Get to know BorgWarner CEO Joseph Fadool

BRUCE:

This is Roger Penske and you're listening to Pit Pass Indie, sponsored by Penske Truck Rental. IndyCar fans, it's time to start your engines. Welcome to Pit Pass Indy, a production of Evergreen Podcast. I'm your host, Bruce Martin, a journalist who regularly covers the NTT IndyCar Series. Our goal at Pit Pass Indy is to give racing fans an insider's view of the exciting world of the NTT IndyCar Series in a fast-paced podcast featuring interviews with the biggest names in the sport. I bring nearly 40 years of experience covering IndyCar and NASCAR, working for such media brands as NBCSports.com, SI.com, ESPN SportsTicker, Sports Illustrated, AutoWeek and SpeedSport. So let's drop the green flag on this episode of Pit Pass Indy. Welcome to Pit Pass Indy presented by Penske Truck Rental as we continue our fifth season of giving IndyCar fans an inside look at the most exciting form of racing on the planet, the NTT IndyCar Series. Let's welcome back our friends from Penske Truck Rental as they return to sponsor Pit Pass Indy, helping bring you the inside stories of IndyCar from the paddock to the racetrack to the highways and streets of America. And let's congratulate Porsche-Penske Motorsport for winning the famed Mobile One 12 Hours of Sebring on March 15th. The two Porsches owned by team owner Roger Penske dominated the oldest major sports car endurance race in North America held in Sebring, Florida. The winning number seven Porsche 963 was driven by Felipe Nassar of Brazil, Nick Tandy from Great Britain, and Laurens Vanthoor from Belgium. The team's number six entry, driven by Matt Campbell from Australia, and two Frenchmen, Mathieu Jaminet and Kevin Estry, finished second, giving Porsche-Penske Motorsport a one-two sweep. It was Penske's first win in the 12 Hours of Sebring since 2008, when the team raced the Porsche Spyder to victory. It was the 12th time Porsche has won the 12 Hours of Sebring. The first two races of the IMSA WeatherTech Sports Car Championship have been the Rolex 24 at Daytona and the 12 Hours of Sebring. Porsche-Penske Motorsport has won both, which led Penske Corporation President Bud Denker to proclaim 36 hours of winning. Team owner Roger Penske sent me a text the following day that said, big day, perfect execution by drivers, pit crews, and strategy. Once again, congratulations for another big win for Porsche Penske Motorsport and Team Penske. Switching gears to IndyCar, the series is off to the Thermal Club in Thermal, California for Sunday's first-ever championship points effort at the exclusive resort that caters to elite motorsports enthusiasts. IndyCar held an all-star race at the Thermal Club in 2024, where the winner, Alex Pillow, collected $500,000 in a special event that did not count towards the championship. This year's race pays points toward the 2025 IndyCar Series Championship and is included in the prize fund. This year's race is 65 laps on the 3.067 mile 17 turn road course and can be seen on Fox Sports beginning at 3 p.m. Eastern Time on Sunday, March 23rd. Friday's practice and Saturday's practice and qualifications can be seen on FS1. On today's Pit Pass Indy presented by Penske Truck Rental, we want to introduce BorgWarner CEO Joseph Fadul, who took over the role on February 7th. The previous CEO, Frederic LaSalle, has retired after a term that saw BorgWarner achieve tremendous growth globally. BorgWarner is an important partner to IndyCar as all turbochargers on every car in the series are manufactured by BorgWarner. The relationship goes much deeper than that, however. BorgWarner is the longest continuous sports sponsor in the world, dating all the way back to the 1935 Indianapolis 500, when it was commissioned to create the famed BorgWarner Trophy. That iconic trophy was first presented following Louis Meyer's third Indianapolis 500 win in 1936, the same year a bottle of milk first appeared in Victory Lane. A sterling silver face of every Indianapolis 500 winner is eternally memorialized on the BorgWarner trophy, a testament that lasts forever. So let's get to know BorgWarner CEO Joseph Fadool on this exclusive interview for PitPass Indy presented by Penske Truck Rental. Well, first off, Joe, congratulations on being the CEO, and when did you start? Yeah, thank you. Yeah, I started February 7th, so I'm in my fourth week. When you look at the transition from Frederick LoSalde to yourself, what usually happens in a transition period like that?

JOSEPH:

Well, as you may recall, I've been at the company nearly 15 years, and Fred, he's just been a great mentor for me. Just to give you some context, he and I were both promoted to president of our respective business units back in 2011 at the same time. So we've shared a lot of time and experience together, both as peers and then as he was the CEO, and he's just been a tremendous supporter for me. Uh, you know, we, how we handled the succession this time as I was announced as the COO in July. Uh, so I came out of my business unit role and we use that time, you know, for me to first learn the rest of the business. Um, so especially the businesses that we've bought in the last five years that maybe I you know, didn't have as much insights to. So I spent a lot of time on the road learning those businesses, meeting the folks and some of their customers. And then I spent some of the time just working with Fred and going to investor meetings. That's a new part of the role of CEO. And, you know, he's given me great advice and coaching throughout the whole period. So it was a pretty seamless transition.

BRUCE:

uh four weeks ago when it happened when a person comes in and read after another successful ceo or corporate executive a lot of times the new person will have other ideas and some things and visions of their own. Is there a transition period that it takes before all of that, some of your ideas start to come into play?

JOSEPH:

Yeah, so maybe a good example of how we handled it. You know, you may have also noticed we reorganized last July. So commensurate with me becoming the COO, Fred and I had worked together with our strategy board a few months before to adjust our organization to what we saw as an emerging change to our strategy. So, you know, organization always follows strategy. And what we have started to see is that electrification, you know, the growth wasn't going to be as strong as we had thought it would be. It's still growing, but it's not as strong, especially in the Western markets. And we were also incubating some of our new e-assets, and they were ready to stand on their own. So, you know, in essence, we work very closely together, so we didn't lose any time as we reorganized in July. And then, you know, I spent the better half of last year shaping our strategy leading up to a senior management meeting in November. So we feel this approach works really well. We didn't really lose any time. Fred being the gracious leader he is, he gave me lots of room to adjust and reshape things. He's not one to have an over sense of pride in what he's done. He realizes the markets are moving fast and a lot of what he did was successful. Some of the things we had to make some changes to and he just gave me a lot of room to make those adjustments.

BRUCE:

Over the last couple of years, BorgWarner has really been active in acquiring companies internationally, diversifying its efforts, continuing its growth in other areas of technology. What can you tell me about all those efforts?

JOSEPH:

Sure. So, as we've all witnessed, the automotive industry is probably one of the most transformational industries on Earth right now. You know, when you think about electrification, you think about autonomous driving, you think about the growth of the Chinese OEMs and coming into the Western market, you know, it's full of change. So, you know, innovation is fast and exciting and at Forerunner, the way we approach it is to first lean on our organization to grow organically. bring new products to market, the ones we already have in the market, scale them, diversify our customer base, close the top line. We've done that. Also, inorganically, as you mentioned, we've done seven acquisitions in six years, starting with the Delphi acquisition. That brought us Power Electronics, which we didn't have in the past. And since then, we've really built what we think is arguably the strongest powertrain portfolio in the industry. It's very resilient. Whether customers choose to continue with combustion engines, we've got great foundational products like four-wheel drive, turbochargers, EGR. and timing systems, or as they move into hybrids, you know, we were fortunate we can pull from that great foundational set of components I mentioned. But now we're starting to pull from the east side, you know, inverters and motors, and I would say onboard charging thing that we've acquired over the last five years. So we think we're in a great spot, depending on what region goes where. And it's something I think we're really proud of. We didn't have this resilient portfolio five years ago. I would say the last thing that really we benefited from is leveraging our customer intimacy as we move from combustion to E. I'll give you a little example of that. We're very strong in exhaust gas management, which requires a lot of thermal management competence and thermal transfer. knowledge. And one of our strategic customers in Europe, premium luxury brand, really loved what we were doing for them on that side. And they decided to pull us in to the inter-cell cooling technology for batteries. And out of 10 players, we ended up winning that business. So it's a brand new product line for us. So, you know, it's not always just about technology and innovation. It's having great customer trust. And that's a great example of where they pulled us into a space we weren't playing yet. And yeah, we're about to launch that program by the end of this year. So, you know, I think that speaks to really the customer relationships we have.

BRUCE:

I had dinner last night with a friend of mine who used to be involved with NASCAR media. I said I was doing an interview today with the CEO of BorgWarner and he was, for someone who may not understand what BorgWarner is, I told him a technology company that specializes in the automotive industry and I said the turbochargers in most of the cars, passenger vehicles that are on the road today, I believe BorgWarner parts are in them and I believe the turbochargers are in them. So just to kind of explain that even more to say somebody who may not be as familiar with what BorgWarner does as I am.

JOSEPH:

Yeah, no, that's, you know, that's a great example. We're a B2B, so we fly under the radar of a lot of consumers. But you're absolutely right. If you look at the vehicles going down the road, the chances are you got BorgWarner technology inside. You know, about a third of the turbocharged engines in the world are boosted by BorgWarner. About a third of the four-wheel drive businesses are cranked out by us. So, yeah, a lot of folks outside of the automotive space don't maybe see that. But, yeah, we're certainly a leader in most of the products that we when you serve to the market.

BRUCE:

And then I told him that BorgWarner has the longest running sponsorship in sports with the Indianapolis 500 trophy going all the way back to 1935. And his next question was, wow, I didn't know that. What did they make back then? And I explained, well, a lot of your gauges and things on the dashboard and things like that and other automotive parts that went in the cars all the way back then were manufactured by BorgWarner. So please correct me if any of that was wrong.

JOSEPH:

Yeah, well, we've been in so many different businesses. One of the areas that we're most known for are transmissions. We used to make complete transmissions. In fact, we've set up even a joint venture with Aizen, a Japanese company, to produce transmissions for the Japanese market, too. So we've been in and out of products. We're a 130-year-old company. A lot of folks don't realize one of our first patents back in 1890 was through a guy, George Morse. He's the one that started Morse timing systems. And it was for a leaf spring on a buggy to improve the ride. So I think it just kind of shows we've got a long history of products supporting the automotive space and innovations at our core. We've also been in marine, we've done some aerospace in the past. and also off-highway work. So yeah, today we're mainly focused on past car and commercial vehicle, but yeah, we've touched a lot of industries in the past.

BRUCE:

I would also assume that in the automotive aftermarket industry, if you go to your auto parts stores to buy items, I've seen BorgWarner branded products on the shelves there. How involved are you on that?

JOSEPH:

Yeah, so we have an aftermarket business. It's about 2% of our overall business, but growing. on the mid to high single digits every year. We are mostly serving the markets with products that we serve the OEMs with. So turbochargers, we have a really great aftermarket brand, and we've got a performance line of turbos, which is what we modeled the IndyCar 500, Indy 500 engines after. And we turned that into its own aftermarket brand called EFR. So turbos, exhaust gas management, ignition coils, clutches, friction plates, you know, a lot of the products that we're known for. through the OE side we serve in the aftermarket business.

BRUCE:

You brought up a very interesting point earlier about it seems that the appetite for full electric isn't as high as a lot of people expected it to be. Maybe seven Five to seven years ago, it seemed like that was the direction the automotive industry was heading in and you better get on board or you'd be parked alongside of the road. Now it seems like a more reasonable approach is the combination of that creates a hybrid, a little electric and internal combustion. So in that regard, what do you envision the passenger car industry looking like over the next 15, 20 years?

JOSEPH:

Yeah, we're still a very strong believer in electrification, whether it's on hybrids, advanced hybrids, or pure electric. And the reason for that, electrification is the only competitive way to reduce carbon. at least in the mobility space. So, you know, although the growth is not as high as we all expected, that space is still growing year over year. And I think a good proxy for, you know, how we think about the future, if you just look to China, where over 50% of the cars are electrified, That's the model that tells us, yes, when vehicles are affordable and the infrastructure is reasonable, people are willing to buy electrified cars. So, you know, I think we're working hard to support the customers in Europe and North America to really improve the cost. And of course, we're working with the government to also help with the infrastructure and create incentives to drive people there. But, you know, long term, we knew electrification is going to take place. And it's just a question of time. So what people really don't know, us included, how quickly or slowly will it play out in each region? You know, you got a number of geopolitical things happening right now. Each region will probably grow at a different rate. And we're organized and set up perfectly for that because our operating model you know, all of our business units are, the first breakdown in the organization is by region. And so they're able to serve their particular markets faster, we think, than a lot of our competitors. So we're prepared for, you know, a fast or slow rollout depending on what those markets need there.

BRUCE:

Are the biggest challenges, cost of the batteries, the availability of lithium, the ability to charge them? regular blue collar worker has an electric vehicle and it's time to replace the battery from what I've heard the batteries could be as expensive as what new cars used to cost. Are those the challenges that technology has to address?

JOSEPH:

Yeah, you exactly have it right. So, you know, if there's four or five things, you know, that incentivize people to buy into electrified vehicles. If we had to narrow it down to two, it's affordability and it's range anxiety. So range anxiety can be solved by a couple of things. One, better infrastructure so that you're not worried about, you know, where you're going to run into a charging station. The second thing that can solve range anxiety is larger batteries, although that that costs more money. And the third is faster charging times. If you can charge 80% of your battery in 15 minutes, you're less of an inconvenience than today. So affordability, range anxiety, those are the two big topics, I think. And as people are working on that, you're going to start to see electrification more and more adaptive. And on your point on batteries, they are the single largest cost. And for vehicles to be affordable, the battery prices have to continue to come down for sure.

BRUCE:

When you talk about range anxiety, say I'm driving from Los Angeles to Las Vegas, I'm in the middle of Death Valley and the car runs out of power. It's not so easy. First of all, there's not going to be any charging stations out in the middle of the desert. And secondly, when you think of tow trucks, does the tow truck of the future have to have some type of charging capability to where they would come out to a stranded vehicle and get the battery charged?

JOSEPH:

Yeah, that's definitely a business model some people are showcasing right now is mobile charging stations. And they can be used, in the example you have, They can also be used in disaster recovery areas and not just for vehicles. So mobile power is becoming a real market and it definitely can support the scenario you're talking about.

BRUCE:

We'll be right back to Pit Pass Indy after this short break.

JOSEF:

Hey, everyone, this is two-time Indy 500 winner Josef Newgarden, and you're listening to Pit Pass Indy presented by Penske Truck Rental.

BRUCE:

Welcome back to Pit Pass Indy presented by Penske Truck Rental. Here's the rest of my exclusive interview with BorgWarner CEO Joseph Fadoul for Pit Pass Indy. So back to a Frederick question, what do you see as legacy at BorgWarner? It seemed to be a period of rapid growth. Yeah, boy, Fred's got so many things to be proud of.

JOSEPH:

You know, I would say a couple of things. You know, first is the transformation of the portfolio. If you went back seven years, you would hear some of our investors say, hey, you're a great company on the combustion side, but you don't have a play in EVs. and your terminal value is zero as a company. And this is back when everyone thought the whole world was going to go EV in 10 years. So he moved quickly to move our portfolio in the right direction, like I mentioned, with seven acquisitions and really driving organic growth. And now we can sit here and say, OK, we no longer have a terminal value of zero. We have a very strong and resilient product portfolio. And, you know, you only do these things every 30 or 40 years. And I would say that's Fred's biggest legacy is us making that transition to be prepared. I think the other legacy Fred leaves is the teams he left in place. He really strengthened BorgWarner, not only at the leadership team level, but we've hired probably 30% of the people into the company over the last five years. So, you know, acting on, hey, we need new skill sets. We need more software people. We need more electronics folks and system people. You know, we move very quickly to help us build and have the right people on board in the company that we do today. So. I would say those are the top two, at least in my view.

BRUCE:

Now, what is your vision of the future for BorgWarner?

JOSEPH:

Well, given that we've done so much great work on the portfolio and we've got a lot of competence now in the company, you know, I've got three priorities. You know, the first one is we don't just want to grow on the electrification side. That had been our focus for the last five, six years. And we funded that with the foundational product. We now want to grow across the entire company. So our four businesses, which make up our $14 billion of revenue, they all have the mandate to, you know, manage both their short and long term. So what I would say, you know, that that's a lot of what BorgWarner has done the last 80 or 100 years is identify customer problems, solve those problems with innovative products and properly grow that top line. The second priority is to leverage our core competence and keep building on it. You know, we don't want to stand still. We need to continue to leverage and build our product portfolio. And that may include also some potential acquisition. in the future. And the third is really to execute that growth. So expanding margins, converting every dollar that comes in the door of revenue. We want to convert the mid-teens to profit and create value for all.

BRUCE:

The importance of BorgWarner's role with both the Indianapolis 500 and IndyCars. You've made all the IndyCar turbochargers, but your relationship with the Indianapolis 500 goes all the way back to 1934, 1935, 1936. With the creation of this incredible trophy, the BorgWarner trophy, just how do you value the relationship from the corporate side with one of the world's greatest sporting events?

JOSEPH:

Yeah, it's such an incredible part of BorgWarner. You know, we are very passionate about and involved with IndyCar racing and have been since the 1930s. And we commissioned the trophy, which we started to award to every winner since the race in 1936. So as you mentioned, we, you know, we go back a long way. This was really a heritage for the company. We believe it's the longest sports partnership in history. Maybe that needs to be double checked, but we can't find any views opposing that. And it's extra special since 2012, as we became the official turbocharger partner for the IndyCar series. And that also makes us proud. So, IndyCar for us parallels a lot of what we stand for as a company. When you think about teamwork and collaboration, trust, winning, resilience, you know, these are all things that you find in the racing world. And it fits so well with what we try to achieve in our company and with all of our people around the globe.

BRUCE:

Is there technology transfer between the stresses and strains that the turbocharger may experience in an IndyCar that you can transfer over the passenger car industry?

JOSEPH:

So there are parallels and things we do transfer. So just to give you an idea, an IndyCar engine, a 2.2 liter engine, you know, it's very compact, a high power density, high temperature environment. So these turbochargers are built for performance. Knock on wood, we haven't had a single failure in a race since 2012. And that's because of the materials we're using and the high engineering in those products, a lot of robustness. So we are able to transfer that knowledge to the past car side. The environments are not as extreme. but we learn things when we really push the limits on our technology. The other thing, as I mentioned earlier, it helped us build a brand in the aftermarket side, Engineered for Racing, EFR, and we have quite a bit of pull on that product line, and we otherwise wouldn't have that if we didn't participate in Indy.

BRUCE:

Does your involvement with the Indianapolis 500, I'm sure you have statistics that can break this down, but I'm sure that that one day being connected with that race and the other attention that goes along with BorgWarner, the BorgWarner trophy, the baby Borgs, et cetera, et cetera, probably creates a brand awareness that is probably the biggest that you get all year. Is there a way to quantify that?

JOSEPH:

Yeah, I don't know if there's any official statistics on it. I can just tell you we use that weekend and all the time leading up to it to really do a couple things. One, you know, make our employees really proud about the company and what we stand for. It's just such a great weekend and we also want to, you know, bring along our customers and other stakeholders to show them, Hey, you're part of a great, um, not only a great event celebrating, uh, these incredible drivers and the teams, but, uh, you know, we're all making history together every year. Uh, the race is different. It's unique. Um, it's absolutely exciting. You know, last year's race, probably one of the most exciting races I've ever witnessed in terms of the finish. So, you know, it's a lot about bringing our stakeholders along, making them proud that they're part of a Baltimore family. And, you know, we don't have any statistics on it, but it's hard to measure the pride and the excitement and the enthusiasm. that our teams feel that race weekend.

BRUCE:

And also the relationship between BorgWarner and the Chevrolet Corvette E Stingray, which is going to pace the field this year. All electric in a Corvette. It's probably the most horsepower Corvette that they've ever created. I know that you brought up earlier the need to go more toward electric. So what's BorgWarner's involvement with that particular car?

JOSEPH:

Yeah, so General Motors, they chose BorgWarner as a strategic partner, innovation partner, some years ago when they were starting to think about that VR1. Each one is equipped with two turbochargers. You know, the vehicle is going to create over 1000 horsepower. And we're just proud to be a part of it. So, you know, I think General Motors and Bullard Warner, we got a partnership that goes long into the past. And I think there's just one more recent examples. And, you know, like I said, we think there's room for all these products, whether they're ice or hybrid or electric, depending on the use case and the markets you're in. So we're just excited to continue to be a part of that tradition with IndyCar and partnered with such a great company and customer like General Motors.

BRUCE:

I'm sure there's a little bit of pride also, because a lot of people, they don't want to do electric because it's not a performance vehicle or this, that. There's a lot of people who, gearheads, internal combustion fans that want to keep seeing loud, proud, fast, things like that. But in a way, does this showcase the fact that you can build an electric car that's going to go way fast?

JOSEPH:

Well, hey, I think this is just the tip of the iceberg. You know, I think people see Uh, what the internal combustion engine can do when it's really pushed to its limits, uh, with technology like our turbochargers. And, uh, you know, I think you can see an F1 and. And also in, uh, other. Other tough environment, hybrids and pure electrics. have their own great characteristics. So, you know, independent of the propulsion that's being used, there's great technology and BorgWarner's just proud to be able to, you know, be at the forefront of all of it. And yeah, who knows? Soon these vehicles are rumored to be hybridized and let's see where that takes us. So, but we really can't comment too much on the future of what Indy's doing, but I think we got a lot of excitement planned ahead.

BRUCE:

And how big a role is BorgWarner playing in either advising or technical expertise with IndyCar's new car and engine platform?

JOSEPH:

Yeah, so, you know, we advise as requested. You know, you can imagine they keep a lot of this top secret. But we are, you know, we do consult with them on the technologies we feel we can bring value on. I can't really comment too much past that, but I think you'd be really pleased. when the new vehicles are launched a couple years from now.

BRUCE:

Yeah, but I just wanted to emphasize that you do have a role, or I don't want to say a seat at the table, but in some ways, yeah, you do have a seat at the table as they consider which direction to go. Is that correct? Yeah, we definitely do. Is there anything else you'd like to mention?

JOSEPH:

No, we're just looking forward to another great race this year in May. And yeah, hope to see you out there. Be rooting for all the car drivers and their teams. And by the way, which every one of those cars have Ford Warner turbochargers. So we're excited for whoever wins, but yeah, it should be another great weekend. All right. Sounds good, Bruce. Appreciate it.

BRUCE:

Okay. Thanks a lot. We'll be right back to Pit Pass Indy after this short break.

WILL:

This is Will Power of Team Penske and you're listening to Pip Pass Indy presented by Penske Truck Rental.

BRUCE:

And that puts a checkered flag on this edition of Pit Pass Indy presented by Penske Truck Rental. We want to thank our guest, Borg Warner CEO Joseph Fadul, for joining us on today's podcast. Along with loyal listeners like you, our guests help make Pit Pass Indy, presented by Penske Truck Rental, your path to victory lane in IndyCar. On the highways, the raceways and every pit stop in between, Penske Truck Rental keeps you moving forward. Gain ground with Penske. For more IndyCar coverage, follow me at X, previously known as Twitter, at BruceMartin, one word, uppercase B, uppercase M, underscore 500. This has been a production of Evergreen Podcast. A special thanks to our production team, executive producers are Bridget Coyne and Gerardo Orlando. Recordings and edits were done by me, Bruce Martin, and final mixing was done by Dave Douglas. Learn more at evergreenpodcast.com. Until next time, be sure to keep it out of the wall.