Consumer Discretionary
Auto Parts
$7.02B
40K
BorgWarner Inc., together with its subsidiaries, provides solutions for combustion, hybrid, and electric vehicles worldwide. It offers turbochargers, eBoosters, eTurbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery modules and systems, battery heaters, and battery charging. The company provides power electronics, control modules, software, friction, and mechanical products for automatic transmissions and torque-management products. It sells its products to original equipment manufacturers of light vehicles, which comprise passenger cars, sport-utility vehicles, vans, and light trucks; commercial vehicles, including medium-duty and heavy-duty trucks, and buses; and off-highway vehicles, such as agricultural and construction machinery, and marine applications, as well as to tier one vehicle systems suppliers and the aftermarket for light, commercial, and off-highway vehicles. The company was formerly known as Borg-Warner Automotive, Inc. BorgWarner Inc. was incorporated in 1987 and is headquartered in Auburn Hills, Michigan.
Key insights and themes extracted from this filing
Net sales for the three months ended June 30, 2024 totaled $3,603 million, a decrease of $68 million, or 2%, compared to the three months ended June 30, 2023. The weighted average market production as estimated by the Company was down approximately 2% from the three months ended June 30, 2023.
Gross profit and gross margin were $685 million and 19.0%, respectively, during the three months ended June 30, 2024, compared to $680 million and 18.5%, respectively, during the three months ended June 30, 2023.
Net earnings from continuing operations was $329 million for the three months ended June 30, 2024, compared to $246 million for the three months ended June 30, 2023.
In 2021, the Company announced its strategy to aggressively grow its eProducts over time through organic investments and technology-focused acquisitions. eProducts include all products utilized on or for electric vehicles ('EVs') plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs.
On July 3, 2023, BorgWarner completed the previously announced spin-off ('Spin-Off') of its Fuel Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company's stockholders for U.S. federal income tax purposes.
The Company expects global market production to decrease modestly year-over-year in 2024. However, the Company expects net new business-related sales growth, due to the increased penetration of BorgWarner products, including eProducts, to drive a modest sales increase despite the decreased market production.
In the second quarter of 2024, the Company announced a new business unit and management structure designed to further enhance the execution of the Company's Charging Forward strategy effective July 1, 2024.
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs primarily in its Foundational products businesses. In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its ePropulsion segment due to increased market volatility.
The Company was in full compliance with its covenants under the revolving credit facility and had full access to its undrawn revolving credit facility.
Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $62 million primarily due to the weakening of the Chinese Renminbi, Euro and Korean Won, in each case relative to the U.S. Dollar.
Foreign currency exchange rate risk is the risk that the Company will incur economic losses due to adverse changes in foreign currency exchange rates. Currently, the Company's most significant currency exposures relate to the Brazilian Real, British Pound, Chinese Renminbi, Euro, Korean Won, Mexican Peso, Polish Zloty, Singaporean Dollar and Thai Baht.
In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, governmental investigations and related proceedings, general liability and other risks.
The Company expects net new business-related sales growth, due to the increased penetration of BorgWarner products, including eProducts, to drive a modest sales increase despite the decreased market production.
The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
The Company believes it is well positioned for the industry's anticipated migration to EVs.
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs primarily in its Foundational products businesses. In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its ePropulsion segment due to increased market volatility.
As a result, the Company expects a trend of slight increasing or flat costs.
The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs.
The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company's eProduct portfolio.
The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
The Company expects net new business-related sales growth, due to the increased penetration of BorgWarner products, including eProducts, to drive a modest sales increase despite the decreased market production.
In April 2024, the Company's Board of Directors authorized the purchase of up to $767 million of the Company's common stock, which replaces the previous authorization.
On February 7, 2024, April 24, 2024 and July 23, 2024, the Company's Board of Directors declared quarterly cash dividends of $0.11 per share of common stock, respectively.
The Company uses its U.S. liquidity primarily for various corporate purposes, including but not limited to debt service, share repurchases, dividend distributions, acquisitions and other corporate expenses.
There are several trends that are driving the Company's long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that the Company believes support demand for the Company's products that drive vehicle efficiency.
The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain state environmental agencies and private parties as potentially responsible parties ('PRPs') at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act ('Superfund') and equivalent state laws.
The Company had an accrual for environmental liabilities of $6 million as of both June 30, 2024 and December 31, 2023, included in Other current and Other non-current liabilities in the Condensed Consolidated Balance Sheets.
The Company expects global market production to decrease modestly year-over-year in 2024.
Prices for commodities have started showing a lower level of volatility in comparison to what the Company had experienced from the beginning of 2021. At the same time, many economies, including the United States, are still experiencing elevated levels of inflation, which continues to put pressure on other input costs (e.g. labor, energy, other materials).
The Company believes it is well positioned for the industry's anticipated migration to EVs.