Q2 2024 Borgwarner Inc Earnings Call

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Bo: My name is Bo, and I will be your conference facilitator at this time. I would like to welcome everyone to the BorgWarner 2024 second quarter results conference call. All lines have been placed on mute to prevent any background noise.

though: Good morning, everyone. My name is though and I will be your conference facilitator at this time I would like to welcome everyone to the Borgwarner 2024 second quarter results Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question.

Bo: My name is Bo, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2024 Second Quarter Results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, press star two. If you are using a speaker phone, please pick up the handset before asking your question.

During this time simply press star one on your telephone keypad, if you would like to withdraw your question Press Star two.

Bo: After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2. If you are using a speakerphone, please pick up the handset before asking your question. I would now like to turn the call over to Patrick Nolan, Vice President of Investor Relations. Mr. Nolan, you may begin your conference. Thank you, Bo. Good morning, everyone, and thank you for joining us today.

If you are using a speakerphone please pick up the handset before asking your question I would now like to turn the call over to Patrick Nolan Vice President of Investor Relations. Mr. Nolan you may begin your conference.

Patrick Nolan: I would now like to turn the call over to Patrick Nolan, Vice President and Investor Relations.

Patrick Nolan: Mr. Nolan, you may begin your conference.

Patrick Nolan: Thank you, Bo.

Patrick Nolan: We issued our earnings release earlier this morning. It's posted on our website, BorgWarner.com, both on our homepage and our Investor Relations homepage. Before we begin, I need to inform you that during this call, we may make forward-looking statements that involve risks and uncertainties as detailed in our 10-K. Our actual results may differ significantly from the matters discussed today. During today's presentation, we'll highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performs and for comparison purposes with prior periods. When you hear us say on a comparable basis, that means excluding the impact of FX, NetM&A, and other non-comparable items. When you hear us say adjusted, that means excluding non-comparable items.

Patrick Nolan: Thank you Bob Good morning, everyone and thank you for joining US today, we issued our earnings release earlier. This morning is posted on our website Borgwarner dot com, both on our homepage and our Investor Relations homepage.

Patrick Nolan: Good morning, everyone, and thank you for joining us today. We should are earnings lease earlier this morning, because posted on our website, BorgWarner.com, both on our homepage and our investor relations homepage.

Patrick Nolan: Before we begin, I need to inform you that during this call, we may make forward-looking statements which involve risks and uncertainties that detail there are 10K. Our actual results may differ significantly from the matters discussed today. During today's presentation, we'll highlight certain non-GAAP measures in order to provide a clearer picture of how the net M&A and other non-GAAP items. When you hear us say "adjusted," that means excluding non-GAAP items. When you hear us say "organic," that means excluding the impact of FX and net M&A. We will also refer to our incremental margin performance. Our incremental margin is defined as the organic change in our all-in incremental margin includes our planned investment in ERD, any impact from net inflationary items, and other cost items. We will also refer to our growth compared to our requirements.

Patrick Nolan: When you hear us say organic, that means excluding the impact of FX and net M&A. We will also refer to our incremental margin performance. Our incremental margin is defined as the organic change in our adjusted operating income divided by the organic change in our sales. Our all-in incremental margin includes our planned investment in ERD, any impact from net inflationary items, and other cost items. We will also refer to our growth compared to our. When you hear us say market, that means the change in light and commercial vehicle production has waited for our geographic exposure.

Speaker Change: Before we begin I need to inform you that during this call. We may make forward looking statements, which involve risks and uncertainties are detailed in our 10-K.

Speaker Change: Our actual results may differ significantly from the matters discussed today.

Speaker Change: During today's presentation, we'll highlight certain non-GAAP measures in order to provide a clearer picture how the core business performed and for comparison purposes with prior periods.

Speaker Change: When you hear us say on a comparable basis that means excluding the impact of FX net M&A and other non comparable items.

Speaker Change: When you hear us say adjusted that means excluding non comparable items.

Speaker Change: When you hear us say organic that means excluding the impact of FX and net M&A.

Speaker Change: We will also refer to our incremental margin performance.

Speaker Change: Our incremental margin is defined as the organic change in our adjusted operating income divided by the organic change in ourselves.

Speaker Change: Our all in incremental margin includes our planned investment in the R&D any impact from net inflationary items and other cost items.

Speaker Change: We will also refer to our growth compared to our Martin.

Patrick Nolan: When you hear us say market, that means the change in light and commercial vehicle production waited for our geographic exposure. Please note that we've posted today's call presentation to the higher page of our website.

When you hear us say market that means the change in light and commercial vehicle production weighted for our geographic exposure.

Patrick Nolan: Please note that we've posted today's earnings goal presentation on the IR page of our website. We encourage you to follow along with these slides during our discussion. With that, I'm happy to turn the call over to Fred. Thank you, Pat. And good day, everyone.

Speaker Change: Please note that we've posted today's earnings call presentation to the IR page of our website.

Patrick Nolan: We encourage you to follow along with these slides during our discussion.

Speaker Change: We encourage you to follow along with these slides during our discussion.

Patrick Nolan: With that, I'm happy to share the call that are for us.

Frank: With that I'm happy to turn the call over to Frank Thank.

Fred: I'm very pleased to share our results for the second quarter of 2024 and provide an overall company update starting on slide five, at approximately $3.6 billion. Our Q2 sales were relatively flat year over year, outperforming a modest decline in production. For the first half of the year, we outgrew our market by about 350 basis points. Once again, the sales outgrowth shows the resiliency of our efficiency-focused portfolio, which is, I believe, positioned to outgrow the market in any type of propulsion mix scenario. We secured multiple new product awards across combustion, hybrid, and electric for both passenger cars and commercial vehicles.

Fred: Thank you, Pat.

Frank: Thank you Pat and good day everyone.

Fred: And good day, everyone. I'm very pleased to share our results for the second quarter of 2024 and provide an overall company update starting on slide five. At approximately $3.6 billion, our Q2 sales were relatively flat year over year, outperforming a modest decline in production. For the first half of the year, we outgrow our market by about 350 basis points. Once again, the sales outgrowth shows the resiliency of our efficiency-focused portfolio, which is, I believe, positioned to outgrow the market in any type of propulsion mix scenario. We secured multiple new product awards across combustion, hybrid and electric, four-both passenger cars and commercial vehicles.

Frank Thank: I am very pleased to share our results for the second quarter of 2024 and provide an overall company update starting on slide five.

Speaker Change: Approximately $3 $6 billion.

Speaker Change: Q2 sales were relatively flat year over year, outperforming and modus decline in production.

Speaker Change: For the first half of the year, we outgrew our market by about 350 basis points.

Speaker Change: Once again the sales outgrowth shows the resiliency of our efficiency focused portfolio, which is I believe positioned to outgrow the market in any type of propulsion mix scenario.

Speaker Change: We secured multiple new product awards across combustion hybrid and electric for both passenger cars and commercial vehicles.

Fred: Turning to our bottom line for the quarter, we delivered a very strong 10.4% margin, which was up 30 basis points versus prior year. We delivered EPS of $1.19 per share, which was a 13 cents increase versus prior year. Our first half 2024 margin and EPS performance has allowed us to increase our full year margin and earnings guidance, as Craig will detail later.

Fred: Turning to our bottom line for the quarter, we delivered a very strong 10.4% margin, which was up 30 basis points versus prior year. We delivered EPS of $1.19 per share, which was a $0.13 increase versus prior year.

Speaker Change: Turning to our bottom line for the quarter, we delivered a very strong 10, 4% margin.

Speaker Change: Which was up 30 basis points versus prior year.

Speaker Change: We delivered EPS of $1 19 per share, which was <unk> 13 cents increase versus prior year.

Fred: Our first half 2024 margin and EPF performance has allowed us to increase our full year margin and earnings guidance, as Craig will detail later. We carried on our restructuring actions, now focusing on our e-propulsion segment to adjust our cost structure to current market dynamics. We expect that these actions will result in annual run rate cost savings of about $100 million by 2026, with an immediate positive impact. We also introduced a new business unit structure designed to maximize cost synergies.

Speaker Change: Our first half 2020 full margin and EPS performance as allowed us to increase our full year margin and earnings guidance as Craig will detail later.

Fred: We carried on our restructuring actions, now focusing on our E-Propulsion segment to adjust our cost structure to current market dynamics. We expect that these actions will result in annual run rate cost savings of about $100 million by 2026, with immediate positive impacts. We also introduced a new business in its structure designed to maximize cost synergies and enhance our growth to market global strategies and bring further simplicity and clarity to our shareholders.

Speaker Change: We carried on our restructuring actions now focusing on our E propulsion segment to adjust our cost structure to current market dynamics.

Craig: We expect that these actions would result in annual run rate cost savings of about $100 million by 2026 with immediate positive impact.

Speaker Change: We also introduced a new business unit structure designed to maximize cost synergies and enhance our go to market global strategies and bring further simplicity and clarity to our shareholders.

Fred: And hence, I'll go to market global strategies and bring further simplicity and clarity to our shareholders. Lastly, we remain focused on efficient deployment of our capital and announced our intention to repurchase $300 million of BorgWarner stock in the second half of 2024. Next, on slide six, I would like to take a moment to highlight our 2024 sustainability report, which was published earlier this month. BorgWarner's vision is a clean, energy efficient

Fred: Lastly, we remain focused on efficient deployment of our capital and announce our intention to repurchase $300 million of BorgWarner stock in the second half of 2024.

Speaker Change: Lastly, we remained focus on efficient deployment of capital and announced our intention to repurchase $300 million of Boe.

Speaker Change: One is stuck in.

Speaker Change: In the second half of 2024.

Fred: Next, on slide 6, I would like to take a moment to highlight our 2024 Sustainability Report, which was published earlier this month. BorgWarner's vision is a clean, energy-efficient world, and I'm proud to lead a company where our business goals go hand in hand with our sustainability goals. At BorgWarner, sustainability means delivering value to all stakeholders for today and tomorrow. I would like to highlight just a few points of progress described in the report. First, BorgWarner has reduced scope 1 and 2 greenhouse gas emissions by 32 percent from the 2021 baseline, making progress on our SBTI-validated goal to reduce it 85 percent by 2030.

Speaker Change: Next on slide six I would like to take a moment to highlight our 2020 for sustainability report, which was published earlier this month.

Fred: And I'm proud to lead a company where our business goals go hand in hand with our sustainability goals. At BorgWarner, sustainability means delivering value to all stakeholders for today and tomorrow. I would like to highlight just a few points of progress described in the report. First, BorgWarner has reduced scope one and two greenhouse gas emissions by 32% from the 2021 baseline, making progress on our SBTI validated goal to reduce them by 85% by 2030. Second,

Speaker Change: Borgwarner. This vision is a clean energy efficient world and I'm proud to lead a company, where our business goals go hand in hand, with our sustainability goals.

Speaker Change: At Borgwarner sustainability means delivering value to all stakeholders for today and tomorrow.

Speaker Change: I would like to highlight just a few points of progress described in the report.

Speaker Change: First borgwarner has reduced scope, one and two greenhouse gas emissions by 32% from the 2021 baseline, making progress on our <unk> goal to reduce its 85% by 2030.

Fred: Second, the company engaged our supply chain management and engineering teams to advance the company's goal of reducing scope 3 emissions 25 percent by 2030 compared to a 2021 baseline. And third, we performed above all benchmarks on unproven sense of inclusion and belonging on the company's engagement survey.

Speaker Change: Second.

Fred: The company engaged its supply chain management and engineering teams to advance the company's goal of reducing scope three emissions 25% by 2030 compared to a 2021 baseline. And third, we performed above all benchmarks on Employee Sense of Inclusion and Belonging on the Company's Engagement Survey. I would like to thank our entire team for their dedication and excellence in innovating products for cleaner mobility, making leaps towards achieving our climate and other sustainability goals, and investing in our people.

Speaker Change: The company engaged our supply chain management and engineering teams to advance the company's goal of reducing our scope three emissions, 25% by 2030 compared to 2021 baseline.

Speaker Change: And third we performed above all benchmarks on Umbro sense of inclusion and belonging on the company's engagement survey.

Fred: I would like to thank our entire team for their dedication and excellence in innovating products for clean mobility, making leaps towards achieving our climate and our sustainability goals, and investing in our people.

Speaker Change: I would like to thank our entire team for their dedication and excellence in innovating products for cleaner mobility, making leaps towards achieving our climate and other sustainability goals.

Speaker Change: And investing in our people.

Fred: Now, let's look at some new product awards on slide 7. First, BorgWarner has secured multiple contracts to supply its electric cross differential, or EXD, to three major OEMs. The companies will incorporate BorgWarner EXD technology into both rear and front wheel drives of electrified powertrain applications. Start-up production is expected in 2024 and 2026. Our EXD is part of our electric torque management system, which offers a range of products that intelligently controls wheel torque to increase stability, provide superior dynamic performance, and improve traction during launch and acceleration.

Fred: Now, let's look at some new product awards on Slate 7. First, BorgWarner has secured multiple contracts to supply its Electric Cross Differential, or EXD, to three major OEMs. The companies will incorporate BorgWarner EXD technology into both rear and front wheel drives of electrified powertrain applications. Startup production is expected in 2024 and 2026. Our EXD is part of our electric torque management system, which offers a range of products that intelligently control wheel torque to increase stability, provide superior dynamic performance, and improve traction during launch and acceleration.

Speaker Change: Now, let's look at some new product awards on slide seven.

Fred: Next, BorgWarner secured awards to deliver high-voltage E-fan systems for use on a major global OEM series of electrical commercial vehicles in North America. This marks the largest E-Fan business win in North America for us, with an expected start of production in Q4 2027. BorgWarner's complete e-fan system is comprised of three components, including a fan, an e-motor, and an integrated high-voltage inverter with the capacity to reach up to 10 kilowatts of power and 40 newton meters of torque.

Speaker Change: First borgwarner has secured multiple contracts to supply its electric cross differential.

Speaker Change: XD to three major Oems the companies would incorporate borgwarner XD technology into both rear and front wheel drives of electrified powertrain application.

Speaker Change: Start of production is expected in 2024 and 2026.

Speaker Change: R. E. XD is part of our electric towards management system, which offers a range of products that intelligence. The controls we talk to increase stability provides superior dynamic performance and improve traction during lounge and acceleration.

Fred: Next, BorgWarner has secured awards to deliver high-voltage e-fan systems for use on a major global OEM series of electrical commercial vehicles in North America. This marks the largest e-fan business win in North America for us with expected start-up production in Q4 2027. BorgWarner's complete e-fan system is comprised of three components, including a fan, an e-motor, and an integrated high-voltage inverter, with the capacity to reach up to 10 kilowatts of power and 40 Newton meters of torque.

Speaker Change: Next Borgwarner are secured awards to deliver high voltage <unk> systems for use on a major global OEM series of electrical commercial vehicles in North America.

Speaker Change: This marks the largest E <unk> business win in North America for Us.

Speaker Change: With the expected start of production in Q4 2027.

Speaker Change: Borgwarner is complete <unk> system is comprised of three components, including a fan and E motor and integrated the high voltage inverter.

Speaker Change: With the capacity to reach up to 10 kilowatt of power and 40 Newton meters of tool.

Fred: Lastly, BorgWarner has secured two EGR cooler awards with a prominent North American-based commercial vehicle customer. Start-up production is expected to be in Q4 2027 with implementation across various medium-duty commercial trucks. Our emissions-reducing EGR solution offers high robustness against thermal fatigue and optimizes coolant distribution throughout the engine for increased performance. We continue to see strong interest across our EGR product portfolio, which supports the need for highly efficient combustion engines that need increased fuel economy needs and stringent emission requirements across the world for combustion and hybrids.

Fred: Lastly, BorgWarner has secured two EGR Cooler Awards with a prominent North American based commercial vehicle customer; start of production is expected to be in Q4 2027 with implementation across various medium duty commercial trucks. Our emissions-reducing EGR solution offers high robustness against thermal fatigue and optimizes coolant distribution throughout the engine for increased performance. We continue to see strong interest across our EGR product portfolio, which supports the need for highly efficient combustion engines that meet increased fuel economy needs and stringent emission requirements across the world for combustion and hybrids.

Speaker Change: Lastly, borgwarner as CTO to Egfr cooler awards with a prominent north American based commercial vehicle customer.

Speaker Change: Start of production is expected to be in Q4 of 2027 with implementation across various medium duty commercial trucks.

Speaker Change: Our emissions, reducing EG, our solution offers high robustness against thermal fatigue, and Optimizes coolant distribution throughout the engine for increased performance.

Speaker Change: We continue to see strong interest across our <unk> product portfolio, which supports the need for highly efficient combustion engine that needs increased fuel economy needs and stringent emission requirements across the world full of combustion and hybrid.

Fred: Now, let's turn to slide eight, where I would like to discuss our new business unit structure. As we have continued to outgrow the market and leveraged the leadership, robustness, and scale of our product portfolio, it is now the right time to align our business unit structure to further enhance our ability to execute our strategy. We believe this will drive cost synergies, higher focus, and clarity for all stakeholders.

Fred: Now, let's turn to slide eight, where I would like to discuss our new business unit structure. As we have continued to outgrow the market and leveraged the leadership, robustness, and scale of our product portfolio, it is now the right time to align our business in its structure to further enhance our ability to execute our strategy. We believe this will drive cost synergies, higher focus, and clarity for all stakeholders. As such, beginning in the third quarter, BorgWarner will reorganize its four business units and associated financial reporting segments as follows. Our Turbos and Thermal Technology business unit is led by Dr. Volker Weng.

Speaker Change: Now, let's turn to slide eight.

Speaker Change: I would like to discuss our new business unit structure.

Speaker Change: As we have continued to outgrow the market and leveraged the leadership robustness and scale of our product portfolio is now the right time to align our business unit structure to further enhance our ability to execute our strategy.

Speaker Change: We believe this will drive cost synergies higher focus and clarity for all stakeholders are.

Fred: As such, beginning in the third quarter, BorgWarner will reorganize its four business units and associate its financial reporting segments as follows. Fox, our turbos and thermal technology business unit is led by Dr. Volkowang. This business unit is unchanged. Our power drive system, which today is our externally reported e-proportion segment, will continue to be led by Dr. Stefan Demela. This business unit is also unchanged. Our drive train and more systems businesses are now combined into one business unit, and is led by Isabel McKinsey. We've combined our commercial vehicle battery and challenging businesses into one business unit, which is led by Hank von Turenaut.

Fred: This business unit is unchanged. Our power drive system, which today is our externally reported e-propulsion segment, will continue to be led by Dr. Stefan Demmeler. This business unit is also unchanged. Our drivetrain and more systems businesses are now combined into one business unit and are led by Isabel McKenzie. We've combined our commercial vehicle battery and charging businesses into one business unit, which is led by Henk van Toornau. To summarize, the takeaways from today are this. BorgWarner's second quarter results were strong.

Speaker Change: As such beginning in the third quarter Borgwarner, we reorganize its full business unit and associated financial reporting segments as follows.

Speaker Change: Our turbos in thermal technology business unit is led by Dr. Volker Bang This business unit is unchanged.

Speaker Change: Our power drive system, which today is our externally reported E. Propulsion segment. We've continued to be led by Dr. Stefan The MLR. This business unit is also unchanged.

Speaker Change: Our drivetrain and more systems businesses.

Speaker Change: Combined into one business unit and is led by is that bad and Mckinsey.

Speaker Change: We've combined our commercial vehicle battery and challenging businesses into one business unit, which is led by Henk van to announce.

Fred: To summarize, the takeaways from today are this.

Speaker Change: To summarize the takeaways from two they all this.

Fred: BorgWarner's second quarter results were strong. Our sales performance once again outperformed the industry. Our adjusted operating margin was the highest since the spinners, and our cash generation was very strong and support our $300 million of intended share repurchase in the second half of the year. We secured multiple new business awards in the quarter, which we believe further demonstrate our product leadership position in all powertrain architectures. BorgWarner is focused on powertrain efficiency. This includes combustion fuel efficiency and electron efficiency, whether it is for hybrids or bags. I believe BorgWarner can support any powertrain architecture. We are a world leader in efficient mobility with a product port for you that we believe is uniquely positioned to outgrow industry production for years to come.

Speaker Change: Borgwarner as second quarter results were strong.

Fred: Our sales performance once again outperformed the industry, and our adjusted operating margin was the highest since the Finnair spinoff. And our cash generation was very strong and supported our $300 million of intended share repurchase in the second half of the year. We secured multiple new business awards in the quarter, which we believe further demonstrate our product leadership position in all powertrain architectures. BorgWarner is focused on powertrain efficiency, which includes combustion fuel efficiency and electron efficiency, whether it is for hybrids or BAFs. I believe BorgWarner can support any powertrain architecture.

Speaker Change: Our sales performance once again outperformed the industry.

Speaker Change: Our adjusted operating margin was the highest since the finance spin off and our cash generation was very strong and support.

Speaker Change: Our $300 million of intended share repurchase in the second half of the year.

Speaker Change: We secured multiple new business awards in the quarter, which we believe further demonstrate our product leadership position in all powertrain architectures.

Speaker Change: Borgwarner is focused on powertrain efficiency.

Speaker Change: This includes combustion fuel efficiency and electron efficiency, whether it is for hybrids.

Speaker Change: <unk>.

Fred: We are a world leader in efficient mobility with a product portfolio that we believe is uniquely positioned to outgrow industry production for years to come. This quarter, we took additional meaningful steps to manage our cost structure in response to the industry's mixed dynamics, as well as to provide increased clarity and transparency from a global product line organization. As we look forward, we expect to continue to secure global growth opportunities as the world transitions to more efficient mobility, thanks to our product leadership position in combustion, hybrids, and BEVs.

Speaker Change: I believe borgwarner can support any powertrain architecture, we are a world leader in efficient mobility with a product portfolio that we believe is uniquely positioned to outgrow industry production for years to come.

Fred: This quarter, we took additional meaningful steps to manage our cost structure in response to the industry mixed dynamics, as well as to provide increased clarity and transparency from a global product line organization. As we look forward, we expect to continue to secure global growth opportunities as the world transitions to more efficient mobility thanks to our product leadership position in combustion, hybrids, and bags. At the same time, we will continue to appropriately manage our cost structure as industry volumes and production mix outlook change, while continuing to preserve our long-term profitable growth and technological edge. This will allow BorgWarner to continue to deliver sales performance through organic growth above market production, convert that growth into higher earnings, and create long-term value for our shareholders.

Speaker Change: This quarter, we took additional meaningful steps to manage our cost structure in response to the industry mix dynamics.

Speaker Change: As well as to provide increased clarity and transparency from our global product line organization.

Speaker Change: As we look forward, we expect to continue to secure global growth opportunities as the world transitions to more efficient mobility, thanks to our product leadership position and combustion hybrids and base at.

Fred: At the same time, we will continue to appropriately manage our cost structure as industry volumes and the production mix outlook change, while continuing to preserve our long-term profitable growth and technological edge. This will allow BorgWarner to continue to deliver sales performance through organic growth above market production, convert that growth into higher earnings, and create long-term value for our shareholders. With that, let me turn the call over to Craig. Thank you, Fred. And good morning, everyone.

Speaker Change: At the same time, we will continue to appropriately manage our cost structure as industry volumes and production mix outlook change.

Speaker Change: While continuing to preserve our long term profitable growth and technological edge.

Speaker Change: This will allow borgwarner to continue to deliver sales performance through organic growth above market production convert that growth into higher earnings and create long term value for our shareholders.

Craig: With that, let me turn the call over to Craig.

Speaker Change: With that let me turn the call over to Craig.

Craig: Thank you, Fred.

Craig: Let's start on slide nine with a look at our year over year sales growth for Q2. Last year's Q2 sales from continuing operations were just under $3.7 billion. You can see that the strengthening U.S. dollar drove a year-over-year decrease in sales of almost 2%, or $62 million. Then you can see a modest decrease in organic sales, which was 120 basis points above market production. Finally, the acquisition of Eldor added $6 million to sales year over year.

Craig: Thank you Fred and good morning, everyone.

Craig: Good morning, everyone. Let's start on slide 9 with a look at our year-over-year sales walk for Q2. Last year's Q2 sales from continuing operations were just under $3.7 billion. You can see that the strengthening US dollar drove a year-over-year decrease in sales of almost 2% or 62 million. Then you can see a modest decrease in organic sales, which was 120 basis points above market production. Finally, the acquisition of Eldor at its 6 million sales year-over-year.

Craig: Let's start on slide nine with a look at our year over year sales walk for Q2.

Craig: Last year's Q2 sales from continuing operations were just under $3 7 billion.

Craig: You can see that the strengthening U S dollar drove a year over year decrease in sales of almost 2% or $62 million.

Craig: Then you can see a modest decrease in organic sales, which was 120 basis points above market production.

Craig: Finally, the acquisition of Al Dor added $6 million sales year over year.

Craig: The sum of all this was just over 3.6 billion of sales in Q2.

Craig: The sum of all this was just over $3.6 billion in sales in Q2. Turning to slide 10, you can see our earnings and cash flow performance for the quarter. Our second quarter adjusted operating income was $376 million, equating to a strong 10.4% margin. That compares to adjusted operating income from continuing operations of $372 million, or a 10.1% margin from a year ago. On a comparable basis, excluding the impact of foreign exchange and M&A, adjusted operating income increased $22 million on $12 million of lower sales.

Craig: The sum of all of this was just over $3 6 billion of sales in Q2.

Craig: Turning to slide 10, you can see our earnings and cash flow performance for the quarter. Our second quarter adjusted operating income was $376 million, equating to a strong 10.4% margin. That compares to adjusted operating income from continuing operations of $372 million, or a 10.1% margin from a year ago. On a comparable basis, excluding the impact of foreign exchange and M&A, adjusted operating income increased $22 million on 12 million of lower sales. This is a great result and reflects our ability to deliver profitability despite a declining production environment. This performance was partially helped by 15 million of favorable items, including the initial benefits from our e-propulsion restructuring, stock forfeiture related to a senior executive retirement, and timing of a supplier cost recovery.

Craig: Turning to slide 10, you can see our earnings and cash flow performance for the quarter.

Craig: Our second quarter adjusted operating income was $376 million equating to a strong 10, 4% margin.

Craig: That compares to adjusted operating income from continuing operations of $372 million or a 10, 1% margin from a year ago.

Craig: On a comparable basis, excluding the impact of foreign exchange and M&A adjusted operating income increased $22 million and $12 million of lower sales.

Craig: This is a great result and reflects our ability to deliver profitability despite a declining production environment. This performance was partially helped by $15 million in favorable items, including the initial benefits from our e-propulsion restructuring, stock forfeiture related to a senior executive retirement, and timing of a supplier cost request. The net impact of Eldor was a $9 million drag on operating income year over year.

Craig: This is a great result, and reflects our ability to deliver profitability.

Craig: A declining production environment.

Craig: This performance was partially helped by $15 million of favorable items, including the initial benefits from our E propulsion restructuring stock forfeiture related to a senior executive retirement and timing of our supplier cost.

Craig: The net impact of Eldor was a $9 million drag on operating income year-over-year. Our adjusted EPS from continuing operations was up 13 cents compared to a year ago as a result of higher adjusted operating income, a decline in our effective tax rate, and the impact of our recent share purchases.

Craig: The net impact of <unk> was a $9 million drag on operating income year over year.

Craig: Our adjusted EPS from continuing operations was up 13 cents compared to a year ago, as a result of higher adjusted operating income, a decline in our effective tax rate, and the impact of our recent share repurchases. And finally, free cash flow from continuing operations was $297 million during the second quarter, which was up $267 million from a year ago, as a result of strong working capital and capital expenditure performance. Now, let's take a look at our full year outlook on slide 11.

Craig: Our adjusted EPS from continuing operations was up 13 compared to a year ago. As a result of higher adjusted operating income a decline in our effective tax rate and the impact of our recent share repurchases.

Craig: And finally, free cash flow from continuing operations was $297 million during the second quarter, which was up $267 million from a year ago as a result of strong working capital and capital expenditure performance.

Craig: And finally free cash flow from continuing operations was $297 million during the second quarter, which was up $267 million from a year ago. As a result of strong working capital and capital expenditure performance.

Craig: Now, let's take a look at our full-year outlook on slide 11. We are projecting total 2024 sales and the range of 14.1 to 14.4 billion, which is a reduction from our prior guidance of 14.4 to 14.9 billion. This reduction is due to weaker foreign currencies, a lower market production outlook, and e-products coming in at the low end of our prior guidance range. Despite this revenue reduction, we expect the company to outgrow market production by 350 to 450 basis points.

Craig: Now, let's take a look at our full year outlook on slide 11.

Craig: We are projecting total 2024 sales in the range of $14.1 to $14.4 billion, which is a reduction from our prior guidance of $14.4 to $14.9 billion. This reduction is due to weaker foreign currencies, a lower market production outlook, and e-products coming in at the low end of our prior guidance range.

Craig: We are projecting total 2024 sales in the range of $14 one to $14 4 billion.

Craig: Which is a reduction from our prior guidance of $14 four to $14 9 billion.

Craig: This reduction is due to weaker foreign currencies.

Craig: Lower market production outlook and E products coming in at the low end of our prior guidance range.

Craig: Despite this revenue reduction, we expect the company to outgrow market production by 350 to 450 basis points, which once again demonstrates the resiliency of our technology-focused portfolio that we believe is positioned to outgrow market production during any kind of propulsion mix environment. Starting with foreign currencies, our guidance now assumes an expected full-year sales headwind from weaker foreign currencies of $175 million compared to 2023. This is also a sales headwind of $75 million versus our prior guidance, with the Euro, the Chinese Renminbi, and the Korean Won being the largest drivers of the change in our outlook.

Craig: Despite this revenue reduction we expect the company to outgrow market production by 350 to 450 basis points.

Craig: Williams, which once again demonstrates the resiliency of our technology-focused portfolio that we believe is positioned to outgrow market production during any kind of propulsion mix environment. Starting with foreign currencies, our guidance now assumes an expected full-year sales headwind from weaker foreign currencies of 175 million compared to 2023. This is also a sales headwind of 75 million versus our prior guidance, with the Euro, Chinese Rendy, and Korean one being the largest drivers of the change in our outlook. Within this guidance, our full-year-end market assumption has been reduced to down 2% to 3% versus flat to down 2.5% previously.

Craig: Which once again demonstrates the resiliency of our technology focused portfolio that we believe is positioned to outgrow market production during any kind of propulsion mix environment.

Craig: Starting with foreign currencies, our guidance now assumes an expected full year sales headwind from weaker foreign currencies of $175 million compared to 2023.

Craig: This is also a sales headwind of $75 million versus our prior guidance with the Euro Chinese RMB and Korean one being the largest drivers of the change in our outlook.

Craig: Within this guidance, our full year end market assumption has been reduced to down 2% to 3% versus flat to down 2.5% previously. Finally, the Eldor and SSE acquisitions are expected to add approximately $30 million to 2024 sales.

Craig: Within this guidance our full year end market assumption has been reduced to down 2% to 3% versus flat to down two 5% previously.

Craig: Finally, the Eldor and SSE acquisitions are expected to add approximately 30 million to 2024 sales. Based on end-market and heat product headwinds, we expect organic growth of approximately half a percent to 2.5% year-over-year compared to our prior guidance of 2 to 5%. However, our expected overall growth above market production remains strong at 350 to 450 basis points.

Craig: Finally, the Eldar and SFC acquisitions are expected to add approximately $30 million to 2024 sales.

Craig: Based on end market and e-product headwinds, we expect organic growth of approximately half a percent to two and a half percent year over year, compared to our prior guidance of two to five percent. However, our expected overall growth above market production remains strong at 350 to 450 basis points. Now, let's switch to margin.

Craig: Based on end market and heat products headwinds, we expect organic growth of approximately half a percent to two 5% year over year compared to our prior guidance of 2% to 5%.

Craig: However, our expected overall growth above market production remained strong at 350 to 450 basis points.

Craig: Now, let's switch to margin.

Craig: Now, let's switch to margin.

Craig: We are increasing our full-year margin outlook to 9.6 to 9.8% from our prior guidance of 9.2 to 9.6%. This is based on our year-to-date performance and the expected benefit of our E-Propulsion Restructuring Actions, which I'll discuss in a few moments. We believe as margin guidance increase reflects our ability to drive profitability in very volatile end-markets, excluding the impact of Eldor-related losses in 2024 and the benefit of our E-Propulsion Restructuring, the high end of our second half outlook contemplates the business delivering an incremental conversion in the mid-teens, while the low end of our guidance provides a decriminal conversion in the low-double digits.

Craig: We are increasing our full-year margin outlook to 9.6 to 9.8% from our prior guidance of 9.2 to 9.6%. This is based on our year-to-date performance and the expected benefit of our e-propulsion restructuring actions, which I'll discuss in a few moments. We believe this margin guidance increase reflects our ability to drive profitability in very volatile end markets; excluding the impact of Eldor-related losses in 2024 and the benefit of our e-propulsion restructuring, the high end of our second half outlook contemplates the business delivering an incremental conversion in the mid-teens, while the low end of our guidance provides a decremental conversion in the low double digits.

Craig: We are increasing our full year margin outlook to nine 6% to nine 8% from our prior guidance of nine two to nine 6%.

Craig: This is based on our year to date performance.

Craig: And the expected benefit of our E propulsion restructuring actions, which I'll discuss in a few moments.

Craig: We believe this margin guidance increase reflects our ability to drive profitability and very volatile end markets.

Craig: Excluding the impact of Eldar related losses in 2024, and the benefit of our E propulsion restructuring the high end of our second half outlook contemplates the business delivering an incremental conversion in the mid teens.

Craig: The low end of our guidance provides a decremental conversion in the low double digits.

Craig: We view this as strong underlying performance given the anticipated 3.5 to 5.5% decline in market production during the second half of the year. Based on this sales and margin outlook, we're expecting full-year adjusted EPS and the range of $3.95 to $4.15 per-deleted share. This increase compared to our prior outlook is being driven by the impact of our higher margin guidance and 300 million in share purchases that we expect to execute before the end of the year. With an expected $475 to $575 million in 2024 pre-cash flow, we expect to allocate all of our cash flow to shareholders through share purchases and dividends.

Craig: We view this as strong underlying performance given the anticipated three and a half to five and a half percent decline in market production during the second half of the year. Based on this sales and margin outlook, we're expecting full year adjusted EPS in the range of $3.95 to $4.15 per diluted share.

Craig: We view this as strong underlying performance given the anticipated three and half to five 5% decline in market production during the second half of the year.

Craig: Based on this sales and margin outlook, we're expecting full year adjusted EPS in the range of $3 95 to.

Craig: To $4 15 per diluted share.

Craig: This increase compared to our prior outlook is being driven by the impact of our higher margin guidance and $300 million in share repurchases that we expect to execute before the end of the year. With an expected $475 to $575 million in 2024 free cash flow, we expect to allocate all of our cash flow to shareholders through share purchases and dividends. In summary, this is simply another example of the company utilizing its strong free cash flow to deliver value to shareholders.

Craig: This increase compared to our prior outlook is being driven by the impact of our higher margin guidance and $300 million in share repurchases that we expect to execute before the end of the year.

Craig: With an expected $475 million to $575 million in 2020 for free cash flow, we expect to allocate all of our cash flow to shareholders through share repurchases and dividends.

Craig: In summary, this is simply another example of the company utilizing its strong pre-cash flow to deliver value to shareholders.

Craig: In summary, this is simply another example of the company utilizing our strong free cash flow to deliver value to shareholders.

Craig: Let's turn to slide 12 and discuss our planned restructuring actions within our e-propulsion segment.

Craig: Let's turn to slide 12 and discuss our planned restructuring actions within our e-propulsion segment. As mentioned earlier, the initial benefits of these actions helped our second quarter results by $5 million. We continue to see short-term sales challenges in this business due to various individual platform shortfalls and other regional market dynamics. Therefore, it was critical to right-size the e-propulsion cost structure to their current level of sales with the restructuring actions that we started in June. We estimate cumulative cash restructuring costs of approximately $75 million that will extend through 2026.

Speaker Change: Let's turn to slide 12, and discuss our planned restructuring actions within our E propulsion segment.

Craig: As mentioned earlier, the initial benefits of these actions helped our second quarter result by $5 million.

Speaker Change: As mentioned earlier the initial benefits of these actions helped our second quarter results by $5 million.

Craig: We continue to see short-term sale challenges in this business due to various individual platforms, shortfalls, and other regional market dynamics. Therefore, it was critical to right size the e-propulsion cost structure to their current level of sales, with restructuring actions that we started in June. We estimate fuel of cash restructuring costs of approximately $75 million that will extend through 2026. These actions are expected to generate cost savings of 20 to 30 million in 2024 and approximately $100 million by 2026. The intention of this restructuring is to improve the near-term earnings of this business, but it also positions the business to be able to deliver mid-teens incremental margins on future growth.

Speaker Change: We continue to see short term sales challenges in this business due to various individual platform shortfalls and other regional market dynamics.

Speaker Change: Therefore, it was critical to rightsize the E propulsion cost structure to their current level of sales with restructuring actions that we started in June.

Speaker Change: We estimate cumulative cash restructuring costs of approximately 75 million that will extend through 2026.

Craig: These actions are expected to generate cost savings of $20 to $30 million in 2024 and approximately $100 million by 2026. The intention of this restructuring is to improve the near-term earnings of this business, but it also positions the business to be able to lever mid-teens incremental margins on future growth. So let me summarize my financial remarks. Overall, we delivered a strong second quarter with sales performance better than market production. We delivered a very strong 10.4% margin, which was 30 basis points higher than 2023. And we generated $297 million in free cash flow, which was $267 million higher than 2023.

Speaker Change: These actions are expected to generate cost savings of $20 million to $30 million in 2024, and approximately 100 million by 2026.

Speaker Change: The intention of this restructuring is to improve the near term earnings of this business, but it also positions the business to be able to deliver mid teens incremental margins on future growth.

Craig: So let me summarize my financial remarks. Overall, we delivered a strong second quarter with sales performance better than market production. We delivered a very strong 10.4% margin, which was 30 basis points higher than 2023, and we generated 297 million in free cash flow, which was $267 million higher than 2023.

Speaker Change: So let me summarize my financial remarks.

Craig: And we did this despite declining market production in the quarter. I believe this once again demonstrates the resiliency of our technology-focused portfolio that is positioned to outgrow market production and to deliver strong profitability and free cash flow in any type of end market environment. Last quarter, I shared three financial goals for BorgWarner for 2024 and beyond. I would like to give you my view of these goals as they relate to our 2024 outlook.

Speaker Change: Overall, we delivered a strong second quarter with sales performance better than market production.

Speaker Change: We delivered a very strong 10, 4% margin, which was 30 basis points higher than 2023.

Speaker Change: And we generated $297 million in free cash flow, which was $267 million higher than 2023.

Craig: And we did this despite declining market production in the course. I believe this once again demonstrates the resiliency of our technology-focused portfolio that is positioned to outgrow market production and to deliver strong profitability and free cash flow in any type of end-market environment.

Speaker Change: And we did this despite declining market production in the quarter.

Speaker Change: I believe this once again demonstrates the resiliency of our technology focused portfolio that is positioned to outgrow market production and Jill and to deliver strong profitability and free cash flow and any type of end market environment.

Craig: Last quarter, I shared three financial goals for Board Warner for 2024 and beyond. I would like to give you my view of these goals as it relates to our 2024 outlook. First, we outperform market production by approximately 350 basis points during the first half of the year. In this spite-anticipated week or second half production environment, we expect to outperform the market by 350 to 450 basis points for the full year. This is a reflection of our leading edge technology that we believe is positioned to outgrow a very volatile powertrain mixed environment. Second, our margin profile remained extremely strong through the first half of the year.

Speaker Change: Last quarter I shared three financial goals for Borgwarner for 2024 and beyond.

Speaker Change: I would like to give you my view of these goals as it relates to our 2020 for outlook.

Craig: First, we outperformed market production by approximately 350 basis points during the first half of the year. And despite an anticipated weaker second half production environment, we expect to outperform the market by 350 to 450 basis points for the full year. This is a reflection of our leading-edge technology that we believe is positioned to outgrow a very volatile powertrain mix environment. Second, our margin profile remained extremely strong through the first half of the year.

Speaker Change: First we outperformed market production by approximately 350 basis points during the first half of the year.

Speaker Change: And despite an anticipated weaker second half production environment, we expect to outperform the market by 350 to 450 basis points for the full year.

Speaker Change: This is a reflection of our leading edge technology that we believe is positioned to outgrow a very volatile powertrain mix environment.

Speaker Change: Second.

Speaker Change: Our margin profile remained extremely strong through the first half of the year when combined with our continued focus on profitable growth, including our planned E. Propulsion restructuring actions. There has allowed us to increase our full year margin outlook by 30 basis points, despite a challenging production environment.

Craig: When combined with our continued focus on profitable growth, including our planned e-propulsion restructuring actions, this allowed us to increase our full year margin outlook by 30 basis points, despite a challenging production environment. And lastly, we generated strong free cash flow during the second quarter, and we have strong liquidity, which supports our intention to repurchase 300 million of additional shares during the second half of the year. This means that we expect all of our 2024 free cash flow will be returned to shareholders through the combination of a consistent quarterly dividend and intended share repurchases. The combination of our 2023 and intended 2024 share repurchases represents more than seven percent of our outstanding shares, post-definion spin-off.

Craig: When combined with our continued focus on profitable growth, including our planned e-propulsion restructuring actions, this allowed us to increase our full-year margin outlook by 30 basis points, despite a challenging production environment. And lastly, we generated strong free cash flow during the second quarter, and we have strong liquidity, which supports our intention to repurchase 300 million additional shares during the second half of the year. This means that we expect all of our 2024 free cash flow to be returned to shareholders through the combination of a consistent quarterly dividend and an intended share repurchase.

Speaker Change: And lastly, we generated strong free cash flow during the second quarter, and we have strong liquidity, which supports our intention to repurchase $300 million of additional shares during the second half of the year.

Speaker Change: This means that we expect all of our 2020 for free cash flow will be returned to shareholders through the combination of a consistent quarterly dividend and tenant share repurchases.

Craig: The combination of our 2023 and intended 2024 share repurchases represents more than 7% of our outstanding shares post the Finneas spinoff, and we expect to do this while also continuing to invest in our business and support our focus on long-term profitable growth. As I look back at the first half of the year, I'm very proud of how we've performed, and I'm equally excited to see our results in the second half of the year. With that, I'd like to turn the call back over to Pat.

Speaker Change: The combination of our 2023 and intended 2024 share repurchases represents more than 7% of our outstanding shares post the finance spin off.

Craig: And we expect to do this while also continuing to invest in our business to support our focus on long-term profitable growth.

Speaker Change: And we expect to do this while also continuing to invest in our business support our focus on long term profitable growth.

Craig: As I look back at the first half of the year, I'm very proud with how we have performed, and I'm equally excited to see our results in the back half of the year.

Speaker Change: As I look back at the first half of the year.

Speaker Change: Im very proud with how we performed and I am equally excited to see our results in the back half of the year.

Patrick Nolan: With that, I'd like to turn the call back over to Pat.

Speaker Change: With that I'd like to turn the call back over to Pat.

Patrick Nolan: Thank you, Craig. Go and ready to open it up for questions. Certainly, Mr. Nolan, ladies and gentlemen, at this time, I would like to remind everyone: if you would like to ask a question, press star 100 on the telephone keypad. If you are using a speaker phone, please pick up the handset before asking your question.

Pat: Thank you Craig.

Patrick Nolan: Thank you, Craig. Go, we're ready to open it up for questions.

Pat: So we're ready to open it up for questions.

Bo: Ladies and gentlemen, at this time, I would like to remind everyone that if you would like to ask a question, press star 1 on your telephone keypad. If you are using a speakerphone, please pick up the handset before asking your question. In the interest of time, please limit yourself to one question and one follow-up question. We'll pause for just a moment to compile the Q&A list. We'll go first this morning to John Murphy with Bank of America. Good morning, guys.

Speaker Change: Certainly Mr. Nolan, ladies and gentlemen at this time I would like to remind everyone. If you would like to ask a question press star one on your telephone keypad. If you are using a speakerphone. Please pick up the handset before asking your question in the interest of time. Please limit yourself to one question and one follow up question, we'll pause for just a moment to compile the Q&A roster.

Patrick Nolan: In the interest of time, please let me yourself do one question and one follow a question. We'll pause for just a moment to compile the Q&A roster.

John Murphy: We'll go first this morning to John Murphy with Bank of America. Good morning, guys. Just a main question here around the E-products restructuring. Why doesn't it not include Europe? Why is it only North America and China? Is this just in response to program cancellations or pushouts, meaning that the business is just not materializing the way you're expecting? It appears just given the very quick savings that some of these programs may have been lost making for you, even if they had come through, so they just kind of confirm that. Why not Europe? Is it just program cancellations and pushouts?

Speaker Change: We'll go first this morning to John Murphy with Bank of America.

John Joseph Murphy: Just a main question here around the E products restructuring. One, why does it not include Europe? Why is it only North America and China?

John Joseph Murphy: Good morning, guys.

John Joseph Murphy: Just a main question here around the E products restructuring.

Speaker Change: Why does it include why does it not include Europe. It wasn't only North America, and China and this <unk>.

John Joseph Murphy: And is this just in response to program cancellations or pushouts, meaning that the business is just not materializing the way you were expecting? And it appears, just given the very quick savings, that some of these programs may have been loss-making for you, even if they had come through. So, let me just kind of confirm that. So, why not Europe?

Speaker Change: Just in response to program cancellations or push outs, meaning that the business is just not materializing the way you were expecting.

Speaker Change: And it appears just given the very quick savings that some of these programs may have been.

Speaker Change: Loss, making for you even if they'd come through so maybe just kind of confirm that so why not Europe.

Fred: Is it just program cancellations and pushouts? And were these programs loss-making to start with, and maybe any other color around this? Yeah, John, from an engineering and SEO footprint perspective, this business unit is essentially tilted to North America and China. That's where the restructuring, most of the restructuring will happen because this is where we have the weight, but it also touches some parts of Europe.

Speaker Change: Is it just program cancellations and push outs.

John Murphy: And were these programs lost making it to start with and maybe any other color around this?

Speaker Change: And more of these programs loss, making.

Speaker Change: To start with and maybe any other color around this.

Craig: Yeah, John, from an engineering and essay, I know a footprint perspective. This business unit is essentially till did to North America and China. That's where most of the restructuring will happen because this is where we have the weight, but it also touches some parts of Europe. The restructuring is sized so that when PDS carries on launching so many products for major OEMs globally, we're converting mid-teens on the way up, and that's how we sized the restructuring. We're focusing on launching the products that we've booked, and we've also focused on very defined programs for long-term product leadership and enhanced product efficiencies.

John Joseph Murphy: Yes, John.

Speaker Change: From a from an engineering and ASC I know footprint perspective. This business unit to this essentially tilted to North America, and China, That's where there is most of the restructuring will happen because this is where we have.

Speaker Change: Wait.

Speaker Change: But it also touches some parts of Europe.

Fred: The restructuring is sized so that... when PDS carries on launching so many products, for major OEMs globally, we're converting mid-teens on the way up, and that's how we size the restructuring. We're focusing on launching the products that we've booked, and we've also focused on very defined programs for long-term product leadership and enhanced product efficiencies. Okay, and then maybe just a follow up on the seat on the seesaw on the ice and potentially on the hybrid side.

Speaker Change: The restructuring is sized so that.

Speaker Change: When pds carries on launching so many products for major Oems globally, we converting mid teens on the way up and Thats, how we sized.

Speaker Change: When we say is the restructuring.

Speaker Change: We are focusing on launching the products that we've booked and we are also focused on very.

Speaker Change: Defined programs for long term product leadership and product efficiencies.

Craig: Okay, and then maybe just a follow-up on the seesaw on the ice and potentially on the hybrid side. Are you seeing any benefits that might come to that side of the business where they're gaining a little bit of revenue that might come in at higher incrementals, that maybe it's this year or maybe it is, we go through 25 and 26 through the courses program. So the propulsion mix is volatile and unpredictable. And what we're doing at Borg is making sure that we are converting on the additional revenue, wherever the revenue comes from. We're focusing on launching our new business that we're booked.

John Joseph Murphy: Are you seeing any, you know, benefits that might come to that side of the business where you're getting a little bit of revenue that might come in at higher incrementals that, you know, maybe it's this year, or maybe it is we go through 25 and 26 through the course of this program? Yeah, so the prop the propulsion mix is volatile and unpredictable. What we're doing at Borg is making sure that we are converting on the additional revenue wherever the revenue comes from.

Speaker Change: Okay, and then maybe just a follow up on the seat on the seesaw.

Speaker Change: On the icing and potentially on the hybrid side.

Speaker Change: Are you seeing any benefits that might come to that side of the business, where we're gaining a little bit of revenue that might come in at higher Incrementals that maybe it's this year or maybe it as we go through $25 26 through the course of this program.

Speaker Change: Yes.

Speaker Change: The propulsion mix is.

Speaker Change: <unk>.

Speaker Change: Volatile and unpredictable.

Speaker Change: And.

Speaker Change #107: What we're doing at Borg is making sure that we are converting on the additional revenue wherever the revenue comes from.

John Joseph Murphy: We're focusing on launching our new business that we booked, and this is what translates in the numbers and the updated guide. Okay, just one, just Bob, most of this is, it sounds like it's headcount on R&D. Is that a fair statement? It is headcount and other types of spending. Okay, all right. It's more SCNO than any other things, SCNO or ROLL.

Speaker Change: We're focusing on launching our new business that were booked and and this is what translates in the numbers and the updated guide.

Craig: And, and this is what translates in the numbers and the updated guide. Okay.

Speaker Change: Okay, and just one just Bob most of this is it sounds like its head count on R&D.

John Murphy: And just one, just one. Most of this is, hey, it sounds like a Ted count on our on our disease. Is that a, is that a first statement? It is that counts and other types of spent. Okay. But it's more I see; I know within any other things. I see an overall got it. That's very helpful. All right. Thank you, guys. Thank you, John. Thank you.

Speaker Change: That a fair statement.

Bob: It is head count and other types of spend.

Speaker Change: Okay.

Speaker Change: It's more <unk> than any other things overall.

John Joseph Murphy: Got it. That's very helpful. All right. Thank you, guys. Thank you, John.

Speaker Change: Got it that's very helpful. Alright, Thank you guys.

John Joseph Murphy: Thank you John.

Colin M. Langan: Thank you. We go next to Colin Langan at Wells Fargo. Thanks for taking my questions and congrats on a pretty good quarter. If I look at the midpoint of your guidance, it does imply something like over a 30% decrement if I go first half to second half on those lower sales, kind of a higher end of the conversion on lower sales. And on top of that, I think you mentioned there's actually a little bit of savings from the restructuring program in the second half. What is driving that? Is that just normal seasonality?

Speaker Change: Thank you. We'll go next now to Colin Langan at Wells Fargo.

Colin Lingen: We go next now to Colin Lingen and Wells Fargo. Thanks for taking my questions, and congrats on a pretty good quarter. If I look at the midpoint of your guidance, it does imply something like a over a 30% decarimental. If I go first half to second half on those lower sales, kind of a higher end of the conversion on lower sales. And on top of it, I think you mentioned there's actually a little bit of savings from the restructuring program into the second half.

Colin M. Langan: Thanks for taking my questions Congrats on a pretty good quarter.

Speaker Change: If I look at the midpoint of full year guidance. It does imply something like over a 30% decremental. If I go first half second half all of those lower sales kind of a higher end of the conversion on lower sales.

Speaker Change: And on top of it I think you mentioned there is actually a little bit of savings from the restructuring program into the second half.

Craig: What is driving that? Is that just normal seasonality? How should we think about first half second half decarimental? Yeah. So when we think about first half second half, I think actually the better way to look at it is year over year. And when you think about our margin, 9.3 to 9.6% in the second half of the year, when you look at the high end of our guide, we're incrementing in the mid teens; on the low end, we're decarimenting in the low double digits. That's excluding the benefits of restructuring. So Colin, when you include restructuring, we're incrementing in the 30% range on the high end of our guide, and on the bottom end of the guide, we're holding flat.

Speaker Change: What is driving that is that just normal seasonality how should we be thinking about first half second half decremental.

Craig: How should we be thinking about first half to second half? Yeah, so when we think about first half, second half, I think actually the better way to look at it is year over year. And when you think about our margin, 9.3 to 9.6% in the second half of the year, when you look at the high end of our guide, we're increasing in the mid-teens. On the low end, we're decrementing in the low double digits.

Speaker Change: Yes, so when we think about first half second half I think actually the better way to look at it year over year and when you think about our margin nine three to nine 6% in the second half of the year. When you look at the high end of our guide we're increments in the mid teens on the low end, we're a decremental.

Collyn: In the low double digits, that's excluding the benefits of restructuring. So collyn. When you include restructuring were incremental and the 30% range and the high end of our guidance and on the bottom end of the guide we're holding flat for US I think that's really good underlying performance and so that's how we're looking at it year over year.

Craig: That's excluding the benefits of restructuring. So Colin, when you include restructuring, we're incrementing in the 30% range on the high end of our guide, and on the bottom end of the guide, we're holding flat.

Craig: For us, I think that's really good underlying performance. And so that's how we're looking at it year over year.

Craig: For us, I think that's really good underlying performance, and so that's how we're looking at it.

Colin Lingen: You're over here. Got it. And if I look at growth over market, I think it came down a little bit less than 100 basis points. It seems to be pretty small considering some of the issues. I mean, what is driving that slight change? Is that all the EV delays? And is there any customer mix as other suppliers have reported, or is that not an issue for you, giving your pretty strong position in China with domestic? Yeah, Colin, the outgrowth for Q2 is 120 basis points. And this is essentially impacted by a product revenue at the low end of our guide.

Speaker Change: Got it and.

Colin M. Langan: And if I look at growth over market, I think it came down a little bit less than 100 basis points. Seems pretty small considering some of the issues. I mean, what is driving that slight change? Is that all the EV delays?

Speaker Change: And if I look at growth over market I think it came down a little bit less than a 100 basis points seems pretty small considering some of the issues. I mean, what is driving that slight change is that all of the EV delays and is there any customer mix. It's other suppliers have reported or is that not an issue for you given your pretty strong position in China with domestic.

Fred: And is there any customer mix, as other suppliers have reported? Or is that not an issue for you given your pretty strong position in China? Yeah, Colin, the outgrowth for Q2 is 120 basis points, and this is essentially impacted by e-product revenue at the low end of our gate, and also essentially a program in North America, a BEV program in North America that's not really performing well. I would not really look at a smooth outgrowth quarter over quarter as a good proxy.

Speaker Change: Yes.

Speaker Change: <unk> growth for Q2 was 120 basis points and.

Speaker Change: This is essentially impacted by E product revenue at the low end of our gate and also essentially programming North in North America Bev program in North America, that's not really performing well.

Colin Lingen: And also essentially programming North America, a bit of programming North America that's not really performing well. I would not really look at smooth out growth quarter over quarter as a good proxy. I think 300 basis points for the first half is where we want to be. And we'll be around 400 basis points for the free, which is also where we kind of want to be. I was kind of referring to the full year guide growth over market that was implied. It seems like it's slightly lower. Is that also all EV related?

Speaker Change: I would not really look at a smooth our growth quarter over quarter as a good proxy I think three basis points for the first half as is.

Fred: I think 300 basis points for the first half is where we want to be, and we'll be around 400 basis points for the free year, which is also where we kind of want to be. I was kind of referring to the full year guide growth of a market that was applied, but it seems like it's slightly lower.

Speaker Change: Is the way we want to be.

Speaker Change: We'll be around 400 basis points for the full year, which is also where we kind of want to be.

Speaker Change: I was kind of referring to the full year guide growth of a market that was applied.

Speaker Change: Seems like it's slightly lower is that also all EV.

Speaker Change: It is.

Speaker Change: It is.

Colin Lingen: All right, thanks for taking my question. Thank you.

Speaker Change: Alright, thanks for taking my questions.

Speaker Change: Q.

Fred: Is that also all EV related? Yes, it is. Alright, thanks for taking part. Thank you. Thank you. We go next now to Chris McNally at Evercore, on 30 beeps. I mean, basically, the way I think about it is, essentially, given the organic revenue reduction of, you know, a little bit less than 300 million, you probably would have lost 20 or 30 basis points on normal incremental. So if you add those two, it's about 50 to 60 beeps of operational, sort of better than expected performance.

Speaker Change: Thank you well go next now to Chris Mcnally at Evercore.

Chris Mcnally: We'll go next now to Chris McNally at Evercore. Thanks so much, team. I mean, maybe if I step back for the impressive dive raise of 30 beeps, I mean, basically the way I think about it is essentially given the organic revenue reduction of, you know, a little bit less than 300 million, you probably would have lost, you know, 20 to 30 basis points on normal incremental. So if you add those two, it's about a 50 to 60 of operational, sort of better than expected performance.

Speaker Change: Thanks, so much team.

Speaker Change #114: Maybe if I step back.

Speaker Change: Impressive guide raise of 30 bps I mean, basically the way I think about it as essentially given the organic revenue reduction of a little bit less than $300 million.

Speaker Change: Probably would have lost.

Speaker Change: 2030 basis points on normal incremental so if you add those two it's about 50 to 60 feet of operational sort of better than expected at <unk>.

Christopher Patrick McNally: And I think what we're all trying to work out is, you know, if you look at Q2 and a 10.4% margin while you still have e-propulsion losses in the double digits. Can you just walk us through some of the concepts, why we can't sort of propel out that 10% plus margin, you know, for 2526, where obviously we're, you know, you've discussed lower, what rolls off anything just qualitative, I know, there's a lot of moving parts in one quarter doesn't doesn't make sort of a trend.

Speaker Change: Performance.

Craig: And I think what we're all trying to, to work out is, you know, if you look at Q2 and a 10.4% margin, while you still have e-populsion losses in the, in the double digits, can you just walk us through some of the concepts? That's why we can't sort of propel out that 10% plus margin, you know, for 25, 26, where obviously we're, you know, you've discussed lower, you know, what rolls off anything just qualitative. I know there's a lot of moving parts in one part doesn't, doesn't make sort of a trend, but we're all trying to figure out if ice is here for a little bit longer.

Speaker Change: What we're all trying to work out is if you look at Q2 and 10, 4% margin. While you still have E propulsion losses in the double digits can.

Speaker Change: Can you just walk us through some of the concepts why we can't sort of propel out that 10% plus margin for.

Speaker Change: For $25 26, we're obviously.

Speaker Change: Can you discuss slower.

Speaker Change: What rolls off anything just qualitative I know theres, a lot of moving parts and one quarter doesn't make a.

Speaker Change: Trend, but we're all trying to figure out if ic's here for a little bit longer what is the negative that trains that down because obviously E. Propulsion you will get better than this minus sort of double digit margin. The long question, but im curious why we can't see more strength in the in the foundational business.

Christopher Patrick McNally: But we're all trying to figure out if ice is here for a little bit longer, what is the negative that drains that down? Because obviously, the propulsion, you will get no better than this minus, you know, sort of double digit margin.

Craig: What is the negative that strains that down, because obviously e-populsion, you will get, you know, better than this minus, you know, sort of double digit margin? It's a long question, but you know, curious why we can't see more strength in the, in the foundational visit. Yeah, Chris, I'd say the way to look at it is when you look at Q2, we're at 10.4% the risk as I mentioned in my script, about 15 million benefit in the quarter with some items. So when you remove that, it's about 10% for Q2. As we move into the second half of the year, as you mentioned, you know, revenues coming down about 200 million surely market, 75 million foreign exchange and the balances on the e-product side of our portfolio, and ultimately at the midpoint operating income is unchanged.

Craig: It's a long question, but curious why we can't see more strength in the foundational business. Yeah, Chris, I'd say the way to look at it is when you look at Q2, we're at 10.4%. There was, as I mentioned in my script, about $15 million benefit in the quarter with some items. So when you remove that, it's about 10% for Q2.

Speaker Change: Yes, Chris I'd say the way to look at it is when you look at Q2, we're at 10, 4%. There was as I mentioned in my script about $15 million benefit in the quarter with some items. So when you remove that it's about 10%.

Speaker Change: For Q2, as we move into the second half of the year as you mentioned revenues coming down about $200 million purely market $75 million foreign exchange and the balances on the product side of our portfolio and ultimately at the mid point operating income is unchanged and so I think your question is how are we doing that.

Craig: As we move into the second half of the year, as you mentioned, revenues coming down about $200 million purely on the market, $75 million in foreign exchange in the balances on the e-product side of our portfolio, and ultimately, at the midpoint, operating income is unchanged. And so I think your question is, you know, how are we doing on that? And I think it's coming from our strong first half performance, and our restructuring benefits are offsetting the sales decline. I think it's really as simple as that. And then this idea as, obviously, we're going to see pure ICE, right?

Craig: So I think your question is, you know, how are we doing that? And I think it's coming from our strong first half performance, and our restructuring benefits is offsetting the sale decline. I think it's really as simple as that. And then this idea as, as obviously we're going to see pure ice, right, so X plug in, X hybrid, X EV, volumes decline over the next couple of years. Should we assume that if we were to able to isolate that margin of business that that's coming down, meaning they'll see decremental, because they'll also often at the end of life of a lot of these programs, you actually see R&D sort of also come down.

Speaker Change: It's coming from our strong first half performance and our restructuring benefits is offsetting the sales decline I think it's really as simple as that.

Christopher Patrick McNally: So x-plugin, x-hybrid, and x-EV volumes will decline over the next couple of years. Should we assume that if we were able to isolate that margin of business, that that's coming down, meaning they'll see declines? Because often, at the end of the life of a lot of these programs, you actually see R&D sort of go down. So that's one of the things that we're trying to figure out. If we were to isolate specifically ICE foundational programs, will they see margin decline as units go down over the next couple of years? And obviously, then the question will be, you know, some of these programs may be extended, or volumes may come down less.

Speaker Change: Okay.

Speaker Change: And then there is this.

Speaker Change: Idea is obviously, we're going to see pure ice right to plug in hybrid EV volumes decline over the next couple of years.

Speaker Change: Should we assume that if we were to able to isolate that that margin of business.

Speaker Change: That's coming down mean, they'll see decrementals because I'll also often at the end of life of a lot of these program you actually see R&D sort of also come down.

Craig: So that's one of the things that we're trying to figure out: if we would isolate specifically ice foundational programs. Will they see margin decline as units go down over the next couple of years? And obviously then the question will, you know, some of these programs may be extended or your volumes may come down less. But just if we were to think about not how you report, but sort of should we see margins on a life for like basis on pure ice come down. Yeah, so I would say first, a lot of our combustion products go into hybrids and are a key element of making the combustion site of hybrid lean and efficient.

Speaker Change: That's one of the things that we're trying to figure out if we were to isolate specifically is foundational.

Speaker Change: Programs will they see margin decline as units go down over the next couple of years.

Speaker Change: And obviously then the question will some of these programs may be extended or volumes may come down less but.

Fred: But just if we were to think about it, not how you report, but sort of should we see margins on a life-for-life basis on pure ICE come down? Yeah, so I would say first, A lot of our combustion products go into hybrids and are a key element of making the combustion side of hybrids lean and efficient. [inaudible] I think when you think about BorgWarner, I don't think you should try and and split combustion, hybrid, and VEV.

Speaker Change: If we were to think about it not how you report.

Speaker Change: Should we see margins on a like for like basis on pure ice come down.

Speaker Change: Sure.

Speaker Change: Yes, so I would say.

Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: A lot of our combustion products go into hybrids and are a key element of making the combustion side of hybrid lean and efficient.

Speaker Change: So I.

Craig: I think when you think about BorgWarner, I don't think you should try and split combustion hybrid in there because our combustion product goes on combustion and hybrid. Our e-product also are very versatile and go on EV and hybrid. Those are the same products. Now that's how I know I know it's a tough one to isolate.

Speaker Change: I think when you think about borgwarner.

Speaker Change: I don't think you should try and.

Speaker Change: And split combustion hybrid and Bev the because our combustible product goes on combustion and hybrid OE product also a very versatile and even go on EV and hybrid those are the same products.

Fred: Because our combustion product goes on combustion and hybrid, our E product is also very versatile and goes on EV and hybrid, those are the same product. And so we have the portfolio to play in all three segments, if you call that segments, and an algorithm segment and convert on that algorithm. It is as simple as this. Now, that's helpful. I know it's a tough one to isolate.

Speaker Change: And so we have the portfolio to play in.

Speaker Change: All three segments, if you grow that segments.

Speaker Change: And.

Speaker Change: And outgrow those segment and convert on that al growth. It is as simple as this.

Speaker Change: No. That's helpful. I know I know I know.

Speaker Change: At the top line.

Speaker Change: And I think as you as we can also see in the four new segments. Some of the margin progression I think upfront.

Chris Mcnally: And I think, as we also see in the four new segments, some of the larger progression I think that actually may be easier for the investment community to kind of see the trend segmented in sort of these segments where we do get a little interplay of ICE, EV, and hybrid. Thanks so much. Really appreciate it. Thank you.

Speaker Change: That actually maybe.

Speaker Change: Easier for the investment community to kind of see that.

Christopher Patrick McNally: And I think as we also see in the four new segments, some of the margin progression, I think, Fred, that actually may be, you know, easier for the investment community to kind of see the trend, you know, segmented in sort of these segments where we do get a little interplay of ICE, EV, and hybrid. Thanks so much. I really appreciate it. Thank you. Thank you. We go next to Joe Spak at UBS.

Speaker Change: Trend segmented in sort of these these segments, where we do get a little into play.

Speaker Change: Ice Evs and hybrid.

Speaker Change: So much really appreciate it.

Speaker Change: Thank you.

Speaker Change: Thank you we'll go next now to Joe Spak at UBS.

Joe Spak: We go next now to Joe's back at UBS. Thanks. Good morning. I just, you know, I think before you were looking for ER and D to be, you know, plus 40 to 50 million net for the year. Now, with this restructuring, it does sound like it's, again, mostly people. Is that now like a 20 million dollar year-over-year pace? Or is there some other sort of savings from the restructuring? Yeah.

Joseph Robert Spak: Thanks, good morning. I just, you know, I think before you were looking for ER&D to be, you know, plus 50, 40 to 50 million for the year. Now with this, with this restructuring, and it does sound like it's, again, mostly people, is that now like a $20 million year-over-year pace, or is there some other sort of savings from the restructuring? Yeah, thanks, Joe, for the question. You're right.

Joseph Robert Spak: Thanks, Good morning.

Speaker Change: And just.

Joseph Robert Spak: I think before you were looking for R&D to be plus 50 $40 million to $50 million for the year now with this with this restructuring and it does sound like it's again, mostly.

Speaker Change: People is that now like a $20 million year over year pace or is there some other sort of savings from the restructuring.

Speaker Change: Yes, Thanks, Joe for the question Youre right, Yes, we said, 40% to $50 million starting the year now after this restructuring is going to be down to 20% to 30, and how I look at it is our <unk> product portfolio is still growing half of $1 billion, it's still going to be up about 25% year over year and that $20 million to $30 million.

Joe Spak: Thanks, Joe, for the question. You're right. Yeah. We said 40 to 50 million starting the year. Now, after this restructuring. It's going to be down to 20 to 30. And I don't know how I look at it as our e-products portfolio is still growing half a billion dollars. It's still going to be up about 25% year over year. And that 20 to 30 million is supporting a lot of launches that are going to be happening in the future. It's really focused on application engineering. And that's really what that 20 to 30 million represents your year.

Craig: Yeah, we said 40 to 50 million last year. Now, after this restructuring, it's going to be down to 20 to 30. And how I look at it is, our e-products portfolio is still growing half a billion dollars; it's still going to be up about 25% year over year, and that 20 to 30 million are supporting a lot of launches that are going to be happening in the future. It's really focused on application engineering.

Speaker Change: Supporting a lot of launches that are going to be happening in the future. It's really focused on application engineering and thats really what that $20 million to $30 million represents year over year.

Joe Spak: So I guess just to follow on it more importantly, like how should we think about R&D there and capital investment on the products given, you know, your new view is sort of how this market is going to evolve here. On that growth, we're going to continue to support those programs with ER and D, and we're still focused, as always, on 15% return, invest the capital on all the programs.

Craig: And that's really what that 20 to 30 million represents here. So, I guess just to follow on, and more importantly, like, how should we think about R&D there and capital investment in e-products, given, you know, your new view as sort of how this market's going to evolve here? With that growth, we're going to continue to support those programs with ER&E, and we're still focused, as always, on 15% return on invested capital on all new programs. And then maybe just one more quick one here on, you know, e-products, sort of the lower end here. Maybe, apologies if I missed this, but is the battery ramp still on track?

Speaker Change: So I guess just to follow on and more importantly, like how should we think about R&D, there and and capital investment on the products given your new view of sort of how this market is going to evolve here.

Speaker Change: On that growth, we're going to continue to support those programs with E. R&D and we're still focused as always on 15% return on invested capital on all new programs.

Speaker Change: Okay.

Joe Spak: And then maybe just one more quick one here on, you know, e-products sort of the lower end here. Maybe I should apologize when I missed this, but is that the battery ramp still on track. I think you were looking for that to be like 7,800 million. So the reduction is really in some of those other e-products, or it was their revision to the battery side as well. Yeah, back to your prior question. I just want to add that we incrementing meetings, including that Eurovere additional 20 million ER and D spent on battery. It's on track.

Speaker Change: And then maybe just one more quick one here on E products sort of at the lower end here.

Joseph Robert Spak: I think you were looking for that to be like $700 million to $800 million, so the reduction is really in some of those other e-products, or was there a revision to the battery side as well? Yeah, back to your prior question. I just want to add that we're increasing meetings, including that year over year additional 20 million ER&D spent. On battery, it's on track. Seneca is doing a great job.

Speaker Change: I apologize if I missed this but is that is the battery ramp still on track I think youre looking for that to be like $7 million to $800 million. So the reduction is really in some of those are there any products or it was there a revision to the battery side as well.

Speaker Change: Yes back to your.

Speaker Change #101: Prior question, just wanted to add that incremental mid teens, including that year with the additional $20 million E. R&D spent.

Fred: And they're now fully in production. We're on track also for Europe. And, and the battery business performance is, of course, contributing positively to the incremental margins that we are delivering for the first half and and and and also an important part of how we are guiding up for the full year. Thank you. I'll pass it on.

Speaker Change #108: On battery it's on track.

Craig: As Seneca is doing a great job. And now fully fully in production, we're on track also for Europe and the battery, the battery business performance is of course contributing positively to the incremental mountains that we are delivering for the first half and also an important part of our guiding up for the free year.

Speaker Change: <unk> is doing a great job.

Speaker Change: And the now fully fully in production we are on track also for Europe.

Speaker Change: And the battery.

Speaker Change: The battery business performance.

Speaker Change: Of course contributing positively to the to the incremental margins that we are delivering for the first half and also an important part of.

Speaker Change: Our <unk>.

Speaker Change: <unk> up for the full year.

Joe Spak: Thank you. I'll pass it on. Thank you.

Speaker Change: Okay. Thank you I'll pass it on.

Speaker Change: Okay.

Joseph Robert Spak: Thank you. We go next now to Dan Levy at Mark. Hi, good morning.

Speaker Change: Thank you we'll go next now to Dan Levy at Barclays.

Dan Levy: We go next now to Dan Levy at Mark Levy's. Hi, good morning. Thank you for taking the question. One is to start first with the question on the drive train and battery system segment, which is another really strong quarter. So maybe you can help us disaggregate the margin strength. So much of this was on the core foundational piece versus, you know, the battery side where you just talked to the second ago, but that's obviously branding. Yeah, the quick answer is coming from both really really strong growth in the quarter, like you saw. It's coming from both sides of the portfolio on the battery business and the foundational business.

Dan Meir Levy: Thank you for taking the question. I wanted to start first with the question on the drivetrain and battery system segment, which is another really strong quarter. So maybe you can help us disaggregate the margin strength, how much of this was on the core foundational piece versus, you know, the battery side, where you just talked to a second ago, but that's obviously ramped up. Yeah, the quick answer is coming from both really, really strong growth in the quarter.

Dan Meir Levy: Hi, Good morning. Thank you for taking the question wanted to start first.

Dan Meir Levy: The question on the drivetrain.

Dan Meir Levy: <unk> systems segment, which is another really strong quarter. So maybe you can help us disaggregate the margin strength how much of this was on the core foundational piece.

Dan Meir Levy: Versus.

Speaker Change: The battery side, where I think you just talk to in a second ago, but that's obviously ramping.

Dan Meir Levy: Like you saw, it's coming from both sides of the portfolio, the battery business and the foundational business. And I think we're also, so we're converting that extra sales at the same time, really focused on cost, you know, taking productivity action, supplier savings, restructuring, those are all the benefits that you're seeing come through our P&L. But the short answer, it's really coming from both sides of the equation. And on the foundational side within drive train, is there one particular region or one particular product that's trending through? I mean, just trying to get a sense of how sustainable, when I recognize the margin, the segments are getting reshuffled, how sustainable these drive train, you know, foundational results are.

Speaker Change: Yes, the quick answer it's coming from both really really strong growth in the quarter like you saw it's coming from both sides of the portfolio on the battery business and the foundational business and I think we're also so we're converting on that extra sales at the same time really focused on cost taking productivity actions supplier savings restructuring.

Craig: And I think we're also so we're converting on that extra sale, but the same time really focused on cost, you know, taking productivity actions, supplier savings, restructuring. Those are all the benefits that you're seeing come through our panel. But the short answer, it's really coming from both sides of the business.

Speaker Change: <unk> those are all the benefits that you're seeing come through our P&L, but the short answer it's really coming from both sides of the business.

Craig: And the foundational side within drive train is there one particular region or one particular product that's trending to them and just trying to get a sense of how sustainable when I recognize the margin, the segments are getting reshuffled, but how sustainable these drive train, you know, foundation results are. Yeah, the drive train, the foundational side, seeing good strength out of Asia. Got it.

Speaker Change: And the foundational side within drivetrain is there one particular region or one particular product that is trending to I mean, just trying to get a sense of how sustainable when I recognize that the segments are getting reshuffled how sustainable these drivetrain.

Speaker Change: Foundation results are.

Craig: Yeah, the drive train, the foundational side, is seeing good strength out of Asia on the end markets. You know, we've obviously seen the negative revisions, but maybe, you know, what you're seeing in terms of a customer mix standpoint, how much, you know, conservatism you might be including, because we've seen, you know, a number of reductions to the end market outlook talk about production cuts. Just, you know, your views on customer mix and, you know, the conservatism on schedules, please.

Speaker Change #103: Yes, the drivetrain the foundational side seeing good strength out of Asia.

Speaker Change: Got it thank you.

Craig: Thank you. Maybe as a follow-up, maybe you can help us understand on the forward assumptions on the end markets. You know, we've obviously seen the negative revisions, but maybe, you know, what you're seeing in terms of a customer mix standpoint, how much, you know, conservatism you might be including because we've seen, you know, a number. We've heard reductions to the end market outlook talk about production taxes, you know, reviews on customer mix and the conservatism on schedule, please. And our guide reflects what we see in the market, and we expect the market to be down 2 to 3% year over year, with the biggest reduction being in China, followed by North America and Europe.

Speaker Change #132: Maybe as a follow up maybe you can help us understand on the forward assumptions.

Speaker Change #100: End markets.

Speaker Change: We've obviously seen the negative revisions, but maybe what youre seeing in terms of the customer mix standpoint, how much conservatism you might be including because we've seen a number of.

Speaker Change: Reductions.

Speaker Change: The end market outlook talked about production.

Speaker Change: Your views on customer mix and the conservatism on schedules. Please.

Craig: And our guide reflects what we see in the market. And we expect the market to be down 2 to 3% year over year, with the biggest reduction being in China, followed by North America and Europe. In China, we see a bit of weaker consumer demand now impacting production rates. In North America, we're seeing some customers working to address their inventory levels. And in Europe, there is also a bit of weaker demand and a depletion of backlog. But all that is embedded in our guide, both on the top line and bottom line. Great, thank you.

Speaker Change #112: And our guide reflects what we've seen in the market and we expect the market to be down to two 3% year over year.

Speaker Change: With the biggest reduction being in China, followed by North America and Europe.

Craig: In China, we see a bit of a weaker consumer demands, now impacting election rates in North America. We're seeing some customers working to address their inventory level. And in Europe, there is also a bit of a weaker demand and depletion of bank load, but all that is embedded in our guide, both on the top 9 and bottom 9.

Speaker Change: In China, we see a bit of a week.

Speaker Change: Summa demands now impacting production rates in North America, we are seeing some customers working to address their inventory level and in Europe.

Speaker Change: There is also a bit of a weaker demand in depletion of of backlog, but all of that is embedded in our in our gate both on the topline and Bottomline.

Dan Levy: Great, thank you.

Speaker Change: Great. Thank you.

Mark Delaney: We'll go next now to Mark Delaney at Goldman Sachs. I guess, Good morning. Thanks very much for taking a question.

Dan Meir Levy: We'll go next now to Mark Delaney at Goldman Sachs, who understands e-products within China. And that's a market where EV sales have held up better than some of the other regions. And the company has spoken about some good design wins within e-products with the domestic Chinese OEM. So maybe you'd speak a little bit more about what you're seeing in the Chinese market for e-products and to what extent, if at all, are some of the incremental tariffs that the US and Europe have placed on Chinese imports having an effect on your e-products business for Chinese domestic OEMs? Yeah, Mark.

Speaker Change: We'll go next now to Mark Delaney at Goldman Sachs.

Mark Trevor Delaney: Good morning, and thanks very much for taking the question.

Mark Delaney: One area has something to better understand was e-products within China. That's a market where EV sales have held up better than some of the other regions. And the company has spoken about some good design wins within e-products with the domestic Chinese.

Mark Trevor Delaney: One area I was hoping to better understand was E products within China, and that's a market where EV sales have held up better than some of the other regions in the company has spoken about some good design wins within <unk> products with the domestic Chinese OEM. So maybe you can speak a little bit more on what youre seeing in the China market with new products and to what extent if at all or.

Mark Delaney: So maybe you took a little bit more around what you're seeing in the China market with e-products. And to what extent, if at all, are some of the incremental tariffs that the US and in Europe market placed on Chinese imports having an effect on your e-products business for Chinese domestic Williams. Mark, so remember, e-products are go both into hybrids and devs and in China, and EVs and compasses both hybrid and devs, the fastest growth is hybrids in China. We're launching a lot of new products in China. About 95% of our e-products in China are made with the big Chinese car makers.

Mark Trevor Delaney: Some of the incremental tariffs that the U S and Europe based on Chinese imports.

Speaker Change: The effect on your <unk> products business for Chinese domestic Oems.

Fred: So remember, e products are going both into hybrids and devs. And in China, NEVs and encompass both hybrids and devs. The fastest growth is in hybrids in China.

Speaker Change #104: Hey, Mark So remember E products, our go both into hybrids and Bev send in China, any visa uncompetitive and capacities.

Mark: Both hybrids and Bev the fastest growth is hybrids in China.

Speaker Change #111: We're launching a lot of new products in China about 95% of our products in China are made with the big Chinese carmakers.

Fred: We're launching a lot of new products in China; about 95% of our e-commerce products in China are made with the big Chinese car makers. A lot of our products are also used for potential exports and also potential localization. So we're very happy with our business in China. The impact of the tariff, I think it's a little early to anticipate, but China is certainly a part of the world where we're gaining scale, and that's very helpful when we go with those eProducts supporting the e-side of hybrids and dev in other parts of the world.

Mark Delaney: A lot of our products also are used for potential exports and also potential localization. So we're very happy with our business in China. The impact of the tariff, I think it's a little early to anticipate, but China is certainly a part of the world where we're gaining scale. And that's very helpful when we go with those e-products supporting the east side of hybrids and devs in other parts of the world. That's helpful.

Speaker Change #111: A lot of our products also are used for potential exports and also potential localization. So we're very happy with our business in China.

Speaker Change #111: The impact of the tariff is saying it's still early too.

Speaker Change #111: To anticipate.

Speaker Change #104: But China is certainly a part of the world we are gaining scale and Thats very helpful. When we go with those.

Speaker Change #104: E products supporting the east side of AB Inbev in other in other parts of the world.

Fred: That's helpful. Another question was on capital allocation. And I understand that the plan for the balance of this year is for capital allocation to be prioritized for shareholder returns, and you spoke about the $300 million of shareworthy purchases. As you think beyond 2024, can you help us better understand how you're thinking about allocating capital? We've seen the company use Tuck and M&A in recent years to bolster its capabilities. Is that something you think may be part of the calculus going forward? Or would you think the preference for shareholder returns and buybacks will be more of the uses of capital as you're looking at into 2025? Thank you. Thank you.

Speaker Change #118: That's helpful. Another question was on capital allocation and I understand that the plan for the balance of this year is for capital allocation to be prioritized for shareholder returns and he spoke about the $300 million of share repurchases. As you think beyond 2024 can you help us better understand how youre thinking about allocating capital.

Mark Delaney: Another question was on capital allocation. And I understand that the plan for the balance of this year is for capital allocation to be prioritized for children returns, and you spoke about the 300 million of shared purchases.

Mark Delaney: Do you think beyond 2024, can you help us better understand how you're thinking about allocating capital? You know, we've seen the company use token M&A in recent years to bolster the capabilities. Is that something you think maybe part of the calculus going forward? Or would you think the preference for shareholder returns to buy actually be more of the uses of capital as you're looking at it to 2025? Thank you. Thanks. Acquisition, together with organic product development, has allowed us to create that very unique portfolio that we're growing organically. Acquisition may remain an important part of the strategy over the long term, but I can tell you that I would classify our process as being even more stringent and prudent than in the past.

Speaker Change #110: We've seen the company you just tuck in M&A and in recent years to bolster the capability and is that something you think maybe.

Speaker Change #125: But part of the calculus going forward or would you say the.

Speaker Change #120: The preference for shareholder returns of buybacks will be more of these as the capital as you know.

Speaker Change #139: Got it into 2025, thank you.

Fred: Yeah, acquisition, together with organic product development, has allowed us to create that very unique portfolio that we're growing organically. Acquisition may remain an important part of the strategy over the long term, but I can tell you that I would classify our approach as being even more stringent and prudent than in the past. And I don't see M&A highly likely to be announced over the next couple of two, or three quarters, thus our intention to repurchase $300 million of stock or pretty much giving back to shareholders 100% of our cash generation. That's what I would tell you, Mark. Thank you. Thank you. We go next now to Adam Jonas, excuse me, of Morgan.

Speaker Change #110: Thanks.

Speaker Change #128: <unk> together with organic product development has allowed us to create that very unique portfolio.

Speaker Change #110: We're growing organically.

Mark Trevor Delaney: Acquisition May remain an important part of our strategy over the long term, but I can tell you that I would classify our approach as being even more stringent and prudent than in the past and I don't see M&A.

Mark Delaney: And I don't see M&A highly likely to be announced over the next couple of two, three quarters. Thus, our intention to repurchase 300 million dollars of stock, or pretty much giving back to shareholders 100% of our cash generation. That's what I would tell you, Mom. Thank you.

Mark Trevor Delaney: Highly likely to be announced over the next couple of two or three quarters, thus our intention too.

Speaker Change #117: <unk> repurchased $300 million of stuck or pretty much.

Mark Trevor Delaney: Giving back to shareholders as a percent of our of our cash generation.

Mark Trevor Delaney: That's what I would tell you mark.

Speaker Change #106: Thank you.

Speaker Change #113: Thank you. We'll go next now to Adam Joe Jonas excuse me of Morgan Stanley.

Adam Jonas: We go next now to Adam Jonas, excuse me, of Morgan's family. I'm ready and Team. I just got a couple of questions. So.

Adam Michael Jonas: Hey Freddie and team, I just got a couple questions. BorgWarner ranks around 490 out of 500 companies in the S&P 500 and PE multiple. It is by far the cheapest auto-related supplier in the S&P 500, which is really astonishing given, in my opinion, and I think in yours too, Freddie, this is one of the most accomplished engineering firms in the industry, maybe in the world. You have custom alloys and the tolerances and the pressures that your products are used at.

Adam Michael Jonas: Okay Friday and team I, just got a couple of questions. So.

Adam Jonas: BorgWarner ranks around 490 out of 500 companies in the S&P 500 and PE multiple. It is by far the cheapest auto supplier, auto-related supplier in the S&P 500, which is really astonishing. Given, in my opinion, I think in years too, Freddie, this is one of the most accomplished engineering firms in the industry, maybe in the world. You have custom alloys and the tolerances and pressures that your products are used; it's just, it's very, very high tech stuff.

Speaker Change #102: Borgwarner ranks around 498 out of 500 companies in the S&P 500, and P/e multiple is.

Speaker Change #119: <unk> is by far the cheapest auto supplier auto related supplier.

Speaker Change #127: In the S&P 500, which is really astonishing given my opinion I think in years two Freddie. This is one of the most accomplished engineering firms in the industry maybe in the World you have custom alloys in the tolerances and the pressures that your products are used.

Speaker Change #127: It's a very very high tech stuff.

Fred: It's very, very high-tech stuff. Why, in your opinion, your team's opinion, what is the market telling you about your capital allocation strategy? And I don't know what clues you're getting from today's share price reaction, for example, versus others. It seems like the market is penalizing investments in E and then rewarding, pulling back, or rewarding capital return.

Adam Jonas: Why, what in your opinion, your team's opinion, what is the market telling you about your capital allocation strategy? And I, I don't know what clues you're getting from today's share price reaction, for example, versus other. It seems like the market is penalizing investments in E and then rewarding pulling back or rewarding capital return. I don't know if you agree with that message, or you're in tune with that, or do you have a different hypothesis, and then I have a follow-up. Thanks.

Speaker Change #126: Why what.

Speaker Change #140: In your opinion on your team's opinion.

Speaker Change #143: What is the market telling you about your capital allocation strategy and I don't know what clues youre getting from today's share price reaction for example versus other it seems like the market is tantalizing.

Speaker Change #121: <unk> and <unk> and then rewarding.

Speaker Change #137: Pulling back or rewarding capital return I don't know if you agree with that message or you're in tune with that or do you have a different hypothesis and then I have a follow up thanks.

Adam Michael Jonas: I don't know if you agree with that message or you're in tune with that, or do you have a different hypothesis? And, Adam, I think we need to focus on what we can control. And what we can control is creating a great product that is versatile across different production mix scenarios. Grow the market, increment, generate cash, and be smart about the cash utilization.

Craig: Adam, I think we need to, we need to focus on what we can control. What we can control is create a great product that is versatile across different products and makes scenario. I'll go the market increment, generating cash and be smart about the cash utilization. As I mentioned before in Mark's quest, prior question, I mean, it was essential and helped us together with organic product development to create that very unique portfolio. Now I, you know, I think we have a great portfolio and we're focusing on growing it organically and going back to the bulk on the basics of all growing, converting, generating cash.

Speaker Change #109: Adam I think we need to we need to focus on what we can control.

Adam: We can control is create a great product that is versatile across different production mix scenario.

Speaker Change #109: I'll go to the market increment generating cash and be smart about the cash utilization as I mentioned before and in Mark's Quest prior question.

Fred: As I mentioned before, in Mark's prior question, M&A was essential and helped us, together with organic product development, to create that very unique portfolio. Now, I think we have a great portfolio, and we're focusing on growing it organically and going back to the BorgWarner basics of outgrowing, converting, and generating cash. Okay, that's great. My follow-up question is a simple question, I guess. What is the logic?

Mark: M&A was essential and helped us together with organic product development to create that very unique portfolio.

Mark: Now.

Speaker Change #153: I think we have a great portfolio and we are focusing on growing it organically.

Speaker Change #153: Going back to the bolt on the basics of outgrowing converting generic in cash.

Adam Jonas: Okay. That's great.

Speaker Change #130: Okay, that's great.

Adam Jonas: My follow-up is a simple question, I guess.

Speaker Change: My follow up is simple.

Speaker Change #154: A simple question I guess.

Adam Jonas: What is the logic for advertising the share buybacks? Why? Well, to me, it's like going to someone's and like, you want to buy a house and you tell the owner, hey, I love your house; it's fantastic. And then making it a bit later, why advertise the target? In this case, being your own stock in a way that might make you a hostage to your own fortune. I just don't understand the logic.

Speaker Change #152: What is the logic.

Adam Michael Jonas: for advertising the share buybacks. Why? Why? I'd be like, to me, it's like going to someone's house and you want to buy a house, and you tell the owner, Hey, I love your house. It's fantastic.

Speaker Change #130: For advertising the share buybacks.

Speaker Change #136: To me, it's like going to someone's and like you want to buy a house and you tell the owner Hey, I Love Your house, it's fantastic and then making a bid later why advertise the target in this case being your own stock in a way that might make you a hostage to your own fortune I just don't understand the logic can you explain why you do that.

Adam Michael Jonas: And then making a bid later. Why advertise the target, in this case, being your own stock, in a way that might make you a hostage to your own fortune? I just don't understand the logic.

Craig: Can you explain why you do that? Thanks. Yeah. I think for us, it's about transparency for our shareholders. You know, when you look at the second quarter, we were blacked out for the majority of the second quarter, and we wanted to provide clarity to the investment community that we wanted to allocate all of our free cash flow to shareholders. It was the right time, given Fred's comments earlier about Eminent, so we wanted to provide clarity and transparency. Okay, my only feedback is that you can do that in real time. And you don't always have to have the forward, you know, time horizon with the amount, but that's just feedback.

Craig: Can you explain why you do that? Thanks. Yeah.

Mark: Thanks.

Craig: I think for us, it's about transparency to our shareholders. You know, when you look at the second quarter, we are blacked out for the majority of the second quarter and we wanted to provide clarity to the investment community that we wanted to allocate, although of our free cash blow to shareholders, it was the right time, given Fred's comments earlier about evident. So we wanted to provide clarity and transparency. Okay.

Speaker Change #145: I think for US it's about transparency to our shareholders. When you look at the second quarter, we were blacked out for the majority of the second quarter and we wanted to provide clarity to the investment community community that we wanted to allocate all of our free cash flow to shareholders. It was the right time, given fred's comments earlier about M&A. So we wanted to provide clarity.

Fred: And transparency.

Adam Michael Jonas: And you guys run the business. I appreciate you taking the time to answer the questions. Thank you, Adam. Thank you, and we do have time for one final question, and that will come from James Picariello of DNP. Hi, everyone.

Mark: Okay.

Unknown Attendee: My only feedback is you can do that in real time, and you don't always have to have the forward, you know, time horizon with the amount. But that's just feedback, and you guys run the business. I appreciate you taking the time to answer the questions. Thank you.

Speaker Change #155: My only my only feedback as you can do that in real time, and you don't always have to have the forward.

Speaker Change #115: Time horizon with the amount, but thats just feedback you guys run the business I. Appreciate you taking the time to answer the questions.

Ed: Thank you Ed.

Ed: Okay.

James Picariello: And we do have time for one final question, and that will come from James Picarello of D&P Paribus. Hi, everyone. Just as we think about each product sales, now trending towards you in a half billion for the year, the first quarter finished at 500 million per year 10-Q filing. Can you confirm how the second quarter trended? So if you gain a sense for what's implied in the second half.

Speaker Change #122: Thank you and we do have time for one final question and that will come from James Picariello of BNP Paribas.

James Albert Picariello: Just as we think about e-product sales, now trending toward $2.5 billion for the year, the first quarter finished at $500 million, per your 10-Q filing. Can you confirm how the second quarter trended so we can gain a sense for what's implied in the second half? And on Acasol specifically, another, and I think a few other questions we're getting at this, another supplier this morning that has pretty decent commercial vehicle bed exposure just cut its commercial EV sales expectation for the year by a substantial clip. That supplier doesn't compete directly against Borg, but from an end market perspective, is this something that BorgWarner is seeing at all in your battery systems business?

James Albert Picariello: Hi, everyone.

Speaker Change #135: Just as we think about any product sales.

Speaker Change #135: Now turning to our $2 5 billion for the for the.

Speaker Change #131: The year the first quarter finished at 500 million per your 10-Q filing.

<unk> confirmed how the second quarter trended.

Craig: Okay, thanks, James. And I'll confirm Q2 sales were 576 million. You'll see that in our time queue later today. And I'll turn it over to Fred on your other questions. Yeah, I think our numbers in commercial vehicle have been adjusted a little bit in the prior quarter due to the impact of e-products, which is essentially linked to late vehicles at this point in time.

Speaker Change #124: Again central what's implied in the second half and on ACA saw specifically, another and I think a few other questions.

Craig: And on Acasol specifically, another, and I think a few other questions, we're getting at this. Another supplier this morning that is pretty decent commercial vehicle bed exposure. Just cut its commercially resailed expectation for the year by a substantial clip. That supplier doesn't compete directly against Ford, but, you know, from an end market perspective, is this something that, you know, boardwriters seeing it all in your better systems business? Thanks. Okay, thanks, James. And I'll confirm Q2 sales were 576 million. You'll see that in our time queue later today.

Speaker Change #124: We're getting at this.

Speaker Change #144: Another supplier this morning that it's pretty decent commercial vehicle debt exposure just cut its commercially be sales expectation for the year by a substantial clip.

Speaker Change #133: That supplier doesn't compete.

Speaker Change #133: Directly against <unk>, but from an end market perspective.

Speaker Change #150: Is this something that borgwarner seeing at all in your battery systems business. Thanks.

Speaker Change #133: Okay. Thanks, James ill confirm Q2 sales were $576 million, you'll see that in our 10-Q later today and I'll turn it over to Fred on your other question.

Craig: And I'll turn it over to Fred on your other question. Yeah, I think our numbers in commercial vehicle have been adjusted a little bit in prior quarter. The impact of e-products is essentially linked to late vehicle at this point in time. I would just remind you that we're growing 25% year-over-year on e-products from about 2 billion to about 2.5 billion, which is, if you take a step back, an outgrowth versus what you see in power-trended electrification. Understood.

Speaker Change #133: Yes.

Speaker Change #138: I think our numbers.

Speaker Change #133: And in commercial vehicle.

Speaker Change #149: I have been adjusted a little bit.

Speaker Change #141: Good quarter.

Speaker Change #141: <unk>.

Speaker Change #141: The impact of your products.

Speaker Change #148: He is essentially linked to Davy two light vehicle at this point in time I would just remind you that we are growing 25% year over year on the products.

Fred: I would just remind you that we're growing 25% year over year on e-products, from about $2 billion to about $2.5 billion, which is, if you take a step back, an hour's growth versus what you see in powertrain electrification. And then just last, can you provide color on how Eldor losses are now slated to trend for this year? I believe the prior guidance called for 45 million or so. And will your repropulsion restructuring actions also include future efforts at Eldor? Yeah, right now Eldor is unchanged.

Ed: From about $2 billion to about.

Mark: Now.

Mark: About $2 5 billion, which is if you take a step back.

Mark: A.

Mark: And our growth versus what you see in in powertrain electrification.

Speaker Change #142: Okay understood.

Speaker Change #151: Understood and then just lastly can you provide color on how al Dor losses are now slated to transfer this year I believe the prior guidance.

Craig: And then just last, can you provide color on how outdoor losses are now stated in the trend for this year? I believe the prior guys called for 45 million or so. And will your repropagion restructuring actions also include future efforts at outdoor? Thanks. Yeah, right now, outdoor is unchanged. And that's how you should think about it. Obviously, we're focused on the total business and targeting $100 million in cost savings by 2026. Thanks.

Speaker Change #157: For $45 million or so and will your new Cottongin restructuring actions also include future efforts.

Mark: Thanks.

Craig: And that's how you should think about it. Obviously, we're focused on the whole business and targeting $100 million in cost savings by 2026. With that, I'd like to thank you all for your questions today. If you have any follow-up, feel free to reach out to me or my team. Beau, you can go ahead and conclude today's call. Thank you, Mr. Nolan. Again, ladies and gentlemen, that will conclude today's BorgWarner second quarter earnings call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye. [inaudible] Thank you for watching! BF-WATCH TV 2021

Speaker Change #146: Right now al Dor is unchanged and Thats, how you should think about it obviously, we're focused on the total business and targeting a $100 million in cost savings by 2026.

Mark: Yes.

Patrick Nolan: With that, I'd like to thank you all for your questions today. If you've only followed through your reach out to me or my team, well, you can go ahead and include today's call.

Speaker Change #158: With that I'd like to thank you all for your questions today for any follow ups <unk> reach out to me or my team.

Speaker Change #156: So you can go ahead and conclude today's call.

Patrick Nolan: Thank you, Mr. Nolan.

Mark: Thank you Mr. Nolan again, ladies and gentlemen that will conclude today's borgwarner second quarter earnings call again, thanks, so much for joining US everyone and we wish you all a great day Goodbye.

Unknown Attendee: Again, ladies and gentlemen, that will conclude today's board one or second quarter earnings call. Again, thanks so much for joining us, everyone. We wish you all a great day.

Unknown Attendee: Goodbye.

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