BorgWarner at Baird Conference: Driving Growth Amid Market Shifts

BorgWarner Inc. (NYSE:BWA) presented a strategic overview at the Baird 55th Annual Global Industrial Conference on Thursday, 13 November 2025. The company highlighted its dual focus on combustion and electrification, navigating a dynamic market with mixed regional adoption rates. While pleased with year-to-date performance and an upgraded financial outlook, challenges like supply chain disruptions and tariff impacts remain.

Key Takeaways

• BorgWarner upgraded its financial guidance, expanded margins, and increased cash flow.
• The company secured 17 new business wins in the last six months, boosting its portfolio.
• China is a significant market, accounting for 20% of sales, with a focus on e-products.
• BorgWarner expects tariff recovery to become positive in Q4, covering 80% of exposure.
• AI initiatives are underway for quality improvements and cost reductions.

Financial Results

• Revenue: Relatively flat year-to-date.
• Operating Margins: Increased by 30 basis points.
• EPS Growth: Focused on growth from 2024 to 2026.
• Free Cash Flow: Anticipated to reach $900 million.
• Capital Allocation: Balanced between organic/inorganic investments, dividends, and buybacks.
• Tariff Impact: Agreements cover 80% of exposure; positive recovery expected in Q4.
• E-Product Sales Growth: Up 27% year-over-year.

Operational Updates

• Supply Chain Issues: A fire impacted North American truckmaker supply, affecting guidance by $50 million to $100 million.
• Nexperia Disruption: Becoming less significant.
• AI Initiatives: Machine learning and GenAI are used for quality improvement and cost reduction, showing positive results in 30% of pilot programs.
• China Business: Represents 20% of sales, with 75% from domestic OEMs. E-product sales in China account for 50% of light vehicle e-product sales.

Future Outlook

• Growth Strategy: Aims to outgrow end markets in both combustion and e-product businesses.
• M&A Strategy: Focus on leveraging core competencies for accretive deals to drive earnings growth.
• Capital Allocation: Continues a balanced approach with investments, dividends, and share repurchases.
• Governmental Policies: Preparing for potential changes.
• Free Cash Flow: Strong focus on maintaining robust cash flow.

Q&A Highlights

• Award Flow: Increased RFQ flow with 17 wins announced recently.
• E-Products in China: China remains the strongest market for e-products.
• Tariffs: Positive tariff recovery expected in Q4.
• M&A: Aiming for acquisitions that enhance earnings growth and leverage existing strengths.

For more detailed insights, please refer to the full conference call transcript below.

Full transcript - Baird 55th Annual Global Industrial Conference:

Luke Young, Analyst, Baird: Let’s go ahead and kick it off here. Good morning. Thanks for joining us. My name is Luke Young. I cover vehicle tech and mobility for Baird, and my pleasure to introduce you today to BorgWarner, who, as you probably know, is a global leader in both legacy combustion technologies like turbochargers and a leader in e-products as well. Really happy this morning to have with us Joe Fadool, CEO, seated to my right, Craig Aaron, CFO of the company, and Pat Nolan from IR. All of them will be in the discussion today. Before that, let’s just jump into Q&A. If you’ve got questions, you can send those to, I think this is session three, at rwbaird.com. Joe, you stepped into the CEO chair earlier this year. You’ve outlined some key priorities.

Why don’t we just walk through those to kind of set the table for the conversation this morning?

Joe Fadool, CEO, BorgWarner: Sure. Great to be here. Our first priority we kicked off this year is really driving financial performance of the company. We spent the last five years building a really strong portfolio, so we wanted to make sure that a lot of the business that we won, we’re launching it well around the globe. Doesn’t matter if it’s combustion or some of the new EV products. The second priority is really to take advantage of the environment right now, which is to win a lot of the RFQs that are out there. If we compare today versus a year ago, the amount of RFQ flow is significantly higher. We’re winning our fair share of those new businesses, and it’s across the entire portfolio. Whether it’s our strong turbocharger or EGR business, but also inverters, motors, complete drive systems.

Finally, as that growth comes, which we expect out in the 2027, 2028 time frame, converting on that growth and expanding the earnings power of the company. We want to do that as we bring in that new business, but also having a very balanced capital allocation approach. Returning shareholder value in the short term with a balanced buyback approach, but also it’s a great opportunity for us to look at some inorganic investments. We are in a very unique position to do that.

Luke Young, Analyst, Baird: Okay, cool. Why don’t we start with the macro and want to touch on what you just mentioned, the award flow that you’re seeing out there and capturing those awards. Can we maybe just double-click on what you’re seeing sort of in the foundational side of the house versus e-products, advanced hybrids especially, and then maybe geographically what you’re seeing? The lift certainly seems like it’s an aftershock in a good way of kind of the confusion that had existed in the West that maybe is now freeing up incrementally.

Joe Fadool, CEO, BorgWarner: Yeah. So when you think about e-products, the market where e-products are playing out most strongly is China. We continue to grow and win there. We’re very pleased with how our teams are performing. China also has quite a few combustion programs, so it’s not all E, and our portfolio serves that market well. When you move west toward Europe, it’s a balance of EVs, advanced hybrids, also some combustion extensions. I would say a little bit less EV-focused in the short term, but we still see good growth there with our e-products. When you move more toward this market, as we all know, EVs have more or less flattened out, so it’s a great combustion business for us. That is evidenced by some of our awards when we look at extension of turbocharger businesses or Conquest wins also on the EGR, four-wheel drive side.

If you just take all of that in total, we’ve announced in the last six months about 17 wins, which is just a sample of the wins across the globe, and it’s across the entire portfolio. We’re excited. This move, which was unexpected, where the regions are moving at different speeds toward electrification, actually it plays well both into our portfolio but also into our operating model. Our teams in China are able to run fast, chase that e-growth, and similarly in Europe and here, we’re able to serve the customers with what they’re expecting.

Luke Young, Analyst, Baird: Yeah. Like you said, you’ve shown a lot of awards in your earnings reports so far this year. That’s just a subset of the total awards. In any way to think about the dollar impact, it’s a question that we get. I mean, it seems pretty material, but I don’t know, just any context or guardrails you can put around that?

Joe Fadool, CEO, BorgWarner: Yeah. We do not really declare any particular award on the dollar impact. In February, we will give a more concrete guide for next year. If I step back for a minute, a lot of the wins on the EV side the last couple of years have not come to fruition like we expected here in Europe. We have seen a little bit lower outgrowth in 2024 and this year especially. That overhang is going to continue as we get into 2026. What I am excited about is a lot of the new business that I just referenced that we are winning will start to show up in 2027 and beyond. We expect that overhang to be with us a little bit longer before some of those new launches.

Luke Young, Analyst, Baird: Maybe nearer term, certainly supply chain as we came out of three-key earnings, some just things bubbling up in terms of aluminum supply and chips. Just real-time, yeah, what are you seeing in the production backdrop?

Joe Fadool, CEO, BorgWarner: Yeah. As we mentioned in our full-year guide update, the North American truckmaker in this market had a supply issue due to a fire. They’re working through that. We’ve included about $50 million-$100 million of impact into our updated guide. They continue to work through that topic, and we’re hopeful that they’re able to recover a lot of those units next year. When you look at Nexperia, that was, I would say, an issue more concerning about four weeks ago. As we’re reading in the headlines, it’s becoming really less material. We did include what we expected to be the impact in our guide, but a couple of points I think are important.

Although it’s disrupted us slightly here and there on some production, we have not shut down any customers, and we’re working closely with them to ensure this becomes very little in terms of material.

Luke Young, Analyst, Baird: If we look just at the production backdrop writ large, I would say certainly the theme of 2025 has been less bad, just at a high level. How do you think about the production environment as we head into 2026? Are you planning for growth, or do you just have to control what you can control from an execution standpoint?

Joe Fadool, CEO, BorgWarner: Yeah, it’s a little bit early to talk about 2026. We’ll do that in February. As I mentioned, we’ve got this overhang. We’re working through some of the E announcements from a couple of years ago. With that said, we are focused on the things we can control, and I think that’s playing out very well in 2025. Our teams are executing well. We’re launching well. We’ve been able to upgrade the guide. We’re expanding margins. We’re increasing cash flow. We are really pleased with the performance. You can expect more of the same in 2026.

Luke Young, Analyst, Baird: Certainly, governmental policies have been impactful this year. I mean, tariffs, of course, top of mind, but we’ve got the one big beautiful bill. You’ve got maybe USMCA renegotiation in 2026. Interest rates, like what’s on your horizon? What maybe could be most important and maybe even some good news potentially on policy next year?

Joe Fadool, CEO, BorgWarner: We always hope for good news on policy. Difficult to plan for. If we take us back to earlier in the year, tariffs became the big topic. As we’ve worked through that with our customers and our supply chain, we found it to be a very manageable topic for us. We expect that we’ll put a lot of that behind us moving into next year. I would say some of the other regulations, like around emissions or fuel economy, especially in this market, it doesn’t really play heavily one way or another in our portfolio. We’ve got a very resilient portfolio. If it does turn out we’re going to have more combustion vehicles due to the recent clarity on the road the next three, four, five years, that’s good for us. I mean, we’re number one or two in each of those markets.

This doesn’t really play a lot into our thinking. I would say we have to be ready for any change on the governmental side.

Luke Young, Analyst, Baird: Yeah. Craig, you also stepped into your role in the last 18 months or so. Similar to Joe’s comments, maybe just any high-level priorities or sort of incremental priorities in your role as CFO?

Craig Aaron, CFO, BorgWarner: Sure. Joe mentioned it. I’m focused, but also the leadership team is. We’re going to grow the earnings power of the company, and actually that’s what you’ve seen this year, really growing EPS from 2024 to 2025. We’re going to continue to do that as we move into 2026. How are we going to do that? First, it starts with growth, what Joe mentioned. We’re going to continue to outgrow our markets. We’re going to turn that growth into income on an all-in basis, inclusive of R&D. We’re going to drive strong free cash flow, and we’re going to find a balanced capital allocation approach that allows us to invest organically, inorganically, but at the same time reward shareholders, return cash to shareholders through dividends and buybacks.

I think we’re doing all of those things really well this year, and we’re going to continue to do that into 2026 and 2027.

Luke Young, Analyst, Baird: Yeah. Craig or Joe, feel free to jump in here. Just 2025 in review, curious what has surprised you, both good and bad. If I look at it through just the lens of guidance and some of those priorities that you just spoke to, Craig, midpoint operating margins have moved up in the guidance about 30 basis points year to date. That is despite tariffs, of course. Can you unpack maybe some of the major drivers or areas of execution that have been most helpful this year?

Craig Aaron, CFO, BorgWarner: Yeah. I think every business unit and corporate is contributing to our overall goal, which is growing EPS. When you look at our different businesses, our turbo and thermal technologies business, they are expanding margins on relatively flat sales. They are focused on cost controls, same with drivetrain and motor systems. We are using levers like supply chain savings, productivity, restructuring savings, lower cost of poor quality, all to drive margin expansion with revenues being relatively flat. In our E segments, power drive systems, we are seeing really strong growth year over year, and we are planning on converting that growth in the mid-teens. We are on track to do that this year, which is an important threshold for us because we had to take important restructuring actions last year. How are we measuring success this year? Converting the mid-teens on an all-in basis, and we are on track to do that.

For our battery business that is having some headwinds from the top line, they are controlling what they can control, controlling costs, holding income relatively flat in the third quarter despite revenue being much lower through cost actions, including restructuring. I think the teams around the globe are doing the right things, and it is leading to a great result for BorgWarner. Like you said, hey, revenue is relatively flat. We are expanding margins 30 basis points. We are growing EPS. We are delivering $900 million in free cash flow, and we are returning that back to shareholders, and we are in a great position to execute on an inorganic opportunity when it presents itself. I feel really, really great about what we have done this year.

Luke Young, Analyst, Baird: What about just managing through tariffs in the nearer term? I know tariffs from just a timing standpoint have been a headwind the last couple of quarters. I think you’re expecting those to reverse into the fourth quarter. Can you just help us understand the mechanics driving that?

Craig Aaron, CFO, BorgWarner: Sure. So maybe just for the group, the key statistics as it relates to tariffs. So 1% of sales is our exposure. Right now, as we sit here today, we have agreements in place with our customers to cover about 80% of that exposure. The remaining 20% we’re working on. As you think about the cadence of recovery, it’s been a headwind for us Q1 through Q3. There’s accounting rules in place. We have to go through an audit process. So we provide the input to our customers, the exposure. They have to audit it. Once we get that positive audit outcome, we can recognize it in our P&L, and we expect that tariff recovery to flip positive in the fourth quarter.

Luke Young, Analyst, Baird: AI, it’s obviously all the buzz in the markets these days, but I think there’s some real opportunities to actually use AI tools. I know it’s probably not material at this point, but are you looking at those sorts of things for BorgWarner?

Craig Aaron, CFO, BorgWarner: We are using machine learning, GenAI. We started maybe about 18 months ago with some pilots across the operations and also some in R&D to see where the value is. We have since out of the pilots, about 30% of them, maybe a little bit better, look really positive. They’re mostly focused on quality improvement, cost reduction. If you think about a plant, we do a lot of visual inspection. We found great application to use it there and train the model quickly, reduce some of our labor costs. We’re also finding on some of our back-office processes or in R&D. If you think about the very first step, whenever you get a new program, you have to go through a big stack of requirements from the customer.

Processing through that with GenAI techniques and an agent by your side, you can really reduce the time and the amount of engineering workload. You can free those people up to work on some of the more value-added areas. It has mainly been used in quality and cost reduction to this point.

Luke Young, Analyst, Baird: Let’s shift to China. Just be curious to get your thoughts to kick this off. Just around moving at China speed, certainly the company has a strong position with local OEMs in China and just areas you can lean into incrementally either that you have this year or maybe areas of opportunity into next year on that front.

Craig Aaron, CFO, BorgWarner: Sure. For context for the group, about 20% of our sales are in China, and about 75% of that revenue is with the domestic OEM. A little bit overweight to the domestics, but we think that’s a great position to be. We’ve been operating in China for over 30 years. We have great customer intimacy there. We have business with all the leading Chinese OEMs. Why do they pick BorgWarner? Besides the customer intimacy, we’re able to bring competitive technology to the market, which is really important. The second, which is almost as important, is the speed. When you hear China speed, think about they get to market in about half the time that it takes a Western OEM to get to market. They want to pick partners that can run fast with them. That’s been a game changer.

That is due to our decentralized operating model. We spent the last 30 years building up very strong and competent teams in China. Now we are seeing some of the fruition of that as they move faster to get products into the market. It has been a positive process for us.

Luke Young, Analyst, Baird: If we look at just your E products growth overall, is there a way to contextualize sort of how much of that is expected to come into China over the next few years versus just everything else globally?

Craig Aaron, CFO, BorgWarner: Yeah, maybe a few data points to help. About 50% of our light vehicle E product sales is in China. That is where the music’s playing. That sort of makes sense. If you think about the growth we saw from last year to this year, our light vehicle E products is up about 27%. We are really pleased with that. You can imagine where a lot of that growth is coming from. If you look since 2021, we have been growing that business steadily year over year. I think a nice change you have started to see is how we are incrementing on that business more toward a break-even position. China plays a big role in that.

Luke Young, Analyst, Baird: Is working with local OEMs outside of China something that’s becoming more real? I mean, certainly we’ve seen some movement in Europe. If you look in South Asia, I think that’s already something that’s happening. Just what’s BorgWarner’s perspective on that opportunity?

Craig Aaron, CFO, BorgWarner: Yeah, we’re starting to work with them how to localize. If you look over the last couple of years, the Chinese OEMs have been really successful not only in their market, but in export. Last year, over 5 million vehicles exported, a lot of it with BorgWarner contents. We’re really pleased with that. This year, probably be a little bit higher than that. Now they’re moving to the next step. Okay, how can they localize and import less into the markets they’re playing in? I found it interesting. I was in Munich two months ago for the IAA conference, and probably 15% or 20% of my meetings were with Chinese OEMs who were looking for help to localize. We start to see them taking the steps. They want to be successful in the markets that they are gaining revenue. That’s a very positive sign in my view.

Luke Young, Analyst, Baird: Maybe if we could just zoom out to E products overall, I think your current business mix is around 60% BEV and 40% advanced hybrids. Correct me if that’s wrong. Can you maybe just speak about the backlog? I think there’s maybe a perception, especially if you live in the West, of EV moderation, but especially that hybrid story seems to be one of the best stories in automotive. Can you talk about your leverage to hybrids, advanced hybrids especially?

Craig Aaron, CFO, BorgWarner: We do not really provide a backlog breakout like you are referring to, but I will talk about how do we measure success for each of our businesses. When you think about our foundational business, we measure success or outgrowth by outgrow your end markets. Your end markets are the combustion plus hybrid end market. That defines success for you. When you look at our E product business units, it is the hybrid plus BEV markets. Outgrow that end market. That is the goal for each of those different segments of our business. Joe spoke about the 17 awards that we spoke about externally over the last couple of quarters. It is those awards that are happening on both sides of our portfolio that are going to help us outgrow those end markets as we go into 2027 and beyond.

Luke Young, Analyst, Baird: Yeah. Is there, would you say, an advantage to owning both combustion and E product assets when you’re going after those hybrid awards?

Craig Aaron, CFO, BorgWarner: I mean, certainly there is. If you think about the three major types of vehicles, you’ve got combustion, you’ve got advanced hybrids, and you’ve got EVs. As we mentioned, in the last five years, we’ve spent a lot of effort and resources to build the portfolio we have. As the regions now play out a little bit differently in that mix of powertrains, we’re in a great position to serve the customers what they want. In China, some of the RFQ flow has been more weighted toward NEVs, so advanced hybrids, EVs. That’s why you see more wins in China representing the NEV market. In Europe, it’s a pretty good balance between combustion, advanced hybrids, and EVs. In this market, it’s likely, as we talked about, probably the next three, four, five years, EVs aren’t going to really grow materially.

Taking advantage of our strong position on the combustion side. We think it’s a great strength to have the portfolio we do. We can serve our customers from that portfolio regardless of the mix that they’re looking for.

Luke Young, Analyst, Baird: Craig, like you mentioned, you’ve been incrementing at the mid-teens incremental in the business overall or higher and in PDS specifically this year. I know you’ve got some tools in the toolkit in terms of Zebra Plants and some flexibility that you’re building in. Can we think of ways that you can get to break even faster in PDS? And maybe is looking at China maybe part of the conversation, given that that’s half the company and maybe a little more mature business, that maybe some clues to the future of PDS overall?

Craig Aaron, CFO, BorgWarner: Sure. Yeah. I mean, for PDS, the clear avenue to break even and beyond is scale. When you look at this year, we’re having nice growth through the first nine months, over 20% growth. It’s really nice to see that. With that said, if you go back a year or so ago, we had an announced restructuring for PDS. We had won a lot of awards following the Delphi transaction, but the market did not cooperate, and we had to right-size that cost structure. What Joe and I have been focused on this year is, hey, let’s continue to grow in PDS, which is what we’re seeing. More importantly, we’re going to increment in the mid-teens on an all-in basis. PDS is on track to do that. That’s how we’re going to measure success.

If we see that continue to convert on an all-in basis in the mid-teens, it means we have that cost structure right. If that’s not happening, then we’re going to have to revisit that cost structure. That is what we’re watching this year, but we feel really good about the execution in that business through the first nine months, and we expect to continue that in the fourth quarter.

Luke Young, Analyst, Baird: Yeah. China, I mean, is the level of profitability better in China? I am just curious if there is anything to read into getting that scale and what China tells us about it.

Craig Aaron, CFO, BorgWarner: Yeah. I mean, our China business is pretty successful. We do not talk about profitability for any one region, but certainly if you are going to increment in the mid-teens and China’s the growth engine, you can kind of conclude that we are doing pretty well in China.

Luke Young, Analyst, Baird: Yeah. I want to talk about the foundational business. Maybe, I do not know if I would say this is more of a cultural question, but Joe, you mentioned obviously over the past five years, the focus of the company has been building the portfolio. Now you are moving into leveraging the portfolio. Just be curious from a foundational point of view, maybe to compare and contrast the overall mindset in the company now versus two to three years ago and recognizing that you actually, of course, spent a lot of time in the company’s combustion businesses before becoming CEO.

Craig Aaron, CFO, BorgWarner: Sure. No, we have a great combustion business. I mean, we’re number one or two if you think about turbochargers and exhaust gas management, four-wheel drive, our timing systems business. And if I take us back to five or six years ago, we were facing an existential threat to that business, which is why we made a lot of investments on the E side. If you step back now, the world’s changed. The growth opportunities aren’t only in E. We see now great growth opportunities across the whole portfolio. That was a change Craig and I made a little over a year ago to the strategy. We didn’t want the foundational businesses to primarily be funding E only. Leveraging growth across now all the BUs, I mean, it’s been well received inside the company, as you can imagine. You see us winning the programs.

That’s the exciting part. The amount of wins in the last six months, we’ve just shared 17 of them. That’s what I’m really excited about.

Luke Young, Analyst, Baird: What about just the, Craig, you’ve talked to some of the successes in terms of margins this year, and certainly the foundational businesses have played a really key role in that story. Just how do you think about opportunities for margin resilience and expansion from here, be it, I don’t know if restructuring is necessarily part of the conversation, but operations and growth? Is there maybe opportunity to kind of stitch these two businesses together in terms of the Zebra Plan concept or things similar to that?

Craig Aaron, CFO, BorgWarner: Yeah. I mean, first of all, really happy with the execution in those businesses. They’ve done extremely well expanding margins or holding margins relatively flat despite limited growth in those portfolios. With that said, those businesses are using all types of levers. Restructuring, productivity, supply chain savings, lower cost to port quality, all of those things have been really important to expand margins in the foundational business. I don’t see that stopping. We’re going to continue to use those levers to continue to expand margins with the goal, hey, we’re growing EPS for BorgWarner, and part of that equation is continuing to elevate our game on the foundational side of the business.

Luke Young, Analyst, Baird: On the time we got left, I want to talk about M&A. I think if there was a single takeaway from BorgWarner, it’s that you want to grow the earnings of the company and that M&A is one of the levers you’re looking to use. Can we just talk at a high level about industrial logic and sort of maybe a hypothetical business that you could buy, given that we haven’t seen an acquisition yet? Or maybe more importantly, I think people are just, there’s fear of the unknown, maybe something that wouldn’t be interesting to you or even that you’ve already passed on.

Craig Aaron, CFO, BorgWarner: Yeah. We would not comment on any particular target, but to give you maybe more depth on our industrial logic, how do we think about it? It is about leveraging the core competence the company has. When you think about BorgWarner, we have got extensive competence in rotating mechanics, high-speed rotating electrics, software, electronics, hardware, system engineering, tribology. How do we leverage that to make an inorganic investment where one plus one can equal more than two? That is what we mean by industrial logic. For us, what is important is we are not trying to fill a gap. We are really pleased with the portfolio we have now because of all the work we did the last five years. We want to continue to strengthen the portfolio and expand the earnings, as you mentioned. We have been very disciplined in the process.

We’re pretty strict to adhere to the criteria, but we have opened up the aperture. What is possible given the extensive competence we have? I’m really pleased with the discipline we’re following. It’s true, we’ve passed up a couple of deals that didn’t fit those criteria, but I’m really happy with the process.

Luke Young, Analyst, Baird: Yeah. Craig, how do you think about M&A just from a balance sheet standpoint? I’m thinking more valuation, returns. What are some of the key commitments that investors should think about from that point of view?

Craig Aaron, CFO, BorgWarner: Yeah. I mean, the first key commitment, which we’ve emphasized a couple of times, is we’re looking for inorganic investments to drive the earnings growth of the company. We’re going to make sure we’re focused on that. When it comes to valuation, we have a very disciplined process. We’re going to run a discounted cash flow model. We’re going to look at a lot of different scenarios, as Joe mentioned. The regions are adopting electrification differently. We have to put that intelligence into our DCF model, make sure we run a lot of different scenarios to ultimately make sure that we feel comfortable with the valuation and can articulate that value externally. We’re going to focus on that discipline. When we have an inorganic investment, we’re going to make sure it’s very clear why we think we paid the right value for that asset.

Luke Young, Analyst, Baird: Just in terms of scale, I guess another question that we’ve gotten is, are these the sorts of acquisitions that you would press release, or are these more likely to be tuck-in type things that are more augmenting in nature, would you say?

Craig Aaron, CFO, BorgWarner: I mean, I would say we haven’t taken anything off the table. When you think about inorganic opportunities, there’s larger ones where you create more synergy and value and expand the earnings power, which we’re heavily focused on. Of course, we’re a technology company. We’re going to find some smaller players that are sort of tuck-in, like you mentioned, that help us accelerate a gap that maybe we’re looking to close organically. We can do it faster with a small technology acquisition. We’re opening up our aperture, but we want to have a strict, I would say, set of criteria for any decision if we go forward with an inorganic investment.

Luke Young, Analyst, Baird: Yeah. Craig, as you mentioned, obviously the company is generating cash. Just how do you think about returning cash to shareholders if nothing comes to fruition on the M&A front, or do you want to have a little dry powder for M&A?

Craig Aaron, CFO, BorgWarner: Yeah. I mean, first, we’re operating from a position of strength. We have a lot of liquidity on our balance sheet. Our leverage is very moderate, so we feel really good about the strength. When you think about opportunities that are in front of us, we’re going to continue to focus on those accretive deals. When you think about returning cash to shareholders, what everybody should understand is we’re focused on discipline and consistency. That is what you’ve seen the last actually two years from us. Last year, we returned $500,000,000 of cash to shareholders. We’re on track for $420,000,000 plus this year of cash return to shareholders. BorgWarner can do it all. We do not have to focus on one or the other.

We can return cash to shareholders through repurchases and dividends, and we’re in a great position to execute an inorganic investment when the right opportunity presents itself. Again, we’re operating from a position of strength, and we can do it all.

Luke Young, Analyst, Baird: Okay. We’ll leave it there. I mentioned we’ll be available for breakout in Salon A here in 12 Halvor. Thank you for the presentation.

Craig Aaron, CFO, BorgWarner: Thank you.

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