Borg-Warner sees gold in timing modules

Automotive Industries, Sept, 1998 by Marjorie Sorge

Company will double sales volume in five years, sparked by global engine trend to chain-driven overhead cams.

The North American market has blessed Borg-Warner Automotive in the last decade when everybody and their brother seemed to want 4x4 vehicles and ohc engines. As those design trends boomed, so did Borg-Warner because cam drives and transfer cases were already its two core businesses.

It made $103.2 million on sales of $2 billion in 1997 up from $41.8 million on sales of $1.5 billion in 1996. Now, Borg-Warner Chairman John Fiedler sees opportunities to do even more by.

"We intend to double in size over the next five to seven years," he says. That means 8% to 10% growth each year. To accomplish that, Borg-Warner had to change the way it does business. In the past the company's four divisions had little interaction.

Enter the 45RFE 4-speed automatic transmission the company makes for Chrysler's new Jeep Grand Cherokee. Both B-W's air/fluid systems and automatic transmission systems groups provided parts for that transmission-- independently. That led management to see that those two divisions could provide more of the transmission system by working together, rather than alone.

"Our intent now is more cross-unit work," says Steve Gifford, vice president of worldwide sales and marketing for the automatic transmission system group. "What we are doing with Chrysler is bringing our groups together on some new transmissions beyond the 45RFE in Europe and North America."

Also on the horizon is supplying complete engine timing system modules. Gifford indicates that the timing systems that Borg-Warners Morse-TEC division supplies to Chrysler and Ford, which include cam chain, sprockets, tensioners and guides, might be expanded into modules. These would likely include the camshaft and timing cover.

Engine technology is already the fastest growing of any of Borg-Warner's operations, says Fiedler. Right now, it's about 15% of the company's business but that should grow to 30% by 2001 or 2002, due, in large part, to the industry's continuing march toward more ohc engines, with their use of multiple camshaft drives.

"If there is growth in ohc engines, there is a large opportunity (for Borg-Warner)," points out Greg Janicki, vice-president of supplier analysts CSM Consulting in Okemos, Mich.

That trend is well on its way in North America. By 2002, 43% of all engines will be dohc, 32% will be sohc and 25% ohv, according to market analysts DRI/Standard & Poors. That compares with 52% ohv, 25% sohc and 23% dohc in 1997.

The camchain business could boom if General Motors, currently the champion of the workhorse pushrod-actuated ohv engine, decides to move its truck V-8s (currently ohv) to ohc over the next eight years (see GM story, p. 70).

Japanese OEMs are replacing their rubber belt-type cam drives with more durable chains, Fiedler says. He predicts volume jumping from about 3.5 million camchains in 1997, to 5.3 million by 2005. The worldwide interest in new, cleaner diesels also promises growth for the timing chain business.

However, many automakers (including GM) are working on careless engines E with electronic valve actuation. That could impact Borg-Warner's business.

Borg-Warner also owns 63% of AG Kuhnle, Kopp & Kausch in Germany, a turbocharger maker. Fielder wants 100% of that company, to insure a bigger cut of the turbo market in Germany and France.

Transmissions, the oldest product in Borg-Warner's stable, will shrink below the current 45% of business, but, Fiedler notes, the dollar volume will increase with new products.

Meanwhile, the 4-wheel-drive trend continues. There will soon by small front-wheel-drive SUVs off car platforms in North America and Europe, and a larger car-derived SUV with all-wheel-drive in Asia.

If the world doesn't turn upside down, Borg-Warner could continue to be in the right place at the right time.

[ILLUSTRATION OMITTED]

TRANSMISSION INSTALLATION RATES

                       1998      2002

North America          86%       88%
Europe                 16%       21%
Japan                  81%       82%
Korea                  50%       61%

Source: Borg-Warner