Businessmodel of BorgWarner

Customer Segments

BorgWarner manufactures a broad range of products for use in the automotive industry. The Company serves a wide spectrum of customers within this industry, which can be categorised as follows:

• Light Vehicle Manufacturers, comprising manufacturers of passenger vehicles, light trucks, sport-utility vehicles, and vans;
• Commercial Vehicle Manufacturers, comprising manufacturers of medium and heavy trucks, as well as other commercial vehicles, such as buses;
• Off-Highway Vehicle Manufacturers, comprising manufacturers of off-highway vehicles, such as those used in agriculture, construction, and industry; and
• Automotive Aftermarket Distributors, comprising distributors of parts to the automotive aftermarket. In 2015 around 84% of the Company’s net sales were for light-vehicle applications. According to its annual report, BorgWarner serves every major automotive original equipment manufacturer in the world. The Company includes high-profile passenger vehicle manufacturers such as Ford Motor Company and Volkswagen among its customers, both of which accounted individually for 15% of BorgWarner’s net sales in 2015, as well as General Motors, Great Wall, Hyundai, Renault, Volvo, and BMW. It also serves off-highway vehicle manufacturers, including John Deere and Caterpillar.

BorgWarner serves an international client base, operating manufacturing facilities that serve customers across Europe, Asia Pacific, the Americas and Africa.

Value Propositions

BorgWarner provides value to its customers in the following ways:

• Its reputation and industry standing, with the Company established as one of the leading independent automotive parts manufacturers in the world, serving an extensive client base including market-leading companies such as Volkswagen and Ford Motor Company.
• Its international sales reach, with the Company operating an international network of manufacturing facilities, serving customers large customer base spread across the Americas, Europe, Asia Pacific, and Africa;
• Its extensive product portfolio, with the Company designing, manufacturing, and marketing a wide range of products for various types of vehicle, including turbochargers, timing systems, electrical components, emissions systems, thermal systems, automatic transmissions, thermostats, and gasoline ignition systems;
• Its proprietary technologies and unique products, with the Company utilising a number of patented technologies in its various products, making its product portfolio unique in its quality and design; and
• Its expert personnel, with the Company employing highly-trained specialist personnel across its two operating segment, led by a team of experienced industry executives. ### Channels

BorgWarner operates a website at www.borgwarner.com, through which it provides information on its various products, locations, and technologies. The Company does not operate an online sales channel, nor does it provide an online customer portal.

BorgWarner makes sales through its in-house direct sales force, with each of the Company’s businesses within its two operating segments having its own independent sales team. Account executives participate directly in product launch activities and serve as a key points of contact with customers. The Company’s sales and marketing employees frequently work together to explore cross-development opportunities.

BorgWarner’s sales personnel operate out of its global network of locations, including in China, Hungary, Brazil, Mexico, Japan, and Italy. BorgWarner operates its own manufacturing and distribution facilities, comprising a network of plants across the Americas, Europe, Asia Pacific, and Africa.

Customer Relationships

BorgWarner does not provide any products or services to its customers on a self-service basis. The Company makes its sales directly through dedicated sales team across the Company’s operating divisions, the members of which work closely with customers to establish their individual circumstances and requirements.

BorgWarner has account management teams and account executives assigned to specific customers for one or more of its businesses’ products. These account executives spend the majority of their time in direct contact with members of BorgWarner’s customers’s purchasing and engineering teams, establishing close relationships that enable the Company to more effectively meet the needs of its customers and secure recurring business.

BorgWarner provides ongoing support to its existing customers through its account management teams. It also provides assistance more broadly through its various departments, which are able to provide personal responses to queries and concerns filed either online or over the phone. The Company also provides a range of news and media resources on its website that keep customers up-to-date with company developments, Alternatively, customers are able to receive updates and interact with the Company directly through its social media accounts, including with LinkedIn, Facebook, and YouTube.

Key Activities

BorgWarner is a manufacturer and supplier of engineered automotive systems and components for powertrain applications. The Company aligns its activities into two reportable business segments: Engine, which is concerned with the manufacture and sale of turbochargers, timing devices and chains, emissions systems and thermal system; and Drivetrain, which is concerned with the manufacture and sale of transmission components and systems, all-wheel drive torque transfer systems, and rotating electrical devices. BorgWarner serves customers across all segments of the automotive industry, including manufacturers of light vehicles, including passenger cars, vans and light trucks; commercial vehicles, including medium-duty trucks, heavy-duty trucks and buses; and off-highway vehicles, including those used in agriculture, construction, and marine applications. It also provides products to distributors of parts to the automotive aftermarket.

Key Partners

BorgWarner works in conjunction with a wide network of companies and organisations, which support the Company’s manufacturing and distribution activities. These partners can be categorised as:

• Supplier and Vendor Partners, comprising suppliers of raw materials, tools, and equipment utilised in the Company’s manufacturing and design processes, as well as suppliers of services and technologies that are utilised more broadly across the enterprise;
• Joint Venture Partners, comprising various automotive manufacturing companies with which the Company collaborates on the manufacture and marketing of certain products through mutually owned entities;
• Channel and Distribution Partners, comprising various distributors and logistics service providers that support the Company’s own in-house sales and marketing operations; and
• Strategic and Alliance Partners, comprising various market-leading companies across multiple sectors, with which the Company shares certain resources and collaborates on joint projects. BorgWarner operates a number of joint ventures, primarily in Asia, with companies such as NSK, Divgi Metalwares, Beijing Automotive Components Stock, and Korea Flange Company.

Key Resources

BorgWarner’s key resources are its technologies and intellectual properties, its development and manufacturing facilities, its sales and distribution infrastructure, its raw materials and supply chain, its IT and communications infrastructure, its partnerships, and its personnel.

BorgWarner owns more than 5,600 active domestic and foreign patents and patent applications pending or under preparation, and receives royalties from licensing patent rights to others. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in BorgWarner’s name, including applications entitled ‘Solenoid assembly for friction clutch’, ‘Electronic shift on the fly part-time electro mechanical transfer case’ and ‘Metal pulley with non-magnetically susceptible insert’.

Additionally, BorgWarner owns and or leases a number of physical properties that are key to its operations, notably its 74 manufacturing, assembly, and technical locations across the Americas, Asia Pacific, Europe, and Africa.

Cost Structure

BorgWarner incurs costs in relation to the procurement of supplies and materials, the development and design of its products, the operation of its manufacturing and distribution facilities, the operation of its sales and marketing channels, the maintenance of its IT and communications infrastructure, the management of its partnerships, and the retention of its personnel.

In 2015 BorgWarner accrued total cost of sales in the amount of $6.32 billion and selling, general, and administrative costs totalling $662 million. The Company’s net research and development expenditure amounted to $307.4 million for the year.

Revenue Streams

BorgWarner generates revenue through the manufacture and sale of various automotive parts and systems. The Company’s two operating segments derive revenue from the sale of different product lines:

• Revenue derived from the sale of turbochargers, timing systems, emissions systems, thermal systems, thermostats, diesel cold start, and gasoline ignition technology; and
• Revenue derived from the sale of mechanical products for automatic transmissions and all-wheel drive vehicles, as well as rotating electrical components for light and commercial vehicles. In 2015 BorgWarner generated annual net sales of $8.02 billion, down slightly on the $8.31 billion recorded by the Company in 2014. The majority of the Company’s revenue was generated by its Engine segment, which recorded net sales of $5.50 billion. The Drivetrain segment recorded net sales of $2.56 billion.