INVESTOR PRESENTATION - BORGWARNER
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Investor Presentation August/September 2020
Forward-Looking Statements Statements in this presentation may contain 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 Release 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” 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 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 presentation. 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: uncertainties regarding the extent and duration of impacts of matters associated with COVID-19/coronavirus, including additional production disruptions; the failure to complete our anticipated acquisition of Delphi Technologies PLC, as a result of, by way of example, the failure to: satisfy the conditions to the completion of the transaction or obtain the regulatory approvals required for the transaction on the terms expected or on the anticipated schedule; our dependence on automotive and truck production, both of which are highly cyclical; our reliance on major OEM customers; commodities availability and pricing; supply disruptions; fluctuations in interest rates and foreign currency exchange rates; availability of credit; our dependence on key management; 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, tariffs, in the countries in which we operate; and the other risks, including, by way of example, pandemics and quarantines, 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 as updated by Item 1A of our most recently filed 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 presentation to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements. © BorgWarner Inc. 2
BorgWarner Today
▪ Executing Balanced Propulsion Strategy
▪ Delivering Strong Relative Performance in Current
Environment
▪ Delivering Outgrowth Across , and
▪ Product Leadership Remains the Driver of Our Business
© BorgWarner Inc. 3
2020 Net Sales Outlook*
$ in millions
Full-year Net Sales Outlook Low-End Full-Year Net Sales Outlook High-End
2019 proforma excl. 2019 proforma excl.
Thermostat business $10,138 Thermostat business $10,138
FX $(110) FX $(110)
Market $(2,495) Market $(2,246)
Outgrowth $467 Outgrowth $618
2020 net sales $8,000 2020 net sales $8,400
▪ Global BWA LV market down ~25% ▪ Global BWA LV market down ~22%
▪ Organic revenue decline of ~20%, as market ▪ Organic revenue decline of ~16%, as market
decline is offset by ~450 basis points of outgrowth decline is offset by ~600 basis points of outgrowth
* Net Sales Outlook uses BorgWarner LV Production Scenarios on Slide 5 as a basis
© BorgWarner Inc. 4
2020 BorgWarner LV Production Scenarios
Q1 Q2 Q3 Q4
0% Assumes that there is not a second
wave of production disruptions arising
from COVID-19. If there is a second
wave, revenue outlook would likely be
materially worse.
-20% Full Year Production
(% change from 2019)
North America (24)% to (27)%
Europe (26)% to (28)%
-40% China (13)% to (15)%
Global (22)% to (25)%
High Scenario Low Scenario
-60%
© BorgWarner Inc. 5
Proactive Steps to Sustain Margin Profile and Competitiveness
($ in millions)
Restructuring Cost Savings ▪ Restructuring, closure or consolidation of
Announced Feb 2020 $135-$145 manufacturing and/or technical centers in all
(primarily COGS) $120-$130 major regions
Announced Apr 2019
(primarily SG&A) $95-$105 ▪ Consolidation of Turbo & ETS businesses
▪ Headcount reduction of up to an additional 1,600
employees
$45-$55
▪ Additional cash restructuring costs of up to $275
to $300M through 2023
$15
▪ Positions company to sustain strong margin
profile and overall long-term competitiveness
2019 2020 2021 2022 2023
Note: Table above includes ~$45M of savings related to April 2019 restructuring announcement
© BorgWarner Inc. 6
BorgWarner Light Vehicle Net New Business Backlog
Average Light Vehicle Outgrowth 2021 to 2023 Backlog Weighted to Asia
~3% ~10% ~17% China 50%
▪ Expect 2021-2023 outgrowth in the
500bps range Europe 10%
Americas 20%
▪ Increased content on Hybrid and Electric Asia ex. China 20%
vehicles >100% of net new business
backlog
▪ Current business pursuits will impact new
business beyond 2023
Note: Data represents regional breakdown of Net New Business Backlog
© BorgWarner Inc. 7
Integrated Drive Module for Ford Mach-E
Integrated Drive Module (iDM)
▪ Award for Ford’s new all-electric
Mustang Mach-E SUV
▪ Details
▪ iDM powers RWD and multiple AWD
vehicle configurations
▪ State-of-the-art gearing handles 4,278
Nm of axle torque and input speeds up
to 13,800 rpm
▪ Project fueled by our extensive systems
integration knowledge
Extends iDM sales to North American EV market
© BorgWarner Inc. 8
Additional Key Business Wins
Three Electric Drive Modules Intelligent Cam Torque
(eDM) Actuation (iCTA)
for electric JMC-Ford and two for both combustion and popular
other NEV manufacturers in China hybrid applications for GAC Motor
Sustaining product leadership across propulsion types
© BorgWarner Inc. 9
Investment in Future Continues
R&D Spending and % Sales CapEx Spending and % Sales
4.8% 5.5% 5.7%
4.2% 4.2% to 5.2% 5.0%
4.1% 4.7%
3.8% 5.0% to
$440 $560 $546 5.4%
$408 $413 $400 $501 $481
$343 $400
To
$450
2016 2017 2018 2019 2020E 2016 2017 2018 2019 2020E
▪ Restructuring enables continued investment ▪ Spending to support future growth
▪ R&D spending has shifted towards electrification ▪ Efficient capital utilization enables focused and
reduced spending
© BorgWarner Inc. 10Journey to Advanced Propulsion and Electrification
Complementing Organic Growth with Acquisitions
Launched electric drive Launched 48-volt eBooster® Developed groundbreaking Won contract to supply P2 on- Won first eTurboTM award with Unveiled fully integrated drive
module (eDM) electrically driven compressor S-wind process for electric axis hybrid modules to two European-based OEM with module (iDM) and secured first
in Daimler’s latest 3.0-liter motors and alternators, leading Chinese automakers SoP in 2022 award with SoP in 2021
gasoline engine winning 2018 PACE Award
2015 2016 2017 2018 2019 2020
Acquired rotating electric Acquired industrial- Acquired propulsion 60/40 JV added
business to integrate with focused power inverters and controls battery packs and
existing powertrain electronics portfolio businesses for HEVs / EVs module management Acquiring industry-leading power electronics, software,
technology in specialty and commercial capabilities calibration capabilities, and scale
vehicle sectors
Combined Inverter On Board Battery Pack
and DC/DC Converter Charger Controller
Acquired Capabilities Acquisition of Delphi Technologies
© BorgWarner Inc. 11A Propulsion Systems Leader, Well Positioned for the Future
BorgWarner’s acquisition of Delphi Technologies will
strengthen its propulsion systems leadership
✔
▪ Reinforces leadership in electrified propulsion systems
✔
▪ Increases electronics and power electronics scale, technology, talent and adds to system capabilities
✔
▪ Enhances combustion, commercial vehicle, and aftermarket businesses, resulting in more balance
across light and commercial vehicles as well as the aftermarket
✔
▪ Consistent with BorgWarner’s stated balanced combustion, hybrid, and electric propulsion strategy
© BorgWarner Inc. 12Delphi Technologies Overview
Sales Mix by Business
Deep expertise in Expect Powertrain to
(1)
Electrification with remain a highly profitable Electronics
business providing a wide Aftermarket
differentiated power 19% 18%
electronics and software range of engine and fuel
capabilities handling components
Light Vehicle
14%
2019 Diesel
Powertrain 26%
Products 9%
Broad aftermarket product Strong position in high GDi
14%
portfolio with respected pressure fuel injection
Commercial
brand and deep systems for LV and CV Vehicle Diesel
relationships with both OES
and IAM (1)
Aftermarket Electronics
19%
27%
$4.4 billion ~21,000 2023E(2) Powertrain
Products
20% 4% Light Vehicle
Employees Diesel
2019 Revenue
18%
12% GDi
Commercial
Vehicle Diesel
(1) Electronics includes power electronics, ECU, and other gas electronics.
(2) 2023 uses BorgWarner’s sales mix by business estimates
© BorgWarner Inc. 13Delphi Technologies Electronics Overview
18%
2019
Power Electronics ECUs
▪ ~25% of electronics business ▪ Broad range of ECUs and systems &
from power electronics software integration capabilities
HV Inverters
Engine Controller
▪ Broad high voltage power ▪ High level of vertical integration
electronics portfolio to serve most
emerging xEV architectures ▪ Transferable software, controls and
DC-DC Converter
system know-how Transmission Controllers
▪ State-of-the art high voltage
inverter business ▪ Brings scale in purchasing, capacity
and customer reach
▪ ~30% CAGR through 2023 Battery Pack On-Board Local Controllers
Controller Chargers
Combined Units Domain Controllers
© BorgWarner Inc. 14Delphi Technologies Business Overview (Cont’d)
19%
2019 2019
Powertrain Products Aftermarket
26%
▪ Wide range of engine and fuel ▪ Broad product portfolio spanning
handing components to help across passenger and commercial
monitor, control, and optimize vehicles, heavy commercial vehicles,
powertrain efficiency in Ignition Valvetrain and off-highways
(VCT & VVT) Gas & Diesel Fuel
conventional and hybrid vehicles Systems
▪ ~$1.4 billion of combined aftermarket
▪ Modest near-term revenue sales, positions the combined
declines, but strong profitability company as a leading automotive
and cash generation Fuel Module Sensor aftermarket supplier
Electronics & Engine
Management
▪ Opportunity to meaningfully enhance
operational efficiency
EACV Actuator
▪ Stable, modestly growing revenue
Diagnostics & Testing
base, which should generate strong
cash flows Maintenance Solutions
Canisters
© BorgWarner Inc. 15Delphi Technologies Business Overview (Cont’d)
2019 2019
Light Vehicle Fuel Injection 23% Commercial Vehicle Diesel Injection
▪ GDi growth driven by advanced ▪ Strong profitability and cash generation 14%
emission standards and decline of enabled by low cost global
light vehicle diesel in Europe manufacturing footprint with a skilled
and flexible engineering team
▪ Penetration rate in hybrids to
Fuel Assembly / Delivery
increase from nearly 50% ▪ High pressure commercial vehicle
today to >75% by 2029 diesel systems with leading technology
MD Common Rail
▪ Path to profitability on GDi supported
▪ Transition of off-highway applications
by growing volume, proven
from mechanical systems to common
technologies, and low competition 500+ Bar Direct Injection rail in China & India drives growth
▪ Light vehicle diesel revenue decline
likely to stabilize over coming years, ▪ Aside from normal market cyclicality,
HD Common Rail
as portfolio approaches ~5% of total expected to provide relatively stable
company revenues revenue base over extended horizon
© BorgWarner Inc. 16Strengthens Scale and Expertise in Electrification
Mechanical, clutching, Award-winning motors Leadership in power
and hydraulic controls provide industry electronics, software,
expertise leading technology and controls
eGearDrive® Electric Drive High Voltage Integrated Drive Module
Transmission Motor Inverter (iDM)
Well positioned to take advantage of future propulsion migration
Representative Example
© BorgWarner Inc. 17Strengthens Combustion Leadership
so so
Boosting Exhaust Gas Fuel Assembly / Engine / Transmission
Technologies Management Delivery Controllers
Air Path, Mechanical, and All Fuel Injection and
Wheel Drive Electronics
Representative Examples
© BorgWarner Inc. 18Enhances Market Balance
End Market Mix (2019 Sales) Geographic Mix (2019 Sales)
RoW
Aftermarket
Asia Pacific 2%
9%
27%
39% Europe
Commerical
16%
Vehicle
OEM
Light 75%
Vehicle
OEM 32%
North America
Enhanced end market exposure to commercial vehicle and aftermarket
while maintaining geographic mix
© BorgWarner Inc. 19Potential Revenue Synergies Support Long-term Outgrowth Opportunities
Focused Pursuit Opportunities
Light Vehicle
Customers Products
BEV iDM >$1.3B
Customer A
P4 iDM
HV P2
▪ Represents top 15
Customer B Motor + Inverter
opportunities identified jointly
HV P4 during due diligence
Customer C BEV iDM
P2 ▪ Projected awards over next
Customer D
BEV iDM >$0.7B 18 to 24 months
Customer E HV P2
Customer F P2 ▪ Start of production generally
Customer G P4 iDM in 2024 and 2025
Customer H BEV iDM
Customer I Motor + Inverter
Customer J Motor + Inverter
Customer K Motor + Inverter
2025 2027
© BorgWarner Inc. 20Commitment to Sustainability
Create a cleaner, more Live the Partner with and
energy-efficient world BorgWarner Beliefs report to stakeholders
Products that drive clean mobility Fostering talent and diversity Responsibility in our supply chain
• > 80% revenue from electric, • CEO Action for Diversity & • Supplier sustainability training
hybrid, and emissions-reducing Inclusion™ signatory and assessment programs
combustion parts
• ~58,000 hours of employee
training in 2019
Leading environmental targets Top-quartile worker safety rate Transparency in our reporting
• 50% carbon and 37% energy • 75% improvement in total • SASB, TCFD, and GRI aligned
intensity reductions by 2030 incident rate over the past reporting
from 2015 decade
Delivering our vision of a clean, energy-efficient world
© BorgWarner Inc. 21Sector-leading targets to reduce our
Create a cleaner,
more energy-
efficient world environmental footprint
Operations environmental goals
• 50% greenhouse gas intensity reduction GHG: 50% Reduction by 2030 Energy: 37% Reduction by 2030
by 2030 from 2015 baseline
• 37% energy intensity reduction by 2030
from 2015 baseline
• Maintain 100% ISO 14001 certification
at all of our manufacturing facilities
• Annual water risk assessment of
facilities and target high and
extremely high-risk locations
for reduction
• Benchmark and disclose our baseline
waste generation and establish a
diversion goal in 2021
© BorgWarner Inc. 22Appendix
Combined Capabilities Across Propulsion Types
Boosting All Wheel Drive & Engine Timing
Technologies Cross Axle Systems Systems
High Voltage Battery eGearDrive® Battery Module
eBooster® electrically P2 Hybrid Modules
Integrated Belt / Coolant Heater Transmission
driven compressor On / Off Axis
Alternator Starter
Exhaust Gas Starters & Systems
Management Alternators
Dual Clutch
Thermal Transmission Variable Valvetrain Electric All Electric Drive Electric Drive Power Electronics
Modules Turbochargers Power Electronics
Management Technologies Systems Wheel Drive Motor Module
Smart Remote
Fuel Assembly / Delivery Engine Controller Inverters Combined Units Battery Pack Controller Local Controllers Software & Calibration
Actuator
Transmission Controllers
Canisters Engine Air Control Valve DC-DC Converter On-Board Chargers Domain Controllers Power Modules Application-Specific
Integrated Circuits
Note: Representative selection of product portfolios.
© BorgWarner Inc. 24General The release, publication or distribution of this communication in or into certain jurisdictions may be restricted by the laws of those jurisdictions. Accordingly, copies of this communication and all other documents relating to the proposed transaction are not being, and must not be, released, published, mailed or otherwise forwarded, distributed or sent in, into or from any such jurisdictions. Persons receiving such documents (including, without limitation, nominees, trustees and custodians) should observe these restrictions. Failure to do so may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies involved in the proposed transaction disclaim any responsibility or liability for the violations of any such restrictions by any person. Any response in relation to the proposed transaction should be made only on the basis of the information contained in the proxy statement and other relevant documents. Delphi Technologies shareholders are advised to read carefully the formal documentation in relation to the proposed transaction once the proxy statement and other relevant documents have been dispatched. © BorgWarner Inc. 25
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