BorgWarner (BWA) 10-Q 29 Apr 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information (USD $)
In Billions, except Share data	3 Months Ended Mar. 31, 2010	Jun. 30, 2009
Document and Entity Information [Abstract]
Entity Registrant Name	BORGWARNER INC.
Entity Central Index Key	0000908255
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
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		$4
Entity Common Stock, Shares Outstanding	117,722,437

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
ASSETS
Cash	374.1	357.4
Receivables, net	885.2	732
Inventories, net	350.3	314.3
Deferred income taxes	52	60.2
Prepayments and other current assets	97.4	87.9
Total current assets	1,759	1551.8
Property, plant and equipment, net	1436.4	1490.3
Investments and advances	264.9	257.4
Goodwill	1041.2	1061.4
Other non-current assets	464.7	450.5
Total assets	4966.2	4811.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable and other short-term debt	132.4	69.1
Accounts payable and accrued expenses	1042.6	977.1
Income taxes payable	10.1	0
Total current liabilities	1185.1	1046.2
Long-term debt	774	773.2
Other non-current liabilities:
Retirement-related liabilities	468.2	473.7
Other	296.1	295.6
Total other non-current liabilities	764.3	769.3
Common stock	1.2	1.2
Capital in excess of par value	1037.9	1034.1
Retained earnings	1262.8	1193.4
Accumulated other comprehensive income (loss)	-60.6	14.5
Treasury stock	-37.1	-57.9
Total BorgWarner Inc. stockholders' equity	2204.2	2185.3
Noncontrolling interest	38.6	37.4
Total stockholders' equity	2242.8	2222.7
Total liabilities and stockholders' equity	4966.2	4811.4

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Share data in Thousands	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Condensed Consolidated Statements of Operations
Net sales	1286.8		819.5
Cost of sales	1048.3		739.9
Gross profit	238.5		79.6
Selling, general and administrative expenses	130.3		74.1
Other expense	1.6
Operating income	106.6		5.5
Equity in affiliates' earnings, net of tax	-9.3		-0.2
Interest income	-0.6		-0.5
Interest expense and finance charges	14.2		19.1
Earnings (loss) before income taxes and noncontrolling interest	102.3		-12.9
Provision (benefit) for income taxes	20.9		-6.6
Net earnings (loss)	81.4		-6.3
Net earnings attributable to the noncontrolling interest, net of tax	5.2		0.7
Net earnings (loss) attributable to BorgWarner Inc.	76.2		($7)
Earnings (loss) per share - basic	0.65		-0.06	[1]
Earnings (loss) per share - diluted	0.63	[2]	-0.06	[1]
Weighted average shares outstanding (thousands):
Basic	116,375		116,029
Diluted	129,663	[2]	116,029	[1]
Dividends declared per share			0.12
[1]The Company had a loss for the quarter ended March 31, 2009. As a result, diluted loss per share is the same as basic in the period, as any dilutive securities would reduce the loss per share. Therefore, diluted shares are equal to basic shares outstanding for the three months ended March 31, 2009.
[2]The Company's diluted earnings per share for the quarter ended March 31, 2010 includes the impact of the Company's 3.50% convertible notes. Refer to Note 17, "Earnings (Loss) Per Share", for further information on our first quarter 2010 diluted earnings calculation.

1_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
OPERATING
Net earnings (loss)	81.4	-6.3
Non-cash charges (credits) to operations:
Depreciation and tooling amortization	57.1	57.3
Amortization of intangible assets and other	6.5	5.8
Convertible bond premium amortization	4.4
Stock based compensation expense	4.9	5.2
Deferred income tax benefit	-3.8	-12.1
Equity in affiliates' earnings, net of dividends received, and other	(11)	44.4
Net earnings (loss) adjusted for non-cash charges to operations	139.5	94.3
Changes in assets and liabilities:
Receivables	-128.6	-37.6
Inventories	-47.9	83.4
Prepayments and other current assets	-3.4	14.9
Accounts payable and accrued expenses	102.2	-54.3
Income taxes payable	10.1	3.8
Other non-current assets and liabilities	-7.8	-36.5
Net cash provided by operating activities	64.1	68
INVESTING
Capital expenditures, including tooling outlays	-55.3	-38.6
Net proceeds from asset disposals	2	5.2
Proceeds from sale of business	5
Net cash used in investing activities	-48.3	-33.4
FINANCING
Increase in notes payable	13.9	70.2
Additions to long-term debt		20
Repayments of long-term debt	-2.5	-136.7
Payments for noncontrolling interest acquired		-12.2
Proceeds from interest rate swap termination		30
Proceeds from stock options exercised, including the tax benefit	15.1	0.5
Dividends paid to BorgWarner stockholders		-13.8
Dividends paid to noncontrolling stockholders	(5)	-4.6
Net cash provided by (used in) financing activities	21.5	-46.6
Effect of exchange rate changes on cash	-20.6	-0.6
Net increase (decrease) in cash	16.7	-12.6
Cash at beginning of year	357.4	103.4
Cash at end of period	374.1	90.8
Net cash paid (refunded) during the period for:
Interest	6.1	11.4
Income taxes	14.5	-0.9
Non-cash financing transactions:
Stock performance plans	2.1	1.5

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation [Abstract]
Basis of Presentation	(1)Basis of Presentation The accompanying unaudited condensed 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 months ended March31, 2010 are not necessarily indicative of the results that may be expected for the year ending December31, 2010. The balance sheet as of December31, 2009 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 December31, 2009. We have reclassified certain 2009 amounts to conform to the presentation of our 2010 Condensed Consolidated Statement of Cash Flows. The financial statements and Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Companys Annual Report on Form 10-K for the fiscal year ended December31, 2009. 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
	3 Months Ended Mar. 31, 2010
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: (millions) Three months ended March 31, 2010 2009 Gross RD expenditures $ 52.2 $ 48.5 Customer reimbursements (9.9 ) (16.0 ) Net RD expenditures $ 42.3 $ 32.5 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
	3 Months Ended Mar. 31, 2010
Income Taxes [Abstract]
Income Taxes	(3)Income Taxes The Companys provision for income taxes is based upon an estimated annual tax rate for the year applied to federal, state and foreign income. The Companys projected annual effective tax rate is estimated to be 18.9% which includes the one-time impact of the change in tax legislation related to Medicare PartD subsidies. This rate differs from the U.S. statutory rate primarily due to foreign rates, which differ from those in the U.S., the realization of certain business tax credits including foreign tax credits and favorable permanent differences between book and tax treatment for items, including equity in affiliates earnings. If the impact to the change in tax treatment for Medicare PartD subsidies is not taken into account, the Companys annual effective tax rate associated with on-going business operations was estimated to be 18.0%. The Company will generate income tax expense for 2010 compared to the 2009 effective tax rate benefit of (103.4)% because the 2009 rate included: a) lower amount of U.S. income; b) change in the mix of income in various jurisdictions whereby foreign rates differ from those in the U.S.; c) other permanent items, including equity in affiliates earnings; and d) the change of tax accrual accounts upon conclusion of certain tax audits. In the first quarter of 2010, the Patient Protection and Affordable Care Act (PPACA)was signed into law. In addition, the Health Care and Education Reconciliation Act of 2010 was also passed which amended certain portions of the PPACA. The PPACA contains a provision eliminating tax deductibility of retiree health care costs to the extent of federal subsidies received by plan sponsors that provide retiree prescription drug benefits equivalent to Medicare PartD coverage. However, based upon the changes made in the Reconciliation Act, the tax benefit related to the Medicare PartD subsidies would be extended until December31, 2012. For all tax years ending after December31, 2012 there would no longer be a tax benefit for the Medicare PartD subsidies. Therefore, the impact to the Company for the loss of this future tax benefit (after December31, 2012) was an additional tax expense of $2.5million in the first quarter 2010. The Company continues to analyze and review all unrecognized tax benefits on a quarterly basis for changes. As of December31, 2009, the balance of gross unrecognized tax benefits was $34.8million. As of March31, 2010, the balance of gross unrecognized tax benefits increased to $34.9million. Included in the balance at March31, 2010 are $28.9million of tax positions that are permanent in nature and, if recognized, would reduce the global effective tax rate. The Company is currently litigating disputed issues related to a certain state tax audit, which is not expected to be resolved by December31, 2010. The Company is also in final stages of a non-U.S. audit which may settle before December31, 2010. A reasonably estimated amount is accounted for in the balance of the unrecognized tax benefits as of March31, 2010. Other possible changes in the unrecognized tax benefits balance related to other examinations cannot be reasonably estimated withi

Receivables Securitization

Receivables Securitization
	3 Months Ended Mar. 31, 2010
Receivables Securitization [Abstract]
Receivables Securitization	(4)Receivables Securitization The Company securitizes certain receivables through third party financial institutions without recourse. The amount can vary each month based on the amount of underlying receivables. The Company continues to administer the collection of these receivables on behalf of the third party. The maximum size of the facility has been set at $50million. On April24, 2009 the Companys $50million accounts receivable securitization facility matured and was repaid. On December21, 2009 the Company entered into a new $50million accounts receivable securitization facility. This facility matures on December21, 2012. The Company was required to adopt amended ASC Topic 860, Accounting for Transfer of Financial Assets, on January1, 2010. This adoption required the Company to reflect its receivable securitization facility in its financial statements in the current year of change. Accounting rules prior to January1, 2010 allowed qualifying special-purpose entities off-balance sheet treatment. The first quarter 2010 impact of this adoption was an increase in receivables, net of $50million and an increase in notes payable and other short-term debt of $50million in the Companys March31, 2010 Condensed Consolidated Balance Sheet. The Company paid servicing fees related to these receivables for the three months ended March31, 2010 and 2009 of $0.2million and $0.3million, respectively. As they were under prior accounting rules, these amounts are consistently recorded in interest expense and finance charges in the Condensed Consolidated Statements of Operations.

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
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: March 31, December 31, (millions) 2010 2009 Raw material and supplies $ 208.3 $ 187.3 Work in progress 75.8 69.8 Finished goods 76.7 68.8 FIFO inventories 360.8 325.9 LIFO reserve (10.5 ) (11.6 ) Inventories, net $ 350.3 $ 314.3

Property, Plant and Equipment

Property, Plant and Equipment
	3 Months Ended Mar. 31, 2010
Property, Plant & Equipment [Abstract]
Property, Plant & Equipment	(6)Property, Plant Equipment March 31, December 31, (millions) 2010 2009 Land and buildings $ 636.4 $ 626.3 Machinery and equipment 1,839.4 1,866.5 Capital leases 2.3 2.4 Construction in progress 91.5 126.4 Total property, plant equipment 2,569.6 2,621.6 Less accumulated depreciation (1,211.0 ) (1,211.6 ) 1,358.6 1,410.0 Tooling, net of amortization 77.8 80.3 Property, plant equipment, net $ 1,436.4 $ 1,490.3 Interest costs capitalized during the three-month periods ended March31, 2010 and March31, 2009 were $2.8million and $2.7million, respectively. As of March31, 2010 and December31, 2009, accounts payable of $23.7million and $28.6million, respectively, were related to property, plant and equipment purchases. As of March31, 2010 and December31, 2009, specific assets of $3.5million and $3.7million, respectively, were pledged as collateral under certain of the Companys long-term debt agreements.

Product Warranty

Product Warranty
	3 Months Ended Mar. 31, 2010
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: Three months ended March 31, (millions) 2010 2009 Beginning balance $ 61.7 $ 82.1 Provision 9.9 0.2 Payments (8.9 ) (15.3 ) Currency translation (2.0 ) (2.9 ) Ending balance $ 60.7 $ 64.1 The product warranty liability is classified in the consolidated balance sheet as follows: March 31, December 31, (millions) 2010 2009 Accounts payable and accrued expenses $ 29.9 $ 32.5 Other long-term liabilities 30.8 29.2 Total product warranty liability $ 60.7 $ 61.7

Notes Payable and Long-Term Deb

Notes Payable and Long-Term Debt
	3 Months Ended Mar. 31, 2010
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 March31, 2010 and December31, 2009 was 6.9%. March 31, 2010 December 31, 2009 (millions) Current Long-Term Current Long-Term Bank borrowings and other $ 47.8 $ 1.3 $ 32.5 $ 1.5 Term loans due through 2015 (at an average rate of 4.1% in 2010 and 3.9% in 2009) 34.6 5.1 36.6 7.6 Receivables securitization facility (b) 50.0 3.50% Convertible Notes due 04/15/12 334.6 330.2 5.75% Senior Notes due 11/01/16, net of unamortized discount (a) 149.3 149.3 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 119.3 119.3 Carrying amount of notes payable and long-term debt 132.4 743.5 69.1 741.8 Impact of derivatives on debt (a) 30.5 31.4 Total notes payable and long-term debt $ 132.4 $ 774.0 $ 69.1 $ 773.2 (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. 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 and is being amortized over the remaining lives of the respective 2016 and 2019 debt. As of March31, 2010, the unamortized portion was $30.5million. (b) On January1, 2010, the Company adopted ASC Topic 860. The first quarter 2010 impact of this adoption is an increase in receivables, net of $50million and an increase in notes payable and other short-term debt of $50million in the Companys March31, 2010 Condensed Consolidated Balance Sheet. See Note 19 to the Condensed Consolidated Financial Statements for more information regarding the Companys first quarter 2010 adoption of ASC Topic 860. On March31, 2010, the Company replaced its $250million multi-currency revolving credit facility with a new $550million multi-currency revolving credit facility, which includes a feature that allows the Company to increase its borrowings to $600million. The new facility provides for borrowings through March31, 2013, and is guaranteed by the Companys domestic subsidiaries. The Company has three key financial covenants as part of the credit agreement. These covenants are a net worth test, a debt compared to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) test, and an interest coverage test. The Company was in compliance with all covenants at Ma

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Mar. 31, 2010
Fair Value Measurements [Abstract]
Fair Value Measurements	(9)Fair Value Measurements On January1, 2009, the Company fully adopted as required, ASC Topic 820 Fair Value Measurements which expands the disclosure of fair value measurements and its impact on the Companys financial statements. ASC Topic 820 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, ASC Topic 820 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 ASC Topic 820: 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 on a recurring basis as of March31, 2010: Basis of Fair Value Measurements Quoted Prices in Significant Active Other Significant Balance at Markets for Observable Unobservable March 31, Identical Items Inputs Inputs Valuation (millions) 2010 (Level 1) (Level 2) (Level 3) Technique Assets: Commodity contracts $ 10.0 $ $ 10.0 $ A Foreign exchange contracts 8.2 8.2 A $ 18.2 $ $ 18.2 $ Liabilities: Commodity contracts $ 0.3 $ $ 0.3 $ A Foreign exchange contracts 13.5 13.5 A Net investment hedge contracts 44.4 44.4 A $ 58.2 $ $ 58.2 $ The following table classifies the assets and liabilities measured at fair value on a recurring basis as of December31, 2009: Basis of Fair Value Measurements Quoted

Financial Instruments

Financial Instruments
	3 Months Ended Mar. 31, 2010
Financial Instruments [Abstract]
Financial Instruments	(10)Financial Instruments On January1, 2009, the Company adopted as required, ASC Topic 815, Disclosures about Derivative Instruments and Hedging Activities which expands the disclosure of financial instruments. The Companys financial instruments include cash and marketable securities. 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 March31, 2010 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 ASC Topic 820). At March31, 2010 and December31, 2009 the following cross-currency swaps were outstanding: Cross-Currency Swaps Notional Notional (millions) in USD in Local Currency Duration Floating $ to Floating $ 75.0 58.5 Oct - 19 Floating $ to Floating $ 150.0 17,581.5 Nov - 16 The Company uses certain commodity derivative instruments to protect against commodity price changes related to forecasted raw material and supplies purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. All outstanding commodity contracts will mature in less than one year. At March31, 2010 and December31, 2009 the following commodity derivative contracts were outstanding: Commodity Hedges Volume Volume Hedged Hedged Units of Commodity March 31, 2010 December 31, 2009 Measure Duration Nickel 540 780 Metric Tons Dec - 10 Copper 568 759 Metric Tons Dec - 10 Aluminum 248 330 Metric Tons Dec - 10 Natural Gas 253,220 392,396 MMBtu Dec - 10 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. At March31, 2010 and December31, 2009 the following foreign exchange derivative contracts were outstanding:

Retirement Benefit Plans

Retirement Benefit Plans
	3 Months Ended Mar. 31, 2010
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 2010 range from $15 to $25 million, of which $3.4million has been contributed through the first three 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 other post employment benefit plan 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. 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. On March24, 2010, the Company finalized its settlement agreement regarding the closure of the Muncie Plant with the Pension Benefit Guaranty Corporation (PBGC) in which the Company will make certain payments directly to the Muncie Plants defined benefit pension plan (the Plan). On December23, 2009 the Company made an initial cash contribution of $23million for the 2009 Plan year, consistent with the settlement agreement. Also under the settlement agreement for each of the Plan years beginning in 2011, 2012, and 2013, the Company will make a cash contribution to the Plan in the amount of $15million, unless this contribution exceeds the maximum amounts deductible under the applicable U.S. tax regulations. The company will also provide $35million in the form of a letter of credit or other security, and will waive a credit balance valued at $8million in 2014. The components of net periodic benefit cost recorded in the Companys Condensed Consolidated Statements of Operations, are as follows: Other post (millions) Pension benefits employment Three months ended March 31, 2010 2009 benefits US No

Stock-Based Compensation

Stock-Based Compensation
	3 Months Ended Mar. 31, 2010
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 2,200,000 shares are available for future issuance. As of March31, 2010, there were a total of 4,952,740 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 March31, 2010 and 2009 by: Three Months Ended March 31, (millions), except per share data 2010 2009 Earnings before income taxes and noncontrolling interest $ 0.1 $ 1.7 Net earnings $ $ 1.3 Per share basic $ $ 0.01 Per share diluted $ $ 0.01 A summary of the plans shares under option for the three months ended March31, 2010 is as follows: Weighted Shares Average Aggregate Under Remaining Intrinsic Option Weighted-average Contractual Value (thousands) exercise price Life (in years) (in millions) Outstanding at December31, 2009 5,177 $ 27.98 Exercised (203 ) 24.81 Forfeited (26 ) 34.95 Other 5 27.34 Outstanding at March31, 2010 4,953 $ 28.08 5.5 $ 50.0 Options exercisable at March 31, 2010 4,953 $ 28.08 5.5 $ 50.0 At its November2007 meeting, our Compensation Committee decided that restricted common stock and stock units would be awarded in place of stock options for long-term incentive award grants to employees. These restricted shares and units for employees vest fifty percent after two years and the remainder after three years from the date of grant. The Company also grants restricted common stock to its non-employee directors. For non-employee directors restricted shares generally vest ratably on the anniversary of the date of the grant over a period of three years. The market value of the Companys restricted common stock and stock units at the date of grant determines the value of the restricted common stock. In February2010, 570,954 restricted shares and units were granted to employees under the 2004 Stock Incentive Plan. The value of t

Comprehensive Income

Comprehensive Income (Loss)
	3 Months Ended Mar. 31, 2010
Comprehensive Income (Loss) [Abstract]
Comprehensive Income (Loss)	(13)Comprehensive Income (Loss) The amounts presented as changes in accumulated other comprehensive income (loss), net of related taxes, are added to (deducted from) net earnings (loss)resulting in comprehensive income (loss). The following table summarizes the components of comprehensive income (loss)on an after-tax basis for the three-month periods ended March31, 2010 and 2009. Three months ended March 31, (millions) 2010 2009 Foreign currency translation adjustments, net $ (86.8 ) $ (58.3 ) Market value change in hedge instruments, net 10.6 26.6 Defined benefit post employment plans, net 1.5 Change in accumulated other comprehensive income (loss) (76.2 ) (30.2 ) Net earnings (loss)as reported 76.2 (7.0 ) Comprehensive income (loss) (37.2 ) Comprehensive income (loss)attributable to the noncontrolling interest 1.1 (1.4 ) Comprehensive income (loss)attributable to BorgWarner Inc. $ 1.1 $ (38.6 )

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
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 then-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 Division) on March11, 2009, for which a class has been certified. During the last quarter of 2009 the action pending in Indiana was dismissed, while the action in Michigan is continuing. At this stage of the litigation, the Company cannot make any predictions as to the outcome, but it is vigorously defending against the suit. 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 environment

Leases and Commitments

Leases and Commitments
	3 Months Ended Mar. 31, 2010
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 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 remaining machinery and equipment, the Company has guaranteed a residual value of $6.0million at September 30, 2010.

Restructuring

Restructuring
	3 Months Ended Mar. 31, 2010
Restructuring [Abstract]
Restructuring	(16)Restructuring In the third and forth quarters of 2008 and in the second quarter of 2009 the Company took restructuring actions. These actions were in response to declines in global customer production levels, customer restructurings and a subsequent evaluation of our headcount levels in North America, Europe and Asia. 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 reserves. The following table displays a rollforward of the employee related restructuring accruals recorded within the Companys Consolidated Balance Sheet and the related cash flow activity for the quarter ended March31, 2010: Employee Related and Other Costs (millions) Drivetrain Engine Corporate Total Balance at December31, 2009 $ 4.5 $ 10.9 $ 2.1 $ 17.5 Cash payments (0.8 ) (5.1 ) (2.1 ) (8.0 ) Translation adjustment (0.1 ) (0.6 ) (0.7 ) Balance at March31, 2010 $ 3.6 $ 5.2 $ $ 8.8 Future cash payments for these restructuring activities are expected to be complete during 2010.

Earnings

Earnings (Loss) Per Share
	3 Months Ended Mar. 31, 2010
Earnings (Loss) Per Share [Abstract]
Earnings (Loss) Per Share	(17)Earnings (Loss) Per Share The Company presents both basic and diluted earnings per share of common stock (EPS) amounts. Basic EPS is calculated by dividing net earnings (loss)attributable to BorgWarner Inc. by the weighted average shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing net earnings (loss)attributable to BorgWarner Inc. by the weighted average shares of common stock and common equivalent stock outstanding during the reporting period. The dilutive impact of stock options and restricted stock are calculated using the treasury stock method. The treasury stock method assumes that the proceeds from the exercise of stock options will be used by the company to repurchase treasury shares at the prevailing market price, resulting in an incremental increase in shares outstanding, but not the full amount of shares that are issued on exercise. The Companys 3.50% convertible notes due April15, 2012 are reflected in diluted earnings per share in 2010 using the if-converted method. Under this method, if dilutive, the common stock is assumed issued as of the beginning of the reporting period and included in calculating diluted earnings per share of common stock. In addition, if dilutive, interest expense, net of tax, related to the convertible notes is added back to the numerator in calculating diluted earnings per share of common stock. Separately and concurrently with the issuance of the Companys 3.50% convertible notes, the Company entered into a bond hedge overlay, including warrants and options. If the Companys weighted-average share price exceeds $38.61 per share for any period presented, the warrants will be dilutive to the Companys earnings. The options are not included in the diluted earnings per share calculation because they are anti-dilutive. The following table reconciles the numerators and denominators used to calculate basic and diluted earnings (loss)per share of common stock: Three Months Ended March 31, in millions except per share amounts 2010 2009 Basic earnings (loss)per share: Net earnings (loss)attributable to BorgWarner Inc. $ 76.2 $ (7.0 ) Weighted average shares of common stock outstanding 116.375 116.029 Basic earnings (loss)per share of common stock $ 0.65 $ (0.06 ) Diluted earnings (loss)per share: Net earnings (loss)attributable to BorgWarner Inc. $ 76.2 $ (7.0 ) Adjustment for net interest expense on convertible notes 5.0 Diluted net earnings (loss)attributable to BorgWarner Inc. $ 81.2 $ (7.0 ) Weighted average shares of common stock outstanding 116.375 116.029 Effect of 3.50% convertible notes 11.389 Effect of stock-based compensation 1.899 Total dilutive effect on weighted average shares of common stock outstanding 13.288 * Weighted average shares of common stock outstanding including dilutive shares 129.663 116.029 Dilu

Reporting Segments

Reporting Segments
	3 Months Ended Mar. 31, 2010
Reporting Segments [Abstract]
Reporting Segments	(18)Reporting Segments The Companys business is comprised of two reporting segments: Engine and Drivetrain. These segments are strategic business groups, which are managed separately as each represents a specific grouping of 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 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 its segments by excluding interest, income taxes and noncontrolling interest, 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 its 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 show net sales and segment earnings (loss)before interest and income taxes for the Companys reporting segments. Net Sales by Reporting Segment (millions) Three months ended March 31, 2010 2009 Engine $ 906.0 $ 624.5 Drivetrain 385.8 198.2 Inter-segment eliminations (5.0 ) (3.2 ) Net sales $ 1,286.8 $ 819.5 Segment Earnings (Loss) Before Interest and Income Taxes (millions) Three months ended March 31, 2010 2009 Engine $ 106.7 $ 35.9 Drivetrain 36.7 (32.7 ) Segment earnings before interest and income taxes (Segment EBIT) 143.4 3.2 Muncie closure retiree obligation net gain 27.9 Corporate, including equity in affiliates earnings and stock-based compensation (27.5 ) (25.4 ) Consolidated earnings before interest and taxes (EBIT) 115.9 5.7 Interest income (0.6 ) (0.5 ) Interest expense and finance charges 14.2 19.1 Earnings (loss)before income taxes and noncontrolling interest 102.3 (12.9 ) Provision (benefit)for income taxes 20.9 (6.6 ) Net earnings (loss) 81.4 (6.3 ) Net earnings attributable to the noncontrolling interest, net of tax

New Accounting Pronouncements

New Accounting Pronouncements
	3 Months Ended Mar. 31, 2010
New Accounting Pronouncements [Abstract]
New Accounting Pronouncements	(19)New Accounting Pronouncements In September2006, the FASB ASC amended Topic 820, Fair Value Measurements and Disclosures. ASC Topic 820 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, ASC Topic 820. See Note 9 to the Consolidated Financial Statements for more information regarding the implementation of ASC Topic 820. In December2007, the FASB ASC amended Topic 805, Business Combinations. ASC Topic 805 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 are recognized separately from the acquisition. Also, restructuring costs that are expected but the acquirer is not obligated to incur are recognized separately from the acquisition. On January1, 2009, the Company adopted ASC Topic 805. In the first quarter of 2009, the Company expensed $4.8 million related to on-going acquisition related activity. In December2007, the FASB ASC amended Topic 810, Consolidation. 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 noncontrolling 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. Effective January1, 2009, the Company adopted ASC Topic 810. In March2008, the FASB ASC amended Topic 815, Derivatives and Hedging. ASC Topic 815 requires entities to provide enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under ASC Topic 815 and its related interpretations, and how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. On January1, 2009, the Company adopted ASC Topic 815. See Note 10 to the Consolidated Financial Statements for more information regarding the implementation of ASC Topic 815. In May2008, the FASB ASC amended Topic 470, Debt. Under ASC Topic 470, an entity must separately account for the liability and equity components of the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuers interest cost. ASC Topic 470 is effective for fiscal years beginning after December15, 2008, and for interim periods within those fiscal years, with retrospective application required. As a result of our adoption of ASC Topic 470 for fiscal 2009 and the Companys April9, 2009 issuance of $373.8 million convertible senior notes due April15, 2012, we recorded the equity and liability components of the notes on our Dec

Subsequent Event

Subsequent Event
	3 Months Ended Mar. 31, 2010
Subsequent Event [Abstract]
Subsequent Event	(20)Subsequent Event On April9, 2010 the Company acquired Dytech ENSA SL, a producer of exhaust gas recirculation (EGR) coolers, EGR tubes, and integrated EGR modules including valves for automotive and commercial vehicle applications, both on- and off-road. With locations in Spain, Portugal and India, Dytech ENSA employs approximately 1,000 people and supplies customers such as Renault/Nissan, VW/Audi, Ford, Fiat, Navistar, GM, Daimler, PSA, Suzuki, Mahindra Mahindra, TATA, Ashok Leyland, MAN, and IVECO. Dytech ENSAs annual sales for 2009 were approximately $180million. The newly acquired business will be included in the Companys Engine segment.