Earnings call transcript Q4 2022

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Patrick Nolan

This is Patrick Nolan. I apologize about the technical difficulties we've had this morning, but we're in a kickoff today's call.

So we have issued our press release earlier this morning. It's posted on our website, borgwarner.com, on our homepage and on our Investor Relations home page.

Before we begin, I to inform in joining this call, we may make forward-looking statements which involves risks and uncertainties as detailed in our 10-K.

differ the may discussed results actual significantly matters from today. Our

business certain presentation, picture in core comparison we today's period. non-GAAP with of and prior purposes will the clearer During a highlight measures for provide order how performed to

the on us you that M&A excluding means net comparable basis, other excluding of adjusted hear that noncomparable organic, items. impact noncomparable When the say that excluding net of When impact us and you say M&A. means a hear say items. FX, and is FX And here

presentation We these on weighted also our of light market, slides the compared an exposure. with refer encourage to vehicle We to follow our website. along call that our in for during market. that to the growth to note IR change production discussion. say when posted Please he page vehicle our you geographic and commercial we've means earnings

call Fred. happy that, to turn over the With to I'm

Frederic Lissalde

everyone. you, of morning, Thank a reaction speech. and allergic morning bit an Pat, impacting my good I have this

So stay the with Kevin you remarks. I'll prepared Kevin? answer questions. and cover the will

Kevin Nowlan

and morning, All starting Fred, overall Slide update, share and provide good for Thanks, everyone. an company to We're on X. our right. results pleased XXXX

the strength was up the a We continue be billion to market, which our were compared our very proud industry. up sales little relative we to than to With sales, of of overall in $XX.X about approximately X%. XX% less

production We're and to XXXX. growth. delivered meaningfully sales also with we significant our Importantly, which contributed that faced inflationary margin volatility this we our pleased BEV-related despite the headwinds during solid performance,

e-product the to our increase significantly continued to investment continuing while achieved was growth our in performance support portfolio. This R&D

future inorganic support cash to allowed free us same shareholders. cash continue which our to the investments make We at returning our time also to delivered record that while flow

sustainability drive to continue we steps our in quarter. several during results, the long-term our near-term our efforts. We took positioning leading Beyond

multiple the announcement forward in report. our more earnings made I'll awards planned And Fuel Systems a We new advancement secured the detail in those the with significant separation and since segments. of electrification just charging of also program Aftermarket moment. a last we

Next, previously absolute with with respect in XX% X aiming The submitted our a through its path its to XXXX at electrification Scope baseline. In align absolute least formally and future accelerated on more net achieve our targets. reductions for mid-December, along our Slide or give target to announced carbon achieve you SBTi. commitment science-based progress from X announced with XX% emissions to a BorgWarner I'd Scope to to by by XXXX X, validation Scope X X color forward reduce emissions Scope like These to by SBTi X targets by was target for charging all. emission XXXX

targets and emissions We've while as promoting meaningful Scope toward had XXXX opportunities progress employee to made energy some our X and across achieving certification X bonus procurement energy. our of energy global also intensity the renewable management operations we tied in reducing

of efforts do raw supply driving recyclable meet reducing the actions We'll same. weight to of target, content electrification, X the with the also base on working material to including product its a to remanufactured BorgWarner and focus To Scope intends our transitioning selection. be sustainable increasing portfolio number material, product

planned planned Slide now believe as to separation fuel aftermarket like we as We value. that in refer Next, summarize right NewCo. the separate time businesses to X, and to on and unlock separation segments, we the is I'd this which of systems shareholder December these our announced

last years margin over improvement significant despite industry NewCo, the the we've driven couple challenging environment. For of

public well with the with our the these We car a From for a aftermarket and segment passenger hydrogen technologies position injection standpoint, commercial stand-alone product GDI business. NewCo things the vehicle in including leadership cutting-edge position in company. believe success NewCo's we in as solidified segment,

our vision For the of electrified towards our of energy-efficient our Charging investments and a propulsion. management separation clean, intended enhances attractive It our supports attention, world. to EV BorgWarner, strategy all and believe focuses our of and we energy our focus Forward accelerates flexibility all pursue

separation its updates own maximizing focus and opportunity plan teams each pursue strategies The allow work our various are well on company appropriate. to intended with The to overarching progressing the will through shareholders. for value an we the provide streams as

intended expect continue in the We to XXXX. close to late separation

new look electrification X. at awards some on let's Now Slide

alternative with manufacturer the and First, BorgWarner Europe next-generation will for OEM's expected for vehicles an Compared and this with cooling first greater United German smaller a weight award well to reduced a plates cost. as the major within BorgWarner States. in in supply cooling XXXX. product electric innovative is as cooling the our new installation vehicle developed battery This organically solutions, launch capacity places provide space

pioneer cooling a battery leader believe We be market management thermal of for the developments that and cooler processes as exhaust and positions gas recirculation expertise market. ideal technology global the in the company new to manufacturing BorgWarner's an associated

On crossover XXX-volt we're now XXX-kilowatt the module of being OEMs can XXXX, you see with expansion utility the with business vehicle a performance inverter product, this sourced in global variants a to kilowatts an XXX new we're for silicon inverter announcing XXX-volt on top for sizable the and a all-wheel launch an manufacturing two right of vehicles. drive that a with OEM award. XXX-volt car side carbide partnering slide, our After

suppliers our of to strengthens business position transitions customer this as strategy. expanded as customer one its of next the that the This for long-standing BEV phase strategic inverter

we've see, forward objectives. toward can you charging As our further progress made

sales organic Starting So at let's Slide our progress electric first what look in with means this X. vehicle growth. on report

from update I rates headwind by underlying new This versus the was the headwind our With FX partially discussed prior FX prior pure this accounts million booked XXXX business we XXXX. disclosure, stemming in to our about $X estimate an the guidance. of reflect sales BEV now offset for on call, estimate Of the billion we as have a about wins note, that of $XXX this slide. programs reflects awards secured

announced about $X.X now Rhombus, billion X to Santroll, of those Charging our Turning sales We've the generate will due start believe Akasol, Forward; we and since of or acquisitions EV-related diligence, businesses in SSE XXXX. on Based Drivetek. M&A. completed

higher This previous revised in here. But ramp-up Akasol, our than done faster projections is initially for we're our sales a not seeing than anticipated. outlook on we based is which

expect We additional we'll that with portfolio. are parts we continue acquisitions think various of enhance and potential to that execute of targets actively handful our EV engaged will a

$X.X vehicle sales will which complete in pure track puts the it billion last billion we accomplished And separation we that electric set about XXXX in sales all for billion of pillar finally, of to years, in and us forward dispositions of to planned of the within charging NewCo about couple the we've address believe XXXX. original we an goal target With by of third distance already we're XXXX. $X.X on EV for our achieve believe striking $X.X

for Now on QX disposition a revenue let's our walk for starting last billion. our revenue for over of the the $X.X at was XX Slide look Water After move year-over-year into year's just QX. adjusting financials, facility, Valley

about increase can US $XXX dollar a organic that year-over-year see the year-over-year. the million. approximately over can You decrease drove see strengthening of you XX% our in X% Then revenue in revenue or

The means a strong less X% in year. increase was market over this billion we to than sum outperformance. $X.X just compares in of finish the of which a QX, strong That delivered production, all average of another quarter to weighted revenue

XX. to Turning Slide

cash and quarter. earnings our see flow performance can for the You

million, was a of adjusted million operating XX.X% compares Our income fourth year from ago. XX.X% quarter adjusted to to $XXX $XXX operating That or equating margin. a income

of converted increased the income of increased $XX by million comparable exchange million foreign M&A, performance by approximately last million planned adjusted this $XXX these sales. basis, R&D excluding In investments operating positive sales. that But we and $XX our a relative partially driver increase On impact was the to we XX% of was higher our e-products conversion in impact at QX, biggest of R&D. on additional year. The on this offset

a fourth rates Our years. over That tax few the by jurisdictions improved driven by the qualifying in tax we than certain operating what in income initiatives, contribute was last which XXX impact forward lower of to rate and adjusted of earnings mix tax nearly going by experienced more of jurisdictions, EPS tax all believe basis lower the should year-over-year tax ongoing lower taxing our adjusted across rate. for a $X.XX and in points a driven improvement favorable the structuring we've favorable rate quarter

of last of the And onetime generated million plus $XXX year. finally, year-over-year nonrecurrence amount positive inflationary flow free recoveries the a of and cash the warranty meaningful our customer price $XXX during in a collection from payment of improvement increase million to things: QX. The free income, X timing flow. cash We of driven a by customers operating was

you slide, few continue global the Let's at XXXX. can can now market see macro you been our When you that industry over of our years. experiencing turn on to to for uncertainty look last the this XX, Slide perspective we've see contemplate types production assumptions where

our in background to commercial mind, weighted vehicle markets and that be to year. X% up With this flat expect we light global

by we're be we China, X% to X%. flat market up down to blended up in In up expect at Europe, our we North to overall X% Looking to be to about the region, markets to for our roughly planning this weighted American year-over-year. market be expect X%. X% And

at full XX. Now year our let's outlook look Slide take a on

full to from important headwind it's million. weaker $XXX that expected foreign an assumes guidance year First, of our note currencies

contributes flat X% see mentioned, organic you the markets for previously net change slide. on to to be year, I as Second, end we the which our expect to up sales the

new vehicle to growth of driven important expect by markets, electric we in revenue in revenue. business that grow continue more But our than and launches higher industry end excess production well slight to

XXXX, up in EV expecting the in fact, we're is revenue $X.X $X.X between XXXX. billion million to from generated $XXX we which In and deliver in significantly billion

add acquisitions equates approximately the assumptions, on revenue approximately organic expected million Rhombus and which XXXX billion, to X% we're XXXX are to Santroll $XX.X Based range projecting the of these total of revenue. $XX.X to XX%. billion in to growth Finally, to $XX

to margin. Switching

in variation XXXX. We quarters We the in the operating year adjusted full expect range XX.X%. margin be the some margin of margin expect compared XX.X% to to level XX.X% to XXXX do of our our in across

is year. Specifically, XXXX. actions the we into as during over finalizing in work and XXXX on negotiated we to believe inflationary pricing which the to suppliers be likely weakest margin the with reported carry customers that our QX extent

be on is end, negligible. to the are the year-over-year year impact full pressures expectations margins likely current of In our inflationary that

could impact QX. However, in some we see negative

business be as forward XXXX. year-over-year R&D, is and a But R&D expected the XXXX increase e to see to relates securing importantly, new investment. the you electrified in it continued in than anticipates to R&D in to on portfolio. increase million lean our support our year-over-year our $XX invest success eProducts lower year continuing With slide, XXXX $XX full million more As to we're in the wins, products-related guidance increase

R&D, to occurring the as the XXXX related year. Excluding eProducts product launches full mid-teens, year we amount margin which outlook delivering our given incrementals contemplates the this the conversion ramp-ups this solid and in impact of increase in business of view a

we're Based revenue full XXXX. on headwinds adjusted and $X $X.XX relative outlook, This two this share. to expecting contemplates EPS EPS to guidance margin diluted per slight year of

an approximately tax expect of a percentage to rate we effective last relative year. of First, up points XX%, couple

that likely in that's rate However, sustainable and recent we've rate go-forward a a years, experienced what we far lower on remains to than be basis. think it's

higher Second, a higher negative result per expense from of net rates. impact guidance our discount as EPS share assumes coming $X.XX a pension

Turning cash flow. free to

the onetime cash to to flow tax a NewCo. will cash IT the full spin-off range payments environment Fuel $XXX to adviser our for to outlook million from and for $XXX of it and This of approximately cash flow cash outside a separation the free the fees, million Aftermarket deliver cost expect year. million includes facilitate $XXX We costs arising create related Systems stand-alone IT in businesses, of intended

$XXX million $XXX $XXX onetime flow That's lower costs, Excluding these in we outlook. cash be is would flow million only than record guidance XXXX. the generated our which our million XXXX free cash slightly to of

XXXX this In So we let significantly. of performance environment, me delivered despite environment headwinds. the summarize market and volatile we inflation Overall, the outgrew this a market remarks. strong morning's face significant in end

incremental And sales while customers. delivering e-business. our also delivered to and adjusted with maintained our our record support future successfully the more in above R&D year operating by our free $XXX completing negotiations a flow. cash margins million on margins commercial we finally, higher investing of growth XX% We of

making present, to also our successfully charging to future the successfully forward continue were we by deliver on plan. we the As continuing on significant progress manage

investments, focused and volumes to organic Now will Aftermarket both make on our the to as Fuel the we ahead help and Systems financial executing keenly single-digit look strong present long disciplined sustaining our be manage businesses, high the we'll on XXXX, spin-off revenue strength and compared conversion this future. successfully and outperformance intended into to secure to continuing and continuing of inorganic, driving growth, revenue by industry that growth

to like With the to Pat. I'd that, back over turn call

Patrick Nolan

up ready Kevin. we're you, Thank Operator, to for open it questions.

Operator

we'll Instructions] question first from Colin And Fargo. Langan with [Operator our take Wells

Your open. line is

Colin Langan

Just follow-up the costs. little inflationary a on comments on

need implies the you're that particularly impact to business to the some is to think of guidance why or the suppliers any far, it other so And you're offset? that kind on underlying said of structure around growth expecting a negligible seeing the you suppliers I benefits? a as price color just you'll Any get color not And concessions I factor seems are big other impact. have headwinds. pretty large labor. guided like mean

Kevin Nowlan

Yes.

manage inflationary XXXX. at I think now is way right exited we're that to our continue we levels the to expectation going

to supply in levels continue expect maintain continue the customers our would with place elevated we we basis to that to go-forward mitigate see from extent the base, inflation to on a pricing the that. of to So

underlying that's guidance. So really what's the

Colin Langan

And like you're you gotten it comments, last too this on or seeing are you've based really costs year more [indiscernible] your increases renegotiating the these Or no? in sounds just year? what

Kevin Nowlan

ahead that and expecting going I levels to to base what new would we are about we're essentially continue appropriate enter to last with look those negotiations entering year were to types of as the we really we're customer mitigate and were focus year of the see and impacts. XXXX the pricing the we the was align year XXXX, think how then that we

imagine, pricing so can the those as we'll you new discussions we the year and enter cost have here environment. about as And

Colin Langan

believe historically your talk used about Got to based on outlook more I it. you X%. like X% And about looks it your market guidance, market. to X% it's over And

think over this we that forward? So year? it going should strong sustainable? market the what's driving How Is growth about

Frederic Lissalde

and next around plug-in outgrowth year for X%, be is it of hybrids. the very we're midpoint other right of proud is you're that. Colin, products X/X Yes, of -- and About products

approaching next year, be between fuel billion proud this BEV $X.X of revenue. acceleration. we'll of our XX% is which So to billion $X.X I'm very about revenue

Colin Langan

anything growth this in And in for the is nature onetime there year?

Frederic Lissalde

confirms of revenue year towards the $X.X And much pretty This and BEV track, target part on of all. are that at that's a marching increase XXXX. versus this our billion of you plan. we in year, Xx Not see fuel prior

Operator

Bank. from Deutsche our take We'll question with next Emmanuel Rosner

Emmanuel Rosner

and better at more I as growth was it's incredibly hoping your seems overall. you margin walk year-over-year just color in what and margin outlook. could flat give operating us takes a around terms of guess strong midpoint, you growth the be little puts and sort of slightly bit to than like And mentioned yourself, I organic the despite basically

the cutting some how much about you be bit, R&D, Like by that a of And the by? understand going up like full increase talk going R&D? you back on I but anything up sort can then so else is R&D on? just maybe going R&D that overall? Or that offsetting R&D will are of

Kevin Nowlan

simple. margin is converting that then call sales look we effectively also profile investing really it to -- year-over-year which incrementally year-over-year we're organic million improvement net on on at shows overall a the change, walk and that what slight million The in about XXXX going XX% only R&D we're in basis. in $XX to on from It's that down mid-teens, of fairly XX%, Yes. But range. XXXX brings conversion eProducts-related our in is as then a the $XX a basis,

in seeing really revenue and pleased launches growth in not end pretty ramp recovery to mid-teens related XXXX up, given the markets. the bulk that we're that conversion of is But with we're product

pleased of comment R&D? performance. you with do some that the see there, the with on costs you we're to Fred, want so pretty start-up And

Frederic Lissalde

but not midterm the mentioned, and this at combustion constraining between -- R&D side, think looking Kevin the the X% that right the I expect up working of on a in foundation be also And expect as and that R&D lot going to long is thing sure products. R&D again to year-over-year. we year on we're making doing side. We're revenue, growth X.X% of also the efficiency we stay

Emmanuel Rosner

up following then on this And Okay. then.

does within end your getting sort is guess case? breakeven investment, enough sort where X.X%. these like year additional this essentially is Or still past, business this of the is range out So the that of being in or profitable a about to X% Is the size of you push loaded bit? this fully that sort have as is scale XXXX turning the you've the as to the will time line like revenue match EV R&D of I R&D. tail of of sort And well total spoken this point like

Kevin Nowlan

A couple $XX increase $XX to totality choosing million. really an I'll at eProducts-elated of investment that with the they only question say, million R&D, of foundational things manage foundational just budget, the the of moment overall seeing were businesses. guiding are profitability to being make R&D, that the the we R&D in on on we're we is R&D to those the the the way about which in managed

As it relates of to EV, profitability. the trajectory

coming the that from R&D, to that beginning XXXX, to related the margin that see totality, our that the is that and comes which growth approaching breakeven. the effectively we're and we generating and on portfolio that XX 'XX, portfolio in generating we're that year, are you to revenue the improving you this of is outpacing exit year eProduct margin incremental we which in can As contribution eProducts the that of growth on see portfolio growth means from seeing as track profitability believe continue in growth added this X/X that we're

Operator

And Paribas. with from question come will next Picariello our BNP James

James Picariello

Good morning, everyone.

market, I your within revenue X-point over like from growth. commodity in a thought was growth benefit almost bedded the back Just there recovery to XXXX,

high not commodity does do that type points just the of any X that, benefit? want outgrowth, So include recovery XXXX that to recovery, cost I single-digit clarify ongoing

Kevin Nowlan

in you XXXX growth at mean correct. as a guide. the That's -- organic I net pricing look not is that that tailwind number effectively

James Picariello

Okay. guys time million have business. What for frame R&D better look talked And EV frame. $XX commitments step-up, Understood. to you then given breakeven in about the previously, I that you visibility the R&D 'XX, achieving the like million profitability does now just $XX the to maybe 'XX terms Any of on -- back given late have? early think time

Kevin Nowlan

and really we mean standpoint. significantly unchanged. the I a I Emmanuel, of to leaned an of step-up it's this point inflection with the was in think was beginning business year as from pretty $XXX-plus year mentioning just into I to last think the R&D. essentially forward eProducts related We heading million last electrification year

all growth contribution now exit put us seeing revenue the R&D be this we enter pace, I margin through is as that Emmanuel as head continues to into year and coming coming growth revenue and we to 'XX breakeven for the that to contribution outpacing you're eProducts on growth that XXXX. And XXXX EV-related on of and beginning the approaching as and in us mentioned, growth

James Picariello

any it. structure. cap have on a you've SpinCo's clarity a what could net healthy I targeted lot just the Got be? leverage know communicated previously And

Just there's a curious if finer point that. on

Kevin Nowlan

expect around both and businesses. companies the time date, clarity not are in point. to structures XXXX. more execute that, on as And we'll I'm to we're approach any which you spin-off get the color provide we late spin this still at on provide capital both financial And in going hold more outlook to going closer the to investor days, of that that at target point should

of on supports continue But and going the moderate as concept go-forward levels basis to BorgWarner ability relates to a to of overall maintain respective that companies that their we're leverage both the way execute is to in it both NewCo strategies. a

Operator

question Research. next from Wolfe Lache with comes And Rod your

Rod Lache

for few better. Kevin, think Good I have a morning, feel Fred, you I you. everybody. questions

forecast. that a any would First earnings revenue recovery, assuming significant inflation And of incremental in of to that be XXXX, of real it correct that? all, your Am recovery you your actually if you additional that terms pricing and is forecast already accretive right? do on I but amount that achieve understanding not are incremental

Kevin Nowlan

XXXX exited customers base that the pricing underlying into and I that's around effectively -- about pricing a likely think we the heading at continue the supply or going to is think level XXXX. I with we the And it, at guide. of that what's mean, to way from level think

Rod Lache

Okay.

benefited the already from So in There's you course last year. from of in the year this the of year year? no from over effect other you the words, had the the negotiations spillover middle like beginning that or of had

Kevin Nowlan

about as share the I spillover make with in inflationary really our QX, effect margins XXXX, recovering think on were we customers respect as sure the with we seeing focus was we potential comments is I volatility the in how exited what impacts mentioned fair XXXX. the -- we to of in negotiated that we're a my in

and increases would inflationary our extent And we head as offset to to environment. pricing the our those some suppliers, we into XXXX, continue with discuss to need of customers the which

material little full bit QX on in And year-over-year 'XX. to the relative we so the our environment don't to a we of net as could overall, a of those outlook see choppiness for basis see a pricing some through from But year discussions. is we go impact expect that

Rod Lache

the the inflationary through like Understood. things scope burden in in maybe labor embedded clarify the this is materials it for other offsetting Is is factors of at your beyond you you magnitude productivity. you're it's is additional energy, correct that point? that to of that and like extending seemingly already and and part burden inflationary parts numbers Can what

Kevin Nowlan

the managing impact through of about fair is we things. from disclosed costs biggest customers our issues and P&L recoveries that that freight we the a cost and net impact the material from to on inflation mean, we've material labor, $XX from date other But was headwind. side year, million other That's Yes. to of productivity have we're obviously, last say, is on Rod. cost net I really what on see the

Operator

question And Bank Murphy of from comes with America. our next John

John Murphy

all through the you've your showed it to follow your content wanted in XXXX on acquisitions. EVs opportunity what just something here. on response had you vehicle I I investment of developed banks you like the and shows through up per other mean, outside

big I'm chunk looking a as still the at we're just business of But being curious, ICE.

through of you vehicle? an and if a the how ICE you vehicle view think content about curious developing the EV XXXX million in as you Just similar ways per had content XXXX provision on showed

Frederic Lissalde

would or contributor at in hybrid look the or ICE positive if powertrain pure I the our say you Yes. to whether powertrain products, outgrowth. XX, in combustion

we see types from lot of energy-efficient So ICE still products. a market the pull for of our

John Murphy

Okay. And returns like sometime -- showed. you return also, between you sort mean that mean it just do you're of I return you I looks 'XX, capital and When is the margins the become when it's closer an might capital do of become like think on for invested the looks occurring invested that is of get 'XX, highlighting breakeven 'XX slides, slide adequate you? sort indicating on of an it to business the the starts on adequate? kind EV's basis to "normal". in you in operating start the kind think 'XX on and 'XX, roughly that that to level

Frederic Lissalde

appropriation to So Kevin. other EV John, that over booking the through we processes ROIC maybe I products are than start at turn threshold going The announcing any same products. and request it are

ROIC And from program doubt a Kevin… turn There's to program Not standpoint, over I'd that. it no timing use so the by about there.

Kevin Nowlan

No.

as that's what basis, these to in programs categories, a price all foundational that on the lot point. drive have makes of in the our so profitable, that today bit businesses think is in a the they're past, invest I We e-business different key a eProducts-related little mentioned we stand-alone the that than to growth upfront, our we've R&D. businesses, of product other revenue some these

so provides overhang And margins given in-year an the that to year. any

'XX this in our that see even year, you And guide.

to pretty million of X million years invest X, with. that wins good But happy and business support to have $XX conversion out. $XX to new We we're we're another continuing levels X

on to business, to that And related continue stand-alone our happy we the growth as so meeting to in long-term invest to for programs continue continue business viable to as individually this targets long ROIC here. have in R&D to basis, in invest we we're sure are the a as very And long going prospects make see as eProducts we're R&D. that all those to again,

John Murphy

of maybe point may range, front I of it there XX% that maybe improve ICE aggregate margins of 'XX? to you the margins even as over business in sort transition being is ICE do this and bit to a us? a think at do I like put kind even think time you think and together, looks And lastly, on margins Or point be 'XX the we all in we're mean hitting in mean, just on XX%, this about XX% returns low will the still a where of kind in those that's the margins

know we Because I roughly, and mean, that trying out, to I be may are of average of far show getting hitting we get kind you improve. far low but we're just return? kind understand this may what match 'XX and sometime basis on transition breakeven the business we indicates actually EV an really a part to that the looking between 'XX to point sort EV things on that through 'XX, as of between people

Frederic Lissalde

you've example would very quartile product And the that strong and our foundational forget around top products have leadership I scale that. morning the product of and we and EV great very, an of in say foundational we as past. remain margin that this will a in is cooling seen that don't Also, our on the made battery impact growth the plates John, strong. is the one the announcements

combustion. world foundational cooler the We're applications of in know-how product with leveraging

around from into proving battery technology We around leakage brazing control know-how are plate. cooling the our leveraging processes,

is this world. EV product of for great know-how foundational developed losing the a So new example to create a organically

John Murphy

say, and that this a now sort operating it basis mark the hard the might margins low time all to that's markets transition into it what the where is point using at fair be but an mark conceptually mark right know through the we one year money transition it's going just that's in of of on may Okay. looking based or may I a on 'XX. last in mean, this being -- be showing kind I say, given going But, to equal? may a of you're volatility transition you in water else the just and

Frederic Lissalde

John, 'XX? to But point I breakeven. breakeven, we Is the 'XX? it's say. absolutely end that's of revenue pretty visible. Is mean tough and it both it a a to are approaching turning from absolutely it clear beginning that path now is

Operator

Instructions] question next Luke our [Operator Baird. from we'll with Junk And take

Luke Junk

great is think XXX-volt with and be today? pull you the get push more that you XXX-volt with you're dynamic what animate Does that Fred all? what curious customer moving architectures. will, the your on industry-wide perspective at in industry-wide or award seeing Kevin, XXX-volt? consensus, Do And mentioned towards and just terms it'd to this happened just you the of if between

Frederic Lissalde

Look, volts will in vehicle type on XXX that to to with depending and space the and and set leave comes wants additional voltages cost market. the believe the two a remain application, but we will also and the few have features price leads efficiency a that point active. OE improvements, vehicle the the technologies both and end

approach pretty those that on silicon module design on carbide agnostic voltages BorgWarner that inverters what of of level have a we the are level doing of And be output to we focusing necessary at voltages. building so so we're depending the modular really that using will blocks silicon, is or

Luke Junk

I now be Wolfspeed And most compete that and after chain supply Good. in carbide? silicon was that. November, follow-up, supply your announced could around extent think specifically ensure you that peers my for position for And could the to in advantaged incrementally importantly, on hoping your partnership? what ability Appreciate then versus just and you you comment partnership

Frederic Lissalde

can is I not very, a this supplier our points. agreement forward want OEM we've we our that silicon the with going other meaning secured fact that but corridor One, X can of should too. fast to want, our pretty and think supply open, exclusive the with expectations growth, and carbide if we So with also meet significant other silicon suppliers, is work is carbide us absolutely work supply door

who to with we have ability work flexible capacity a think decide but we So I also the be significant road. the corridor, secured we down to

Operator

Morgan next question with from Stanley. Jonas will our And Adam come

Adam Jonas

kind around it of curious so XXXX on about hope versus cooling hope prismatic Slide Fred, beautifully become plan pouch the cylindrical like that, feeling that Tesla you're changing XXXX because up I'm or make that Buddy, form be others you're I standard, there's nesting of though still and X, an thinking given and I better. a better. feel more is noticed cylindrical you their seems what factor fourth plates maybe and reports industry of I GM, cell. might to possibly some not even ramping -- factors? doing it form lot getting

get what's curious on? of XXXX, a Because Tesla but or was a argument bit shift dense pouch that that and versus better and well. just prismatic possibly energy your witnessing cylinders but and I plate pouch? momentum, that some Is products energy are more to the with able you're the the thought I to get around with was gravitational of cylinder your as was like cooling others going whether from not the density

Frederic Lissalde

Yes.

the we So mainstream. first, we we the different major first, vehicle where be where marketplace. we what in manufacturer say in In the I see as battery really side, will that from that a technologies cylindrical that, German standpoint, have a OEM, business car, commercial pass won would with pack are active

is and to CV, their have here all question and But created cylindrical will pros your the views. be simply focused they different to on mainstream hitting cooling we've is different cylindrical. market, which technologies. on I've on Again, cons. applicability and the the comment answer on What technologies to got other

Adam Jonas

Okay. Fred, And appreciate just... that.

Frederic Lissalde

significant XXXX estimate I billion pretty The market types opportunity, for battery architecture, that add, be only those I and thing plates that opportunity around battery would already. are a we mean, to in cooling $X.X of those market generating

So as it's significant. not

Adam Jonas

Fred. it, Got

The the change picked view committed, on from in consumer et investment of I commitment up might didn't gives rate really on changed, slowing your you out if the cetera. a know price And quarter margin. but seeing Tesla's have have portfolio in they're forward to dramatic cost or I your so. rates the might capital, a Just interest know change of any continues electrification of was or that really -- pushing hesitation at long-dated into EV Are over there cuts, terms a still maybe last you forward. OEMs world of follow-up. the you

Frederic Lissalde

that see, focus be though, after, when that they X calls, management, And is the see a talking few together. launch. on pivot want who we so program and but What that can contrary, partner customer Tier in we increase. what I both impactful capacity also we're also the side mentioned from a someone as sides, side, is side with we about east the prior say the program, we on foundational I accelerate to No. months also, would to OE on see book I tremendous a

Operator

with next Noah comes Kaye Our from question Oppenheimer.

Noah Kaye

a with for here. battery stick I'll minute the theme

Akasol, then year, the out for a BEV expectations quarter. given over majority organic the higher this of mentioned just growth growth term? So significant also at And the you this contributor driving I guess, medium is battery is outlook you called

what's driving platforms? commercial own just picking you increased share And in expectations your your sell-through are just for understand EV higher Or on battery Is us it business? the up new gains help side?

Frederic Lissalde

simple. It's No.

We leading moving $X billion XXXX. for $X see year to you that this pleased already other our have $XXX that on our XXXX. million slightly inverted Akasol role or part that's and cases, about we're across of in volume higher about to customers, us portfolio. from with multiple year path. very the impact But awards motor customer under very in billion And core slightly and from pleased And the also is our wins -- last on glide too

Noah Kaye

the manufacturing might I'm your battery you're any that the Okay. if curious XXx making CapEx And in much how price allocated production of a to And then benefit just you follow-up. might be how investments. tax XXXX U.S.

Kevin Nowlan

up the accelerating as in business. seeing then Yes, other a that because to of our And investments related related both in are through we're Fred year-over-year America side. that to some revenue expenditure we vehicle part of increase on even mentioned, also seeing North the Europe on the basis light capital in the of we're electrification we're and making the 'XX, businesses in Akasol, acceleration

the a to might looking and And to us apply how relates those contributor. beyond. as 'XX from go at through credits we're tax a definitely So North it and America, production standpoint we as

Noah Kaye

Just full waiting get to clarification? for guidance treasury

Kevin Nowlan

we there's are based here the we the that that that we're some mean sure production us think I we that were that the any in pursuing to -- had, on be to making available need credits are clarifications United understand that, executing States. but of

Operator

Delaney one question, Goldman for from with final Sachs. question Mark that We and have comes time

Mark Delaney

customers, what to volumes When to what your to vehicle OEM you as you is think speak do to auto extent XXXX? opposed the volume supply in gated gating demand? production is by factor light And

Frederic Lissalde

more a is answer to question, still say, from supply would availability unfortunately. availability XXXX. and And from it's your I semiconductor standpoint standpoint alive, capped demand The a in

Mark Delaney

question just second customers the And responded was announced how the in to of of business. have terms separation

great all on in Werner announced products about seen engagement customer wondering I'm any the with design the change side. momentum to separation? having spoke have the is though, you in product NewCo You

Frederic Lissalde

No, to strategy we're we've two able spin-off. are actually from our they with happy see no to to own respective being strong with obviously and their the execute happy that be noise understand. and talk And almost those all customers, companies There's announced all nil.

Patrick Nolan

technical we today. for all the questions apologize I'd to your you difficulties in Again, the Now call. for thank like earlier

today's me additional if conclude have team. follow-ups, and you to With that, out reach operator, If can you my call. few directly

Operator

results conclude conference does the quarter fourth XXXX call. BorgWarner That

You may disconnect. now

BorgWarner (BWA) 9 Feb 232022 Q4 Earnings call transcript