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What changed in BORGWARNER INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BORGWARNER INC's 2023 and 2024 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 2024 report.

+370 added−343 removedSource: 10-K (2025-02-06) vs 10-K (2024-02-08)

Top changes in BORGWARNER INC's 2024 10-K

370 paragraphs added · 343 removed · 254 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

58 edited+14 added−33 removed32 unchanged
Biggest changeFarrell (57) 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) Isabelle McKenzie (54) Vice President and President and General Manager, Morse Systems (2023) • Vice President & General Manager, Americas, Power-Drive Systems (2020 - 2023) • Vice President Global Engineering, Transmission Systems (2014 - 2020) Volker Weng (53) Vice President and President and General Manager, Drivetrain & Battery Systems (formerly known as Drivetrain Systems) (2019) • Vice President of the Company and President and General Manager, BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc.
Biggest changeKulikowski (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.
The Company uses a variety of tactics in an attempt to limit the impact of supply shortages 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.
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.
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. 15 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.
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.
The Company’s worldwide net sales to the following customers (including their subsidiaries) were approximately as follows: Year Ended December 31, Customer 2023 2022 2021 Ford 14 % 15 % 13 % Volkswagen 11 % 9 % 9 % No other single customer accounted for more than 10% of the Company’s consolidated net sales in any of the years presented.
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.
The Company owns the “BorgWarner” trade name and numerous trademarks which are material to the Company's business. 12 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. 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.
Ultimate responsibility for DE&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 DE&I strategy.
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.
Results from the two 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.
These employees, located at one facility in the state of New York, are covered by a collective bargaining agreement that expires in September 2024. Employees at certain international facilities are also unionized. The Company believes the current relations with its workforce to be satisfactory.
These employees, located at one facility in the state of New York, are covered by a collective bargaining agreement that expires in September 2028. Employees at certain international facilities are also unionized. The Company believes the current relations with its workforce to be satisfactory.
Financial Information About Geographic Areas The Company has a global presence. During the year ended December 31, 2023, 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, 2024, approximately 16% of the Company’s net sales were generated in the United States, and 84% were generated outside the United States.
Item 1. Business BorgWarner Inc. (together with its Consolidated Subsidiaries, the “Company” or “BorgWarner”) is a Delaware corporation incorporated in 1987. The Company is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. Its products help improve vehicle performance, propulsion efficiency, stability and air quality.
Item 1. Business BorgWarner Inc. (collectively with its consolidated subsidiaries, the “Company” or “BorgWarner”) is a Delaware corporation incorporated in 1987. The Company is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. BorgWarner’s products help improve vehicle performance, propulsion efficiency, stability and air quality.
Intellectual Property The Company has approximately 5,700 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 5,190 active domestic and foreign patents and patent applications pending or under preparation and receives royalties from licensing patent rights to others.
Sales to the Company’s top ten customers represented 68% of sales for the year ended December 31, 2023. 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 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.
Additionally, the ePropulsion segment’s iDMs combine all the benefits of our inverters, eMotors and gear reducers in a single package optimized for cost, performance, noise vibration and harshness and packaging. iDMs contain full software that offers functional safety and cybersecurity. This capability comes from deep experience of over 40 years in the field of automotive software.
Additionally, PowerDrive Systems’ iDMs combine all the benefits of our inverters, eMotors and gear reducers in a single package optimized for cost, performance, noise vibration and harshness and packaging. iDMs contain full software that offers functional safety and cybersecurity. This capability comes from deep experience of over 40 years in the field of automotive software.
The ePropulsion segment’s technologies include power electronics such as inverters, onboard chargers, DC/DC converters and combination boxes (multiple combined power electronics components). Rotating electric machines are also part of the ePropulsion portfolio, including eMotors and generators as well as fully integrated drive modules (“iDM”) consisting of inverter, eMotor and gear reducer.
PowerDrive Systems’ technologies include power electronics such as inverters, onboard chargers, DC/DC converters and combination boxes (multiple combined power electronics components). Rotating electric machines are also part of the PowerDrive Systems’ portfolio, including eMotors and generators as well as fully integrated drive modules (“iDM”) consisting of inverter, eMotor and gear reducer.
The top quartile for motor vehicle parts manufacturing was lower than or equal to 0.2 according to the BLS. 3 ◦ 93% of the Company’s manufacturing sites were ISO 45001 certified. 4 Approximately 12.5% of the Company’s U.S. workforce is unionized.
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.
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. 10 Table of Contents Product Lines and Customers During the year ended December 31, 2023, approximately 82% of the Company’s net sales were for light-vehicle applications; approximately 10% were for commercial-vehicle applications; approximately 6% 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. 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.
Technological innovation, application engineering development, quality, price, delivery and program launch support are the primary methods of competition. The Company’s major non-OEM competitors are Robert Bosch GmbH, Denso Corporation, Garrett Motion, Hitachi, Ltd., Magna Powertrain (an operating unit of Magna International Inc.), Valeo, Schaeffler Group and Vitesco Technologies. The Company also competes with certain start-ups in electrification.
Technological innovation, application engineering development, quality, price, delivery and program launch support are the primary methods of competition. The Company’s major non-OEM competitors are Robert Bosch GmbH, Denso Corporation, Garrett Motion, Hitachi, Ltd., Magna Powertrain (an operating unit of Magna International Inc.), Valeo, Schaeffler Group and Contemporary Amperex Technology Co., Limited. The Company also competes with certain start-ups in electrification.
The Company also makes the following documents available on its Internet website: the Audit Committee Charter; the Compensation Committee Charter; the Corporate Governance Committee Charter; the Company’s Corporate Governance Guidelines; the Company’s Code of Ethical Conduct; and the Company’s Code of Ethics for CEO and Senior Financial Officers.
The Company also makes the following documents available on its Internet website: the Audit Committee Charter; the Compensation Committee Charter; the Corporate Governance Committee Charter; the Company’s Bylaws; the Company’s Corporate Governance Guidelines; the Company’s Code of Ethical Conduct; the Company’s Code of Ethics for CEO and Senior Financial Officers; and the Company’s Insider Trading and Confidentiality Policy.
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. 11 Table of Contents In addition, each of the Company's businesses within its Air Management, Drivetrain & Battery Systems and ePropulsion reportable segments has its own research and development (“R&D”) organization, including engineers and technicians, engaged in R&D activities at facilities worldwide.
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.
Sales of turbochargers for light vehicles represented approximately 21%, 26% and 24% of the Company’s net sales for the years ended December 31, 2023, 2022 and 2021, 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%, 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.
Calaway (56) 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.
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.
The top quartile for motor vehicle parts manufacturing was lower than or equal to 1.2 according to the BLS. 3 ◦ The Company’s global workforce accident LTIR was 0.21.
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.
Additionally, the segment’s products include electronic controls such as engine control units, transmission control units, battery management systems, propulsion controllers and domain controllers. 9 Table of Contents The ePropulsion segment’s 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 global leading electric and hybrid vehicles.
Year Ended December 31, (in millions) 2023 2022 2021 Gross R&D expenditures $ 856 $ 787 $ 694 Customer reimbursements (139) (86) (108) Net R&D expenditures $ 717 $ 701 $ 586 Net R&D expenditures as a percentage of net sales were 5.1%, 5.5% and 5.0% for the years ended December 31, 2023, 2022 and 2021, respectively.
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.
Such unconsolidated sales totaled approximately $732 million, $734 million, and $852 million for the years ended December 31, 2023, 2022 and 2021, respectively. Air Management The Air Management segment develops and manufactures products to improve fuel economy, reduce emissions and enhance performance.
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.
The Air Management segment’s technologies include turbochargers, eBoosters, eTurbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery heaters, battery charging and direct current charging stations. 8 Table of Contents The Air Management segment’s 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’ 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.
In lieu of fractional shares of PHINIA, shareholders of the Company received cash. 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.
(“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.
Recent Acquisitions Acquisitions are an integral component of the Company’s growth and value creation strategy. Below are summaries of recent acquisitions.
Recent Acquisitions Acquisitions have been an integral component of the Company’s growth and value creation strategy.
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. 16 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 8, 2024. 5 Name (Age) Present Position (Effective Date) Positions Held During the Past Five Years (Effective Date) Frederic B.
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.
There is no assurance that the Company’s business will not be adversely affected by increased competition in the markets in which it operates.
We cannot guarantee that the Company’s business will not be adversely affected by increased competition in the markets in which it operates.
Those goals include: ◦ Perform in the top quartile for Total Recordable Incident Rate (“TRIR”) and Lost Time Incident Rate (“LTIR”). 3 ◦ Implement and then maintain ISO 45001 certification at 100% of its manufacturing sites. 4 In the year ended December 31, 2023: ◦ The Company’s global workforce accident TRIR was 0.36, which was within top quartile performance.
The 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.
Turbo Energy Private Limited Turbochargers 1987 32.6 % India Sundaram Finance Limited; Brakes India Limited Consolidated: BuradaWarner LLC Valvetrain and fuel injection equipment 1977 70 % Korea BU RA DA Company Limited BorgWarner Transmission Systems Korea Ltd. 1 Transmission components 1987 60 % Korea NSK-Warner Beijing Delphi Wan Yuan Engine Management Systems Co. Ltd.
Inverters 2024 49% China Shaanxi Fast Auto Drive Group Consolidated: BuradaWarner LLC Valvetrain and fuel injection equipment 1977 70% Korea BU RA DA Company Limited BorgWarner Transmission Systems Korea Ltd. 1 Transmission components 1987 60% Korea NSK-Warner Beijing Delphi Wan Yuan Engine Management Systems Co. Ltd.
As of December 31, 2023, the Company had a salaried and hourly workforce as follows: Americas 11,800 Asia 12,200 Europe 15,900 Total workforce 39,900 Salaried 13,000 Hourly 26,900 Total workforce 39,900 The Company uses an array of practices to attract, develop and retain highly qualified talent, including the following: • Diversity, Equity & Inclusion (“DE&I”) .
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 .
Carey Inc., Member of Board of Directors (2020 – Present) Tania Wingfield (57) 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) Craig D.
(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.
The Company utilizes various strategies to attract, engage and retain the brightest and best talent. It 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.
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%.
In addition, the Company uses long-term contracts, cost sharing arrangements, design changes, customer buy programs and limited financial instruments to help control costs. The Company intends to use similar measures in 2024 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.
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.
Net sales by reportable segment were as follows: Year Ended December 31, (in millions) 2023 2022 2021 Air Management $ 7,833 $ 7,137 $ 6,867 Drivetrain & Battery Systems 4,348 3,735 3,660 ePropulsion 2,166 1,906 1,427 Inter-segment eliminations (149) (143) (151) Net sales $ 14,198 $ 12,635 $ 11,803 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) 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).
The Drivetrain & Battery Systems segment’s 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. Controls products for automatic transmissions feature electro-hydraulic solenoids for standard and high-pressure hydraulic systems, transmission solenoid modules and dual clutch control modules.
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.
During the year ended December 31, 2023, the Company’s eProduct revenue was approximately $2.0 billion, or 14% of its total revenue.
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.
The Air Management segment’s powertrain products include an array of highly engineered products that complement and enhance the efficiency improvements delivered by many other air management technologies.
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.
For 2024, the Company believes there will be continued inflationary pressures in certain raw materials, labor and energy. While the Company sees inflation decreasing in some areas it does not expect to see “deflation,” which means that it expects supplier costs to remain elevated relative to prior years.
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.
The Company undertakes a variety of recruitment and retention initiatives that serve as a strategic opportunity to build a diverse talent and leadership pipeline. 13 Table of Contents In 2022, the Company set goals to advance DE&I and support its commitment to creating an inclusive and sustainable workforce.
The Company undertakes a variety of recruitment and retention initiatives that serve as a strategic opportunity to expand its talent and leadership pipeline.
Fadool (57) 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. (2017 – 2019) Paul A.
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.
These opportunities are delivered in a variety of formats to make its portfolio of solutions flexible, accessible, scalable and translatable to meet the needs of our evolving workplace and workforce. The Company is also committed to preparing its workforce for the transition from combustion to electrification.
The Company provides formal development opportunities at all levels and stages of the career journey of its employees. These opportunities are delivered in a variety of formats so that they are flexible, accessible, scalable and translatable to meet the needs of our evolving workplace and workforce.
The Drivetrain & Battery Systems segment’s 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.
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.
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. Narrative Description of Reportable Segments The Company reports its results under three reportable segments: Air Management, Drivetrain & Battery Systems and ePropulsion.
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.
In 2023, the Company delivered 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. • Health & Safety . The safety of the Company’s employees is vitally important, and the Company is dedicated to continuously improving safety performance.
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”) .
(2019) • Vice President and General Manager, Europe, BorgWarner Emissions Systems LLC and BorgWarner Thermal Systems Inc. (2017 – 2019) 5 On November 30, 2023, Kevin A. Nowlan, Executive Vice President and Chief Financial Officer of the Company, notified the Company of his intention to retire as Executive Vice President and Chief Financial Officer effective March 1, 2024.
(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.
In addition to the Company’s DE&I goals progress, as of December 31, 2023: ◦ Five of eight board members (63%) were women and/or racially/ethnically diverse. ◦ Four of 10 executive management team members (40%) were women and/or racially/ethnically diverse. ◦ Women composed 17.4% of the Company’s leadership (those who participate in the management incentive plan), 25.0% of the Company’s salaried workforce, 32.9% of the Company’s hourly workforce, and 36.3% of the Company’s new hires in 2023. 1 ◦ Racial/ethnic minorities composed 20.6% of the Company’s U.S. leadership, 23.6% of the Company’s U.S. salaried workforce, 34.9% of the Company’s U.S. hourly workforce, and 44.9% of the Company’s U.S. new hires in 2023. 1 • Engagement & Retention .
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.
Charging Forward - Electrification Portfolio Strategy In 2021, the Company announced its strategy to aggressively grow its eProducts over time through organic investments and technology-focused acquisitions. eProducts 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.
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).
Supplies of raw materials are adequate and available from multiple sources to support the Company’s manufacturing requirements. 3 Based on U.S. Bureau of Labor Statistics (the “BLS”), Survey of Occupational Injuries and Illnesses Data, motor vehicle parts manufacturing (NAICS 336300).
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.
In the U.S., racial/ethnic minorities received compensation of 100.9% compared to compensation received by non-minorities for substantially similar work. 2 ◦ The Company’s 2023 employee engagement survey achieved a 76% score on the BorgWarner Beliefs index.
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.
Lissalde (56) President and Chief Executive Officer (2018) • Autoliv, Inc., Member of Board of Directors (2020 – Present) Kevin A.
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.
In the first quarter of 2023, the Company elected to disaggregate Air Management and ePropulsion & Drivetrain segments into Air Management, Drivetrain & Battery Systems and ePropulsion and reported its results in a total of five reportable segments: Air Management, Drivetrain & Battery Systems, ePropulsion, Fuel Systems and Aftermarket.
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.
Applications of iDMs include a wide range of electric and hybrid vehicles globally. Joint Ventures As of December 31, 2023, the Company had eight joint ventures in which it had a less-than-100% ownership interest.
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.
The segment is developing electronically controlled torque management devices and systems that will benefit vehicle energy efficiency and vehicle dynamics. ePropulsion The Company’s ePropulsion segment’s 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 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.
Aaron (46) Vice President and Controller (2022) • Vice President and Treasurer (2019 – 2022) • Vice President, Finance, BorgWarner Morse Systems (2016 – 2019) Stefan Demmerle (59) 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) Joseph F.
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.
The Company’s safety performance is rooted in robust safety management systems consisting of leading safety indicators, integrating detailed metrics into safety scorecards, engaging employees at every level, training and 1 Data excludes employees acquired through the Eldor acquisition. 2 The Company’s most recent pay equity study was conducted in 2023 based on compensation and employees as of December 31, 2022.
The Company’s safety performance is rooted in strong leadership commitment and support, as well as robust safety management systems. These systems consist of tracking leading and lagging safety indicators, integrating detailed metrics into safety scorecards, engaging employees at every level, training and prevention initiatives, performing risk assessments and inspections, sharing best practices, hosting safety conferences and sponsoring recognition programs.
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The Company believes it is well positioned for the industry’s anticipated migration to EVs. In June 2023, the Company announced the next phase of its Charging Forward strategy, which focuses on profitably growing eProducts while maximizing the value of the Company’s Foundational products portfolio.
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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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Foundational products include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains.
Added
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.
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As a result of executing its strategy, the Company expects that by 2027, it will achieve over $10 billion in annual eProduct sales, deliver eProduct adjusted operating margin of approximately 7% and maintain its double-digit adjusted operating margin for its Foundational products portfolio.
Added
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.
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(“PHINIA”) to holders of record of common stock of the Company on a pro-rata basis. Each holder of record of common stock of the Company received one share of PHINIA common stock for every five shares of common stock of the Company held on June 23, 2023, the record date for the distribution (“Distribution Date”).
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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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Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Item 8 of this report for more information. 6 Table of Contents Eldor Corporation’s Electric Hybrid Systems Business On December 1, 2023, the Company completed its acquisition of the electric hybrid systems business segment of Eldor Corporation (“Eldor”), which is headquartered in Italy.
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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.
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The acquisition is expected to complement its existing ePropulsion product portfolio by enhancing the Company’s engineering capabilities in power electronics. The Company paid €72 million ( $78 million ) at closing, with up to €175 million ($191 million) in earn-out payments that could be paid over the two years following closing.
Added
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.
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The Company’s current estimates indicate that the minimum threshold for the earn-out target will not be achieved, thus no amount of the earn-out payment has been included in the purchase consideration.
Added
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.
Removed
Hubei Surpass Sun Electric Charging Business On March 1, 2023, the Company completed its acquisition of the electric vehicle solution, smart grid and smart energy businesses of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition is expected to complement the Company’s existing European and North American charging footprint by adding a presence in China.
Added
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.
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The total consideration was ¥288 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of the base purchase price in the year ended December 31, 2023.
Added
Turbo Energy Private Limited Turbochargers 1987 32.6% India Sundaram Finance Limited; Brakes India Limited Fast Warner Intelligent Control Systems (Xi’an) Co., Ltd.
Removed
The remaining ¥51 million ($8 million) of base purchase price is payable in two installments with the last payment due before April 30, 2025. In addition, pursuant to the agreement, the Company could be obligated to remit up to ¥103 million ($15 million), in the form of contingent payments over approximately two years following the closing.
Added
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.
Removed
Drivetek AG On December 1, 2022, the Company acquired Drivetek AG, an engineering and product development company located in Switzerland. This acquisition is expected to strengthen the Company’s power electronics capabilities in auxiliary inverters to accelerate the growth of the High Voltage eFan business.
Added
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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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTo 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.
Biggest changeThe 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.
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 25 Table of Contents an adverse impact on our results of operations.
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.
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 (“UAW”). Additionally, there is effort from the UAW to unionize other North American OEM plants, the outcome of which is difficult to predict.
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.
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.
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.
Following non-contractual negotiations, we reached cost-recovery agreements with various customers in 2022 and 2023, 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.
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 indemnification liabilities pursuant to the spin-off of PHINIA could materially and adversely affect our business.
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.
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. 29 Table of Contents
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.
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 2023, approximately 84% of our consolidated net sales were outside the U.S.
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.
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 program 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. 23 Table of Contents Our profitability and results of operations may be adversely affected by new business launch difficulties.
Some cyber-attacks depend on human error or manipulation, including phishing attacks or schemes that use social engineering 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 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.
It is possible that the integration process could result in the loss of key employees, the disruption of our operations, the inability to maintain or increase 18 Table of Contents our competitive presence, inconsistencies in standards, controls, procedures and policies, difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition, the diversion of management’s attention to integration matters and/or difficulties in the assimilation of employees and corporate cultures.
It is possible that the integration process could result in the loss of key employees, the disruption of our operations, the inability to maintain or increase our competitive presence, inconsistencies in standards, controls, procedures and policies, difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition, the diversion of management’s attention to integration matters and/or difficulties in the assimilation of employees and corporate cultures.
If we do not continue to innovate and develop, or acquire, new and compelling products that capitalize upon new technologies in 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 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.
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 strategic objectives.
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.
Further, while it is intended that the transaction will be 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, either the Company, PHINIA, or the Company’s stockholders could incur income tax liabilities that could be significant.
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.
In addition, with respect to the liabilities for which the other parties have agreed to indemnify us under these agreements, there can be no assurance that the indemnity rights we have against such other parties will be sufficient to protect us against the full amount of the liabilities or that such other parties will be able to fully satisfy its indemnification obligations.
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.
Alleged violations by BorgWarner of existing or future emissions standards could result in government investigations and other legal proceedings, the recall of one or more of our products, negotiated remedial actions, fines, 21 Table of Contents disgorgement of profits, restricted product offerings, reputational harm or a combination of any of those items.
Any potential alleged violations by BorgWarner of existing or future emissions standards could result in government investigations and other legal proceedings, the recall of one or more of our products, negotiated remedial actions, fines, disgorgement of profits, restricted product offerings, reputational harm or a combination of any of those items.
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, such as Russia’s invasion of Ukraine in 2022, 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.
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.
We may not meet our goals due to many factors, including any of the risks identified in the paragraph that follows, 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 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.
Item 1A. Risk Factors The following risk factors and other information included in this Annual Report on Form 10-K should be considered. 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 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.
Rapidly changing industry conditions such as volatile production volumes; our need to seek price reductions from our suppliers as a result of the substantial pressure we face from OEMs to reduce the prices of our products; credit tightness; changes in foreign currency exchange rates; raw material, commodity, tariffs, transportation, and energy price escalation; drastic changes in consumer preferences; and other factors could adversely affect our supply chain, and sometimes with little advance notice.
Rapidly changing industry conditions such as volatile production volumes, including volatility in electric vehicle adoption across different regions; our need to seek price reductions from our suppliers as a result of the substantial pressure we face from OEMs to reduce the prices of our products; credit tightness; changes in foreign currency exchange rates; raw material, commodity, tariffs, transportation, and energy price escalation; drastic changes in consumer preferences; and other factors could adversely affect our supply chain, and sometimes with little advance notice.
Part of our workforce is unionized, which could subject us to work stoppages. As of December 31, 2023, approximately 12.5% of our U.S. workforce was unionized. We have a domestic collective bargaining agreement for one facility in New York, which expires in September 2024. 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, 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.
A significant disruption in the supply of a key component due to supply constraints, such as the constraints experienced in 2021 and 2022 related to semiconductor chips, or due to a work stoppage or production shutdown at one of our suppliers or any other supplier could have the same consequences and, accordingly, have an adverse effect on our financial results.
A significant disruption in the supply of a key component due to supply constraints or due to a work stoppage or production shutdown at one of our suppliers or any other supplier could have the same consequences and, accordingly, have an adverse effect on our financial results.
Our worldwide sales in 2023 to Ford and Volkswagen constituted approximately 14% and 11% of our 2023 consolidated net sales, respectively. Sales to the Company’s top ten customers represented 68% of sales for the year ended December 31, 2023. We are sensitive to the effects of our major customers’ labor relations.
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.
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, 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 may not be able to successfully assimilate or integrate companies that we have acquired or will acquire in the future, including their personnel, financial systems, distribution, operations and general operating procedures. Failure to execute our growth strategy could adversely affect our business.
We may not be able to successfully assimilate or integrate companies that we have acquired or will acquire in the future, including their personnel, financial systems, distribution, operations and general operating procedures.
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.
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.
Price, quality, delivery, technological innovation, engineering development and program launch support are the primary elements of competition. Our competitors include vertically integrated units of our major OEM customers, as well as a large number of independent domestic and international suppliers.
We compete globally with a number of other manufacturers and distributors that produce and sell similar products. Price, quality, delivery, technological innovation, engineering development and program launch support are the primary elements of competition. Our competitors include vertically integrated units of our major OEM customers, as well as a large number of independent domestic and international suppliers.
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.
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.
A failure of or disruption in our information technology infrastructure, including a disruption related to cybersecurity, could adversely impact our business and operations. We rely on the capacity, reliability and security of our IT systems and infrastructure. IT systems are vulnerable to disruptions, including those resulting from natural disasters, cyber-attacks or failures in third-party provided services.
We rely on the capacity, reliability and security of our IT systems and infrastructure to operate our business. IT systems are vulnerable to disruptions, including those resulting from natural disasters, cyber-attacks or failures in third-party provided services.
We cannot predict with certainty when the benefits expected from the Spin-Off will occur or the extent to which they will be achieved. There is no assurance that following the Spin-Off each separate company will be successful.
We may not realize the anticipated strategic, financial, operational or other benefits of the spin-off of PHINIA. We cannot predict with certainty when the benefits that we expect from the spin-off will occur or the extent to which they will be achieved. There is no assurance that following the spin-off each separate company will be successful.
Disruptions and attacks on our IT systems pose a risk to the security of our systems and our ability to protect our networks and the confidentiality, availability and integrity of information and data and that of third parties, including our employees.
Disruptions and attacks on our IT systems pose a risk to our business operations and our ability to protect our systems, networks and communications, and the confidentiality and availability of third-party and internal data, including our employees.
Additionally, a material deterioration in the funded status of the plans could significantly increase our pension expenses and reduce profitability in the future. We also sponsor post-employment medical benefit plans in the U.S. that are unfunded.
Additionally, a material deterioration in the funded status of the plans could significantly increase our pension expenses and reduce profitability in the future. We also sponsor post-employment medical benefit plans in the U.S. that are unfunded. If medical costs continue to increase or actuarial assumptions are modified, this could have an adverse effect on our business.
Our inability to protect or enforce our intellectual property rights or claims that we are infringing intellectual property rights of others could adversely affect our business and our competitive position. We are subject to business continuity risks associated with increasing centralization of our information technology (“IT”) systems.
Our inability to protect or enforce our intellectual property rights or claims that we are infringing intellectual property rights of others could adversely affect our business and our competitive position.
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.
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).
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 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.
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.
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.
We use a variety of commodities (including aluminum, copper, nickel, plastic resins, steel, other raw materials and energy) and materials purchased in various forms such as castings, powder metal, forgings, stampings and bar stock.
We use a variety of commodities (including aluminum, copper, nickel, plastic resins, steel, other raw materials and energy) and materials purchased in various forms such as castings, powder metal, forgings, stampings and bar stock. The costs and availability of raw materials can fluctuate due to factors beyond our control. Increasing commodity costs negatively impact our operating margins and results.
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 Charging Forward strategy may prove unsuccessful. In 2021, we announced our strategy to aggressively grow our eProduct portfolio over time through organic investments and technology-focused acquisitions.
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.
Changes in interest rates and asset returns could increase our pension funding obligations and reduce our profitability. We have unfunded obligations under certain of our defined benefit pension and other postemployment benefit plans.
Our benefit plan expenses and obligations may fluctuate depending on various factors, including changes in interest rates, changes in regulations and plan asset returns. We have unfunded obligations under certain of our defined benefit pension and other postemployment benefit plans.
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. We have liabilities related to environmental, product warranties, litigation and other claims.
It is also possible that a court could disregard the allocation of assets and liabilities agreed to between the Company and such other parties and require the Company to assume responsibility for obligations allocated to such other parties. Each of these risks could negatively affect our business and financial statements.
It is also possible that a court could disregard the allocation of assets and liabilities agreed to among the Company, PHINIA and such other parties and require the Company to assume responsibility for obligations allocated to PHINIA or such other parties or to cause the Company to not realize an asset on its Consolidated Balance Sheet.
In addition, during 2022 and 2023, many global economies, including the United States, experienced elevated levels of inflation more generally, which drove an increase in input costs.
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.
To improve efficiency and reduce costs, we have regionally centralized the information systems that support our business processes such as invoicing, payroll, and general management operations. If the centralized systems are disrupted or disabled, key business processes could be interrupted, which could adversely affect our business.
We are subject to business continuity risks associated with increasing centralization of our information technology (“IT”) systems. 22 Table of Contents To improve efficiency and reduce costs, we have regionally centralized the information systems that support our business processes such as invoicing, payroll, and general management operations.
Economic declines that result in significant reduction in automotive or truck production would have an adverse effect on our sales to OEMs. 20 Table of Contents We face strong competition. We compete globally with a number of other manufacturers and distributors that produce and sell similar products.
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.
An impairment charge on these assets could have a material adverse impact on our financial condition and results of operations. We have recorded goodwill and indefinite-lived intangible assets related to acquisitions. We periodically assess these assets to determine if they are impaired.
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.
We expect to continue to pursue business ventures, acquisitions, and strategic alliances that leverage our technology capabilities and enhance our customer base, geographic representation, and scale to complement our current businesses. We regularly evaluate potential growth opportunities, some of which could be material.
Further, if we invest in relationships with the wrong customers or in the wrong markets, then we may still fail to realize expected returns. We expect to continue to pursue business ventures, acquisitions, and strategic alliances that leverage our technology capabilities and enhance our customer base, geographic representation, and scale to complement our current businesses.
We have sought 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. 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.
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.
If we are required to indemnify the other parties under the circumstances set forth in these agreements, we may be subject to future liabilities.
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.
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. Goodwill and indefinite-lived intangible assets, which are subject to periodic impairment evaluations, represent a significant portion of our total assets.
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.
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. 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.
Each of these risks could negatively affect our business and financial statements. 19 Table of Contents 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.
While we will continue to negotiate the pass through and recovery of higher costs with our customers, continued increasing levels of inflation could adversely affect our business. Changes in U.S. administrative policy, including 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 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.
The failure to realize the expected benefits of acquisitions and other risks associated with acquisitions could adversely affect our business. 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.
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.
Removed
We believe we are well positioned for the industry’s anticipated migration to EV. In June 2023, we announced the next phase of our Charging Forward strategy which focuses on profitably growing eProducts while maximizing the value of our Foundational product portfolio.
Added
Our strategy is to focus on profitable growth across our technology-focused product portfolio that supports electric, hybrid and combustion vehicles by growing our eProducts as well as continuing our focus on Foundational products. Our balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions.
Removed
As a result of executing this strategy, we expect that by 2027, we will achieve over $10 billion in annual eProduct sales, deliver eProduct adjusted operating margin of approximately 7% and maintain double-digit adjusted operating margins for our Foundational products portfolio.
Added
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.
Removed
Any charges relating to such impairments could adversely affect our results of operations in the periods recognized. 19 Table of Contents Risks related to the Spin-Off of PHINIA Inc. The Spin-Off may not achieve the anticipated benefits and may expose us to additional risks. We may not realize the anticipated strategic, financial, operational or other benefits of the Spin-Off.
Added
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.
Removed
We may face material challenges in connection with the Spin-Off, including but not limited to, the diversion of management time on matters relating to the Spin-Off; the impact of having to operate under the terms of transition service agreements; the impact on our ability to retain talent; and potential impacts on our relationships with customers, suppliers, employees and other counterparties.
Added
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. Further, there is potential for unknown or inestimable liabilities relating to the acquired businesses.
Removed
In addition, we have incurred one-time costs and may incur ongoing costs in connection with, or as a result of, the spin-off, including costs of operating as independent, publicly-traded companies that the separate businesses will no longer be able to share. Those costs may exceed our estimates or could negate some of the benefits we expect to realize.
Added
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.
Removed
Beginning in 2021, we have experienced price increases for base metals (e.g., steel, aluminum and nickel), precious metals (e.g., palladium) and raw materials that are primarily used in batteries for electric vehicles (e.g., lithium and cobalt). Increasing commodity costs negatively impact our operating margins and results.
Added
Elevated levels of inflation could adversely affect our business. 21 Table of Contents We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring actions may adversely affect our business.
Removed
If the U.S. or other countries impose additional tariffs, that will have a further adverse impact on us. 22 Table of Contents We use important intellectual property in our business.
Added
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.
Removed
If medical costs continue to increase or actuarial assumptions are modified, this could have an adverse effect on our business. 24 Table of Contents We are subject to extensive environmental regulations that are subject to change and involve significant risks.
Added
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.
Removed
During 2021, and to a lesser extent in 2022, trailing impacts of the shutdowns and production declines related, in part, to COVID-19, created supply constraints of certain components, particularly semiconductor chips. These supply constraints have had significant impacts on global industry production levels.
Added
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.
Added
Moreover, we base projections of any cost savings or other benefits associated with our restructuring actions on current business operations and market dynamics, and various factors, including but not limited to our evolving business models, future investment decisions, market environment and technology landscape, could significantly impact the success of these actions.
Added
Additionally, ongoing changes in U.S. and foreign government trade policies, including potential modifications to existing trade agreements and further restrictions on free trade, could introduce additional uncertainty. The U.S. administration has announced plans to implement or increase tariffs, particularly on products manufactured in China, Canada and Mexico, though it remains unclear what specific actions will be taken.
Added
Any 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.
Added
A trade war or other significant changes in trade regulations could have a material adverse effect on our business, financial condition, results of operations and cash flows. In 2024, the Company imported approximately $875 million in value to the U.S. Approximately 55% of that value originated in Mexico, approximately 10% originated in Canada and approximately 5% originated in China.
Added
If the centralized systems are disrupted or disabled, key business processes could be interrupted, which could adversely affect our business. A failure of or disruption in our information technology infrastructure, including a disruption related to cybersecurity, could adversely impact our business and operations.
Added
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.
Added
The increasing use and evolution of advanced technology solutions creates potential risks for loss or misuse of Company data that forms part of any data set that was collected, used, stored, or transferred to run our business.
Added
Any unintentional dissemination or intentional destruction of confidential information stored in our or our third-party providers' systems, portable media or storage devices may result in significantly increased business and security recovery costs, a damaged reputation, administrative penalties, or costs related to defending legal claims.
Added
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.
Added
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.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese reports include updates on the Company’s cybersecurity risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the information security program, recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the emerging threat landscape, technological trends and information security considerations arising with respect to the Company’s peers and third parties. 30 Table of Contents The Audit Committee and Board receive prompt and timely information regarding cybersecurity threats and incidents that meet specified thresholds, as well as ongoing updates regarding any such threats or incidents until they have been addressed.
Biggest changeThe Audit Committee and Board receive prompt and timely information regarding cybersecurity threats and incidents that meet specified thresholds, as well as ongoing updates regarding any such threats or incidents until they have been addressed.
Item 1C. Cybersecurity BorgWarner’s Board of Directors acknowledges the importance of upholding the trust and confidence of its customers, business partners, employees and other stakeholders. The Board, in conjunction with the Audit Committee, is involved in the oversight of the Company’s risk management program, including its Cybersecurity Program.
Item 1C. Cybersecurity BorgWarner’s Board of Directors acknowledges the importance of upholding the trust and confidence of BorgWarner’s customers, business partners, employees and other stakeholders. The Board, in conjunction with the Audit Committee, is involved in the oversight of the Company’s risk management program, including its Cybersecurity Program.
The CIO reports on the Company’s 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 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.
Education and Awareness: The Company provides regular, mandatory training for applicable personnel on cybersecurity threats to help them identify, avoid and address cybersecurity threats and to communicate the Company’s Cybersecurity Program, including applicable policies, standards, processes and practices. Governance The Board and the Audit Committee actively discuss cybersecurity risks with management and among themselves.
Education and Awareness: The Company provides regular, mandatory training for applicable personnel on cybersecurity threats to help them identify, avoid and address cybersecurity threats and to communicate the Cybersecurity Program, including applicable policies, standards, processes and practices. Governance The Board and the Audit Committee actively discuss cybersecurity risks with management and among themselves.
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 Cybersecurity Program, including its standards, processes and practices, is benchmarked 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 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 and related initiatives are 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 information technology and information security.
The 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.
Third-Party Risk Management: The Company is developing processes and procedures to identify and oversee cybersecurity risks presented by third parties, including service providers, vendors and other users of the Company’s systems.
Third-Party Risk Management: The Company continues to review processes and procedures that identify and oversee cybersecurity risks presented by third parties, including service providers, vendors and other users of the Company’s systems.
The Company’s efforts include a wide range of actions, including audits, assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating and improving the effectiveness of the Company’s cybersecurity measures and planning.
The Company’s efforts include a wide range of actions, including audits, assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating and improving the effectiveness of the Company’s cybersecurity measures and planning. The Company engages in periodic assessment and testing of the Cybersecurity Program and may periodically engage a third-party expert to conduct assessments, audits and testing.
The Company engages in periodic assessment and testing of the Cybersecurity Program and may periodically engage a third-party expert to conduct the assessment, audits and testing. The results of such assessments, audits and testing are reported to the CIO and the Audit Committee or full Board, as applicable, and the Company makes adjustments as appropriate.
The results of such assessments, audits and testing are reported to the CIO and the Audit Committee or full Board, as applicable, and the Company makes adjustments as appropriate.
The Cybersecurity Program continually enhances the enterprise security structure and contingency plans with the goal of preventing cybersecurity incidents to the extent feasible, while simultaneously increasing the organization system resilience to minimize the business impact should an incident occur.
The Cybersecurity Program continually enhances the enterprise security structure and contingency plans with the goal of preventing cybersecurity incidents to the extent feasible and minimizing the business impact should an incident occur. Risk Management and Strategy Collaborative Approach: The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents.
Removed
Risk Management and Strategy Collaborative Approach: The Company has implemented a comprehensive, cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents.
Added
In December 2024, the Company updated its indirect Purchase Order Terms and Conditions, effective January 1, 2025, to address (i) supplier cybersecurity incident notification requirements and (ii) the Company’s right to audit supplier IT systems.
Added
These reports include updates on the Company’s cybersecurity risks and threats, the status of projects to strengthen the Company’s information security systems, assessments of the Cybersecurity Program, recent developments, evolving standards and emerging threats or trends within cybersecurity.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is additional information concerning principal manufacturing, assembly and technical facilities operated by the Company, its subsidiaries, and affiliates. Segments Americas Europe Asia Total Air Management 14 13 16 43 Drivetrain & Battery Systems 4 5 7 16 ePropulsion 8 6 9 23 The table above excludes unconsolidated joint ventures as of December 31, 2023 and administrative offices.
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.
Item 2. Properties As of December 31, 2023, the Company had 82 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, 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.
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, 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.
Removed
Of the facilities noted above, 35 have leased land rights or a leased facility. 31 Table of Contents Item 3.
Added
The following is additional information concerning principal manufacturing, assembly and technical facilities operated by the Company, its subsidiaries, and affiliates.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 32 Item 4 . Mine Safety Disclosures 32 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6 . [Reserved] 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A.
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.
Quantitative and Qualitative Disclosures About Market Risk 58 Item 8. Financial Statements and Supplementary Data 59
Quantitative and Qualitative Disclosures About Market Risk 60 Item 8. Financial Statements and Supplementary Data 61

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+3 added−1 removed2 unchanged
Biggest changeThe 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, 2023: Issuer Purchases of Equity Securities Period Total number of shares purchased Average price per share 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, 2023 - October 31, 2023 Common Stock Repurchase Program — $ — — $ 544 Employee transactions — $ — — November 1, 2023 - November 30, 2023 Common Stock Repurchase Program 3,000,000 $ 33.65 3,000,000 $ 443 Employee transactions 4,573 $ 34.15 — December 1, 2023 - December 31, 2023 Common Stock Repurchase Program 2,264,923 $ 33.52 2,264,923 $ 367 Employee transactions 194 $ 33.95 — 34 Table of Contents Equity Compensation Plan Information As of December 31, 2023, 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 1,817,795 $ 47.48 9,126,458 Equity compensation plans not approved by security holders — $ — — Total 1,817,795 $ 47.48 9,126,458
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.
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 12/31/2018 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2024 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 12/31/2019 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2025 Standard & Poor’s, a division of S&P Global.
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 February 2, 2024, there were 1,464 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 31, 2025, there were 1,379 holders of record of common 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. Withheld shares will be deemed common stock held in treasury and may subsequently be reissued for general corporate purposes.
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.
As of December 31, 2023, the Company had repurchased $177 million of common stock under this repurchase authorization. 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.
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.
All rights reserved. 33 Table of Contents BWA and S&P 500 data are from Capital IQ; SIC Code Index data is from Research Data Group December 31, 2018 2019 2020 2021 2022 2023 BorgWarner Inc. 1 $ 100.00 $ 127.16 $ 115.46 $ 136.71 $ 124.16 $ 127.65 S&P 500 2 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 SIC Code Index 3 $ 100.00 $ 128.74 $ 152.65 $ 162.23 $ 117.41 $ 116.08 ________________ 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 January 2020, the Company’s Board of Directors authorized the purchase of up to $1 billion of the Company's common 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.
This share repurchase authorization expired in January 2023 with approximately $544 million remaining for repurchase under that authorization. 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. This share repurchase authorization does not expire.
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.
Removed
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.
Added
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.
Added
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
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

Item 7. Management's Discussion & Analysis

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

120 edited+77 added−44 removed61 unchanged
Biggest changeThe following table presents a summary of the Company’s operating results: Year Ended December 31, (in millions, except per share data) 2023 2022 Net sales % of net sales % of net sales Air Management $ 7,833 55.2 % $ 7,137 56.5 % Drivetrain & Battery Systems 4,348 30.6 3,735 29.6 ePropulsion 2,166 15.3 1,906 15.1 Inter-segment eliminations (149) (1.0) (143) (1.1) Total net sales 14,198 100.0 12,635 100.0 Cost of sales 11,630 81.9 10,266 81.3 Gross profit 2,568 18.1 2,369 18.7 Selling, general and administrative expenses - R&D, net 717 5.1 701 5.5 Selling, general and administrative expenses - Other 599 4.2 589 4.7 Restructuring expense 79 0.6 48 0.4 Other operating expense, net 13 0.1 22 0.2 Operating income 1,160 8.2 1,009 8.0 Equity in affiliates’ earnings, net of tax (30) (0.2) (28) (0.2) Realized and unrealized loss on debt and equity securities 174 1.2 73 0.6 Interest expense, net 10 0.1 51 0.4 Other postretirement expense 15 0.1 — — Earnings from continuing operations before income taxes and noncontrolling interest 991 7.0 913 7.2 Provision for income taxes 289 2.0 195 1.5 Net earnings from continuing operations 702 4.9 718 5.7 Net (loss) earnings from discontinued operations (7) — 308 2.4 Net earnings 695 4.9 1,026 8.1 Net earnings from continuing operations attributable to the noncontrolling interest, net of tax 70 0.5 82 0.6 Net earnings attributable to BorgWarner Inc. $ 625 4.4 % $ 944 7.5 % Earnings per share from continuing operations — diluted $ 2.70 $ 2.69 Net sales Net sales for the year ended December 31, 2023 totaled $14,198 million, an increase of $1,563 million, or 12%, from the year ended December 31, 2022.
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.
Similar to goodwill, the Company can elect to perform the impairment test for indefinite-lived intangibles other than goodwill (primarily trade names) using a qualitative analysis, considering similar factors as outlined in the goodwill discussion, in order to determine if it is more-likely-than-not that the fair value of the trade names is less than the respective carrying values.
Similar to goodwill, the Company can elect to perform the impairment test for indefinite-lived intangibles other than goodwill (primarily trade names) using a qualitative analysis, considering similar factors as outlined in the goodwill discussion, to determine if it is more-likely-than-not that the fair value of the trade names is less than the respective carrying values.
On November 16, 2022, the Company entered into a strategic partnership with Wolfspeed in which the Company invested $500 million in Wolfspeed’s convertible debt securities and simultaneously entered into an agreement under which Wolfspeed agreed to provide a silicon carbide manufacturing capacity corridor to the Company.
On November 16, 2022, the Company entered into a strategic partnership with Wolfspeed pursuant to which the Company invested $500 million in Wolfspeed’s convertible debt securities and simultaneously entered into an agreement under which Wolfspeed agreed to provide a silicon carbide manufacturing capacity corridor to the Company.
I n addition to the above primary assumptions, the Company notes 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 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.
Costs for involuntary separation programs are recorded when management has approved the plan for separation, the employees are identified and aware of the benefits they are entitled to and it is unlikely that the plan will change significantly.
Costs for involuntary separation programs are recorded when management has approved the plan for separation, the employees are identified and aware of the benefits to which they are entitled and it is unlikely that the plan will change significantly.
It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be.
It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or what the impact might be.
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, 2023, 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, 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 increase excluding the impact of foreign currencies was primarily due to approximately $596 million of volume, mix and net new business driven by increased demand for the Company’s products and higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers.
The increase excluding the impact of foreign currencies was primarily due to approximately $477 million of volume, mix and net new business driven by increased demand for the Company’s products and higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers.
The increase excluding these items was primarily due to approximately $604 million of volume, mix and net new business driven by increased demand for the Company’s products and higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers.
The increase excluding these items was primarily due to approximately $546 million of volume, mix and net new business driven by increased demand for the Company’s products and higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers.
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, 2023. At December 31, 2023 and 2022, 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, 2024. At December 31, 2024 and 2023, the Company had no outstanding borrowings under this facility.
The Company had no outstanding borrowings under this program as of December 31, 2023 and 2022. 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, 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.
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, 2023 and 2022, 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, 2024 and 2023, the Company had no outstanding commodity swap contracts.
As of December 31, 2023, 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, 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.
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. 51 Table of Contents • 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 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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION BorgWarner Inc. and Consolidated Subsidiaries (the “Company” or “BorgWarner”) is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. BorgWarner’s products help improve vehicle performance, propulsion efficiency, stability and air quality.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION BorgWarner Inc. (collectively with its consolidated subsidiaries, the “Company” or “BorgWarner”) is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. BorgWarner’s products help improve vehicle performance, propulsion efficiency, stability and air quality.
Foreign currencies resulted in a year-over-year decrease in sales of approximately $17 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 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.
Refer to Note 12, “Goodwill and Other Intangibles,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding goodwill. 52 Table of Contents Product warranties The Company provides warranties on some, but not all, of its products. The warranty terms are typically from one to three years.
Refer to Note 12, “Goodwill and Other Intangibles,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding goodwill. Product warranties The Company provides warranties on some, but not all, of its products. The warranty terms are typically from one to three years.
Finally, during the year ended December 31, 2023, the Company executed the Spin-Off and received a net distribution, part of which was utilized to purchase and extinguish a portion of senior notes due in 2025. 47 Table of Contents Contractual Obligations The Company’s significant cash requirements for contractual obligations as of December 31, 2023 primarily consisted of the principal and interest payments on its notes payable and long-term debt, non-cancelable lease obligations, capital spending obligations and purchase obligations.
During the year ended December 31, 2023, the Company executed the Spin-Off and received a net distribution, part of which was utilized to purchase and extinguish a portion of senior notes due in 2025. 48 Table of Contents Contractual Obligations The Company’s significant cash requirements for contractual obligations as of December 31, 2024 primarily consisted of the principal and interest payments on its notes payable and long-term debt, non-cancelable lease obligations, capital spending obligations and purchase obligations.
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.
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.
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.
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.
Refer to Note 21, “Contingencies,” to the Consolidated Financial Statements in Item 8 of this report for further details and information respecting the Company’s environmental liability. 49 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).
Refer to Note 21, “Contingencies,” to the Consolidated Financial Statements in Item 8 of this report for further details and information respecting the Company’s environmental liability. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).
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 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.
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. 38 Table of Contents RESULTS OF OPERATIONS A detailed comparison of the Company’s 2021 operating results to its 2022 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s 2022 Annual Report on Form 10-K filed February 9, 2023.
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.
Of the total net unfunded amounts, $39 million and $34 million at December 31, 2023 and 2022, 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 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.
These products are manufactured and sold 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 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).
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, 2023, the total accrued warranty liability was $196 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, 2024, the total accrued warranty liability was $215 million.
This line item reflects the net realized and unrealized gains or losses recognized due to valuing the Company’s investments at fair value. For the year ended December 31, 2023, this primarily related to losses recognized to adjust the Company’s investment in Wolfspeed Inc. (“Wolfspeed”) convertible debt securities to fair value.
This line item reflects the net realized and unrealized gains or losses recognized due to valuing the Company’s investments at fair value. For the year ended December 31, 2023, this primarily related to losses recognized to adjust the Company’s 40 Table of Contents investment in Wolfspeed Inc. (“Wolfspeed”) convertible debt securities to fair value.
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.
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.
The accrual is represented as $91 million in Other current liabilities and $105 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 $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 total debt expected to mature through the end of 2024 is $73 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 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.
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. 57 Table of Contents
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.
A restructuring charge can consist of severance costs associated with reductions to the workforce, costs to terminate an operating lease or contract, professional fees and other costs incurred related to the implementation of restructuring activities. The Company generally records costs associated with voluntary separations at the time of employee acceptance.
A restructuring charge can consist of severance costs associated with reductions to the workforce, costs to terminate a contract, professional fees and other costs incurred related to the implementation of restructuring activities. The Company generally records costs associated with voluntary separations at the time of employee acceptance.
This line item is driven by the results of the Company’s unconsolidated joint ventures. Realized and unrealized loss on debt and equity securities was $174 million and $73 million for the years ended December 31, 2023 and 2022, respectively.
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.
At December 31, 2023, all legal funding requirements had been met. The Company contributed $21 million, $22 million and $24 million to its defined benefit pension plans in the years ended December 31, 2023, 2022 and 2021, respectively. The Company expects to contribute a total of $20 million to $30 million into its defined benefit pension plans during 2024.
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.
This decrease was primarily due to a decline in demand for certain of the Company’s Foundational products in China as well as the reduction arising from the Company’s 2023 purchase of the noncontrolling interest related to SeohanWarner Turbo Systems Ltd. in Korea. 42 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 $2.70 and $2.69 for the years ended December 31, 2023 and 2022, respectively.
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.
Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below. Equity in affiliates’ earnings, net of tax was $30 million and $28 million in the years ended December 31, 2023 and 2022, respectively.
Other operating expense (income), net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below. Equity in affiliates’ earnings, net of tax was $27 million and $30 million in the years ended December 31, 2024 and 2023, respectively.
Actual returns on German pension assets were 9.9% and (19.7)% for the years ended December 31, 2023 and 2022, respectively, compared to the expected rate of return assumptions of 4.5% and 4.0%, 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 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.
As of December 31, 2023 and 2022, the Company recorded a deferred gain of $112 million and $196 million, respectively, both before taxes, for designated net investment hedges within accumulated other comprehensive income (loss).
As of December 31, 2024 and 2023, the Company recorded a deferred gain of $252 million and $112 million, respectively, both before taxes, for designated net investment hedges within accumulated other comprehensive income (loss).
The change in SG&A was primarily attributable to: • Research and development (“R&D”) costs increased $16 million. R&D costs, net of customer reimbursements, were 5.1% of net sales in the year ended December 31, 2023, compared to 5.5% of net sales in the year ended December 31, 2022.
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.
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 laws and, as such, may be presently liable for the cost of clean-up and other remedial activities at 17 such sites.
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.
The market approach is based on market multiples (revenue and “EBITDA”, defined as earnings before interest, taxes, depreciation and amortization) and requires an estimate of appropriate multiples based on market data for comparable companies.
The market approach was based on market multiples (revenue and “EBITDA”, defined as earnings before interest, taxes, depreciation and amortization) and required an estimate of appropriate multiples based on market data for comparable companies.
PBO 25 basis point decrease in discount rate $ 3 $ 16 25 basis point increase in discount rate $ (3) $ (16) 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 $ 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.
Of the $20 million to $30 million in projected 2024 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 $94 million and $173 million at December 31, 2023 and 2022, respectively.
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.
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 48 Table of Contents incurred. Other postemployment benefits had an unfunded status of $33 million and $37 million at December 31, 2023 and 2022, 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. Other postemployment benefits had an unfunded status of $29 million and $33 million at December 31, 2024 and 2023, respectively.
In determining the projected benefit obligation for postemployment health care plans as of December 31, 2023, the Company used health care cost trend rates of 6.3%, 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, 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.
The Company’s management does not believe that adverse outcomes in any of these commercial and legal claims, actions and complaints are reasonably likely to have a material adverse effect on the Company’s results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations or cash flows.
The Company does not believe that adverse outcomes in any of these commercial and legal claims, actions and complaints are reasonably likely to have a material adverse effect on the Company’s results of operations, financial position or cash flows.
For its significant plans, the Company used discount rates ranging from 1.8% to 11.8% to determine its pension and other benefit obligations as of December 31, 2023, including weighted average discount rates of 5.1% in the U.S., 4.2% outside of the U.S. (including 4.6% in the U.K.) and 5.1% for U.S. other postemployment health care plans.
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.
Selling, general and administrative expenses (“SG&A”) SG&A for the year ended December 31, 2023 was $1,316 million as compared to $1,290 million for the year ended December 31, 2022. SG&A as a percentage of net sales was 9.3% and 10.2% for the years ended December 31, 2023 and 2022, respectively.
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.
As of December 31, 2023, the Company had liquidity of $3,534 million, comprised of cash and cash equivalent balances of $1,534 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, 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.
Actual returns on U.K. pension assets were 3.2% and (34.8)% for the years ended December 31, 2023 and 2022, respectively, compared to the expected rate of return assumption of 5.3% and 4.1%, respectively, for the same years ended.
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.
Securities and Exchange Commission provides the Company with the ability to issue various debt and equity securities subject to market conditions. On February 8, 2023, April 26, 2023, July 26, 2023 and November 8, 2023, the Company’s Board of Directors declared quarterly cash dividends of $0.17, $0.17, $0.11 and $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 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.
Cost of sales and gross profit Cost of sales and cost of sales as a percentage of net sales were $11,630 million and 81.9%, respectively, during the year ended December 31, 2023, compared to $10,266 million and 81.3%, respectively, during the year ended December 31, 2022.
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.
Segment Adjusted Operating Income excludes certain corporate costs, which primarily represent headquarters’ expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment Adjusted Operating Income were $278 million and $282 million for the years ended December 31, 2023 and 2022, respectively.
Segment Adjusted Operating Income (Loss) excludes certain corporate costs, which primarily represent headquarters’ expenses not directly attributable to the individual segments. Corporate expenses not 42 Table of Contents allocated to Segment Adjusted Operating Income (Loss) were $279 million and $278 million for the years ended December 31, 2024 and 2023, respectively.
The change in cost of sales for the year ended December 31, 2023 was primarily driven by the following: • Higher sales volume, mix and net new business increased cost of sales by approximately $1,012 million. • Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $30 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, 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.
Gross profit and gross margin were $2,568 million and 18.1%, respectively, during the year ended December 31, 2023 compared to $2,369 million and 18.7%, respectively, during the year ended December 31, 2022. The decrease in gross margin was primarily due to the factors discussed above.
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.
The increase for the year ended December 31, 2023, compared with the year ended December 31, 2022, was primarily due to higher net earnings adjusted for non-cash charges partially offset by changes in working capital. 46 Table of Contents Investing Activities Year Ended December 31, (in millions) 2023 2022 INVESTING ACTIVITIES OF CONTINUING OPERATIONS Capital expenditures, including tooling outlays $ (832) $ (622) Payments for businesses acquired, net of cash and restricted cash acquired (109) (312) Proceeds from sale of businesses, net of cash divested 9 27 Proceeds from settlement of net investment hedges, net 25 40 Proceeds from (payments for) investments in debt and equity securities, net 284 (473) Proceeds from asset disposals and other, net 30 20 Net cash used in investing activities from continuing operations $ (593) $ (1,320) Net cash used in investing activities was $593 million and $1,320 million in the years ended December 31, 2023 and 2022, respectively.
The decrease for the year ended December 31, 2024, compared with the year ended December 31, 2023, was primarily due to higher net earnings adjusted for non-cash charges, offset by changes in working capital. 47 Table of Contents Investing Activities Year Ended December 31, (in millions) 2024 2023 INVESTING ACTIVITIES OF CONTINUING OPERATIONS Capital expenditures, including tooling outlays $ (671) $ (832) Customer advances related to capital expenditures 18 — Payments for businesses acquired, net of cash acquired — (109) Proceeds from sale of businesses, net of cash divested 8 9 Proceeds from settlement of net investment hedges, net 46 25 (Payments for) proceeds from investments in debt and equity securities, net (8) 284 Proceeds from asset disposals and other, net 4 30 Net cash used in investing activities from continuing operations $ (603) $ (593) Net cash used in investing activities was $603 million and $593 million in the years ended December 31, 2024 and 2023, respectively.
Financing Activities Year Ended December 31, (in millions) 2023 2022 FINANCING ACTIVITIES OF CONTINUING OPERATIONS Additions to debt $ 18 $ 5 Repayments of debt, including current portion (451) (13) Payments for debt issuance costs (3) — Payments for purchase of treasury stock (177) (240) Payments for stock-based compensation items (25) (18) Purchase of noncontrolling interest (15) (56) Payments for contingent consideration (23) — Net distribution from PHINIA 401 — Dividends paid to BorgWarner stockholders (130) (161) Dividends paid to noncontrolling stockholders (116) (81) Net cash used in financing activities from continuing operations $ (521) $ (564) Net cash used in financing activities was $521 million during the year ended December 31, 2023 compared to $564 million in the year ended December 31, 2022.
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.
During the year ended December 31, 2023, the Company’s eProduct revenue was approximately $2.0 billion, or 14% of its total revenue. 35 Table of Contents 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.
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.
Refer to Note 7, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding income taxes. 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.
Refer to Note 7, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this report for more information regarding income taxes.
Foreign currencies resulted in a year-over-year decrease in sales of approximately $6 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. Dollar. Acquisitions contributed $25 million in additional sales during the year ended December 31, 2023.
Foreign currencies resulted in a year-over-year decrease in sales of approximately $2 million, primarily due to the weakening of the Brazilian Real, partially offset by the strengthening of the Euro, in each case relative to the U.S. Dollar. Acquisitions contributed $5 million in additional sales during the year ended December 31, 2024.
In lieu of fractional shares of PHINIA, shareholders of the Company received cash. 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.
(“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.
The decrease in the net unfunded position was a result of a lower projected benefit obligation, which was primarily due to discontinued operations and actuarial losses during the period. The main driver of these losses was the decrease of 0.70% in the weighted average discount rate for Non-U.S. plans.
The decrease in the net unfunded position was a result of a lower projected benefit obligation, which was primarily due to benefits paid and actuarial gains during the 49 Table of Contents period. The main driver of these gains was the increase of 0.40% in the weighted average discount rate for U.S. plans.
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 $ 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.
The market valuation models and other financial ratios used by the Company require certain assumptions and estimates regarding the applicability of those models to the Company’s facts and circumstances. The Company believes the assumptions and estimates used to determine the estimated fair value are reasonable. Different assumptions could materially affect the estimated fair value.
The market valuation models and other financial ratios used by the Company require certain assumptions and estimates regarding the applicability of those models to the Company’s facts and circumstances. For the reporting units for which the Company performed a quantitative assessment, the Company believes the assumptions and estimates used to determine the estimated fair value are reasonable.
None of the Company's debt agreements require accelerated repayment in the event of a downgrade in credit ratings. 45 Table of Contents Cash Flows Operating Activities Year Ended December 31, (in millions) 2023 2022 OPERATING ACTIVITIES OF CONTINUING OPERATIONS Net earnings from continuing operations $ 702 $ 718 Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations: Depreciation and tooling amortization 515 483 Intangible asset amortization 67 69 Restructuring expense, net of cash paid 66 41 Stock-based compensation expense 58 64 (Gain) loss on sales of businesses (5) (16) Gain on debt extinguishment (28) — Realized and unrealized loss on debt and equity securities 174 73 Deferred income tax benefit (44) (76) Other non-cash adjustments 4 (3) Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations 1,509 1,353 Retirement plan contributions (19) (21) Changes in assets and liabilities: Receivables (482) (409) Inventories (72) (158) Accounts payable and accrued expenses 375 433 Other assets and liabilities 86 (18) Net cash provided by operating activities from continuing operations $ 1,397 $ 1,180 Net cash provided by operating activities was $1,397 million and $1,180 million in the years ended December 31, 2023 and 2022, respectively.
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.
As of December 31, 2023, non-cancelable lease obligations were $225 million. Refer to Note 22, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this report for more information. Capital spending obligations were $148 million as of December 31, 2023.
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.
The primary assumptions affecting the Company’s 2023 goodwill quantitative impairment review are as follows: • Discount rates: The Company used a range of 12.5% to 14.5% weighted average cost of capital (“WACC”) as the discount rates for future cash flows.
Different assumptions could materially affect the estimated fair value. The primary assumptions affecting the Company’s 2024 goodwill quantitative impairment review are as follows: 53 Table of Contents • Discount rates: The Company used a range of 13.5% to 14.5% weighted average cost of capital (“WACC”) as the discount rates for future cash flows.
The Drivetrain & Battery Systems segment’s net sales for the year ended December 31, 2023 increased $613 million, or 16%, and Segment Adjusted Operating Income increased $96 million from the year ended December 31, 2022.
Drivetrain & Morse Systems net sales for the year ended December 31, 2023 increased $521 million, or 10.4%, and Segment Adjusted Operating Income increased $175 million from the year ended December 31, 2022.
The ePropulsion segment’s net sales for the year ended December 31, 2023 increased $260 million, or 14%, and Segment Adjusted Operating Loss increased $2 million from the year ended December 31, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $43 million, primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar.
PowerDrive Systems net sales for the year ended December 31, 2024 decreased $229 million, or 11%, and Segment Adjusted Operating Loss increased $54 million from the year ended December 31, 2023. Foreign currencies resulted in a year-over-year decrease in sales of approximately $22 million, primarily due to the weakening of the Chinese Renminbi and Korean Won relative to the U.S.
Other commodity purchase price risk is occasionally addressed by hedging strategies, which include forward contracts. The Company enters into derivative instruments only with high credit quality counterparties and diversifies its positions across such counterparties in order to reduce its exposure to credit losses. The Company does not engage in any derivative instruments for purposes other than hedging specific operating risks.
Some of its commodity purchase price risk is covered by supply agreements with customers and suppliers. Other commodity purchase price risk is occasionally addressed by hedging strategies, which include forward contracts. The Company enters into derivative instruments only with high credit quality counterparties and diversifies its positions across such counterparties to reduce its exposure to credit losses.
During the year ended December 31, 2023, the Company sold all of the $500 million in convertible debt securities. Interest expense, net was $10 million and $51 million in the years ended December 31, 2023 and 2022, respectively.
The Company sold its Wolfspeed convertible debt securities during the third and fourth quarters of 2023. Interest expense, net was $20 million and $10 million in the years ended December 31, 2024 and 2023, respectively.
The Company has established policies and procedures to manage sensitivity to interest rate, foreign currency exchange rate and commodity purchase price risk, which include monitoring the level of exposure to each market risk.
The Company does not engage in any derivative instruments for purposes other than hedging specific operating risks. The Company has established policies and procedures to manage sensitivity to interest rate, foreign currency exchange rate and commodity purchase price risk, which include monitoring the level of exposure to each market risk.
Existing deferred tax assets, net operating losses and tax credits by jurisdiction and expectations of the ability to utilize these tax attributes are assessed through a review of past, current and estimated future taxable income and tax planning strategies. 55 Table of Contents Estimates of future taxable income, including income generated from prudent and feasible tax planning strategies resulting from actual or planned business and operational developments, could change in the near term, perhaps materially, which may require the Company to consider any potential impact to the assessment of the recoverability of the related deferred tax asset.
Estimates of future taxable income, including income generated from prudent and feasible tax planning strategies resulting from actual or planned business and operational developments, could change in the near term, perhaps materially, which may require the Company to consider any potential impact to the assessment of the recoverability of the related deferred tax asset.
In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value. The Company performs a quantitative analysis on each reporting unit to refresh its respective fair value using a combined income and market approach.
In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could indicate it is more-likely-than-not that the fair value of a reporting unit is below its carrying value.
The significant foreign currency translation adjustments, including the impact of the net investment hedges discussed above, during the years ended December 31, 2023 and 2022, are shown in the following table, which provides the percentage change in U.S. Dollars against the respective currencies and the approximate impacts of these changes recorded within other comprehensive income (loss) for the respective periods.
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.
Net cash used in financing activities during the year ended December 31, 2023 was primarily related to the $177 million of BorgWarner share repurchases, $130 million in dividends paid to the Company’s stockholders, $116 million in dividends paid to noncontrolling stockholders of the Company’s consolidated joint ventures and $23 million in contingent consideration payments.
Net cash used in financing activities during the year ended December 31, 2024 was primarily related to the purchase and extinguishment of $503 million of senior notes, $402 million of BorgWarner share repurchases, $113 million in dividends paid to noncontrolling stockholders of the Company’s consolidated joint ventures and $98 million in dividends paid to the Company’s stockholders.
In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs in its Foundational products businesses. During the year ended December 31, 2023, the Company recorded $79 million of restructuring costs related to this plan.
Refer to Note 4 “Restructuring” to the Consolidated Financial Statements in Item 8 of this report for more information. In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs in its Foundational products businesses. During the year ended December 31, 2024, the Company recorded $61 million of restructuring costs related to this plan.
Under this agreement, beginning in 2024, the Company will purchase silicon carbide parts with an aggregate total price equal to or greater than the corridor amount totaling a minimum of $184 million, annually through 2029. On September 21, 2023, and November 15, 2023, the Company sold $100 million and the remaining $400 million, respectively, of the Wolfspeed convertible debt securities.
Under this agreement, beginning in 2024, the Company originally expected to purchase silicon carbide parts with an aggregate total price equal to or greater than the corridor amount totaling a minimum of $184 million, annually through 2029.
Other operating expense, net was $13 million and $22 million for the years ended December 31, 2023 and 2022, respectively.
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.
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 Fitch, Standard & Poor’s and Moody’s is stable.
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.

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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 levels of indebtedness subject to interest rate fluctuation, refer to Note 14, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this report.
Biggest changeFor information regarding the levels of indebtedness subject to interest rate fluctuation, refer to Note 14, “Debt,” to the Consolidated Financial Statements in Item 8 of this report.
For 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. 58 Table of Contents
For 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

Other BWA 10-K year-over-year comparisons