Guillermo Ulacia, Gamesa
Release Date: 2009-03-12
What was the vision behind the decision to concentrate on strategic activities, divesting activities in aeronautics, services and solar, in the years following your arrival as CEO of Gamesa in December 2005?When I joined Gamesa it was a multi sector company devoted to aeronautics, services, solar and wind. The question was whether we should continue in the same lines of business, or whether we should specialize ourselves as a leading technological company. The answer was that we preferred to focus on technological matters and try to become a wind power leader. Based on the shared vision of the shareholders, board of directors and employees we defined a roadmap to strengthen our focus on wind power and determined the speed of the transformation process.
We defined four key action strategies. The first one was to focus on key accounts, meaning key clients and key markets. The second was to build a very competitive supply chain worldwide. The third one was ensuring that we can bring technological breakthroughs to the market, and the final one was spinning-off all activities where we were not on a leading position. Through these four action strategies we have executed our business case. The main issue was determining how to select key clients and how to define our core markets.
Right now, Gamesa has 50% market share in Spain, and our challenge is to become the leader in other markets. At the European level we should really be able to develop ourselves in countries in the Mediterranean area, such as Italy and France. Going beyond the European borders we were pioneers taking the decision to enter China. Three years ago, we selected both China and the US as top priorities in our internationalization process. Subsequently we opened manufacturing facilities in both China and the US.
In Europe we have very good relations with our key customers. In China we have worked with many clients, and one of these clients was Longyuan Electric Power Group Corporation. Over the past years we established a close relationship with Longyuan, trying to understand their needs in terms of volume, products and services. We defined as well what kind of knowledge management systems we should install in both companies in order to facilitate the understanding the way of operating our turbines and keeping them in service. Through these mechanisms we have been growing in key markets as well as getting more market participation in key clients.
Gamesa’s business model is based on a strong commitment to the in-house manufacturing of critical components, while China requires 70% local content. This implies that entering the Chinese market required quite a commitment from Gamesa, was your commitment to the in-house manufacturing of components an extra challenge?
It was a challenge, but at the same time it offered a very nice opportunity. Once we decided to go to China the question was whether we had to develop a supplier base. Remember that our second key action strategy was to develop a very competitive global supply chain. In China, our towers are produced by a Chinese supplier, but we produce our own blades, generators, nacelles and gearboxes at our manufacturing centre in Tianjin. We are considering China both as a wind power market as well as a component sourcing platform for both the domestic market and the export market. That is why entering China has been both a challenge and an opportunity for Gamesa.
When Gamesa entered the Chinese market the company has a strong technology advantage over its Chinese competitors. What has been your strategy to maintain Gamesa’s competitive edge in the Chinese and how successful have the Chinese turbine manufacturers been in closing the gap?
In reality, in order to keep your competitive advantages you need to invest in R&D for both new products and manufacturing processes. It is not a matter of closing the gap; it is a matter of keeping the competitive edge. Gamesa is not competing with Chinese suppliers. I think that we should replace the word competition by cooperation. Once the Chinese turbine manufacturers can produce wind turbines that are as good as those produced by Gamesa then let’s go to the market and see who the number one is when other key attributes of the company come into play. It is a matter of cooperation, competition and trying to be the number one. I am not always concerned about the competition coming from China. Of course, we are in a market where we will all compete in the long term, and our challenge is to keep our competitive advantages. That means that we need to be sure that we are bringing new services and features which, on top of the production issues, should enable our clients to recognize us as one of the best choices.
When you look at the purchasing criteria, it is not just a matter of price. Other key factors are used when the purchasing director is making a decision. You need to be sure that you know what the key factors are that your clients use in their purchasing decisions, and then you need to be the number one in all of them. You need to be the number one in management, which means that you know what your client expects from you and that you have a clear plan to meet the requirements.
What are the differences between the expectations of clients in China and in Europe?
As B2B customers and business leaders they have different requirements and different technical specifications. I am not saying better or worse, but they have different specifications. The Chinese market also differs from the Spanish market in terms of service requirements. In addition, Chinese regulations define different quality specifications and the last differentiator is price. Even if you are meeting the technical, quality, service and management requirements but are not able to deliver the right price then you will face difficult times in China. We firmly believe that what is good for the client is good for Gamesa as well.
What would you like your Chinese manufacturing facilities to play in the Gamesa’s global supply chain in the future?
Gamesa is has one of the most integrated supply chain’s in the industry. At our manufacturing centre in Tianjin we produce gearboxes and generators and have an assembly plant for our main wind turbine generator components. Most of these components are manufactured in-house China, representing 45% of the total cost. At our Tianjin facility we have incorporated a new production system, the Synchronous Manufacturing System, for the first time in Gamesa’s history. We are going to produce top quality turbines based on a simplified manufacturing process, transportation is not a challenge and local content is not an issue for us.
We have started the implementation of this system in China because there was a good opportunity. It enabled us to meet the local content requirement while creating the opportunity to focus the competitiveness of our manufacturing system. This approach optimizes our time to market while reducing manufacturing cost, and has created a clear long term advantage from a manufacturing point of view. Of course others will try to do the same in the future.
How do you expect the market to develop in terms of turbine size in the coming years, and which role will the G10x 4.5 MW turbine play as a driver of your competitiveness in the coming years?
You need to have a complete product portfolio with turbines of less than 1MW, one between 1MW and 2MW, and turbines of 3MW and 4MW. At the end, you need to go project by project and the key issue is how to offer the turbines that best fit every single project in order to guarantee the lowest cost of energy. When you are in Inner Mongolia you need to offer the right products to guarantee the adequate return on investment, therefore, you need to have the right products in your portfolio. The implementation of flexible manufacturing systems and the standardization of our product enable us to produce different turbines on demand with a lot of common parts.
Gamesa’s new G10x 4.5 MW turbine is developed for the onshore market and its market launch will represent an important step forward for Gamesa. Right now, the first prototype of the Gamesa G10x is being installed in Jaulín, in the province of Zaragoza, and will be put into operation this year. To overcome the transportation constraints associated with large machines such as the G10x 4.5 MW we have created a special design that allows us to move all the components of this turbine with the same means of transportation. We have also applied other types of materials and the design allows us to make the final assembly on site.
Several competitors have even bigger turbines, many of them developed for offshore, but a bigger turbine is not necessarily a better turbine. It is not a matter of size; it is a matter of efficiency. The main purpose of a wind turbine generator is producing electricity and the key issues are finding a location with a good wind resource, installing a good machine, and then the capacity factor will enable you to be competitive. This will bring the cost of energy down, which is essential to ensure that the cost of energy is equivalent to the cost of any alternative sources of energy that you can use. All wind turbine manufacturers are trying to increase the quality of their products to ensure that from an investment point of view wind turbines will be the first choice.
I still remember when Mr Hahn, CEO of Volkswagen at the time, decided to move the manufacturing of one old model car produced in Germany to China. That was the beginning of industrial relationships between China and Europe. Today, Volkswagen produces a lot of cars in China, and they are not discussing whether customers want to have the old fashioned car or the new car, a large car or the small car. As a successful company you have your market, your products and your clients in China.
You have spent an important part of your career in the automotive industry, and I can imagine that you would like to repeat the success of Volkswagen as an early mover in the Chinese market and a dominant player today. What will be the role of Chinese in the future growth of Gamesa?
China will play a very important role in the success of Gamesa. The Chinese market is going to be one of the biggest in the world, and China’s commitment to be greener is a clear advantage for all of us. I share this commitment 100%.
I do not like the term global player; Gamesa tries to be a regional player. In China we want to be a Chinese company, producing products in China that are 100% adapted to Chinese requirements. I do not want people saying that we are moving European standards to China. We have more than 1000 people working at our facilities in China. Only two of our key executives in China are Spanish, the remaining management team is Chinese. Gamesa is a Spanish company that should take advantage of the cross cultural opportunities that are open to us. We are learning a lot from our Chinese colleagues and we want to export this knowhow to other places. We need to learn from others, we are not only teachers, we are pupils as well.
Installed wind power capacity doubled every year since 2005. In order to keep up with such growth without losing market share means that you need an aggressive growth strategy. What is your ambitions in the Chinese markets for the coming years?
Our first priority is to make sure that we are maintaining the confidence of our clients. The second one is to increase the number of clients in China, like we are doing in the rest of the world. The third one is to install the capacity and the products that our clients need. For example, we are close to signing an agreement to start selling our 2MW turbine in China and later on start producing it as well. We will follow our clients, grow in the market Chinese market and install the capacity and the products that the market requests from us.
The Prime Minsiter of China met with President Zapatero in Madrid last month and one of the issues discussed was the role of renewable energy in our bilateral cooperation. Spain has proved to a successful business case and is sharing China’s renewable energy vision. The objective of both governments is to strengthen the knowledge transfer between Spain and China to take advantage of our knowledge of turbines and the connection of renewable energy to the grid. Spain and China are committed to a clear action plan to enlarge the cooperation between both countries involving key players and Gamesa will play an important role in this process. Moreover, Gamesa has decided to develop a Renewable Energy Degree in cooperation with Shanghai Business School. Most of the Chinese executives and management team of Gamesa are already being trained and coached in business there. Gamesa will be one of the key players in enhancing the cooperation between China and Spain and enable both countries to grow together.
| Company: | Gamesa |
| Position: | former CEO |
| Country: | Spain |