Borgwarner Inc. · NYSE:BWA
Borgwarner — Investor Day (September 2018)
83 slides from Borgwarner's investor day presentation, Sep 18, 2018
Slide 1: Investor Day 2018
Investor Day 2018 Propulsion Technical Center Auburn Hills, Michigan September 18, 2018
Slide 2: Investor Day 2018 - Patrick Nolan
Investor Day 2018 Patrick Nolan Vice President, Investor Relations September 18, 2018
Slide 3: Safe Harbor Statement
Safe Harbor Statement Statements contained in, or incorporated by reference into this presentation, future filings by us with the Securities and Exchange Commission (“SEC”), and oral statements made by, or with the approval of, our authorized personnel, that relate to our future performance or futur
Slide 4: Investor Day Agenda - Morning
Investor Day Agenda - Morning 11:05am Keynote address | Fred Lissalde, President & Chief Executive Officer 11:35am Combustion | Robin Kendrick, President & General Manager 11:45am Hybrid | Joe Fadool, President & General Manager 11:55am Electric | Stefan Demmerle, President & General Manager 12:05pm
Slide 5: Investor Day Agenda - Afternoon
Investor Day Agenda - Afternoon 2:05pm Commercial vehicle / aftermarket | Joel Wiegert, President & General Manager 2:15pm Portfolio management | Brady Ericson, Chief Strategy Officer 2:30pm Financial discipline / cash flow & outlook | Ron Hundzinski, Chief Financial Officer 2:50pm Closing remarks |
Slide 6: Investor Day 2018 - Fred Lissalde
Investor Day 2018 Fred Lissalde President & Chief Executive Officer September 18, 2018
Slide 7: Our Vision and Mission
Ourboxes, Text in overlaying Vision: black, A clean, energy-efficient world between 14pt and 18pt Our Mission: Propulsion System Leader for Combustion, Hybrid and Electric Vehicles © BorgWarner Inc. 7
Slide 8: BorgWarner Today
BorgWarner Today ▪ Executing Balanced Propulsion Strategy ▪ Product Leadership Remains the Driver of Our Business ▪ Strong Operational Discipline, with Areas to Improve ▪ Delivering Growth, Growth, Growth © BorgWarner Inc. 8
Slide 9: Our Strategy is Working
Our Strategy is Working ▪ Unrivaled Product Positioning ▪ Booking Ahead of Plan, Overweight Hybrid and Electric by 2023 ▪ Trusted Partner to Our Customers ▪ Strong Talent Pipeline © BorgWarner Inc. 9
Slide 10: Moving Forward…
Moving Forward… ▪ Electrification Accelerates Opportunities ▪ Ongoing Strength in Sales and Margin Growth ▪ 2023 revenue outlook of $14bn ▪ Margins continue to improve ▪ Leverage Growth with Improving Free Cash Flow and Cost Efficiency © BorgWarner Inc. 10
Slide 11: Growth Drivers & Outlook
Investor Day 2018 Growth Drivers & Outlook Fred Lissalde President & Chief Executive Officer September 18, 2018
Slide 12: Driving Growth: Organic and M&A
Driving Growth Organic M&A Technology driven Invest ~4% of revenue in R&D to complement our portfolio Venture Capital Engagements Market & Technology Sensing © BorgWarner Inc. 12
Slide 13: BorgWarner Growth Strategy
BorgWarner Growth Strategy Focus on efficient & clean Combustion products Accelerate our product growth across Hybrid architectures Grow our Electric product portfolio © BorgWarner Inc. 13
Slide 14: Combustion Vehicle Technology
Combustion Vehicle Technology* * Includes engines, transmissions and all-wheel drive systems with no electrification, includes stop/start. Delivering clean, fast-to- market technology solutions to increase efficiency and performance. AWD Systems Boosting Engine timing Exhaust Gas Ignition Starters &
Slide 15: Combustion Still Growing
Combustion Still Growing BorgWarner Revenue Related Industry Combustion to Combustion Propulsion Vehicle Volumes 2023 2023 CAGR 1% CAGR -3% 2017 2017 © BorgWarner Inc. 15
Slide 16: Customers Pursuing Broad Electrification Strategies
Customers Pursuing Broad Electrification Strategies Developing / Producing Electric Hybrid Yes Yes No BEV P0 P1 P2 P3 P4 PS Customer A Customer B Customer C Customer D Customer E Customer F Customer G Customer H Customer I Customer J © BorgWarner Inc. 16
Slide 17: Hybrid Vehicle Technology
Hybrid Vehicle Technology Combustion Products PLUS Hybrid Specific Products Mild, full and plug-in. Comprehensive product portfolio, offers advanced solutions for all hybrid architectures. P0 Hybrid P1 Hybrid P2 Hybrid P3 Hybrid P4 Hybrid PS Hybrid Power Thermal Electric Boosting Architecture Archit
Slide 18: Significant Revenue Growth
Significant Revenue Growth BorgWarner Revenue Related Industry Hybrid to Hybrid Propulsion Vehicle Volumes 2023 2023 CAGR 73% CAGR 41% 2017 2017 © BorgWarner Inc. 18
Slide 19: Electric Vehicle Technology
Electric Vehicle Technology* * Includes battery electric vehicles, range extenders and fuel cells. Our growing product portfolio covers virtually all electric propulsion areas including electric motors, power transmission, power electronics, thermal management and battery charging. EV Transmission E
Slide 20: EV Portfolio Provides Numerous Opportunities
EV Portfolio Provides Numerous Opportunities © BorgWarner Inc. 20
Slide 21: System Expertise Driving Dramatic Growth
System Expertise Driving Dramatic Growth BorgWarner Revenue Related Industry Electric to Electric Propulsion Vehicle Volumes 2023 2023 CAGR 73% CAGR 36% 2017 2017 © BorgWarner Inc. 21
Slide 22: 2023 Revenue Outlook of $14.0bn
2023 Revenue Outlook of $14.0bn COMBUSTION $210 52% Estimated 2023 Average Content HYBRID $275 Per Light Vehicle 46% ELECTRIC $340 33% Note: Participation Rate © BorgWarner Inc. 22
Slide 23: Catching the Waves of Industry Change
Catching the Waves of Industry Change ▪ Robust sales growth and margin improvement through 2023 ▪ Product portfolio is well positioned to drive growth across C-H-E ▪ Manage our portfolio to maximize growth ▪ Increased focus on cash flow and cost efficiency ▪ Long-term outlook supported by additional
Slide 24: Combustion, Still Growing
Investor Day 2018 Combustion, Still Growing Robin Kendrick President & General Manager September 18, 2018
Slide 25: Combustion Still Growing
Combustion Still Growing ▪ Demand for BorgWarner products continues to grow in combustion propulsion ▪ Innovation focused on efficient and clean combustion ▪ Hybrids are an additional demand driver for efficient ICE products © BorgWarner Inc. 25
Slide 26: Combustion Propulsion Technology
Combustion Propulsion Technology* * Includes engines, transmissions and all-wheel drive systems with no electrification, includes stop/start. All prices are estimates, actual prices will vary. Combustion Products: ▪ Timing system ▪ Variable cam timing ▪ Exhaust gas recirculation ▪ Clutch plates ▪ Al
Slide 27: Penetration Rates Continue to Grow
Penetration Rates Continue to Grow Technology Penetration % - Combustion Only Turbochargers Exhaust Gas Recirculation Variable Cam Timing Stop/Start © BorgWarner Inc. 27
Slide 28: Gasoline Turbocharger
Gasoline Turbocharger ▪ Variable Turbine Geometry for highly CAGR Turbo Market: fuel efficient gasoline engines 5.8% 64M 48M 2018 2023 Turbo Penetration 2018 2023 Europe 80% 80% North America 31% 52% Asia 37% 52% Global 47% 59% © BorgWarner Inc. 28
Slide 29: Dual Clutch Transmission (DCT) Modules
Dual Clutch Transmission (DCT) Modules Market: ▪ Global Market CAGR ’18–’23: 5.7% ▪ BorgWarner Global Rev. CAGR ’18–’23: ~10% 14.7M DCTs 11.1M DCTs Dry 5.6M DCTs Wet 2015 2018 2023 © BorgWarner Inc. 29
Slide 30: Hybrid Opportunity for Efficient Combustion Products
Hybrid Opportunity for Efficient Combustion Products Technology Penetration % - Hybrid Only 2017 2027 Turbochargers 20% 67% Variable Cam Timing 63% 70% Dual Clutch Transmission 15% 36% © BorgWarner Inc. 30
Slide 31: Combustion Still Growing
Combustion Still Growing Revenue Market and 91M Participation 2023 76M NEW 2023 CAGR aCPV aCPV Estimate 1% 47% 52% $187 $210 2017 2017 IHS UNITS* 2023 IHS UNITS* aCPV (Average Content Per Vehicle) Combustion Vehicles with BW Content *Source market data: IHS Light Vehicle Forecast (June 2018). All va
Slide 32: Hybrid, Breadth Across Portfolio
Investor Day 2018 Hybrid, Breadth Across Portfolio Joe Fadool President & General Manager September 18, 2018
Slide 33: Significant Revenue Growth
Significant Revenue Growth ▪ Strong global market growth ▪ Right products and portfolio depth is driving leading position ▪ Overweight hybrid business by 2023 © BorgWarner Inc. 33
Slide 34: Hybrid Propulsion Technology
Hybrid Propulsion Technology* * Includes mild, full and plug-in hybrid. All prices are estimates, actual prices will vary. Combustion Products PLUS Hybrid Specific Products ▪ Exhaust heat recovery systems ▪ Electric drive motors ▪ Disconnect clutch and controls ▪ Pictured products and many more… eBo
Slide 35: Broad Expertise Across Hybrid Platforms
Broad Expertise Across Hybrid Platforms ▪ iBAS – Integrated Belt Alternator Starter ▪ BISG – Belt Integrated Starter Generator ▪ MGU – Motor Generator Unit ▪ PS – Power Split © BorgWarner Inc. 35
Slide 36: Integrated Motor Generator (MGI)
Integrated Motor Generator (MGI) ▪ High performance 48V electrical machine ▪ S-Wind technology drives competitive advantages in efficiency and compact design ▪ Motor Generator Unit with integrated Power Electronics ▪ Modular concept to fit multiple hybrid architectures © BorgWarner Inc. 36
Slide 37: Growing P2 Hybrid Opportunity
Growing P2 Hybrid Opportunity ▪ Strong volume growth, with upside potential in the market forecast ▪ Leverages transmission, clutching, hydraulic controls, and electric motor expertise ▪ Numerous production contracts 2018 2023 2028 awarded (18 to date) 0.5M 3.7M 6.4M P2 Hybrids P2 Hybrids P2 Hybrids
Slide 38: P2 Modules – Leveraging Our Expertise
P2 Modules – Leveraging Our Expertise © BorgWarner Inc. 38
Slide 39: Significantly Increasing Penetration and aCPV
Significantly Increasing Penetration and aCPV Revenue Market and Participation 26M 2023 CAGR NEW 73% 2023 aCPV aCPV Estimate $147 3.3M $275 46% 25% 2017 2017 IHS UNITS* 2023 IHS UNITS* aCPV (Average Content Per Vehicle) Hybrid Vehicles with BW Content *Source market data: IHS Light Vehicle Forecast
Slide 40: Electric, Full System Expertise
Investor Day 2018 Electric, Full System Expertise Stefan Demmerle President & General Manager September 18, 2018
Slide 41: Full System Expertise Driving Growth
Full System Expertise Driving Growth ▪ Uniquely positioned to provide complete propulsion solutions for Electric vehicles ▪ Wide variety of products fitting customers needs ▪ Leveraging system competence to win business © BorgWarner Inc. 41
Slide 42: Electric Propulsion Technology
Electric Propulsion Technology* * Includes battery electric vehicles, range extenders and fuel cells. All prices are estimates, actual prices will vary. Electric Vehicle Products: ▪ Battery Heater ▪ Fuel Cell air supply ▪ Transmission Chain ▪ Pictured products and many more… Cabin Heater EV Transmis
Slide 43: Full Electric Propulsion System Expertise
Full Electric Propulsion System Expertise HV Off-Axis EV Transmission Electric Drive Motor Power Electronics Integrated Electric Drive eGearDrive® Module Specify, Develop and Manufacture HV On-Axis © BorgWarner Inc. 43
Slide 44: S-wind Stator Technology
S-wind Stator Technology ▪ 2018 Automotive News PACE Award winner ▪ High efficiency and compact winding technology ▪ Leverage across multiple products (48V through HV) to gain economies of scale © BorgWarner Inc. 44
Slide 45: Motor Controllers (Power Electronics)
Motor Controllers (Power Electronics) ▪ Motor controllers for pure electric (and Low Voltage hybrid) passenger and commercial 96Vdc vehicles ▪ Highly configurable to satisfy different vehicle profiles High Voltage, Low Power ▪ Controls both induction and permanent magnet motors High Voltage, High Po
Slide 46: Cabin Heaters & Battery Heaters
Cabin Heaters & Battery Heaters ▪ High Voltage Air Heater for Cabin Heating: ▪ High power density packages ▪ Closed heater rod for safety ▪ Light weight design ▪ High Voltage Coolant Heaters for Cabin and Battery Heating: ▪ Highly flexible packaging options ▪ Compact technology ▪ Fail safe operation
Slide 47: Full System Expertise Driving Growth
Full System Expertise Driving Growth Revenue Market and Participation 5.6M 2023 CAGR NEW 73% 2023 aCPV aCPV Estimate $204 0.9M $340 33% 13% 2017 2017 IHS UNITS* 2023 IHS UNITS* aCPV (Average Content Per Vehicle) Electric Vehicles with BW Content *Source market data: IHS Light Vehicle Forecast (June
Slide 48: Investor Day 2018
Investor Day 2018 Propulsion Technical Center Auburn Hills, Michigan September 18, 2018
Slide 49: Investor Day Agenda - Afternoon
Investor Day Agenda - Afternoon 2:05pm Commercial vehicle / aftermarket | Joel Wiegert, President & General Manager 2:15pm Portfolio management | Brady Ericson, Chief Strategy Officer 2:30pm Financial discipline / cash flow & outlook | Ron Hundzinski, Chief Financial Officer 2:50pm Closing remarks |
Slide 50: Commercial Vehicle and Aftermarket
Investor Day 2018 Commercial Vehicle and Aftermarket Joel Wiegert President & General Manager September 18, 2018
Slide 51: Diverse Commercial Vehicle Portfolio
Diverse Commercial Vehicle Portfolio ▪ ~14% of Total Revenue Europe ▪ Global Business with Diverse Commercial Customer Base Vehicle North Revenue America Breakdown ▪ On and Off-Road Exposure Rest of World © BorgWarner Inc. 51
Slide 52: Commercial Vehicle Technology
Commercial Vehicle Technology Low fuel consumption and long service life are priorities. BorgWarner offers highly efficient combustion, hybrid and electric technologies. Boosting Thermal Exhaust Gas Starters & Battery Heavy Duty Transmission Power Electric Technologies Management Management Alternat
Slide 53: Applying Hybrid & Electric Technologies
Applying Hybrid & Electric Technologies Electric Motor for Scania’s Electric Motor and eGearDrive new Citywide hybrid bus for FUSO eCanter Trucks © BorgWarner Inc. 53
Slide 54: Global Aftermarket Business Overview
Global Aftermarket Business Overview 5 $365M 800 Dedicated Reman (~2017 Customers Operations & 5 Revenue) in 4 Regions Distribution 11,000 PNs Centers © BorgWarner Inc. 54
Slide 55: Commercial Vehicle & Aftermarket Summary
Commercial Vehicle & Aftermarket Summary ▪ Technology translates across both light vehicle and commercial vehicle markets ▪ Electrification of propulsion systems is happening now ▪ Growing Aftermarket revenue opportunities ▪ Conservative revenue projections in a potential growth market © BorgWarner
Slide 56: Portfolio Management
Investor Day 2018 Portfolio Management Brady Ericson Chief Strategy Officer September 18, 2018
Slide 57: Managing Portfolio for Growth
Managing Portfolio for Growth ▪ Product Line Strategy ▪ Prioritize ▪ Optimize Product Growth ▪ Rationalize ▪ Active Management of Portfolio to Meet Growth Expectations Market Position © BorgWarner Inc. 57
Slide 58: Combustion Opportunity
Combustion Opportunity 2017 2023 $55B BorgWarner $47B Takeaways Addressable Market • Combustion remains largest market opportunity • Growth despite declining market volumes Market Volumes 91M 76M / (3%) • Revenues continue to rise BorgWarner Content • Driven by product penetration gains Opportunity
Slide 59: Hybrid Opportunity
Hybrid Opportunity Takeaways 2017 2023 • Average Hybrid Cost to Customers declines BorgWarner $39B • Current volumes low, led by PS Addressable • Higher volume content on P0/P1/P2, Market shifting from PS • Opportunity in Hybrid is 2.5x that of $6.5B Combustion Market Volumes 3.3M 26M / 41% • Revenu
Slide 60: Electric Opportunity
Electric Opportunity Takeaways 2017 2023 • Average content opportunity increasing BorgWarner $11B • Despite prices decreasing Addressable Market • Driven by higher AWD penetration • Opportunity in Electric is more the 3x that of Combustion $1.7B Market Volumes 0.9M 5.6M / 36% • CAGR more than double
Slide 61: Significantly Higher Content Opportunities in Hybrid and Electric
Significantly Higher Content Opportunities in Hybrid and Electric Combustion Hybrid Electric ~3.0X $$ 2023 BorgWarner Content Opportunity ~2.5X $$ Per Vehicle Summary $1,501 $1,947 $613 Market Volumes 76M 26M 5.6M Addressable $47B $39B $11B Market © BorgWarner Inc. 61
Slide 62: Our Content Opportunity Continues to Grow
Our Content Opportunity Continues to Grow BorgWarner Takeaways • Average content opportunity up over 35% BorgWarner Content • Driven by higher share of Hybrid and Opportunity Electric Per Vehicle $896 Summary $664 • Revenue opportunity up 54% • Content and volume driven 2017 2023 • Equates to 7% CAG
Slide 63: Financial Discipline & Outlook
Investor Day 2018 Financial Discipline & Outlook Ron Hundzinski Chief Financial Officer September 18, 2018
Slide 64: IHS Light Vehicle Projections
Electric IHS Light Vehicle Projections Hybrid Combustion 2% CAGR 108M 5.6M 0.9M 95M 36% CAGR 26M 3M 41% CAGR 91M 83M 76M -3% CAGR *Source market data: IHS Light Vehicle Forecast (June 2018*). 2017 IHS UNITS* 2023 IHS UNITS* © BorgWarner Inc. 64
Slide 65: 2023 Revenue Outlook of $14.0 Billion
CV & AM Electric 2023 Revenue Outlook of $14.0 Billion Hybrid Combustion ~6% CAGR $14.0 2% CAGR $1.8 $9.8 73% CAGR 21M $0.6 $1.7 $3.2 <$0.1 73% CAGR $0.1 $8.0 83M $8.3 1% CAGR Source: As of 2018 Investor Day 2017 *all values in billions 2023 © BorgWarner Inc. 65
Slide 66: Overweight Hybrid and Electric by 2023
Electric Overweight Hybrid and Electric by 2023 Hybrid Combustion 1.0% 0.3% 5.2% 5.2% 3.4% 1.5% 24.0% 26.6% 95.6% 98.2% 70.8% 68.2% 2017 IHS UNITS* 2017 BWA REVENUE (USD) 2023 IHS UNITS* 2023 BWA REVENUE (USD) *Source market data: IHS Light Vehicle Forecast (Jun 2018), volumes and revenue are light
Slide 67: Hybrid Boosting Market Opportunity
Hybrid Boosting Market Opportunity Turbocharger Opportunity for Hybrids ▪ 2028 Hybrid market is 47M vehicles ▪ Turbocharger penetration of 68% ▪ Average content per vehicle $250 ~$8bn Annual Market Opportunity © BorgWarner Inc. 67
Slide 68: P2 Hybrid Market Opportunity
P2 Hybrid Market Opportunity P2 Hybrid Architectures Clutch Modules & ▪ 2028 Hybrid market is 47M vehicles Friction Transmission Controls ▪ P2 module penetration of 14% ▪ Average content per vehicle: $900 ~$6bn Annual Market Opportunity P2 “On-Axis” Modules P2 “Off-Axis” Modules © BorgWarner Inc. 68
Slide 69: Power Electronics Opportunity
Power Electronics Opportunity High Voltage Power Electronics (excludes 12 & 48V Hybrids) ▪ 2028 Hybrid and Electric market is 22M vehicles ▪ Power Electronics penetration of 100% ▪ Average content per vehicle $350 ~8bnAnnual ~$8bn AnnualMarket Sales Opportunity Opportunity © BorgWarner Inc. 69
Slide 70: Margins Poised to Expand Through 2023
Margins Poised to Expand Through 2023 2023 Operating Margin Outlook 2017 Operating Margin Low 13% Range 12.4% © BorgWarner Inc. 70
Slide 71: Capital Deployment Discipline
Capital Deployment Discipline ROIC% 20%+ 19% 18% 17% 16% 15% 2018 2019 2020 SOP Year © BorgWarner Inc. 71
Slide 72: Focus on Cost Efficiency
Focus on Cost Efficiency Leverage corporate costs Reallocate R&D spend and personnel Control launch costs Total cost of quality © BorgWarner Inc. 72
Slide 73: Strong Base for Free Cash Flow Improvement
Strong Base for Free Cash Flow Improvement ▪ Operating Cash Flow Continues to Improve Goal: Accelerate Pace ▪ Capital Spending to Support Growth Goal: Increase Efficiency ▪ Increase Corporate Level Focus © BorgWarner Inc. 73
Slide 74: Significant Free Cash Flow Leverage
Significant Free Cash Flow Leverage 2023 Free Cash Flow Outlook 2018 Free Cash Flow Guidance $550M-$575M ~$1.0bn 12% FCF CAGR through 2023 © BorgWarner Inc. 74
Slide 75: Cash Priorities
Cash Priorities ▪ Return Capital to Shareholders ▪ Dividend growth in line with cash flow ▪ Opportunistic share buybacks ▪ Manage Portfolio for Growth ▪ Effective technology driven acquisition of assets ▪ Identify non-core assets for possible divestiture ▪ Balance near-term financial impacts with lo
Slide 76: Building Upon Our Financial Strength
Building Upon Our Financial Strength Expect $14bn of revenue by 2023 Overweight hybrid and electric revenue by 2023 Abundant future growth opportunities Margin improvements poised to continue Expect $1bn of free cash flow by 2023 © BorgWarner Inc. 76
Slide 77: Closing Remarks
Investor Day 2018 Closing Remarks Fred Lissalde President & Chief Executive Officer September 18, 2018
Slide 78: Combustion Awards Secured Into Next Decade
Combustion Awards Secured Into Next Decade ▪ Gas <2.0L turbocharger EU (2020, 2021, 2022), Asia (2018, 2020, 2021) ▪ Gas <1.5L turbocharger EU (2020), Asia (2018, 2019, 2020, 2022) ▪ Variable Cam Timing EU (2019, 2021), Asia (2019, 2020, 2021), Americas (2020) ▪ Dual Clutch Module EU (2022), Asia (2
Slide 79: Significant Revenue Contribution from Hybrid Awards
Significant Revenue Contribution from Hybrid Awards ▪ Complete P2 On-Axis Module Asia (2020, 2021) ▪ P2 On-Axis Stator EU (2019) ▪ Wet disconnect and controls for P2 Asia (2019, 2020) ▪ Chain drive for P3 EU (2018) ▪ 200V MGU for P0 EU (2019), Asia (2019) ▪ Exhaust Heat Recovery System Americas (201
Slide 80: Awards Across Products, Regions and Customers
Awards Across Products, Regions and Customers ▪ eGearDrive® Transmission Asia (2018 (3), 2019 (3), 2021) ▪ Electric Drive Module Asia (2018 (3) 2019 (3)) ▪ Electric Drive Module N. America (2019) ▪ Electric Drive Motor N. America (2018) ▪ CV Electric Drive Motor EU (2019, 2020) ▪ Cabin Air Heater As
Slide 81: BorgWarner: Driving Forward
BorgWarner: Driving Forward ▪ $14 billion Revenue Outlook ▪ Overweight Hybrid and Electric by 2023 ▪ $1 billion Free Cash Flow Outlook ▪ Electrification Accelerates Opportunities © BorgWarner Inc. 81
Slide 82: Thank you!
Thank you! © BorgWarner Inc. 82
Slide 83: Investor Day 2018
Investor Day 2018 Propulsion Technical Center Auburn Hills, Michigan September 18, 2018