BorgWarner to Sell Tire Pressure Biz - Analyst Blog

BorgWarner Inc. ( BWA ) plans to sell its tire pressure monitoring business to Germany-based Huf Electronics GmbH as it diverts its attention to powertrain technologies. The sale includes a manufacturing facility in Bretten, Germany that employs 230 people.

BorgWarner acquired the tire pressure monitoring business in 2005 as a part of its BERU diesel cold start and ignition systems business. The company would incur a book loss of approximately $10-$15 million due to the sale of the business.

The sale of the business at a book loss is not a negative factor when the company is highly optimistic about its powertrain business. BorgWarner expects net new powertrain business of $2.5 billion from 2012 through 2014, reflecting a 9% increase from its previous three-year net new business.

New business is expected to generate due to strong demand for the company's environmentally friendly technologies, including gasoline and diesel turbochargers, dual-clutch transmission, engine timing systems and emissions products.

About 80% of the new business is expected to come from engine-related products including turbochargers, ignition systems, emissions products, engine timing systems, variable cam timing modules and thermal systems.

The remaining 20% of the business is expected to emanate from drive train-related products such as the company's fuel-efficient DualTronic transmission technology, traditional automatic transmission and all-wheel drive technologies.

The new business will involve programs with every major automaker around the world. Being the market leader in new powertrain technology, Europe is expected to account for 45% of the business.

Meanwhile, Asia is anticipated to account for 35%, with China (22%) being the largest player as the top 25 customers of the business will include eight Chinese domestic original equipment manufacturers (OEMs). The remaining 20% of the business is expected to generate in the U.S. over three years.

Tightening emissions standards and a heightened focus on fuel economy in the commercial vehicle market is expected to help BorgWarner win new business. The top twenty-five customers of its new business include six commercial vehicle OEMs and 18% comes from the commercial vehicle market.

BorgWarner, a Zacks #3 Rank (Hold) company, is a leading manufacturer of powertrain products for the world's major automakers. Its products include four-wheel-drive and all-wheel-drive transfer cases (primarily for light trucks and sport utility vehicles or SUVs), as well as automatic transmission and timing chain systems.

These products are manufactured and sold worldwide, primarily to original equipment manufacturers of passenger cars, SUVs, trucks and commercial transportation products. The company's largest customers include Volkswagen ( VLKAY ) and Ford Motor ( F ).

The company posted a 64% increase in profit to $1.15 per share in the third quarter of the year from 70 cents per share (excluding non-recurring item) in the same quarter of 2010. The profit was higher than the Zacks Consensus Estimate of $1.05 per share.

Net sales surged 27% to $1.79 billion from $1.41 billion in the year-ago quarter led by strong demand for the company's products in the midst of improved fuel economy and emission standards.

For full year 2011, BorgWarner stated its EPS guidance of $4.35 to $4.45, which is the upper end of its previous guidance of $4.25-$4.45. The company expects revenues to grow between 26% and 27%, compared with the prior guidance of 25% to 28%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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