Borgwarner Inc. · NYSE:BWA
Borgwarner — Investor Day (August 2017)
57 slides from Borgwarner's investor day presentation, Aug 7, 2017
Slide 1: Investor Day 2017
Investor Day 2017 August 7, 2017
Slide 2: Investor Day 2017 - Patrick Nolan
Investor Day 2017 Patrick Nolan Vice President, Investor Relations August 7, 2017
Slide 3: Safe Harbor Statement
Safe Harbor Statement Statements contained in, or incorporated by reference into this presentation, future filings by us with the Securities and Exchange Commission (“SEC”), and oral statements made by, or with the approval of, our authorized personnel, that relate to our future performance or futur
Slide 4: Investor Day Agenda
Investor Day Agenda 9:30 Progress Towards Combustion/Hybrid/Electric Goals – James Verrier, President and CEO 10:10 Product Leadership – Chris Thomas, Chief Technology Officer 10:25 Break - Static Displays Available 11:05 Financial Discipline and Outlook - Ron Hundzinski, Chief Financial Officer 11:
Slide 5: Investor Day 2017 - James Verrier
Investor Day 2017 James Verrier President and Chief Executive Officer August 7, 2017
Slide 6: Addressing Vehicle Mobility Trends
Addressing Vehicle Mobility Trends autonomous shared cars connected efficiency/CO2 driving and rideshare cars emissions THERE WILL ALWAYS BE A NEED FOR A PROPULSION SYSTEM © BorgWarner Inc. 6
Slide 7: Balanced Across Propulsion Systems
Balanced Across Propulsion Systems $285 $225 $215 COMBUSTION ELECTRIC Estimated 2023 HYBRID Average Content Per Vehicle (Shared at Sept ‘16 Investor Day) Note: Participation Rate 53% 42% 29% © BorgWarner Inc. 7
Slide 8: IHS Light Vehicle Projections
Electric IHS Light Vehicle Projections Hybrid Combustion 2% CAGR 107M 3.4M 0.5M 93M 31% CAGR 21M 3M 34% CAGR 90M 83M -1.1% CAGR *Source market data: IHS Light Vehicle Forecast (May 2017*). 2016 IHS UNITS* 2023 IHS UNITS* © BorgWarner Inc. 8
Slide 9: 2020: Ongoing Evolution
Electric 2020: Ongoing Evolution Hybrid Combustion 107M 2.2M 102M 3.4M 0.5M 93M 21M 3M 11M 90M 89M 83M *Source market data: IHS Light Vehicle Forecast (May 2017*). 2016 IHS UNITS* 2020 IHS UNITS* 2023 IHS UNITS* © BorgWarner Inc. 9
Slide 10: Combustion Propulsion
Combustion Propulsion* * Includes engines, transmissions and all-wheel drive systems with no electrification, includes stop/start. All prices are estimates, actual prices will vary. Combustion Products: Timing system Variable cam timing Exhaust gas recirculation Clutch plates All-wheel drive systems
Slide 11: Growth and Participation in Combustion
Growth and Participation in Combustion aCPV (Average Content Per Vehicle) Combustion Vehicles with BW Content 88M 89M 86M aCPV aCPV aCPV 53% 44% 50% $185 $200 $215 2016 IHS UNITS 2020 IHS UNITS 2023 IHS UNITS (As of Sep 2016) (As of Aug 2017) (As of Sep 2016) © BorgWarner Inc. 11
Slide 12: Combustion – Select Customer Awards
Combustion – Select Customer Awards P0 Timing DrivesP2 & P3 Turbochargers: Variable Cam 1.5L gas Asia (2) Timing: 2.0L gas EU (3) Americas (1) 2.0L gas Asia (1) EU (2) Asia (5) Dual Clutch EGR Modules: Modules: EU (3) Asia (4) Asia (2) © BorgWarner Inc. 12
Slide 13: Hybrid Propulsion
Hybrid Propulsion* * Includes mild, full and plug-in hybrid. All prices are estimates, actual prices will vary. Combustion Products PLUS Hybrid Specific Products Exhaust heat recovery systems Electric drive motors Disconnect clutch and controls Pictured products and many more… eBooster® iBAS Systems
Slide 14: Growth and Participation in Hybrid
Growth and Participation in Hybrid aCPV (Average Content Per Vehicle) Hybrid Vehicles with BW Content 18M 11M aCPV aCPV aCPV 3M 42% $140 20% $240 $225 36% 2016 IHS UNITS 2020 IHS UNITS* 2023 IHS UNITS (As of Sep 2016) (As of Aug 2017) (As of Sep 2016) © BorgWarner Inc. 14
Slide 15: Hybrid – Select Customer Awards
Hybrid – Select Customer Awards P3 BAS for P0: Wet disconnect Exhaust Heat 200V Asia and controls: Recovery System: 200V EU Asia (2) N. America © BorgWarner Inc. 15
Slide 16: Hybrid – Select Customer Awards
Hybrid – Select Customer Awards P3 eBooster®: Chain Drive: 48V EU (3) Asia & EU © BorgWarner Inc. 16
Slide 17: Electric Propulsion
Electric Propulsion* * Includes battery electric vehicles, range extenders and fuel cells. All prices are estimates, actual prices will vary. Electric Vehicle Products: Electric all-wheel drive Liquid heater Auxiliary coolant pump Fuel Cell air supply Transmission Chain Pictured products and many mo
Slide 18: Growth and Participation in Electric
Growth and Participation in Electric aCPV (Average Content Per Vehicle) Electric Vehicles with BW Content 2.3M 2.2M aCPV aCPV aCPV $620 0.5M 3% $285 26% $285 29% 2016 IHS UNITS 2020 IHS UNITS* 2023 IHS UNITS (As of Sep 2016) (As of Aug 2017) (As of Sep 2016) © BorgWarner Inc. 18
Slide 19: Electric - Select Customer Awards
Electric - Select Customer Awards P0 P2 P3 eGearDrive® Electric Electric Transmission: Drive Motor: Drive Module: Asia (5) N. America Asia (4) N. America N. America © BorgWarner Inc. 19
Slide 20: Electric - Select Customer Awards
Electric - Select Customer Awards P0 P2 P3 Cabin Air Friction Auxiliary Heater: Plates: Coolant Pump: N. America EU Asia Asia (2) © BorgWarner Inc. 20
Slide 21: Commercial Vehicle Technology
Commercial Vehicle Technology Low fuel consumption and a long service life remain priorities Highly efficient technologies offered across platforms Boosting Engine Timing Exhaust Gas Ignition Starters & Thermal Heavy Duty Transmission Technologies Systems Management Technologies Alternators Manageme
Slide 22: Excellent Balance by 2020
Excellent Balance by 2020 $285 $240 $200 COMBUSTION ELECTRIC NEW HYBRID Estimated 2020 Average Content Per Vehicle Note: Excludes Sevcon Note: Participation Rate 50% 36% 26% © BorgWarner Inc. 22
Slide 23: Staying Ahead of the Curve
Staying Ahead of the Curve New 2020 outlook indicates BorgWarner is tracking ahead of our 2023 goals Product portfolio is well positioned to address current & future propulsion needs Continued significant wins across C-H-E Continued confidence in long-term growth targets of mid to high single digits
Slide 24: Investor Day 2017
Investor Day 2017 August 7, 2017
Slide 25: Investor Day 2017 - Christopher Thomas
Investor Day 2017 Prof. Christopher Thomas Chief Technology Officer August 7, 2017
Slide 26: Why We Are Winning
Why We Are Winning New dynamics in customer engagements Product leadership across propulsion systems © BorgWarner Inc. 26
Slide 27: All Markets Have Similar Challenges
All Markets Have Similar Challenges Propelled by both regulatory demands and consumer needs Never-ending drive to improve performance and efficiency Note China 2020-2025 has been added by BW. Source: CATARC EU 2025 at 86 g/km CO2 Source BW EU 2030 at 75 g/km CO2 Source BW © BorgWarner Inc. 27
Slide 28: New Dynamics in Customer Relationships
New Dynamics in Customer Relationships Historical: BorgWarner Engineering worked with technology leading customers to develop and launch specific products New Dynamic: Approach our customers as a balanced propulsion partner Open dialogue concerning future of propulsion mix Collaborate to implement p
Slide 29: Long-Standing Relationships Paying Off
Long-Standing Relationships Paying Off China 13% GM 2% Ford 1% VW/Audi 1% BYD 1% SAIC 1% Americas 33% Great Wall 1% Ford 8% Other China 6% Europe 40% FCA 6% GM 5% VW/Audi 11% Asian OEMs 3% Daimler 5% Commercial 4% Asia ex. China 14% Renault 4% Vehicles Ford 3% Hyundai/Kia 8% Other 7% BMW 3% Other As
Slide 30: Product Leadership Across Propulsion Systems
Product Leadership Across Propulsion Systems Common themes: Proprietary high-tech products / Intellectual Property Commercialize in mass volume Continuous innovation Strong market position © BorgWarner Inc. 30
Slide 31: Variable Turbine Geometry (VTG) Turbochargers
Variable Turbine Geometry (VTG) Turbochargers VTG Controller Compressor Deep systems integration 250,000 rpm – 18x Turbine faster than Boeing 787 blades Temps >1000°C – lava rock starts liquifying at 700°C VTG Shaft Bearing Housing Mechanism Housing © BorgWarner Inc. 31
Slide 32: eBooster Electrically Driven Compressors
eBooster® Electrically Driven Compressors Deep systems Compressor integration 0-75,000 rpm in 0.25 Housing seconds Unique motor & power electronic Shaft applications Power Motor Electronics © BorgWarner Inc. 32
Slide 33: Hybrid / Electric Drive Motors
Hybrid / Electric Drive Motors Lamination Housing Deep systems Stacks / integration Magnets 18,000 rpm Same motor used for both vehicle propulsion and battery regeneration Bearing Unique motor & power Bearing electronics applications Stator / Windings Rotor © BorgWarner Inc. 33
Slide 34: Wide Variety of Hybrid / EV Motor Topologies
Wide Variety of Hybrid / EV Motor Topologies Awarded / H/EV Traction Motor Production Quoted Permanent Magnet Non-Permanent Magnet Neodinium Assisted Synch Reluctance Rectangular Wire Rectangular Wire Round Hairpin S-Wind Round Hairpin S-Wind Induction Induction Wire Wire Copper Aluminum © BorgWarne
Slide 35: S-Wind High Efficiency Stator
S-Wind High Efficiency Stator •More Power in Same Size Motor Increased Copper •Better Copper Utilization = Less Cost area •Heat Transfer •Reduces Space Coil End Turn Height Reduction Conventional S-Series © BorgWarner Inc. 35
Slide 36: Winning Combination
Winning Combination Unique customer engagements Helping customers determine future propulsion portfolio mix True partner with OEMs; balanced across propulsion systems Product leadership Providing elegant solutions to complex propulsion challenges BorgWarner remains at the forefront of evolving indus
Slide 37: Investor Day 2017
Investor Day 2017 August 7, 2017
Slide 38: Investor Day 2017 - Ron Hundzinski
Investor Day 2017 Ron Hundzinski Executive Vice President & Chief Financial Officer August 7, 2017
Slide 39: Excellent Balance Across Light Vehicles
Electric Excellent Balance Across Light Vehicles Hybrid Combustion 0.6% 0.1% 2.2% 1.7% 3.0% 1.1% 10.8% 9.6% 96.4% 98.8% 87.0% 88.7% 2016 IHS UNITS* 2016 BWA REVENUE (USD) 2020 IHS UNITS* 2020 BWA REVENUE (USD) *Source market data: IHS Light Vehicle Forecast (May 2017) © BorgWarner Inc. 39
Slide 40: Dual Clutch & Control Module Market Opportunity
Dual Clutch & Control Module Market Opportunity Dual Clutch & Control Modules 2023 Combustion market is 83M vehicles Dual Clutch penetration (of LV Market) 12% Estimated BorgWarner market share (of DCT market) 38% Average Content per Vehicle $300 ~$1.1B Annual Sales Opportunity, with additional oppo
Slide 41: Hybrid Boosting Market Opportunity
Hybrid Boosting Market Opportunity Turbocharger Opportunity for Hybrids 2023 Hybrid market is 21M vehicles Turbocharger penetration of 45% Estimated BorgWarner market share 30% of Turbocharger market Average Content per Vehicle $250 ~$700M Annual Sales Opportunity, additional opportunities in Combus
Slide 42: P2 Hybrid Market Opportunity
P2 Hybrid Market Opportunity P2 Hybrid Architectures 2023 Hybrid market is 21M vehicles Clutch Modules & P2 Hybrid architecture penetration of 13% Friction Transmission Controls Estimated BorgWarner Market participation is 55% of all P2 applications Average Content per Vehicle: $230 Friction Product
Slide 43: Electric Drive Market Opportunity
Electric Drive Market Opportunity Electric Drive Motors & Modules 2023 Electric market is 3.5M vehicles Electric Drive penetration of 100% Approximately 40%-50% outsourced Estimated BorgWarner Market Share 15%- 20% of the outsourced Electric Drive market Average Content per Vehicle $1,000 ~$210M-$35
Slide 44: $2 Billion Market Opportunity
$2 Billion Market Opportunity Significant opportunities in other C-H-E products for additional revenue growth © BorgWarner Inc. 44
Slide 45: Accelerating Revenue Diversity by 2020
CV & AM Electric Accelerating Revenue Diversity by 2020 Hybrid Combustion 7% CAGR $11.5 3% CAGR $1.6 $8.8 102% CAGR 21M $0.2 $1.4 $1.0 88% CAGR <$0.1 $0.1 $7.3 83M $8.8 5% CAGR 2016 *all values in billions 2020 © BorgWarner Inc. 45
Slide 46: Projected Operating Margin Growth by 2020
Projected Operating Margin Growth by 2020 Low 13% Range 12.6% *2016 Margin Proforma for Remy LV Aftermarket Sale 2016* 2020 © BorgWarner Inc. 46
Slide 47: Rigorous Focus on ROIC
Rigorous Focus on ROIC Ingrained in the BorgWarner culture since the 1990s Each business decision must stand on its own merits >$2M investments must be approved by the Investment Committee >$15M investments must be approved by the Board of Directors MINIMUM 15% ROIC after-tax requirement across C-H-
Slide 48: Capital Deployment Discipline
Capital Deployment Discipline ROI% 20%+ 19% 18% 17% 16% 15% 2017 2018 2019 SOP Year © BorgWarner Inc. 48
Slide 49: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation Maintain technology leadership 4% of revenue for R&D spending Capital Spending 5.5%-6.5% of sales 80% for growth programs Dividend growth in line with cash flow Maintain adequate liquidity for M&A Offset dilution of stock based compensation via share repurchas
Slide 50: Well Positioned for Ongoing Financial Strength
Well Positioned for Ongoing Financial Strength Expect 7% revenue CAGR through 2020 Evolution of revenue matches industry trends Growth products across platforms represent significant revenue opportunities Margins improve through end of decade ROIC hurdle rates steady across portfolio Balanced capita
Slide 51: Investor Day 2017
Investor Day 2017 August 7, 2017
Slide 52: Investor Day 2017 - James Verrier
Investor Day 2017 James Verrier President and Chief Executive Officer August 7, 2017
Slide 53: Combustion - Select Customer Awards
Combustion - Select Customer Awards Timing drive Americas (2019), EU (2019), Asia (2019) Variable cam timing EU (2019), Asia (2018, (3) 2019) Dual Clutch Module Asia ((4) 2019) Transfer Case & Disconnect EU (2020) EGR Cooler EU (2017, 2019, 2020), Asia (2018, 2019) Plug top Ignition coils EU (2020)
Slide 54: Hybrid - Select Customer Awards
Hybrid - Select Customer Awards Chain drive for P3 Europe (2018) Wet disconnect and controls for P2 Asia (2018, 2019) 200V BAS for P0 EU & Asia (2019) P2 On-Axis Module EU (2020) CV P2 On-Axis motor N. America & EU (2018) Exhaust heat recovery system N. America (2019) 48V eBooster® EU (2019, 2020) ©
Slide 55: Electric - Select Customer Awards
Electric - Select Customer Awards eGearDrive® transmission Asia (2017, 2017, 2018, 2018, 2018) Electric Drive Module Asia (2018, 2018, 2018, 2019) Electric Drive Module N. America (2019) Cabin Air Heater N. America (2017) Cabin Air Heater China (2017, 2018) Electric Drive Motor N. America (2018) CV
Slide 56: Our Strategy is Working
Our Strategy is Working Continued significant wins across C-H-E New 2020 outlook indicates BorgWarner is tracking ahead of our 2023 goals Expect 7% revenue CAGR through 2020 Margins set to improve through the end of the decade Ongoing confidence in long-term growth targets of mid to high single digi
Slide 57: Thank you!
Thank you! © BorgWarner Inc. 57