Despite downturn, engine business booming

Even though heavy trucks sales are down almost 50% this year in the U.S, strong global demand is projected to boost diesel engine and related powertrain component sales.

Borg Warner, for example, expects $1.95 billion net new powertrain business from 2008 through 2010 – a 15% increase over the previous three-year period – for components it sells such as turbochargers and dual-clutch transmissions. The company said it expects the majority of this new business to come from outside North America, with 80% of new growth coming from Asia and Europe over the three-year period.

“Of this total new business, 78% is anticipated from engine-related products such as turbochargers, ignition systems, emissions products, engine timing systems, variable cam timing modules and thermal system,” said Timothy Manganello, Borg Warner chairman & CEO. “The other 22% is expected in drivetrain-related products.”

He said Europe accounts for 50% of Borg Warmer’s expected new business, with Asia – especially Korea and China – making up the other 30%.

Diesel engine manufacturer Cummins is also enjoying serious sales growth despite the falloff in U.S. heavy-truck sales. For the third quarter this year, Cummins said sales grew 20% to $3.37 billion, up from $2.81 billion during the same period in 2006, while net income rose 7.6% to $184 million compared to the third quarter last year.

In the company’s engine business, gains in many markets – most notably in the light-duty automotive, medium-duty truck, construction and mining markets – helped increase sales 17% over the third quarter 2006. That increase came despite continued weakness in the North American heavy-duty truck engine market, said Tim Solso, Cummins chairman & CEO, with the forecast for heavy truck sales trucks now approximately 180,000 units for 2007, down almost 50% from 2006.

“We continue to experience significant growth in most of our markets around the world,” Solso said, noting that Cummins expects to spend $2.5 billion on capital expenditures in the next five years to meet the demand for current and future products, and with its partners, invest another $1 billion into growing joint venture operations around the world.