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BorgWarner vows to become a global leader in torque management systems

From Gasgoo.com| June 27 , 2008

BorgWarner vows to become a global leader in torque management systems
                       Tom Tan (left), Cynthia A. Niekamp(right)

Cynthia A. Niekamp
Vice President, BorgWarner, Inc.
President and General Manager,
BorgWarner TorqTransfer Systems

Tom Tan
General Manager
BorgWarner TorqTransfer Systems (Beijing) Co., Ltd.

Before I speak specifically about china and our operations in china, maybe I can briefly tell you our business on a global basis. We have plants and operations in the U.S., U.K., Germany, Korea, India, Japan, China and Mexico.

So I would speak about China, we have been in Beijing area, a joint venture in 2001, we own 80% of this joint venture, our partner is Beijing automotive industrial corp., is general manager of this business in Beijing.

We make torque management product, mainly for all wheel drive systems, we make transfer cases for rear wheel drive based vehicles, and we make carburetor engine for front wheel drive based vehicles.

Our customers are local Chinese customers, including Naveco, Beijing Auto Works, Chery, Shuanghuan, Nissan, Huatai and Zhongxing Motors, but I should note we also have Western, Korean, Japanese customers that we also sell our products to that coming into the Chinese market, for example, vehicles of Hyundai, Kia, Honda, GM, Ford, Audi that we sell and even though they are not produced here, but the Chinese consumer has an experience with our products.

On a global basis, our business has 2,500 employees, here in Beijing in China we have 72 employees, and we take all the best ideas from all around the world and invest. This is our most recent assembly line investment we made in Beijing. It's very flexible, and very state of the art, all the best ideas, it's brand new, no old equipment, brand new assembly plant.

We have been growing very rapidly. As I mentioned, we only started in 2001; this year we expect to be post $30 million revenue, we'll at least grow three times; every year we’ve been doubling in China, and we expect to grow by three times or more by the year 2012.

We're the No. 1 supplier of transfer cases in China. We are the only foreign producer of transfer cases in China. We have about 1/3 market share here in China.

Here is an example of our product technology. The first is our all wheel drive traction and stability product for front wheel drive based architectures. An examples of this is Chery has just chosen us as the provider of this, in addition, we'll be the driveline integrator provider for Chery in an all wheel drive systems for the new SUV vehicles. This is a growing market globally, growing market significantly in China.

The second is the transfer cases, this is all wheel drive for rear wheel drive based vehicles, and this is the product we do pretty fine in China for 6 years, and we have many many customers that we provide transfer cases to since 2001.

As vehicles become more technologically sophisticated, the vehicles become smart vehicles, so we also do ECU (Electronic Control Unit) with, this means that the systems are activated on an intelligent basis, all wheel drive systems are engaged when the driving conditions need them, rather than done on a mechanical basis. We bring intelligent systems, and also do the ECU. We also make systems for manual transmissions as well.

Q: Recently, BAIC has announced the establishment of a new component company. How is the new company related with BorgWarner TTS (Beijing) Co.?

A: BAIC owns 20% of our BorgWarner TTS Beijing, and they use the 20% ownership as their contribution to the newly established components company, so they are leveraging our big name, and reputation.

Q: You mentioned your business in China has a big forward. What about your overall business on a global basis? How the declining SUV market affect your business?

A: Yes, in the past, the traditional SUV market in the United States was the primary market globally, and there has been a significantly decline in the past two years in the SUV segments, but all wheel drive market penetration in the United States has always been very high. That was not the case in Europe and Asia, so now the consumers in Europe and Asia are having an increasing interest in all wheel drive, so we see significant growth in Europe and significant growth in Asia. The other point that is very important is there are many applications for all wheel drive, not just SUVs, so there is large pick up trucks, medium and small size pick up trucks, there is SUVs and passenger cars, there is rear wheel drive and four wheel drive, so even though there has been a decline in rear wheel drive and SUVs, the pick ups are very high, the passenger car is growing, the front wheel drive based SUVs or crossovers is growing, and in Europe is growing, in Asia is growing, so you add all that together, even though in the united states SUV is declining, everything else is stable and growing, so we having a growing market opportunity.

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