BorgWarner spinoff Phinia sees growth in ICE, alternative fuels
The company had a $300 million cash balance at the time of the spin-off and is expected to generate more than $200 million in free cash flow per year. At the beginning of the month, it entered a $1.2 billion credit agreement with Bank of America NA.
About 44 percent of Phinia’s business is supplying light vehicles, and its largest customer is General Motors, which accounts for 12 percent of its revenue.
“We have a tremendous amount of exposure with the aftermarket, which we think will give us a lot of stability and decades of revenue and profits even with traditional vehicles,” Ericson said.
As light vehicles move increasingly toward battery electric as predicted, Phinia plans to supplant that business with its commercial vehicle and off-highway segments, which are growing significantly, Ericson said.
Battery electric is the rising star in the U.S., but elsewhere in the world, countries are demanding different clean fuel alternatives, and Phinia is tailoring its business model accordingly. It is investing heavily in hydrogen and recently converted its first gas production line to hydrogen in Europe, for example. Aided by federal incentives, hydrogen is also gaining steam in the U.S.
Even in China, where production and popularity of BEVs are skyrocketing, plug-in hybrids are still growing rapidly, Ericson said. Meanwhile, Brazil is seeking energy independence and economic stability by using sugarcane to generate ethanol.
There is growing demand for alternatives to purely battery motors, Ericson said, especially as the roll-out of BEVs is bumpier than anticipated and barriers including lack of infrastructure and affordability remain. The company is working with major OEMs in metro Detroit and around the world on hydrogen and alternative fuel projects, Ericson said, declining to offer specific details.
Bottom line, gasoline isn’t going away anytime soon.
“The flexibility, the utility, the energy density of it is such that there’s just a lot of applications that are going to be better off with that type of solution,” he said.
