Turbos Fuel New BorgWarner Growth

By Danny King November 9, 2011

BW Turbo Growth lede.jpg

BorgWarner Inc., the world's largest producer of automatic transmissions, said the amount of new business it will receive for its transmissions and drivetrain components for the next three years will be 9 percent more than its new business during the last three years as the Chinese automobile market grows and more automakers look to meet progressively tougher greenhouse-gas emissions standards in Europe. The Auburn Hills, Mich., company said in a statement Tuesday that its new business for 2012 through 2014 will total about $2.5 billion as it sells more turbochargers, dual-clutch transmissions, engine-timing systems and other emissions products. Morgan Stanley analyst Ravi Shanker, who covers the company, said in a note on Tuesday that BorgWarner's estimates on its backlog of business may be "conservative."

About 80 percent of BorgWarner's new business will be from engine-related components, and about half of the new business will specifically stem from turbocharger demand as more vehicle makers use turbochargers to reduce the size of their engines without sacrificing power, the company said. Almost half of the new business will come from Europe, where regulators are requiring automakers to cut fleetwide greenhouse-gas emissions from new light-duty vehicles by about 7 percent between 2009 and 2015, and by more than 30 percent by the end of the decade. And about a third of BorgWarner's new business will come from Asia -- largely from China-based vehicle makers.

"Improving fuel economy, lowering emissions and enhancing the driving experience remain key objectives for auto makers around the world," BorgWarner CEO Timothy M. Manganello said in the statement. "Over the next three years, we believe our fuel-efficient technologies will be in high demand as the industry continues to implement advanced powertrain strategies."

The company said late last month that its third-quarter profit surged 33 percent from a year earlier on sales of engine and transmission components. BorgWarner earned $141.6 million in the third quarter, up from with $106.7 million a year earlier. BorgWarner, which generated $5.34 billion in revenue for the first nine months of the year, late last month also sued competitor Cummins Inc., alleging that the company infringed on three patents for a titanium wheel used in engine turbochargers.

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