Automotive-Parts Supplier BorgWarner's Long-Term Outlook Remains Positive

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Researched by Industrial Info Resources (Sugar Land, Texas)--Despite being hit hard by the worldwide economic crisis, BorgWarner Incorporated (NYSE:BWA) (Auburn Hills, Michigan), an international automotive-parts supplier, remains optimistic for growth. As the lack of consumer confidence has had a major effect on automotive sales, the company responded by cutting nearly 2,900 employees, or 17%, and shutting down operations in North America and Europe from December 12 to January 12, CEO Tim Manganello said at the Deutsche Bank Securities Auto Analysts Conference. "Don't expect to see the performance you had historically in 2009," he said. "This company historically has had strong growth and expects to continue to have strong growth going forward, but we need to get through this short time period right here." In the long term, the company sees an opportunity to remain profitable, as the need for fuel economy and reduced emissions are driving its $2.1 billion backlog of new business over the next three years, Manganello said.

The North American and European markets make up about 80% of the company's business, and both are experiencing major declines, Manganello said. About 12% of the company's business is with the Detroit Three: General Motors Corporation (NYSE:GM) (Detroit, Michigan), Ford (NYSE:F) (Dearborn, Michigan), Chrysler LLC (Auburn Hills, Michigan).

2009 Sales Breakdown

• Europe: 50%
• Americas: 30%
• Asia: 20%

"The underlying fundamentals of our business remain strong," Manganello said. "It's what we call the 'BorgWarner Difference.' We still have leading power train technology that drives our growth, customer and geographic diversity, a robust focus on cost reduction, financial discipline and financial strength, coupled with ample liquidity."

The company also implemented four-day work weeks in many of its European locations. It plans to close a four-wheel-drive facility in Wales in 2010, and is evaluating other smaller products and product lines, along with manufacturing facilities for their longer-term viability. In November 2007, Industrial Info began tracking an $18 million manufacturing plant expansion that BorgWarner had planned in Longview, Texas. The project, which was scheduled to begin construction in August 2008, was canceled before it kicked off.

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