Borgwarner Inc. · NYSE:BWA
Borgwarner — Investor Presentation (August 2010)
36 slides from Borgwarner's investor presentation, August 2010
Slide 1: A Proud Past, A Strong Future
A Proud Past A Strong Future August 2010 Our Beliefs Respect Collaboration Excellence Integrity Community
Slide 2: BorgWarner—Back To The Future
BorgWarner—Back To The Future With 2008/2009 behind us, we are now able to re-focus on growth We have re-sized our business We are energized by the opportunities in front of us Strong demand for fuel economy, lower emissions and vehicle performance persists BorgWarner technologies will lea
Slide 3: The BorgWarner Strategic Difference
The BorgWarner Strategic Difference Technology Focus Customer & Geographic Diversity Cost Control 450% Financial Strength 350% Compound Growth BorgWarner Sales Global Production 250% North American Production 150% 50% -50% '93 '10E 3
Slide 4: BorgWarner = Powertrain Innovation
BorgWarner = Powertrain Innovation Engine 72% / SALES Drivetrain 28% / SALES Turbo Systems Morse TEC (Chain) Transmission Systems 4WD/AWD Systems • Wastegate • Engine Valve Timing Systems • DualTronic® Clutch Modules • AWD Couplings • Variable Turbine Geometry • Timing Chain • DualTronic® Control Mo
Slide 5: Customer Diversity Worldwide
Customer Diversity Worldwide 2010 Sales Outlook* VW/Audi 16% Toyota 6% Daimler 6% Hyundai/Kia 3% Ford 4% Honda 2% BMW 3% Renault/Nissan 1% Fiat 3% Renault/ China 5% 3% Nissan Other 7% GM 1% PSA 1% Ford 7% Commercial GM 3% Vehicles 3% Chrysler 2% Other 10% Asian OEMs 2% Aftermarket 1% Americas ~25%*
Slide 6: Long-Term Opportunities
Long-Term Opportunities Actual and Projected Fuel Economy for Light Vehicles 70 15%-30% E.U. Proposed more fuel 60 economy Miles per Gallon Equivalent (CAFE/Local test cycle) Gas and Diesel 50 Turbochargers E.U. Enacted 5%-15% 40 China Proposed more fuel Japan Enacted economy 30 China Enacted Dual C
Slide 7: Net New Business 2010 thru 2012
Net New Business 2010 thru 2012 $1.8 Billion of Net New Business Americas*: 20% Europe: 50% Asia**: 30% Chrysler Ford Japanese OEMs • Transfer cases •Turbochargers • Engine timing • Engine timing •Diesel cold start • Variable cam timing •DualTronic® Ford GM • Engine timing BMW • Emissions • Variable
Slide 8: Net New Business 2010 thru 2012
Net New Business 2010 thru 2012 $1.8 Billion of Net New Business—By Product DCT GDI, VTG & R2S 13% Turbochargers Transmission 35% Components 2% AWD 5% eGearDriveTM for EV 1% VCT & Engine Timing 14% Turbo & Emissions 16% Ignition Systems 6% Drivetrain: ~20% Thermal Engine: ~80% 8% 8
Slide 9: Global Engine Downsizing
Global Engine Downsizing Light Vehicle Engines Produced—by Engine Size 100.0 90.0 2.5 2.5 2.4 80.0 2.7 8.1 8.0 2.8 8.0 4.7 2.9 70.0 3.2 7.7 Millions of Engines 2.3 7.9 60.0 10.5 8.8 7.3 50.0 5.8 64.4 66.6 40.0 61.8 58.1 54.0 30.0 48.6 48.8 51.6 44.0 20.0 10.0 6.4 8.0 8.9 9.4 4.0 4.0 4.0 4.3 5.2 0.0
Slide 10: Global Light Vehicle Engine Market
Global Light Vehicle Engine Market Light Vehicle Engines Produced—by Technology Type 100 2-10% 90 1% 5% 5% 80 20% 20% Millions of Engines 70 5% 30%-50% 60 20% HEVs 23% ~20% 35% 50 7% HEVs 40 ~6% 30 HEVs 20 68% 51% 33% 10 0 2010E 2015E 2020E Alternative Fuel Gasoline—Port Fuel Injection and Other Die
Slide 11: LV Turbocharger Growth by Market
LV Turbocharger Growth by Market Diesel Turbochargers Gasoline Turbochargers ~31% growth from 2010 to 2015 ~180% growth from 2010 to 2015 20.0 20.0 17.8 17.5 17.5 15.0 15.0 13.6 Millions of Turbos Millions of Turbos 12.5 12.5 10.2 10.0 10.0 7.5 7.5 5.0 5.0 3.6 2.5 2.5 0.0 0.0 2007 2008 2009 2010E 20
Slide 12: High-frequency Ignition
High-frequency Ignition Next generation gasoline engine ignition technology Replacing spark plugs Ignition caused by a high-energy electrostatic field as opposed to spark heat A number of improvements over spark plugs Significant improvement in fuel economy and emissions due to improved co
Slide 13: Expanding Our Emissions Systems Portfolio
Expanding Our Emissions Systems Portfolio EGR Coolers Acquisition BorgWarner has acquired ENSA, a leading supplier of exhaust gas recirculation (“EGR”) coolers 2009 sales of $180 million Cooled EGR lowers combustion temperatures thereby reducing NOx emissions by 40% to 80% in diesel engines* a
Slide 14: Automatic Transmissions Advance
Automatic Transmissions Advance 350+% Growth 90 5.8 2.1 80 6.7 Millions of Transmissions 70 1.2 75% Growth 0.9 4.7 17.7 60 10.1 50 8.0 1.4 12.6 40 0.9 30 45.8 20 36.0 10 0 2010E 2015E Dual Clutch 6/7/8 Speed Step Automatics Manual Transmissions Full HEV/EV 3/4/5 Speed Step Automatics Continuously Va
Slide 15: BorgWarner = Dual Clutch Technology
BorgWarner = Dual Clutch Technology Global volume of nearly 6 million units by 2015 BW DualTronicTM content in > 80% of global market by volume Programs with VW/Audi, Ford/Getrag, BMW/Getrag, SAIC, FAW, Nissan, and other Chinese and Japanese customers 15 Source: CSM, JD Power, BorgWarner forec
Slide 16: New DCT Joint Venture in China
New DCT Joint Venture in China BW & 12 leading Chinese OEMs Module production begins in 2011 BW supplies components BW holds 66% majority ownership 16
Slide 17: Hybrid and Electric Vehicle Segments
Hybrid and Electric Vehicle Segments Increasing Electrification Internal Combustion Engine (ICE) Electric Motor Electric Motor + Electrification + ICE Only Hybrid Electric “HEV” Plug-In Electric Plug-In Stop/Start HEV Mild HEV Full HEV Range PHEV Extender PEV Parallel Parallel/Series Series HEV Elec
Slide 18: Hybrid and Electric Vehicles
Hybrid and Electric Vehicles Projected Global Production in 2015 18 16 14 VW R/N 12 PSA Millions Ford R/N 10 BMW PSA Daimler GM 8 GM Daimler Toyota Tata 6 Fiat Toyota Bright Others Daimler Honda VW 4 BMW Others CODA GM Others 2 Others 0 Stop/Start Mild HEV Full HEV PHEV and PEV 18 Source: BorgWarner
Slide 19: BorgWarner = Hybrid & Electric Vehicles
BorgWarner = Hybrid & Electric Vehicles BorgWarner is developing advanced powertrain products for HEVs vehicles driving efficient use of electrical energy Driving the Engine Turbochargers Electronic Coolant Valve Driving the Wheels DualTronic™ DCT eAssist eGearDrive™ Driving the Accessories Cabin He
Slide 20: BorgWarner = PHEV & PEV
BorgWarner = PHEV & PEV Working with 15 PHEV & PEV Vehicle Manufacturers 5 Traditional OEMs 10 Non-Traditional OEMs 20
Slide 21: Growth in a Low Growth Industry
Growth in a Low Growth Industry BorgWarner Sales* vs. Auto Industry Production* 450% BorgWarner Sales* 10.4% CAGR Global Production* 2.9% CAGR North American Production* -1.0% CAGR 350% Compound Growth 250% 150% 50% -50% '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10E 21 *Bo
Slide 22: Cost Reduction Focus
Cost Reduction Focus Consistently Maintaining Operating Income Margins 9.0% 9.2% 8.8% 8.8% 8.9% 8.5% 7.8% 8.0% 6.3% Adjusted OI Margins 2.0% 2002 2003 2004 2005* 2006* 2007* 2008* 2009* 2010E 22 *Excludes special items. Including these items, operating income margins in 2005, 2006, 2007, 2008 and 20
Slide 23: Earnings Performance
Earnings Performance Leading Sales Growth + Cost Reduction Focus = Strong Earnings Growth $2.80 $2.60 $2.44 $2.17 $2.04 $2.07 $1.83 $1.60 $1.40 Adjusted EPS* $0.40 2002 2003 2004 2005 2006 2007 2008 2009 2010E 23 *Excludes special items. See Appendix slide “EPS Reconciliation “ for details
Slide 24: Financial Discipline
Financial Discipline Strong Returns on Invested Capital = Economic Value Creation 15.6% 15.5% 15.2% 14.9% ~14.0% 14.3% 13.9% 10.0% Return on Invested Capital* 3.3% 2002 2003 2004 2005 2006 2007 2008 2009 2010E 24 *Rolling four quarters. Invested capital excludes residual goodwill related to$4.8 bill
Slide 25: Vehicle Production
Vehicle Production Units in Millions North America Europe 6.0 6.0 4.8 4.7 4.8 5.0 5.0 4.3 4.5 4.0 4.1 4.0 4.0 3.4 3.0 2.9 3.1 2.7 2.7 3.0 2.4 3.0 1.7 1.8 2.0 2.0 1.0 1.0 0.0 0.0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2008 2009 2009 2009 2009 2010 2010 2008 2008 2009 2009 2009 2009 2010
Slide 26: BorgWarner Financial Performance
BorgWarner Financial Performance Dollars in Millions, except Earnings Per Share Sales Operating Income $1,422 $137 $1,500 $1,317 $150 $1,287 $1,198 $107 $1,200 $1,028 $932 $916 $100 $72 $820 $67 $900 $50 $28 $600 $4 ($18) $1 $300 $0 $0 ($50) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2008 2009 2009 2009 2009 2010
Slide 27: Strong Capital Structure
Strong Capital Structure A Strong Balance Sheet = The Flexibility to Weather the Current Environment and Take Advantage of Strategic Opportunities As of June 30, 2010 $ in millions Actual “If-Converted” Cash $187 $187 Total debt 966 627 Net debt 779 440 Total equity 2,058 2,397 Total net capital 2,8
Slide 28: 2010 Expectations
2010 Expectations Industry Production Outlook April 29, 2010 July 30, 2010 North America ~ 11.3 million ~ 11.6 million Europe ~ 16.6 million ~ 17.3 million Asia Global BorgWarner Outlook Sales Growth 28% - 32% 32% - 35% EPS Guidance $2.20 - $2.50 $2.60 - $2.80 Net Cash Provided by Operating Activiti
Slide 29: The BorgWarner Strategic Difference
The BorgWarner Strategic Difference Technology Leadership Drives Growth Customer and Geographic Diversity Cost Control Financial Strength and Discipline 29
Slide 30: Forward-Looking Statements
Forward-Looking Statements Statements contained in this presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management's current expectations, estimates and projections. Words such as “outlook,” "expects," "antici
Slide 31: Appendix
Appendix x BorgWarner
Slide 32: 2009 Revenue by Market
2009 Revenue by Market Agricultural, Off-Highway and Aftermarket Other 8% 7% Medium & Heavy Duty 10% Light Vehicles 75% 32
Slide 33: Automatic Transmissions in China
Automatic Transmissions in China 20 3.2 18 1.5 1.2 16 Millions of Transmissions 14 0.8 3.2 1.9 0.2 12 0.1 0.3 10 1.1 8 0.1 6 11.8 12.0 4 8.9 2 0 2010E 2015E 2020E Dual Clutch Automated Manuals Continuously Variable Manuals Step Automatics 33 Source: CSM, Internal BW forecasts (July 2010)
Slide 34: Transmissions in Europe
Transmissions in Europe By Technology Type 25.0 13% Millions of Transmissions 1% 1% 20.0 2% 11% 14% 15% 7% 1% 3% 3% 2% 15.0 13% 3% 10.0 85% 80% 72% 75% 5.0 0.0 2000 2005 2010E 2015E Dual Clutch Automated Manuals Continuously Variable Manuals Step Automatics 34 Source: CSM, Internal BW forecasts (Jul
Slide 35: Light Vehicle Builds
Light Vehicle Builds Europe & North America—1985 thru 2010E 18.0 17.0 16.0 Production Units (Millions) 15.0 14.0 13.0 12.0 2007 to 2009 Decline 11.0 N. America 43% West. Europe 27% 10.0 9.0 8.0 1985 1990 1995 2000 2005 2010E 35 Source: Ward’s Auto and JD Power 2010E forecast represents consensus est
Slide 36: EPS Reconciliation
EPS Reconciliation Actual and Forecasted Results Earnings per diluted share 2002 2003 2004 2005 2006 2007 2008 2009 U.S. GAAP ($1.11) $1.60 $1.93 $2.09 $1.83 $2.45 ($0.31) $0.23 Non-U.S. GAAP adjustments: Non-recurring charges and restructurings 0.36 0.43 0.02 2.28 0.17 Change in accounting related