The paragraph is an introduction to the BorgWarner 2024 Fourth Quarter and Full Year Results Conference Call. The conference, led by Patrick Nolan, VP of Investor Relations, will discuss the company's financial performance, including earnings and highlights of certain non-GAAP measures to provide clarity on business performance. Attendees are informed that forward-looking statements may be made, which involve risks. Terms like "comparable basis," "adjusted," and "organic" are defined for clarity. The notion of "incremental margin performance," which relates to changes in operating income and sales, is also discussed.

The paragraph provides an overview of BorgWarner's financial performance for 2024 and a company update. The company reported approximately $14 billion in sales, remaining relatively flat compared to 2023, despite a 3% decline in industry production. BorgWarner achieved a 280-basis-point outgrowth, indicating resilience in its foundational and e-product portfolios. The company secured new product awards, supporting long-term growth. Adjusted operating margin exceeded 10%, with earnings per share growing by 15%. Free cash flow reached $729 million, surpassing expectations. BorgWarner plans to continue generating strong cash flow and invest in efficient powertrain development. The paragraph concludes by noting that this is Frédéric Lissalde's final earnings call with the company.

The paragraph is a transition speech from a BorgWarner leader, Fred, who reflects on his 26-year tenure and expresses confidence in the company's future. He highlights BorgWarner's strong powertrain portfolio, decentralized model, and financial success. Fred thanks the board of directors, his team, global employees, analysts, and shareholders for their support, and endorses Joe as the new CEO. Joe Spak, the new CEO, thanks Fred for his leadership, mentorship, and impact on the company.

The paragraph highlights the key drivers of BorgWarner's value proposition, emphasizing a strong and resilient product portfolio, solid market share positions, and financial strength that supports business investment and attracts new customers. The company values its long-term relationships with vehicle customers, which enhance efficiency and value beyond individual projects. It also praises a decentralized operating model for its speed, accountability, and agility, crucial during industry challenges. The paragraph concludes with an announcement of an upcoming review of the detailed 2025 outlook, acknowledging potential declines in industry volumes and tariff uncertainty, and introduces strategic focus areas for the future.

The paragraph outlines BorgWarner's strategy to surpass industry production growth by leveraging its core competencies in efficiency for both combustion and electric vehicles. The company plans to expand its product portfolio through strategic investments and innovation, both organically and inorganically, to meet global demand for efficient propulsion solutions. BorgWarner aims to enhance financial performance by expanding margins and generating strong cash flow, maintaining cost efficiency amidst industry changes, and launching new ventures globally to sustain growth and profitability.

The paragraph highlights BorgWarner's recent product awards and partnerships as indicators of future growth. The company will supply a variable cam timing system to an East Asian OEM for hybrid and gasoline engines, impacting fuel efficiency and emissions, with production starting in early 2026. BorgWarner is also extending its partnership with a North American OEM by providing wastegate turbocharger programs for i4 and V6 engines, set to be used in SUVs and trucks from 2026. Additionally, BorgWarner will supply transfer cases to SAIC Maxus for export vehicles, designed and manufactured in China, with mass production beginning in 2026. These collaborations emphasize BorgWarner's strong industry relationships and technological capabilities.

BorgWarner has secured four e-motor contracts with major Chinese OEMs for plug-in hybrids and electric vehicles, launching in 2025 and 2026. The company ended 2024 with strong results, achieving a nearly 3% outgrowth, over 10% adjusted operating margin, and robust free cash flow. New business awards reflect their product leadership. For 2025, BorgWarner aims to outgrow industry production, maintain high margins, and generate strong cash flow by securing new business, expanding their e-product portfolio, and fostering innovation. The focus will remain on financial strength and investments to drive shareholder value as a new CEO takes over.

The paragraph provides an overview of BorgWarner's financial performance for the fourth quarter. It reports sales of over $3.4 billion, a decrease of approximately 2% from the previous year when excluding FX and M&A, against a market production decline of 4%, showing a sales outgrowth of 220 basis points. The adjusted operating margin was strong at 10.2%, aided by solid operational performance and cost controls, contributing to a full-year margin above 10%, an increase from 2023. Free cash flow in the quarter was up by $539 million, exceeding 2024 guidance, resulting in $729 million for the year. The sales decline was partly due to a weakening U.S. Dollar and a 1.5% decrease in organic sales, countered by growth in e-products in Europe and Asia and foundational growth in various regions.

In the fourth quarter, the company faced challenges in China due to reduced volumes in an existing EV program and declining foundational sales, while the Eldor acquisition added $6 million in sales. Overall, sales reached $3.4 billion. Adjusted operating income increased to $352 million, reflecting a 10.2% margin, up from $332 million or 9.4% a year ago, mainly due to restructuring and cost controls. Despite a $12 million drag from Eldor, adjusted EPS rose by $0.11, aided by strong operating income and share repurchases, though partly offset by a higher tax rate. Free cash flow was $539 million for the quarter, down $140 million year-over-year due to lower business activity and payment timings, but totaled $729 million for the year. Additionally, $646 million in impairment charges were recorded following annual tests.

The company has adjusted its discounted cash flow estimates for its PowerDrive system and Battery and Charging Systems business units due to delays in BEV adoption in the Western world, resulting in a $577 million goodwill impairment charge and a $69 million charge related to assets. These are non-cash items with minimal impact on future earnings. The company believes its technology-focused portfolio will remain resilient amid these challenges. Looking ahead, it forecasts a decline in global vehicle markets for 2024 and 2025, with specific regional downturns in North America and Europe due to inventory and economic issues, and a flat to slight decline in China due to tough comparisons and possible tariff impacts.

The paragraph provides BorgWarner's financial outlook and projections for 2025. It addresses the impact of tariffs on market volume assumptions, noting that the net cost of tariffs is not yet included in the financial guidance due to various influencing factors. The company projects total sales of $13.4 billion to $14 billion, with a $410 million sales headwind anticipated from weaker foreign currencies compared to 2024. Despite expecting a 1% to 3% decline in end markets, BorgWarner predicts outperforming market production by 100 to 300 basis points. They anticipate an organic sales change of -2% to +2% year over year and expect an adjusted operating margin between 10.0% and 10.2%, compared to a 10.1% margin in 2024. The company highlights its portfolio's resilience and strong performance relative to expectations.

The paragraph discusses the financial outlook and recent performance of a company, highlighting expectations for 2025 and summarizing 2024 results. For 2025, the company anticipates adjusted EPS between $4.05 and $4.40 per share and free cash flow ranging from $650 million to $750 million, affected by foreign exchange headwinds. Despite production challenges, the company achieved a strong 10.1% margin in 2024, outperforming initial guidance. It projects continued outperformance in market production for 2025, along with maintaining an operating margin above 10% and strong free cash flow. The focus on cost management and an investment-grade balance sheet is noted as key to navigating a difficult market. The paragraph concludes with the speaker expressing pride in the team's achievements and handing the call over to another participant for a Q&A session.

In the paragraph, John Murphy from Bank of America Merrill Lynch asks Joe Spak about the resilience and adaptability of their portfolio in response to shifts in the automotive market, such as the cancellation of certain electric vehicle programs by companies like Ford. Joe Spak explains that although there have been slowdowns and cancellations in certain requests for quotes outside of China, they also see increased potential in foundational products and are positioned to capture higher volumes or extend programs when traditional vehicles face delays. Murphy also inquires about a $100 million organic variance in their 2025 outlook, which Spak attributes to expected market outgrowth, as had been demonstrated in their past performance.

The paragraph features a conversation during a conference call, discussing a company's exposure and performance in China and their e-product business. Joe Spak notes that 20% of their global sales are in China, with 75% of those sales coming from Chinese OEMs, particularly in the NEV (New Energy Vehicle) sector. Colin Langan from Wells Fargo asks about the performance of their e-products, mentioning a weaker battery side and noting anticipated market changes due to regulations in Europe and an expected increase in the US. Joe Spak responds that while there is year-over-year growth in the e-product business, battery sales are flat due to pricing, leading to a drop in overall revenue, but emphasizes that the e-product segment is still significant, valued at over $600 million.

The paragraph discusses a company's positive outlook on the Akasol business acquisition, despite challenges such as lower cell pricing. Colin Langan questions the growth forecast, which suggests 200 basis points growth over market, previously inferred to be around 4%. Joe Spak explains that recent growth has been in the 2-3% range, influenced by delays in a North American EV program and battery cell pricing. He emphasizes the goal of outgrowing markets by expanding market share in foundational products and capitalizing on new launches in the e-side portfolio. Additionally, Ryan Brinkman inquires about the company's products in Mexico concerning potential tariffs and preliminary discussions with automakers. Joe Spak addresses this but details are not included in the summary.

The paragraph discusses a company's production alignment with its customers, particularly emphasizing its international sourcing strategy for 2024, where approximately half of the $875 million in imported material to the U.S. originates from Mexico, 10% from Canada, and 5% from China. The company is keeping an eye on industry news that may impact them. If any effects arise, they plan to communicate with customers and suppliers. During a Q&A, Joe Spak explains that the company anticipates increased EV adoption across all markets yearly. Last July, they reorganized into four operating segments to enhance business transparency and assess performance outgrowth. Luke Junk inquires about the continuation and impact of foundational awards and RFQs, which have been prominently featured in recent quarters.

The paragraph features a discussion between Joe Spak and Fred, focusing on future growth projections, particularly for the years 2026-2027. Spak indicates that their portfolio's strength is drawing increasing customer interest, which may lead to program extensions or new bids, fostering growth across their offerings. The conversation also touches on guidance, specifically concerning North America's projected downturn of 3% to 4%, which differs slightly from third-party estimates of a 2% decline. This difference may be due to a conservative approach considering potential tariff impacts. Lastly, there's a query regarding expectations for "e-products" within the new segments for the year, seeking additional insight into performance metrics related to market conditions.

In the paragraph, Joe Spak provides an overview of market forecasts, predicting a decline of 1% to 3% globally, with North America down 3% to 4% due to inventory and potential tariff issues, Europe down 4% to 6% due to backlog and economic challenges, and China remaining relatively stable. Sales for 2024 are projected at over $2.3 billion for e-products, with future disclosures expected to separate e-products from foundational products in financial reports. Despite some discussions of inorganic growth being on hold, the company plans to continue prioritizing organic investments.

The paragraph discusses BorgWarner's product portfolio and growth strategy, emphasizing the significance of acquisitions despite industry turbulence, which is seen as an opportunity due to the company's financial strength. The focus remains on creating long-term shareholder value. Edison Yu from Deutsche Bank asks about BorgWarner's eRev successes in China and its prospects in the US and Europe, particularly in the truck market for better fuel economy and emissions reduction. Joe Spak replies that while big volumes haven't been seen yet, eRevs are an emerging option. For China, Spak indicates a flat market expectation without factoring in scrappage incentives. The paragraph concludes with Emmanuel Rosner from Wolfe Research posing a question about CapEx outlook.

In the paragraph, Joe Spak discusses BorgWarner's approach to capital expenditure (CapEx) and share buybacks. The company has reduced its CapEx to below 5% of sales, aiming to maintain it in the high 4s to low 5s percentage range. While there are no specific plans for share buybacks, BorgWarner has spent $3.4 billion on shareholder returns since 2020, focusing on growing earnings and cash flow. In terms of growth, especially for electric vehicle (EV) products in China, 20% of the company's business is there, with 90% of the Chinese EV market dominated by local OEMs who represent 75% of BorgWarner's business, positioning the company well for future growth.

In the paragraph, during a Q&A session, Dan Levy from Barclays asks about the performance of the PowerDrive business in 2024, particularly regarding its softness in Asia despite strong electric vehicle (EV) markets in China. Joe Spak responds that the overall sales were down over $200 million, primarily due to issues on the foundational side of the portfolio, while the "e-side" remained relatively flat. Looking forward to 2025, Joe mentions the launch of new products and platforms that should drive growth for PowerDrive, with a strong market position in China. Dan Levy also inquires about the EBIT bridge and potential margin benefits, noting that organic revenue was flat or slightly down, yet EBIT increased by $60 million. Joe Spak acknowledges the restructuring benefits and potential pricing advantages but does not detail why additional margin benefits are not evident, stating he'll walk through their guidance.

The paragraph discusses the financial performance and outlook of a company, focusing on sales, earnings before interest and taxes (EBIT), and cost control strategies. The company reported last year's sales of $14.1 billion and provided guidance with a midpoint of $13.7 billion for the current year, indicating slight growth when excluding foreign exchange effects. They expect to outperform the market by about 250 basis points despite a projected 2% market decline. EBIT remains steady at 10.1%, and the company highlights their focus on restructuring savings and cost controls as key factors in their performance for 2024 and future outlook for 2025. The session concludes with an offer for further questions and ends the conference call.

This summary was generated with AI and may contain some inaccuracies.