Auto Service World
News   September 22, 2006   by Auto Service World

“Fundamental Change” Cited By BorgWarner CEO

In response to declining North American auto industry production, BorgWarner Inc. today announced that it is in the process of reducing its North American workforce by approximately 850 people, or 13%, spread across its 19 operations in the U.S., Canada and Mexico.
The reductions are driven by recent customer volume decreases and restructurings, and are expected to be substantially completed by the end of October.
“We continue to adjust our North American operations to the realities of the region’s drastic volume declines and customer restructurings, despite the fact that our growth in other parts of the world remains strong,” said Tim Manganello, chairman and CEO.
“All of our North American operations are affected by the significant recent actions at Ford, DaimlerChrysler, General Motors and other customers. This is more than a ‘one customer, one product’ issue. We are resizing our North American operations in response to current market conditions, and will continue to proactively manage our North American business as we build infrastructure in those regions of the world where we are growing.”
The company also revised its full-year 2006 earnings guidance down to $3.95 to $4.10 per share due to the significant recent customer volume declines and a greater-than-expected impact from higher commodity prices.
The range excludes a one-time cost of approximately $0.15 per share related to the restructuring. Previous guidance was $4.35-$4.60 per share for the full year.
Manganello noted that despite weak industry conditions in North America, the company still expects to grow company-wide 2006 sales at the low end of its original guidance of 5% to 7% and be back on track for 7% to 9% growth in 2007.
“The North American auto industry is undergoing fundamental change,” he said.
“The steps we are taking are difficult but necessary to assure our long-term growth. Demand for our technologies that improve fuel economy, emissions reductions, performance and vehicle stability in Europe and Asia, continue to drive our above-industry-average growth.”
The full-year 2006 impact on the company from commodity price increases is estimated at $40 million, up from the previous estimate of $25 million, primarily due to recent increases in the cost of nickel used in turbochargers.
Nickel prices have almost doubled from $6.50 per pound in the first quarter of 2006 to an expected $12.00 a pound projected for the second half of the year.
BorgWarner uses about 6.5 million pounds of nickel a year in its turbochargers.

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