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 September 30, 2024, totaled $3,449 million, a decrease of $173 million, or 5%, compared to the three months ended September 30, 2023. The weighted average market production, as estimated by the Company, was down approximately 6% from the three months ended September 30, 2023.
Gross profit and gross margin were $636 million and 18.4%, respectively, during the three months ended September 30, 2024, compared to $652 million and 18.0%, respectively, during the three months ended September 30, 2023. The increase in gross margin was primarily due to the factors discussed above.
Net earnings from continuing operations were $257 million for the three months ended September 30, 2024, compared to $105 million for the three months ended September 30, 2023. This was primarily due to a decrease in sales and an increase in restructuring expenses.
In June 2023, the Company announced the next phase of its Charging Forward strategy, which focuses on profitably growing eProducts while maximizing the value of the Company's Foundational products portfolio. During the nine months ended September 30, 2024 and 2023, the Company's eProducts revenue was approximately $1,721 million and $1,494 million, respectively, or 16% and 14% of its total revenue, respectively.
Acquisitions contributed $9 million in additional sales during the three months ended September 30, 2024. However, the overall decrease in net sales indicates that organic growth was not sufficient to offset declines in other areas.
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 PowerDrive Systems segment.
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). These pressures have softened in 2024, and as a result, the Company expects a trend of slight decreasing or flat costs.
On October 17, 2024, the Company announced that the remaining outstanding balance of $343 million on the 5.000% senior notes due in October 2025 will be redeemed in full on November 1, 2024 using cash on hand, in accordance with the terms of the agreement.
On September 26, 2024, a hurricane made landfall in North Carolina disrupting operations at the Company's facility in Arden, North Carolina (the "Arden Plant"). The Arden Plant was largely untouched, but the Company believes there is some loss or damage to the Company's assets.
During the three months ended September 30, 2024, there have been no material changes from the risk factors disclosed in the Company's Annual Report on the Form 10-K for the year ended December 31, 2023.
On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA has received or expects to receive from governmental agencies as well as damages and interest, which PHINIA has refused to pay to the Company.
On September 26, 2024, a hurricane made landfall in North Carolina disrupting operations at the Company's facility in Arden, North Carolina (the “Arden Plant"). The Arden Plant was largely untouched, but the Company believes there is some loss or damage to the Company's assets.
The Company expects global market production to decrease 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 allow the Company's year-over-year change in net sales to outperform the market production decline.
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.
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.
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 PowerDrive Systems segment.
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). These pressures have softened in 2024, and as a result, the Company expects a trend of slight decreasing or flat costs.
On September 26, 2024, a hurricane made landfall in North Carolina disrupting operations at the Company's facility in Arden, North Carolina (the “Arden Plant"). The Arden Plant was largely untouched, but the Company believes there is some loss or damage to the Company's assets.
Research and Development ("R&D") costs increased by $25 million. R&D costs, net of customer reimbursements, were 5.3% of net sales for the nine months ended September 30, 2024, compared to 5.1% of net sales for the nine months ended September 30, 2023. The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company's eProduct portfolio.
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 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.
On October 17, 2024, the Company announced that the remaining outstanding balance of $343 million on the 5.000% senior notes due in October 2025 will be redeemed in full on November 1, 2024 using cash on hand, in accordance with the terms of the agreement.
As of September 30, 2024, the Company had repurchased $404 million of common stock under this repurchase program. Shares purchased under this authorization may be repurchased in the open market at prevailing prices and at times and in amounts to be determined by management as market conditions and the Company's capital position warrant.
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 dividends were paid on March 15, 2024, June 17, 2024 and September 16, 2024, respectively.
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. 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 had an accrual for environmental liabilities of $5 million and $6 million as of September 30, 2024 and December 31, 2023, respectively, included in Other current and Other non-current liabilities in the Condensed Consolidated Balance Sheets.
The Company's Board of Directors declared quarterly cash dividends of $0.11 per share of common stock, respectively. The dividends were paid on March 15, 2024, June 17, 2024 and September 16, 2024, respectively.
The Company expects global market production to decrease 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 allow the Company's year-over-year change in net sales to outperform the market production decline.
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 British Pound, Chinese Renminbi, Euro, Hungarian Forint, Japanese Yen, Korean Won, Mexican Peso, Polish Zloty, Swiss Franc and Thai Baht.
On September 26, 2024, a hurricane made landfall in North Carolina disrupting operations at the Company's facility in Arden, North Carolina (the “Arden Plant"). The Arden Plant was largely untouched, but the Company believes there is some loss or damage to the Company's assets.