BorgWarner Inc. said it plans to start a restructuring program over the next two years after reporting first-quarter net income fell 29 percent from a year earlier to $160 million.
The Auburn Hills, Mich., turbocharger and electric motor supplier said its performance during the quarter compared with industry trends was still stronger than it expected, driven by higher volume of new programs, especially in Europe and North America.
BorgWarner said it plans to take several cost-cutting steps over the next two years. It expects to take $80 million to $100 million in restructuring charges by the end of 2020, which should result in annual savings of $40 million to $50 million by 2021.
"The company plans to utilize these savings to sustain the company's overall operating margin profile as it simultaneously increases investment to support future growth in hybrid and electric propulsion," BorgWarner's quarterly press release said.
The company said its first-quarter adjusted operating margin declined to 11.5 percent vs. 12.2 percent in 2018. Adjusted earnings of $295 million were down from $339 million but still beat Wall Street forecasts by 2 to 4 percent, according to a report from Robert W. Baird & Co.
BorgWarner shares fell 4.5 percent to close at $41.57 on Thursday.
Revenue for the first quarter fell 7.8 percent to $2.57 billion. BorgWarner said revenue decreased roughly $127 million because of foreign currency fluctuations.
"I'm very proud to say that our outgrowth in Q1 was stronger than we expected, driven by higher volume of new programs, especially in Europe and North America," CEO Frédéric Lissalde said in a conference call with analysts. "With $2.6 billion in sales, we were down 3.3 percent organically. This compares to our market being down by approximately 5.2 percent."
The company's engine segment decreased 6 percent to $1.6 billion in the first quarter. Excluding foreign currencies, net sales for the segment fell 1.8 percent year over year, as growth in North America was offset by lower Europe and China volume, Controller Thomas McGill said.
Revenue for the drivetrain unit dropped to $982 million in the first quarter from $1.08 billion in 2018.
BorgWarner said because of the encouragement from its first-quarter performance it will maintain it's full-year guidance for 2019.
BorgWarner ranks No. 25 on Automotive News' list of the top 100 global automotive parts suppliers, with $9.8 billion in sales to automakers in 2017.