End game nears in the war of the wheels

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By Peter Marsh, May 9 2014

It is high noon in one of the world’s longest running business battles. In beginning their competing efforts to acquire the prize of Alstom‘s electricity generation arm, Siemens  and General Electric have entered the final bout of a marathon heavy-weight contest to determine the identity of the global leader in power equipment.

The German and US engineering giants have been sparring for well over a century for pole position in what could be termed the ‘war of the wheels’. We live in an age dominated by passage of invisible globules of information passed silently over the internet. But the the global economy would come to a standstill without the spinning turbine machines central to the creation of electricity.

Siemens and GE – set up within 30 years of each other during the 19th century’s great burst of technology innovation – both attached great importance from early on to building up leadership in power generation machines. They were helped in this by the invention in 1884 of the steam turbine by the UK engineer Sir Charles Parsons.

In what is now an immense global industry – supplying products and services worth about $150bn a year – Alstom has in the past decade occupied the number three position behind the German and US leaders by dint of its acquisition in 2000 of the power generation division of the Swiss-Swedish ABB.

But it has been obvious for some time that the French company’s position has been slipping as a result of missteps in both technology development and in global market penetration, while its big two competitors have been moving further ahead.

As Siemens and GE start what will be a politically charged  tussle to acquire Alstom’s still powerful turbine building operations, the other main players in the industry ,which include  Japan’s Mitsubishi Heavy Industries and a clutch of up and coming Chinese suppliers, look to be only distant challengers.

For all the interest in renewable or carbon-free forms of electricity generation, conventional turbines that use natural gas , coal or oil as a fuel remain responsible for by far the biggest share of world power production.

Whoever emerges victorious from the struggle for the key Alstom division – in a competition where the French economy minister Arnaud Montebourg is likely to play the part of an over-fussy referee – will acquire valuable momentum in the effort to gain ultimate superiority over the other incumbent.

But what will also be important is the respective players’ capabilities in  developing new technologies of the sort that have helped to make modern power systems much more reliable and economic than in the past. Such ideas take in esoteric surface coatings for ensuring components can withstand extremes of temperature,  plus clever control software to regulate the motion of the wheels and the flows of electricity that emerge.

In the area of technological improvements GE has played what could be a key card through pouring resources into the new ideas of 3D printing  – most notably through the recent acquisition of Morris Technologies,  a US 3D printing leader. Meanwhile Siemens also appears highly interested in the potential of the technology to create the sort of specialist parts needed in today’s high-tech generation machinery.

Also crucial will be the two companies’ capability in bolting on to their manufacturing of turbine equipment the connected activity of making new forms of machines linked to handling electricity once it has been created. In this Siemens might appear to have the upper hand. This is the result of its strong position in production of current generations of electricity  transmission equipment, future versions of which are seen  as increasingly essential to the so-called ‘smart grids’ likely to become important over the next 20 years.

GE on the other hand  has been quicker off the mark in exploring how it could use  its electricity network know-how to provide a platform for a strong role in the emerging ‘internet of things‘.  In this field GE could use its ideas in control systems technology, some of which link directly to the company’s strengths in power generation hardware, to provide the equipment and software needed to connect up machines and gadgets in industrial premises, offices and homes.

Such networking efforts could lead to the creation of a vast system of mechanical connectedness  – helping  efforts to automate industry more effectively as well as boosting the efficiencies of industries such as healthcare and transport – that would work in  parallel to the conventional internet that links people.

It seems that whichever of the power heavyweights can carry off the Alstom prize will edge ahead in the long struggle for dominance. But almost certainly this business will have then to formulate – and execute – a vision to link the generation of electricity to the most elegant and efficient ways to use it. Only then will we see at last which of the power twins can finally declare victory.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

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