Innovation and diversity: a must for BorgWarner success

Q: In your speech, you mentioned BorgWarner's careful select in investment place, such as Ningbo in China. What's BorgWarner new investment plan in China? 

So we see good growth opportunities in China, I think at this point Ningbo is our main manufacturing campus, but overtime, in additional to Ningbo and our growth in Ningbo, we may have other manufacturing campuses based on meeting customer needs. And in addition to a tech center we are looking at on Shanghai, we are also looking at expanding the office building in Ningbo for local engineers, and we would offer more space in the WOFI across some streets form BorgWarner Shenglong joint venture.

Q: Concerning about the intellectual property problem in China, global companies were not willing to bring their advanced technology to China a few years ago, but now many of them have announced to set up an R&D center in China. BorgWarner also decided to set up a tech center in Shanghai. Does this mean that you don't worry about the intellectual property problem any more? What's the progress of your tech center? 

Timothy M. Manganello: Regarding our tech center in China, we have not broken ground yet; we are on the final stages finalizing the deal, finalizing the transition. We will be looking forward shortly, once we get everything finalized. There will be a Shanghai technical center for most of our business units. We will also have some of the engineering and R&D resources in Ningbo, and we are going to have a building in Ningbo to support that portion of the technical center. The place we are looking at for the Shanghai technical center is Zizhu Industrial Park, near Jiaotong University.

Regarding the IP, I think globally everybody realizes the IP issues in China. My feeling is the Chinese are worried about the IP issues too. The Chinese OEMs are investing and creating their own technology, so they are just important to the Chinese OEMs to protect their technology as these foreign companies to protect their technology in China. I think the Chinese are doing a much better job, and there is a lot of focus and importance put on to the intellectual property protection in China.

We are bringing advanced technology to China. We would rather be the first one into China with new technology, and gain the first-mover advantage. I think a good example of that is dual-clutch technology that is doing well with Shanghai Automotive. We are also cooperating with three or four other Chinese OEMs for dual-clutch transmissions.

We are doing the same thing like turbo charger technology, chain drive technology and fan drives technology. We will take the proper steps, we'll do anything we can to protect our intellectual property, but we'll be in China with our advanced technology, so we can be the first one in, and gain competitive advantage.

Q: Most American auto suppliers are going down, but BorgWarner performs very well. What's the reason of your success? Do you have any plan of acquiring some American companies?

Timothy M. Manganello: We are successful in America, just like we are successful in Europe, China, Japan and everywhere else, because we have leading technology, we have strong focus on financial discipline, and we have broad customer base.

We will do an acquisition that will help BorgWarner, that will bring in new technology, or more diversified customer base, or put us in a part of the world that are a growing one. If there was an opportunity to do an acquisition in China from the very kind of company with that very kind of technology, we would probably look at it. We do an acquisition in Japan to begin business with Toyota.

Most of our recent acquisitions are doing in Europe, 20:20 mainly because Europe has the best appreciation for leading technology and using leading technology to improve fuel economy and emissions. We see the same demand for fuel economy improvements and emission reduction improvements in China. Most of our acquisitions would be doing globally, not necessarily in America, mainly because we are looking for the leading technologies, not just companies.

Q: Under the pressure of fuel economy and environment protection, new technologies such as hybrid, fuel cell vehicles become possible. The current situation is, the OEMs want to grow sustainably, but they don't want to take more risks in investing on the new technologies, so the pressure starts to be transferred to the parts suppliers. But once the technology succeeds, the supplier will win a long term contract from the OEMs. How can the suppliers avoid risks when they are investing new technologies?

Timothy M. Manganello: First, We focus on technologies that OEMs have to have. We figure that we can come up with the best technology solutions to include the economy and emissions. The OEMs would want to do business with BorgWarner. Second, , when we do gain business in the powertrain area, our contracts can be longer time contracts that cater for the life of a transmission, for the life of an engine, or for the life of a particular application of all wheel drive. We typically have five, seven or eight year contracts. Third, we have a diversified technology for broad applications.

Q: The BorgWarner plant in China has business of export to South African customers. Are the supplies for this export delivered to the South African plant directly from the China plant, or are they sent to the South African customers indirectly through BorgWarner's other plants in the world? This involves the issue of supply chain's simplification, and is likely to upset the balance between different interested parties inside the group. Is there any trend like this? And what is BorgWarner doing to address this problem?

Wenchang Zhang: The whole BorgWarner consists of six systems. With a growth history of one hundred years, BorgWarner has different operating modes in different countries. Now let me talk about the operating mode of the heat energy system. We have three operating principles, which are based on BorgWarner's powerful or lasting competitiveness in the world. Firstly, we have set up plants in different parts of the world to get closer to our customers and to meet their demands better. If we have a plant in an area, we will bring the local business to that plant. Secondly, when we are unable to satisfy our customers in an area due to economic or other factors, we will transfer some products to the more competitive manufacturing bases, such as India and China, a mode that has been proven by the manufacturing capabilities of our heat energy system. Thirdly, to boost its global competitiveness, BorgWarner will encourage its India and China plants to serve customers from other countries and regions. For examples, a BorgWarner's heat energy plant in China is providing products directly to the plants of Ford South Africa and American Chrysler, bypassing the BorgWarner's plants in the U.S. or other countries and regions. BorgWarner will continue to follow the three operating modes all the time to enhance its global competitiveness and long-term competitiveness as one of its major tasks.