ABB to increase local US production to reduce tariff impact

By John Revill

ZURICH (Reuters) - Swiss engineering group ABB is expanding its local production in the United States and other countries to mitigate the impact of tariffs imposed by U.S. President Donald Trump, Chief Executive Morten Wierod said on Thursday.

ABB has already pledged this year to spend $120 million to expand production of low voltage electrical equipment in the U.S. at its sites in Tennessee and Mississippi and will continue to invest, Wierod told Reuters.

The company, which produces electrification equipment, industrial machinery and factory robots, has been growing its sales from local production globally.

"In India we have a target to get to above 90% local production. We have the same target in China, Europe and also the U.S.," he said after ABB reported its first-quarter figures.

"We will do this mainly through organic investments, but inorganic moves can also be a part of that," he added.

The drive to become more self-sufficient would help ABB mitigate the impact of tariffs, Wierod said, while the company was also spending to meet market growth.

Currently 75-80% of ABB's sales for the United States are produced domestically, while 85% of its sales in India and China are produced locally. In Europe the figure is around 95%.

"We have spent about $500 million over the last three years in the U.S., and we will continue at that rate. The overall spending will go up rather than down. It's a constant project," Wierod said.

"We will see more of that to become less dependent on imports from outside the U.S," he added.

Trump's tariffs and the lack of certainty created by their on-again off-again nature have roiled global markets, destabilised the United States' trading partners and left companies reassessing their operations.

ABB expects only limited impact from tariffs on its business for the rest of the year however, the company said.

It did not have a time frame to reach its local production targets, Wierod said. And, as the company aimed to continue benefiting from economies of scale, it was not aiming for 100% production in any one country.

The COVID-19 pandemic also illustrated the importance of having flexible local production to enable uninterrupted supplies, if global supply chains experience difficulties.

"It's important for customers to know, even if we are a single-source supplier, we have factories that can still supply them if there's trade disruptions," Wierod said.

(Reporting by John Revill; Editing by Joe Bavier)