Good morning. My name is Jerome, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2020 Third Quarter Results Conference Call. 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, Jerome, and good morning, everyone. Thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website, borgwarner.com, on our homepage and on our Investor Relations homepage. With regard to our Investor Relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the Events section of our Investor Relations homepage for a full list. Before we begin, I want to inform you that during this call, we may make forward-looking statements, which 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 will highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performed for comparison purposes with prior periods. When you hear us say 'on a comparable basis,' that means excluding the impact of FX, net M&A and other noncomparable items. When you hear us say 'adjusted,' that means excluding noncomparable items, and when we say 'organic,' that refers to excluding the impact of FX and net M&A. We will also refer to our growth compared to our market. When you hear us say 'market,' that means the change in light vehicle production weighted for our geographic exposure. Outgrowth is defined as our organic revenue change versus the market. Please note that we've posted an earnings call presentation to 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 morning, everyone. We are very pleased to share our results for Q3 today and provide an overall company update, starting on Slide 5. The industry production rates steadily improved throughout the quarter as volumes in China and North America exceeded our expectations. Importantly, we continued to outperform on a relative basis. With approximately $2.5 billion in sales, we were up about 1% organically, and this compares to a market being down about 2%. This means we saw continued outgrowth in the quarter. We saw significant outgrowth in China, driven by DCT and commercial vehicle business. We also outperformed in North America, driven by new programs and a beneficial mix. Our incremental margin performance was very strong as revenue trends exceeded our expectations, and we benefited from our restructuring savings and temporary wage reductions. We also delivered significant positive free cash flow. And we completed the acquisition of Delphi Technologies shortly after the close of the quarter. We're excited to move forward as one company and capitalize on our product leadership. Let's now turn to Slide 6, where you can see our perspectives on the global industry production. As you can see by the chart on the slide, the industry backdrop in the second half has significantly improved from the environment that we experienced during the first half. It's important to note that the market environment is still volatile, with the risk of future disruptions arising from COVID-19. As you've seen from the latest lockdown announcements in Europe, the risk level of these potential disruptions has elevated, and we're monitoring the situation very closely. With that important caveat in mind, on a full-year basis, overall, our industry production expectations for the full year have improved. We expect the market decline to be in the range of minus 18.5% to minus 19% compared to our prior expectation of a 22% to 25% decline. Looking at this by region, we're planning for Europe to be down in the 23% to 24% range, and in North America, we expect a 20% to 21% decline. On a relative basis, the outlook for China is stronger, but we still expect a 7% to 9% decline for the full year. As you can see from the line chart, we expect a low to mid-single-digit decline in Q4. As we manage the balance of 2020, we will continue to maintain a very active dialogue with both our customers and our suppliers to manage any production volatility. Let's now discuss some new business awards. First, I'm happy to announce, on Slide 7, our second eTurbo award with a major European OEM launching in 2023. Our eTurbo is an efficient solution capable of delivering crucial benefits for our partners, especially in hybrid applications. The in-house association of the mechanical, in this case, the turbo, the state-of-the-art motor, and an electronic controller was key for us to win. Next, I would like to summarize our latest inverter win that was announced in September on Slide 8. We're partnering with a premium European OEM to supply our 800-volt silicon carbide inverter for their next-generation battery electric vehicle. This business will launch in 2024 and is another great win in power electronics. Our 800-volt silicon carbide inverter significantly improves efficiency and range, whilst enabling, through the 800-volt architecture, a 50% charging time reduction. We're excited to build upon the momentum of this win and position BorgWarner as a leading supplier of inverters for future battery electric vehicles. I would like to give you a little more detail on our planned customer engagement on vehicle electrification on Slide 9. We had been looking forward to engaging with our customers about our expanded electrification product offerings after the closing of the Delphi transaction and we're excited to report that we've hit the ground running post-closing, with customer meetings currently underway. We have plans to meet with customers representing 70% of the global industry volume over the next four months. We will be pursuing both full system and component opportunities with these customers. The charts on the right are just a sampling of the programs we expect to pursue. We believe that we are very well positioned to secure our share of the expected industry award activity over the next 12 to 24 months. Before I turn it over to Kevin, let me summarize our third quarter results and our outlook on Slide 10. We achieved better-than-expected outgrowth in the third quarter, driven by new business in China. Our margin performance has been solid. Despite the industry's challenges throughout 2020, we delivered strong year-to-date free cash flow. As I look forward, I'm excited about our positioning as we look to capitalize on the profound industry shift towards electrification. Wins like the 800-volt silicon carbide inverter and the eTurbo only help support our continued and accelerated evolution. It is our people and their efforts that allow us to manage through a year like 2020 while continuing to secure our future position in the industry. I am very proud of the teams. With that, I will turn over to Kevin.

Thank you, Fred, and good morning, everyone. Given the number of financial topics we have to get through this morning, I'm going to dive right into the details. So let's turn to Slide 11. As we look at our year-over-year revenue walk for Q3, you can see that modestly stronger foreign currencies increased revenue by about 0.8% from a year ago. Excluding this impact, our organic sales were up almost 1% compared to a roughly 2% decline in weighted average market production. That means we delivered 280 basis points of outgrowth in the quarter. In China, we outperformed the market by about 17%. Strong DCT demand was the biggest contributor to the sizable outgrowth in the quarter. But our China commercial vehicle business also outperformed, although the good news in China was largely offset by commercial vehicle declines in other regions. In North America, we outperformed the relatively flat market by approximately 2%, driven by strong mix and new programs. From a mix perspective, our slightly overweight position in SUVs and pickup trucks continues to bode well for our ability to deliver outgrowth in the region. And in Europe, our light vehicle organic revenue was down 12% compared to the market decline of approximately 8%. As we've discussed for several quarters, we've been outperforming light vehicle diesel in Europe since the third quarter of last year. However, we've now started to lap this market outperformance, which simply means that diesel will start to become a bit of a headwind again. Nonetheless, even with this headwind, we delivered another quarter of meaningful outgrowth. Now let's look at our earnings and cash flow performance, which can be found on Slide 12. Our third quarter adjusted operating income was $317 million compared to $294 million in the third quarter of 2019. This yielded an adjusted operating margin of 12.5%, which was up compared to the 11.8% in the third quarter of 2019. On a comparable basis, adjusted operating income increased $25 million on $20 million of higher sales. This earnings performance in the quarter was driven by our ability to successfully convert on the revenue recovery and the benefit of our restructuring actions in some of the temporary wage reductions we implemented earlier in the year. Adjusted earnings per share were $0.88 for the quarter, which was lower than a year ago due to a higher tax rate this year. The higher tax rate was driven by a U.S. tax regulation change announced at the end of the quarter, which will limit our ability to utilize certain foreign tax credits to offset future tax obligations. Moving to cash flow, we're proud of the fact that we generated $390 million of positive free cash flow during the third quarter. Fundamentally, we demonstrated our ability to convert operating income into cash flow. In addition to that, we drove inventory performance that was better than we anticipated, and we saw some accelerated customer collections as certain customers paid early in China in advance of the Golden Week holiday period that started on October 1. Our year-to-date cash flow performance positions us very well to deliver higher full-year free cash flow than what we were previously projecting. I'll talk about that more in a moment. Before I discuss our updated full-year outlook, I wanted to take a few minutes on Slide 13 to review the expected impact of Delphi Technologies on our Q4 outlook. Starting with revenue, we expect the acquired businesses to contribute between $950 million and $1 billion of revenue to our Q4 results, which will be down 5% to 10% from Delphi's reported fourth quarter revenue last year. We expect the adjusted baseline operating margin for the Delphi businesses to be in the range of 4.7% to 6%, inclusive of $10 million in synergies. This lower year-over-year margin is the result of downside conversion on the combustion portfolio being only partially offset at this point by the benefits from restructuring actions. This is in line with what we've told you to expect for this business. Specifically, we don't expect to see the stand-alone business before synergies return to 2019's level of margin performance until we see both the restructuring initiatives fully implemented in 2022 and a recovery of revenue to pre-COVID levels. In addition to the baseline performance of the Delphi businesses, we're anticipating between $55 million and $60 million of annualized purchase price amortization, which means we expect to have around $15 million in amortization each quarter. So inclusive of this amortization, we expect that Q4 adjusted operating income impact of $30 million to $45 million from the acquisition. Finally, from a free cash flow perspective, we expect our fourth quarter cash flow to be impacted by approximately $100 million of transaction-related costs around the closing and the cost of achieving synergies during the quarter. Now that you have a good understanding of how the Delphi acquisition is expected to impact our Q4 results, let's talk about our consolidated full-year outlook on Slide 14. Our guidance is based on the end market assumptions that Fred reviewed earlier, with global production being down 18.5% to 19%. Also, we expect to drive market outgrowth for the full year of approximately 550 to 600 basis points, which is at the high end of our prior guidance of 450 to 600 basis points. Based on these assumptions, our 2020 organic revenue would decline by 12.5% to 13.5% year-over-year. Then adding the Q4 revenue from Delphi Technologies, we're projecting total 2020 revenue to be in the range of $9.7 billion to $9.85 billion. From a margin perspective, we expect our full-year adjusted operating margin to be in the range of 8.7% to 9.0%. This contemplates the legacy BorgWarner business delivering full-year decrementals in the 30% range, consistent with our prior guidance. Now this implies a somewhat higher Q4 decremental margin as a result of the relatively strong 13.3% margin from a year ago, which makes for a difficult comparable; Q4 R&D that we expect will be higher by about $25 million as we continue to fund investment in our long-term organic growth opportunities; and our expectation that we'll experience some level of COVID-related costs and inefficiencies that impact our operational performance. This guidance range also contemplates the impact of adding Delphi Technologies to the mix, which means that we're adding up to $1 billion of revenue in Q4, with much lower operating margin for the reasons I noted earlier. Let's turn to Slide 15, where you can see our updated free cash flow guidance. Year-to-date, we've generated $546 million of free cash flow, which we view as a tremendous achievement in this very challenging end market environment. As COVID-19 hit, we focused our team on taking the actions necessary to manage decremental margins, while at the same time managing working capital and capital expenditures prudently. The results speak for themselves. As we look ahead to the full year, we now expect to generate between $575 million and $625 million of free cash flow before the $100 million of expected Delphi Technologies transaction-related costs and the cost of achieving synergies that I mentioned earlier. But even with the Q4 headwinds arising from the transaction, we still expect to deliver $475 million to $525 million in free cash flow, a significant increase from our prior guidance. This positions us to continue investing in our future growth opportunities while maintaining a focus on returning cash flow to shareholders. So let me summarize my financial remarks. Simply put, we had another strong quarter. In spite of overarching industry pressures, we delivered outgrowth at the high end of our expectations. We delivered a strong operating margin for the quarter, back to levels we've seen in recent years. And we converted our earnings to free cash flow, both for the quarter and on a year-to-date basis. So as we wrap up this quarter and look ahead to the balance of the year, we're confident in reinstating our margin guidance and in raising our 2020 expectations for both revenue and free cash flow. With that, I'd like to turn the call back over to Pat.

Thank you, Kevin. Jerome, we're ready to open up the call for questions.

Your first question comes from John Murphy with Bank of America.

I just want to ask a first question around the fourth quarter and then into 2021 on trucks in North America. The F-150, I think they were talking about being down about 100,000 units in the fourth quarter. I'm just curious what kind of impact, Kevin, you think that has. But then we're going through this sort of new truck boom, right? It's been going on for a while, but it seems like it's strengthening as we go into 2021 and beyond with some product launches. And that's very good for your business. Just curious how you think about that going forward, Fred, and what kind of opportunity there is in your backlog and what you might be able to win. I know it's a little less sexy than EVs, maybe, but it's still pretty attractive on the profit side.

John, it's Kevin. I'll start with that. On the Ford F-150, obviously, we are seeing the changeover, and that is having an impact on our outgrowth, both a little bit in Q3, but a little bit more so in Q4. I'd say, from a revenue perspective, it's about a $30 million impact for us in Q4 from a revenue perspective. But then as you alluded to, the truck mix has been a benefit for us. So when we talk about North American mix benefits that we're seeing, part of it is the benefit of having a mix that's skewed a little bit more towards truck than car than what we've seen in the past. So that is what we're seeing right now, and we're reaping the benefits of that in our outgrowth.

Yes. And John, I just want to highlight the fact that this is exactly why we are executing a balanced strategy across combustion, hybrid, and electric, with a great portfolio to capitalize on the growth of electrification. If you take your question at the high level, if you look at the vehicles that are going to be produced between now and 2030, it's about 1 billion vehicles. IHS is saying 17% electrification. Let's round it to 20%. Out of that 1 billion vehicles, 900 million will have a combustion engine, either as a combustion architecture or together with a hybrid. And we believe that it would be a mistake to ignore that profitable cash-generating revenue as well as the environmental opportunity to be supplying products on those 900 million vehicles. And I think your question is a good example.

Okay. That's incredibly helpful. I have a follow-up question regarding the diesel challenges in Europe. Kevin, I understand the comparisons, and while there seems to be some recovery, the comparisons are becoming tougher. The diesel challenges will likely continue to affect both your business and Delphi's business. Do you think we've seen the worst of this shift in product mix, and how should we consider that moving forward?

So John, you're correct that diesel is decreasing. The take rate is dropping significantly from Q2 to Q3. We outperformed the diesel market last year, and since Q3 of last year, we're starting to compare against that growth. It's difficult to determine where this decline will level off. We are certainly more focused on larger diesels, and the decrease is also affecting the smaller ones. This will pose a challenge for us. However, for some of our product lines, growth in gasoline is offsetting the decline in diesel. Overall, this challenge is expected to ease in the future.

Your next question comes from James Picariello with KeyBanc Capital Markets.

Just on the timing of the Delphi cost-out synergies, is anything baked into the fourth quarter outlook? Or should the synergy capture strictly take place next year?

Yes. In our fourth quarter, we're expecting already $10 million of synergies in those numbers that we showed on the slide in the deck. So that includes $10 million of synergies coming through in Q4.

Got it. Okay. And then the drivers behind drivetrain's strong quarterly performance, I mean, we've seen three quarters now of double-digit market outperformance. The margins clearly came through this quarter. I mean, does your guidance factor in sustainable momentum run rate around this business? And could you provide some color on the drivers from a product and regional standpoint for that segment in particular?

So in Q3, the key drivers were a strong outgrowth on dual-clutch transmissions in China and North American mix product profile. So this certainly, that DCT growth in China was above our expectations going into 2020 and going into the second half of 2020, and we converted well on those programs.

Got it. And just one last one for me. Is there any change in your expectations for next year's incremental margins, given the stronger second half performance this year operationally? Just is there an element of more difficult comps relative to how you were thinking about things a few months ago? Or are 30% incremental margin still the right target for BorgWarner's base business next year?

Yes. I mean when we speak of the 30% incrementals that we were talking about earlier this year and taking a step back, what we said is, hey, given the pace at which revenue was coming out as a result of COVID-19, we thought we would generate decrementals at about 30%. And then we said, hey, as we thought end markets recovered or rebounded from those COVID lows that we should be able to deliver incrementals on that end market recovery at the same rate at which we decrement it. And that's effectively what you saw in Q3 results, but that's not the long-term incremental profile of the company. That's really just the short-term snapback of a rebound in revenue. We still continue to think about ourselves as being a mid- to high-teens incremental converter as you get beyond the snapback in end markets like we've seen here. So I wouldn't look at next year and then layer on 30% on top of that. If you look at our revenue profile, we're back to a north of $10 billion of annualized revenue here in Q3 and Q4, and we've converted on that effectively, incrementally back at the 30% like we had hoped and expected.

Okay. So first half next year at the same decrement that you had in the first half in 2020. And then in the second half, maybe at a normalized rate.

Yes, that's a reasonable way to look at it. When comparing year-over-year, we should anticipate a return to incremental growth similar to the second quarter as we recover from the market lows experienced in Q2. We aim to return to market norms, hopefully by Q2 of 2021, which could yield increments within the 30% range. Beyond that, our growth should align with historical trends.

Your next question comes from Dan Levy with Crédit Suisse.

First, I just wanted to ask a question on your core turbocharger business. Given the bankruptcy filing by your largest competitor in the space, is there any potential to see maybe incremental turbocharger business over the near or midterm? And then, similarly, maybe you could give us a sense of the underlying price or margin trends you've seen in terms of whether you anticipate this competitive development maybe shifting with those pricing or margin trends. So just an update on turbos given the development.

Yes. What I would say is that balance sheet strength is certainly a competitive advantage, and that's what we're seeing in the turbo field. We're not seeing any major changes from a pricing standpoint that we've seen in the past. It remains a competitive business, where product leadership is absolutely important because turbo efficiency translates for our customers into direct impact on fuel economy. And so, in this business, like in a lot of businesses in our field, it's a lot around efficiency and the product leadership we can provide to our customers.

And I appreciate the balance sheet strength that you have. If customers view that as a good reason to use you as a sourcing solution, how long would it theoretically take for some of that incremental revenue to show up in the backlog or ultimately hitting the revenue line?

It would take about 3 to 4 years to hit the revenue line from a sourcing event or from a booking event.

Okay, so nothing near term. Great. I wanted to ask about your growth trends in Europe. We are currently seeing a significant change in powertrain trends in Europe as automakers rush to meet emission targets. I understand that your advanced hybrid and EV solutions will not be launched for a couple of years, but could you provide some insight into why we haven't seen better growth in Europe this quarter for powertrain? I know you're dealing with the challenging issue of diesel comparisons, which are starting to fade. I'm curious why there isn't a more noticeable shift from automakers that would impact you. Is it simply a matter of the portfolio, where they are opting for EVs and not focusing on enhanced powertrain solutions at this time?

You raised a valid point. The decline in diesel sales sequentially is definitely a factor. As you mentioned, we are not very active in the first generation of hybrids. Our focus is much more on plug-in hybrids and higher-voltage hybrids that are set to debut in 2023 and later. We have already shared some successes in previous quarters. An interesting detail to note is that from Q2 to Q3, the diesel take rate decreased by 370 basis points, which is one of the largest quarter-over-quarter drops we have seen in several quarters.

Your next question comes from Noah Kaye with Oppenheimer.

So obviously, you kind of hit the ground running here on the Delphi integration in terms of the customer outreach. Can you talk to us a little bit about the execution on some of the ramps that we know Delphi has and had in front of them in terms of scaling up their GDI and power electronics business? What are some of the priorities there? How do you see that tracking? Where is your focus going to be with some of those launches?

We are seeing strong demand for GDI and some promising bookings coming in. Our priority is to assist the plants in launching their products effectively. We have assigned a skilled team from BorgWarner to the fuel injection system business unit, ensuring it remains undisturbed during these launches. Additionally, we recently shared updates on bookings in power electronics and are placing a high emphasis on launch effectiveness within our PDS business unit.

I'm not sure how much additional information you've gathered since the merger closed, but could you share your thoughts on the pricing and contract structures in those businesses? Also, have you learned anything that makes you more or less confident in achieving better results than Delphi on a stand-alone basis regarding reaching breakeven or corporate average margins in those businesses over the next 1.5 years?

We've not seen anything dramatically different than what we looked at over the past month, so no surprises for us.

And I think from a disciplined perspective, we are instilling the BorgWarner culture. We have a focus as we look at new programs of maintaining the discipline of driving towards a 15% ROIC on any new programs. And that's the same discipline we'll hold, whether it's a business that we acquired as part of the Delphi acquisition or part of a legacy BorgWarner position. It's the same approach that we take to the entire portfolio of businesses we have at BorgWarner.

That's great. And if I could just sneak one more in. It's really around the pace of overall booking activity and quoting activity you're seeing in the space. I think we've heard from some peers that, interestingly, I mean, some bookings were still awarded in 2Q. But there was a surprising level, just ongoing engineering and development activity for what the conditions were in the pandemic. And I want to ask, if you have seen then, how you think about kind of the cadence and pace of booking activity as we are exiting the year here?

I agree with you, Noah. I think it's amazing how teams and human beings can still strive and push forward programs during the pandemic. And we are a good proxy of that. We're spending more R&D in Q4 than the prior year. And so we don't see any slowdown from an electrification trend perspective. And so this is still very, very important for our customers to just carry on, working on those new powertrain architectures. This is becoming very, very important for them to be able to sell going forward. So we don't see any slowdown in our field.

Your next question comes from John Saager with Evercore ISI.

It's John Saager on for Chris McNally. Congrats on finalizing the transaction. We saw the sort of go-to-market strategy on Slides 7 to 9, and I'm wondering if there's any upside to the initial Delphi margin outlook or order bookings from potential electrification synergies if we were to get a Democrat sweep on Tuesday.

Yes. I'd say, just stepping back from a margin outlook, I mean, from a margin perspective, we still feel good about the direction that we're taking the business and the ability to deliver the 11-plus percent margin as we look at the run rate over the next few years. I think in terms of the impact on the near term of what an election might do, TBD, but it's part of our strategy of being balanced across combustion, hybrid, and electric that we are positioned to be successful in all those environments, depending on which portion of the portfolio is growing more quickly than the others. So if there is more emphasis on electrification here following an election, that's great. We'll look to capitalize on that. And I think the Delphi Technologies acquisition will only help that with the power electronics and electronics capabilities that they bring to the table.

Sure. Makes sense. And then does BorgWarner care if you're a fully integrated solution versus just one of the components? In other words, an OEM does the integration and then sources BWA as one of the critical components. Is it logical to think about the full integration drive module, could that be the highest-margin product for Borg?

We had to partner and serve our customers, and so we'll be happy to provide a system like we do for the Mach-E. We'll also be happy to provide components. For us, we run the company with return on invested capital, and we will look at getting the same hurdle rates, whether it's a system or a component.

Do you believe the full integration drive module could potentially be your highest-margin product?

We don't get into the margins of our specific products. But I would say, just as Fred mentioned, whether it's a component or a system offering, we look at driving the same discipline around return on invested capital. They may have different levels of capital investment requirements. But overall, we would drive that same discipline. Obviously, as you get to an integrated drive module, particularly if it has all of our components, it's a higher dollar amount than selling an individual component. And so you have the opportunity to generate more dollars. But in terms of the return on the employed capital, we maintain the same discipline of that 15% target, whether it's a component or a system.

Your next question comes from Brian Johnson with Barclays.

Yes. Just following up on that question. Could you maybe drill down a little bit more into the dynamic? And it's kind of represented on Page 9 between component opportunities for BEV versus integrated iDM opportunities for BEV. It looks like any components that most of the things you're chasing are inverter related. I guess a couple of questions there. Is that a fair characterization? And then as inverters are designed to be bundled very close to or part of the motor as opposed to a stand-alone power electronics box, how comfortable are you with the Delphi product line that you got in terms of the ability to supply inverter components into highly engineered integrated modules that the OEM themselves are producing?

Brian, first, it is kind of funny to watch that customers go in different direction. And even within a customer, some programs may go in different directions between in-sourcing and outsourcing the full system. And so that's why, first, it's important to be able to talk to the customer from a system perspective to look at the optimization of the design that can be done by BorgWarner versus what they can do. Secondly, when we talk to customers, we are not only talking to them about full systems, but they absolutely understand that we can do a full system. And being able to understand the full system, from mechanical motor and electronics, is an enabler to sell a system, but it's also an enabler to sell components. On the transmission side, when the customer does a full system, most probably, they'll do the transmission. On the motor side, there is a mix of both in-sourcing and outsourcing. On the inverter side, as I mentioned at the last quarter call, this might be the component that has the least likelihood to be in-sourced by the customer. And so there are a lot of discussions around those components but not limited to inverters. What I can tell you is that BorgWarner has a great technology from an inverter standpoint. And the win that I alluded to in my prepared remarks speaks volumes to that. That 800-volt silicon carbide is really, really, very high technology and well managed and controlled. So we see some good tailwinds on those systems and components, both.

The BEV iDM opportunity is exceptional. Congratulations on the wins with Ford and the upcoming launch. Are there similarities among the types of OEMs that are open to outsourcing the iDM? Also, regarding the large skateboards being developed, like the GM multi and the Volkswagen BEV, will those also be outsourcing their iDMs or are they primarily seeking specific components for those skateboards?

No. We don't see common characteristics of the OEMs going through in-sourcing or outsourcing. One element is that, temporarily, we see some of the OEMs that have obligations with their works councils and things like that to start maybe in-source a little bit more at the start. But we don't see common characteristics. We have opportunities in all three major regions of potentially getting full IDM businesses on the system standpoint.

Your next question comes from David Kelley with Jefferies.

Maybe just starting with the margin assumption for the fourth quarter. Can you give us a sense for how the BorgWarner-specific restructuring actions are going to factor in there? And just curious if you're still on track for the $50 million in incremental savings this year.

Yes. From a BorgWarner restructuring perspective, you should assume that the Q4 on a year-over-year basis is in that $10 million to $15 million range in terms of the tailwind that it's providing. And we're definitely on track in terms of achieving the restructuring objectives from a savings perspective for the full year that we laid out before.

Okay. Great. That's helpful. And then I wanted to also ask about your commercial vehicle exposure. You noted strength in China and weakness elsewhere. We've been hearing that from others as well. We were curious to hear what you're seeing as it relates to CV exposure trajectory in the year-end. Do you think that China tailwind starts to tail off here? And are you starting to see some signs of life and recovery in the other regions?

So the CV in China, both off-road and on-highway, has been very strong, and is still very strong, stronger than we expected. It is not easy to figure out if this is going to carry on. But demand is strong, and we don't see signs of slowing down. For other regions, we see that business picking up, too. What we also see is an appetite from a commercial vehicle standpoint, customer standpoint to move towards electrification of their propulsion architecture, either hybrid or fuel cell or battery electric. It's going to take time. Those cycles are long in commercial vehicles, off-road and on-highway. But we see that trend, too, pretty solidly.

Your next question comes from Joseph Spak with RBC Capital Markets.

I just had a question, I guess, on where things are headed on electrification in your portfolio. I know you talked about your iDM. And my understanding is that's really sort of positioned in the middle, if you will, and sort of putting power to the wheels. But as some of these larger vehicle programs come to market or are being shown, it seems like the motor is closer to the wheel. And I'm curious about your capabilities there, your product offerings and whether what you can do on an iDM is transferable to accommodate some of those larger vehicles as they go electrified.

Yes. We're looking at in-wheel motors. Right now, we don't see a path to growth in the foreseeable future, but we understand that technology. We still feel that having a structure that is closer to the traditional iDM architecture is, for now, the most probable path going forward, Joe.

Okay. But not all the way in the wheel but just closer to the wheel, like maybe some of the larger electrified pickups coming out seem to be using that sort of structure.

Yes. I'm not equipped to answer that question. I have to come back to you on this one particular.

Mr. Nolan, there are no further questions in the queue. I will hand it back to you for concluding remarks.

Thank you all for taking the time today, and thank you for your helpful questions. If you have any follow-ups, feel free to reach out to me. With that, Jerome, you can conclude today's call.

That does conclude the BorgWarner 2020 Third Quarter Results Conference Call. You may now disconnect.