Statements contained in this Annual Report on Form 10-K ("(“Form 10-K"10-K”) (including Management'sManagement’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'smanagement’s current outlook, expectations, estimates and projections. Words such as "anticipates," "believes," "continues," "could," "designed," "effect," "estimates," "evaluates," "expects," "forecasts," "goal," "initiative," "intends," "outlook," "plans," "potential," "project," "pursue," "seek," "should," "target," "when," "would,"“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“Critical Accounting Policies"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'sCompany’s actual results may differ materially from those expressed, projected or implied in or by the forward-looking statements.

This section and the discussions contained in Item 1A, "Risk“Risk Factors,"” and in Item 7, subheading "Critical“Critical Accounting Policies"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.

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'sCompany’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.

BorgWarner Inc. (together with itits Consolidated Subsidiaries, the “Company” or “BorgWarner”) is a Delaware corporation incorporated in 1987. We are1987.The Company is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. OurIts products help improve vehicle performance, propulsion efficiency, stability and air quality. We manufactureThe Company manufactures and sellsells these products worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles ("SUVs"(“SUVs”), vans and light trucks). The Company'sCompany’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). WeThe Company also manufacturemanufactures and sell oursells its products to certain Tier One vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The Company operates manufacturing facilities serving customers in Europe, the Americas and Asia and is an original equipment supplier to nearly every major automotive OEM in the world.

The Company reports its results under twofour reporting segments: EngineAir Management, e-Propulsion & Drivetrain, Fuel Injection and Drivetrain.Aftermarket. Net sales by reporting segment for the years ended December 31, 2018, 2017 and 2016 arewere as follows:

The sales information presented above does not include the sales by the Company'sCompany’s unconsolidated joint ventures (see sub-heading “Joint Ventures”) below). Such unconsolidated sales totaled approximately $947$1,053 million, $844$721 million, and $737$827 million for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.

The Engine SegmentAir Management segment develops and manufactures products to improve fuel economy, reduce emissions and enhance performance. Increasingly stringent regulations of, and consumer demand for, better fuel economy and emissions performance are driving demand for the Engine Segment's products in combustion, hybrid and electric propulsion systems. The Engine Segment'sAir Management segment’s technologies include:include turbochargers, eBoosters, eTurbos, timing systems, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, canisters, cabin heaters, battery modules and systems, battery packs, battery heaters and battery charging. The Company’s Air Management segment includes AKASOL.

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 reduced emissions. The Engine Segment has benefited from the growthoptimized temperatures in turbocharger demand around the world for both combustionpropulsion systems and hybrid propulsion systems. The Engine Segment provides turbochargers for light, commercial and off-highway applications for combustion and hybrid vehicles in Europe, the Americas and Asia.  The Engine Segment also designs and manufactures turbocharger actuators using integrated electronics to precisely control turbocharger speed and pressure ratio.

The Engine Segment'sAir Management segment’s timing systems enable precise control of air and exhaust flow through the engine, improving fuel economy and emissions. The Engine Segment's timing systems products include timing chain, variable cam timing (“VCT”), crankshaft and camshaft sprockets, tensioners, guides and snubbers, HY-VO® front-wheel drive (“FWD”) transmission chain, four-wheel drive (“4WD”) chain for light vehicles and hybrid power transmission chain. The Engine SegmentAir Management segment is a leading manufacturer of timing systems for OEMs around the world.

The Engine Segment's engine timing technology includes VCT with mid position lock, which allows a greater rangeAir Management segment’s powertrain products include an array of camshaft positioning thereby enabling greater control over airflowhighly engineered products that complement and enhance the opportunity to improveefficiency improvements delivered by many other air management and fuel economy, reduce emissions and improve engine performance compared with conventional VCT systems.injection technologies.

The Engine Segment's emissions systemsAir Management segment’s battery products improve emissions performanceinclude high-performance lithium-ion battery modules and fuel economy. Products include electric air pumps and exhaust gas recirculation ("EGR") modules, EGR coolers, EGR valves, glow plugs and instant starting systems for combustion, both gasolineelectrified applications that provide long battery life with a high power output for safe, reliable and diesel propulsion systems, and hybrid vehicles.durable operation.

The Engine Segment's thermal systems products are designed to optimize temperatures in propulsion systems and vehicle cabins. ProductsCompany’s e-Propulsion & Drivetrain segment’s technologies include viscous fan drives that sense and respond to multiple cooling requirements, polymer fans, coolant pumps, cabin heaters, battery heaters and battery charging.

The core design features of itse-Propulsion & Drivetrain segment’s rotating electrical components portfolio are meetingmeets the demands of increasing vehicle electrification, improved fuel efficiency, reduced weight, and lowered electrical and mechanical noise. The Drivetrain Segment's mechanical products include friction, mechanical and controls products for automatic transmissions and torque management products for All-Wheel Drive ("AWD") vehicles, and its rotatingRotating electrical components include starter motors, alternators and electric motors for hybrid and electric vehicles.

The e-Propulsion & Drivetrain 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 Company's 50%-owned joint venture in Japan, NSK-Warner KK ("NSK-Warner"), is a leading producer of friction plates and one-way clutches in Japan and China.

The e-Propulsion & Drivetrain Segment'ssegment’s torque management products include rear-wheel drive (“RWD”)-AWD-all-wheel drive (“AWD”) transfer case systems, FWD-AWDfront-wheel drive (“FWD”)-AWD coupling systems and cross-axle coupling systems. The Drivetrain Segment's focussegment is on developing electronically-controlledelectronically controlled torque management devices and systems that will benefit fuel economyvehicle energy efficiency and vehicle dynamics.

The Drivetrain Segment is involved in the AWD marketFuel Injection segment develops and manufactures gasoline and diesel fuel injection components and systems. Its gasoline fuel injection portfolio includes a full suite of fuel injection technologies – including pumps, injectors, fuel rail assemblies and complete systems – that deliver greater efficiency for FWD based vehicles with couplings that use electronically-controlled clutches to distribute power to the rear wheels as traction is required. The Drivetrain Segment's latest coupling innovation, the Centrifugal Electro-Hydraulic (“CEH”) Actuator, used to engage the clutches in the coupling, produces outstanding vehicle stability and traction while promoting better fuel economy with reduced weight. The CEH Actuator is found in the AWD couplings featured in several current FWD-AWD vehicles.

Set forth below are the names, ages, positions and certain other information concerning the executive officers of the Company as of February 14, 2019.

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.the Company faces. Additional risks and uncertainties not presently known to usthe Company or that weit currently deemdeems immaterial also may impact ourits business operations. If any of the following risks occur, ourthe Company’s business including its financial performance, financial condition, operating results and cash flows could be adversely affected.

OurThe Company’s 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 ourthe Company’s sales to OEMs.

We competeThe Company competes worldwide with a number of other manufacturers and distributors that produce and sell products similar to ours.products. Price, quality, delivery, technological innovation, engineering development and program launch support are the primary elements of competition. OurThe Company’s competitors include vertically integrated units of ourits major OEM customers, as well as a large number of independent domestic and international suppliers. Additionally, its competitors include start-ups that may be well funded, with the result that they could have more operational and financial flexibility than it has. A number of ourthe Company’s competitors are larger than we are,it is, and some competitors have greater financial and other resources than we do.it does. Although OEMs have indicated that they will continue to rely on outside suppliers, a number of our major OEM customers manufacture products for their own uses that directly compete with ourthe Company’s products. These OEMs could elect to manufacture such products for their own uses in place of the products wethe Company currently supply.supplies. The competitive environment has changed dramatically over the past few years as ourCompany’s traditional U.S. OEM customers, faced with intense international competition, have expandedcontinued to expand their worldwide sourcing of components. As a result, we havethe Company has 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 ourthe Company’s business. In addition, any of ourits competitors may foresee the course of market development more accurately than we do,it does, develop products that are superior to ourits products, produce

The automotive industry is increasingly focused on the development of hybrid and electric vehicles and of advanced driver assistance technologies, with the goal of developing and introducing a commercially-viable, fully-automatedcommercially viable, fully automated driving experience. There has also been an increase in consumer preferences for mobility on demand services, such as car-car and ride-sharing,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. If we dothe Company does not continue to innovate toand 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 ourits results of operations.

There is substantial and continuing pressure on OEMs to reduce costs, including costs of products we supply. Annualthe Company supplies. OEM customers expect annual price reductions to OEM customers are a permanent component of ourin its business. To maintain ourits profit margins, we seekthe Company seeks price reductions from ourits suppliers, improved production processes to increase manufacturing efficiency, and updatedstreamlined product designs to reduce costs, and we attemptit attempts to develop new products, the benefits of which support stable or increased prices. OurThe Company’s ability to pass through increased raw material costs to ourits 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 ourits business.

The Company uses 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. Increasing commodity costs will have an impact on ourits results. We haveThe Company has sought to alleviate the impact of increasing costs by including a material pass-through provision in ourits customer contracts wherever possible and by selectively hedging certain commodity exposures. Customers frequently challenge these contractual provisions and rarely pay the full cost of any increases in the cost of materials. The discontinuation or lessening of ourthe Company’s ability to pass-throughpass through or hedge increasing commodity costs could adversely affect ourits business.

From time to time, commodity prices may also fall rapidly. WhenIf this happens, suppliers may withdraw capacity from the market until prices improve which may cause periodic supply interruptions. The same may be true of our transportation carriers and energy providers. If these supply interruptions occur, it could adversely affect ourthe Company’s business.

The United States has implementedmaintained tariffs on certain imported steel, aluminum and aluminum, as well as certain other listed products importeditems originating from China. The United States is also considering implementing newThese tariffs on items imported by us from China or other countries and export controls on additional items. The impact of these tariffs could increasehave increased the cost of raw materials orand components we purchase.the Company purchases. The imposition of tariffs by the United States has resulted in retaliatory tariffs from a number of countries, including China, which could increase the cost of products we sell. Any resulting trade war couldthe Company sells. If the U.S. or other countries impose additional tariffs, that will have a negativefurther adverse impact on the global market and an adverse effect on ourits business.

We ownThe Company owns important intellectual property, including patents, trademarks, copyrights, and trade secrets, and areis involved in numerous licensing arrangements. OurIts intellectual property plays an important role in maintaining ourits competitive position in a number of the markets that we serve. Ourit serves. The Company’s competitors may develop technologies that are similar or superior to ourits proprietary technologies or design around the patents we ownit owns or license.licenses. Further, as we expand ourit expands its operations in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of others duplicating ourthe Company’s proprietary technologies increases, despite efforts we undertakeit undertakes to protect them. OurThe Company’s inability to protect or enforce ourits intellectual property rights or claims that we areit is infringing intellectual property rights of others could adversely affect ourits business and ourits competitive position.

To improve efficiency and reduce costs, we havethe Company has regionally centralized the information systems that support ourits 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 ourits business.

We relyThe Company relies on the capacity, reliability and security of ourits IT systems and infrastructure. IT systems are vulnerable to disruptions, including those resulting from natural disasters, cyber-attacks or failures in third-party-providedthird-party provided services. Disruptions and attacks on ourthe Company’s IT systems pose a risk to the security of ourits systems and ourits ability to protect ourits networks and the confidentiality, availability and integrity of information and data and that of third parties, including ourits employees. As a result,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 it has implemented security policies, processes, and layers of defense designed to help identify and protect against intentional and unintentional misappropriation or corruption of its systems and information, and disruptions of its operations, the Company has 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 ourthe Company’s intellectual property, improper use of ourits systems and networks, access to and manipulation and destruction of Company or third-party data, production downtimes, lost revenues, inappropriate disbursement of funds and both internal and external supply shortages. In addition, wethe Company may be required to incur significant costs to protect against damage caused by such attacks or disruptions in the future. ThisThese consequences could cause significant damage to ourthe Company’s reputation, affect ourits relationships with ourits customers and suppliers, lead to claims against the Company and ultimately adversely affect ourits business.

OurThe Company’s ability to sustain and grow ourits business requires usit 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 ourits needs could adversely affect ourits business.

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 ourthe Company’s manufacturing facilities and manufacturing processes and those of ourits suppliers, as well as factors related to tooling, equipment, employees, initial product quality and other factors. OurThe Company’s failure to successfully launch new business, or ourits inability to accurately estimate the cost to design, develop and launch new business, could have an adverse effect on ourits profitability and results of operations.

To the extent we arethe Company is not able to successfully launch new business, vehicle production at ourits customers could be significantly delayed or shut down. Such situations could result in significant financial penalties to usthe Company 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 ourits customers shifting work away from usit to a competitor, all of which could result in loss of revenue or loss of market share and could have an adverse effect on ourits profitability and cash flows.

As of December 31, 2018,2021, approximately 15%13% of ourthe Company’s U.S. workforce was unionized. We haveThe Company has a domestic collective bargaining agreement for one facility in New York, which expires in September 2020.2024. The workforce at certain of ourits international facilities is also unionized. A prolonged dispute with ourits employees could have an adverse effect on ourthe Company’s 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 ourthe Company’s manufacturing and assembly facilities could have adverse effects on ourits business. Similarly, if one or more of ourits customers were to experience a work stoppage or production shutdown, that customer would likely halt or limit purchases of ourthe Company’s products, which could result in the shutdown of the related manufacturing facilities. A significant disruption in the supply of a key

    

We haveThe Company has unfunded obligations under certain of ourits defined benefit pension and other postretirement benefit plans. The valuation of ourits 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 usthe Company to make significant additional contributions to ourits pension plans in the future. Additionally, a material deterioration in the funded status of the plans could significantly increase ourthe Company’s pension expenses and reduce profitability in the future.

WeThe Company also sponsorsponsors 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 ourits business. 

The Company’s operations are subject to laws governing, among other things, emissions to air, discharges to waters, and the generation, handling, storage,management, transportation treatment and disposal of waste and other materials. The operation of automotive parts manufacturing plants entails risks in these areas, and wethe Company cannot assure that weit will not incur material costs or liabilities as a result. Through various acquisitions over the years, we havethe Company has acquired a number of manufacturing facilities, and weit cannot assure that weit will not incur material costs and liabilities relating to activities that predate ourits 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 ourthe Company’s business.

WeThe Company and certain of ourits 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, wethe Company could have greater liability under applicable statutes. Refer to Note 15, "Contingencies,"21, “Contingencies,” to the Condensed Consolidated Financial Statements in item 8 of this report for further discussion.

We provideThe Company provides product warranties to ourits customers for some of ourits products. Under these product warranties, wethe Company 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,the Company, or a product warranty claim brought against us,it, could have an adverseadversely impact on ourits results of operations. In addition, a recall claim could require usit to review ourits entire product portfolio to assess whether similar issues are present in other product lines, which could result in significant disruption to ourits business and could have an adverse impact on ourits results of operations. WeThe Company 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 ourits financial statements.