BorgWarner (BWA) revealed that it has been selected to supply friction materials and plates for the new ZF 8-speed automatic transmission (8HP), debuting on the 2010 BMW 760i. The Michigan-based company manufactures the multi-segmented friction material in Heidelberg, Germany. It has already supplied friction materials and one-way clutches for ZF’s current 6HP transmission models.

BorgWarner friction plates and materials are used at key clutch positions to meet ZF’s high requirements for efficiency and shift performance. It helps reduce drag losses, enabling the transmission to achieve improved fuel economy and better performance. The friction plate technology also enables neutral idle control (NIC) to further enhance fuel economy.

Growing demand for the company’s strong technology-based product portfolio, impressive product launches and cost reduction efforts drive our outlook for BorgWarner. Demand for front-wheel drive systems is rising in North America, as is demand for automatic transmission components and systems in Europe.

BorgWarner expects revenues of $2.1 billion from the new powertrain business for 2009 through 2011, an 8% increase over its previous three-year new business. Demand for the company’s environmentally-friendly technologies such as turbochargers and DCT technology continue to drive its growth rate, which exceeds that of the auto industry. About 50% of the new business is expected to come from Europe and 20% from North America over the next 3 years. Backed by continuous expansions, the company expects the remaining 30% to come from Asia, especially Korea and China.

About 80% of BorgWarner’s new business is expected to be in engine-related products such as turbochargers, ignition systems, emissions products, engine timing systems, variable cam timing modules and thermal systems. The other 20% would relate to transmission modules and all-wheel drive systems including the company’s fuel-efficient DualTronic transmission technology and electronic InterActive Torque Management systems. The company expects a tenfold increase in demand for DualTronic transmission modules by 2013 to about 5 million units, which will be a key component for its growth.

We continue to recommend the shares of BorgWarner as Neutral.

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