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Growth, really both
on the engine side of our company and on the drivetrain side of our company,
is all around technology, and it's all around
product innovation, technology leadership.
Again, what we're all about is, we're very focused on the powertrain.
That's what we do. We focus very narrowly on powertrain.
And we bring and innovate and we deliver new technologies
that help the automakers meet their fuel-economy standards, their emissions standards
and we get great driving performance for the end customer.
So that's really what drives the company. That's what's driven us
for a while. I don't think it's one big thing.
If I look at our history and I look forward,
what we've done - and we've done very well actually - is we've anticipated
what that next trend may be.
So, go back, way back, and we had the foresight to see the evolution
and penetration of all-wheel drive type vehicles four-wheel drive type architectures, and
that drove our business for many many years around transfer case technology.
We had a vision many many years ago around
the evolution of air management and the optimization of air management which
took us into the turbocharger business and
more recently into advanced emissions type products.
So I think that's going to be the pattern you will see for BorgWarner.
So, if you think of the continued evolution of
transmission evolution, 8-speed,
9-speed, 10-speed, you think of all-wheel drive architecture, disconnect
capability, more driving performance,
you think of the continued evolution of hybrid.
You think of the internal combustion engine. They all offer
opportunity for new innovation and new technology, and that's where we'll see
BorgWarner continue to do it. And the way I like to think of it, is it's
kind of a product or system at a time. We're not out there gambling or betting on gambling or betting on
one big thing that's going to change the world. I think it'll just be a series of incremental
new products. Some of those are extensions of our current products,
and some will be brand new. The central theme
for us, somewhat, is the automaker.
We certainly take on board government policy,
end user preferences, etcetera, but our
primary relationship is with the automakers.
And the way I would articulate that is, it's very much
evolved into a partnership type approach over the last decade. What that
really
translates to is, the automakers are thinking,
"Here's where we need to be five years, 10 years, twelve years
"in terms of meeting emission standards, meeting fuel economy standards."
And they engage in that dialogue with the types of companies like BorgWarner. And they say,
"This is what we're thinking of. We're thinking of a 9-speed, a 10-speed. What do you think?"
And we say,
"You know, that's pretty interesting and here are some ideas that we would have
"that may be able to help get there."
And that is a very advanced relationship. It's quite formalized.
That's how we do things. So, we're inventing
with them. That's, to me, a very key point.
We're not doing a whole lot of pure invention in isolation.
It's somewhat connected to the automakers. And then it
evolves into a path of evolution.
We'll develop and invent a few products that'll test not quite OK.
Let's go to another product. And that's an intricate process.
And then when it comes to releasing that engine
or that transmission, as we've worked with them for multiple years,
we're the natural choice to be the
supplier for that product, because we've engineered ourself
into the engine or the transmission. So I would say to you that's the
bulk of how we do R&D. The other
perspective, we do have another part of our engineering group
that is much longer route.
Ten, 15, 20 years and that's probably a little more aligned with
research institutes,
universities, etcetera.
Where we're thinking maybe a little bit beyond the norm.
We've got a goal out there that we're going to double the size of the company
over the next seven years.
So in rough numbers that takes us from about $7.5 billion company
to a $15 billion company over seven years.
So that's pretty exciting. It's pretty challenging as well.
The vast majority that will come through what we discussed earlier, which is
organic product innovation,
organic technology. So that's the primary path for growth.
Part of that growth story will come through acquisition
as it's done in the past.
And when we think of acquisitions, we have
a very focused effort and it's around bringing in
technology to the company. Every company we target, from an
acquisition perspective, needs bring technology
and needs to bring growth. Those are very fundamental.
We're very open if it's drivetrain or engine.
That's ok. We're very open to wherever it may be
in the world. So that gives us some flexibility.
We have about 30 target companies that we're
evaluating. Some of those are pretty preliminary.
And some of those are getting much closer towards a potential transaction.
If you add those, the annualized revenue of those thirty companies,
it's about $5 billion or $6 billion. So it gives a little bit of a sense of our
growth. Now, we're not going to bring all of those home; we know that.
but what we do believe is, if you've got a robust set of companies in the hopper,
and you're managing them well, 1 or 2 of those are going to fall through to the bottom,
and that's what we're planning on. So acquisition is an important part of our
growth story, just like it has been in the past.
We've had a history of some very effective, very successful joint ventures.
Probably one of our most famous ones is with
a partner in Japan.
We do have joint ventures in China. We have joint ventures in India.
So that's been a part of our strategy when
we feel that. But I would say in general
we go to market more as a wholly-owned
company, but we do use joint ventures
in emerging markets. In a broader perspective we use
alliances, partnerships, joint ventures in a number of
different ways also primarily around
educational institutions. We have a lot of relationships with
universities, colleges, which doesn't maybe surprise you when
think we're a technology company. So we utilize them
in that perspective as well as the more conventional
joint venture company for operations.
There are many things, as you go around the world, that can
drive our business. The one that probably hits closest to us, though,
is the legislation that drives
fuel economy standards, emissions performance
and other related pieces of legislation.
In North America we're all driving towards cafe standards.
They're twenty years out. We know what the game is.
Everybody has bought into them. And then we can go forward.
So that's key. The next part is, then, for the government to get out of the way.
And what I mean by the government getting away is,
what we don't need is the government to help decide what type of
engine technology or vehicle technology
is required to meet those standards. So, simply put,
let the automakers, let the supplies, let the consumer
decide if you want a naturally aspirated engine,
or do you want a turbocharged engine to meet the standards. Whether you want to put more
speeds in a transmission.
Let that play out to give
the best solution for all parties - automakers, suppliers and consumers -
rather than
heavily subsidized government incentives to pick
or force a technology into the space.
And I think if we get that level of consistency,
it'll be a good world for us. There are other things, though,
I would touch on - there's much, obviously, economic stability that we
can get,
of course, helps. There's nothing worse than cycling in and out of
a recession, as an example. So, the more consistent
the economies can be, the better for it.
Last but not least, which does drive our business globally is
the governments need to ensure they're providing a competitive landscape for
doing business.
Whether that's free trade agreements, whether that's a tax policy,
whether that's educational institutions,
it varies by country. But, we've got to make each country
competitive because we're a global industry. So I
encourage and applaud the governments that are taking actions in those fields.
I think the two key areas where we've
seen the most
change, or we are seeing change, are the customers and
our employees. So from an employee perspective,
a couple of major shift for us, as we talked about earlier, we're
an ever growing global company.
So we're bringing people into our business, whether it be
Portugal, Poland, India, Brazil.
And that brings challenges. We're much more global company.
And those regions of the world are very different. So, yeah, you have to
learn how to do that. We see generation shifts.
We're bringing in a lot of younger employees into our company.
As I'm learning, they're very different to people like me.
And that's OK. We have to capture that. We have to harness
the uniqueness that the younger folks bring into our company.
And learn to work with it. So, there's definitely a difference.
Our employees, when I compare to
a decade ago, are much more socially
aware, much more environmentally conscious. So that brings different perspectives
of how you run the company.
To us, we see that as a big advantage.
A big advantage because it brings diversity, and it
brings a different perspective.
Portuguese people do think differently to people in Hungary. And that's good.
That's really good, actually. So, our perspective is, we're trying to take take advantage,
so to speak, of that.
And what we do is, we respect and value the different cultures of the world,
but the
overall glue that brings it all together is BorgWarner.
With the customer, I would say, it's more about
transparency.
I think that's a little bit of a shift. I alluded
earlier, that it's this very open, collaborative approach on developing new technology.
With that comes a trust and an openness to just share
with the customers what you're thinking of what you're doing, what you're thinking
of what they're doing.
And the good news for the industry is I think we're on the right path there. I see more of that occurring.
So that's a bit of a shift much more so than metrics and reporting and data
it's more about behavioral engagement.