BorgWarner Inc. plans to buy the electric motor business of Santroll Electric Auto in a deal valued at more than $220 million as the supplier plugs away at electrifying its portfolio though mergers and acquisitions.
The deal was announced Tuesday as the company reported new EV program wins, such as bus batteries to be produced in Hazel Park, and fourth-quarter financial results that fell short of the same period last year but nonetheless exceeded expectations.
BorgWarner’s fourth-quarter revenue fell 7 percent from a year ago to $3.65 billion, while adjusted operating income plunged 16 percent to $375 million. The sales and earnings slide were not as dramatic as they could have been given the ongoing production volatility and supply chain issues, and $16 million in net commodity headwinds, CFO Kevin Nowlan said during an earnings call Tuesday morning.
“We delivered another quarter of strong outperformance in the face of challenging end market environment, and we’re pleased with the fact that this outperformance occurred in all three major markets,” Nowlan said of North America, Europe and China.
Full-year revenue for 2021 was $14.83 billion, representing a 12 percent increase in organic sales from the year prior. Adjusted operating margin increased more than 10 percent over the period.
“I’m also pleased with our margin performance despite the significant production volatility we faced during 2021,” CEO Fred Lissalde said during the call. “This was achieved while continuing to significantly increase our R&D investment to support our e-product growth.”
BorgWarner stock was up nearly 4 percent to $44.79 per share early Tuesday afternoon following the earnings presentation.
The company’s acquisition of Santroll’s electric motor business, expected to close late in the first quarter, will boost BorgWarner’s “vertical integration, scale and portfolio breadth in light vehicle e-motors while allowing for increased speed to market,” it said in a news release.
Santroll designs and makes hairpin and concentrated-winding technology electric motors with nearly 400 full-time employees and key customers in China.
Additionally, the company said Tuesday that it completed the merger squeeze-out of Akasol AG, announced last February, giving it full control and ownership of the commercial vehicle battery pack manufacturer.
Lissalde said Tuesday that BorgWarner also landed a series of new business contracts, including its first hydrogen injection award for a “top global manufacturer of construction equipment,” as well as the battery systems program for California-based bus maker Gillig.
The battery systems will be manufactured in BorgWarner’s Hazel Park plant, which came with the Akasol purchase. The batteries, calibrated for long distances, will offer up to 686kWh of energy, the largest in a North American transit bus, according to the company.
The company declined to offer details about jobs and investment impact in Hazel Park.
The business wins and acquisitions fall in line with BorgWarner’s “charging forward” plan — an ambitious electrification blueprint first rolled out last March.
The company has $2.7 billion in EV organic sales booked into 2025 and aims to shed $3.5 billion worth of business tied to its traditional internal combustion engine business. It has hit $200 million of that target thus far and plans to increase its R&D spending from $130 million to $160 million this year, with 45 percent of it directed at EVs.
Executives said they expect full-year sales to grow to $16.5 billion in 2022, depending on improved global light vehicle production.
Said Nowlan: “Now as we look ahead to 2022, we’re keenly focused on continuing to manage the present by sustaining our strong margin and cash flow profile, maintaining the momentum and new business wins on electric vehicle programs, and continuing to make disciplined investments, both organic and inorganic, that will help secure our growth and financial strength long into the future.”
BorgWarner ranks No. 23 on the Automotive News list of the top 100 global auto suppliers with worldwide sales to automakers of $9.97 billion in 2020.
