Borgwarner Inc. · NYSE:BWA

Borgwarner — Investor Presentation (August 2015)

29 slides from Borgwarner's investor presentation, August 2015

  1. Slide 1: Fast Forward

    Fast Forward x BorgWarner August 2015

  2. Slide 2: A Portfolio of Leading Powertrain Technology

    A Portfolio of Leading Powertrain Technology Engine 68% / SALES Drivetrain 32% / SALES Turbo Systems Emissions Systems Transmission Systems TorqTransfer Systems  Wastegate  Exhaust Gas Recirculation  DualTronic® Systems for Dual  AWD Couplings  Variable Turbine Geometry (EGR) Valves Clutch Tran

  3. Slide 3: The BorgWarner Strategic Difference

    The BorgWarner Strategic Difference  Technology Leadership  Customer and Geographic Diversity  Financial Strength and Discipline Copyright © 2015 BorgWarner Inc. 3

  4. Slide 4: Global Macro Trends

    Global Macro Trends Pace of Innovation Connected Living Autonomous and Global Urbanization Connected Vehicles Rebalancing of Economic Power Improved Efficiency Big Data Resource Demographic Shifts Increased Scarcity & Vehicle Environment Population Copyright © 2015 BorgWarner Inc. 4

  5. Slide 5: Stringent Regulations—A Resilient Secular Trend

    Stringent Regulations—A Resilient Secular Trend Korea Proposed 60 E.U. Enacted U.S. Enacted MPG Equivalent (CAFE/Local Test Cycle) for 55 China Proposed 50 Passenger Cars 45 Korea Enacted 40 35 China Enacted 30 25 20 2005 2010 2015 2020 2025 Year Source: International Council on Clean Transportation

  6. Slide 6: Fuel Economy Drives Growth for BorgWarner

    Fuel Economy Drives Growth for BorgWarner LV Transmissions LV Turbocharged Systems 103.8 103.8 89.6 89.6 Manual Transmissions Non-Turbocharged 10.8 6.4 DCT (11%)* Step ATs (1%)* 32.8 CVT (7%)* 28.5 32.4 AMTs and EVTs (13%)* 15.6 (13%)* Gasoline 9.4 13.0 (3%)*Diesel 19.3 22.1 2.0 3.7 2015E 2020E 2015

  7. Slide 7: Powertrain Trends

    Powertrain Trends Electrification Stop/Start 48 Volts Thermal Management Downsizing and boosting Downspeeding Light-weighting Cost Reduction Fuel Diversification Emissions Reduction Copyright © 2015 BorgWarner Inc. 7

  8. Slide 8: Expanding Our Reach Across the Powertrain

    Expanding Our Reach Across the Powertrain Variable VCT valvetrain Timing system ePhaser Timing chain Exhaust heat recovery system Fans/fan drive EGR cooler Eco-LaunchTM solenoid valve Solenoid Control module Wet clutch for Clutch module manual Friction transmissions AWD coupling Transfer case Perman

  9. Slide 9: Customer and Geographic Diversity

    Customer and Geographic Diversity 2015 Sales Outlook* Hyundai/Kia 6% Toyota 4% Nissan 1% VW/Audi 11% Honda 1% Daimler 6% China 13% Ford 4% Other 5% Renault 3% BMW 3% Fiat 2% PSA 1% Ford 8% GM 1% Chrysler 5% Commercial GM 3% Vehicles 2% Asian OEMs 2% Other 11% Commercial Vehicles 4% * NSK-Warner incl

  10. Slide 10: 10% to 12% Organic CAGR thru 2017

    10% to 12% Organic* CAGR thru 2017 $2.85 Billion — $3.35 Billion of Net New Business 2015 thru 2017 Americas**: ~30% Europe: ~15% Asia***: ~55% Domestic OEMs (Chrysler, Ford, GM) Domestic OEMs (Fiat, JLR, PSA, China (BYD, Chang’an, Chery, • All-wheel drive Renault/Nissan, VW/Audi) CNHDTC, Cummins, F

  11. Slide 11: 10% to 12% Organic CAGR thru 2017

    10% to 12% Organic* CAGR thru 2017 $2.85 Billion — $3.35 Billion of Net New Business 2015 thru 2017 Ignition Systems Traditional Transmission Engine 1% Components Drivetrain Thermal Systems 7% And Thermostats 5% All-Wheel Drive 14% Emissions Systems 10% DCT Modules 8% Engine Timing and VCT 16% Diese

  12. Slide 12: Growth in Asia Leading to Geographic Balance

    Growth in Asia Leading to Geographic Balance 2015E 2020E 45% 26% ~40% ~30% 29% ~30% Americas Asia Europe As of January 14, 2015 Copyright © 2015 BorgWarner Inc. 12

  13. Slide 13: 2015 Expectations

    2015 Expectations BorgWarner Outlook Sales Growth -5.5% - 2.5% Sales Growth—Excluding Currency 5.5% - 7.5% EPS Guidance $2.95 - $3.10 EPS Guidance—Excluding Currency $3.30 - $3.40 Free Cash Flow $250-$300 million R&D Spending > 4.0% of sales Tax Rate ~ 29.5% Return on Invested Capital ~ 20% $ / Euro

  14. Slide 14: 2015 Guidance—Sales Guidance Range

    2015 Guidance—Sales Guidance Range Low End High End Net new business 7.0% 8.0% Changes in product pricing -2.0% -2.0% Base business growth 0.5% 1.5% Foreign currencies -11.0% -10.0% Total -5.5% -2.5% As of July 30, 2015 Copyright © 2015 BorgWarner Inc. 14

  15. Slide 15: $15 Billion in Revenue by 2020

    $15 Billion in Revenue by 2020 $ in Billions ~15 8.1 8.3 7.8 7.1 7.2 7.4 5.7 2010 2011 2012 2013 2014 2015E 2020E  Net New Business implies double digit organic growth in 2016 and 2017  M&A would provide incremental growth  On pace to $15 billion by 2020 As of July 30, 2015 Copyright © 2015 BorgW

  16. Slide 16: Operating Income Margins On the Rise

    Operating Income Margins* On the Rise Mid‐Teens 12.4% 12.9% ~13% 11.1% 11.7% 9.3% 2010 2011 2012 2013 2014 2015E 2020E  Expect operating income margins to improve in 2015  Would be the sixth straight year-over-year improvement  Expect mid-teens incremental margins for the foreseeable future * Exc

  17. Slide 17: Attractive Business Model, Difficult to Replicate

    Attractive Business Model, Difficult to Replicate New Entrant New Entrant New Entrant New Entrant Copyright © 2015 BorgWarner Inc. 17

  18. Slide 18: Financial Discipline

    Financial Discipline Strong Returns on Invested Capital = Economic Value Creation >20% 21.7% 20.7% 20.0% 19.4% 16.7% Return on Invested Capital* 2010 2011 2012 2013 2014 2015E * Rolling four quarters. Invested capital excludes residual goodwill related to $4.8 billion leveraged buyout of BorgWarner

  19. Slide 19: Strong Capital Structure

    Strong Capital Structure A Strong Balance Sheet = The Flexibility to Take Advantage of Strategic Opportunities As of June 30, 2015 $ in millions Cash $1,108 Total debt 1,804 Net debt 696 Total equity 3,752 Total net capital 4,448 Net debt to net capital 15.6% Net debt to TTM EBITDA 0.5x Copyright ©

  20. Slide 20: Putting Our Cash Flow to Work

    Putting Our Cash Flow to Work $ in millions 140 106 226 115 296 204 57 165 563 394 407 418 277 2010* 2011* 2012 2013 2014 2015E 2020E Available for M&A and Share Repurchases * $358 million and $326 million was spent on share repurchases in 2010 and 2011, Dividends respectively, primarily to settle o

  21. Slide 21: Thank You for Your Attention

    Thank You for Your Attention Our Vision  A Clean, Energy-Efficient World Our Mission  Deliver Innovative Powertrain Solutions that Improve Fuel Economy, Emissions & Performance Fuel Economy Emissions Performance Copyright © 2015 BorgWarner Inc. 21

  22. Slide 22: Forward-Looking Statements

    Forward-Looking Statements Statements contained 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," "beli

  23. Slide 23: Providing Value Across Markets

    Providing Value Across Markets Medium & Heavy Duty 7% Agricultural, Off-Highway and Other 6% Aftermarket Light Vehicles 4% 83% Copyright © 2015 BorgWarner Inc. 23

  24. Slide 24: Millions of Turbocharged Systems

    LV Turbocharged Systems Growth by Market Diesel Turbocharged Systems Gasoline Turbocharged Systems ~15% growth from 2015 to 2020 ~83% growth from 2015 to 2020 30.0 30.0 Millions of Turbocharged Systems Millions of Turbocharged Systems 25.0 25.0 7.5 2.2 0.3 20.0 20.0 1.8 3.0 4.2 3.0 15.0 2.5 15.0 2.4

  25. Slide 25: Millions of Transmissions: Transmissions in China

    Transmissions in China 30.0 25.0 5.3 Millions of Transmissions 1.7 3.1 20.0 1.5 5.0 15.0 4.0 0.3 0.2 10.0 14.6 13.0 5.0 0.0 2015E 2020E Dual Clutch (25%)* Continuously Variable (16%)* Step Automatics (5%)* Automated Manuals (8%)* Source: IHS Automotive, BorgWarner forecasts (January 2015) *CAGRs are

  26. Slide 26: Millions of Transmissions: Transmissions in Europe

    Transmissions in Europe By Technology Type 25.0 Millions of Transmissions 0.2 4.4 20.0 0.3 3.4 2.8 2.9 0.4 0.0 0.2 0.5 4.6 15.0 4.5 0.4 0.4 10.0 16.5 16.0 13.0 14.0 5.0 0.0 2000 2005 2015E 2020E Dual Clutch (5%)* Continuously Variable (-100%)* Step Automatics (1%)* Automated Manuals (0%)* Source: IH

  27. Slide 27: Hybrid and Electric Vehicle Segments

    Hybrid and Electric Vehicle Segments INCREASING ELECTRIFICATION Internal Combustion Engine (ICE) Electric Motor Electric Motor + Electrification + ICE Only ENHANCED ICE HYBRID ELECTRIC “HEV” ELECTRIC DRIVE Mild HEV Full HEV Range Extended Battery Stop/Start Parallel Parallel/Series Electric Vehicle

  28. Slide 28: Downsizing >> Downspeeding >> More Gears

    Downsizing >> Downspeeding >> More Gears Copyright © 2015 BorgWarner Inc. 28

  29. Slide 29: EPS Reconciliation

    EPS Reconciliation Actual Results Earnings per diluted share 2006 2007 2008 2009 2010 2011 2012 2013 2014 U.S. GAAP $0.92 $1.23 ($0.16) $0.12 $1.54 $2.23 $2.09 $2.70 $2.86 Non-U.S. GAAP adjustments: Non-recurring charges and restructurings 0.22 0.01 1.14 0.09 0.08 (0.07) 0.14 0.25 0.39 Adjustments t

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