Slide 1: Charging Forward Investor Day 2021
Charging Forward Investor Day 2021 1
Slide 2: Welcome and Agenda
Charging Forward Welcome and Agenda Investor Day Patrick Nolan – Vice President, Investor Relations March 23, 2021 2
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “cou
Slide 4: Forward-Looking Statements: Risks and Uncertainties
You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results t
Slide 5: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation contains information about BorgWarner’s financial results that is not presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Such non-GAAP financial measures are reconciled to their closest GAAP financial mea
Slide 6: Today's Agenda
Today’s Agenda Accelerating Our Electrification Strategy Fred Lissalde, Chief Executive Officer Technology Leadership in Electrification Stefan Demmerle, President, PowerDrive Systems Financial Performance and Outlook Kevin Nowlan, Chief Financial Officer Closing Remarks Fred Lissalde Break All Q&A
Slide 7: Questions
Questions FOR THOSE DIALING IN United States: (844) 264-9340 International: (267) 753-2116 Conference ID: 9958459 To ask a question: Press *1 FOR THOSE LISTENING ON-LINE Submit your questions to ir@BorgWarner.com during the call 7
Slide 8: Accelerating Our Electrification Strategy
Charging Forward Accelerating Our Electrification Strategy Investor Day Fred Lissalde – Chief Executive Officer March 23, 2021 8
Slide 9: Intentional Growth for a Sustainable Future
Intentional Growth for a Sustainable Future Revenue from EVs • This high-impact change is a product of our vision and strategy <3%1 ~45% • Our vision of a clean, energy- efficient world is as relevant today as ever • And our accelerated electrification strategy to advance that vision is today’s stor
Slide 10: BorgWarner Is Evolving Its Mission
BorgWarner Is Evolving Its Mission Today and Tomorrow Our mission was focused on balance: We’re accelerating Propulsion System Leader toward electrification for Combustion, Hybrid and Electric Vehicles We deliver innovative and sustainable mobility solutions for the vehicle market 10
Slide 11: This Evolution Is Consistent with Our Commitment to Sustainability
This Evolution Is Consistent with Our Commitment to Sustainability GHG: 50% Reduction by 2030 tCO2e / $M sales Committed to being 50 40.9 Baseline 40 30 32.0 Progress as of 2019 Goal 20.5 CARBON NEUTRAL 20 2015 2018 2021 2024 2027 2030 by 2035 Energy: 37% Reduction by 2030 Our sustainability objecti
Slide 12: We Empower Our Diverse Teams
Local Accountability Global Strength Gender Diversity Gender Pay Overall New Hires Parity1 33.2% 25.6% 98.7% Leadership 14.6% WeEmpower We Empower Our Our Diverse DiverseTeams Teams Minorities (USA) Overall 21.2% New Hires 24.7% Leadership 13.9% 1 This study was facilitated by Mercer on behalf of Bo
Slide 13: Rising Temperatures Drive Demand for Clean, Efficient Vehicles
Rising Temperatures Drive Demand for Clean, Efficient Vehicles External Factors Global Surface Temperature Anomalies – 5-year average 1 Are Accelerating Degrees Celsius 0.4 Demand for Cleaner, -0.2 More Efficient -0.8 1880 1900 1920 1940 1960 1980 2000 2020 NASA figure adapted from Goddard Institute
Slide 14: We're Moving Electrification to the Forefront of Our Strategy
We’re Moving Electrification to the Forefront of Our Strategy 2021-2025: Accelerating Our Shift These actions alone expected to lead to • Significantly shifting our organic investments towards electrification • More aggressively deploying capital ~45% toward M&A revenue from EV • Steadily optimizing
Slide 15: We've Grown Our Electrification Portfolio Deliberately over Time
We’ve Grown Our Electrification Portfolio Deliberately over Time Rotating electric Est. 2025 Content Opportunity per eLV 2015 (i.e., motors) $2,640 2016 Industrial-focused power electronics 2017 Electronics for start- $1,614 Delphi/Sevcon Acquisitions up EV customers — Power Electronics 2018 Battery
Slide 16: We Know How to Evolve to Meet Tomorrow's Needs
We Know How to Evolve to Meet Tomorrow’s Needs Decades of leadership through strategic evolution — and our next phase is underway Late 1990s Total Turbos 2010s DCT Units in Vehicles BorgWarner pivots to ~13M BorgWarner turbos through series of significantly ~2M strategic acquisitions, accelerates du
Slide 17: Electric Vehicles (% Sales)
Electric Vehicles (% Sales) ~45% >25% <3% 2021¹ 2025 2030 1 Estimate at the midpoint of FY21 guidance Source: BorgWarner estimate 17
Slide 18: Organic Investment Will Play a Major Role in Advancing eLV
Organic Investment Will Play a Major Role in Advancing eLV… Estimated R&D Spend for eProducts ($M) Organic Investment Strategy • Combined R&D and capital spending for eProducts >$3B over next 5 years • eProducts approaching 50% of $200 to $225 R&D before acquisitions by 2025 • Spending driven by sec
Slide 19: Well Positioned to Seize Market Opportunity
…and We’re Well Positioned to Seize Market Opportunity Est. 2025 BorgWarner Combustion Based Electric Content Opportunity Per ~2.9X Combustion $ Light Vehicle Summary Hybrid $2,640 Combustion $1,875 $907 Addressable Market $100B $38B Sources: BorgWarner TAM; IHS Markit, KGP. Excludes: Romeo Power B
Slide 20: Prepared to Profitably Scale eLV and Accelerate Expansion
We’re Prepared to Profitably Scale eLV and Accelerate Expansion Estimated BorgWarner eLV Revenue ~$8B Our Objectives Growth with End Markets • Deliver on organic growth initiatives • Leverage next-generation products Charging ~$3.5B and technologies Forward Initiatives • Proactively pursue inorganic
Slide 21: Expanding into eCV Based on Growth, Size, Profit Potential and Fit
We’re Expanding into eCV Based on Growth, Size, Profit Potential and Fit… Estimated eCV Total Addressable Market (TAM) ~$29B eCV Thematic Findings • Large, fast-growing market that builds on existing BorgWarner technologies and capabilities ~$8B • Existing customer relationships will support penetra
Slide 22: Creating an Expanded eCV Portfolio
…Creating an Expanded eCV Portfolio… On-Board Chargers Inverters Charging Product Offerings eMotors Stations • Leverage existing eLV portfolio Electric Drive Modules • Other offerings for fuel-cell- based eCVs Battery Modules & Packs eHeaters 22
Slide 23: With Significant Potential for Growth
…With Significant Potential for Growth Estimated BorgWarner eCV Revenue >$2B Our Objectives Growth with End Markets • Execute organic growth plan • Explore potential partnerships or Charging >$1B collaborations for stronger move Forward into eCV market Initiatives • Complement existing portfolio thr
Slide 24: A More Focused Combustion Business
A More Focused Combustion Business Areas of Focus Combustion Portfolio Profile • Support our customers as they bridge Leading market positions to electrification Growing through 2025+ Strong margins and cash flow • Focus on technologies that interconnect with EVs and future mobility needs • Deliver
Slide 25: How We'll Measure Success
How We’ll Measure Success Expected Revenue Mix 2030 Light Vehicle Market Mix $22B+ 102M Units ~$18B 36% $15B1 Hybrid 34% Electric Vehicles ~45% 30% 2021 2025 2030 2030 BorgWarner Planning Assumption eLV eCV Combustion Based Aftermarket & Other Electric Vehicle Combustion and Hybrid 1 Estimate at the
Slide 26: Key Takeaways on Strategy and Execution
• We have both the strategies and execution capabilities to lead the industry • Sustainability is core with a commitment to carbon neutrality by 2035 • Our actions through 2025 are expected to achieve ~45% of revenue from EV by 2030, with potential for more to come 26
Slide 27: Technology Leadership Positions BorgWarner to Capture Electrification Opportunities
Charging Forward Technology Leadership Positions BorgWarner to Capture Electrification Opportunities Investor Day Stefan Demmerle – President, PowerDrive Systems March 23, 2021 27
Slide 28: Delphi Engineering Integration Is a Key Near-Term Focus
Bring together • Product Leadership from BorgWarner • Technology Leadership in Power Electronics from Delphi Technologies • Regional Autonomy for Speed and Accountability Engineering priorities moving forward Delphi Engineering • Execution: Securing Program Launches • Pursuit: Driving Growth Integra
Slide 29: Product AND System Capability Are Core to Our EV Strategy
Product AND System Capability Are Core to Our Electric Vehicle Strategy Inverters Motors Gearboxes Integrated Drive Module (iDM) Efficient System Customers 29
Slide 30: Electric Vehicle Gearboxes Provide Foundation for Drive Module Integration
Electric Vehicle Gearboxes Provide Foundation for Drive Module Integration $1.9B BorgWarner Strategy / Competitive Advantage Addressable LV outsourced market • Essential component in integrated drive modules • Builds upon proven transmission and 34% transfer case reliability 2025 • Proven technology
Slide 31: Ford Mustang Mach-e iDM is a Great Example
Ford Mustang Mach-e iDM is a Great Example High torque capacity • Potential for other platform applications, such as light commercial vehicles Integrated Drive Module Integrated Gearbox with gearbox, electric motor, and inverter • Stepped planetary gearset with differential • Optimized for quietness
Slide 32: Electric Motors Support Drive Module Opportunities and eCV Expansion
Electric Motors are Supportive of Drive Module Opportunities and eCV Expansion $4.2B BorgWarner Strategy / Competitive Advantage Addressable LV outsourced market • Broad range of motors for 400V, 800V & 48V • Technology focused on driving superior power density 42% • Product and process innovation f
Slide 33: Why We Are Winning — 800V Electric Motor
Why We Are Winning — 800V Electric Motor for European Commercial Vehicle OEM High-voltage hairpin technology The biggest drivers of the win were High efficiency – 97% maximum POWER DENSITY Sized for high power: over 400kW peak and STRONG Patented stator winding technology CUSTOMER RELATIONSHIP 2024
Slide 34: Inverter Innovation and Technology Will Remain Drivers of Future Awards
Inverter Innovation and Technology Will Remain Drivers of Future Business Awards $8.8B BorgWarner Strategy / Competitive Advantage Addressable LV outsourced market • Scale in Electronics 18% • Efficient speed-to-market with products covering 400V SiC, 800V SiC & 48V 2025 • Proprietary inverter power
Slide 35: 800V and Silicon Carbide Inverters Will Be Drivers of Change
800V is an emerging trend for EVs. Enables: • High power density (2x possible at 400V) for high performance automotive and commercial EVs • 50% reduction in charging time Silicon Carbide is an increasing trend for Inverters. Enables: 800V and Silicon • Significantly higher efficiency, especially at
Slide 36: Custom Integrated Circuits Will Drive Further Innovation
Custom Integrated Circuits Will Drive Further Innovation… Condenses part of the circuit onto a small silicon chip Benefits • Reduced size • Reduced cost • Added functionality • Unique selling proposition Electronics Silicon • Effective IP protection Circuitry “die” Award- winning, in-house design te
Slide 37: Why We Are Winning — 800V SiC Inverter
Why We Are Winning — 800V SiC Inverter for Major European OEM High-efficiency, high-power design The biggest Light duty passenger vehicles driver of the win was at high volume TECHNOLOGY Uses proprietary Viper power switch LEADERSHIP – Compact, double-sided cooling in 800V and SiC 2024 SOP 2022 37
Slide 38: Opportunities for Combination Units of Other Power Electronics
…And We Are Seeing Further Opportunities for Combination Units of Other Power Electronics Benefits and Features $9.7B Addressable LV outsourced market • Combines multiple electronic units for both 400V & 800V applications 17% • Saves space, eliminates cables and hoses OEM In-House • Single unit to i
Slide 39: Three Measures of Success in the Coming Years
Three Measures of Success in the Coming Years Speed Innovation Near-term Revenue Focus for ePropulsion Growth Inverters iDMs eCV Globally in Asia Opportunities 39
Slide 40: Financial Performance and Outlook
Charging Forward Financial Performance and Outlook Investor Day Kevin Nowlan – Chief Financial Officer March 23, 2021 © BorgWarner Inc. 40
Slide 41: Long-Term Planning Secures a Portfolio
Long-Term Planning Secures a Portfolio That… Drives Sustained Outgrowth Delivers Top-Quartile Margins Each year, revenue has grown more than industry production Adjusted operating margin ~$15B1 10.0% revenue 12.3% 12.4% 12.3% 12.1% to 10.5%2 9.7% Outgrowth 2016 2017 2018 2019 2020 2021 Est. 2016 201
Slide 42: Balanced, Disciplined Capital Deployment
Balanced, Disciplined Capital Deployment 2016-2020 Capital Allocation Capital allocation strategy has Capital supported growth while returning M&A activity1 value to shareholders expenditures 36% 34% • Organic investments have driven meaningful outgrowth • M&A has accelerated company’s positioning i
Slide 43: Acquisitions Are Driving Long-Term Value Creation
Acquisitions Are Driving Long-Term Value Creation M&A Has Enhanced Content Opportunity Per Vehicle Delphi Integration On Track Est. Cumulative Cost Synergies Est. 2025 Content Opportunity Per $2,640 Electric Vehicle $175M $15M $90M Delphi/Sevcon Acquisitions — $1,614 Power Electronics 2020 2021 Guid
Slide 44: eLV Market Expected to Experience Profound Growth
eLV Market eLV Addressable Market Expected to ~$76B eHeater/Other1 15% Experience CAGR Profound Growth Power 35% Electronics2 Over Next Decade CAGR ~$38B BorgWarner has positioned itself to ~$11B Motor+Gear3 capitalize on this growth 2021 2025 2030 EV Market Penetration 5% 15% 30% 1 Includes high-vo
Slide 45: eCV Market Also Poised for Significant Acceleration
eCV Market Also eCV Addressable Market Poised for 13% ~$29B Forklift Significant CAGR Chargers Acceleration Rest of World 19% ~$16B Battery1 CAGR EU & North ~$8B America BorgWarner enhancing its focus in this area to participate in rapid growth Inverter2 Motor+Gear2 2021 2025 2030 EV Market Penetrat
Slide 46: Clear Roadmap to Driving Sustainable Growth Through 2030
Clear Roadmap to Driving Sustainable Growth Through 2030 Estimated Organic Growth and Portfolio Realignment… …Sets Up Second Half of Decade $22B+ $2B to $3B ~$4B Growth attributable ~$18B to market mix $15B1 $(3B) to $(4B) ~45% of total >25% of total 2021 Organic Growth Acquisitions Dispositions 202
Slide 47: Profitability on EV Portfolio Expected to Improve as Programs Launch
Profitability on EV $700 Estimated EV Profitability Characteristics 27.0% Portfolio Expected $500 + to Improve as 17.0% Programs Launch $300 7.0% $100 Current profitability already reflects elevated R&D spending for EVs -3.0% $(100) Growth in R&D spending not Breakeven commensurate with sales trajec
Slide 48: Committed to Top-Quartile Margin Profile
Committed to Top-Quartile Margin Profile Adj. Operating Margin Performance Strong margins are part of the BorgWarner culture >11.0% • Sales growth and proactive cost Double-digit margin management sustain margin profile even with revenue mix shift 10.3% • R&D for rapidly growing EV portfolio is over
Slide 49: Strong Free Cash Flow Generation Expected to Continue
Strong Free Cash Flow Generation Expected to Continue Estimated Free Cash Flow ~$4.5B in FCF expected over 5 years, building on record 2020 performance >$1.0B • Expect to continue delivering strong $0.8B to $0.9B conversion of earnings into FCF • Working capital in support of revenue growth encompas
Slide 50: Dispositions Increase EV Focus and Allow for Capital Redeployment
Dispositions Increase EV Focus and Allow for Capital Redeployment Disposition Planning Assumptions Portfolio management becomes increasingly important Prioritizes BorgWarner vision of a clean, energy-efficient world ~$1B in sales over next 12-18 months Supports future propulsion mix objectives Based
Slide 51: Significant Capital Available to Accelerate Positioning in EV
Significant Capital 2021-2025 Estimated Capital Flows Available to Accelerate >$7B Positioning in EV ~$1.5B Dispositions1 ~$5.5B • Strong cash flow and investment- >$1.0B Available grade balance sheet support M&A Available Leverage2 for M&A • Dispositions provide additional source of capital ~$4.5B
Slide 52: ROIC Focus Will Continue to Drive Capital Allocation Decisions
ROIC Focus Will Continue to Drive Capital Allocation Decisions Return on Invested Capital Will maintain ROIC discipline as 16.8% electrification investments accelerate 14.7% 15.3% ~12% • Have delivered consistently strong 10.3% ROIC, even during COVID-19 pandemic Cost of Capital1 • Although EV inves
Slide 53: Financial Summary
Financial • Strategic growth actions expected to drive EV revenue of: Summary − >25% of sales in 2025 − ~45% of sales in 2030 • Top-quartile margin performance expected to be sustained, even while funding EV investments • Strong FCF generation expected to continue through 2025 & beyond • More aggres
Slide 54: Appendix
x BorgWarner Appendix
Slide 55: Adjusted Operating Income and Margin Reconciliation to US GAAP
Adjusted Operating Income and Margin Reconciliation to US GAAP The Company defines adjusted operating income as operating income adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations, and other gains and lo
Slide 56: Free Cash Flow Reconciliation to US GAAP
Free Cash Flow Reconciliation to US GAAP The Company defines free cash flow as net cash provided by operating activities minus capital expenditures, including tooling outlays. The measure is useful to both management and investors in evaluating the Company’s ability to service and repay its debt. To
Slide 57: ROIC Reconciliation to US GAAP
ROIC Reconciliation to US GAAP Year Ended December 31, Guidance1 $ in millions 2017 2018 2019 2020 2021 A. Adj. operating income $1,222 $1,350 $1,232 $990 ~$1,540 B. Adjustment to align operating earnings to the performance target's foreign exchange basis - - 17 - - C. Less taxes ((A. plus B.) times