During the 1980s, a special effort must be made in supplementary training in electronics for thousands of engineers with mechanical or more conventional electrical-engineering backgrounds.

In recent years, a number of independent profit centers responsible for product development, production, and marketing have been established in both the parent company and subsidiaries. A major objective is to achieve a proximity to the market and to competitors that will help us detect signals indicating change. Other benefits are a clear delineation of responsibility for profits, and opportunities for greater delegation of authority and responsibility. At the same time, on a global basis, we are trying to combine the benefits of many smaller corporate units--that have profit responsibility, flexibility, and entrepreneurship--with the resources and international coordination offered by large enterprises.

Another important element is to have adequate financial resources to make required changes with a reasonable degree of risk. About 20 corporate units in stagnating and unprofitable sectors have been closed down during the first two years of this decade, releasing capital resources and managerial capacity.

The largest relative increase in our sales between now and the end of the century is expected to occur in the industrialized countries of Western Europe and the US. Approximately 30 percent of the world potential for sales of ASEA products (outside the state-economy countries) is in the US.

R&D is the key

The basic technology that will have any major commercial impact within the next few decades is probably already in some stage of development. We hardly expect to see great surprises--completely new technologies--achieving commercial importance in the next 10 to 15 years.

ASEA is today investing more than 1 billion Swedish krona ($130 million) in R&D and has more than 3000 people involved. This equals 4 to 5 percent of group sales.

The parent company, which is more technology intensive, is investing between 8 and 10 percent. The trend today is that each new generation of products costs twice as much as its predecessor, with the life cycles becoming shorter and shorter. This factor alone drives up the cost of development work, expressed in percentages, without any actual increase in R&D activity.

The area of electronics is the fastest growing sector of ASEA. The electronics content in all products will expand sharply with increasingly less expensive and smaller components. Companies within the ASEA group are directly engaged in the manufacture of custom-designed integrated circuits. Nearly 40 percent of the parent company's R&D resources are today being allocated for the development of electronics.

ASEA has historically maintained a small presence in manufacturing, but is now one of the leading companies in the world in the field of industrial robots. We also intend to be one of the leaders at the close of this decade when the market is likely to have grown tenfold. Assembly work and demand for efficient vision systems offer substantial potentials. Robot accessories and complete automation systems will represent sharply higher percentages of sales.

We will also be increasingly automating our own production, design, plant engineering, and office routines. In all these areas, available human resources are the factor restricting our ability to fully utilize electronic discoveries. Accordingly, there will be emphasis on the comprehensive training and retraining of personnel.

The next two decades will represent a challenge, with sharply varying and generally low total growth in the world economy, but good opportunities within special product niches and market segments in which we possess the requisite technology and have, or can acquire, competitive advantages.

We will become an energy company in the broadest sense of the term, and will be substantially closer to becoming an electronics company, with perhaps 12,000 to 15,000 people (five times what we have now) in the electronics field. Industrial automation and transport vehicles will be major business areas then. The ASEA group will be considerably larger than it is now, but above all, it will have a more international structure, with substantially more production and plant engineering outside Sweden. Only 15 to 20 percent of the group's sales will be made in Sweden, slightly more than 50 percent in other industrialized countries, and barely 30 percent in developing and state-economy countries.

If you would like more information about ASEA's plans for the US, circle E4.

Photo: Percy Barnevik
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Title Annotation:Swedish high-tech conglomerate
Author:Doaks, Joe
Publication:Tooling & Production
Article Type:column
Date:Jan 1, 1984
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