Delphi deal was perfect timing

Some auto suppliers are optimistically pushing forward through the global crisis to strengthen themselves for the future.

BorgWarner is one of them, declares CEO Frederic Lissalde.

The U.S. supplier of turbochargers and electric motors last week closed its acquisition of powertrain and aftermarket supplier Delphi Technologies. The $3.2 billion deal bolsters the expertise of both companies and is expected to result in an estimated $125 million in bottom-line synergies by 2023.

With COVID-19 threatening the financial viability of parts makers, and customers and industry stakeholders pushing for innovations in traditional powertrains, there couldn’t be a more perfect union, the CEO said.

It’s a “winning equation of mechanical, plus motor, plus power electronics and software, under one roof,” Lissalde told Automotive News last week in describing the resulting company.

The Delphi acquisition was the outcome of regular strategy and portfolio management discussions in which BorgWarner vets technologies and key players in the industry.

Lissalde said there is no particular product or technology on the chopping block now that the companies are joined. But he added, “We’re going to go through the process. We like everything we see at Delphi and the combination of product is absolutely unique in the propulsion area.”

One potential opportunity could be for Delphi to participate in BorgWarner’s recently announced business to supply an integrated drive module for Ford Motor Co.’s Mustang Mach-E crossover rear-wheel-drive and all-wheel-drive configurations. Lissalde called that “a key milestone in our journey towards electrification.”

Ford, together with Volkswagen, accounted for more than a quarter of BorgWarner’s business last year.

“I think that’s a testament to our ability, first, to serve Ford, but also to serve customers with fairly complex systems,” Lissalde said of the Mach-E deal. “Now, with the electrification, power electronics side that comes from Delphi, that’s a winning player.”

BorgWarner and Delphi posted parts sales to automakers last year of $10.2 billion and $4.4 billion, respectively. But like most major suppliers, both took massive hits this year because of the pandemic. BorgWarner reported a net loss of $98 million in the second quarter. Delphi reported a revenue drop of 44 percent to $628 million in the same quarter.

Lissalde remains bullish. “When you look at the potential book of business that we see going forward around the world when it comes to hybrid electric,” he said, “we’re talking about a lot of potential business.”

He also anticipates more opportunities from commercial vehicles. “I’m really confident what we’ve done with passenger cars can be translatable in some shape or form to the commercial-vehicle world, and vice versa.”

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