BorgWarner (NYSE:BWA) is about to release earnings. Ponder this Bear Case Scenario:
Raw material costs are volatile adding significant uncertainty.
BorgWarner has a high fixed cost component much like other auto part suppliers. any fluctuations in revenues will immediate translate to the bottom line. Usually to the negative.
End users have strong pricing power and usually can be depended on to negotiate price reductions. The auto manufacturer has a broken business model at the present and is loath to immediately take advantage of the parts suppliers. But it will happen. BorgWarner has no defense.
George Gutowski writes from a caveat emptor perspective.