netrashetty
Netra Shetty
BorgWarner Inc. (NYSE: BWA) is a United States-based worldwide automotive industry components and parts supplier. It is primarily known for its powertrain products,[1] which include manual and automatic transmissions and transmission components, (e.g., electro-hydraulic control components, transmission control units, friction materials, and one-way clutches), turbochargers, engine valve timing system components, along with four-wheel drive system components.[1]
The company has 60 manufacturing facilities across 18 countries,[1] which include the U.S., Canada, Europe, and Asia. It provides drivetrain component solutions to all three U.S. automakers,[1] as well as a variety of European[1] and Asian[1] original equipment manufacturer (OEM) customers. BorgWarner has diversified into several automotive-related markets (1999),[2] including ignition interlock technology (ACS Corporation est.1976) for preventing impaired operation of vehicles.[citation needed]
Historically, BorgWarner was also known for their ownership of the Norge appliance company (washers and dryers).
etrains, 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 $262 million boost in 2007.[5]
Business Segments
BWA 2007 Revenues by Segment[6]
Engine (70% of 2007 revenue)
The Engine group sells products that improve the performance and fuel efficiency of engines. The Engine group's main products are turbochargers, timing chains, and other engine products.[7]
Drivetrain (30% of 2007 revenue)
The Drivetrain segment specializes in four-wheel drive (4WD), all-wheel drive (AWD). and dual-clutch transmission systems. The company's 4WD and AWD products include transfer cases, which distribute engine torque to the front and rear axles, and active torque management systems, which sense the wheels that have the most traction and transfer power to those wheels.[8] BorgWarner also manufactures the famous DualTronic® transmission.[9]
Contents
1 Business Segments
1.1 Engine (70% of 2007 revenue)
1.2 Drivetrain (30% of 2007 revenue)
2 Business Financials
3 Key Trends and Forces
3.1 A weak U.S. dollar boosts Borg Warner's international sales
3.2 Higher steel prices increased COGS 17% in 2007
3.3 2007 U.S. new car sales lowest since 1998
3.4 Three customers accounted for 33% of 2007 sales
4 Key Competitors
5 References
Business Financials
BWA 2007 Revenues by Geography[10]
BorgWarner 2007 Revenue, Operating Income and Net Income[11] ($ 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
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.
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.
The company has 60 manufacturing facilities across 18 countries,[1] which include the U.S., Canada, Europe, and Asia. It provides drivetrain component solutions to all three U.S. automakers,[1] as well as a variety of European[1] and Asian[1] original equipment manufacturer (OEM) customers. BorgWarner has diversified into several automotive-related markets (1999),[2] including ignition interlock technology (ACS Corporation est.1976) for preventing impaired operation of vehicles.[citation needed]
Historically, BorgWarner was also known for their ownership of the Norge appliance company (washers and dryers).
etrains, 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 $262 million boost in 2007.[5]
Business Segments
BWA 2007 Revenues by Segment[6]
Engine (70% of 2007 revenue)
The Engine group sells products that improve the performance and fuel efficiency of engines. The Engine group's main products are turbochargers, timing chains, and other engine products.[7]
Drivetrain (30% of 2007 revenue)
The Drivetrain segment specializes in four-wheel drive (4WD), all-wheel drive (AWD). and dual-clutch transmission systems. The company's 4WD and AWD products include transfer cases, which distribute engine torque to the front and rear axles, and active torque management systems, which sense the wheels that have the most traction and transfer power to those wheels.[8] BorgWarner also manufactures the famous DualTronic® transmission.[9]
Contents
1 Business Segments
1.1 Engine (70% of 2007 revenue)
1.2 Drivetrain (30% of 2007 revenue)
2 Business Financials
3 Key Trends and Forces
3.1 A weak U.S. dollar boosts Borg Warner's international sales
3.2 Higher steel prices increased COGS 17% in 2007
3.3 2007 U.S. new car sales lowest since 1998
3.4 Three customers accounted for 33% of 2007 sales
4 Key Competitors
5 References
Business Financials
BWA 2007 Revenues by Geography[10]
BorgWarner 2007 Revenue, Operating Income and Net Income[11] ($ 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
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.
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.
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