Årets CEO Survey visar att det fortfarande råder stor osäkerhet bland företagsledare kring hur ekonomin ska utvecklas. Åtta av tio vd:ar är oroliga för den ekonomiska tillväxten. Endast 15 procent tror på en snar återhämtning. Men vilka är de största utmaningarna för året? Vilket förtroende har företagen för marknaden? Vilja möjligheter finns för de som vill växa? Ta del av det unika materialet där några av världens främsta vd:ar har lämnat sin syn på utsikterna för den globala ekonomin. CEO Survey presenterad under World Economic Forum i Davos 2012.
Ladda ner rapporten:
CEO Survey 2012
Keith McLoughlin holds a bachelor of science in Engineering. He joined Electrolux as Head of Major Appliances in North America and Executive Vice- President of Electrolux in 2003. Prior to that, he was 22 years and held senior management positions with Du Pont. He is also a Board Member of Briggs & Stratton Corp.
At the moment, the mature markets are slow-growing or in decline with respect to high ticket consumer durables. In North America, the housing collapse and high unemployment have combined to create one of the lowest levels of consumer confidence in decades - which means discretionary purchases get postponed. There are similar consumer constraints in Western Europe as a result of the banking crisis and sovereign debt issues. But one also has to note the dissimilarities among the regions of Europe. Northern Europe appears to be relatively stable. Eastern Europe is actually growing - albeit at a slower pace than it had been. Unfortunately, Southern Europe is in quite difficult times for the moment. Australia is doing quite well because of its iron ore exports to China - but still, the consumer purchasing patterns there are down despite full employment and the robust export market. So, overall, I would say that the mature markets are not in good shape.
Now, does the economic contraction impact our business? Of course it does. About 65% of our demand comes from mature markets. But five years ago, 85% of our demand originated in the mature markets. So today Electrolux has greater revenue diversification as a result of our presence in the emerging markets. The contraction in the mature markets is something we have to cope with - but we continue to generate free cash flow through productivity gains.
We believe that the turnaround in the US will take longer - but once it begins, it will have significant strength. We think things will not improve much in North America in the near term - the near term being the next four to six quarters. But longer term, the housing market will have to come back strongly simply as a consequence of the predictable rise in household formation. Historically, the American housing market represents five or six percent of US GDP. Today the American housing market is around one percent of US GDP. So the housing market has a significant multiplier effect on the rest of the economy.
Again, it will take time to recover. But at the end of the day, the European governments will make the decisions that are necessary to preserve the Euro.
In the mature markets we foresee growing at 1% in Western Europe; 2-3% in North America; and 1-3% in Australia. And that’s OK. That’s fine. Those are big markets. If we can grow one, two, or three percent in the mature markets that’s very healthy for us.
We see long-term sustainable growth across Eastern Europe, the Middle East, Northern Africa, Latin America, and Southeast Asia in the range of 4-6%. In China and India we’re expecting growth in the 7-9% range.
Our goal is to maintain market share in the mature markets. Those markets generate a lot of earnings so we have no plans to shrink our presence there. On the other hand, we are planning to invest substantially in the emerging markets.
Our strategy is focussed on building greater innovation into our products and services at an ever faster rate. And that strategy sets the agenda for what we call our innovation triangle, which is a combination of and collaboration among our R&D, marketing, and design units. That’s a different approach than having, say, an engineer come up with an idea for a product or a designer who wants to add a design flourish here and there. When R&D, marketing, and design work independently of one another, we do have some successes. But we don’t get the same sort of amplifying effect like we do when they work together in the innovation triangle.
Sustainability begins with the way we operate our own facilities. Globally, Electrolux has reduced the energy use in its operations. So far, we have reduced it by 25% since 2005. But candidly, in terms of the total life-cycle impact of Electrolux products, manufacturing products isn't the real sustainability issue. It’s actually, the ongoing use of the product by the consumer where the energy consumption becomes significant. So a big part of our opportunity to positively affect the environment is to develop more resource-efficient products. That may mean manufacturing products that require less water or less electricity during use; or building products using either less material or more recycled and recyclable content. We don’t cut down trees in order to put out press releases that describe our sustainability agenda. But we firmly believe that by applying advanced technology we can make more resource-efficient appliances available and affordable to more people around the world. And that will have a significant impact in terms of sustainability. Right now, if you wanted to buy the most energy-efficient appliance you’d have to pay a premium for it. Our vision is to use technology to invert that equation so that the more efficient appliances are also the most affordable appliances. And in that paradigm, the consumer says, “Of course I want the more efficient energy appliance. It costs less and it’s cheaper to use.” So that’s the challenge and the opportunity that we’re focussed on.
It is. But you can imagine the level of energy and inspiration created in our organisation when we say that we’re going to run Electrolux as an enterprise that creates value for our customers, shareholders and employees without compromising the well-being of future generations.
Ultimately, it’s all about talent, it’s all about people. You can have a great strategy and the best facilities and an outstanding balance sheet. But in the end, it’s all about talent and people. So do demographic trends - whether it’s in Western Europe with a declining birth rate or in the US with the retiring baby boomers - does that present a challenge to the system? I think the answer is, it obviously does. Having said that, what's interesting to me and what I find hopeful is the attitudes and values of the youngest generation of workers.
They're motivated by different kinds of rewards. To me, they seem to have a more holistic view of where value is - and where value can be and should be created. What motivates them is the quality of the experience that that they have at their workplace. They want to find meaning in the work that they do. Does it have a purpose? Can they make a difference? Can they have fun? Can they can they lead a life that includes work and family equally? The younger generation has an agenda unlike the one that was common when I was growing up. Then you worked for the same company for 30 years to get a pension and make as much money as you could. For young workers, that’s no longer sufficient reward.
To keep young workers engaged you have to change the corporate culture, change the work environment, and constantly create opportunities. Companies with the best talent win. So the question is how do you attract, develop and retain the best talent? You have to adjust and make sure that your job offers are tailored to meet these new expectations. That doesn’t mean you don’t have to be competitive in wages. You do, but it’s not just about wages anymore.
And you can’t just redecorate the lobby and say, OK - this is now a cool place to work. You can't fool the young generation of workers. The changes you make have to be real. Today businesses have to be built around a higher-order purpose. Yes, we’re going to maximise earnings and deliver shareholder value. But in addition to financial objectives, there has to be a goal that speaks to what a company can and should be doing to contribute to society. At Electrolux, we are very, very fortunate in that the nature of our work allows us the opportunity to make products that directly impact consumers in a positive way. As a company, we can do that. The key for us - with respect to the war for talent - is how do we align a societal purpose with a business agenda? A lot of what we do directly benefits society. It’s not a second order effect. What we do for a living actually contributes to the quality of people’s lives. For example, in the emerging markets we give people the ability to shift their diet from grain to dairy and meat by inventing the sort of appliances that they can afford and don’t require excessive power or water to operate. In the developed markets, we create products that connect with people’s values - whether its time-saving appliances that allow parents to spend more time with their children; or energy-efficient appliances that help people reduce their own carbon footprint; or beautifully designed appliances that provide aesthetic pleasure.
During the first half of the year, I had to spend most of my time on strategy development. Do we have a clear, cogent path and direction and do we know how we going to get where we want to go? Now most of my time is shifting very much over into operational issues -executing our strategy. Since I took on my new role, the three areas where I spend most of my time -strategy, operations, and people-related issues -I would say that my focus on strategy has decreased, the operational work has increased, and the people work has stayed steady throughout the year.
That’s right. In terms of our financial health, Electrolux has two advantages. First, many of our shareholders are investors for the long-term and they worry less about quarterly earnings than they do about maximising long term shareholder value. So we’re fortunate in that regard. Second, partly through execution, partly through good board governance, we’ve been able to maintain a strong balance sheet. And a strong balance sheet allows one to have a more expansive agenda. We have the running room to consider broad, strategic questions. Are we investing in profitable growth regions? Are there any attractive acquisitions opportunities for us? What sorts of restructuring activities could we be taking to unlock further value? How do we maximise our shareholder dividend and what should our share repurchase policy be? Those are the sort of issues on our agenda. Companies that don’t have strong balance sheets have got very different issues to worry about - such as raising capital and protecting their bond rating. It’s a whole different agenda. So we’re fortunate in that our agenda is more of the former than the latter.
Martin Lindqvist is the President and CEO of SSAB AB. He is a Member of Group Executive Committee since 2001. He is with SSAB since 1998, positions include Head of SSAB EMEA, Head of SSAB Strip Products, CFO SSAB AB and SSAB Tunnplåt. Positions prior to SSAB include Chief Controller at NCC.
He holds a B. Sc. in Economics, Uppsala University.
From SSAB’s perspective, I see continued high levels of demand in Asia and China. And I am not particularly worried about North America or Latin America. In fact, Latin America should demonstrate the same levels of demand as Asia. There are also markets in Sub-Saharan Africa where there is considerable demand for our products. But Europe is more of a question mark. If you look at our industry through the lens of utilised capacity, we are nowhere near the demand levels the industry enjoyed during 2007-2008. In Asia, we do have significantly higher levels of utilised capacity then elsewhere. But capacity levels in Europe have not recovered. I do think it will take some time for things in Europe to improve. Having said that, I also believe that there remains in most markets a fundamental need for our products. This need is driven by the desire to promote productivity, reduce emissions, and increase load capacities.
I can only speak from the perspective of SSAB. My optimism is based partly on the fact that we operate in the right sectors. Energy, mining, and heavy transport are important to us. And in North America, I see that the energy sector will continue to be very important. I also see that the mining industry will continue to be important. And I’m aware that North America is lagging Europe with regard to transport design. So, I see good potential demand for both our niche products and our standard products - all of which are of very high quality. Additionally, we have established long-term customer relationships in North America.
If we look at that issue in a general way, I think it’s important to support Europe’s competitiveness regardless of which particular political decisions are made. It goes without saying that if we want some form of production to remain in Europe, then European companies must not be unduly constrained. Take for example the decision by the International Maritime Organization to introduce new sulphur limits for shipping in the Baltic Sea. That decision will subject industry in the Baltic Sea region to requirements that are one hundred times stricter than in other parts of the world. European policies with regard to emissions trading may also have negative consequences on the competitiveness of European industry. Without judging the final merits of any of these political decisions, I simply stress the need to bear in mind how they could affect European competiveness. I think it’s important that we ask that question.
Most immediately, they will increase our costs. Consider the decision regarding sulphur limits for shipping in the Baltic Sea. That will cost the Swedish export industry an extra 30 billion Krona a year in increased expenditures. Given that, SSAB might decide to abandon shipping by sea and use trucks or railways. But of course, trucks are not in the slightest better for the environment. Rather the opposite, I think. Railways might be better for the environment, but we haven’t developed the necessary infrastructure in Sweden to make shipping by rail feasible. So, whichever way you look at it, the IMO decision means rising costs for companies that have operations around the Baltic Sea - and that hurts our competitiveness. With regard to the emissions issue, we of course understand the importance of reducing emissions and we are investing a great deal both as a company and as an industry in emission-reduction technologies. We have, for example, a large plant in Luleå with the most carbon-dioxide-efficient blast furnace in Europe. Political pressure that might force us to limit the operation of that furnace - or close that plant entirely and acquire a less efficient plant elsewhere in the world - isn’t especially smart for the environment. If there were a global system in place with regard to emissions that would be a different matter. Then one wouldn’t be creating these selective distortions in terms of competiveness. That’s why we get involved in these issues on a governmental level. We meet Members of Parliament and government representatives and attempt to articulate all the possible implications of a particular political proposal. But all I can do is to describe our daily reality and explain how things affect us. And then the politicians have to decide if they think it is relevant or not.
There are a number of issues, but investment in infrastructure - particularly railways - is important to us. Taking a longer-term perspective, the question of energy costs is also very important to us.
I would say that our strategy has only been affected slightly. We have continued with our big investment programs and they have recently been completed or are being driven toward completion. If I had a pessimistic outlook on the future, I might doubt the timing of these investments. But I am not pessimistic. The forces driving the demand for our types of steel are increasing. So I believe the timing of our investments is quite apt. We are very happy that we have had the ability to press on despite all the turbulence.
We reduced staff between 2008 and 2009, but have since maintained a steady workforce level. For reasons of flexibility, we have recently contracted out more work than what we have historically done. But at present, we have no plans for any workforce reductions. Personnel costs are a large, important item. But at the same time - because of the way we operate - we are extremely dependant on qualified people. So in terms of personnel costs, we have to think long term and not just try to adjust to cyclical fluctuations. Nevertheless, there is always pressure on us to become more efficient - but it has always been that way. We make investments for this and typically achieve a productivity increase of a few percent every year.
Our biggest cost parameter is raw material. But in what direction the cost of raw material is headed over the long-term, I haven’t a clue. We like to think that our competitiveness is created at the other end of the value chain in working with customers and producing and selling the products they need. Over time, if we match the indices or market prices with regards to commodities, that is enough for us. We have no intention of investing in mines or anything like that.
When we made cutbacks in 2008 and 2009, we made sure to seize the opportunity to get our age pyramid in order. We got a lot of people to take early retirement and managed to reduce the mean age of our workforce. Longer-term, the bigger problem we face will be to encourage more young people to follow a technological course of study and education. We try to be very active in this area. For example, along with a number of other companies, we take part in an initiative that offers internships in cooperation with Industrivärden och Nordstjärnan. We also work closely with Jernkontoret [The Swedish Steel Producers´ Association] to encourage young people to follow a technological education and offer scholarships to the most deserving among them. But admittedly, we have not done a good enough job in describing the professional opportunities that our industry offers. Our industry is not just about production - there are also many exciting marketing, sales, and R&D opportunities, many of which afford the chance to work internationally.
Today we do not have difficulties recruiting. On the contrary - SSAB has become more known internationally as a result of our acquisition in the US. So we do not have any difficulties now. But if you look at the demographics and do the math, you will see that recruiting will eventually become difficult. It is a long-term issue for us and the industry as a whole.