BorgWarner CEO Says Fourth Quarter May Be ‘Difficult’

BorgWarner Inc. (BWA), which makes turbochargers, is concerned the fourth quarter may be “more difficult” for companies as a slowdown in Europe widens, Tim Manganello, chief executive officer, said in an interview.

“The fourth quarter could be a little bit more difficult,” Manganello told Tom Keene today on Bloomberg Television’s “Surveillance.” “The economic mood of not just the country but globally has gotten a little bit more conservative and a little bit more nervous.”

Auto sales in the region are slumping to a 17-year low. BorgWarner is seeing the region’s slowdown expanding, the company’s chief said. German automakers were the last ones to make production cuts, following moves by French and Italian carmakers, he said. Fiat SpA (F) will cut its outlook for the market when the company updates its five-year plan that runs through 2014, CEO Sergio Marchionne said yesterday in Columbus, Ohio.

“It’s now gone across the full landscape in Europe,” Manganello said.

BorgWarner in July said profit this year would be $5.05 to $5.25 a share, excluding some items, compared with a January forecast of as much as $5.65, because of “weakening global economic conditions.” The average estimate of 22 analysts surveyed by Bloomberg is for a profit of $5.11.

The company projected that sales will rise 4 percent to 6 percent, compared with an earlier forecast of as much as 12 percent, according to a statement. BorgWarner reports third- quarter results Oct. 31.

Fiscal Cliff

Uncertainty globally and the so-called fiscal cliff in the U.S. is causing the Auburn Hills, Michigan-based auto supplier to curtail investment, Manganello said. More than $600 billion in automatic tax increases and spending cuts are set to take effect in January. That is one of the “main sources of risk” facing the U.S. economy, Ben S. Bernanke, the chairman of the Federal Reserve, has said.

“People are sitting on cash,” Manganello said. “When larger companies like ours are sitting on cash that trickles down to the small guys. They’re not going to invest if we’re not going to invest.”

If needed, Manganello said the company can adjust its temporary workforce in Europe to match demand. About 20 percent to 25 percent of its workers in the region are temporary, he said. In the U.S., BorgWarner can cut jobs “if we have to.”

BorgWarner fell 4.3 percent to $69.45 at the close in New York, the biggest drop since June 1. The shares have risen 9 percent this year.

To contact the reporter on this story: Mark Clothier in Southfield at mclothier@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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