by
Jim Pinto
General Electric's Automation Division
in Charlottesville, VA has always been one of the leading automation suppliers.
As a part of GE, it's independent financials were never disclosed. However, it was
clear that it did not meet the business rule set by former CEO Jack Welch: "Any
business in which GE participates must be either No. 1 or No. 2 in its category".
If it didn't meet this criterion, it was divested.
Evidently to meet this rule, the GE
joint venture with Fanuc was announced. Fanuc Automation, a Japanese CNC and robotics
pioneer, was headed up by Dr. Seiuemon Inaba, compared at the time to Dr. No in
the James Bond film because of the flashy trappings that surrounded him. Dr. Inaba
(in his early 60's at the time) was much admired by Jack Welch, a sucker for ostentation.
To my recollection, the joint-venture
was oddly structured: GE owned 55% of GE-Fanuc-N. America, Fanuc owned 55% in the
Far East (including Japan), and in Europe it was 50/50.
In my opinion, the linkup was a strategic
mistake, caused by Jack Welch's lack of understanding of the fragmented automation
business. Fanuc was primarily in machine tool CNC (Computer Numerical Control) and
robotics, while GE was focused on factory and process automation.
Well, the strategy was flawed and
the marriage never quite melded. Dr. Inaba is now in his eighties and Jack Welch
has departed.
GE and Fanuc announced (mid-August
'09) that they will dissolve their partnership by the end of this year. This reflects
the reality that automation and CNC/robotics technologies and markets have continued
to diverge.
Under the terms of the breakup, Fanuc
retains the global CNC business, while GE retains the software, services, embedded
and control systems businesses worldwide. On the automation side, Fanuc is dropped
from the name and the company becomes "GE Intelligent Platforms".
GE shares fell some 58% over the past
year, largely because of GE Capital which generated 50% of GE profits before the
downturn. CEO Jeffrey Immelt publicly admits the mistakes; he recently stated that
the US should now aim for manufacturing jobs to be at least 20% of total employment,
about twice what it is now. That gives some indication of change in direction. In
my view, the GE de-linking from Fanuc will fuel new growth through automation acquisitions.
The candidates are Invensys and Rockwell,
both struggling to stay afloat. Also, ruthless Honeywell CEO Dave Cote may be ready
to sell Honeywell Process Solutions, which remains disorganized and unfocused. GE
came close to acquiring all of Honeywell almost a decade ago, but "welched" on the
deal - long story, see weblink below.
Aside from GE, only ABB, Siemens,
Emerson and Schneider are big enough to make acquisitions of this size. Clearly
they are all examining alternatives and getting down to the short-strokes.
GE is well-organized, with huge resources
and expertise in making acquisitions work. In the automation business, it has been
constrained through its Fanuc link. Now, the giant is ready to pounce.
Stay tuned for BIG re-shuffles of
the automation majors. It's long overdue.
