Interview with James R. Verrier, President and CEO, BorgWarner Inc.

BorgWarner is a global product leader in powertrain solutions. The company focuses on developing leading powertrain technologies that improve fuel economy, emissions and performance. Its facilities are located across the globe to provide local support to its diverse customer base.

The company operates in two groups: The Engine Group develops air management strategies and products to optimise engines for fuel efficiency, reduced emissions and enhanced performance. BorgWarner’s expertise includes engine timing systems, boosting systems, ignition systems, air and noise management, cooling and controls. The Drivetrain Group harnesses a legacy of more than 100 years as an industry innovator in transmission and all-wheel drive technology. The group leverages this understanding of powertrain clutching technology to develop interactive control systems and strategies for all types of torque management.

What are your plans for India and how do you perceive the growth in this part of the world?

BorgWarner’s stated goal laid out in 2013 is for the company to become a US$ 15 billion enterprise by 2020. It implies doubling the company in seven years which is roughly a 10 pc growth rate. The way we plan to do that is to stay focused as a powertrain leader and a technology leading company which is focused on drivetrain and engine products and all products which we have or will have that all enable the auto makers to achieve fuel economy, emission standards and the driving performance they require. Where does India fit into that picture? Well in the last few years the company is spread out half in Europe and the other half split equally between the Americas and Asia. Over the next five years that will change. We will become 40 pc in Europe, 30 pc in Asia and 30 pc in the Americas. What that tells you is that the growth is still there in Europe but is slowing down. That is because the vehicle growth is slow in Europe and we have a very high saturation in all of our technology today. The two big growth sectors are Asia and the Americas. In Asia we are basically focused on China and India. We expect India to be a major contributor to that growth. BorgWarner will be growing at the rate of 10 pc. I will expect the same for India as well. We will surely look for more investment in India. When I look at the growth we have in India, we will have to invest more in capital equipment and support the programmes we have been awarded. I think you will see continued investment around technical infrastructure capability. You will certainly see it on production equipment to support the growth and in terms of new buildings we will see how that plays over time but we will keep investing in India.

When you talked of saturation in the European market, saturation in what sense? Is it in terms of market growth or technology?

What I said earlier is that BorgWarner has always grown much faster than the market growth because of the adoption of our products. Europe has been part of that growth when we have had very strong growth. What you see is that a lot of the adoption of our product is much more main stream in Europe. For example, all diesel passenger vehicles in Europe have turbochargers on them. Even the petrol vehicles have turbochargers on them. If you contrast that on petrol turbochargers for other parts of the world that penetration is very low. The reason is that the emissions and fuel economy standards in Europe are tighter. A lot of our products have been adopted and applied to the products in Europe but it will be at a lower rate from what we have historically done, largely driven by a large amount of our products which have penetrated into that space to help them meet fuel economy and emission standards. The good news is that the technologies applied in Europe over the last few years for emissions and regulations is going to be the same technology being brought to India and China, so that is going to be a great benefit to these countries.

What are the different kinds of new product development that BorgWarner is currently working on?

We constantly look to be inventing new products and technologies. The way we generally think about it is that BorgWarner has always had innovation and technology for the current products and we have to get them to the next level. Today we produce a lot of technology for transmissions, 6-speed, and 7-speed and now you probably know 9 and 10-speed transmissions. We have to develop and make sure we have that. Long ago there were engines with one turbo, then two and now three may be four who knows. There is always invention of new products to get to the next level. BorgWarner has always been looking for brand new products, so as an example in the last year or two we launched in the US market a product to work with transmissions used in stop/start technology for automatic transmissions. We launched the stop / start accumulator. What it does is it helps the transmission function better for the driver when it goes into stop and start mode. That is an example of what we have not done before. The other aspect of next gen products are products that we bring into the portfolio through acquisition as well. A very good example is the acquisition of Gustav Wahler GmbH. That brought products like thermostats which was a brand new product for BorgWarner. We will be making that here in India. There are multiple sources but the way to think of it is that it is all going to be around powertrain, things like thermal management products, valve train products, air management products, etc. So it is exciting and that is why we spend a lot of money on R&D and it is good for us.

How do you see India as an export hub of sorts feeding the European and North American markets?

From a BorgWarner perspective our strategy is to invest in the region, produce in the region and engineer products in the region where it is consumed. That’s our primary strategy, so we do very little of what I call export of finished goods. The real strategy for India as an example is, we want to be able to do engineering and manufacture of products to serve the local Indian markets. We don’t do a lot of export of turbochargers or transmission products from India. I would never say we never do because there is always a small example. Where I see the opportunity in India is, we find component supply and support very strong in India. In BorgWarner we buy a lot of components from India that we use in Europe or North America and that will continue from a component supply point of view. For example, we may source housings for turbochargers or similar type of components. That is a strong element we will continue to use. One of the things which help us a lot is the strong team we have on ground in India and as those guys develop their local suppliers for India we also have the opportunity then to use that same tier II supplier to supply other parts of BorgWarner around the world.

You are also focusing a lot on R&D in the Indian context. Do you see India becoming a strategic hub for BorgWarner globally for any particular range of products or technologies?

As I mentioned earlier, a lot of what we are going to be launching in India over the next three years are derivatives of products existing in Europe. The base design is already established and in production in Europe. What we are doing is building local application engineering and designing, as well as testing and validation work here. They can take accountability and responsibility to do that locally with the customer. They can take a turbocharger in production in Europe and adopt and modify it, adjust it and fit it for a local Indian customer. Because they do that locally, they can also do it quickly and are very responsive and can do the tests. That is what I think the next few years look like. Would I see a possibility that we would do core research and development work in India at the time? I would say that is possible. I think that is the next step. The Indian team is busy with a lot of new products to launch, so we want to walk before we run. But in the long haul, I think the engineering talent in India is outstanding and can be utilised.

Are you developing some new products for the diesel engine market from your turbocharger division in terms of below 1000cc engines which are coming in now?

We work with everything from 15 L and 18 L engines for big trucks all the way down to the 660cc engines. What we see is a very strong trend of downsized engines is very much a theme and also boosting those engines. We provide products to very small engines as well as large engines. It is not just turbochargers, we make small engines for coolers and we provide timing drive products for 660cc engines in Japan. The customer and the OEM will decide what engine optimisation they want, whether they want to be at 660cc, 900cc or 1200cc. The customer specifies the capacity and we tell them how we can optimise the engine or transmission by showcasing products which can be applied.   

You said India is important in the global context for BorgWarner. What is going to be the strategy for your growth in India? Is it going to be organic or inorganic?

I think the majority of our growth will be organic. When I look at the products we have today in our portfolio we have a lot of really great stuff and that is going to drive the growth we need. As I said earlier we completed the acquisition of Gustav Wahler GmbH last year and that is an immediate benefit for India with some of those products applying here in India. I think it will be a mix of organic and some acquisition along the way. We have a lot of good products right now. A company has to bring in technology for us to acquire it. We are looking for technology. What is interesting is when I look at Wahler and other such acquisitions, they were privately owned by families in Europe and the reason why they sold to BorgWarner was that they were under pressure from their customers to go global.