Borg-Warner Industrial Products Inc. Case Analysis

Borg-Warner Industrial Products Inc. (BWIP) was a subsidiary of Borg-Warner Corporation. BWIP manufactured fluid transfer and control equipment. The subsidiary was split into three divisions; the pump division, the mechanical seal division and the fluid control division. The pump division specialized in designing, producing and servicing pumps that could handle dangerous fluids at high temperatures.
A major part of the customers of the pumps belonged to the petroleum industry. As a result, the oil crises in 1980’s resulted in significant loss of revenue. This lead to BWIP’s focus on the aftermarket which together with aggressive profit improvement program ensured the company 's survival.
The company executives agreed to acquire United Centrifugal

BW/IP only a year before had gone through LBO with a significant amount of loan and acquiring UCP would incur more debt on the company. Albeit C&D was still supportive of growth plans, many lenders thought that the plan was of crucial necessity for the success of BW/IP. In addition, the prospects for the petroleum industry which both BW/IP and UCP had high dependence remained quite weak. On top of such uncertainty, there were pessimistic predictions at the time that the U.S economy would soon fall into recession. Both BW/IP and UCP relied mostly on U.S customers. Hence, if the U.S fell under an economic crisis, BW/IP and other levered firms would be vulnerable to

Currently BW/IP only has a firm pump market in the United States, and there have been little attempts to reach out internationally. Creating a new department to focus on these goals will require too much capital and human capital that the BW/IP doesn’t have. Rather, it would more efficient to merge with a company that already has experience with working abroad. This will widen the range of customers, letting BW/IP focus their attention away from an already dominant US market and towards a larger international market. While reaching out beyond the domestic market, BW/IP should focus on reducing overlap on its departments when acquisition or mergers take place. One of the big problems of the company is that its three main industries: chemical, petroleum, and power, are overlapping. As a result, whenever there is a fall in the sales of a product, such as petroleum back in the 1970s, the other departments suffer as well. Thus, there is a need to focus on specific core departments, balancing sales so that each of them are less vulnerable to