Here's Why BorgWarner Stock Crashed in August
According to a recent report by S&P Global Market Intelligence, share price of BorgWarner (BW), an American worldwide automotive industry components and parts supplier, plunged by 13.7% in August. Experts assume that this disappointing figure can be associated with negative forecasts on global light vehicle production and as repercussions from a disappointing Q2 profit-and-loss report from BW.
The company is famous for its powertrain
solutions, which include manual and automatic gearboxes and related parts, such
as electro-hydraulic control units, TCMs, friction materials, and freewheel
clutches, superchargers, along with 4WD system elements.
Learn more about
BorgWarner and its product portfolio
The report says that in addition to the low
operating margin (BW didn’t manage to reduce expenditures as much as expected
and the growing pace of the auto market disruption caught the company
off-guard), the company’s officials warned investors to be ready for a challenging
Q3 and lowered its annual profit outlook because of negative trends in the
automobile manufacture worldwide.
It is predicted that financial results in Q3
won’t bode well for BW, as the company doesn’t look for outgrowing its target
markets because of sales slowdown in China and Europe.
Automotive industry investors have to take into
account the cyclical nature of the industry. There is a wide range of factors
that directly affects financial well-being of automakers and their suppliers:
interest rate fluctuation, labor force issues, state support, as well as
general trends in global economy. All these factors have a significant impact
on production of vehicles and their subsequent sales rates. Taking into account
numerous trade disagreements between major players in the industry (China, USA,
Europe), it is not a big surprise that many companies sustain losses and cut
their profit outlooks.
Now the company is actively reducing its expenditures in response and keeps investing in hybrid and electric vehicle technologies in expectation of new model launches. Thanks to its solid technological base in in the field of environmentally-friendly technologies and strengthening of CO2 emissions control, BW hopes to obtain substantial benefits in the long-term.
