A Brighter Future Together
–
2023 Stockholders letter and
annual report on Form 10-K
Dear Fellow Stockholders,
Management, ePropulsion and Drivetrain &
Battery Systems segments are all proving to be
catalysts for our future growth in eProducts. We
expect to continue capturing significant eProduct
Reflecting on 2023, I am proud of all that
opportunities that are in front of us, through
BorgWarner’s global workforce accomplished. Our
the continued development of our industry-
resilient business model, which prioritizes product
leading technology, and we fully expect to drive
leadership, customer and geographic diversity and
profitability from that eProduct portfolio over
sustaining a top-quartile margin profile, prevailed
time as we successfully scale the business. Indeed,
amid another year of market volatility, and we
BorgWarner has long been known for our ability to
believe we are in a strong position heading into
take great technologies and transform them into
this year.
differentiated products that we can scale,
and we believe the progress we made in 2023
With your support, we reached several important
puts us on the path to win, as our industry
milestones during 2023, including successfully
continues to move toward electrification.
completing the spin-off of PHINIA into a new,
independent company. Not only did this mark
For 2027, we’ve set objectives to achieve over $10
the completion of a key pillar of our Charging
billion in eProduct revenue and an approximately
Forward strategy – to divest $3 billion to $4 billion
7% adjusted operating margin on this eProduct
in combustion-related revenue by 2025 – but it
revenue, in addition to sustaining our strong
also best positioned us to focus on the next phase
foundational operating margins. One way we
of our electrification journey. Another important
expect to do this is through implementing our
milestone is our eProduct revenue, which was
disciplined capital allocation plan centered on
over $2 billion, or 14% of our total sales, in 2023.
leveraging our fixed costs and turning our already-
We believe this level of sales further validates the
strong operating income into free cash flow that
strength of our eProduct portfolio and the value
can be deployed across our strategic priorities.
it’s already creating for our customers.
Our recent acquisitions of Hubei Surpass Sun
Electric Charging Business and Eldor Corporation’s
Our Charging Forward 2027 strategy, which we
Electric Hybrid Systems Business Segment are
unveiled at our Investor Day in June, is premised
examples of this strategy in action, which added
on further advancing BorgWarner’s position as a
technology-focused capabilities that we believe
technology leader in eProducts and maximizing
will drive growth and create long-term shareholder
the value of our foundational portfolio.
value.
As we charge into the future, our commitment
As we build on this momentum, we’re also
to our Foundational and eProduct portfolios
continuing to prioritize entering new and
has never been stronger. We believe our Air
expanding existing partnerships. Global OEMs
across North America, Europe and Asia are
BorgWarner. I look forward to keeping you updated
increasingly recognizing the value of our leading
on our progress as we deliver on our vision of a
technologies and utilizing our solutions to support
clean, energy-efficient world.
the next generation of their electric and hybrid
vehicles. BorgWarner is excited to continue
delivering and adapting to meet their rapidly
changing needs over time.
We take great pride in the role we play as a sector
leader in sustainability. As outlined in our 2023
Sustainability Report, “Accelerating Action,” 88%
of our 2022 sales were from clean and emissions-
reducing products. We invested 66% of our 2023
R&D spend in the development of electrification
products and we remain committed to achieving
carbon neutrality by 2035. Simply put, responsible,
sustainable operations are core to BorgWarner
and central to our efforts to accelerate the world’s
transition to eMobility.
Finally, I’d like to extend my deepest appreciation
to Kevin Nowlan, our CFO, who announced his
retirement from the CFO role effective March 1,
2024. Kevin has played an instrumental role in all
of BorgWarner’s major strategic initiatives during
his tenure, and we wish him the best in his well-
deserved retirement. I am very pleased that Craig
Aaron, a 17-year veteran of our organization, has
stepped into the CFO role to carry us into our next
chapter of growth.
Best regards,
Needless to say, without our strong and dedicated
Frédéric B. Lissalde
global team, none of our many accomplishments
President and Chief Executive Officer
in 2023 would have been possible. It is because of
their unwavering commitment to our company and
the stakeholders we serve that our future is bright.
Thank you for your continued support of
Forward-Looking Statements: This document contains forward-looking statements as contemplated by the 1995 Private Securities Litigation
Reform Act that are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,”
“continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,” “forecasts,” “goal,” “guidance,” “initiative,” “intends,” “may,”
“outlook,” “plans,” “potential,” “predicts,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words and
similar expressions are intended to identify such forward-looking statements. Further, all statements, other than statements of historical fact
contained or incorporated by reference in this document that we expect or anticipate will or may occur in the future regarding our financial
position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion
and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements.
Accounting estimates, such as those described under the heading “Critical Accounting Policies and Estimates” in Item 7 of our most recently-
filed Annual Report on Form 10-K (“Form 10-K”), are inherently forward-looking. All forward-looking statements are based on assumptions and
analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments,
as well as other factors we believe are appropriate under the circumstances. Forward-looking statements are not guarantees of performance,
and the Company’s actual results may differ materially from those expressed, projected or implied in or by the forward-looking statements.
You should not place undue reliance on these forward-looking statements, which speak only as of the date of this document. Forward-
looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could
cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. These risks and
uncertainties, among others, include supply disruptions impacting us or our customers, such as the current shortage of semiconductor chips
that has impacted original equipment manufacturer (“OEM”) customers and their suppliers, including us; commodity availability and pricing,
and an inability to achieve expected levels of recoverability in commercial negotiations with customers concerning these costs; competitive
challenges from existing and new competitors including OEM customers; the challenges associated with rapidly-changing technologies,
particularly as relates to electric vehicles, and our ability to innovate in response; the difficulty in forecasting demand for electric vehicles
and our electric vehicles revenue growth; potential disruptions in the global economy caused by Russia’s invasion of Ukraine; the ability to
identify targets and consummate acquisitions on acceptable terms; failure to realize the expected benefits of acquisitions on a timely basis;
our ability to effect the intended tax-free spin-off of our Fuel Systems and Aftermarket segments into a separate, publicly traded company on
a timely basis or at all; the potential that uncertainty during the pendency of the spin-off transaction could affect our financial performance;
the possibility that the spin-off transaction will not achieve its intended benefits; the failure to promptly and effectively integrate acquired
businesses; the potential for unknown or inestimable liabilities relating to the acquired businesses; our dependence on automotive and truck
production, both of which are highly cyclical and subject to disruptions; our reliance on major OEM customers; fluctuations in interest rates and
foreign currency exchange rates; our dependence on information systems; the uncertainty of the global economic environment; the outcome
of existing or any future legal proceedings, including litigation with respect to various claims; future changes in laws and regulations, including,
by way of example, taxes and tariffs, in the countries in which we operate; impacts from any potential future acquisition or disposition
transactions; and the other risks noted under Item 1A, “Risk Factors” in our most recently-filed Form 10-K and/or Quarterly Report on Form
10-Q. We do not undertake any obligation to update or announce publicly any updates to or revisions to any of the forward-looking statements
in this document to reflect any change in our expectations or any change in events, conditions, circumstances or assumptions underlying the
statements.
The Company’s Annual Report on Form 10-K includes inaccurate information regarding the percentage of the Company’s net sales represented
by sales of turbochargers for light vehicles. The revised information is as follows: Sales of turbochargers for light vehicles represented
approximately 23%, 25% and 24% of the Company’s net sales for the years ended December 31, 2023, 2022 and 2021, respectively (rather than
approximately 21%, 26% and 24%, respectively, as included in the Form 10-K).
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-12162
BorgWarner Inc.
(Exact name of registrant as specified in its charter)
Delaware
13-3404508
(State or other jurisdiction of Incorporation or organization)
(I.R.S. Employer Identification No.)
3850 Hamlin Road,
Auburn Hills, Michigan 48326
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (248) 754-9200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
1.00% Senior Notes due 2031
BWA
BWA31
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
_________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Emerging growth company
☑
☐
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting common stock of the registrant held by stockholders (not including voting common stock held by directors and
executive officers of the registrant) on June 30, 2023 (the last business day of the most recently completed second fiscal quarter) was approximately $10
billion.
As of February 2, 2024, the registrant had 229,780,053 shares of voting common stock outstanding.
Portions of the following documents are incorporated herein by reference into the Part of the Form 10-K indicated.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Portions of the BorgWarner Inc. Proxy Statement for the 2024 Annual Meeting of Stockholders ...........
Part of Form 10-K into which incorporated
Part III
BORGWARNER INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 2023
INDEX
PART I.
Page No.
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business.............................................................................................................................
Risk Factors.......................................................................................................................
Unresolved Staff Comments...........................................................................................
Cybersecurity ....................................................................................................................
Properties...........................................................................................................................
Legal Proceedings............................................................................................................
Mine Safety Disclosures..................................................................................................
PART II.
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities...........................................................................
[Reserved] .........................................................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of
Operations .........................................................................................................................
Quantitative and Qualitative Disclosures About Market Risk ....................................
Financial Statements and Supplementary Data ..........................................................
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure ..........................................................................................................................
Controls and Procedures.................................................................................................
Other Information..............................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.....................
PART III.
Directors, Executive Officers and Corporate Governance.........................................
Executive Compensation.................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters .........................................................................................................
Certain Relationships and Related Transactions and Director Independence.......
Principal Accountant Fees and Services ......................................................................
Item 15.
Item 16.
Exhibits and Financial Statement Schedules...............................................................
Form 10-K Summary........................................................................................................
PART IV.
6
18
30
30
31
32
32
33
35
35
58
59
130
130
131
131
131
132
132
132
132
132
133
3
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION
Statements contained in this Annual Report on Form 10-K (“Form 10-K”) (including Management’s
Discussion and Analysis of Financial Condition and Results of Operations) may contain forward-looking
statements as contemplated by the 1995 Private Securities Litigation Reform Act (the “Act”) that are
based on management’s current outlook, expectations, estimates and projections. Words such as
“anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,”
“forecasts,” “goal,” “initiative,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,” “project,”
“pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words and similar
expressions are intended to identify such forward-looking statements. Further, all statements, other than
statements of historical fact contained or incorporated by reference in this Form 10-K, that we expect or
anticipate will or may occur in the future regarding our financial position, business strategy and measures
to implement that strategy, including changes to operations, competitive strengths, goals, expansion and
growth of our business and operations, plans, references to future success and other such matters, are
forward-looking statements. Accounting estimates, such as those described under the heading “Critical
Accounting Policies and Estimates” in Item 7 of this Annual Report on Form 10-K, are inherently forward-
looking. All forward-looking statements are based on assumptions and analyses made by us in light of
our experience and our perception of historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate in the circumstances. Forward-looking
statements are not guarantees of performance and the Company’s actual results may differ materially
from those expressed, projected or implied in or by the forward-looking statements.
You should not place undue reliance on these forward-looking statements, which speak only as of the
date of this Annual Report. Forward-looking statements are subject to risks and uncertainties, many of
which are difficult to predict and generally beyond our control, that could cause actual results to differ
materially from those expressed, projected or implied in or by the forward-looking statements. These risks
and uncertainties, among others, include supply disruptions impacting us or our customers, such as the
current shortage of semiconductor chips that has impacted original equipment manufacturer (“OEM”)
customers and their suppliers, including us; commodity availability and pricing, and an inability to achieve
expected levels of recoverability in commercial negotiations with customers concerning these costs;
competitive challenges from existing and new competitors, including OEM customers; the challenges
associated with rapidly changing technologies, particularly as they relate to electric vehicles, and our
ability to innovate in response; the difficulty in forecasting demand for electric vehicles and our electric
vehicles revenue growth; potential disruptions in the global economy caused by Russia’s invasion of
Ukraine; the ability to identify targets and consummate acquisitions on acceptable terms; failure to realize
the expected benefits of acquisitions on a timely basis; the possibility that our recently-completed tax-free
spin-off of our former Fuel Systems and Aftermarket segments into a separate publicly traded company
will not achieve its intended benefits; the failure to promptly and effectively integrate acquired businesses;
the potential for unknown or inestimable liabilities relating to the acquired businesses; our dependence on
automotive and truck production and is highly cyclical and subject to disruptions; our reliance on major
OEM customers; impacts of any future strikes involving some of our OEM customers and any actions
such OEM customers take in response; fluctuations in interest rates and foreign currency exchange
rates; our dependence on information systems; the uncertainty of the global economic environment; the
outcome of existing or any future legal proceedings, including litigation with respect to various claims, or
governmental investigations, including related litigation; future changes in laws and regulations, including,
by way of example, taxes and tariffs, in the countries in which we operate; impacts from any potential
future acquisition or disposition transactions; and the other risks, noted in reports that we file with the
Securities and Exchange Commission, including Item 1A, “Risk Factors” in our most recently-filed Form
10-K. We do not undertake any obligation to update or announce publicly any updates to or revisions to
any of the forward-looking statements in this Form 10-Q to reflect any change in our expectations or any
change in events, conditions, circumstances, or assumptions underlying the statements.
4
This section and the discussions contained in Item 1A, “Risk Factors,” and in Item 7, subheading “Critical
Accounting Policies and Estimates” in this report, are intended to provide meaningful cautionary
statements for purposes of the safe harbor provisions of the Act. This should not be construed as a
complete list of all of the economic, competitive, governmental, technological and other factors that could
adversely affect our expected consolidated financial position, results of operations or liquidity. Additional
risks and uncertainties, including without limitation those not currently known to us or that we currently
believe are immaterial, also may impair our business, operations, liquidity, financial condition and
prospects.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with accounting principles generally accepted in the United
States of America (“GAAP”), this report includes non-GAAP financial measures. The Company believes
these non-GAAP financial measures provide additional information that is useful to investors in
understanding the underlying performance and trends of the Company. Readers should be aware that
non-GAAP financial measures have inherent limitations and should be cautious with respect to the use of
such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools,
together with GAAP measures, to assist in the evaluation of our operating performance or financial
condition. We calculate these measures using the appropriate GAAP components in their entirety and
compute them in a manner intended to facilitate consistent period-to-period comparisons. The Company’s
method of calculating these non-GAAP measures may differ from methods used by other companies.
These non-GAAP measures should not be considered in isolation or as a substitute for those financial
measures prepared in accordance with GAAP. Where non-GAAP financial measures are used, the most
directly comparable GAAP financial measure, as well as the reconciliation to the most directly
comparable GAAP financial measure, can be found in this report.
5
Item 1. Business
PART I
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. The Company manufactures and sells these
products worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger
cars, sport-utility vehicles (“SUVs”), vans and light trucks). The Company’s products are also sold to
OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway
vehicles (agricultural and construction machinery and marine applications). The Company 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.
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. 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. Foundational products include all products utilized on internal combustion engines plus those
same products and components that are also included in hybrid powertrains. 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. During the year ended December 31, 2023, the
Company’s eProduct revenue was approximately $2.0 billion, or 14% of its total revenue.
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. (“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”). 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.
Recent Acquisitions
Acquisitions are an integral component of the Company’s growth and value creation strategy. Below are
summaries of recent acquisitions. Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated
Financial Statements in Item 8 of this report for more information.
6
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. 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. 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.
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. 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. 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.
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.
The total consideration was ₣27 million ($29 million) of base purchase price paid at closing, and
₣10 million ($10 million) of estimated earn-out payments that could be paid in the form of contingent
payments over the three years following closing.
Rhombus Energy Solutions
On July 29, 2022, the Company acquired Rhombus Energy Solutions, a provider of charging solutions in
the North American market. The acquisition is expected to complement the Company’s existing European
charging footprint to accelerate organic growth and adds North American regional presence to its
charging business. The Company paid $131 million at closing, and up to $30 million could be paid in the
form of contingent payments over the three years following closing. The Company’s current estimates
indicate that the minimum thresholds for these earn-out targets will not be achieved, thus no amount for
the earn-out payments has been included in the purchase consideration.
Santroll Automotive Components
On March 31, 2022, the Company acquired Santroll Automotive Components, a carve-out of Santroll
Electric Auto’s eMotor business. The acquisition is expected to strengthen the Company’s vertical
integration, scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to
market. The total final consideration was $192 million, including approximately ¥1.0 billion ($152 million)
of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The
Company paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended
December 31, 2022 and no longer expects to recapture a previously anticipated $5 million of post-closing
adjustments, which has been recorded in Other operating expense, net. Pursuant to the Equity Transfer
Agreement for the acquisition, the obligation of the Company to remit up to ¥0.3 billion (approximately
7
$47 million) of earn-out payments was contingent upon achievement of certain sales volume targets and
certain estimated future volume targets associated with newly awarded business. During the year ended
December 31, 2023, the Company paid approximately ¥0.2 billion ($24 million) to settle the remaining
earn-out liability and related adjustments.
AKASOL AG
On June 4, 2021, the Company completed a voluntary public takeover offer for shares of AKASOL AG
(“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid
approximately €648 million ($788 million) to settle the offer. During 2021, the Company increased its
ownership to 93% through the subsequent purchase of additional shares. On February 10, 2022, the
Company completed a merger squeeze-out process to obtain the remaining shares, resulting in 100%
ownership. The acquisition is expected to further strengthen BorgWarner’s commercial vehicle and
industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a
fast-growing battery module and pack market.
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. In previous years, the Company presented its results under four reportable
segments: Air Management, ePropulsion & Drivetrain, Fuel Systems and Aftermarket. 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. As a result of the Spin-Off, Fuel Systems and Aftermarket are no longer reportable
segments.
Net sales by reportable segment were as follows:
(in millions)
Air Management
Drivetrain & Battery Systems
ePropulsion
Inter-segment eliminations
Net sales
Year Ended December 31,
2023
2022
2021
$
7,833 $
7,137 $
4,348
2,166
3,735
1,906
6,867
3,660
1,427
(149)
(143)
(151)
$
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). 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. 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
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. 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.
The Air Management segment’s timing systems enable precise control of air and exhaust flow through the
engine, improving fuel economy and emissions. The Air Management segment is a leading manufacturer
of timing systems for OEMs around the world.
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.
Drivetrain & Battery Systems
The Company’s Drivetrain & Battery Systems segment’s technologies include battery modules and
systems, control modules, friction and mechanical clutch products for automatic transmissions, torque-
management products and rear-wheel drive (“RWD”) and all-wheel drive (“AWD”) transfer case systems
and coupling systems.
The Drivetrain & Battery Systems segment’s battery products include high-performance lithium-ion
battery systems for electrified bus, truck and off-highway applications. The battery products provide
commercial vehicle performance with a high-power output for safe, reliable and durable operation. The
ultra-high energy battery system for electric drivetrains offers up to 4,000 cycles, significantly enhancing
electric commercial vehicle range and is compatible with hyper-charging infrastructure. The battery
management system provides safety and efficiency, with liquid cooling preventing overheating.
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.
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. 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 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. 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
The ePropulsion segment’s inverter products power many of the global leading electric and hybrid
vehicles.
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. 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. Results from the six joint ventures in which the Company is the majority owner and
has a controlling financial interest are consolidated as part of the Company’s results. 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.
Management of the unconsolidated joint ventures is shared with the Company’s respective joint venture
partners. Certain information concerning the Company's joint ventures is set forth below:
Joint venture
Unconsolidated:
NSK-Warner K.K.
Turbo Energy Private
Limited
Consolidated:
BuradaWarner LLC
BorgWarner Transmission
Systems Korea Ltd.1
Beijing Delphi Wan Yuan
Engine Management
Systems Co. Ltd.
BorgWarner Shenglong
(Ningbo) Co. Ltd.
BorgWarner TorqTransfer
Systems Beijing Co. Ltd.
BorgWarner United
Transmission Systems Co.
Ltd.
Products
Transmission
components
Turbochargers
Valvetrain and fuel
injection equipment
Transmission
components
Engine management
systems
Fans and fan drives
Transfer cases
Transmission
components
Year
organized
Percentage
owned by
the
Company
Location
of
operation
Joint venture partner
1964
50 % Japan/
China
NSK Ltd.
1987
32.6 %
India
Sundaram Finance Limited;
Brakes India Limited
1977
1987
1999
1999
2000
2009
70 % Korea
BU RA DA Company Limited
60 % Korea
NSK-Warner
51 % China
Beijing Wan Yuan Industry
Corporation
70 % China
80 % China
66 % China
Ningbo Shenglong Automotive
Powertrain Systems Co., Ltd.
Beijing Hainachuan Automotive
Parts Holding Co., Ltd.
China Automobile Development
United Investment Co., Ltd.
__________________________
1 BorgWarner Inc. owns 50% of NSK-Warner, which has a 40% interest in BorgWarner Transmission Systems Korea Ltd. This
ownership gives the Company an additional indirect effective ownership percentage of 20% in BorgWarner Transmission
Systems Korea Ltd., resulting in a total effective ownership interest of 80%.
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. 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
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.
The Company’s worldwide net sales to the following customers (including their subsidiaries) were
approximately as follows:
Customer
Ford
Volkswagen
Year Ended December 31,
2023
2022
2021
14 %
11 %
15 %
9 %
13 %
9 %
No other single customer accounted for more than 10% of the Company’s consolidated net sales in any
of the years presented. 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.
The Company typically ships its products directly from its plants to the OEMs.
Sales and Marketing
Each of the Company’s businesses within its reportable segments has its own sales function. Account
executives for each of the Company’s businesses are assigned to serve specific customers for one or
more businesses’ products. Account executives spend the majority of their time in direct contact with
customers’ purchasing and engineering employees and are responsible for servicing existing business
and for identifying and obtaining new business. Because of their close relationship with customers,
account executives are able to identify and meet customers’ needs based upon their knowledge of the
Company’s product design and manufacturing capabilities. Upon securing a new order, account
executives participate in product launch team activities and serve as a key interface with customers. In
addition, sales and marketing employees of the Company’s reportable segments often work together to
explore cross-development opportunities where appropriate.
Seasonality
The Company’s operations are directly related to the automotive and commercial-vehicle industry.
Consequently, the Company’s segments may experience seasonal fluctuations to the extent vehicle
production slows at certain times of the year. For example, model changeovers and vacations during the
summer months have generally resulted in lower sales volume in the Company’s third quarter, and in
China, the Company typically experiences lower sales in the first quarter due to the Chinese New Year.
Research and Development
The Company conducts advanced propulsion research. This advanced engineering function seeks to
leverage know-how and expertise across product lines to create new electrified propulsion systems and
modules that can be commercialized. This function oversees the Company's investments in certain
venture capital funds that provide seed money for start-up businesses developing new technologies
pertinent to the automotive industry and the Company's propulsion strategies.
11
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. The Company also
operates testing facilities such as prototype, measurement and calibration, life-cycle testing and
dynamometer laboratories.
By working closely with OEMs and anticipating their future product needs, the Company’s R&D personnel
conceive, design, develop and manufacture new proprietary components and systems. R&D personnel
also work to improve current products and production processes. The Company believes its commitment
to R&D will allow it to continue to obtain new orders from its OEM customers.
The Company’s net R&D expenditures are primarily included in selling, general and administrative
expenses of the Consolidated Statements of Operations. Customer reimbursements are netted against
gross R&D expenditures as they are considered a recovery of cost. Customer reimbursements for
prototypes are recorded net of prototype costs based on customer contracts, typically either when the
prototype is shipped or when it is accepted by the customer. Customer reimbursements for engineering
services are recorded when performance obligations are satisfied in accordance with the contract.
Financial risks and rewards transfer upon shipment, acceptance of a prototype component by the
customer or upon completion of the performance obligation as stated in the respective customer
agreement.
(in millions)
Gross R&D expenditures
Customer reimbursements
Net R&D expenditures
Year Ended December 31,
2023
2022
2021
$
$
856 $
(139)
717 $
787 $
(86)
701 $
694
(108)
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.
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. While it
considers its patents on the whole to be important, the Company does not consider any single patent,
any group of related patents or any single license essential to its operations in the aggregate or to the
operations of any of the Company’s business groups individually. The expiration of the patents
individually and in the aggregate is not expected to have a material effect on the Company’s financial
position or future operating results. The Company owns numerous trademarks, some of which are
valuable, but none of which are essential to its business in the aggregate.
The Company owns the “BorgWarner” trade name and numerous trademarks which are material to the
Company's business.
12
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. 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.
In addition, a number of the Company’s major OEM customers manufacture, for their own use and for
others, products that compete with the Company's products. Other current OEM customers could elect to
manufacture products to meet their own requirements or to compete with the Company. There is no
assurance that the Company’s business will not be adversely affected by increased competition in the
markets in which it operates.
For many of its products, the Company’s competitors include suppliers in parts of the world that enjoy
economic advantages such as lower labor costs, lower health care costs, lower tax rates and, in some
cases, export subsidies and/or raw materials subsidies. Also, see Item 1A, “Risk Factors.”
Human Capital Management
The Company’s ability to sustain and grow its business requires it to hire, retain and develop a highly
skilled and diverse management team and workforce worldwide. The Company believes the skills,
experience, and industry knowledge of its employees significantly benefit its operations and performance.
The Compensation Committee of the Board of Directors oversees human capital management and
assesses whether efforts to promote and advance environmental, social and governance (“ESG”)
initiatives, practices, and objectives, as appropriate, are effectively reflected in executive compensation.
The full Board of Directors oversees talent reviews and succession planning for the Company.
As of December 31, 2023, the Company had a salaried and hourly workforce as follows:
Americas
Asia
Europe
Total workforce
Salaried
Hourly
Total workforce
11,800
12,200
15,900
39,900
13,000
26,900
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”). 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. 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
In 2022, the Company set goals to advance DE&I and support its commitment to creating an
inclusive and sustainable workforce. Those goals include:
35% of global workforce are women by 2026
30% of U.S. workforce are racially/ethnically diverse by 2026
Pay parity for all by 2026
80% or above on the BorgWarner Beliefs index score from the Company’s employee
engagement survey by 2026
◦
◦
◦
◦
As of December 31, 2023:
◦ Women composed 30.1% of the Company’s global workforce.1
◦
◦
Racial/ethnic minorities composed 29.5% of the Company’s total U.S. workforce.1
The Company’s latest pay equity analysis identified that, on average, women received
compensation equal to 99.0% of that received by men across the Company’s global
workforce for substantially similar work. 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 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. 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. In the year ended
December 31, 2023, annual voluntary employee turnover was 11.0%, annual voluntary turnover
for our salaried workforce was 9.7%, and annual voluntary turnover for our hourly workforce was
11.7%.1
Education & Development. 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 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. 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’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 analysis included employees from salaried early-in-career through vice president roles.
14
prevention initiatives, performing risk assessments and inspections, sharing best practices,
hosting safety conferences, and sponsoring recognition programs.
In 2023, the Company set goals for the safety of its workforce. 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 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 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. 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. The Company recognizes that, in many of the
locations where it operates, employees have freedom of association rights with third-party organizations
such as labor unions. The Company respects and supports those rights, including the right to collective
bargaining, in accordance with local laws.
Raw Materials
The Company uses a variety of raw materials in the production of its products, including aluminum,
copper, nickel, plastic resins, steel, certain alloy elements and semiconductor chips. Manufacturing
operations for each of the Company’s operating segments are dependent upon natural gas, fuel oil and
electricity.
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. 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.
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. 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). TRIR and LTIR exclude safety performance for Eldor, which was
acquired in the fourth quarter of 2023.
4 Certified to ISO 45001:2018. 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
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 practice is to identify potential regulatory and quality risks early in the design and
development process and proactively manage them throughout the product lifecycle through the use of
routine assessments, protocols, standards, performance measures and audits. New regulations and
changes to existing regulations are managed in collaboration with the Company’s OEM customers and
implemented through its global systems and procedures designed to ensure compliance with existing
laws and regulations. The Company demonstrates material content compliance through the International
Material Data System (“IMDS”), which is the automotive industry material data system. In the IMDS, all
materials used for automobile manufacturing are archived and maintained to meet the obligations placed
on the automobile manufacturers, and thus on their suppliers, by national and international standards,
laws and regulations.
The Company works collaboratively with a number of stakeholder groups, including government
agencies, such as the National Highway Traffic Safety Administration, its customers and its suppliers to
proactively engage in federal, state and international public policy processes.
Refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” for a discussion of the impact of environmental regulations on the Company’s business.
Also, see Item 1A, “Risk Factors.”
Available Information
Through its Internet website (www.borgwarner.com), the Company makes available, free of charge, its
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all
amendments to those reports, and other filings with the Securities and Exchange Commission as soon as
reasonably practicable after they are filed or furnished. 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. You may also obtain a copy of any of the foregoing documents, free of charge,
if you submit a written request to Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326.
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
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. Lissalde (56) President and Chief Executive Officer
• Autoliv, Inc., Member of Board of Directors (2020 –
(2018)
Present)
Kevin A. Nowlan (52)
Executive Vice President, Chief
Financial Officer (2019)
• Meritor Inc., Senior Vice President, President, Trailer,
Components and Chief Financial Officer (2018 – 2019)
• Federal Reserve Bank of Chicago – Detroit Branch,
Member of Board of Directors (2022 – Present)
Tonit M. 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
Tania Wingfield (57)
Executive Vice President, Chief Human
Resources Officer (2022)
Craig D. Aaron (46)
Vice President and Controller (2022)
Directors (2022 – Present)
• W.P. Carey Inc., Member of Board of Directors (2020 –
Present)
• Vice President and General Manager, North America
Aftermarket (2021 – 2022)
• Vice President and Integration Champion (2020 –
2021)
• Vice President, Engineering, PowerDrive Systems
(2017 – 2020)
• Vice President and Treasurer (2019 – 2022)
• Vice President, Finance, BorgWarner Morse Systems
(2016 – 2019)
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)
Stefan Demmerle (59)
Joseph F. Fadool (57)
Vice President and President and
General Manager, Emissions, Thermal
and Turbo Systems (2019)
Paul A. Farrell (57)
Executive Vice President and Chief
Strategy Officer (2020)
• 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)
• 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. (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. On December 5, 2023, the Company announced the appointment of Craig D. Aaron, currently the
Company’s Vice President and Controller, to the role of Executive Vice President and Chief Financial Officer,
effective March 1, 2024, succeeding Mr. Nowlan in that role.
17
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. 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. 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. 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.
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 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. 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. However, the amount of information we can obtain about a potential
growth opportunity can be limited, and we can give no assurance that past or future business ventures,
acquisitions, and strategic alliances will positively affect our financial performance or will perform as
planned. Assessing a price for potential transactions is inexact. 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.
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. To realize these anticipated benefits, both
companies must be successfully combined, which is subject to our ability to consolidate operations,
corporate cultures and systems and to eliminate redundancies and costs. If we are unsuccessful in
combining companies, the anticipated benefits of the acquisitions may not be realized fully or at all or
may take longer to realize than expected. 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. 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
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. Any or all of these factors could adversely affect our
ability to maintain relationships with customers and employees or to achieve the anticipated benefits of
the acquisition and could have an adverse effect on the combined company. In addition, many of these
factors are outside of our control, and any one of these factors could result in increased costs, decreases
in the amount of expected revenues and additional diversion of management’s time and energy, which
could materially adversely impact our business, financial condition and results of operations.
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 also dispose of a business at a price or on terms that are less desirable
than we had anticipated. Buyers of the assets or business may from time to time agree to indemnify us
for operations of such businesses after the closing. We cannot be assured that any of these
indemnification provisions will fully protect us, and as a result may face unexpected liabilities that
adversely affect our business, financial condition and results of operations. In addition, we may
experience fewer synergies than expected or even negative synergies from separating a business, and
the impact of the disposition on our financial results may be larger than projected.
After reaching an agreement for the disposition of a business, we are subject to satisfaction of pre-closing
conditions as well as necessary regulatory and governmental approvals on acceptable terms, which, if
not satisfied or obtained, may prevent us from completing the transaction. 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. 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. 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 review goodwill and indefinite-lived intangible assets for impairment either annually or whenever
changes in circumstances indicate that the carrying value may not be recoverable. The risk of impairment
to goodwill and indefinite-lived intangible assets is higher during the early years following an acquisition.
This is because the fair values of these assets align very closely with what was paid to acquire the
reporting units to which these assets are assigned. As a result, the difference between the carrying value
of the reporting unit and its fair value (typically referred to as “headroom”) is smaller at the time of
acquisition. Until this headroom grows over time, due to business growth or lower carrying value of the
reporting unit, a relatively small decrease in reporting unit fair value can trigger impairment charges.
When impairment charges are triggered, they tend to be material due to the size of the assets involved.
Future acquisitions could present similar risks. Any charges relating to such impairments could adversely
affect our results of operations in the periods recognized.
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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. 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 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. 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. 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. 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.
In connection with the Spin-Off, we entered into a separation and distribution agreement and related
agreements with PHINIA to govern the Spin-Off and the relationship between the two companies
following the completion of the Spin-Off. These agreements provide for specific indemnity and liability
obligations of each party and could lead to disputes between us. If we are required to indemnify the other
parties under the circumstances set forth in these agreements, we may be subject to future liabilities. 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. 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.
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. Economic declines
that result in significant reduction in automotive or truck production would have an adverse effect on our
sales to OEMs.
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We face strong competition.
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.
Additionally, our competitors include start-ups that may be well funded, with the result that they could
have more operational and financial flexibility than we have. A number of our competitors are larger than
we are, and some competitors have greater financial and other resources than we do. Although many
OEMs have indicated that they will continue to rely on outside suppliers, a number of major OEM
customers have indicated their intent to insource certain components that we produce, and many do
manufacture products for their own uses that directly compete with our products. These OEMs could elect
to manufacture such products for their own uses in place of the products we currently supply. Our
traditional OEM customers, faced with intense international competition, have continued to expand their
global sourcing of components. As a result, we have experienced competition from suppliers in other
parts of the world that enjoy economic advantages, such as lower labor costs, lower health care costs,
lower tax rates and, in some cases, export or raw materials subsidies. Increased competition could
adversely affect our business. In addition, any of our competitors may foresee the course of market
development more accurately than we do, develop products that are superior to our products, produce
similar products at a cost that is lower than our cost, or adapt more quickly than we do to new
technologies or evolving customer requirements. As a result, our products may not be able to compete
successfully with our competitors' products, and we may not be able to meet the growing demands of
customers. These trends may adversely affect our sales as well as the profit margins on our products.
If we do not respond appropriately, the evolution of the automotive industry could adversely
affect our business.
The automotive industry is increasingly focused on improved vehicle efficiency and reduced emissions,
including the development of hybrid and electric vehicles, largely as a result of changing consumer
preferences and increasingly stringent global regulatory requirements related to climate change, and of
advanced driver-assistance technologies, with the goal of developing and introducing a commercially
viable, fully automated driving experience. There has also been an increase in consumer preferences for
mobility-on-demand services, such as car and ride sharing, as opposed to automobile ownership, which
may result in a long-term reduction in the number of vehicles per capita. In addition, some industry
participants are exploring transportation through alternatives to automobiles. These evolving areas have
also attracted increased competition from entrants outside the traditional automotive industry. While we
are focused on driving growth through our ability to capitalize on certain potential trends, such as the
move toward hybrid and electric vehicles, some of the focuses and trends are not part of our product line
or strategy, which could have an adverse impact on our results of operations. 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.
In recent years, within the automotive industry, there have been governmental investigations and related
proceedings relating to alleged or actual violations of vehicle emissions standards. 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,
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disgorgement of profits, restricted product offerings, reputational harm or a combination of any of those
items. Any of these actions could have a material adverse effect on our business and financial results.
Risks related to our business
We are under substantial pressure from OEMs to reduce the prices of our products.
There is substantial and continuing pressure on OEMs to reduce costs, including costs of products we
supply. OEM customers expect annual price reductions in our business. To maintain our profit margins,
we seek price reductions from our suppliers, improved production processes to increase manufacturing
efficiency, and streamlined product designs to reduce costs, and we attempt to develop new products, the
benefits of which support stable or increased prices. Our ability to pass through increased raw material or
other inflationary costs to our OEM customers is limited, with cost recovery often less than 100% and
often on a delayed basis. Inability to reduce costs in an amount equal to annual price reductions,
increases in raw material costs, and increases in employee wages and benefits could have an adverse
effect on us.
We continue to face volatile costs of commodities used in the production of our products and
elevated levels of inflation.
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. 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. 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. If this happens, suppliers may withdraw
capacity from the market until prices improve, which may cause periodic supply interruptions. The same
may be true of transportation carriers and energy providers. If these supply interruptions occur, it could
adversely affect our business.
In addition, 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. 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. 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.
The United States has maintained tariffs on certain imported steel, aluminum and items originating from
China. These tariffs have increased the cost of raw materials and components we purchase. The
imposition of tariffs by the United States has resulted in retaliatory tariffs from a number of countries,
including China, which increase the cost of products we sell. If the U.S. or other countries impose
additional tariffs, that will have a further adverse impact on us.
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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. Our intellectual property plays an important role in
maintaining our competitive position in a number of the markets that we serve. Our competitors may
develop technologies that are similar or superior to our proprietary technologies or design around the
patents we own or license. Further, as we expand our operations in jurisdictions where the enforcement
of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies
increases, despite efforts we undertake to protect them. 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.
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.
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. 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. 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. 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. Future attacks or disruptions could potentially lead to the inappropriate disclosure of
confidential information, including our intellectual property or employee data, improper use of our systems
and networks, access to and manipulation and destruction of our or third-party data, production
downtimes, lost revenues, inappropriate disbursement of funds and both internal and external supply
shortages. In addition, we may be required to incur significant costs to protect against damage caused by
such attacks or disruptions in the future. These consequences could cause significant damage to our
reputation, affect our relationships with our customers and suppliers, lead to claims against us and
ultimately adversely affect our business.
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. 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.
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Our profitability and results of operations may be adversely affected by program launch
difficulties.
The launch of new business is a complex process, the success of which depends on a wide range of
factors, including the production readiness of our manufacturing facilities and manufacturing processes
and those of our suppliers, as well as factors related to tooling, equipment, employees, initial product
quality and other factors. Our failure to successfully launch new business, or our inability to accurately
estimate the cost to design, develop and launch new business, could have an adverse effect on our
profitability and results of operations.
To the extent we are not able to successfully launch new business, vehicle production at our customers
could be significantly delayed or shut down. Such situations could result in significant financial penalties
to us or a diversion of personnel and financial resources to improving launches rather than investment in
continuous process improvement or other growth initiatives and could result in our customers shifting
work away from us to a competitor, all of which could result in loss of revenue or loss of market share and
could have an adverse effect on our profitability and cash flows.
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. A prolonged dispute with our
employees could have an adverse effect on our business.
Work stoppages, production shutdowns and similar events could significantly disrupt our
business.
Because the automotive industry relies heavily on just-in-time delivery of components during the
assembly and manufacture of vehicles, a work stoppage or production shutdown at one or more of our
manufacturing and assembly facilities could have adverse effects on our business. Similarly, if one or
more of our customers were to experience a work stoppage or production shutdown, that customer would
likely halt or limit purchases of our products, which could result in the shutdown of the related
manufacturing facilities. 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.
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. The valuation of our future payment obligations under the plans and the related plan assets
is subject to significant adverse changes if the credit and capital markets cause interest rates and
projected rates of return to decline. Such declines could also require us to make significant additional
contributions to our pension plans in the future. 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.
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We are subject to extensive environmental regulations that are subject to change and involve
significant risks.
Our operations are subject to laws governing, among other things, emissions to air, discharges to waters,
and the generation, management, transportation and disposal of waste and other materials. The
operation of automotive parts manufacturing plants entails risks in these areas, and we cannot assure
that we will not incur material costs or liabilities as a result. Through various acquisitions over the years,
we have acquired a number of manufacturing facilities, and we cannot assure that we will not incur
material costs and liabilities relating to activities that predate our ownership. In addition, potentially
significant expenditures could be required to comply with evolving interpretations of existing
environmental, health and safety laws and regulations or any new such laws and regulations (including
concerns about global climate change and its impact) that may be adopted in the future. Costs
associated with failure to comply with such laws and regulations could have an adverse effect on our
business.
Our operations may be affected by greenhouse emissions and climate change and related
regulations.
Climate change is receiving increasing attention worldwide, which has led to significant legislative and
regulatory efforts to limit greenhouse gas emissions. Our manufacturing plants use energy, including
electricity and natural gas, and certain of our plants emit amounts of greenhouse gas that may be
affected by these legislative and regulatory efforts. Greenhouse gas regulation could increase the price of
the electricity we purchase, increase costs for use of natural gas, potentially restrict access to or the use
of natural gas, require us to purchase allowances to offset our own emissions or result in an overall
increase in costs of raw materials, any one of which could increase our costs, reduce competitiveness in
a global economy or otherwise negatively affect our financial condition, results of operations and
reputation. Many of our suppliers face similar circumstances. Supply disruptions would raise market rates
and jeopardize the continuity of production and could have an adverse effect on our financial results.
Climate changes could also disrupt our operations by impacting the availability and cost of materials
within our supply chain, and could also increase insurance and other operating costs. These factors may
impact our decisions to construct new facilities.
We have liabilities related to environmental, product warranties, litigation and other claims.
We and certain of our 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 at various hazardous waste
disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act and
equivalent state laws, and, as such, may be liable for the cost of clean-up and other remedial activities at
such sites. While responsibility for clean-up and other remedial activities at such sites is typically shared
among potentially responsible parties based on an allocation formula, we could have greater liability
under applicable statutes. Refer to Note 21, “Contingencies,” to the Consolidated Financial Statements in
item 8 of this report for further discussion.
We provide product warranties to our customers for some of our products. Under these product
warranties, we may be required to bear costs and expenses for the repair or replacement of these
products. As suppliers become more integrally involved in the vehicle design process and assume more
of the vehicle assembly functions, auto manufacturers are increasingly looking to their suppliers for
contribution when faced with recalls and product warranty claims. A recall claim brought against us, or a
product warranty claim brought against us, could adversely impact our results of operations. In addition, a
recall claim could require us to review our entire product portfolio to assess whether similar issues are
present in other product lines, which could result in significant disruption to our business and could have
25
an adverse impact on our results of operations. We cannot assure that costs and expenses associated
with these product warranties will not be material or that those costs will not exceed any amounts
accrued for such product warranties in our financial statements.
We are currently, and may in the future become, subject to legal proceedings and commercial or
contractual disputes. These claims typically arise in the normal course of business and may include, but
not be limited to, commercial or contractual disputes with our customers and suppliers, intellectual
property matters, personal injury, product liability, environmental and employment claims. There is a
possibility that such claims may have an adverse impact on our business that is greater than we
anticipate. While we maintain insurance for certain risks, the amount of insurance may not be adequate
to cover all insured claims and liabilities. The incurrence of significant liabilities for which there is no, or
insufficient, insurance coverage could adversely affect our business.
Compliance with and changes in laws could be costly and could affect our operating results.
We have operations in multiple countries that can be impacted by expected and unexpected changes in
the legal and business environments in which we operate. Compliance-related issues in certain countries
associated with laws such as the Foreign Corrupt Practices Act and other anti-corruption laws could
adversely affect our business. We have internal policies and procedures relating to compliance with such
laws; however, there is a risk that such policies and procedures will not always protect us from the
improper acts of employees, agents, business partners, joint venture partners, or representatives,
particularly in the case of recently acquired operations that may not have significant training in applicable
compliance policies and procedures. Violations of these laws, which are complex, may result in criminal
penalties, sanctions and/or fines that could have an adverse effect on our business, financial condition,
and results of operations and reputation.
Changes that could impact the legal environment include new legislation, new regulations, new policies,
investigations and legal proceedings, and new interpretations of existing legal rules and regulations, in
particular, changes in import and export control laws or exchange control laws, additional restrictions on
doing business in countries subject to sanctions, additional limitations on greenhouse gas emissions or
other matters related to climate change and other changes in laws in countries where we operate or
intend to operate.
Changes in tax laws or tax rates taken by taxing authorities and tax audits could adversely affect
our business.
Changes in tax laws or tax rates, the resolution of tax assessments or audits by various tax authorities,
and the inability to fully utilize our tax loss carryforwards and tax credits could adversely affect our
operating results. In addition, we may periodically restructure our legal entity organization. If taxing
authorities were to disagree with our tax positions in connection with any such restructurings, our
effective tax rate could be materially affected.
Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions where we
conduct business. We have received tax assessments from various taxing authorities and are currently at
varying stages of appeals and/or litigation regarding these matters. These audits may result in
assessment of additional taxes that are resolved with the authorities or through the courts. We believe
these assessments may occasionally be based on erroneous and even arbitrary interpretations of local
tax law. Resolution of any tax matters involves uncertainties, and there are no assurances that the
outcomes will be favorable.
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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.
Consequently, our results could be affected by changes in trade, monetary and fiscal policies, trade
restrictions or prohibitions, import or other charges or taxes, fluctuations in foreign currency exchange
rates, limitations on the repatriation of funds, changing economic conditions, unreliable intellectual
property protection and legal systems, insufficient infrastructures, social unrest, political instability and
disputes, international terrorism and other factors that may be discrete to a particular country or
geography. Compliance with multiple and potentially conflicting laws and regulations of various countries
is challenging, burdensome and expensive.
The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end
exchange rate for assets and liabilities and an average exchange rate for each period for revenues,
expenses and capital expenditures. The local currency is typically the functional currency for our foreign
subsidiaries. Significant foreign currency fluctuations and the associated translation of those foreign
currencies to U.S. Dollars could adversely affect our business. Additionally, significant changes in
currency exchange rates, particularly the Euro, Korean Won and Chinese Renminbi, could cause
fluctuations in the reported results of our businesses’ operations that could negatively affect our results of
operations.
Because we are a U.S. holding company, one significant source of our funds is distributions from our non-
U.S. subsidiaries. Certain countries in which we operate have adopted or could institute currency
exchange controls that limit or prohibit our non-U.S. subsidiaries' ability to convert local currency into U.S.
Dollars or to make payments outside the country. This could subject us to the risks of local currency
devaluation and business disruption.
Our business in China is subject to aggressive competition and is sensitive to economic, political,
and market conditions.
Maintaining a strong position in the Chinese market is a key component of our global growth strategy.
The automotive supply market in China is highly competitive, with competition from many of the largest
global manufacturers and numerous smaller domestic manufacturers. As the Chinese market evolves, we
anticipate that market participants will act aggressively to increase or maintain their market share.
Increased competition may result in price reductions, reduced margins and our inability to gain or hold
market share. In addition, our business in China is sensitive to economic, political, social and market
conditions that drive sales volumes in China. If we are unable to maintain our position in the Chinese
market or if vehicle sales in China decrease, our business and financial results could be adversely
affected.
A downgrade in the ratings of our debt could restrict our ability to access the debt capital
markets.
Changes in the ratings that rating agencies assign to our debt may ultimately impact our access to the
debt capital markets and the costs we incur to borrow funds. If ratings for our debt fall below investment
grade, our access to the debt capital markets could become restricted and our cost of borrowing or the
interest rate for any subsequently issued debt would likely increase.
Our revolving credit agreement includes an increase in interest rates if the ratings for our debt are
downgraded. The interest cost on our revolving credit agreement is based on a rating grid. Further, an
increase in the level of our indebtedness and related interest costs may increase our vulnerability to
adverse general economic and industry conditions and may affect our ability to obtain additional
financing.
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We could incur additional restructuring charges as we continue to execute actions in an effort to
improve future profitability and competitiveness and to optimize our product portfolio and may
not achieve the anticipated savings and benefits from these actions.
We have initiated and may continue to initiate restructuring actions designed to improve the
competitiveness of our business and sustain our margin profile, optimize our product portfolio or create
an optimal legal entity structure. We may not realize anticipated savings or benefits from past or future
actions in full or in part or within the time periods we expect. We are also subject to the risks of labor
unrest, negative publicity and business disruption in connection with our actions. Failure to realize
anticipated savings or benefits from our actions could have an adverse effect on our business.
Risks related to our customers
We rely on sales to major customers.
We rely on sales to OEMs around the world of varying credit quality and manufacturing demands. Supply
to several of these customers requires significant investment by us. We base our growth projections, in
part, on commitments made by our customers. These commitments generally renew yearly during a
program life cycle. Among other things, the level of production orders we receive is dependent on the
ability of our OEM customers to design and sell products that consumers desire to purchase. If actual
production orders from our customers do not approximate such commitments due to a variety of factors,
including non-renewal of purchase orders, a customer's financial hardship or other unforeseen reasons, it
could adversely affect our business.
Some of our sales are concentrated. 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.
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. Because of domestic OEMs’ dependence on a
single union, we are affected by labor difficulties and work stoppages at OEMs’ facilities, such as the
UAW strikes that occurred in 2023. Such stoppages at OEMs’ facilities could halt our businesses with
those facilities and an increase in the number of OEMs facilities with union contracts with the UAW could
increase the negative impact to our business. Similarly, a majority of our global customers’ operations
outside of North America are also represented by various unions. Any extended work stoppage at one or
more of our customers could have an adverse effect on our business.
Risks related to our suppliers
We could be adversely affected by supply shortages of components from our suppliers.
In an effort to manage and reduce the cost of purchased goods and services, we have been rationalizing
our supply base. As a result, we remain dependent on fewer sources of supply for certain components
used in the manufacture of our products. We select suppliers based on total value (including total landed
price, quality, delivery, and technology), taking into consideration their production capacities and financial
condition. We expect that they will deliver to our stated written expectations.
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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. 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. If we experience a prolonged shortage of critical components from any
of our suppliers and cannot procure the components from other sources, we may be unable to meet the
production schedules for some of our key products and could miss customer delivery expectations. In
addition, with fewer sources of supply for certain components, each supplier may perceive that it has
greater leverage and, therefore, some ability to seek higher prices from us at a time that we face
substantial pressure from OEMs to reduce the prices of our products, which could adversely affect our
customer relations and business.
Suppliers’ economic distress could result in the disruption of our operations and could adversely
affect our business.
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.
These conditions could also result in increased commercial disputes and supply interruption risks. In
certain instances, it would be difficult and expensive for us to change suppliers that are critical to our
business. On occasion, we must provide financial support to distressed suppliers or take other measures
to protect our supply lines. We cannot predict with certainty the potential adverse effects these costs
might have on our business.
We are subject to possible insolvency of financial counterparties.
We engage in numerous financial transactions and contracts, including insurance policies, letters of
credit, credit line agreements, financial derivatives, and investment management agreements involving
various counterparties. We are subject to the risk that one or more of these counterparties may become
insolvent and, therefore, be unable to meet its obligations under such contracts.
Other risks
A variety of other factors could adversely affect our business.
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
Item 1B. Unresolved Staff Comments
The Company has received no written comments regarding its periodic or current reports from the staff of
the Securities and Exchange Commission that were issued 180 days or more preceding the end of its
2023 fiscal year that remain unresolved.
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. 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 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.
Risk Management and Strategy
Collaborative Approach: The Company has implemented a comprehensive, cross-functional approach to
identifying, preventing and mitigating cybersecurity threats and incidents. The Cybersecurity Program has
various tools and programs in place to monitor and address potential threats and incidents impacting the
Company’s operations and to determine the materiality of and ensure timely public disclosure of such
threat or incident, if appropriate.
Technical Safeguards: The Company deploys technical safeguards designed to protect the Company’s
information systems from cybersecurity threats. The Company deploys tools in an effort to detect
vulnerabilities, and when a weakness is identified, the Company seeks to assess the significance of the
impact and mitigate before the weakness is exploited by an unauthorized actor.
Incident Response and Recovery Plan: The Company has an incident response and recovery plan, which
details the steps to be taken from the initial internal reporting of a potential cybersecurity incident.
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.
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. 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. 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 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
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.
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 CIO and the IT team
work with the business to implement the Cybersecurity Program, which is designed to protect the
Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity
incidents in accordance with the Company’s Cybersecurity Incident Response Plan. The CIO and the IT
team use detection tools to monitor for cybersecurity threats and incidents in real time, apply mitigation
and remediation steps and then report such threats to the Audit Committee and the Board, as
appropriate.
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 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.
As of the date of this report, the Company is not aware of any material risks from cybersecurity threats
that have materially affected or are reasonably likely to materially affect the Company, including its
business strategy, results of operations, or financial condition. Despite the extensive approach we take to
cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could
have a material adverse effect on the Company or its stakeholders. See Item 1A. “Risk Factors” for a
discussion of cybersecurity risks.
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.
The 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
Drivetrain & Battery Systems
ePropulsion
14
4
8
13
5
6
16
7
9
43
16
23
The table above excludes unconsolidated joint ventures as of December 31, 2023 and administrative
offices. Of the facilities noted above, 35 have leased land rights or a leased facility.
31
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. See Note 21, “Contingencies,” to the
Consolidated Financial Statements in Item 8 of this report for a discussion of environmental, product
liability, derivative and other litigation, which is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
32
PART II
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.
While the Company currently expects that quarterly cash dividends will continue to be paid in the future at
levels comparable to recent historical levels, the dividend policy is subject to review and change at the
discretion of the Board of Directors.
The line graph below compares the cumulative total shareholder return on the Company’s Common
Stock with the cumulative total return of companies on the Standard & Poor’s (S&P’s) 500 Stock Index,
and companies within Standard Industrial Code (“SIC”) 3714 - Motor Vehicle Parts.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN1
Among BorgWarner Inc., the S&P 500 Index, and SIC 3714 Motor Vehicle Parts
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
2018
2019
2020
2021
2022
2023
BorgWarner Inc.
S&P 500
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. All rights reserved.
33
BWA and S&P 500 data are from Capital IQ; SIC Code Index data is from Research Data Group
BorgWarner Inc.1
S&P 5002
SIC Code Index3
December 31,
2018
2019
2020
2021
2022
2023
$ 100.00 $ 127.16 $ 115.46 $ 136.71 $ 124.16 $ 127.65
$ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21
$ 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. 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. 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. 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. 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.
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, 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
Employee transactions
November 1, 2023 - November 30, 2023
Common Stock Repurchase Program
Employee transactions
December 1, 2023 - December 31, 2023
Common Stock Repurchase Program
Employee transactions
— $
— $
3,000,000 $
4,573 $
2,264,923 $
194 $
—
—
33.65
34.15
33.52
33.95
— $
—
3,000,000 $
—
2,264,923 $
—
544
443
367
34
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
Equity compensation plans not
approved by security holders
Total
Item 6. [Reserved]
1,817,795 $
— $
1,817,795 $
47.48
—
47.48
9,126,458
—
9,126,458
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.
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 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.
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. 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. Foundational products include all products utilized on internal combustion engines plus those
same products and components that are also included in hybrid powertrains. 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. During the year ended December 31, 2023, the
Company’s eProduct revenue was approximately $2.0 billion, or 14% of its total revenue.
35
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. (“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”). 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.
Acquisitions
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. 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. 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.
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. 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. 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.
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.
The total consideration was ₣27 million ($29 million) of base purchase price paid at closing, and
₣10 million ($10 million) of estimated earn-out payments that could be paid in the form of contingent
payments over the three years following closing.
Rhombus Energy Solutions
On July 29, 2022, the Company acquired Rhombus Energy Solutions, a provider of charging solutions in
the North American market. The acquisition is expected to complement the Company’s existing European
charging footprint to accelerate organic growth and adds North American regional presence to its
charging business. The Company paid $131 million at closing, and up to $30 million could be paid in the
36
form of contingent payments over the three years following closing. The Company’s current estimates
indicate that the minimum thresholds for these earn-out targets will not be achieved, thus no amount for
the earn-out payments has been included in the purchase consideration.
Santroll Automotive Components
On March 31, 2022, the Company acquired Santroll Automotive Components, a carve-out of Santroll
Electric Auto’s eMotor business. The acquisition is expected to strengthen the Company’s vertical
integration, scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to
market. The total final consideration was $192 million, including approximately ¥1.0 billion ($152 million)
of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The
Company paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended
December 31, 2022 and no longer expects to recapture a previously anticipated $5 million of post-closing
adjustments, which has been recorded in Other operating expense, net. Pursuant to the Equity Transfer
Agreement for the acquisition, the obligation of the Company to remit up to ¥0.3 billion (approximately
$47 million) of earn-out payments was contingent upon achievement of certain sales volume targets and
certain estimated future volume targets associated with newly awarded business. During the year ended
December 31, 2023, the Company paid approximately ¥0.2 billion ($24 million) to settle the remaining
earn-out liability and related adjustments.
AKASOL AG
On June 4, 2021, the Company completed a voluntary public takeover offer for shares of AKASOL AG
(“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid
approximately €648 million ($788 million) to settle the offer. During 2021, the Company increased its
ownership to 93% through the subsequent purchase of additional shares. On February 10, 2022, the
Company completed a merger squeeze-out process to obtain the remaining shares, resulting in 100%
ownership. The acquisition is expected to further strengthen BorgWarner’s commercial vehicle and
industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a
fast-growing battery module and pack market.
Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements in Item 8 of
this report for more information. Results of operations for these acquisitions are included in the
Company’s financial information following their respective dates of acquisition.
Key Trends and Economic Factors
Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and since the
beginning of 2021, the Company has experienced price increases for base metals (e.g., steel, aluminum
and nickel), precious metals (e.g., palladium), silicon carbide, and raw materials that are primarily used in
batteries for electric vehicles (e.g., lithium and cobalt). In addition, many global economies, including the
United States, are experiencing elevated levels of inflation more generally, which is driving an increase in
other input costs. As a result, the Company has experienced, and is continuing to experience, higher
costs.
In 2022 and 2023, following non-contractual negotiations, the Company reached agreement for the pass
through and recovery of higher costs with various customers. These agreements did not enable the
Company to recover 100 percent of its increased costs, and as a result, the Company’s operating
margins were negatively impacted.
Foreign Currency Impacts. The rapid strengthening of the U.S. Dollar in 2022, which continued in 2023,
albeit to a lesser extent, relative to major foreign currencies, including the Euro, Korean Won and
Chinese Renminbi, and related translation of these currencies to the U.S. Dollar, unfavorably impacted
37
the Company’s net sales, earnings and cash flows. Continued significant fluctuations of foreign
currencies against the U.S. Dollar may further negatively impact the Company’s financial results.
Outlook
The Company expects global industry production to be flat or to decrease modestly year over year in
2024. However, the Company expects net new business-related sales growth, due to the increased
penetration of BorgWarner products, including eProducts, to drive a sales increase in excess of the
change in industry production outlook. As a result, the Company expects increased revenue in 2024,
excluding the impact of foreign currencies. The Company expects the earnings benefit of this revenue
growth to be partially offset by the negative earnings impact of the acquisition of Eldor.
The Company maintains a positive long-term outlook for its global business and is committed to new
product development and strategic investments to enhance its product leadership strategy. 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
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.
The following table presents a summary of the Company’s operating results:
(in millions, except per share data)
Net sales
Air Management
Drivetrain & Battery Systems
ePropulsion
Inter-segment eliminations
Total net sales
Cost of sales
Gross profit
$
Selling, general and administrative expenses - R&D, net
Selling, general and administrative expenses - Other
Restructuring expense
Other operating expense, net
Operating income
Equity in affiliates’ earnings, net of tax
Realized and unrealized loss on debt and equity securities
Interest expense, net
Other postretirement expense
Earnings from continuing operations before income taxes and
noncontrolling interest
Provision for income taxes
Net earnings from continuing operations
Net (loss) earnings from discontinued operations
Net earnings
Net earnings from continuing operations attributable to the
noncontrolling interest, net of tax
Net earnings attributable to BorgWarner Inc.
Earnings per share from continuing operations — diluted
$
$
Year Ended December 31,
2023
2022
% of net sales
% of net sales
7,833
4,348
2,166
(149)
14,198
11,630
2,568
717
599
79
13
1,160
(30)
174
10
15
991
289
702
(7)
695
70
625
2.70
55.2 % $
30.6
15.3
(1.0)
100.0
81.9
18.1
5.1
4.2
0.6
0.1
8.2
(0.2)
1.2
0.1
0.1
7.0
2.0
4.9
—
4.9
0.5
4.4 % $
$
7,137
3,735
1,906
(143)
12,635
10,266
2,369
701
589
48
22
1,009
56.5 %
29.6
15.1
(1.1)
100.0
81.3
18.7
5.5
4.7
0.4
0.2
8.0
(28)
(0.2)
73
51
—
913
195
718
308
1,026
82
944
2.69
0.6
0.4
—
7.2
1.5
5.7
2.4
8.1
0.6
7.5 %
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. The change in net sales for the year ended December 31,
2023 was primarily driven by the following:
•
•
Favorable volume, mix and net new business increased sales approximately $1,418 million, or 10%.
This increase was primarily driven by higher weighted average market production as estimated by
the Company, which was up approximately 11% from the year ended December 31, 2022. The
remaining increase primarily reflects the sales growth above market production, which the Company
believes reflects higher demand for its products. Weighted average market production reflects light
and commercial vehicle production as reported by IHS weighted for the Company’s geographic
exposure, as estimated by the Company.
Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately
$66 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.
39
• Recoveries from the Company’s customers of material cost inflation arising from non-contractual
commercial negotiations with those customers and normal contractual customer commodity pass-
through arrangements increased net sales by approximately $158 million.
• Acquisitions contributed $53 million in additional sales during the year ended December 31, 2023.
Cost of sales and gross profit
Cost of sales and cost of sales as a percentage of net sales were $11,630 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. 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. Dollar.
• Cost of sales was also impacted by material cost inflation of approximately $170 million arising from
non-contractual commercial negotiations and normal contractual supplier commodity pass-through
arrangements with the Company’s suppliers.
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.
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. 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 increase in R&D costs, net of customer
reimbursements, was primarily due to increasing net investment related to the Company’s eProduct
portfolio. The Company will continue to invest in R&D programs, which are necessary to support
short- and long-term growth.
Increased administrative expenses of $19 million, primarily related to IT and travel.
•
Restructuring expense was $79 million and $48 million for the years ended December 31, 2023 and
2022, respectively, primarily related to employee benefit costs. 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, 2023, the Company
recorded $79 million of restructuring costs related to this plan.
Other operating expense, net was $13 million and $22 million for the years ended December 31, 2023
and 2022, respectively.
For the years ended December 31, 2023 and 2022, merger and acquisition expenses, net were $23 million
and $9 million, respectively, primarily related to professional fees associated with specific acquisition
initiatives.
40
During the year ended December 31, 2023, the Company recorded charges of $29 million, primarily related
to the write down of a customer incentive asset, a service and lease agreement termination and impairment
of certain property, plant and equipment.
During the year ended December 31, 2023, the Company recorded a $13 million gain, primarily related to
the sale of a European manufacturing facility and other fixed assets. The sale of the facility was pursuant to
a formal restructuring plan.
During the year ended December 31, 2022, the Company recorded a gain of $22 million in connection with
the sale of its interest in BorgWarner Romeo Power LLC, in which the Company owned a 60% interest.
During the year ended December 31, 2022, the Company recorded an impairment charge of $30 million to
remove the AKASOL indefinite-lived trade name as the Company no longer plans to utilize this trade name
in the business.
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. 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 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. 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 decrease was primarily due to recognition of a $28 million gain on extinguishment of the
Company’s 3.375% and 5.000% Senior Notes and higher interest rates on cash and cash equivalents
balances and lower expense related to the Company’s cross-currency swaps.
Other postretirement expense was $15 million in the year ended December 31, 2023 compared to an
immaterial amount in the year ended December 31, 2022. The increase in other postretirement expense for
the year ended December 31, 2023, was primarily due to higher interest cost in 2023.
Provision for income taxes was $289 million for the year ended December 31, 2023 resulting in an
effective tax rate of 29%. This compared to $195 million or 21% for the year ended December 31, 2022.
In 2023, the Company recognized a discrete tax benefit of approximately $19 million related to the
resolution of tax audits and reductions in certain unrecognized tax benefits and accrued interest related to
matters for which the statute of limitation had lapsed. In addition, the Company recognized a discrete tax
benefit of approximately $50 million in relation to the Spin-Off, a discrete tax benefit of approximately
$30 million in relation to various changes in filling positions for prior years, and a discrete tax expense of
approximately $79 million in relation to changes in judgment related to the recovery of deferred tax assets,
primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for
tax purposes as well as various tax structuring actions and strategies.
In 2022, the Company recognized discrete tax benefits of $23 million, primarily related to a reduction in
certain unrecognized tax benefits and accrued interest related to a matter for which the statute of limitations
had lapsed and favorable provision-to-return adjustments.
41
For further details, see Note 7, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this
report.
Net earnings attributable to the noncontrolling interest, net of tax of $70 million for the year ended
December 31, 2023 decreased by $12 million compared to the year ended December 31, 2022. 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
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. The non-comparable items presented below are calculated after tax using the
corresponding effective tax rate discrete to each item and the weighted average number of diluted shares
for each of the years then ended. The Company believes the following table is useful in highlighting non-
comparable items that impacted its earnings per diluted share:
Non-comparable items:
Restructuring expense
Merger and acquisition expense, net
Asset impairments and lease modifications
Gain on sales of businesses
Other non-comparable items
Realized and unrealized loss on debt and equity securities
Gain on sale of assets
Gain on debt extinguishment
Tax adjustments1
Year Ended December 31,
2023
2022
$
(0.24) $
(0.09)
(0.10)
0.02
(0.07)
(0.73)
0.04
0.09
0.05
(0.15)
(0.03)
(0.13)
0.04
—
(0.25)
—
—
0.10
(0.42)
Total impact of non-comparable items per share — diluted:
$
(1.03) $
_____________________
1 In 2023, the Company recognized a discrete tax benefit of approximately $19 million related to the resolution of tax audits and reductions
in certain unrecognized tax benefits and accrued interest related to matters for which the statute of limitations had lapsed. In addition, the
Company recognized a discrete tax benefit of approximately $50 million related to the Spin-Off, a discrete tax benefit of approximately $30
million due to various changes in filling positions for prior years, and a discrete tax expense of approximately $79 million for changes in
judgement on the recovery of certain deferred tax assets. During the year ended December 31, 2022, the Company recognized discrete
tax benefits of $23 million, primarily related to a reduction in certain unrecognized tax benefits and accrued interest for a matter in which
the statute of limitations had lapsed.
Results by Reportable Segment
The Company’s business is aggregated into three reportable segments: Air Management, Drivetrain &
Battery Systems and ePropulsion. These segments are strategic business groups, which are managed
separately as each represents a specific grouping of related automotive components and systems. In
previous years, the Company presented its results under four reportable segments: Air Management,
ePropulsion & Drivetrain, Fuel Systems and Aftermarket. 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. As a result of the
Spin-Off, Fuel Systems and Aftermarket are no longer reportable segments.
Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by the
Company. Segment Adjusted Operating Income (Loss) is comprised of operating income adjusted for
restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense,
impairment charges and other items not reflective of ongoing operating income or loss. The Company
believes Segment Adjusted Operating Income (Loss) is most reflective of the operational profitability or loss
of its reportable segments.
Segment Adjusted Operating Income 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. The decrease in corporate expenses in 2023 is primarily
related to cost savings realized post PHINIA spin-off.
43
The following table presents net sales and Segment Adjusted Operating Income for the Company’s
reportable segments:
(in millions)
Air Management
Drivetrain & Battery Systems
ePropulsion
Year ended December 31, 2023
Year ended December 31, 2022
Segment
Adjusted
Operating
Income (Loss) % margin
Net sales
Segment
Adjusted
Operating
Income (Loss) % margin
Net sales
$
7,833 $
1,171
14.9 % $
7,137 $
1,073
15.0 %
4,348
2,166
545
12.5 %
(90)
(4.2) %
3,735
1,906
449
12.0 %
(88)
(4.6) %
Inter-segment eliminations
(149)
—
(143)
—
Totals
$
14,198 $
1,626
$
12,635 $
1,434
The Air Management segment’s net sales for the year ended December 31, 2023 increased $696 million,
or 10%, and Segment Adjusted Operating Income increased $98 million from the year ended December 31,
2022. 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. 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. Segment Adjusted Operating margin was
14.9% for the year ended December 31, 2023, compared to 15.0% in the year ended December 31, 2022.
The Segment Adjusted Operating margin decrease was primarily due to the impacts of charging business
losses.
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. 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. 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. Segment Adjusted Operating margin was 12.5% in the year
ended December 31, 2023, compared to 12.0% in the year ended December 31, 2022. The Segment
Adjusted Operating margin increase was primarily due to conversion on higher sales and customer
recoveries, partially offset by higher costs due to inflation and battery systems business losses.
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. Acquisitions contributed $28
million in additional sales during the year ended December 31, 2023. The increase excluding the impact of
foreign currencies was primarily due to approximately $224 million of volume, mix and net new business
driven by 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. Segment Adjusted Operating margin was (4.2)% in the year ended December 31,
2023, compared to (4.6)% in the year ended December 31, 2022. The Segment Adjusted Operating Loss
was primarily due to investments in R&D for eProducts. The Segment Adjusted Operating margin was
relatively flat as conversion on higher sales related to eProduct growth and customer recoveries were offset
by higher R&D for eProducts, higher input costs due to inflation and additional depreciation expense.
44
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains various liquidity sources, including cash and cash equivalents and the unused
portion of its multi-currency revolving credit agreement. 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. 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.
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. The Company uses its U.S.
liquidity primarily for various corporate purposes, including but not limited to debt service, share
repurchases, dividend distributions, acquisitions and other corporate expenses.
The Company has a $2.0 billion multi-currency revolving credit facility, which includes a feature that
allows the facility to be increased by $1.0 billion with bank group approval. 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.
The Company’s commercial paper program allows the Company to issue $2.0 billion of short-term,
unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under
this program, the Company may issue notes from time to time and use the proceeds for general
corporate purposes. The Company 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. 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. These dividends were paid on March 15, 2023, June 15, 2023, September 15, 2023 and
December 15, 2023, respectively. The Company’s third and fourth quarter cash dividend rate compared
to the second quarter dividend rate reflects the impact of the Spin-Off.
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. None of the Company's debt agreements require accelerated repayment in the
event of a downgrade in credit ratings.
45
Cash Flows
Operating Activities
(in millions)
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net earnings from continuing operations
Adjustments to reconcile net earnings from continuing operations to net cash provided by
operating activities from continuing operations:
Depreciation and tooling amortization
Intangible asset amortization
Restructuring expense, net of cash paid
Stock-based compensation expense
(Gain) loss on sales of businesses
Gain on debt extinguishment
Realized and unrealized loss on debt and equity securities
Deferred income tax benefit
Other non-cash adjustments
Adjustments to reconcile net earnings from continuing operations to net cash provided
by operating activities from continuing operations
Retirement plan contributions
Changes in assets and liabilities:
Receivables
Inventories
Accounts payable and accrued expenses
Other assets and liabilities
Year Ended December 31,
2023
2022
$
702 $
718
515
67
66
58
(5)
(28)
174
(44)
4
1,509
(19)
(482)
(72)
375
86
483
69
41
64
(16)
—
73
(76)
(3)
1,353
(21)
(409)
(158)
433
(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. 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
Investing Activities
(in millions)
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Capital expenditures, including tooling outlays
Payments for businesses acquired, net of cash and restricted cash acquired
Proceeds from sale of businesses, net of cash divested
Proceeds from settlement of net investment hedges, net
Proceeds from (payments for) investments in debt and equity securities, net
Proceeds from asset disposals and other, net
Year Ended December 31,
2023
2022
$
(832) $
(109)
9
25
284
30
(622)
(312)
27
40
(473)
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. In 2023, the Company acquired the electric vehicle solution,
smart grid and smart energy businesses of Hubei Surpass Sun Electric and the electric hybrid systems
business segment of Eldor Corporation. In 2022, the Company acquired Rhombus Energy Solutions,
Santroll Automotive Components and Drivetek AG. Additionally, in 2022, the Company invested $500
million in Wolfspeed convertible debt securities, which were sold in 2023. These impacts were partially
offset by proceeds related to the liquidation of the Company’s investment in Romeo Power, Inc., the sale
of the Company’s 60% interest in BorgWarner Romeo Power LLC and proceeds from net investment
hedges. As a percentage of sales, capital expenditures were 5.9% and 4.9% for the years ended
December 31, 2023 and 2022, respectively.
Financing Activities
(in millions)
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Additions to debt
Repayments of debt, including current portion
Payments for debt issuance costs
Payments for purchase of treasury stock
Payments for stock-based compensation items
Purchase of noncontrolling interest
Payments for contingent consideration
Net distribution from PHINIA
Dividends paid to BorgWarner stockholders
Dividends paid to noncontrolling stockholders
Year Ended December 31,
2023
2022
$
18 $
(451)
(3)
5
(13)
—
(177)
(240)
(25)
(15)
(23)
401
(130)
(116)
(18)
(56)
—
—
(161)
(81)
(564)
Net cash used in financing activities from continuing operations
$
(521) $
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. 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. Additionally, during the year ended December 31, 2023, the Company used $15
million to purchase the noncontrolling interest related to SeohanWarner Turbo Systems Ltd. in Korea.
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
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. The principal amount
of notes payable and long-term debt was $3,785 million as of December 31, 2023. The projected interest
payments over the terms of that debt were $761 million as of December 31, 2023. Refer to Note 14,
“Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this report for more
information.
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.
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. 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. The silicone carbine parts agreement is independent of the sale of the convertible debt
securities and remains effective as of December 31, 2023.
Management believes that the combination of cash from operations, cash balances, available credit
facilities, and the universal shelf registration capacity will be sufficient to satisfy the Company’s cash
needs for its current level of operations and its planned operations for the foreseeable future.
Management will continue to balance the Company’s needs for organic growth, inorganic growth, debt
reduction, cash conservation and return of cash to shareholders.
Postretirement Defined Benefits
The Company’s policy is to fund its defined benefit pension plans in accordance with applicable
government regulations and to make additional contributions when appropriate. 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. 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. 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. 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.
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
incurred. Other postemployment benefits had an unfunded status of $33 million and $37 million at
December 31, 2023 and 2022, respectively.
The Company believes it will be able to fund the requirements of these plans through cash generated
from operations or other available sources of financing for the foreseeable future.
Refer to Note 18, “Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of this
report for more information regarding costs and assumptions for employee retirement benefits.
OTHER MATTERS
Contingencies
In the normal course of business, the Company is party to various commercial and legal claims, actions
and complaints, including matters involving warranty claims, intellectual property claims, governmental
investigations and related proceedings, general liability and other risks. 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. 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.
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. Responsibility for clean-up
and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation
formula.
The Company believes that none of these matters, individually or in the aggregate, will have a material
adverse effect on its results of operations, financial position or cash flows. Generally, this is because
either the estimates of the maximum potential liability at a site are not material or the liability will be
shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any
such matter.
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
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States (“GAAP”). In preparing these financial statements, management has made
its best estimates and judgments of certain amounts included in the financial statements, giving due
consideration to materiality. Critical accounting policies are those that are most important to the portrayal
of the Company’s financial condition and results of operations. Some of these policies require
management's most difficult, subjective or complex judgments in the preparation of the financial
statements and accompanying notes. Management makes estimates and assumptions about the effect
of matters that are inherently uncertain, relating to the reporting of assets, liabilities, revenues, expenses
and the disclosure of contingent assets and liabilities. The Company’s most critical accounting policies
are discussed below.
Business combinations The Company allocates the cost of an acquired business to the assets
acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The
excess value of the cost of an acquired business over the estimated fair value of the assets acquired and
liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will
impact the determination of future operating results. 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. If goodwill is
assigned to more than one reporting unit, the Company utilizes a method that is consistent with the
manner in which the amount of goodwill in a business combination is determined. Costs related to the
acquisition of a business are expensed as incurred.
Acquired intangible assets include customer relationships, developed technology and trade names. The
Company estimates the fair value of acquired intangible assets using various valuation techniques. The
primary valuation techniques used include forms of the income approach, specifically the relief-from-
royalty and multi-period excess earnings valuation methods. Under these valuation approaches, the
Company is required to make estimates and assumptions from a market participant perspective, which
may include revenue growth rates, estimated earnings, royalty rates, obsolescence factors, contributory
asset charges, customer attrition and discount rates. Under the multi-period excess earnings method,
value is estimated as the present value of the benefits anticipated from ownership of the asset, in excess
of the returns required on the investment in contributory assets that are necessary to realize those
benefits. The intangible asset’s estimated earnings are determined as the residual earnings after
quantifying estimated earnings from contributory assets. When the Company estimates fair value using
the relief-from-royalty method, it calculates the cost savings associated with owning rather than licensing
the assets. Assumed royalty rates are applied to projected revenue for the remaining useful lives of the
assets to estimate the royalty savings.
While the Company uses its best estimates and assumptions, fair value estimates are inherently
uncertain and subject to refinement. As a result, during the measurement period, which may be up to one
year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities
assumed, with the corresponding offset to goodwill. Any adjustments required after the measurement
period are recorded in the consolidated statement of earnings.
Future changes in the judgments, assumptions and estimates that are used in acquisition valuations and
intangible asset and goodwill impairment testing, including discount rates or future operating results and
related cash flow projections, could result in significantly different estimates of the fair values in the future.
An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead
to a reduction in the estimated fair values, which may result in impairment charges that could materially
affect the Company’s financial statements in any given year.
50
Impairment of long-lived assets, including definite-lived intangible assets The Company reviews
the carrying value of its long-lived assets, whether held for use or disposal, including other amortizing
intangible assets, when events and circumstances warrant such a review under ASC Topic 360. In
assessing long-lived assets for an impairment loss, assets are grouped with other assets and liabilities at
the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets
and liabilities. In assessing long-lived assets for impairment, management generally considers individual
facilities to be the lowest level for which identifiable cash flows are largely independent. A recoverability
review is performed using the undiscounted cash flows if there is a triggering event. If the undiscounted
cash flow test for recoverability identifies a possible impairment, management will perform a fair value
analysis. Management determines fair value under ASC Topic 820 using the appropriate valuation
technique of market, income or cost approach. If the carrying value of a long-lived asset is considered
impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived
asset exceeds its fair value.
Management believes that the estimates of future cash flows and fair value assumptions are reasonable;
however, changes in assumptions underlying these estimates could affect the valuations. 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. Events and conditions that could result in impairment in the value of long-lived assets include
changes in the industries in which the Company operates, particularly the impact of a downturn in the
global economy, as well as competition and advances in technology, adverse changes in the regulatory
environment, or other factors leading to reduction in expected long-term sales or profitability.
Goodwill and other indefinite-lived intangible assets During the fourth quarter of each year, the
Company tests goodwill for impairment by either performing a qualitative assessment or a quantitative
analysis. The qualitative assessment evaluates various events and circumstances, such as
macroeconomic conditions, industry and market conditions, cost factors, relevant events and financial
trends, that may impact a reporting unit's fair value. Using this qualitative assessment, the Company
determines whether it is more-likely-than-not the reporting unit's fair value exceeds its carrying value. If it
is determined that it is not more-likely-than-not the reporting unit's fair value exceeds the carrying value,
or upon consideration of other factors, including recent acquisition, restructuring or disposal activity or to
refresh the fair values, the Company performs a quantitative goodwill impairment analysis. 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. 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 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 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. 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
• Revenue growth rates: The Company used a global automotive market industry growth rate
forecast adjusted to estimate its own market participation for product lines.
In 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.
Based on the assumptions outlined above, the impairment testing conducted in the fourth quarter of 2023
indicated the Company’s goodwill assigned to the respective reporting units was not impaired. Future
changes in the judgments, assumptions and estimates from those used in acquisition-related valuations
and goodwill impairment testing, including discount rates or future operating results and related cash flow
projections, could result in significantly different estimates of the fair values in the future. Due to the
Company’s recent acquisitions, there is less headroom (the difference between the carrying value and
the fair value) associated with certain of the Company’s reporting units. Based on the impairment testing
conducted in 2023, the amounts by which the estimated fair values of the Company’s goodwill reporting
units exceeded their carrying values ranged from 22% to 139%. An increase in discount rates, a
reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated
fair values, which may result in impairment charges that could materially affect the Company’s financial
statements in any given year.
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. If the Company elects to perform or is
required to perform a quantitative analysis, the test consists of a comparison of the fair value of the
indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The
Company estimates the fair value of indefinite-lived intangibles using the relief-from-royalty method,
which it believes is an appropriate and widely used valuation technique for such assets. The fair value
derived from the relief-from-royalty method is measured as the discounted cash flow savings realized
from owning such trade names and not being required to pay a royalty for their use.
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
Product warranties The Company provides warranties on some, but not all, of its products. The
warranty terms are typically from one to three years. Provisions for estimated expenses related to product
warranty are made at the time products are sold. These estimates are established using historical
information about the nature, frequency and average cost of warranty claim settlements as well as
product manufacturing and industry developments and recoveries from third parties. Management
actively studies trends of warranty claims and takes action to improve product quality and minimize
warranty claims. Costs of product recalls, which may include the cost of the product being replaced as
well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are
accrued as part of the Company’s warranty accrual at the time an obligation becomes probable and can
be reasonably estimated. 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. 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.
Postretirement defined benefits The Company provides postretirement defined benefits to a number of
its current and former employees. Costs associated with postretirement defined benefits include pension
and other postemployment health care expenses for former employees, retirees and surviving spouses
and dependents.
The Company’s defined benefit pension and other postemployment benefit plans are accounted for in
accordance with ASC Topic 715. The determination of the Company’s obligation and expense for its
pension and other postemployment benefits, such as retiree health care, is dependent on certain
assumptions used by actuaries in calculating such amounts. Certain assumptions, including the expected
long-term rate of return on plan assets, discount rate, rates of increase in compensation and health care
costs trends are described in Note 18, “Retirement Benefit Plans,” to the Consolidated Financial
Statements in Item 8 of this report. The effects of any modification to those assumptions, or actual results
that differ from assumptions used, are either recognized immediately or amortized over future periods in
accordance with GAAP.
The primary assumptions affecting the Company’s accounting for employee benefits under ASC Topics
712 and 715 as of December 31, 2023 are as follows:
• Expected long-term rate of return on plan assets: The expected long-term rate of return is used in
the calculation of net periodic benefit cost. The required use of the expected long-term rate of return
on plan assets may result in recognized returns that are greater or less than the actual returns on
those plan assets in any given year. Over time, however, the expected long-term rate of return on
plan assets is designed to approximate actual earned long-term returns. The expected long-term rate
of return for pension assets has been determined based on various inputs, including historical returns
for the different asset classes held by the Company’s trusts and its asset allocation, as well as inputs
from internal and external sources regarding expected capital market return, inflation and other
variables. The Company also considers the impact of active management of the plans’ invested
assets. In determining its pension expense for the year ended December 31, 2023, the Company
used long-term rates of return on plan assets ranging from 1.3% to 12% outside of the U.S. and 5% in
the U.S.
53
Actual returns on U.S. pension assets were 5.2 % and (17.9)% for the years ended December 31,
2023 and 2022, respectively, compared to the expected rate of return assumptions of 5% and 4.8%,
respectively, for the same years ended.
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 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. In determining the discount rate, the Company utilizes a full-yield approach in
the estimation of service and interest components by applying the specific spot rates along the yield
curve used in the determination of the benefit obligation to the relevant projected 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. The U.S. and U.K. discount rates reflect the fact that the
U.S. and U.K. pension plans have been closed for new participants.
• Health care cost trend: For postemployment employee health care plan accounting, the Company
reviews external data and Company-specific historical trends for health care cost to determine the
health care cost trend rate assumptions. 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.
While the Company believes that these assumptions are appropriate, significant differences in actual
experience or significant changes in these assumptions may materially affect the Company's pension and
OPEB and its future expense.
The sensitivity to a 25 basis-point change in the assumptions for discount rate and expected return on
assets related to 2024 pre-tax pension expense for Company sponsored U.S. and non-U.S. pension
plans is expected to be negligible.
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)
25 basis point decrease in discount rate
25 basis point increase in discount rate
Impact on U.S. PBO
Impact on Non-U.S.
PBO
$
$
3
$
(3) $
16
(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.
Refer to Note 18, “Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of this
report for more information regarding the Company’s retirement benefit plans.
Restructuring Restructuring costs may occur when the Company takes action to exit or significantly
curtail a part of its operations or implements a reorganization that affects the nature and focus of
54
operations. 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. 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. When a plan of separation requires approval by or
consultation with the relevant labor organization or government, the costs are recorded upon agreement.
Costs associated with benefits that are contingent on the employee continuing to provide service are
expensed over the required service period.
Income taxes The Company accounts for income taxes in accordance with ASC Topic 740. Deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between
financial statement carrying amounts of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if,
based on the weight of available evidence, it is more-likely-than-not that some portion or all of the
deferred tax assets will not be realized.
Accounting for income taxes is complex, in part because the Company conducts business globally and,
therefore, files income tax returns in numerous tax jurisdictions. Management judgment is required in
determining the Company’s worldwide provision for income taxes and recording the related assets and
liabilities, including accruals for unrecognized tax benefits and assessing the need for valuation
allowances. 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 determining the need for a valuation allowance, the historical and projected financial
performance of the operation recording the net deferred tax asset is considered along with any other
pertinent information. Since future financial results may differ from previous estimates, periodic
adjustments to the Company’s valuation allowance may be necessary.
The Company is subject to income taxes in the U.S. at the federal and state level and numerous non-
U.S. jurisdictions. The determination of accruals for unrecognized tax benefits includes the application of
complex tax laws in a multitude of jurisdictions across the Company's global operations. Management
judgment is required in determining the accruals for unrecognized tax benefits. In the ordinary course of
the Company’s business, there are many transactions and calculations where the ultimate tax
determination is less than certain. Accruals for unrecognized tax benefits are established when, despite
the belief that tax positions are supportable, there remain certain positions that do not meet the minimum
probability threshold, which is a tax position that is more-likely-than-not to be sustained upon examination
by the applicable taxing authority. 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. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the
taxing authorities may differ materially from the amounts accrued for each year.
The Company records valuation allowances to reduce the carrying value of certain deferred tax assets to
amounts that it expects are more-likely-than-not to be realized. 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
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. Such potential impact could be
material to the Company’s consolidated financial condition or results of operations for an individual
reporting period.
In future periods, the Company’s effective tax rate and tax liability may be impacted due to changes in
U.S. and non-U.S. tax laws and as a result of regulatory or legislative developments related to such laws.
This could include U.S. and non-U.S. tax law developments related to changes to long-standing tax
principles arising from proposals made by the Organization for Economic Co-operation and Development
that seek to allocate greater taxing rights to countries where customers are located and establish a global
minimum tax rate of at least 15%.
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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s primary market risks include fluctuations in interest rates and foreign currency exchange
rates. The Company is also affected by changes in the prices of commodities used or consumed in its
manufacturing operations. 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 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.
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. For quantitative disclosures about market risk, refer to Note 17, “Financial
Instruments,” to the Consolidated Financial Statements in Item 8 of this report for information with respect
to interest rate risk, foreign currency exchange rate risk and commodity purchase price risk.
Interest Rate Risk
Interest rate risk is the risk that the Company will incur economic losses due to adverse changes in
interest rates. The Company manages its interest rate risk by monitoring its exposure to fixed and
variable rates while attempting to optimize its interest costs. The Company selectively uses interest rate
swaps to reduce market value risk associated with changes in interest rates (fair value hedges). At
December 31, 2023, all of the Company’s long-term debt had fixed interest rates.
56
Foreign Currency Exchange Rate Risk
Foreign currency exchange rate risk is the risk that the Company will incur economic losses due to
adverse changes in foreign currency exchange rates. Currently, the Company’s most significant currency
exposures relate to the Brazilian Real, British Pound, Chinese Renminbi, Euro, Korean Won, Mexican
Peso, Polish Zloty, Singapore Dollar and Thailand Baht. The Company mitigates its foreign currency
exchange rate risk by establishing local production facilities and related supply chain participants in the
markets it serves, by invoicing customers in the same currency as the source of the products and by
funding some of its investments in foreign markets through local currency loans. The Company also
monitors its foreign currency exposure in each country and implements strategies to respond to changing
economic and political environments. In addition, the Company regularly enters into forward currency
contracts, cross-currency swaps and foreign currency-denominated debt designated as net investment
hedges to reduce exposure to translation exchange rate risk. 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).
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.
(in millions, except for percentages)
Chinese Renminbi
Korean Won
Euro
(in millions, except for percentages)
Chinese Renminbi
Euro
British Pound
Korean Won
India Rupee
Commodity Price Risk
December 31, 2023
(3) % $
(3) % $
(61)
(11)
3 % $
9
December 31, 2022
(8) % $
(201)
(6) % $
(11) % $
(6) % $
(10) % $
(46)
(40)
(25)
(11)
Commodity price risk is the possibility that the Company will incur economic losses due to adverse
changes in the cost of raw materials used in the production of its products. 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.
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
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative information regarding market risk, refer to the discussion in Item 7 of this
report under the caption “Quantitative and Qualitative Disclosures about Market Risk.”
For information regarding interest rate risk, foreign currency exchange risk and commodity price risk,
refer to Note 17, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this report.
For 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. 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
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Data
Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
60
63
64
65
66
67
68
59
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of BorgWarner Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of BorgWarner Inc. and its subsidiaries (the
“Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of
comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31,
2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have
audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded
Hubei Surpass Sun Electric’s charging business and Eldor Corporation’s electric hybrid systems business from its
assessment of internal control over financial reporting as of December 31, 2023 because they were acquired by the
Company in purchase business combinations during 2023. We have also excluded Hubei Surpass Sun Electric’s
charging business and Eldor Corporation’s electric hybrid systems business from our audit of internal control over
financial reporting. Hubei Surpass Sun Electric’s charging business and Eldor Corporation’s electric hybrid systems
business are wholly-owned subsidiaries whose total assets and total net sales excluded from management’s
assessment and our audit of internal control over financial reporting collectively represent less than 1% of the
related consolidated financial statement amounts as of and for the year ended December 31, 2023.
60
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Worldwide Provision for Income Taxes
As described in Notes 1 and 7 to the consolidated financial statements, the Company recorded income taxes from
continuing operations of $289 million for the year ended December 31, 2023. Management judgment is required in
determining the Company’s worldwide provision for income taxes and recording the related assets and liabilities,
including accruals for unrecognized tax benefits and assessing the need for valuation allowances. As disclosed by
management, accounting for income taxes is complex, in part because the Company conducts business globally
and, therefore, files income tax returns in numerous tax jurisdictions. The Company is subject to income taxes in the
U.S. at the federal and state level and numerous non-U.S. jurisdictions. In the ordinary course of the Company’s
business, there are many transactions and calculations where the ultimate tax determination is less than certain.
Accruals for unrecognized tax benefits are established when, despite the belief that tax positions are supportable,
there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is
more-likely-than-not to be sustained upon examination by the applicable taxing authority. The determination of
accruals for unrecognized tax benefits includes the application of complex tax laws in a multitude of jurisdictions
across the Company’s global operations. The Company records valuation allowances to reduce the carrying value
of deferred tax assets to amounts that it expects are more-likely-than-not to be realized. The Company assesses
existing deferred tax assets, net operating loss carryforwards, and tax credit carryforwards by jurisdiction and
expectations of its ability to utilize these tax attributes through a review of past, current, and estimated future taxable
income and tax planning strategies.
The principal considerations for our determination that performing procedures relating to management’s worldwide
provision for income taxes is a critical audit matter are (i) the significant judgment by management when developing
the worldwide provision for income taxes, (ii) a high degree of auditor judgment, subjectivity and effort in performing
procedures and evaluating management’s worldwide provision for income taxes, including the accruals for
unrecognized tax benefits and valuation allowances on deferred tax assets, and (iii) the audit effort involved the use
of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to management’s worldwide provision for income taxes, including controls over accruals for
61
unrecognized tax benefits and valuation allowances on deferred tax assets. These procedures also included,
among others, (i) testing the accuracy of the worldwide provision for income taxes, including the rate reconciliation
and permanent and temporary differences, (ii) evaluating the completeness of the accruals for unrecognized tax
benefits, (iii) evaluating the reasonableness of management’s more-likely-than-not determination in consideration of
the tax laws in relevant jurisdictions, and (iv) evaluating the reasonableness of management’s assessment of the
realizability of its deferred tax assets based on expectations of the ability to utilize its tax attributes through a review
of historical and estimated future taxable income and tax planning strategies. Professionals with specialized skill
and knowledge were used to assist in (i) testing the accuracy of the worldwide provision for income taxes, (ii)
evaluating the completeness of the accruals for unrecognized tax benefits, (iii) evaluating the reasonableness of
management’s more-likely-than-not determination in consideration of the tax laws in relevant jurisdictions, and (iv)
evaluating the reasonableness of management’s assessment of the realizability of its deferred tax assets.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
February 8, 2024
We have served as the Company’s auditor since 2008.
62
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
ASSETS
Cash, cash equivalents and restricted cash
Receivables, net
Inventories, net
Prepayments and other current assets
Current assets of discontinued operations
Total current assets
Property, plant and equipment, net
Investments and long-term receivables
Goodwill
Other intangible assets, net
Other non-current assets
Non-current assets of discontinued operations
Total assets
LIABILITIES AND EQUITY
Notes payable and other short-term debt
Accounts payable
Other current liabilities
Current liabilities of discontinued operations
Total current liabilities
Long-term debt
Retirement-related liabilities
Other non-current liabilities
Non-current liabilities of discontinued operations
Total liabilities
Commitments and contingencies
Capital stock:
Preferred stock, $0.01 par value; authorized shares: 5,000,000; none issued and outstanding
Common stock, $0.01 par value; authorized shares: 390,000,000; issued shares: (2023 -
283,575,876; 2022 - 283,575,876); outstanding shares: (2023 - 229,783,795; 2022 - 234,122,211)
Non-voting common stock, $0.01 par value; authorized shares: 25,000,000; none issued and
outstanding
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
December 31,
2023
2022
$
1,534 $
3,109
1,313
261
—
6,217
3,783
364
3,013
564
512
—
1,083
2,471
1,217
230
1,616
6,617
3,426
819
2,978
619
489
2,046
$
14,453 $
16,994
$
73 $
2,546
1,148
—
3,767
60
2,146
1,084
946
4,236
3,707
4,140
146
767
—
129
686
295
8,387
9,486
—
3
—
—
3
—
2,689
6,152
2,675
7,454
(828)
(876)
Common stock held in treasury, at cost: (2023 - 53,792,081 shares; 2022 - 49,453,665 shares)
(2,188)
(2,032)
Total BorgWarner Inc. stockholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
5,828
238
6,066
7,224
284
7,508
$
14,453 $
16,994
See Accompanying Notes to Consolidated Financial Statements.
63
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring expense
Other operating expense, net
Operating income
Equity in affiliates’ earnings, net of tax
Realized and unrealized loss on debt and equity securities
Interest expense, net
Other postretirement expense (income)
Earnings from continuing operations before income taxes and noncontrolling
interest
Provision for income taxes
Net earnings from continuing operations
Net (loss) earnings from discontinued operations
Net earnings
Net earnings from continuing operations attributable to the noncontrolling
interest, net of tax
Net earnings attributable to BorgWarner Inc.
Amounts attributable to BorgWarner Inc.:
Net earnings from continuing operations
Net (loss) earnings from discontinued operations
Net earnings attributable to BorgWarner Inc.
Earnings per share from continuing operations — basic
Earnings per share from discontinued operations — basic
Earnings per share attributable to BorgWarner Inc. — basic
Earnings per share from continuing operations — diluted
Earnings per share from discontinued operations — diluted
Earnings per share attributable to BorgWarner Inc. — diluted
Weighted average shares outstanding:
Basic
Diluted
Year Ended December 31,
2023
2022
2021
$
14,198 $
11,630
2,568
12,635 $
10,266
2,369
11,803
9,630
2,173
1,316
79
13
1,160
(30)
174
10
15
991
289
702
(7)
695
70
1,290
48
22
1,009
(28)
73
51
—
913
195
718
308
1,026
82
$
$
$
$
$
$
$
625 $
944 $
632 $
(7)
625 $
2.71 $
(0.03)
2.68 $
2.70 $
(0.03)
2.67 $
636 $
308
944 $
2.70 $
1.31
4.01 $
2.69 $
1.30
3.99 $
1,085
108
66
914
(42)
362
91
(7)
510
65
445
194
639
102
537
343
194
537
1.44
0.81
2.25
1.43
0.81
2.24
232.8
234.4
235.5
236.8
238.1
239.5
See Accompanying Notes to Consolidated Financial Statements.
64
—
202
100
637
102
(6)
733
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Net earnings attributable to BorgWarner Inc.
Other comprehensive (loss) income
Foreign currency translation adjustments1
Hedge instruments1
Postretirement defined benefit plans1
Total other comprehensive (loss) income attributable to BorgWarner Inc.
Year Ended December 31,
2023
2022
2021
$
625 $
944 $
537
(327)
(102)
31
24
(7)
48
4
(2)
(325)
Comprehensive income attributable to BorgWarner Inc.1
673
619
Net earnings attributable to noncontrolling interest, net of tax
Other comprehensive (loss) income attributable to the noncontrolling interest1
Comprehensive income
____________________________________
1 Net of income taxes.
70
(8)
82
(24)
$
735 $
677 $
See Accompanying Notes to Consolidated Financial Statements.
65
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Year Ended December 31,
2023
2022
2021
Net cash provided by operating activities (see Note 25)
$
1,397 $
1,180 $
1,210
INVESTING ACTIVITIES OF CONTINUING OPERATIONS
Capital expenditures, including tooling outlays
Capital expenditures for damage to property, plant and equipment
Insurance proceeds received for damage to property, plant and equipment
(832)
(622)
(514)
—
—
—
—
(2)
5
Payments for businesses acquired, net of cash and restricted cash acquired
(109)
(312)
(759)
Proceeds from sale of businesses, net of cash divested
Proceeds from settlement of net investment hedges, net
Proceeds from (payments for) investments in debt and equity securities, net
Proceeds from asset disposals and other, net
9
25
284
30
27
40
(473)
20
22
11
(20)
8
Net cash used in investing activities from continuing operations
(593)
(1,320)
(1,249)
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Additions to debt
Repayments of debt, including current portion
Payments for debt issuance costs
Payments for purchase of treasury stock
Payments for stock-based compensation items
Purchase of noncontrolling interest
Payments for contingent consideration
Net distribution from PHINIA
Dividends paid to BorgWarner stockholders
Dividends paid to noncontrolling stockholders
Net cash (used in) provided by financing activities from continuing operations
CASH FLOWS FROM DISCONTINUED OPERATIONS
Operating activities of discontinued operations
Investing activities of discontinued operations
Financing activities of discontinued operations
Net cash (used in) provided by discontinued operations
Effect of exchange rate changes on cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Less: Cash, cash equivalents and restricted cash of discontinued operations at end
of year
Cash, cash equivalents and restricted cash of continuing operations at end of year
$
$
$
18
(451)
(3)
(177)
(25)
(15)
(23)
401
(130)
(116)
(521)
(85)
(86)
84
(87)
—
196
5
(13)
—
(240)
(18)
(56)
—
—
(161)
(81)
(564)
390
(99)
(3)
288
(90)
(506)
1,338
1,844
1,534 $
1,338 $
1,286
(699)
(11)
—
(15)
(33)
—
—
(162)
(72)
294
97
(147)
(8)
(58)
(3)
194
1,650
1,844
— $
255 $
295
1,534 $
1,083 $
1,549
See Accompanying Notes to Consolidated Financial Statements.
66
BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Number of shares
BorgWarner Inc. stockholder's equity
(in millions, except share data)
Issued
common
stock
Common
stock held in
treasury
Issued
common
stock
Capital in
excess of
par value
Treasury
stock
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Noncontrolling
interests
Total
Balance, January 1, 2021
283,575,876
(44,645,173) $
3 $
2,614 $
(1,834) $
6,296 $
(651) $
296 $
6,724
Dividends declared ($0.68 per
share)1
Net issuance for executive stock plan
Net issuance of restricted stock
Acquisition of AKASOL
Purchase and reclass of
noncontrolling interest
Net earnings
Other comprehensive loss
—
—
—
—
—
—
—
—
89,787
756,402
—
—
—
—
—
—
—
—
—
—
—
—
19
5
—
(1)
—
—
—
2
20
—
—
—
—
(162)
—
—
—
—
537
—
—
—
—
—
—
—
100
(84)
(246)
—
—
96
(90)
102
(6)
21
25
96
(91)
639
94
Balance, December 31, 2021
283,575,876
(43,798,984) $
3 $
2,637 $
(1,812) $
6,671 $
(551) $
314 $
7,262
Dividends declared ($0.68 per
share)1
Net issuance for executive stock plan
Net issuance of restricted stock
Purchase of treasury stock
Purchase/sale of noncontrolling
interest
Net earnings
Other comprehensive loss
—
—
—
—
—
—
—
—
181,212
583,021
(6,418,914)
—
—
—
—
—
—
—
—
—
—
—
28
9
—
1
—
—
—
4
16
(240)
—
—
—
(161)
—
—
—
—
944
—
—
—
—
—
—
—
(325)
(85)
(246)
—
—
—
(3)
82
(24)
32
25
(240)
(2)
1,026
(349)
Balance, December 31, 2022
283,575,876
(49,453,665) $
3 $
2,675 $
(2,032) $
7,454 $
(876) $
284 $
7,508
Dividends declared ($0.56 per
share)1
Net issuance for executive stock plan
Net issuance of restricted stock
Purchase of treasury stock
Purchase of noncontrolling interest
Net earnings
Other comprehensive income
Spin-Off of PHINIA
—
—
—
—
—
—
—
—
—
238,708
687,799
(5,264,923)
—
—
—
—
—
—
—
—
—
—
—
—
—
9
7
—
(2)
—
—
—
—
5
16
(177)
—
—
—
—
(130)
—
—
—
—
625
—
—
—
—
—
—
—
64
(1,797)
(16)
(95)
(225)
—
—
—
(13)
70
(8)
—
14
23
(177)
(15)
695
56
(1,813)
Balance, December 31, 2023
283,575,876
(53,792,081) $
3 $
2,689 $
(2,188) $
6,152 $
(828) $
238 $
6,066
____________________________________
1 Dividends declared relate to BorgWarner common stock.
See Accompanying Notes to Consolidated Financial Statements.
67
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
BorgWarner Inc. (together with its Consolidated Subsidiaries, the “Company”) 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. The Company’s products help improve vehicle performance,
propulsion efficiency, stability and air quality. The Company manufactures and sells these products
worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars,
sport-utility vehicles (“SUVs”), vans and light trucks). The Company's products are also sold to OEMs of
commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles
(agricultural and construction machinery and marine applications). The Company 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.
On July 3, 2023, BorgWarner completed the previously announced spin-off (“Spin-Off”) of its Fuel
Systems and Aftermarket segments by the distribution of 100% of the outstanding common stock of
PHINIA, Inc. (“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”). 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.
In connection with the Spin-Off, the Company entered into several agreements with PHINIA on or prior to
the Distribution Date that, among other things, provide a framework for the Company’s relationship with
PHINIA after the Spin-Off, including a separation and distribution agreement, an employee matters
agreement, a tax matters agreement, an intellectual property cross-license agreement and a transition
services agreement through which the Company and PHINIA will continue to provide certain services to
each other following the Spin-Off.
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following paragraphs briefly describe the Company’s significant accounting policies.
Basis of presentation Certain prior period amounts have been reclassified to conform to current period
presentation.
As discussed in the Introduction above, as a result of the Spin-Off, the historical results of operations and
the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations
in these Consolidated Financial Statements. Refer to Note 26, “Discontinued Operations,” to the
Consolidated Financial Statements for more information.
The Company’s Consolidated Financial Statements reflect the results of acquisitions following the date of
the respective acquisition. Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial
Statements for more information.
Use of estimates The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) requires management to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities as of the date of the financial statements and the
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
accompanying notes, as well as the amounts of revenues and expenses reported during the periods
covered by these financial statements and accompanying notes. Actual results could differ from those
estimates.
Principles of consolidation The Consolidated Financial Statements include all majority-owned
subsidiaries in which the Company has a controlling financial interest. All inter-company balances and
transactions have been eliminated in consolidation.
Joint ventures and equity securities The Company has investments in two unconsolidated joint
ventures, NSK-Warner K.K. and Turbo Energy Private Limited, of which the Company owns 50% and
32.6%, respectively. These joint ventures are non-controlled affiliates in which the Company exercises
significant influence but does not have a controlling financial interest and, therefore, are accounted for
under the equity method. Generally, under the equity method, the Company’s original investments in
these joint ventures are recorded at cost and subsequently adjusted by the Company’s share of equity in
income or losses. The Company monitors its equity method investments for indicators of other-than-
temporary declines in fair value on an ongoing basis. If such a decline has occurred, an impairment
charge is recorded, which is measured as the difference between the carrying value and the estimated
fair value. The Company’s investment in these non-controlled affiliates is included within Investments and
long-term receivables in the Consolidated Balance Sheets. The Company’s share of equity in income or
losses is included in Equity in affiliates’ earnings, net of tax in the Consolidated Statements of Operations.
The Company also has certain investments for which it does not have the ability to exercise significant
influence (generally when ownership interest is less than 20%). The Company’s investment in these
equity securities is included within Investments and long-term receivables in the Consolidated Balance
Sheet. Refer to Note 10, “Other Current and Non-Current Assets,” to the Consolidated Financial
Statements for more information.
Interests in privately held companies that do not have readily determinable fair values are accounted for
using the measurement alternative under ASC Topic 321, “Investments - Equity Securities,” which
includes monitoring on an ongoing basis for indicators of impairments or upward adjustments. These
equity securities are measured at cost less impairments, adjusted for observable price changes in orderly
transactions for the identical or similar investment of the same issuer. If the Company determines that an
indicator of impairment or upward adjustment is present, an adjustment is recorded, which is measured
as the difference between carrying value and estimated fair value. Estimated fair value is generally
determined using an income approach on discounted cash flows or negotiated transaction values.
Equity securities that have readily determinable fair values are measured at fair value. Equity securities
that do not have a readily determinable fair value and which provide a net asset value (“NAV”) or its
equivalent, are valued using NAV as a practical expedient. Changes in fair value and NAV are recorded in
Realized and unrealized loss on debt and equity securities in the Consolidated Statements of Operations.
Debt securities During 2022, the Company invested $500 million in convertible debt securities of
Wolfspeed, Inc. (“Wolfspeed”) as part of a strategic partnership with Wolfspeed. The Company elected to
classify the debt security as trading and remeasured the investment quarterly using fair value in
accordance with ASC Topic 320, “Investments.” In 2023, the investment in Wolfspeed was disposed and
recorded a loss in Realized and unrealized loss on debt and equity securities in the Consolidated
Statements of Operations. Refer to Note 16, “Fair Value Measurements,” to the Consolidated Financial
Statements for more information regarding the fair value of the convertible debt securities.
The Company’s investment in the debt securities was included within Investments and long-term
receivables in the Consolidated Balance Sheets. The changes in fair value are recorded in Realized and
unrealized loss on debt and equity securities in the Consolidated Statements of Operations.
Business combinations In accordance with ASC Topic 805, “Business Combinations,” acquisitions are
recorded using the acquisition method of accounting. The Company includes the operating results of
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
acquired entities from their respective dates of acquisition. The Company recognizes and measures the
identifiable assets acquired, liabilities assumed, and any non-controlling interest at the acquisition date
fair value. Various valuation techniques are used to determine the fair value of intangible assets, with the
primary techniques being forms of the income approach, specifically the relief-from-royalty and multi-
period excess earnings valuation methods. Under these valuation approaches, the Company is required
to make estimates and assumptions from a market participant perspective that may include revenue
growth rates, estimated earnings, royalty rates, obsolescence factors, contributory asset charges,
customer attrition and discount rates. The excess, if any, of total consideration transferred in a business
combination over the fair value of identifiable assets acquired, liabilities assumed and any non-controlling
interest is recognized as goodwill. Costs incurred as a result of a business combination other than costs
related to the issuance of debt or equity securities are recorded in the period the costs are incurred.
During the measurement period, which may be up to one year from the acquisition date, the Company
may record adjustments to assets acquired and liabilities assumed with the corresponding offset to
goodwill.
Revenue recognition Revenue is recognized when performance obligations under the terms of a
contract are satisfied, which generally occurs with the transfer of control of the products. For most
products, transfer of control occurs upon shipment or delivery; however, a limited number of customer
arrangements for highly customized products with no alternative use provide the Company with the right
to payment during the production process. As a result, for these limited arrangements, revenue is
recognized as goods are produced and control transfers to the customer using the input cost-to-cost
method. Revenue is measured at the amount of consideration the Company expects to receive in
exchange for transferring the goods. Although the Company may enter into long-term supply
arrangements with its major customers, the prices and volumes are not fixed over the life of the
arrangements, and a contract does not exist for purposes of applying ASC Topic 606, “Revenue from
Contracts with Customers,” until volumes are contractually known.
Sales incentives and allowances (including returns) are recognized as a reduction to revenue at the time
of the related sale. The Company estimates the allowances based on an analysis of historical experience.
Taxes assessed by a governmental authority collected by the Company concurrent with a specific
revenue-producing transaction are excluded from net sales. Shipping and handling fees billed to
customers are included in sales, while costs of shipping and handling are included in cost of sales. The
Company has elected to apply the accounting policy election available under ASC Topic 606 and
accounts for shipping and handling activities as a fulfillment cost.
The Company has a limited number of arrangements with customers where the price paid by the
customer is dependent on the volume of product purchased over the term of the arrangement. In other
arrangements, the Company will provide a rebate to customers based on the volume of products
purchased during the course of the arrangement. The Company estimates the volumes to be sold over
the term of the arrangement and recognizes revenue based on the estimated amount of consideration to
be received from these arrangements.
The Company continually seeks business development opportunities and at times provides customer
incentives for new program awards. The Company evaluates the underlying economics of each amount
of consideration payable to a customer to determine the proper accounting by understanding the reasons
for the payment, the rights and obligations resulting from the payment, the nature of the promise in the
contract, and other relevant facts and circumstances. When the Company determines that the payments
are incremental and incurred only if the new business is obtained and expects to recover these amounts
from the customer over the term of the new business arrangement, the Company capitalizes these
amounts. The Company recognizes a reduction to revenue as products that the upfront payments are
related to are transferred to the customer, based on the total amount of products expected to be sold over
the term of the arrangement (generally three to seven years). The Company evaluates the amounts
capitalized each period end for recoverability and expenses any amounts that are no longer expected to
be recovered over the term of the business arrangement.
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Refer to Note 3, “Revenue from Contracts with Customers,” to the Consolidated Financial Statements for
more information.
Cost of sales The Company includes materials, direct labor and manufacturing overhead within cost of
sales. Manufacturing overhead is comprised of indirect materials, indirect labor, factory operating costs,
warranty costs and other such costs associated with manufacturing products for sale.
Cash and cash equivalents Cash and cash equivalents are valued at fair market value. It is the
Company's policy to classify all highly liquid investments with original maturities of three months or less
as cash and cash equivalents. Cash and cash equivalents are maintained with several financial
institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and are maintained with financial institutions
of reputable credit and, therefore, bear minimal risk.
Restricted cash Restricted cash includes amounts designated for uses other than current operations
and is related to the Company’s commitment to acquire or invest in certain companies. As of
December 31, 2023, the Company had no restricted cash. As of December 31, 2022, the Company had
restricted cash of $5 million.
Receivables, net and long-term receivables Accounts receivable and long-term receivables are stated
at cost less an allowance for credit losses. An allowance for credit losses is recorded for amounts that
may become uncollectible in the future. The allowance for credit losses is an estimate based on expected
losses, current economic and market conditions, and a review of the current status of each customer’s
accounts receivable.
Inventories, net The majority of inventory is measured using first-in, first-out (“FIFO”) or average-cost
methods at the lower of cost or net realizable value, with the exception of certain U.S. inventories that are
determined using the last-in, first-out (“LIFO”) method at the lower of cost or market. Inventory held by
U.S. operations using the LIFO method was $116 million and $184 million at December 31, 2023 and
2022, respectively. Such inventories, if valued at current cost instead of LIFO, would have been greater
by $32 million and $25 million at December 31, 2023 and 2022, respectively. Refer to Note 9,
“Inventories, Net,” to the Consolidated Financial Statements for more information.
Pre-production costs related to long-term supply arrangements Engineering, research and
development and other design and development costs for products sold on long-term supply
arrangements are expensed as incurred unless the Company has a contractual guarantee for
reimbursement from the customer. Costs for molds, dies and other tools used to make products sold on
long-term supply arrangements for which the Company has title to the assets are capitalized in property,
plant and equipment and amortized to cost of sales over the shorter of the term of the arrangement or
over the estimated useful lives of the assets, typically three to five years. Costs for molds, dies and other
tools used to make products sold on long-term supply arrangements for which the Company has a
contractual guarantee for lump sum reimbursement from the customer are capitalized in prepayments
and other current assets.
Property, plant and equipment, net Property, plant and equipment is valued at cost less accumulated
depreciation. Expenditures for maintenance, repairs and renewals of relatively minor items are generally
charged to expense as incurred. Renewals of significant items are capitalized. Depreciation is generally
computed on a straight-line basis over the estimated useful lives of the assets. Useful lives for buildings
range from 15 to 40 years, and useful lives for machinery and equipment range from three to 12 years.
For income tax purposes, accelerated methods of depreciation are generally used. Refer to Note 11,
“Property, Plant and Equipment, Net,” to the Consolidated Financial Statements for more information.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Impairment of long-lived assets, including definite-lived intangible assets The Company reviews
the carrying value of its long-lived assets, whether held for use or disposal, including other amortizing
intangible assets, when events and circumstances warrant such a review under ASC Topic 360,
“Property, Plant and Equipment.” In assessing long-lived assets for an impairment loss, assets are
grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities. In assessing long-lived assets for
impairment, management generally considers individual facilities to be the lowest level for which
identifiable cash flows are largely independent. A recoverability review is performed using the
undiscounted cash flows if there is a triggering event. If the undiscounted cash flow test for recoverability
identifies a possible impairment, management will perform a fair value analysis. Management determines
fair value under ASC Topic 820, “Fair Value Measurement,” using the appropriate valuation technique of
market, income or cost approach. If the carrying value of a long-lived asset is considered impaired, an
impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds
its fair value.
Management believes that the estimates of future cash flows and fair value assumptions are reasonable;
however, changes in assumptions underlying these estimates could affect the valuations. 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.
Goodwill and other intangible assets During the fourth quarter of each year, the Company tests
goodwill for impairment by either performing a qualitative assessment or a quantitative analysis. The
qualitative assessment evaluates various events and circumstances, such as macroeconomic conditions,
industry and market conditions, cost factors, relevant events and financial trends, that may impact a
reporting unit's fair value. Using this qualitative assessment, the Company determines whether it is more-
likely-than-not the reporting unit's fair value exceeds its carrying value. If it is determined that it is not
more-likely-than-not the reporting unit's fair value exceeds the carrying value, or upon consideration of
other factors, including recent acquisition, restructuring or disposal activity or to refresh the fair values,
the Company performs a quantitative goodwill impairment analysis. 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 has definite-lived intangible assets related to patents and developed technology, customer
relationships and trade names. The Company amortizes definite-lived intangible assets over their
estimated useful lives. The Company also has intangible assets related to acquired trade names that are
classified as indefinite-lived when there are no foreseeable limits on the periods of time over which they
are expected to contribute cash flows. Costs to renew or extend the term of acquired intangible assets
are recognized as expense as incurred.
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. If the Company elects to perform or is
required to perform a quantitative analysis, the test consists of a comparison of the fair value of the
indefinite-lived intangible asset to the carrying value of the asset as of the impairment testing date. The
Company estimates the fair value of indefinite-lived intangibles using the relief-from-royalty method,
which it believes is an appropriate and widely used valuation technique for such assets. The fair value
derived from the relief-from-royalty method is measured as the discounted cash flow savings realized
from owning such trade names and not being required to pay a royalty for their use.
Refer to Note 12, “Goodwill and Other Intangibles,” to the Consolidated Financial Statements for more
information.
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Assets and liabilities held for sale The Company classifies assets and liabilities (disposal groups) to be
sold as held for sale in the period in which all of the following criteria are met: management, having the
authority to approve the action, commits to a plan to sell the disposal group; the disposal group is
available for immediate sale in its present condition subject only to terms that are usual and customary
for sales of such disposal groups; an active program to locate a buyer and other actions required to
complete the plan to sell the disposal group have been initiated; the sale of the disposal group is
probable, and transfer of the disposal group is expected to qualify for recognition as a completed sale
within one year, except if events or circumstances beyond the Company’s control extend the period of
time required to sell the disposal group beyond one year; the disposal group is being actively marketed
for sale at a price that is reasonable in relation to its current fair value; and actions required to complete
the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be
withdrawn.
The Company initially measures a disposal group that is classified as held for sale at the lower of its
carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized
in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale
of a disposal group until the date of sale. The Company assesses the fair value of a disposal group, less
any costs to sell, each reporting period it remains classified as held for sale and reports any subsequent
changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value
does not exceed the carrying value of the disposal group at the time it was initially classified as held for
sale. Additionally, depreciation is not recorded during the period in which the long-lived assets, included in
the disposal group, are classified as held for sale.
Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company
reports the assets and liabilities of the disposal group, if material, in the line items assets held for sale
and liabilities held for sale in the Consolidated Balance Sheets.
Product warranties The Company provides warranties on some, but not all, of its products. The
warranty terms are typically from one to three years. Provisions for estimated expenses related to product
warranty are made at the time products are sold. These estimates are established using historical
information about the nature, frequency and average cost of warranty claim settlements as well as
product manufacturing and industry developments and recoveries from third parties. Management
actively studies trends of warranty claims and takes action to improve product quality and minimize
warranty claims. Costs of product recalls, which may include the cost of the product being replaced as
well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are
accrued as part of the Company’s warranty accrual at the time an obligation becomes probable and can
be reasonably estimated. Management believes that the warranty accrual is appropriate; however, actual
claims incurred could differ from the original estimates, requiring adjustments to the accrual. The product
warranty accrual is allocated to current and non-current liabilities in the Consolidated Balance Sheets.
Refer to Note 13, “Product Warranty,” to the Consolidated Financial Statements for more information.
Other loss accruals and valuation allowances The Company has numerous other loss exposures,
such as customer claims, workers’ compensation claims, litigation and recoverability of certain assets.
Establishing loss accruals or valuation allowances for these matters requires the use of estimates and
judgment in regard to the risk exposure and ultimate realization. The Company estimates losses using
consistent and appropriate methods; however, changes to its assumptions could materially affect the
recorded accrued liabilities for loss or asset valuation allowances.
Environmental contingencies The Company accounts for environmental costs in accordance with ASC
Topic 450, “Contingencies.” Costs related to environmental assessments and remediation efforts at
operating facilities are accrued when it is probable that a liability has been incurred and the amount of
73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
that liability can be reasonably estimated. Estimated costs are recorded at undiscounted amounts, based
on experience and assessments and are regularly evaluated. The liabilities are recorded in Other current
and Other non-current liabilities in the Company’s Consolidated Balance Sheets.
Refer to Note 21, “Contingencies,” to the Consolidated Financial Statements for more information.
Government grants The Company periodically receives government grants representing assistance
provided by a government. These government grants are generally received in cash and typically provide
reimbursement related to acquisition of property and equipment, product development or local
governmental economic relief. The government grants are generally amortized using a systematic and
rational method over the life of the grant. As of December 31, 2023, the Company recorded government
grant related liabilities of $3 million in Other current liabilities and $50 million in Other non-current
liabilities in the Company’s Consolidated Balance Sheet. During the year ended December 31, 2023, the
Company recorded $37 million and $12 million of government grant-related credits in Selling, general and
administrative expenses and Cost of sales, respectively, in the Company’s Consolidated Statement of
Operations.
Derivative financial instruments The Company recognizes that certain normal business transactions
and foreign currency operations generate risk. Examples of risks include exposure to exchange rate risk
related to transactions denominated in currencies other than the functional currency, changes in
commodity costs and interest rates. It is the objective of the Company to assess the impact of these
transaction risks and offer protection from selected risks through various methods, including financial
derivatives. Virtually all derivative instruments held by the Company are designated as hedges, have high
correlation with the underlying exposure and are highly effective in offsetting underlying price movements.
Accordingly, gains and losses from changes in qualifying hedge fair values are matched with the
underlying transactions. Hedge instruments are generally reported gross, with no right to offset, on the
Consolidated Balance Sheets at their fair value based on quoted market prices for contracts with similar
maturities. The Company does not engage in any derivative transactions for purposes other than hedging
specific operational risks.
Refer to Note 17, “Financial Instruments,” to the Consolidated Financial Statements for more information.
Foreign currency The financial statements of foreign subsidiaries are translated to U.S. Dollars using
the period-end exchange rate for assets and liabilities and an average exchange rate for each period for
revenues, expenses and capital expenditures. The local currency is the functional currency for
substantially all of the Company's foreign subsidiaries. Translation adjustments for foreign subsidiaries
are recorded as a component of accumulated other comprehensive income (loss) in equity. The
Company recognizes transaction gains and losses arising from fluctuations in currency exchange rates
on transactions denominated in currencies other than the functional currency in earnings as incurred.
Refer to Note 20, “Accumulated Other Comprehensive Loss,” to the Consolidated Financial Statements
for more information.
Postretirement defined benefits The Company’s defined benefit pension and other postemployment
benefit plans are accounted for in accordance with ASC Topic 715, “Compensation - Retirement
Benefits.” Disability, early retirement and other postemployment benefits are accounted for in accordance
with ASC Topic 712, “Compensation - Nonretirement Postemployment Benefits.”
Pensions and other postemployment benefit costs and related liabilities and assets are dependent upon
assumptions used in calculating such amounts. These assumptions include discount rates, expected
returns on plan assets, health care cost trends, compensation and other factors. In accordance with
GAAP, actual results that differ from the assumptions used are accumulated and amortized over future
periods, and accordingly, generally affect recognized expense in future periods.
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Refer to Note 18, “Retirement Benefit Plans,” to the Consolidated Financial Statements for more
information.
Restructuring Restructuring costs may occur when the Company takes action to exit or significantly
curtail a part of its operations or implements a reorganization that affects the nature and focus of
operations. 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. 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. When a plan of separation requires approval by or
consultation with the relevant labor organization or government, the costs are recorded upon agreement.
Costs associated with benefits that are contingent on the employee continuing to provide service are
expensed over the required service period.
Refer to Note 4, “Restructuring,” to the Consolidated Financial Statements for more information.
Income taxes In accordance with ASC Topic 740, “Income Taxes,” the Company’s income tax expense
is calculated based on expected income and statutory tax rates in the various jurisdictions in which the
Company operates and requires the use of management’s estimates and judgments. Accounting for
income taxes is complex, in part because the Company conducts business globally and, therefore, files
income tax returns in numerous tax jurisdictions. Management judgment is required in determining the
Company’s worldwide provision for income taxes and recording the related assets and liabilities, including
accruals for unrecognized tax benefits and assessing the need for valuation allowances.
The determination of accruals for unrecognized tax benefits includes the application of complex tax laws
in a multitude of jurisdictions across the Company’s global operations. Management judgment is required
in determining the gross unrecognized tax benefits’ related liabilities. In the ordinary course of the
Company’s business, there are many transactions and calculations where the ultimate tax determination
is less than certain. Accruals for unrecognized tax benefits are established when, despite the belief that
tax positions are supportable, there remain certain positions that do not meet the minimum probability
threshold, which is a tax position that is more-likely-than-not to be sustained upon examination by the
applicable taxing authority.
The Company records valuation allowances to reduce the carrying value of deferred tax assets to
amounts that it expects are more-likely-than-not to be realized. The Company assesses existing deferred
tax assets, net operating losses and tax credit carryforwards by jurisdiction and expectations of its ability
to utilize these tax attributes through a review of past, current and estimated future taxable income and
tax planning strategies.
Refer to Note 7, “Income Taxes,” to the Consolidated Financial Statements for more information.
75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
New Accounting Pronouncements
Recently Adopted Accounting Standards
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for
Contract Assets and Contract Liabilities from Contracts with Customers.” It requires entities to apply Topic
606 to recognize and measure contract assets and contract liabilities in a business combination. The
amendments improve comparability after the business combination by providing consistent recognition
and measurement guidance for revenue contracts with customers acquired in a business combination
and revenue contracts with customers not acquired in a business combination. This guidance is effective
for interim and annual reporting periods beginning after December 15, 2022. The Company adopted this
guidance prospectively as of January 1, 2023, and there was no impact related to the 2023 acquisitions
in the Consolidated Financial Statements.
Accounting Standards Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements
to Reportable Segment Disclosures.” It requires incremental disclosures related to an entity’s reportable
segments, including (i) significant segment expense categories and amounts for each reportable segment
that are provided to the chief operating decision maker (“CODM”), (ii) an aggregate amount and
description of other segment items included in each reported measure, (iii) all annual disclosures about a
reportable segment’s profit or loss and assets required by Topic 280, to be disclosed in interim periods,
(iv) title and position of the individual or the name of the group identified as the CODM and (v)
explanation of how the CODM uses the reported measures of segment profit or loss to assess
performance and allocate resources to the segment. The standard improves transparency by providing
disaggregated expense information about an entity’s reportable segments. The standard does not change
the definition of a segment, the method for determining segments or the criteria for aggregating operating
segments into reportable segments. This guidance is effective for annual reporting periods beginning
after December 15, 2023, and interim reporting periods beginning after December 15, 2024. The
Company does not expect this guidance to have a material impact on its Consolidated Financial
Statements.
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to
Income Tax Disclosures.” It requires entities to disaggregate information related to the effective tax rate
reconciliation and income taxes paid. The standard improve transparency by providing more detailed
income tax disclosures that would be useful in making capital allocation decisions. This guidance is
effective for annual reporting periods beginning after December 15, 2024. The Company does not expect
this guidance to have a material impact on its Consolidated Financial Statements.
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 2
ACQUISITIONS AND DISPOSITIONS
Acquisitions
In accordance with ASC Topic 805, “Business Combinations,” acquisitions are recorded using the
acquisition method of accounting. The Company recognizes and measures the acquisition date fair value
of the identifiable assets acquired, liabilities assumed, and any non-controlling interest using a range of
methodologies as indicated by generally accepted valuation practices. Various valuation techniques are
used to determine the fair value of intangible assets, with the primary techniques being forms of the
income approach, specifically the relief-from-royalty and multi-period excess earnings valuation methods.
Under these valuation approaches, the Company is required to make estimates and assumptions from a
market participant perspective and may include revenue growth rates, estimated earnings, royalty rates,
obsolescence factors, contributory asset charges, customer attrition and discount rates. For each
acquisition disclosed below, management used a third-party valuation firm to assist in the determination
of the provisional purchase accounting fair values; however, management ultimately oversees the third-
party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company.
Due to the insignificant size of the 2023, 2022 and 2021 acquisitions, both individually and in the
aggregate, relative to the Company, supplemental pro forma financial information for the current and prior
reporting periods is not provided.
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. The Company expects the
acquisition 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.
Pursuant to the Agreement, the Company is obligated to remit up to €175 million ($191 million) of earn-
out payments contingent upon booked business for future periods from new customer awards. 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 or in
the Company’s Consolidated Balance Sheet.
The purchase price was allocated on a provisional basis as of December 1, 2023. Assets acquired and
liabilities assumed were recorded at estimated fair values based on management’s estimates, available
information, and supportable assumptions that management considered reasonable. Certain estimated
values for the acquisition, including goodwill, tangible, and intangible assets and deferred taxes, are not
yet finalized, and the provisional purchase price allocations are subject to change as the Company
completes its analysis of the fair value at the date of acquisition. The final valuation of assets acquired
and liabilities assumed may be materially different than the estimated values shown below.
The estimated fair values of assets acquired and liabilities assumed as of December 1, 2023 were assets
of $86 million, including goodwill and intangibles of $25 million, and liabilities of $8 million.
Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill.
Goodwill of $14 million was recorded within the Company’s ePropulsion segment. Goodwill consists of
the Company’s expected future economic benefits that will be realized from expanding the Company’s
electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not expected to
be deductible for tax purposes in Italy.
In connection with the acquisition, the Company preliminarily recorded $11 million for intangible assets,
primarily for customer relationships and developed technology. The provisional fair values of goodwill and
identifiable intangible assets were valued using the market approach.
77
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The impact of the Eldor acquisition on net sales and net earnings was immaterial for the year ended
December 31, 2023.
Hubei Surpass Sun Electric Charging Business
On March 1, 2023, the Company completed its acquisition of 100% of the electric vehicle solution, smart
grid and smart energy businesses (“SSE”) 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. 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 base purchase price in the
year ended December 31, 2023. Of the remaining ¥51 million ($8 million) of base purchase price, ¥31
million ($5 million) is payable by April 30, 2024 and is recorded in Other current liabilities in the
Company’s Consolidated Balance Sheet as of December 31, 2023. The remaining ¥20 million ($3 million)
of base purchase price is payable before April 30, 2025 and is recorded in Other non-current liabilities in
the Company’s Consolidated Balance Sheet as of December 31, 2023. Pursuant to the agreement, the
Company’s obligation to remit up to ¥103 million ($15 million) of earn-out payments is contingent upon
the achievement of certain revenue and pre-tax profit margin targets in 2023 and 2024 as well as the
retention of key employees during the same time period. As of December 31, 2023, the Company’s
estimate of the earn-out payments was approximately ¥20 million ($3 million), of which half is recorded in
Other current liabilities and half is recorded in Other non-current liabilities in the Company’s Consolidated
Balance Sheet.
The purchase price was allocated on a provisional basis as of March 1, 2023, and all assets acquired and
liabilities assumed were recorded at estimated fair values based on management’s estimates, available
information, and supportable assumptions that management considered reasonable. The Company
subsequently finalized its valuation of the assets and liabilities of the SSE acquisition during the third
quarter of 2023, and the estimated fair values of assets acquired and liabilities assumed amounted to
total assets of $50 million, including goodwill and intangibles of $5 million, and total liabilities of $8 million.
These final amounts were not materially different than the estimated values recorded on March 1, 2023.
Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill.
Goodwill of $2 million was recorded within the Company’s Air Management segment. Goodwill consists of
the Company’s expected future economic benefits that will be realized from expanding the Company’s
electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not deductible for
tax purposes in China.
The following table summarizes the other intangible assets acquired:
(in millions)
Developed technology
Customer relationships
Total other intangible assets
Estimated
Life
Estimated
Fair Value
5 years
6 years
$
$
2
1
3
Identifiable intangible assets were valued using the income approach.
The impact of the SSE acquisition on net sales and net earnings was immaterial for the year ended
December 31, 2023.
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Drivetek AG
On December 1, 2022, the Company completed its acquisition of 100% of Drivetek AG (“Drivetek”), 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. The Company paid ₣27 million ($29 million) at closing, and up to
₣10 million ($10 million) could be paid in the form of contingent earn-out payments over the three years
following closing. The earn-out payments are contingent upon achievement of estimated future sales
targets associated with newly awarded business and future turnover rate targets. As of December 31,
2023, the Company’s estimate of the earn-out payments was approximately ₣10 million ($12 million),
which is recorded in Other non-current liabilities in the Company’s Consolidated Balance Sheet.
The purchase price was allocated on a preliminary basis as of December 1, 2022. Assets acquired and
liabilities assumed were recorded at estimated fair values based on management’s estimates, available
information, and supportable assumptions that management considered reasonable. The Company
subsequently finalized its valuation of the assets and liabilities of the Drivetek acquisition during the third
quarter of 2023, and the estimated fair values of assets acquired and liabilities assumed amounted to
total assets of $49 million, including goodwill and intangibles of $40 million, and liabilities of $10 million.
These final amounts were not materially different than the estimated values recorded on December 1,
2022.
Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill.
Goodwill of $22 million was recorded within the Company’s Air Management segment. Goodwill consists
of the Company’s expected future economic benefits that will be realized from expanding the Company’s
electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not expected to
be deductible for tax purposes.
The following table summarizes the other intangible assets acquired:
(in millions)
Developed technology
Customer relationships
Total other intangible assets
Estimated
Life
Estimated
Fair Value
8 years
12 years
$
$
11
7
18
Identifiable intangible assets were valued using the market approach.
The impact of the Drivetek acquisition on net sales and net earnings was immaterial for the year ended
December 31, 2022.
Rhombus Energy Solutions
On July 29, 2022, the Company completed its acquisition of 100% of Rhombus Energy Solutions
(“Rhombus”), a provider of charging solutions in the North American market, pursuant to the terms of an
Agreement and Plan of Merger (the “Agreement”). The acquisition is expected to complement the
Company’s existing European charging footprint to accelerate organic growth and adds North American
regional presence to its charging business.
The Company paid $131 million at closing. Pursuant to the Agreement, the Company is obligated to remit
up to $30 million of earn-out payments, payable in 2025, contingent upon achievement of certain sales
dollars, sales volume, and gross margin targets. The Company’s current estimates indicate that the
minimum thresholds for these earn-out targets will not be achieved, thus no amount for the earn-out
payments has been included in the purchase consideration or in the Company’s Consolidated Balance
Sheet. Additionally, pursuant to the Agreement, the Company is obligated to remit up to $25 million over
79
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the three years following closing in key employee retention related payments, which include certain
performance targets. The amounts will be accounted for as post-combination expense.
The Company finalized its valuation of the assets and liabilities for the Rhombus acquisition during the
second quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets was
recognized as goodwill. Goodwill of $104 million was recorded within the Company’s Air Management
segment. Goodwill consists of the Company’s expected future economic benefits that will be realized
from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to
increase. Goodwill is not expected to be deductible for tax purposes.
The following table summarizes the other intangible assets acquired:
(in millions)
Developed technology
Customer relationships
Total other intangible assets
Estimated
Life
Estimated
Fair Value
13 years
$
8 years
$
22
5
27
Identifiable intangible assets were valued using the income approach.
The impact of the Rhombus acquisition on net sales and net earnings was immaterial for the year ended
December 31, 2022.
Santroll Automotive Components
On March 31, 2022, the Company completed its acquisition of 100% of Santroll Automotive Components
(“Santroll”), a carve-out of Santroll Electric Auto’s eMotor business, pursuant to the terms of an Equity
Transfer Agreement (“ETA”). The acquisition is expected to strengthen the Company’s vertical integration,
scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to market.
The total final consideration was $192 million, including approximately ¥1.0 billion ($152 million) of base
purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company
paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended December 31,
2022 and no longer expects to recapture a previously anticipated $5 million of post-closing adjustments,
which has been recorded in Other operating expense, net. Pursuant to the ETA, the obligation of the
Company to remit up to ¥0.3 billion (approximately $47 million) of earn-out payments was contingent
upon achievement of certain sales volume targets and certain estimated future volume targets associated
with newly awarded business. As of December 31, 2023, the Company paid ¥0.2 billion ($24 million) to
settle the remaining earn-out liability and related adjustments.
The Company finalized its valuation of the assets and liabilities of the Santroll acquisition during the first
quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets was
recognized as goodwill. Goodwill of $112 million was recorded within the Company’s ePropulsion
segment. Goodwill consists of the Company’s expected future economic benefits that will arise from
future product sales and the added capabilities from vertical integration of eMotors. Goodwill is not
expected to be deductible for tax purposes in China.
The following table summarizes the other intangible assets acquired:
(in millions)
Customer relationships
Manufacturing processes (know-how)
Total other intangible assets
80
Estimated
Life
Estimated
Fair Value
12 years
$
10 years
$
62
25
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Identifiable intangible assets were valued using the income approach.
The impact of the Santroll acquisition on net sales and net earnings was immaterial for the year ended
December 31, 2022.
AKASOL AG
On June 4, 2021, the Company completed its voluntary public takeover offer for shares of AKASOL AG
(“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid
approximately €648 million ($788 million) to settle the offer. During 2021, the Company purchased
additional shares of AKASOL for €28 million ($33 million) increasing its ownership to 93% as of
December 31, 2021.
At December 31, 2021, the noncontrolling interest in AKASOL of approximately €51 million ($58 million),
which was to be acquired through a merger squeeze-out process (the “Squeeze Out”). On February 10,
2022, the Company completed the registration of the Squeeze Out resulting in 100% ownership. The
Company settled the Squeeze Out with AKASOL minority shareholders in the first quarter of 2022.
The acquisition is expected to further strengthen BorgWarner’s commercial vehicle and industrial
electrification capabilities, which positions the Company to capitalize on what it believes to be a fast-
growing battery module and pack market. Following the June 4, 2021 acquisition date, AKASOL’s
operations had net sales of $67 million for the year ended December 31, 2021. The impact on net
earnings was immaterial for the year ended December 31, 2021.
Romeo Power, Inc.
In May 2019, the Company invested $50 million in exchange for a 20% equity interest in Romeo
Systems, Inc. (“Romeo”), a technology-leading battery module and pack supplier that was then privately
held. On December 29, 2020, through the business combination of Romeo Systems, Inc. and special
purpose acquisition company RMG Acquisition Corporation, a new entity, Romeo Power, Inc., became a
publicly listed company. The Company’s ownership in Romeo was reduced to 14%, and the investment
was recorded at fair value on an ongoing basis with changes in fair value being recognized in Realized
and unrealized loss on debt and equity securities in the Consolidated Statements of Operations. During
the years ended December 31, 2021 and 2020, the Company recorded a loss of $362 million and a gain
of $382 million, respectively, to adjust the carrying value of the Company’s investment to fair value.
During the year ended December 31, 2022, the Company recorded a loss of $39 million and liquidated its
investment in Romeo shares at a fair value of $31 million. As of March 17, 2022, the Company no longer
held any investment in Romeo.
In September 2019, the Company and Romeo contributed total equity of $10 million and formed a new
joint venture, BorgWarner Romeo Power LLC (“Romeo JV”), in which the Company owned a 60%
interest. Romeo JV was a variable interest entity focusing on producing battery module and pack
technology. The Company was the primary beneficiary of Romeo JV and had consolidated Romeo JV in
its consolidated financial statements. On October 25, 2021, the Company delivered written notice to
Romeo that the Company was electing to exercise its right to put its ownership stake in Romeo JV to
Romeo. Based on an independent appraisal, the Company’s interest in Romeo JV was valued at
$30 million. In February 2022, the Company completed the sale of its 60% interest in the Romeo JV for
$29 million, the fair value of $30 million reduced by a 5% discount pursuant to the joint venture
agreement. During the year ended December 31, 2022, the Company recorded a gain of $22 million in
Other operating expense, net, which represented the difference between the Company’s book value of its
interest in Romeo JV compared to the fair value of consideration received. As a result of the sale, the
Company has no further rights in or involvement with Romeo JV.
81
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Dispositions
PHINIA Inc.
On July 3, 2023, BorgWarner completed the previously announced Spin-Off of its Fuel Systems and
Aftermarket segments by the distribution of 100% of the outstanding common stock of 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”). 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.
In connection with the Spin-Off, the Company entered into several agreements with PHINIA on or prior to
the Distribution Date that, among other things, provide a framework for the Company’s relationship with
PHINIA after the Spin-Off, including a separation and distribution agreement, an employee matters
agreement, a tax matters agreement, an intellectual property cross-license agreement and a transition
services agreement through which the Company and PHINIA will continue to provide certain services to
each other following the Spin-Off.
Refer to Note 26, “Discontinued Operations” to the Consolidated Financial Statements for more
information.
Water Valley
In 2021, the Company announced its strategy to aggressively grow its electrification product portfolio over
time through organic investments and technology-focused acquisitions. Additionally, the Company
announced a plan to dispose of certain internal combustion assets in support of that strategy. In
December 2021, the Company entered into a definitive agreement to sell its Water Valley, Mississippi
manufacturing facility (“Water Valley”) and the associated solenoid, transmission control module and stop/
start accumulator system business for an estimated $57 million. The consideration consisted of
$39 million in cash and promissory notes and up to $30 million in potential earn-out payments. The
Company included $18 million as contingent consideration in the proceeds, which reflected its original
estimate of the payout pursuant to the earn-out. During the year ended December 31, 2022, the
Company changed its estimate of the expected earn-out and recorded a pre-tax loss of $9 million in
Other operating expense, net. During the year ended December 31, 2023, the Company and the buyer
agreed on a final settlement of $14 million for the earn-out and recorded a pre-tax gain of $5 million in
Other operating expense, net. As of December 31, 2023, the unpaid portion of $5 million of the contingent
consideration and the $10 million remaining on the promissory notes were included in Receivables, net
and Investments and long-term receivables, respectively, on the Consolidated Balance Sheet.
Water Valley had net sales of $177 million during the year ended December 31, 2021 and was included in
the Company’s Drivetrain & Battery Systems segment. On December 31, 2021, upon the closing of the
transaction, based upon the final transaction price agreed to in the fourth quarter of 2021, the Company
recorded a loss on divestiture of $22 million.
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 3
REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company manufactures and sells products, primarily to OEMs of light vehicles and, to a lesser
extent, to other OEMs of commercial vehicles and off-highway vehicles, to certain tier one vehicle
systems suppliers and into the aftermarket. The Company’s payment terms are based on customary
business practices and vary by customer type and products offered. The Company has evaluated the
terms of its arrangements and determined that they do not contain significant financing components.
Generally, revenue is recognized upon shipment or delivery; however, a limited number of the Company’s
customer arrangements for its highly customized products with no alternative use provide the Company
with the right to payment during the production process. As a result, for these limited arrangements,
revenue is recognized as goods are produced and control transfers to the customer using the input cost-
to-cost method. The Company recorded a contract asset of $18 million and $14 million at December 31,
2023 and 2022, respectively, for these arrangements. These amounts are reflected in Prepayments and
other current assets in the Company’s Consolidated Balance Sheets.
In limited instances, certain customers have provided payments in advance of receiving related products,
typically at the onset of an arrangement prior to the beginning of production. These contract liabilities are
reflected as Other current liabilities in the Consolidated Balance Sheets and were $18 million at
December 31, 2023 and $14 million at December 31, 2022, respectively. These amounts are reflected as
revenue over the term of the arrangement (typically three to seven years) as the underlying products are
shipped and represent the Company’s remaining performance obligations as of the end of the period.
The Company continually seeks business development opportunities and at times provides customer
incentives for new program awards. When the Company determines that the payments are incremental
and incurred only if the new business is obtained and expects to recover these amounts from the
customer over the term of the new business arrangement, the Company capitalizes these amounts. As of
December 31, 2023 and 2022, the Company recorded customer incentive payments of $27 million and
$34 million, respectively, in Prepayments and other current assets, and $58 million and $99 million,
respectively, in Other non-current assets in the Consolidated Balance Sheets.
83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s products can be disaggregated by two types: eProducts and Foundational products.
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. Foundational products include all products utilized on internal
combustion engines plus those same products and components that are also included in hybrid
powertrains. The following table represents a disaggregation of revenue from contracts with customers by
Foundational products and eProducts for the years ended December 31, 2023, 2022, and 2021.
(in millions)
Foundational products
eProducts
Total
Year Ended December 31,
2023
2022
2021
$
$
12,161 $
11,163 $
11,061
2,037
1,472
742
14,198 $
12,635 $
11,803
The following table represents a disaggregation of revenue from contracts with customers by reportable
segment and region for the years ended December 31, 2023, 2022, and 2021. Refer to Note 24,
“Reportable Segments and Related Information” to the Consolidated Financial Statements for more
information.
(in millions)
North America
Europe
Asia
Other
Total
(in millions)
North America
Europe
Asia
Other
Total
(in millions)
North America
Europe
Asia
Other
Total
Year ended December 31, 2023
Air
Management
Drivetrain &
Battery
Systems
ePropulsion
Total
$
2,103 $
1,532 $
458 $
3,377
2,068
202
1,332
1,474
8
372
1,268
4
4,093
5,081
4,810
214
$
7,750 $
4,346 $
2,102 $
14,198
Year ended December 31, 2022
Air
Management
Drivetrain &
Battery
Systems
ePropulsion
Total
$
1,998 $
1,371 $
500 $
2,872
2,024
182
1,003
1,379
—
198
1,099
9
3,869
4,073
4,502
191
$
7,076 $
3,753 $
1,806 $
12,635
Year ended December 31, 2021
Air
Management
Drivetrain &
Battery
Systems
ePropulsion
Total
$
1,700 $
1,309 $
324 $
2,808
2,105
148
773
1,577
—
210
849
—
3,333
3,791
4,531
148
$
6,761 $
3,659 $
1,383 $
11,803
84
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 4 RESTRUCTURING
The Company’s restructuring activities are undertaken as necessary to execute management’s strategy
and streamline operations, consolidate and take advantage of available capacity and resources, and
ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize
the Company’s business and to relocate operations to best-cost locations.
The Company’s restructuring expenses consist primarily of employee termination benefits (principally
severance and/or other termination benefits) and other costs, which are primarily professional fees and
costs related to facility closures and exits.
(in millions)
Year ended December 31, 2023
Employee termination benefits
Other
Total restructuring expense
Year ended December 31, 2022
Employee termination benefits
Other
Total restructuring expense
Year ended December 31, 2021
Employee termination benefits
Other
Total restructuring expense
Air
Management
Drivetrain &
Battery
Systems
ePropulsion
Corporate
Total
$
$
$
$
$
$
67 $
7
74 $
2 $
2
4 $
24 $
14 $
—
9
24 $
23 $
34 $
11 $
18
36
52 $
47 $
1 $
—
1 $
— $
1
1 $
— $
7
7 $
— $
—
— $
— $
—
— $
— $
2
2 $
70
9
79
38
10
48
45
63
108
The following table displays a roll forward of the restructuring liability recorded within the Company’s
Consolidated Balance Sheets and the related cash flow activity:
(in millions)
Balance at January 1, 2022
Restructuring expense, net
Cash payments
Foreign currency translation adjustment and other
Balance at December 31, 2022
Restructuring expense, net
Cash payments
Foreign currency translation adjustment and other
Balance at December 31, 2023
Less: Non-current restructuring liability
Current restructuring liability at December 31, 2023
Employee
termination
benefits
Other
Total
$
66 $
13 $
38
(58)
(7)
39
70
10
(19)
5
9
9
(43)
(13)
2
68 $
7
2
7 $
—
61 $
7 $
$
$
79
48
(77)
(2)
48
79
(56)
4
75
7
68
2023 Structural Costs Plan 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.
85
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2020 Structural Costs Plan In February 2020, the Company announced a $300 million restructuring
plan to address existing structural costs. The actions under this plan are complete.
2019 Legacy Delphi Technologies Plan In 2019, legacy Delphi Technologies announced a restructuring
plan to reshape and realign its global technical center footprint and reduce salaried and contract staff.
The actions under this plan are complete.
The following provides details of restructuring expense incurred by the Company’s reportable segments
during the years ended December 31, 2023, 2022 and 2021, related to the plans discussed above:
Air Management
2023 Structural Costs Plan
• During the year ended December 31, 2023, the segment recorded $74 million of
restructuring costs under this plan, primarily related to employee termination benefits
associated with the announced closure of a facility in Europe affecting approximately 200
employees.
2020 Structural Costs Plan
• During the year ended December 31, 2022, the segment recorded $24 million of
restructuring costs under this plan. This primarily related to $18 million for two voluntary
termination programs pursuant to which approximately 74 employees accepted termination
packages in 2022.
• During the year ended December 31, 2021, the segment recorded $48 million of
restructuring costs, of which $23 million related to a voluntary termination program where
approximately 140 employees accepted termination packages in 2021, and $25 million
related to severance costs and professional fees for specific actions to reduce structural
costs.
2019 Legacy Delphi Technologies Plan
• During the year ended December 31, 2021, the segment recorded $4 million of
restructuring costs, primarily related to severance costs.
Drivetrain & Battery Systems
2023 Structural Costs Plan
• During the year ended December 31, 2023, the segment recorded $4 million of
restructuring costs under this plan, primarily related to employee termination benefits and
equipment moves.
2020 Structural Costs Plan
• During the year ended December 31, 2022, the segment recorded $9 million of
restructuring costs primarily related to contractual settlements and professional fees.
• During the year ended December 31, 2021, the segment recorded $47 million of
restructuring costs, of which $36 million primarily related to severance costs, equipment
relocation and professional fees to reduce existing structural costs, and $11 million related
86
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
to contractual settlements, professional fees and other costs associated with the
announced closure of a facility in Europe.
• During the year ended December 31, 2022, the segment recorded $14 million of restructuring
costs, primarily related to severance costs associated with the announced closure of a technical
center in Europe affecting approximately 80 employees.
ePropulsion
2023 Structural Costs Plan
• During the year ended December 31, 2023, the segment recorded $1 million of
restructuring costs under this plan, primarily related to employee termination benefits.
2020 Structural Costs Plan
• During the year ended December 31, 2022, the segment recorded $1 million of
restructuring costs, primarily related to equipment relocation costs.
• During the year ended December 31, 2021, the segment recorded $7 million of
restructuring costs, primarily related to legal, professional fees, and equipment relocation
costs.
Corporate
• During the year ended December 31, 2021, $2 million of net restructuring costs were recorded for
various corporate restructuring actions.
Estimates of restructuring expense are based on information available at the time such charges are
recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts
paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record
revisions of previous estimates by adjusting previously established accruals.
The Company continues to evaluate different options across its operations to reduce existing structural
costs over the next few years. The Company will recognize restructuring expense associated with any
future actions at the time they are approved and become probable or are incurred. Any future actions
could result in significant restructuring expense.
NOTE 5
RESEARCH AND DEVELOPMENT COSTS
The Company’s net Research & Development (“R&D”) expenditures are primarily included in Selling,
general and administrative expenses of the Consolidated Statements of Operations. Customer
reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost.
Customer reimbursements for prototypes are recorded net of prototype costs based on customer
contracts, typically either when the prototype is shipped or when it is accepted by the customer.
Customer reimbursements for engineering services are recorded when performance obligations are
satisfied in accordance with the contract. Financial risks and rewards transfer upon shipment, acceptance
of a prototype component by the customer or upon completion of the performance obligation as stated in
the respective customer agreement. The Company has various customer arrangements relating to R&D
activities that it performs at its various R&D locations.
87
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the Company’s gross and net expenditures on R&D activities:
(in millions)
Gross R&D expenditures
Customer reimbursements
Net R&D expenditures
Year Ended December 31,
2023
2022
2021
$
$
856 $
(139)
717 $
787 $
(86)
701 $
694
(108)
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.
NOTE 6 OTHER OPERATING EXPENSE, NET
Items included in Other operating expense, net consist of:
(in millions)
Merger and acquisition expense, net
Asset impairments and lease modifications
Gain on sale of assets
Spin-Off transition services income, net
(Gain) loss on sale of business
Other income, net
Other operating expense, net
Year Ended December 31,
2023
2022
2021
$
23 $
9 $
29
(13)
(10)
(5)
(11)
$
13 $
30
—
—
(13)
(4)
22 $
48
—
—
—
29
(11)
66
Merger and acquisition expense, net: During the year ended December 31, 2023, the Company
recorded merger and acquisition expense, net of $23 million, primarily related to professional fees for
specific acquisition initiatives. This merger and acquisition expense, net included an $8 million loss
related to a change in estimate of the expected earn-out estimate associated with the Santroll acquisition.
During the year ended December 31, 2022, the Company recorded merger and acquisition expense, net
of $9 million, primarily related to professional fees for specific acquisition initiatives. During the year
ended December 31, 2021, the Company recorded merger and acquisition expense of $48 million,
primarily for professional fees associated with the Company’s acquisition of AKASOL.
Asset impairments and lease modifications: During the year ended December 31, 2023, the Company
recorded charges of $29 million, primarily related to the write down of a customer incentive asset, a
service and lease agreement termination and impairment of certain property, plant and equipment. During
the year ended December 31, 2022, the Company recorded an impairment charge of $30 million to
remove the AKASOL indefinite-lived trade name as the Company no longer plans to utilize this trade
name in the business. Refer to Note 12 “Goodwill and Other Intangibles,” to the Consolidated Financial
Statement for more information.
Gain on sale of assets: During the year ended December 31, 2023, the Company recorded a
$13 million gain on sale of fixed assets, primarily attributed to the sale of a European manufacturing
facility and other fixed assets. The sale of the facility was pursuant to a formal restructuring plan.
Spin-Off transition services income, net: During the year ended December 31, 2023, the Company
recorded other income in the amount of $10 million for net service reimbursements related to the Spin-
Off. These services provided include information technology, human resources, finance, facilities,
procurement, sales, intellectual properties and engineering. Refer to Note 26 - “Discontinued Operations,”
to the Consolidated Financial Statements for more information.
88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Gain) loss on sale of business: During the year ended December 31, 2023, the Company recorded a
net gain on sales of businesses of $5 million. During the year ended December 31, 2022, the Company
recorded a net gain on sales of businesses of $13 million, which included a $22 million gain related to the
sale of its interest in BorgWarner Romeo Power LLC and a $9 million loss related to a change in estimate
of the expected earn-out related to the divestiture of the Company’s Water Valley facility. During the year
ended December 31, 2021, the Company recorded a pre-tax loss of $29 million, which included a
$22 million loss in connection with the divestiture of the Company’s Water Valley facility and a $7 million
loss on the sale of an ePropulsion technical center in Europe. Refer to Note 2 “Acquisitions and
Dispositions,” to the Consolidated Financial Statements for more information.
NOTE 7
INCOME TAXES
Earnings before income taxes and the provision for income taxes are presented in the following table.
(in millions)
Earnings (loss) before income taxes:
U.S.1
Non-U.S.1
Total
Provision for income taxes:
Current:
Federal
State
Foreign
Total current expense
Deferred:
Federal
State
Foreign
Total deferred (benefit) expense
Total provision for income taxes
Year Ended December 31,
2023
2022
2021
(316) $
(40) $
(523)
1,307
953
991 $
913 $
1,033
510
42 $
49 $
8
299
349
(85)
—
25
(60)
289 $
7
233
289
(54)
(8)
(32)
(94)
195 $
15
5
232
252
(90)
(10)
(87)
(187)
65
$
$
$
$
__________________________
1 In 2023, the U.S. loss before income taxes was primarily due to the realized and unrealized loss on debt and equity securities of
$174 million that was primarily related to the Company’s investment in Wolfspeed convertible debt securities that was sold
during the year. In 2021, the U.S. loss before income taxes was primarily related to the $362 million unrealized loss related to
the Company’s investment in Romeo Power, Inc.
The provision for income taxes resulted in an effective tax rate of approximately 29%, 21% and 13% for
the years ended December 31, 2023, 2022 and 2021, respectively.
89
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides a reconciliation of tax expense based on the U.S. statutory tax rate to final
tax expense.
(in millions)
Income taxes at U.S. statutory rate of 21%
Increases (decreases) resulting from:
Valuation allowance adjustments, net
Net tax on remittance of foreign earnings
Foreign rate differentials
U.S. tax on foreign earnings
State taxes, net of federal benefit
Other permanent differences
Impact of tax law and rate change
Affiliates' earnings
Reserve adjustments, settlements and claims
Changes in accounting methods and filing positions
Tax credits
Foreign derived intangible income deduction
Enhanced research and development deductions
Tax holidays
Deferred tax impact of intra-group transactions
Other, net
Year Ended December 31,
2023
2022
2021
$
209 $
192 $
107
186
45
20
18
6
6
(1)
(7)
(15)
(18)
(21)
(23)
(35)
(35)
(70)
24
21
36
57
10
(3)
5
1
(6)
13
(15)
(15)
(23)
(33)
(38)
—
(7)
(13)
35
66
10
(6)
14
(19)
(9)
(20)
(7)
(5)
(8)
(22)
(81)
—
23
65
Provision for income taxes, as reported
$
289 $
195 $
The Company’s tax rate is affected by the tax laws and rates of the U.S. and other jurisdictions in which
the Company operates, the relative amount of income earned by jurisdiction and the relative amount of
losses or income for which no tax benefit or expense was recognized due to a valuation allowance.
The Company’s effective tax rate was impacted beneficially by tax incentives obtained in various non-
U.S. countries, primarily those arising in China related to the High and New Technology Enterprise
(“HNTE”) status of various subsidiaries ($35 million, $38 million and $81 million for the years ended
December 31, 2023, 2022 and 2021, respectively). HNTE status is granted for three-year periods, and
the Company seeks to renew such status on a regular basis. In addition, beneficial impacts were
recognized related to tax deductions for qualifying research and development expenditures ($35 million,
$33 million and $22 million for the years ended December 31, 2023, 2022 and 2021, respectively).
The Company’s effective tax rate is also impacted by net changes to valuation allowances, where the
Company has determined that it is more-likely-than-not that certain deferred tax assets would not be
realized. For the years ended December 31, 2023 and 2022, the Company recorded net expense related
to valuation allowances of $186 million and $21 million, respectively. For the year ended December 31,
2021, the Company recorded a net benefit of $13 million.
In 2023, the Company recognized a discrete tax benefit of approximately $19 million related to the
resolution of tax audits and reductions in certain unrecognized tax benefits and accrued interest related to
matters for which the statute of limitation had lapsed. In addition, the Company recognized a discrete tax
benefit of approximately $50 million in relation to the Spin-Off, a discrete tax benefit of approximately
$30 million in relation to various changes in filling positions for prior years, and a discrete tax expense of
approximately $79 million in relation to changes in judgment related to the recovery of deferred tax
assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across
jurisdictions for tax purposes as well as various tax structuring actions and strategies.
90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In 2022, the Company recognized discrete tax benefits of $23 million, primarily related to a reduction in
certain unrecognized tax benefits and accrued interest related to matters for which the statute of
limitations had lapsed and favorable provision-to-return adjustments.
In 2021, the Company recognized a $55 million tax benefit related to a reduction in certain unrecognized
tax benefits and accrued interest related to matters for which the statute of limitations had lapsed. In
addition, the Company recognized a discrete tax benefit of $20 million related to an increase in its
deferred tax assets as a result of an increase in the United Kingdom (“U.K.”) tax rate from 19% to 25%.
This rate change was enacted in June 2021 and becomes effective April 2023. Further, a net discrete tax
benefit of $36 million was recognized, primarily related to changes to certain withholding rates applied to
unremitted earnings. In the fourth quarter of 2021, the Company received approval for tax holiday status
reducing the statutory tax rate for two of its legal entities, resulting in a reduction in tax expense of
$28 million in 2021.
A roll forward of the Company’s total gross unrecognized tax benefits is presented below:
(in millions)
Balance, January 1
Additions based on tax positions related to current year
Reductions for tax positions of prior years
Reductions for lapse in statute of limitations
Reductions for closure of tax audits and settlements
Translation adjustment
Balance, December 31
2023
2022
2021
$
172 $
181 $
198
15
(11)
(10)
(5)
—
19
(7)
—
(9)
(12)
21
—
(36)
—
(2)
$
161 $
172 $
181
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax
expense and accrued approximately $65 million and $55 million for the payment of interest and penalties
at December 31, 2023 and 2022, respectively. For the years ended December 31, 2023, 2022 and 2021,
the Company recognized expense related to interest and penalties of $10 million, $6 million and $16
million, respectively.
During the year ended December 31, 2021, the Company also recorded a reduction in tax expense of
$34 million for previously recorded interest related to matters for which the statute of limitations lapsed.
As of December 31, 2023, approximately $198 million represents the amount that, if recognized, would
affect the Company's effective income tax rate in future periods. This amount includes a decrease in
U.S. federal income taxes that would occur upon recognition of the state tax benefits and U.S. foreign tax
credits included therein.
The Company estimates that it is reasonably possible there could be a decrease of approximately $108
million in unrecognized tax benefits and interest in the next 12 months related to the closure of an audit
and the lapse in statute of limitations subsequent to the reporting period from certain taxing jurisdictions.
91
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company and/or one of its subsidiaries files income tax returns in the U.S. federal, various state
jurisdictions and various foreign jurisdictions. In certain tax jurisdictions, the Company may have more
than one taxpayer. The Company is no longer subject to income tax examinations by tax authorities in its
major tax jurisdictions as follows:
Tax jurisdiction
U.S. Federal
Barbados
China
France
Germany
Hungary
Years no longer subject to audit
Tax jurisdiction
Years no longer subject to audit
2015 and prior
Japan
2016 and prior
Luxembourg
2015 and prior
2015 and prior
Mexico
Poland
2015 and prior
South Korea
2017 and prior
United Kingdom
2018 and prior
2019 and prior
2015 and prior
2016 and prior
2016 and prior
2018 and prior
In the U.S., certain tax attributes created in years prior to 2017 were subsequently utilized. Even though
the U.S. federal statute of limitations may have expired for years prior to 2017, the years in which these
tax attributes were created could still be subject to examination, limited to only the examination of the
creation of the tax attribute.
The components of deferred tax assets and liabilities consist of the following:
(in millions)
Deferred tax assets:
Net operating loss and capital loss carryforwards
Research and development capitalization
Employee compensation
State tax credits
Unrecognized tax benefits
Warranty
Pension and other postemployment benefits
Other comprehensive loss
Unrealized loss on equity securities
Foreign tax credits
Other
Total deferred tax assets
Valuation allowance
Net deferred tax asset
Deferred tax liabilities:
Goodwill and intangible assets
Fixed assets
Unremitted foreign earnings
Unrealized gain on equity securities
Other comprehensive income
Other
Total deferred tax liabilities
Net deferred taxes
92
December 31,
2023
2022
$
359 $
211
43
23
21
20
4
3
—
—
103
787 $
(310)
477 $
(135)
(121)
(115)
(2)
—
(7)
(380) $
97 $
$
$
$
$
256
143
41
29
24
20
10
—
8
6
97
634
(136)
498
(194)
(113)
(125)
—
(14)
(16)
(462)
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2023, the Company had gross deferred tax assets for certain non-U.S. net operating
loss (“NOL”) carryforwards of $277 million, $43 million of which expire at various dates from 2024 through
2043 and $234 million of which have an indefinite life. The Company has a valuation allowance recorded
of $213 million with regards to these deferred tax assets.
As of December 31, 2023, certain U.S. subsidiaries had gross deferred tax assets of approximately $39
million for federal and state NOL carryforwards, $21 million of which expire at various dates from 2024
through 2043 and $18 million of which have an indefinite life. The Company has recorded a valuation
allowance of $17 million with regards to these deferred tax assets. In addition, certain U.S. subsidiaries
also have state tax credit carryforwards of $23 million, which are offset by a valuation allowance of $23
million.
On a quarterly basis, the Company reviews the likelihood that the benefit of its deferred tax assets will be
realized and, therefore, the need for valuation allowances. The Company assesses existing deferred tax
assets, net operating loss carryforwards and tax credit carryforwards by jurisdiction and expectations of
its ability to utilize these tax attributes through a review of past, current, and estimated future taxable
income and tax planning strategies. If, based upon the weight of available evidence, it is more-likely-than-
not the deferred tax assets will not be realized, a valuation allowance is recorded. Due to recent
restructurings, the Company concluded that the weight of the negative evidence outweighs the positive
evidence in certain foreign jurisdictions. As a result, the Company believes it is more-likely-than-not that
the net deferred tax assets in certain foreign jurisdictions that include entities in Barbados, Hungary,
France, Spain, Ireland and the U.K. will not be realized in the future.
As of December 31, 2023, the Company recorded deferred tax liabilities of $115 million with respect to
foreign unremitted earnings. The Company did not provide deferred tax liabilities with respect to certain
book versus tax basis differences not represented by undistributed earnings of approximately
$449 million as of December 31, 2023, because the Company continues to assert indefinite reinvestment
of these basis differences. These basis differences would become taxable upon the sale or liquidation of
the foreign subsidiaries. The Company’s best estimate of the unrecognized deferred tax liability on these
basis differences is approximately $18 million as of December 31, 2023.
NOTE 8 RECEIVABLES, NET
The table below provides details of receivables as of December 31, 2023 and 2022:
(in millions)
Receivables, net:
Customers
Indirect taxes
Other
Gross receivables
Allowance for credit losses
Total receivables, net
December 31,
2023
2022
$
2,519 $
2,133
238
364
3,121
(12)
$
3,109 $
193
156
2,482
(11)
2,471
93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below summarizes the activity in the allowance for credit losses for the years ended
December 31, 2023, 2022 and 2021:
(in millions)
Beginning balance, January 1
Provision
Write-offs
Translation adjustment and other
Ending balance, December 31
NOTE 9
INVENTORIES, NET
A summary of Inventories, net is presented below:
(in millions)
Raw material and supplies
Work-in-progress
Finished goods
FIFO inventories
LIFO reserve
Inventories, net
Year Ended December 31,
2023
2022
2021
$
(11) $
(4)
2
1
(9) $
(2)
—
—
$
(12) $
(11) $
(12)
—
2
1
(9)
December 31,
2023
2022
$
991 $
160
194
1,345
(32)
919
136
187
1,242
(25)
$
1,313 $
1,217
94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 10 OTHER CURRENT AND NON-CURRENT ASSETS
Additional detail related to assets is presented below:
(in millions)
Prepayments and other current assets:
Prepaid tooling
Prepaid taxes
Derivative instruments
Customer incentive payments (Note 3)
Contract assets (Note 3)
Prepaid insurance
Other
Total prepayments and other current assets
Investments and long-term receivables:
Investment in equity affiliates
Investment in equity securities
Long-term receivables
Investment in debt securities
Total investments and long-term receivables
Other non-current assets:
Deferred income taxes (Note 7)
Operating leases (Note 22)
Customer incentive payments (Note 3)
Derivative instruments
Other
Total other non-current assets
December 31,
2023
2022
$
89 $
38
32
27
18
10
47
77
33
12
34
14
10
50
261 $
230
237 $
71
56
—
364 $
257 $
143
58
15
39
235
73
56
455
819
179
106
99
68
37
489
$
512 $
$
$
$
$
NOTE 11 PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is stated at cost less accumulated depreciation and amortization, and
consisted of:
(in millions)
Land, land use rights and buildings
Machinery and equipment
Finance lease assets
Construction in progress
Total property, plant and equipment, gross
Less: accumulated depreciation
Property, plant and equipment, net, excluding tooling
Tooling, net of amortization
Property, plant and equipment, net
95
December 31,
2023
2022
$
1,319 $
5,327
32
671
7,349
3,816
3,533
250
$
3,783 $
1,213
4,963
13
529
6,718
3,531
3,187
239
3,426
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Interest costs capitalized for the years ended December 31, 2023, 2022 and 2021 were $17 million, $17
million and $9 million, respectively.
NOTE 12 GOODWILL AND OTHER INTANGIBLES
During the fourth quarter of 2023, the Company performed a quantitative analysis on each reporting unit
to refresh its respective fair value. For 2023 and 2022, the estimated fair value was determined using a
combined income and market approach. 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 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 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. 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.
In 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.
Based on the assumptions outlined above, the impairment testing conducted in the fourth quarter of 2023
indicated the Company’s goodwill assigned to the respective reporting units was not impaired. Future
changes in the judgments, assumptions and estimates from those used in acquisition-related valuations
and goodwill impairment testing, including discount rates or future operating results and related cash flow
projections, could result in significantly different estimates of the fair values in the future. Due to the
Company’s recent acquisitions, there is less headroom (the difference between the carrying value and
the fair value) associated with certain of the Company’s reporting units. Based on the impairment testing
conducted in 2023, the amounts by which the estimated fair values of the Company’s goodwill reporting
units exceeded their carrying values ranged from 22% to 139%. An increase in discount rates, a
reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated
fair values, which may result in impairment charges that could materially affect the Company’s financial
statements in any given year.
96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of the changes in the carrying amount of goodwill is presented in the following tables. The
prior period balances have been recast for inter-segment transitions of certain businesses that were
completed during 2022. Refer to Note 24, “Reportable Segments and Related Information” for more
information.
(in millions)
Gross goodwill balance, January 1
Accumulated impairment losses, January 1
Net goodwill balance, January 1
Goodwill during the year:
Acquisitions1 (Note 2)
Measurement period adjustments (Note 2)
Other, primarily translation adjustment
Net goodwill balance, December 31
(in millions)
Gross goodwill balance, January 1
Accumulated impairment losses, January 1
Net goodwill balance, January 1
Goodwill during the year:
Acquisitions1 (Note 2)
Measurement period adjustments2
Other, primarily translation adjustment
Net goodwill balance, December 31
2023
Air
Management
Drivetrain &
Battery
Systems
ePropulsion
Total
$
$
1,566 $
1,434 $
480 $
3,480
(502)
—
—
(502)
1,064 $
1,434 $
480 $
2,978
8
(6)
11
—
—
21
14
—
(13)
22
(6)
19
$
1,077 $
1,455 $
481 $
3,013
2022
Air
Management
Drivetrain &
Battery
Systems
ePropulsion
Total
$
$
1,466 $
1,364 $
526 $
3,356
(502)
—
—
(502)
964 $
1,364 $
526 $
2,854
126
—
(26)
132
(20)
(42)
—
—
(46)
258
(20)
(114)
$
1,064 $
1,434 $
480 $
2,978
_____________________________
1 Acquisitions relate to the Company’s 2023 purchases of SSE, Eldor, and 2022 purchases of Drivetek, Rhombus and Santroll.
2 Measurement period adjustments primarily relate to the 2023 acquisition of SSE and 2022 acquisition of Santroll.
The Company’s other intangible assets, primarily from acquisitions, consist of the following:
December 31, 2023
December 31, 2022
Estimated
useful lives
(years)
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
Gross
carrying
amount
Accumulated
amortization
Net
carrying
amount
(in millions)
Amortized intangible assets:
Patented and unpatented
technology
Customer relationships
Miscellaneous
Total amortized intangible assets
Unamortized trade names
5 - 15
6 - 15
2 - 5
$
364 $
145 $
219 $
349 $
111 $
641
9
1,014
6
305
6
456
—
336
3
558
6
639
9
997
6
267
6
384
—
238
372
3
613
6
619
Total other intangible assets
$
1,020 $
456 $
564 $
1,003 $
384 $
Amortization of other intangible assets was $67 million, $69 million and $59 million for the years ended
December 31, 2023, 2022 and 2021, respectively. The Company utilizes the straight-line method of
amortization recognized over the estimated useful lives of the assets. The estimated future annual
amortization expense, primarily for acquired intangible assets, is as follows: $70 million in 2024, $69
million in 2025, $61 million in 2026, $54 million in 2027, $54 million in 2028 and $250 million thereafter.
97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A roll forward of the gross carrying amounts and related accumulated amortization of the Company’s
other intangible assets is presented below:
(in millions)
Beginning balance, January 1
Acquisitions1 (Note 2)
Impairment2
Amortization
Translation adjustment
Ending balance, December 31
Gross carrying amounts
Accumulated amortization
2023
2022
2023
2022
$
1,003 $
957 $
384 $
14
—
—
3
132
(35)
—
(51)
—
—
67
5
$
1,020 $
1,003 $
456 $
_____________________________
1 Acquisitions relate to the Company’s 2023 purchases of SSE, Eldor, 2022 purchases of Drivetek, Rhombus and Santroll.
2 During the fourth quarter of 2022, the Company recorded an impairment charge of $30 million to remove the AKASOL
indefinite-lived trade name as the Company no longer plans to utilize this trade name in the business.
NOTE 13 PRODUCT WARRANTY
The following table summarizes the activity in the product warranty accrual accounts:
(in millions)
Beginning balance, January 1
Provisions for current period sales
Adjustments of prior estimates
Payments
Other, primarily translation adjustment
Ending balance, December 31
2023
2022
$
185 $
98
(3)
(84)
—
$
196 $
335
—
(2)
69
(18)
384
168
81
(9)
(48)
(7)
185
The product warranty liability is classified in the Consolidated Balance Sheets as follows:
(in millions)
Other current liabilities
Other non-current liabilities
Total product warranty liability
December 31,
2023
2022
$
$
91 $
105
196 $
110
75
185
98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 14 NOTES PAYABLE AND DEBT
The Company had short-term and long-term debt outstanding as follows:
(in millions)
Short-term debt
Short-term borrowings
Long-term debt
3.375% Senior notes due 03/15/25 ($384 million par value)
5.000% Senior notes due 10/01/25 ($453 million par value)1
2.650% Senior notes due 07/01/27 ($1,100 million par value)
7.125% Senior notes due 02/15/29 ($121 million par value)
1.000% Senior notes due 05/19/31 (€1,000 million par value)
4.375% Senior notes due 03/15/45 ($500 million par value)
Term loan facilities, finance leases and other
Total long-term debt
Less: current portion
December 31,
2023
2022
$
70 $
58
384
477
1,093
120
1,088
495
53
3,710
3
499
840
1,092
120
1,051
495
45
4,142
2
4,140
Long-term debt, net of current portion
$
3,707 $
_____________________________
1 These notes include the fair value step up of $24 million and $65 million as of December 31, 2023 and 2022, respectively,
related to the Delphi Technologies acquisition in 2020. The fair value step up was calculated based on observable market data
and is amortized as a reduction to interest expense over the remaining life of the instrument using the effective interest method.
In September 2023, the Company purchased and extinguished $438 million of Senior notes due in 2025,
comprised of $115 million and $323 million face value of its 3.375% and 5.000% Senior notes,
respectively. Total cash consideration paid was $430 million. The Company recorded a gain of
approximately $28 million during the year ended December 31, 2023, consisting of an $8 million gain
related to a cash settlement below the face value of the 2025 notes and $20 million related to the write-off
of a portion of the unamortized fair value step up on the 5.000% Senior notes due in 2025 from the Delphi
Technologies acquisition in 2020 and a portion of the unamortized discount on the 3.375% Senior notes
due in 2025 that was recorded at the time of that note issuance. The gain on extinguishment was
recorded to Interest expense, net, in the Consolidated Statement of Operations.
On May 19, 2021, in anticipation of the acquisition of AKASOL and to refinance the Company’s €500
million 1.800% Senior notes due in November 2022, the Company issued €1.0 billion in 1.000% Senior
notes due May 2031. Interest is payable annually in arrears on May 19 of each year. On June 18, 2021,
the Company repaid its €500 million 1.80% Senior notes due November 2022 and incurred a loss on debt
extinguishment of $20 million, which is reflected in Interest expense, net in the Consolidated Statement of
Operations.
The Company may utilize uncommitted lines of credit for short-term working capital requirements. As of
December 31, 2023 and 2022, the Company had $70 million and $58 million, respectively, in borrowings
under these facilities, which are classified in Notes payable and other short-term debt in the Consolidated
Balance Sheets. The short-term borrowings primarily relate to a European money market loan with an
interest rate of Euribor plus 1.75% that is callable upon immediate notice by either party.
The weighted average interest rate on short-term borrowings outstanding as of December 31, 2023 and
2022 was 3.5% and 0.9%, respectively. The weighted average interest rate on all borrowings outstanding,
including the effects of outstanding swaps, as of December 31, 2023 and 2022 was 2.3% and 2.5%,
respectively. The following table provides details on Interest expense, net included in the Consolidated
Statements of Operations. Interest expense primarily relates to interest on the Company’s fixed rate
99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Senior notes, net of any amortization of premium or discount. Interest income primarily relates to interest
received on cash and investments and interest received on the Company’s net investment hedges.
Interest income has been favorably impacted by rising interest rates.
(in millions)
Interest expense
(Gain) loss on debt extinguishment
Interest income
Interest expense, net
Year Ended December 31,
2022
2021
2023
$
$
73 $
(28)
(35)
10 $
71 $
—
(20)
51 $
82
20
(11)
91
Annual principal payments required as of December 31, 2023 are as follows:
(in millions)
2024
2025
2026
2027
2028
After 2028
Total payments
Less: unamortized premiums, net of discount
Total short and long-term debt
$
$
$
73
846
8
1,107
8
1,743
3,785
(5)
3,780
The Company’s long-term debt includes various covenants, none of which are expected to restrict future
operations.
The Company has a $2 billion multi-currency revolving credit facility that allows the Company to increase
the facility by $1 billion with bank group approval. This facility was renewed in September 2023 and now
matures in September 2028. The credit 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.
The Company’s commercial paper program allows the Company to issue $2 billion of short-term,
unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under
this program, the Company may issue notes from time to time and use the proceeds for general
corporate purposes. The Company 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 billion.
As of December 31, 2023 and 2022, the estimated fair values of the Company’s senior unsecured notes
totaled $3,304 million and $3,530 million, respectively. The estimated fair values were $353 million and
$567 million lower than carrying value at December 31, 2023 and 2022, respectively. Fair market values
of the senior unsecured notes are developed using observable values for similar debt instruments, which
are considered Level 2 inputs as defined by ASC Topic 820. The carrying values of the Company’s multi-
currency revolving credit facility, commercial paper program and other debt facilities approximate fair
value. The fair value estimates do not necessarily reflect the values the Company could realize in the
current markets.
100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company had outstanding letters of credit of $37 million and $31 million at December 31, 2023 and
2022, respectively. The letters of credit typically act as guarantees of payment to certain third parties in
accordance with specified terms and conditions.
NOTE 15
OTHER CURRENT AND NON-CURRENT LIABILITIES
Additional detail related to liabilities is presented in the table below:
(in millions)
Other current liabilities:
Payroll and employee related
Customer related
Indirect taxes
Income taxes payable
Product warranties (Note 13)
Employee termination benefits (Note 4)
Operating leases (Note 22)
Accrued freight
Interest
Contract liabilities (Note 3)
Supplier related
Insurance
Deferred engineering
Other non-income taxes
Retirement related (Note 18)
Dividends payable
Other
Total other current liabilities
Other non-current liabilities:
Other income tax liabilities
Deferred income taxes (Note 7)
Operating leases (Note 22)
Product warranties (Note 13)
Deferred income
Earn-out liability (Note 2)
Employee termination benefits (Note 4)
Other
Total other non-current liabilities
December 31,
2023
2022
$
329 $
124
121
103
91
61
37
26
26
18
16
16
13
12
11
—
144
$
1,148 $
$
226 $
160
112
105
83
13
7
61
314
108
115
107
110
21
22
30
22
14
15
18
23
12
11
21
121
1,084
242
143
85
75
59
10
18
54
$
767 $
686
NOTE 16
FAIR VALUE MEASUREMENTS
ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity-specific
measurement. Therefore, a fair value measurement should be determined based on assumptions that
market participants would use in pricing an asset or liability. As a basis for considering market participant
assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy, which
prioritizes the inputs used in measuring fair values as follows:
101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;
Level 2:
Inputs, other than quoted prices in active markets, that are observable either directly or
indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.
Assets and liabilities measured at fair value are based on one or more of the following three valuation
techniques noted in ASC Topic 820:
A. Market approach: Prices and other relevant information generated by market transactions
involving identical or comparable assets, liabilities or a group of assets or liabilities, such
as a business.
B. Cost approach: Amount that would be required to replace the service capacity of an asset
C.
(replacement cost).
Income approach: Techniques to convert future amounts to a single present amount
based upon market expectations (including present value techniques, option-pricing and
excess earnings models).
The following tables classify assets and liabilities measured at fair value on a recurring basis as of
December 31, 2023 and 2022:
Basis of fair value measurements
Balance at
December 31,
2023
Quoted prices
in active
markets for
identical items
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Valuation
technique
Assets
measured at
NAV1
(in millions)
Assets:
Current earn-out receivables
Investment in equity securities
Foreign currency contracts
Net investment hedge contracts
Liabilities:
Current earn-out liabilities
Non-current earn-out liabilities
Foreign currency contracts
Net investment hedge contracts
$
$
$
$
$
$
$
$
5 $
26 $
33 $
14 $
2 $
13 $
3 $
2 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
33 $
14 $
— $
— $
3 $
2 $
5
—
—
—
2
13
—
—
C
—
A
A
C
C
A
A
$
$
$
$
$
$
$
$
—
26
—
—
—
—
—
—
102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Basis of fair value measurements
Balance at
December 31,
2022
Quoted prices
in active
markets for
identical items
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Valuation
technique
Assets
measured at
NAV1
(in millions)
Assets:
Current earn-out receivables
Investment in debt securities
Investment in equity securities
Foreign currency contracts
Net investment hedge contracts
Liabilities:
Current earn-out liabilities
Non-current earn-out liabilities
Foreign currency contracts
Net investment hedge contracts
$
$
$
$
$
$
$
$
$
9 $
455 $
29 $
12 $
68 $
21 $
10 $
9 $
1 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
455 $
— $
12 $
68 $
— $
— $
9 $
1 $
9
—
—
—
—
21
10
—
—
C
A
—
A
A
C
C
A
A
$
$
$
$
$
$
$
$
$
—
—
29
—
—
—
—
—
—
_____________________________
1 Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been
classified in the fair value hierarchy. These amounts represent investments in commingled and managed funds that have
underlying assets in fixed income securities, equity securities, and other assets and the fair values have been estimated using
the net asset value of the Company's ownership interest in partners' capital. The Company’s redemption of its investments with
the funds is governed by the partnership agreements and subject to approval from the general partners. With the exception of
annual distributions in connection with the Company’s deemed tax liability, distributions from each fund will be received as the
underlying investments of the funds are liquidated, the timing of which is unknown.
The following tables provide a reconciliation of the Company’s Level 3 earn-out assets and liabilities:
(in millions)
Balance at January 1, 2022
Contingent earn-out recognized upon acquisition or disposition
Change in fair value of contingent consideration
Classification reclass
Balance at December 31, 2022
Change in fair value of contingent consideration
Earn-out settlements
Balance at December 31, 2023
Fair Value Measurements Using Significant Unobservable
Inputs (Level 3)
Long-Term
receivables
Current
earn-out
receivables
Current earn-
out liabilities
Non-current
earn-out
liabilities
$
18 $
— $
— $
—
—
(18)
— $
—
—
— $
—
(9)
18
9 $
5
(9)
5 $
16
5
—
21 $
5
(24)
2 $
$
$
—
34
(24)
—
10
3
—
13
Refer to Note 2, “Acquisitions and Dispositions,” to the Consolidated Financial Statements for more detail
regarding earn-outs.
The PHINIA-related defined benefits pension assets, liabilities and benefits (costs) are included in the
tables below for periods prior to the Spin-Off, as they are not reported as discontinued operations in
accordance with ASC Topic 205-20, “Discontinued Operations”.
103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following tables provide a reconciliation of the Company’s defined benefit plans assets measured at
fair value on a recurring basis:
(in millions)
U.S. Plans:
Fixed income securities
Equity securities
Alternative credit fund
Cash
Non-U.S. Plans:
Fixed income securities
Equity securities
Cash
Insurance contract1
Real estate and other
(in millions)
U.S. Plans:
Fixed income securities
Equity securities
Alternative credit fund
Cash
Non-U.S. Plans:
Fixed income securities
Equity securities
Cash
Insurance contract1
Real estate and other
Basis of fair value measurements
Balance at
December 31,
2023
Quoted prices
in active
markets for
identical items
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Valuation
technique
Assets
measured
at NAV2
$
$
$
87 $
— $
— $
18
16
2
—
—
2
—
—
—
123 $
2 $
— $
213 $
167 $
— $
40
5
74
60
27
5
—
—
—
—
—
23
$
392 $
199 $
23 $
—
—
—
—
—
—
—
—
74
—
74
—
—
—
A
A
A
A
C
A,C
$
$
$
$
87
18
16
—
121
46
13
—
—
37
96
Basis of fair value measurements
Balance at
December 31,
2022
Quoted prices
in active
markets for
identical items
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Valuation
technique
Assets
measured
at NAV2
$
$
$
89 $
— $
— $
17
20
3
—
—
3
—
—
—
129 $
3 $
— $
525 $
54 $
— $
142
147
69
273
113
147
—
—
—
—
—
20
$
$
$
—
—
—
—
—
—
—
—
69
46
—
—
—
A
A
A
A
C
A,C
$
1,156 $
314 $
20 $
115
$
89
17
20
—
126
471
29
—
—
207
707
_____________________________
1 A BorgWarner defined benefit plan in the United Kingdom owns an insurance contract that guarantees payment of specified
pension liabilities. The Company measures the fair value of the insurance asset by projecting expected future cash flows from
the contract and discounting them to present value based on current market rates, including an assessment for non-
performance risk of the insurance company. The assumptions used to project expected future cash flows are based on actuarial
estimates and are unobservable; therefore, the contract is categorized within Level 3 of the hierarchy.
2 Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been
classified in the fair value hierarchy. These amounts represent investments in commingled and managed funds that have
underlying assets in fixed income securities, equity securities, and other assets.
104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following tables provide a reconciliation of the Company’s Level 3 defined benefit plans assets:
(in millions)
Balance at January 1, 2022
Purchases, sales and settlements
Realized gains
Benefits paid
Unrealized (losses) gains on assets still held at the reporting date
Translation adjustment
Balance at December 31, 2022
Purchases, sales and settlements
Benefits paid
Unrealized (losses) gains on assets still held at the reporting date
Translation adjustment
Balance at December 31, 2023
Fair Value Measurements Using
Significant Unobservable Inputs
(Level 3)
Insurance
contract
Real estate
trust fund
$
108 $
—
—
(5)
(20)
(14)
$
69 $
—
5
(4)
4
74 $
$
127
(93)
3
—
25
(16)
46
(46)
—
—
—
—
Refer to Note 18, “Retirement Benefit Plans,” to the Consolidated Financial Statements for more detail
surrounding the defined benefit plan’s asset investment policies and strategies, target allocation
percentages and expected return on plan asset assumptions.
NOTE 17 FINANCIAL INSTRUMENTS
The Company’s financial instruments include cash and cash equivalents, marketable securities and
accounts receivable. Due to the short-term nature of these instruments, their book value approximates
their fair value. The Company’s financial instruments may include long-term debt, investments in equity
securities, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency
derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or
equivalent, investment grade credit rating at the time of the contracts’ placement. An adjustment for non-
performance risk is considered in the estimate of fair value in derivative assets based on the counterparty
credit default swap (“CDS”) rate. When the Company is in a net derivative liability position, the non-
performance risk adjustment is based on its CDS rate. At December 31, 2023 and 2022, the Company
had no derivative contracts that contained credit-risk-related contingent features.
The Company, at times, uses certain commodity derivative contracts to protect against commodity price
changes related to forecasted raw material and component purchases. The Company had no outstanding
commodity contracts at December 31, 2023 and 2022.
The Company manages its interest rate risk by assessing its exposure to fixed and variable rates while
attempting to optimize its interest costs. The Company, at times, selectively uses interest rate swaps to
reduce market value risk associated with changes in interest rates (fair value hedges and cash flow
hedges). At December 31, 2023 and 2022, the Company had no outstanding interest rate swaps or
options.
105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company uses foreign currency forward and option contracts to protect against exchange rate
movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or
sales transactions designated in currencies other than the functional currency of the operating unit. In
addition, the Company uses foreign currency forward contracts to hedge exposure associated with its net
investment in certain foreign operations (net investment hedges). Foreign currency derivative contracts
require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating
units’ local currency. The following foreign currency derivative contracts were outstanding and mature
through the ending duration noted below:
Foreign currency derivatives (in millions)1
Notional in traded currency
December 31, 2023
Notional in traded currency
December 31, 2022
Ending duration
Functional currency
Traded currency
British Pound
Euro
Chinese Renminbi
U.S. Dollar
Euro
Euro
Euro
Euro
Euro
Thailand Baht
U.S. Dollar
U.S. Dollar
U.S. Dollar
U.S. Dollar
U.S. Dollar
British Pound
Hungarian Forint
Polish Zloty
U.S. Dollar
Swiss Franc
U.S. Dollar
Chinese Renminbi
Euro
Korean Won
Mexican Peso
Thai Baht
83
209
15
8,233
573
152
24
30
582
9
34,209
3,280
2,100
10
276
9
—
440
120
—
—
1,402
45
51,786
2,474
—
Dec-25
Nov-25
Jan-24
Dec-25
Dec-25
Dec-25
Dec-25
Dec-24
Jun-24
Jan-24
Nov-24
Dec-25
Jun-24
_____________________________
1 Table above excludes non-significant traded currency pairings with total notional amounts less than $10 million U.S. Dollar
equivalent as of December 31, 2023 or 2022.
The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated
with its net investment in certain foreign operations (net investment hedges). At December 31, 2023 and
2022, the following cross-currency swap contracts were outstanding:
(in millions)
U.S. Dollar to Euro:
Fixed receiving notional
Fixed paying notional
U.S. Dollar to Euro:
Fixed receiving notional
Fixed paying notional
U.S. Dollar to Japanese Yen:
Fixed receiving notional
Fixed paying notional
Cross-currency swaps
December 31, 2023
December 31, 2022
Ending duration
1,100 $
976 €
500 $
450 €
100 $
12,724 ¥
1,100
976
500
450
100
12,724
Jul-27
Jul-27
Mar-25
Mar-25
Feb-29
Feb-29
$
€
$
€
$
¥
106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2023 and 2022, the following amounts were recorded in the Consolidated Balance
Sheets as being payable to or receivable from counterparties under ASC Topic 815, “Derivatives and
Hedging”:
(in millions)
Derivatives designated as
hedging instruments Under
Topic 815:
Foreign currency
Foreign currency
Net investment hedges
Derivatives not designated as
hedging instruments:
Foreign currency
Assets
Liabilities
Balance Sheet
Location
December 31,
2023
December 31,
2022
Balance Sheet
Location
December 31,
2023
December 31,
2022
Prepayments
and other
current assets
Other non-
current assets
Other non-
current assets
Prepayments
and other
current assets
$
$
$
$
30 $
1 $
14 $
9
Other current
liabilities
—
68
Other non-current
liabilities
Other non-current
liabilities
2 $
3
Other current
liabilities
$
$
$
$
2 $
— $
2 $
8
1
1
1 $
—
Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly,
thereafter. Gains and losses arising from these contracts that are included in the assessment of
effectiveness are deferred into accumulated other comprehensive income (loss) (“AOCI”) and reclassified
into income as the underlying operating transactions are recognized. These realized gains or losses
offset the hedged transaction and are recorded on the same line in the statement of operations. The initial
value of any component excluded from the assessment of effectiveness will be recognized in income
using a systematic and rational method over the life of the hedging instrument. Any difference between
the change in fair value of the excluded component and amounts recognized in income under that
systematic and rational method will be recognized in AOCI.
Effectiveness for net investment hedges is assessed at the inception of the hedging relationship and
quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of
effectiveness are deferred into foreign currency translation adjustments and only released when the
subsidiary being hedged is sold or substantially liquidated. The initial value of any component excluded
from the assessment of effectiveness will be recognized in income using a systematic and rational
method over the life of the hedging instrument. Any difference between the change in fair value of the
excluded component and amounts recognized in income under that systematic and rational method will
be recognized in AOCI.
The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be
reclassified to income in one year or less for designated net investment hedges. The amount expected to
be reclassified to income in one year or less assumes no change in the current relationship of the hedged
item at December 31, 2023 market rates.
(in millions)
Contract Type
Net investment hedges:
Foreign currency
Cross-currency swaps
Foreign currency-denominated debt
Total
Deferred gain (loss) in AOCI at
December 31,
2023
December 31,
2022
Gain (loss)
expected to be
reclassified to
income in one
year or less
$
$
—
12
100
112
$
$
(4) $
67
133
196
$
—
—
—
—
107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during the
period resulted in the following gains and losses recorded in income:
Year ended December 31, 2023
Net sales
Cost of sales
Selling, general and
administrative expenses
Other comprehensive
income
$
14,198
$
11,630
$
1,316
$
$
48
25
Year ended December 31, 2022
Net sales
Cost of sales
Selling, general and
administrative expenses
Other comprehensive
income
$
12,635
$
10,266
$
1,290
$
(325)
Year ended December 31, 2021
Net sales
Cost of sales
Selling, general and
administrative expenses
Other comprehensive
income
$
4
$
11,803
$
9,630
$
1,085
$
100
(in millions)
Total amounts of earnings and other
comprehensive income line items in which the
effects of cash flow hedges are recorded
Gain (loss) on cash flow hedging relationships:
Foreign currency
Gain (loss) recognized in other comprehensive
income
(in millions)
Total amounts of earnings and other
comprehensive income line items in which the
effects of cash flow hedges are recorded
Gain (loss) on cash flow hedging relationships:
Foreign currency
Gain (loss) recognized in other comprehensive
income
(in millions)
Total amounts of earnings and other
comprehensive income line items in which the
effects of cash flow hedges are recorded
Gain (loss) on cash flow hedging relationships:
Foreign currency
Gain (loss) recognized in other comprehensive
income
Gain (loss) reclassified from AOCI to income
$
1
$
(4) $
$
(1) $
(4)
—
The gains or losses recorded in income related to components excluded from the assessment of
effectiveness for derivative instruments designated as cash flow hedges were immaterial for the periods
presented.
Gains and losses on derivative instruments designated as net investment hedges were recognized in
other comprehensive income (loss) during the periods presented below.
(in millions)
Net investment hedges
Foreign currency
Cross-currency swaps
Foreign currency-denominated debt
Year Ended December 31,
2023
2022
2021
$
$
$
—
$
(55) $
(33) $
6
129
67
$
$
$
(9)
115
84
108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Derivatives designated as net investment hedge instruments as defined by ASC Topic 815 held during the
period resulted in the following gains recorded in Interest expense on components excluded from the
assessment of effectiveness:
(in millions)
Net investment hedges
Cross-currency swaps
Year Ended December 31,
2023
2022
2021
$
25
$
26
$
22
There were no gains or losses recorded in income related to components excluded from the assessment
of effectiveness for foreign currency-denominated debt designated as net investment hedges. There were
no gains or losses reclassified from AOCI for net investment hedges during the periods presented.
Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of
monetary assets and liabilities denominated in currencies other than the operating units' functional
currency. These derivatives resulted in the following gains recorded in earnings, in the Consolidated
Statement of Operations:
(in millions)
Contract Type
Location
Year Ended December 31,
2023
2022
2021
Foreign
Currency
Selling, general and administrative expenses
$
19
$
23
$
9
NOTE 18
RETIREMENT BENEFIT PLANS
The Company sponsors various defined contribution savings plans, primarily in the U.S., that allow
employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan
specified guidelines. Under specified conditions, the Company will make contributions to the plans and/or
match a percentage of the employee contributions up to certain limits. Total expense related to the
defined contribution plans was $45 million, $59 million and $58 million in the years ended December 31,
2023, 2022 and 2021, respectively.
The Company has a number of defined benefit pension plans and other postemployment benefit plans
covering eligible salaried and hourly employees and their dependents. The defined pension benefits
provided are primarily based on (i) years of service and (ii) average compensation or a monthly
retirement benefit amount. The Company provides defined benefit pension plans in France, Germany,
India, Italy, Japan, Mexico, South Korea, Sweden, Switzerland, Turkey, U.K. and the U.S. The other
postemployment benefit plans, which provide medical benefits, are unfunded plans. The Company’s U.S.
and U.K. defined benefit plans are frozen, and no additional service cost is being accrued. All pension
and other postemployment benefit plans in the U.S. have been closed to new employees. The
measurement date for all plans is December 31.
The PHINIA-related defined benefits pension assets, liabilities and benefits (costs) are included in the
tables below for periods prior to the Spin-Off, as they are not reported as discontinued operations in
accordance with ASC Topic 205-20, “Discontinued Operations”.
109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the expenses for the Company’s defined contribution and defined benefit
pension plans and the other postemployment benefit plans:
(in millions)
Defined contribution expense
Defined benefit pension (income) expense
Other postemployment benefit income
Total
Year Ended December 31,
2023
2022
2021
$
$
45 $
59 $
26
—
(10)
(1)
71 $
48 $
58
(19)
(1)
38
110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following provides a roll forward of the plans’ benefit obligations, plan assets, funded status and
recognition in the Consolidated Balance Sheets:
(in millions)
U.S.
Non-U.S.
U.S.
Non-U.S.
2023
2022
Pension benefits
Year Ended December 31,
Other postemployment
benefits
2023
2022
Year Ended December 31,
Change in projected benefit obligation:
Projected benefit obligation, January 1
$
136 $ 1,322 $
183 $ 2,227 $
37 $
Service cost
Interest cost
Plan amendments
Settlement and curtailment
Actuarial loss (gain)
Currency translation
Acquisition
PHINIA spin-off
Benefits paid
—
7
—
—
2
—
—
—
11
42
—
3
25
57
—
(938)
—
4
—
(6)
20
37
(11)
(3)
(33)
(685)
—
—
—
(200)
8
—
(14)
(44)
(12)
(71)
—
2
—
—
—
—
—
(1)
(5)
Projected benefit obligation, December 311
$
131 $
478 $
136 $ 1,322 $
33 $
Change in plan assets:
Fair value of plan assets, January 1
$
129 $ 1,156 $
177 $ 2,049
54
—
1
—
—
(13)
—
—
—
(5)
37
Actual return on plan assets
Employer contribution
Plan participants’ contribution
Settlements
Currency translation
Acquisition
PHINIA spin-off
Benefits paid
Fair value of plan assets, December 31
Funded status
$
$
Amounts in the Consolidated Balance Sheets
consist of:
7
1
—
—
—
—
—
50
20
1
(3)
53
—
(841)
(33)
(655)
2
—
(5)
—
—
—
20
—
(4)
(189)
6
—
(14)
(44)
(12)
(71)
123 $
392 $
129 $ 1,156
(8) $
(86) $
(7) $
(166) $
(33) $
(37)
Non-current assets
Current liabilities
Non-current liabilities
Net amount
$
— $
30 $
— $
26 $
— $
(1)
(7)
(5)
(111)
(1)
(6)
(6)
(186)
(5)
(28)
$
(8) $
(86) $
(7) $
(166) $
(33) $
Amounts in accumulated other comprehensive
loss consist of:
Net actuarial loss
Net prior service (credit) cost
Net amount
$
$
77 $
112 $
80 $
104 $
(2)
1
(3)
(9)
(3) $
(8)
75 $
113 $
77 $
95 $
(11) $
—
(6)
(31)
(37)
(3)
(11)
(14)
Total accumulated benefit obligation for all plans $
131 $
450 $
136 $ 1,279
_____________________________
1 The decrease in the projected benefit obligation 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.
111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The funded status of pension plans with accumulated benefit obligations in excess of plan assets is as
follows:
(in millions)
Accumulated benefit obligation
Plan assets
Deficiency
Pension deficiency by country:
United States
United Kingdom
Germany
Other
$
$
$
December 31,
2023
2022
(338) $
(1,185)
235
(103) $
1,022
(163)
(8) $
—
(39)
(56)
(6)
(38)
(34)
(85)
Total pension deficiency
$
(103) $
(163)
The funded status of pension plans with projected benefit obligations in excess of plan assets is as
follows:
(in millions)
Projected benefit obligation
Plan assets
Deficiency
Pension deficiency by country:
United States
United Kingdom
Germany
Other
$
$
$
December 31,
2023
2022
(360) $
(1,223)
237
(123) $
1,026
(197)
(8) $
—
(40)
(75)
(6)
(38)
(35)
(118)
(197)
Total pension deficiency
$
(123) $
The weighted average asset allocations of the Company’s funded pension plans and target allocations by
asset category are as follows:
U.S. Plans:
Alternative credit, real estate, cash and other
Fixed income securities
Equity securities
Non-U.S. Plans:
Insurance contract, real estate, cash and other
Fixed income securities
Equity securities
December 31,
2023
2022
Target
Allocation
15 %
71 %
14 %
18 % 10% - 20%
69 % 66% - 76%
13 % 10% - 20%
100 %
100 %
36 %
54 %
10 %
42 % 32% - 42%
46 % 49% - 59%
12 %
4% - 14%
100 %
100 %
The Company’s investment strategy is to maintain actual asset weightings within a preset range of target
allocations. The Company believes these ranges represent an appropriate risk profile for the planned
benefit payments of the plans based on the timing of the estimated benefit payments. In each asset
category, separate portfolios are maintained for additional diversification. Investment managers are
retained in each asset category to manage each portfolio against its benchmark. Each investment
112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
manager has appropriate investment guidelines. In addition, the entire portfolio is evaluated against a
relevant peer group. The defined benefit pension plans did not hold any Company securities as
investments as of December 31, 2023 and 2022. A portion of pension assets is invested in common and
commingled trusts.
The Company expects to contribute a total of $20 million to $30 million into its defined benefit pension
plans during 2024. Of the $20 million to $30 million in projected 2024 contributions, $6 million are
contractually obligated, while any remaining payments would be discretionary.
Refer to Note 16, “Fair Value Measurements,” to the Consolidated Financial Statements for more detail
surrounding the fair value of each major category of plan assets, as well as the inputs and valuation
techniques used to develop the fair value measurements of the plans’ assets at December 31, 2023 and
2022.
See the table below for a breakout of net periodic benefit cost between U.S. and non-U.S. pension plans:
(in millions)
Service cost
Interest cost
Pension benefits
Year Ended December 31,
Other postemployment
benefits
2023
2022
2021
Year Ended December 31,
U.S.
Non-U.S.
U.S.
Non-U.S.
U.S.
Non-U.S.
2023
2022
2021
$ — $
11 $ — $
20 $ — $
25 $ — $ — $ —
7
42
4
37
3
30
Expected return on plan assets
(6)
(37)
(8)
(75)
(10)
(83)
Settlements, curtailments and other
—
Amortization of unrecognized prior
service (credit) cost
Amortization of unrecognized loss
(1)
3
4
—
3
3
(1)
3
—
—
7
2
—
—
1
—
—
2
(2)
(1)
4
—
13
(2)
(2)
—
—
1
—
—
(3)
1
(1)
Net periodic cost (income)
$
3 $
23 $
1 $
(11) $
(2) $
(17) $ — $
(1) $
The components of net periodic benefit cost other than the service cost component are included in Other
postretirement income in the Consolidated Statements of Operations.
The Company’s weighted average assumptions used to determine the benefit obligations for its defined
benefit pension and other postemployment benefit plans were as follows:
(percent)
U.S. pension plans:
Discount rate
Rate of compensation increase
U.S. other postemployment benefit plans:
Discount rate
Rate of compensation increase
Non-U.S. pension plans:
Discount rate1
Rate of compensation increase
________________
1 Includes 4.61% and 4.94% for the U.K. pension plans for December 31, 2023 and 2022, respectively.
113
December 31,
2023
2022
5.14
N/A
5.10
N/A
4.23
3.32
5.46
N/A
5.41
N/A
4.94
3.76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s weighted average assumptions used to determine the net periodic benefit cost/(income)
for its defined benefit pension and other postemployment benefit plans were as follows:
(percent)
U.S. pension plans:
Discount rate
Effective interest rate on benefit obligation
Expected long-term rate of return on assets
Average rate of increase in compensation
U.S. other postemployment plans:
Discount rate
Effective interest rate on benefit obligation
Expected long-term rate of return on assets
Average rate of increase in compensation
Non-U.S. pension plans:
Discount rate1
Effective interest rate on benefit obligation
Expected long-term rate of return on assets2
Average rate of increase in compensation
Year Ended December 31,
2023
2022
2021
5.47
5.34
5.00
N/A
5.41
5.29
N/A
N/A
4.85
4.88
4.90
3.58
2.73
2.18
4.75
N/A
2.46
1.84
N/A
N/A
1.97
1.83
4.10
3.21
2.31
1.62
5.75
N/A
1.93
1.21
N/A
N/A
1.44
1.24
4.10
3.23
________________
1 Includes 4.94%, 1.91% and 1.39% for the U.K. pension plans for December 31, 2023, 2022 and 2021, respectively.
2 Includes 5.30%, 4.12% and 4.00% for the U.K. pension plans for December 31, 2023, 2022 and 2021, respectively.
The Company's approach to establishing the discount rate is based upon the market yields of high-quality
corporate bonds, with appropriate consideration of each plan's defined benefit payment terms and
duration of the liabilities. In determining the discount rate, the Company utilizes a full-yield approach in
the estimation of service and interest components by applying the specific spot rates along the yield
curve used in the determination of the benefit obligation to the relevant projected cash flows.
The Company determines its expected return on plan asset assumptions by evaluating estimates of
future market returns and the plans’ asset allocation. The Company also considers the impact of active
management of the plans’ invested assets.
The estimated future benefit payments for the pension and other postemployment benefits are as follows:
(in millions)
Year
2024
2025
2026
2027
2028
2029-2033
Pension benefits
U.S.
Non-U.S.
Other
postemployment
benefits
$
15 $
24 $
13
12
12
11
48
28
27
27
29
164
5
5
4
4
3
12
The weighted average rate of increase in the per capita cost of covered health care benefits is projected
to range from 6.25% in 2024 down to an ultimate trend rate of 4.75%.
114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 19 STOCK-BASED COMPENSATION
The Company has granted restricted common stock and restricted stock units (collectively, “restricted
stock”) and performance share units as long-term incentive awards to employees and non-employee
directors under the BorgWarner Inc. 2018 Stock Incentive Plan, as amended (“2018 Plan”) and the
BorgWarner Inc. 2023 Stock Incentive Plan (“2023 Plan”). The Company’s Board of Directors adopted the
2023 Plan as a replacement to the 2018 Plan in April 2023, and the Company’s stockholders approved
the 2023 Plan at the annual meeting of stockholders on April 26, 2023. The 2023 Plan authorizes the
issuance of a total of 11.3 million shares and approximately 9.1 million shares were available for future
issuance as of December 31, 2023.
Restricted Stock: The value of restricted stock is determined by the market value of the Company’s
common stock at the date of grant. In 2023, restricted stock in the amount of 1.3 million shares and less
than 0.1 million shares were granted to employees and non-employee directors, respectively. The value
of the awards is recognized as compensation expense ratably over the restriction periods, generally two
or three years. As of December 31, 2023, there was $42 million of unrecognized compensation expense
related to restricted stock that will be recognized over a weighted average period of approximately 1.7
years.
Restricted stock compensation expense from continuing operations recorded in the Consolidated
Statements of Operations is as follows:
(in millions, except per share data)
Restricted stock compensation expense
Restricted stock compensation expense, net of tax
Year Ended December 31,
2023
2022
2021
$
$
37 $
28 $
28 $
21 $
27
20
A summary of the status of the Company’s nonvested restricted stock for employees and non-employee
directors is as follows:
Nonvested at January 1, 2021
Granted
Vested
Forfeited
Nonvested at December 31, 2021
Granted
Vested
Forfeited
Nonvested at December 31, 2022
Granted
Vested
Forfeited
PHINIA spin-off awards transferred1
PHINIA spin-off adjustment2
Shares subject
to restriction
(thousands)
Weighted
average grant
date fair value
2,140 $
1,175 $
(845) $
(107) $
2,363 $
1,060 $
(862) $
(188) $
2,373 $
1,099 $
(917) $
(111) $
(389) $
274 $
39.58
43.66
43.34
39.86
40.24
44.32
38.68
42.09
42.47
48.19
39.80
44.63
45.80
—
Nonvested at December 31, 2023
________________
1 Represents the cancellation of awards outstanding as of Distribution Date held by PHINIA employees. PHINIA employees were
granted PHINIA restricted stock after the spin-off replacing the cancelled awards.
2 Represents the adjustment of unvested awards using a conversion ratio of 1.13 to 1 to preserve the intrinsic value of the
awards prior to spin-off as authorized by the 2023 Plan and 2018 Plan.
2,329 $
40.57
115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Performance share units: The Company grants performance share units to members of senior
management that vest at the end of three-year periods based the following metrics:
•
Total Stockholder Return Units: This performance metric is based on the Company’s market
performance in terms of total shareholder return relative to a peer group of automotive companies.
Based on the Company’s relative ranking within the performance peer group, it is possible for
none of the awards to vest or for a range of up to 200% of the target shares to vest.
The Company recognizes compensation expense relating to this performance share plan ratably
over the performance period regardless of whether the market conditions are expected to be
achieved. Compensation expense associated with the performance share plans is calculated
using a lattice model (Monte Carlo simulation).
As of December 31, 2023, there was $10 million of unrecognized compensation expense related
to total stockholder return units that will be recognized over a weighted average period of
approximately 1.7 years.
• Relative Revenue Growth Units: This performance metric is based on the Company’s
performance in terms of revenue growth relative to the vehicle market over three-year
performance periods. Based on the Company’s relative revenue growth in excess of the industry
vehicle production, it is possible for none of the awards to vest or for a range of up to 200% of the
target shares to vest.
The value of this performance share award is determined by the market value of the Company’s
common stock at the date of grant. The Company recognizes compensation expense relating to
this performance share plan over the performance period based on the number of shares
expected to vest at the end of each reporting period. The actual performance of the Company is
evaluated quarterly and the expense is adjusted according to the new projections.
As of December 31, 2022, these awards were fully expensed.
• Adjusted Earnings Per Share Units: Introduced in the first quarter of 2020, this performance
metric is based on the Company’s earnings per share adjusted for certain one-time items and
non-operating gains and losses against a pre-defined target measured in the third year of the
performance period.
The value of this performance share award is determined by the adjusted earnings per share
performance. The Company recognizes compensation expense relating to this performance share
plan over the performance period based on the number of shares expected to vest at the end of
each reporting period. The actual performance of the Company is evaluated quarterly and the
expense is adjusted according to the new projections.
As of December 31, 2022, these awards were fully expensed.
•
eProduct Revenue Mix: Introduced in the first quarter of 2021, this performance metric is based
on the Company’s total revenue derived from eProducts in relation to its total proforma revenue in
the third year of the performance period. Based on the Company’s eProduct revenue mix, it is
possible for none of the awards to vest or for a range of up to 200% of the target shares to vest.
The value of this performance share award is determined by the market value of the Company’s
common stock at the date of grant. The Company recognizes compensation expense relating to
this performance share plan over the performance period based on the number of shares
expected to vest at the end of each reporting period. The actual performance of the Company is
evaluated quarterly and the expense is adjusted according to the new projections.
As of December 31, 2023, there was $7 million of unrecognized compensation expense related to
the eProduct revenue mix units that will be recognized over a weighted average period of
approximately 1.6 years. The unrecognized amount of compensation expense is based on
projected performance as of December 31, 2023.
116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• Cumulative Free Cash Flow: Introduced in the first quarter of 2021, this performance metric is
based on the Company’s performance in terms of its operating cash flow less capital expenditures
over the three-year performance periods. Based on the Company’s cumulative free cash flow, it is
possible for none of the awards to vest or for a range of up to 200% of the target shares to vest.
The value of this performance share award is determined by the market value of the Company’s
common stock at the date of grant. The Company recognizes compensation expense relating to
this performance share plan over the performance period based on the number of shares
expected to vest at the end of each reporting period. The actual performance of the Company is
evaluated quarterly and the expense is adjusted according to the new projections.
As of December 31, 2023, there was $7 million of unrecognized compensation expense related to
the cumulative free cash flow units that will be recognized over a weighted average period of
approximately 1.6 years. The unrecognized amount of compensation expense is based on
projected performance as of December 31, 2023.
•
eProduct Revenue: Introduced in the first quarter of 2022, this performance metric is based on
the amount of the Company’s total revenue derived from eProducts in the third year of the
performance period. Based on the Company’s eProduct revenue, it is possible for none of the
awards to vest or for a range of up to 200% of the target shares to vest.
The value of this performance share award is determined by the market value of the Company’s
common stock at the date of grant. The Company recognizes compensation expense relating to
this performance share plan over the performance period based on the number of shares
expected to vest at the end of each reporting period. The actual performance of the Company is
evaluated quarterly and the expense is adjusted according to the new projections.
As of December 31, 2023, there was $6 million of unrecognized compensation expense related to
the eProduct revenue units that will be recognized over a weighted average period of
approximately 1.7 years. The unrecognized amount of compensation expense is based on
projected performance as of December 31, 2023.
The amounts expensed and common stock issued from continuing operations for performance share
units for the years ended December 31, 2023, 2022 and 2021 were as follows:
Year Ended December 31,
2023
2022
2021
Expense (in
millions)
Number of
shares issued
(in thousands)
Expense (in
millions)
Number of
shares issued
(in thousands)
Expense (in
millions)
Number of
shares issued
(in thousands)
Total Stockholder Return
Other Performance-Based
Total
$
$
8
13
21
107 $
313
420 $
6
30
36
— $
284
284 $
6
17
23
—
138
138
117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of the status of the Company’s nonvested performance share units for the years ended
December 31, 2023, 2022 and 2021 were as follows:
Nonvested at January 1, 2021
Granted
Vested
Forfeited
Nonvested at December 31, 2021
Granted
Vested
Forfeited
Nonvested at December 31, 2022
Granted
Vested
Forfeited
PHINIA spin-off awards transferred1
PHINIA spin-off adjustment2
Nonvested at December 31, 2023
Total Stockholder Return
Other Performance-Based
Number of
shares (in
thousands)
Weighted
average grant
date fair value
Number of
shares (in
thousands)
Weighted
average grant
date fair value
271 $
135 $
(143) $
(4) $
259 $
138 $
(127) $
(20) $
250 $
135 $
(114) $
(11) $
(22) $
35 $
45.20
70.39
47.93
37.28
56.90
66.96
28.55
59.87
76.68
79.39
70.39
68.66
72.33
—
385 $
404 $
(143) $
(6) $
640 $
415 $
(234) $
(56) $
765 $
405 $
(341) $
(34) $
(67) $
106 $
38.66
45.30
41.92
36.79
42.14
44.33
34.73
43.35
45.51
48.06
45.14
44.96
46.03
—
273 $
71.37
834 $
41.08
________________
1 Represents the cancellation of awards outstanding as of Distribution Date held by PHINIA employees. PHINIA employees were
granted PHINIA restricted stock after the spin-off replacing the cancelled awards.
2 Represents the adjustment of unvested awards using a conversion ratio of 1.13 to 1 to preserve the intrinsic value of the
awards prior to spin-off as authorized by the 2023 Plan and 2018 Plan.
118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 20 ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the activity within accumulated other comprehensive loss:
(in millions)
Foreign
currency
translation
adjustments
Hedge
instruments
Defined benefit
postretirement
plans
Total
Beginning Balance, January 1, 2021
$
(321) $
Comprehensive (loss) income before reclassifications1
Income taxes associated with comprehensive (loss) income
before reclassifications
Reclassification from accumulated other comprehensive
(loss) income
Income taxes reclassified into net earnings
Ending Balance December 31, 2021
$
Comprehensive (loss) income before reclassifications
Income taxes associated with comprehensive (loss) income
before reclassifications
Reclassification from accumulated other comprehensive
(loss) income
Income taxes reclassified into net earnings
(59)
(43)
—
—
(423) $
(287)
(40)
—
—
— $
(4)
(330) $
255
(651)
192
(64)
(107)
—
4
—
14
(3)
— $
(128) $
4
—
—
—
(14)
7
7
(2)
18
(3)
(551)
(297)
(33)
7
(2)
Ending Balance December 31, 2022
$
(750) $
4 $
(130) $
(876)
Comprehensive (loss) income before reclassifications
Income taxes associated with comprehensive (loss) income
before reclassifications
Reclassification from accumulated other comprehensive
(loss) income
Income taxes reclassified into net earnings
27
24
—
—
25
—
—
—
Spin-off of PHINIA
Ending Balance December 31, 2023
(20)
$
(719) $
(1)
28 $
(9)
(5)
3
(1)
5
(137) $
43
19
3
(1)
(16)
(828)
_____________________________
1 The increase in the defined benefit postretirement plans comprehensive income before reclassifications is primarily due to
actuarial gains during the period.
The change in other comprehensive income for the Company’s noncontrolling interest entities is related
to foreign currency translation.
NOTE 21 CONTINGENCIES
In the normal course of business, the Company is party to various commercial and legal claims, actions
and complaints, including matters involving warranty claims, intellectual property claims, governmental
investigations and related proceedings, general liability and other risks. 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. 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.
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,
119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 and 22 such sites as of December 31,
2023 and 2022, respectively. Responsibility for clean-up and other remedial activities at a Superfund site
is typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters, individually or in the aggregate, will have a material
adverse effect on its results of operations, financial position or cash flows. Generally, this is because
either the estimates of the maximum potential liability at a site are not material or the liability will be
shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any
such matter.
The Company has an accrual for environmental liabilities of $6 million as of both December 31, 2023 and
2022, included in Other current and Other non-current liabilities in the Consolidated Balance Sheets. As
of December 31, 2023, this accrual, which relates to six of the sites, is based on information available to
the Company (which, in most cases, includes an estimate of allocation of liability among PRPs; the
probability that other PRPs, many of which are large, solvent public companies, will fully pay the cost
apportioned to them; currently available information from PRPs and/or federal or state environmental
agencies concerning the scope of contamination and estimated remediation and consulting costs; and
remediation alternatives). Clean-up and other remedial activities are complete or nearing completion at
the other 11 sites, for which there was no accrual as of December 31, 2023.
NOTE 22 LEASES AND COMMITMENTS
The Company’s lease agreements primarily consist of real estate property, such as manufacturing
facilities, warehouses, and office buildings, in addition to personal property, such as vehicles,
manufacturing and information technology equipment. The Company determines whether a contract is or
contains a lease at contract inception. The majority of the Company’s lease arrangements are comprised
of fixed payments, and a limited number of these arrangements include a variable payment component
based on certain index fluctuations. As of December 31, 2023, a significant portion of the Company’s
leases were classified as operating leases.
Generally, the Company’s operating leases have renewal options that extend the lease terms, and some
include options to terminate the agreement or purchase the leased asset. The amortizable life of these
assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of
being exercised at lease inception.
All leases with an initial term of 12 months or less without an option to extend or purchase the underlying
asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the
Consolidated Balance Sheets, and lease expense is recognized on a straight-line basis over the lease
term.
120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the lease assets and lease liabilities as of December 31, 2023 and 2022:
(in millions)
Assets
Operating leases
Finance leases
Total lease assets
Liabilities
Current
Operating leases
Finance leases
Non-current
Operating leases
Finance leases
Balance Sheet Location
Other non-current assets
Property, plant and equipment, net
Other current liabilities
Notes payable and other short-term debt
Other non-current liabilities
Long-term debt
December 31,
2023
2022
$
$
$
143 $
25
168 $
37 $
3
112
23
Total lease liabilities
$
175 $
106
8
114
22
2
85
9
118
The following table presents lease obligations arising from obtaining leased assets for the years ended
December 31, 2023 and 2022:
(in millions)
Operating leases
Finance leases
Total lease obligations
December 31,
2023
2022
$
$
63 $
17
80 $
14
—
14
The following table presents the maturity of lease liabilities as of December 31, 2023:
(in millions)
2024
2025
2026
2027
2028
After 2028
Total (undiscounted) lease payments
Less: Imputed interest
Present value of lease liabilities
Operating leases
Finance leases
$
37 $
30
23
19
14
69
192 $
43
149 $
$
$
3
5
4
4
5
12
33
7
26
In the years ended December 31, 2023, 2022 and 2021, the Company recorded operating lease expense
of $33 million, $32 million and $28 million, respectively.
In the years ended December 31, 2023, 2022 and 2021, the operating cash flows for operating leases
were $33 million, $30 million and $28 million, respectively.
In the years ended December 31, 2023, 2022 and 2021, the Company recorded short-term lease costs of
$29 million, $21 million and $17 million, respectively.
Finance lease costs and related cash flows were immaterial for the periods presented.
121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ASC Topic 842, “Leases”, requires that the rate implicit in the lease be used if readily determinable.
Generally, implicit rates are not readily determinable in the Company’s agreements, so the incremental
borrowing rate is used instead for such lease arrangements. The incremental borrowing rates are
determined using rates specific to the term of the lease, economic environments where lease activity is
concentrated, value of lease portfolio, and assuming full collateralization of the loans. The following table
presents the terms and discount rates:
Weighted average remaining lease term (years)
Operating leases
Finance leases
Weighted average discount rate
Operating leases
Finance leases
NOTE 23 EARNINGS PER SHARE
December 31,
2023
2022
8
8
5.4 %
6.2 %
6
5
3.1 %
2.5 %
The Company presents both basic and diluted earnings per share of common stock (“EPS”) amounts.
Basic EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average
shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing
net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock and
common stock equivalents outstanding during the reporting period.
The dilutive impact of stock-based compensation is calculated using the treasury stock method. The
treasury stock method assumes that the Company uses the assumed proceeds from the exercise of
awards to repurchase common stock at the average market price during the period. The assumed
proceeds under the treasury stock method include the purchase price that the grantee will pay in the
future and compensation cost for future service that the Company has not yet recognized. The dilutive
effects of performance-based stock awards described in Note 19, “Stock-Based Compensation,” to the
Consolidated Financial Statements are included in the computation of diluted earnings per share at the
level the related performance criteria are met through the respective balance sheet date. There were 0.7
million, 0.8 million and 0.8 million of performance share units excluded from the computation of the
diluted earnings per share for the years ended December 31, 2023, 2022 and 2021, respectively,
because the related performance criteria had not been met as of the balance sheet dates.
122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table reconciles the numerators and denominators used to calculate basic and diluted
earnings per share of common stock:
(in millions except share and per share amounts)
Basic earnings per share:
Net earnings from continuing operations
Weighted average shares of common stock outstanding
Basic earnings per share of common stock
Diluted earnings per share:
Net earnings from continuing operations
Weighted average shares of common stock outstanding
Effect of stock-based compensation
Year Ended December 31,
2022
2021
2023
$
$
$
632 $
636 $
232.8
235.5
2.71 $
2.70 $
632 $
636 $
232.8
1.6
235.5
1.3
343
238.1
1.44
343
238.1
1.4
239.5
1.43
Weighted average shares of common stock outstanding, including dilutive
shares
Diluted earnings per share of common stock
234.4
236.8
$
2.70 $
2.69 $
NOTE 24 REPORTABLE SEGMENTS AND RELATED INFORMATION
The Company’s business is aggregated into three reportable segments, which are further described
below. These segments are strategic business groups, which are managed separately as each
represents a specific grouping of related automotive components and systems. In previous years, the
Company presented its results under four reportable segments: Air Management, ePropulsion &
Drivetrain, Fuel Systems and Aftermarket.
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. As a result of the Spin-Off, Fuel Systems and Aftermarket are no longer
reportable segments.
The reportable segment disclosures have been updated accordingly, which included recasting prior
period information for the new reporting structure.
• Air Management. This segment 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.
• Drivetrain & Battery Systems. This segment’s technologies include battery modules and
systems, control modules, friction and mechanical clutch products for automatic transmissions,
torque-management products and rear-wheel drive (“RWD”) and all-wheel drive (“AWD”) transfer
case systems and coupling systems.
•
ePropulsion. This 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 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 consisting of inverter,
123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
eMotor and gear reducer. Additionally, the segment’s products include electronic controls such as
engine control units, transmission control units, battery management systems, propulsion
controllers and domain controllers.
Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by the
Company. Segment Adjusted Operating Income (Loss) is comprised of operating income adjusted for
restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense,
impairment charges and other items not reflective of ongoing operating income or loss. The Company
believes Segment Adjusted Operating Income (Loss) is most reflective of the operational profitability or
loss of its reportable segments.
The following tables show segment information and Segment Adjusted Operating Income (Loss) for the
Company’s reportable segments:
2023 Segment information
(in millions)
Air Management
Drivetrain & Battery Systems
ePropulsion
Inter-segment eliminations
Total
Corporate2
Consolidated
2022 Segment information
(in millions)
Air Management
Drivetrain & Battery Systems
ePropulsion
Inter-segment eliminations
Total
Corporate2
Consolidated
2021 Segment information
(in millions)
Air Management
Net sales
Customers
Inter-segment
Net
Year-end assets
Depreciation/
amortization
Long-lived asset
expenditures1
$
7,750 $
83 $
7,833 $
5,505 $
252 $
4,346
2,102
—
14,198
—
2
64
4,348
2,166
(149)
(149)
—
—
14,198
—
4,023
3,185
—
12,713
1,740
172
127
—
551
31
$
14,198 $
— $
14,198 $
14,453 $
582 $
252
162
384
—
798
34
832
Net sales
Customers
Inter-segment
Net
Year-end assets
Depreciation/
amortization
Long-lived asset
expenditures1
$
7,076 $
61 $
7,137 $
5,329 $
243 $
3,753
1,806
—
12,635
—
(18)
100
(143)
—
—
3,735
1,906
(143)
12,635
—
3,963
2,349
—
11,641
1,691
166
111
—
520
32
$
12,635 $
— $
12,635 $
13,332 $
552 $
187
166
257
—
610
12
622
Net sales
Customers
Inter-segment
Net
Year-end assets
Depreciation/
amortization
Long-lived asset
expenditures1
$
6,761 $
106 $
6,867 $
5,174 $
281 $
Drivetrain & Battery Systems
ePropulsion
Inter-segment eliminations
3,659
1,383
—
1
44
3,660
1,427
(151)
(151)
4,229
1,828
—
160
102
—
—
11,803
Total
Corporate2
Consolidated
_______________
1 Long-lived asset expenditures include capital expenditures and tooling outlays.
2 Corporate assets include cash and cash equivalents, investments and long-term receivables, and deferred income
taxes.
11,803 $
11,803 $
12,887 $
574 $
11,803
11,231
— $
1,656
543
31
—
—
—
$
124
214
150
113
—
477
37
514
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Segment Adjusted Operating Income (Loss)
(in millions)
Air Management
Drivetrain & Battery Systems
ePropulsion
Segment Adjusted Operating Income
Corporate, including stock-based compensation
Intangible asset amortization expense
Restructuring expense
Merger and acquisition expense, net
Asset impairments and lease modifications
(Gain) loss on sale of business
Gain on sale of assets
Other non-comparable items
Customer warranty settlement
Equity in affiliates' earnings, net of tax
Realized and unrealized loss on debt and equity securities
Interest expense, net
Other postretirement expense (income)
Year Ended December 31,
2023
2022
2021
$
1,171 $
1,073 $
1,037
545
(90)
1,626
278
449
(88)
1,434
282
67
79
23
29
(5)
(13)
8
—
69
48
9
30
(13)
—
—
—
(30)
(28)
174
10
15
73
51
—
524
(48)
1,513
234
59
108
48
—
29
—
(3)
124
(42)
362
91
(7)
Earnings from continuing operations before income taxes and noncontrolling
interest
$
991 $
913 $
510
Geographic Information
During the year ended December 31, 2023, approximately 84% of the Company’s consolidated net sales
were outside the U.S., attributing sales to the location of production rather than the location of the
customer. Outside the U.S., China, Mexico, Germany, Poland, Hungary and South Korea exceeded 5% of
consolidated net sales during the year ended December 31, 2023. The Company’s investments in equity
securities are excluded from the definition of long-lived assets, as are goodwill and certain other non-
current assets.
(in millions)
United States
Europe:
Germany
Poland
Hungary
Other Europe
Total Europe
China
Mexico
South Korea
Other foreign
Total
2023
Net sales
2022
2021
2023
2022
2021
Long-lived assets
$
2,334 $
2,143 $
2,125 $
778 $
469 $
489
1,669
1,121
904
1,386
5,080
2,998
1,760
1,163
863
1,443
937
636
1,056
4,072
2,864
1,727
1,073
756
1,338
961
469
1,023
3,791
2,958
1,208
1,117
604
393
342
167
456
354
277
170
327
401
276
193
289
1,358
1,128
1,159
876
374
197
200
821
612
205
191
776
561
239
164
$
14,198 $
12,635 $
11,803 $
3,783 $
3,426 $
3,388
125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Sales to Major Customers
Consolidated net sales to Ford (including its subsidiaries) were approximately 14%, 15% and 13% for the
years ended December 31, 2023, 2022 and 2021, respectively. Consolidated net sales to Volkswagen
(including its subsidiaries) were approximately 11%, 9% and 9% for the years ended December 31, 2023,
2022 and 2021. Such sales consisted of a variety of products to a variety of customer locations and
regions. No other single customer accounted for more than 10% of consolidated net sales in any of the
years presented.
Sales by Product Line
Sales of turbochargers for light vehicles represented approximately 21%, 26% and 24% of consolidated
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.
126
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 25 OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION
(in millions)
OPERATING ACTIVITIES OF CONTINUING OPERATIONS
Net earnings
Net (loss) earnings from discontinued operations
Net earnings from continuing operations
Adjustments to reconcile net earnings from continuing operations to net
cash provided by operating activities from continuing operations:
Depreciation and tooling amortization
Intangible asset amortization
Restructuring expense, net of cash paid
Stock-based compensation expense
(Gain) loss on sales of businesses
(Gain) loss on debt extinguishment
Asset impairments
Realized and unrealized loss on debt and equity securities
Deferred income tax benefit
Gain on insurance recovery received for property damages
Other non-cash adjustments
Adjustments to reconcile net earnings from continuing operations to
net cash provided by operating activities from continuing operations
Retirement plan contributions
Changes in assets and liabilities, excluding effects of acquisitions,
divestitures and foreign currency translation adjustments:
Receivables
Inventories
Prepayments and other current assets
Accounts payable and accrued expenses
Prepaid taxes and income taxes payable
Other assets and liabilities
Year Ended December 31,
2023
2022
2021
$
695 $
1,026 $
(7)
702
515
67
66
58
(5)
(28)
20
174
(44)
—
(16)
308
718
483
69
41
64
(16)
—
30
73
(76)
—
(33)
639
194
445
515
59
81
50
29
20
—
362
(96)
(5)
(38)
1,509
(19)
1,353
(21)
1,422
(28)
(482)
(72)
(3)
375
(20)
109
(409)
(158)
17
433
25
(60)
(55)
(179)
14
(61)
(10)
107
1,210
Net cash provided by operating activities from continuing operations
$
1,397 $
1,180 $
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest
Income taxes, net of refunds
Non-cash investing transactions:
Period end accounts payable related to property, plant and equipment
purchases
$
$
$
126 $
362 $
131 $
268 $
127
290
148 $
165 $
95
127
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 26 DISCONTINUED OPERATIONS
The historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off
are presented as discontinued operations in these Consolidated Financial Statements.
The following table summarizes the assets and liabilities from discontinued operations of PHINIA.
(in millions)
ASSETS
Cash, cash equivalents and restricted cash
Receivables, net
Inventories, net
Prepayments and other current assets
Total current assets of discontinued operations
Property, plant and equipment, net
Investments and long-term receivables
Goodwill
Other intangible assets, net
Other non-current assets
Total non-current assets of discontinued operations
LIABILITIES
Notes payable and other short-term debt
Accounts payable
Other current liabilities
Total current liabilities of discontinued operations
Long-term debt
Retirement-related liabilities
Other non-current liabilities
Total non-current liabilities of discontinued operations
December 31,
2022
$
255
852
470
39
$
1,616
939
77
419
432
179
2,046
2
538
406
946
26
94
175
295
$
$
$
$
128
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the financial results from discontinued operations of PHINIA.
(in millions)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring expense
Other operating expense, net
Operating (loss) income
Equity in affiliates’ earnings, net of tax
Interest expense, net
Other postretirement expense (income)
Earnings from discontinued operations before income taxes
Provision for income taxes
Year Ended December 31,
2023
2022
2021
$
1,723 $
3,348 $
1,362
361
173
7
132
49
(5)
—
—
54
61
2,616
732
320
11
36
365
(10)
1
(31)
405
97
308 $
3,227
2,545
682
375
55
15
237
(6)
2
(38)
279
85
194
Net (loss) earnings from discontinued operations attributable to PHINIA
$
(7) $
In connection with the Spin-Off, the Company entered into a transition services agreement through which
the Company and PHINIA will continue to provide certain services to each other following the Spin-Off.
These services are related to information technology, human resources, finance, facilities, procurement,
sales, intellectual properties and engineering. The combined impact of these services is reported in
results of continuing operations in the Consolidated Financial Statements. From the date of the Spin-Off
through the year ended December 31, 2023, the Company provided services at a cost of $13 million to
PHINIA, and PHINIA provided services at a cost of $3 million to the Company .
The Company incurred $134 million and $30 million of costs relating to the Spin-Off during the year
ended December 31, 2023 and 2022, respectively, which are reflected within Net (loss) earnings from
discontinued operations in the Company’s Consolidated Statements of Operations. Spin-Off costs are
primarily comprised of professional fees and costs to separate certain operational activities.
129
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 27 INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following table presents summary quarterly financial information for the years ended December 31,
2023 and 2022. The table presents recast financial information reflecting the presentation of discontinued
operations related to the Spin-Off:
(in millions, except per share
amounts)
Quarter ended
Net sales
Gross profit
Operating income
Amounts attributable to
BorgWarner Inc.:
Net earnings from continuing
operations
Net earnings (loss) from
discontinued operations
Net earnings attributable to
BorgWarner Inc.
Earnings per share from
continuing operations —
basic
Earnings per share from
discontinued operations —
basic
Earnings per share
attributable to BorgWarner
Inc. — basic1
Earnings per share from
continuing operations —
diluted
Earnings per share from
discontinued operations —
diluted
Earnings per share
attributable to BorgWarner
Inc. — diluted1
2023
2022
Mar-31
Jun-30
Sep-30
Dec-31
Year
Mar-31
Jun-30
Sep-30
Dec-31
Year
$ 3,383 $ 3,671 $ 3,622 $ 3,522 $ 14,198 $ 3,079 $ 3,013 $ 3,226 $ 3,317 $ 12,635
578
273
679
334
652
272
659
2,568
281
1,160
575
270
548
209
607
265
639
2,369
265
1,009
$ 166 $ 230 $
87 $ 149 $ 632 $ 130 $ 161 $ 173 $ 172 $ 636
51
(26)
(37)
5
(7)
70
54
102
82
308
$ 217 $ 204 $
50 $ 154 $ 625 $ 200 $ 215 $ 275 $ 254 $ 944
$ 0.72 $ 0.99 $ 0.37 $ 0.64 $ 2.71 $ 0.55 $ 0.68 $ 0.74 $ 0.74 $ 2.70
$ 0.21 $ (0.11) $ (0.16) $ 0.02 $ (0.03) $ 0.29 $ 0.23 $ 0.43 $ 0.35 $ 1.31
$ 0.93 $ 0.87 $ 0.21 $ 0.67 $ 2.68 $ 0.84 $ 0.91 $ 1.17 $ 1.09 $ 4.01
$ 0.72 $ 0.97 $ 0.37 $ 0.64 $ 2.70 $ 0.54 $ 0.68 $ 0.73 $ 0.73 $ 2.69
$ 0.21 $ (0.10) $ (0.16) $ 0.02 $ (0.03) $ 0.30 $ 0.23 $ 0.42 $ 0.36 $ 1.30
$ 0.93 $ 0.87 $ 0.21 $ 0.66 $ 2.67 $ 0.84 $ 0.91 $ 1.15 $ 1.09 $ 3.99
_____________________________
1 Due to the use of quarterly weighted average shares outstanding for computing earnings per share, the sum of the quarterly per
share amounts may not equal the per share amount for the year.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be considered
relative to costs. Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if any, within the Company have
130
been detected. Because of the inherent limitations in a cost-effective control system, misstatements due
to error or fraud may occur and not be detected. However, the Company’s disclosure controls and
procedures are designed to provide reasonable assurance of achieving their objectives.
The Company has adopted and maintains disclosure controls and procedures that are designed
to provide reasonable assurance that information required to be disclosed in the reports filed or submitted
under the Exchange Act, such as this Form 10-K, is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and Exchange Commission. The
Company’s disclosure controls and procedures are also designed to provide reasonable assurance that
such information is accumulated and communicated to management, as appropriate, to allow timely
decisions regarding required disclosure. As required under Exchange Act Rule 13a-15, the Company’s
management, including the Chief Executive Officer and Chief Financial Officer, has conducted an
evaluation of the effectiveness of disclosure controls and procedures as of December 31, 2023, the end
of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures are effective at the reasonable
assurance level.
Management’s Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control
over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an
assessment of the Company’s internal control over financial reporting based on the framework and
criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in
“Internal Control - Integrated Framework” (2013). Management excluded from its assessment of internal
control over financial reporting Hubei Surpass Sun Electric’s charging business, which was acquired on
March 1, 2023, and Eldor Corporation’s electric hybrid systems business, which was acquired on
December 1, 2023. In aggregate, these acquisitions accounted for less than 1% of consolidated total
assets and less than 1% of consolidated net sales, as of and for the year ended December 31, 2023,
respectively. Based on the assessment, management concluded that as of December 31, 2023, the
Company’s internal control over financial reporting was effective based on those criteria.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the
Company’s consolidated financial statements and the effectiveness of internal control over financial
reporting as of December 31, 2023 as stated in its report included herein.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over the financial reporting that occurred during the most
recent fiscal quarter that have materially affected or are reasonably likely to materially affect the
Company’s internal control over financial reporting.
Item 9B. Other Information
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III
131
Information with respect to directors, executive officers and corporate governance that appears in the
Company’s proxy statement for its 2024 Annual Meeting of Stockholders under the captions “Election of
Directors,” “Information on Nominees for Directors,” “Board Committees,” “Compensation Committee
Report,” and “Code of Ethics” is incorporated herein by this reference and made a part of this report.
Code of Ethics
The Company has long maintained a Code of Ethical Conduct, updated from time to time, which is
applicable to all directors, officers, and employees of the Company. In addition, the Company has
adopted a Code of Ethics for CEO and Senior Financial Officers, which applies to the Company’s CEO,
CFO, Treasurer, and Controller. Each of these codes is posted on the Company’s website at
www.borgwarner.com/investors/corporate-governance. The Company intends to disclose any
amendments to, or waivers from, a provision of its Code of Ethical Conduct or Code of Ethics for CEO
and Senior Financial Officers on its website within four business days following the date of any
amendment or waiver.
Item 11. Executive Compensation
Information with respect to director and executive compensation that will appear in the Company’s proxy
statement for its 2024 Annual Meeting of Stockholders under the captions “Director Compensation,”
“Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and
Analysis,” “Restricted Stock,” “Long-Term Equity Incentives,” and “Change of Control Agreements and
Transitional Income Plan” is incorporated herein by this reference and made a part of this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Information with respect to security ownership and certain beneficial owners and management and
related stockholders matters that will appear in the Company’s proxy statement for its 2024 Annual
Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners and
Management” is incorporated herein by this reference and made a part of this report.
For information regarding the Company's equity compensation plans, see Item 5 “Market for the
Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in
this Annual Report on Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information with respect to certain relationships and related transactions and director independence that
will appear in the Company’s proxy statement for its 2024 Annual Meeting of Stockholders under the
captions “Certain Relationships and Related Transactions” and “Independence of the Directors” is
incorporated herein by this reference and made a part of this report.
Item 14. Principal Accountant Fees and Services
Information with respect to principal accountant fees and services that will appear in the Company’s proxy
statement for its 2024 Annual Meeting of Stockholders under the caption “Fees Paid to PwC” is
incorporated herein by this reference and made a part of this report.
Item 15. Exhibits and Financial Statement Schedules
PART IV
132
The information required by Section (a)(3) of Item 15 is set forth on the Exhibit Index that precedes the
Signatures page of this Form 10-K. The information required by Section (a)(1) of Item 15 is set forth
above in Item 8, Financial Statements and Supplementary Data. All financial statement schedules have
been omitted, since the required information is not applicable or is not present in amounts sufficient to
require submission of the schedule or because the information required is included in the consolidated
financial statements and notes thereto included in this Form 10-K.
Item 16. Form 10-K Summary
Not applicable.
133
Exhibit Number
EXHIBIT INDEX
Description
1.1
3.1
3.2
4.1
4.2
Separation and Distribution Agreement, dated July 2, 2023, by and between the Company and PHINIA
(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 7, 2023).
Composite Restated Certificate of Incorporation of the Company, as amended through July 22, 2022
(incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2022 filed August 3, 2022).
Amended and Restated By-Laws of the Company, as amended through April 25, 2018 (incorporated by
reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2018 filed July 26, 2018).
Indenture, dated as of February 15, 1999, between Borg-Warner Automotive, Inc. and The Bank of New York
Mellon Trust Company, N.A. (successor in interest to The First National Bank of Chicago), as trustee
(incorporated by reference to Exhibit No. 4.5 to the Company's Registration Statement No. 333-172198 filed
on February 11, 2011).
Indenture, dated as of September 23, 1999, between Borg-Warner Automotive, Inc. and The Bank of New
York Mellon Trust Company, N.A. (successor in interest to Chase Manhattan Trust Company, National
Association), as trustee (incorporated by reference to Exhibit No. 4.6 to the Company's Registration
Statement 333-172198 filed on February 11, 2011).
4.3 Fourth Supplemental Indenture dated as of March 16, 2015, between the Company and The Bank of New
York Mellon Trust Company, N.A., as the indenture trustee (incorporated by reference to Exhibit 4.2 to the
Company's Current Report on Form 8-K filed March 16, 2015).
4.4
4.5
4.6
Sixth Supplemental Indenture, dated as of June 19, 2020, between the Company and Deutsche Bank Trust
Company Americas, as the indenture trustee (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed June 19, 2020).
Seventh Supplemental Indenture, dated as of October 5, 2020, between the Company and Deutsche Bank
Trust Company Americas, as the indenture trustee (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed October 5, 2020).
Eighth Supplemental Indenture, dated as of May 19. 2021, between the Company and Deutsche Bank Trust
Company Americas, as the indenture trustee (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed May 19, 2021)
4.7
Description of Securities (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2019 filed February 13, 2020).
10.1 Transition Services Agreement, dated July 2, 2023, by and between the Company and PHINIA (incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 7, 2023).
10.2
Tax Matters Agreement, dated July 2, 2023, by and between the Company and PHINIA (incorporated by
reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 7, 2023).
10.3
Employee Matters Agreement, dated July 2, 2023, by and between the Company and PHINIA (incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 7, 2023).
10.4
10.5
Intellectual Property Cross-License Agreement, dated July 2, 2023, by and between the Company and
PHINIA (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on July
7, 2023).
Fifth Amended and Restated Credit Agreement dated as of September 22, 2023, among BorgWarner Inc.,
Bank of America, N.A., as Administrative Agent for the Lenders and as Swingline Lender and an Issuing
Bank, and the Lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on September 22, 2023).
†10.6
BorgWarner Inc. 2023 Stock Incentive Plan, as Amended and Restated (incorporated by reference to Exhibit
10.2 to the Company’s Quarterly report on Form 10-Q for the quarter ended September 30, 2023 filed on
November 2, 2023).
134
Exhibit Number
Description
†10.7
†10.8
†10.9
Form of BorgWarner Inc. 2023 Stock Incentive Plan Restricted Stock Agreement for Employees (incorporated
by reference to Exhibit 10.5 to the Company’s Quarterly report on Form 10-Q for the quarter ended June 30,
2023 filed on August 2, 2023).
Form of BorgWarner Inc. 2023 Stock Incentive Plan Stock Units Award Agreement for Non-U.S. Employees
(incorporated by reference to Exhibit 10.6 to the Company’s Quarterly report on Form 10-Q for the quarter
ended June 30, 2023 filed on August 2, 2023).
Form of 2023 BorgWarner Inc. 2023 Stock Incentive Plan Performance Stock Units Award Agreement
(incorporated by reference to Exhibit 10.7 to the Company’s Quarterly report on Form 10-Q for the quarter
ended June 30, 2023 filed on August 2, 2023).
†10.10
Form of 2023 BorgWarner Inc. 2023 Stock Incentive Plan Restricted Stock Agreement for Non-Employee
Directors (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly report on Form 10-Q for the
quarter ended June 30, 2023 filed on August 2, 2023).
†10.11
Form of 2022 BorgWarner Inc. 2018 Stock Incentive Plan Restricted Stock Agreement for Employees
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2022 filed on May 4, 2022).
†10.12
†10.13
†10.14
†10.15
†10.16
†10.17
†10.18
Form of 2022 BorgWarner Inc. 2018 Stock Incentive Plan Stock Units Award Agreement for Non-U.S.
Employees (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2022 filed on May 4, 2022).
Form of 2022 BorgWarner Inc. 2018 Stock Incentive Plan Performance Share Award Agreement
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed for the
quarter ended March 31, 2022 on May 4, 2022).
Form of 2022 BorgWarner Inc. 2018 Stock Incentive Plan Restricted Stock Agreement for Non-Employee
Directors (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2022 filed on February 9, 2023).
Form of 2021 BorgWarner Inc. 2018 Stock Incentive Plan Restricted Stock Agreement for Employees
(incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2021 filed on February 15, 2022).
Form of 2021 BorgWarner Inc. 2018 Stock Incentive Plan Restricted Stock Units Agreement for Non-U.S.
Employees (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2021 filed on February 15, 2022).
Form of 2021 BorgWarner Inc. 2018 Stock Incentive Plan Performance Share Award Agreement
(incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2021 filed on February 15, 2022).
Form of 2021 BorgWarner Inc. 2018 Stock Incentive Plan Restricted Stock Agreement for Non-Employee
Directors (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2021 filed on February 15, 2022).
†10.19
Amended and Restated BorgWarner Inc. Management Incentive Bonus Plan, effective as of December 31,
2008 (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2018 filed on February 19, 2019).
†10.20
BorgWarner Inc. Retirement Savings Excess Benefit Plan, as amended and restated, effective January 1,
2009 (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2018 filed on February 19, 2019).
†10.21
BorgWarner Inc. Board of Directors Deferred Compensation Plan, as amended and restated, effective
January 1, 2009 (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2018 filed on February 19, 2019).
†10.22
First Amendment, dated as of January 1, 2011, to BorgWarner Inc. Board of Directors Deferred
Compensation Plan (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-
K for the year ended December 31, 2018 filed on February 19, 2019).
135
Exhibit Number
Description
†10.23
Second Amendment, dated as of August 1, 2016, to BorgWarner Inc. Board of Directors Deferred
Compensation Plan (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-
K for the year ended December 31, 2016 filed February 9, 2017).
†10.24
Form of Change of Control Employment Agreement entered into by the Company and each of Tonit Calaway,
Stefan Demmerle, Brady Ericson, Joe Fadool, Paul Farrell, Davide Girelli, Frederic Lissalde, Kevin Nowlan,
Volker Weng, and Tania Wingfield (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-K for the quarter ended June 30, 2022 filed on August 3, 2022).
†10.25
BorgWarner Inc. 2004 Deferred Compensation Plan, as amended and restated, effective January 1, 2009
(incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018 filed on February 19, 2019).
†10.26
Employment Agreement, dated as of September 9, 2022, between BorgWarner Inc. and Frederic B. Lissalde
(incorporated by reference to Exhibit 10.2 on the Company’s Quarterly Report on Form 10-Q filed for the
quarter ended September 30, 2022 on October 27, 2022).
21.1 Subsidiaries of the Company.*
23.1
Independent Registered Public Accounting Firm's Consent.*
31.1 Rule 13a-14(a)/15d-14(a) Certification by Principal Executive Officer.*
31.2 Rule 13a-14(a)/15d-14(a) Certification by Principal Financial Officer.*
32.1 Section 1350 Certifications.*
†97.1
BorgWarner Inc. Compensation Recovery Policy.*
101.INS
Inline XBRL Instance Document.*
101.SCH
Inline XBRL Taxonomy Extension Schema Document.*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104.1
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*
*Filed herewith.
† Indicates a management contract or compensatory plan or arrangement.
136
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BORGWARNER INC.
By:
/s/ Frederic B. Lissalde
Frederic B. Lissalde
President and Chief Executive Officer
Date: February 8, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person
on behalf of the registrant and in the capacities indicated on the 8th day of February, 2024.
Signature
/s/ Frederic B. Lissalde
Frederic B. Lissalde
/s/ Kevin A. Nowlan
Kevin A. Nowlan
/s/ Craig D. Aaron
Craig D. Aaron
/s/ Sara A. Greenstein
Sara A. Greenstein
/s/ Michael S. Hanley
Michael S. Hanley
/s/ Shaun E. McAlmont
Shaun E. McAlmont
/s/ Deborah D. McWhinney
Deborah D. McWhinney
/s/ Alexis P. Michas
Alexis P. Michas
/s/ Sailaja K. Shankar
Sailaja K. Shankar
/s/ Hau N. Thai-Tang
Hau N. Thai-Tang
Title
President and Chief Executive Officer
(Principal Executive Officer) and Director
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Vice President and Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director and Non-Executive Chairman
Director
Director
137
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(This page has been left blank intentionally.)
Directors and Officers
BOARD OF DIRECTORS
Alexis P. Michas (1, 4, 5)
Managing Partner, Juniper Invest-
Dr. Shaun E. McAlmont (3, 4)
President and Chief Executive Offi-
ment Company, LLC
cer, Ninjio, LLC
Frédéric B. Lissalde (5)
President and Chief Executive Offi-
Deborah D. McWhinney (2, 3)
Retired Chief Executive Officer of
Officer, Ford Motor Company
(1 ) Non-Executive Chair of the Board
(2) Member of the Audit Committee,
of which Director Hanley is the
Chair
cer, BorgWarner Inc.
Global Enterprise Payments, Citigroup
(3) Member of the Compensation
Sara A. Greenstein (3, 4)
President and Chief Executive Offi-
cer, Axel Johnson Inc.
Inc.
Committee, of which Director
McWhinney is the Chair
Sailaja K. Shankar (2, 3)
Senior Vice President, Engineering of
the Security Business Group, Cisco
(4) Member of the Corporate
Governance Committee, of
which Director Michas is the
Michael S. Hanley (2, 5)
Retired Global Automotive Leader,
Systems Inc.
Ernst & Young LLP
Hau N. Thai-Tang (2)
Former Chief Industrial Platform
Chair
(5) Member of the Executive
Committee, of which Director
Michas is the Chair
OFFICERS (as of December 31, 2023)
Frédéric B. Lissalde
President and
Chief Executive Officer
Kevin A. Nowlan
Executive Vice President,
Chief Financial Officer
Tonit M. Calaway
Executive Vice President,
Chief Administrative Officer,
General Counsel and Secretary
Tania Wingfield
Executive Vice President,
Chief Human Resources Officer
Craig D. Aaron
Vice President and Controller
Stefan Demmerle
Vice President and President
and General Manager,
PowerDrive Systems
Daniel R. Etue
Vice President and Treasurer
Joseph F. Fadool
Vice President and President and
General Manager, Emissions,
Thermal and Turbo Systems
Paul A. Farrell
Executive Vice President and
Chief Strategy Officer
Isabelle McKenzie
Vice President and President and
General Manager, Morse Systems
Volker Weng
Vice President and President
and General Manager, Drivetrain
& Battery Systems
BorgWarner Inc.
World Headquarters
3850 Hamlin Road
Auburn Hills, MI 48326