(Bloomberg) -- Europe risks losing investments and industrial jobs to countries including the US if the region fails to cut red tape and energy costs, said ABB Ltd. Chief Executive Officer Morten Wierod.
Manufacturers are forced to pay more for electricity in Europe than in the US and China, where the overall regulatory environment also tends to be more favorable, the chief of the Swiss engineering company said in an interview in London.
“The cost for energy intense industries like chemical, steel production, cement is a challenge, and investments will go elsewhere than Europe if this continues,” Wierod said. This could weigh on job creation in the region, “which is a clear concern.”
Wierod’s concerns have been underlined by a stream of bad news from European industrial companies in recent weeks. Thyssenkrupp AG’s steel unit on Monday announced plans to reduce its workforce by around 40% this decade to become more competitive. Manufacturers including Robert Bosch GmbH and Volkswagen AG are also moving to cut jobs and reduce costs to deal with anemic growth and intense competition from Chinese manufacturers.
ABB was among the early backers of Northvolt AB, the Swedish battery maker that filed for bankruptcy protection in the US last week in a setback for Europe’s bid to become a major electric-vehicle supplier. The Swiss company owns less than 1% of Northvolt and has no plans to support the company with additional funding, he said.
US, China
Despite the woes of Northvolt and other manufacturers, Europe “shouldn’t give up” and leave the industries of the future to the US and China, Wierod said Monday on Bloomberg Television. The region needs more tax incentives for energy projects, he said, and should consider recommendations in a recent report on European Union competitiveness by former European Central Bank President Mario Draghi, which included major investments in technology.
Meanwhile, Zurich-based ABB is investing more in markets such as China and India, where Wierod said “massive” infrastructure spending is driving growth.
The company may shift more of its European production to the US — it already makes about three-quarters of what it sells in the US domestically — to counteract potential tariffs from a new government led by President-elect Donald Trump.
The manufacturer, which makes products including electrification and robotics equipment, is eager to hire more people in the US but has had trouble finding skilled labor, the CEO said. With potentially tighter immigration policies on the way, ABB is investing heavily in factory-floor automation there, he added, to replace relatively expensive local workers with robots.
The manufacturer is shifting from a focus on profitability to one on growth including via acquisitions, and is open to buying firms that strengthen ABB’s core businesses, the CEO said.
He cited data centers as an attractive growth sector, adding that M&A there would focus on firms adding value for “white spaces” in these centers that house IT equipment like servers.
“We have a balance sheet to absolutely do M&A if we find good targets,” he said. ABB’s war chest amounts to around $1.5 billion a year for bolt-on deals, but the firm has the capability to do “much more than that” if it identifies a larger target that fits, Wierod said.
--With assistance from Ruth David and Aaron Kirchfeld.
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