Turbochargers were for years a popular way for automakers to shrink their engines and make them more efficient. But stricter auto-emissions standards are now forcing companies to embrace electrification, limiting the growth potential for turbos. Garrett Motion, one of the top suppliers of the components along with BorgWarner, has said roughly 56 percent of vehicles will use turbos by 2023, up modestly from 51 percent last year.
Garrett’s filing for bankruptcy last month has put the company spun off from Honeywell International Inc. in play for a sale. While private equity firm KPS Capital Partners has offered $2.6 billion, the judge overseeing Garrett’s reorganization said this week that the company must engage with Centerbridge Partners and Oaktree Capital Group about their restructuring plan.
Auto suppliers have been under pressure from the seismic technology shift toward electric and self-driving vehicles. The financial strain of tackling this transformation has been exacerbated this year by the coronavirus outbreak that shuttered factories worldwide.
Continental on Wednesday announced it will record another quarterly loss as impairments and restructuring measures take a toll. The supervisory board last month approved a dramatic overhaul affecting as many as 30,000 jobs that could be shifted or eliminated after earlier plans for a revamp were rendered insufficient by the pandemic.
The company also said on Sept. 30 that it will consider asset sales as part of its overhaul efforts. A deal would echo the sale of Robert Bosch and Mahle's turbocharger joint venture to private equity firm FountainVest Partners in 2017.
Turbochargers force compressed air into combustion engines to boost efficiency and power output. Continental has supplied the devices to automakers including Volkswagen Group and Ford Motor.