BorgWarner (BWA) 10-Q 29 Jul 09 2009 Q2 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
In Billions, except Share data	6 Months Ended Jun. 30, 2009	Jun. 30, 2008
Document And Company Information
Entity Registrant Name	BORGWARNER INC.
Entity Central Index Key	0000908255
Document Type	10-Q
Document Period End Date	2009-06-30
Amendment Flag	false
Amendment Description	N/A
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		5.2
Entity Common Stock, Shares Outstanding	116,653,717

BorgWarner Inc. and Consolidate

BorgWarner Inc. and Consolidated Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
ASSETS
Cash	256.9	103.4
Receivables, net	681.1	607.1
Inventories, net	313.5	451.2
Deferred income taxes	62	67.5
Prepayments and other current assets	81.3	79
Total current assets	1394.8	1308.2
Property, plant & equipment, net	1502.1	1586.2
Investments & advances	232.8	266.5
Goodwill	1057.3	1052.4
Other non-current assets	424	430.7
Total assets	4,611	4,644
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable	95.8	183.8
Current portion of long-term debt	0	136.9
Accounts payable and accrued expenses	889.3	923
Income taxes payable	0	6.3
Total current liabilities	985.1	1,250
Long-term debt	766.2	459.6
Other non-current liabilities:
Retirement-related liabilities	473.4	543.8
Other	303.5	353.1
Total other non-current liabilities	776.9	896.9
Common stock	1.2	1.2
Capital in excess of par value	1028.6	977.6
Retained earnings	1,141	1200.5
Accumulated other comprehensive loss	-31.4	-85.9
Treasury stock	-81.8	-87.4
Total BorgWarner Inc. stockholders' equity	2057.6	2,006
Noncontrolling interest	25.2	31.5
Total stockholders' equity	2082.8	2037.5
Total liabilities and stockholders' equity	$4,611	$4,644

1_BorgWarner Inc. and Consolida

BorgWarner Inc. and Consolidated Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Share data in Thousands	3 Months Ended Jun. 30, 2009		3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009		6 Months Ended Jun. 30, 2008
Net sales	916.2		1516.6	1735.7		3015.5
Cost of sales	800		1237.8	1539.9		2453.2
Gross profit	116.2		278.8	195.8		562.3
Selling, general and administrative expenses	115.4		159.9	189.5		315.6
Restructuring expense	50.3		0	50.3		0
Other expense	0		0.2	0		3.2
Operating income (loss)	-49.5		118.7	(44)		243.5
Equity in affiliates' earnings, net of tax	-4.8		-11.9	(5)		(21)
Interest income	-0.7		-2.3	-1.2		-4.2
Interest expense and finance charges	9		10.8	28.1		17.3
Earnings (loss) before income taxes and noncontrolling interest	(53)		122.1	-65.9		251.4
Provision (benefit) for income taxes	-19.1		29.8	-25.7		63.4
Net earnings (loss)	-33.9		92.3	-40.2		188
Net earnings attributable to the noncontrolling interest	2		4.8	2.7		11.8
Net earnings (loss) attributable to BorgWarner Inc.	-35.9		87.5	-42.9		176.2
Earnings (loss) per share - basic	-0.31	[1]	0.75	-0.37	[1]	1.52
Earnings (loss) per share - diluted	-0.31	[1]	0.74	-0.37	[1]	1.49
Weighted average shares outstanding (thousands):
Basic	116,564		116,250	116,296		116,248
Diluted	116,564	[1]	118,382	116,296	[1]	118,426
Dividends declared per share	$0		0.11	0.12		0.22
[1] * The Company had a loss for the quarter and six months ended June 30, 2009. As a result, diluted loss per share is the same as basic, as any dilutive securities would reduce the loss per share. Therefore, diluted shares are equal to basic shares outstanding for the three and six months ended June 30, 2009.

2_BorgWarner Inc. and Consolida

BorgWarner Inc. and Consolidated Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
OPERATING
Net earnings (loss)	-40.2	$188
Non-cash charges (credits) to operations:
Depreciation and tooling amortization	114.1	135.5
Amortization of intangible assets and other	11.9	17.7
Restructuring expense, net of cash paid	44	0
Stock based compensation expense	12.5	7.1
Deferred income tax benefit	-39.3	-14.9
Convertible bond premium amortization	4.2	0
Equity in affiliates' earnings, net of dividends received and other	36	16.3
Net earnings adjusted for non-cash charges to operations	143.2	349.7
Changes in assets and liabilities:
Receivables	-19.1	(110)
Inventories	135.1	-29.9
Prepayments and other current assets	4.9	-2.8
Accounts payable and accrued expenses	-45.9	86.7
Income taxes payable	-6.1	-7.2
Other non-current assets and liabilities	-38.3	-19.4
Net cash provided by operating activities	173.8	267.1
INVESTING
Capital expenditures, including tooling outlays	-88.3	-162.2
Net proceeds from asset disposals	13.7	2
Payments for business acquired, net of cash acquired	-22.3	0
Proceeds from sales of marketable securities	0	14.6
Net cash used in investing activities	-96.9	-145.6
FINANCING
Decrease in notes payable	-87.1	-7.1
Additions to long-term debt	381.6	0
Repayments of long-term debt, including current portion	(158)	-7.3
Payment for purchase of bond hedge	-56.4	0
Proceeds from warrant issuance	31.2	0
Reduction in accounts receivable securitization facility	(50)	0
Payment for purchase of treasury stock	0	-27.7
Proceeds from interest rate swap termination	30	0
Proceeds from stock options exercised, including the tax benefit	2.6	7.1
Dividends paid to BorgWarner stockholders	-13.8	-25.8
Dividends paid to noncontrolling stockholders	-8.3	(12)
Net cash provided by (used in) financing activities	71.8	-72.8
Effect of exchange rate changes on cash	4.8	-11.3
Net increase in cash	153.5	37.4
Cash at beginning of year	103.4	188.5
Cash at end of period	256.9	225.9
Net cash paid during the period for:
Interest	44	22.4
Income taxes	18.6	72.8
Non-cash financing transactions:
Stock performance plans	4.1	2.6

Basis of Presentation

Basis of Presentation
	6 Months Ended Jun. 30, 2009 USD / shares
Basis of Presentation [Abstract]
Basis of Presentation	(1)Basis of Presentation The accompanying unaudited consolidated financial statements of BorgWarner Inc. and Consolidated Subsidiaries (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule10-01 of RegulationS-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flow activity required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of results have been included. Operating results for the three and six months ended June30, 2009 are not necessarily indicative of the results that may be expected for the year ending December31, 2009. The balance sheet as of December31, 2008 was derived from the audited financial statements as of that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008. We have reclassified certain 2008 amounts to conform to the presentation of our 2009 Condensed Consolidated Statement of Operations. The financial statements should be read in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended December31, 2008. The Companys presentation of the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Reporting Segments Note and Comprehensive Income (Loss) Note have been adjusted to conform with the requirements of Statement of Financial Accounting Standard No.160, Non-controlling Interest in Consolidated Financial Statements, (FAS 160). See Note 18 to the Condensed Consolidated Financial Statements for more information regarding the Companys first quarter 2009 adoption of FAS 160. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and accompanying notes, as well as the amounts of revenues and expenses reported during the periods covered by those financial statements and accompanying notes. Actual results could differ from these estimates.

Research and Development

Research and Development
	6 Months Ended Jun. 30, 2009 USD / shares
Research and Development [Abstract]
Research and Development	(2)Research and Development The following table presents the Companys gross and net expenditures on research and development (RD) activities: Three Months Ended Six Months Ended June 30, June 30, (millions) 2009 2008 2009 2008 Gross RD expenditures $ 50.8 $ 71.7 $ 99.3 $ 138.7 Customer reimbursements (15.0 ) (13.9 ) (31.0 ) (23.4 ) Net RD expenditures $ 35.8 $ 57.8 $ 68.3 $ 115.3 The Companys net RD expenditures are included in the selling, general and administrative expenses of the Condensed Consolidated Statements of Operations. Customer reimbursements are netted against gross RD expenditures upon billing of services performed. The Company has contracts with several customers at the Companys various RD locations. No such contract exceeded $6million in any of the periods presented.

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Income Taxes [Abstract]
Income Taxes	(3)Income Taxes The Companys provision for income taxes is normally based on an estimated tax rate for the year applied to the year-to-date federal, state and foreign income. However, due to unprecedented depressed global economic conditions there is significant uncertainty regarding industry production volumes for the remainder of the year. This precludes us from making a reliable estimate of the annual effective tax rate for the year. Accordingly, we have made our 2009 income tax provision pursuant to Financial Accounting Standards Board (FASB) Interpretation No.18, Accounting for Income Taxes in Interim Periods, which provides that tax (or benefit) in each foreign jurisdiction that is not subject to a valuation allowance be separately computed as ordinary income/(loss) occurs within the jurisdiction for the quarter. The actual global effective tax rate for the six months is calculated to be a benefit of 39%, which resulted in a 36% tax rate (benefit)for the second quarter. This represents an income tax benefit of ($25.7) million on the loss of ($65.9) million for the first six months of 2009. It results in a ($19.1) million benefit on the loss of ($53.0) million for the second quarter of 2009. As of June30, 2009, the balance of gross unrecognized tax benefits was $61.2million. Included in the balance at June30, 2009 was $50.9million of tax positions that are permanent in nature and, if recognized, would reduce the global effective tax rate. During the first quarter of 2008, the Company made a $6.6million cash payment to the Internal Revenue Service (IRS) to resolve agreed upon issues of the ongoing IRS examination of the Companys 2002-2004 tax years. Also, there was a reduction in the first quarter of 2008 of $6.7 million related to the Companys unrecognized tax benefits balance due to settlement of the agreed upon issues primarily related to the Extraterritorial Income Exclusion for the 2002-2004 tax years. The Company is currently in the process of settling the disputed issues with appeals related to the 2002-2004 IRS audit. Upon settlement of the IRS audits related to the periods 2002-2004, the gross unrecognized tax benefits balance will be reevaluated. Possible changes related to other examinations cannot be reasonably estimated within the next 12months. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued approximately $11.4million for the payment of interest and penalties at December31, 2008. The Company had approximately $12.3million for the payment of interest and penalties accrued at June30, 2009. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The Company is no longer subject to income tax examinations by tax authorities in its major tax jurisdictions as follows: Years No Longer Tax Jurisdiction Subject to Audit U.S. Federal 2001 and prior Brazil 2002 and prior France 2006 and prior Germany 2002 and prior Hungary 2004 and prior Italy 2002 and prior Japan 2006 and prior

Sales of Receivables

Sales of Receivables
	6 Months Ended Jun. 30, 2009 USD / shares
Sales of Receivables [Abstract]
Sales of Receivables	(4)Sales of Receivables The Company securitized and sold certain receivables through third party financial institutions without recourse. The amount sold would vary each month based on the amount of underlying receivables. The maximum size of the facility was set at $50million since fourth quarter of 2003. On April24, 2009 the Companys $50million receivables securitization facility matured and was not renewed. The impact of this maturity was an increase in receivables of $50million and a decrease in cash of $50million in the second quarter of 2009. This is reflected as a Financing activity in the Condensed Consolidated Statements of Cash Flows. During the six-month periods ended June30, 2009 and 2008, total cash proceeds from sales of accounts receivable were $200million and $300million, respectively. The Company paid servicing fees related to these receivables for the three and six months ended June30, 2009 and 2008 of $0.1 million and $0.4million and $0.4million and $1.0million, respectively. These amounts are recorded in interest expense and finance charges in the Condensed Consolidated Statements of Operations.

Inventories

Inventories
	6 Months Ended Jun. 30, 2009 USD / shares
Inventories [Abstract]
Inventories	(5)Inventories Inventories are valued at the lower of cost or market. The cost of U.S. inventories is determined by the last-in, first-out (LIFO) method, while the operations outside the U.S. use the first-in, first-out (FIFO) or average-cost methods. Inventories consisted of the following: June 30, December 31, (millions) 2009 2008 Raw material and supplies $ 190.8 $ 260.7 Work in progress 67.8 95.7 Finished goods 70.8 111.4 FIFO inventories 329.4 467.8 LIFO reserve (15.9 ) (16.6 ) Inventories, net $ 313.5 $ 451.2

Property, Plant and Equipment

Property, Plant and Equipment
	6 Months Ended Jun. 30, 2009 USD / shares
Property Equipment And Plant [Abstract]
Property, Plant and Equipment	(6)Property, Plant Equipment June 30, December 31, (millions) 2009 2008 Land and buildings $ 624.3 $ 619.8 Machinery and equipment 1,745.3 1,756.1 Capital leases 1.1 1.1 Construction in progress 150.3 160.0 Total property, plant equipment 2,521.0 2,537.0 Less accumulated depreciation (1,104.5 ) (1,047.4 ) 1,416.5 1,489.6 Tooling, net of amortization 85.6 96.6 Property, plant equipment net $ 1,502.1 $ 1,586.2 Interest costs capitalized during the six-month periods ended June30, 2009 and June30, 2008 were $5.4 million and $5.5million, respectively. As of June30, 2009 and December31, 2008, accounts payable of $28.7million and $43.2million, respectively, were related to property, plant and equipment purchases. As of June30, 2009 and December31, 2008, specific assets of $3.6million and $7.4million, respectively, were pledged as collateral under certain of the Companys long-term debt agreements. As a result of the impairment charges recorded in the third and fourth quarters of 2008, depreciation expense for the three and six months ended June30, 2009 was reduced by approximately $3million and $6million, respectively. During the first quarter of 2009, based on current market conditions and asset utilization rates, the Company elected to extend the useful lives of certain machinery and equipment. As a result of this change in estimate, depreciation expense for the three and six months ended June30, 2009 was reduced by approximately $5million and $9million, respectively.

Product Warranty

Product Warranty
	6 Months Ended Jun. 30, 2009 USD / shares
Product Warranty [Abstract]
Product Warranty	(7)Product Warranty The Company provides warranties on some of its products. The warranty terms are typically from one to three years. Provisions for estimated expenses related to product warranty are made at the time products are sold. These estimates are established using historical information about the nature, frequency, and average cost of warranty claims. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. While management believes that the warranty accrual is appropriate, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual. The accrual is recorded in both long-term and short-term liabilities on the balance sheet. The following table summarizes the activity in the warranty accrual accounts: Six months ended June 30, (millions) 2009 2008 Beginning balance $ 82.1 $ 70.1 Provision 15.4 21.8 Payments (30.0 ) (16.1 ) Currency translation 0.4 4.3 Ending balance $ 67.9 $ 80.1 The product warranty liability is classified in the consolidated balance sheet as follows: June 30, December 31, (millions) 2009 2008 Accounts payable and accrued expenses $ 42.0 $ 51.4 Other non-current liabilities 25.9 30.7 Total product warranty liability $ 67.9 $ 82.1

Notes Payable and Long Term Deb

Notes Payable and Long Term Debt
	6 Months Ended Jun. 30, 2009 USD / shares
Notes Payable and Long-Term Debt [Abstract]
Notes Payable and Long-Term Debt	(8)Notes Payable and Long-Term Debt Following is a summary of notes payable and long-term debt, including the current portion. The weighted average interest rate on all borrowings outstanding as of June30, 2009 and December31, 2008 was 6.0% and 5.0%, respectively. June 30, 2009 December 31, 2008 (millions) Current Long-Term Current Long-Term Bank borrowings and other $ 51.6 $ 0.5 $ 130.7 $ 1.0 Term loans due through 2015 (at an average rate of 4.1% in 2009 and 4.9% in 2008) 44.2 8.5 53.1 12.9 6.50% Senior Notes due 2/17/09, net of unamortized discount (a) 136.7 3.50% Convertible Notes due 4/15/12, net of unamortized discount 321.7 5.75% Senior Notes due 11/01/16, net of unamortized discount (a) 149.2 149.2 8.00% Senior Notes due 10/01/19, net of unamortized discount (a) 133.9 133.9 7.125% Senior Notes due 02/15/29, net of unamortized discount 119.2 119.2 Carrying amount of notes payable and long-term debt 95.8 733.0 320.5 416.2 Impact of derivatives on debt (a) 33.2 0.2 43.4 Total notes payable and long-term debt $ 95.8 $ 766.2 $ 320.7 $ 459.6 (a) In 2006, the Company entered into several interest rate swaps that had the effect of converting $325.0million of fixed rate notes to variable rates. The weighted average effective interest rate of these borrowings, including the effects of outstanding swaps as noted in Note 10 was 5.3% as of December31, 2008. In the first quarter of 2009, $100million in interest rate swaps related to the Companys 2009 fixed rate debt matured and the Company terminated $150million in interest rate swap agreements related to the Companys 2016 fixed rate debt and $75million of interest rate swap agreements related to the Companys 2019 fixed rate debt. As a result of the first quarter 2009 swap terminations, a $34.5million gain remained in debt to be amortized over the remaining lives of the respective 2016 and 2019 debt. As of June30, 2009, the unamortized portion was $33.2million. The Company has a multi-currency revolving credit facility, which provided for borrowings up to $600million through July22, 2009. On April30, 2009, the Company extended its revolving credit facility for 18months, maturing January22, 2011. The facility was reduced to $250million beginning July23, 2009. The facility is now secured by unperfected pledges of the Companys equity interests in its subsidiaries and certain assets. No secured party is entitled to perfect its lien on any of the collateral until the long term unsecured senior, non-credit enhanced debt rating of the Company is less than or equal to BB by Standard Poors and less than or equal to Ba1 by Moodys. The Companys credit rating as of June30, 2009 was BBB by Standard Poors and Ba1 by Moodys. The three key covenants of the credit agreement are a net worth test, a debt compared to EBITDA (Earnings Before Interest, Taxes, Depreci

Fair Value Measurements

Fair Value Measurements
	6 Months Ended Jun. 30, 2009 USD / shares
Fair Value Measurements [Abstract]
Fair Value Measurements	(9)Fair Value Measurements On January1, 2009, the Company fully adopted as required, Statement of Financial Accounting Standards No.157 Fair Value Measurements (SFAS 157) which expands the disclosure of fair value measurements and its impact on the Companys financial statements. Statement No.157 emphasizes that fair value is a market-based measurement, not an entity specific measurement. Therefore, a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS 157 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in SFAS 157: A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost). C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models). The following table classifies the assets and liabilities measured at fair value during the period ended June30, 2009: Basis of Fair Value Measurements Quoted Prices in Significant Active Other Significant Balance at Markets for Observable Unobservable June 30, Identical Items Inputs Inputs Valuation (millions) 2009 (Level 1) (Level 2) (Level 3) Technique Assets: Commodity contracts $ 6.5 $ $ 6.5 $ A Foreign exchange contracts 4.0 4.0 A Fixed assets 11.7 11.7 B $ 22.2 $ $ 10.5 $ 11.7 Liabilities: Commodity contracts $ 2.6 $ $ 2.6 $ A Foreign exchange contracts 26.2 26.2 A Net investment hedge contracts 43.4 43.4 A $ 72.2 $ $ 72.2 $ The change in the fair value of the Companys net fixed assets impaired in 2009 is as follows: Fair Value Measurements Using Significant Unobservable Input

Financial Instruments

Financial Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Financial Instruments [Abstract]
Financial Instruments	(10)Financial Instruments On January1, 2009, the Company adopted as required, Statement of Financial Accounting Standards No.161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161) which expands the disclosure of financial instruments. The Companys financial instruments include cash, marketable securities, trade receivables, trade payables, and notes payable. Due to the short-term nature of these instruments, their book value approximates their fair value. The Companys financial instruments also include long-term debt, interest rate and currency swaps, commodity forward contracts, and foreign currency forward contracts. All derivative contracts are placed with counterparties that have an SP, or equivalent, investment grade credit rating at the time of the contracts placement. At June30, 2009 the Company had no derivative contracts that contained credit risk related contingent features. The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated with our net investment in certain foreign operations (net investment hedges). Fair values of cross currency swaps are based on observable inputs, such as interest rate, yield curves, credit risks, currency exchange rates and other external valuation methodology (Level 2 inputs under SFAS 157). The Company uses certain commodity derivative instruments to protect against commodity price changes related to forecasted raw material and supplies purchases. The primary purpose of our commodity price hedging activities is to manage the volatility associated with these forecasted purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. The fair values for certain commodity derivative instruments are based on Level 2 evidence (for example, future prices reported on commodity exchanges) under SFAS 157. To the extent that derivative instruments are deemed to be effective as defined by FAS 133, gains and losses arising from these contracts are deferred in other comprehensive income or loss. Such gains and losses will be reclassified into income as the underlying operating transactions are realized. Gains and losses not qualifying for deferral treatment have been credited/charged to income as they are recognized. The Company uses foreign exchange forward and option contracts to protect against exchange rate movements for forecasted cash flows for purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. Most contracts mature in less than one year, however, certain long-term commitments are covered by forward currency arrangements to protect against currency risk through 2011. Foreign currency contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units local currency. To the extent that derivative instruments are deemed to be effective as defined by FAS 133, gains and losses arising from these contracts are deferred in other comprehensive income or loss. Such gains and losses will be reclassified into income as the underlying operating

Retirement Benefit Plans

Retirement Benefit Plans
	6 Months Ended Jun. 30, 2009 USD / shares
Retirement Benefit Plans [Abstract]
Retirement Benefit Plans	(11)Retirement Benefit Plans The Company has a number of defined benefit pension plans and other post employment benefit plans covering eligible salaried and hourly employees and their dependents. The other post employment benefit plans, which provide medical and life insurance benefits, are unfunded plans. The estimated contributions to the Companys defined benefit pension plans for 2009 range from $15 to $35 million, of which $6.7million has been contributed through the first six months of the year. On February26, 2009, the Companys subsidiary, BorgWarner Diversified Transmission Products Inc. (DTP), entered into a Plant Shutdown Agreement with the United Auto Workers (UAW) for its Muncie, Indiana automotive component plant (the Muncie Plant). Management subsequently wound-down production activity at the plant, with operations effectively ceased as of March31, 2009. As a result of the closure of the Muncie Plant, the Company recorded a curtailment gain of $41.9million in the first quarter of 2009. The Plant Shutdown Agreement with the UAW for the Muncie Plant also included a settlement of a portion of the UAW retiree health care obligation, resulting in the remeasurement of the retiree medical plan. The financial impact of this settlement resulted in expense recognition of $14.0 million, a $47.2million reduction to retirement-related liabilities, a $27.2million increase in accumulated other comprehensive income and a $34.0million increase in accounts payable and accrued expenses in the first quarter of 2009. The $34.0million in accounts payable and accrued expenses will be paid in monthly installments, which began in May2009 and will conclude in April2010. With the plant closing announcement, the Company has entered into discussions with the Pension Benefit Guaranty Corporation regarding potential funding of the Muncie Plants defined benefit pension plan. The combined pre-tax impact of these actions was a net gain of $27.9million, comprised of a $41.9 million curtailment gain and $14.0million settlement loss on the Companys Condensed Consolidated Statements of Operations as of March31, 2009. The weighted average discount rate used to determine the benefit obligation of the Companys retiree medical plan as of March31, 2009 was 8.00%. This represents a 100 basis point increase from the 7.00% weighted average discount rate used at year-end 2008. In June2009, the Company announced its plan to freeze its defined benefit plan at its Bradford plant in the United Kingdom in consultation with affected employees and their representatives. The effect of this change is expected to be that participants in the Bradford defined benefit plan will cease to accrue defined benefits after October1, 2009. Future pension benefits will be earned within an existing defined contribution plan going forward. The financial impact of this change was a $3.7million reduction to retirement-related liabilities, a $3.5 increase in accumulated other comprehensive income and $0.2million in income recognition in the second quarter of 2009. The weighted average discount rate used to determine the benefit obligation of the Companys Bradford defi

Stock Based Compensation

Stock Based Compensation
	6 Months Ended Jun. 30, 2009 USD / shares
Stock-Based Compensation [Abstract]
Stock-Based Compensation	(12)Stock-Based Compensation Under the Companys 1993 Stock Incentive Plan (1993 Plan), the Company granted options to purchase shares of the Companys common stock at the fair market value on the date of grant. The options vest over periods up to three years and have a term of ten years from date of grant. As of December31, 2003, there were no options available for future grants under the 1993 Plan. The 1993 Plan expired at the end of 2003 and was replaced by the Companys 2004 Stock Incentive Plan, which was amended at the Companys 2009 Annual Stockholders Meeting, among other things, to increase the number of shares available for issuance under the Plan. Under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan (2004 Stock Incentive Plan), the number of shares authorized for grant was 12,500,000, of which approximately 2,700,000 shares are available for future issuance. As of June30, 2009, there were a total of 5,462,118 outstanding options under the 1993 and 2004 Stock Incentive Plans. Stock option compensation expense reduced income before income taxes and net earnings for the three months ended June30, 2009 and 2008 by $2.4million and $1.9million ($0.02 per basic and diluted share) and by $3.5million and $2.7million ($0.02 per basic and diluted share), respectively. Stock option compensation expense reduced income before income taxes and net earnings for the six months ended June30, 2009 and 2008 by $4.1million and $3.2million ($0.03 per basic and diluted share) and by $7.1million and $5.3million ($0.05 and $0.04 per basic and diluted shares, respectively). Stock option compensation expense affected both operating activities ($4.1million and $7.1million non-cash charge backs) and financing activities ($0.9million and $1.8million tax benefits) of the Condensed Consolidated Statements of Cash Flows for the six months ended June30, 2009 and 2008, respectively. Total unrecognized compensation cost related to nonvested stock options at June30, 2009 was approximately $3.5million. This cost is expected to be recognized over the next 0.6years. On a weighted average basis, this cost is expected to be recognized over 0.3years. A summary of the plans shares under option as of and for the six months ended June30, 2009 is as follows: Weighted Shares Weighted Average Aggregate Under Average Remaining Intrinsic Option Exercise Contractual Value (thousands) Price Life (in years) (in millions) Outstanding at December31, 2008 5,798 $ 27.86 Exercised (10 ) 13.25 Forfeited (195 ) 29.63 Outstanding at March31, 2009 5,593 $ 27.82 6.5 $ 4.9 Exercised (119 ) 21.37 Forfeited (48 ) 31.04 Other 36 25.72 Outstanding at June30, 2009 5,462 $ 27.92 6.2 $ 35.3 Options exercisable at June30,

Comprehensive Income

Comprehensive Income (Loss)
	6 Months Ended Jun. 30, 2009 USD / shares
Comprehensive Income (Loss) [Abstract]
Comprehensive Income (Loss)	(13)Comprehensive Income The amounts presented as changes in accumulated other comprehensive income, net of related taxes, are added to net earnings (loss)resulting in comprehensive income. The following table summarizes the components of comprehensive income on an after-tax basis for the three and six month periods ended June30, 2009 and 2008. Three months ended Six months ended June 30, June 30, (millions) 2009 2008 2009 2008 Foreign currency translation adjustments, net $ 66.0 $ (4.8 ) $ 7.7 $ 108.9 Market value change in hedge instruments, net 21.5 11.5 48.1 (21.3 ) Defined benefit post employment plans, net 4.5 6.0 Bond hedge on 3.50% convertible notes, net (36.7 ) (36.7 ) Warrant on 3.50% convertible notes, net 31.2 31.2 Unrealized gain (loss) on available-for-sale securities, net 0.2 (0.1 ) 0.2 Change in accumulated other comprehensive income 86.7 6.6 56.5 87.6 Net earnings (loss)attributable to BorgWarner Inc. (35.9 ) 87.5 (42.9 ) 176.2 Comprehensive income 50.8 94.1 13.6 263.8 Comprehensive income (loss)attributable to the noncontrolling interest (0.6 ) (2.9 ) (2.0 ) 2.2 Comprehensive income attributable to BorgWarner Inc. $ 50.2 $ 91.2 $ 11.6 $ 266.0

Contingencies

Contingencies
	6 Months Ended Jun. 30, 2009 USD / shares
Contingencies [Abstract]
Contingencies	(14)Contingencies In the normal course of business the Company and its subsidiaries are parties to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, general liability and various other risks. It is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Companys environmental and product liability contingencies are discussed separately below. The Companys management does not expect that the results in any of these commercial and legal claims, actions and complaints will have a material adverse effect on the Companys results of operations, financial position or cash flows. Litigation In January2006, DTP, a subsidiary of the Company, filed a declaratory judgment action in United States District Court, Southern District of Indiana (Indianapolis Division) against the United Automobile, Aerospace, and Agricultural Implements Workers of America (UAW) Local No.287 and Gerald Poor, individually and as the representative of a defendant class. DTP sought the Courts affirmation that DTP did not violate the Labor-Management Relations Act or the Employee Retirement Income Security Act by unilaterally amending certain medical plans effective April1, 2006 and October1, 2006, prior to the expiration of the current collective bargaining agreements. On September10, 2008, the Court found that DTPs reservation of the right to make such amendments reducing the level of benefits provided to retirees was limited by its collectively bargained health insurance agreement with the UAW, which did not expire until April24, 2009. Thus, the amendments were untimely. In 2008 the Company recorded a charge of $4.0million as a result of the Courts decision. DTP filed a declaratory judgment action in the United States District Court, Southern District of Indiana (Indianapolis Division) against the UAW Local No.287 and Jim Barrett and others individually, and as representatives of a defendant class, on February26, 2009 again seeking the Courts affirmation that DTP will not violate the Labor Management Relations Act or the Employment Retirement Income Security Act (ERISA)by modifying the level of benefits provided retirees to make them comparable to other Company retiree benefit plans after April24, 2009. Certain retirees, on behalf of themselves and others, filed a mirror-image action in the United States District Court, Eastern District of Michigan (Southern District) on March11, 2009. Both actions are pending. The Company has communicated its plan to modify the level of benefits provided to the retirees to make them comparable to other Company retiree benefit plans effective May1, 2009. Environmental The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain state environmental agencies and private parties as potentially responsible parties (PRPs) at various hazardous was

Leases and Commitments

Leases and Commitments
	6 Months Ended Jun. 30, 2009 USD / shares
Leases and Commitments [Abstract]
Leases and Commitments	(15)Leases and Commitments The Company has guaranteed the residual values of certain leased machinery and equipment at one of its facilities. The guarantees extend through the maturity of the underlying lease, which is in September2010. In the event the Company exercises its option not to purchase the machinery and equipment, the Company has guaranteed a residual value of $7.7million. The Company has accrued $4.1million as a loss on this guarantee, which is expected to be paid in 2009.

Restructuring

Restructuring
	6 Months Ended Jun. 30, 2009 USD / shares
Restructuring [Abstract]
Restructuring	(16)Restructuring In the second quarter of 2009, the Company took additional restructuring actions. The Company reduced its North American workforce by approximately 550 people, or 12%; its European workforce by approximately 150 people, or 2%; and its Asian workforce by approximately 60 people, or 3% in the second quarter. The net restructuring expense recognized in the second quarter was $9.0million for employee termination benefits. In addition to employee termination costs, the Company recorded $36.3million of asset impairment and $5.0million of other charges in the second quarter of 2009 related to the North American and European restructuring. The combined 2009 restructuring expenses of $50.3million are broken out by segment as follows: Engine $27.2million, Drivetrain $19.7million and Corporate $3.4 million. Included in the second quarter of 2009 asset impairment charge is $22.3million related to one of the Companys European locations. During the second quarter of 2009 circumstances caused the Company to evaluate the long range outlook of the facility using an undiscounted and discounted cash flow model, both of which indicated that assets were impaired. The Company then used an estimate of cost replacement to determine the fair value of the assets at the facility. This reduction of asset value was included in the Engine segment. On July31, 2008, the Company announced a restructuring of its operations to align ongoing operations with a continuing, fundamental market shift in the auto industry. As a continuation of the Companys third quarter restructuring, on December11, 2008, the Company announced plans for additional restructuring actions. As a result of these third and fourth quarter 2008 restructuring actions, the Company has reduced its North American workforce by approximately 2,400 people, or 33%; its European workforce by approximately 1,600 people, or 18%; and its Asian workforce by approximately 400 people, or 17%. The restructuring expense recognized in 2008 for employee termination benefits is $54.6million. In addition to employee termination costs, the Company recorded $72.9million of asset impairment charges in 2008 related to the North American and European restructuring. The combined 2008 restructuring expenses of $127.5million are broken out by segment as follows: Engine $85.3million, Drivetrain $40.9million and Corporate $1.3million. Estimates of restructuring expense are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established accruals. The following table displays a rollforward of the employee related and other restructuring accruals recorded within the Companys Consolidated Balance Sheet and the related cash flow activity for the three and six months ended June30, 2009: Employee Related and Other Costs (millions) Drivetrain Engine Corporate Total Balance at December

Reporting Segments

Reporting Segments
	6 Months Ended Jun. 30, 2009 USD / shares
Reporting Segments [Abstract]
Reporting Segments	(17)Reporting Segments The Companys business is comprised of two reporting segments: Engine and Drivetrain. These reporting segments are strategic business groups, which are managed separately as each represents a specific grouping of related automotive components and systems. The Company allocates resources to each segment based upon the projected after-tax return on invested capital (ROIC) of its business initiatives. The ROIC is comprised of projected earnings before interest, income taxes and noncontrolling interest (EBIT) adjusted for income taxes compared to the projected average capital investment required. EBIT is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a companys financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. EBIT is defined as earnings before interest, income taxes and noncontrolling interest. Earnings is intended to mean net earnings as presented in the Consolidated Statements of Operations under GAAP. The Company believes that EBIT is useful to demonstrate the operational profitability of our segments by excluding interest and income taxes, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by the Company to determine resource allocation within the Company. Although the Company believes that EBIT enhances understanding of our business and performance, it should not be considered an alternative to, or more meaningful than, net earnings or cash flows from operations as determined in accordance with GAAP. The following tables present net sales, segment EBIT and total assets for the Companys reporting segments. Net Sales by Reporting Segment Three months ended Six months ended June 30, June 30, (millions) 2009 2008 2009 2008 Engine $ 670.4 $ 1,109.0 $ 1,294.9 $ 2,207.1 Drivetrain 248.8 414.4 447.0 824.2 Inter-segment eliminations (3.0 ) (6.8 ) (6.2 ) (15.8 ) Net sales $ 916.2 $ 1,516.6 $ 1,735.7 $ 3,015.5 Segment Earnings (Loss) Before Interest and Income Taxes Three months ended Six months ended June 30, June 30, (millions) 2009 2008 2009 2008 Engine $ 44.0 $ 126.4 $ 79.9 $ 264.3 Drivetrain (8.8 ) 21.8 (41.5 ) 40.1 Segment earnings before interest and income taxes (Segment EBIT) 35.2 148.2 38.4 304.4 Muncie closure retiree obligation net gain 27.9 Corporate, including equity in affiliates earnings and stock-based compensation (29.6 ) (17.6 ) (55.0 ) (39.9 ) Consolidated earnings before interest and taxes (EBIT) 5.6 130.6 11.3 264.5 Restructuring expense

New Accounting Pronouncements

New Accounting Pronouncements
	6 Months Ended Jun. 30, 2009 USD / shares
New Accounting Pronouncements [Abstract]
New Accounting Pronouncements	(18)New Accounting Pronouncements In September2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. On January1, 2009, the Company fully adopted as required, FAS 157. See Note 9 to the Consolidated Financial Statements for more information regarding the implementation of FAS 157. In December2007, the FASB issued Statement of Financial Accounting Standards No.141 (Revised 2007), Business Combinations (FAS 141(R)). FAS 141(R) establishes principles and requirements for recognizing identifiable assets acquired, liabilities assumed, noncontrolling interest in the acquiree, goodwill acquired in the combination or the gain from a bargain purchase, and disclosure requirements. Under this revised statement, all costs incurred to effect an acquisition will be recognized separately from the acquisition. Also, restructuring costs that are expected but the acquirer is not obligated to incur will be recognized separately from the acquisition. On January 1, 2009, the Company adopted FAS 141(R). In the first quarter of 2009, the Company expensed $4.8 million related to on-going acquisition related activity. In December2007, the FASB issued Statement of Financial Accounting Standards No.160, Noncontrolling Interests in Consolidated Financial Statements (FAS 160). Effective January1, 2009, the Company adopted FAS 160. For consolidated subsidiaries that are less than wholly owned, the third party holdings of equity interests are referred to as noncontrolling interests. The portion of net income (loss)attributable to noncontrolling interests for such subsidiaries is presented as net income (loss)applicable to non-controlling interest on the consolidated statement of operation, and the portion of stockholders equity of such subsidiaries is presented as noncontrolling interest on the consolidated balance sheet. The adoption of FAS 160 did not have a material impact on the Companys financial condition, results of operations or cash flows. However, it did impact the presentation and disclosure of noncontrolling (minority)interests in our consolidated financial statements and notes to the consolidated financial statements. As a result of the retrospective presentation and disclosure requirements of SFAS 160, the Company was required to reflect the change in presentation and disclosure for the period ending March31, 2009 and all periods presented in future filings. The principal effect on the prior year balance sheets related to the adoption of SFAS 160 is summarized as follows: Balance Sheet (millions) December 31, 2008 Total stockholders equity, as previously reported $ 2,006.0 Increase for SFAS 160 reclass of non-controlling interest 31.5 Total stockholders equity, as adjusted $ 2,037.5 The principal effect on the prior year statement of operations related to the adoption of SFAS 160 is summarized as follows: Consolidated Statement

Recent Transactions

Recent Transactions
	6 Months Ended Jun. 30, 2009 USD / shares
Recent Transactions [Abstract]
Recent Transactions	(19)Recent Transactions BERU AG Domination and Profit Transfer Agreement and Squeeze-out of Minority Shareholders In the second quarter of 2008, the Company and BERU AG (BERU) completed a Domination and Profit Transfer Agreement (DPTA), giving BorgWarner full control of BERU. Under this agreement BERU is obligated to transfer 100% of its annual profits or losses to the Company. Upon request of BERU minority shareholders, the Company is obligated to purchase their shares for a cash payment of 71.32 per share. Those BERU minority shareholders who did not sell their shares are entitled to receive an annual compensatory payment (perpetual dividend) of 4.23 (net)per share. The DPTA is a binding agreement. However, certain minority shareholders of BERU initiated an appraisal proceeding in the German court system that challenged the valuation of the 71.32 purchase price and 4.23 annual compensatory payment (perpetual dividend). On January7, 2009 the Company informed BERU of its intention to purchase the remaining outstanding shares at that time of approximately 4%, using the required German legal process referred to as a squeeze-out to complete the 100% ownership. This process included an affirmative vote of BERU shareholders at its May20, 2009 annual shareholder meeting. The registration of the squeeze-out was challenged by certain minority shareholders of BERU with the commercial register in June2009. The squeeze-out share price passed by the BERU shareholders in May2009 was 73.39. The increase in price per share of 2.07 resulting from the squeeze out was reflected as an increase to the Companys total DPTA obligation. The DPTA obligation as of June30, 2009 was approximately 23.0 ($32.2) million, and approximates the cost if all remaining shares were purchased by the Company at 73.39 per share. As of June30, 2009, the DPTA obligation is presented in the Condensed Consolidated Balance Sheet as $32.2million in current liabilities. The table below summarizes activity related to the Companys DPTA obligation as of June30, 2009 as follows (in millions): Domination and Profit Transfer Agreement Obligation at December31, 2008 $ 44.0 Shares Purchased During the Three Months Ended March31, 2009 (12.2 ) Translation Adjustment (2.1 ) Domination and Profit Transfer Agreement Obligation at March31, 2009 29.7 Share Resolution to 73.39 per Share 0.9 Shares Purchased During the Three Months Ended June30, 2009 (0.7 ) Translation Adjustment 2.3 Domination and Profit Transfer Agreement Obligation at June30, 2009 $ 32.2 As of June30, 2009, the portion of the acquisition related to the DPTA represents a non-cash transaction of 23.0 ($32.2) million. For the three months and six months ended June30, 2009, the costs related to the annual perpetual dividend arrangement are reported as interest expense in the Consolidated Statement of Operations of $1.1million and $1.6million, respectively. As a result of the tendering of shares, the Company owned approximately 97% of all BERUs outstanding shares at June30, 2009. The tendering of approximately 1.3