Frederic Lissalde, a 19-year veteran of BorgWarner, has led the company since August 2018, when he replaced James Verrier after being COO. The Auburn Hills, Mich.-based supplier has developed solutions for nearly all aspects of electrified drivetrains, including a broad portfolio of products for 48-volt hybrids. Lissalde, 52, spoke with Automotive News Europe Correspondent Peter Sigal on the changing demands in the powertrain market.
Q: What kind of impact do you hope to have on the company?
A: When you start as CEO, you have a tendency to want to change things, but I decided not to change our existing strategy. I feel comfortable about the work done by my predecessor, as I was part of his team. My goal is to accelerate the evolution of the company toward electrification and hybridization, but without forgetting that internal combustion will be around for a long time.
BorgWarner is restructuring to reduce costs. Could you provide some details?
We are taking a companywide approach to finding efficiencies, for example, in administration and overhead. But we are not going to touch our r&d spending. It’s too important for the future. And we’re going into a deeper cost adjustment that includes looking at our manufacturing footprint.
The company is introducing an integrated electric drive unit, a battery pack and a 48-volt module in the P2 position between the engine and transmission. Other companies also have these products — what’s your competitive advantage?
You can create tangible value for your customers with packaging or cost efficiency. For example, we make every part of the P2 module ourselves, from clutch to mechanicals to motor to electronic controls to solenoids. Because we make it all in-house, we understand the system better, and we are not looking for margins [from Tier 2 suppliers] on top of our own margins.
BorgWarner has a wide range of 48-volt products. How will this market evolve?
Since battery-electric and plug-in hybrid sales are growing at a pace that is not sufficient to close the CO2 gap (relative to CO2 targets in Europe), there is still a great need for efficiency improvements in conventional powertrains. Mild hybridization with a 48-volt system offers a way to improve the efficiency without adding a lot of cost or complexity.
Will that extend the life of the internal-combustion engine?
Yes, definitely. And it puts us in a really good position. Most of the 48-volt players are coming from the electric motor or inverter side. We come from the mechanical integration side, and automakers want more and more system integration, because they have a lot to do with all the other trends such as autonomous and connected cars.
How does your business break down by powertrain?
We will transition from slightly underweight on hybrids and nonexistent in electrics to on par with the market, and even slightly overweight on hybrids. Looking at IHS Markit’s 2023 global production forecasts, 71 percent of powertrains will be internal combustion; about 67 percent of our revenue will come from internal combustion.
Hybrids will be about 24 percent; we will be at nearly 27 percent. Electric vehicles will be at 5 percent, and so will we.
It’s like the stock market; you want to hedge your bets a little bit and you know where you want to put a little more risk.
With a slowdown in global auto production, how will BorgWarner sustain its revenues?
We look at our content per vehicle. Looking at internal combustion, our participation rate is expected to rise to 52 percent in 2023 from 47 percent now, and the average content per vehicle to $210 from $187.
In hybrids, where production is increasing sharply, we expect our participation rate to go from 25 percent to 46 percent, and content per vehicle to go from $147 to $275. In electric, we will move from 13 percent to 33 percent, and the content per vehicle will be $340 — even higher than hybrid or combustion.
Why is your content per vehicle highest in electric?
It’s simply because we are moving up the food chain. What we sell for electric vehicles has more value added. Many people associate electrification of the powertrain with full-electric vehicles, but this isn’t really the case.
It’s really important for our growth to make sure we are considering all of the electrification possibilities and that we have a modular design, which will give us scale.
Is BorgWarner negatively affected by the trade disputes?
Relative to our peer group, we think we’re in a slightly better position because we manufacture our finished products in the same region where our customers use them. Where trade disputes affect us is in our own supply chain. We’re working with our suppliers to see what can be done — can they adjust pricing, absorb some of the tariffs or can they relocate?
On the other side, we are asking our customers to help. It’s not the first time we have had to manage things like this.