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BorgWarner Q1 profits take a hit from electrification R&D, inflation

BorgWarner Q1 profits take a hit from electrification R&D, inflation

BorgWarner Inc. executives are expecting a boom in the electrification business but not before e-products put some strain on its profitability.

The supplier saw first-quarter sales of $4.2 billion, up 8 percent from a year ago, and net earnings of $230 million, about flat with last year, according to its earnings report Thursday.

While the company increased its sales and earnings projections for the full year, its first-quarter profit results came in just shy of Wall Street expectations, due to inflated costs, high R&D spending on electrification and sagging sales in China, which is also hurting other suppliers with high exposure to the Far East.

“We outperformed the market both in Europe and North America,” CEO Frederic Lissalde said on a call with investment analysts. “As we expected going into the quarter, our margin performance was negatively impacted by our planned e-R&D investment, net inflationary costs and the impact of low production in China.”

BorgWarner, known for its turbochargers, has been working the last few years to shed ties to the internal combustion engine and recast itself as a leading supplier of inverters, batteries and other EV components. To that end, the spin-off of its fuel systems and aftermarket segments — to be renamed Phinia — is expected to be complete by the end of the third quarter. read more