DETROIT -- BorgWarner Inc. forecasts about $1.8 billion in net new powertrain business in the next three years, surprising analysts who expected the supplier's plan to take a sharper hit from the global recession.
The suburban Detroit company, which last month posted a third-quarter profit after four straight quarters in the red, said half of the new business would come from Europe, as the continent is still the main market for advanced gasoline- and diesel-engine technology. In announcing its three-year plan a year ago, BorgWarner said it expected to bring in $2.1 billion in new business from 2010 through 2012.
The news was greeted well on Wall Street today, where BorgWarner shares closed up 3.8 percent to $33.04 a share.
“The size of the drop is somewhat smaller than expected, given the decline in expected global light vehicle production,” said David Leiker, an analyst with Robert W. Baird & Co., today in a research note. Last year's projection came in late October, “when the global financial crisis was still in its early stages,” Leiker said.
North America should soon bring more drivetrain and engine air-management business, CEO Tim Manganello said today in a conference call.
For instance, Chrysler Group does not account for any new business currently in BorgWarner's backlog, but that could change as Chrysler's future vehicles with smaller-displacement gasoline engines are to be powered with engines from Fiat S.p.A.
Currently, BorgWarner supplies the control module for Fiat dry-clutch transmissions and turbochargers for Fiat diesel and gasoline engines. The supplier's contracts include turbochargers for Fiat's 1.8-liter gasoline engine that Manganello says could power a number of Chrysler vehicles.
Manganello said he expects North American car and truck production to return to rates seen in late 2007 and early 2008 by 2013 or 2014.
“Production assumptions are realistic, if not conservative, in our opinion,” analyst Rich Kwas of Wells Fargo Securities said today in a research note.
Better growth than most
Analyst Leiker said he thinks the 2010 to 2012 expectations represent a growth rate of 12.5 percent in new business, about equal to the 12 percent in growth he estimated in last year's three-year projection. That's well above the typical business growth rate of 3 to 6 percent, he said.
Of the expected business for the next three years, 30 percent will come from Asia and 20 percent from the Americas, BorgWarner said.
Dual-clutch transmissions make up about 13 percent of BorgWarner's 2010 to 2012 backlog, and the company expects the global market to grow by five million units by 2014.
Manganello said he expects dual-clutch transmission sales to occupy a larger share of company sales in 2013 to 2015, noting a “very strong” development program with a Japanese automaker for dual-clutch technology.
BorgWarner posted third-quarter net income of $20 million before extraordinary items after losing money in each of the previous four quarters, according to Bloomberg data.
The supplier ranks No. 32 on the Automotive News list of the 100 top global suppliers, with estimated worldwide sales to automakers of $5.26 billion in 2008.
Ryan Beene is a reporter for Crain's Detroit Business