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What changed in BORGWARNER INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of BORGWARNER INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+376 added−377 removedSource: 10-K (2026-02-11) vs 10-K (2025-02-06)

Top changes in BORGWARNER INC's 2025 10-K

376 paragraphs added · 377 removed · 288 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

52 edited+7 added−21 removed31 unchanged
Biggest changeThe analysis included employees from salaried early-in-career through vice president roles. 13 Table of Contents ◦ Perform in the top quartile for Total Recordable Incident Rate (“TRIR”) and Lost Time Incident Rate (“LTIR”). 4 ◦ Implement and then maintain ISO 45001 certification at 100% of its manufacturing sites. 4 In the year ended December 31, 2024: ◦ The Company’s global workforce accident TRIR was 0.38, which was within top quartile performance.
Biggest changeThose goals include: ◦ Perform in the top quartile for Total Recordable Incident Rate (“TRIR”) and Lost Time Incident Rate (“LTIR”). 4 ◦ Implement and then maintain ISO 45001 certification at 100% of its manufacturing sites. 5 In the year ended December 31, 2025: ◦ The Company’s global workforce accident TRIR was 0.36, which was within top quartile performance. 6 The top quartile for motor vehicle parts manufacturing was lower than or equal to 1.4 according to the BLS. 4 ◦ The Company’s global workforce accident LTIR was 0.23. 6 The top quartile for motor vehicle parts manufacturing was lower than or equal to 0.2 according to the BLS. 4 ◦ 95% of the Company’s manufacturing sites were ISO 45001 certified. 5 Approximately 13% of the Company’s U.S. workforce is unionized.
The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions.
BorgWarner Strategy The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions.
The Company manufactures and sells these products worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles (“SUVs”), vans and light trucks). The Company’s products are also sold to OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications).
The Company manufactures and sells these products worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles, vans and light trucks). The Company’s products are also sold to OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications).
Additionally, Drivetrain & Morse Systems’ products include chain systems as well as variable camshaft phasing products. Drivetrain & Morse Systems’ friction and mechanical products for automatic transmissions include dual clutch modules, friction clutch modules, friction and separator plates, transmission bands, torque converter clutches, one-way clutches and torsional vibration dampers.
Additionally, Drivetrain & Morse Systems’ products include chain systems as well as variable camshaft phasing products. Drivetrain & Morse Systems’ friction and mechanical products for automatic transmissions include dual clutch modules, friction clutch modules, electromagnetic clutches, friction and separator plates, transmission bands, torque converter clutches, one-way clutches and torsional vibration dampers.
While it considers its patents on the whole to be important, the Company does not consider any single patent, any group of related patents or any single license essential to its operations in the aggregate or to the operations of any of the Company’s business groups individually.
While the Company considers its patents on the whole to be important, the Company does not consider any single patent, any group of related patents or any single license essential to its operations in the aggregate or to the operations of any of the Company’s business groups individually.
Also, see Item 1A, “Risk Factors.” Human Capital Management The Company’s ability to sustain and grow its business requires it to hire, retain and develop a highly skilled and diverse management team and workforce worldwide. The Company believes the skills, experience, and industry knowledge of its employees significantly benefit its operations and performance.
Also, see Item 1A, “Risk Factors.” Human Capital Management The Company’s ability to sustain and grow its business requires it to hire, retain and develop a highly qualified management team and workforce worldwide. The Company believes the diverse skills, experience, and industry knowledge of its employees significantly benefit its operations and performance.
Also, see Item 1A, “Risk Factors.” Available Information Through its Internet website (www.borgwarner.com), the Company makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings with the Securities and Exchange Commission as soon as reasonably practicable after they are filed or furnished.
Also, see Item 1A, “Risk Factors.” 14 Table of Contents Available Information Through its Internet website (www.borgwarner.com), the Company makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, and other filings with the Securities and Exchange Commission as soon as reasonably practicable after they are filed or furnished.
Financial Information About Geographic Areas The Company has a global presence. During the year ended December 31, 2024, approximately 16% of the Company’s net sales were generated in the United States, and 84% were generated outside the United States.
Financial Information About Geographic Areas The Company has a global presence. During the year ended December 31, 2025, approximately 16% of the Company’s net sales were generated in the United States, and 84% were generated outside the United States.
Additionally, PowerDrive Systems’ products include electronic controls such as engine control units, transmission control units, battery management systems, propulsion controllers and domain controllers. PowerDrive Systems’ inverter products power many of the global leading electric and hybrid vehicles.
Additionally, PowerDrive Systems’ products include electronic controls such as engine control units, transmission control units, battery management systems, propulsion controllers and domain controllers. PowerDrive Systems’ inverter products power many of the world’s leading electric and hybrid vehicles.
The Company owns the “BorgWarner” trade name and numerous trademarks which are material to the Company's business. 11 Table of Contents Competition The Company’s reportable segments compete worldwide with a number of other manufacturers and distributors that produce and sell similar products. Many of these competitors are larger and have greater resources than the Company.
The Company owns the “BorgWarner” trade name and numerous trademarks which are material to the Company's business. Competition The Company’s reportable segments compete worldwide with a number of other manufacturers and distributors that produce and sell similar products. Many of these competitors are larger and have greater resources than the Company.
Intellectual Property The Company has approximately 5,190 active domestic and foreign patents and patent applications pending or under preparation and receives royalties from licensing patent rights to others.
Intellectual Property The Company has approximately 5,000 active domestic and foreign patents and patent applications pending or under preparation and receives royalties from licensing patent rights to others.
You can also find the Company’s public filings at a website maintained by the SEC, http://www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 15 Table of Contents Information About Executive Officers of the Company Set forth below are the names, ages, positions and certain other information concerning the executive officers of the Company as of February 6, 2025.
You can also find the Company’s public filings at a website maintained by the SEC, http://www.sec.gov, which contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 15 Table of Contents Information About Executive Officers of the Company Set forth below are the names, ages, positions and certain other information concerning the executive officers of the Company as of February 11, 2026.
Sales to the Company’s top ten customers represented 67% of sales for the year ended December 31, 2024. The Company’s automotive products are generally sold directly to OEMs, substantially pursuant to negotiated annual contracts, long-term supply agreements or terms and conditions as may be modified by the parties. Deliveries are subject to periodic authorizations based upon OEM production schedules.
Sales to the Company’s top ten customers represented 71% of sales for the year ended December 31, 2025. The Company’s automotive products are generally sold directly to OEMs, substantially pursuant to negotiated annual contracts, long-term supply agreements or terms and conditions as may be modified by the parties. Deliveries are subject to periodic authorizations based upon OEM production schedules.
Sales of turbochargers for light vehicles represented approximately 21%, 22% and 25% of the Company’s net sales for the years ended December 31, 2024, 2023 and 2022, respectively. No other single product line accounted for more than 10% of consolidated net sales in any of the years presented.
Sales of turbochargers for light vehicles represented approximately 21%, 21% and 22% of the Company’s net sales for the years ended December 31, 2025, 2024 and 2023, respectively. No other single product line accounted for more than 10% of consolidated net sales in any of the years presented.
The Company also operates testing facilities such as prototype, measurement and calibration, life-cycle testing and dynamometer laboratories. By working closely with OEMs and anticipating their future product needs, the Company’s R&D personnel conceive, design, develop and manufacture new proprietary components and systems. R&D personnel also work to improve current products and production processes.
The Company also operates testing facilities such as prototype, measurement and calibration, life-cycle testing and dynamometer laboratories. By working closely with OEMs and anticipating their future product needs, the Company’s R&D personnel conceive, design, develop and manufacture new proprietary components and systems. R&D personnel 10 Table of Contents also work to improve current products and production processes.
Such unconsolidated sales totaled approximately $764 million, $732 million, and $734 million for the years ended December 31, 2024, 2023 and 2022, respectively. Turbos & Thermal Technologies Turbos & Thermal Technologies develops and manufactures products to improve fuel economy, reduce emissions and enhance performance.
Such unconsolidated sales totaled approximately $764 million, $764 million, and $732 million for the years ended December 31, 2025, 2024 and 2023, respectively. Turbos & Thermal Technologies Turbos & Thermal Technologies develops and manufactures products to improve fuel economy, reduce emissions and enhance performance.
While the Company believes inflation will decrease in some areas, it does not expect to see “deflation,” which means that it expects supplier costs to remain elevated relative to prior years. Supplies of raw materials are adequate and available from multiple sources to support the Company’s manufacturing requirements. 4 Based on U.S.
While the Company believes inflation will decrease in some areas, it does not expect to see “deflation,” which means that it expects supplier costs to remain elevated relative to prior years. Supplies of raw materials are adequate and available from multiple sources to support the Company’s manufacturing requirements.
The Company recognizes that, in many of the locations where it operates, employees have freedom of association rights with third-party organizations such as labor unions. The Company respects and supports those rights, including the right to collective bargaining, in accordance with local laws.
The Company recognizes that, in many of the locations where it operates, employees have freedom of association rights with third-party organizations such as labor unions. The Company respects and supports those rights, including the right to collective bargaining, in accordance with local laws. 4 Based on latest U.S.
Refer to Note 17, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this report for information related to the Company’s hedging activities. For 2025, the Company believes there will be continued inflationary pressures in certain raw materials, labor and energy.
The Company intends to use similar measures in 2026 and beyond. Refer to Note 17, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this report for information related to the Company’s hedging activities. For 2026, the Company believes there will be continued inflationary pressures in certain raw materials, labor and energy.
We cannot guarantee that the Company’s business will not be adversely affected by increased competition in the markets in which it operates.
We cannot 11 Table of Contents guarantee that the Company’s business will not be adversely affected by increased competition in the markets in which it operates.
Turbos & Thermal Technologies’ powertrain products include an array of highly engineered products that complement and enhance the efficiency improvements delivered by many other air management technologies. 7 Table of Contents Drivetrain & Morse Systems Drivetrain & Morse Systems’ technologies include control modules, friction and mechanical clutch products for automatic transmissions, torque-management products and coupling systems.
Turbos & Thermal Technologies’ powertrain products include an array of highly engineered products that complement and enhance the efficiency improvements delivered by many other air management technologies. Drivetrain & Morse Systems Drivetrain & Morse Systems’ technologies include hydraulic controls, friction and mechanical clutch products for automatic transmissions and torque-management products.
Kulikowski (48) Vice President, Chief Accounting Officer (2024) • Cooper-Standard Holdings Inc., Vice President, Chief Accounting Officer (2022 – 2024) • Cooper-Standard Holdings Inc., Vice President, Global Internal Audit and Compliance (2021 – 2022) • BorgWarner Inc., Assistant Controller, Delphi Accounting and Integration (2020 – 2021) • Delphi Technologies PLC, Vice President and Assistant Controller (2017 – 2020) Isabelle McKenzie (55) Vice President and President and General Manager, Drivetrain and Morse Systems (2024) • Vice President and President and General Manager, Morse Systems (2023 – 2024) • Vice President & General Manager, Americas, Power-Drive Systems (2020 – 2023) • Vice President Global Engineering, Transmission Systems (2014 – 2020) Henk Vanthournout (51) Vice President and President and General Manager, Battery and Charging Systems (2024) • Vice President and General Manager, Battery Systems (2022-2024) • Vice President and General Manager, Drivetrain Systems Europe (2019-2022) 16 Table of Contents Volker Weng (54) Vice President and President and General Manager, Turbos and Thermal Technologies (2024) • Vice President and President and General Manager, Drivetrain & Battery Systems (2019) • Vice President of the Company and President and General Manager, BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc.
Kulikowski (49) Vice President, Chief Accounting Officer of the Company (2024) • Cooper-Standard Holdings Inc., Vice President, Chief Accounting Officer (2022 – 2024) • Cooper-Standard Holdings Inc., Vice President, Global Internal Audit and Compliance (2021 – 2022) • BorgWarner Inc., Assistant Controller, Delphi Accounting and Integration (2020 – 2021) Isabelle McKenzie (56) Vice President of the Company and President and General Manager, Drivetrain & Morse Systems (2024) • Vice President of the Company and President and General Manager, Morse Systems (2023 – 2024) • Vice President of the Company and General Manager, Americas, Power-Drive Systems (2020 – 2023) Henk Vanthournout (52) Vice President of the Company and President and General Manager, Battery & Charging Systems (2024) • Vice President of the Company and General Manager, Battery Systems (2022 – 2024) • Vice President of the Company and General Manager, Drivetrain Systems Europe (2019 – 2022) Volker Weng (55) Vice President of the Company and President and General Manager, Turbos & Thermal Technologies (2024) • Vice President of the Company and President and General Manager, Drivetrain & Battery Systems (2019 – 2024) • Vice President of the Company and President and General Manager, BorgWarner Emissions Systems and BorgWarner Thermal Systems (2019) 16 Table of Contents
Net sales by reportable segment were as follows: Year Ended December 31, (in millions) 2024 2023 2022 Turbos & Thermal Technologies $ 5,887 $ 6,012 $ 5,455 Drivetrain & Morse Systems 5,577 5,549 5,028 PowerDrive Systems 1,937 2,166 1,906 Battery & Charging Systems 729 546 335 Inter-segment eliminations (44) (75) (89) Net sales $ 14,086 $ 14,198 $ 12,635 The sales information presented above does not include the sales by the Company’s unconsolidated joint ventures (see sub-heading “Joint Ventures” below).
Net sales by reportable segment were as follows: Year Ended December 31, (in millions) 2025 2024 2023 Turbos & Thermal Technologies $ 5,772 $ 5,887 $ 6,012 Drivetrain & Morse Systems 5,654 5,577 5,549 PowerDrive Systems 2,347 1,937 2,166 Battery & Charging Systems 590 729 546 Inter-segment eliminations (47) (44) (75) Net sales $ 14,316 $ 14,086 $ 14,198 The sales information presented above does not include the sales by the Company’s unconsolidated joint ventures (see sub-heading “Joint Ventures” below).
Year Ended December 31, (in millions) 2024 2023 2022 Gross R&D expenditures $ 872 $ 856 $ 787 Customer reimbursements (136) (139) (86) Net R&D expenditures $ 736 $ 717 $ 701 Net R&D expenditures as a percentage of net sales were 5.2%, 5.1% and 5.5% for the years ended December 31, 2024, 2023 and 2022, respectively.
Year Ended December 31, (in millions) 2025 2024 2023 Gross R&D expenditures $ 823 $ 872 $ 856 Customer reimbursements (113) (136) (139) Net R&D expenditures $ 710 $ 736 $ 717 Net R&D expenditures as a percentage of net sales were 5.0%, 5.2% and 5.1% for the years ended December 31, 2025, 2024 and 2023, respectively.
Calaway (57) Executive Vice President, Chief Administrative Officer, General Counsel and Secretary (2020) • Executive Vice President, Chief Legal Officer and Secretary (2018 - 2020) • Air Products & Chemicals, Inc., Member of Board of Directors (2022 – Present) • W.P. Carey Inc., Member of Board of Directors (2020 – Present) Joseph F.
Calaway (58) Executive Vice President, Chief Administrative Officer, General Counsel and Secretary of the Company (2020) • Executive Vice President, Chief Legal Officer and Secretary of the Company (2018 – 2020) • Air Products & Chemicals, Inc., Member of Board of Directors (2022 – Present) • W.P.
The variable cam phasing products are used for variable control of engine exhaust and intake valves to control air- and gas-exchange in the engine. PowerDrive Systems PowerDrive Systems’ products and technologies provide industry-leading performance and efficiency with quick-to-market solutions powering current and next-generation electric and hybrid vehicles.
The variable cam phasing products are used for control of engine exhaust and intake valve timing to optimize fuel efficiency, emissions and performance. PowerDrive Systems PowerDrive Systems’ products and technologies provide industry-leading performance and efficiency with quick-to-market solutions powering current and next-generation electric and hybrid vehicles.
Results from the three joint ventures in which the Company exercises significant influence but does not have a controlling financial interest, were reported by the Company using the equity method of accounting pursuant to which the Company records its proportionate share of each joint venture’s income or loss each period.
Results from the three joint ventures in which the Company exercises significant influence but does not have a controlling financial interest, were reported by the Company using the equity method of accounting pursuant to which the Company records its proportionate share of each joint venture’s income or loss each period. 8 Table of Contents Management of the unconsolidated joint ventures is shared with the Company’s respective joint venture partners.
(2017 – 2019) Tania Wingfield (58) Executive Vice President, Chief Human Resources Officer (2022) • Vice President and General Manager, North America Aftermarket (2021 – 2022) • Vice President and Integration Champion (2020 – 2021) • Vice President, Engineering, PowerDrive Systems (2017 – 2020) Stefan Demmerle (60) Vice President and President and General Manager, PowerDrive Systems (2015) • Vice President of the Company and President and General Manager of BorgWarner PowerDrive Systems (2015 – Present) Paul A.
Carey Inc., Member of Board of Directors (2020 – Present) Tania Wingfield (59) Executive Vice President, Chief Human Resources Officer of the Company (2022) • Vice President of the Company and General Manager, North America Aftermarket (2021 – 2022) • Vice President and Integration Champion of the Company (2020 – 2021) Stefan Demmerle (61) Vice President of the Company and President and General Manager, PowerDrive Systems (2015) Paul A.
The segment is developing electronically controlled torque management devices and systems that will benefit vehicle energy efficiency and vehicle dynamics. Drivetrain & Morse Systems’ chain system products are used on engines in on- and off-road vehicles to drive camshaft and other auxiliary drives, in transmissions for torque transfer and some drivetrain applications.
The segment also includes electronic limited slip differentials (“eLSD”), electric torque vectoring products and axle disconnect systems that will benefit vehicle energy efficiency and vehicle dynamics. Drivetrain & Morse Systems’ chain system products are used on engines in on- and off-road vehicles to drive camshaft and other auxiliary drives, in transmissions and some drivetrain applications for torque transfer.
As of December 31, 2024, the Company had a salaried and hourly workforce 1 as follows: Americas 11,300 Asia 12,300 Europe 14,700 Total workforce 38,300 Salaried 12,300 Hourly 26,000 Total workforce 38,300 The Company uses an array of practices to attract, develop and retain qualified talent, including the following: • Engagement & Retention .
As of December 31, 2025, the Company had a salaried and hourly workforce 1 as follows: Americas 10,800 Asia 11,900 Europe 14,800 Total workforce 37,500 Salaried 11,600 Hourly 25,900 Total workforce 37,500 The Company uses an array of practices to attract, develop and retain qualified talent, including the following: • Attraction and Retention .
Applications of iDMs include a wide range of electric and hybrid vehicles globally. Battery & Charging Systems Battery & Charging Systems’ products drive electrified propulsion forward by providing high-performance lithium-ion battery systems for electrified bus, truck- and off-highway applications and DC (direct current) fast chargers suitable for all types of electric vehicles.
Applications of iDMs include a wide range of electric and hybrid vehicles globally. Battery & Charging Systems Battery & Charging Systems’ products drive electrified propulsion forward by providing high-performance lithium-ion battery systems for electrified bus, truck- and off-highway applications. Battery & Charging Systems’ products include a nickel manganese cobalt battery pack product line and lithium iron phosphate battery packs.
The Company’s worldwide net sales to the following customers (including their subsidiaries) were approximately as follows: Year Ended December 31, Customer 2024 2023 2022 Ford 13 % 14 % 15 % Volkswagen 10 % 11 % 9 % No other single customer accounted for more than 10% of the Company’s consolidated net sales in any of the years presented.
Product Lines and Customers During the year ended December 31, 2025, approximately 82% of the Company’s net sales were for light-vehicle applications; approximately 10% were for commercial-vehicle applications; approximately 5% were for off-highway vehicle applications; and approximately 3% were to distributors of aftermarket replacement parts. 9 Table of Contents The Company’s worldwide net sales to the following customers (including their subsidiaries) were approximately as follows: Year Ended December 31, Customer 2025 2024 2023 Volkswagen 13 % 10 % 11 % Ford 12 % 13 % 14 % No other single customer accounted for more than 10% of the Company’s consolidated net sales in any of the years presented.
Turbos & Thermal Technologies’ technologies include turbochargers, eBoosters, eTurbos, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters and battery heaters. Turbos & Thermal Technologies’ emissions, thermal and turbocharger systems provide several benefits, including increased power for a given engine size, improved fuel economy, reduced emissions and optimized temperatures in propulsion systems and vehicle cabins.
Turbos & Thermal Technologies’ emissions, thermal and turbocharger systems provide several benefits, including increased power for a given engine size, improved fuel economy, reduced emissions and optimized temperatures in propulsion systems and vehicle cabins.
Controls products for automatic transmissions feature electro-hydraulic solenoids for standard and high-pressure hydraulic systems, transmission solenoid modules and dual clutch control modules. Drivetrain & Morse Systems’ torque management products include rear-wheel drive (“RWD”) and all-wheel drive (“AWD”) transfer case systems, front-wheel drive (“FWD”)-AWD coupling systems and cross-axle coupling systems.
Hydraulic controls products for automatic transmissions feature electro-hydraulic solenoids for standard and high-pressure hydraulic systems, transmission solenoid modules and dual clutch hydraulic control modules. 7 Table of Contents Drivetrain & Morse Systems’ torque management products include transfer cases for 4-wheel drive applications (“4WD”) and couplings for all-wheel drive applications (“AWD”).
Fadool (58) Executive Vice President and Chief Operating Officer (2024); President and Chief Executive Officer (as of the close of business on February 6, 2025) 6 • Vice President and President and General Manager, Emissions, Thermal and Turbo Systems (2019) • Vice President of the Company and President and General Manager, Turbo Systems LLC (2019) • Vice President of the Company and President and General Manager, BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc.
Fadool (59) President and Chief Executive Officer of the Company (2025) • Executive Vice President and Chief Operating Officer of the Company (2024 – 2025) • Vice President of the Company and President and General Manager, Emissions, Thermal and Turbo Systems (2019 – 2024) Craig D.
Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Item 8 of this report for more information, including a summary of recent acquisitions. 6 Table of Contents Financial Information About Reportable Segments Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report for financial information about the Company's reportable segments.
Recent Acquisitions and Dispositions Acquisitions have been an integral component of the Company’s growth and value creation strategy. Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Item 8 of this report for more information, including a summary of recent acquisitions.
Aaron (47) Executive Vice President and Chief Financial Officer (2024) • Vice President and Controller (2022 – 2024) • Vice President and Treasurer (2019 – 2022) • Vice President, Finance, BorgWarner Morse Systems (2016 – 2019) Tonit M.
Aaron (48) Executive Vice President and Chief Financial Officer of the Company (2024) • Vice President and Controller of the Company (2022 – 2024) • Vice President and Treasurer of the Company (2019 – 2022) Tonit M.
Management of the unconsolidated joint ventures is shared with the Company’s respective joint venture partners. Certain information concerning the Company's joint ventures is set forth below: Joint venture Products Year organized Percentage owned by the Company Location of operation Joint venture partner Unconsolidated: NSK-Warner K.K. Transmission components 1964 50% Japan/China NSK Ltd.
Certain information concerning the Company's joint ventures is set forth below: Joint venture Products Year organized Percentage owned by the Company Location of operation Joint venture partner Unconsolidated: NSK-Warner K.K. Transmission components 1964 50% Japan/China NSK Ltd. Turbo Energy Private Limited Turbochargers 1987 32.6% India Sundaram Finance Limited; Brakes India Limited Fast Warner Intelligent Control Systems (Xi’an) Co., Ltd.
Narrative Description of Reportable Segments The Company discloses segment information under four reportable segments, consistent with the way operating results are evaluated by management: Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems and Battery & Charging Systems.
Financial Information About Reportable Segments Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report for financial information about the Company's reportable segments. 6 Table of Contents Narrative Description of Reportable Segments The Company discloses segment information under four reportable segments, consistent with the way operating results are evaluated by management: Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems and Battery & Charging Systems.
This function oversees the Company's investments in certain venture capital funds that provide seed money for start-up businesses developing new technologies pertinent to the automotive industry and the Company's propulsion strategies. 10 Table of Contents In addition, each of the Company's businesses within its Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems and Battery & Charging Systems reportable segments has its own research and development (“R&D”) organization, including engineers and technicians, engaged in R&D activities at facilities worldwide.
In addition, each of the Company's businesses within its Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems and Battery & Charging Systems reportable segments has its own research and development (“R&D”) organization, including engineers and technicians, engaged in R&D activities at facilities worldwide.
Farrell (58) Executive Vice President and Chief Strategy Officer (2020) • Delphi Technologies PLC, Senior Vice President Strategy, Sales and Corporate Development (2020) • Delphi Technologies PLC, Senior Vice President Strategy and Corporate Development (2019 – 2020) • Delphi Technologies PLC, Senior Vice President Strategic Planning and Product Marketing (2017 – 2019) Amy B.
Farrell (59) Executive Vice President and Chief Strategy Officer of the Company (2022) • Vice President and Chief Strategy Officer of the Company (2020 – 2021) • Delphi Technologies PLC, Senior Vice President Strategy, Sales and Corporate Development (2020) Amy B.
Bureau of Labor Statistics (the “BLS”), Survey of Occupational Injuries and Illnesses Data, motor vehicle parts manufacturing (NAICS 336300). 5 Certified to ISO 45001:2018.
Bureau of Labor Statistics (the “BLS”), Survey of Occupational Injuries and Illnesses Data, motor vehicle parts manufacturing (NAICS 336300). 5 ISO 45001:2018 certifications include manufacturing locations that supply directly to OEMs, locations that have passed external audit and are awaiting certification, and those undergoing recertification, as required.
This advanced engineering function seeks to leverage know-how and expertise across product lines to create new electrified propulsion systems and modules that can be commercialized.
This advanced engineering function seeks to leverage know-how and expertise across product lines to create new electrified propulsion systems and modules that can be commercialized. This function oversees the Company's investments in certain venture capital funds that provide seed money for start-up businesses developing new technologies pertinent to the automotive industry and the Company's propulsion strategies.
In addition, the Company uses long-term contracts, cost sharing arrangements, design changes, dual sourcing, customer buy programs and limited financial instruments to help control costs. The Company intends to use similar measures in 2025 and beyond.
The Company’s global procurement organization works to accelerate cost reductions, purchase from lower cost regions, optimize the supply base, mitigate risk and collaborate on its buying activities. In addition, the Company uses long-term contracts, cost sharing arrangements, design changes, dual sourcing, customer buy programs and limited financial instruments to help control costs.
The scope of this performance indicator is for manufacturing locations that supply directly to original equipment manufacturers, excluding locations during their first 18 months of production and newly acquired sites during their first 18 months with the Company. 14 Table of Contents Regulations The Company operates in a constantly evolving global regulatory environment and is subject to numerous and varying regulatory requirements for its product performance and material content.
Regulations The Company operates in a constantly evolving global regulatory environment and is subject to numerous and varying regulatory requirements for its product performance and material content.
The Company recognizes and rewards employee contributions with competitive pay and benefits. The Company closely monitors employee turnover as part of its efforts to improve retention and to spot any potential opportunities for improvement. In the year ended December 31, 2024, annual voluntary employee turnover was 9.7%.
As a part of its focus on retention, the Company closely monitors employee turnover to identify any potential opportunities for improvement. For the year ended December 31, 2025, annual voluntary employee turnover was 10.2% overall—7.4% for salaried employees and 11.8% for hourly employees. 2 • Education and Development.
Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report for additional financial information about geographic areas. 9 Table of Contents Product Lines and Customers During the year ended December 31, 2024, approximately 81% of the Company’s net sales were for light-vehicle applications; approximately 10% were for commercial-vehicle applications; approximately 7% were for off-highway vehicle applications; and approximately 2% were to distributors of aftermarket replacement parts.
Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report for additional financial information about geographic areas.
Raw Materials The Company uses a variety of raw materials in the production of its products, including aluminum, copper, nickel, plastic resins, steel, certain alloy elements and semiconductor chips. Manufacturing operations for each of the Company’s operating segments are dependent upon natural gas, fuel oil and electricity.
Manufacturing operations for each of the Company’s operating segments are dependent upon natural gas, fuel oil and electricity. The Company uses a variety of tactics in an attempt to limit the impact of supply shortages, tariffs, export bans and inflationary pressures.
These come with the relevant on- and off-highway- as well as marine certifications and are liquid cooled for cycle life up to 6,000 cycles and megawatt charging capability. 8 Table of Contents Battery & Charging Systems expands the global charging infrastructure with innovative DC-fast charging solutions.
The proprietary battery management system provides state-of-the-art functionality like cybersecurity, functional safety and conformity with EU regulations- and ASPICE. These come with the relevant on- and off-highway- as well as marine certifications and are liquid cooled for cycle life up to 6,000 cycles. In February 2025, the Company made the decision to exit its charging business.
During the years ended December 31, 2024, 2023 and 2022, the Company’s eProduct revenue was approximately $2.3 billion, $2.0 billion and $1.5 billion, respectively, or 17%, 14% and 12% of its total revenue, respectively, and the Company’s Foundational products revenue was approximately $11.8 billion, $12.2 billion and $11.2 billion, respectively, or 83%, 86% and 88% of its total revenue, respectively.
During the years ended December 31, 2025, 2024 and 2023, the Company’s revenue from eProducts, which include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs, was approximately $2.6 billion, $2.3 billion and $2.0 billion, respectively, or 18%, 17% and 14% of its total revenue, respectively, and the Company’s revenue from Foundational products, which include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains, was approximately $11.7 billion, $11.8 billion and $12.2 billion, respectively, or 82%, 83% and 86% of its total revenue, respectively.
Name (Age) Present Position (Effective Date) Positions Held During the Past Five Years (Effective Date) Frederic B. Lissalde (57) President and Chief Executive Officer (2018) 6 • Autoliv, Inc., Member of Board of Directors (2020 – Present) Craig D.
Name (Age) Present Position (Effective Date) Other Positions Held During the Past Five Years (Effective Date) Joseph F.
The Company undertakes a variety of recruitment and retention initiatives that serve as a strategic opportunity to expand its talent and leadership pipeline.
The Company undertakes a variety of recruitment and retention initiatives designed to expand its talent and leadership pipeline and is committed to recognizing and rewarding employee contributions through competitive pay and benefits. The Company also fosters a workplace culture where everyone feels safe, respected, and valued for their differences.
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BorgWarner Strategy In 2021, the Company announced its accelerated electrification strategy. There were three primary elements of the strategy: (1) profitably scaling organic growth in electric vehicles (“EVs”); (2) executing mergers and acquisitions that expand our EV products; and (3) optimizing our combustion portfolio through planned dispositions of between $3 billion and $4 billion of annual revenue.
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Turbos & Thermal Technologies’ technologies include turbochargers, eBoosters, eTurbos, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery heaters and battery cooling systems.
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In June 2023, the Company announced the next phase of its strategy, which focused on advancing its position as a leader in eProducts (all products utilized on or for EVs plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable to those used in or for EVs), while maximizing the value of its combustion portfolio or Foundational products (all products utilized in internal combustion engines plus those same products and components that are also included in hybrid powertrains).
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This decision was made following the Company’s continuing evaluation of its product portfolio and future investments. Production operations ceased during the second quarter of 2025. Joint Ventures As of December 31, 2025, the Company had nine joint ventures in which it had a less-than-100% ownership interest.
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On July 3, 2023, BorgWarner completed the previously announced spin-off (“Spin-Off”) of its Fuel Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of 100% of the outstanding common stock of PHINIA, Inc.
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The Company surpassed its goal to fill the majority of leadership positions internally in 2025 3 . The Company is committed to building a flexible workforce with the skills needed to support customers’ needs now and in the future.
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(“PHINIA”) to holders of record of common stock of the Company on a pro-rata basis. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange. The historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations in the accompanying Consolidated Financial Statements.
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This includes a wide range of initiatives—such as leadership development, technical training and mentorship 1 “Workforce” data is approximate and includes estimated full-time equivalent numbers for contractors and temporary workers. 2 Employee turnover excludes interns, co-ops and apprentices. 3 Leadership is defined as Senior Manager and above, which is the same group that partakes in the Management Incentive Plan (MIP).
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Recent Acquisitions Acquisitions have been an integral component of the Company’s growth and value creation strategy.
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Majority is defined as more than 50%. 12 Table of Contents programs—that strengthen capabilities across our evolving portfolio and respond to changing customer demands. • Health and Safety . The safety of the Company’s employees is vitally important, and the Company is dedicated to continuously improving safety performance.
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In the third quarter of 2024, the Company implemented a new business unit and management structure designed to further enhance the execution of the Company’s strategy. Previously, the Company presented its results under three reportable segments: Air Management, Drivetrain & Battery Systems and ePropulsion.
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The Company has set goals for the safety of its workforce.
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Prior period reportable segment disclosures have been updated accordingly, including recasting prior period information for the new reporting structure.
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This excludes new or newly acquired sites during their first 18 months of production and sites scheduled for closure or sale. 6 TRIR and LTIR are based on full-year performance data for 2025 as of January 22, 2026. 13 Table of Contents Raw Materials The Company uses a variety of raw materials in the production of its products, including aluminum, copper, nickel, plastic resins, steel, magnets, certain alloy elements and semiconductor chips.
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Battery & Charging Systems’ products include a nickel manganese cobalt battery pack product line and lithium iron phosphate battery packs. The proprietary battery management system provides state-of-the-art functionality like cybersecurity, functional safety and conformity with EU regulations- and ASPICE.
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These are available in integrated and distributed solutions across a wide range of power levels and are based on a modular high-power platform design, with a focus on uptime performance and user experience. Joint Ventures As of December 31, 2024, the Company had nine joint ventures in which it had a less-than-100% ownership interest.
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Turbo Energy Private Limited Turbochargers 1987 32.6% India Sundaram Finance Limited; Brakes India Limited Fast Warner Intelligent Control Systems (Xi’an) Co., Ltd.
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The annual voluntary 1 “Workforce” data is approximate and includes estimated full-time equivalent numbers for contractors and temporary workers. 12 Table of Contents turnover for our salaried employees was 7.8%, while the annual voluntary turnover for our hourly employees was 10.8%. 2 • Education & Development.
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The Company is also committed to preparing its workforce for changes in the industry through multiple initiatives, such as training programs created in partnership with elite universities to increase the knowledge and skills of its engineers to enable them to work in an electrification environment. • Diversity & Inclusion (“D&I”) .
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Ultimate responsibility for D&I at BorgWarner lies with the Company’s CEO, while the Board of Directors monitors initiatives and performance. The Company cultivates a culture where employees are treated with respect and their differences are valued. The Company is continually reviewing its policies, programs and processes to ensure alignment with its D&I strategy.
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As of December 31, 2024: ◦ Five of eight members of the Board of Directors (63%) were women and/or racially/ethnically diverse. ◦ Four of 11 executive management team members (36%) were women and/or racially/ethnically diverse. ◦ Women composed 30.7% of the Company’s employees, 18.3% of the Company’s leadership (those who participate in the management incentive plan), 24.8% of the Company’s salaried employees, 33.8% of the Company’s hourly employees and 41.7% of the Company’s new hires in 2024. 2 ◦ Racial/ethnic minorities composed 30.3% of the Company’s total U.S. employees, 20.4% of the Company’s U.S. leadership, 24.5% of the Company’s U.S. salaried employees, 35.6% of the Company’s U.S. hourly employees and 45.0% of the Company’s U.S. new hires in 2024. 2 ◦ The Company’s latest pay equity analysis identified that, on average, women received compensation equal to 99.2% of that received by men across the Company’s global workforce for substantially similar work.
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In the U.S., racial/ethnic minorities received compensation of 100.9% compared to compensation received by non-minorities for substantially similar work. 3 • Health & Safety . The safety of the Company’s employees is vitally important, and the Company is dedicated to continuously improving safety performance.
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The Company set goals for the safety of its workforce. Those goals include: 2 Employee turnover and new hire data excludes interns, co-ops and apprentices. 3 The Company’s most recent pay equity study was conducted in 2024 based on compensation and employees as of December 31, 2023.
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The top quartile for motor vehicle parts manufacturing was lower than or equal to 1.4 according to the BLS. 4 ◦ The Company’s global workforce accident LTIR was 0.25.
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The top quartile for motor vehicle parts manufacturing was lower than or equal to 0.2 according to the BLS. 4 ◦ 91% of the Company’s manufacturing sites were ISO 45001 certified. 5 Approximately 13.3% of the Company’s U.S. workforce is unionized.
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The Company uses a variety of tactics in an attempt to limit the impact of supply shortages, tariffs and inflationary pressures. The Company’s global procurement organization works to accelerate cost reductions, purchase from lower cost regions, optimize the supply base, mitigate risk and collaborate on its buying activities.
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(2019) • Vice President and General Manager, Europe, BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc. (2017 – 2019) __________________________ 6 On November 6, 2024, the Company announced that, effective at the close of business on February 6, 2025, Frederic B. Lissalde, the President and Chief Executive Officer of the Company, will retire and that Joseph F.
Removed
Fadool, currently the Company’s Executive Vice President of BorgWarner Inc. and Chief Operating Officer, has been appointed to succeed him as President and Chief Executive Officer.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

83 edited+33 added−12 removed63 unchanged
Biggest changeAny escalation of trade tensions, additional tariffs, retaliatory measures by foreign governments or shifts in U.S. or international trade policies could adversely impact our supply chain, increase costs and reduce demand for our products.
Biggest changeTariffs or retaliatory tariffs announced to date or announced in the future, current trade tensions, any escalation of trade tensions, additional tariffs, retaliatory measures by foreign governments, shifts in U.S. or international trade policies or related uncertainties affecting the conduct of business and consumer spending could continue to adversely impact our supply chain, increase costs of components and materials and reduce demand for our products, directly or indirectly due to negative effects on our customers, the U.S. economy, the economies of other countries in which we operate or the global economy, any or all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Such situations could result in significant financial penalties to us or a diversion of personnel and financial resources to improving launches rather than investment in continuous process improvement or other growth initiatives and could result in our customers shifting work away from us to a competitor, all of which could result in loss of revenue or loss of market share and could have an adverse effect on our profitability and cash flows.
Such situations could result in loss of customers, significant financial penalties to us or a diversion of personnel and financial resources to improving launches rather than investment in continuous process improvement or other growth initiatives and could result in our customers shifting work away from us to a competitor, all of which could result in loss of revenue or loss of market share and could have an adverse effect on our profitability and cash flows.
Any of the following could materially and adversely affect our business: the loss of or changes in supply contracts or sourcing strategies of our major customers or suppliers; start-up expenses associated with new vehicle programs or delays or cancellation of such programs; low levels of utilization of our manufacturing facilities, which can be dependent on a single product line or customer; inability to recover engineering and tooling costs; market and financial consequences of recalls that may be required on products we supplied; delays or difficulties in new product development; the possible introduction of similar or superior technologies by others; global excess capacity and vehicle platform proliferation; and the impact of fire, flood, or other natural disasters, including pandemics and quarantines.
Any of the following could materially and adversely affect our business and results of operations: the loss of or changes in supply contracts or sourcing strategies of our major customers or suppliers; start-up expenses associated with new vehicle programs or delays or cancellation of such programs; low levels of utilization of our manufacturing facilities, which can be dependent on a single product line or customer; inability to recover engineering and tooling costs; market and financial consequences of recalls that may be required on products we supplied; delays or difficulties in new product development; the possible introduction of similar or superior technologies by others; global excess capacity and vehicle platform proliferation; and the impact of fire, flood, or other natural disasters, including pandemics and quarantines.
Compliance with multiple and potentially conflicting laws and regulations of various countries is challenging, burdensome and expensive. The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for each period for revenues, expenses and capital expenditures.
Compliance with multiple and potentially conflicting laws and regulations of various countries is challenging, burdensome and expensive. The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for each period for sales revenues, expenses and capital expenditures.
Our future success is dependent upon our making the right investments at the right times with the right customers who can rapidly adapt to the market, to support product development in areas of evolving vehicle technologies. We have made, and expect to continue to make, significant investments to grow our eProducts.
Our future success is dependent upon us making the right investments at the right times, with the right customers who can rapidly adapt to the market, to support product development in areas of evolving vehicle technologies. We have made, and expect to continue to make, significant investments to grow our eProducts.
We use important intellectual property in our business. If we are unable to protect our intellectual property or if a third party makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected. We own important intellectual property, including patents, trademarks, copyrights, and trade secrets and are involved in numerous licensing arrangements.
If we are unable to protect our intellectual property or if a third party makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected. We own important intellectual property, including patents, trademarks, copyrights, and trade secrets and are involved in numerous licensing arrangements.
Some cyber-attacks depend on human error or manipulation, including phishing attacks or social engineering schemes to gain access to systems or carry out disbursement of funds or other frauds, which raise the risks from such events and the costs associated with protecting against such attacks.
Some cyber-attacks depend on human error or manipulation, including phishing attacks, social engineering schemes or ransomware to gain access to systems or carry out disbursement of funds or other frauds, which raise the risks from such events and the costs associated with protecting against such attacks.
We cannot predict with certainty the potential adverse effects these costs might have on our business. We are subject to possible insolvency of financial counterparties. We engage in numerous financial transactions and contracts, including insurance policies, letters of credit, credit line agreements, financial derivatives, and investment management agreements involving various counterparties.
We cannot predict with certainty the potential adverse effects these costs might have on our business and results of operations. We are subject to possible insolvency of financial counterparties. We engage in numerous financial transactions and contracts, including insurance policies, letters of credit, credit line agreements, financial derivatives, and investment management agreements involving various counterparties.
Although we have implemented security policies, processes, and layers of defense designed to help identify and protect against intentional and unintentional misappropriation or corruption of our systems and information and disruptions of our operations, we have been, and likely will continue to be, subjected to such attacks or disruptions (to date, we are not aware that we have experienced a cybersecurity incident that has materially affected our business strategy, results of operations, or financial condition).
Although we have implemented security policies, processes, and layers of defense designed to help identify and protect against intentional and unintentional misappropriation or corruption of our systems and information and disruptions of our operations (and, to date, we are not aware that we have experienced a cybersecurity incident that has materially affected our business strategy, results of operations, or financial condition), we have been, and likely will continue to be, subjected to such attacks or disruptions which could be material.
These OEMs could elect to manufacture such products for their own uses in place of the products we currently supply. Our traditional OEM customers, faced with intense international competition, have continued to expand their global sourcing of components.
These OEMs have elected and could elect to manufacture such products for their own uses in place of the products we currently supply. Our traditional OEM customers, faced with intense international competition, have continued to expand their global sourcing of components.
Implementation of any restructuring action may be costly and disruptive to our business, and we may not be able to obtain the cost savings, operational improvements and estimated workforce reductions that we anticipate within the projected timing or at all.
Implementation of any restructuring action may be costly and disruptive to our business, and we may not be able to realize the cost savings, operational improvements and estimated workforce reductions that we anticipate within the projected timing or at all.
If the overall adoption of electric vehicles continues to be slower as compared to our expectations, we may not only fail to realize expected rates of return on our existing investments, but we may incur further losses on such investments.
If the overall adoption of electric vehicles continues to be slower as compared to our expectations, we may not only fail to realize expected rates of return on our existing investments, we may also incur further losses on such investments.
Changes in tax laws or tax rates taken by taxing authorities and tax audits could adversely affect our business. Changes in tax laws or tax rates, the resolution of tax assessments or audits by various tax authorities, and the inability to fully utilize our tax loss carryforwards and tax credits could adversely affect our operating results.
Changes in tax laws or tax rates by taxing authorities and the outcome of tax audits could adversely affect our business. Changes in tax laws or tax rates, the resolution of tax assessments or audits by various tax authorities, and the inability to fully utilize our tax loss carryforwards and tax credits could adversely affect our operating results.
Part of our workforce is unionized, which could subject us to work stoppages. As of December 31, 2024, approximately 13.3% of our U.S. workforce was unionized. We have a domestic collective bargaining agreement for one facility in New York, which expires in September 2028. The workforce at certain of our international facilities is also unionized.
Part of our workforce is unionized, which could subject us to work stoppages. As of December 31, 2025, approximately 13% of our U.S. workforce was unionized. We have a domestic collective bargaining agreement for one facility in New York, which expires in September 2028. The workforce at certain of our international facilities is also unionized.
Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our non-U.S. subsidiaries' ability to convert local currency into U.S. Dollars or to make payments outside the country. This could subject us to the risks of local currency devaluation and business disruption.
Certain countries in which we operate have adopted or could institute currency 27 Table of Contents exchange controls that limit or prohibit our non-U.S. subsidiaries' ability to convert local currency into U.S. Dollars or to make payments outside the country. This could subject us to the risks of local currency devaluation and business disruption.
Refer to Note 4, “Restructuring,” to the Consolidated Financial Statements for more information. Changes in U.S. administrative policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on us.
Refer to Note 4, “Restructuring,” to the Consolidated Financial Statements for more information. Changes in administrative policy on the part of the U.S. or other countries, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on us.
The valuation of our future payment obligations under the plans and the related plan assets is subject to significant adverse changes if the credit and capital markets cause interest rates and projected rates of return to decline. Such declines could also require us to make significant additional contributions to our pension plans in the future.
The valuation of our future payment obligations under the plans and the related plan assets is subject to significant adverse changes if the credit and capital markets cause interest rates and 24 Table of Contents projected rates of return to decline. Such declines could also require us to make significant additional contributions to our pension plans in the future.
In particular, any unplanned turnover or inability to attract and retain key employees and employees with engineering, technical and software capabilities in numbers sufficient for our needs could adversely affect our business. 23 Table of Contents Our profitability and results of operations may be adversely affected by new business launch difficulties.
In particular, any unplanned turnover or inability to attract and retain key employees and employees with engineering, technical and software capabilities in numbers sufficient for our needs could adversely affect our business. Our profitability and results of operations may be adversely affected by new business launch difficulties.
If actual production orders from our customers do not approximate such commitments due to a variety of factors, including non-renewal of purchase orders, a customer's financial hardship or other unforeseen reasons, it could adversely affect our business. Some of our sales are concentrated.
If actual production orders from our customers do not approximate such commitments due to a variety of factors, including non-renewal of purchase orders, a customer's financial hardship or other unforeseen reasons, it could adversely affect our business. 28 Table of Contents Some of our sales are concentrated.
In addition, a 25 Table of Contents recall claim could require us to review our entire product portfolio to assess whether similar issues are present in other product lines, which could result in significant disruption to our business and could have an adverse impact on our results of operations.
In addition, a recall claim could require us to review our entire product portfolio to assess whether similar issues are present in other product lines, which could result in significant disruption to our business and could have an adverse impact on our results of operations.
We may also dispose of a business at a price or on terms that are less desirable than we had anticipated. Buyers of the assets or business may from time to time agree to indemnify us for operations of such businesses after the closing.
We may also dispose of a business at a price or on terms that are less desirable 18 Table of Contents than we had anticipated. Buyers of the assets or business may from time to time agree to indemnify us for operations of such businesses after the closing.
We continually monitor changes in global pension regulations as the complexity of pension laws in the jurisdictions where we sponsor plans can present financial risks in the event of noncompliance. 24 Table of Contents We are subject to extensive environmental regulations that are subject to change and involve significant risks.
We continually monitor changes in global pension regulations as the complexity of pension laws in the jurisdictions where we sponsor plans can present financial risks in the event of noncompliance. We are subject to extensive environmental regulations that are subject to change and involve significant risks.
Consequently, our results could be affected by changes in trade, monetary and fiscal policies, trade restrictions or prohibitions, import or other charges or taxes, fluctuations in foreign currency exchange rates, limitations on the repatriation of funds, changing economic conditions, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political instability and disputes, international terrorism and other factors that may be discrete to a particular country or geography.
Consequently, our results could be affected by changes in trade, monetary and fiscal policies, trade restrictions or prohibitions, import or other charges or taxes, fluctuations in foreign currency exchange rates, limitations on the repatriation of funds, data protection regulations, changing economic conditions, unreliable intellectual property protection and legal systems, including the ability to enforce commercial agreements, insufficient infrastructures, social unrest, political instability and disputes, international terrorism and other factors that may be discrete to a particular country or geography.
We may not meet our goals due to many factors, including any of the risks identified in the paragraphs that follow, failure to develop new products that our customers will purchase, technology changes that could render our products obsolete, or the introduction of new technology to which we do not have access, among other things.
We may not prove successful in our strategy due to many factors, including any of the risks identified in the paragraphs that follow, failure to develop new products that our customers will purchase, technology changes that could render our products obsolete, or the introduction of new technology to which we do not have access, among other things.
We regularly evaluate potential growth opportunities, some of which could be material. While we believe that such transactions are an integral part of our long-term strategy, there are risks and uncertainties related to these activities. Assessing a potential growth opportunity involves extensive due diligence.
We regularly evaluate potential growth opportunities. While we believe that such transactions are an integral part of our long-term strategy, there are risks and uncertainties related to these activities. Assessing a potential growth opportunity involves extensive due diligence.
For example, on September 19, 2024, we commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA has received or expects to receive from governmental agencies as well as damages and interest, which PHINIA has refused to pay the Company.
For example, on September 19, 2024, we commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expects to receive from governmental agencies as well as damages and interest.
In addition, many of these factors are outside of our control, and any one of these factors could result in increased costs, decreases in the amount of expected revenues and additional diversion of management’s time and energy, which could materially adversely impact our business, financial condition and results of operations.
In addition, many of these factors are outside of our control, and any one of these factors could result in increased costs, decreases in the amount of expected revenues, unanticipated risks and liabilities associated with the acquired business, and additional diversion of management’s time and energy, which could materially adversely impact our business, financial condition and results of operations.
OEM customers expect annual price reductions in our business. To maintain our profit margins, we seek price reductions from our suppliers, improved production processes to increase manufacturing efficiency, and streamlined product designs to reduce costs, and we attempt to develop new products, the benefits of which support stable or increased prices.
To maintain our profit margins, we seek price reductions from our suppliers, improved production processes to increase manufacturing efficiency, and streamlined product designs to reduce costs, and we attempt to develop new products, the benefits of which support stable or increased prices.
Following non-contractual negotiations, we reached cost-recovery agreements with various customers in 2024, 2023 and 2022, but these agreements did not enable us to recover 100 percent of our increased costs, and as a result, our operating margins were negatively impacted.
Following non-contractual negotiations, we reached cost-recovery agreements with various customers in 2024, 2023 and 2022, but these agreements did not enable us to recover 100 percent of our increased costs, and as a result, our operating margins were negatively impacted. Elevated levels of inflation could adversely affect our business.
In recent years, within the automotive industry, there have been governmental investigations and related proceedings relating to alleged or actual violations of vehicle emissions standards.
We may be subject to potential governmental investigations and related proceedings relating to vehicle emissions standards. In recent years, within the automotive industry, there have been governmental investigations and related proceedings relating to alleged or actual violations of vehicle emissions standards.
We have recorded goodwill and indefinite-lived intangible assets related to acquisitions. We periodically assess these assets to determine if they are impaired. Significant negative industry or macroeconomic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets, dispositions and market capitalization declines may impair these assets.
We periodically assess these assets to determine if they are impaired. Significant negative industry or macroeconomic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets, dispositions and market capitalization declines may impair these assets.
In addition, extreme weather events may damage a facility or surrounding infrastructure, making the facility unusable for a time. These factors may impact our decisions to construct new facilities. We have liabilities related to environmental, product warranties, litigation and other claims.
In addition, extreme weather events may damage a facility or surrounding infrastructure, making the facility unusable for a time. These factors may impact our decisions to construct new facilities. 25 Table of Contents We have been and are exposed to liabilities related to environmental, product warranties, product recalls, litigation and other claims.
We expect that they will deliver to our stated written expectations. 28 Table of Contents However, there can be no assurance that capacity limitations, industry shortages, labor or social unrest, weather emergencies, commercial disputes, government actions, riots, wars, sabotage, cyber-attacks, non-conforming parts, acts of terrorism, “Acts of God,” or other problems that our suppliers experience will not result in occasional shortages or delays in their supply of components to us.
However, there can be no assurance that capacity limitations, industry shortages, labor or social unrest, weather emergencies, commercial disputes, government actions, riots, wars, sabotage, cyber-attacks, non-conforming parts, acts of terrorism, “Acts of God,” or other problems that our suppliers experience will not result in shortages or delays in their supply of components to us.
If we are unable to maintain our position in the Chinese market or if vehicle sales in China decrease, our business and financial results could be adversely affected. A downgrade in the ratings of our debt could restrict our ability to access the debt capital markets.
If we are unable to maintain our position in the Chinese market or if vehicle sales in China decrease, our business and financial results could be adversely affected. For 2025, approximately 21% of our consolidated net sales were attributable to China. A downgrade in the ratings of our debt could restrict our ability to access the debt capital markets.
In addition, with fewer sources of supply for certain components, each supplier may perceive that it has greater leverage and, therefore, some ability to seek higher prices from us at a time that we face substantial pressure from OEMs to reduce the prices of our products, which could adversely affect our customer relations and business.
In addition, with fewer sources of supply for certain components, each supplier may perceive that it has greater leverage and, therefore, some ability to seek higher prices from us at a time that we face substantial pressure from OEMs to reduce the prices of our products, which could adversely affect our customer relations and business. 29 Table of Contents Suppliers’ economic distress could result in supply interruptions and, in turn, disrupt our operations and adversely affect our business.
In addition, with respect to the liabilities for which PHINIA and the other parties have agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against PHINIA and such other parties will be sufficient to protect us against the full amount of the liabilities or that PHINIA or such other parties will be able to fully satisfy their indemnification obligations.
In addition, with respect to the liabilities for which PHINIA and the other parties have agreed to indemnify us under these agreements, the indemnity rights we have against PHINIA and such other parties may not be sufficient to protect us against the full amount of the liabilities, further PHINIA or such other parties may not be able to fully satisfy their indemnification obligations.
We rely on sales to OEMs around the world of varying credit quality and manufacturing demands. Supply to several of these customers requires significant investment by us. We base our growth projections, in part, on commitments made by our customers. These commitments generally renew yearly during a program life cycle.
We rely on sales to OEMs around the world of varying credit quality and manufacturing demands. Supply to several of these customers requires significant investment by us. We base our growth projections, in part, on commitments made by our customers.
Inability to reduce costs in an amount equal to annual price reductions, increases in raw material costs, and increases in employee wages and benefits could have an adverse effect on us. We continue to face volatile costs of commodities used in the production of our products and elevated levels of inflation.
Inability to reduce or offset costs in an amount equal to annual price reductions, increases in raw material costs, and increases in employee wages and benefits could have an adverse effect on our business and results of operations. 20 Table of Contents We continue to face volatile costs of commodities used in the production of our products and elevated levels of inflation.
Item 1A. Risk Factors Investors should carefully consider the following risk factors and other information included in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impact our business operations.
Item 1A. Risk Factors Investors should carefully consider the following risk factors and other information included in this report. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impact our business operations.
Failure to execute our growth strategy could adversely affect our business. 17 Table of Contents Goodwill and indefinite-lived intangible assets, which are subject to periodic impairment evaluations, represent a significant portion of our total assets. An impairment charge on these assets could have a material adverse impact on our financial condition and results of operations.
Goodwill and indefinite-lived intangible assets, which are subject to periodic impairment evaluations, represent a significant portion of our total assets. An impairment charge on these assets could have a material adverse impact on our financial condition and results of operations. 17 Table of Contents We have recorded goodwill and indefinite-lived intangible assets related to acquisitions.
We may not be able to execute dispositions of assets or businesses successfully. When we decide to dispose of assets or a business, we may have difficulty finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay our ability to achieve our 18 Table of Contents strategic objectives.
When we decide to dispose of assets or a business, we may have difficulty finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay our ability to achieve our strategic objectives.
In addition, if the content, analyses, or recommendations that A.I. programs assist in producing are or are alleged to be deficient, inaccurate, or biased, then our business, financial condition, and results of operations and our reputation may be adversely affected. Our business success depends on attracting and retaining qualified personnel.
In addition, if the content, analyses, or recommendations that AI programs assist in producing are or are alleged to be deficient, inaccurate, or biased, then our business, financial condition, and results of operations and our reputation may be adversely affected.
The discontinuation or lessening of our ability to pass through or hedge increasing commodity costs could adversely affect our business. From time to time, commodity prices may also fall rapidly. If this happens, suppliers may withdraw capacity from the market until prices improve, which may cause periodic supply interruptions. The same may be true of transportation carriers and energy providers.
From time to time, commodity prices may also fall rapidly. If this happens, suppliers may withdraw capacity from the market until prices improve, which may cause periodic supply interruptions. The same may be true of transportation carriers and energy providers. If these supply interruptions occur, it could adversely affect our business.
In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the acquisitions. The combination of independent businesses is a complex, costly and time-consuming process that requires significant management attention and resources.
Further, there is potential for unknown or inestimable liabilities relating to the acquired businesses. In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the acquisitions. The combination of independent businesses is a complex, costly and time-consuming process that requires significant management attention and resources.
Our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce worldwide.
Our business success depends on attracting and retaining qualified personnel. Our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce worldwide.
As a result, our products may not be able to compete successfully with our competitors' products, and we may not be able to meet the growing demands of customers. These trends may adversely affect our sales as well as the profit margins on our products.
As a result, our products may not be able to compete successfully with our competitors' products, and we may not be able to meet the growing demands of customers.
We review goodwill and indefinite-lived intangible assets for impairment either annually or whenever changes in circumstances indicate that the carrying value may not be recoverable. The risk of impairment to goodwill and indefinite-lived intangible assets is higher during the early years following an acquisition.
We review goodwill and indefinite-lived intangible assets for impairment either annually or whenever changes in circumstances indicate that the carrying value may not be recoverable.
We have taken, are taking, and may in the future take restructuring actions to realign and resize our production capacity and cost structure to meet current and projected operational and market requirements.
We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring actions may adversely affect our business. We have taken, are taking, and may in the future take restructuring actions to realign and resize our production capacity and cost structure to meet current and projected operational and market requirements.
These claims typically arise in the normal course of business and may include, but not be limited to, commercial or contractual disputes with our customers and suppliers, intellectual property matters, personal injury, product liability, environmental and employment claims. There is a possibility that such claims may have an adverse impact on our business that is greater than we anticipate.
These claims typically arise in the normal course of business and may include, but not be limited to, commercial or contractual disputes with our customers and suppliers, intellectual property matters, personal injury, product liability, tax matters, environmental and employment claims.
Changes that could impact the legal environment include new legislation, new regulations, new policies, investigations and legal proceedings, and new interpretations of existing legal rules and regulations, in particular, changes in import and export control laws or exchange control laws, additional restrictions on doing business in countries subject to sanctions, additional limitations on greenhouse gas emissions or other matters related to climate change and other changes in laws in countries where we operate or intend to operate.
Violations of these laws, which are complex, may result in criminal penalties, sanctions and/or fines that could have an adverse effect on our business, financial condition, and results of operations and reputation. 26 Table of Contents Changes that could impact the legal environment include new legislation, new regulations, new policies, investigations and legal proceedings, and new interpretations of existing legal rules and regulations, in particular, changes in import and export control laws or exchange control laws, additional restrictions on doing business in countries subject to sanctions, additional limitations on greenhouse gas emissions or other matters related to climate change and other changes in laws in countries where we operate or intend to operate.
Any extended work stoppage at one or more of our customers could have an adverse effect on our business. Risks related to our suppliers We could be adversely affected by supply shortages of components from our suppliers. In an effort to manage and reduce the cost of purchased goods and services, we have been rationalizing our supply base.
Any extended work stoppage at one or more of our customers could delay the manufacture and sale of our products and have an adverse effect on our business and operating results. Risks related to our suppliers We could be adversely affected by supply shortages of components from our suppliers.
As the Chinese market evolves, we anticipate that market participants will act aggressively to increase or maintain their market share. Increased competition may result in price reductions, reduced margins and our inability to gain or hold market share. In addition, our business in China is sensitive to economic, political, social and market conditions that drive sales volumes in China.
As the Chinese market evolves, market participants have acted, and we anticipate will continue to act aggressively to increase or maintain their market share. Increased competition may result in price reductions, reduced margins and our inability to gain or hold market share.
If these supply interruptions occur, it could adversely affect our business. Many global economies, including the United States, have experienced and continue to experience elevated levels of inflation more generally, which drove an increase in input costs.
Many global economies, including the United States, have experienced and continue to experience elevated levels of inflation more generally, which have driven an increase in input costs.
We cannot assure that costs and expenses associated with these product warranties will not be material or that those costs will not exceed any amounts accrued for such product warranties in our financial statements. We are currently, and may in the future become, subject to legal proceedings and commercial or contractual disputes.
We cannot assure that costs and expenses associated with these product warranties will not be material or that those costs will not exceed our available insurance, or any amounts accrued for such product warranties in our financial statements.
Our worldwide sales in 2024 to Ford and Volkswagen constituted approximately 13% and 10% of our 2024 consolidated net sales, respectively. Sales to the Company’s top ten customers represented 67% of sales for the year ended December 31, 2024. We are sensitive to the effects of our major customers’ labor relations.
Our worldwide sales in 2025 to Volkswagen and Ford constituted approximately 13% and 12% of our 2025 consolidated net sales, respectively. Sales to the Company’s top ten customers represented 71% of sales for the year ended December 31, 2025.
If any of the following risks occur, our business, including our financial performance, financial condition, operating results and cash flows, could be adversely affected. Risks related to our strategy Our portfolio strategy may prove unsuccessful.
If any of the following risks occur, our business, including our financial performance, financial condition, operating results and cash flows, could be adversely affected. In such an event, the market price of our common stock could decline, and you could lose all or part of your investment. Risks related to our strategy Our portfolio strategy may prove unsuccessful.
While we would seek to alleviate the impact of increasing costs by including material pass-through provisions in our customer contracts wherever possible and by selectively hedging certain commodity exposures, there can be no assurances that we will be successful in these efforts.
While we seek to alleviate the impact of increasing costs by including material pass-through provisions in our customer contracts wherever possible and by selectively hedging certain commodity exposures, we may not be successful in these efforts. The discontinuation or lessening of our ability to pass through or hedge increasing commodity costs could adversely affect our business.
Our ability to pass through increased raw material or other inflationary costs to our OEM customers is limited, with cost recovery often less than 100% and often on a delayed basis.
Price reductions have impacted the Company’s sales and profit margins and are expected to continue to do so in the future. Our ability to pass through increased raw material or other inflationary costs to our OEM customers is limited, with cost recovery often less than 100% and often on a delayed basis.
While we are focused on driving growth through our ability to capitalize on certain potential trends, such as the move toward hybrid and electric vehicles, some of the focuses and trends are not part of our product line or strategy, which could have an adverse impact on our results of operations.
These evolving areas have also attracted increased competition from entrants outside the traditional automotive industry. While we are focused on driving growth through our ability to capitalize on certain potential trends, such as the move toward hybrid and electric vehicles, some of the focuses and trends are not part of our product line or strategy.
We have received tax assessments from various taxing authorities and are currently at varying stages of appeals and/or litigation regarding these matters. These audits may result in assessment of additional taxes that are resolved with the authorities or through the courts. We believe these assessments may occasionally be based on erroneous and even arbitrary interpretations of local tax law.
These audits may result in assessment of additional taxes that are resolved with the authorities or through the courts. We believe these assessments may occasionally be based on erroneous and even arbitrary interpretations of local tax law. Resolution of tax matters involves uncertainty, and there are no assurances that the outcomes will be favorable.
While it is intended that the transaction was tax-free to the Company’s stockholders for U.S. federal income tax purposes, there is no assurance that the transaction will qualify for this treatment. If the spin-off is ultimately determined to be taxable, the Company, PHINIA, or the Company’s stockholders could incur income tax liabilities that could be significant.
We may not realize the anticipated tax benefits of the spin-off of PHINIA. While it is intended that the transaction was tax-free to the Company’s stockholders for U.S. federal income tax purposes, there is no assurance that the transaction will qualify for this treatment.
If we do not realize the anticipated benefits of the spin-off, it could adversely affect our business, results of operations, cash flows and financial condition. Potential liabilities pursuant to the spin-off of PHINIA could materially and adversely affect our business.
If the spin-off is ultimately determined to be taxable, the Company, PHINIA, or the Company’s stockholders could incur income tax liabilities that could be significant. If we do not realize the anticipated tax benefits of the spin-off, it could adversely affect our business, results of operations, cash flows and financial condition.
If we do not continue to innovate and develop, or acquire, new and compelling products that capitalize upon new technologies in 20 Table of Contents response to OEM and consumer preferences, this could have an adverse impact on our results of operations. We may be subject to potential governmental investigations and related proceedings relating to vehicle emissions standards.
If we do not continue to innovate and develop, or acquire, new and compelling products that capitalize upon new technologies, including artificial intelligence (“AI”) and machine learning, or improve in response to OEM and consumer preferences, this could have an adverse impact on our results of operations.
The success of our acquisitions is dependent, in part, on our ability to realize the expected benefits from combining our businesses and businesses that we acquire. To realize these anticipated benefits, both companies must be successfully combined, which is subject to our ability to consolidate operations, corporate cultures and systems and to eliminate redundancies and costs.
To realize these anticipated benefits, both companies must be successfully combined, which is subject to our ability to consolidate operations, corporate cultures and systems and to eliminate redundancies and costs. If we are unsuccessful in combining companies, the anticipated benefits of the acquisitions may not be realized fully or at all or may take longer to realize than expected.
All three of our primary North American customers, Ford, Stellantis, and General Motors, have major union contracts with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (or “UAW”). Additionally, there is effort from the UAW to unionize other North American OEM plants, the outcome of which is difficult to predict.
We are sensitive to the effects of our major customers’ labor relations. All three of our primary North American customers, Ford, Stellantis, and General Motors, have major union contracts with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (or “UAW”).
In connection with the spin-off, we entered into a separation and distribution agreement and related agreements with PHINIA to govern the spin-off and the relationship between the two companies following the completion of the spin-off. These agreements provide for specific indemnity and liability obligations of each party and could lead to disputes between us.
Potential liabilities pursuant to the spin-off of PHINIA could materially and adversely affect our business. In connection with the spin-off, we entered into a separation and distribution agreement and related agreements with PHINIA to govern the spin-off and the relationship between the two companies following the completion of the spin-off.
If we do not respond appropriately, the evolution of the automotive industry could adversely affect our business.
These trends may adversely affect our sales as well as the profit margins on our products. 19 Table of Contents If we do not respond appropriately, the evolution of the automotive industry could adversely affect our business.
We are subject to the risk that one or more of these counterparties may become insolvent and, therefore, be unable to meet its obligations under such contracts. Other risks A variety of other factors could adversely affect our business.
We are subject to the risk that one or more of these counterparties may become insolvent and, therefore, be unable to meet its obligations under such contracts. Risks related to the spin-off of PHINIA Inc. The spin-off of PHINIA may not achieve anticipated tax benefits and may expose us to additional tax risks.
While we maintain insurance for certain risks, the amount of insurance may not be adequate to cover all insured claims and liabilities. The incurrence of significant liabilities for which there is no, or insufficient, insurance coverage could adversely affect our business. Compliance with and changes in laws could be costly and could affect our operating results.
The incurrence of significant liabilities for which there is no, or insufficient, insurance coverage could adversely affect our business. For more information regarding our legal matters, see Item 3. Legal Proceedings of this report. Compliance with and changes in laws could be costly and could affect our operating results.
Further, we continually update and expand our information technology systems to enable us to run our business more efficiently, including the potential incorporation of artificial intelligence (“A.I.”) solutions into our information systems and processes.
Failure of such products to effectively protect against attacks targeted at our products can negatively impact our brand and our business or results of operation. Further, we continually update and expand our information technology systems to enable us to run our business more efficiently, including the potential incorporation of AI solutions into our information systems and processes.
Such regulatory and governmental approvals may be required in jurisdictions around the world, and any delays in the timing of such approvals could materially delay or prevent the transaction. Risks related to the spin-off of PHINIA Inc. The spin-off of PHINIA may not achieve the anticipated benefits and may expose us to additional risks.
Such regulatory and governmental approvals may be required in jurisdictions around the world, and any delays in the timing of such approvals could materially delay or prevent the transaction. Risks related to our industry Conditions in the automotive industry may adversely affect our business. Our financial performance depends on conditions in the global automotive industry.
Resolution of any tax matters involves uncertainties, and there are no assurances that the outcomes will be favorable. 26 Table of Contents We are subject to risks related to our international operations. We have manufacturing and technical facilities in many regions, including Europe, Asia, and the Americas. For 2024, approximately 84% of our consolidated net sales were outside the U.S.
We are subject to risks related to our international operations. We have manufacturing and technical facilities in many regions, including Europe, Asia, and the Americas. For 2025, approximately 84% of our consolidated net sales were outside the U.S. We also purchase raw materials and other supplies from many different countries around the world.
Any charges relating to such impairments, such as those recorded for the year ended December 31, 2024, could adversely affect our results of operations in the periods recognized. The failure to realize the expected benefits of acquisitions and other risks associated with acquisitions could adversely affect our business.
When impairment charges are triggered, they tend to be material due to the size of the assets involved. Future acquisitions could present similar risks. Any charges relating to such impairments, such as those recorded for the years ended December 31, 2025 and 2024, could adversely affect our results of operations in the periods recognized.
Additionally, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency, loss of key employees and/or other retention issues during transitional periods. Restructuring can require a significant amount of time and focus, which may divert attention from operating and growing our business.
We are also subject to the risks of labor unrest, negative publicity and business disruption in connection with our restructuring actions. Additionally, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency, loss of key employees and/or other retention issues during transitional periods.
Until this headroom grows over time, due to business growth or lower carrying value of the reporting unit, a relatively small decrease in reporting unit fair value can trigger impairment charges. When impairment charges are triggered, they tend to be material due to the size of the assets involved. Future acquisitions could present similar risks.
As a result, the difference between the carrying value of the reporting unit and its fair value (typically referred to as “headroom”) is smaller at the time of acquisition. Until this headroom grows over time, due to business growth or lower carrying value of the reporting unit, a relatively small decrease in reporting unit fair value can trigger impairment charges.
In addition, we may periodically restructure our legal entity organization. If taxing authorities were to disagree with our tax positions in connection with any such restructurings, our effective tax rate could be materially affected. Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions where we conduct business.
In addition, we may periodically restructure our legal entity organization, and if taxing authorities were to disagree with our tax positions in connection with any such restructurings, our effective tax rate could be materially affected. On July 4, 2025, the U.S. government enacted tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”).
As a result, we remain dependent on fewer sources of supply for certain components used in the manufacture of our products. We select suppliers based on total value (including total landed price, quality, delivery, and technology), taking into consideration their production capacities and financial condition.
We select suppliers based on total value (including total landed price, quality, delivery, and technology), taking into consideration their production capacities and financial condition. We expect that they will deliver to our stated written expectations.
This is because the fair values of these assets align very closely with what was paid to acquire the reporting units to which these assets are assigned. As a result, the difference between the carrying value of the reporting unit and its fair value (typically referred to as “headroom”) is smaller at the time of acquisition.
The risk of impairment to goodwill and indefinite-lived intangible assets is higher during the early years following an acquisition as the fair values of these assets align very closely with what was paid to acquire the reporting units to which these assets are assigned.
Automotive and truck production and sales are cyclical and sensitive to general economic conditions and other factors, including interest rates, consumer credit, and consumer spending and preferences. Economic declines that result in significant reduction in automotive or truck production would have an adverse effect on our sales to OEMs. We face strong competition.
Automotive and truck production and sales are cyclical and sensitive to general economic conditions, geopolitical and trade-related issues and other factors, including interest rates, declines in the availability of consumer credit, increased borrowing costs and consumer spending and preferences.
As of December 31, 2024, the Company had an asset related to these VAT refunds of approximately $120 million, which is included in Receivables, net on the Consolidated Balance Sheet. If we are required to indemnify PHINIA and other parties under the circumstances set forth in these agreements, we may be subject to future liabilities.
If we are required to indemnify PHINIA and other parties under the circumstances set forth in the agreements with PHINIA, we may be subject to future liabilities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Cybersecurity Program is managed by the CIO, and the Company’s IT team is responsible for enterprise-wide informational technology, coordinating with various functions and business groups to ensure they are following best practices. The current CIO has over two decades of experience in various 30 Table of Contents roles in information technology and information security.
Biggest changeThe Cybersecurity Program is managed by the CIO, and the Company’s IT team is responsible for enterprise-wide informational technology, coordinating with various functions and business groups to ensure they are following best practices. The current CIO has over two decades of experience in various roles in IT and information security.
The Cybersecurity Program is managed by the Chief Information Officer (“CIO”), whose information technology (“IT”) team is responsible for enterprise-wide information technology, including cybersecurity strategy, policy, standards, architecture and processes. The Company benchmarks the Cybersecurity Program, including its standards, processes and practices, against recognized cybersecurity frameworks.
The Cybersecurity Program is managed by the Chief Information Officer (“CIO”), whose information technology (“IT”) team is responsible for enterprise-wide IT, including cybersecurity strategy, policy, standards, architecture and processes. The Company benchmarks the Cybersecurity Program, including its standards, processes and practices, against recognized cybersecurity frameworks.
The Cybersecurity Program has various tools and programs in place to monitor and address potential threats and incidents impacting the Company’s operations and to determine the materiality of and ensure timely public disclosure of such threat or incident, if appropriate. Technical Safeguards: The Company deploys technical safeguards designed to protect the Company’s information systems from cybersecurity threats.
The Cybersecurity Program has various tools and programs in place to monitor and address potential threats and incidents impacting the Company’s operations and to determine the materiality of and ensure timely public disclosure of such threat or incident, if appropriate. 31 Table of Contents Technical Safeguards: The Company deploys technical safeguards designed to protect the Company’s information systems from cybersecurity threats.
Despite the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on the Company or its stakeholders. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks.
Despite the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could 32 Table of Contents have a material adverse effect on the Company or its stakeholders. See Item 1A. “Risk Factors” for a discussion of cybersecurity risks.
The CIO reports on the Cybersecurity Program and the Company’s approach to cybersecurity risk management to the Audit Committee of the Board of Directors two times a year and to the full Board periodically, as appropriate.
The CIO annually reports on the Cybersecurity Program and the Company’s approach to cybersecurity risk management to the Audit Committee of the Board of Directors and to the full Board periodically, as appropriate.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeReportable Segment Americas Europe Asia Total Turbos & Thermal Technologies 8 11 9 28 Drivetrain & Morse Systems 8 6 11 25 PowerDrive Systems 6 6 10 22 Battery & Charging Systems 3 5 1 9 The table above excludes unconsolidated joint ventures as of December 31, 2024 and administrative offices.
Biggest changeReportable Segment Americas Europe Asia Total Turbos & Thermal Technologies 7 11 8 26 Drivetrain & Morse Systems 8 6 14 28 PowerDrive Systems 6 6 11 23 Battery & Charging Systems 1 3 — 4 The table above excludes unconsolidated joint ventures as of December 31, 2025 and administrative offices.
Of the facilities noted above, 40 have leased land rights or a leased facility. Item 3. Legal Proceedings The Company is subject to a number of claims and judicial and administrative proceedings (some of which involve substantial amounts) arising out of the Company’s business or relating to matters for which the Company may have a contractual indemnity obligation.
Of the facilities noted above, 37 have leased land rights or a leased facility. Item 3. Legal Proceedings The Company is subject to a number of claims and judicial and administrative proceedings (some of which involve substantial amounts) arising out of the Company’s business or relating to matters for which the Company may have a contractual indemnity obligation.
Item 2. Properties As of December 31, 2024, the Company had 84 manufacturing, assembly and technical locations worldwide. The Company’s worldwide headquarters are located in a leased facility in Auburn Hills, Michigan. In general, the Company believes its facilities to be suitable and adequate to meet its current and reasonably anticipated needs.
Item 2. Properties As of December 31, 2025, the Company had 81 manufacturing, assembly and technical locations worldwide. The Company’s worldwide headquarters are located in a leased facility in Auburn Hills, Michigan. In general, the Company believes its facilities to be suitable and adequate to meet its current and reasonably anticipated needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 31 Item 4 . Mine Safety Disclosures 31 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 6 . [Reserved] 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A.
Biggest changeItem 3. Legal Proceedings 33 Item 4 . Mine Safety Disclosures 33 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 6 . [Reserved] 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A.
Quantitative and Qualitative Disclosures About Market Risk 60 Item 8. Financial Statements and Supplementary Data 61
Quantitative and Qualitative Disclosures About Market Risk 62 Item 8. Financial Statements and Supplementary Data 63

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWithheld shares will be deemed common stock held in treasury and may subsequently be reissued. 33 Table of Contents The following table provides information about the Company’s purchases of its equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the quarter ended December 31, 2024: Issuer Purchases of Equity Securities Period Total number of shares purchased Average price per share 1 Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under plans or programs (in millions) 2 October 1, 2024 - October 31, 2024 Common Stock Repurchase Program — $ — — $ 467 Employee transactions — $ — — November 1, 2024 - November 30, 2024 Common Stock Repurchase Program — $ — — $ 467 Employee transactions 1,205 $ 34.43 — December 1, 2024 - December 31, 2024 Common Stock Repurchase Program — $ — — $ 467 Employee transactions 198 $ 34.32 — ________________ 1 The average price per share excludes fees and taxes related to the share repurchases. 2 For the three months ended December 31, 2024, the Company revised the approximate dollar value of shares that may yet be purchased under plans or programs to remove $4 million in related fees and taxes incurred on prior shares purchased.
Biggest changeWithheld shares will be deemed common stock held in treasury and may subsequently be reissued. 35 Table of Contents The following table provides information about the Company’s purchases of its equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the quarter ended December 31, 2025: Issuer Purchases of Equity Securities Period Total number of shares purchased Average price per share 1 Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under plans or programs (in millions) October 1, 2025 - October 31, 2025 Common Stock Repurchase Program — $ — — $ 900 Employee transactions — $ — — November 1, 2025 - November 30, 2025 Common Stock Repurchase Program 4,526,371 $ 44.17 4,526,371 $ 700 Employee transactions 646 $ 45.40 — December 1, 2025 - December 31, 2025 Common Stock Repurchase Program 2,310,682 $ 43.28 2,310,682 $ 600 Employee transactions — $ — — ________________ 1 The average price per share excludes fees and taxes related to the share repurchases.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN 1 Among BorgWarner Inc., the S&P 500 Index, and SIC 3714 Motor Vehicle Parts ________________ 1 $100 invested on 12/31/2019 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2025 Standard & Poor’s, a division of S&P Global.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN 1 Among BorgWarner Inc., the S&P 500 Index, and SIC 3714 Motor Vehicle Parts ________________ 1 $100 invested on 12/31/2020 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2026 Standard & Poor’s, a division of S&P Global.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed for trading on the New York Stock Exchange under the symbol BWA. As of January 31, 2025, there were 1,379 holders of record of common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed for trading on the New York Stock Exchange under the symbol BWA. As of January 30, 2026, there were 1,298 holders of record of common stock.
While the Company currently expects that quarterly cash dividends will continue to be paid in the future at levels comparable to recent historical levels, the dividend policy is subject to review and change at the discretion of the Board of Directors.
While the Company currently expects that quarterly cash dividends will continue to be paid in the future at levels comparable to recent historical levels, the dividend policy is subject to review and change at the discretion of the Board of Directors. During 2025, the Company paid cash dividends to its stockholders of $0.56 per share.
Equity Compensation Plan Information As of December 31, 2024, the number of shares of options, warrants and rights outstanding under the Company’s equity compensation plans, the weighted average exercise price of outstanding options, restricted common stock, warrants and rights and the number of securities remaining available for issuance were as follows: Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan category (a) (b) (c) Equity compensation plans approved by security holders 2,122,572 $ 40.61 6,429,668 Equity compensation plans not approved by security holders — $ — — Total 2,122,572 $ 40.61 6,429,668
Equity Compensation Plan Information As of December 31, 2025, the number of shares of options, warrants and rights outstanding under the Company’s equity compensation plans, the weighted average exercise price of outstanding options, restricted common stock, warrants and rights and the number of securities remaining available for issuance were as follows: Number of securities to be issued upon exercise of outstanding options, warrants and rights 1 Weighted average exercise price of outstanding options, warrants and rights 2 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan category (a) (b) (c) Equity compensation plans approved by security holders 4,131,209 $ — 3,930,553 Equity compensation plans not approved by security holders — $ — — Total 4,131,209 $ — 3,930,553 ________________ 1 The number is comprised of 1,857,289 performance stock units, 1,544,565 shares of restricted common stock and 729,355 restricted stock units.
In April 2024, the Company’s Board of Directors authorized the purchase of up to $767 million of the Company’s common stock, which replaced the November 2023 authorization. By its terms, this share repurchase authorization expires on December 31, 2027.
In July 2025, the Company’s Board of Directors authorized the purchase of up to $1 billion of the Company’s common stock, which replaced the previous authorization. By its terms, this share repurchase authorization expires on December 31, 2028.
Repurchased shares will be deemed common stock held in treasury and may subsequently be reissued. Employee transactions include restricted stock withheld to offset statutory minimum tax withholding that occurs upon vesting of restricted stock. The BorgWarner Inc. 2023 Stock Incentive Plan provides that the withholding obligations be settled by the Company retaining stock that is part of the award.
The Company may use Rule 10b5-1 and 10b-18 plans to facilitate share repurchases. Repurchased shares will be deemed common stock held in treasury and may subsequently be reissued. Employee transactions include restricted stock withheld to offset statutory minimum tax withholding that occurs upon vesting of restricted stock.
All rights reserved. 32 Table of Contents BWA, S&P 500, and SIC Code Index data is from Research Data Group December 31, 2019 2020 2021 2022 2023 2024 BorgWarner Inc. 1 $ 100.00 $ 90.80 $ 107.51 $ 97.64 $ 100.38 $ 90.19 S&P 500 2 $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 SIC Code Index 3 $ 100.00 $ 114.73 $ 122.86 $ 86.80 $ 85.14 $ 74.69 ________________ 1 BorgWarner Inc. 2 S&P 500 — Standard & Poor’s 500 Total Return Index 3 Standard Industrial Code (“SIC”) 3714-Motor Vehicle Parts Purchase of Equity Securities In November 2023, the Company’s Board of Directors authorized the purchase of up to $544 million of the Company’s common stock, which replaced the previous repurchase authorization.
All rights reserved. 34 Table of Contents BWA, S&P 500, and SIC Code Index data is from Research Data Group December 31, 2020 2021 2022 2023 2024 2025 BorgWarner Inc. 1 $ 100.00 $ 118.40 $ 107.53 $ 110.55 $ 99.33 $ 142.94 S&P 500 2 $ 100.00 $ 128.71 $ 105.40 $ 133.10 $ 166.40 $ 196.16 SIC Code Index 3 $ 100.00 $ 110.04 $ 81.87 $ 81.57 $ 72.26 $ 86.63 ________________ 1 BorgWarner Inc. 2 S&P 500 — Standard & Poor’s 500 Total Return Index 3 Standard Industrial Code (“SIC”) 3714-Motor Vehicle Parts Purchase of Equity Securities In April 2024, the Company’s Board of Directors authorized the purchase of up to $767 million of the Company’s common stock, which replaced the previous repurchase authorization.
By its terms, this share repurchase authorization had an expiration date of December 31, 2027. As of March 31, 2024, the Company had repurchased $277 million of common stock under this repurchase authorization, excluding any related fees and taxes, including $100 million repurchased during the first quarter of 2024.
By its terms, this share repurchase authorization was scheduled to expire on December 31, 2027. As of June 30, 2025, the Company had purchased $408 million of common stock under this repurchase authorization, excluding any related fees and taxes, including $108 million purchased during the six month ended June 30, 2025.
Shares purchased under this authorization may be repurchased in the open market at prevailing prices and at times and in amounts to be determined by management as market conditions and the Company’s capital position warrant. The Company may use Rule 10b5-1 and 10b-18 plans to facilitate share repurchases.
As of December 31, 2025, the Company had repurchased $400 million of common stock under this authorization, excluding any related fees and taxes. Shares purchased under this authorization may be repurchased in the open market at prevailing prices and at times and in amounts to be determined by management based on the Company's capital position.
Removed
As of December 31, 2024, the Company had repurchased $300 million of common stock under this repurchase authorization, excluding any related fees and taxes. In total, the Company repurchased $400 million of the Company’s stock during the year ended December 31, 2024, excluding any related fees and taxes.
Added
The BorgWarner Inc. 2023 Stock Incentive Plan provides that the withholding obligations be settled by the Company retaining stock that is part of the award.
Added
See Note 19, “Stock-Based Compensation,” to the Consolidated Financial Statements in Item 8 of this report for a description of how shares are awarded. The Company does not have outstanding options. 2 Performance stock units and restricted stock do not have an exercise price and, therefore, are not included in this calculation.
Added
Other than performance stock units and shares restricted stock, there were no outstanding options, warrants, or rights under the equity compensation plan at December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

132 edited+45 added−55 removed71 unchanged
Biggest changeThe following table presents a summary of the Company’s operating results: Year Ended December 31, (in millions, except per share data) 2024 2023 Net sales % of net sales % of net sales Turbos & Thermal Technologies $ 5,887 41.8 % $ 6,012 42.3 % Drivetrain & Morse Systems 5,577 39.6 5,549 39.1 PowerDrive Systems 1,937 13.8 2,166 15.3 Battery & Charging Systems 729 5.2 546 3.8 Inter-segment eliminations (44) (0.3) (75) (0.5) Total net sales 14,086 100.0 14,198 100.0 Cost of sales 11,438 81.2 11,630 81.9 Gross profit 2,648 18.8 2,568 18.1 Selling, general and administrative expenses - R&D, net 736 5.2 717 5.1 Selling, general and administrative expenses - Other 614 4.4 599 4.2 Restructuring expense 74 0.5 79 0.6 Other operating expense (income), net 32 0.2 (16) (0.1) Impairment charges 646 4.6 29 0.2 Operating income 546 3.9 1,160 8.2 Equity in affiliates’ earnings, net of tax (27) (0.2) (30) (0.2) Unrealized and realized loss on equity and debt securities 1 — 174 1.2 Interest expense, net 20 0.1 10 0.1 Other postretirement expense 13 0.1 15 0.1 Earnings from continuing operations before income taxes and noncontrolling interest 539 3.8 991 7.0 Provision for income taxes 111 0.8 289 2.0 Net earnings from continuing operations 428 3.0 702 4.9 Net loss from discontinued operations (29) (0.2) (7) — Net earnings 399 2.8 695 4.9 Net earnings from continuing operations attributable to the noncontrolling interest, net of tax 61 0.4 70 0.5 Net earnings attributable to BorgWarner Inc. $ 338 2.4 % $ 625 4.4 % Earnings per share from continuing operations — diluted $ 1.63 $ 2.70 Net sales Net sales for the year ended December 31, 2024 totaled $14,086 million, a decrease of $112 million, or 1%, from the year ended December 31, 2023.
Biggest changeThe following table presents a summary of the Company’s operating results: Year Ended December 31, (in millions, except per share data) 2025 2024 Net sales % of net sales % of net sales Turbos & Thermal Technologies $ 5,772 40.3 % $ 5,887 41.8 % Drivetrain & Morse Systems 5,654 39.5 5,577 39.6 PowerDrive Systems 2,347 16.4 1,937 13.8 Battery & Charging Systems 590 4.1 729 5.2 Inter-segment eliminations (47) (0.3) (44) (0.3) Total net sales 14,316 100.0 14,086 100.0 Cost of sales 11,642 81.3 11,438 81.2 Gross profit 2,674 18.7 2,648 18.8 Selling, general and administrative expenses - R&D, net 710 5.0 736 5.2 Selling, general and administrative expenses - Other 594 4.1 614 4.4 Restructuring expense 101 0.7 74 0.5 Other operating expense, net 109 0.8 32 0.2 Impairment charges 624 4.4 646 4.6 Operating income 536 3.7 546 3.9 Equity in affiliates’ earnings, net of tax (35) (0.2) (27) (0.2) Unrealized (gain) loss on equity securities (3) — 1 — Interest expense, net 39 0.3 20 0.1 Other postretirement expense 11 0.1 13 0.1 Earnings from continuing operations before income taxes and noncontrolling interest 524 3.7 539 3.8 Provision for income taxes 189 1.3 111 0.8 Net earnings from continuing operations 335 2.3 428 3.0 Net loss from discontinued operations — — (29) (0.2) Net earnings 335 2.3 399 2.8 Net earnings from continuing operations attributable to the noncontrolling interest, net of tax 58 0.4 61 0.4 Net earnings attributable to BorgWarner Inc. $ 277 1.9 % $ 338 2.4 % Earnings per share from continuing operations — diluted $ 1.28 $ 1.63 Net sales Net sales for the year ended December 31, 2025 totaled $14,316 million, an increase of $230 million, or 2%, from the year ended December 31, 2024.
Acquisitions Acquisitions have been an integral component of the Company’s growth and value creation strategy. Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Item 8 of this report for more information, including a summary of recent acquisitions. Key Trends and Economic Factors Economic Conditions.
Acquisitions and Dispositions Acquisitions have been an integral component of the Company’s growth and value creation strategy. Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Item 8 of this report for more information, including a summary of recent acquisitions. Key Trends and Economic Factors Economic Conditions.
The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions.
BorgWarner Strategy The Company’s current strategy is to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid and combustion vehicles. This entails growing its product portfolio through organic investments and technology-focused acquisitions. The Company’s balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions.
The Company’s commercial paper program allows the Company to issue $2.0 billion of short-term, unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under this program, the Company may issue notes from time to time and use the proceeds for general corporate purposes.
The Company’s commercial paper program allows the Company to issue up to $2.0 billion of short-term, unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under this program, the Company may issue notes from time to time and use the proceeds for general corporate purposes.
Future changes in the judgments, assumptions and estimates from those used in acquisition-related valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future.
Future changes in the judgments, assumptions and estimates from those used in valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future.
I n addition to the above primary assumptions, the Company noted the following risks to volume and operating income assumptions that could have an impact on the discounted cash flow models: • The automotive industry is cyclical, and the Company’s results of operations could be adversely affected by industry downturns. • The automotive industry is evolving, and if the Company does not respond appropriately, its results of operations could be adversely affected. • The Company is dependent on market segments that use its key products and could be affected by decreasing demand in those segments. • The Company is subject to risks related to international operations.
I n addition to the above significant assumptions, the Company noted the following risks to volume and operating income assumptions that could have an impact on the discounted cash flow models: • The automotive industry is cyclical, and the Company’s results of operations could be adversely affected by industry downturns. • The automotive industry is evolving, and if the Company does not respond appropriately, its results of operations could be adversely affected. • The Company is dependent on market segments that use its key products and could be affected by decreasing demand in those segments. • The Company is subject to risks related to international operations.
The Company has certain U.S. state income tax returns and certain non-U.S. income tax returns that are currently under various stages of audit by applicable tax authorities. At December 31, 2024, the Company had a liability for tax positions the Company estimates are not more-likely-than-not to be sustained based on the technical merits, which is included in Other non-current liabilities.
The Company has certain U.S. state income tax returns and certain non-U.S. income tax returns that are currently under various stages of audit by applicable tax authorities. At December 31, 2025, the Company had a liability for tax positions the Company estimates are not more-likely-than-not to be sustained based on the technical merits, which is included in Other non-current liabilities.
This facility matures in September 2028. The credit facility agreement contains customary events of default and one key financial covenant, which is a debt-to-EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio. The Company was in compliance with the financial covenant at December 31, 2024. At December 31, 2024 and 2023, the Company had no outstanding borrowings under this facility.
This facility matures in September 2028. The credit facility agreement contains customary events of default and one key financial covenant, which is a debt-to-EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio. The Company was in compliance with the financial covenant at December 31, 2025. At December 31, 2025 and 2024, the Company had no outstanding borrowings under this facility.
New Accounting Pronouncements Refer to Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding new applicable accounting pronouncements. 58 Table of Contents QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company’s primary market risks include fluctuations in interest rates and foreign currency exchange rates.
New Accounting Pronouncements Refer to Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding new applicable accounting pronouncements. 60 Table of Contents QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company’s primary market risks include fluctuations in interest rates and foreign currency exchange rates.
The Company had no outstanding borrowings under this program as of December 31, 2024 and 2023. The total current combined borrowing capacity under the multi-currency revolving credit facility and commercial paper program cannot exceed $2.0 billion. In addition to the revolving credit facility, the Company’s universal shelf registration statement filed with the U.S.
The Company had no outstanding borrowings under this program as of December 31, 2025 and 2024. The total current combined borrowing capacity under the multi-currency revolving credit facility and commercial paper program cannot exceed $2.0 billion. In addition to the revolving credit facility, the Company’s universal shelf registration statement filed with the U.S.
Commodity forward and option contracts are occasionally executed to offset exposure to potential change in prices mainly for various non-ferrous metals and natural gas consumption used in the manufacturing of vehicle components. As of December 31, 2024 and 2023, the Company had no outstanding commodity swap contracts.
Commodity forward and option contracts are occasionally executed to offset exposure to potential change in prices mainly for various non-ferrous metals and natural gas consumption used in the manufacturing of vehicle components. As of December 31, 2025 and 2024, the Company had no outstanding commodity swap contracts.
PBO 25 basis point decrease in expected return on assets $ 7 $ 1 25 basis point increase in expected return on assets $ (7) $ (1) The following table illustrates the sensitivity to a change in discount rate for Company sponsored U.S. and non-U.S. pension plans on its pension obligations: (in millions) Impact on U.S. PBO Impact on Non-U.S.
PBO 25 basis point decrease in expected return on assets $ 8 $ 1 25 basis point increase in expected return on assets $ (8) $ (1) The following table illustrates the sensitivity to a change in discount rate for Company sponsored U.S. and non-U.S. pension plans on its pension obligations: (in millions) Impact on U.S. PBO Impact on Non-U.S.
The WACC is intended to represent a rate of return that would be expected by a market participant. • Operating income margin: The Company used historical and expected operating income margins, which may vary based on the projections of the reporting unit being evaluated. • Revenue growth rates: The Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.
The WACC is intended to represent a rate of return that would be expected by a market participant. • Operating income (loss) margin: The Company used historical and expected operating income (loss) margins, which may vary based on the projection of the reporting unit being evaluated. • Revenue growth rates: The Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.
The effects of any modification to those assumptions, or actual results that differ from assumptions used, are either recognized immediately or amortized over future periods in accordance with GAAP. 55 Table of Contents The primary assumptions affecting the Company’s accounting for employee benefits under ASC Topics 712 and 715 as of December 31, 2024 are as follows: • Expected long-term rate of return on plan assets : The expected long-term rate of return is used in the calculation of net periodic benefit cost.
The effects of any modification to those assumptions, or actual results that differ from assumptions used, are either recognized immediately or amortized over future periods in accordance with GAAP. 57 Table of Contents The primary assumptions affecting the Company’s accounting for employee benefits under ASC Topics 712 and 715 as of December 31, 2025 are as follows: • Expected long-term rate of return on plan assets : The expected long-term rate of return is used in the calculation of net periodic benefit cost.
The Company selectively uses interest rate swaps to reduce market value risk associated with changes in interest rates (fair value hedges). At December 31, 2024, all of the Company’s long-term debt had fixed interest rates.
The Company selectively uses interest rate swaps to reduce market value risk associated with changes in interest rates (fair value hedges). At December 31, 2025, all of the Company’s long-term debt had fixed interest rates.
The following table illustrates the sensitivity to a change in expected return on assets related to 2025 pre-tax pension expense for Company sponsored U.S. and non-U.S. pension: (in millions) Impact on U.S. PBO Impact on Non-U.S.
The following table illustrates the sensitivity to a change in expected return on assets related to 2026 pre-tax pension expense for Company sponsored U.S. and non-U.S. pension: (in millions) Impact on U.S. PBO Impact on Non-U.S.
Significant judgments and estimates used by management when evaluating long-lived assets for impairment include (i) an assessment as to whether an adverse event or circumstance has triggered the need for an impairment review; (ii) undiscounted future cash flows generated by the asset; and (iii) fair valuation of 52 Table of Contents the asset.
Significant judgments and estimates used by management when evaluating long-lived assets for impairment include (i) an assessment as to whether an adverse event or circumstance has triggered the need for an impairment review; (ii) undiscounted future cash flows generated by the asset; and (iii) fair valuation of the asset.
The Company uses a variety of information sources to determine the value of acquired assets and liabilities, including third-party appraisers for the values 51 Table of Contents and lives of property, identifiable intangibles and inventories, and actuaries for defined benefit retirement plans. Goodwill is assigned to reporting units as of the date of the related acquisition.
The Company uses a variety of information sources to determine the value of acquired assets and liabilities, including third-party appraisers for the values and lives of property, identifiable intangibles and inventories, and actuaries for defined benefit retirement plans. Goodwill is assigned to reporting units as of the date of the related acquisition.
While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company's pension and OPEB and its future expense. 56 Table of Contents The sensitivity to a 25 basis-point change in the assumptions for discount rate related to 2025 pre-tax pension expense for Company sponsored U.S. and non-U.S. pension plans is expected to be negligible.
While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company's pension and OPEB and its future expense. 58 Table of Contents The sensitivity to a 25 basis point change in the assumptions for discount rate related to 2026 pre-tax pension expense for Company sponsored U.S. and non-U.S. pension plans is expected to be negligible.
The Company also manufactures and sells its products to certain tier one 34 Table of Contents vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The Company operates manufacturing facilities serving customers in Europe, the Americas and Asia and is an original equipment supplier to nearly every major automotive OEM in the world.
The Company also manufactures and sells its products to certain tier one vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The Company operates manufacturing facilities serving customers in Europe, the Americas and Asia and is an original equipment supplier to nearly every major automotive OEM in the world.
The following tables present net sales and Segment Adjusted Operating Income (Loss) for the Company’s reportable segments: Year Ended December 31, 2024 vs.
The following tables present net sales and Segment Adjusted Operating Income (Loss) for the Company’s reportable segments: Year Ended December 31, 2025 vs.
The Company’s most critical accounting policies are discussed below. Business combinations The Company allocates the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.
The Company’s most critical accounting policies are discussed below. 53 Table of Contents Business combinations The Company allocates the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.
In addition, the Company recorded a discrete tax benefit of $107 million related to reductions in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed, and a discrete tax benefit of $36 million related to post Spin-Off restructuring.
In 2024, the Company recorded a tax benefit of $107 million related to reductions in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed and a tax benefit of $36 million related to post Spin-Off restructuring.
Management believes that the warranty accrual is appropriate; however, if actual claims incurred differ from the original estimates or there are changes in our assumptions, it could materially affect the Company’s financial statements. At December 31, 2024, the total accrued warranty liability was $215 million.
Management believes that the warranty accrual is appropriate; however, if actual claims incurred differ from the original estimates or there are changes in our assumptions, it could materially affect the Company’s financial statements. At December 31, 2025, the total accrued warranty liability was $254 million.
In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim 57 Table of Contents period.
In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period.
There are several trends that are driving the Company’s long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that support demand for the Company’s products that drive vehicle efficiency. 37 Table of Contents RESULTS OF OPERATIONS A detailed comparison of the Company’s 2022 operating results to its 2023 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s 2023 Annual Report on Form 10-K filed February 8, 2024.
There are several trends that are driving the Company’s long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that support demand for the Company’s products that drive vehicle efficiency. 39 Table of Contents RESULTS OF OPERATIONS A detailed comparison of the Company’s 2023 operating results to the Company’s 2024 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s 2024 Annual Report on Form 10-K filed February 6, 2025.
The accrual is represented as $88 million in Other current liabilities and $127 million in Other non-current liabilities on the Consolidated Balance Sheets. Refer to Note 13, “Product Warranty,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding product warranties.
The accrual is represented as $86 million in Other current liabilities and $168 million in Other non-current liabilities on the Consolidated Balance Sheets. Refer to Note 13, “Product Warranty,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding product warranties.
Environmental The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain local environmental agencies and private parties as potentially responsible parties (“PRPs”) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (“Superfund”) and equivalent state or local laws and, as such, may be currently and may have been liable for the cost of clean-up and other remedial activities at 17 such sites as of both December 31, 2024 and 2023.
Environmental The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain state environmental agencies and private parties as potentially responsible parties (“PRPs”) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (“Superfund”) and equivalent state or local laws and, as such, may have been liable for the cost of clean-up and other remedial activities at 16 and 17 such sites as of December 31, 2025 and 2024, respectively.
The total debt expected to mature through the end of 2025 is $398 million. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants through at least the next 12 months.
The total debt expected to mature through the end of 2026 is $5 million. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants through at least the next 12 months.
The Company manufactures and sells these products worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles (“SUVs”), vans and light trucks). The Company’s products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications).
The Company manufactures and sells these products worldwide, primarily to original equipment 36 Table of Contents manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles, vans and light trucks). The Company’s products are also sold to OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications).
As of December 31, 2024, the Company had liquidity of $4,094 million, comprised of cash and cash equivalent balances of $2,094 million and an undrawn revolving credit facility of $2,000 million. The Company was in full compliance with its covenants under the revolving credit facility and had full access to its undrawn revolving credit facility.
As of December 31, 2025, the Company had liquidity of $4,313 million, comprised of cash and cash equivalent balances of $2,313 million and an undrawn revolving credit facility of $2,000 million. The Company was in full compliance with its covenants under the revolving credit facility and had full access to its undrawn revolving credit facility.
PBO 25 basis point decrease in discount rate $ 2 $ 15 25 basis point increase in discount rate $ (2) $ (14) The sensitivity to a 25 basis-point change in the discount rate assumption and to the assumed health care cost trend related to the Company’s OPEB obligation and service and interest cost is expected to be negligible.
PBO 25 basis point decrease in discount rate $ 3 $ 14 25 basis point increase in discount rate $ (3) $ (13) The sensitivity to a 25 basis point change in the discount rate assumption and to the assumed health care cost trend related to the Company’s OPEB obligation and service and interest cost is expected to be negligible.
The significant foreign currency translation adjustments, including the impact of the net investment hedges discussed above, during the years ended December 31, 2024 and 2023, are shown in the following table, which provides the percentage change in U.S.
The significant foreign currency translation adjustments, including the impact of the cash flow net investment hedges discussed above, during the years ended December 31, 2025 and 2024, are shown in the following table, which provides the percentage change in U.S.
As of December 31, 2024, cash balances of $891 million were held by the Company’s subsidiaries outside of the United States. Cash and cash equivalents held by these subsidiaries are used to fund foreign operational activities and future investments, including acquisitions. The majority of cash and cash equivalents held outside the United States is available for repatriation.
As of December 31, 2025, cash balances of $1,350 million were held by the Company’s subsidiaries outside of the United States. Cash and cash equivalents held by these subsidiaries are used to fund foreign operational activities and future investments, including acquisitions. The majority of cash and cash equivalents held outside the United States is available for repatriation.
Of the total net unfunded amounts, $32 million and $39 million at December 31, 2024 and 2023, respectively, were related to plans in Germany, where there is no tax deduction allowed under the applicable regulations to fund the plans; hence, the common practice is to make contributions as benefit payments become due.
Of t he total net unfunded amounts, $17 million and $32 million at December 31, 2025 and 2024, respectively, were related to plans in Germany, where there is no tax deduction allowed under the applicable regulations to fund the plans; hence, the common practice is to make contributions as benefit payments become due.
Foreign Currency Exchange Rate Risk Foreign currency exchange rate risk is the risk that the Company will incur economic losses due to adverse changes in foreign currency exchange rates. Currently, the Company’s most significant currency exposures relate to the British Pound, Chinese Renminbi, Euro, Hungarian Forint, Japanese Yen, Korean Won, Mexican Peso, Polish Zloty, Swiss Franc and Thai Baht.
Foreign Currency Exchange Rate Risk Foreign currency exchange rate risk is the risk that the Company will incur economic losses due to adverse changes in foreign currency exchange rates. Currently, the Company’s most significant currency exposures relate to the Brazilian Real, British Pound, Chinese Renminbi, Euro, Hungarian Forint, Korean Won, Mexican Peso, Polish Zloty and Swiss Franc.
A n increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.
An increase in discount rates, a reduction in projected cash flows or a combination of the 56 Table of Contents two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.
Management judgment is required in determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities, including accruals for unrecognized tax benefits and assessing the need for valuation allowances.
Management judgment is required in 59 Table of Contents determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities, including accruals for unrecognized tax benefits and assessing the need for valuation allowances.
Impairment of long-lived assets, including definite-lived intangible assets The Company reviews the carrying value of its long-lived assets, whether held for use or disposal, including other amortizing intangible assets, when events and circumstances warrant such a review under ASC Topic 360.
Impairment of long-lived assets, including definite-lived intangible assets The Company reviews the carrying value of its long-lived assets, whether held for use or disposal, including other amortizing intangible assets, when events and circumstances warrant such a review under Accounting Standards Codification (“ASC”) Topic 360.
For its significant plans, the Company used discount rates ranging from 1.0% to 22.3% to determine its pension and other benefit obligations as of December 31, 2024, including weighted average discount rates of 5.5% in the U.S., 4.3% outside of the U.S. (including 5.6% in the U.K.) and 5.4% for U.S. other postemployment health care plans.
For its significant plans, the Company used discount rates ranging from 1.0% to 10.5% to determine its pension and other benefit obligations as of December 31, 2025, including weighted average discount rates of 4.1% in the U.S., 4.6% outside of the U.S. (including 5.5% in the U.K.) and 4.9% for U.S. other postemployment health care plans.
Selling, general and administrative expenses (“SG&A”) SG&A for the year ended December 31, 2024 was $1,350 million as compared to $1,316 million for the year ended December 31, 2023. SG&A as a percentage of net sales was 9.6% and 9.3% for the years ended December 31, 2024 and 2023, respectively.
Selling, general and administrative expenses (“SG&A”) SG&A for the year ended December 31, 2025 was $1,304 million as compared to $1,350 million for the year ended December 31, 2024. SG&A as a percentage of net sales was 9.1% and 9.6% for the years ended December 31, 2025 and 2024, respectively.
The Company also considers the impact of active management of the plans’ invested assets. In determining its pension expense for the year ended December 31, 2024, the Company used long-term rates of return on plan assets ranging from 3% to 8% outside of the U.S. and 5% in the U.S.
The Company also considers the impact of active management of the plans’ invested assets. In determining its pension expense for the year ended December 31, 2025, the Company used long-term rates of return on plan assets ranging from 2.8% to 7.9% outside of the U.S. and 5% in the U.S.
Actual returns on U.K. pension assets were (3.7)% and 3.2% for the years ended December 31, 2024 and 2023, respectively, compared to the expected rate of return assumption of 4.0% and 5.3%, respectively, for the same years ended.
Actual returns on U.K. pension assets were 5.9% and (3.7)% for the years ended December 31, 2025 and 2024, respectively, compared to the expected rate of return assumption of 4.8% and 4.0%, respectively, for the same years ended.
The primary funded non-U.S. plans are in the U.K. and Germany. Actual returns on U.S. pension assets were 0.6 % and 5.2% for the years ended December 31, 2024 and 2023, respectively, compared to the expected rate of return assumptions of 5% and 5%, respectively, for the same years ended.
The primary funded non-U.S. plans are in the U.K. and Germany. Actual returns on U.S. pension assets were 7.3% and 0.6% for the years ended December 31, 2025 and 2024, respectively, compared to the expected rate of return assumptions of 5% for the years ended December 31, 2025 and 2024.
Lawsuit Against PHINIA 35 Table of Contents On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA has received or expects to receive from governmental agencies as well as damages and interest, which PHINIA has refused to pay to the Company.
Lawsuit Against PHINIA On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expects to receive from governmental agencies as well as damages and interest.
Actual returns on German pension assets were 7% and 9.9% for the years ended December 31, 2024 and 2023, respectively, compared to the expected rate of return assumptions of 4.2% and 4.5%, respectively, for the same years ended. • Discount rate : The discount rate is used to calculate pension and other postemployment benefit (“OPEB”) obligations.
Actual returns on German pension assets were 0.8% and 7.0% for the years ended December 31, 2025 and 2024, respectively, compared to the expected rate of return assumptions of 4.2% for the years ended December 31, 2025 and 2024. • Discount rate : The discount rate is used to calculate pension and other postemployment benefit (“OPEB”) obligations.
An adverse outcome could, nonetheless, be material to the results of operations or cash flows as the ultimate resolutions of these matters are inherently unpredictable. 50 Table of Contents Lawsuit Against PHINIA On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA has received or expects to receive from governmental agencies as well as damages and interest, which PHINIA has refused to pay to the Company.
An adverse outcome could, nonetheless, be material to the results of operations or cash flows as the ultimate resolutions of these matters are inherently unpredictable. 52 Table of Contents Lawsuit Against PHINIA On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of VAT refunds that PHINIA received or expects to receive from governmental agencies as well as damages and interest.
Securities and Exchange Commission provides the Company with the ability to issue various debt and equity securities subject to market conditions. On February 7, 2024, April 24, 2024, July 23, 2024 and November 6, 2024, the Company’s Board of Directors declared quarterly cash dividends of $0.11 per share of common stock, respectively.
Securities and Exchange Commission provides the Company with the ability to issue various debt and equity securities subject to market conditions. On February 6, 2025 and April 30, 2025, the Company’s Board of Directors declared quarterly cash dividends of $0.11 per share of common stock, respectively.
Dollars against the respective currencies and the approximate impacts of these changes recorded within other comprehensive income (loss) for the respective periods. 59 Table of Contents (in millions, except for percentages) December 31, 2024 Euro (6) % $ (90) Chinese Renminbi (3) % $ (51) Korean Won (12) % $ (34) (in millions, except for percentages) December 31, 2023 Chinese Renminbi (3) % $ (61) Korean Won (3) % $ (11) Euro 3 % $ 9 Commodity Price Risk Commodity price risk is the possibility that the Company will incur economic losses due to adverse changes in the cost of raw materials used in the production of its products.
Dollars against the respective currencies and the approximate impacts of these changes recorded within other comprehensive income (loss) for the respective periods. 61 Table of Contents (in millions, except for percentages) December 31, 2025 Euro 14 % $ 78 Chinese Renminbi 4 % $ 58 British Pound 8 % $ 12 Brazilian Real 11 % $ 7 (in millions, except for percentages) December 31, 2024 Euro (6) % $ (90) Chinese Renminbi (3) % $ (51) Korean Won (12) % $ (34) Commodity Price Risk Commodity price risk is the possibility that the Company will incur economic losses due to adverse changes in the cost of raw materials used in the production of its products.
Drivetrain & Morse Systems net sales for the year ended December 31, 2024 increased $28 million, or 1%, and Segment Adjusted Operating Income increased $52 million from the year ended December 31, 2023.
Drivetrain & Morse Systems net sales for the year ended December 31, 2025 increased $77 million, or 1%, and Segment Adjusted Operating Income increased $31 million from the year ended December 31, 2024.
Cost of sales and gross profit Cost of sales and cost of sales as a percentage of net sales were $11,438 million and 81.2%, respectively, during the year ended December 31, 2024, compared to $11,630 million and 81.9%, respectively, during the year ended December 31, 2023.
Cost of sales and gross profit Cost of sales and cost of sales as a percentage of net sales were $11,642 million and 81.3%, respectively, during the year ended December 31, 2025, compared to $11,438 million and 81.2%, respectively, during the year ended December 31, 2024.
Of the $20 million in projected 2025 contributions, $6 million are contractually obligated, while any remaining payments would be discretionary. The funded status of all pension plans was a net unfunded position of $66 million and $94 million at December 31, 2024 and 2023, respectively.
Of the $25 million in projected 2026 contributions, $8 million are contractually obligated, while any remaining payments would be discretionary. The funded status of all pension plans was a net unfunded position of $36 million and $66 million at December 31, 2025 and 2024, respectively.
The change in SG&A was primarily attributable to: • Research and development (“R&D”) costs increased $19 million. R&D costs, net of customer reimbursements, were 5.2% of net sales in the year ended December 31, 2024, compared to 5.1% of net sales in the year ended December 31, 2023.
The change in SG&A was primarily attributable to: • Research and development (“R&D”) costs decreased $26 million. R&D costs, net of customer reimbursements, were 5.0% of net sales in the year ended December 31, 2025, compared to 5.2% of net sales in the year ended December 31, 2024.
Foreign currencies resulted in a year-over-year increase in sales of approximately $21 million, primarily due to the strengthening of the Euro, partially offset by the weakening of the Chinese Renminbi, in each case relative to the U.S. Dollar.
Foreign currencies also resulted in a year-over-year increase in sales of approximately $22 million, primarily due to the strengthening of the Euro, partially offset by the weakening of the Korean Won, in each case relative to the U.S. Dollar.
Disclosure Regarding Forward-Looking Statements The matters discussed in this Item 7 include forward looking statements. See “Forward Looking Statements” at the beginning of this Annual Report on Form 10-K.
Disclosure Regarding Forward-Looking Statements The matters discussed in this Item 7 include forward looking statements. See “Forward Looking Statements” at the beginning of this report.
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its PowerDrive Systems segment due to electric vehicle adoption volatility across different regions, which could include realignment of the segment’s manufacturing footprint. During the year ended December 31, 2024, the Company recorded $13 million of restructuring costs related to this plan.
In June 2024, the Company announced a $75 million restructuring plan to address the cost structure in its PowerDrive Systems segment due to increased market volatility, which could include realignment of the segment’s manufacturing footprint. During the year ended December 31, 2025, the Company recorded $31 million of restructuring costs related to this plan.
Other operating expense (income), net was an expense of $32 million and income of $16 million for the years ended December 31, 2024 and 2023, respectively.
Other operating expense, net was an expense of $109 million and expense of $32 million for the years ended December 31, 2025 and 2024, respectively.
Refer to Note 12, “Goodwill and Other Intangibles,” to the Consolidated Financial Statements for more information. Additionally, during the year ended December 31, 2024, the Company recorded charges of $69 million related to certain property, plant and equipment at locations in the Company’s Battery & Charging Systems and PowerDrive Systems reporting segments.
Refer to Note 2, “Acquisitions and Dispositions,” and Note 12, “Goodwill and Other Intangibles,” to the Consolidated Financial Statements in Item 8 of this report for more information. • During the year ended December 31, 2025, the Company recorded charges of $174 million related to certain property, plant and equipment at locations in the Company’s Battery & Charging Systems and PowerDrive Systems reporting segments.
At December 31, 2024, all legal funding requirements had been met. The Company contributed $39 million, $21 million and $22 million to its defined benefit pension plans in the years ended December 31, 2024, 2023 and 2022, respectively. The Company expects to contribute a total of $20 million into its defined benefit pension plans during 2025.
At December 31, 2025, all legal funding requirements had been met. The Company contributed $23 million, $39 million and $21 million to its defined benefit pension plans in the years ended December 31, 2025, 2024 and 2023, respectively. The Company expects to contribute approximately $25 million into its defined benefit pension plans during 2026.
The change in net sales for the year ended December 31, 2024 was primarily driven by the following: • Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $122 million, primarily due to the weakening of the Chinese Renminbi and Korean Won, partially offset by the strengthening of the Euro, in each case relative to the U.S.
The change in net sales for the year ended December 31, 2025 was primarily driven by the following: • Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $154 million, primarily due to the strengthening of the Euro and Thai Baht, partially offset by the weakening of the Korean Won and Brazilian Real, in each case relative to the U.S.
The decrease in other postretirement expense for the year ended December 31, 2024 was primarily due to lower interest in 2024. Provision for income taxes was $111 million for the year ended December 31, 2024 resulting in an effective tax rate of 21%.
The decrease in other postretirement expense for the year ended December 31, 2025 was primarily due to lower settlement costs. Provision for income taxes was $189 million for the year ended December 31, 2025, resulting in an effective tax rate of 36%. This compared to $111 million, or an effective rate of 21%, for the year ended December 31, 2024.
In determining the projected benefit obligation for postemployment health care plans as of December 31, 2024, the Company used health care cost trend rates of 7.0%, declining to an ultimate trend rate of 4.75% by the year 2026.
In determining the projected benefit obligation for postemployment health care plans as of December 31, 2025, the Company used health care cost trend rates of 6.8%, declining to an ultimate trend rate of 4.8% by the year 2034.
Dollar. Gross profit and gross margin were $2,648 million and 18.8%, respectively, during the year ended December 31, 2024 compared to $2,568 million and 18.1%, respectively, during the year ended December 31, 2023. The increase in gross margin was primarily due to the factors discussed above.
Gross profit and gross margin were $2,674 million and 18.7%, respectively, during the year ended December 31, 2025 compared to $2,648 million and 18.8%, respectively, during the year ended December 31, 2024. The change in gross margin was primarily due to the factors discussed above.
As a result, the Company expects sales to be relatively flat in 2025, excluding the impact of foreign currencies. The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
As a result, at the mid-point of its outlook, the Company expects total sales in 2026 to decline year-over-year, excluding the impact of foreign currencies. The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
Refer to Note 22, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this report for more information. Capital spending obligations due within the next twelve months were $111 million as of December 31, 2024.
As of December 31, 2025, non-cancelable operating lease obligations due within twelve months and beyond were $39 million and $165 million, respectively. Refer to Note 22, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this report for more information. Capital spending obligations due within the next twelve months were $116 million as of December 31, 2025.
This line item is driven by the results of the Company’s unconsolidated joint ventures. Unrealized and realized loss on equity and debt securities was $1 million and $174 million for the years ended December 31, 2024 and 2023, respectively.
This line item is driven by the results of the Company’s unconsolidated joint ventures. Unrealized (gain) loss on equity securities was a gain of $3 million and a loss of $1 million in the years ended December 31, 2025 and 2024, respectively.
Segment Adjusted Operating Income (Loss) is comprised of operating income adjusted for restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss. The Company believes Segment Adjusted Operating Income (Loss) is most reflective of the operational profitability or loss of its reportable segments.
Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by the Company. Segment Adjusted Operating Income (Loss) is comprised of operating income adjusted for restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss.
These dividends were paid on March 15, 2024, June 17, 2024, September 16, 2024 and December 16, 2024, respectively. From a credit quality perspective, the Company has a credit rating of BBB from Standard & Poor’s, Baa1 from Moody’s and BBB+ from Fitch Ratings. The current outlook from each of Standard & Poor’s, Moody’s and Fitch is stable.
The dividends declared in the third quarter and fourth quarter were paid on September 15, 2025 and December 15, 2025, respectively. From a credit quality perspective, the Company has a credit rating of BBB from Standard & Poor’s, Baa1 from Moody’s and BBB+ from Fitch Ratings. The current outlook from each of Standard & Poor’s, Moody’s and Fitch is stable.
None of the Company's debt agreements requires accelerated repayment in the event of a downgrade in credit ratings. 46 Table of Contents Cash Flows Operating Activities Year Ended December 31, (in millions) 2024 2023 OPERATING ACTIVITIES OF CONTINUING OPERATIONS Net earnings from continuing operations $ 428 $ 702 Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations: Depreciation and tooling amortization 604 515 Intangible asset amortization 69 67 Restructuring expense, net of cash paid 6 66 Stock-based compensation expense 62 58 Loss (gain) on sales of businesses 6 (5) Gain on debt extinguishment (10) (28) Asset impairments 646 29 Change in accounting method (29) — Unrealized and realized loss on equity and debt securities 1 174 Deferred income tax benefit (156) (44) Other non-cash adjustments 8 (25) Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations 1,207 807 Retirement plan contributions (45) (19) Changes in assets and liabilities: Receivables 143 (482) Inventories 31 (72) Accounts payable and accrued expenses (292) 375 Other assets and liabilities (90) 86 Net cash provided by operating activities from continuing operations $ 1,382 $ 1,397 Net cash provided by operating activities was $1,382 million and $1,397 million in the years ended December 31, 2024 and 2023, respectively.
None of the Company's debt agreements requires accelerated repayment in the event of a downgrade in credit ratings. 48 Table of Contents Cash Flows Operating Activities Year Ended December 31, (in millions) 2025 2024 OPERATING ACTIVITIES OF CONTINUING OPERATIONS Net earnings from continuing operations $ 335 $ 428 Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations: Depreciation and tooling amortization 653 604 Intangible asset amortization 66 69 Restructuring expense, net of cash paid 36 6 Stock-based compensation expense 66 62 Loss on sales of assets 9 — Loss on sales of businesses 2 6 Gain on debt extinguishment — (10) Asset impairments 624 646 Impairment of investment 16 — Change in accounting method — (29) Unrealized and realized (gain) loss on equity securities (3) 1 Deferred income tax benefit (133) (156) Other non-cash adjustments 35 8 Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations 1,371 1,207 Retirement plan contributions (24) (45) Changes in assets and liabilities: Receivables 2 143 Inventories 105 31 Accounts payable and accrued expenses (207) (292) Other assets and liabilities 66 (90) Net cash provided by operating activities from continuing operations $ 1,648 $ 1,382 Net cash provided by operating activities was $1,648 million for the year ended December 31, 2025 compared to $1,382 million for the year ended December 31, 2024.
Foreign currencies resulted in a year-over-year decrease in sales of approximately $54 million, primarily due to the weakening of the Chinese Renminbi, partially offset by the strengthening of the Euro, in each case relative to the U.S. Dollar.
Foreign currencies resulted in a year-over-year increase in sales of approximately $42 million, primarily due to the strengthening of the Euro and Thai Baht, partially offset by the weakening of the Korean Won, in each case relative to the U.S. Dollar.
Financing Activities Year Ended December 31, (in millions) 2024 2023 FINANCING ACTIVITIES OF CONTINUING OPERATIONS Additions to debt $ 1,008 $ 18 Repayments of debt, including current portion (525) (451) Payments for debt issuance costs (9) (3) Payments for purchase of treasury stock (402) (177) Payments for stock-based compensation items (23) (25) Payments for business acquired, net of cash acquired (4) — Purchase of noncontrolling interest — (15) Payments for contingent consideration (1) (23) Net distribution from PHINIA — 401 Dividends paid to BorgWarner stockholders (98) (130) Dividends paid to noncontrolling stockholders (113) (116) Net cash used in financing activities from continuing operations $ (167) $ (521) Net cash used in financing activities was $167 million during the year ended December 31, 2024 compared to $521 million in the year ended December 31, 2023.
Financing Activities Year Ended December 31, (in millions) 2025 2024 FINANCING ACTIVITIES OF CONTINUING OPERATIONS Payments on notes payable $ (5) $ — Additions to debt — 1,008 Repayments of debt, including current portion (409) (525) Payments for debt issuance costs — (9) Payments for purchase of treasury stock (508) (402) Payments for stock-based compensation items (22) (23) Payments for business acquired, net of cash acquired — (4) Payments for contingent consideration (4) (1) Dividends paid to BorgWarner stockholders (119) (98) Dividends paid to noncontrolling stockholders (49) (113) Net cash used in financing activities from continuing operations $ (1,116) $ (167) Net cash used in financing activities was $1,116 million for the year ended December 31, 2025 compared to $167 million for the year ended December 31, 2024.
The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share: Year Ended December 31, Non-comparable items: 2024 2023 Impairment charges $ (2.73) $ (0.10) Restructuring expense (0.24) (0.24) Accelerated depreciation (0.18) (0.01) Adjustments associated with Spin-Off related balances (0.14) — Commercial contract settlement (0.07) — (Loss) gain on sale of business (0.04) 0.02 Merger and acquisition expense, net — (0.09) Unrealized and realized loss on equity and debt securities — (0.73) Gain on sale of assets — 0.04 Gain on debt extinguishment 0.01 0.09 Change in accounting method 0.10 — Tax adjustments 1 0.64 0.05 Other non-comparable items (0.04) (0.06) Total impact of non-comparable items per share — diluted: $ (2.69) $ (1.03) _____________________ 1 In 2024, the Company recorded a discrete tax benefit of $107 million related to reductions in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed and a discrete tax benefit of $36 million related to post Spin-Off restructuring.
The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share: Year Ended December 31, Non-comparable items: 2025 2024 Impairment charges $ (2.63) $ (2.73) Restructuring expense (0.36) (0.24) Accelerated depreciation (0.31) (0.18) Legal settlement (0.18) — Costs to exit charging business (0.14) — Impairment of investment (0.07) — Chief Executive Officer ("CEO") transition compensation (0.05) — Loss on sale of assets (0.03) — Adjustments associated with Spin-Off related balances (0.03) (0.14) Write-off of customer incentive asset (0.03) — Merger and acquisition expense, net (0.02) — Loss on sale of businesses (0.01) (0.04) Change in accounting method — 0.10 Commercial contract settlement — (0.07) Gain on debt extinguishment — 0.01 Unrealized gain on equity securities 0.01 — Insurance recovery 0.07 — Tax adjustments 1 0.23 0.64 Other non-comparable items (0.08) (0.04) Total impact of non-comparable items per share — diluted: $ (3.63) $ (2.69) _____________________ 1 In 2025, the Company recorded a tax benefit of $29 million related to reductions in certain unrecognized tax benefits and accrued interest for matters remeasured after various audit closures.
Other postemployment benefits primarily consist of health care benefits for certain former employees and retirees of the Company’s U.S. operations. The Company funds these benefits as retiree claims are incurred. Other postemployment benefits had an unfunded status of $29 million and $33 million at December 31, 2024 and 2023, respectively.
Other postemployment benefits primarily consist of health care benefits for certain former employees and retirees of the Company’s U.S. operations. The Company funds these benefits as retiree claims are incurred.
When a plan of separation requires approval by or consultation with the relevant labor organization or government, the costs are recorded upon agreement. Costs associated with benefits that are contingent on the employee continuing to provide service are expensed over the required service period. Income taxes The Company accounts for income taxes in accordance with ASC Topic 740.
When a plan of separation requires approval by or consultation with the relevant labor organization or government, the costs are recorded upon agreement. Costs associated with benefits that are contingent on the employee continuing to provide service are expensed over the required service period. Restructuring accruals can include estimates related to employee termination costs.
The change in Other operating expense (income), net was primarily due to: • During the year ended December 31, 2024, the Company recorded expense of $17 million primarily for adjustments to net amounts owed to the Company related to the tax matters agreement between the Company and PHINIA. • During the year ended December 31, 2024, the Company recorded a loss of approximately $15 million related to the settlement of a commercial contract assumed in its acquisition of the electric hybrid systems business segment of Eldor. • During the year ended December 31, 2024, the Company recorded a charge of $6 million related to the estimated loss on an immaterial business that met held for sale accounting criteria.
During the year ended December 31, 2024, the Company recorded a net loss on sale of business of $6 million primarily related to the estimated loss on an immaterial business that met held for sale accounting criteria. • During the year ended December 31, 2024, the Company recorded a loss of approximately $15 million related to the settlement of a commercial contract assumed in its acquisition of the electric hybrid systems business segment of Eldor Corporation. • During the year ended December 31, 2024, the Company recorded other income in the amount of $5 million for net service reimbursements related to the Spin-Off.
Year Ended December 31, 2023 Year ended December 31, 2024 Year ended December 31, 2023 (in millions) Net sales Segment Adjusted Operating Income (Loss) % margin Net sales Segment Adjusted Operating Income (Loss) % margin Turbos & Thermal Technologies $ 5,887 $ 877 14.9 % $ 6,012 $ 874 14.5 % Drivetrain & Morse Systems 5,577 1,010 18.1 % 5,549 958 17.3 % PowerDrive Systems 1,937 (144) (7.4) % 2,166 (90) (4.2) % Battery & Charging Systems 729 (47) (6.4) % 546 (116) (21.2) % Inter-segment eliminations (44) — (75) — Totals $ 14,086 $ 1,696 $ 14,198 $ 1,626 Turbos & Thermal Technologies net sales for the year ended December 31, 2024 decreased $125 million, or 2%, and Segment Adjusted Operating Income increased $3 million from the year ended December 31, 2023.
Year Ended December 31, 2024 Year ended December 31, 2025 Year ended December 31, 2024 (in millions) Net sales Segment Adjusted Operating Income (Loss) % margin Net sales Segment Adjusted Operating Income (Loss) % margin Turbos & Thermal Technologies $ 5,772 $ 879 15.2 % $ 5,887 $ 877 14.9 % Drivetrain & Morse Systems 5,654 1,041 18.4 % 5,577 1,010 18.1 % PowerDrive Systems 2,347 (83) (3.5) % 1,937 (144) (7.4) % Battery & Charging Systems 590 (39) (6.6) % 729 (47) (6.4) % Inter-segment eliminations (47) — (44) — Totals $ 14,316 $ 1,798 $ 14,086 $ 1,696 Turbos & Thermal Technologies net sales for the year ended December 31, 2025 decreased $115 million, or 2%, and Segment Adjusted Operating Income increased $2 million from the year ended December 31, 2024.
Segment Adjusted Operating margin was 18.1% in the year ended December 31, 2024, compared to 17.3% in the year ended December 31, 2023. The Segment Adjusted Operating margin increase was primarily due to conversion on higher sales and manufacturing efficiencies, supply chain and restructuring savings.
Segment Adjusted Operating margin was (3.5)% in the year ended December 31, 2025, compared to (7.4)% in the year ended December 31, 2024. The increase in Segment Adjusted Operating margin was primarily due to incremental conversion on higher sales, customer volume recoveries and supply chain and restructuring savings.
Segment Adjusted Operating margin was 14.9% for the year ended December 31, 2024, compared to 14.5% in the year ended December 31, 2023. The Segment Adjusted Operating margin was relatively flat as lower sales were offset by manufacturing efficiencies, supply chain and restructuring savings.
Segment Adjusted Operating margin was 15.2% for the year ended December 31, 2025, compared to 14.9% in the year ended December 31, 2024. The Segment Adjusted Operating margin increase was primarily due to supply chain savings, manufacturing efficiencies and restructuring savings, partially offset by decremental conversion on lower sales.
This decrease was primarily due to a decline in demand for certain of the Company’s Foundational products in China as well as a reduction arising from the Company’s 2023 purchase of the noncontrolling interest related to SeohanWarner Turbo Systems Ltd. in Korea. 41 Table of Contents Non-comparable items impacting the Company’s earnings per diluted share and net earnings The Company’s earnings per diluted share were $1.63 and $2.70 for the years ended December 31, 2024 and 2023, respectively.
The decrease was primarily due to a decline in demand for certain of the Company’s Foundational products in China. 44 Table of Contents Non-comparable items impacting the Company’s earnings per diluted share and net earnings The Company’s earnings per diluted share were $1.28 and $1.63 for the years ended December 31, 2025 and 2024, respectively.
Refer to Note 14, “Debt,” to the Consolidated Financial Statements in Item 8 of this report for more information. As of December 31, 2024, non-cancelable lease obligations due within twelve months and beyond were $46 million and $219 million, respectively.
The projected interest payments over the terms of that debt due within the next twelve months and beyond were $109 million and $805 million, respectively, as of December 31, 2025. Refer to Note 14, “Debt,” to the Consolidated Financial Statements in Item 8 of this report for more information.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor information regarding the level of business outside the United States, which is subject to foreign currency exchange rate market risk, refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report. 60 Table of Contents
Biggest changeFor information regarding the level of business outside the United States, which is subject to foreign currency exchange rate market risk, refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report. 62 Table of Contents

Other BWA 10-K year-over-year comparisons