- In today’s CEO Daily: Peter Vanham talks to Hitachi Energy CEO Andreas Schierenbeck about hedging against a trade war.
- The big story: Trump will propose a peace plan for Ukraine.
- The markets: Very happy indeed.
- Analyst notes from Goldman Sachs, Convera, JP Morgan, and Joachim Klement.
- Plus: All the news and watercooler chat from Fortune.
Good morning. Peter Vanham filling in for Diane today from Geneva: As a global trade war is unfolding in a rapid and unpredictable way, companies around the world are scrambling to react. But I recently spoke to the CEO of a multinational that seemed less worried than most. His secret? He leads a company that is “naturally hedged” against trade and other disruptions.
Andreas Schierenbeck runs Hitachi Energy, a $13 billion business headquartered in Switzerland. Its Hitachi parent company, meanwhile, is based in Japan. But the maker of transformers and high-voltage switchgear nevertheless has geography on its side, Schierenbeck told me. That’s because when it comes to production and supply chains, Hitachi hedges its bets.
Some of its largest manufacturing facilities are in Finland, Germany, and India, but it equally produces for the U.S. in the U.S., and for Japan in Japan. In September of last year, before even the Trump election, it announced $80 million worth of new facilities in Virginia and Boston to keep up with growing U.S. demand. At the same time, it invested another $75 million in its Mexico manufacturing site to service the U.S. market. “We’re analyzing all kinds of scenarios,” Schierenbeck told me.
But perhaps the best natural hedge is the last one: to find a niche global market, in which competitive pressure is moderate, and the growth outlook and margins are high. If you can’t name Hitachi’s competitors in the market for high-voltage switchgear, transformers, or grid automation, I can’t blame you. (They include Mitsubishi, Siemens, GE, and Schneider Electric.) Combined, this is a $90 billion industry with growth rates reminiscent of China in the early 2000s, and EBITDA margins Jack Welch would be proud of.
While Schierenbeck is certainly tuned-in to the rising rhetoric out of Washington D.C., he’s focused on what he can control. A trade war, he said, was less of a concern than “being too lazy or complacent.” As long as he can fight that, “We have decades of growth ahead of us.”
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Contact CEO Daily via Diane Brady, diane.brady@fortune.com, LinkedIn.
