QUOTE AND NEWS
Motley Fool  Jan 30  Comment 
The future's uncertain, and a hike in BorgWarner's dividend is... nowhere near.
Automotive World  Jan 20  Comment 
BorgWarner is rethinking its forecasting methodology to project more realistic growth assumptions. By Freddie Holmes The post BorgWarner hits reset on its forecasting methodology appeared first on Automotive World.
Automotive World  Jan 19  Comment 
BorgWarner’s Innovative Powertrain Solutions Help to Improve Fuel Economy, Optimize Cooling Performance and Reduce Emissions BorgWarner will display a broad range of fuel-efficient technologies in Hall 18FF, Booth 26, at this year’s Auto Expo...
Automotive World  Jan 18  Comment 
BorgWarner’s Coolant Pump Technology Supports Broad Range of Powertrains, from Internal Combustion to Hybrid and Electric Vehicles BorgWarner supplies the electric auxiliary thermal coolant pump (ATCP) for a turbocharged compact SUV built by a...
Forbes  Jan 14  Comment 
Looking at the sectors faring worst as of midday Thursday, shares of Consumer Products companies are underperforming other sectors, up 0.5%. Within the sector, BorgWarner Inc (NYSE: BWA) and Under Armour Inc (NYSE: UA) are two large stocks that...
Automotive World  Jan 13  Comment 
BorgWarner projects mid-single digit net new business growth over the next three years Expects net sales growth of approximately 13% to 18% and net earnings of $3.11 to $3.32 per diluted share in 2016 bolstered by Remy acquisition Provides net...
SeekingAlpha  Jan 13  Comment 
Automotive World  Dec 9  Comment 
Despite economic uncertainty, BorgWarner believes Brazil will remain a key market The post Brazil still holds “tremendous potential,” says BorgWarner appeared first on Automotive World.
Automotive World  Dec 8  Comment 
BorgWarner’s Variable Cam Timing (VCT) Technology Improves Engine Efficiency, Performance and Fuel Economy BorgWarner is expanding its engine timing business in Korea, by supplying its advanced cam torque actuated (CTA) variable cam timing (VCT)...
Automotive World  Dec 7  Comment 
BorgWarner will present the iClutchTM intelligent clutch system and its innovative compact disconnect system for electrified drivetrains in two technical presentations held at the 14th International Car Training Institute (CTI) Symposium,...




 

BorgWarner, Inc. (NYSE:BWA) makes parts used in car engines and drivetrains, such as transmissions and four-wheel-drive components. BWA's largest customers include Auto Makers Ford Motor Company (F), Daimler AG (DAI) and Volkswagen (VLKAY), who collectively accounted for 30% of BWA's $5.3 billion in 2007 revenue.[1]


A nearly $100-per-ton increase in the price of steel in 2007 increased BorgWarner's cost of goods sold (COGS) by more than 17% year-over-year.[2] Also, when U.S. new car sales declined by over 5% between 2005 and 2007,[3] BorgWarner's sales in the U.S. fell by $110 million, a decline of around 6%.[4] On the other hand, BorgWarner only earned 34% of its 2007 revenue in the U.S.; as such, a weak dollar and favorable exchange rates gave the company's non-U.S. revenue a $262 million boost in 2007.[5]

Business Segments

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BWA 2007 Revenues by Segment[6]

Engine (70% of 2007 revenue)

The Engine group sells products that improve the performance and fuel efficiency of engines. The Engine group's main products are turbochargers, timing chains, and other engine products.[7]

Drivetrain (30% of 2007 revenue)

The Drivetrain segment specializes in four-wheel drive (4WD), all-wheel drive (AWD). and dual-clutch transmission systems. The company's 4WD and AWD products include transfer cases, which distribute engine torque to the front and rear axles, and active torque management systems, which sense the wheels that have the most traction and transfer power to those wheels.[8] BorgWarner also manufactures the famous DualTronic® transmission.[9]

Business Financials

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BWA 2007 Revenues by Geography[10]

BorgWarner 2007 Revenue, Operating Income and Net Income[11] ($ in millions)

Segment 2007 2006 2005
Engine 3,761 3,155 2,855
Drivetrain 1,599 1,461 1,473
Inter-segment eliminations (32) (31) (35)
Total Revenues 5,329 4,585 4,294
Operating Income 425 275 323
Net Income 289 212 240


Key Trends and Forces

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EUR to USD Exchange Rates[12]

A weak U.S. dollar boosts Borg Warner's international sales

Between June 18, 2007 and June 18, 2008, the euro value of one U.S. dollar decreased from 0.75€ to 0.65€.[13] Since BorgWarner reports its revenue in USD but does over half of its business in Europe, the favorable euro-USD exchange rate boosted the value of its international sales. As a result of the dollar's depreciation, BorgWarner's 2007 revenue and net income were boosted by $262 million and $15 million, respectively.[14] While a weak dollar both boosts the value of sales in other currencies and makes BorgWarner's products relatively cheaper on international markets, a strengthening dollar has the exact opposite effects.

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Steel Prices 2007-2008[15]

Higher steel prices increased COGS 17% in 2007

Between January 2007 and December 2007, the price of hot rolled steel coil rose from $549 to $630 per metric ton, and the price of hot rolled steel plate rose from $747 to $837 per metric ton.[16] As a result, BorgWarner's cost of sales rose over 17% from 2006 to 2007, and its gross margin fell from 18.5% to 17.8%.[17] Because it is difficult for BorgWarner to pass higher materials costs on to customers as price increases, rises in the cost of raw materials often hurt profitability.[18]

2007 U.S. new car sales lowest since 1998

Between 2005 and 2007, U.S. new automobile sales fell nearly 5% from 16.9 million cars in 2005[19] to 16.14 million in 2007, the lowest level since 1998.[20] Despite attempting to minimize the effects of decreased automobile demand by negotiating contracts, BorgWarner's North American revenues decreased by 5% between 2005 and 2007.[21] In 2007, 73% of BorgWarner's sales came from products used in automobiles (light cars, trucks, SUV's, etc.),[22] making BorgWarner's sales highly dependent on trends in the auto industry.

Three customers accounted for 33% of 2007 sales

BorgWarner is heavily dependent on a few key customers, as its three largest customers accounted for right at 33% of its 2007 revenue. Volkswagen (VLKAY), Ford Motor Company (F), and Daimler AG (DAI) accounted for 15%, 12%, and 6%, respectively, of all 2007 sales.[23] The loss of any one of these three key clients would have a significantly negative impact on BorgWarner's revenue and profitability.

Key Competitors

  • Honeywell International (HON) makes turbochargers that compete directly with those produced by BorgWarner.[24]
  • Federal-Mogul Corporation (FDML) is an automotive parts manufacturer, and its ignition and temperature management products compete directly with similar products from BorgWarner's Engine group.[25]
  • Robert Bosch GmbH, a privately owned company, makes transmissions, emissions reduction products, and diesel starting products that compete directly with BorgWarner.[26][27]

BorgWarner and Key Competitors 2007 ($ in millions)

Company Revenue Net Income Net Profit Margin
BorgWarner 5,329 289 5.4%
Honeywell International (HON) 34,589 2,444 7.1%
Federal-Mogul Corporation (FDML) 6,914 1,412 20.4%
Robert Bosch GmbH 63,491 Pvt.Pvt.

Note: Figures for Robert Bosch GmbH were were converted from Euros using average 2007 exchange rates.[28]



References

  1. BWA 2007 10-K: Customers, pg 8
  2. MEPS STEEL PRODUCT PRICE LEVELS ACROSS 2007 - 2008
  3. NADA: 2006 Auto Sales Eighth Strongest on Record According to NADA DATA Report
  4. BWA 2007 10-K Exhibit 13: Geographic Information, pg 62
  5. BWA 2007 10-K Exhibit 13: Results of Operations, pg 3
  6. BWA 2007 10-K Exhibit 13: Results By Reporting Segment, pg 4
  7. BWA 2007 10-K: Business, pg 5
  8. BWA 2007 10-K: Business, pg 6-7
  9. How Dual-clutch Transmissions Work: Dual-clutch Transmissions: Past, Present and Future
  10. BWA 2007 10-K Exhibit 13: Geographic Information, pg 62
  11. BWA 2007 10-K Exhibit 13: Results by Reporting Segment, pg 4
  12. EUR to USD Exchange Rates
  13. EUR-USD Exchange Rates
  14. BWA 2007 10-K Exhibit 13: Results of Operations, pg 3
  15. MEPS STEEL PRODUCT PRICE LEVELS ACROSS 2007 - 2008
  16. MEPS STEEL PRODUCT PRICE LEVELS ACROSS 2007 - 2008
  17. BWA 2007 10-K Exhibit 13: Results of Operations, pg 6
  18. BWA 2007 10-K: Risk Factors, pg 14
  19. NADA: 2006 Auto Sales Eighth Strongest on Record According to NADA DATA Report
  20. 2007 U.S. Auto Sales Dimmest Since 1998 - The Auto Channel
  21. BWA 2007 10-K Exhibit 13: Geographic Information, pg 62
  22. BWA 2007 10-K Item 1, Business, pg. 8
  23. BWA 2007 10-K: Customers, pg 8
  24. Google Finance: HON
  25. Google Finance: FDML
  26. Bosch.com: Business sectors and divisions
  27. Bosch.com: Bosch in figures
  28. Monthly Average Graph (American Dollar, Euro) 2007
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