1.3 Operating Costs and Procurement Strategy
Alstom Power develops, designs and manufactures all key components as it does not believe it could guarantee quality if it did not make key components itself. This includes compressors, combustion chambers and power turbines. All auxiliary components and materials are sourced externally, some of them from other members of Alstom Group and some from members of the ABB Group, although Alstom Power is free to buy from whichever source they deem appropriate. The published accounts of ABB Stal indicate that previously the company bought about 15 per cent of its supplies from other ABB Group companies.
In 1999 the Group completed the implementation of its 'Stretch 30' sourcing cost reduction programme. Across the Group as a whole it was estimated to have resulted in savings of EUR 200 million in the 1998/99 financial year.
1.4 Competition Aspects
Between the late 1980s and mid-1990s ABB Stal/Alstom Power did not supply turbines for marine applications. Since re-entering the marine market in 1995 the company has secured two orders involving the supply of four gas turbines to two high speed ferries.
The main competition to the company comes from diesel engine manufacturers who continue to dominate the market for propulsion systems, with gas turbines used in only a small minority of vessels. As far as other suppliers of gas turbines are concerned, General Electric has had most success in penetrating the marine market, with Rolls-Royce and Pratt & Whitney some way behind. The technology of these companies is said to be based on their experiences in the naval and aerospace markets which has resulted in the development of highly sophisticated products.
Alstom Power's experience on the other hand is grounded in industrial applications, with more of an emphasis on designing turbines with longer life spans and requiring relatively low levels of maintenance. Although not as advanced as the turbines offered by some of their competitors, Alstom Power's turbines are said to have the benefits of a longer life and lower maintenance than diesel alternatives, in addition to which they use a heavier kind of fuel, currently half the price of that used in some other gas turbines.
Alstom has had limited success but believes that once it achieves a breakthrough in the cruise ship market that it will go on to make significant inroads into the sector. At present however the company appears to be meeting resistance from shipowners and shipyards that have become used to diesel engines over the past 20 or so years.
