BorgWarner Turbo & Emissions Systems to grow 7 to 8 times by 2012 in China

Our Regulated 2-Stage (R2S) turbo chargers technology is becoming more and more popular in every region of the world. Variable turbine geometry (VTG) is one of our newest technologies for gasoline engines, and BorgWarner does the very first to market to commercialize this technology on a Porsche engine, and since we have launched that in 2006, we have had much interest from all the other customers in the world.

We have our turbo chargers in some of the vehicle types in passenger car market, such as Renault R9M (S2D), Renault K9K EU5 Step4, BMW N47 TOP, BMW M57 TOP US, Mercedes OM651 with R2S. Diesel engine market is a market that we watch very closely, because almost all the diesel engines have turbo chargers on them. We believe that in India, China and Korea, the diesel market will grow significantly. So this area of the world, specifically in china, is a very important area for our continuous growth in Turbo & Emissions.

R2S and Gasoline turbo chargers are the most important for us, because these are the two technologies where the most growth we think is going to come from, and these are the two technologies that BorgWarner has the technological lead, over the rest of the competitors in.

The worldwide market is about 21,138,000 turbo chargers on an annual basis in 2007, and BorgWarner enjoys a 32% market share. The gasoline turbo chargers market which is a very significant future market for turbo chargers, BorgWarner currently enjoys a 40% market share in this market. As I mentioned with the Porsche applications, BorgWarner has the leading technologies on the gasoline side of the market.

Another very important part of our business in Turbo & Emissions is the Emissions Systems Technology. We have a unique position in the market place to combine the turbo charger technology with the emission component technology, to provide our customers with air management solutions.

In summary, BorgWarner is a unique supplier of the complete turbo and emissions systems products. We are recognized as the global leader in gasoline turbo technology as well as the Regulated 2-Stage technology and we have 50 plus years of experience and a very significant market share. And I should mention that we have locations for our business in every major region of the world, and our strategy is to be located close to where our customers are located.

Q: The China and India market are growing very fast, so what's your strategy for these markets?

A: Our strategy is to be located in the local market, to serve our customers. And specifically for China, we are putting technical resources of engineering as well as testing in place to be able to develop our products closely for our customers' applications. We have significant growth plan here in china: to grow about 7 or 8 times over the next five years, 7 or 8 times the size of what we are today. And in India, the Turbo & Emissions group has a joint venture partner in India, where we have a new facility in Chennai, that is set up to serve the engineering, technology, and manufacturing needs of our Indian customers.

Q: Can your turbo charger technology be used in the small and cheap cars, such as those of a price under $3000?

A: Yes, we have a various range of technologies, from very simple to very sophisticated. We do have products in the portfolio that we are working in lower cost vehicles.

Q: Do you have an example for turbo charger applications in the lower cost vehicles?

A: We have what we call in the technology portfolio -- waste gate, small size turbo chargers.

Q: Do you have any customers that you can tell us on this kind of application?

A: Not that we can disclose, but we are working on some applications with our customers. 

Q: It is reported that Daimler plans to become one of the leading turbochargers supplier in Europe. What do you think of that? Would you and Daimler become competitors?

A: Daimler Benz has a joint venture with IHI, and they are interested in producing some of their own turbo chargers. But Daimler is also a customer of ours. I think we will continue to be a supplier of Daimler, even when the joint venture is making a significant number of turbo chargers. Typically our customers come to us for the high technology applications and our strategy is to still be the number one technology leader.
 
Q: You mentioned your technology (R2S, VTG, and etc.) advantage in the gasoline market, and the significant growth in the diesel market. Would that be a contradiction?

A: No contradiction. The R2S is for diesel applications. We also play in the other technologies also to accomplish the diesel market. The gasoline is a specialty of ours, and in some market, the gasoline market is very important, in North America, it's very important, and I think in China, it will be very important.
 
Q: What's the benefit of using R2S turbo chargers?

A: That's a great question. R2S is really two turbo chargers that work together with each other. Most emissions are created at very low RPMs of the engine. But the turbo charger requires exhaust in order to begin the movement of the turbo charger. With only one turbo charger, by the time the exhaust turn starts the working with the turbo charger, the low RPM range of the engine has already been passed. We have a small turbo charger in the very beginning to turn very quickly, and we have a larger turbo charger for the higher RPM range in order to accomplish the emission reduction for the whole range.

Q: R2S is only used on diesel engines?

A: It can be used for both, while primarily used for diesel engine.

Q: Can you give us some example for the application of the R2S? 

A: BMW 535 in Europe has our R2S system, and Ford medium duty pick up truck in North America has our R2S system. And we are working on many of others.

Q: In terms of powertrain development trend, Europe works more on diesel engine, Japan has been developing with the hybrid power, and Daimler believes gasoline engine can still have a big future. What is BorgWarner's forecast for the future powertrain technology in the world?

A: From a global basis, each region is a little bit unique right now. North America has a very large engine infrastructure for gasoline, so we think in the future 10 years diesels will grow and take maybe 15% or 20 % to the market in North America. As you know, Europe has a 50% diesel penetration right now, and it is continuing to grow slightly. The regulations in China haves followed the European regulations, and I think that is why the diesel penetration in China will be very significant; the gasoline is also very popular here in China. So our strategy is to be here with both technologies to serve the market.