Fuel economy drive seen powering turbo boom

By Soyoung Kim

DETROIT (Reuters) - Underpowered and unprofitable, a generation of small cars from Detroit has sputtered in the marketplace.

"Among other pejorative terms, dealers have sometimes referred to subcompacts as beer cans -- meaning it's a bunch of metal and not much more," veteran auto investor and executive Jerry York told the Reuters Autos Summit in Detroit this week.

But as General Motors and Ford work to roll out revamped, fuel-efficient cars starting in 2010, they also are trying to strike a balance between the need for economy and the American craving for horsepower.

The result appears to be a boom-in-the-making for turbo suppliers led by Honeywell and BorgWarner, which together control 80 percent of the global market, executives and analysts say.

A turbocharger is an engine add-on that coaxes greater power out of smaller engines. Essentially, a car equipped with a turbocharged engine can get the fuel economy of a smaller four-cylinder engine combined with the power of a six-cylinder.

While the auto industry's high-profile rush to develop new electric vehicles grab headlines, high battery costs mean the mass-market adoption of those alternatives is years away.

In the meantime, turbochargers, which improve the efficiency of standard engines by up to 20 percent, could emerge as a standout area of growth in a slumping industry.

"There's so much opportunity to improve the fuel efficiency and C02 reduction by turbocharging the engines," Ford Chief Executive Alan Mulally told Reuters.