BorgWarner’s growth has significantly outpaced the industry. Sales were up 15 percent to $3.5 billion (about E2.7 billion) last year and operating profit also rose 15 percent to $309.1 million compared with 2003.
The company has benefited from Europe’s boom in diesel new-car sales – many of those diesels get their extra kick from one of BorgWarner’s turbochargers. The US-based supplier further enhanced its diesel competence this year by taking over Beru. The German supplier adds sensors and cold-start technology, such as glow plugs, to BorgWarner’s diesel portfolio.
CEO Timothy Manganello talked about the Beru acquisition and other key issues when he sat down with Automotive News Europe’s Edmund Chew.
What does Beru offer?
The real reason we bought them was they are leaders in diesel technology. They have engine-electronics control capabilities and they can help with air management. One of the overall strategies for our engine group is improved air management to create more efficient combustion. Beru will help [us] with its emission capabilities, its engine knowledge and its electronic controls capabilities.
How is the integration going?
Our business model is that each one of our product groups basically runs as a stand-alone product business. Right now there is no integration plan. The management of Beru will run the business.
Does that limit potential synergies?
It does limit some for a while. If we have buying power with certain suppliers it doesn’t mean Beru can’t leverage off that, although they have their own purchase orders. We can at least share the names of companies where we think we get pretty good pricing. We’ll see what happens.
What is the outlook for Europe?
Although the European market is probably not going to be much better than flat, it’s our largest growth market with turbochargers – for diesel and for direct-injection gasoline engines.
We’re also growing in Europe [because of] our dual-clutch transmission, the technology we call DualTronic and Volkswagen-Audi calls the DSG.
What about Asia?
We are growing quite rapidly in Korea on the [transmission] chain side of our business, the turbocharger side, and the all-wheel-drive/four-wheel-drive side. In the rest of Asia, we are growing in turbochargers and diesel engines, chain systems and multiple-speed transmissions.
One trend that’s helping us is in Asia and in Europe is the increased use of automatic transmissions and the increasing number of speeds in an automatic transmission.
Because we are in the clutching business, a lot of our technologies are used on automatic transmissions. When you add more speeds it just increases the number of products per transmission for BorgWarner.
And North America?
The North American market is going to decline a little bit relative to last year. The industry is starting to see this in the first and probably the early second-quarter schedules. We will do OK in North America because we are growing with some of our products and technologies that we will launch there. We are seeing growth in North America, but not as much as we are seeing in Europe and in Asia.
How much of your business is diesel related?
We’ve got a book of new business for 2005-2007 of $1.4 billion (about E1.1 billion). This does not include the [business from Beru], this is just BorgWarner. Of that, about
25 percent is turbochargers and 20 percent is DualTronic. Of the turbochargers, the lion’s share is diesel engines. But not all of it, as you know, there is a growing market in direct-injection gasoline engines.
What are the prospects for that segment?
I think that turbocharged gasoline engines in Europe already have proved to be a growing market. I think [soon] you will see turbocharged gasoline engines in North America and then, maybe toward the end of the decade, you will see more penetration of diesel engines with turbochargers. You are already seeing diesel growth in North America with light trucks and SUVs.
What else is growing?
We also see growth worldwide in chain systems. The switch from belts to chains is happening in Europe and Asia. That, combined with variable-valve timing growth, is about 10 percent of our growth for the next three years