DETROIT -- Supplier BorgWarner Inc., flush with cash from several years of sales and earnings growth, is taking a serious look at newacquisition targets.
There are a lot of possibilities out there, Robin Adams, BorgWarners
executive vice president and CFO said during a quarterly conference call with Wall Street analysts last week.
During its third quarter ending Sept. 30, BorgWarners sales grew in every region of the world where the company operates and in each of its major product groups.
BorgWarner makes transmission components, clutch assemblies, torque transfer products and turbochargers. Many of those products are experiencing an increase in global demand.
Whats more, BorgWarner holds strong market position in many of those categories, especially turbochargers, where it commands about 30 percent market share.
The company is doing so well that Wall Street analysts peppered BorgWarners management team with questions about acquisitions.
Whats going on is, weve got cash, CEO Tim Manganello told Crains Detroit Business, a sister publication of Automotive News. And Id like to think that were smart managers and we are going to find the best use for that cash.
With total liabilities of $1.03 billion as of Sept. 30 and total shareholder equity of $2.2 billion, BorgWarners debt-to-equity ratio is just under 0.5, low for a manufacturing company.
Manganello and Adams told analysts they reviewed a list of potential acquisitions just two weeks ago. BorgWarner, they said, is currently talking to several companies and is hoping one will agree to be acquired.
We are looking at acquisitions from large to small, Manganello said.
Manganello and Adams declined to give any time frame for when an acquisition would be likely.
We have some very good, solid opportunities, Maganello said. We believe some parties might be interested. We also remember that it takes a willing buyer and a willing seller.
Adams said BorgWarners due diligence often takes longer than the average deal because of the type of companies it tries to acquire.
We are not buying assets that are out there that are being marketed for a sale, Adams said.
Even so, BorgWarner has made several recent acquisitions. Its biggest deal was the acquisition of a majority share of Ludwigsburg, Germany-based electronics supplier Beru AG in 2005 for $554.8 million.
And, on Sept. 30, 2006, BorgWarner acquired the European transmission and engine controls product lines from Eaton Corp. for $63.7 million.
In 2004, BorgWarner reported total sales of $3.5 billion. This year, sales have already exceeded $3.96 billion.
One of the products responsible for the rapid growth is BorgWarners dual-clutch transmission technology.
Dual-clutch transmissions are essentially manual transmissions that offer the option of driving in an automatic mode. BorgWarner makes clutches and clutch control modules.
Earlier this month, BorgWarner said it expects production of its dual-clutch transmission modules to increase 500 percent in the next six years. By 2012-2013, BorgWarner projects it will be producing 2.3 million dual-clutch transmissions per year.
Fewer than 450,000 dual-clutch transmissions a year are produced today.
On Oct. 24, BorgWarner announced it is supplying Nissan with dual-clutch technology for the 2008 Nissan GT-R sports car, which debuted last week at Tokyo Motor Show.
Manganello said the Nissan GT-R will likely lead to additional business with Asian automakers.
Its going to be a halo product in terms of getting the attention of the Japanese (automakers), Manganello said.
Based in suburban Detroit, BorgWarner ranks No. 33 on the Automotive News list of the top 100 global suppliers with worldwide original-equipment automotive parts sales of $4.68 billion in 2006.