Latest Investor Presentation

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Latest Investor Presentation
Fast Forward
Deutsche Bank 2015 Global Auto Industry Conference
January 14, 2015
2015 Guidance—Highlights
 Sales growth of 2% to 6% compared with 2014 sales
 9.5% to 12% sales growth, excluding currency
 EPS guidance range of $3.35 to $3.55 per diluted share
 $3.60 to $3.75 excluding currency
 11% to 14% increase over 2014 EPS guidance of $3.23 to $3.28
per diluted share, excluding non-recurring items
 Operating margin above 13%
 Up for the sixth straight year
As of January 14, 2015
Copyright © 2014 BorgWarner Inc.
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A Portfolio of Leading Powertrain Technology
Engine
67% / SALES
Drivetrain
33% / SALES
Turbo Systems
Morse TEC
Transmission Systems
TorqTransfer Systems
• Wastegate
• Engine Valve Timing Systems
• AWD Couplings
• Variable Turbine Geometry
(VTG)
• Regulated 2-stage
(R2S™)
• Actuators
-Timing Chain
• Variable Cam Timing
-Oil Pressure Actuated
-Torsional Assist
- Cam Torque Actuated
• HY-VO® Transmission Chain
-Transmission/Transfer
case chain
• DualTronic® Systems for Dual
Clutch Transmissions
• ECO-LaunchTM Stop/Start
Accumulator Solenoid Valves
Thermal Systems
• Thermal Management
Components and Systems
• Visctronic® Systems
• eGearDrive® Electric
Drive Transmissions
• One-way Clutches and Modules • eAWD Torque Vectoring
• Friction and Steel Plates
• AWD Electronic Controls
and Systems Integration
Morse TEC
Thermal
Systems
• Fans/Fan Drives
• Exhaust Gas Recirculation
(EGR) Valves
• EGR Coolers & EGR tubes
• Integrated EGR Modules
• Secondary Air Systems
• Thermostats
Copyright © 2014 BorgWarner Inc.
Transmission
Systems
TorqTransfer
Systems
Emissions Systems
• Glow Plugs
• Instant Start System
• Pressure Sensor Glow Plugs
• Gasoline Ignition Technology
• Sensor Technology
• PTC Cabin Heaters
• Transfer Cases
Turbo
Systems
BERU
Systems
Emissions
Systems
3
The BorgWarner Strategic Difference
 Technology Leadership
 Customer and Geographic Diversity
 Financial Strength and Discipline
Copyright © 2014 BorgWarner Inc.
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Global Macro Trends
Pace of Innovation
Connected Living
Autonomous and
Connected Vehicles
Improved Efficiency
Big Data
Resource
Scarcity &
Environment
Copyright © 2014 BorgWarner Inc.
Global
Rebalancing of
Economic
Power
Demographic Shifts
Urbanization
Increased
Vehicle
Population
5
Stringent Regulations—A Resilient Secular Trend
Korea Proposed
MPG Equivalent (CAFE/Local Test Cycle) for
Passenger Cars
60
E.U. Enacted
U.S. Enacted
55
China Proposed
50
45
Korea Enacted
40
35
China Enacted
30
25
20
2005
2010
2015
Year
2020
2025
Source: International Council on Clean Transportation, November 2014
Copyright © 2014 BorgWarner Inc.
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Fuel Economy Drives Growth for BorgWarner
LV Transmissions
LV Turbocharged Systems
103.2
103.2
86.6
86.6
Manual Transmissions
9.4
4.6
31.1
30.1
1.0
9.7
1.0
2014E
Non-Turbocharged
DCT (15%)*
Step ATs (1%)*
CVT (8%)*
AMTs and Other (0%)*
21.5
(13%)* Gasoline
(4%)*Diesel
13.9
2019E
11.6
17.8
21.5
2014E
2019E
LV VCT Systems
LV EGR Systems
103.2
103.2
86.6
86.6
Fuel Economy
Non-EGR
Non-VCT
(6%)* VCT Systems
9.6
2.8
16.6
21.3
2014E
2019E
Gasoline (28%)*
Diesel (5%)*
64.4
47.4
2014E
2019E
Global light vehicle industry volumes; units in millions (January 2014)
* CAGRs are shown in parentheses
Copyright © 2014 BorgWarner Inc.
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Powertrain Trends
Electrification
Downspeeding
Stop/Start
Light-weighting
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48 Volts
Cost Reduction
Thermal Management
Downsizing
and boosting
Fuel Diversification
Emissions
Reduction
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Expanding Our Reach Across the Powertrain
Variable
valvetrain
VCT
ePhaser
Timing system
Timing chain
EGR cooler
Fans/fan drive
Solenoid
Friction
Transfer case
Exhaust heat
recovery system
Eco-LaunchTM
solenoid valve
Control module
Wet clutch for
manual
transmissions
Clutch module
AWD coupling
Permanently
Engaged Starter
FXD
Turbocharger
eBOOSTER®
turbocharger
R2S
turbocharger
Diesel cold start
Gasoline ignition
coils
Copyright © 2014 BorgWarner Inc.
Cabin heater for
EVs
EcoFlash® high
frequency ignition
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Customer and Geographic Diversity
2014 Sales Outlook*
VW/Audi 12%
Daimler
6%
Hyundai/Kia
4%
Toyota
4%
Nissan
1%
Honda
1%
China 10%
Ford
5%
Other 7%
Renault
3%
3%
BMW
1%
Fiat
1%
PSA
1%
GM
Commercial
Vehicles 3%
Other
10%
*
**
NSK-Warner included
NSK-Warner excluded
Copyright © 2014 BorgWarner Inc.
Ford
Chrysler
GM
Asian OEMs
7%
5%
4%
2%
Commercial
Vehicles 5%
Other 5%
Americas
Asia
Europe
~28%* 30%**
~26%* 22%**
~46%* 48%**
10
10% to 12% Organic* CAGR thru 2017
$2.85 Billion — $3.35 Billion of Net New Business 2015 thru 2017
Americas**: ~30%
Europe: ~15%
Asia***: ~55%
Domestic OEMs (Chrysler, Ford, GM)
• All-wheel drive
• Engine timing and VCT
• EGR coolers and valves
• Transmission solenoids
• Turbochargers
Domestic OEMs (Fiat, JLR, PSA,
Renault/Nissan, VW/Audi)
•All-wheel drive
•EGR coolers and valves
•Engine timing
•Ignition systems
•Turbochargers
China (BYD, Chang’an, Chery,
CNHDTC, Cummins, FAW, Ford,
Geely, Great Wall, Honda, JAC,
Navistar, PSA, SAIC, S-GM, S-VW,
Volvo, Weichai)
•All-wheel drive
•DCT components
•EGR coolers and valves
•Engine timing and VCT
•Ignition systems
•Thermal systems
•Thermostats
•Transmission solenoids
•Turbochargers
Commercial Vehicles (Cummins,
Daimler)
• EGR valves
• Turbochargers
Non-Domestic OEMs (Fiat,
Renault/Nissan, Subaru, VW/Audi)
• Engine timing
• EGR coolers
• Turbochargers
Non-Domestic OEMs (Tata Motors,
Great Wall)
•Engine timing and VCT
•Turbochargers
Commercial Vehicles (Deutz, MAN)
•Thermal systems
•Turbochargers
* Organic growth includes the change in sales due to net new business and excludes the impact
of base business growth or shrink, changes in product pricing, acquisitions, divestitures and
foreign currencies
** Net new business with GM, Ford and Chrysler in North America is 25% of total net new
business
*** Net new business in China and Korea is ~38% and ~14% of total net new business,
respectively
Copyright © 2014 BorgWarner Inc.
Korea (Hyundai/Kia, Ford, GM,
Renault/Nissan, SsangYong)
•All-wheel drive
•Engine timing and VCT
•Transmission components
•Turbochargers
India
•EGR coolers and valves
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10% to 12% Organic* CAGR thru 2017
$2.85 Billion — $3.35 Billion of Net New Business 2015 thru 2017
Engine
Drivetrain
Ignition Systems
1%
Thermal Systems
And Thermostats 5%
Traditional Transmission
Components
7%
All-Wheel Drive
14%
Emissions Systems
10%
DCT Modules
8%
Engine Timing
and VCT
16%
Diesel Turbochargers
15%
Gas Turbochargers
23%
* Organic growth includes the change in sales due to net new business and excludes the impact of base business growth or shrink, changes
in product pricing, acquisitions, divestitures and foreign currencies
Copyright © 2014 BorgWarner Inc.
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Growth in Asia Leading to Geographic Balance
2015E
2014E
48%
22%
46%
30%
26%
28%
2019E
~40%
Americas
Asia
Europe
Copyright © 2014 BorgWarner Inc.
~30%
~30%
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2015 Expectations
BorgWarner Outlook
Sales Growth
2% - 6%
Sales Growth—Excluding Currency
9.5% - 12%
EPS Guidance
$3.35 - $3.55
EPS Guidance—Excluding Currency
$3.60 - $3.75
Free Cash Flow
$350-$400 million
R&D Spending
> 4.0% of sales
Tax Rate
~ 29%
Return on Invested Capital
> 20%
$ / Euro Exchange Rate
~ 1.20 at midpoint
As of January 14, 2015
Copyright © 2014 BorgWarner Inc.
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2015 Guidance—Sales Guidance Range
Low End
High End
Net new business
10.3%
11.5%
Changes in product pricing
-2.0%
-2.0%
1.2%
2.6%
-7.5%
-6.0%
2.0%
6.0%
Base business growth
Foreign currencies
Total
As of January 14, 2015
Copyright © 2014 BorgWarner Inc.
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$15 Billion in Revenue by 2020
$ in Billions
~15
8.8 7.1
7.2
7.4
2011
2012
2013
8.3
8.5
2014E
2015E
5.7
2010
2020E
 Net New Business implies double digit organic growth in
2016 and 2017
 M&A would provide incremental growth
 On pace to $15 billion by 2020
Copyright © 2014 BorgWarner Inc.
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Operating Income Margins* On the Rise
Mid‐Teens
11.1%
11.7%
12.4%
2011
2012
2013
<13%
>13%
2014E
2015E
9.3%
2010
2020E
 Expect operating income margins to improve in 2015
 Would be the sixth straight year-over-year improvement
 Expect mid-teens incremental margins for the forseeable
future
* Excludes special items.
Copyright © 2014 BorgWarner Inc.
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Attractive Business Model, Difficult to Replicate
New Entrant
New Entrant
New Entrant
New Entrant
Copyright © 2014 BorgWarner Inc.
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Strong Capital Structure
A Strong Balance Sheet = The Flexibility to Take Advantage of
Strategic Opportunities
As of September 30, 2014
$ in millions
Cash
Total debt
Net debt
$783
1,312
529
Total equity
Total net capital
3,800
4,329
Net debt to net capital
Net debt to TTM EBITDA
Copyright © 2014 BorgWarner Inc.
12.2%
0.4x
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Putting Our Cash Flow to Work
$ in millions
~140 ~106 296 226 ~116 204 56 51 57 165 ~525 370 8 14 394 407 418 2011*
2012
2013
277 172 2008
2009
2010*
* $358 million and $326 million was spent on share repurchases in 2010 and 2011,
respectively, primarily to settle obligations related to convertible debt that matured in
April 2012.
Copyright © 2014 BorgWarner Inc.
2014E
Dividends
M&A Activity
Share Repurchases
Capital Expenditures
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Thank You for Your Attention
Our Vision

A Clean, Energy-Efficient World
Our Mission

Deliver Innovative Powertrain Solutions that Improve
Fuel Economy, Emissions & Performance
Fuel Economy
Copyright © 2014 BorgWarner Inc.
Emissions
Performance
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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 outlook, expectations,
estimates and projections. Words such as "anticipates," "believes,"
“continues,” “could,” “designed,” “effect,” "estimates”, “evaluates,”
“expects,” “forecasts,” “goal,” “initiative,” "intends," “outlook,” "plans,"
“potential,” “project,” “pursue,” “seek,” “should,” “target,” “when,”
“would,” variations of such words and similar expressions are intended to
identify such forward-looking statements. 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 to differ
materially from those expressed, projected or implied in or by the forwardlooking statements. Such risks and uncertainties include: fluctuations in
domestic or foreign vehicle production, the continued use by original
equipment manufacturers of outside suppliers, fluctuations in demand for
vehicles containing our products, changes in general economic conditions,
as well as other risks noted reports that we file with the Securities and
Exchange Commission, including the Risk Factors identified in our most
recently filed Annual Report on Form 10-K. We do not undertake any
obligation to update or announce publicly any updates to or revision to any
of the forward-looking statements.
Copyright © 2014 BorgWarner Inc.
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