Good morning. My name is Connie, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2024 Third 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. 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, Connie, 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, both on our home page and on our Investor Relations home page. 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 home page for a full list. Before we begin, I need 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 and 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 non-comparable items. When you hear us say adjusted, that means excluding non-comparable 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 adjusted operating income divided by the organic change in our sales. Our all incremental includes our planned investment in ER&D, any impact from net inflationary items and other cost items. Lastly, we refer to our growth compared to our market. When you hear us say market, that means the change in light and commercial vehicle production weighted for our geographic exposure. Please note that we've posted today's 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 day, everyone. I’m very pleased to share our results for the third quarter and provide an overall company update, starting on Slide 5. At more than $3.4 billion, our Q3 organic sales were down about 5% year-over-year, modestly outperforming a 6% decline in our market. Year-to-date, we have outgrown our market by about 270 basis points. This demonstrates the resiliency of our technology-focused portfolio, which we believe is positioned to outgrow the market production. We secured multiple new product awards for both foundational and eProduct, which we believe further support our long-term profitable growth. Turning to our bottom line for the quarter. We delivered a very strong 10.1% margin which was 50 basis points higher than last year. We also delivered earnings per share of $1.09, which was $0.11 higher than the prior year. This strong underlying operational performance was primarily driven by our focus on cost controls across the business. Our strong year-to-date margin and cash performance enabled us once again to increase our full year margin and earnings guidance, as Craig will detail later. Lastly, we remained focused on the efficient deployment of our capital and completed our planned 2024 repurchase of $400 million of BorgWarner stock. Now let’s look at some new product awards on Slide 6. First, BorgWarner has furthered its business with a major North American OEM by securing the extensions on two transfer cases for full-size pickups. BorgWarner will supply two types of transfer cases to the OEM for use on three platforms. Start of production for two of the platforms are slated for 2027 with the third expected to begin in 2028. We have supplied this OEM with transfer cases for over 40 years. We believe this extension solidifies our team’s reputation and the proven architecture, field performance, and quality of our products. Next, BorgWarner has secured three high-voltage coolant heater business wins in Asia, expanding our technological reach in the Asian electric vehicle markets. In China, our high-voltage coolant heater will be used in a leading domestic OEM’s fully electric SUV, with production expected to start in the second quarter of 2025. This partnership marks a significant step forward in our continued expansion in China’s rapidly growing electric vehicle industry. In Korea, the product will be used in an electric pickup vehicle with production estimated to begin in March 2025. The heater will be critical in managing cabin temperatures, improving energy efficiency, and enhancing the driving experience. In Japan, our high-voltage coolant heater has been chosen by a Japanese OEM for its small battery electric vehicle, with production expected to start in 2028. This marks the company’s first heater program in the country. The compact heater design offers a perfect fit for smaller vehicle platforms, delivering superior performance and efficiency. These three important business wins demonstrate the strength of BorgWarner in this growing field and further solidify our presence in the Asia-Pacific region. And lastly, BorgWarner will deliver its turbochargers for use on GM’s Corvette ZR1 sports car platform, marking the largest passenger car twin turbochargers to be released and produced to date. We’re proud to secure this contract and support General Motors in making the most powerful Corvette ever built. This technology has been in the works for some time now, and to see it come to fruition is both exciting and fulfilling for our passionate teams. BorgWarner and General Motors have a long history of producing market-leading application across a wide range of segments, and we look forward to continuing to develop new technologies with them and push industry boundaries. Now let’s turn to Slide 7, where I would like to share our net sales breakdown following our business unit realignment that was effective July 1. Our business units are now aligned with our externally reported segments. On the left side of the slide, you see that our turbos and thermal technologies and Drivetrain and Morse Systems segments, each represent approximately 40% of our net sales. These segments generate most of their net sales from our foundational products. They both enjoy a number one or number two positions in the different product market segments they serve. These are mature businesses with strong margin and cash flow profiles that we expect will continue to strive as the world looks for more efficient combustion and hybrid powertrains. The remaining 20% of our net sales is comprised of our Power Drive Systems business unit, which was previously reported as ePropulsion, and our battery and charging systems business unit except for engine control products. All of these sales generated from these two segments, our eProducts for hybrid and battery electric vehicles. These segments are expected to be significant drivers of our future growth. As these businesses continue to scale, we expect to capitalize on their growth by converting at mid-teens, which is what we are seeing this year. I also want to highlight our regional and customer diversity shown on the right side of the slide. Regionally, Americas, Europe, and Asia, Rest of the World, each represent approximately a third of BorgWarner’s net sales. We are also strongly positioned in terms of exposure to various customer groups. For example, our sales to the Chinese local OEMs represents roughly 15% of our overall net sales so far this year. This is comparable to our net sales to the German OEMs in Europe and our North American sales to the Detroit 3. I think this chart clearly shows BorgWarner’s sales resiliency and highlights the benefits of strong diversification across products, customers, and regions. To summarize, the takeaways from today are, BorgWarner’s third quarter results were strong. Sales performance was slightly better than market production. Our adjusted operating margin was over 10%, and our cash generation was very strong. This allowed us to accelerate our second half $300 million share repurchase plan, taking our full year repurchases to $400 million. We secured new foundational and eProduct business awards in the quarter, which we believe once again demonstrate our product leadership on both sides of our portfolio, further supporting our focus on profitable growth over market production. As we look forward, our formula for success is unchanged. We expect to continue to secure business opportunities that will allow us to continue to grow faster than market production. As I mentioned before, BorgWarner’s DNA is to focus on propulsion efficiency, which includes both combustion fuel efficiency and electron efficiency for hybrids or BEVs. I expect efficiency to remain an industry trend for years to come and strong drivers of BorgWarner’s growth regardless of propulsion architecture. We continue to seek to appropriately manage our cost structure as industry volumes and propulsion mix outlooks change while continuing to preserve our long-term profitable growth and product leadership edge. We believe this focus will allow BorgWarner to continue to deliver sales performance through organic growth above market, 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. Before I dive into the financials, I’d like to provide a quick overview of our third quarter results. First, we reported just over $3.4 billion in sales, which was down approximately 5% versus the prior year, excluding FX and M&A. This was slightly above market production in the quarter, which was down approximately 6%, so we saw modest sales outgrowth in the quarter of approximately 50 basis points, which was primarily driven by European battery growth. Second, we had strong margin performance in the quarter at 10.1%. This was driven by solid operational performance, the continued benefit of restructuring actions we announced in July, our continued focus on cost controls across the business, and customer recoveries. Third, we had strong free cash flow in the quarter of $201 million, which allowed us to accelerate our second half $300 million share repurchase plan. Importantly, we delivered this result while also continuing to organically invest in our business to support our focus on long-term profitable growth. Now, let’s turn to Slide 8 for a look at our year-over-year sales walk for Q3. Last year’s Q3 sales from continuing operations were just over $3.6 billion. You can see that the weakening U.S. dollar drove a year-over-year increase in sales of $4 million. Then you can see a decrease in organic sales of approximately 5%, which was 50 basis points above market production, primarily due to strong European battery growth. And finally, the acquisition of Eldor added $9 million of sales year-over-year. The sum of all this was just over $3.4 billion of sales in Q3. Turning to Slide 9, you can see our earnings and cash flow performance for the quarter. Our third quarter adjusted operating income was $350 million, equating to a strong 10.1% margin. That compares to adjusted operating income from continuing operations of $349 million or a 9.6% margin from a year ago. On a comparable basis, adjusted operating income increased $15 million and $186 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 $24 million of favorable items related to customer recoveries for eProduct program volume shortfalls and the benefit of our Power Drive Systems restructuring that we announced in July. The net impact of Eldor was a $14 million drag on operating income year-over-year. Our adjusted EPS from continuing operations was up $0.11 compared to a year ago as a result of strong adjusted operating income, a decline in our effective tax rate, and the impact of $300 million in share repurchases during the quarter. And finally, free cash flow from continuing operations was $201 million during the third quarter, which was up $165 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 10. We are projecting total 2024 sales in the range of $14.0 billion to $14.2 billion, which is a reduction from our prior guidance of $14.1 billion to $14.4 billion. This reduction is due to a lower market production outlook and modestly lower eProduct sales. Despite the sales reduction, we expect the company to outgrow market production by 200 basis points to 300 basis points, which once again demonstrates the resiliency of our technology-focused portfolio that we believe is positioned to outgrow market production. Starting with foreign currencies, our guidance now assumes an expected full year sales headwind from weaker foreign currencies of $20 million compared to 2023. Within this guidance, our full year end market assumption has been reduced to down 3% to 3.5% versus down 2% to 3% previously. Finally, the Eldor and SSE acquisitions are expected to add approximately $30 million to 2024 sales. Based on our updated outlook, we expect our organic sales change to be flat to down 1.5% year-over-year or outgrowth above industry production of 200 basis points to 300 basis points. Now, let’s switch to margin. We are increasing our full year margin outlook to 9.8% to 10.0% from our prior guidance of 9.6% to 9.8%. This is based on our year-to-date performance and continued benefits of our Power Drive Systems restructuring that we announced in July. This expected margin increase demonstrates the resiliency of our technology-focused portfolio and our ability to drive profitability in very challenging end markets. Our implied fourth quarter outlook assumes that our boat business delivers a mid-teens decremental conversion compared to our average year-to-date results, excluding the benefits of third quarter volume-related eProduct customer recoveries and second quarter stock forfeitures related to a senior executive retirement. We view this mid-teens decremental conversion as strong underlying performance given the anticipated 5% to 7% year-over-year decline in market production during the fourth quarter of 2024. Based on the sales and margin outlook, we’re expecting full year adjusted EPS in the range of $4.15 to $4.30 per diluted share. This 4% EPS increase compared to our prior outlook is being driven by the impact of our strong third quarter results, a lower share count due to the third quarter execution of our share repurchase plan, and a reduction in our full year effective tax rate. We continue to expect full year free cash flow to be in a range of $475 million to $575 million. Our ability to increase our margin and EPS guidance during a challenging production environment demonstrates our focus on managing costs in order to hold our prior guidance absolute income dollars, and we’re doing this despite a significant reduction in global industry volumes. Now, let’s turn to Slide 11 and take a look at how we will deploy our expected $475 million to $575 million in 2024 free cash flow. As I just highlighted, we expect another strong year of free cash flow generation. At the midpoint of our guidance, we expect to generate $525 million in free cash flow. It is important to note that $475 million of this cash flow has already been deployed to shareholders with $400 million of shares repurchased and $75 million of dividends already paid through the end of the third quarter. If we assume that we will declare and pay our consistent quarterly dividend in the fourth quarter, almost all of our expected free cash flow will be deployed to shareholders in 2024. We believe our ability to return capital to shareholders while also investing in the business demonstrates the underlying strength of the company and the importance of maintaining a strong balance sheet that allows us to invest in our long-term profitable growth and follow a balanced capital allocation approach that rewards shareholders. So let me summarize my financial remarks. Overall, we delivered a strong third quarter with sales outperformance compared to industry production. We delivered a very strong 10.1% margin, which was 50 basis points higher than 2023 and the second quarter in a row with a margin above 10%. Additionally, we generated $201 million in free cash flow, which allowed us to accelerate our second half $300 million share repurchase plan. And we did this despite challenging market production in the quarter. This once again shows the resiliency of our technology-focused portfolio that we believe is positioned to outgrow industry production and deliver strong profitability and free cash flow. We are proud to be increasing our margin and EPS outlook for the second time this year despite a declining industry volume.

I apologize for the audio interruption. Connie, if you can hear us, we can open up the call for questions.

Thank you. And we’ll take our first question from Colin Langan, Wells Fargo.

Oh, great. Thanks for taking my questions and congrats on a good quarter in a pretty tough market. I wanted to ask, if we go back to the Investor Day in June of last year, you talked about a 10% margin in 2027. Now I think at the high end of your guidance, you could be there this year, which is pretty impressive since the world has actually been a bit worse over the last 1.5 years. How should we think about margins from here? Is there anything that might prevent you from getting above that 10%? It sounds like you expect to convert EV or ICE at the same contribution, so that would imply if we have growth, if we could kind of beat that 2027 target already?

Yes, thanks Colin for the question. Can you hear me okay?

Yes.

Okay, great. Let’s start with the quarter. Overall, the quarter, really strong operational performance. As I mentioned in my script, we benefited from restructuring actions, a real focus on cost controls across the business. And I mentioned that we also had a bit of a tailwind from PDS volume-related customer recovery. So really pleased with our performance in the quarter. As you look to the fourth quarter, I think how you should look at our performance really two ways to look at it. First, against our average performance for the full year. If you look at that at the midpoint of our guide, we’re expecting revenue to be down, let’s just call it roughly 3%, and when you remove the one-time items in the second quarter and the third quarter that I mentioned in my script, we’re decrementing in the mid-teens, which is what you would expect. That’s one way to look at our fourth quarter performance. That gets us to 9.6% for the guidance. If you look at our year-over-year performance for the fourth quarter, again, revenue down about 2% year-over-year, and we’re actually holding incomes flat. Again, that gets us to 9.6% at the midpoint. So either way you look at it from our perspective, good operational performance in the fourth quarter. And I think we’re focused on delivering that guidance at the midpoint, again, right around 9.6%.

I guess a follow-up on the long-term 10% target, you’re pretty close. Anything that we should be thinking about as we think about 2025, 2026 that would sort of prevent getting above that target because it seems like you’re pretty awful close?

It’s Frederic. It’s not the time to talk about longer term. We’re focusing on 2024. We’re focusing on controlling our incremental or decremental for that matter. And I think you can see it in our guide and we’ve talked about 2025 in the Q4 call.

Got it. All right. Thanks for taking my questions.

Thank you, Colin.

Thank you, Colin.

And your next question comes from Dan Levy, Barclays.

Hi. Good morning. Thank you. I wanted to just double-click on the margin in 3Q. Based on the revenue decline at a 20% decremental, that would have been—call it—a $37 million EBIT hit, but instead you were plus 15% on the year-over-year. So that’s a $50 million plus swing. It’s even more if you’re adjusting for Eldor. So maybe you can just decompose that? I know you mentioned there was the $24 million benefit for ePropulsion, but there’s still another gap. And then maybe on the $24 million, how much of that is sort of recurring—sort of the ongoing restructuring benefit versus maybe a one-time benefit?

Yes. Overall, when you look at the quarter, like you said, it was just really strong operational performance. We’re benefiting from the PDS restructuring that we announced in July. We’re benefiting from our focus on cost controls, productivity, restructuring savings, etc. To answer your question, the $24 million of volume-related PDS customer recoveries, that’s a one-time item in the quarter. You should not expect that to repeat quarter-after-quarter.

And what’s the ongoing restructuring benefit?

The PDS restructuring, you said $20 million to $30 million for the full year.

Okay. Got it. Thank you. Second, I appreciate with the new segment structure, we can now better see the battery business. If you could maybe just double-click on the growth there. How much of that is just strong demand versus getting new supply online? I think a lot of it is new supply. What type of growth profile we can expect for this business? And then interesting to see that it’s near breakeven, should we just assume that this is going to increment your mid- to high teens and working your way up as you continue to grow? Just a way to think about sort of the margin profile of that business over time?

Dan, I’ll start. Yes, on the battery and challenging for the quarter, it was a good incremental of about 36%, strong sales, especially in Europe. And I think for—when you look at the segments too, on the other segment, there was a very, very efficient decremental on the way there, right? So we’re really focused on controlling what we can control, adjusting to the volatility of the market and driving margin performance. And I think you can see that in the guide. I don’t see a reason why this business should not carry on incrementing at the meeting.

And the supply versus demand dynamics, how much of this is just sort of new supply hitting?

I would say the supply versus demand dynamic is not a dynamic where we are, let’s say, short of supply; we now have aligned capacity to demand in both regions, North America and Europe. So this is behind us.

Okay. Thank you.

And we’ll take our next question from Joe Spak, UBS.

Thank you. I guess, maybe just to sort of follow on Dan’s question there: with some of the new segmentation, like we have seen pretty steady improvement in the margins in battery and charging. And I know I think your capacity is sort of fully built out by the end of this year, and you’re going to sort of fill that up. So is getting to positive margins just sort of the remaining—filling up that sort of remaining capacity? Or are there other actions in that segment?

Yes, it’s really at scale. We got to continue to scale the business. So you saw revenue in the quarter coming in right around $200 million as we continue to scale that business and increment in the mid-teens, then we’ll get to breakeven and above. And that’s what we’re focused on doing.

And the build-out is effectively done this quarter?

It’s complete.

And then just Craig, you sort of stressed, I think a couple of times, right, all the cash generation was redeployed to shareholders this year between the buyback and the dividend. I appreciate we’re sort of not talking about 2025 yet. But I mean, is that a sort of similar paradigm that we should expect going forward here over the coming years?

Yes. We’ll comment on 2025 when we get to 2025. Really happy with the way that we’ve deployed cash this year. Again, as you mentioned, we have line of sight to $525 million at the midpoint of our guide. We’ll effectively apply all of that to shareholders. I’m really pleased with the way that we’ve allocated capital this year. Again, we’ll give you insight into 2025 as we get into February.

Thank you.

And your next question comes from Adam Jonas with Morgan Stanley.

Thanks, everybody. Joe just asked my question on the free cash flow paradigm and how much of that’s returned. So just one left for me. I know you’re saying the $24 million of recoveries is one-time, won’t be repeated. But it does seem like the narrative from your customers is pushed out, written off, canceled at the margin, EV programs and some of them are quite sizable, including from the likes of Ford and some others. We suspect that will continue. So I didn’t know if that was, again, not calling out in a specific quarter or the occurrence of one-time items. But is – am I right that if I’m looking ahead 12 months, there is a possibility for more recoveries from OEMs, given what has been announced and what you’re seeing in your discussion so far of cancellations of E product and EV-related products that you spend money on and may not be made at anywhere near the volumes which you expected or at all? Thanks.

Thanks. And yes, each case is specific. I would say that this case is a little exceptional. What we’re focusing on at BorgWarner is also bringing flexibility from a modular design standpoint, flexibility from a production standpoint, reusing the four walls and transforming our plants from combustion into electrification in a measured way. So we are with our customers for the long run. And I would say that each case is very specific, and we’re going to manage the business going forward depending on what’s happening.

Thanks, Fred.

Your next question comes from John Murphy from Bank of America.

Good morning, guys. Fred, I just wanted to ask on Slide 6, when you look at something like the transfer case extension, how much new capital needs to go into investing in sort of that next-gen product? Is it minimal? And as we see these extensions on the ICE side, could the profits and returns be significantly or margins and returns could be significantly better than they have been historically or even just a bit better?

Yes. I won’t comment specifically on this transfer case program. But what we see from a combustion standpoint is you have three elements happening in the marketplace. First is program extension, like the transfer case, where some capital may have to be put in place to go with the extension and sometimes less. So that’s the first case. Second case is program prolongations where the combustion engine is going to be run for longer. And the third case is hybrids carrying over combustion gasoline engines for a hybrid application. And that’s what’s driving also the outgrowth of the combustion market in that specific case.

Okay. That’s helpful. And then just a second question. A lot of other suppliers are kind of alluding to the bidding process or the program bidding process being pushed out quite dramatically. But once again, on Slide 6, you’re showing some pretty good wins. I just wonder if you could characterize your quoting activity right now and if you think it’s very different than history or disrupted by EVs, I mean, what’s your current take on that? And is there anything that’s really shifted maybe in absolute terms or maybe just timing terms?

John, so what we’re seeing is that in the Western world, there is a bit of a slowdown in new quoting activities for electrified powertrains. And I think one of the key reasons is that we’re all focused on launching including at BorgWarner. There are many, many electrified hybrid and BEV launches in Europe and North America. And again, that opens other opportunities for us on combustion with what I alluded to before—extensions that the transfer case, prolongations and/or carrying over combustion engines into hybrid powertrains. So that’s the dynamic that we see in the marketplace.

But would it be fair to say that, that does not have a significant impact on your mid- to long-term growth over market prospects?

We expect to have a portfolio that is resilient on the various propulsion architecture, mix scenario and regional mix scenario, and we expect to carry on outgrowing our respective markets.

Okay. Thank you very much.

And your next question comes from Luke Junk from Baird.

Good morning. First question, Fred, just hoping you could—building on the last response there, just comment on your hybrid pipeline, specifically in—I’d just be interested if you’re seeing any evolution more on a bigger picture standpoint, I guess, relative to the regulatory backdrop and how you solve for that, both in Europe in U.S. from a powertrain standpoint, and the real hybrid is going to play in that. Thank you.

For us, it’s fairly simple. Our combustion portfolio is fully fungible into hybrid powertrains. The most advanced and modern hybrid powertrains carry most of our combustion products. And on an eProduct standpoint, as we mentioned in the past, an inverter for BEV is the same as an inverter for hybrid. So I’m oversimplifying, but the gas are the same; the motor is actually pretty much the same. And a P4 for hybrid can be an IDM for BEV, it’s the same types of products. So we are in a position to serve our customers globally into wherever they want to go from a powertrain architecture standpoint going forward. So for us, I wouldn’t say that it doesn’t really matter, but this is why we think we can carry on outgrowing the market or the markets and convert on that outlook.

And then for my follow-up, Craig, just wondering if we could get some flavor for incremental cost controls productivity. Just help us understand some of the areas that you’re leaning into and what might carry over into 2025 for the back half of this year?

I think we’re leaning into all of those things. We’re real focused across the business on cost controls. Luke, the items that you mentioned were—helped us in the quarter, whether it’s restructuring actions, whether its continued focus on savings, whether that’s supply chain or productivity, we’re leaning into all that across the business. And I think you can see that in our segment performance through the first nine months. We’ll continue to have that focus, especially as the top line stays very volatile.

Understood. Thank you.

And your next question comes from James Picariello from BNP Paribas.

Hi guys. Just on the LVP assumption for this year, you’re signaling down 2% to 2.5%. Like there are other suppliers out there that are calling for down 4 now, right, which implies the fourth quarter precipitous down something close to 10%. Just curious on your thoughts there and the visibility in your own build schedules, in your own customer mix, on that point.

Hey James, our view is the market will be down 3% to 3.5% year-over-year. Our biggest reductions in North America and Europe are down 5% to 5.5% year-over-year and with a slight increase in China. That’s what we see. And we are going to carry on managing our costs effectively and adjust to potential production environment changes. And I think this is evidenced in our dated guide too.

Yes, I was referring to just the light vehicle component, but yes, still splitting hairs, I suppose. My follow-up is just as we think about your foundational product suite and the potential for hybrids to run much stronger in demand. Between your turbos and Thermal segment versus the drivetrain and more systems, how do you view hybrid demand between those two segments, again, on the foundational side is one position then the other if there’s some kind of ranking that you could share?

I don’t think we’ve broken down that potential. I would say that it would touch both segments. The most advanced hybrids carry engine components that we have in motors, in turbos, and other subsystems. It will also carry everything related to shifting mechanism between the eDrive and the combustion driver hybrid. So I would say that advanced hybrid powertrain will grow products from those two essential foundational segments.

Thanks.

And your next question comes from Mark Delaney with Goldman Sachs.

Yes. Good morning. Thanks for taking my questions. First, I believe you are now assuming growth over market of 200 to 300 basis points. And I think it had been 350 to 450, assume for 2024 previously. So maybe you can help us better understand what’s changing in the growth of our market outlook for this year.

So Mark, our growth has dropped off about $200 million and a half, probably coming from eProduct portfolio. The other half is coming from our foundational business, which is about $100 million out of $12 billion. I would say it is not extremely material. And from a quarter-over-quarter, our growth, I would not really look at it. We are year-to-date at 270 basis points. And I think it’s not always smooth quarter-to-quarter.

Okay. That’s helpful. My other question was just following up on John’s question around the pace of bookings and understanding the Western OEM bookings activity has slowed. I’m curious if you think post-U.S. election results, if there’s the potential for award activity from Western OEMs to accelerate once they have a better sense on the likely path of CO2 requirements in the coming years? Thanks.

I am not sure I can comment on this. Let’s wait and see. At least at BorgWarner, we’re already wherever the customers want to go.

Understood. Thank you.

Thank you.

We have time for one final question, and that question comes from Emmanuel Rosner with Wolfe Research.

Great. Thank you so much. I was hoping you can help us put a finer point on the cost actions and how do you think about them? How should we think about the amount of structural cost reduction that you’re taking out this year? How do they annualize like into next year? Like how much of it is left over from more recent actions? And generally speaking, the programs you’ve announced or you have in place, how much cost is left to take out?

Yes. Thanks for the question. So I’ll point to the PDS restructuring because those are structural changes that we’re making. What we indicated this year is $20 million to $30 million. We announced that in July. So if you annualize that $40 million to $60 million next year with a target of $100 million by 2026. Those are structural changes that we’re making. As you think about our business as we move forward, even with these restructuring actions, what’s our goal? Our goals are to grow over the market from a sales perspective, turn that growth into income in the mid-teens, regardless of whether the growth is on the foundational product side of the portfolio and to generate cash. So I think, ultimately, how you should think about our growth is incrementing in the mid-teens. That’s a great way to model it.

Thank you for the color. And then I was hoping to hone in a little bit more on the commercial vehicle battery business. Can you maybe talk to us about BorgWarner’s competitive advantages in that business and then also the operating leverage on this business specifically? Obviously, very strong incrementals that we just saw, then I think your earlier comments spoke about no reason why you shouldn’t stay in the mid-teens. That’s obviously quite a big difference between 40% and the mid-teens. So maybe the longer-term question is, okay, what are BorgWarner’s competitive advantages, but maybe shorter term is how do you think about the operating leverage, please?

So from a product perspective, Emmanuel, as you know, we are focused only on commercial vehicle trucks and buses. With this, we are pretty agnostic from a sales form perspective, in production within NMC and preparing production with LFP in the light of our association with FinDreams. We have capacity installed in both sides of the ponds in the U.S. and in Europe. And we are in charge of software, cybersecurity, assembly of the pack, testing of the pack, and everything that goes around the pack, which I think is pretty differentiated. And we are one of the only one in the Western world building very impactful commercial vehicle trucks and buses as an independent supplier.

Yes. And I’ll comment on the margin profile. Obviously, really happy with the performance of that business. It grew quite significantly in the quarter, converted at a really high level, like you mentioned, about $0.35 on the dollar. As we move forward, I wouldn’t say one quarter makes a trend. So we’re focused on that business, incrementing in the mid-teens like all of our other businesses. That’s how we’ll measure success for the battery business in the charging business.

Thank you.

Thank you.

With that, I’d like to apologize for the audio issues that we had today, and thank you all for your great questions. If you have additional follow-ups, feel free to reach out to me or my team. With that, Connie, you can go ahead and conclude today’s call.

This does conclude the BorgWarner 2024 Third Quarter Results Conference Call. You may now disconnect.