BorgWarner Shares Drop After Showcasing of EV Vision

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David Welch and Skylar Woodhouse
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(Bloomberg) -- BorgWarner Inc.’s attempt to garner more respect from investors for its effort to shift to electrification fell flat, triggering an 8% slide in the auto-parts maker’s shares on the day it presented its strategic vision.

The Detroit-area based company gave a three-hour presentation Tuesday, making a case that it’s just as prepared for the move to electric cars as the vehicle assemblers it has longed supplied, including Ford Motor Co., General Motors Co. and Volkswagen AG.

Shares of those automakers each have soared more than 30% so far this year, based in part on aggressive plans to sell more EVs. BorgWarner is up less than half that amount -- and fell 7.9% Tuesday to $44.30, the steepest drop since June.

“People have really asked the question: Is BorgWarner really positioned to succeed as the world shifts more dramatically toward electrification?” Chief Financial Officer Kevin Nowlan said in an interview. “That’s exactly what today’s strategy is intended to address.”

The leading manufacturer of turbochargers for gasoline-powered vehicles has had trouble convincing investors it can make the leap to the era of electrics. Ford and VW together account for about 24% of its sales, according to supply-chain data compiled by Bloomberg.

The company said it aims to boost revenue generated from EVs to about 45% of the total by 2030, up from the current 3%. It also will spend around 30% of its R&D total budget on electrification-related technology.

But those goals are less ambitious than Ford’s decision to double spending on EVs through 2025, GM’s pledge to go all-electric by 2035 and VW’s plan to build six car-battery factories.

As part of its repositioning, BorgWarner intends to sell off parts of its internal combustion engine business that generate between $3 billion and $4 billion in revenue, Nowlan said. It plans to make up for that -- at least in part -- by acquiring electrification-related business that can generate $2 billion to $3 billion in revenue.

The CFO shrugged off the share price drop, saying the company’s margins and financial performance have been strong.

“We don’t get hung up on the one day movement,” he said. “It is really about driving long-term value.”

(Corrects spelling of CFO’s name to Nowlan in eighth paragraph.)

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