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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No.     )

 Filed by the Registrant   o
 Filed by a Party other than the Registrant   o
 
 Check the appropriate box:


 x   Preliminary Proxy Statement
 o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 o   Definitive Proxy Statement
 o   Definitive Additional Materials
 o   Soliciting Material Pursuant to §240.14a-12

BORGWARNER INC.

(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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SEC 1913 (02-02)Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.




BORGWARNER INC.

___________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Chicago, Illinois

Auburn Hills, Michigan
March 19, 200420, 2008

Dear Stockholder:

BorgWarner Inc. will hold its Annual Meeting of Stockholders at the Company’s headquarters located at 200 South3850 Hamlin Road, Auburn Hills, Michigan, Avenue, Chicago, Illinois, 60604,48326, on April 21, 2004,30, 2008, at 10:9:00 a.m., local time, for the following purposes:

 1.To elect the nominees for Class IIIII Directors to serve for the next three years;
 
 2.To vote upon a proposal to approve the BorgWarner Inc. 2004 Stock Incentive Plan;
 
 3.2.To vote upon a proposal to approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized common stock of the Company in orderfrom 150,000,000 shares to permit, among other things, a 2-for-1 stock split;400,000,000 shares; 
 
 4.3.To ratify the appointment of Deloitte & Touche LLP as the independent auditorsregistered public accounting firm for the Company for 2004; and2008;
 
 5.4. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only stockholders at the close of business on March 5, 2004 will be3, 2008 are entitled to vote at the meeting or any adjournment or postponement thereof.

By Order of the Board of Directors
Laurene H. Horiszny
Secretary

Your vote is important!  Whether or not you intend to be present at the meeting, and in order to assure that your shares are represented at the meeting, please mark, sign and date the enclosed proxy card and return it in the enclosed prepaid envelope.  If you prefer, you can submit your proxy by telephone or the internet.  If you attend the meeting, you may vote in person if you wish to do so, even if you have previously submitted your proxy.

Please read the attached proxy statement carefully as it describes in greater detail the matters to be acted upon and your voting rights with respect to those matters.

Along with the attached proxy statement, we are sending you our 2007 summary annual report, which includes our financial statements.  Most of you can elect to view future proxy statements and annual reports over the internet instead of receiving paper copies in the mail.  Please refer to page __ of the proxy statement and your proxy card for further information.

By Order of the Board of Directors
/s/ John J. Gasparovic
John J. Gasparovic
Secretary 


YOUR VOTE IS IMPORTANT!

YOU MAY VOTE BY:


•  Signing and returning the accompanying proxy cardcard; 
OR 
•  Voting by telephone or by the Internet. SeeInternet (See proxy card for instructions.);

OR

• Voting in person at the meeting (if you are a stockholder of record). 

TABLE OF CONTENTS

PROPOSAL 1 -- ELECTION OF DIRECTORS
REPORT OF THE BORGWARNER INC. FINANCE AND AUDIT COMMITTEE
SUMMARY COMPENSATION TABLE
PROPOSAL 2 -- APPROVAL OF THE BORGWARNER INC. 2004 STOCK INCENTIVE PLAN
PROPOSAL 3 -- APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
PROPOSAL 4 -- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
OTHER INFORMATION
APPENDIX A BORGWARNER INC. FINANCE AND AUDIT COMMITTEE

PROPOSAL 1 - - ELECTION OF DIRECTORS
REPORT OF THE AUDIT COMMITTEE
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION COMMITTEE REPORT
EXECUTIVE COMPENSATION
PROPOSAL 2 - - PROPOSAL CONCERNING AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
PROPOSAL 3 – RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
OTHER INFORMATION
ANNEX A 
ANNEX B

BORGWARNER INC.
200 South3850 Hamlin Road 
Auburn Hills, Michigan Avenue48326 
Chicago, Illinois 60604

PROXY STATEMENT

March 19, 2004

20, 2008

This Proxy Statementproxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of BorgWarner Inc. (the “Company”) for the 2004Company’s 2008 Annual Meeting of Stockholders to be held at the Company’s headquarters at 200 South3850 Hamlin Road, Auburn Hills, Michigan Avenue, Chicago, Illinois 6060448326 on April 21, 200430, 2008 at 10:9:00 a.m., local time, or at any adjournments thereof. This Proxy Statementproxy statement and the accompanying form of proxy and our 2007 summary annual report are being mailed to stockholders beginning on or about March 19, 2004.20, 2008. The Company’s Summary Annual Report to Stockholders for the year ended December 31, 20032007 is enclosed.

Record Date and Voting at the Annual Meeting 
Only stockholders of record at the close of business on March 5, 20043, 2008 will be entitled to vote at the meeting. As of such date, there were 2x,xxx,xxx________ issued and 2x,xxx,xxx__________ outstanding shares of common stock. Each share of common stock entitles the holder to one vote.

If you return your signed proxy card or vote by telephone or by the Internet before the Annual Meeting, we will vote your shares as you direct. Any proxy returned without specification as to any matter will be voted as to each proposal in accordance with the recommendation of the Board of Directors. You may revoke your proxy at any time before the vote is taken by delivering to the Secretary of the Company written revocation or a proxy bearing a later date, or by attending and voting at the Annual Meeting.

The election inspectors will tabulate the votes cast prior to the meeting and at the meeting to determine whether a quorum is present. The presence in person or by proxy of the holders of a majority of common stock will constitute a quorum. A quorum is necessary to transact business at the Annual Meeting. Shares of common stock represented by proxies that reflect abstentions or “broker non-votes” (i.e., shares held by a broker or nominee which are represented at the Annual Meeting, but with respect to which such broker or nominee is not empowered to vote on a particular proposal) will be counted as present and entitled to vote for purposes of determining the presence of a quorum. Assuming
With respect to the election of Directors, stockholders may (a) vote in favor of all nominees, (b) withhold votes as to all nominees, or (c) withhold votes as to specific nominees. In an uncontested director election, such as this year’s election, a quorum is present, an abstention from voting ordirector nominee may serve on the board only if the nominee receives the favorable vote of more than 50% of the shares voted.  In a contested election, directors are elected by a plurality vote. Withheld votes and broker non-vote has no effect on Proposals 1,non-votes will not affect the outcome of the election of directors.
With respect to Proposal 2 and 4. However, anthe proposed amendment to our certificate of incorporation: the approval and adoption of that amendment requires the affirmative vote of a majority of the outstanding shares of the Company’s common stock.  An abstention or a broker non-votenonvote is the functional equivalent of a “no” vote on this proposal.

With respect to proposal 3: the affirmative vote of a majority of the votes cast with respect to a particular proposal is required for approval and adoption of that proposal.  An abstention on this proposal will be the functional equivalent of a “no” vote on that proposal.  However, a broker nonvote on any one of those proposals will not be counted for purposes of determining the number of votes cast on that proposal and thus will not affect the outcome of the vote on that proposal.

Electronic Delivery of Proxy Statement and Annual Report

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 30, 2008.  THE PROXY STATEMENT AND ANNUAL REPORT TO SECURITY HOLDERS ARE AVAILABLE ON THE INTERNET SITE AT http://ww3.ics.adp.com/streetlink/BWA.

Most stockholders can elect to view future proxy statements and annual reports over the internet instead of receiving paper copies in the mail.

You can choose this option and save the Company the cost of producing and mailing these documents by:

•           Following the instructions provided on your proxy card or voter instruction form;
•           Following the instructions provided when you vote over the Internet; or
•           Going to www.______________ and following the instructions provided.

If you choose to view future proxy statements and annual reports over the Internet, you will receive an e-mail message next year containing the Internet address to access the Company’s proxy statement and annual report.  The e-mail message also will include instructions for voting over the Internet.  You will have the same legal effectopportunity to opt out at any time by following the instructions on www.___________________.  You do not have to re-elect Internet access each year.

Householding Information  

The Company has adopted a procedure called “householding,” which has been approved by the SEC.  Under this procedure, a single copy of the summary annual report, proxy statement or Notice of Internet Availability of Proxy materials, as applicable, will be sent to any household at which two or more stockholders reside, unless one of the stockholders at that address notifies the Company that they wish to receive individual copies.  This procedure reduces our printing costs and fees.  Stockholders who participate in householding will continue to receive separate proxy cards.

Householding will not affect dividend check mailings in any way.

The Company will deliver promptly upon written or oral request a vote “against” Proposal 3.separate copy of the summary annual report, the proxy statement or Notice of Internet Availability of Proxy Materials, as applicable to any stockholder at a shared address to which a single copy of those documents was delivered.  If you share an address with another stockholder and you wish to receive a separate copy of any of those documents you may inform the Company of your wish by contacting Mary Brevard, Vice President, Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326 (tel: 248-754-9200).  Similarly, if you share an address with another stockholder that is receiving multiple copies and wish to request that the number of copies of those documents being delivered to that address be reduced to a single copy, you may inform the Company of your wish by contacting Mary Brevard, Vice President, Investor Relations at the above address and telephone number.

PROPOSAL 1 —1— ELECTION OF DIRECTORS

The Company’s Board of Directors currently consists of ten directors and is divided into three classes. Jere A. Drummond, Timothy M. ManganelloRobin J. Adams and Ernest J. Novak, Jr. (the “Class II Directors”)David T. Brown are the nominees for election as Class III Directors to the Board at this meeting. Mr. Glaske will retire from the Board of Directors at the 2008 Annual Meeting of Stockholders in accordance with retirement guidelines adopted by the Board.  Following the election of directors at this Annual Meeting your Board of Directors will have nine members and one vacancy.  If elected, each nominee will serve for a term of three years andor until their successors arehis successor is elected and qualified. The Class III Directors have terms expiring at the 2005 Annual Meeting of Stockholders and the Class I Directors have terms expiring at the 20062009 Annual Meeting of Stockholders and the Class II Directors have terms expiring at the 2010 Annual Meeting of Stockholders. Each of the nominees for election as a Class IIIII Director is presently a director of the Company and has agreed to serve if elected. All of the Class III Directors are presently directors of the Company. In the event that any nominee should become unavailable for election, the Board of Directors may designate a substitute nominee, in which event the shares represented by proxies at the meeting will be voted for such substitute nominee unless an instruction to the contrary is indicated on the proxy card.
Recommendation 
YOUR BOARD OF DIRECTORS RECOMMENDS A plurality of the votes cast is needed for the election of directors.

Recommendation of the Board of Directors

The Board of Directors recommends a voteVOTE “FOR” the election of each of the Class II Directors — Jere A. Drummond, Timothy M. Manganello and Ernest Novak, Jr.

THE ELECTION OF EACH OF THE NOMINEES FOR CLASS III DIRECTOR —ROBIN J. ADAMS AND DAVID T. BROWN

.
Information on Nominees for Directors and Continuing Directors

The following table sets forth as of February 13, 2004,March 3, 2008, with respect to each nominee and each directorof the Company’s current directors continuing to serve, theirhis or her name, age, principal occupation, the year in which theyhe or she first became a director of the Company and directorships in other corporations:
entities:  

Class I Directors AgePrincipal Occupation and Directorships 
       
Principal Occupation
Class I DirectorsAgeand Directorships
Phyllis O. Bonanno
1999
  6064  Ms. Bonanno has been President and CEO of International Trade Solutions, Inc., an international trade consulting firm, since March 2002. She was the President of TradeBuilders, Inc. from October 2000 until October 2001. She was President of Columbia College from July 1997 until March 2000. She is also a director of Adams Express Company, Mohawk Industries, Inc. and Petroleum & Resources Corporation.
Andrew F. Brimmer
1997
Alexis P. Michas
1993
  77Dr. Brimmer has been President of Brimmer & Company, Inc., an economic and financial consulting firm, since July 1976. He is also a director of CarrAmerica Realty Corporation, BlackRock Investment Income Trust, Inc. and other BlackRock funds.
Alexis P. Michas
1993		4650  Mr. Michas has been the Managing Partner since 1996 of Stonington Partners, Inc., an investment management firm.firm since 1996. He is also a director of AirTran Airways, Inc., PerkinElmer, Inc., Lincoln Educational Services Corporation and a number of privatelyprivately-held companies.
Richard O. Schaum
2005
61Mr. Schaum served as the 2007 President of the Society of Automotive Engineers and has been General Manager, 3rd Horizon Associates LLC, a technology assessment and development company, since May 2003.  He was Vice President and General Manager of Vehicle Systems for WaveCrest Laboratories, Inc. from October 2003 until June 2005. He was Executive Vice President, Product Development for DaimlerChrysler Corporation from January 2000 until his retirement in March 2003.
Thomas T. Stallkamp
2006
61Mr. Stallkamp has been an Industrial Partner in Ripplewood Holdings LLC, a New York private equity group, since July 2004. From 2003 to 2004, he served as Chairman of MSX International, Inc., a global provider of technology-driven engineering, business and specialized staffing services, and from 2000 to 2003 he served as its Vice Chairman and Chief Executive Officer. From 1980 to 1999, Mr. Stallkamp held companies.various positions with DaimlerChrysler Corporation and its predecessor Chrysler Corporation, the most recent of which were Vice Chairman and President. Mr. Stallkamp also serves as a Director of Baxter International, Inc.
Class II Directors AgePrincipal Occupation and Directorships 
       
Principal Occupation
Class II DirectorsAgeand Directorships
Jere A. Drummond
1996
  6468  Mr. Drummond retired from the BellSouth Corporation on December 31, 2001.  He served as Vice Chairman of the BellSouth Corporation from January 2000 until his retirement.  He was President and Chief Executive Officer of BellSouth Communications Group, a provider of traditional telephone operations and products, from January 1998 until December 1999.  He was President and Chief Executive Officer of BellSouth Telecommunications, Inc. (“BellSouth”) from January 1995 until December 1997 and was elected a director of BellSouth Telecommunications, Inc. in 1993.  He is also a director of AirTran Holdings, Inc., Centillium Communications, Inc. and Science Applications International Corporation.SAIC, Inc.
Timothy M. Manganello
2002
  5458  Mr. Manganello has been Chairman of the Board since June 2003 and Chief Executive Officer of the Company since February 2003 and has been President since February 2002.2003.  He was also President and Chief Operating Officer of the Company from February 2002 until February 2003.  He was Executive Vice President from June 2001 until February 2002.  He was Vice President of the Company from February 1999 until June 2001 and President and General Manager of BorgWarner TorqTransfer Systems Inc. (“("TorqTransfer Systems”Systems") from July 2001 until January 2002. He was Vice President of the Company and General Manager of TorqTransfer Systems from February 1999 until June 2001.February 2002.  He was appointed a director of the Company in February 2002.  Mr. Manganello is also a director of Bemis Company, Inc. and he serves as the Board Chairman of Federal Reserve Bank of Chicago, Detroit branch. 

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Ernest J. Novak, Jr.
2003
  
Principal Occupation
Class II DirectorsAgeand Directorships
Ernest J. Novak, Jr.
2003		5963  Mr. Novak retired as a Managing Partner from Ernst & Young in June 2003.  He was a Managing Partner from 1986 until June 2003.  Mr. Novak is also a director of A. Schulman, Inc. and FirstEnergy Corp.
Class III Directors AgePrincipal Occupation and Directorships 
       
Principal Occupation
Class III DirectorsAgeand Directorships
William E. Butler
1997
Robin J. Adams
2005
  7354  Mr. ButlerAdams has been Executive Vice President, Chief Financial Officer and Chief Administrative Officer since April 2004. He was ChairmanExecutive Vice President — Finance and Chief Financial Officer of American Axle & Manufacturing Holdings Inc. (“American Axle”) from July 1999 until April 2004. Prior to joining American Axle, he was Vice President and Treasurer and principal financial officer of BorgWarner Inc. from May 1993 until June 1999. Mr. Adams also is a member of the Supervisory Board of BERU AG.
David T. Brown
2004
59Mr. Brown retired from Owens Corning on December 31, 2007.  He was President and Chief Executive Officer of Eaton Corporation, a global manufacturer of industrial, vehicle, construction, commercialOwens Corning from April 2002 until his retirement. He was Executive Vice President and aerospace products,Chief Operating Officer from January 1992 until his retirement at the end2001 to March 2002. He was Vice President of 1995. Mr. Butler is a director of Applied Industrial Technologies.Owens Corning and President, Insulating Systems Business from January 1997 to December 2000.
Paul E. Glaske
1994
  7073   Mr. Glaske was Chairman, President and Chief Executive Officer from April 1992 until his retirement in October 1999 of Blue Bird Corporation, a leading manufacturer of school buses, motor homes and a variety of other vehicles.
John Rau
1997		55Mr. Rau has been President and Chief Executive Officer of Miami Corporation, a private asset management firm, since January 2003. He has been Chairman of the Chicago Title and Trust Company Foundation since April 2000. He was President and Chief Executive Officer of Chicago Title Corporation from January 1997 until March 2000. Mr. RauGlaske is also a director of First Industrial Realty Trust, Inc.Lincoln Educational Services Corporation, Energy Transfer Partners, L.P. and Nicor, Inc.Energy Transfer Equity, L.P.

No director nominee, director or executive officer is related to any other director nominee, director or executive officer (or to any director or executive officer of any of the Company’s subsidiaries) by blood, marriage or adoption.  There are no arrangements or understandings between any nominee or any of our directors or executive officers or any other person pursuant to which that nominee or director or executive officer was nominated or elected as a director of the Company or any of its subsidiaries.  No director or executive officer of the Company is party to, or has any material interests in, any material legal proceedings that are adverse to the Company or its subsidiaries.

Board of Directors and Its Committees

The Board of Directors held four regular meetings during 2003.2007. All of the directors attended at least 75% of the meetings of the Board of Directors and anyeach committee on which they served.  Director Novak was elected to the Board at the July 2003 meeting and attended all subsequent meetings. OurThe Company’s Corporate Governance Guidelines set forth ourthe Company’s policy that directors should use their best efforts to attend the Company’s annual meetingsmeeting of stockholders. All directors serving at the time of the 20032007 Annual Meeting of Stockholders attended the meeting.

The Board of Directors has a standing Compensation Committee, Finance and Audit Committee, Corporate Governance Committee and Executive Committee. The Charters for each of our Board committees can be accessed on the Company’s website at www.bwauto.com.

www.borgwarner.com.

The Board has determined that all Board members meet the independence requirements of the New York Stock Exchange (“NYSE”), with the exception of Timothy M.Mr. Manganello, our Chairman and Chief Executive Officer, and Mr. Adams, our Executive Vice President, Chief Financial Officer and Chief Administrative Officer. Under the Company’s Corporate Governance Guidelines, a director will not be considered independent unless the Board determines that such director has no direct or indirect material relationship with the Company. In addition, the Company’s Corporate Governance Guidelines provide, among other things, that:

 • a director who is an employee, or whose immediate family member is an executive officer, of the Company is not independent“independent” until three years after the end of such employment relationship.
 
 • a director who receives, or whose immediate family member receives, more than $100,000 per year in direct compensation from the Company, other than director and committee fees or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent“independent” until three years after he or she ceases to receive more than $100,000 per year in such compensation.
 
 • a director who is affiliated with or employed by, or whose immediate family member is affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the Company,

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is not “independent” until three years after the end of the affiliation or the employment or auditing relationship.
 
 • a director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of the Company’s present executives serve on that company’s compensation committee, is not “independent” until three years after the end of such service or the employment relationship.
 
 • a director who is an executive officer or an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, the listed company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues, is not “independent” until three years after falling below such threshold.
• a director who is not considered independent by relevant statute or regulation is not “independent.”

Compensation Committee.The presentcurrent members of the Compensation Committee are Directors GlaskeDrummond (Chairman), Butler, DrummondBonanno, and Rau.Brown. The principal functions of the Compensation Committee include reviewing and approving executive appointments, remuneration, and remunerationcompensation plans and supervising the administration of the Company’s employee benefitthese plans. The Compensation Committee met foursix times during 2003.2007.

Finance and Audit Committee.The presentcurrent members of the Finance and Audit Committee are Directors RauNovak (Chairman), Bonanno, Brimmer, MichasSchaum and Novak.Stallkamp. The Audit Committee of the Board of Directors of BorgWarner Inc. is charged with assisting the full Board in fulfilling the Board’s oversight responsibility with respect to the quality and integrity of the accounting, auditing and financial reporting practices of the Company. The Committee also has the responsibility for, among other things, selection and compensation of the independent registered public accounting firm, monitoring the independent registered public accounting firm’s qualifications, independence and work (including resolving any disagreements between the Company’s management and the independent registered public accounting firm regarding financial reporting), pre-approving all audit services to be performed by the independent registered public accounting firm, monitoring the performance of the Company’s internal audit function and reviewing on behalf of the Board  the Company’s pension plans and risk management programs. The responsibilities of the Committee are set forth in its charter, which is reviewed at least annually.

Each member of the Committee meets the independence requirements set by the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission. The Board of Directors has determined that DirectorMr. Novak qualifiesis a financial expert as an “audit committee financial expert” withindefined by the meaning of applicable SEC regulations. In addition, the Board has determined that each memberrules and regulations of the FinanceSecurities and Exchange Commission. None of the members of the Committee simultaneously serve on the audit committees of more than two other public companies.

 The Audit Committee is financially literate as required by applicable NYSE rules.met seven times during 2007. The principal functions of the Finance and Audit Committee include: the engagement of the Company’s independent auditors; determining the scope of services provided by the independent auditors; reviewing the methodologies used by the CompanyCommittee’s charter, which was amended in its accounting and financial reporting practices; reviewing the results of the annual audit and the Company’s annual financial statements; and overseeing the Company’s internal control and internal auditing services. A copy of the Charter for the Finance and Audit CommitteeNovember 2007, is attached as AppendixAnnex A. The Finance and Audit Committee met six times during 2003.

Corporate Governance Committee.The present members of the Corporate Governance Committee are Directors ButlerGlaske (Chairman), Drummond Glaske and Gorr. Director Gorr intends to retire at the 2004 Annual Meeting of Stockholders.Michas. The principal functions of the Corporate Governance Committee include making recommendations to the Board of Directors regarding: (i) Board composition and structure, (ii) corporate governance principles, including the nature, duties and powers of Board committees, (iii) term of office for members, (iv) qualified persons to be nominated for election or re-election as directors, (v) stockholders’ suggestions for board nominations, and (vi) the emergency successor to the Chief Executive Officer.Officer, and (vii) any requests for waivers of application of the Company’s Code of Ethical Conduct and any related person transactions. The Corporate Governance Committee also establishes criteria for Board and committee membership, and evaluates Company policies relating to the recruitment of directors and oversees the evaluation of the Board, its committees and management. The Corporate Governance Committee met four times during 2003.2007.


The Corporate Governance Committee will consider nominees for the Board of Directors from a variety of sources, including current directors, management, retained third-party search firms, and stockholders.
Stockholders of record of the Company may recommend director candidates for inclusion by the Board in the slate of nominees which the Board recommends to stockholders for election. Appropriate biographical information and background material must be submitted to the “BorgWarner Inc. Corporate Governance Committee” c/o BorgWarner Inc. General Counsel, 200 South3850 Hamlin Road, Auburn Hills, Michigan Avenue, Chicago, IL 6060448326 in a timely manner. Assuming that appropriate biographical and background material is provided for candidates recommended by stockholders, the Corporate Governance Committee will evaluate those candidates by following substantially the same process, and applying substantially the same criteria, as for candidates submitted by Board members. The General Counsel will review the information and provide to the Chairman of the Corporate Governance Committee an assessment of the candidate’s independence, freedom from conflicts of interest and general suitability. If the Chairman of the Committee decides to submit the candidate to the entire Committee, each member will receive the candidate’s background information and will be afforded an opportunity to interview the candidate.

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In considering whether to recommend to the full Board any candidate for inclusion in the Board’s slate of recommended director nominees, the Corporate Governance Committee will consider, among other things, the following factors:

 • personal and professional ethics, integrity and values;
 
 • the education and breadth of experience necessary to understand business problems and evaluate and postulate solutions;
 
 • interest and availability of time to be involved with the Company and its employees over a sustained period;
 
 • stature to represent the Company before the public, stockholders and various others who affect the Company;
 
 • willingness to objectively appraise management performance in the interest of the stockholders;
 
 • open mindedness on policy issues and areas of activity affecting overall interests of the Company and its stockholders;
 
 • involvement only in activities and interests that do not create a conflict with the director’s responsibilities to the Company and its stockholders;
 
 • ability to evaluate strategic options and risks;
 
 • contribution to the Board’s desired diversity and balance; and
 • willingness to limit public company board service to four or fewer boards of public companies, unless the Corporate Governance Committee approves otherwise.otherwise; and 
• agreement to tender promptly following their election an irrevocable resignation effective upon failure to receive the required vote for re-election at the next meeting at which such person would face re-election and upon acceptance of such resignation by the Board of Directors.

The Company believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. If the Corporate Governance Committee determines that a stockholder-nominated candidate is suitable and that the candidate should be recommended to the full Board, a quorum of the full Board must discuss whether to include the candidate in the slate of nominees which the Board recommends to stockholders for election and, if appropriate, adopt a resolution authorizing the inclusion.

There have been no material changes to the procedures by which security holders may recommend nominees since last year’s annual meeting.
You may send communications to your Board of Directors and to individual directors.  Such communications should be submitted in writing addressed to your Board of Directors or to one or more named individual directors in care of BorgWarner Inc., General Counsel, 3850 Hamlin Road, Auburn Hills, Michigan 48326.  All such communications will be forwarded promptly to your Board of Directors or such named individual director.
Executive Committee.The present members of the Executive Committee are Directors Drummond, Manganello and Michas. The Executive Committee is empowered to act for the full Board during intervals between Board meetings when telephonic meetings cannot reasonably be arranged, with the exception of certain matters that by law may not be delegated. The Executive Committee did not meetmet once during 2003.2007.

Executive Sessions.The non-employee directors meet in executive sessions without the presence of any corporate officer or member of management in conjunction with regular meetings of the Board. Director ButlerGlaske is the current presiding director.  It is expected that Director Michas will become presiding director of these executive sessions.upon Mr. Glaske’s retirement.  Interested parties can make concerns known directly to the non-management directors on-line atwww.mysafeworkplace.comor by toll-free call to 1-800-461-9330.


Directors Compensation

     Effective July 1, 2003, the annual retainer for non-employee directors was increased from $26,000 to $40,000 for service on the Board of Directors. Each non-employee director receives $1,000 for each Board meeting attended. Committee members also receive $1,000 ($1,500 if Chairman of the committee) for each committee meeting attended. In recognition of increased time commitments, the Chairman of the Finance and Audit Committee received $3,000 for each committee meeting attended, since April 2003. The Company pays for the expenses associated with attendance at Board and committee meetings.

     In addition, under the terms of the BorgWarner Inc. 1993 Stock Incentive Plan, as Amended (the “1993 Plan”), which expired on December 31, 2003, each non-employee director of the Company received on the third Tuesday of each year an annual grant of options to purchase 2,000 shares of common stock having an

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exercise price equal to the fair market value of the common stock at the date of grant of such option. Each director, upon joining the Board, also received an initial grant of options to purchase 2,000 shares of common stock having an exercise price equal to the fair market value of the common stock as of such date. All such options expire ten years after the date of grant and become exercisable in installments on the second and third anniversaries of the date of grant.

If the BorgWarner Inc. 2004 Stock Incentive Plan (the “2004 Plan”) is approved by stockholders (Proposal 2), starting in 2004, instead of annual stock option grants, non-employee directors will receive an annual grant of 400 shares of restricted stock pursuant to a resolution. (The amount of restricted shares will be adjusted, if necessary, to account for the effect of the stock split if Proposal 2 is approved.) Non-employee directors no longer receive automatic annual grants of options under the 1993 Plan.

REPORT OF THE BORGWARNER INC. FINANCE AND AUDIT COMMITTEE

     The Finance and Audit Committee


Management of your Company is responsible for the Board of Directors of BorgWarner Inc. is charged with assisting the Board with respect to fulfilling the Board’s oversight responsibility regarding the qualitypreparation, presentation and integrity of your Company's financial statements and for the effectiveness of internal control over reporting.  Management and the Company's internal auditing department are responsible for maintaining its accounting auditing and financial reporting practicesprinciples and internal controls and procedures designed to maintain compliance with accounting standards and applicable laws and regulations.  Deloitte & Touche LLP, the independent registered public accounting firm for the Company is responsible for auditing your Company's financial statements and internal controls over financial reporting, and expressing opinions on (1) the conformity of the Company.financial statements with accounting principles, generally accepted in the United States of America and (2) the effectiveness of internal control over financial reporting.  The Audit Committee also hasis responsible for the responsibility for, among other things, monitoringappointment, oversight, compensation and retention of the independent auditor’s qualifications and independence, monitoringregistered public accounting firm.

            In the performance of its oversight function, the Company’s internal audit function and advising the Board on corporate financial policy and capital structure and reviewing capital expenditure plans and financing plans. The full charge of theAudit Committee is set forth in its charter, which ishas reviewed and updated annually and approved by the Board. During 2003, the Committee met six times and the Committee chairman, as representative of the Committee, discussed the interim financial information contained in each quarterly earnings announcement with the chief financial officer or acting chief financial officer, controller and independent auditors prior to its public release.

     With respect to the 2003 financial statements, the Committee, in conjunction with the Board, reviewed the 2003 financial results and financial condition with management. The Committee met with selected members of management and Deloitte & Touche LLP, (“Deloitte”), the Company’s independent auditors, to review theaudited financial statements (including quarterly reports)for the year ended December 31, 2007.  The Audit Committee also has discussed with Deloitte & Touche LLP, the matters required to be discussed by the Public Company Accounting Oversight Board (“PCAOB”) Interim Auditing Standard AU Section 380, "Communication with Audit Committees."  We have received from Deloitte & Touche LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1. ("Independence Discussions with Audit Committees"), discussing such matters asand have discussed with Deloitte & Touche LLP their independence.  The Audit Committee has concluded that Deloitte & Touche LLP's provision of audit and non-audit services to the Company is compatible with their independence.


              The Audit Committee discussed with Deloitte & Touche LLP  the overall scope and plans for their audit.  The Audit Committee meets with Deloitte & Touche LLP, with and without management present to discuss the results of their audits, the evaluations of the Company's internal controls, and the overall quality of earnings; estimates, reserves and accruals; suitability of accounting principles; judgmental areas; and audit adjustments, whether recorded or not.the Company's financial reporting.  In addition, the Committee considered the quality and adequacy of the Company’s internal controls, taxation issues, information technology matters and other areas as appropriate to its oversight of the financial reporting and audit processes.

     In discharging its oversight responsibilities as to the audit process, the Committee:

• Satisfied itself as to Deloitte’s independence through a review of relationships and services which might affect the objectivity of the auditors, a review of the written disclosures and letter from Deloitte required by Independence Standards Board Standard No. 1 and discussions with Deloitte concerning their independence;
• Discussed the overall audit process, including audit reports;
• Involved Deloitte in the Committee’s review of the Company’s financial statements;
• Discussed with Deloitte all matters required to be reviewed by generally accepted auditing standards;
• Provided Deloitte full access to the Committee to report on any and all appropriate matters;
• Recommended to the Board, subject to shareholder approval, the reappointment of Deloitte as independent auditors for the Company. The Board concurred with this recommendation; and
• Was informed of and reviewed the oaths and certifications of the Chief Executive Officer and Chief Financial Officer required by the Securities and Exchange Commission General Order 4-460 and by the Sarbanes-Oxley Act Sections 302 and 906, and was informed of the process supporting the same.

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     TheAudit Committee provided guidance and oversight to the internal audit function, including a review of the organization, the audit plan, and results of internal audit activity.  The Director of Internal Audit had routine opportunityhas direct access to meet with the Committee to discuss any matters desired.

     Based on its workdesired, and the Director of Internal Audit presented an update of internal audit activity at each Committee meeting.


The members of the Audit Committee are not full-time employees of your Company and are not performing the functions of auditors or accountants.  As such, it is not the duty or responsibility of the Audit Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures or to set auditor independence standards.  Members of the Audit Committee necessarily rely on the information received as outlinedprovided to them by management and the independent auditors.  Accordingly, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles, or that the Company's auditors are "independent."

Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee that are described above and in the Audit Committee's charter, the Audit Committee recommended to the Board andof Directors that the Board approved the Company’s audited financial statements for 2003 toof the Company be included in the Company's Annual Report on Form 10-K for filing with the Securities and Exchange Commission. The Committee is satisfied that it has met its responsibilities for the year ended December 31, 2003 under its charter and2007.  It also recommended to the Board that, subject to stockholder ratification, Deloitte & Touche LLP be appointed as the financial reporting and audit processes ofindependent registered public accounting firm for the Company are functioning appropriately.

Company.


BORGWARNER INC. FINANCE AND AUDIT COMMITTEE

John Rau, Chairman

Phyllis O. Bonanno                 Dr. Andrew F. Brimmer                 Alexis P. Michas                 
Ernest J. Novak, Jr.Chairman

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Thomas T. Stallkamp      Richard O. Schaum

           The Audit Committee Report does not constitute soliciting material. It is not considered filed by us and shall not be incorporated by reference into any of our other filings under the Securities Act or the Exchange Act unless we state otherwise.
Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of February 17, 2004,14, 2008, certain information regarding beneficial ownership of common stock by allthose persons and entities that are known to the best knowledge of the Company as beneficially ownedowning more than the five percent of the Company’s common stock.
          
Number ofPercent of
Name and Address of Beneficial OwnerSharesClass
Wellington Management Company, LLP  1,943,000(a)  7.08%
 75 State Street        
 Boston, MA 02109        
AXA Financial, Inc.  1,594,026(b)  5.8%
 1290 Avenue of the Americas        
 New York, NY 10104        
  Number of  Percent of 
Name and Address of Beneficial Owner 
 Shares   Class  
         
   UBS AG                                              15,036,076(a)  12.9%
      Bahnhofstrasse                                        
      45, PO Box CH-8021
      Zurich, Switzerland                                     
        
   AXA Financial, Inc.     7,843,361(b)  6.7%
     1290 Avenue of the Americas
     New York, New York 10104
        
(a)
(a)Pursuant to a Schedule 13G filed13G/A dated February 14, 2008 on February 12, 2004, Wellington Management Company, LLP indicatedbehalf of UBS AG indicating that it had sharedsole voting power for 1,686,700 shares15,036,076 and shared dispositive power for 1,943,000 shares.
16,354,032.
(b)Pursuant to a Schedule 13G/A Schedule 13G was filed ondated February 10, 200414, 2008 on behalf of AXA Financial, Inc., AXA Assurances I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle, AXA Courtage Assurance Mutuelle and AXA indicating that it had sole voting power for 1,198,4877,843,361 shares, shared voting power for 5,6501,446,274 shares, and sole dispositive power for 1,421,514 shares and shared dispositive power for 172,51212,300,398 shares.

The following table sets forth, as of February 13, 2004,March 3, 2008, certain information regarding the beneficial ownership of common stock bystock.  Each person who was a director of the Company’s directors andCompany at December 31, 2007, each nominee for election as a director, each executive officersofficer named in the Summary Compensation Table, and by allsuch directors and executive officers as a group.
         
Amount(a) and Nature(b)Percent of
Name of Beneficial Ownerof Stock Ownershipclass
John F. Fiedler(c)  6,977   * 
Timothy M. Manganello  24,934   * 
John J. McGill  18,142   * 
Alfred O. Weber  316   * 
F. Lee Wilson  19,140   * 
Roger S. Wood  6,985   * 
Phyllis O. Bonanno  6,235   * 
Andrew F. Brimmer  9,157   * 
William E. Butler  8,100   * 
Jere A. Drummond  12,719   * 
Paul E. Glaske  18,518   * 
Ivan W. Gorr  10,000   * 
Alexis P. Michas  44,468   * 
Ernest J. Novak, Jr.  648   * 
John Rau  11,329   * 
All directors and executive officers of the Company (21 persons)  263,542   .9%


  
Amount and Nature
of Stock Ownership(b)(c) 
    
Name of Beneficial Owner (a)
   Percent of Class 
           
Timothy M. Manganello  350,598.93   * 
Robin J. Adams  182,184.36   * 
Bernd Matthes  43,556.00   * 
Cynthia Niekamp  73,246.71    * 
Roger J. Wood  120,955.38   * 
Phyllis O. Bonanno  33,428.00   * 
David T. Brown  5,682.00   * 
Jere A. Drummond  37,704.00   * 
Paul E. Glaske (d)  71,322.00   * 
Alexis P. Michas  183,014.00   * 
Ernest J. Novak, Jr.   20,104.00   * 
Richard O. Schaum  7,568.00   *     
Thomas T. Stallkamp  6,674.00   * 
All directors and executive officers of the Company (18 persons)  1,737,264.16   1.48% 
*Represents less than one percent.
(a) For purposes of the above table, the address for each named person is 3850 Hamlin Road, Auburn Hills, Michigan 48326.
(a)(b) Includes the following number of shares issuable upon the exercise of options within the next 60 days: 28880,926 for Mr. Adams; 24,000 for Ms. Bonanno; 28,000 for Mr. Drummond; 28,000 for Mr. Glaske; 112,440 for Mr. Manganello; 5,00014,840 for Mr. Matthes; 24,000 for Mr. Michas; 28,000 for Ms. Bonanno; 7,000 for Dr. Brimmer; 7,000 for Mr. Butler;Niekamp; 8,000 for Mr. Drummond; 10,000Novak; 39,418 for Mr. Glaske; 9,000 for Mr. Gorr; 5,000 for Mr. Michas; 7,000 for Mr. Rau;Wood; and 103,327675,186 for all directors and executive officers of the Company.

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(C) 
(b)Includes all shares with respect to which each officer or director directly, or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares the power to vote or to direct voting of such shares or to dispose or to direct the disposition of such shares.
(d) 
(c)Retired from the Company on May Retiring at April 30, 2003.2008 Annual Meeting of Stockholders

     In addition to the shares of Common Stock reported above, the following directors have acquired phantom stock units through the deferral of director fees under the Borg-Warner Automotive, Inc. Board of Directors Deferred Compensation Plan: Ms. Bonanno has 1,135.02 phantom stock units; Dr. Brimmer has 1,557.39 phantom stock units; Mr. Drummond has 3,719.87 phantom stock units; Mr. Glaske has 508.68 phantom stock units; Mr. Michas has 2,588.25 phantom stock units; Mr. Novak has 48.98 phantom stock units; and Mr. Rau has 2,329.66 phantom stock units.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that the Company’s executive officers, directors and greaterpersons who beneficially own more than 10% stockholders10 percent of a registered class of the Company’s equity securities, to file certainwith the SEC initial reports with respect to beneficialof ownership and reports of changes in ownership of the Company’s equity securities. Based on information providedcommon stock.  Such officers, directors and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.

Based solely on a review of the copies of such forms that were received by each director and executive officer,the Company, or written representations from certain reporting persons that no Form 5s were required for those persons, the Company believes that all reports requiredfiling requirements applicable to be filed in 2003its directors, executive officers and greater than 10 percent stockholders were timely filed, except for forms relatingcomplied with during 2007.
Code of Ethics 
The Company has long maintained a Code of Ethical Conduct which is applicable to options that were granted on July 25, 2003 which were reported on August 4, 2003 on behalfall directors, officers and employees of the following individuals: John Kalina, Robert Welding, William Cline, Anthony Hensel, Laurene Horiszny, John McGill, and Roger Wood.

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Executive Compensation

The following table shows, for the years ended December 31, 2003, 2002 and 2001, the cash compensation paid byCompany. In addition, the Company has adopted a Code of Ethics for CEO and its subsidiaries, as well as certain other compensation paid or accrued for these years,Senior Financial Officers which applies to the Company’s Chief Executive Officer, Chief Financial Officer, Treasurer and certain executive officers.Controller. Each of these codes is posted on the Company’s website at www.borgwarner.com.

 

SUMMARY COMPENSATION TABLEDISCUSSION AND ANALYSIS
                              
Long Term
Compensation
Awards(b)
Long Term
Annual CompensationOther AnnualSecuritiesIncentiveAll Other
Name and Principal
CompensationUnderlyingPlanCompensation
PositionYearSalary($)Bonus($)($)(a)Options(#)Payouts($)(c)
John F. Fiedler(*)  2003  $234,664  $1,034,120  $2,660,757(d)  0  $956,000  $3,384,407(f)
 Chairman and CEO  2002  $564,050  $1,520,666  $0   10,557  $1,471,000  $90,704 
 (Retired)  2001  $553,000  $291,401  $588,150(d)  8,340  $567,035  $116,168 
Timothy M. Manganello  2003  $538,144  $768,877  $69,548(e)  0  $286,800  $146,743 
 Chairman and CEO  2002  $381,625  $624,109  $125,755(d)  5,766  $382,460  $66,425 
   2001  $253,000  $146,607  $13,993(d)  576  $133,420  $69,972 
F. Lee Wilson  2003  $247,600  $332,731  $402,956(d)  0  $191,200  $26,471 
 Vice President  2002  $234,600  $403,263  $0   0  $205,940  $24,026 
   2001  $230,000  $255,175  $0   0  $0  $24,943 
John J. McGill  2003  $247,600  $560,853  $190,914(d)(e)  0  $248,560  $31,117 
 Vice President  2002  $234,600  $312,005  $0   0  $382,460  $22,789 
   2001  $229,584  $34,446  $0   0  $0  $22,107 
Roger S. Wood  2003  $232,100  $387,933  $0   3,663  $191,200  $69,626 
 Vice President  2002  $210,000  $336,949  $0   0  $147,100  $38,551 
   2001  $200,000  $119,203  $0   0  $47,650  $30,924 
Alfred O. Weber  2003  $211,000  $252,763  $221,851(d)(e)  0  $0  $46,269 
 Vice President  2002  $204,359  $211,043  $67,043(e)  10,000  $0  $6,230 
   2001  $133,683  $88,836  $0   0  $0  $0 

General

The primary executive compensation objectives of the Compensation Committee of our Board of Directors are to:

·  attract and retain the best possible executive talent,
·  motivate these executives to achieve goals that support the Company’s business strategy (including growth and the creation of long term value),
·  link executives’ and stockholders’ interests through equity-based plans, and
·  provide a compensation package that is based on individual performance as well as overall business results.

    To achieve these objectives, our Compensation Committee has implemented and maintains compensation plans and programs that tie a substantial portion of our executives’ overall compensation to our financial performance, our common stock price, and the achievement of total shareholder return as compared to our industry. Overall, the intention is to set compensation targets slightly above the median competitive levels of comparable companies in the automotive, transportation and general industry sectors (as described further in the Compensation Benchmarking section) and reward for above median performance.  Targets are set above the median to motivate exceptional performance.

The primary components of our 2007 compensation program are base salary, an annual bonus plan, performance shares and stock options. Generally, we set base compensation at the market median, which we believe enables us to hire and retain individuals in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business goals. We use annual cash incentives in order to reward our executives for meeting annual objectives of our long-range plan.  We use long term equity incentives to reward long-term performance (over a time horizon of three or more years) thus linking our executives’ interests with that of stockholders by maximizing long-term stockholder value.  We determine the appropriate level for each compensation component for each executive based in part, but not exclusively, on competitive benchmarking.  Other factors that affect these decisions include our recruiting and retention goals, our view of internal equity and consistency (e.g., size and complexity of business managed, scope and influence of role), and other considerations we deem relevant, such as rewarding superior performance.

Our Compensation Committee performs a strategic review of our executive officers’ compensation at least annually. During this review, our Compensation Committee evaluates our compensation philosophy and objectives to ensure that they continue to reflect our business objectives, competitive realities and our Board’s determination of the best interests of stockholders. Our Compensation Committee then determines whether our compensation programs are meeting these objectives, providing adequate incentives and motivation to our executive officers and adequately compensating our executive officers relative to comparable officers in other companies with which we compete for executives. Also as part of this strategic review in 2007, our Compensation Committee determined the compensation of our 17 corporate officers including our Chief Executive Officer, our Chief Financial Officer and the three other officers whose compensation is detailed in the Summary Compensation Table on page ____(the “Named Executive Officers”). For compensation decisions, including decisions regarding the grant of equity compensation, relating to executive officers other than our Chief Executive Officer, our Compensation Committee considers recommendations from our Chief Executive Officer. At the request of the Compensation Committee, materials for Committee meetings are prepared by our Vice President, Human Resources with assistance from the compensation consultant engaged by the Committee, Hewitt Associates, LLC (the “Compensation Consultant”) in 2007. Our Compensation Committee’s strategic review for the 2007 plan year occurred in October 2006 and its strategic review for the 2008 plan year occurred in October 2007 (in each instance in an extended session). The Committee consulted with our Chief Executive Officer during this session regarding the compensation of our 16 other corporate officers.

Compensation Benchmarking
    Our Compensation Committee believes that benchmarking is a useful tool because it is a reflection of the market in which we compete for talent and provides credibility for our compensation programs with both our employees and our stockholders. However, benchmarking is not the only criterion used in compensation decisions.  Other factors such as internal equity, individual and business performance, and the degree of alignment between job duties of the incumbent with the benchmark job description are also considered.  For example, in instances where an executive officer is uniquely key to our success, our Compensation Committee may provide compensation in excess of these benchmarks.

As part of our compensation benchmarking, each year our Compensation Committee engages an outside consultant, Hewitt Associates, LLC in 2007, to compare the total compensation levels (including base salary, annual bonus, and long-term incentives) for our executive officers to the compensation practices of a comparator group with whom we compete for talent. Our Compensation Committee has established that the comparator group (“Comparator Group”) used for benchmarking executive officer compensation should include companies with revenues between $1.5 billion and $15 billion in the automotive, transportation and general industrial sectors, with general industrial companies comprising no more than 25% of the total group. The group used for establishing 2007 compensation levels consisted of the following thirty-one companies:

AMSTED Industries, Inc.Fleetwood Enterprises, Inc.Praxair Inc.
(a)BAE Systems, Inc.Excludes certain non-cash benefits that are deemed compensation for federal income tax purposes. These non-cash benefits are provided by the Company to its executive officers and include group term life insurance and automobiles. The net cost to the Company of such benefits during 2001, 2002, or 2003 did not exceed the lesser of $50,000 or 10% of the total annual salary and bonus for each named executive officer.Freightliner LLCRobert Bosch Corporation
Ball CorporationHarley-Davidson Motor Co.The Sherwin-Williams Co.
Brunswick CorporationIllinois Tool Works Inc.SPS Technologies Inc.
Cummins Inc.Intl Truck and Engine Corp.Thyssen Krupp Budd Co.
Dana CorporationITT Industries, Inc.The Timken Company
Denso Intl America, Inc.Kennametal Inc.TRW Automotive Inc.
Donaldson Company Inc.Metaldyne CorporationValmont Industries Inc.
Dover CorporationPACCAR Inc.Worthington Industries Inc.
Eastman Chemical Co.Parker Hannifin Corporation 
(b)Eaton CorporationNo restricted stock awards were made in 2001, 2002, or 2003.Polaris Industries Inc.

Due to the differences in size among the comparator companies, a form of analysis known as regression was used in order to normalize the survey results for the size of our Company.
    Generally, our executive compensation program comprises base salary at the 50th percentile of the Comparator Group, annual target bonus at the 65th percentile of the Comparator Group, and long-term target incentives at the 65th percentile of the Comparator Group. We believe that these percentiles reflect consideration of our stockholders’ interests in paying what is necessary, but not significantly more than necessary, to achieve our corporate goals. We also believe that these percentiles provide for a competitive level of base compensation at the midpoint of the market and place a higher level of compensation potential (65th percentile) on direct performance-based components (bonus and long-term incentives). Further, the achievement of a target level long-term incentive payout under the performance share grants is predicated on our total shareholder return over a three year period being at the 65th percentile of our peers.
Components of Compensation

The key elements of our executive compensation program are base salary, short-term (annual) incentives and long-term incentives. In 2007 the long-term incentive vehicles used were performance shares, stock options and stock units.  Additionally, a limited number of executive benefits and perquisites are used based on competitive practices and to provide a connection to our industry, such as the provision of leased vehicles with BorgWarner component content to our executives.
Base Salary

Base salaries for our executives are established based on the scope of the executive’s responsibilities, taking into account competitive market compensation paid by other companies for similar positions and internal equity.  Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, individual and business unit performance, and experience.

Based on its review of the compensation data described above in October 2006 for the 2007 plan year, our Compensation Committee determined that, relative to the Comparator Group, the majority of the Named Executive Officers had base salaries below the targets set forth in our executive compensation program.  Even so, due to the competitive pressures in the North American automotive industry, a recommendation was made by our Chief Executive Officer and accepted by our Compensation Committee to freeze the base salary for our Chief Executive Officer and all but one of the Named Executive Officers in 2007.  Dr. Matthes received a base salary increase for internal equity purposes resulting from the growth of the business unit he manages.

Our Compensation Committee’s review of the 2008 base salaries for our Named Executive Officers occurred in October 2007.  The freezing of base salaries in 2007 as noted above resulted in salaries significantly below the median of the Comparator Group for all but one of our Named Executive Officers.  Base salary increases ranging from 0 – 22% were therefore granted for 2008 in accordance with our stated philosophy to target the median of the competitive market, to reward strong 2007 performance, and to motivate continued strong performance.

Short-Term Incentives

The Management Incentive Plan (“MIP”) is our cash-based, annual incentive plan for executives.  The primary purposes of the MIP are: (i) to focus key managers on creating economic value ("EV") for the Company; (ii) to reinforce teamwork and collaboration among key managers of the Company by measuring the management team at each business unit by the business results they achieve together; (iii) to deliver competitive awards for key managers when economic value objectives are achieved or surpassed; and (iv) to attract and retain key managers by enabling participants in the MIP to share in the success of the Company.  As a result, we have chosen to use EV as our performance measure because we consider EV to be the foundation on which we operate and a very dynamic measure of how well we turn investment into profit. It is based on the concept that a business can be financially strong in the long run only if it consistently earns enough to cover its operating cost and, at the same time, produces enough additional earnings to cover its cost of capital or pay interest on debt and provide the required return to its stockholders. We consider any amount that exceeds these requirements to truly be additional economic value. 

The formula used in the MIP is as follows: EV = After-Tax Operating Income minus (Average Operating Investment x Cost of Capital). We define “After-Tax Operating Income” as income prior to interest and finance charges net of income taxes calculated at a fixed composite statutory rate. We define “Average Operating Investment” for each business unit as the sum of the assets employed in the business less operating liabilities such as accounts payable, accruals, and long-term liabilities other than debt. We define “Average Operating Investment” for the Company to be the sum of debt, minority interest, and stockholders equity less cash and cash equivalents and 1987 leveraged buy-out (“LBO”) related goodwill. We define “Cost of Capital” as the rate of return on capital invested required to compensate debt and equity investors.

Actual performance under our MIP is measured annually from January 1 to December 31. Our Compensation Committee determines any earned MIP bonuses for any given fiscal year after review of the actual performance in relation to pre-established targets for that fiscal year. Ordinarily, bonuses are paid in a single installment in the first quarter following the completion of a given fiscal year. The MIP is designed so that bonus compensation determined thereunder is considered qualified performance-based compensation within the meaning of Internal Revenue Code Section 162(m).  Although annual bonuses currently depend primarily on the achievement of EV objectives, our Compensation Committee may adjust bonus measures and awards based on other financial or non-financial measures that it believes will benefit long-term stockholder value. While EV was the sole measure used for the payment of executive bonuses for the 2007 plan payment made in the first quarter of 2008, an adjustment was made to the EV performance improvement goals.  See page ___ for an explanation of this adjustment.

We expect each of our business units to increase its economic value each year in order to receive above threshold levels of payout. Accordingly, a range of performance expectations (Threshold, Target and Maximum) is set by management and approved by our Compensation Committee, three years at a time, for our Company and each of our business units. At the time the performance expectations are set, there is substantial uncertainty as to whether they will be met.  Generally, the Threshold for each of the three years is set at a level that is greater than or equal to the EV achieved in the last year of the preceding three year period.  In each of the second and third years of the three-year cycle, the Threshold value remains constant and the Target and Maximum values are adjusted upward each year.  For the 2005 – 2007 performance cycle, the Target and Maximum values were set at an improvement of 1% and 2%, respectively, of the operating investment (“OI”) at the beginning of the three-year cycle.

Establishment of 2005 - 2007 Cycle EV Levels
Year 1: 2005Year 2: 2006Year 3: 2007
 
(c)ThresholdIncludes amounts contributed by the Company on behalf of the named executive officers during 2001, 2002, and 2003 pursuant to the provisions of the BorgWarner Inc. Retirement Savings Plan and credits made pursuant to the BorgWarner Inc. Retirement Savings Excess Benefit Plan.Base EV Base EVBase EV
 
(d)TargetRepresents gain on stock option exercise(s).   Base + 1% of OI    Base + 2% of OI   Base + 3% of OI
 
(e)MaximumIncludes imputed income for company car, relocation expense reimbursements and gross-up for taxes on relocation reimbursements. The following officers received relocation expense reimbursements (including tax gross-up) in excess   Base + 2% of $50,000: Mr. Manganello received $69,548 in 2003; Mr. McGill received $64,610 in 2003; and Mr. Weber received $71,748 in 2003.OI
   
(f)Base + 4% of OIIncludes principal and loan forgiven ($2,758,682) and gross-up payment ($435,841) as described in “Certain Relationships and Related Transactions.”
(*)Retired on May 30, 2003.   Base + 6% of OI

10

    Because the performance objectives under our MIP are determined three years at a time rather than annually, our MIP is a very challenging plan for our executives and forces our key managers to find ways to generate and sustain economic growth over an extended period.  Over the last nine years, results at or above target have been achieved just over half of the time.

In order to encourage a longer-term perspective in decision-making while continuing to reward participants for the achievement of annual goals, our MIP includes a “Carryover Bonus” feature that allows participants to earn, over the following two-year period, any MIP bonus opportunity (up to specified maximum limits) that was not attained during the current plan year. Thus, if the Maximum bonus opportunity is not earned in a given year, then the amount of the shortfall can be earned over the next two years (50% each year) by achieving results each year which are higher than the prior year.  However, no Carryover Bonus from a prior year is earned if the Threshold level of performance for the current year is not achieved. For example, if an individual was part of a unit which achieved results at Threshold in year one, that individual would carryover the lost dollar opportunity between Threshold and Maximum into years two and three.  If in year two that individual’s unit achieved Maximum results, he would be paid 50% of that lost opportunity from year one.  If in the subsequent year three, his unit’s performance was below Threshold, he would lose the other 50% of the original carryover from year one.  Because the carryover opportunity is available in addition to the basic bonus opportunity for the next two years, in a given year, the Carryover Bonus from prior years may increase the annual bonus opportunity of the executive officers above the regular target levels.

Because 2007 was the last year of a 3-year cycle of MIP, our Compensation Committee and management undertook a study in mid-2007 with the assistance of the Compensation Consultant to reassess the MIP design with regard to its relevance to current market practice and projections of the business environment for the 2008 – 2010 cycle. Subsequently, based on typical plan design features as compared with other companies, as well as dramatic shifts in the shrinking North American auto industry, our Compensation Committee determined that for the 2008-2010 cycle the following EV-based performance objectives represent realistic stretch goals that are calibrated to motivate continued excellent performance and delivery of shareholder value.  This plan also addresses overall competitiveness critical to attraction and retention of talent.

Establishment of 2008 – 2010 Cycle EV Levels
  200820092010
 ThresholdBase EV Base EVBase EV
 Target   Base + 0.5% of OI    Base + 1% of OI   Base + 1.5% of OI
 Maximum   Base + 1% of OI    Base + 2% of OI   Base + 3% of OI

The results of this study completed in mid-2007 caused our Compensation Committee to also reassess the applicability of the 2007 MIP performance improvement factors established 3 years earlier.  Our Compensation Committee therefore determined in November 2007 that the new EV performance improvement formula outlined above for the third year of the cycle should also be applied to the 2007 results (including the carryover calculation) to better reflect competitive market practices and to be more realistic in view of shifts in the automotive industry that have already occurred.  This action supports a critical goal of the program to motivate employees to desired performance in a year where the Company’s stock price and total shareholder return increased significantly.

Based on our compensation philosophy, in November 2006, for the 2007 plan year, our Compensation Committee approved target bonus opportunities ranging from 85% to 125% of base salary for our Named Executive Officers.  (See Grants of Plan-Based Awards table on page____).  Our Named Executive Officers receive 50% of the Target opportunity for achieving Threshold performance and 200% of the Target opportunity for achieving Maximum performance or above.  Results in between these levels are interpolated.  In November 2007, our Compensation Committee approved the target bonus opportunities for our executive officers for 2008.  These target bonus opportunities range from 85% to 130% of base salary for our Named Executive Officers.  The target bonus opportunities reflect the approximated 65th percentile of annual bonus levels for similar positions in the Comparator Group. The final bonus amounts paid, if any, are determined by our Compensation Committee based on achievement of the performance measures.

The bonus opportunity for each officer is further defined by unit, group and corporate results as applicable.  The Compensation Committee’s objective for the Presidents is to assign the largest percentage of the bonus opportunity to the individual business unit for which the executive has responsibility, while also promoting collaboration within and between business groups.
For our Named Executive Officers, the 2007 bonus opportunities were allocated as follows:

 BorgWarner Inc.BERU*Business GroupBusiness Unit
T. Manganello, CEO90%10%  
R. Adams, CFO90%10%  
R. Wood, President, Turbo/Emissions20%10%15%55%
C. Niekamp, President, TorqTransfer Systems30% 15%55%
B. Matthes, President, Transmission Systems30% 15%55%
* In January 2005, BorgWarner acquired a majority stake in BERU, a leading global supplier of diesel cold starting technology, gasoline ignition technology, and electronic control units and sensor technology.  For 2007, BERU was not included in “BorgWarner Inc.” for purposes of calculating incentive compensation, consistent with the MIP’s treatment for acquisitions.  Beginning in 2008 BERU will be included in "BorgWarner Inc." for incentive compensation purposes.

In November 2007, our Compensation Committee revised these percentages for the three Presidents mentioned in the table above to reflect a split of 60% based on business unit, 15% based on business group and 25% based on BorgWarner Inc. corporate results for 2008 to further align their bonus opportunity to the results of their individual units, consistent with market practices. 

In February 2008, our Compensation Committee determined that, for purposes of our MIP, during the 2007 plan year, the Company created economic value of $49.3 million, which resulted in a payout under the new performance improvement formula indicated above between the Target and Maximum levels for the BorgWarner Inc. component.  A portion of the bonus payments for Mr. Manganello, Mr. Adams, Mr. Wood, Ms. Niekamp and Dr. Matthes included carryover from the previous year.  For details of these amounts, as well as further information regarding the 2007 MIP bonuses paid to our Named Executive Officers, see the Summary Compensation Table on page ___.
Long-Term Incentives

We believe that long-term performance is achieved through an ownership culture that rewards our executives for the maximization of long-term stockholder value. Our long-term incentive plans have been established and operated to provide certain of our employees, including our executive officers, with appropriate incentives to help align their interests with the interests of our stockholders. Furthermore, our stock compensation plans have provided a method for our executive officers to acquire equity interests in our Company and comply with our stock ownership guidelines.

ESPP. The Executive Stock OptionsPerformance Plan (“ESPP”) was approved by our stockholders and became effective on April 18, 1995. Under the terms of the ESPP, the final award of units was made in February 2004 for the three-year performance period beginning January 1, 2004 and ending on December 31, 2006. Therefore the final payment under the ESPP was made in February 2007 for the 2004 to 2006 performance period.


The following table sets forth information with respectSIP. All long-term incentive grants awarded in 2007 (performance shares, stock options and stock units) were awarded under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan (the “SIP”). Although the SIP provides for the use of a variety of equity-related vehicles, our Compensation Committee determined in 2007 to rely primarily on grants of stock options made during 2003and performance shares in order to motivate and reward executives for growth in total shareholder return as compared to our industry (in the named executive officers.
                         
Potential Realizable
Value at Assumed
Number ofAnnual Rates of Stock
Securities% of TotalPrice Appreciation for
UnderlyingOptions GrantedExerciseOption Term
Options Grantedto Employees inPriceExpiration
Name(a)Fiscal Year($/Sh)Date5%10%
Roger S. Wood  3,663   1.1% $66.080   7/23/13  $152,225  $385,767 
(a)Options are exercisable starting 24 months after the grant date, with 50% of the shares covered thereby becoming exercisable at that time and with the remaining 50% of the option shares becoming exercisable on the third anniversary date. The options were granted for a term of 10 years.

The following table sets forth information with respect tocase of performance shares) and growth in the named executive officers concerningCompany’s stock price (in the exercisecase of stock options during 2003 and concerning unexercisedperformance shares).


As discussed above, the target awards (in dollars) for our executives are based on the 65th percentile market value that reflects the responsibility of each Named Executive Officer, with grant sizes (in shares) based on a valuation methodology calculated by the Compensation Consultant.  This methodology is the same one used by the Compensation Consultant in its market study to value equity compensation consistently between companies. Based on its review of the market data described above, our Compensation Committee approved grants in 2007 that were substantially at this target market value for our Named Executive Officers.

    In 2007, two-thirds of total value of the target long-term incentive opportunity was delivered through performance shares and one-third of total value was delivered through stock options. Due to the significant challenges in the automotive industry, our Compensation Committee determined to place the greater emphasis on performance shares because of its belief that this long-term incentive vehicle provides a more direct comparison of our performance to the performance of our peers within our industry while firmly aligning our executives’ interests with the interests of our stockholders.  See further discussion of the performance shares below.

In February 2007, performance shares were granted to our Named Executive Officers to coincide with the beginning of the three-year performance period.  Stock options heldwere also granted at that time.  In accordance with the SIP, the exercise price for the stock options was set at the average of the high and low price of our common stock on the date of grant.
At its November 2007 meeting, our Compensation Committee decided that restricted stock would be used for a portion of the 2008 long-term incentive award grants (replacing one-third of the value that would otherwise have been granted in stock options).   This change, which will also be made for non-officer participants, is viewed as a more effective retention tool and reflects the increasing use of restricted stock in the competitive market.  It also better aligns the officers’ equity compensation with that of the members of the Board of Directors, who receive their equity compensation through restricted stock.

Performance Shares.  Annual grants of performance shares are designed to provide competitive payouts at the end of a three-year period relative to how well we perform against a peer group of companies (the “Peer Group Companies”) in terms of Total Shareholder Return (“TSR”). A listing of the Peer Group Companies (for the 2006 and 2007 grants) and the Former Peer Group Companies (for the 2005 grant) can be found on page ___.  Our Board of Directors reserves the right to modify the list at any time in order to ensure that the peer group remains relevant as a measure for TSR performance. When granted, each performance share represents one share of common stock.  In order for participants to earn a target award, the performance of our common stock must be at the 65th percentile of the TSR performance over a three-year period when compared to the Peer Group Companies. The value of the payout at the end of the three-year performance period is based on both the TSR performance and the stock price at the end of the period. This provides an additional link to stockholder value.

    A new performance period begins each January 1 and ends three years later on December 31, 2003.31. As a result, up to three performance periods may overlap in a given year.
                         
Number of SecuritiesValue of Unexercised
Underlying UnexercisedIn-the-Money Options
SharesOptions at FY-Endat FY-End(b)
AcquiredValue
Nameon ExerciseRealizedExercisableUnexercisable(a)ExercisableUnexercisable
John F. Fiedler(*)  180,382  $2,618,433   —   —  $—  $— 
Timothy M. Manganello  —  $—   288   6,054  $10,596  $209,061 
John J. McGill  5,000  $121,285   10,000   18,696  $428,850  $598,337 
F. Lee Wilson  10,000  $401,111   15,000   15,000  $901,150  $344,200 
Roger S. Wood  —  $—   —   3,683  $—  $69,940 
Alfred O. Weber  7,400  $152,096   —   12,000  $—  $418,680 
    The target award is determined at the beginning of the performance period. The award is expressed in terms of performance shares.  Our Compensation Committee established a convention in February 2007 for determining the stock price to be used for converting the target dollar amount to a specific number of shares.  This was established in order to provide consistency in the method of determining the stock price to be used from year to year.  The convention uses the average closing price of the Company’s common stock for the last five (5) trading days of the year preceding the date of grant, which coincides with the end of the prior performance period. The actual shares awarded for 2007 are detailed on page ___in the Grants of Plan-Based Awards table. The final value of each performance share will be determined only after the close of the performance period. There is no annual vesting of the target awards under this plan.

The actual number of performance shares earned at the time of payout will range from 0% to a maximum of 175% of target, depending on our TSR performance at the end of the three-year period relative to the percentile distribution of TSR performance for the other companies in the peer group.

Performance Share TSR Performance/Payout Table
BorgWarner TSR Percentile to Peer GroupPercent of Target Number of Performance Shares Earned
(a)
Below 25th percentile
Represents shares that could not be acquired by the named executive officer as of December 31, 2003 and that become exercisable based upon the satisfaction of certain periods of employment.   0.000%
25th percentile
 25.000%
(b)
35th percentile
Represents the difference between the exercise price and the closing share price of BWA Common Stock on December 31, 2003. 43.750%
50th percentile
 71.875%
(*)
65th percentile
Retired May 30, 2003.100.000%
75th percentile
130.000%
90th percentile
175.000%

Long-Term Incentive Plans


Interpolation is used to determine the percent of performance shares when our percentile rank does not fall directly on one of the ranks listed in the above.

Payment of earned performance shares is made in a combination of stock and cash in order to facilitate ownership of our common stock by our executives. Under current practice, sixty percent of the earned performance shares are converted to our common stock. The following table sets forth information with respectshares of stock are typically delivered shortly after our Compensation Committee certifies the results, which occurs during the first quarter after the three-year cycle has ended. Also under current practice, forty percent of the award is paid in cash since the full amount of the award is subject to income tax in the year in which it is received.  The cash portion is based on the fair market value (average of the high and low sales price) of our stock on the date of delivery.

Stock Options.  The role of stock options in the overall executive compensation package has been as a retention tool and as an incentive to and reward for improving the long term stock value to stockholders.  In 2007, the stock options were granted in February at the same time as the performance shares.  The exercise price is the average of the highest and lowest reported sales price of our common stock on the New York Stock Exchange on the day of the award. This method is used to mitigate any major fluctuations in the stock price that could occur during a typical day of trading in the stock market.

The option term is ten years from the date of grant and each stock option grant is subject to a two-step vesting period. One-half of the stock option grant will become available for exercise on the second anniversary of the grant and the remainder of the grant will become available for exercise on the third anniversary of the grant if the option-holder is still employed by the Company.
Executive Benefits and Perquisites 
General. Our Named Executive Officers are eligible to participate in all of our employee benefit plans (such as medical, dental and vision care plans; flexible spending accounts for healthcare; life, accidental death and dismemberment and disability insurance; employee assistance programs (confidential counseling); a defined contribution retirement plan including a 401(k) feature; and paid time off), in each case on the same basis as our other employees. The retirement plans described below are provided to executives in order to permit them to accumulate funds for retirement and to provide a competitive retirement package as compared to other companies. Additionally, as described below, a limited number of executive perquisites are used, also based on competitive practices. Our Compensation Committee in its discretion may revise, amend or add to an officer’s executive benefits and perquisites if it deems it advisable. We believe that the benefits and perquisites we provide our executives are currently at or below median competitive levels for comparable companies.
    The additional executive perquisites available to our Named Executive Officers include a company-leased vehicle, financial counseling, and limited personal use of corporate aircraft (we do not encourage personal use but recognize that at times it is appropriate).  Each of our Named Executive Officers is eligible for a new vehicle at the earlier of 60,000 miles or three years. In addition to the namedcost of the lease, we pay for the cost of insurance, vehicle license, taxes, and maintenance. Financial counseling and annual income tax preparation services are provided to our Named Executive Officers through a third-party service to allow Named Executive Officers to better focus on meeting the considerable demands of their positions.

Other executive officers concerning long-term incentive plan awardsbenefits available to our Named Executive Officers include the BorgWarner Inc. Retirement Savings Excess Benefit Plan (“Excess Plan”) and the BorgWarner Inc. 2004 Deferred Compensation Plan (“Deferred Compensation Plan”).  All of our Named Executive Officers received Company contributions under the Excess Plan in 2007.  None of our Named Executive Officers made during 2003 pursuantdeferrals into the Deferred Compensation Plan in 2007.  Mr. Wood has an account balance in the Deferred Compensation Plan from deferrals made prior to his appointment as an officer of the Company’sCompany.  See further descriptions of these plans on page ___ under the Non-Qualified Deferred Compensation section.
Pension Benefits.  Except as described below on page ___, none of our Named Executive Stock Performance Plan.Officers participate in or have account balances in any of the qualified or non-qualified defined benefit pension plans sponsored by us.
                     
Estimated Future Payouts
NumberPerformanceunder Non-Stock
of Sharesor OtherPrice-Based Plans(b)
Units orPeriod Until
RightsMaturationThresholdTargetMaximum
Name(#)(a)or Payout($)($)($)
John F. Fiedler(*)  0   36 months   —   —   — 
Timothy M. Manganello  700   36 months   175,000   700,000   1,225,000 
F. Lee Wilson  260   36 months   65,000   260,000   455,000 
John J. McGill  260   36 months   65,000   260,000   455,000 
Roger S. Wood  260   36 months   65,000   260,000   455,000 
Alfred O. Weber  230   36 months   57,500   230,000   402,500 
All executive officers, as a group(11)  1,710   36 months   427,500   1,710,000   2,992,500 

(a)Performance units with an initial value of $1,000 per unit.
(b)Payouts under the Company’s Executive Stock Performance Plan are based upon the percentile rank of the total stockholder return of the Company among the total stockholder returns of a peer group of

11

companies. Total stockholder return is based on a formula relating to market price appreciation of the Company’s common stock and dividend return as compared to the peer group companies’ stock market price appreciation and dividend returns.
(*)Retired May 30, 2003.

Potential Payments Upon Termination or Change of Control

Change of Control Employment AgreementsAgreements. 

     The Company hasWe have entered into Change of Control Employment Agreements (the “Change of Control Employment Agreements”) with each of our Named Executive Officers. In establishing the Change of Control Agreements, our Board of Directors determined that it is in the best interests of the Company and its stockholders (i) to assure that we will have the continued dedication of our Named Executive Officers in the event of the threat or occurrence of a Change of Control, and (ii) to diminish the inevitable distraction of our Named Executive Officers by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control by agreeing to provide two to three years of compensation (depending on position) if the executive’s employment is terminated as a result of a Change of Control. See pages ___ and __ for further details of the Change of Control Agreements for our Named Executive Officers.


    Severance Benefits. Each of our Named Executive Officers is eligible for severance benefits under the BorgWarner Inc. Transitional Income Plan (“TIP”). The TIP was established to provide some financial protection to all U.S. salaried employees in the event that their employment is terminated for reasons beyond their control. The TIP benefit includes a lump sum payment that is based on salary level and length of service with us (with a maximum benefit of twenty-six weeks of base salary, adjusted for unemployment benefits) and medical coverage.

Stock Ownership Guidelines

In order to promote equity ownership and further align the interests of our management and our stockholders, we have established stock ownership guidelines that request our executives to hold a significant and sustained long-term personal financial interest in the Company. Our stock ownership guidelines, which apply to all of our officers including our Named Executive Officers, request that our officers own and continuously hold a minimum level of stock as long as we employ them. The levels of requested stock ownership for our Named Executive Officers are as follows:

PositionStock Ownership Guideline
CEOThree times average salary plus bonus for prior three years
CFO and PresidentsTwo times average salary plus bonus for prior three years
    Each of our Named Executive Officers is expected to fulfill this goal within five years of his or her appointment as an officer. Moreover, enough stock must be secured during each of the first five years to demonstrate progress toward fulfilling the goal by year five. Our Compensation Committee reviews the ownership level for our Chief Executive Officer and all other persons covered under this guideline each year. Our Board of Directors reserves the right to determine what action will be taken if a covered individual does not meet the requested ownership guidelines. All of our Named Executive Officers met the requested stock ownership guidelines in 2007.

Our Insider Trading and Confidentiality Policy prohibits our directors and employees from engaging in any transaction involving a put, call or other option on BorgWarner Securities or from selling any BorgWarner Securities he or she does not own; i.e., “selling short.”

Deductibility of Compensation

Section 162(m) of the U.S. Internal Revenue Code places a limit on the deduction as a business expense of compensation in excess of $1 million paid to certain “covered employees” of a publicly held corporation (generally, our Chief Executive Officer, Chief Financial Officer and our next three most highly compensated executive officers. officers in the year that the compensation is paid). Compensation that is “performance-based compensation” generally does not count toward Section 162(m)’s $1 million limit.

Our compensation plans are designed so that bonus compensation determined thereunder qualifies as performance-based compensation within the meaning of Section 162(m). Our Compensation Committee is comprised solely of “outside directors” for purposes of Section 162(m) of the Internal Revenue Code.  It is believed that all compensation earned by the named executive officers in 2007 was fully deductible for Federal income tax puroses.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

Jere A. Drummond, Chairman
Phyllis O. Bonanno
David T. Brown
    The Compensation Committee Report does not constitute soliciting material.  It is not considered filed by us and shall not be incorporated by reference into any of our other filings under the Securities Act or the Exchange Act unless we state otherwise.
Compensation Committee Interlocks and Insider Participation

During our last completed fiscal year, the voting members of our Compensation Committee were Jere A. Drummond, Chairman, Phyllis O. Bonanno and David T. Brown. None of these persons was an officer or employee of the Company or any of its subsidiaries, or was formerly an officer of the Company or of any of its subsidiaries during such fiscal year. None of these persons has any relationship requiring disclosure by the Company under Item 404 of Regulation S-K.

No executive officer of the Company served as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the Company’s Compensation Committee or the Company’s Board of Directors. No executive officer of the Company served as a director of another entity, or as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of such other entity, one of whose executive officers served on the Compensation Committee or the Board of Directors of the Company.


EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information regarding compensation earned by our Named Executive Officers during 2007:
Name and Principle PositionYear Salary  Bonus (1)  Stock Awards (2)  Option Awards (3)  Non-Equity Incentive Plan Compensation (4)  Change in Pension Value and Non-Qualified Deferred Compensation Earnings (5)  All Other Compensation  Total 
   ($)  ($)  ($)  ($)  ($)  ($)  ($)  ($) 
(a)(b) (c)  (d)  (e)  (f)  (g)  (h)  (i)  (j) 
Timothy M. Manganello2007  900,000   -   6,296,024   1,030,051   2,666,782   -   237,695   11,130,552 
Chairman and CEO2006  900,000   -   315,529   494,516   624,118   -   293,431   2,627,594 
                                  
Robin J. Adams2007  466,000   -   1,644,501   445,985   1,061,342   -   111,776   3,729,604 
EVP, CFO and CAO2006  466,000   -   167,811   295,042   215,686   -   150,336   1,294,875 
                                  
Roger J. Wood2007  395,000   -   1,271,210   254,809   709,924   -   158,982   2,789,925 
President and GM, Turbo / Emission Systems2006  395,000   -   117,169   123,333   329,835   -   249,738   1,215,075 
                                  
Cynthia A. Niekamp2007  365,000   -   1,032,589   213,575   875,385   -   58,724   2,545,274 
President and GM, TorqTransfer Systems2006  365,000   85,000   117,169   119,341   43,448   -   90,256   820,214 
                                  
Bernd W. Matthes(6)2007  365,000   -   1,032,589   198,144   326,478   -   321,672   2,243,883 
President and GM, Transmission Systems2006  -   -   -   -   -   -   -   - 
                                  
                                  
(1) $85,000 sign-on bonus paid in 2006 per 2004 employment offer.
                        
(2) 2007 compensation expense of the 2005, 2006, and 2007 performance share awards. Assumptions used in the 
calculations of these amounts are included in the Company’s audited financial statements for the fiscal year ended December 31, 2007,         
included in the Company’s Summary Annual Report for 2008 filed with the Securities and Exchange Commission (See Note 12 on pages 49-52).        
This also includes the 2007 compensation expense of the August 3, 2007 Recognition and Retention Grant to Mr. Manganello.        
Details of this grant were disclosed in an 8-K filing on August 7, 2007. The compensation expense reported for 2006 included the        
2004 ESPP award and the 2005 and 2006 performance share awards. Assumptions used in the 2006 calculations were included in       
the Company’s 2006 Annual Report filed with the Securities and Exchange Commission (See Note 12 on pages 49-52).             
(3) 2007 compensation expense of aggregate grant date fair value of the 2004, 2005, 2006, 2007 Stock Option awards, excluding forfeitures.         
Assumptions used in the calculations of these amounts are included in the Company’s audited financial statements for the fiscal year ended         
December 31, 2007, included in the Company’s Summary Annual Report for 2008 filed with the Securities and Exchange Commission (See Note 12 on pages 49-52).         
The compensation expense reported for 2006 included the aggregate grant date fair values of the 2004, 2005, 2006 Stock Option awards, excluding     
forfeitures. Assumptions used in the 2006 calculations were included in the Company’s 2006 Annual Report filed with the Securities and Exchange     
Commission (See Note 12 on pages 49-52).                             
(4) Reflects the 2007 plan year payout, paid in February 2008, under the Management Incentive Plan (MIP), including Carryover Bonus payments of     
$691,606 for Mr. Manganello, $243,180 for Mr. Adams, $95,801 for Mr. Wood, $80,424 for Dr. Matthes, and $288,055 for Ms. Niekamp.         
The 2006 plan year payout under the MIP included Carryover Bonus payments of $2,582 for Mr. Manganello, $1,141 for             
Mr. Adams, $713 for Mr. Wood. No Carryover Bonus was paid to Ms. Niekamp for the 2006 plan year.                 
(5) The actual change in the present value of the accumulated pension value decreased for Dr. Matthes by $98,908 in 2007 due to an increase in the     
discount rate used in 2007 compared to the rate used in 2006. Change in Pension Value for 2007 was converted from Euro to US Dollar using         
an exchange rate of 1 Euro = 1.4598 US Dollar.                            
(6) Compensation is not reported for Dr. Matthes for 2006 as he was not a Named Executive Officer.                

All Other Compensation Table

The following table details, by category, the amounts reported above in the “All Other Compensation” column of the Summary Compensation Table for each of our Named Executive Officers. All of our Named Executive Officers exceeded the aggregate threshold of $10,000 for perquisites and personal benefits. The chart below indicates the amount in each category for each of our Named Executive Officers:


Name Personal Use of Leased Vehicle  Financial Counseling  Personal Use of Company Aircraft  Relocation Costs (1)  Life Insurance Premiums Paid by Company  Tax Reimbursement  Registrant Contributions to Defined Contribution Plans (2)  TOTAL of "All Other Compensation" 
  ($)  ($)  ($)  ($)  ($)  ($)  ($)  ($) 
(a) (b)  (c)  (d)  (e)  (f)  (g)  (h)  (i) 
Timothy M. Manganello  17,071   10,000   6,363   -   900   10,101   193,260   237,695 
CEO                                
Robin J. Adams  9,943   10,000   -   -   839   7,250   83,744   111,776 
CFO                                
Roger J. Wood  9,674   10,000   997   28,917   711   8,944   99,739   158,982 
President, TBS/E                                
Cynthia A. Niekamp  -   10,000   1,477       657   5,061   41,529   58,724 
President, TTS                                
Bernd W. Matthes  9,084   10,000   606   173,905   657   85,791   41,629   321,672 
President, TS                                
                                 
(1) Amounts relating to relocation from New York to North Carolina and North Carolina to Michigan for Mr. Wood, and from Germany to Michigan for Dr. Matthes.
 
(2) Amounts contributed by the Company on behalf of its Named Executive officers during 2007 pursuant to the provisions of the RSP and the Excess Plan. 
                                 

    The following table details the tax reimbursement amounts listed in Column (g) of the above table:
Name Tax Reimbursement for Personal Use of Leased Vehicle  Tax Reimbursement for Financial Counseling Services  Tax Reimbursement for Personal Use of Company Aircraft  Tax Reimbursement for Relocation Costs  Total Tax Reimbursement 
  ($)  ($)  ($)  ($)  ($) 
(a) (b)  (c)  (d)  (e)  (f) 
Timothy M. Manganello  2,846   6,828   427   -   10,101 
CEO                    
Robin J. Adams  2,846   4,404   -   -   7,250 
CFO                    
Roger J. Wood  2,846   4,404   444   1,250   8,944 
President, TBS/E                    
Cynthia A. Niekamp  -   4,404   657   -   5,061 
President, TTS                    
Bernd W. Matthes  2,798   4,404   270   78,319   85,791 
President, TS                    
                     
                     


Grants of Plan Based Awards

The following table summarizes the grants of equity and non-equity plan awards to our Named Executive Officers in 2007: 
 
 
 
 
 
 
Name
 
 
 
 
 
 
Grant Date
 
 
 
 
 
 
Estimated Possible Payout Under
 
 
 
 
 
 
Estimated Future Payout Under
 
All Other Stock Awards: Number of Shares or Stock Units
All Other Option Awards: Number of Securities Underlying Option
 
Exercise or Base Price of Option Awards (4)
 
Closing Market Price on Date of Option Grant
 
 
Grant Date Fair Value of Stock and Option Awards
  Non-Equity Incentive Plan Awards (1)Equity Incentive Plan Awards     
  ThresholdTargetMaximumThresholdTargetMaximum     
  ($)($)($)(#)(#)(#)(#)(#)($/Share)($/Share)($)
(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l)(m)
Timothy M. Manganello        562,500    1,125,000    2,250,000        
CEO2/6/2007 (2)          22,000       88,000      154,000    3,080,000
 2/6/2007 (3)             114,84034.9535.001,208,117
 8/3/2007 (5)            253,274   11,166,851
             
Robin J. Adams        233,000       466,000       932,000                 -    
CFO2/6/2007 (2)            8,350       33,400       58,450    1,169,000
 2/6/2007 (3)               43,46034.9535.00457,199
             
Roger J. Wood        167,900       335,800       671,500                 -    
President, TBS/E2/6/2007 (2)            5,200       20,800       36,400    728,000
 2/6/2007 (3)               27,06034.9535.00284,671
             
Cynthia A. Niekamp        155,150       310,300       620,500                 -    
President, TTS2/6/2007 (2)            3,800       15,200       26,600    532,000
 2/6/2007 (3)               19,70034.9535.00207,244
             
Bernd W. Matthes        155,100       310,300       620,500                 -    
President, TS2/6/2007 (2)            3,800       15,200       26,600    532,000
 2/6/2007 (3)               19,70034.9535.00207,244
             
             
(1) 2007 bonus opportunity under the MIP. Estimated possible payout levels do not reflect carryover opportunities for the prior years.
    
(2) 2007 Performance Share Grant: Value of grant = number of target shares times the closing stock price on grant date of $35.00.    
All amounts reflect values after December 17, 2007 stock split.         
(3) 2007 Stock Option Grant: Stock options granted same day as approved by Compensation Committee of the Board of Directors.    
FMV at grant date = number of shares times $10.52, excluding forfeitures in accordance with FAS123R. All amounts reflect  
values after December 17, 2007 stock split.        
(4) Exercise Price is the average of the high and the low stock price on day of grant.  Value is adjusted to reflect December 17, 2007 stock split.   
(5) 2007 Recognition and Retention Grant: Value of Grant = number of stock units times the average of the high and low stock price on    
August 3, 2007 of $44.09. Values are adjusted to reflect December 17, 2007 stock split.  Details of this grant were disclosed in an 8-K filing on August 7, 2007.  


    The equity awards reflected in the Grants of Plan-Based Awards table are granted under the SIP. Further details regarding BorgWarner’s incentive plans can be found in our Compensation Discussion and Analysis on pages xx-xx.
The peer group for the performance share grants includes publicly traded companies in the automotive supplier industry with at least $1 billion in sales that compete for stockholder investment dollars. For the performance period from January 1, 2007 to December 31, 2009, the peer group includes the following companies (the “Peer Group Companies”):

    American Axle & ManufacturingJohnson Controls Inc.Tenneco Automotive Inc.
    ArvinMeritor Inc.Lear CorporationTRW Automotive Inc.
    Autoliv Inc.Magna International Inc.Visteon Corporation
    Gentex CorporationModine Manufacturing Co.
Our Board of Directors reserves the right to modify the list at any time in order to ensure that the peer group remains relevant as a measure for TSR performance in the automotive supply industry.
To the extent a stock option is exercisable in the event of death of the option holder, the option may be exercised for a period of one year from the date of such death or until the expiration of the stock option, whichever period is shorter. To the extent a stock option is exercisable in the event of disability or retirement, the option may be exercised for a period of three years from the date of such disability or retirement or until the expiration of the stock option, whichever period is shorter. Our Compensation Committee may elect to accelerate the exercise date of a stock option in the event of employment termination, such as due to death, disability, or retirement. Stock options granted in 2005, 2006, and 2007 provided for immediate vesting in the event of retirement as defined under the Plan. Stock options granted in 2007 provided for immediate vesting in the event of death or disability. Our Compensation Committee decided to incorporate these provisions into these award agreements in order to provide for consistency in the acceleration of options in the event of retirement, death or disability. Our Compensation Committee took competitive practice into consideration.

If an option-holder incurs a termination of employment due to cause, any stock options held by the option-holder will terminate. If termination of employment is voluntary and without cause, any vested and unexercised stock options may be exercised for a period of five business days from the date of termination or until expiration of the stock option, whichever period is shorter. If termination of employment is involuntary and without cause, any vested and unexercised stock options may be exercised for one year or until the expiration of the stock option, whichever period is shorter.

In the event of a Change of Control, during the sixty day period from and after a Change of Control, our Compensation Committee may allow the option-holder to surrender all or part of his or her options to the Company and receive a cash payment equal to the difference between the Change of Control price and the exercise price of the option, less appropriate tax withholdings. However, if the Change of Control is within six months of the date of grant to an officer or director subject to Section 16(b) of the Exchange Act, then the option holder is unable to elect to receive a cash payment until after six months from the date of grant.
    Regarding adjustments to shares, in the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the stock or other change in corporate structure affecting the stock, our Compensation Committee or our Board of Directors may make such substitution or adjustments in the aggregate number, kind and option price of shares or adjustments in the consideration receivable upon exercise as it may determine to be appropriate in its sole discretion. 

Outstanding Equity Awards at Fiscal Year End

The following table summarizes all equity awards to our Named Executive Officers that remain either unexercised and/or unvested as of December 31, 2007:
 Option AwardsStock Awards
 
 
 
 
 
 
 
 
 
 
Name
 
 
 
 
 
Number of Securities Underlying Unexercised Options Exercisable (1)
 
 
 
 
 
Number of Securities Underlying Unexercised Options Unexercisable (1)
 
 
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
 
 
 
 
 
 
 
 
 
Option Exercise Price (1)
 
 
 
 
 
 
 
 
Option Expiration Date (2)
 
 
 
 
 
 
Number of Shares or Units of Stock That Have Not Vested (1)(3)
 
 
 
 
 
 
Market Value of Shares or Units of Stock That Have Not Vested (1)(3)
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1)(4)
Equity Incentive Plan Awards: Market or Payout of Unearned Shares, Units or Other Rights That Have Not Vested (1)(4)
 (#)(#)(#)(#) (#)($)(#)($)
(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)
Timothy M. Manganello               114,840 34.9502/06/2017    
CEO               100,000 29.0907/26/2016    
             62,000               62,000 29.0407/27/2015    
             25,072  22.2807/28/2014    
             23,064  12.6607/24/2012    
              2,304  12.0707/25/2011    
                253,698     12,281,514  
                  311,500     15,079,715
          
Robin J. Adams                43,460 34.9502/06/2017    
CFO                40,000 29.0907/26/2016    
             15,000               15,000 29.0407/27/2015    
             25,926  22.2807/28/2014    
             40,000  22.1504/26/2014    
                  100,450       4,862,785
          
Roger J. Wood                27,060 34.9502/06/2017    
President, TBS/E                28,000 29.0907/26/2016    
             10,000               10,000 29.0407/27/2015    
             14,686  22.2807/28/2014    
             14,732  16.5207/23/2013    
                    74,900       3,625,909
          
Cynthia A. Niekamp                19,700 34.9502/06/2017    
President, TTS                21,000 29.0907/26/2016    
              8,000                 8,000 29.0407/27/2015    
             20,000  22.2807/28/2014    
                    54,950       2,660,130
          
Bernd W. Matthes                19,700 34.9502/06/2017    
President, TS                21,000 29.0907/26/2016    
              8,000                 8,000 29.0407/27/2015    
              6,840  22.2807/28/2014    
                    54,950       2,660,130
          
(1) All amounts reflect values after December 17, 2007 stock split.
      
(2) The stock options noted with expiration dates of 2011, 2012, 2013, and 2014 are fully vested. Stock options with an expiration date of  
2015 are 50% vested, with the other 50% vesting on July 27, 2008. Stock options with an expiration date of 2016 will vest 50% on July 26, 2008  
and 50% on July 26, 2009. Stock options with an expiration date of 2017 will vest 50% on February 6, 2009 and 50% on February 6, 2010.  
(3) The values in columns (g) and (h) represent the number of shares granted and the year-end value of the August 3, 2007 Recognition and  
Retention stock grant to Mr. Manganello, valued at $48.41 per share, which is the closing stock price on December 31, 2007.   
Dividend equivalents earned on Novemeber 15, 2007 are included.  Details of this grant were disclosed in an 8-K filing on August 7, 2007.   
(4) The values of columns (i) and (j) are comprised of performance share grants made under the SIP, issued for the performance periods of  
2006-2008 and 2007-2009. Column (i) represents the number of all outstanding unearned performance shares that would be paid out at the  
end of each performance period if maximum TSR performance is achieved. The maximum value was assumed based on actual performance  
over the most recent period at maximum levels. Column (j) represents the number of performance shares in column (i) times the closing  
stock price of $48.41 on December 31, 2007. Actual future payouts will depend on several factors, including (i) the number of performance  
shares that are earned, as determined after the end of the performance period based on the level at which the applicable performance goals  
have been achieved, as described on pages XX–XX; and (ii) the fair market value of stock, as defined in the Plan.
    
          

Option Exercises and Stock Vested

The following table summarizes all option exercises and stock vestings by our Named Executive Officers during 2007:
 Option AwardsStock Awards
 Number of Shares Acquired on Exercise (1)
 
Value Realized On Exercise
Number of Shares Acquired on Vesting (2)Value Realized On Vesting (3)
  Name(#)($)(#)($)
(a)(b)(c)(d)(e)
Timothy M. Manganello                 -                 -            64,5753,126,076
CEO    
Robin J. Adams                 -                 -            32,2881,563,062
CFO    
Roger J. Wood                 -                 -            23,9751,160,630
President, TBS/E    
Cynthia A. Niekamp                 -                 -            23,9751,160,630
President, TTS    
Bernd W. Matthes            7,740        355,586            23,9751,160,630
President, TS    
     
(1) Stock option exercises on June 19, 2007 were comprised of two exercises, 4,320 shares
that were granted on July 23, 2003 and 3,420 shares granted on July 24, 2004. 
(2) Number of “shares” disclosed in column (d) represents the total number of performance
shares earned for the 2005-2007 performance period and paid in 2008.  The performance
shares are actually paid 60% in stock and 40% in cash.  
(3) Amount in column (e) is equal to the number of units vested multiplied by $48.41, which
is the closing stock price at the end of the performance period on December 31, 2007.

    As previously stated in the Compensation Discussion and Analysis, the granting of performance shares is designed to provide competitive payouts at the end of a three-year period relative to how well the Company performs against its Peer Group Companies in TSR.
At the end of the 2005 to 2007 performance period, the Company’s TSR was above the 90th percentile relative to the peer group companies’ in effect at the time of the grant.  These companies were Arvin Meritor, Autoliv, Cummins Engine, Dana, Delphi, Dura, Eaton, Johnson Controls, Lear, Magna, Modine, Tenneco and Visteon.  Tower Automotive was also originally in this peer group, but ceased trading on July 31, 2007.  The gross value of the payouts, before taxes, is reflected above in column (e) of the table.


Pension Benefits

NamePlan Name Number of Years Credited Service  Present Value of Accumulated Benefit (1)  Payment During Last Fiscal Year 
    (#)  ($)  ($) 
(a)(b) (c)  (d)  (e) 
                  Timothy M. Manganello   -   -   - 
C               CEO             
                  Robin J. Adams   -   -   - 
                  CFO                               
                 Roger J. Wood   -   -   - 
                 President, TBS/E             
                 Cynthia A. Niekamp   -   -   - 
                 President, TTS             
                 Bernd W. MatthesBorgWarner Transmission Systems GmbH Pension Plan  11.8   593,026   - 
                 President, TS             
              
                (1) Converted from Euro to US Dollar using an exchange rate of 1 Euro = 1.4598 US Dollar for SFAS 87/158 disclosure purposes. 
    Dr. Matthes, formerly an employee of BorgWarner Transmission Systems GmbH in Germany and now a U.S.-based employee, was vested in a defined benefit pension plan while an employee in Germany and is therefore entitled to receive an annual retirement benefit from the Transmission Systems GmbH pension plan based on 11.8 years of credited service for the time he was employed in Germany.

The Present Value of the Accumulated Pension Benefits as of December 31, 2007 for Dr. Matthes is calculated using the following assumptions:

     . Mortality Tables: Heubeck 2005G
     .  Discount Rate: 5.75%
     .  Retirement Age: 65
     . Annual Pension Increase: 1.75%

The discount rate of 5.75% is based on yields of bonds in the iBoxx EUR AA 10+ index as of December 31, 2007 and takes into account the duration of plan liabilities. A "pension increase" assumption of 1.75% is applied annually, beginning at retirement age. The Heubeck 2005G tables are generational mortality tables introduced in 2005 and allow for improved longevity. Use of these tables was phased in over three years, with 100% of the new tables being used to value plan liabilities at year-end 2007.

Non-Qualified Deferred Compensation

The following table shows the non-qualified deferred compensation activity for our Named Executive Officers during 2007:



Name  Executive Contributions in Last FY  Registrant Contributions in Last FY  Aggregate Earnings in Last FY  Aggregate Withdrawals/ Distributions  Aggregate Balance at Last FYE 
   ($)  ($)  ($)  ($)  ($) 
(a)  (b)  (c)  (d)  (e)  (f) 
Timothy M. Manganello                
CEO                               (1)   -   -   -   -   - 
 (2)  -   169,385   292,008   -   1,795,324 
Robin J. Adams                     
CFO                               (1)   -   -   -   -   - 
 (2)  -   59,369   74,161   -   347,086 
Roger J. Wood                     
President, TBS/E         (1)   -   -   21,313   -   273,551 
 (2)  -   72,476   60,144   -   486,045 
Cynthia A. Niekamp                     
President, TTS             (1)   -   -   -   -   - 
 (2)  -   21,206   12,309   -   120,009 
Bernd W. Matthes                     
President, TS                (1)   -   -   -   -   - 
 (2)  -   20,279   2,879   -   62,004 
                       
(1) Deferred Compensation Plan
                 
(2) Excess Plan                     
                       
No Deferred Compensation elections were made by Named Executive Officers for fiscal year 2007     

Our Named Executive Officers are eligible to participate in the BorgWarner Inc. Retirement Savings Plan (“RSP”).  This plan, which is available to all U.S. salaried and certain hourly employees, allows our Named Executive Officers to take advantage of current tax-advantaged opportunities for accumulating future retirement income. The RSP is comprised of two components: a Company Retirement Account and a Savings Account with a match feature. In the Company Retirement Account, the Company makes a contribution to the employee’s account each pay period based on years of service and eligible pay ranging from 4% to 6% of compensation up to the Social Security wage base and from 8% to 11.5% of compensation above the Social Security wage base. In the Savings Account, participants may make contributions to the plan of 1% to 28% of their eligible earnings on a before-tax and/or after-tax basis (up to the statutorily prescribed annual limit on pre-tax contributions under the Internal Revenue Code). The Company will match 100% of the first 3% of the employee’s pre-tax contributions. Participant contributions are held in trust as required by law. All employee contributions are 100% vested when contributed, and any employer contributions vest 100% after three years of service.

The Excess Plan is an unfunded, non-qualified retirement plan, which keeps certain highly compensated employees whole with regard to Company contributions that are otherwise limited under the RSP by Internal Revenue Code provisions.  Participation is automatic once these limits are reached in a plan year. The contributions vest in the same manner as under the RSP.  Distributions are made only when, and if, the participant is entitled to benefits under the RSP.  No in-service withdrawals or loans are available.
The Deferred Compensation Plan is a non-qualified plan that allows executives to defer from 1% to 20% of their base salary and up to 100% of their bonus (if any bonus is paid) in 1% increments. Participants in this plan receive market earnings. When making a deferral election, a participant may elect to have his or her account paid out at retirement, disability, or death in either a single lump sum or quarterly payments over a term of 5, 10, or 15 years. If the participant’s employment is terminated prior to retirement, disability, or death, the account will be paid out in a single lump sum.  The Plan also provides for distributions for hardship upon approval of our Compensation Committee and lump sum payments upon the occurrence of a Change of Control.

Participants in the Excess Plan may elect to invest their deferrals in the same investment choices that are offered in the RSP.  Participants in the Deferred Compensation Plan may elect to invest their deferrals in the same investment choices that are offered in the RSP, except for the BorgWarner Stock Fund. As the Excess Plan and the Deferred Compensation Plan are unfunded, no money is actually invested. Rather, a notional account is maintained which mirrors the returns of these mutual funds.  The funds available and their annual rate of return for the calendar year ended December 31, 2007 as reported by the plan administrator are as follows: 
Barclays Equity Index:5.38%
Barclays Life Path 2010:5.08%
Barclays Life Path 2015:4.73%
Barclays Life Path 2020:4.42%
Barclays Life Path 2025:4.01%
Barclays Life Path 2030:3.82%
Barclays Life Path 2035:3.52%
Barclays Life Path 2040:3.34%
Barclays Life Path 2045:3.06%
Barclays Life Path RET:5.24%
BGI US Debt Index:6.95%
BorgWarner Company Stock:65.41%
Buffalo Small Cap:(.33%)  
Harbor International Fund:21.82%
TRP Stable Value Fund, Sched N1:
4.73%
Vanguard Mid Cap Index:6.22%  
1 Formerly known as the Investment Contracts Fund

Potential Payments Upon Termination or Change of Control

The following table shows the post-employment payments that would be paid to each of our Named Executive Officers under the various employment-related scenarios. The calculations assume each Named Executive Officer’s employment is terminated on December 31, 2007. For purposes of the calculations, the closing stock price on the last business day of 2007 ($48.41) was used to determine the market value of stock options and stock units.
NamePayment Triggering Events Not In Connection with a Change of Control ("CoC")   Payment Triggering Events In Connection with a CoC 
 Involuntary TerminationVoluntary Termination     Involuntary TerminationVoluntary Termination
 with Cause (1)without Cause (2)with Good Reason (3)without Good Reason (3)Retirement (2)Death (4)Disability (2) CoC onlywith Cause (6)without Cause (5)For Good Reason (5)without Good Reason (7)
 ($)($)($)($)($)($)($) ($)($)($)($)($)
Timothy M. Manganello  1,795,324 10,259,153   4,559,606  4,559,606    14,938,414 12,305,474 11,805,474               -               -34,949,75034,949,750              -
CEO             
Robin J. Adams     347,086   4,943,330   2,365,582  2,365,582      6,591,869   5,994,519   5,528,519               -               -8,232,5538,232,553              -
CFO             
Roger J. Wood     759,596   3,642,755   1,806,845  1,806,845      4,741,778   4,402,118   4,007,118               -               -6,612,4166,612,416              -
President, TBS/E             
Cynthia A. Niekamp     120,009   2,798,941      797,569     797,569      3,624,882   3,429,202   3,064,202               -               -4,486,3344,486,334              -
President, TTS             
Bernd W. Matthes       62,004   2,026,886      574,422     574,422      2,852,827   2,622,147   2,292,147               -               -4,492,6944,492,694     ��        -
President, TS             
              
(1) Includes vested balance of the Excess Plan and vested balance of the Deferred Compensation Plan (Mr. Wood only).      
(2) Includes 2007 MIP payment, value of vested stock options, 2005-2007 PSP payment, vested balance of the     
Excess Plan, and vested balance of the Deferred Compensation Plan (Mr. Wood only).        
(3) Includes value of vested stock options, vested balance of the Excess Plan, and vested balance of the Deferred      
Compensation Plan (Mr. Wood only).            
(4) Includes 2007 MIP payment, value of vested stock options, 2005-2007 PSP payment, vested balance of the     
Excess Plan, vested balance of the Deferred Compensation Plan (Mr. Wood only), and life insurance.      
(5) Includes cash severance payment based on three times the average of base plus bonus, 2007 MIP payment,       
stock option payment, 2007 stock unit payment, 2006-2008 and 2007-2009 performance share payment, retirement benefit based on      
three times the 2007 Company contributions to the RSP, value of welfare benefits (i.e. health care, life       
insurance, and disability insurance coverage for 3 years), outplacement services, and excise tax and tax     
gross-up payment.             
(6) While there are no additional payments associated with Involuntary Termination for Cause associated with a       
Change of Control, each Named Executive Officer would be eligible for the same payments listed under footnote (1) above.     
(7) While there are no additional payments associated with Voluntary Termination without Good Reason associated      
with a Change of Control, each Named Executive Officer would be eligible for the same payments listed under footnote (3) above.
 

The stated amounts do not include vested benefits under the qualified RSP or under the TIP, as these benefit plans are available to all salaried employees. The provisions of each plan would determine the timing and method of payments made under the above scenarios.

 Change of Control Employment Agreements

Below is a general description of certain terms and conditions of theour existing Change of Control Employment Agreements.

In the event a Change of a “Change of Control”Control of the Company is followed within three years by (1) the termination of the executive’sa Named Executive Officer’s employment for any reason other than death, disability, or “Cause”Cause or (2) the termination of the executive’ssuch Named Executive Officer terminates his or her employment by the executive for “GoodGood Reason,” then under the Change of Control Employment Agreements, provide that the executiveNamed Executive Officer shall be paid a lump sum cash amount equal to three times the executive’shis or her annual base salary and average annual bonus for the most recent average bonus,three years, and a lump sum cash amount equal to three times the Company’s retirement contributions which would have been made on his or her behalf of the executive in the first year after termination of employment. If an excise tax is imposed under Section 4999 of the Internal Revenue Code on payments received by the Named Executive Officer due to a Change of Control of the Company or any interest or penalty is incurred by the Named Executive Officer with respect to such excise tax, the Company will pay the Named Executive Officer an amount that will net the Named Executive Officer the amount the Named Executive Officer would have received if the excise or penalty had not been imposed. In addition, the executiveNamed Executive Officer is entitled to continued employee welfare benefits for three years after termination of employment.

     “Change of Control” means (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) of beneficial ownership of 20% or more of either (i) the then outstanding shares of Common Stock of the Companyour common stock or (ii) the combined voting power of theour then outstanding voting securities of the Company entitled to vote generally in the election of our directors, (b) a change in the majority of theour Board orof Directors, (c) a major corporate transaction, such as a merger or sale of substantially all of the Company’sour assets, or a liquidation, which results in a change in the majority of theour Board of Directors or a majority of stockholders.

     “Cause”stockholders or (d) a complete liquidation or dissolution of the Company.


“Cause” means the willful and continued failure of the executive to perform substantially the executive’s duties or the willful engaging by the executive in illegal conduct or gross misconduct materially injurious to the Company.

     “Goodus.


“Good Reason” means the diminution of responsibilities, assignment to inappropriate duties, our failure of the Company to comply with compensation or benefit provisions, transfer to a new work location more than 35 miles from the executive’s previous work location, a purported termination of the Change of Control Employment Agreement by the Companyus other than in accordance with the Change of Control Employment Agreement, or our failure of the Company to require any successor to the Companyus to comply with the Change of Control Employment Agreement.

     Notwithstanding anything to


Director Compensation

The following table details the contrary set forth in any of the Company’s previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filingscompensation earned by reference, including this Proxy Statement, in whole or in part, the following Compensation Committee Reporteach non-employee director who served on Executive Compensation and Performance Graph shall not be incorporated by reference into any such filings.

Compensation Committee Report on Executive Compensation

     The Compensation Committee of the Board of Directors is responsiblein 2007. Directors who are employees of BorgWarner are not compensated for setting and administeringtheir service on the policies that govern base salary, annual bonus, long-term incentives and stock ownership programsBoard:


Name Fees Earned or Paid in Cash  
Stock Awards (1)
  Option Awards  
Aggregate Number of Outstanding Stock and Option Awards (2)
  Non-Equity Incentive Plan Compensation  Changes in Pension Value and Nonqualified Deferred Compensation Earnings  All Other Compensation  Total 
  ($)  ($)  ($)   (#) ($)  ($)  ($)  ($) 
                          
(a) (b)  (c)  (d)  (e)  (f)  (g)  (h)  (i) 
Phyllis O. Bonanno  55,000   80,284   -   27,782   -   -   -   135,284 
                                 
David T. Brown  55,000   55,002   -   1,894   -   -   -   110,002 
                                 
Jere A. Drummond  73,000   80,276   -   32,316   -   -   -   153,276 
                                 
Paul E. Glaske  58,000   61,933   -   29,894   -   -   -   119,933 
                                 
Alexis P. Michas  53,500   80,284   -   27,782   -   -   -   133,784 
                                 
Ernest J. Novak, Jr.  85,000   80,276   -   12,316   -   -   -   165,276 
                                 
Richard O. Schaum  57,000   73,353   -   3,782   -   -   -   130,353 
                                 
Thomas T. Stallkamp  56,500   55,019   -   3,782   -   -   -   111,519 
                                 
                                 
(1) 2007 compensation expense of aggregate grant date fair value of the 2005, 2006, 2007 Restricted Stock Awards, excluding forfeitures, in accordance with FAS 123R.
 
(2) Aggregate number of outstanding shares of restricted stock and outstanding vested and unvested stock options at fiscal year-end. Values reflect 12/17/2007 stock split. 

Annual compensation for the executive officersour non-employee directors for 2007 was comprised of the Company.

Overall Policy

     The Company’s executivefollowing components: annual retainer, Board meeting fees, Committee meeting fees, and equity compensation, program is designed to link executiveconsisting of restricted stock. Our non-employee directors were not granted any Stock Option Awards and did not receive any Non-Equity Incentive Plan Compensation for 2007. After review of non-employee director compensation paid by peer and other corporations, the Board approved an increase in non-employee director compensation to corporate performance. To this end,be effective January 1, 2008, the Company has developed an overall compensation strategyfirst increase since 2005.


As allowed under the BorgWarner Inc. Amended and specific compensation plans that tie executive compensation to the Company’s success in meeting specified perform-

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ance goals. The overall objectivesRestated 2004 Stock Incentive Plan, each non-employee director received $165,000 worth of this strategy are to attract and retain the best possible executive talent, to motivate these executives to achieve goals that support the Company’s business strategy, to link executive and stockholder interests through equity-based plans, and to provide a compensation package that is based on individual performance as well as overall business results.

     The Compensation Committee reviews the Company’s executive compensation program annually. The review includes a comparison of current total compensation levels (including base salary, annual bonus and long-term incentives) to those provided in similar companiesrestricted stock in the durable manufacturing sector that have total sales in the rangeinitial year of each three-year term. In April 2007, two billion to four billion dollars, with data being collected from several prominent executive compensation surveys (the “Compensation Surveys”). In addition to the Compensation Surveys, the Compensation Committee also considers the compensation reportednon-employee directors (Drummond and Novak) were elected for executives by the companies included in a peer groupthree-year term. These two directors were each awarded 2,158 shares of automotive companies (the “Peer Group Companies”). Financial results of the Peer Group Companies are used to compare shareholder returns on the performance graph. The Compensation Committee may adjust compensation levels based upon information obtained from the Compensation Surveys and the Peer Group Companies.

     The Compensation Committee determines the compensation of the CEO and the officers of the corporation, reviews the policies and philosophy set for the next level of key executives (approximately 280), and evaluates and recommends to the Board of Directors all long-term incentive plans. This process is designed to ensure congruity throughout the executive compensation program. In reviewing the individual performance of the executives whose compensation is detailed in this proxy statement (other than Mr. Manganello), the Compensation Committee takes into account the views of Mr. Manganello.

     The key elements of the Company’s executive compensation program are base salary, annual bonus and long-term incentives that consist of cash compensation, Companyrestricted common stock, and stock options. The Compensation Committee’s policies with respect to each of these elements, including the basis for the compensation awarded to Mr. Fiedler, the Company’s CEO from January 1 to February 3, 2003, and Mr. Manganello, the Company’s CEO thereafter in 2003, are discussed below.

Base Salary

     Annual salary adjustments are determined by dividing the Compensation Committee by examining each executive officer’s current responsibilities, the executive officer’s individual and business unit performance, and by comparing the executive officer’s current base salary to competitive median salaries as reported in the Compensation Surveys and by the Peer Group Companies.

     Mr. Manganello became the CEO of the Company on February 4, 2003. The Compensation Committee considered the scope and complexity of Mr. Manganello’s position, the Company’s performance during the preceding year, his prior salary, and the median salaries paid for similar positions as reported in the Compensation Surveys and by the Peer Group Companies. Expected long-term growth ($1.3 billion in anticipated new business over the next three years), his performance in his role as COO in 2002 and the Company’s increasing global presence were among the performance factors considered in determining Mr. Manganello’s salary for 2003. Mr. Manganello received a base salary of $538,143 during 2003.

     Mr. Fiedler was CEO of the Company between January 1 and February 3, 2003; thereafter, he continued as Chairman of the Board until May 30, 2003. He earned $234,664 in salary for the portion of the year that he was employed by the Company.

Annual Bonus

     The Company’s executive officers are eligible participants in an annual cash bonus plan. Performance objectives are established at the beginning of each year for the Company and each of its business units. The performance objectives are based on the increase in economictotal value of the Company or business unit over the prior year. Economic value is determined$165,000 by a formula taking into account the after-tax operating income and the average operating investment of the Company or business unit.

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     Eligible executives are assigned threshold, target and maximum bonus levels. For those executive officers responsible for the entire Company, 100% of their bonus opportunity is based on the increase in economic value for the Company; for those executive officers responsible for a business unit, 30% of the bonus opportunity is based on the increase in economic value for the Company, and 70% is based on the increase in economic value of their assigned group and business units. If the threshold level of these performance measures is not met, no bonus is paid.

     To encourage a longer-term perspective while continuing to reward participants for the achievement of annual goals, the bonus plan for executives includes a “Carryover Bonus” feature. Carryover Bonus allows participants in the bonus plan to earn — over a two-year period — any bonus opportunity (up to specified maximum limits) that was not attained during the current Plan Year. Executives can earn the balance of the unattained bonus opportunity whenever cumulative value targets are achieved during the subsequent two years. No Carryover Bonus from a prior year is earned if the threshold level of performance for the current year is not achieved.

     The potential annual total cash compensation (base salary plus bonus) for each executive officer is targeted at the approximated 65th percentile of annual total cash compensation levels for similar positions as reported by comparable companies in the Compensation Surveys. In a given year, Carryover Bonus from prior years may increase the annual bonus opportunity of the executive officers above the regular target levels.

     Although annual bonuses depend primarily on the achievement of performance objectives as described above, the Compensation Committee may adjust bonus measures and awards based on other financial or non-financial actions that the Compensation Committee believes will benefit long-term stockholder value.

     The increase in economic value of the Company during 2003 resulted in a bonus payout between the target and the maximum opportunity level for the portion of individual bonuses based on overall corporate performance. As a result Mr. Manganello earned a $628,877 cash bonus for the year; of this, $82,987 represents Carryover Bonus from 2001. In recognition of a particularly distinguished performance during 2003, the Compensation Committee authorized a supplemental discretionary bonus of $370,000 to be allocated by Mr. Manganello among 10 executives, and the Committee authorized a similar bonus of $140,000 to be paid to Mr. Manganello.

     Likewise, Mr. Fiedler earned a $1,034,120 cash bonus for the year; of this, $193,170 represents Carryover Bonus from 2001.

Long-Term Incentive Plans

Executive Stock Performance Plan

     The BorgWarner Inc. Executive Stock Performance Plan is a long-term incentive plan for selected top executives including the named executive officers. It is designed to provide competitive payouts at the end of a three year period relative to how well the Company performs against the Peer Group Companies in terms of total shareholder return (“TSR”). The Compensation Committee believes that the Executive Stock Performance Plan will help to focus key senior executives on the long-term overall value of the Company to the investor community.

     The award levels under the Executive Stock Performance Plan are targeted to pay at approximately the 65th percentile of total direct compensation (as reported by the Compensation Surveys) for 65th percentile TSR performance relative to the TSR performance of the Peer Group Companies.

     Awards under this plan are paid out in the form of stock and sufficient cash to meet tax-withholding requirements. Payments made under this plan are exempt from the provisions of Section 162(m) of the Code that limit the tax deductibility of compensation in excess of one million dollars.

     Full participants in this plan do not receive regular stock option grants.

     This plan is administered by a committee which consists solely of two or more “outside directors” as defined by Section 162(m) of the Code and the regulations thereunder.

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     For the period between January 1, 2001 to December 31, 2003, Mr. Manganello had a target award of 300 performance units at a par value of $1,000 per unit. At the end of the performance period, the Company’s TSR performance was at the 62nd percentile of the TSR performance of the Peer Group Companies. As a result, Mr. Manganello earned an award of $286,800.

     For the period between January 1, 2002 to December 31, 2004, Mr. Manganello has a target award of 500 performance units at a value of $1,000 per unit. Depending upon the performance of the Company, Mr. Manganello’s final award can range from $0 per unit if the Company’s TSR performance is below the 25th percentile of the TSR performance of the Peer Group Companies to $1,750 per unit if the Company’s TSR performance is at the 90th percentile (or higher) of the TSR performance of the Peer Group Companies.

     For the period between January 1, 2003 to December 31, 2005, Mr. Manganello has a target award of 700 performance units at a value of $1,000 per unit. Depending upon the performance of the Company, Mr. Manganello’s final award can range from $0 per unit if the Company’s TSR performance is below the 25th percentile of the TSR performance of the Peer Group Companies to $1,750 per unit if the Company’s TSR performance is at the 90th percentile (or higher) of the TSR performance of the Peer Group Companies.

     Mr. Fiedler was a participant in the 2001-2003 cycle of the Executive Stock Performance Plan. Mr. Fiedler had a target award of 1000 performance units at a value of $1,000 per unit. At the end of the performance period, the Company’s TSR performance was at the 62nd percentile of the TSR performance of the Peer Group Companies; as a result, Mr. Fiedler earned an award of $956,000. As noted in the 2003 Compensation Committee Report, the number of units granted to Mr. Fiedler under the 2002-2004 cycle was reduced to 500 units to reflect a shorter period of participation in the plan as a result of his retirement in 2003.

Stock Options

Regular Stock Option Awards

     For other executives not eligible for the Executive Stock Performance Plan, the Company uses stock options to align the interests of this next level of executives with those of the stockholders and to retain and motivate these executives to continue the long-term focus required for the Company’s future success.

     Executives may receive annual stock option awards based on competitive market conditions, their level of responsibility for the management and growth of the Company and individual contribution. Current base salary and annual incentive opportunity, as well as the size and timing of previous stock option awards, are also considered when determining annual stock option awards.

     All stock options are granted at no less than the fair market value of the stock on the date of grant. The number of shares awarded to each recipient is determined by an analysis of median competitive data provided in the Compensation Surveys. The analysis is based on the current discounted market value of the Company’s stock and the annualized cash value of competitive grants. All options granted by the Company have vesting requirements and a ten-year term.

     The gains on stock options granted by the Company are exempt from the provisions of Section 162(m) of the Internal Revenue Code (the “Code”) which limit the tax deductibility of compensation in excess of one million dollars.

     No regular stock option grants were awarded to either Mr. Manganello or Mr. Fiedler in 2003.

Ownership Guidelines

     The Company has established stock ownership guidelines for the senior officers of the Company. Mr. Manganello is expected to own three times the average of his annualized salarythe high and target bonus for the prior three years; the other officers named in this proxy are expected to own two times the average of their annualized salary and target bonus for the prior three years.

     If a senior executive owns more BorgWarner stock than required by these guidelines, the executive is then eligible to receive an additional award of stock options equal to the valuelow of the ownership above the

15

required level divided by the CompanyCompany’s stock price at the time this award is computed; the maximum number of option shares that can be granted in one year to an executive for ownership above the required level is 100,000 shares.

     Neither Mr. Manganello nor Mr. Fiedler received stock options in 2003 for stock ownership above the required level. The only named officer that received stock options for ownership in 2003 was Roger Wood; he received 3,663 stock options.

Deductible Compensation of Officers

     During 2003, Mr. Manganello received compensation in excess of the grant. The restrictions on the shares of stock will expire over the three-year term, one million dollar limitation on deductibility under Section 162(m)third in each year and the Compensation Committee has the authority to accelerate vesting in the event of retirement. During the period that the restrictions are in place, directors have all of the Code. Consequently, $307,021rights of the compensation earned by Mr. Manganello in 2003 was not deductible by the Company.

     Compensation subject to the one million dollar limitation on deductibility under Section 162(m) of the Code was not paid in 2003 to any of the other named executive officers.

     The Compensation Committee periodically reviews the executive compensation plansa stockholder of the Company holding the same class or series of stock as the restricted stock, including the right to determine their compliance with Section 162(m)vote the shares and the right to receive any cash dividends. Non-employee directors elected to new terms in 2008 will receive $258,000 worth of the Code. The Compensation Committee may, as was the case in 2003, recommend that compensation that is non-deductible be paid to executive officers when such compensation is deemedrestricted stock in the best interestinitial year of stockholders.

Other

     After Mr. Manganello became CEO of the Company on February 4, 2003, Mr. Fiedler continued on as Chairman of the Board until his retirement on May 30, 2003. Per the terms of an employment agreement entered into on January 27, 1998 (and amended on January 3, 2001), Mr. Fiedler earned additional compensation upon completing a commitment to postpone his retirement and to lead the Company for five years beyond 1997.

     Between 1997 and 2003, the Company grew significantly and profitably. Full year sales for 1997 were $1.7 billion; by the time Mr. Fiedler retired, world-wide sales were over $2.7 billion. The total shareholder return during this period was 61%. Considering the sound financial condition of the Company at the time of his retirement, the Compensation Committee and the Board as a whole determined that Mr. Fiedler had honorably fulfilled his contractual obligation to lead the Company.

     In further settlement of his employment agreement, Mr. Fiedler received a cash payment of $435,841. In addition, as provided under the terms of the promissory note dated January 30, 1998, the principal and interest on his loan totaling $2,758,682, which was used to buy Company stock, was forgiven.

Compensation Committee

Paul E. Glaske, Chairman

William E. Butler          Jere A. Drummond          John Rau

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Comparison of Cumulative Total Return

Among Company, Industry Index, Peer Group and S&P 500 Index(1)

(PERFORMANCE GRAPH)

               
199819992000200120022003
  BORGWARNER(2) 100.0  73.48  73.78 97.67 95.32 162.68
  SIC CODE INDEX(3) 100.0  80.93  61.41 74.54 70.13 101.46
  PEER GROUP INDEX(4) 100.0  85.94  67.99 86.89 74.23 111.93
  S&P 500 INDEX(5) 100.0 121.04 110.02 96.95 75.52  97.18
(1) Assumes $100 invested on December 31, 1998; assumes dividends reinvested for period of December 31, 1998 through December 31, 2003.
(2) BorgWarner Inc. (As compiled by Media General Financial Services of Richmond, VA).
(3) Standard Industrial Code (“SIC”) 3714 — Motor Vehicle Parts & Accessories (As compiled by Media General Financial Services of Richmond, VA).
(4) Peer Group Companies — Consists of the following companies: ArvinMeritor, Inc., Autoliv, Inc., Cummins Engine, Inc., Dana Corporation, Delphi Automotive Systems Corp., Dura Automotive Systems, Inc., Eaton Corporation, Johnson Controls, Inc., Lear Corporation, Magna International, Inc. Class A, Modine Manufacturing Co., Tenneco Automotive, Inc., Tower Automotive, Inc., and Visteon Corporation (As compiled by Media General Financial Services of Richmond, VA).
(5) S&P 500 — Standard & Poor’s 500 Total Return Index (As compiled by Media General Financial Services of Richmond, VA).

Certain Relationships and Related Transactions

     The Company entered into an employment agreement, effective January 1, 1998 with Mr. Fiedler which provided, among other things, for Mr. Fiedler’s full-time employment until December 30, 2002 at an annual salary of not less than $500,000. Subject to the terms and conditions of his agreement, Mr. Fiedler was eligible for annual performance bonuses and awards under the Company’s Executive Stock Performance Plan at target levels no less than those set for 1997. In addition, the Company granted Mr. Fiedler a Non-Qualified Stock

17

Option, subject to the provisions of the 1993 Plan and the terms and conditions of a Non-Qualified Stock Option Agreement, to purchase from the Company 75,000 shares of common stock at the fair market value per share on January 27, 1998, such option to be exercisable starting on December 30, 2002.

     Effective November 8, 2000, the Company entered into an addendum to the employment agreement with Mr. Fiedler which provided that Mr. Fiedler would continueeach three-year term. Non-employee directors continuing to serve as Chairman ofwithout re-election will receive pro-rated increases in equity compensation to equalize the equity compensation increase.


The annual retainer for non-employee directors in 2007 was $40,000 for service on the Board of Directors until May 30, 2003 (subjectDirectors. Beginning January 1, 2008 the annual retainer for non-employee directors was increased to $55,000. The annual approvalretainer is prorated when a new member joins or a current member leaves our Board.  Mr. Glaske will retire from the Board at the 2008 Annual Meeting in accordance with retirement guidelines adopted by the Board.  When a qualified candidate is identified, a new director will be appointed to Class III by the Board of Directors and re-election byDirectors.

 Each non-employee director received $1,500 for each Board meeting attended. Each Committee member also received $1,500 ($3,000 if he or she was the stockholders). Under the addendum, the Company granted Mr. Fiedler a Non-Qualified Stock Option, subject to the provisionsChairman of the 1993 Plancommittee) for each committee meeting attended. In recognition of increased time commitments, the Chairman of the Audit Committee received $5,000 for each committee meeting attended since January 1, 2005.  Meeting and the terms and conditions of a Non-Qualified Stock Option Agreement, to purchase 25,000 shares of common stock, such option was exercisable starting on May 30, 2003.

     On January 30, 1998, theattendance fees were not changed for 2008. The Company loaned Mr. Fiedler $2 millionpays for the exclusive purpose of Mr. Fiedler purchasing the Company’s Common Stock. The loan was evidenced by a non-negotiable full recourse promissory note, as amended, which matured on May 30, 2003. The note accrued interestexpenses associated with attendance at Board and Committee meetings and other functions attended at the raterequest of 5.84% per annum, compounded semiannually.the Company.  The largest aggregate amount outstanding during 2003 and the amount outstandingCompany maintains a directors’ deferred compensation plan under which directors may defer receipt of retainer fees only.  Four directors deferred fees under the note as of May 30, 2003 was $2,758,682. As provided under the note, the entire obligation was forgiven because Mr. Fiedler remained with the Company through May 30, 2003.

On or about June 5, 2003,plan in further settlement of its obligations under the employment agreement, the Company paid Mr. Fiedler the sum of $435,841 of which amount represented Mr. Fiedler’s income tax liability associated with forgiveness of the note less the after tax gain he realized upon exercise of the options just mentioned.2007.


PROPOSAL 2 — APPROVAL – TO VOTE TO APPROVE AN AMENDMENT TO THE COMPANY’S RESTATED CERTIFICATE OF

INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF THE BORGWARNER INC. 2004 STOCK INCENTIVE PLAN

     At itsCOMPANY

 FROM 150,000,000 SHARES TO 400,000,000 SHARES

On February 4, 2004 meeting, the7, 2008, your Board of Directors unanimously adoptedapproved a proposal to increase the BorgWarner Inc. 2004 Stock Incentive Plan (the “2004 Plan”), subjectauthorized capital stock of the Company.  If approved by our stockholders, the proposed increase in our authorized capital stock will be accomplished through an amendment to the approval thereof byCompany’s restated certificate of incorporation that will increase the stockholderstotal authorized common stock of the Company at the Annual Meeting.from 150,000,000 shares to 400,000,000 shares.  A copy of the 2004 Planproposed amendment is attached to this proxy statement as AppendixAnnex B.  If approved by the stockholders, the 2004 Plan will replace the 1993 Plan, which expired on December 31, 2003. The favorable vote of a majority of theOn March 3, 2008 there were _______issued and ________outstanding shares of common stock represented at the Annual Meeting is requiredand 9,117,590 shares reserved for approval of the 2004 Plan.

     Thebusiness purposes, including for equity compensation awards in accordance with shareholder approved equity plans.


Your Board of Directors recommends that stockholders vote “FOR”approved the 2004 Plan.

Description of the 2004 Plan

     The following description of the material terms of the 2004 Plan is intended as a summary only and is qualifiedproposed increase in its entirety by reference to the text of the attached 2004 Plan.

Administration.The 2004 Plan will be administered by the Compensation Committee of the Company’s Board of Directors, or such other committee comprised of members of the Boardauthorized common stock because it believes that the Board appoints (“Committee”). If the Compensation Committee has not been designated as the Committee, members of the Committee must be “non-employee directors” within the meaning of Section 16 of the Securities Exchange Act of 1934 (“Exchange Act”) and “independent directors” within the meaning of any applicable stock exchange rule. In addition, to the extent that the Committee intends that an award granted under the 2004 Plan constitutes “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code (“Code”) (discussed below), members of the Committee must be “outside directors” within the meaning of Section 162(m) of the Code.

     In the case of awards granted to members of the Board who are not officers or employees of the Company or an affiliate, the 2004 Plan will be administered by the Committee subject to the approval of a majority of all members of the Board who are “non-employee directors” within the meaning of Section 16 of the Exchange Act, and “independent directors” within the meaning of any applicable stock exchange rule.

     The Committee may authorize the chief executive officer of the Company to grant awards under the 2004 Plan of up to 10,000 shares of common stock per individual per year to officers and employees of the Company and its affiliates who are not executive officers subject to Section 16 of the Exchange Act or “covered

18

employees” under Code section 162(m). In addition, the Committee may authorize the chief executive officer of the Company to grant awards under the 2004 Plan of up to 10,000 shares of common stock per individual as an inducement for an individual to accept an offer of employment with the Company or an affiliate. Recipients of such employee inducement awards may include individuals who are executive officers subject to Section 16 of the Exchange Act or “covered employees” under Code section 162(m). Whenever the Committee has granted the chief executive officer the authority to make such awards under the 2004 Plan, the chief executive officer has the authority under the 2004 Plan to select the employees (or prospective employees) to whom awards will be given, determine the type of awards to be granted and the number of shares to be covered by an award, and determine the terms and conditions of an award, subject however, to any limits or qualifications on such powers as the Committee may establish. The 2004 Plan also provides that any such authorizations to the chief executive officer must be consistent with recommendations made by the Board’s Compensation Committee to the Board regarding non-CEO compensation, incentive compensation, and equity-based plans.

     For purposes of the remaining portions of this description of the 2004 Plan, references to the Committee shall also refer (i) in the case of awards to directors who are not employees of the Company or a subsidiary, to the Committee, as approved by a majority of all members of the Board who are “non-employee directors” within the meaning of Section 16 of the Exchange Act, and “independent directors” within the meaning of any applicable stock exchange rule, and (ii) in the case of awards granted to employees by the chief executive officer pursuant to an authorization by the Committee, to the chief executive officer.

     Under the 2004 Plan, the Committee has full authority to select the eligible individuals to whom awards will be granted, the types of awards to be granted, the number of shares to be subject to an award, the exercise price (in the case of a stock option) and other terms and conditions of awards, to interpret the 2004 Plan, and to prescribe, amend and rescind the rules and regulations relating to the 2004 Plan.

Term, Amendment and Termination.If not terminated sooner by the Board of Directors, the 2004 Plan will terminate on the date immediately preceding the tenth anniversary of the 2004 Plan’s effective date, and no awards will be granted after that date. Awards granted and outstanding as of the date the 2004 Plan terminates will not be effected or impaired by such termination.

     The Board of Directors may amend, alter or discontinue the 2004 Plan at any time. However, no amendment, alteration or discontinuation of the 2004 Plan may impair the rights of an award recipient with respect to awards previously granted without such recipient’s consent (except that no consent is necessary for amendments made to cause the 2004 Plan to qualify for the exemption provided by Rule 16b-3 of the Exchange Act or for awards to qualify for the “qualified performance-based compensation” exception under Code section 162(m), discussed below). No amendment may be made that would disqualify the 2004 Plan from the exemption provided by Rule 16b-3 of the Exchange Act or to extend the term of the 2004 Plan. No amendment can be made to the 2004 Plan without the consent of the Company’s stockholders to the extent that such approval is required by law or agreement.

     The Committee may amend the terms of any outstanding award, either prospectively or retroactively, except that an amendment that would impair the rights of the award holder requires the holder’s consent (except that no consent in necessary for amendments made to cause the 2004 Plan to qualify for the exemption provided by Rule 16b-3 of the Exchange Act or for awards to qualify for the “qualified performance-based compensation” exception under Code section 162(m), discussed below).

No Repricing of Stock Options or Stock Appreciation Rights. Except for adjustments for certain corporate events as described below, the 2004 Plan expressly prohibits the Committee from repricing stock options or stock appreciation rights once they are granted.

Shares Subject to the 2004 Plan. Subject to adjustments as described below, up to 1,350,000 shares of the Company’s common stock, par value of $.01 per share, will be available for issuance for awards under the 2004 Plan, including with respect to incentive stock options. Shares subject to an award may be authorized and unissued shares, treasury shares, or shares of common stock purchased on the open market. As of February 13, 2004, the closing price of a share of common stock was $93.49.

19

     If an award granted under the 2004 Plan expires, terminates, is cancelled, or lapses for any reason without the issuancecontinued availability of shares of common stock is advisable to provide the Company with the flexibility to take advantage of opportunities to issue such stock to obtain capital, or if anyas consideration for possible acquisitions or for other purposes (including, without limitation, the issuance of additional shares of restrictedcommon stock awarded underthrough stock splits and stock dividends in appropriate circumstances).  There are, at present, no plans, understandings, agreements or arrangements concerning the 2004 Plan are forfeited, the shares covered by such award or such restricted stock will again be available for awards under the 2004 Plan. In addition, if an award recipient tenders previously-acquiredissuance of additional shares of the Company’s common stock to satisfy applicable withholding obligations with respect to an award, or if sharespreferred stock.


Recommendation

    For the foregoing reasons, your Board of Directors believes that this proposal is in the Company’s common stock are withheld to satisfy applicable withholding obligations, such shares will again be available for further awards under the 2004 Plan. Also, if an award recipient tenders previously-acquired sharesbest interests of the Company’s common stock in paymentBorgWarner and its stockholders and unanimously recommends that you vote FOR this proposal.

    If a majority of the option price upon exercise of a stock option awarded under the 2004 Plan, or ifour outstanding shares of common stock are withheld in payment ofvoted FOR the option price,amendment, then the number ofamendment will be approved.
    If your shares tendered or withheld will again be available for further awards under the 2004 Plan.

Individual Limitations. Subject to adjustments as described below, no individual may be granted, within one fiscal year of the Company, awards covering more than 100,000 shares of common stock or common stock equivalents (in the case of awards of stock appreciation rights, stock units, and performance shares). Additionally, no individual may be granted within one fiscal year of the Company, Performance Units that could exceed $500,000 when paid in cash or in shares of common stock.

     If there is a changeare held in the common stock of the Company through the declaration of stock dividends, or through recapitalization resulting in stock split-ups, or combinations or exchanges of shares, or otherwise, the 2004 Plan authorizes the Committee to make appropriate adjustments in the number of shares authorized for grants, in the exercise prices of outstanding stock options, in the base prices of stock appreciation rights, and in the limits described above on the number of shares available for grant to individuals per fiscal year.

Eligibility and Types of Awards.The Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, stock units, performance units, and performance shares. Participation in the 2004 Plan is open to officers, employees and directors of the Company, as selected by the Committee. However, directors who are not employees of the Company orname of a subsidiary arenominee and you do not eligibletell the nominee by ______ how to receive grants of incentive stock options, performance units, or performancevote your shares, under the 2004 Plan. As of February 13, 2004, approximately 300 employees, including 11 officers, and nine directors who are not employees of the Company or any subsidiary would have been eligible to receive awards under the 2004 Plan.

Stock Options.Officers, employees and directors of the Company and its subsidiaries may be granted options to acquire the Company’s common stock under the 2004 Plan, either alone or in conjunction with other awards under the 2004 Plan. However, as noted above, directors who are not employees of the Company or a subsidiary of the Company are not eligible to receive grants of incentive stock options (“ISOs”).

     Under the 2004 Plan, stock options may be either ISOs or nonqualified stock options. The exercise price of a stock option is determined at the time of grant butthen your nominee may not be less than the fair market value per share of common stock on date of grant. Stock options are exercisable at the times and upon the conditions that the Committee may determine, as reflected in the applicable stock option agreement. The exercise period of a stock option is determined by the Committee and may not exceed 10 years from the date of grant.

     The holder of a stock option generally has a one-year period following the grantee’s termination of employment or service with the Company and its subsidiaries (but not to exceed the stock option’s term), in which to exercise a stock option that was exercisable as of such termination. An extended exercise period (generally three years, but not to exceed the stock option’s term) may apply following a termination of employment or service by reason of disability or retirement. The 2004 Plan authorizes the Committee to accelerate the schedules or installments on which stock options become exercisable.

     The exercise price of a stock option must be paid in full at the time of exercise and is payable in cash. However, if (and to the extent) provided by the related award agreement, the option exercise price may also be paid: (i) by the surrender of common stock already owned by the optionee, (ii) by requesting the Company to withhold, from the number of shares of common stock otherwise issuable upon exercise of the stock option, shares having an aggregate fair market value on the date of exercise equal to the exercise price, or (iii) a combination of the foregoing, as provided by the award agreement. Additionally, if permitted by the

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Committee and allowable by law, payment of the exercise price may be made through a broker-facilitated cashless exercise.

     If permitted by the related award agreement, an optionee may surrender shares of restricted stock in payment of the exercise price of a nonqualified stock option. Where restricted stock is so surrendered, an equal number of shares received upon the exercise of the nonqualified stock option shall be subject to the same forfeiture restrictions as the shares surrendered.

     ISOs are exercisable only by the optionee during his or her lifetime and are not assignable or transferable other than by will or by the application of the laws of inheritance. Nonqualified stock options may be assigned during the optionee’s lifetime to one or more of the optionee’s immediate family members or to a trust benefiting one or more family members exclusively, or to the optionee’s spouse or former spouse pursuant to a qualified domestic relations order.

     Upon receipt of a notice of exercise, the Committee may elect to cash out all or part of a stock option that is being exercised by paying the optionee cash or common stock equal to the difference between the exercise price and the fair market value of the Company’s common stock.

     In the event of a change in control (as defined in the 2004 Plan), all stock options outstanding as of the date on which the change in control occurs become fully exercisable and vested. Unless otherwise provided in the related award agreement, during the 60-day period following a change in control, the holder of a stock option has the right to surrender such option for cash in an amount equal to the difference between the “change in control price” (as defined in the 2004 Plan) and the exercise price. Under the 2004 Plan, such a cash out may automatically occur in the case of an officer who is subject to Section 16(b) of the Exchange Act with respect to a grant of stock options in instances where the 60-day period ends within six months of the date of the stock option’s grant, with the cash out occurring immediately following the close of the six-month period.

Stock Appreciation Rights.A stock appreciation right (“SAR”) may be granted (i) to employees or directors in conjunction with all or any part of an option granted under the 2004 Plan (a “Tandem SAR”), or (ii) without relationship to an option (a “Freestanding SAR”). Tandem SARs may be granted either at or after the time of grant of such options in the case of a nonqualified stock option, but must be granted at the time such option is granted in the case of an ISO. A Tandem SAR is only exercisable at the time and to the extent that the related option is exercisable. Upon the exercise of a Tandem SAR, the holder thereof is entitled to receive, in cash or common stock, as provided in the related award agreement, the excess of the fair market value of the share for which the right is exercised (calculated as of the exercise date) over the exercise price per share of the related option. Stock options are no longer exercisable to the extent that a related Tandem SAR has been exercised, and a Tandem SAR is no longer exercisable upon the forfeiture, termination or exercise of the related stock option. A Freestanding SAR entitles the holder to a cash payment equal to the difference between the base price and the fair market value of a share of common stock on the date of exercise. The base price is the fair market value of a share of common stock on the date of the Freestanding SAR’s grant.

     In the event of a change in control (as defined in the 2004 Plan), all stock appreciation rights outstanding as of the date on which the change in control occurs shall become fully exercisable and vested.

     SARs may not be sold, assigned, transferred, pledged or otherwise encumbered.

Restricted Stock. Officers, employees and directors of the Company and its subsidiaries may be granted restricted stock under the 2004 Plan, either alone or in combination with other awards. Restricted stock are shares of the Company’s common stock that are subject to forfeiture by the recipient if the conditions to vesting that are set forth in the related restricted stock agreement are not met. Vesting may be based on the continued service of the recipient, one or more performance goals (described below), or such other factors or criteria as the Committee may determine.

     Unless otherwise provided in the related restricted stock agreement, the grant of a restricted stock award will entitle the recipient to vote the shares of Company common stock covered by such award and to receive

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the dividends thereon. Under the 2004 Plan, a restricted stock agreement may provide that cash dividends paid on restricted stock will be automatically deferred and reinvested in additional restricted stock and dividends payable in stock will be paid in the form of restricted stock.

     During the period that shares of stock are restricted, the recipient cannot sell, assign, transfer, pledge or otherwise encumber the shares of restricted stock. If a recipient’s employment or service with the Company and its subsidiaries terminates, the recipient will forfeit all rights to the unvested portion of the restricted stock award. However, if the participant’s service is involuntarily terminated other than for cause (as defined in the 2004 Plan), the Committee may waive any remaining restrictions upon the stock in effect upon such termination.

     In the event of a change in control (as defined in the 2004 Plan), the restrictions applicable to any outstanding restricted stock will lapse and the restricted stock will become fully vested to the full extent of the grant.

Stock Units.Officers, employees and directors of the Company and its subsidiaries may be granted stock units under the 2004 Plan, either alone or in combination with other awards. A stock unit is a right to receive a share of common stock of the Company or the fair market value in cash of a share of common stock in the future, under terms and conditions established by the Committee. Under the 2004 Plan, the Committee may make grants of stock units that are immediately vested or may make grants of stock units that are subject to vesting requirements, such as continued service.

     Except to the extent otherwise provided in the applicable award agreement, if a participant’s employment with the Company terminates prior to the date on which the participant’s stock units become vested, the participant will forfeit the stock units. The Committee has the discretion to waive in whole or in part, any payment limitations for stock units that remain outstanding at a participant’s retirement, or if the participant’s employment is involuntarily terminated (other than for cause, as defined in the 2004 Plan).

     Prior to an actual delivery of shares of common stock in settlement of a stock units grant, a participant acquires no rights of a shareholder. Stock units may not be sold, assigned, transferred or pledged or otherwise encumbered, but a participant may designate one or more beneficiaries to whom shares of common stock covered by a grant of stock units will be transferred in the event of the participant’s death.

     The Committee may, in its discretion, provide in a stock units award agreement that a participant will be entitled to receive dividend equivalents with respect to his or her restricted stock units. Dividend equivalents may, in the discretion of the Committee, be paid in cash or credited to the participant as additional restricted stock units, or any combination of cash and additional restricted stock units. The amount that can be paid to a recipient as a dividend equivalent cannot exceed the amount that would be payable as a dividend if the stock unit were actually a share of common stock. If credited to the participant as additional stock units, the additional stock units will vest at the same time as the stock units to which they relate.

     At the time specified in the applicable award agreement, stock units will be settled by the delivery to the participant of shares of common stock equal in number to the number of the participant’s stock units that are vested as of the specified date or event, or cash equal to the fair market value of such shares. The Committee may in its discretion allow a stock unit recipient to defer such delivery of common stock to a later date, under such terms and conditions established by the Committee.

     In the event of a change in control (as defined in the 2004 Plan), the restrictions applicable to any outstanding stock units will lapse and the stock units will become fully vested to the full extent of the grant.

Performance Units.Officers and employees of the Company and its subsidiaries may be granted performance units under the 2004 Plan, either alone or in combination with other 2004 Plan awards.

     A performance unit is a contingent right to receive cash or shares of common stock of the Company, in the future, pursuant to the terms of a grant made under the 2004 Plan and the related award agreement. The value of a performance unit is established by the Committee based on cash or on property other than common stock of the Company. For any grant of performance units, the Committee will establish (i) one or more performance goals, and (ii) a performance period of not less than one year. The performance goals will be

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based on one or more performance criteria set forth in the 2004 Plan and described below. At the expiration of the performance period, the Committee will determine and certify the extent to which the performance goals were achieved. The Committee will then determine the number of performance units to which a recipient of performance units under the grant is entitled, and the value of such performance units (if the value is based on the level of achievement) based upon the number of performance units originally granted to the recipient and the level of performance achieved. Performance units will be settled by payment of the cash value of the performance units to which the recipient is entitled or delivery of shares of common stock of the Company with a fair market value equal to the cash value of such performance units.

     Except to the extent otherwise provided in the applicable award agreement, if a performance unit recipient’s employment or service with the Company terminates during the performance period or before the performance goals are satisfied, the recipient will forfeit the performance units granted with respect to such performance period. The Committee has the discretion to waive in whole or in part, any payment limitations for performance units that remain outstanding at a participant’s retirement or if the participant’s employment or is involuntarily terminated (other than for cause, as defined in the 2004 Plan).

     In the event of a change in control (as defined in the 2004 Plan), the performance goals of all outstanding performance units granted under the 2004 Plan shall be deemed to have been achieved at target levels, and a recipient shall be entitled to a pro rata distribution of shares of common stock or cash in settlement of the performance units, based upon the number of whole months during the performance period that have elapsed prior to the date of the change in control.

     Prior to an actual delivery of shares of common stock in settlement of a performance units grant, a recipient acquires no rights of a shareholder. Performance units may not be sold, assigned, transferred or pledged or otherwise encumbered, but a recipient may designate one or more beneficiaries to whom shares of common stock covered by a grant of performance units will be transferred in the event of the recipient’s death.

     If approved by the Committee, a participant may elect to defer the delivery of cash or shares in payment of performance units for a specified period or until a specified event. Such an election must generally be made prior to the commencement of the performance period for such performance units.

Performance Shares.Officers and employees of the Company and its subsidiaries may be granted performance shares under the 2004 Plan, either alone or in combination with other 2004 Plan awards.

     A performance share is a contingent right to receive a share of common stock of the Company or the fair market value in cash of a share of common stock, in the future, pursuant to the terms of a grant made under the 2004 Plan and the related award agreement. For any grant of performance shares, the Committee will establish (i) one or more performance goals, and (ii) a performance period of not less than one year. The performance goals will be based on one or more performance criteria set forth in the 2004 Plan and described below. At the expiration of the performance period, the Committee will determine and certify the extent to which the performance goals were achieved. The Committee will then determine the number of performance shares to which a recipient of performance shares under the grant is entitled, based upon the number of performance shares originally granted to the recipient and the level of performance achieved. Performance shares will be settled by the delivery of shares of common stock of the Company or cash equal to the fair market value of such shares as soon as practicable after the close of the performance period.

     Except to the extent otherwise provided in the applicable award agreement, if a performance share recipient’s employment with the Company terminates during the performance period or before the performance goals are satisfied, the recipient will forfeit the performance shares granted with respect to such performance period. The Committee has the discretion to waive in whole or in part, any payment limitations for performance shares that remain outstanding at a participant’s retirement or if the participant’s employment is involuntarily terminated (other than for cause, as defined in the 2004 Plan).

     In the event of a change in control (as defined in the 2004 Plan), the performance goals of all outstanding performance shares granted under the 2004 Plan shall be deemed to have been achieved at target levels, and a recipient shall be entitled to a pro rata distribution of shares of common stock or cash in settlement of the

23

performance shares, based upon the number of whole months during the performance period that have elapsed prior to the date of the change in control.

     Prior to an actual delivery of shares of common stock in settlement of a performance shares grant, a recipient acquires no rights of a shareholder. Performance shares may not be sold, assigned, transferred or pledged or otherwise encumbered, but a recipient may designate one or more beneficiaries to whom shares of common stock covered by a grant of performance shares will be transferred in the event of the recipient’s death.

     If approved by the Committee, a participant may elect to defer the delivery of cash or shares in payment of performance shares for a specified period or until a specified event. Such an election must generally be made prior to the commencement of the performance period for such performance shares.

Rescission of Awards.Under the 2004 Plan, the Committee may cancel or declare forfeited or rescind awards upon its determination that a participant has violated the terms of the 2004 Plan or the award agreement under which the award has been made. In addition, for a period of one year following the exercise, payment or delivery of an award, the Committee may rescind the award upon its determining that the participant has committed a breach of conduct (as defined in the 2004 Plan) prior to the exercise, payment or delivery of the award or within six months thereafter.

Certain Federal Income Tax Considerations

     The following is a brief and general summary of the federal income tax consequences of transactions under the 2004 Plan based on federal income tax laws in effect on January 1, 2004. The summary does not purport to be complete, and does not address the tax consequences of a participant’s death or the state, local and foreign tax laws that may also be applicable to awards and transactions involving awards.

Stock Options. Stock options granted under the 2004 Plan may be either “Incentive Stock Options,” as defined in Section 422 of the Code, or Nonstatutory Stock Options.

Incentive Stock Options.Incentive Stock Options granted under the 2004 Plan will be subject to the applicable provisions of the Code, including Code section 422. If shares of common stock are issued to an optionee upon the exercise of an ISO, and if no “disqualifying disposition” of such shares is made by such optionee within one year after the exercise of the ISO or within two years after the date the ISO was granted, then (i) no income will be recognized by the optionee at the time of the grant of the ISO, (ii) no income, for regular tax purposes, will be realized by the optionee at the date of exercise, (iii) upon sale of the shares of the common stock acquired by exercise of the ISO, any amount realized in excess of the option price will be taxed to the optionee, for regular tax purposes, as a capital gain (at varying rates depending upon the optionee’s holding period in the shares and income level) and any loss sustained will be a capital loss, and (iv) no deduction will be allowed to the Company for federal income tax purposes. If a “disqualifying disposition” of such shares is made, the optionee will realize taxable ordinary income in an amount equal to the excess of the fair market value of the shares purchased at the time of exercise over the exercise price (the “bargain purchase element”) and the Company will generally be entitled to a federal income tax deduction equal to such amount. The amount of any gain in excess of the bargain purchase element realized upon a “disqualifying disposition” will be taxable as capital gain to the holder (at varying rates depending upon such holder’s holding period in the shares and income level), for which the Company will not be entitled to a federal income tax deduction. Upon exercise of an ISO, the optionee may be subject to alternative minimum tax.

Nonqualified Stock Options.With respect to nonqualified stock options: (i) no income is recognized by the optionee at the time the option is granted; (ii) generally, at exercise, ordinary income is recognized by the optionee in an amount equal to the difference between the option exercise price paid for the shares and the fair market value of theyour shares on the date of exercise, and the Company is entitled to a tax deduction in the same amount; and (iii) at disposition, any gain or loss is treated as capital gain or loss. In the case of an optionee who is also an employee, any income recognized upon exercise of a nonqualified stock option will constitute wages for which withholding will be required.

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Stock Appreciation Rights.No income will be recognized by a recipient in connection with the grant of an SAR. When an SAR is exercised, the recipient will generally be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any common stock received on the exercise. In the case of a recipient who is also an employee, any income recognized upon exercise of an SAR will constitute wages for which withholding will be required. The Company will be entitled to a tax deduction at the same time and in the same amount. If the optionee receives common stock upon the exercise of an SAR, any gain or loss on the sale of such stock will be treated in the same manner as discussed above under “nonqualified stock options.”

Restricted Stock.A recipient will not realize taxable income at the time of grant of a restricted stock award, assuming that the restrictions constitute a substantial risk of forfeiture for Federal income tax purposes. Upon the vesting of shares of Company common stock subject to an award, the recipient will realize ordinary income in an amount equal to the excess of the fair market value of such shares at such time over the amount paid by the recipient, if any. The Company will be entitled to a deduction equal to the amount of ordinary income realized by the recipient in the taxable year in which the amount is included in the recipient’s income. Dividends paid to the recipient during the restriction period will be taxable as compensation income to the recipient at the time paid and will be deductible at such time by the Company. The recipient of a restricted stock award may, by filing an election with the Internal Revenue Service within 30 days of the date of grant of the restricted stock award, elect to be taxed at the time of grant of the award on the excess of the then fair market value of the shares of Company common stock over the amount paid by the recipient, if any, in which case (1) the Company will be entitled to a deduction equal to the amount of ordinary income realized by the recipient in the taxable year in which the amount is included in the recipient’s income, (2) dividends paid to the recipient during the restriction period will be taxable as dividends to the recipient and not deductible by the Company, and (3) there will be no further tax consequences to either the recipient or the Company when the restrictions lapse. In the case of a recipient who is also an employee, any amount included in income will constitute wages for which withholding will be required.

Stock Units, Performance Units, and Performance Shares. An employee who is awarded one or more stock units, performance units and/or performance shares will not recognize income and the Company will not be allowed a deduction at the time the award is made. When an employee receives payment for such awards in cash or shares of common stock, the amount of the cash and the fair market value of the shares of common stock received will be ordinary income to the employee and will be allowed as a deduction for federal income taxthis proposal (a so-called “broker nonvote”).  For purposes to the Company. If the receipt of payment is deferred, as allowable under the 2004 Plan and as may be permitted by the Committee, the recipient will realize, in the year when paid, ordinary income equal to the amount of the cash received or the fair market value of any shares issued or transferred, determined as of the date of delivery or transfer. The Company will be entitled to a deduction equal in amount to the ordinary income realized by the recipient in the year paid. In the case of a recipient who is an employee, any amount included in income will constitute wages for which withholding will be required.

Section 162(m) Limit.Section 162(m) of the Code generally limits a public company’s federal income tax deduction for compensation paid to any of its executive officers to $1,000,000 per year. However, certain “performance-based compensation” paid to such officers is exempt from the $1,000,000 annual deduction limit.

     The 2004 Plan is designed to enable the Company to provide grants of stock options, stock appreciation rights and performance units under the 2004 Plan to the Company’s executive officers that will satisfy the requirements of the exception of Section 162(m) for performance-based compensation. The 2004 Plan is also designed so that awards of restricted stock under the 2004 Plan may be made in a manner which satisfies the performance-based compensation exception of Section 162(m). Accordingly, (i) the right to receive a share of common stock or cash in payment of a stock option, stock appreciation right or performance share award, and, (ii) if the Committee intends that a restricted stock award satisfy the performance-based compensation exception, the vesting of such stock, will be contingent upon the achievement of objective performance goals established by the Committee at the time of grant.

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     Under the 2004 Plan, a performance goal will be based on one or more of the following criteria: earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); net or operating income; earnings per share; expense reductions; return on investment; combined net worth; debt to equity ratio; operating cash flow; return on total capital, equity, or assets; total shareholder return; economic value; or changes in the market price of the Company’s common stock. The criteria selected by the Committee from the foregoing list may relate to the Company, one or more of its affiliates, divisions, units, or any combination of the Company, its affiliates, divisions, or units. Performance goals may be based on the performance of the Company generally or relative to peer company performance and may be based on a comparison of actual performance during a performance period against budget for such period. A performance goal may include a threshold level of performance below which no vesting or payout will occur, target levels at which full vesting or a full payout will occur and (or) a maximum level at which specified additional vesting or a specified additional payout will occur. The level of achievement of a performance goal will be determined in accordance with generally accepted accounting principles and shall be subject to certification by the Committee. Under the 2004 Plan, the Committee does have the discretion, to the extent such discretion is consistent with the “qualified performance-based exception” of the Code and its regulations, to make equitable adjustments to performance goals in recognition of unusual or non-recurring events affecting the Company or a subsidiary or the financial statements of the Company or any subsidiary, or for changes in the law or accounting principles. Once a performance goal is established, the Committee will have no discretion to increase the amount of compensation that would otherwise be payable to a recipient upon attainment of the performance goal.

Income Tax Withholding.Upon an employee’s realization of income from an award, the Company is generally obligated to withhold against the employee’s Federal and state income and employment tax liability. Payment of the withholding obligation can be made from other amounts due from the Company to the award recipient or with shares of Company common stock owned by the recipient. If the recipient elects to tender shares of Company common stock or to reduce the number of shares the recipient is otherwise entitled to receive to satisfy the withholding obligation, the shares tendered or reduced will be treated as having been sold to the Company.

Capital Gains.Generally, under law in effect as of January 1, 2004, net capital gain (net long-term capital gain minus net short-term capital loss) is taxed at a maximum rate of 15%.

New Plan Benefits

     As described in “Directors Compensation” on pages 5-6, on November 12, 2003, the Board approved a resolution providing for annual grants of restricted stock under the 2004 Plan to each director of the Company who is not otherwise an employee of the Company or any of its subsidiaries or Affiliates (“Non-Executive Director Group”), subject to the approval of the 2004 Plan by the Company’s stockholders at the Annual Meeting. The Board believes that equity compensation enhances alignment of the interests of the Non-Executive Director Group with those of other stockholders. The following New Plan Benefits table provides certain information with respect to such grants of restricted stock:

New Plan Benefits

BorgWarner Inc. 2004 Stock Incentive Plan

         
Name and PositionDollar Value($)(a)Number of Shares(b)
Non-Executive Director Group  37,396   400 

(a)Based on a closing price of $93.49 on February 13, 2004. The actual dollar value will be determined by the fair market value of stock, as defined in the 2004 Plan, on the grant date which is expected to be in July 2005.
(b)The number of restricted shares will be adjusted to reflect the 2-for-1 stock split if Proposal 3 is approved by stockholders.

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     Other than the restricted stock grants to the Non-Executive Director Group shown above on the New Plan Benefits table, no awards have been made to date under the 2004 Plan. Awards for which benefits that may be paid under the 2004 Plan are made at the discretion of the Committee, subject to the maximum plan and maximum individual limitations described above. In addition, the actual benefits that will be paid under the 2004 Plan will depend upon a number of factors, including the market value of the Company’s common stock on future dates, and in the case of performance units, performance shares and restricted stock with vesting based on the achievement of one or more performance goals, actual performance of the Company (both absolutely, and in some cases, as measured against the performance of peer companies), and decisions made by recipients. Since these factors are not known at this time, the benefits or amounts paid under the 2004 Plan, and the market value of such awards, other than the grants to the Non-Executive Director Group shown above, are not yet determinable. In addition, because of these unknown variables, it is not possible to determine any other benefits that might be received by recipients under the 2004 Plan.

Effective Date.If approved by the shareholders, the 2004 Plan described above will be effective as of the date of approval.

     As of December 31, 2003, the number of stock options outstanding under our equity compensation plans, the weighted average exercise price of outstanding options, and the number of securities remaining available for issuance were as follows:

Equity Compensation Plan Information

             
Number of Securities
Remaining Available
Number of Securitiesfor Future Issuance
to be Issued UponWeighted-AverageUnder Equity
Exercise ofExercise Price ofCompensation Plans
Outstanding Options,Outstanding Options,(excluding securities
Plan CategoryWarrants and RightsWarrants and Rightsreflected in column(a))
(a)(b)(c)
Equity compensation plans approved by security holders  277,046   52.88   0 
Equity compensation plans not approved by security holders  0   0   0 
Total  277,046   52.88   0 

Vote required and Board of Directors’ Recommendation

     Approval of the 2004 Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock represented and voting in person or by proxy at the Annual Meeting.

Recommendation

The Board of Directors has unanimously approved the 2004 Plan and the reservation of shares of common stock of the Company for issuance under the 2004 Plan and recommends that shareholders vote “FOR” the 2004 Plan and the reservation of shares for issuance thereunder.

PROPOSAL 3 — APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF

INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK

     The Board of Directors proposes that stockholders authorize the amendment of the Company’s Restated Certificate of Incorporation to increase the Company’s authorized shares of common stock. The amendment would increase the authorized shares of common stock from 50,000,000 shares to 150,000,000 shares.

     The proposed increase in authorized shares will permit a 2-for-1 split of all of the Company’s common stock. The proposed stock split was approved by the Board of Directors on February 4, 2004, subject to stockholder approval of this proposal, to increase authorized shares. The Restated Certificate currently authorizesa broker nonvote and an abstention are the issuance of up to 50,000,000 shares of common stock. As of March 5, 2004, there were

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27,xxx,xxx shares of common stock issued and 27,xxx,xxx shares outstanding. The current authorization of 50,000,000 shares of common stock is insufficient to permit a 2-for-1 stock split. If this proposal is approved and after the 2-for-1 stock split, there will be approximately 5x,xxx,xxx shares issued and 5x,xxx,xxx shares outstanding.

     The remaining shares of authorized common stock will provide the Company with flexibility in the future by assuring the availability of sufficient authorized but unissued common stock for valid corporate proposes such as financings, future stock splits or stock dividends, and mergers and acquisitions.

     If the amendment to increase the number of authorized shares of common stock is approved, the first sentence of Article IV of the Restated Certificate will read in its entirety as follows:

The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 180,000,000 shares, consisting of 150,000,000 shares of Common Stock, par value $0.01 per share (“Common Stock”), 25,000,000 shares of Non-Voting Common Stock, par value $0.01 per share (“Non-Voting Common Stock” and, together with the Common Stock, the “Junior Stock”), and 5,000,000 shares of Preferred Stock, par value $0.01 per share (“Preferred Stock”).

     Approval of the amendment to the Restated Certificate of Incorporation will require the affirmative votefunctional equivalents of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting. If such approval is obtained, the stock split will be effected by the issuance on May 17, 2004, of one share of common stock for each share outstanding at the close of business on May“no” vote.


PROPOSAL 3 2004, the record date for the stock split.

Recommendation

The Board has unanimously determined that the amendment to the Restated Certificate is advisable and in the best interests of the stockholders of the Company and recommend that shareholders vote “FOR” this proposal.

PROPOSAL 4 — RATIFICATION OF SELECTION OF

INDEPENDENT AUDITORS

REGISTERED PUBLIC ACCOUNTING FIRM 

The Board of Directors proposes that the stockholders approve the selection by the Finance and Audit Committee of Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”) to serve as the Company’s independent auditorsregistered public accounting firm for the 20042008 fiscal year.

The Board of Directors anticipates that representatives of Deloitte will be present at the meeting to respond to appropriate questions, and will have an opportunity, if they desire, to make a statement. This

Recommendation 
 Your Board of Directors believes that this proposal will requireis in the affirmativebest interests of BorgWarner and its stockholders and unanimously recommends that you vote of a majority of the shares represented at the Annual Meeting.FOR this proposal.

Principal Accounting Firm Fees



INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES
Aggregate fees including expenses billed to the Companyus for the fiscal years ended December 31, 20032007 and December 31, 2002 by Deloitte, are as follows:
         
20032002
Audit Fees $1,529,000  $1,393,000 
Audit-Related Fees $366,000  $206,000 
   
   
 
Total Audit and Audit-Related Fees $1,895,000  $1,599,000 
Tax Fees $246,000  $387,000 
All Other Fees $506,000  $483,000 
   
   
 
Total Fees $2,647,000  $2,469,000 

Audit Fees

     These fees are2006, for professional services rendered for the audit of the Company’s annual financial statements for the fiscal year ended December 31, 2003, including foreign statutory audit requirements, and

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performed by Deloitte & Touche, were as follows:

for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for that fiscal year.

  2007   2006  
        Audit Fees and Expenses $4,268,900  $4,236,600     
        Audit-Related Fees $253,700  $348,900 
        Tax Fees $362,000  $346,700     
        All Other Fees $—  $— 
         
        Totals $4,884,600  $4,932,200 
 
Audit-Related Fees

     These fees are for professional services rendered in connection with the audit of the Company’s employee benefit plans and for Sarbanes-Oxley Act, Section 404 advisory services in 2003.

Tax Fees

     These fees relate to federal, state and foreign tax compliance services.

All Other Fees

     Fees for all other services consisted of permitted information technology services related to financial information systems design and implementation.

     The Finance and Audit Committee has considered whether the provision of non-audit services is compatible with maintaining Deloitte’s independence.

     The Finance and    Your Audit Committee has adopted an Audit and Non-Audit Services Pre-Approval Policy which requires the Committee’s pre-approval ofprocedures for pre-approving all audit and non-audit services performedprovided by the independent auditor to assureregistered public accounting firm, including the fees and terms of such services. These procedures include reviewing detailed back-up documentation for audit and permitted non-audit services. The documentation includes a description of, and a budgeted amount for, particular categories of non-audit services that are recurring in nature and therefore anticipated at the time that the provisionbudget is submitted. Audit Committee approval is required to exceed the pre-approved amount for a particular category of non-audit services and to engage the independent registered public accounting firm for any non-audit services not included in those pre-approved amounts. For both types of pre-approval, the Audit Committee considers whether such services does not impairare consistent with the rules on auditor independence promulgated by the SEC and the PCAOB. The Audit Committee also considers whether the independent registered public accounting firm is best positioned to provide the most effective and efficient service, based on such reasons as the auditor’s independence. Forfamiliarity with the fiscal year ended December 31, 2003,Company’s business, people, culture, accounting systems, risk profile, and whether the Financeservices enhance the Company’s ability to manage or control risks and improve audit quality. The Audit Committee pre-approved allmay form and delegate pre-approval authority to subcommittees consisting of one or more members of the auditAudit Committee, and non-auditsuch subcommittees must report any pre-approval decisions to the Audit Committee at its next scheduled meeting. All of the services renderedprovided by Deloitte and listed above.

The Board of Directors recommends a vote “FOR” the appointment of Deloitte & Touche LLP as the independent auditors.registered public accounting firm were pre-approved by your Audit Committee. 


OTHER INFORMATION


The Company has no reasonis not aware of any business to believe that anycome before this annual meeting other business will be presented atthan the Annual Meeting, butmatters described in this proxy statement.  However, if any other business shall be presented,matters should properly come before this meeting, votes pursuant to the proxy will be cast thereon in accordance with the discretion of the persons named in the accompanying proxy.

Expenses of Solicitation

The cost of solicitation of proxies will be borne by the Company. In addition to solicitation of proxies by use of the mail, proxies may be solicited by directors, officers and regularly engaged employees of the Company. None of these directors, officers or employees will receive any extra compensation for doing this.  We have also retained Georgeson to assist us in soliciting proxies for a fee of $_____ plus reasonable out-of-pocket expenses.  Brokers, nominees and other similar record holders will be requested to forward solicitation material and will be reimbursed by the Company upon request for their reasonable out-of-pocket expenses.

Stockholder Proposals

Stockholder proposals which are intended to be presented at the 20052009 Annual Meeting of Stockholders pursuant to SEC Rule 14a-8 must be received by the Company on or before November 19, 2004,22, 2008, for inclusion in the proxy statement relating to that meeting.

A stockholder who intends to present business, including the election of a director, at the 20052009 Annual Meeting of Stockholders other than pursuant to Rule 14a-8, must comply with the requirements set forth in the Company’s Amended and Restated By-Laws. Among other things, under the Company’s Bylaws to bring business before an annual meeting a stockholder must give written notice to the Secretary of the Company nonot less than 90 days and not more than 120 days prior to the first anniversary of the preceding year’s annual meeting. Therefore, for stockholder proposals to be presented other than pursuant to Rule 14a-8, the Company must receive notice no sooner than December 28, 2004,27, 2008, and no later than January 21, 2005.28, 2009. The notice should contain (a) as to each person whom the stockholder proposes to nominate for election as director, all information that is required to be disclosed in solicitations of proxies for election of directors under the securities laws, including the person’s

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written consent to serve as a director if elected, and (b) as to any other business,business: the reason for conducting such business; any material interest in such business the stockholder has; the name and address of the stockholder proposing such business as it appears in the Company’s books; and the number of shares of the Company that are beneficially owned by the stockholder. Stockholders should consult the Company’s Amended and Restated By-Laws to ensure that all of the specific requirements of such notice are met.

Annual Report

Available Information on Form 10-K

The Company will furnish, without charge, to each person whose proxy is being solicited, upon request of such person, one copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, as filed with the SecuritiesCorporate Governance and Exchange Commission.SEC Filings 

Requests for copies of such report should be directed in writing to Mary Brevard, Vice President, Investor Relations and Communications Department, 200 South Michigan Avenue, Chicago, Illinois 60604 or by telephone at 312-322-8683. In addition, throughThrough its website (www.bwauto.com)(www.borgwarner.com), the Company makes available, free of charge, the Company’s 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.Commission, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.  The Company also makes the following documents available on its 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 Mary Brevard, Vice President, Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326.

BORGWARNER INC.

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No person is authorized to give any information or make any representation other than that contained in this proxy statement, and if given or made, such information may not be relied upon as having been authorized.

APPENDIX A

CHARTER

 
ANNEX A


CHARTER

BORGWARNER INC.
FINANCE AND
AUDIT COMMITTEE




The BorgWarner Inc. Finance and Audit Committee (the “Committee”"Committee") is responsible for providing assistance to the Board of Directors in monitoring (i) the integrity of the financial statements of the Corporation, (ii) the independent auditor’s qualifications and independence (iii) the performance of the Corporation’s internal audit function and independent auditors, and (iv) the compliance by the Corporation with legal and regulatory requirements.


The Committee shall be composed of three or more directors who are free of any relationship that, in the opinion of the Board of Directors, would interfere with their individual exercise of independent judgment as a Committee member and who meet the independence and experience requirements of the New York Stock Exchange.Exchange and applicable regulations of the Securities and Exchange Commission (the “Commission”).  All members of the Committee shall be generally knowledgeable in financial and auditing matters and at least one member of the Committee shall be a“an audit committee financial expertexpert” as defined by the Securities and Exchange Commission.  Audit committeeCommittee members shall not simultaneously serve on the audit committees of more than two other public corporations.

     In its finance capacity, the Committee is responsible for:

     1.     Advising the Board of Directors on corporate financial policy;

     2.     Advising the Board of Directors on capital structure and related corporate financial matters;

     3.     Recommending dividend policy to the Board of Directors;

     4.     Reviewing capital expenditure plans;

     5.     Reviewing financing plans; and

6.Recommending to the Board of Directors the investment policy for those investment portfolios specified in resolutions adopted from time to time by the Board and monitoring the investment performance thereof.


In its audit capacity, the Committee shall provide assistance to the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Corporation.  The Committee shall report regularly to the Board and establish and maintain free and open communication between the directors, the independent accountants, the internal auditors and the financial management of the Corporation.  The Committee will:


1.Be directly responsible for the selection of, and compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.  The independent auditor shall report directly to the Audit Committee.

2.  
  2.PreapprovePre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Corporation by its independent auditor.auditor, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Committee prior to the completion of the audit. Discuss and consider the independence of the independent auditors, including the auditors’auditors' written affirmation of independence.

3.Discuss and review with the independent auditors and financial management of the Corporation the proposed scope of the audit for the current year and the nature and thoroughness of the audit process; and at the conclusion thereof, receive and review audit reports including any comments or recommendations of the independent auditors.

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4.  Review with the independent auditor any audit problems or difficulties and management’s response.

5.  Adopt hiring policies for employees or former employees of the independent auditor who participated in any capacity in the audit of the Corporation.

  4.6.  Review with the independent auditors, the Corporation’sCorporation's Director of Internal Audit and with the Corporation’sCorporation's financial and accounting managers, the adequacy and effectiveness of the Corporation’sCorporation's internal auditing, accounting and financial policies, procedures and controls; and elicit any recommendations for the improvement of existing internal control procedures or the establishment of controls or procedures.  Particular emphasis should be given to the adequacy of the internal controls to expose payments, transactions or procedures which might be deemed illegal or otherwise improper.

  5.7.  Review the internal audit function of the Corporation including proposed audit plans for the coming year, the coordination of its programs with the independent auditors and the results of the internal programs.

  6.8.  Review and discuss recurring financial statements (including quarterly reports and disclosures made in management’s discussion and analysis) to be issued to the shareholdersstockholders or the public with management and the independent auditor and recommend to the Board the inclusion of the Corporation’sCorporation's audited financial statements in the Corporation’sCorporation's Annual Report on Form 10-K. Quarterly review of financial information prior to filing of the Corporation’s Form 10Q may be performed by the Committee Chairperson.

  7.9.  Review and discuss:


(a)  
(a) All critical accounting policies and practices to be used.
(b)  All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
(c)  Other material written communication between the independent auditor and management, such as any management letter or schedule of unadjusted differences.


  8.10.  Discuss with management the Corporation’s earnings press releases, including the use of “proforma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.  Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made.)

  9.11.  Investigate any matter brought to its attention within the scope of its duties and retain outside counsel or other experts for this or any other purpose, if, in its judgment, such retention is appropriate.  The Corporation shall provide appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report and to any advisors employed by the Committee.Committee and for other expenses necessary or appropriate in carrying out its duties.


10.Periodically review major information technology trends as they affect the Corporation.
11.12.  Report Committee activities to the full Board and annually issue a summary report (including appropriate oversight conclusions) suitable for submission to shareholders.stockholders.

12.13.  Review disclosures made to the Committee by the Corporation’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a role in the Company’s internal controls.

13.14.  Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.

15.  Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor’s internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) all relationships between the independent auditor and the Corporation. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, taking into account the opinions of management and internal auditors. The Committee shall present its conclusions with respect to the independent auditor to the Board.

14.16.  Establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

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15.17. Discuss with the Corporation’s General Counsel legal matters that may have a material impact on the financial statements or the Corporation’s compliance policies.


18.Discuss with management the Corporation’s risk assessment and risk management policies.

The Committee’sCommittee's charter, policies and procedures will be reassessed at least annually to allow reaction to changing conditions and environment and to assure that the Corporation’sCorporation's accounting and reporting practices are in accordance with all requirements and are of the highest quality.  The Committee may amend or repeal its charter, policies and procedures, as the Committee deems appropriate.  The Committee shall annually review the Committee’s own performance.


The Committee shall meet as often as it determines necessary, but not less frequently than quarterly. At all meetings ofThe Committee shall meet periodically with management, the Committee, sufficient opportunity shall be made available forinternal auditors and the external auditors to meet with the members of the Committee without members of management present and for management to meet independently with the Committee members.independent auditor in separate executive sessions.  These meetings shall include the independent auditors’auditors' evaluation of the Corporation’sCorporation's financial, accounting and auditing personnel and an assessment of the cooperation the independent auditors received during the review.  The Committee may request any officer or employee of the Corporation or the Corporation’s outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

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APPENDIX B

BORGWARNER INC.

2004 STOCK INCENTIVE PLAN

SECTION 1.     Purpose.

     The purpose of the Plan is to give the Company a significant advantage in attracting, retaining and motivating officers, employees and directors and to provide the Company and its subsidiaries with the ability to provide incentives more directly linked to the profitability of the Company’s businesses and increases in stockholder value.

SECTION 2.     Definitions.

     For purposes of the Plan, the following terms are defined as set forth below:

     (a) “Affiliate” means a corporation or other entity controlled by the Company and designated by the Committee as such.
     (b) “Award” means a Stock Appreciation Right, Stock Option, Restricted Stock, Stock Unit, Performance Unit, or Performance Share.
     (c) “Award Agreement” means a written agreement or notice memorializing the terms and conditions of an Award granted pursuant to the Plan.
     (d) “Board” means the Board of Directors of the Company.
     (e) “Breach of Conduct” means, for purposes of the Plan, any of the following: (i) actions by the participant resulting in the termination of the participant’s employment with the Company or any Affiliate for Cause, (ii) the participant’s violation of the Company’s Code of Ethical Conduct where such business standards have been distributed or made available to the participant, (iii) the participant’s unauthorized disclosure to a third party of confidential information, intellectual property, or proprietary business practices, processes, or methods of the Company; or willful failure to protect the Company’s confidential information, intellectual property, proprietary business practices, processes, or methods from unauthorized disclosure, or (iv) the participant’s soliciting, inducing, or attempting to induce employees of the Company and its Affiliates to terminate their employment with the Company or an Affiliate.
     (f) “Cause” has the meaning set forth in Section 6(i).
     (g) “CEO” means the chief executive officer of the Company or any successor corporation.
     (h) “Change in Control” and “Change in Control Price” have the meanings set forth in Sections 12(b) and (c), respectively.
     (i) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
     (j) “Commission” means the Securities and Exchange Commission or any successor agency.
     (k) “Committee” means the Committee referred to in Section 3.
     (l) “Company” means BorgWarner Inc., a Delaware corporation.
     (m) “Disability” means “Permanent Disability” as defined in and as determined by the plan administrator of the RSP under the RSP’s procedures for disability claims, subject to final review and approval by the Committee in the case of a participant who is a “covered employee” within the meaning of Section 162(m)(3) of the Code.
     (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.
     (o) “Fair Market Value” means, as of any given date, the mean between the highest and lowest reported sales prices of the Stock on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on any other national securities exchange on which the Stock is listed or on NASDAQ. If there is no regular public trading market for such Stock, the Fair Market Value of the Stock shall be determined by the Committee in good faith.

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     (p) “Freestanding Stock Appreciation Right” means a Stock Appreciation Right granted under Section 7 without relationship to a Stock Option.
     (q) “Incentive Stock Option” means any Stock Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
     (r) “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
     (s) “Performance Goals” means a target or targets of objective performance established by the Committee in its sole discretion. A Performance Goal shall be based on one or more of the following criteria: earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); net or operating income; earnings per share; expense reductions; return on investment; combined net worth; debt to equity ratio; operating cash flow; return on total capital, equity, or assets; total shareholder return; economic value; or changes in the market price of the Common Stock. The criteria selected by the Committee may relate to the Company, one or more of its Affiliates or one or more of its business units, or any combination thereof. The Performance Goals so selected by the Committee may be based solely on the performance of the Company, its Affiliates, or business units, or any combination thereof, or may be relative to the performance of one or more peer group companies, indices, or combination thereof. A Performance Goal may include a threshold level of performance below which no payout or vesting will occur, target levels of performance at which a full payout or full vesting will occur, and/or a maximum level of performance at which a specified additional payout or vesting will occur. Each of the foregoing Performance Goals shall be subject to certification by the Committee; provided that the Committee shall have the authority, to the extent consistent with the “qualified performance-based compensation” exception of Section 162(m) of the Code and Section 1.162-27(e) of the Income Tax Regulations, to make equitable adjustments to the Performance Goals in recognition of unusual or nonrecurring events affecting the Company or any Affiliate or the financial statements of the Company or any Affiliate in response to changes in applicable laws or regulations, or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles. Once a Performance Goal is established, the Committee shall have no discretion to increase the amount of compensation that would otherwise be payable to a recipient upon attainment of a Performance Goal.
     (t) “Performance Period” means the period of one (1) year or longer established by the Committee in connection with the grant of an Award for which the Committee has established Performance Goals.
     (u) “Performance Unit” means an Award granted under Section 10, the value of which is expressed in terms of cash or in property other than Stock.
     (v) “Performance Share” means an Award granted under Section 11, the value of which is expressed in terms of, or valued by reference to, a share of Stock.
     (w) “Plan” means the BorgWarner Inc. 2004 Stock Incentive Plan, as set forth herein and as hereinafter amended from time to time.
     (x) “Restricted Stock” means an award granted under Section 8.
     (y) “Restricted Stock Agreement” means an Award Agreement memorializing the terms and conditions of a grant of Restricted Stock.
     (z) “Retirement” means the participant’s termination of employment with the Company and all Affiliates (i) on or after the last day of the calendar month coincident with or immediately following the day on which the participant attains age 65, or age 60 if the participant has been credited with at least 15 years of service as determined under the RSP, or (ii) with the written consent of the Company that such termination of employment shall constitute retirement.
     (aa) “RSP” means the BorgWarner Inc. Retirement Savings Plan.
     (bb) “Rule 16b-3” means Rule 16b-3, as promulgated by the Commission under Section 16(b) of the Exchange Act, as amended from time to time or any successor definition adopted by the Commission.

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     (cc) “Stock” means common stock, par value $.01 per share, of the Company.
     (dd) “Stock Appreciation Right” means a right granted under Section 7.
     (ee) “Stock Option” means an option granted under Section 6 to purchase one or more shares of Stock.
     (ff) “Stock Unit” means a right granted under Section 9.
     (gg) “Tandem Stock Appreciation Right” means a Stock Appreciation Right granted under Section 7 in conjunction with a Stock Option.
     (hh) “Termination of Employment” means the termination of the participant’s employment with the Company and any subsidiary or Affiliate. A participant employed by a subsidiary or an Affiliate shall also be deemed to incur a Termination of Employment if the subsidiary or Affiliate ceases to be such a subsidiary or Affiliate, as the case may be, and the participant does not immediately thereafter become an employee of the Company or another subsidiary or Affiliate. In the case of a participant who is a director but not an employee of the Company or any subsidiary or Affiliate, “Termination of Employment” means the termination of the participant’s services as a member of the Board.

     In addition, certain other terms used herein have definitions given to them in the first place in which they are used.

SECTION 3.     Administration.

     The Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board, composed of not less than three (3) members of the Board, each of whom shall be appointed by and serve at the pleasure of the Board and who shall also be “non-employee directors” within the meaning of Rule 16b-3, “independent directors” within the meaning of any applicable stock exchange rule, and to the extent that the Committee has resolved to take actions necessary to enable compensation arising with respect to Awards under the Plan to constitute performance-based compensation for purposes of Section 162(m) of the Code, “outside directors” within the meaning of Section 162(m) of the Code.

     With respect to Awards granted to members of the Board who are not officers or employees of the Company, a subsidiary, or an Affiliate, the Plan shall be administered by the Committee subject to the approval of a majority of all members of the Board (including members of the Committee) who are “non-employee directors” within the meaning of Rule 16b-3, and “independent directors” with the meaning of any applicable stock exchange rule. With respect to such Awards, all references to the “Committee” contained in the Plan shall be deemed and construed to mean the Committee, the decisions of which shall be subject to the approval of a majority of such members of the Board who are both “non-employee directors” within the meaning of Rule 16b-3 and “independent directors” within the meaning of any applicable stock exchange rule.


The Committee shall have fullmay form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant Awards pursuantpre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee shall be presented to the termsfull Committee at its next scheduled meeting.

The Chair of the Plan to officers, employees and directors of the Company and its subsidiaries and Affiliates.

     Among other things, the Committee shall haveestablish such rules for the authority, subjectCommittee and its members as may from time to time be necessary and proper for the conduct of the Committee’s business, in conformity with applicable laws, rules and regulations.




ANNEX B

PROPOSED AMENDMENT TO THE RESTATED
 CERTIFICATE OF INCORPORATION OF BORGWARNER INC.


The proposed amendment to the termsCompany’s restated certificate of incorporation would amend and restate the Plan:

     (a) to select the officers, employees and directors to whom Awards may from time to time be granted;
     (b) to determine whether and to what extent Awards are to be granted hereunder and the type or types of Awards to be granted;
     (c) to determine thefirst sentence of Article IV in its entirety to read as follows:

The total number of shares of Stock to be covered by each Award granted hereunder;
     (d) to determine the terms and conditions of any Award granted hereunder (including, but not limited to, the option price (subject to Section 6(a)), any vesting restriction or limitation and any vesting acceleration or forfeiture waiver regarding any Award and the shares of Stock relating thereto, based on such factors as the Committee shall determine);

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     (e) to modify, amend or adjust the terms and conditions of any Award, at any time or from time to time;
     (f) to determine to what extent and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred; and
     (g) to determine under what circumstances a Stock Option may be settled in cash or Stock under Section 6(j).

     The Committee may authorize the CEO to grant Awards pursuant to the terms of the Plan covering up to ten thousand (10,000) shares of Stock per individual, per year, to officers and employeesall classes of stock which the Company and its subsidiaries and Affiliates who are not (i) subject to Section 16 of the Exchange Act, nor (ii) “covered employees” within the meaning of Code Section 162(m)(3). Any such authorization so made shall be consistent with recommendations made by the Board’s Compensation Committee to the Board regarding non-CEO compensation, incentive-compensation plans and equity-based plans. When such authorization is so made by the Committee, the CEO shall have the authority of the Committee described in Sections 3(a), 3(b), 3(c), and 3(d) of the Plan with respect to the granting of such Awards; provided, however, that the Committee may limit or qualify such authorization in any manner it deems appropriate.

     The Committee may also authorize the CEO to grant Awards pursuant to the terms of the Plan covering up to ten thousand (10,000) shares of Stock per individual, as an inducement to an individual to accept an offer of employment, including Awards to individuals who may become, upon accepting an offer of employment, (i) officers of the Company and its subsidiaries and Affiliates who are subject to Section 16 of the Exchange Act, or (ii) “covered employees” within the meaning of Code Section 162(m)(3). Any such authorization so made shall be consistent with recommendations made by the Board’s Compensation Committee to the Board regarding non-CEO compensation, incentive-compensation plans and equity-based plans. When such authorization is so made by the Committee, the CEO shall have the authority of the Committee described in Sections 3(a), 3(b), 3(c), and 3(d) of the Plan with respect to the granting of such Awards; provided, however, that the Committee may limit or qualify such authorization in any manner it deems appropriate.

     The CommitteeCorporation shall have the authority to adopt, alterissue is 430,000,000 shares, consisting of 400,000,000 shares of Common Stock, par value $0.01 per share (“Common Stock”), 25,000,000 shares of Non-Voting Common Stock, par value $0.01 per share (“Non-Voting Common Stock” and, repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan.

     The Committee may act only by a majority of its members then in office, except that the members thereof may (i) delegate all or a portion of the administration of the Plan to one or more officers of the Company, provided that no such delegation may be made that would cause Awards or other transactions under the Plan to cease to be exempt from Section 16(b) of the Exchange Act or to cease to constitute “qualified performance-based compensation within the meaning of Section 1.162-27(e) of the Income Tax Regulations in instances where the Committee has intended that an Award so qualify, and (ii) authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee.

     Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan participants.

     In addition to such other rights of indemnification from the Company as they may have, the members of the Committee shall be indemnified by the Company against reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connectiontogether with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection withCommon Stock, the Plan or any Award granted thereunder,“Junior Stock”), and against all amounts paid by them in settlement thereof (provided such settlement is approved by legal counsel selected

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by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except that such member is liable for negligence or misconduct in the performance of his duties; provided that within sixty (60) days after institution of any such action, suit or proceeding, the member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

SECTION 4.     Stock Subject to Plan; Individual Limitations.

     (a) Subject to adjustment as provided herein, the total number of5,000,000 shares of Preferred Stock, of the Company available for Awards under the Plan, including with respect to Incentive Stock Options, shall be one million three hundred fifty thousand (1,350,000) shares.

     (b) No “covered employee,” as such term is defined in Section 162(m) of the Code, shall in any fiscal year of the Company be granted Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units, or Performance Shares covering more than one hundred thousand (100,000) shares of Stock (including grants of Stock Options, Stock Appreciation Rights, Stock Units, or Performance Shares that are paid or payable in cash), but excluding from this limitation (i) any additional shares of Stock credited to the participant as dividend equivalents on Awards during an Elective Deferral Period, (ii) cash or stock dividends on Restricted Stock that are paid or credited to a participant as additional Restricted Stock, and (iii) dividend equivalents that are paid or credited to a participant on Stock Units prior to an Elective Deferral Period. No “covered employee,” as such term is defined in Section 162(m) of the Code, shall in any fiscal year of the Company be granted Performance Units of apar value exceeding when paid five hundred thousand dollars ($500,000) in cash or in property other than Stock, but excluding from this limitation including any additional amounts credited to the participant as interest or dividend equivalents during an Elective Deferral Period.

     (c) The Stock to be delivered under the Plan may be made available from authorized but unissued shares of Stock, treasury stock, or shares of Stock purchased on the open market.

     (d) With respect to Awards under the Plan,

     (i) If any shares of Restricted Stock are forfeited, any Stock Option or Stock Appreciation Right is forfeited, cancelled or otherwise terminated without being exercised, or if any Stock Option or Stock Appreciation Right (whether granted alone or in conjunction with a Stock Option) is exercised for or paid in cash, shares subject to such Awards that are forfeited, cancelled, terminated without being exercised, or paid in cash shall again be available for distribution in connection with Awards under the Plan;
     (ii) If any Stock Unit, Performance Unit, or Performance Share is cancelled, forfeited, terminates in whole or in part without the delivery of Stock or is paid in cash, shares subject to such Awards that are so cancelled, forfeited, terminated or paid in cash shall again be available for distribution in connection with Awards under the Plan;
     (iii) If an Award recipient tenders shares of previously-acquired Stock in satisfaction of applicable withholding tax obligations, or if any shares of Stock covered by an Award are not delivered to the Award recipient because such shares are withheld to satisfy applicable withholding tax obligations, such shares shall again be available for further Award grants under the Plan; and
     (iv) If an Award recipient tenders shares of previously-acquired Stock in payment of the option price upon exercise of a Stock Option or if shares of Stock are withheld in payment of the option price, the number of shares represented thereby shall again be available for further Award grants under the Plan.

     (e) In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the Stock or other change in corporate structure affecting the Stock, the Committee or Board may make such substitution or adjustments in the aggregate number and kind of shares reserved for issuance under the Plan, in the number, kind and option price of shares subject to outstanding Stock Options and Stock Appreciation Rights, in the number and kind of shares subject to other outstanding Awards granted under the Plan and/or such other substitution or adjustments in the consideration

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receivable upon exercise as it may determine to be appropriate in its sole discretion; provided, however, that the number of shares subject to any Award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option.

SECTION 5.     Eligibility.

     Officers, employees and directors of the Company, its subsidiaries and Affiliates who are responsible for or contribute to the management, growth and profitability of the business of the Company, its subsidiaries and Affiliates, as determined by the Committee, are eligible to be granted Awards under the Plan. However, no grant of Incentive Stock Options, Performance Units, or Performance Shares shall be made to a director who is not an officer or a salaried employee of the Company, a subsidiary, or an Affiliate.

SECTION 6.     Stock Options.

     Stock Options may be granted alone or in addition to other Awards granted under the Plan and may be of two types: Incentive Stock Options and Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve.

     A Stock Option shall entitle the optionee to purchase one or more shares of Stock, pursuant to the terms and provisions of the Plan and the applicable Award Agreement. The Committee shall have the authority to grant participants Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights), provided however, that Incentive Stock Options may be granted only to employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.

     Stock Options shall be evidenced by Award Agreements, the terms and provisions of which may differ. An Award Agreement providing for the grant of Stock Options shall indicate on its face whether it is intended to be an agreement for an Incentive Stock Option or a Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date the Committee by resolution selects an individual to be a participant in any grant of a Stock Option, determines the number of shares of Stock to be subject to such Stock Option to be granted to such individual and specifies the terms and provisions of the Stock Option. The Company shall notify a participant of any grant of a Stock Option, and a written Award Agreement or Award Agreements shall be duly executed and delivered by the Company to the participant.

     Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered nor shall any discretion or authority granted under the Plan be exercised so as to disqualify the Plan under Section 422 of the Code or, without the consent of the optionee affected, to disqualify any Incentive Stock Option under such Section 422.

     Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions as the Committee shall deem desirable:

(a) Option Price.The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee and set forth in the Award Agreement, and shall not be less than the Fair Market Value of the Stock subject to the Stock Option on the date of grant.
(b) Option Term.The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten (10) years after the date the Stock Option is granted.
(c) Exercisability.Except as otherwise provided herein, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the Committee may at any time, in whole or in part, accelerate the exercisability of any Stock Option.

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(d) Method of Exercise.Subject to the provisions of this Section 6, Stock Options may be exercised, in whole or in part, at any time during the option term by giving written notice of exercise to the Company specifying the number of shares of Stock subject to the Stock Option to be purchased.
     The option price of Stock to be purchased upon exercise of any Option shall be paid in full in cash (by certified or bank check or such other instrument as the Company may accept) or, if and to the extent set forth in the Award Agreement, may also be paid by one or more of the following: (i) in the form of unrestricted Stock already owned by the optionee (and, in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock subject to an Award hereunder) based in any such instance on the Fair Market Value of the Stock on the date the Stock Option is exercised; provided, however, that, in the case of an Incentive Stock Option, the right to make a payment in the form of already owned shares of Stock may be authorized only at the time the Stock Option is granted; (ii) by requesting the Company to withhold from the number of shares of Stock otherwise issuable upon exercise of the Stock Option that number of shares having an aggregate Fair Market Value on the date of exercise equal to the exercise price for all of the shares of Stock subject to such exercise; or (iii) by a combination thereof, in each case in the manner provided in the Award Agreement.
     In the discretion of the Committee and if not prohibited by law, payment for any shares subject to a Stock Option may also be made by delivering a properly executed exercise notice to the Company or its agent, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.
     If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock, the number of shares of Stock to be received upon such exercise equal to the number of shares of Restricted Stock used for payment of the option exercise price shall be subject to the same forfeiture restrictions to which such Restricted Stock was subject, unless otherwise determined by the Committee.
     No shares of Stock shall be issued until full payment therefore has been made. Subject to any forfeiture restrictions that may apply if a Stock Option is exercised using Restricted Stock, an optionee shall have all of the rights of a stockholder of the Company holding the Stock that is subject to such Stock Option (including, if applicable, the right to vote the shares and the right to receive dividends) when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 16(a).
(e) Transferability of Stock Options.No Stock Option shall be transferable by the optionee other than (i) by will or by the laws of descent and distribution, or, in the Committee’s discretion, pursuant to a written beneficiary designation, (ii) pursuant to a qualified domestic relations order (as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder), or (iii) in the Committee’s discretion, pursuant to a gift to such optionee’s “immediate family” members directly, or indirectly by means of a trust, partnership, or limited liability company. Subject to the terms of this Plan and the relevant Award Agreement, all Stock Options shall be exercisable only by the optionee, guardian, legal representative or beneficiary of the optionee or permitted transferee, it being understood that the terms “holder” and “optionee” include any such guardian, legal representative or beneficiary or transferee. For purposes of this Section 6(e), “immediate family” shall mean, except as otherwise defined by the Committee, the optionee’s spouse, children, siblings, stepchildren, grandchildren, parents, stepparents, grandparents, in-laws and persons related by legal adoption. Such transferees may transfer a Stock Option only by will or by the laws of descent and distribution. In no event may a participant transfer an Incentive Stock Option other than by will or the laws of descent and distribution.
(f) Termination by Death.If an optionee’s employment terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised, to the extent then exercisable, or on such accelerated basis as the Committee may determine, for a period of one (1) year (or such other period as the Committee may specify in the Award Agreement) from the date of such death or until the expiration

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of the stated term of such Stock Option, whichever period is the shorter. In the event of Termination of Employment due to death, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(g) Termination by Reason of Disability.If an optionee’s employment terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine, for a period of three (3) years (or such shorter period as the Committee may specify in the Award Agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that if the optionee dies within such three-year period (or such shorter period), any unexercised Stock Option held by such optionee shall, notwithstanding the expiration of such three-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement.If an optionee’s employment terminates by reason of Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of such Retirement or on such accelerated basis as the Committee may determine, for a period of three (3) years (or such shorter period as the Committee may specify in the Award Agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided, however, that if the optionee dies within such three-year (or such shorter) period, any unexercised Stock Option held by such optionee shall, notwithstanding the expiration of such three-year (or such shorter) period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(i) Other Termination.Unless otherwise determined by the Committee, if an optionee incurs a Termination of Employment for any reason other than death, Disability or Retirement, any Stock Option held by such Optionee shall thereupon terminate, except that such Stock Option, to the extent then exercisable, or on such accelerated basis as the Committee may determine, may be exercised for the lesser of one (1) year from the date of such Termination of Employment or the balance of such Stock Option’s term if such Termination of Employment of the optionee is involuntary and without Cause; provided, however, that if the optionee dies within such one-year period, any unexercised Stock Option held by such optionee shall notwithstanding the expiration of such one-year period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of Termination of Employment for any reason other than death, Disability or Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. Unless otherwise determined by the Committee, for the purposes of the Plan “Cause” shall mean (i) the participant’s conviction of, or entering a guilty plea, no contest plea or nolo contendre plea to any felony or to any crime involving dishonesty or moral turpitude under Federal law or the law of the state in which such action occurred, (ii) dishonesty in the course of fulfilling the participant’s employment duties or (iii) willful and deliberate failure on the part of the participant to perform his employment duties in any material respect.
(j) Cashing Out of Stock Option.On receipt of written notice of exercise, the Committee may elect to cash out all or part of the portion of the shares of Stock for which a Stock Option is being

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exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Stock over the option price times the number of shares of Stock for which to the Option is being exercised on the effective date of such cash out.
(k) Change in Control Cash Out.Notwithstanding any other provision of the Plan, during the sixty-day (60-day) period from and after a Change in Control (the “Exercise Period”), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the shares of Stock being purchased under the Stock Option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within thirty (30) days of such notice, in an amount equal to the amount by which the Change in Control Price per share of Stock on the date of such election shall exceed the exercise price per share of Stock under the Stock Option (the “Spread”) multiplied by the number of shares of Stock granted under the Stock Option as to which the right granted under this Section 6(k) shall have been exercised; provided, however, that if the Change in Control is within six (6) months of the date of grant of a particular Stock Option held by an optionee who is an officer or director of the Company and is subject to Section 16(b) of the Exchange Act no such election shall be made by such optionee with respect to such Stock Option prior to six (6) months from the date of grant. Notwithstanding any other provision hereof, if the end of such sixty-day period from and after a Change in Control is within six (6) months of the date of grant of a Stock Option held by an optionee who is an officer or director of the Company and is subject to Section 16(b) of the Exchange Act, such Stock Option shall be cancelled in exchange for a cash payment to the optionee, effected on the day which is six (6) months and one (1) day after the date of grant of such Option, equal to the Spread multiplied by the number of shares of Stock granted under the Stock Option.

SECTION 7.     Stock Appreciation Rights.

(a) Grant and Exercise.Stock Appreciation Rights may be granted as Awards under the Plan as either Freestanding Stock Appreciation Rights or Tandem Stock Appreciation Rights. Freestanding Stock Appreciation Rights may be granted alone or in addition to other Awards under the Plan. Tandem Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-Qualified Stock Option, Tandem Stock Appreciation Rights may be granted either at or after the time of grant of such Stock Option. In the case of an Incentive Stock Option, Tandem Stock Appreciation Rights may be granted only at the time of grant of such Stock Option. Each grant of a Stock Appreciation Right shall be confirmed by, and be subject to the terms of, an Award Agreement.

(b) Freestanding Stock Appreciation Rights.A Freestanding Stock Appreciation Right granted pursuant to Section 7(a), shall be exercisable as determined by the Committee, but in no event after ten years from the date of grant. The base price of a Freestanding Stock Appreciation Right shall be the Fair Market Value of a share of Stock on date of grant. A Freestanding Stock Appreciation Right shall entitle the holder, upon receipt of such right, to a cash payment determined by multiplying (i) the difference between the base price of the Stock Appreciation Right and the Fair Market Value of a share of Stock on the date of exercise of the Freestanding Stock Appreciation Right, by (ii) the number of shares of Stock as to which such Freestanding Stock Appreciation Right shall have been exercised. A Freestanding Stock Appreciation Right may be exercised by giving written notice of exercise to the Company or its designated agent specifying the number of shares of Stock as to which Freestanding Stock Appreciation Right is being exercised.

(c) Tandem Stock Appreciation Rights.A Tandem Stock Appreciation Right may be exercised by an optionee in accordance with Section 7(d) by surrendering the applicable portion of the related Stock Option in accordance with procedures established by the Committee. Upon exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 7(d). Stock Options which have been so surrendered shall no longer be exercisable to the extent the related Tandem Stock Appreciation Right have been exercised.

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(d) Tandem Stock Appreciation Rights Terms and Conditions.Tandem Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Committee, including the following:

     (i) Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate are exercisable in accordance with the provisions of Section 6 and this Section 7. A Tandem Stock Appreciation Right shall terminate and no longer be exercisable upon the forfeiture, termination, or exercise of the related Stock Option.
     (ii) Upon the exercise of a Tandem Stock Appreciation Right, an optionee shall be entitled to receive an amount in cash, shares of Stock or both equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment.
     (iii) Tandem Stock Appreciation Rights shall be transferable only to permitted transferees of the underlying Stock Option in accordance with Section 6(e).
     (iv) Upon the exercise of a Tandem Stock Appreciation Right, the Stock Option or part thereof to which such Tandem Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 4 on the number of shares of Common Stock to be issued under the Plan, but only to the extent of the number of shares covered by the Tandem Stock Appreciation Right at the time of exercise based on the value of the Tandem Stock Appreciation Right at such time.

SECTION 8.     Restricted Stock.

(a) Administration.Shares of Restricted Stock may be granted either alone or in addition to other Awards granted under the Plan. The Committee shall determine the officers, employees, and directors to whom and the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any participant, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards, in addition to those contained in Section 8(c). Each grant of Restricted Stock shall be confirmed by, and be subject to the terms of a Restricted Stock Agreement.

     The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance measures of the participant or of the Company or subsidiary, division or department of the Company for or within which the participant is primarily employed or upon such other factors or criteria as the Committee shall determine. Where the grant or vesting of Restricted Stock is subject to the attainment of one or more Performance Goals, such shares of Restricted Stock shall be released from such restrictions only after the attainment of such Performance Goals has been certified by the Committee.

     The provisions of Restricted Stock Awards need not be the same with respect to each recipient.

(b) Awards and Certificates.Shares of Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of shares of Restricted Stock shall be registered in the name of such participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:

“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the 2004 Stock Incentive Plan and a Restricted Stock Agreement. Copies of such Plan and Restricted Stock Agreement are on file at the headquarters offices of BorgWarner Inc.”
The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such Award.

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(c) Terms and Conditions.Shares of Restricted Stock shall be subject to the following terms and conditions:

     (i) Subject to the provisions of the Plan and the applicable Restricted Stock Agreement, during a period set by the Committee, commencing with the date of such Award (the “Restriction Period”), the participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock. The Committee may provide for the lapse of such restrictions in installments or otherwise and may accelerate or waive such restrictions, in whole or in part, in each case based on period of service, performance of the participant or of the Company or the subsidiary, division or department for which the participant is employed or such other factors or criteria as the Committee may determine.
     (ii) Except as provided in this paragraph (ii) and Section 8(c)(i) and the applicable Restricted Stock Agreement, the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends. If so determined by the Committee in the applicable Restricted Stock Agreement and subject to Section 16(g) of the Plan, (1) cash dividends on the shares of Stock that are the subject of the Restricted Stock Award shall be automatically deferred and reinvested in additional Restricted Stock, and (2) dividends payable in Stock shall be paid in the form of Restricted Stock.
     (iii) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and Sections 8(c)(i), 8(c)(iv) and 12(a)(ii), upon a participant’s Termination of Employment for any reason during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant.
     (iv) Except to the extent otherwise provided in Section 12(a)(ii), in the event that a participant’s employment is involuntarily terminated (other than for Cause), or in the event of a participant’s Retirement, the Committee shall have the discretion to waive in whole or in part any or all remaining restrictions with respect to any or all of such participant’s shares of Restricted Stock.
     (v) If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unlegended certificates for such shares shall be delivered to the participant.

SECTION 9.     Stock Units.

(a) Administration.A Stock Unit is the grant of a right to receive a share of Stock or the Fair Market Value in cash of a share of Stock, in the future, at such time and upon such terms as the Committee shall establish. Stock Units may be granted either alone or in addition to other Awards granted under the Plan. The Committee shall determine the officers, employees, and directors to whom and the time or times at which grants of Stock Units will be awarded, the number of Stock Units to be awarded to any participant, the time or times within which such Awards may be subject to forfeiture, and any other terms and conditions of the Awards in addition to those contained in Section 9(b). The provisions of Stock Units Awards need not be the same with respect to each recipient. Each grant of Stock Units shall be confirmed by, and be subject to, the terms of an Award Agreement.

(b) Terms and Conditions.Stock Units shall be subject to the following terms and conditions.

     (i) Subject to the provisions of the Plan and the applicable Award Agreement, Stock Units may not be sold, assigned, transferred, pledged or otherwise encumbered.
     (ii) Except to the extent otherwise provided in the applicable Award Agreement and Sections 9(b)(iii) and 12(a)(iii), upon a participant’s Termination of Employment for any reason prior to the date on which Stock Units awarded to the participant shall have vested, all rights to receive cash or Stock in payment of such Stock Units shall be forfeited by the participant.
     (iii) Except to the extent otherwise provided in Section 12(a)(iii), in the event that a participant’s employment is involuntarily terminated (other than for Cause), or in the event of a participant’s

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Retirement, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all of such participant’s Stock Units.
     (iv) With respect to any grant of Stock Units, the recipient of such grant shall acquire no rights of a shareholder of Stock unless and until the recipient becomes the holder of shares of Stock delivered to such recipient with respect to such Stock Units.
     (v) The Committee may in its discretion provide that a participant shall be entitled to receive dividend equivalents on outstanding Stock Units. Such dividend equivalents may, in the discretion of the Committee, be (i) paid in cash, (ii) credited to the participant as additional Stock Units, or (iii) any combination of cash and additional Stock Units. If dividend equivalents are credited to the participant as additional Stock Units, the number of additional Stock Units that shall be credited to the participant with respect to any dividend on Stock shall not exceed the amount that is the result of multiplying the number of Stock Units credited to the participant on the dividend record date by the dividend paid on each share of Stock, and then dividing this amount by the price per share of Stock on the dividend payment date. For this purpose, the price per share of Stock shall be its Fair Market Value for the dividend payment date. In the event no trading is reported for the dividend payment date, the price per share of Stock shall be the Fair Market Value for the most recent prior date for which trading for Stock was reported on the New York Stock Exchange Composite Tape. A Stock Unit credited to a recipient as a dividend equivalent shall vest at the same time as the Stock Unit to which it relates. Any credit of dividend equivalents shall be subject to Section 16(g) of the Plan.
     (vi) A participant may elect to further defer receipt of cash or shares in payment of Stock Units for a specified period or until a specified event, subject in each case to the Committee’s approval and such terms as are determined by the Committee (the “Elective Deferral Period”). Subject to any exceptions adopted by the Committee, such election must generally be made prior to the commencement of the vesting period for the Stock Units for which the deferral election is being made. For any such deferral, the Committee may in its discretion provide for the crediting of dividend or interest equivalents.
     (vii) At the time specified in the applicable Award Agreement for the payment of cash or Stock with respect to vested Stock Units, the Committee shall cause to be delivered to the participant, (A) a number of shares of Stock equal to the number of vested Stock Units, or (B) cash equal to the Fair Market Value of such number of shares of Stock, the form of payment determined by the Committee in its discretion or as provided by in the applicable Award Agreement (subject to any deferral pursuant to Section 9(b)(vi)).

SECTION 10.     Performance Units.

(a) Administration.Performance Units may be awarded to officers and employees of the Company, its subsidiaries and Affiliates, either alone or in addition to other Awards under the Plan. The Committee shall determine the officers and employees to whom, and the time or times at which, Performance Units shall be awarded, the number of Performance Units to be awarded to any participant, the duration of the Performance Period and any other terms and conditions of the Award, in addition to those contained in Section 10(b). Each grant of Performance Units shall be confirmed by, and be subject to, the terms of an Award Agreement.

(b) Terms and Conditions.Performance Units shall be subject to the following terms and conditions.

     (i) The Committee may, prior to or at the time of the grant, designate Performance Units, in which event it shall condition payment with respect thereto to the attainment of Performance Goals. The Committee may also condition Performance Unit payments upon the continued service of the participant. The provisions of such Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient. Subject to the provisions of the Plan and the applicable Award Agreement, Performance Units may not be sold, assigned, transferred, pledged or otherwise encumbered during the Performance Period.
     (ii) Except to the extent otherwise provided in the applicable Award Agreement and Sections 10(b)(iii) and 12(a)(iii), upon a participant’s Termination of Employment for any reason during

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the Performance Period or before any applicable Performance Goals are satisfied, all rights to receive cash or Stock in payment of the Performance Units shall be forfeited by the participant.
     (iii) Except to the extent otherwise provided in Section 12(a)(iii), in the event that a participant’s employment is involuntarily terminated (other than for Cause), or in the event of a participant’s Retirement, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all of such participant’s Performance Units.
     (iv) A participant may elect to further defer receipt of cash or shares in payment of Performance Units for a specified period or until a specified event, subject in each case to the Committee’s approval and to such terms as are determined by the Committee (the “Elective Deferral Period”). Subject to any exceptions adopted by the Committee, such election must generally be made prior to commencement of the Performance Period for the Performance Units for which the deferral election is being made. For any such deferral, the Committee may in its discretion provide for the crediting of dividend or interest equivalents.
     (v) At the expiration of the Performance Period, the Committee shall evaluate the extent to which the Performance Goals for the Award have been achieved and shall determine the number of Performance Units granted to the participant which shall have been earned, and the cash value thereof. The Committee shall then cause to be delivered to the participant (A) a cash payment equal in amount to the cash value of the Performance Units, or (B) shares of Stock equal in value to the cash value of the Performance Units, the form of payment determined by the Committee in its discretion or as provided in the applicable Award Agreement (subject to any deferral pursuant to Section 10(b)(iv)). If Performance Units may, or are to be paid in Stock, the Committee shall designate in the applicable Award Agreement a method of converting the Performance Units into Stock based on the Fair Market Value of the Stock.

SECTION 11.     Performance Shares.

(a) Administration.Performance Shares may be awarded to officers and employees of the Company, its subsidiaries and Affiliates, either alone or in addition to other Awards under the Plan. The Committee shall determine the officers and employees to whom, and the time or times at which, Performance Shares shall be awarded, the number of Performance Shares to be awarded to any participant, the duration of the Performance Period and any other terms and conditions of the Award, in addition to those contained in Section 11(b). Each grant of Performance Shares shall be confirmed by, and be subject to, the terms of an Award Agreement.

(b) Terms and Conditions.Performance Shares shall be subject to the following terms and conditions.

     (i) The Committee may, prior to or at the time of the grant, designate Performance Shares, in which event it shall condition payment with respect thereto to the attainment of Performance Goals. The Committee may also condition Performance Share payments upon the continued service of the participant. The provisions of such Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient. Subject to the provisions of the Plan and the applicable Award Agreement, Performance Shares may not be sold, assigned, transferred, pledged or otherwise encumbered during the Performance Period.
     (ii) Except to the extent otherwise provided in the applicable Award Agreement and Sections 11(b)(iii) and 12(a)(iv), upon a participant’s Termination of Employment for any reason during the Performance Period or before any applicable Performance Goals are satisfied, all rights to receive cash or Stock in payment of the Performance Units shall be forfeited by the participant.
     (iii) Except to the extent otherwise provided in Section 12(a)(iv), in the event that a participant’s employment is involuntarily terminated (other than for Cause), or in the event of a participant’s Retirement, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all such participant’s Performance Shares.

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     (iv) A participant may elect to further defer receipt of cash or shares in payment of Performance Shares for a specified period or until a specified event, subject in each case to the Committee’s approval and to such terms as are determined by the Committee (the “Elective Deferral Period”). Subject to any exceptions adopted by the Committee, such election must generally be made prior to commencement of the Performance Period for the Performance Shares for which the deferral election is being made. For any such deferral, the Committee may in its discretion provide for the crediting of dividend or interest equivalents.
     (v) At the expiration of the Performance Period, the Committee shall evaluate the extent to which the Performance Goals for the Award have been achieved and shall determine the number of Performance Shares granted to the participant which shall have been earned, and the cash value thereof. The Committee shall then cause to be delivered to the participant (A) a number of shares of Stock equal to the number of Performance Shares determined by the Committee to have been earned, or (B) cash equal to the Fair Market Value of such number of shares of Stock, the form of payment determined by the Committee in its discretion or as provided in the applicable Award Agreement (subject to any deferral pursuant to Section 11(b)(iv)).

SECTION 12.     Change in Control Provisions.

(a) Impact of Event.Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control:

     (i) Any Stock Options and Stock Appreciation Rights outstanding as of the date such Change in Control is determined to have occurred and not then exercisable and vested shall become fully exercisable and vested to the full extent of the original grant.
     (ii) The restrictions applicable to any outstanding Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant.
     (iii) The restrictions applicable to any outstanding Stock Units shall lapse, and such Stock Units shall become free of all restrictions and become fully vested.
     (iv) The restrictions applicable to any outstanding Performance Units and Performance Shares shall lapse, the Performance Goals of all such outstanding Performance Units and Performance Shares shall be deemed to have been achieved at target levels, the relevant Performance Period shall be deemed to have ended on the effective date of the Change of Control, and all other terms and conditions thereto shall be deemed to have been satisfied. If due to a Change in Control, a Performance Period is shortened, the target Performance Award initially established for such Performance Period shall be prorated by multiplying the initial target Performance Award by a fraction, the numerator of which is the actual number of whole months in the shortened Performance Period and the denominator of which is the number of whole months in the original Performance Period. Payment for such Performance Units and Performance Shares shall be made in cash or Stock (as determined by the Committee) as promptly as is practicable.

(b) Definition of Change in Control.For purposes of the Plan, a “Change in Control” shall mean the happening of any of the following events:

     (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (b), the following acquisitions shall not constitute a Change in Control: (W) any acquisition directly from the Company, (X) any acquisition by the Company, (Y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or

B-14

any corporation controlled by the Company, or (Z) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 12(b); or
     (ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
     (iii) Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (each of the foregoing, a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
     (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(c) Change in Control Price.For purposes of the Plan, “Change in Control Price” means the higher of (i) the highest reported sales price, regular way, of a share of Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the sixty-day (60-day) period prior to and including the date of a Change in Control or (ii) if the Change in Control is the result of a tender or exchange offer or a Business Combination, the highest price$0.01 per share of Stock paid in such tender or exchange offer or Business Combination; provided, however, that (X) in the case of a Stock Option which (I) is held by an optionee who is an officer or director of the Company and is subject to Section 16(b) of the Exchange Act and (II) was granted within two hundred forty (240) days of the Change in Control, then the Change in Control Price for such Stock Option shall be the Fair Market Value of the Stock on the date such Stock Option is exercised or cancelled and (Y) in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change in Control Price shall be in all cases the Fair Market Value of the Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non-cash consideration, the value of such securities or other non-cash consideration shall be determined in the sole discretion of the Board.(“Preferred Stock”).

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SECTION 13.     Term, Amendment and Termination.

     Unless terminated sooner by the Board, the Plan will terminate on the date that immediately precedes the tenth (10th) anniversary of the Plan’s effective date. Awards outstanding as of the date on which the Plan terminates shall not be affected or impaired by the termination of the Plan.

     The Board may amend, alter, or discontinue the Plan at any time, but no amendment, alteration or discontinuation shall be made which would (i) impair the rights of a participant under an Award theretofore granted without the participant’s consent, except such an amendment made to cause the Plan to qualify for the exemption provided by Rule 16b-3 or for Awards to qualify for the “qualified performance-based compensation” exception provided by Section 1.162-27(e) of the Income Tax Regulations (where the Committee has intended that such Awards qualify for the exception), (ii) disqualify the Plan from the exemption provided by Rule 16b-3, or (iii) extend the term of the Plan. In addition, no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by law or agreement.

     The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without the holder’s consent except such an amendment made to cause the Plan or Award to qualify for the exemption provided by Rule 16b-3 or for the Award to qualify for the “qualified performance-based compensation” exception provided by Section 1.162-27(e) of the Income Tax Regulations (where the Committee has intended that such Award qualify for the exception).

     Subject to the above provisions, the Board shall have the authority to amend the Plan and the terms of any Award theretofore granted to take into account changes in law and tax and accounting rules.

SECTION 14.     Unfunded Status of Plan.

     It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.

SECTION 15.     Cancellation and Rescission of Awards.

     The Committee may cancel, declare forfeited, or rescind any unexercised, undelivered, or unpaid Award upon its determining that (i) a participant has violated the terms of the Plan or the Award Agreement under which such Award has been made, or (ii) the participant has committed a Breach of Conduct. In addition, for a period of one (1) year following the exercise, payment or delivery of an Award, the Committee may rescind any such exercise, payment or delivery of an Award upon its determining that the participant committed a Breach of Conduct prior to the exercise, payment or delivery of the Award, or within six (6) months thereafter.

     In the case of an Award’s cancellation, forfeiture, or rescission due to a Breach of Conduct by reason of the participant’s conviction of, or entering a guilty plea, no contest plea or nolo contendre plea to any felony or to any crime involving dishonesty or moral turpitude, the Committee’s determination that a participant has committed a Breach of Conduct, and its decision to require rescission of an Award’s exercise, payment or delivery shall be conclusive, binding, and final on all parties. In all other cases, the Committee’s determination that a participant has violated the terms of the Plan or the Award, or has committed a Breach of Conduct, and the Committee’s decision to cancel, declare forfeited or rescind an Award or to require rescission of an Award’s exercise, payment or delivery shall be conclusive, binding, and final on all parties unless the participant makes a written request to the Committee to review such determination and decision within thirty (30) days of the Committee’s written notice of such actions to the participant. In the event of such a written request, the members of the Board who are “independent directors” within the meaning of the applicable stock exchange rule (including members of the Committee) shall review the Committee’s determination no later than the next regularly scheduled meeting of the Board. If, following its review, such directors approve,

B-16

by a majority vote, (i) the Committee’s determination that the participant violated the terms of the Plan or the Award or committed a Breach of Conduct, and (ii) the Committee’s decision to cancel, declare forfeited, or rescind the Award, such determination and decision shall thereupon be conclusive, binding, and final on all parties.

     In the event an Award is rescinded, the affected participant shall repay or return to the Company any cash amount, Stock, or other property received from the Company upon the exercise, payment or delivery of such Award (or, if the participant has disposed of the Stock or other property received and cannot return it, its cash value at the time of exercise, payment or delivery), and, in the case of Stock or other property delivered to the participant, any gain or profit realized by the participant in a subsequent sale or other disposition of such Stock or other property. Such repayment and (or) delivery shall be on such terms and conditions as the Committee shall prescribe.

SECTION 16.     General Provisions.

     (a) The Committee may require each person purchasing or receiving shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

     All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Commission, any stock exchange upon which the Stock is then listed and any applicable Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Company shall have no obligation to issue or deliver certificates for shares of Stock under the Plan prior to (i) obtaining approval from any governmental agency which the Company determines is necessary or advisable, (ii) admission of such shares to listing on the stock exchange on which the Stock may be listed, and (iii) completion of any registration or other qualification of such shares under any state or federal law or ruling of any governmental body which the Company determines to be necessary or advisable.

     (b) Notwithstanding any other provisions of this Plan, the following shall apply to any person subject to Section 16 of the Exchange Act, except in the case of death or disability or unless Section 16 shall be amended to provide otherwise than as described below, in which event this Plan shall be amended to conform to Section 16, as amended:

     (i) Restricted stock or other equity securities (within the meaning used in Rule 16b-3) offered pursuant to this Plan must be held by the person for at least six (6) months from the date of grant; and
     (ii) At least six (6) months must elapse from the date of acquisition of any Stock Option, Stock Appreciation Right, Stock Unit, Performance Share, Performance Unit or other derivative security (within the meaning used in Rule 16b-3) issued pursuant to the Plan to the date of disposition of such derivative security (other than upon exercise or conversion) or its underlying security.

     (c) Nothing contained in the Plan shall prevent the Company or any subsidiary or Affiliate from adopting other or additional compensation arrangements for its employees.

     (d) The adoption of the Plan shall not confer upon any employee any right to continued employment nor shall it interfere in any way with the right of the Company or any subsidiary or Affiliate to terminate the employment of any employee at any time.

     (e) No later than the date as of which an amount first becomes includible in the gross income of the participant for Federal income tax purposes with respect to any Award under the Plan, the participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations may be settled with Stock, including Stock that is part of the Award that gives rise to the withholding requirement. The obligations of the Company

B-17

under the Plan shall be conditional on such payment or arrangements, and the Company, its subsidiaries and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settlement of withholding obligations with Stock.image

     (f) At the time of grant, the Committee may provide in connection with any grant made under the Plan that the shares of Stock received as a result of such grant shall be subject to a right of first refusal pursuant to which the participant shall be required to offer to the Company any shares that the participant wishes to sell at the then Fair Market Value of the Stock, subject to such other terms and conditions as the Committee may specify at the time of grant.

     (g) The reinvestment of cash dividends in additional shares of Restricted Stock, and the crediting of dividend equivalents or interest equivalents (if such interest equivalents are payable in Stock when distributed) on Stock Units or on the deferred payment of Stock Units, Performance Units or Performance Shares shall only be permissible if sufficient shares of Stock are available under Section 4 (taking into account then outstanding Awards).

     (h) The Committee shall establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant’s death are to be paid.

     (i) It is intended that payments under the Stock Options, Stock Appreciation Rights, Performance Units, and Performance Shares provisions of the Plan to recipients who are “covered officers” within the meaning of Section 162(m)(3) of the Internal Revenue Code (“Code”) constitute “qualified performance-based compensation” within the meaning of 1.162-27(e) of the Income Tax Regulations. Awards of Restricted Stock may be designated by the Committee as intended to constitute “qualified performance-based compensation” in the relevant Award Agreement. To the maximum extent possible, the Plan and the terms of any Stock Options, Stock Appreciation Rights, Performance Units, Performance Shares, and, where applicable, Restricted Stock, shall be so interpreted and construed.

     (j) Except for adjustments as permitted by Section 4(e), once granted hereunder, no Stock Option or Stock Appreciation Right shall be repriced.

     (k) If any provision of this Plan is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be impaired or affected thereby.

     (l) The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware without taking into account its conflict of laws provisions.

SECTION 17.     Effective Date of Plan.

     The Plan shall be effective on the date it is approved by the shareholders of the Company.

B-18

BorgWarner Inc LOGO

This Proxy is Solicited by the Board of Directors in Connection
With the Annual Meeting of Stockholders

10:

9:00 A.M. (C.S.T.)

(local time) 

April 21, 200430, 2008
   
PLACE:PLACE:      BorgWarner Inc.
200 South
3850 Hamlin Road
Auburn Hills, Michigan Avenue
Chicago, Illinois 6060448326

    PROXY:JOHN J. GASPAROVIC and LAURENE H. HORISZNY and VINCENT M. LICHTENBERGER and each of them, are hereby appointed by the undersigned as attorneys and proxies with full power of substitution, to vote all the shares of Common Stock held of record by the undersigned on March 5, 20043, 2008 at the Annual Meeting of Stockholders of BorgWarner Inc. or at any adjournment(s) or postponement(s) of the meeting, on each of the items on the reverse side and in accordance with the directions given therein.meeting.


WITH RESPECT TO ANY MATTER THAT SHOULD PROPERLY COME BEFORE THE ANNUAL MEETING THAT IS NOT SPECIFIED HEREIN, THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXY HOLDER.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
Address Change/Comments (Mark(Mark the corresponding box on the reverse side)

é
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You can now access your BorgWarner account online.  
Access your BorgWarner stockholder account online via Investor ServiceDirect® (ISD).

The transfer agent for BorgWarner, now makes it easy and convenient to get current information on your stockholder account.
• View account status• View payment history for dividends
• View certificate history• Make address changes
• View book-entry information• Obtain a duplicate 1099 tax form
• Establish/change your PIN
Visit us on the web at http://www.bnymellon.com/shareowner 
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time 
***TRY IT OUT***
www.bnymellon.com/shareowner/isd
éInvestor ServiceDirect®

Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163 


IF NO CHOICE IS SPECIFIED, this Proxy will be voted “FOR” the election of all listed nominees, “FOR” proposals 2 and 3, all in accordance with the recommendations of the Board of Directors.
Please
Mark Here
for Address  Change or
Comments
SEE REVERSE SIDE

1.Election of two Class III Directors:
for all nominees
withhold authority
listed (except as indicated)to vote for all nominees listed
01 Robin J. Adams 
02 David T. Brown
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee’s name on the space provided below.)

                   
1. Election of three Class II Directors:    2.  To vote upon a proposal to approve the BorgWarner Inc. 2004 Stock Incentive Plan. FOR
o		 AGAINST
o		 ABSTAIN
o
                   
  01 Jere A. Drummond,
02 Timothy M. Manganello,
03 Ernest J. Novak, Jr.		 FOR all nominees
listed (except as
indicated)
 
o		 WITHHOLD
AUTHORITY
to vote for all
nominees listed
o		  3.  To vote upon a proposal to approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized common stock of the Company in order to permit, among other things, a 2-for-1 stock split. FOR
o		 AGAINST
o		 ABSTAIN
o
                   
       4.  To ratify the appointment of Deloitte & Touche LLP as independent auditors for the Company for 2004. FOR
o		 AGAINST
o		 ABSTAIN
o
                   
         5.  To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. 

FORAGAINSTABSTAIN
2.To approve the Amendment to the Company’s Restated Certificate of Incorporation to increase the authorized common stock of the Company from 150,000,000 shares to 400,000,000 shares.  
     
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.)Please disregard if you have previously provided your consent decision.  

FOR  By checkingAGAINSTABSTAIN
3.
To ratify the box to the right, I consent to future deliveryappointment of annual reports, proxy statements, prospectuses and other materials and shareholder communications electronically via the Internet at a webpage which will be disclosed to me. I understand thatDeloitte & Touche LLP as Independent Registered Public Accounting Firm for the Company may no longer distribute printed materials to me from any future shareholder meeting until such consent is revoked. I understand that I may revoke my consent at any time by contacting the Company's transfer agent, Mellon Investor Services LLC, Ridgefield Park, NJ and that costs normally associated with electronic delivery, such as usage and telephone charges as well as any costs I may incur in printing documents, will be my responsibility.for 2008.
 o 
  
   Dated: __________________________, 2004
 4.  To transact such other business as may properly come before the meeting or any adjourment or postponement thereof.
          Dated:__________________________________________2008
 
                                  __________________________________________
      Signature
                                              60;                  Signature

  
 
                     __________________________________________
     Signature if held jointly
                  Please sign exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
  

é
Please sign exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
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Vote by Internet or Telephone or Mail
/\
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 Hours a Day,HOURS A DAY, 7 Days a Week

DAYS A WEEK.

Internet and telephone voting is available through 1111:59 PM Eastern Time
the day prior to annual meeting day.

Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
Internet
http://www.eproxy.com/www.proxyvoting.com/bwa

Use the Internetinternet to vote your proxy.
Have your proxy card in hand when
you access the web site. You will be prompted to enter the control number, located in the box below, to create and submit an electronic ballot.
OR OR
Telephone
1-800-435-6710

1-866-540-5760
Use any touch-tone telephone to
vote your proxy. Have your proxy
card in hand when you call. You will be prompted to enter the control number, located in the box below, and then follow the directions given.
ORMail

Mark, sign and date
your proxy card
and
return it in the
enclosed
postage-paid
envelope.

If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Choose MLink

SM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt you through enrollment.

You can view the Annual Reportour summary annual report and Proxy Statement
on the internet at www.bwauto.com

www.borgwarner.com/invest/proxy.