UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT

(Mark One)

☑	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022

OR

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to

Commission file number: 1-12162

BORGWARNER INC.

________________________________________________

(Exact name of registrant as specified in its charter)

Delaware			13-3404508
(State or other jurisdiction of			(I.R.S. Employer
Incorporation or organization)			Identification No.)
3850 Hamlin Road,	Auburn Hills,	Michigan	48326
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (248) 754-9200

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BWA	New York Stock Exchange
1.00% Senior Notes due 2031	BWA31	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                        Yes ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☑

As of July 29, 2022, the registrant had 236,831,213 shares of voting common stock outstanding.

BORGWARNER INC.

FORM 10-Q

THREE AND SIX MONTHS ENDED JUNE 30, 2022

INDEX

	Page No.
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (Unaudited)	1
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021 (Unaudited)	2
Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2022 and 2021 (Unaudited)	3
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited)	4
Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosures About Market Risk	51
Item 4. Controls and Procedures	52
PART II. Other Information
Item 1. Legal Proceedings	53
Item 1A. Risk Factors	53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 6. Exhibits	55
SIGNATURES	56

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CAUTIONARY STATEMENTS FOR FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) (including Management’s Discussion and Analysis of Financial Condition and Results of Operations) may constitute forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act (the “Act”) that are based on management's current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates,” “evaluates,” “expects,” “forecasts,” “goal,” “guidance,” “initiative,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Further, all statements, other than statements of historical fact contained or incorporated by reference in this Form 10-Q, that we expect or anticipate will or may occur in the future regarding our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. Accounting estimates, such as those described under the heading “Critical Accounting Policies and Estimates” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 (“Form 10-K”), are inherently forward-looking. All forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. Forward-looking statements are not guarantees of performance, and the Company’s actual results may differ materially from those expressed, projected, or implied in or by the forward-looking statements.

You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. These risks and uncertainties, among others, include supply disruptions impacting us or our customers, such as the current shortage of semiconductor chips that has impacted original equipment manufacturer (“OEM”) customers and their suppliers, including us; commodities availability and pricing, and an inability to achieve expected levels of success in additional commercial negotiations with customers; competitive challenges from existing and new competitors including OEM customers; the challenges associated with rapidly changing technologies, particularly as relates to electric vehicles, and our ability to innovate in response; uncertainties regarding the extent and duration of impacts of matters associated with the COVID-19/coronavirus pandemic (“COVID-19”), including additional production disruptions; the difficulty in forecasting demand for electric vehicles and our electric vehicles revenue growth; potential disruptions in the global economy caused by Russia’s invasion of Ukraine; the ability to identify targets and consummate acquisitions on acceptable terms; failure to realize the expected benefits of acquisitions on a timely basis; the ability to identify appropriate combustion portfolio businesses for disposition and consummate planned dispositions on acceptable terms; the failure to promptly and effectively integrate acquired businesses; the potential for unknown or inestimable liabilities relating to the acquired businesses; our dependence on automotive and truck production, both of which are highly cyclical and subject to disruptions; our reliance on major OEM customers; fluctuations in interest rates and foreign currency exchange rates; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or any future legal proceedings, including litigation with respect to various claims; future changes in laws and regulations, including, by way of example, taxes and tariffs, in the countries in which we operate; impacts from any potential future acquisition or disposition transactions; and the other risks, noted in reports that we file with the Securities and Exchange Commission, including Item 1A, “Risk Factors” in our most recently-filed Form 10-K. We do not undertake any obligation to update or announce publicly any updates to or revisions to any of the forward-looking statements in this Form 10-Q to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements.

This section and the discussions contained in Item 1A, “Risk Factors,” and in Item 7, subheading “Critical Accounting Policies and Estimates” in our most recently-filed Form 10-K are intended to provide

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meaningful cautionary statements for purposes of the safe harbor provisions of the Act. This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties, including without limitation those not currently known to us or that we currently believe are immaterial, also may impair our business, operations, liquidity, financial condition and prospects.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), this report includes non-GAAP financial measures. We believe that these non-GAAP financial measures provide additional information that is useful to investors in understanding the underlying performance and trends of the Company. Readers should be aware that non-GAAP financial measures have inherent limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. We ensure that these measures are calculated using the appropriate GAAP components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. Our method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP. Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP financial measure, can be found in this report.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in millions)	June 30,<br>2022		December 31,<br>2021
ASSETS
Cash, cash equivalents and restricted cash	$	1,390	$	1,844
Receivables, net	3,134		2,898
Inventories, net	1,653		1,534
Prepayments and other current assets	303		321
Total current assets	6,480		6,597
Property, plant and equipment, net	4,151		4,395
Investments and long-term receivables	442		530
Goodwill	3,284		3,279
Other intangible assets, net	1,083		1,091
Other non-current assets	704		683
Total assets	$	16,144	$	16,575
LIABILITIES AND EQUITY
Notes payable and other short-term debt	$	60	$	66
Accounts payable	2,298		2,276
Other current liabilities	1,293		1,456
Total current liabilities	3,651		3,798
Long-term debt	4,156		4,261
Retirement-related liabilities	261		290
Other non-current liabilities	905		964
Total liabilities	8,973		9,313
Commitments and contingencies
Common stock	3		3
Capital in excess of par value	2,633		2,637
Retained earnings	7,005		6,671
Accumulated other comprehensive loss	(816)		(551)
Common stock held in treasury, at cost	(1,936)		(1,812)
Total BorgWarner Inc. stockholders’ equity	6,889		6,948
Noncontrolling interest	282		314
Total equity	7,171		7,262
Total liabilities and equity	$	16,144	$	16,575

See accompanying Notes to Condensed Consolidated Financial Statements.

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BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share amounts)	2022		2021		2022		2021
Net sales	$	3,759	$	3,758	$	7,633	$	7,767
Cost of sales	3,047		2,996		6,171		6,187
Gross profit	712		762		1,462		1,580
Selling, general and administrative expenses	394		364		782		741
Restructuring expense	27		62		42		92
Other operating expense, net	19		19		14		27
Operating income	272		317		624		720
Equity in affiliates’ earnings, net of tax	(11)		(16)		(19)		(28)
Unrealized (gain) loss on equity securities	(11)		4		28		276
Interest expense, net	15		39		30		57
Other postretirement income	(9)		(12)		(18)		(23)
Earnings before income taxes and noncontrolling interest	288		302		603		438
Provision for income taxes	57		28		148		70
Net earnings	231		274		455		368
Net earnings attributable to noncontrolling interest, net of tax	15		27		39		56
Net earnings attributable to BorgWarner Inc.	$	216	$	247	$	416	$	312
Earnings per share attributable to BorgWarner Inc. — basic	$	0.91	$	1.03	$	1.75	$	1.31
Earnings per share attributable to BorgWarner Inc. — diluted	$	0.91	$	1.03	$	1.74	$	1.30
Weighted average shares outstanding:
Basic	236.9		238.2		237.6		237.9
Diluted	238.0		239.6		238.5		239.0

See accompanying Notes to Condensed Consolidated Financial Statements.

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BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021		2022		2021
Net earnings attributable to BorgWarner Inc.	$	216	$	247	$	416	$	312
Other comprehensive (loss) income
Foreign currency translation adjustments*	(262)		57		(280)		(30)
Hedge instruments*	5		4		5		(2)
Defined benefit postretirement plans*	5		2		10		10
Total other comprehensive (loss) income attributable to BorgWarner Inc.	(252)		63		(265)		(22)
Comprehensive (loss) income attributable to BorgWarner Inc.*	(36)		310		151		290
Net earnings attributable to noncontrolling interest, net of tax	15		27		39		56
Other comprehensive loss attributable to noncontrolling interest*	(17)		—		(18)		(5)
Comprehensive (loss) income	$	(38)	$	337	$	172	$	341

____________________________________

*    Net of income taxes.

See accompanying Notes to Condensed Consolidated Financial Statements.

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BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
(in millions)	2022		2021
OPERATING
Net cash provided by operating activities (see Note 23)	$	332	$	622
INVESTING
Capital expenditures, including tooling outlays	(331)		(342)
Capital expenditures for damage to property, plant and equipment	—		(2)
Payments for businesses acquired, net of cash acquired	(157)		(759)
Proceeds from settlement of net investment hedges, net	28		11
Proceeds from (payments for) investments in equity securities	30		(7)
Proceeds from the sale of business, net	25		—
Proceeds from asset disposals and other, net	17		—
Net cash used in investing activities	(388)		(1,099)
FINANCING
Net decrease in notes payable	—		(6)
Additions to debt	2		1,229
Payments for debt issuance costs	—		(10)
Repayments of debt, including current portion	(6)		(671)
Payments for purchase of treasury stock	(140)		—
Payments for stock-based compensation items	(17)		(14)
Purchase of noncontrolling interest	(59)		(33)
Dividends paid to BorgWarner stockholders	(82)		(81)
Dividends paid to noncontrolling stockholders	(46)		(5)
Net cash (used in) provided by financing activities	(348)		409
Effect of exchange rate changes on cash	(50)		(14)
Net decrease in cash, cash equivalents and restricted cash	(454)		(82)
Cash, cash equivalents and restricted cash at beginning of year	1,844		1,650
Cash, cash equivalents and restricted cash at end of period	$	1,390	$	1,568

See accompanying Notes to Condensed Consolidated Financial Statements.

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BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements of BorgWarner Inc. and Consolidated Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flow activity required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair statement of results have been included. Certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The balance sheet as of December 31, 2021 was derived from the audited financial statements as of that date. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and accompanying notes, as well as the amounts of revenues and expenses reported during the periods covered by those financial statements and accompanying notes. Actual results could differ from these estimates.

COVID-19 Pandemic and Other Supply Disruptions

The impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy. Recent COVID-19 outbreaks in certain regions continue to cause intermittent COVID-19-related disruptions in the Company’s supply chain and local manufacturing operations. For a significant portion of the quarter ended June 30, 2022, China imposed lock-downs in many cities due to an increase in COVID-19 cases in the region. The Company also continues to face supplier disruptions due to the semiconductor shortage.

The Company expects production levels to modestly increase during 2022; however, the benefit of these improvements are expected to be partially offset by various global disruptions, including, but not limited to, input cost inflation, supply chain disruptions and impacts from Russia’s invasion of Ukraine.

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NOTE 2 NEW ACCOUNTING PRONOUNCEMENTS

In November 2021, the FASB issued ASU No. 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.” It is expected to increase transparency in financial reporting by requiring business entities to disclose information about certain types of government assistance they receive. The amendments require the following annual disclosures about transactions with a government: (i) information about the nature of the transactions and the related accounting policy used to account for the transactions; (ii) the line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item; and (iii) significant terms and conditions of the transactions, including commitments and contingencies. This guidance was effective for annual reporting periods beginning after December 15, 2021. The Company adopted this guidance prospectively as of January 1, 2022, and there was no impact on these Condensed Consolidated Financial Statements; however, the Company will include the annual disclosures as required in its Annual Report on Form 10-K for the year ended December 31, 2022.

In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” It requires entities to apply ASC Topic 606, “Revenue from Contracts with Customers,” to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. This guidance is effective for interim and annual reporting periods beginning after December 15, 2022. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements.

NOTE 3 ACQUISITIONS

In accordance with ASC Topic 805, “Business Combinations,” acquisitions are recorded using the acquisition method of accounting. The Company recognizes and measures the acquisition date fair value of the identifiable assets acquired, liabilities assumed, and any non-controlling interest using a range of methodologies as indicated by generally accepted valuation practices. Various valuation techniques are used to determine the fair value of intangible assets, with the primary techniques being forms of the income approach, specifically the relief-from-royalty and multi-period excess earnings valuation methods. Under these valuation approaches, the Company is required to make estimates and assumptions from a market participant perspective and may include revenue growth rates, estimated earnings, royalty rates, obsolescence factors, contributory asset charges, customer attrition and discount rates.

Santroll Automotive Components

On March 31, 2022, the Company completed its acquisition of 100% of Santroll Automotive Components (“Santroll”), a carve-out of Santroll Electric Auto’s eMotor business, pursuant to the terms of an Equity Transfer Agreement (“ETA”). The total consideration was $212 million, including approximately ¥1.1 billion ($172 million) of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company paid $157 million of base purchase price in the six months ended June 30, 2022. The remaining $15 million of base purchase price is payable in 2022 and is recorded in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet as of June 30, 2022. Pursuant to the ETA, the obligation of the Company to remit up to ¥0.3 billion (approximately $47 million) of earn-out payments is contingent upon achievement of certain sales volume targets and certain estimated future volume targets associated with newly awarded business. During the three months ended June 30, 2022, the Company revised its estimate of expected earn out due to declines in production levels in China. In accordance with ASC Topic 805, this change in estimate was recorded in the period of the change and is included in Other operating expense, net in the Company’s Condensed Consolidated Statements of Operations. As of June 30, 2022, the Company’s estimate of the earn-out payments is approximately $31 million, which is recorded in Other current liabilities in the Company’s Condensed

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Consolidated Balance Sheet. The acquisition is expected to strengthen the Company’s vertical integration, scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to market.

The purchase price was allocated on a preliminary basis as of March 31, 2022. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable. Certain estimated values for the acquisition, including goodwill and deferred taxes, are not yet finalized, and the preliminary purchase price allocations are subject to change as the Company completes its analysis of the fair value at the date of acquisition. The final valuation of assets acquired and liabilities assumed may be materially different from the estimated values shown below.

The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of March 31, 2022, the acquisition date:

(in millions)	Initial Allocation
ASSETS
Receivables, net	$	7
Inventories, net	1
Property, plant and equipment, net	9
Goodwill	132
Other intangible assets, net	87
Total assets acquired	236
LIABILITIES
Accounts payable	2
Other non-current liabilities	22
Total liabilities assumed	24
Net assets acquired	$	212

Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $132 million was recorded within the Company’s e-Propulsion & Drivetrain segment. The goodwill consists of the Company’s expected future economic benefits that will arise from future product sales and the added capabilities from vertical integration of eMotors. The goodwill is not expected to be deductible for tax purposes in China.

The following table summarizes the other intangible assets acquired:

(in millions)	Estimated Life	Estimated Fair Value
Customer relationships	12 years	$	62
Manufacturing processes (know-how)	10 years	25
Total other intangible assets		$	87

Goodwill and identifiable intangible assets were valued using the income approach. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company.

The impact of the Santroll acquisition on net sales and net earnings was immaterial for the three and six months ended June 30, 2022. Due to its insignificant size relative to the Company, supplemental pro forma financial information of the combined entity for the current and prior reporting periods is not provided.

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AKASOL AG

On June 4, 2021, the Company completed its voluntary public takeover offer for shares of AKASOL AG (“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid approximately €648 million ($788 million) to settle the offer from current cash balances, which included proceeds received from its public offering of 1.00% Senior Notes due 2031 completed on May 19, 2021. Following the settlement of the offer, AKASOL became a consolidated majority-owned subsidiary of the Company. Upon that settlement, the Company also consolidated approximately €64 million ($77 million) of gross debt of AKASOL. Subsequent to the completion of the voluntary public takeover offer, the Company purchased additional shares of AKASOL for €28 million ($33 million) increasing its ownership to 93% as of December 31, 2021.

On August 2, 2021, the Company initiated a merger squeeze-out process under German law for the purpose of acquiring 100% of AKASOL. On December 17, 2021, the shareholders of AKASOL voted to mandatorily transfer to ABBA BidCo. AG, a wholly owned indirect subsidiary of the Company, each issued and outstanding share of AKASOL held by shareholders who did not tender their shares in the Company’s previously completed exchange offer for AKASOL shares (the “Squeeze Out”). In exchange for the AKASOL shares transferred in the Squeeze Out, the Company paid appropriate cash compensation, in the amount of €119.16 per share, which was determined after an assessment by a third-party valuation firm, the adequacy of which was examined by an independent, court-appointed auditor. At December 31, 2021, the noncontrolling interest in AKASOL of approximately €51 million ($58 million) to be acquired through the Squeeze Out was reclassified to Other current liabilities in the Company’s Condensed Consolidated Balance Sheet as it was deemed mandatorily redeemable. No shareholder objections were filed during the statutory contestation period, and on February 10, 2022, the Company completed the registration of the Squeeze Out resulting in 100% ownership. The Company settled the Squeeze Out with AKASOL minority shareholders in the first quarter of 2022.

The acquisition further strengthens BorgWarner’s commercial vehicle and industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a fast-growing battery module and pack market. The Company finalized its valuation of the assets and liabilities of the AKASOL acquisition during the second quarter of 2022.

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The following table summarizes the final fair values of assets acquired and liabilities assumed as of the acquisition date and subsequent measurement period adjustments:

(in millions)	Initial Allocation		Measurement Period Adjustments		Final Allocation
ASSETS
Cash and cash equivalents (including restricted cash of $16 million)	$	29	$	—	$	29
Receivables, net	16		—		16
Inventories, net	42		(2)		40
Prepayments and other current assets	5		—		5
Property, plant and equipment, net	106		(3)		103
Goodwill	707		(3)		704
Other intangible assets, net	130		—		130
Other non-current assets	—		7		7
Total assets acquired	1,035		(1)		1,034
LIABILITIES
Notes payable and other short-term debt	8		—		8
Accounts payable	22		—		22
Other current liabilities	13		6		19
Long-term debt	69		—		69
Other non-current liabilities	39		(7)		32
Total liabilities assumed	151		(1)		150
Noncontrolling interest	96		—		96
Net assets and noncontrolling interest acquired	$	788	$	—	$	788

Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $704 million, including the impact of measurement period adjustments, was recorded within the Company’s Air Management segment. The goodwill consists of the Company’s expected future economic benefits that will arise from acquiring this business, which is established in making next-generation products for electric vehicles and the potential development and deployment of future technologies, across a global customer base, in this market and across adjacent industries. The goodwill is not deductible for tax purposes.

The following table summarizes the other intangible assets acquired:

(in millions)	Estimated Life	Estimated Fair Value
Amortized intangible assets:
Developed technology	5 years	$	70
Customer relationships	11 years	25
Total amortized intangible assets		95
Unamortized trade name	Indefinite	35
Total other intangible assets		$	130

The property, plant and equipment acquired were valued using a combination of cost and market approaches. Goodwill and identifiable intangible assets were valued using the income approach. Noncontrolling interests were valued using a market approach. Management used a third-party valuation firm to assist in the determination of the preliminary purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company.

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Due to its insignificant size relative to the Company, supplemental pro forma financial information of the combined entity for the current and prior reporting periods is not provided.

Romeo Power, Inc.

In May 2019, the Company invested $50 million in exchange for a 20% equity interest in Romeo Systems, Inc., now known as Romeo Power, Inc., (“Romeo”) a technology-leading battery module and pack supplier that was then privately held. On December 29, 2020, through the business combination of Romeo Systems, Inc. and special purpose acquisition company RMG Acquisition Corporation, a new entity, Romeo Power, Inc., became a publicly listed company. The Company’s ownership in Romeo was reduced to 14%, and the investment was recorded at fair value on an ongoing basis with changes in fair value being recognized in Unrealized (gain) loss on equity securities in the Condensed Consolidated Statements of Operations. During the three and six months ended June 30, 2021, the Company recorded a loss of $4 million and $276 million, respectively, to adjust the carrying value of the Company’s investment to fair value. As of December 31, 2021, the investment’s fair value was $70 million, which was reflected in Investments and long-term receivables in the Company’s Condensed Consolidated Balance Sheet. During the six months ended June 30, 2022, the Company recorded a loss of $39 million and liquidated its investment in Romeo shares at a fair value of $31 million. As of March 17, 2022, the Company no longer held any investment in Romeo.

In September 2019, the Company and Romeo contributed total equity of $10 million and formed a new joint venture, BorgWarner Romeo Power LLC (“Romeo JV”), in which the Company owned a 60% interest. Romeo JV was a variable interest entity focusing on producing battery module and pack technology. The Company was the primary beneficiary of Romeo JV and had consolidated Romeo JV in its consolidated financial statements. On October 25, 2021, the Company delivered written notice to Romeo that the Company was electing to exercise its right to put its ownership stake in Romeo JV to Romeo. Based on an independent appraisal, the Company’s interest in Romeo JV was valued at $30 million. In February 2022, the Company completed the sale of its 60% interest in Romeo JV for $29 million, the fair value of $30 million reduced by a 5% discount pursuant to the joint venture agreement. The Company recorded a gain of $24 million in Other operating expense, net, which represented the difference between the Company’s book value of its interest in Romeo JV compared to the fair value of consideration received. As a result of the sale, the Company has no further rights in or involvement with Romeo JV.

Subsequent Event

On July 29, 2022, the Company acquired Rhombus Energy Solutions, a provider of charging solutions in the North American market. The Company paid approximately $130 million at closing, and up to $55 million could be paid in the form of contingent payments over the next three years. The acquisition complements the Company’s existing European charging footprint to accelerate organic growth and adds North American regional presence to its charging business.

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NOTE 4 REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company manufactures and sells products, primarily to OEMs of light vehicles and, to a lesser extent, to other OEMs of commercial vehicles and off-highway vehicles, to certain Tier One vehicle systems suppliers and into the aftermarket. The Company’s payment terms are based on customary business practices and vary by customer type and products offered. We have evaluated the terms of our arrangements and determined that they do not contain significant financing components.

Generally, revenue is recognized upon shipment or delivery; however, a limited number of the Company’s customer arrangements for its highly customized products with no alternative use provide the Company with the right to payment during the production process. As a result, for these limited arrangements, revenue is recognized as goods are produced and control transfers to the customer using the input cost-to-cost method. The Company recorded a contract asset of $18 million and $17 million at June 30, 2022 and December 31, 2021, respectively, for these arrangements. These amounts are reflected in Prepayments and other current assets in the Company’s Condensed Consolidated Balance Sheets.

In limited instances, certain customers have provided payments in advance of receiving related products, typically at the onset of an arrangement prior to the beginning of production. These contract liabilities are reflected as Other current liabilities and Other non-current liabilities in the Condensed Consolidated Balance Sheets and were $20 million and less than $1 million at June 30, 2022 and $21 million and $1 million at December 31, 2021, respectively. These amounts are reflected as revenue over the term of the arrangement (typically 3 to 7 years) as the underlying products are shipped and represent the Company’s remaining performance obligations as of the end of the period.

The Company continually seeks business development opportunities and at times provides customer incentives for new program awards. When the Company determines that the payments are incremental and incurred only if the new business is obtained and expects to recover these amounts from the customer over the term of the new business arrangement, the Company capitalizes these amounts. As of June 30, 2022 and December 31, 2021, the Company recorded customer incentive payments of $35 million and $36 million, respectively, in Prepayments and other current assets, and $114 million and $137 million, respectively, in Other non-current assets in the Condensed Consolidated Balance Sheets.

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The following tables represent a disaggregation of revenue from contracts with customers by reporting segment and region. The balances for the three and six months ended June 30, 2021 have been recast for inter-segment transitions of certain businesses that were completed during the three months ended June 30, 2022. Refer to Note 22, “Reporting Segments And Related Information,” to the Condensed Consolidated Financial Statements for more information.

	Three Months Ended June 30, 2022
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Aftermarket		Total
North America	$	515	$	465	$	107	$	184	$	1,271
Europe	746		251		231		102		1,330
Asia	451		488		118		17		1,074
Other	46		—		18		20		84
Total	$	1,758	$	1,204	$	474	$	323	$	3,759
	Three Months Ended June 30, 2021
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Aftermarket		Total
North America	$	407	$	368	$	58	$	169	$	1,002
Europe	763		251		281		108		1,403
Asia	523		584		155		17		1,279
Other	38		—		17		19		74
Total	$	1,731	$	1,203	$	511	$	313	$	3,758
	Six Months Ended June 30, 2022
(In millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Aftermarket		Total
North America	$	974	$	894	$	223	$	352	$	2,443
Europe	1,523		491		472		201		2,687
Asia	967		1,064		272		30		2,333
Other	90		—		36		44		170
Total	$	3,554	$	2,449	$	1,003	$	627	$	7,633
	Six Months Ended June 30, 2021
(In millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Aftermarket		Total
North America	$	869	$	820	$	131	$	319	$	2,139
Europe	1,571		527		577		210		2,885
Asia	1,085		1,186		302		30		2,603
Other	69		—		32		39		140
Total	$	3,594	$	2,533	$	1,042	$	598	$	7,767

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NOTE 5 RESTRUCTURING

The Company’s restructuring activities are undertaken, as necessary, to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company’s business and to relocate operations to best cost locations.

The Company’s restructuring expenses consist primarily of employee termination benefits (principally severance and/or termination benefits) and other costs, which are primarily professional fees and costs related to facility closures and exits.

	Three Months Ended June 30, 2022
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Corporate		Total
Employee termination benefits	$	7	$	14	$	2	$	(1)	$	22
Other	—		3		2		—		5
Total restructuring expense	$	7	$	17	$	4	$	(1)	$	27
	Three Months Ended June 30, 2021
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Corporate		Total
Employee termination benefits	$	9	$	3	$	24	$	—	$	36
Other	3		20		—		3		26
Total restructuring expense	$	12	$	23	$	24	$	3	$	62
	Six Months Ended June 30, 2022
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Corporate		Total
Employee termination benefits	$	14	$	14	$	3	$	(1)	$	30
Other	—		10		2		—		12
Total restructuring expense	$	14	$	24	$	5	$	(1)	$	42
	Six Months Ended June 30, 2021
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Systems		Corporate		Total
Employee termination benefits	$	23	$	7	$	27	$	—	$	57
Other	6		26		—		3		35
Total restructuring expense	$	29	$	33	$	27	$	3	$	92

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The following tables display a rollforward of the restructuring liability recorded within the Company’s Condensed Consolidated Balance Sheets and the related cash flow activity:

(in millions)	Employee Termination Benefits		Other		Total
Balance at January 1, 2022	$	126	$	13	$	139
Restructuring expense, net	30		12		42
Cash payments	(64)		(17)		(81)
Foreign currency translation adjustment and other	(5)		2		(3)
Balance at June 30, 2022	87		10		97
Less: Non-current restructuring liability	21		1		22
Current restructuring liability at June 30, 2022	$	66	$	9	$	75
(in millions)	Employee Termination Benefits		Other		Total
Balance at January 1, 2021	$	160	$	13	$	173
Restructuring expense, net	57		35		92
Cash payments	(82)		(39)		(121)
Foreign currency translation adjustment and other	(1)		1		—
Balance at June 30, 2021	134		10		144
Less: Non-current restructuring liability	37		3		40
Current restructuring liability at June 30, 2021	$	97	$	7	$	104

In 2022, the Company approved individual restructuring actions that primarily related to specific reductions in headcount.

2020 Structural Costs Plan In February 2020, the Company announced a restructuring plan to address existing structural costs. During the three and six months ended June 30, 2022, the Company recorded $10 million and $23 million of restructuring charges related to this plan, respectively. During the three and six months ended June 30, 2021, the Company recorded $37 million and $61 million of restructuring charges related to this plan, respectively. Cumulatively, the Company has incurred $274 million of restructuring charges related to this plan. This plan is expected to result in a total of $300 million of restructuring costs through 2022. Nearly all of the restructuring charges are expected to be cash expenditures.

2019 Legacy Delphi Technologies Plan In 2019, legacy Delphi Technologies announced a restructuring plan to reshape and realign its global technical center footprint and reduce salaried and contract staff. The Company continued actions under this plan post-acquisition and has recorded cumulative charges of $66 million since October 1, 2020, including approximately $4 million and $31 million in restructuring charges during the six months ended June 30, 2022, and 2021, respectively. The majority of the actions under this plan have been completed.

The following provides details of restructuring expense incurred by the Company’s reporting segments during the six months ended June 30, 2022 and 2021, related to the plans and actions discussed above:

Air Management

2020 Structural Costs Plan

•During the three and six months ended June 30, 2022, the segment recorded $7 million and $13 million, respectively, of restructuring costs under this plan. This primarily related to

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$8 million during the six months ended June 30, 2022 for a voluntary termination program pursuant to which approximately 36 employees accepted termination packages in 2022.

•During the three and six months ended June 30, 2021, the segment recorded $12 million and $27 million, respectively, of restructuring costs under this plan. This primarily related to $11 million during the six months ended June 30, 2021 for a voluntary termination program pursuant to which approximately 20 employees accepted termination packages in 2021 and $16 million for other specific actions to reduce structural costs.

2019 Legacy Delphi Technologies Plan

•During the six months ended June 30, 2021, the segment recorded $2 million of restructuring costs, primarily related to severance costs.

e-Propulsion & Drivetrain

•During the six months ended June 30, 2022, the segment recorded $14 million of restructuring costs, primarily related to severance costs associated with the announced closure of a technical Center in Europe effecting approximately 80 employees.

2020 Structural Costs Plan

•During the three and six months ended June 30, 2022, the segment recorded $3 million and $10 million, respectively, of restructuring costs, primarily related to contractual settlements and professional fees.

•During the three and six months ended June 30, 2021, the segment recorded $5 million and $10 million, respectively, of restructuring costs, primarily related to severance costs, equipment relocation and professional fees to reduce existing structural costs. During the three and six months ended June 30, 2021, the segment recorded $19 million and $23 million, respectively, of restructuring costs, primarily related to contractual settlements and professional fees and other costs associated with the announced closure of a facility in Europe.

Fuel Systems

2019 Legacy Delphi Technologies Plan

•During the three and six months ended June 30, 2022, the segment recorded $4 million and $5 million, respectively, of restructuring costs related to this plan, primarily related to employee severance and equipment moves. During the three and six months ended June 30, 2021, the segment recorded $24 million and $27 million, respectively, of restructuring costs related to this plan. These costs were primarily for the statutory minimum benefits and incremental one-time termination benefits negotiated with local labor authorities.

Estimates of restructuring expense are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established accruals.

The Company continues to evaluate different options across its operations to reduce existing structural costs over the next few years. The Company will recognize restructuring expense associated with any future actions at the time they are approved and become probable or are incurred. Any future actions could result in significant restructuring expense.

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NOTE 6 RESEARCH AND DEVELOPMENT COSTS

The Company’s net Research & Development (“R&D”) expenditures are included in Selling, general and administrative expenses of the Condensed Consolidated Statements of Operations. Customer reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost. Customer reimbursements for prototypes are recorded net of prototype costs based on customer contracts, typically either when the prototype is shipped or when it is accepted by the customer. Customer reimbursements for engineering services are recorded when performance obligations are satisfied in accordance with the contract. Financial risks and rewards transfer upon shipment, acceptance of a prototype component by the customer or upon completion of the performance obligation, as stated in the respective customer agreement. The Company has contracts with several customers relating to R&D activities that the Company performs at the Company’s various R&D locations.

The following table presents the Company’s gross and net expenditures on R&D activities:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021		2022		2021
Gross R&D expenditures	$	234	$	224	$	466	$	444
Customer reimbursements	(27)		(58)		(68)		(95)
Net R&D expenditures	$	207	$	166	$	398	$	349

NOTE 7 OTHER OPERATING EXPENSE, NET

Items included in Other operating expense, net consist of:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021		2022		2021
Merger, acquisition and divestiture expense, net	$	9	$	15	$	32	$	28
Loss (gain) on sale of business (Note 3)	—		7		(24)		7
Other expense (income), net	10		(3)		6		(8)
Other operating expense, net	$	19	$	19	$	14	$	27

Merger, acquisition and divestiture expense, net: During the three and six months ended June 30, 2022, the Company recorded merger, acquisition and divestiture expense, net of $9 million and $32 million, respectively, primarily related to professional fees associated with specific acquisition and disposition initiatives. During the three and six months ended June 30, 2021, the Company recorded merger, acquisition and divestiture expense of $15 million and $28 million, respectively. The expense for 2021 primarily related to professional fees for integration and other support associated with the Company’s acquisition of Delphi Technologies and professional fees associated with the acquisition of AKASOL.

NOTE 8 INCOME TAXES

The Company’s provision for income taxes is based upon an estimated annual tax rate for the year applied to federal, state and foreign income. On a quarterly basis, the annual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The Company’s effective tax rate for the six months ended June 30, 2022 and 2021 was 25% and 16%, respectively. During the six-month period ended June 30, 2022, a discrete tax benefit of $8 million was

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recorded relating to other tax adjustments. During the six-month period ended June 30, 2021, unrecognized tax benefits and accrued interest were decreased for the lapse of the statute of limitations in a non-US jurisdiction for a tax holiday matter which, net of unrecognized foreign tax credits, resulted in a $55 million tax benefit. Additionally, an increase in the United Kingdom (“UK”) tax rate from 19% to 25% effective April 1, 2023, was enacted in June 2021, resulting in a discrete tax benefit of $20 million as a result of the revaluation of net deferred tax asset balances. Further, the Company’s effective tax rate for the six months ended June 30, 2021 included a net discrete tax benefit of $24 million, primarily related to changes to certain withholding rates applied to unremitted earnings.

The Company’s effective tax rate for the three months ended June 30, 2022 and 2021 was 20% and 9%, respectively. During the three-month period ended June 30, 2022, a discrete tax benefit of $8 million was recorded relating to other tax adjustments. During the three-month period ended June 30, 2021, unrecognized tax benefits and accrued interest were decreased for the lapse of the statute of limitations in a non-US jurisdiction for a tax holiday matter which, net of unrecognized foreign tax credits, resulted in a $55 million tax benefit. Additionally, an increase in the UK tax rate from 19% to 25% effective April 1, 2023, was enacted in June 2021, resulting in a discrete tax benefit of $20 million as a result of the revaluation of net deferred tax asset balances.

The annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates which vary from those in the U.S., jurisdictions with pretax losses for which no tax benefit could be realized, U.S. taxes on foreign earnings, the realization of certain business tax credits (including foreign tax credits), and permanent differences between book and tax treatment for certain items (including the Foreign-Derived Intangible Income (“FDII”) deduction and the enhanced deduction of research and development expenses in certain jurisdictions).

NOTE 9 INVENTORIES, NET

A summary of Inventories, net is presented below:

	June 30,		December 31,
(in millions)	2022		2021
Raw material and supplies	$	1,118	$	1,057
Work in progress	183		175
Finished goods	380		327
FIFO inventories	1,681		1,559
LIFO reserve	(28)		(25)
Inventories, net	$	1,653	$	1,534

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NOTE 10 OTHER CURRENT AND NON-CURRENT ASSETS

Additional detail related to assets is presented below:

	June 30,		December 31,
(in millions)	2022		2021
Prepayments and other current assets:
Prepaid tooling	$	82	$	81
Prepaid taxes	55		64
Customer incentive payments (Note 4)	35		36
Prepaid engineering	18		27
Contract assets (Note 4)	18		17
Other	95		96
Total prepayments and other current assets	$	303	$	321
Investments and long-term receivables:
Investment in equity affiliates	$	292	$	298
Long-term receivables	79		102
Equity securities (Note 3)	71		130
Total investments and long-term receivables	$	442	$	530
Other non-current assets:
Deferred income taxes	$	229	$	254
Operating leases	176		185
Customer incentive payments (Note 4)	114		137
Derivative instruments	73		8
Other	112		99
Total other non-current assets	$	704	$	683

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NOTE 11 GOODWILL AND OTHER INTANGIBLES

During the fourth quarter of each year, the Company assesses its goodwill and indefinite-lived intangible assets assigned to each of its reporting units. In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value. No events or circumstances were noted in the first six months of 2022 requiring additional assessment or testing. Future changes in the judgments, assumptions and estimates from those used in acquisition-related valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.

A summary of the changes in the carrying amount of goodwill are as follows:

(in millions)	Air Management		e-Propulsion & Drivetrain		Aftermarket		Fuel Systems		Total
Gross goodwill balance, December 31, 2021	$	2,124	$	1,232	$	380	$	45	$	3,781
Accumulated impairment losses, December 31, 2021	(502)		—		—		—		(502)
Net goodwill balance, December 31, 2021*	$	1,622	$	1,232	$	380	$	45	$	3,279
Goodwill during the period:
Acquisition	—		132		—		—		132
Other, primarily translation adjustment	(82)		(42)		(2)		(1)		(127)
Ending balance, June 30, 2022	$	1,540	$	1,322	$	378	$	44	$	3,284

__________________________________

*	The December 31, 2021 balances have been recast for inter-segment transitions of certain businesses that were completed during the three months ended June 30, 2022. Refer to Note 22, “Reporting Segments And Related Information” for more information.

The Company’s other intangible assets, primarily from acquisitions, consist of the following:

		June 30, 2022						December 31, 2021
(in millions)	Estimated useful lives (years)	Gross <br>Carrying <br>Amount		Accumulated <br>Amortization		Net <br>Carrying <br>Amount		Gross <br>Carrying <br>Amount		Accumulated <br>Amortization		Net <br>Carrying <br>Amount
Amortized intangible assets:
Patented and unpatented technology	5 - 15	$	457	$	120	$	337	$	443	$	105	$	338
Customer relationships	7 - 15	885		319		566		877		310		567
Miscellaneous	2 - 13	9		6		3		14		7		7
Total amortized intangible assets		1,351		445		906		1,334		422		912
Unamortized trade names		177		—		177		179		—		179
Total other intangible assets		$	1,528	$	445	$	1,083	$	1,513	$	422	$	1,091

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NOTE 12 PRODUCT WARRANTY

The Company provides warranties on some, but not all, of its products. The warranty terms are typically from one to three years. Provisions for estimated expenses related to product warranty are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements, as well as product manufacturing and industry developments and recoveries from third parties. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. Management believes that the warranty accrual is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual. The product warranty accrual is allocated to current and non-current liabilities in the Condensed Consolidated Balance Sheets.

The following table summarizes the activity in the product warranty accrual accounts:

(in millions)	2022		2021
Beginning balance, January 1	$	236	$	253
Provisions for current period sales	47		52
Adjustments of prior estimates	(2)		17
Payments	(44)		(73)
Other, primarily translation adjustment	(13)		(3)
Ending balance, June 30	$	224	$	246

The product warranty liability is classified in the Condensed Consolidated Balance Sheets as follows:

	June 30,		December 31,
(in millions)	2022		2021
Other current liabilities	$	110	$	128
Other non-current liabilities	114		108
Total product warranty liability	$	224	$	236

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NOTE 13 NOTES PAYABLE AND DEBT

As of June 30, 2022 and December 31, 2021, the Company had debt outstanding as follows:

	June 30,		December 31,
(in millions)	2022		2021
Short-term borrowings	$	56	$	62
Long-term debt
3.375% Senior notes due 03/15/25 ($500 million par value)	499		498
5.000% Senior notes due 10/01/25 ($800 million par value)*	878		889
2.650% Senior notes due 07/01/27 ($1,100 million par value)	1,090		1,092
7.125% Senior notes due 02/15/29 ($121 million par value)	120		119
1.000% Senior Notes due 05/19/31 (€1,000 million par value)	1,030		1,117
4.375% Senior notes due 03/15/45 ($500 million par value)	494		494
Term loan facilities, finance leases and other	49		56
Total long-term debt	4,160		4,265
Less: current portion	4		4
Long-term debt, net of current portion	$	4,156	$	4,261

_____________________________

*Includes the fair value step-up from the Delphi Technologies acquisition, which was based on observable market data and will be amortized as a reduction to interest expense over the remaining life of the instrument using the effective interest method.

The Company may utilize uncommitted lines of credit for short-term working capital requirements. As of June 30, 2022 and December 31, 2021, the Company had $56 million and $62 million, respectively, in borrowings under these facilities, which are classified in Notes payable and other short-term debt on the Condensed Consolidated Balance Sheets.

The following table provides details on Interest expense, net included in the Condensed Consolidated Statements of Operations:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021			2022		2021
Interest expense	$	21	$	42		$	40	$	63
Interest income	(6)		(3)			(10)		(6)
Interest expense, net	$	15	$	39		$	30	$	57

The Company has a $2.0 billion multi-currency revolving credit facility that includes a feature allowing the Company the ability to increase the facility by $1.0 billion with bank group approval. This facility matures in March 2025. The credit agreement contains customary events of default and one key financial covenant, which is a debt-to-EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio. The Company was in compliance with the financial covenant at June 30, 2022. At June 30, 2022 and December 31, 2021, the Company had no outstanding borrowings under this facility.

The Company’s commercial paper program allows the Company to issue up to $2.0 billion of short-term, unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under this program, the Company may issue notes from time to time and use the proceeds for general corporate purposes. The Company had no outstanding borrowings under this program as of June 30, 2022 and December 31, 2021.

The total current combined borrowing capacity under the multi-currency revolving credit facility and commercial paper program cannot exceed $2 billion.

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As of June 30, 2022 and December 31, 2021, the estimated fair values of the Company’s senior unsecured notes totaled $3,620 million and $4,421 million, respectively. The estimated fair values were $491 million lower than their carrying value at June 30, 2022 and $212 million higher than their carrying value at December 31, 2021. Fair market values of the senior unsecured notes are developed using observable values for similar debt instruments, which are considered Level 2 inputs as defined by ASC Topic 820. The carrying values of the Company's multi-currency revolving credit facility, commercial paper program and other debt facilities approximate fair value. The fair value estimates do not necessarily reflect the values the Company could realize in the current markets.

The Company had outstanding letters of credit of $41 million and $35 million at June 30, 2022 and December 31, 2021, respectively. The letters of credit typically act as guarantees of payment to certain third parties in accordance with specified terms and conditions.

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NOTE 14 OTHER CURRENT AND NON-CURRENT LIABILITIES

Additional detail related to liabilities is presented in the table below:

	June 30,		December 31,
(in millions)	2022		2021
Other current liabilities:
Payroll and employee related	$	271	$	330
Customer related	214		220
Product warranties (Note 12)	110		128
Income taxes payable	78		105
Indirect taxes	74		106
Employee termination benefits (Note 5)	66		85
Accrued freight	58		46
Operating leases	37		43
Deferred engineering reimbursements	33		44
Interest	32		23
Earn-out liability (Note 3)	31		—
Supplier related	22		18
Contract liabilities (Note 4)	20		21
Dividends payable	20		18
Insurance	19		19
Other non-income taxes	17		22
Retirement related	16		16
Mandatorily redeemable noncontrolling interest liability (Note 3)	—		58
Other	175		154
Total other current liabilities	$	1,293	$	1,456
Other non-current liabilities:
Other income tax liabilities	$	276	$	274
Deferred income taxes	231		206
Operating leases	147		152
Product warranties (Note 12)	114		108
Deferred income	62		68
Employee termination benefits (Note 5)	21		41
Derivative instruments	—		54
Other	54		61
Total other non-current liabilities	$	905	$	964

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NOTE 15 FAIR VALUE MEASUREMENTS

ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

Level 1:Observable inputs such as quoted prices for identical assets or liabilities in active markets;

Level 2:Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3:Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC Topic 820:

A.Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.

B.Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C.Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

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The following tables classify assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:

			Basis of fair value measurements
(in millions)	Balance at June 30, 2022		Quoted prices in active markets for identical items<br>(Level 1)		Significant other observable inputs<br>(Level 2)		Significant unobservable inputs<br>(Level 3)		Valuation technique	Assets measured at NAV1
Assets:
Receivables	$	20	$	—	$	2	$	18	C	$	—
Long-term receivables	$	15	$	—	$	15	$	—	C	$	—
Investment in equity securities	$	28	$	—	$	—	$	—	—	$	28
Foreign currency contracts	$	18	$	—	$	18	$	—	A	$	—
Net investment hedge contracts	$	73	$	—	$	73	$	—	A	$	—
Liabilities:
Current earn-out liability	$	31	$	—	$	—	$	31	C	$	—
Foreign currency contracts	$	7	$	—	$	7	$	—	A	$	—					Basis of fair value measurements
---	---	---	---	---	---	---	---	---	---	---	---
(in millions)	Balance at<br>December 31, 2021		Quoted prices in active markets for identical items<br>(Level 1)		Significant other observable inputs<br>(Level 2)		Significant unobservable inputs<br>(Level 3)		Valuation<br>technique	Assets measured at NAV1
Assets:
Investment in equity securities	$	87	$	70	$	—	$	—	A	$	17
Long-term receivables	$	35	$	—	$	17	$	18	C	$	—
Foreign currency contracts	$	13	$	—	$	13	$	—	A	$	—
Net investment hedge contracts	$	8	$	—	$	8	$	—	A
Liabilities:
Foreign currency contracts	$	8	$	—	$	8	$	—	A	$	—
Net investment hedge contracts	$	54	$	—	$	54	$	—	A	$	—

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1 Certain assets that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. These amounts represent investments in commingled and managed funds that have underlying assets in fixed income securities, equity securities, and other assets and the fair values have been estimated using the net asset value of the Company's ownership interest in partners' capital. The Company’s redemption of its investments with the funds is governed by the partnership agreements and subject to approval from the general partners. With the exception of annual distributions in connection with the Company’s deemed tax liability, distributions from each fund will be received as the underlying investments of the funds are liquidated, the timing of which is unknown.

NOTE 16 FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash and cash equivalents, marketable securities and accounts receivable. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may also include long-term debt, investments in equity securities, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. At June 30, 2022 and December 31, 2021, the Company had no derivative contracts that contained credit risk-related contingent features.

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The Company, at times, uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and component purchases. At June 30, 2022 and December 31, 2021, the Company had no material commodity derivative contracts. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges.

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company, at times, selectively uses interest rate swaps and options to reduce market value risk associated with changes in interest rates (fair value hedges and cash flow hedges). At June 30, 2022 and December 31, 2021, the Company had no outstanding interest rate swaps or options.

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. In addition, the Company uses foreign currency forward contracts to hedge exposure associated with its net investment in certain foreign operations (net investment hedges). Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units’ local currency. At June 30, 2022 and December 31, 2021, the following foreign currency derivative contracts were outstanding and mature through the ending duration noted below:

Foreign currency derivatives (in millions)*
Functional Currency	Notional in traded currency <br>June 30, 2022	Notional in traded currency <br>December 31, 2021	Ending Duration
Brazilian Real	13	23	Dec - 23
British Pound	—	42	N/A
Chinese Renminbi	19	26	Nov - 23
Chinese Renminbi	21	26	Dec - 23
Chinese Renminbi	130	185	Dec - 23
Euro	32	6	Dec - 23
Euro	217	394	Dec - 23
Euro	65	86	Dec - 23
US Dollar	9	13	Dec - 23
US Dollar	34	28	Sep - 22
US Dollar	128,998	49,919	Nov - 23
US Dollar	1,689	2,619	Dec - 23
US Dollar	10	27	Dec - 22
US Dollar	1,790	1,720	May - 23
*Table above excludes non-significant traded currency pairings with total notional amounts less than 10 million U.S. dollar equivalent as of June 30, 2022 and December 31, 2021.

All values are in US Dollars.

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The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated with its net investment in certain foreign operations (net investment hedges). In May 2022, the Company terminated its $100 million cross-currency swap contract originally maturing in February 2023 and executed a $100 million cross-currency swap contract to mature in February 2029, resulting in cash proceeds of $16 million that are expected to remain in accumulated other comprehensive loss until the net investment is sold, completely liquidated or substantially liquidated. At June 30, 2022 and December 31, 2021, the following cross-currency swap contracts were outstanding:

	Cross-currency swaps
(in millions)	June 30, 2022		December 31, 2021		Ending duration
US dollar to Euro:
Fixed receiving notional	$	1,100	$	1,100	Jul - 27
Fixed paying notional	€	976	€	976	Jul - 27
US dollar to Euro:
Fixed receiving notional	$	500	$	500	Mar - 25
Fixed paying notional	€	450	€	450	Mar - 25
US dollar to Japanese yen:
Fixed receiving notional	$	—	$	100	Feb - 23
Fixed paying notional	¥	—	¥	10,978	Feb - 23
Fixed receiving notional	$	100	$	—	Feb - 29
Fixed paying notional	¥	12,724	¥	—	Feb - 29

At June 30, 2022 and December 31, 2021, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:

(in millions)	Assets					Liabilities
Derivatives designated as hedging instruments Under 815:	Location	June 30, 2022		December 31, 2021		Location	June 30, 2022		December 31, 2021
Foreign currency	Prepayments and other current assets	$	11	$	7	Other current liabilities	$	6	$	8
Net investment hedges	Other non-current assets	$	73	$	8	Other non-current liabilities	$	—	$	54
Derivatives not designated as hedging instruments:
Foreign currency	Prepayments and other current assets	$	7	$	6	Other current liabilities	$	1	$	—

Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into accumulated other comprehensive income (loss) (“AOCI”) and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. The initial value of any component excluded from the assessment of effectiveness will be recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method will be recognized in AOCI.

Effectiveness for net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into foreign currency translation adjustments and only released when the subsidiary being hedged is sold or substantially liquidated. The initial value of any component excluded

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from the assessment of effectiveness will be recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method will be recognized in AOCI.

The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less for designated net investment hedges. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at June 30, 2022 market rates.

(in millions)	Deferred gain (loss) in AOCI at				Gain (loss) expected to be reclassified to income in one year or less
Contract Type	June 30, 2022		December 31, 2021
Net investment hedges:
Foreign currency	$	(7)	$	(10)	$	—
Cross-currency swaps	73		(46)		—
Foreign currency-denominated debt	155		66		—
Total	$	221	$	10	$	—

Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during the period resulted in the following gains and losses recorded in income:

	Three Months Ended June 30, 2022
(in millions)	Net sales		Cost of sales		Selling, general and administrative expenses		Other comprehensive income (loss)
Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded	$	3,759	$	3,047	$	394	$	(252)
Gain (loss) on cash flow hedging relationships:
Foreign currency:
Gain (loss) recognized in other comprehensive income							$	5
	Six Months Ended June 30, 2022
(in millions)	Net sales		Cost of sales		Selling, general and administrative expenses		Other comprehensive income (loss)
Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded	7,633		6,171		782		$	(265)
Gain (loss) on cash flow hedging relationships:
Foreign currency:
Gain (loss) recognized in other comprehensive income							$	4
Gain (loss) reclassified from AOCI to income	$	—	$	(1)	$	—

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	Three Months Ended June 30, 2021
(in millions)	Net sales		Cost of sales		Selling, general and administrative expenses		Other comprehensive income (loss)
Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded	$	3,758	$	2,996	$	364	$	63
Gain (loss) on cash flow hedging relationships:
Foreign currency:
Gain (loss) recognized in other comprehensive income							$	3
Gain (loss) reclassified from AOCI to income	$	—	$	1	$	—
	Six Months Ended June 30, 2021
(in millions)	Net sales		Cost of sales		Selling, general and administrative expenses		Other comprehensive income (loss)
Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded	$	7,767	$	6,187	$	741	$	(22)
Gain (loss) on cash flow hedging relationships:
Foreign currency:
Gain (loss) recognized in other comprehensive income							$	(3)
Gain (loss) reclassified from AOCI to income	$	—	$	1	$	—

The gains or losses recorded in income related to components excluded from the assessment of effectiveness for derivative instruments designated as cash flow hedges were immaterial for the periods presented.

Gains and (losses) on derivative instruments designated as net investment hedges were recognized in other comprehensive income (loss) during the periods presented below.

(in millions)	Three Months Ended June 30,				Six Months Ended June 30,
Net investment hedges	2022		2021		2022		2021
Foreign currency	$	3	$	1	$	3	$	(6)
Cross-currency swaps	$	104	$	3	$	135	$	47
Foreign currency-denominated debt	$	58	$	12	$	89	$	37

Derivatives designated as net investment hedge instruments, as defined by ASC Topic 815, held during the period resulted in the following gains recorded in Interest expense on components excluded from the assessment of effectiveness:

(in millions)	Three Months Ended June 30,				Six Months Ended June 30,
Net investment hedges	2022		2021		2022		2021
Cross-currency swaps	$	7	$	5	$	13	$	10

There were no gains or losses recorded in income related to components excluded from the assessment of effectiveness for foreign currency-denominated debt designated as net investment hedges. There were no gains and losses reclassified from AOCI for net investment hedges during the periods presented.

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Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of monetary assets and liabilities denominated in currencies other than the operating units' functional currency. These derivatives resulted in the following gains recorded in income:

(in millions)		Three Months Ended June 30,				Six Months Ended June 30,
Contract Type	Location	2022		2021		2022		2021
Foreign Currency	Selling, general and administrative expenses	$	(5)	$	4	$	(6)	$	5

NOTE 17 RETIREMENT BENEFIT PLANS

The Company has a number of defined benefit pension plans and other postemployment benefit plans covering eligible salaried and hourly employees and their dependents. The estimated contributions to the Company's defined benefit pension plans for 2022 range from $20 million to $30 million, of which $14 million has been contributed through the first six months of the year. The other postemployment benefit plans, which provide medical and life insurance benefits, are funded on a pay-as-you-go basis.

The components of net periodic benefit income recorded in the Condensed Consolidated Statements of Operations are as follows:

	Pension benefits								Other postemployment benefits
(in millions)	2022				2021
Three Months Ended June 30,	US		Non-US		US		Non-US		2022		2021
Service cost	$	—	$	5	$	—	$	7	$	—	$	—
Interest cost	1		9		—		7		—		—
Expected return on plan assets	(1)		(20)		(2)		(21)		—		—
Amortization of unrecognized prior service credit	—		—		—		—		(1)		(1)
Amortization of unrecognized loss	1		2		—		4		—		1
Net periodic benefit income	$	1	$	(4)	$	(2)	$	(3)	$	(1)	$	—
	Pension benefits								Other postemployment benefits
(in millions)	2022				2021
Six Months Ended June 30,	US		Non-US		US		Non-US		2022		2021
Service cost	$	—	$	10	$	—	$	13	$	—	$	—
Interest cost	2		19		1		15		—		—
Expected return on plan assets	(3)		(40)		(5)		(42)		—		—
Settlement loss	—		—		—		—		—		—
Amortization of unrecognized prior service credit	—		—		—		—		(1)		(1)
Amortization of unrecognized loss	1		4		1		7		—		1
Net periodic benefit income	$	—	$	(7)	$	(3)	$	(7)	$	(1)	$	—

The components of net periodic benefit income other than the service cost component are included in Other postretirement income in the Condensed Consolidated Statements of Operations.

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NOTE 18 STOCKHOLDERS' EQUITY

The changes of the Stockholders’ Equity items during the three and six months ended June 30, 2022 and 2021, are as follows:

	BorgWarner Inc. stockholders' equity
(in millions)	Issued common stock		Capital in excess of par value		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interests
Balance, March 31, 2022	$	3	$	2,617	$	(1,836)	$	6,830	$	(564)	$	288
Dividends declared ($0.17 per share*)	—		—		—		(41)		—		(4)
Net issuance for executive stock plan	—		6		1		—		—		—
Net issuance of restricted stock	—		10		(1)		—		—		—
Purchase of treasury stock	—		—		(100)		—		—		—
Net earnings	—		—		—		216		—		15
Other comprehensive loss	—		—		—		—		(252)		(17)
Balance, June 30, 2022	$	3	$	2,633	$	(1,936)	$	7,005	$	(816)	$	282
	BorgWarner Inc. stockholders' equity
---	---	---	---	---	---	---	---	---	---	---	---	---
(in millions)	Issued common stock		Capital in excess of par value		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interests
Balance, March 31, 2021	$	3	$	2,589	$	(1,810)	$	6,321	$	(736)	$	287
Dividends declared ($0.17 per share*)	—		—		—		(41)		—		(4)
Net issuance for executive stock plan	—		3		—		—		—		—
Net issuance of restricted stock	—		10		—		—		—		—
Purchase of noncontrolling interest	—		—		—		—		—		(33)
Acquisition of AKASOL	—		—		—		—		—		96
Net earnings	—		—		—		247		—		27
Other comprehensive income	—		—		—		—		63		—
Balance, June 30, 2021	$	3	$	2,602	$	(1,810)	$	6,527	$	(673)	$	373
	BorgWarner Inc. stockholders' equity
---	---	---	---	---	---	---	---	---	---	---	---	---
(in millions)	Issued common stock		Capital in excess of par value		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interests
Balance, December 31, 2021	$	3	$	2,637	$	(1,812)	$	6,671	$	(551)	$	314
Dividends declared ($0.34 per share*)	—		—		—		(82)		—		(49)
Net issuance for executive stock plan	—		—		5		—		—		—
Net issuance of restricted stock	—		(5)		11		—		—		—
Purchase of treasury stock	—		—		(140)		—		—		—
Purchase/sale of noncontrolling interest	—		1		—		—		—		(4)
Net earnings	—		—		—		416		—		39
Other comprehensive loss	—		—		—		—		(265)		(18)
Balance, June 30, 2022	$	3	$	2,633	$	(1,936)	$	7,005	$	(816)	$	282

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	BorgWarner Inc. stockholders' equity
(in millions)	Issued common stock		Capital in excess of par value		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Noncontrolling interests
Balance, December 31, 2020	$	3	$	2,614	$	(1,834)	$	6,296	$	(651)	$	296
Dividends declared ($0.34 per share*)	—		—		—		(81)		—		(37)
Net issuance for executive stock plan	—		1		3		—		—		—
Net issuance of restricted stock	—		(13)		21		—		—		—
Purchase of noncontrolling interest	—		—		—		—		—		(33)
Acquisition of AKASOL	—		—		—		—		—		96
Net earnings	—		—		—		312		—		56
Other comprehensive loss	—		—		—		—		(22)		(5)
Balance, June 30, 2021	$	3	$	2,602	$	(1,810)	$	6,527	$	(673)	$	373

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* Per share dividends amount declared relate to BorgWarner common stock.

NOTE 19 ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables summarize the activity within accumulated other comprehensive loss during the three and six months ended June 30, 2022 and 2021:

(in millions)	Foreign currency translation adjustments		Hedge instruments		Defined benefit retirement plans		Total
Beginning balance, March 31, 2022	$	(441)	$	—	$	(123)	$	(564)
Comprehensive (loss) income before reclassifications	(216)		5		3		(208)
Income taxes associated with comprehensive (loss) income before reclassifications	(46)		—		1		(45)
Reclassification from accumulated other comprehensive loss	—		—		2		2
Income taxes reclassified into net earnings	—		—		(1)		(1)
Ending balance, June 30, 2022	$	(703)	$	5	$	(118)	$	(816)
(in millions)	Foreign currency translation adjustments		Hedge instruments		Defined benefit retirement plans		Total
---	---	---	---	---	---	---	---	---
Beginning balance, March 31, 2021	$	(408)	$	(6)	$	(322)	$	(736)
Comprehensive (loss) income before reclassifications	60		3		(1)		62
Income taxes associated with comprehensive (loss) income before reclassifications	(3)		—		—		(3)
Reclassification from accumulated other comprehensive loss	—		1		4		5
Income taxes reclassified into net earnings	—		—		(1)		(1)
Ending balance, June 31, 2021	$	(351)	$	(2)	$	(320)	$	(673)

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(in millions)	Foreign currency translation adjustments		Hedge instruments		Defined benefit retirement plans		Total
Beginning balance, December 31, 2021	$	(423)	$	—	$	(128)	$	(551)
Comprehensive (loss) income before reclassifications	(234)		4		6		(224)
Income taxes associated with comprehensive (loss) income before reclassifications	(46)		—		1		(45)
Reclassification from accumulated other comprehensive loss	—		1		4		5
Income taxes reclassified into net earnings	—		—		(1)		(1)
Ending balance, June 30, 2022	$	(703)	$	5	$	(118)	$	(816)
(in millions)	Foreign currency translation adjustments		Hedge instruments		Defined benefit retirement plans		Total
---	---	---	---	---	---	---	---	---
Beginning balance, December 31, 2020	$	(321)	$	—	$	(330)	$	(651)
Comprehensive (loss) income before reclassifications	(13)		(3)		3		(13)
Income taxes associated with comprehensive (loss) income before reclassifications	(17)		—		1		(16)
Reclassification from accumulated other comprehensive loss	—		1		8		9
Income taxes reclassified into net earnings	—		—		(2)		(2)
Ending balance, June 31, 2021	$	(351)	$	(2)	$	(320)	$	(673)

NOTE 20 CONTINGENCIES

In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, general liability and other risks. It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company’s management does not expect that an adverse outcome in any of these commercial and legal claims, actions and complaints that are currently pending will have a material adverse effect on the Company’s results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations or cash flows.

Environmental

The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain state environmental agencies and private parties as potentially responsible parties (“PRPs”) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (“Superfund”) and equivalent state laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 26 such sites as of June 30, 2022 and December 31, 2021. Responsibility for clean-up and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula.

The Company believes that none of these matters, individually or in the aggregate, will have a material adverse effect on its results of operations, financial position or cash flows. Generally, this is because either the estimates of the maximum potential liability at a site are not material or the liability will be shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any such matter.

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The Company had an accrual for environmental liabilities of $9 million and $7 million as of June 30, 2022 and December 31, 2021, respectively, included in Other current and Other non-current liabilities in the Condensed Consolidated Balance Sheets. This accrual, which relates to eight of the sites, is based on information available to the Company (which, in most cases, includes an estimate of allocation of liability among PRPs; the probability that other PRPs, many of whom are large, solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation and consulting costs; and remediation alternatives). Clean-up and other remedial activities are complete or nearing completion at the other 18 sites, for which there was no accrual as of June 30, 2022 and December 31, 2021.

NOTE 21 EARNINGS PER SHARE

The Company presents both basic and diluted earnings per share of common stock (“EPS”) amounts. Basic EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock and common stock equivalents outstanding during the reporting period.

The dilutive impact of stock-based compensation is calculated using the treasury stock method. The treasury stock method assumes that the Company uses the assumed proceeds from the exercise of awards to repurchase common stock at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized. The dilutive effects of performance-based stock awards are included in the computation of diluted earnings per share at the level the related performance criteria are met through the respective balance sheet date. There were 0.9 million and 0.8 million performance share units excluded from the computation of the diluted earnings for the three months ended June 30, 2022 and 2021, respectively. There were 1.0 million and 0.9 million performance share units excluded from the computation of the diluted earnings for the six months ended June 30, 2022 and 2021, respectively. These units were excluded because the related performance criteria had not been met as of the balance sheet dates.

The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share of common stock:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions, except per share amounts)	2022		2021		2022		2021
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	216	$	247	$	416	$	312
Weighted average shares of common stock outstanding	236.9		238.2		237.6		237.9
Basic earnings per share of common stock	$	0.91	$	1.03	$	1.75	$	1.31
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	216	$	247	$	416	$	312
Weighted average shares of common stock outstanding	236.9		238.2		237.6		237.9
Effect of stock-based compensation	1.1		1.4		0.9		1.1
Weighted average shares of common stock outstanding including dilutive shares	238.0		239.6		238.5		239.0
Diluted earnings per share of common stock	$	0.91	$	1.03	$	1.74	$	1.30

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NOTE 22 REPORTING SEGMENTS AND RELATED INFORMATION

The Company’s business is aggregated into four reporting segments: Air Management, e-Propulsion & Drivetrain, Fuel Systems (formerly known as Fuel Injection) and Aftermarket. These segments are strategic business groups that are managed separately as each represents a specific grouping of related automotive components and systems.

In the first quarter of 2022, the Company announced that the starter and alternator business, previously reported in its e-Propulsion & Drivetrain segment, would transition to the Aftermarket segment. The Company also announced that the canisters and fuel delivery modules business, previously reported in its Air Management segment, would transition to the Fuel Systems segment. Both of these transitions were completed during the three months ended June 30, 2022. The reporting segment disclosures have been updated accordingly which included recasting prior period information for the new reporting structure.

Additionally, during the first quarter of 2022, the Company updated the definition of its measure of segment income or loss to exclude the impact of intangible asset amortization expense. The Company believes this change improves comparability of ongoing operations given the increasing operating margin impact of intangible asset amortization arising from the Company’s merger and acquisition activity. The prior period information disclosed below has been recast to reflect this change. Further, the Company renamed its measure of segment income or loss from Segment Adjusted EBIT to Segment Adjusted Operating Income.

Segment Adjusted Operating Income is comprised of operating income adjusted for restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss.

Segment Adjusted Operating Income is the measure of segment income or loss used by the Company. The Company believes Segment Adjusted Operating Income is most reflective of the operational profitability or loss of our reporting segments. The following tables show segment information and Segment Adjusted Operating Income for the Company’s reporting segments:

Net Sales by Reporting Segment

	Three Months Ended June 30, 2022						Six Months Ended June 30, 2022
(in millions)	Customers		Inter-segment		Net		Customers		Inter-segment		Net
Air Management	$	1,758	$	32	$	1,790	$	3,554	$	48	$	3,602
e-Propulsion & Drivetrain	1,204		68		1,272		2,449		97		2,546
Fuel Systems	474		42		516		1,003		104		1,107
Aftermarket	323		(11)		312		627		6		633
Inter-segment eliminations	—		(131)		(131)		—		(255)		(255)
Net sales	$	3,759	$	—	$	3,759	$	7,633	$	—	$	7,633
	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
---	---	---	---	---	---	---	---	---	---	---	---	---
(in millions)	Customers		Inter-segment		Net		Customers		Inter-segment		Net
Air Management	$	1,731	$	23	$	1,754	$	3,594	$	53	$	3,647
e-Propulsion & Drivetrain	1,203		26		1,229		2,533		59		2,592
Fuel Systems	511		71		582		1,042		131		1,173
Aftermarket	313		19		332		598		36		634
Inter-segment eliminations	—		(139)		(139)		—		(279)		(279)
Net sales	$	3,758	$	—	$	3,758	$	7,767	$	—	$	7,767

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Total Assets by Reporting Segment

(in millions)	June 30, 2022		December 31, 2021
Air Management	$	6,132	$	6,229
e-Propulsion & Drivetrain	5,164		5,163
Fuel Systems	2,110		2,282
Aftermarket	1,266		1,179
Total	14,672		14,853
Corporate	1,472		1,722
Consolidated	$	16,144	$	16,575

Segment Adjusted Operating Income

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2022		2021		2022		2021
Air Management	$	235	$	263	$	478	$	569
e-Propulsion & Drivetrain	80		132		184		266
Fuel Systems	44		60		110		117
Aftermarket	51		44		90		80
Segment Adjusted Operating Income	410		499		862		1,032
Corporate, including stock-based compensation	62		78		125		147
Intangible asset amortization expense	27		20		50		40
Restructuring expense (Note 5)	27		62		42		92
Merger, acquisition and divestiture expense, net	9		15		32		28
Other non-comparable items	13		—		13		(2)
Loss (gain) on sale of business (Note 3)	—		7		(24)		7
Equity in affiliates’ earnings, net of tax	(11)		(16)		(19)		(28)
Unrealized (gain) loss on equity securities	(11)		4		28		276
Interest expense, net	15		39		30		57
Other postretirement income	(9)		(12)		(18)		(23)
Earnings before income taxes and noncontrolling interest	288		302		603		438
Provision for income taxes	57		28		148		70
Net earnings	231		274		$	455	$	368
Net earnings attributable to noncontrolling interest, net of tax	15		27		39		56
Net earnings attributable to BorgWarner Inc.	$	216	$	247	$	416	$	312

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NOTE 23 OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION

	Six Months Ended June 30,
(in millions)	2022		2021
OPERATING
Net earnings	$	455	$	368
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and tooling amortization	315		350
Intangible asset amortization	50		40
Restructuring expense, net of cash paid	36		59
Stock-based compensation expense	28		27
(Gain) loss on sales of businesses	(26)		7
Deferred income tax benefit	(26)		(99)
Unrealized loss on equity securities	28		276
Loss on debt extinguishment	—		20
Gain on insurance recovery received for property damages	—		(2)
Other non-cash adjustments	(15)		(12)
Net earnings adjustments to reconcile to net cash flows from operations	845		1,034
Retirement plan contributions	(14)		(12)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency translation adjustments:
Receivables	(353)		(158)
Inventories	(194)		(260)
Prepayments and other current assets	5		(21)
Accounts payable and accrued expenses	50		41
Prepaid taxes and income taxes payable	(10)		30
Other assets and liabilities	3		(32)
Net cash provided by operating activities	$	332	$	622
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest, net	$	59	$	54
Income taxes, net of refunds	$	171	$	185
	Balance as of:
Non-cash investing transactions:	June 30,<br>2022		December 31,<br>2021
Period end accounts payable related to property, plant and equipment purchases	$	99	$	142

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

BorgWarner Inc. and Consolidated Subsidiaries (the “Company” or “BorgWarner”) is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. The Company’s products help improve vehicle performance, propulsion efficiency, stability and air quality. These products are manufactured and sold worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles (“SUVs”), vans and light trucks). The Company’s products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications). The Company also manufactures and sells its products to certain tier one vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The Company operates manufacturing facilities serving customers in Europe, the Americas and Asia and is an original equipment supplier to nearly every major automotive OEM in the world.

Acquisitions

Santroll Automotive Components

On March 31, 2022, the Company completed its acquisition of 100% of Santroll Automotive Components (“Santroll”), a carve-out of Santroll Electric Auto’s eMotor business, pursuant to the terms of an Equity Transfer Agreement (“ETA”). The total consideration was $212 million, including approximately ¥1.1 billion ($172 million) of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company paid $157 million of base purchase price in the six months ended June 30, 2022. The remaining $15 million of base purchase price is payable in 2022 and is recorded in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet as of June 30, 2022. The acquisition is expected to strengthen the Company’s vertical integration, scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to market. Results of operations for Santroll are included in the Company’s financial information following the date of acquisition. Refer to Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

AKASOL

On June 4, 2021, the Company completed a voluntary public takeover offer for shares of AKASOL AG (“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. During 2021, the Company increased its ownership to 93% through the subsequent purchase of additional shares. On February 10, 2022, the Company completed a merger squeeze out process (the “Squeeze Out”) to obtain the remaining shares, resulting in 100% ownership. The acquisition further strengthens BorgWarner’s commercial vehicle and industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a fast-growing battery module and pack market. Results of operations for AKASOL are included in the Company’s financial information following the date of acquisition. Refer to Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

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Key Trends and Economic Factors

COVID-19 and Supplier Disruptions. The impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy. Recent COVID-19 outbreaks in certain regions continue to cause intermittent COVID-19-related disruptions in the Company’s supply chain and local manufacturing operations. For a significant portion of the quarter ended June 30, 2022, China imposed lock-downs in many cities due to an increase in COVID-19 cases in the region, which contributed to a decline in industry production in China. The Company also continues to face supplier disruptions due to the semiconductor shortage. Further, actions taken by Russia in Ukraine have impacted the automotive industry particularly in Europe, including the Company’s suppliers, customers and its operations more generally. The Company is in the process of winding down its Aftermarket operation in Russia, which is not material to the Company’s financial statements.

Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and the Company has experienced price increases for base metals (e.g., steel, aluminum and nickel), precious metals (e.g., palladium), and raw materials that are primarily used in batteries for electric vehicles (e.g., lithium and cobalt). In addition, many global economies, including the United States, are experiencing elevated levels of inflation more generally, which is driving an increase in other input costs as well. As a result, the Company has experienced, and is continuing to experience, higher costs.

The Company continues to negotiate the pass through and recovery of higher costs with customers. Certain agreements were substantively reached with various customers in the second quarter of 2022. These agreements do not enable the Company to recover 100 percent of its increased costs, and as a result, the Company’s operating margins have been negatively impacted.

Outlook

The Company expects global industry production to modestly increase year over year in 2022, as supply of certain components is expected to improve during the second half of 2022 compared to the first half. However, the benefit of these improvements is expected to be partially offset by various global disruptions, including, but not limited to, input cost inflation, supply chain disruptions and impacts from Russia’s invasion of Ukraine. The Company also expects net new business-related sales growth, due to increased penetration of BorgWarner products around the world, to drive a sales increase in excess of the expected growth in industry production. As a result of all of these considerations, the Company expects increased revenue in 2022, excluding the impact of foreign currencies.

The Company expects its results to be impacted by a planned increase in Research & Development (“R&D”) expenditures during 2022. This planned R&D increase is to support growth in the Company’s electric vehicle-related products and is primarily related to supporting the development and launch of recently awarded programs. The Company also expects higher commodity costs, particularly related to steel and petroleum-based resin products and other supplier cost increases to negatively impact its results of operations. The Company expects to only partially mitigate these items through various contractual pass-through arrangements with its customers, continued commercial negotiations with the Company’s customers and suppliers, cost reductions due to the Company’s restructuring activities and synergies related to the acquisition of Delphi Technologies.

The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy. There are several trends that are driving the Company’s long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that support demand for the Company’s products driving vehicle efficiency.

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2022 vs. Three Months Ended June 30, 2021

The following table presents a summary of our operating results:

	Three Months Ended June 30,
(in millions, except per share data)	2022				2021
Net sales			% of net sales				% of net sales
Air Management	$	1,790	47.6	%	$	1,754	46.7	%
e-Propulsion & Drivetrain	1,272		33.8		1,229		32.7
Fuel Systems	516		13.7		582		15.5
Aftermarket	312		8.3		332		8.8
Inter-segment eliminations	(131)		(3.5)		(139)		(3.7)
Total net sales	3,759		100.0		3,758		100.0
Cost of sales	3,047		81.1		2,996		79.7
Gross profit	712		18.9		762		20.3
Selling, general and administrative expenses - R&D, net	207		5.5		166		4.4
Selling, general and administrative expenses - Other	187		5.0		198		5.3
Restructuring expense	27		0.7		62		1.6
Other operating expense, net	19		0.5		19		0.5
Operating income	272		7.2		317		8.4
Equity in affiliates’ earnings, net of tax	(11)		(0.3)		(16)		(0.4)
Unrealized (gain) loss on equity securities	(11)		(0.3)		4		0.1
Interest expense, net	15		0.4		39		1.0
Other postretirement income	(9)		(0.2)		(12)		(0.3)
Earnings before income taxes and noncontrolling interest	288		7.7		302		8.0
Provision for income taxes	57		1.5		28		0.7
Net earnings	231		6.1		274		7.3
Net earnings attributable to noncontrolling interest, net of tax	15		0.4		27		0.7
Net earnings attributable to BorgWarner Inc.	$	216	5.7	%	$	247	6.6	%
Earnings per share — diluted	$	0.91			$	1.03

Net sales for the three months ended June 30, 2022 totaled $3,759 million, flat compared to the three months ended June 30, 2021. Acquisitions, primarily AKASOL in June of 2021, contributed $67 million in additional sales in the three months ended June 30, 2022. In December 2021, the Company sold its Water Valley, Mississippi manufacturing facility, which accounted for $47 million of net sales in the three months ended June 30, 2021 that did not recur in 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $221 million primarily due to the weakening of the Euro, Korean Won and Chinese Renminbi relative to the U.S. Dollar. The net increase excluding these items was primarily due to increased demand for the Company’s products and the impact of commercial negotiations with the Company’s customers, partially offset by the decline in industry production compared to the prior year, primarily in China due to COVID-19 related lock-downs.

Cost of sales as a percentage of net sales was 81.1% during the three months ended June 30, 2022, compared to 79.7% during the three months ended June 30, 2021. The Company’s material cost as a percentage of sales was 56% and 54% of net sales during the three months ended June 30, 2022 and 2021, respectively. The increase in material cost as a percentage of sales reflects increasing commodity and other material and input costs. Gross profit and gross margin were $712 million and 18.9%, respectively, during the three months ended June 30, 2022 compared to $762 million and 20.3%,

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respectively, during the three months ended June 30, 2021. The decrease in gross margin was primarily due to increases in commodity and other input costs.

Selling, general and administrative expenses (“SG&A”) for the three months ended June 30, 2022 were $394 million as compared to $364 million for the three months ended June 30, 2021. SG&A as a percentage of net sales was 10.5% and 9.7% for the three months ended June 30, 2022 and 2021, respectively. The increase in SG&A was primarily attributable to increased research and development costs, partially offset by decreases in employee costs.

Research and Development (“R&D”) costs, net of customer reimbursements, were $207 million, or 5.5% of net sales, for the three months ended June 30, 2022, compared to $166 million, or 4.4% of net sales, for the three months ended June 30, 2021. The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company’s electrification product portfolio. The Company will continue to invest in R&D programs, which are necessary to support short- and long-term growth. The Company’s current long-term expectation for R&D spending is in the range of 5.0% to 5.5% of net sales.

Restructuring expense was $27 million and $62 million for the three months ended June 30, 2022 and 2021, respectively, primarily related to employee benefit costs. Refer to Note 5 “Restructuring” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

During 2022, the Company approved individual restructuring actions that primarily related to specific reductions in headcount. During the three months ended June 30, 2022, the Company recorded $15 million related to these actions.

In February 2020, the Company announced a restructuring plan to address existing structural costs. During the three month periods ended June 30, 2022 and 2021, the Company recorded $10 million and $37 million of restructuring charges related to this plan, respectively.

Other operating expense, net was $19 million for both the three months ended June 30, 2022 and 2021. For the three months ended June 30, 2022 and 2021, merger, acquisition and divestiture related expenses, net were $9 million and $15 million, respectively.

Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.

Equity in affiliates’ earnings, net of tax was $11 million and $16 million for the three months ended June 30, 2022 and 2021, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Unrealized (gain) loss on equity securities was a gain of $11 million and a loss of $4 million for the three months ended June 30, 2022 and 2021, respectively. This line item reflects the net unrealized gains or losses recognized due to the recording of the Company’s investments at fair value. For further details, see Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements in Item 1 of this report.

Interest expense, net was $15 million and $39 million for the three months ended June 30, 2022 and 2021, respectively. The decrease in interest expense, net was primarily due to the $20 million loss on debt extinguishment recorded in 2021 that related to the early repayment of the Company’s €500 million 1.800% senior notes settled on June 18, 2021.

Provision for income taxes was $57 million for the three months ended June 30, 2022, resulting in an effective rate of 20%. This is compared to $28 million, an effective rate of 9%, for the three-month period ended June 30, 2021.

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During the three months ended June 30, 2021, the Company recognized a $55 million tax benefit related to a reduction in certain unrecognized tax benefits and accrued interest for a matter in which the statute of limitations had lapsed. The Company also recognized a discrete tax benefit of $20 million related to an increase in its deferred tax assets as a result of an increase in the United Kingdom (“UK”) statutory tax rate from 19% to 25%.

Six Months Ended June 30, 2022 vs. Six Months Ended June 30, 2021

The following table presents a summary of our operating results:

	Six Months Ended June 30,
(in millions, except per share data)	2022				2021
Net sales			% of net sales				% of net sales
Air Management	$	3,602	47.2	%	$	3,647	47.0	%
e-Propulsion & Drivetrain	2,546		33.4		2,592		33.4
Fuel Systems	1,107		14.5		1,173		15.1
Aftermarket	633		8.3		634		8.2
Inter-segment eliminations	(255)		(3.3)		(279)		(3.6)
Total net sales	$	7,633	100.0		7,767		100.0
Cost of sales	6,171		80.8		6,187		79.7
Gross profit	1,462		19.2		1,580		20.3
Selling, general and administrative expenses - R&D, net	398		5.2		349		4.5
Selling, general and administrative expenses - Other	384		5.0		392		5.0
Restructuring expense	42		0.6		92		1.2
Other operating expense, net	14		0.2		27		0.3
Operating income	624		8.2		720		9.3
Equity in affiliates’ earnings, net of tax	(19)		(0.2)		(28)		(0.4)
Unrealized loss on equity securities	28		0.4		276		3.6
Interest expense, net	30		0.4		57		0.7
Other postretirement income	(18)		(0.2)		(23)		(0.3)
Earnings before income taxes and noncontrolling interest	603		7.9		438		5.6
Provision for income taxes	148		1.9		70		0.9
Net earnings	455		6.0		368		4.7
Net earnings attributable to noncontrolling interest, net of tax	39		0.5		56		0.7
Net earnings attributable to BorgWarner Inc.	$	416	5.5	%	$	312	4.0	%
Earnings per share — diluted	$	1.74			$	1.30

Net sales for the six months ended June 30, 2022 totaled $7,633 million, a decrease of 2% from the six months ended June 30, 2021. Acquisitions, primarily AKASOL in June of 2021, contributed $111 million in additional sales in the six months ended June 30, 2022. In December 2021, the Company sold its Water Valley, Mississippi manufacturing facility which accounted for $99 million of net sales in the six months ended June 30, 2021 that did not recur in 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $334 million primarily due to the weakening of the Euro and Korean Won relative to the U.S. Dollar. The net increase excluding these items was primarily due to increased demand for the Company’s products, partially offset by the decline in industry production compared to the prior year, primarily in Europe and the impact of COVID-19 related lock-downs in China in the second quarter of 2022.

Cost of sales as a percentage of net sales was 80.8% during the six months ended June 30, 2022, compared to 79.7% during the six months ended June 30, 2021. The Company’s material cost as a

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percentage of sales was 56% and 54% of net sales during the six months ended June 30, 2022 and 2021, respectively. The increase in material cost as a percentage of sales reflects increasing commodity and other material and input costs. Gross profit and gross margin were $1,462 million and 19.2%, respectively, during the six months ended June 30, 2022 compared to $1,580 million and 20.3%, respectively, during the six months ended June 30, 2021. The decrease in gross margin was primarily due to increases in commodity and other input costs.

Selling, general and administrative expenses (“SG&A”) for the six months ended June 30, 2022 were $782 million as compared to $741 million for the six months ended June 30, 2021. SG&A as a percentage of net sales was 10.2% and 9.5% for the six months ended June 30, 2022 and 2021, respectively. The increase in SG&A was primarily attributable to increased research and development costs, partially offset by decreases in employee costs.

Research and Development (“R&D”) costs, net of customer reimbursements, were $398 million, or 5.2% of net sales, for the six months ended June 30, 2022, compared to $349 million, or 4.5% of net sales, for the six months ended June 30, 2021. The increase in R&D costs, net of customer reimbursements, was primarily due to increasing net investment related to the Company’s electrification product portfolio.

Restructuring expense was $42 million and $92 million for the six months ended June 30, 2022 and 2021, respectively, primarily related to employee benefit costs. Refer to Note 5 “Restructuring” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

During 2022, the Company approved individual restructuring actions that primarily related to specific reductions in headcount. During the six months ended June 30, 2022, the Company recorded $15 million related to these actions.

In February 2020, the Company announced a restructuring plan to address existing structural costs. During the six month periods ended June 30, 2022 and 2021, the Company recorded $23 million and $61 million of restructuring charges related to this plan, respectively. Cumulatively, the Company has incurred $274 million of restructuring charges related to this plan. This plan is expected to result in a total of $300 million of restructuring costs through 2022. The resulting annual gross savings are expected to be in excess of $100 million and will be utilized to sustain overall operating margin profile and cost competitiveness. Nearly all of the restructuring charges associated with this plan are expected to be cash expenditures.

Other operating expense, net was $14 million and $27 million for the six months ended June 30, 2022 and 2021, respectively.

For the six months ended June 30, 2022 and 2021, merger, acquisition and divestiture related expenses, net were $32 million and $28 million, respectively. The increase in 2022 was primarily related to related to professional fees associated with specific acquisition and disposition initiatives.

During the six months ended June 30, 2022, the Company recorded a pre-tax gain of $24 million in connection with the sale of its interest in BorgWarner Romeo Power LLC (“Romeo JV”), in which the Company owned a 60% interest. Refer to Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements for more information.

Other operating expense, net is primarily comprised of items included within the subtitle “Non-comparable items impacting the Company’s earnings per diluted share and net earnings” below.

Equity in affiliates’ earnings, net of tax was $19 million and $28 million for the six months ended June 30, 2022 and 2021, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

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Unrealized loss on equity securities was $28 million and $276 million for the six months ended June 30, 2022 and 2021, respectively. This line item reflects the net unrealized gains or losses recognized due to recording the Company’s investments at fair value and the 2021 amount was primarily related to the Company’s investment in Romeo Power, Inc. In the six months ended June 30, 2022, the Company sold all of its remaining investment in Romeo Power, Inc. For further details, see Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements in Item 1 of this report.

Interest expense, net was $30 million and $57 million for the six months ended June 30, 2022 and 2021, respectively. The decrease in interest expense, net was primarily due to the $20 million loss on debt extinguishment recorded in 2021 that related to the early repayment of the Company’s €500 million 1.800% senior notes settled on June 18, 2021.

Provision for income taxes was $148 million for the six months ended June 30, 2022, resulting in an effective rate of 25%. This is compared to $70 million, an effective rate of 16%, for the six-month period ended June 30, 2021.

During the six months ended June 30, 2021, the Company recognized a $55 million tax benefit related to a reduction in certain unrecognized tax benefits and accrued interest for a matter in which the statute of limitations had lapsed. The Company also recognized a discrete tax benefit of $20 million related to an increase in its deferred tax assets as a result of an increase in the United Kingdom (“UK”) statutory tax rate from 19% to 25%. Further, the Company’s effective tax rate for the six months ended June 30, 2021 included a net discrete tax benefit of $24 million, primarily related to changes to certain withholding rates applied to unremitted earnings.

Non-comparable items impacting the Company’s earnings per diluted share

The Company’s earnings per diluted share were $0.91 and $1.03 for the three months ended June 30, 2022 and 2021, respectively, and $1.74 and $1.30 for the six months ended June 30, 2022 and 2021, respectively. The Company believes the table below is useful in highlighting non-comparable items that impacted its earnings per diluted share. The non-comparable items presented below are calculated after tax using the corresponding effective tax rate discrete to each item and the weighted average number of diluted shares for each of the periods then ended.

	Three Months Ended June 30,				Six Months Ended June 30,
Non-comparable items:	2022		2021		2022		2021
Restructuring expense	$	(0.11)	$	(0.19)	$	(0.17)	$	(0.31)
Merger, acquisition and divestiture expense, net	(0.04)		(0.06)		(0.13)		(0.10)
(Loss) gain on sale of business	—		(0.03)		0.08		(0.03)
Other	(0.05)		—		(0.05)		—
Loss on debt extinguishment	—		(0.06)		—		(0.06)
Unrealized gain (loss) on equity securities	0.03		(0.01)		(0.11)		(0.88)
Tax adjustments1	0.03		0.30		0.03		0.38
Total impact of non-comparable items per share - diluted	$	(0.14)	$	(0.05)	$	(0.35)	$	(1.00)

_____________________________

1

During the three and six months ended June 30, 2021, the Company recognized a $55 million tax benefit related to the lapse of the statute of limitations for a tax matter, a $20 million benefit related to an increase in deferred tax assets associated with an increase in the UK tax rate, and a $24 million of tax benefit primarily related to changes to certain withholding rates applied to unremitted earnings.

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Results by Reporting Segment

The Company’s business is aggregated into four reporting segments: Air Management, e-Propulsion & Drivetrain, Fuel Systems (formerly known as Fuel Injection) and Aftermarket. These segments are strategic business groups that are managed separately as each represents a specific grouping of related automotive components and systems.

In the first quarter of 2022, the Company announced that the starter and alternator business, previously reported in its e-Propulsion & Drivetrain segment, would transition to the Aftermarket segment. The Company also announced that the canisters and fuel delivery modules business, previously reported in its Air Management segment, would transition to the Fuel Systems segment. Both of these transitions were completed during the three months ended June 30, 2022. The reporting segment disclosures have been updated accordingly which included recasting prior period information for the new reporting structure.

Additionally, during the first quarter of 2022, the Company updated the definition of its measure of segment income or loss to exclude the impact of intangible asset amortization expense. The Company believes this change improves comparability of ongoing operations given the increasing operating margin impact of intangible asset amortization arising from the Company’s merger and acquisition activity. The prior period information disclosed below has been recast to reflect this change. Further, the Company renamed its measure of segment income or loss from Segment Adjusted EBIT to Segment Adjusted Operating Income.

Segment Adjusted Operating Income is comprised of operating income adjusted for restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss.

Segment Adjusted Operating Income is the measure of segment income or loss used by the Company. The Company believes Segment Adjusted Operating Income is most reflective of the operational profitability or loss of our reporting segments.

The following tables presents net sales and Segment Adjusted Operating Income for the Company’s reporting segments:

Three Months Ended June 30, 2022 vs. Three Months Ended June 30, 2021

	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
(in millions)	Net sales		Segment Adjusted Operating Income		% margin		Net sales		Segment Adjusted Operating Income		% margin
Air Management	$	1,790	$	235	13.1	%	$	1,754	$	263	15.0	%
e-Propulsion & Drivetrain	1,272		80		6.3	%	1,229		132		10.7	%
Fuel Systems	516		44		8.5	%	582		60		10.3	%
Aftermarket	312		51		16.3	%	332		44		13.3	%
Inter-segment eliminations	(131)		—				(139)		—
Totals	$	3,759	$	410			$	3,758	$	499

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The Air Management segment’s net sales increased $36 million, or 2%, and Segment Adjusted Operating Income decreased $28 million from the three months ended June 30, 2021. The acquisition of AKASOL contributed $66 million of additional sales in the quarter ended June 30, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $126 million primarily due to the weakening of the Euro, Korean Won and Chinese Renminbi relative to the U.S. Dollar. The net increase excluding these items was primarily due to increased demand for the Company’s products and the impact of commercial negotiations with the Company’s customers, partially offset by the decline in industry production compared to the prior year. The Segment Adjusted Operating margin was 13.1% for the three months ended June 30, 2022, compared to 15.0% for the three months ended June 30, 2021. The Segment Adjusted Operating margin decrease was primarily due to the dilutive impact of the acquisition of AKASOL, the unfavorable impact of lock-downs in China due to COVID-19 and the net impact of higher commodity and other input costs.

The e-Propulsion & Drivetrain segment’s net sales increased $43 million, or 3%, and Segment Adjusted Operating Income decreased $52 million from the three months ended June 30, 2021. In December 2021, the Company sold its Water Valley, Mississippi manufacturing facility, which was included in the e-Propulsion & Drivetrain segment and accounted for $47 million of net sales in the three months ended June 30, 2021 that did not recur in 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $58 million primarily due to the weakening of the Euro, Korean Won and Chinese Renminbi relative to the U.S. Dollar. The net increase excluding these items was primarily due to increased demand for the Company’s products and the impact of the commercial negotiations with the Company’s customers, partially offset by the decline in industry production compared to the prior year. The e-Propulsion & Drivetrain Segment Adjusted Operating margin was 6.3% during the three months ended June 30, 2022, down from 10.7% during the three months ended June 30, 2021. The Segment Adjusted Operating margin decrease was primarily due to increased investments in R&D, the unfavorable impact of lock-downs in China due to COVID-19 and the net impact of higher commodity and other input costs.

The Fuel Systems segment’s net sales decreased $66 million, or 11%, and Segment Adjusted Operating Income decreased $16 million from the three months ended June 30, 2021. Foreign currencies resulted in a year-over-year decrease in sales of approximately $34 million primarily due to the weakening of the Euro relative to the U.S. Dollar. The net decrease excluding the impact of foreign currencies was primarily due to the decline in industry production compared to the prior year. The Fuel Systems Segment Adjusted Operating margin was 8.5% for the three months ended June 30, 2022, compared to 10.3% for the three months ended June 30, 2021. The Segment Adjusted Operating margin decrease was primarily due to the impact of lower sales and higher commodity and other input costs.

The Aftermarket segment’s net sales decreased $20 million, or 6%, and Segment Adjusted Operating Income increased $7 million from the three months ended June 30, 2021. The decrease in net sales was primarily due to lower demand for the Company’s products in Europe compared to the prior year. The Segment Adjusted Operating margin was 16.3% for the three months ended June 30, 2022, compared to 13.3% for the three months ended June 30, 2021. The Segment Adjusted Operating margin increase was primarily due to increased pricing.

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Six Months Ended June 30, 2022 vs. Six Months Ended June 30, 2021

	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
(in millions)	Net sales		Segment Adjusted Operating Income		% margin		Net sales		Segment Adjusted Operating Income		% margin
Air Management	$	3,602	$	478	13.3	%	$	3,647	$	569	15.6	%
e-Propulsion & Drivetrain	2,546		184		7.2	%	2,592		266		10.3	%
Fuel Systems	1,107		110		9.9	%	1,173		117		10.0	%
Aftermarket	633		90		14.2	%	634		80		12.6	%
Inter-segment eliminations	(255)		—				(279)		—
Totals	$	7,633	$	862			$	7,767	$	1,032

The Air Management segment’s net sales decreased $45 million, or 1%, and Segment Adjusted Operating Income decreased $91 million from the six months ended June 30, 2021. The acquisition of AKASOL contributed $110 million of additional sales in the six months ended June 30, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $196 million primarily due to the weakening of the Euro and Korean Won relative to the U.S. Dollar. The net increase excluding these items was primarily due to increased demand for the Company’s products, partially offset by the decline in industry production compared to the prior year. The Segment Adjusted Operating margin was 13.3% for the six months ended June 30, 2022, compared to 15.6% for the six months ended June 30, 2021. The Segment Adjusted Operating margin decrease was primarily due to the dilutive impact of the acquisition of AKASOL and the net impact of higher commodity and other input costs.

The e-Propulsion & Drivetrain segment’s net sales decreased $46 million, or 2%, and Segment Adjusted Operating Income decreased $82 million from the six months ended June 30, 2021. In 2021, the Company sold its Water Valley, Mississippi manufacturing facility, which was included in the e-Propulsion & Drivetrain segment and accounted for $99 million of net sales in the six months ended June 30, 2021 that did not recur in 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $78 million primarily due to the weakening of the Euro and Korean Won relative to the U.S. Dollar. The net increase excluding these items was primarily due to increased demand for the Company’s products, partially offset by the decline in industry production compared to the prior year. The e-Propulsion & Drivetrain Segment Adjusted Operating margin was 7.2% during the six months ended June 30, 2022, down from 10.3% during the six months ended June 30, 2021. The Segment Adjusted Operating margin decrease was primarily due to increased investments in R&D and the net impact of higher commodity and other input costs.

The Fuel Systems segment’s net sales decreased $66 million, or 6%, and Segment Adjusted Operating Income decreased $7 million from the six months ended June 30, 2021. Foreign currencies resulted in a year-over-year decrease in sales of approximately $44 million primarily due to the weakening of the Euro relative to the U.S. Dollar. The net decrease excluding the impact of foreign currencies was primarily due to the decline in industry production compared to the prior year. The Segment Adjusted Operating margin was 9.9% for the six months ended June 30, 2022, compared to 10.0% for the six months ended June 30, 2021.

The Aftermarket segment’s net sales decreased $1 million and Segment Adjusted Operating Income increased $10 million from the six months ended June 30, 2021. Foreign currencies resulted in a year-over-year decrease in sales of approximately $16 million primarily due to the weakening of the Euro relative to the U.S. Dollar. The net increase excluding the impact of foreign currencies was primarily due to pricing and increased demand for the Company’s products. The Aftermarket Segment Adjusted Operating margin was 14.2% for the six months ended June 30, 2022, compared to 12.6% for the six months ended June 30, 2021. The Segment Adjusted Operating margin increase was primarily due to increased pricing.

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FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

The Company maintains various liquidity sources, including cash and cash equivalents and the unused portion of its multi-currency revolving credit agreement. As of June 30, 2022, the Company had liquidity of $3,390 million, comprised of cash and cash equivalent balances of $1,390 million and an undrawn revolving credit facility of $2,000 million. The Company was in full compliance with its covenants under the revolving credit facility and had full access to its undrawn revolving credit facility. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants through at least the next 12 months.

As of June 30, 2022, cash balances of $899 million were held by the Company’s subsidiaries outside the United States. Cash and cash equivalents held by these subsidiaries are used to fund foreign operational activities and future investments, including acquisitions. The majority of cash held outside the United States is available for repatriation. The Company uses its U.S. liquidity primarily for various corporate purposes, including but not limited to debt service, share repurchases, dividend distributions, acquisitions and other corporate expenses.

The Company has a $2.0 billion multi-currency revolving credit facility that includes a feature allowing the Company the ability to increase the facility by $1.0 billion with bank group approval. This facility matures in March 2025. The credit facility agreement contains customary events of default and one key financial covenant, which is a debt-to-EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) ratio. The Company was in compliance with the financial covenant at June 30, 2022. At June 30, 2022 and December 31, 2021, the Company had no outstanding borrowings under this facility.

The Company’s commercial paper program allows the Company to issue up to $2.0 billion of short-term, unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under this program, the Company may issue notes from time to time and use the proceeds for general corporate purposes. The Company had no outstanding borrowings under this program as of June 30, 2022 and December 31, 2021.

The total current combined borrowing capacity under the multi-currency revolving credit facility and commercial paper program cannot exceed $2.0 billion.

In addition to the revolving credit facility, the Company’s universal shelf registration provides the ability to issue various debt and equity instruments subject to market conditions.

On February 9, 2022, April 27, 2022 and July 28, 2022, the Company’s Board of Directors declared quarterly cash dividends of $0.17 per share of common stock. The dividends declared in the first quarter and second quarters were paid on March 15, 2022 and June 15, 2022, respectively. The dividends declared in the third quarter will be paid on September 15, 2022.

From a credit quality perspective, the Company has a credit rating of BBB+ from Fitch Ratings, BBB from Standard & Poor's and Baa1 from Moody's. The current outlook from Moody's and Fitch Ratings is stable. The current outlook from Standard & Poor's is negative. None of the Company's debt agreements require accelerated repayment in the event of a downgrade in credit ratings.

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Cash Flows

Operating Activities

	Six Months Ended June 30,
(in millions)	2022		2021
OPERATING
Net earnings	$	455	$	368
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and tooling amortization	315		350
Intangible asset amortization	50		40
Restructuring expense, net of cash paid	36		59
Stock-based compensation expense	28		27
(Gain) loss on sales of businesses	(26)		7
Deferred income tax benefit	(26)		(99)
Unrealized loss on equity securities	28		276
Loss on debt extinguishment	—		20
Gain on insurance recovery received for property damages	—		(2)
Other non-cash adjustments	(15)		(12)
Net earnings adjustments to reconcile to net cash flows from operations	845		1,034
Retirement plan contributions	(14)		(12)
Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency translation adjustments:
Receivables	(353)		(158)
Inventories	(194)		(260)
Accounts payable and accrued expenses	50		41
Other assets and liabilities	(2)		(23)
Net cash provided by operating activities	$	332	$	622

Net cash provided by operating activities was $332 million and $622 million for the six months ended June 30, 2022 and 2021, respectively. The decrease for the six months ended June 30, 2022, compared with the six months ended June 30, 2021 was primarily due to higher increases in working capital and lower net earnings adjusted for non-cash charges.

Investing Activities

	Six Months Ended June 30,
(in millions)	2022		2021
INVESTING
Capital expenditures, including tooling outlays	$	(331)	$	(342)
Capital expenditures for damage to property, plant and equipment	—		(2)
Payments for businesses acquired, net of cash acquired	(157)		(759)
Proceeds from settlement of net investment hedges, net	28		11
Proceeds from (payments for) investments in equity securities	30		(7)
Proceeds from the sale of business, net	25		—
Proceeds from asset disposals and other, net	17		—
Net cash used in investing activities	$	(388)	$	(1,099)

Net cash used in investing activities was $388 million during the first six months of 2022 compared to $1,099 million during the first six months of 2021. In the first quarter of 2022, the Company acquired Santroll Automotive Components, which was partially offset by proceeds related to the liquidation of the

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Company’s investment in Romeo Power, Inc. and the sale of the Company’s 60% interest in BorgWarner Romeo Power LLC. During the six months ended June 30, 2021, the Company acquired AKASOL. As a percentage of sales, capital expenditures were 4.3% and 4.4% for the six months ended June 30, 2022 and 2021, respectively.

Financing Activities

	Six Months Ended June 30,
(in millions)	2022		2021
FINANCING
Net decrease in notes payable	$	—	$	(6)
Additions to debt	2		1,229
Payments for debt issuance costs	—		(10)
Repayments of debt, including current portion	(6)		(671)
Payments for purchase of treasury stock	(140)		—
Payments for stock-based compensation items	(17)		(14)
Purchase of noncontrolling interest	(59)		(33)
Dividends paid to BorgWarner stockholders	(82)		(81)
Dividends paid to noncontrolling stockholders	(46)		(5)
Net cash (used in) provided by financing activities	$	(348)	$	409

Net cash used in financing activities was $348 million during the first six months of 2022 compared to net cash provided by financing activites of $409 million during the first six months of 2021. Net cash used in financing activities during the first six months of 2022 was primarily related to the $140 million of BorgWarner share repurchases, $57 million paid to settle the AKASOL Squeeze Out and purchase the remaining outstanding shares and $46 million in dividends paid to noncontrolling stockholders.

CONTINGENCIES

In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, general liability and other risks. It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company’s management does not expect that an adverse outcome in any of these commercial and legal claims, actions and complaints that are currently pending will have a material adverse effect on the Company’s results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations or cash flows.

Environmental

The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain state environmental agencies and private parties as potentially responsible parties (“PRPs”) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (“Superfund”) and equivalent state laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 26 such sites as of June 30, 2022 and December 31, 2021. Responsibility for clean-up and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula.

The Company believes that none of these matters, individually or in the aggregate, will have a material adverse effect on its results of operations, financial position or cash flows. Generally, this is because either the estimates of the maximum potential liability at a site are not material or the liability will be

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shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any such matter.

Refer to Note 20, “Contingencies,” to the Condensed Consolidated Financial Statements in Item 1 of this report for further details and information respecting the Company’s environmental liability.

New Accounting Pronouncements

Refer to Note 2, “New Accounting Pronouncements,” to the Condensed Consolidated Financial Statements in Item 1 of this report for a detailed description of new applicable accounting pronouncements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the information concerning the Company’s exposures to interest rate risk or commodity price risk as stated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Foreign currency exchange rate risk is the risk that the Company will incur economic losses due to adverse changes in foreign currency exchange rates. Currently, the Company’s most significant currency exposures relate to the Brazilian Real, British Pound, Chinese Renminbi, Euro, Polish Zloty, Singapore Dollar, Korean Won, Mexican Peso, Thailand Baht and Turkish Lira. The Company mitigates its foreign currency exchange rate risk by establishing local production facilities and related supply chain participants in the markets it serves, by invoicing customers in the same currency as the source of the products and by funding some of its investments in foreign markets through local currency loans. The Company also monitors its foreign currency exposure in each country and implements strategies to respond to changing economic and political environments. In addition, the Company regularly enters into forward currency contracts, cross-currency swaps and foreign currency denominated debt designated as net investment hedges to reduce exposure to translation exchange rate risk. As of June 30, 2022 and December 31, 2021, the Company recorded a deferred gain of $221 million and $10 million, respectively, both before taxes, for designated net investment hedges within accumulated other comprehensive income (loss).

The significant foreign currency translation adjustments during the six months ended June 30, 2022 and 2021 are shown in the following tables, which provide the percentage change in U.S. dollar against the respective currencies and the approximate impacts of these changes recorded within other comprehensive income (loss) for the respective periods.

(in millions, except for percentages)	Three Months Ended June 30, 2022				Six Months Ended June 30, 2022
Chinese renminbi	(5)	%	$	(138)	(5)	%	$	(132)
Euro	(5)	%	$	(44)	(8)	%	$	(74)
Korean won	(6)	%	$	(44)	(8)	%	$	(54)
British pound	(7)	%	$	(26)	(10)	%	$	(37)
(in millions, except for percentages)	Three Months Ended June 30, 2021				Six Months Ended June 30, 2021
---	---	---	---	---	---	---	---	---
Chinese renminbi	2	%	$	32	1	%	$	24
Brazilian real	12	%	$	23	5	%	$	9
Euro	1	%	$	14	(3)	%	$	(20)
Korean won	—	%	$	(7)	(5)	%	$	(34)

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Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective. There have been no changes in internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The Company is subject to a number of claims and judicial and administrative proceedings (some of which involve substantial amounts) arising out of the Company’s business or relating to matters for which the Company may have a contractual indemnity obligation.

Purported Derivative Lawsuit

On December 15, 2020, a putative derivative lawsuit captioned Nyiradi, et al. v. Michas, et al., Case 1:20-cv-01700, was filed in the United States District Court for the District of Delaware against certain current and former directors and former officers of BorgWarner. On April 22, 2021, the plaintiffs dismissed the case without prejudice, without any payment by the Company. On June 9, 2021, a different stockholder delivered a litigation demand to the Board of Directors (the “Board”) under Delaware law that included similar allegations and demanded that the Board conduct an investigation and commence a civil action against appropriate directors and officers. On January 20, 2022, the parties agreed to a memorandum of understanding (the “MOU”) detailing, among other things, mutually agreed upon corporate governance reforms that the Company would implement.

Following the agreement to the MOU by the parties, on May 23, 2022 stockholders Don David Price, Maria Nyiradi, and Peter Wahler (the “Plaintiffs”) filed a derivative action with the United States District Court for the Eastern District of Michigan captioned Price, et al. v. Michas, et. Al. (E.D. Mich.). On June 2, 2022, the Company and the Plaintiffs filed with the court an agreement to settle the derivative action (the “Stipulation of Settlement”), which remains subject to court approval. As part of Stipulation of Settlement, the Company: (i) agreed to adopt certain governance reforms, and (ii) agreed to attorneys’ fees and expenses in an amount under $1 million. On June 22, 2022, the court issued an order granting preliminary approval of the proposed Stipulation of Settlement; additionally, the court scheduled a hearing on September 23, 2022 to consider final approval of the proposed Stipulation of Settlement. Until the court issues a final order approving the Stipulation of Settlement, the Company cannot provide assurance that the derivative action will be settled on the terms set forth herein or at all.

Refer to Note 20, “Contingencies,” to the Condensed Consolidated Financial Statements of this Form 10-Q for a discussion of environmental and other litigation which is incorporated herein by reference.

Item 1A. Risk Factors

During the six months ended June 30, 2022, there have been no material changes from the risk factors disclosed in the Company’s Annual Report on the Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2020, the Company’s Board of Directors authorized the purchase of up to $1 billion of the Company’s common stock, which replaced the previous share repurchase program. As of June 30, 2022, the Company has repurchased $356 million of common stock under this repurchase program. Shares purchased under this authorization may be repurchased in the open market at prevailing prices and at times and in amounts to be determined by management as market conditions and the Company's capital position warrant. The Company may use Rule 10b5-1 and 10b-18 plans to facilitate share repurchases. Repurchased shares will be deemed common stock held in treasury and may subsequently be reissued.

Employee transactions include restricted stock withheld to offset statutory minimum tax withholding that occurs upon vesting of restricted stock. The BorgWarner Inc. 2018 Stock Incentive Plan provides that the withholding obligations be settled by the Company retaining stock that is part of the award. Withheld

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shares will be deemed common stock held in treasury and may subsequently be reissued for general corporate purposes.

The following table provides information about the Company’s purchases of its equity securities that are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) during the quarter ended June 30, 2022:

Issuer Purchases of Equity Securities
Period	Total number of shares purchased	Average price per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under plans or programs (in millions)
April 1, 2022 - April 30, 2022
Common Stock Repurchase Program	—	$	—	—	$	744
Employee transactions	14,430	$	39.32	—
May 1, 2022 - May 31, 2022
Common Stock Repurchase Program	1,559,493	$	37.65	1,559,493	$	685
Employee transactions	—	$	—	—
June 1, 2022 - June 30, 2022
Common Stock Repurchase Program	1,141,336	$	36.18	1,141,336	$	644
Employee transactions	1,060	$	35.12	—

Item 6. Exhibits

Exhibit 3.1	Composite Restated Certificate of Incorporation of the Company, as amended through July 22, 2022.*
Exhibit 10.4	Form of Change of Control Employment Agreement entered into by the Company and each of Tonit Calaway, Stefan Demmerle, Brady Ericson, Joe Fadool, Paul Farrell, Davide Girelli, Frederic Lissalde, Kevin Nowlan, Volker Weng, anda2022formofchangeofcontrol.htmTania Wingfield.*
Exhibit 31.1	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.*
Exhibit 31.2	Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer.*
Exhibit 32.1	Section 1350 Certifications.*
Exhibit 101.INS	Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.*
Exhibit 101.SCH	Inline XBRL Taxonomy Extension Schema Document.*
Exhibit 101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
Exhibit 101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.*
Exhibit 101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.*
Exhibit 101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
Exhibit 104.1	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*

____________________________________

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, and the undersigned also has signed this report in his capacity as the Registrant’s Controller (Principal Accounting Officer).

	BorgWarner Inc.
	(Registrant)
By	/s/ Daniel R. Etue
	(Signature)
	Daniel R. Etue
	Vice President and Controller
	(Principal Accounting Officer)

Date: August 3, 2022

56

Document

EXHIBIT 3.1

RESTATED CERTIFICATE OF INCORPORATION OF BORGWARNER INC.

(as amended through July 22, 2022)

(originally incorporated on May 4, 1987 under the name BW - Automotive Corporation)

ARTICLE I

NAME

The name of the corporation (hereinafter called the “Corporation”) is BorgWarner Inc.

ARTICLE II

REGISTERED OFFICE

The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.

ARTICLE III

PURPOSE

The purpose or purposes for which the Corporation is organized are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV

CAPITAL STOCK

SECTION 1.The total number of shares of all classes of stock which the Corporation shall have the authority to issue is 420,000,000 shares, consisting of 390,000,000 shares of Common Stock, par value $0.01 per share (“Common Stock”), 25,000,000 shares of Non-Voting Common Stock, par value $0.01 per share (“Non-Voting Common Stock” and, together with the Common Stock, the “Junior Stock”), and 5,000,000 shares of Preferred Stock, par value $0.01 per share (“Preferred Stock”). The Board of Directors shall have authority by resolution to issue the shares of Preferred Stock from time to time on such terms as it may determine and to divide the Preferred Stock into one or more series and, in connection with the creation of any such series, to determine and fix by the resolution or resolutions providing for the issuance of shares thereof:

(a)    the distinctive designation of such series, the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors, and the stated value thereof, if different from the par value thereof;

(b)    the dividend rate, the times of payment of dividends on the shares of such series, whether dividends shall be cumulative, and, if so, from what date or dates, and the preference or relation which such dividends will bear to the dividends payable on any shares of stock of any other class or any other series of this class;

(c)    the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed;

(d)    whether or not the shares of such series shall be entitled to the benefit of a retirement or sinking fund to be applied to the purchase or redemption of such shares and, if so entitled, the amount of such fund and the terms and provisions relative to the operation thereof;

(e)    whether or not the shares of such series shall be convertible into, or exchangeable for, any other shares of stock of the Corporation or any other securities and, if so convertible or exchangeable, the conversion price or prices, or the rates of exchange, and any adjustments thereof, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

(f)    the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets, of the Corporation;

(g)    whether or not the shares of such series shall have priority over or parity with or be junior to the shares of any other class or series in any respect, or shall be entitled to the benefit of limitations restricting (i) the creation of indebtedness of the Corporation, (ii) the issuance of shares of any other class or series having priority over or being on a parity with the shares of such series in any respect, or (iii) the payment of dividends on, the making of other distributions in respect of, or the purchase or redemption of shares of any other class or series on a parity with or ranking junior to the shares of such series as to dividends or assets, and the terms of any such restrictions, or any other restriction with respect to shares of any other class or series on a parity with or ranking junior to the shares of such series in any respect;

(h)    whether such series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights, which may be general or limited; and

(i)    any other powers, designations, preferences and relative, participating, optional, or other special rights of such series, and the qualifications, limitations or restrictions thereof, to the full extent now or hereafter permitted by law.

The powers, designations, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.

SECTION 2.     A statement of the powers, designations, preferences, rights, qualifications, limitations and restrictions in respect of the shares of Junior Stock is as follows:

(1)    The Board of Directors of the Corporation may cause dividends to be paid to the holders of shares of Junior Stock out of funds legally available for the payment of dividends by declaring an amount per share as a dividend. When and as dividends or other distributions are declared, other than dividends declared with respect to the Preferred Stock, whether payable in cash, in property or in shares of stock of the Corporation, other than in shares of Common Stock or Non-Voting Common Stock, the holders of Common Stock and the holders of Non-Voting Common Stock shall be entitled, to the exclusion of the holders of Preferred Stock, to share equally, share for share, in such dividends or other distributions. No dividends or other distributions shall be declared or paid in shares of Common Stock or Non-Voting Common Stock or options, warrants or rights to acquire such stock or securities convertible into or exchangeable for shares of such stock, except dividends or other distributions payable ratably according to the number of shares of Junior Stock held by them, (x) in shares of, or options, warrants or rights to acquire or securities convertible into or exchangeable for, Common Stock to holders of that class of stock and (y) in shares of, or options, warrants or rights to acquire or securities convertible into or exchangeable for, Non-Voting Common Stock to holders of that class of stock.

(2)    In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, after payment shall have been made to the holders of Preferred Stock of the full amount to which they shall be entitled, the holders of Junior Stock shall be entitled, to the exclusion of the holders of Preferred Stock, to share, ratably according to the number of shares of Junior Stock held by them, in all remaining assets of the Corporation available for distribution to its stockholders.

(3)    (i)    Except as otherwise provided in this Restated Certificate of Incorporation or by applicable law, the holders of Common Stock shall be entitled to vote on each matter on which the stockholders of the Corporation shall be entitled to vote, and each holder of Common Stock shall be entitled to one vote for each share of such stock held by him.

(ii)    The holders of Non-Voting Common Stock shall not have any voting rights except as provided by applicable law and except that the holders of the Non-Voting Common Stock shall be entitled to vote as a separate class on any amendment to this paragraph (3) (ii) and on any amendment, repeal or modification of any provision of this Restated Certificate of Incorporation that adversely affects the powers, preferences or special rights of holders of Non-Voting Common Stock.

(4)    (i)    Upon compliance with the provisions of paragraph (4) (iii) below, any Regulated Stockholder (as defined below) shall be entitled to convert, at any time and from time to time, any or all of the shares of Common Stock held by such stockholder into the same number of shares of Non-Voting Common Stock. The term “Regulated Stockholder” shall mean (a) any stockholder that is subject to the provisions of Regulation Y of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 225) or any successor to such regulation (“Regulation Y”), and that holds shares of Junior Stock originally issued pursuant to an Investor Stock Subscription Agreement dated as of July 27, 1987 between the Corporation and the investors listed therein, or

shares issued upon conversion(s) of such shares, so long as such stockholder shall hold, and only with respect to, such shares of Junior Stock or shares issued upon conversion(s) of such shares, (b) any Affiliate (as defined below) of any such Regulated Stockholder that is a transferee of any shares of Junior Stock of the Corporation, so long as such Affiliate shall hold, and only with respect to, such shares of Junior Stock or shares issued upon conversion(s) of such shares and (c) any individual, partnership, joint venture, corporation, association, trust, or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof (a “Person”) (x) to which such Regulated Stockholder or any of its Affiliates has transferred such shares, so long as such transferee shall hold, and only with respect to, any shares transferred by such stockholder or Affiliate or any shares issued upon conversion(s) of such shares, and (y) which is, or any affiliate of which is, subject to the provisions of Regulation Y. As used in this Restated Certificate of Incorporation, the term “Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purpose of this definition, the term “control” (including with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

(ii)    (A)    Upon the occurrence (or the expected occurrence as described in subparagraph (C) below) of any Conversion Event and compliance with the provisions of paragraph (4) (iii) below, each holder of shares of Non-Voting Common Stock shall be entitled to convert into the same number of shares of Common Stock any or all of such holder’s shares of Non-Voting Common Stock being (or expected to be) distributed, disposed of or sold by such holder in connection with such Conversion Event.

(B)    For purposes of this paragraph (4)(ii), a “Conversion Event” shall mean (a) any public offering or public sale of securities of the Corporation (including a public offering registered under the Securities Act of 1933 and a public sale pursuant to Rule 144 of the Securities and Exchange Commission or any similar rule then in force), (b) any sale of securities of the Corporation to a Person or group (within the meaning of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) of Persons if, after such sales, such Person or group of Persons in the aggregate would own or control securities which possess in the aggregate the ordinary voting power to elect a majority of the Corporation’s directors (provided that such sale has been approved by the Corporation’s Board of Directors or a committee thereof), (c) any sale of securities of the Corporation to a Person or group (within the meaning of the 1934 Act) of Persons if, after such sale, such Person or group of Persons in the aggregate would own or control securities of the Corporation (excluding any Non-Voting Common Stock being converted and disposed of in connection with such Conversion Event) which possess in the aggregate the ordinary voting power to elect a majority of the Corporation’s directors, (d) any sale of securities of the Corporation to a Person or group (within the meaning of the 1934 Act) of Persons if, after such sale, such Person or group of Persons would not, in the aggregate, own, control or have the right to acquire more than two percent (2%) of the outstanding securities of any class of voting securities of the Corporation, and (e) a merger, consolidation or similar transaction involving the Corporation if, after such transaction, a Person or group (within the meaning of the 1934 Act) of Persons in the aggregate would own or control securities which possess in the aggregate the ordinary voting power to elect a majority of the surviving corporation’s directors (provided that the transaction has been approved by the Corporation’s Board of Directors or a committee thereof).

(C)    Each holder of Non-Voting Common Stock shall be entitled to convert shares of Non-Voting Common Stock in connection with any Conversion Event if such holder reasonably believes that such Conversion Event will be consummated, and a written request for conversion from any holder of Non-Voting Common Stock to the Corporation, stating such holder’s reasonable belief that a Conversion Event shall occur, shall be conclusive and shall obligate the Corporation to effect such conversion in a timely manner so as to enable each such holder to participate in such Conversion Event. The Corporation will not cancel the shares of Non-Voting Common Stock so converted before the tenth day following such Conversion Event and will reserve such shares until such tenth day for reissuance in compliance with the next sentence. If any shares of Non-Voting Common Stock are converted into shares of Common Stock in connection with a Conversion Event and such shares of Common Stock are not actually distributed, disposed of or sold pursuant to such Conversion Event, such shares of Common Stock shall be promptly converted back into the same number of shares of Non-Voting Common Stock.

(iii)    (a)    Each conversion of shares of Junior Stock of the Corporation into shares of another class of Junior Stock of the Corporation shall be effected by the surrender of the certificate or certificates evidencing the shares of the class of stock to be converted (the “Converting Shares”) at the principal office of the Corporation (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of Junior Stock) at any time during its usual business hours, together with written notice by the holder of such Converting Shares, (1) stating that the holder desires to convert the Converting Shares evidenced by such certificate or certificates into an equal number of shares of the class into which such shares may be converted (the “Converted Shares”), and (2) giving the name or names (with addresses) and denominations in which the certificate or certificates evidencing the Converted Shares shall be issued, and instructions for the delivery thereof. The Corporation shall promptly notify each Regulated Stockholder of record of its receipt of such notice. Except as otherwise provided in paragraph 4(iii)(b), upon receipt of the notice described in the first sentence of this paragraph (4)(iii)(a), together with the certificate or certificates evidencing the Converting Shares, the

Corporation shall be obligated to, and shall, issue and deliver in accordance with such instructions the certificate or certificates evidencing the Converted Shares issuable upon such conversion and a certificate (which shall contain such legends, if any, as were set forth on the surrendered certificate or certificates) representing any shares which were represented by the certificate or certificates surrendered to the Corporation in connection with such conversion but which were not Converting Shares and, therefore, were not converted; provided , however , that if such conversion is subject to paragraph 4(iii)(d) below, the Corporation shall not issue said certificate or certificates until the expiration of the Deferral Period referred to therein. Such conversion, to the extent permitted by law, shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates shall have been surrendered and such written notice shall have been received by the Corporation, and at such time the rights of the holder of such Converting Shares as such holder shall cease (except that in the case of a conversion subject to paragraph (4)(iii)(d) below, the conversion shall be deemed effective upon expiration of the Deferral Period referred to therein), and the person or persons in whose name or names any certificate or certificates evidencing the Converted Shares are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the Converted Shares. The Corporation shall be entitled to rely conclusively on such written notice as to the truth of the statements made therein, and the Corporation shall not be liable to any person with respect to any action taken or omitted to be taken by it in connection with such conversion in reliance on the statements made in such written notice.

(b)    Notwithstanding any provision of paragraph (4)(iii)(a) to the contrary, the Corporation shall not be required to record the conversion of, and No holder of shares shall be entitled to convert, shares of Non-Voting Common Stock into shares of Common Stock unless such conversion is permitted under applicable law; provided, however, that the Corporation shall be entitled to rely without independent verification upon the representation of any holder that the conversion of shares by such holder is permitted under applicable law, and in No event shall the Corporation have any liability to any such holder or any third party arising from any such conversion whether or not permitted by applicable law.

(c)    Upon the issuance of the Converted Shares in accordance with this subsection (4), such shares shall be deemed to be duly authorized, validly issued, fully paid and non-assessable.

(d)    The Corporation shall not convert or directly or indirectly redeem, purchase or otherwise acquire any shares of Common Stock or take any other action affecting the voting rights of such shares, if such action will increase the percentage of outstanding voting securities known by the Corporation to be owned or controlled by any Regulated Stockholder (other than the stockholder which requested that the Corporation take such action, or which otherwise waives in writing its rights under this paragraph (d)) unless the Corporation gives written notice (the “First Notice”) of such action to each such Regulated Stockholder. The Corporation will defer making any conversion, redemption, purchase or other acquisition or taking any such other action for a period of 30 days (the “Deferral Period”) after giving the First Notice in order to allow each such Regulated Stockholder to determine whether it wishes to convert or take any other actions with respect to the Junior Stock it owns, controls or has the power to vote, and if any such Regulated Stockholder then elects to convert any shares of Common Stock, it shall notify the Corporation in writing within 20 days of the issuance of the First Notice, in which case the Corporation (i) shall defer taking the pending action until the end of the Deferral Period, (ii) shall promptly notify from time to time each other Regulated Stockholder holding shares of which it has knowledge of each proposed conversion and the proposed transactions, and (iii) effect the conversion requested by all Regulated Stockholders in response to the notices issued pursuant to this paragraph (4)(iii)(d) at the end of the Deferral Period or as soon thereafter as is reasonably practicable.

(e)    The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Common Stock and Non-Voting Common Stock or its treasury shares, solely for the purpose of issuance upon conversion of shares of Common Stock or Non-Voting Common Stock, such number of shares of such class as shall then be issuable upon the conversion of all outstanding shares of Common Stock and Non-Voting Common Stock.

(f)    Shares of Common Stock or Non-Voting Common Stock that are converted into shares of any other class shall not be reissued, except that (x) shares of Common Stock that are converted into shares of Non-Voting Common Stock may be reissued upon the conversion of such shares of Non-Voting Common Stock and (y) shares of Non-Voting Common Stock that are converted into shares of Common Stock may be reissued upon the conversion of such shares of Common Stock.

(g)    The issuance of certificates evidencing shares of any class of Junior Stock upon conversion of shares of any other class of Junior Stock pursuant to this Article IV shall be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion; provided, however, the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of record of the Junior Stock converted.

(iv)    If the Corporation shall in any manner subdivide (by stock split, stock dividend or otherwise) or combine (by reverse stock split or otherwise) the outstanding shares of any of the Common Stock or the Non-Voting Common Stock, the outstanding shares of the other classes (or series) of Junior Stock shall be proportionately subdivided or combined, as the case may be, and effective provision shall be made for the protection of all conversion rights hereunder. In case of any reorganization, reclassification or change of shares of Junior Stock (other than a change in par value, or from par value to No par value as a result of a subdivision or combination), or in case of any consolidation of the Corporation with one or more other corporations or a merger of the Corporation with another corporation (other than a consolidation or merger in which the Corporation is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock), or in case of any sale, lease or other disposition to another corporation (other than a wholly owned subsidiary of the Corporation) of all or substantially all the assets of the Corporation, each holder of a share of Junior Stock, irrespective of class (or series), shall have the right at any time thereafter, so long as the conversion right hereunder with respect to such shares of Junior Stock would have existed had such event not occurred, to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, change, consolidation, merger, sale, lease or other disposition by a holder of the number of shares of the class of Junior Stock into which such shares of Junior Stock might have been converted immediately prior to such reorganization, reclassification, change, consolidation, merger, sale, lease or other disposition. In the event of such a reorganization, reclassification, change, consolidation, merger, sale, lease or other disposition, effective provision shall be made in the certificate of incorporation of the resulting or surviving corporation or otherwise for the protection of the conversion rights of the shares of Junior Stock of each class and series that shall be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of shares of Junior Stock into which such Junior Stock might have been converted immediately prior to such event.

ARTICLE V

BOARD OF DIRECTORS

SECTION 1.     The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

SECTION 2.     Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Restated Certificate of Incorporation to elect directors under specified circumstances, the number of directors of the Corporation shall be fixed, and may be increased or decreased from time to time, in such a manner as may be prescribed by the By-Laws.

SECTION 3.     The directors, other than those who may be elected by the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Restated Certificate of Incorporation, shall be divided into three classes, as nearly equal in number as possible. Members of each class shall hold office until their successors are elected and qualified. Regardless of anything to the contrary in this Restated Certificate of Incorporation, commencing with the annual meeting of stockholders that is held in calendar year 2015 (the “2015 Annual Meeting”), the directors shall be elected annually for terms of one year, except that any director in office at the 2015 Annual Meeting whose term expires at the annual meeting of stockholders held in calendar year 2016 or calendar year 2017 shall continue to hold office until the end of the term for which such director was elected and until such director’s successor shall have been elected and qualified. At the annual meeting of stockholders in the calendar year 2017 and each annual meeting occurring thereafter, all directors shall be elected for terms expiring at the next annual meeting of stockholders and until such directors’ successors shall have been elected and qualified.

SECTION 4.     Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Restated Certificate of Incorporation to elect directors under specified circumstances, any director may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of a majority of the voting power of the then outstanding Voting Stock, voting together as a single class. For the purpose of this Restated Certificate of Incorporation, “Voting Stock” shall mean the shares of capital stock of the Corporation entitled to vote generally in the election of directors.

SECTION 5.     Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Restated Certificate of Incorporation to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

SECTION 6.     Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of a majority of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article V.

ARTICLE VI

MAKING AND AMENDMENT OF BY-LAWS

SECTION 1.     Power of Directors. The Board of Directors, in furtherance and not in limitation of the powers conferred by the laws of the State of Delaware and by this Restated Certificate of Incorporation, is expressly authorized to make, amend or repeal the By-Laws of the Corporation; provided, however, that any such making, amendment or repeal must be approved by resolution of the Board of Directors adopted by the affirmative vote of not less than a majority of the total number of directors.

SECTION 2.     By-Laws shall not be made, repealed, altered, amended or rescinded by the stockholders of the Corporation except by the affirmative vote of the holders of a majority of the voting power of the then outstanding Voting Stock, voting together as a single class.

ARTICLE VII

MEETINGS

SECTION 1.     Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Restated Certificate of Incorporation to elect directors under specific circumstances, all actions required or permitted to be taken by stockholders at an annual or special meeting of stockholders of the Corporation may be taken by the written consent of the holders of capital stock of the Corporation entitled to vote; provided that No such action may be taken except in accordance with the provisions of this Article VII, the Corporation’s By-Laws and applicable law.

(a) Record Date. The record date for determining such stockholders entitled to consent to corporate action in writing without a meeting shall be as fixed by the Board of Directors or as otherwise established under this Article VII. Any holder of Common Stock of the Corporation seeking to have the stockholders authorize or take corporate action by Consent shall, by written request addressed to the secretary of the Corporation and delivered to the Corporation’s principal executive offices and signed by holders of record at the time such request is delivered representing at least 10 percent (10%) of the outstanding shares of Common Stock of the Corporation, request that a record date be fixed for such purpose. The written request must contain the information set forth in Section 1(b) of this Article VII. Following delivery of the request, the Board of Directors shall, by the later of (x) 20 days after delivery of a valid request to set a record date and (y) 5 days after delivery of any information required by the Corporation to determine the validity of the request for a record date or to determine whether the action to which the request relates may be effected by Consent under Section 1(b)(ii) of this Article VII, determine the validity of the request and whether the request relates to an action that may be taken by Consent and, if appropriate, adopt a resolution fixing the record date for such purpose. The record date for such purpose shall be no more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date such resolution is adopted. If a request complying with the second and third sentences of this Section 1(a) has been delivered to the secretary of the Corporation but no record date has been fixed by the Board of Directors by the date required by the preceding sentence, the record date shall be the first date on which a signed Consent relating to the action taken or proposed to be taken by Consent is delivered to the Corporation in the manner described in Section 1(f) of this Article VII; provided that, if prior action by the Board of Directors is required under the provisions of Delaware law, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

(b) Request Requirements Any request required by Section 1(a) of this Article VII (i) must be delivered by the holders of record of at least 10% of the outstanding shares of common stock of the Corporation, who shall not revoke such request and who shall continue to own not less than 10% of the outstanding shares of common stock of the Corporation through the date of delivery of Consents signed by a sufficient number of stockholders to authorize or take such action; (ii) must contain an agreement to solicit Consents in accordance with Section 1(d) of this Article VII, (iii) must describe the action proposed to be taken by written consent of stockholders, (iv) must contain (1) such information and representations, to the extent applicable, then required by Section 7 of the Corporation’s By-Laws and (2) the text of the proposed action to be taken (including the text of any resolutions to be adopted by Consent), and (v) must include documentary evidence that the requesting stockholder(s) own in the aggregate not less than 10% of the outstanding shares of common stock of the Corporation as of the date of such written request to the secretary; provided, however, that if the stockholder(s) making the request are not the beneficial owners of the shares representing at least 10% of the outstanding shares of common stock of the Corporation, then to be valid, the request must also include documentary evidence (or, if not simultaneously provided with the request, such documentary evidence must be delivered to the secretary within ten business days after the date on which the request is delivered to the secretary) that the beneficial owners on whose behalf the request is made beneficially own at least 10% of the outstanding shares of common stock of the Corporation as of the date on which such request is delivered to the secretary. If the action proposes to elect directors by written consent, the written request for a record date must also contain the information then required by Section 7 and any other applicable sections of the Corporation’s By-Laws. The Corporation may require the stockholder(s) submitting such request to furnish such other information as may be reasonably requested by the Corporation. Any requesting stockholder may revoke his, her or its request at any time by written revocation delivered to the secretary of the Corporation at the Corporation’s principal executive offices. Any disposition by a requesting stockholder of any shares of common stock of the Corporation (or of beneficial ownership of such shares by the beneficial owner on whose behalf the request was made) after the date of the request, shall be deemed a revocation of the request with respect to such shares, and each requesting stockholder and the applicable beneficial owner shall certify to the secretary of the Corporation on the day prior to the record date set for the action by written consent as to whether any such disposition has occurred. If the unrevoked requests represent in the aggregate less than 10% of the outstanding shares of common stock of the Corporation, the Board of Directors, in its discretion, may cancel the action by written consent.

(c) Actions Which May Be Taken by Written Consent. Stockholders are not entitled to act by Consent if (i) the record date request does not comply with this Article VII or the Corporation’s By-Laws; (ii) the action relates to an item of business that is not a proper subject for stockholder action under applicable law; (iii) the request for a record date for such action is received by the Corporation during the period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting; (iv) an identical or substantially similar item of business (as determined by the Board of Directors of the Corporation in its reasonable determination, which determination shall be conclusive and

binding on the Corporation and its stockholders, (a “Similar Item”)), was presented at a meeting of stockholders held not more than 12 months before the request is received by the secretary of the Corporation; (v) a Similar Item consisting of the election or removal of directors was presented at a meeting of stockholders held not more than 90 days before the request is received by the secretary of the Corporation (and, for purposes of this clause, the election or removal of directors shall be deemed a “Similar Item” with respect to all items of business involving the election or removal of directors), (vi) a Similar Item is included in the Corporation’s notice of meeting as an item of business to be brought before an annual or special stockholders meeting that has been called but not yet held or that is called to be held within 90 days after the request is received by the secretary of the Corporation; or (vii) such record date request was made in a manner that involved a violation of Regulation 14A under the Securities Exchange Act of 1934 or other applicable law. For purposes of this Section 1(c), the nomination, election or removal of directors shall be deemed to be a Similar Item with respect to all actions involving the nomination, election or removal of directors, changing the size of the Board of Directors and filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors.

(d) Manner of Consent Solicitation . Holders of common stock of the Corporation may take action by written consent only if Consents are solicited from all holders of common stock of the Corporation entitled to vote on the matter and in accordance with applicable law.

(e) Date of Consent . Every Consent purporting to take or authorize the taking of corporate action must bear the date of signature of each stockholder who manually signs the Consent, and No Consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated Consent delivered in the manner required by Section 1(f) of this Article VII and not later than 120 days after the record date, Consents signed by a sufficient number of stockholders to take such action are so delivered to the Corporation.

(f) Delivery of Consents. No Consents may be dated or delivered to the Corporation or its registered office in the State of Delaware until 60 days after the delivery of a valid request to set a record date. Consents must be delivered to the Corporation by delivery to its registered office in the State of Delaware or its principal place of business. Delivery must be made by hand or by certified or registered mail, return receipt requested. The secretary of the Corporation shall provide for the safe-keeping of such Consents and any related revocations and shall promptly designate one or more persons, who shall not be members of the Board of Directors, to serve as inspectors (“Inspectors”) with respect to such Consents. The Inspectors shall promptly conduct a ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the action to be taken by written consent as the secretary of the Corporation deems necessary or appropriate, including, without limitation, whether the stockholders of a number of shares having the requisite voting power to authorize or take the action specified in Consents have given consent. If after such investigation the Inspectors shall determine that the action purported to have been taken is duly authorized by the Consents, that fact shall be certified on the records of the Corporation kept for the purpose of recording the proceedings of meetings of stockholders and the Consents shall be filed in such records. In conducting the investigation required by this section, the Inspectors of the Corporation may, at the expense of the Corporation, retain special legal counsel and any other necessary or appropriate professional advisors as such person or persons may deem necessary or appropriate and, to the fullest extent permitted by law, shall be fully protected in relying in good faith upon the opinion of such counsel or advisors.

(g) Effectiveness of Consent . No action may be taken by the stockholders by Consent except in accordance with this Article VII. If the Board of Directors shall determine that any request to fix a record date was not properly made in accordance with, or relates to an action that may not be effected by Consent pursuant to, this Article VII, or the stockholder or stockholders seeking to take such action do not otherwise comply with this Article VII, then the Board of Directors shall not be required to fix a record date and any such purported action by Consent shall be null and void to the fullest extent permitted by applicable law. No Consent shall be effective until such date as the Inspectors certify to the Corporation that the Consents delivered to the Corporation in accordance with paragraph (vi) of this Article VII, represent at least the minimum number of votes that would be necessary to take the corporate action at a meeting at which all shares entitled to vote thereon were present and voted, in accordance with Delaware law and this Certificate of Incorporation.

(h) Challenge to Validity of Consent . Nothing contained in this Article VII shall in any way be construed to suggest or imply that the Board of Directors of the Corporation or any stockholder shall not be entitled to contest the validity of any Consent or related revocations, whether before or after such certification by the Inspectors, as the case may be, or to prosecute or defend any litigation with respect thereto.

(i) Board-solicited Stockholder Action by Written Consent. Notwithstanding anything to the contrary set forth above, (x) none of the foregoing provisions of this Article VII shall apply to any solicitation of stockholder action by written consent by or at the direction of the Board of Directors and (y) the Board of Directors shall be entitled to solicit stockholder action by written consent in accordance with applicable law.

SECTION 2. Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Restated Certificate of Incorporation to elect directors under specified circumstances, special meetings of the stockholders of the Corporation may be called by (i) the Board of Directors pursuant to a resolution approved by a majority of the total number of directors or by any person or committee expressly so authorized by the Board of Directors pursuant to a resolution approved by a majority of the total number of directors and, (ii) subject to the provisions of the Corporation’s By-Laws, a special meeting of the stockholders shall be called by the Board of Directors upon written request, of the holders of record of at least twenty percent (20%) of the voting power of all outstanding shares of Common Stock entitled to vote at such meeting, such voting power to be calculated and determined in the manner specified, and with any limitations as may be set forth, in the Corporation’s By-Laws.

SECTION 3. Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of a majority of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article VII.

ARTICLE VIII

ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS

A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. Any amendment or repeal of this Article VIII shall not adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such amendment or repeal.

ARTICLE IX

INDEMNIFICATION

SECTION 1.     Parties and Conduct Within Coverage . To the extent permitted by Delaware law from time to time in effect, and subject to the provisions of Section 2 of this Article, the Corporation shall indemnify (i) any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (“Affiliated Indemnitee”), and (ii) any person who is the lawful spouse of an Affiliated Indemnitee at the time such action, suit or proceeding is threatened or commenced against such Affiliated Indemnitee, who was or is a party or is threatened to be made a party to any such action, suit or proceeding solely by reason of the fact that he or she is the spouse of an Affiliated Indemnitee and who is represented by the same counsel as the Affiliated Indemnitee in such action, suit or proceeding (“Eligible Spouse”), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if such Affiliate Indemnitee acted in good faith or in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had No reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had unreasonable cause to believe that this conduct was unlawful.

SECTION 2.     Determinations. Any indemnification under Section 1 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of an Affiliated Indemnitee or Eligible Spouse is proper in the circumstances because the Affiliated Indemnitee has met the applicable standard of conduct set forth in Section 1. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding or (2) if such a quorum is not obtainable and a quorum of disinterested directors so directs, by independent legal counsel (compensated by the Corporation) in a written opinion, or (3) by the stockholders.

SECTION 3.     Successful Defense . If an Affiliated Indemnitee or Eligible Spouse has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 of this Article, or with respect to any claim, issue or matter therein (to the extent that a portion of his or her expenses can

be reasonably allocated thereto), he or she can be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

SECTION 4. Advances . Expenses incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding, or the threat thereof, may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors, whether a disinterested quorum exists or not, upon receipt of an undertaking by or on behalf of the Affiliated Indemnitee or, as applicable, an Eligible Spouse, to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article.

SECTION 5.     Provisions Not Exclusive. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which an Affiliated Indemnitee or Eligible Spouse may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to the action in an Affiliated Indemnitee’s official capacity and as to action in another capacity while holding such office, and shall continue to an Affiliated Indemnitee (and his or her Eligible Spouse) who has ceased to be a director, officer, employee or agent of the Corporation and shall inure to the benefit of the heirs, executors and administrators of an Affiliated Indemnitee or Eligible Spouse.

SECTION 6. Insurance . The Corporation may purchase and maintain insurance on behalf of any Affiliated Indemnitee or Eligible Spouse against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether nor not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article or of Section 145 of the General Corporation Law of the State of Delaware.

ARTICLE X

EVALUATION OF CERTAIN ACQUISITION PROPOSALS

The Board of Directors of the Corporation, when evaluating any proposal from another party to (a) make a tender offer for equity securities of the Corporation; (b) merge or consolidate the Corporation with another corporation; or (c) purchase or otherwise acquire substantially all of the properties and assets of the Corporation, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its stockholders, give due consideration to all relevant factors, including, without limitation, the social and economic effects on the employees, customers, suppliers and other constituents of the Corporation and its subsidiaries and on the communities in which they operate or are located.

ARTICLE XI

AMENDMENTS

Except as may be expressly provided in this Restated Certificate of Incorporation, the Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation or any certificate of designation of any series of Preferred Stock, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article XI.

Document

Exhibit 10.4

Privileged & Confidential

[AMENDED AND RESTATED] CHANGE OF CONTROL EMPLOYMENT AGREEMENT

AGREEMENT by and between BorgWarner Inc., a Delaware corporation (the “Company”) and _____________ (the “Executive”) dated as of the 21st of June 2022.

WHEREAS, the Board of Directors of the Company (the “Board”), has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the distraction from the Executive’s personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company, and to provide the Executive with satisfactory and competitive compensation and benefits arrangements upon a Change of Control.

WHEREAS, because the Executive will obtain intimate and valuable knowledge and experience concerning the Company, as well as technical, financial, customer and other confidential information, as a condition to the Company’s willingness to enter into this Agreement, the Company has required and the Executive has delivered a non-compete agreement in a form determined by the Company (the “Employee Agreement”), pursuant to which Executive has agreed not to compete with the Company or solicit the Company’s employees and customers during Executive’s employment with the Company and during a specified period following Executive’s termination of employment with the Company.

WHEREAS, the Company would not have entered into this Agreement but for Executive’s execution of the Employee Agreement and, accordingly the Executive and the Company have entered into the Employee Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

1.Certain Definitions. (a) The “Effective Date” shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if (i) the Executive’s employment with the Company is terminated by the Company, (ii) the Date of Termination is before the date on which a Change of Control occurs, and (iii) it is reasonably demonstrated by the Executive that such termination of employment (A) was at the request of a third party that has taken steps reasonably calculated to effect a Change of Control or (B) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement, the “Effective Date” shall mean the date immediately prior to such Date of Termination.

(a)The “Change of Control Period” shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.

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2.Change of Control. Under this Agreement, a “Change of Control” shall mean:

(b)The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either

(i)the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or

(ii)the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);

provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control:

A.any acquisition directly from the Company,

B.any acquisition by the Company,

C.any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or

D.any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2;

(a)Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

(b)Consummation by the Company of a reorganization, statutory share exchange, merger or consolidation or similar transaction involving the Company or any of its subsidiaries or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each of the foregoing, a “Business Combination”), in each case, unless, following such Business Combination,

(iii)all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either

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directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be,

(iv)no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and

(v)at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(c)Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

3.Effect of Change of Control on Outstanding Awards. If the Executive holds any outstanding awards (“Awards”) under the Company’s 2018 Stock Incentive Plan or any successor incentive plan thereto (any “Plan”) at the Effective Date, then, unless the applicable award agreement provides a more favorable result for the Executive, the following will apply:

(d)The successor or purchaser in the Change of Control transaction may assume such Awards or provide replacement awards with terms and conditions at least as favorable as the terms and conditions in effect prior to the Change of Control, provided that any such assumed Award or replacement award shall:

(vi)have substantially equivalent economic value to the Award (as determined by the Compensation Committee of the Board as constituted immediately prior to the Change of Control (the “Committee”));

(vii)relate to a class of equity that is (or will be within five (5) business days following the Change of Control) listed to trade on a recognized securities market;

(viii)provide the Executive with rights and entitlements substantially equivalent to or better than the rights and entitlements applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment (to the extent consistent with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), if applicable), including all provisions applicable in respect of such Award that provide for accelerated vesting;

(ix)with respect to Awards that vest upon the attainment of one or more performance goals, if the Change of Control occurs during the course of a performance period applicable to the Award, then (A) the performance goals shall be deemed to have been satisfied at the target level specified in the Executive’s award agreement or, if greater, as otherwise specified by the Committee at or after grant, and (ii) any assumed or substituted award shall not include a performance objective, unless otherwise determined by the Committee; and

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(x)have terms and conditions providing that, if within two (2) years following a Change of Control either (x) the successor or purchaser in the Change of Control transaction (or any affiliate thereof) terminates the Executive’s employment or service without Cause or (y) the Executive terminates the Executive’s employment for Good Reason, then the following provisions shall apply to any assumed Awards or replacement awards described herein:

(A)Effective upon the date of the Executive’s termination of employment or service, all of the Executive’s outstanding Awards or replacement awards automatically shall vest (assuming, for any Award the vesting of which is subject to performance goals for which the performance period had not been completed as of the date of such termination, that such goals had been met at the target level); and

(B)If the assumed Award or replacement award relates to a class of equity that is not then listed to trade on a recognized securities market, then, at the election of the Executive, at the time of exercise or settlement of such Awards or replacement awards, the Executive may elect to receive, in lieu of the issuance of such equity, a cash payment equal to the fair market value of the equity otherwise issuable thereunder (such payment calculated using the definition of “Fair Market Value” (or similar definition) under the Plan as applied to the equity otherwise issuable under the assumed Award or replacement award).

(a)If the successor or purchaser in the Change of Control does not assume the Awards or issue replacement awards as provided in Section 3(a), then immediately prior to the date of the Change of Control:

(xi)Any stock options and stock appreciation rights outstanding as of the date such Change of Control is determined to have occurred and not then exercisable and vested shall become fully exercisable and vested to the full extent of the original grant.

(xii)The restrictions applicable to any outstanding restricted stock shall lapse as of the date such Change of Control is determined to have occurred, and such restricted stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant.

(xiii)The restrictions applicable to any outstanding stock units shall lapse as of the date such Change of Control is determined to have occurred, and such stock units shall become free of all restrictions and become fully vested. Payment for stock units that have vested as a result of this Section 3(b)(iii) shall occur on the time(s) or event(s) otherwise specified in the applicable award agreement.

(xiv)The restrictions applicable to any outstanding performance units and performance shares shall lapse as of the date such Change of Control is determined to have occurred, the performance goals of all such outstanding performance units and performance shares shall be deemed to have been achieved at target levels, the relevant performance period shall be deemed to have ended on the effective date of the Change of Control, and all other terms and conditions thereto shall be deemed to have been satisfied. If, due to a Change of Control, a performance period is shortened, then the target performance award initially established for such performance period shall be prorated by multiplying the initial target performance award by a fraction, the numerator of which is the actual number of whole months in the shortened performance period and the denominator of which is the number of whole months in the original performance period. Payment for such performance units and performance shares that vest as a result of the Change of Control shall be made in cash

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or shares of the Company’s common stock (as determined by the Committee) as promptly as is practicable upon such vesting, but in no event later than March 15 of the year following the year in which the performance units and performance shares shall have vested pursuant to this Section 3(b)(iv). Payment for performance units and performance shares that have vested prior to the Change of Control as a result of the Committee’s waiver of payment limitations prior to the date of the Change of Control shall be made in cash or shares of the Company’s common stock (as determined by the Committee):

(C)in the year following the year in which the performance period would have otherwise ended absent a Change of Control, or

(D)if earlier, as soon as practicable in the year in which the Executive has a separation from service; provided, however, that if the Executive is a “specified employee” (within the meaning of Code Section 409A) at the time of the Executive’s separation from service and the Executive becomes entitled to payment of performance units or performance shares under this Section 3(b)(iv) by reason of such separation from service, payment shall be made on the first day of the seventh month following the month in which such separation from service occurs, or, if earlier, the date of the Executive’s death.

Notwithstanding anything to the contrary in this Agreement, if an Award is considered deferred compensation subject to the provisions of Section 409A of the Code, and if a payment under such Award would otherwise be triggered upon a Change of Control, then the definition of Change of Control shall be deemed amended to the extent necessary to comply with Section 409A of the Code.

4.Employment Period. The Company agrees to continue the Executive in its employ, and the Executive agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, from the Effective Date and ending on the second anniversary of such date (the “Employment Period”). The Employment Period shall terminate upon the Executive’s termination of employment for any reason.

5.Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned to the Executive at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location.

(xv)During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic, or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements, or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the

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continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) after the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.

(e)Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at an annual rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. The Annual Base Salary shall be paid at such intervals as the Company pays executive salaries generally. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. During the Employment Period, Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.

(i)Annual Bonus. The Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the average of the bonuses paid or payable to the Executive under the Company’s Management Incentive Bonus Plan, or any comparable annual bonus under any predecessor or successor plan, in respect of the last three full fiscal years prior to the Effective Date (or, if the Executive was first employed by the Company after the beginning of the earliest of such three fiscal years, the average of the bonuses paid or payable under such plan(s) in respect of the fiscal years ending before the Effective Date during which the Executive was employed by the Company, with such bonus being annualized with respect to any such fiscal year if the Executive was not employed by the Company for the whole of such fiscal year) (the “Recent Average Bonus”). If the Executive has not been eligible to earn such a bonus for any period prior to the Effective Date, the “Recent Average Bonus” shall mean the Executive’s target annual bonus for the year in which the Effective Date occurs. Each such Annual Bonus shall be paid no later than two and a half months after the end of the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement that meets the requirements of Section 409A of the Code.

(xvi)Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable and, with respect to regular incentive opportunities, taking into account annual bonuses pursuant to Section 5(b)(ii)), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.

(xvii)Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices,

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policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) (“Company Welfare Benefit Plans”) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but if the Company Welfare Benefit Plans provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date (the “Former Company Welfare Benefit Plans”), the Company shall provide the Executive with supplemental arrangements (such as individual insurance coverage purchased by the Company for the Executive) such that the Company Welfare Benefit Plans together with such supplemental arrangements provide the Executive with benefits which are at least as favorable, in the aggregate, as those provided by the Former Company Welfare Benefit Plans.

(xviii)Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

(xix)Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies; provided, that such fringe benefits may be provided in cash or in kind, so long as the after-tax benefits to the Executive of such fringe benefits are not diminished in the aggregate.

(xx)Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

(xxi)Vacation. During the Employment Period, the Executive shall be entitled to paid vacation as well as paid days off for the period between Christmas and January 1, in each case in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 365-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.

6.Termination of Employment. (a) Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 13(b) of its intention

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to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. Under this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days (or for 180 business days in any consecutive 365 days) as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

(a)Cause. The Company may terminate the Executive’s employment during the Employment Period with or without Cause. Under this Agreement, “Cause” shall mean:

(i)the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive’s delivery of a Notice of Termination for Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive’s duties, or

(ii)the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.

For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, or if the Company is not the ultimate parent entity and is not publicly-traded, the board of directors (or, for a non-corporate entity, equivalent governing body) of the ultimate parent of the Company (the “Applicable Board”)or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Applicable Board (excluding the Executive if the Executive is a member of the Applicable Board) at a meeting of the Applicable Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Applicable Board), finding that, in the good faith opinion of the Applicable Board, the Executive is guilty of the conduct described in subsection (i) or (ii), and specifying the particulars thereof in detail.

(a)Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason or by the Executive voluntarily without Good Reason. For purposes of this Agreement, “Good Reason” shall mean:

(iii)the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by

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Section 5(a), or any other diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(iv)any failure by the Company to comply with any of the provisions of Section 5(b), other than an isolated, insubstantial, and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(v)the Company’s requiring the Executive to be based at any office or location other than as provided in Section 5(a)(i)(B) or the Company’s requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;

(vi)any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or

(vii)any failure by the Company to comply with and satisfy Section 12(c).

For purposes of this Section 6(c), any good faith determination of “Good Reason” made by the Executive shall be conclusive.

(a)Incapacity. The Executive’s mental or physical incapacity following the occurrence of an event described in clauses (i) through (v) of Section 6(c) shall not affect the Executive’s ability to terminate employment for Good Reason and the Executive’s death following delivery of a Notice of Termination for Good Reason shall not affect the entitlement of the estate of the Executive to severance payments or benefits provided hereunder upon a termination of employment for Good Reason.

(b)Notice of Termination. Any termination of employment by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 13(b). For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

(c)Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, (iii) if the Executive resigns without Good Reason, the date on which the Executive notifies the Company of such termination and (iv) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be. Notwithstanding

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the foregoing, in no event shall the Date of Termination occur until the Executive experiences a “separation from service” within the meaning of Section 409A of the Code, and notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the “Date of Termination.”

7.Obligations of the Company upon Termination. (a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason:

(i)the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:

(A)the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the Executive’s business expenses that are reimbursable pursuant to Section 5(b)(v) but have not been reimbursed by the Company as of the Date of Termination; (3) the Executive’s Annual Bonus for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs, if such bonus has been determined but not paid as of the Date of Termination; (4) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in subclauses (1), (2), (3) and (4), the “Accrued Obligations”) and (5) an amount equal to the product of (x) the Recent Average Bonus and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 (the “Pro Rata Bonus”); provided, that notwithstanding the foregoing, if the Executive has made an irrevocable election under any deferred compensation arrangement subject to Section 409A of the Code to defer any portion of the Annual Base Salary or the Annual Bonus described in clauses (1) or (3), then for all purposes of this Section 7 (including, without limitation, Sections 7(b) through 7(e)), such deferral election, and the terms of the applicable arrangement shall apply to the same portion of the amount described in such clause (1) or clause (3), and such portion shall not be considered as part of the “Accrued Obligations” but shall instead be an “Other Benefit” (as defined below); and

(B)the amount equal to the product of (1) three and (2) the sum of (x) the Executive’s Annual Base Salary and (y) the Recent Average Bonus; and

(C)an amount equal to the product of (1) three and (2) the sum of (a) the Company Retirement Contributions (as defined in the BorgWarner Inc. Retirement Savings Plan (“RSP”)) that would have been made under the RSP for the first Plan Year (as defined in the RSP) ending after the Date of Termination if there had been no Limitations (as defined below) on such Company Retirement Contributions and (b) an amount equal to the Company Matching Contributions (as defined in the RSP) that would have been made under the RSP in the first Plan Year after the Date of Termination if there had been no Limitations on such Company Matching Contributions, and assuming for these purposes that the Executive had elected to defer the maximum amount of Compensation (as defined in the RSP) permitted by the RSP (without regard to any Limitations on such deferral), and assuming for purposes of calculating the amounts in clauses (a) and (b) that the Executive had remained employed by the Company through the end of such Plan Year with compensation equal to that required by Section 5(b)(i) and Section

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5(b)(ii) (“Limitations” meaning limitations contained in the RSP, the Employee Retirement Income Security Act (“ERISA”) or the Code);

(i)for eighteen months following the Date of Termination (the “Benefits Period”), the Company shall provide the Executive and his eligible dependents with medical and dental insurance coverage (the “Health Care Benefits”) and life insurance benefits no less favorable to those which the Executive and his spouse and eligible dependents were receiving immediately prior to the Date of Termination or, if more favorable to such persons, as in effect generally at any time thereafter with respect to other peer executives of the Company and the Affiliated Companies; provided, however, that the Health Care Benefits shall be provided during the Benefits Period in such a manner that such benefits are excluded from the Executive’s income for federal income tax purposes; provided, further, however, that if the Executive becomes re-employed with another employer and is eligible to receive health care benefits under another employer-provided plan, the health care benefits provided hereunder shall be secondary to those provided under such other plan during such applicable period of eligibility. The receipt of the Health Care Benefits shall be conditioned upon the Executive continuing to pay the Applicable COBRA Premium with respect to the level of coverage that the Executive has elected for the Executive and the Executive’s spouse and eligible dependents (e.g., single, single plus one, or family). During the portion of the Benefits Period in which the Executive and his eligible dependents continue to receive coverage under the Company’s Health Care Benefits plans, the Company shall pay to the Executive a monthly amount equal to the Applicable COBRA Premium in respect of the maximum level of coverage that the Executive could have elected to receive for the Executive and the Executive’s spouse and eligible dependents if the Executive were still an employee of the Company during the Benefits Period (e.g., single, single plus one, or family) regardless of what level of coverage is actually elected, which payment shall be paid in advance on the first payroll day of each month, commencing with the month immediately following the Executive’s Date of Termination. The Company shall use its reasonable best efforts to ensure that, following the end of the Benefit Period, the Executive and the Executive’s spouse and eligible dependents shall be eligible to elect continued health coverage pursuant to Section 4980B of the Code or other applicable law (“COBRA Coverage”), as if the Executive’s employment with the Company had terminated as of the end of such period. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree welfare benefits pursuant to the Company’s retiree welfare benefit plans, if any, the Executive shall be considered to have remained employed until the end of the Benefit Period and to have retired on the last day of such period. For purposes of this Provision, “Applicable COBRA Premium” means the monthly premium in effect from time to time for coverage provided to former employees under Section 4980B of the Code and the regulations thereunder with respect to a particular level of coverage (e.g., single, single plus one, or family).

(ii)the Company shall, at its sole expense as incurred, provide the Executive with outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion, but the cost thereof shall not exceed $40,000; provided, further, that such outplacement benefits shall end not later than the last day of the second calendar year that begins after the Date of Termination; and

(iii)except as otherwise set forth in the last sentence of Section 8, to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan,

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program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”) in accordance with the terms of the underlying plans or agreements.

Notwithstanding the foregoing provisions of Section 7(a)(i) and Section 7(a)(ii), in the event that the Executive is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination) (a “Specified Employee”), amounts that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code that would otherwise be payable and benefits that would otherwise be provided under Section 7(a)(i) or Section 7(a)(ii) during the six-month period immediately following the Date of Termination (other than the Accrued Obligations) shall instead be paid, with interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code (“Interest”) determined as of the Date of Termination, or provided on the first business day after the date that is six months following the Executive’s Date of Termination (the “Delayed Payment Date”);

(a)Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, the Company shall provide the Executive’s estate or beneficiaries with the Accrued Obligations and the Pro Rata Bonus and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement. The Accrued Obligations (subject to the proviso set forth in Section 7(a)(1)(A) to the extent applicable) and the Pro Rata Bonus shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 7(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits (either pursuant to a plan, program, practice or policy or an individual arrangement) at least equal to the most favorable benefits provided by the Company and the affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.

(b)Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, the Company shall provide the Executive with the Accrued Obligations and Pro Rata Bonus and the timely payment or delivery of the Other Benefits in accordance with the terms of the underlying plans or agreements, and shall have no other severance obligations under this Agreement. The Accrued Obligations (subject to the proviso set forth in Section 7(a)(1)(A) to the extent applicable) and the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination, provided, that in the event that the Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with Interest, to the Executive on the Delayed Payment Date. With respect to the provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 7(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits (either pursuant to a plan, program, practice or policy or an individual arrangement) at least equal to the most favorable of those generally provided by the Company and the affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter

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generally with respect to other peer executives of the Company and the affiliated companies and their families.

(c)Cause. If the Executive’s employment is terminated for Cause during the Employment Period, the Company shall provide the Executive with the Executive’s Annual Base Salary (subject to the proviso set forth in Section 7(a)(1)(A) to the extent applicable) through the Date of Termination, and the timely payment or delivery of the Other Benefits, and shall have no other severance obligations under this Agreement.

(d)Other than for Good Reason. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, the Company shall provide to the Executive the Accrued Obligations and the Pro Rata Bonus and the timely payment or delivery of the Other Benefits and shall have no other severance obligations under this Agreement. In such case, all the Accrued Obligations (subject to the proviso set forth in Section 7(a)(1)(A) to the extent applicable) and the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination, provided, that in the event that the Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with Interest, to the Executive on the Delayed Payment Date.

8.Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy, or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 13(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice, or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Without limiting the generality of the foregoing, the Executive’s resignation under this Agreement with or without Good Reason, shall in no way affect the Executive’s ability to terminate employment by reason of the Executive’s “retirement” under any compensation and benefits plans, programs or arrangements of the affiliated companies, including without limitation any retirement or pension plans or arrangements or to be eligible to receive benefits under any compensation or benefit plans, programs or arrangements of the Company or any of its affiliated companies, including without limitation any retirement or pension plan or arrangement of the Company or any of its affiliated companies or substitute plans adopted by the Company or its successors, and any termination which otherwise qualifies as Good Reason shall be treated as such even if it is also a “retirement” for purposes of any such plan. Notwithstanding the foregoing, if the Executive receives payments and benefits pursuant to Section 7(a), the Executive shall not be entitled to any severance pay or benefits under any severance plan, program or policy of the Company and the affiliated companies, unless otherwise specifically provided therein in a specific reference to this Agreement.

9.Full Settlement; Legal Fees. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 7(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt of an invoice from the Executive), at any time from the Effective Date

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through the Executive’s remaining lifetime (or, if longer, through the 20th anniversary of the Effective Date) to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof whether such contest is between the Company and the Executive or between either of them and any third party, and (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case Interest determined as of the date such legal fees and expenses were incurred. In order to comply with Section 409A of the Code, in no event shall the payments by the Company under this Section 9 be made later than the end of the calendar year next following the calendar year in which such fees and expenses were incurred, provided that the Executive or the Executive’s estate shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred. The amount of such legal fees and expenses that the Company is obligated to pay in any given calendar year shall not affect the legal fees and expenses that the Company is obligated to pay in any other calendar year, and the Executive’s right to have the Company pay such legal fees and expenses may not be liquidated or exchanged for any other benefit.

10.Certain Reduction of Payments by the Company.

(e)Anything in this Agreement to the contrary notwithstanding, in the event the independent accounting firm then used by the Company or such other nationally recognized certified public accounting firm as may be designated by the Executive (the “Accounting Firm”) shall determine that receipt of all payments, distributions or benefits provided by the Company or the affiliated companies in the nature of compensation to or for the Executive’s benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject the Executive to the excise tax under Section 4999 of the Code, the Accounting Firm shall determine whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that the Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if the Executive’s Agreement Payments were reduced to the Reduced Amount. If the Accounting Firm determines that the Executive would not have a greater Net After-Tax Receipt of aggregate Payments if the Executive’s Agreement Payments were so reduced, the Executive shall receive all Agreement Payments to which the Executive is entitled under this Agreement.

(f)If the Accounting Firm determines that aggregate Agreement Payments should be reduced to the Reduced Amount, the Company shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 10 shall be binding upon the Company and the Executive and shall be made as soon as reasonably practicable and in no event later than fifteen (15) days following the Date of Termination. For purposes of reducing the Agreement Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction hereunder of the amounts payable, if applicable, shall be made by reducing the Payments in the following order to the extent such Payments have not already been made at the time the reductions hereunder have become applicable: (i) the Payment with the higher ratio of the parachute payment value (as determined for purposes of Code Section 280G) to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a Payment with a lower ratio; (ii) the Payment with the later possible payment date shall be reduced or eliminated before a Payment with an earlier payment date; and (iii) cash Payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Section 409A of the Code, then the reduction shall be made pro rata among the

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Payments on the basis of the relative present value of the Payments. All fees and expenses of the Accounting Firm shall be borne solely by the Company.

(g)As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, the Executive shall pay any such Overpayment to the Company together with Interest; provided, however, that no amount shall be payable by the Executive to the Company if and to the extent such payment would not either reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Company to or for the benefit of the Executive together with Interest.

(h)For purposes hereof, the following terms have the meanings set forth below:

(ii) “Reduced Amount” shall mean the greatest amount of Agreement Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Agreement Payments pursuant to Section 10(a).

(iii)“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Accounting Firm determined to be likely to apply to the Executive in the relevant tax year(s).

(i)To the extent requested by the Executive, the Company shall cooperate with the Executive in good faith in valuing, and the Accounting Firm shall take into account the value of, services provided or to be provided by the Executive (including without limitation, the Executive agreeing to refrain from performing services pursuant to a covenant not to compete or similar covenant) before, on or after the date of a change in ownership or control of the Company (within the meaning of Q&A-2(b) of Section 280G of the Code), such that payments in respect of such services (or refraining from performing such services) may be considered reasonable compensation within the meaning of Q&A-9 and Q&A-40 to Q&A-44 of Section 280G of the Code and/or exempt from the definition of the term “parachute payment” within the meaning of Q&A-2(a) of Section 280G of the Code in accordance with Q&A-5(a) of Section 280G of the Code.

11.Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or

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become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate, or divulge any such information, knowledge, or data to anyone other than the Company and those persons designated by it. In no event shall an asserted violation of the provisions of this Section 11 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement, but the Company otherwise shall be entitled to all other remedies that may be available to it at law or equity.

12.Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(j)This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section 12(c), without the prior written consent of the Executive this Agreement shall not be assignable by the Company.

(b)The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

13.Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. Subject to the last sentence of Section 13(g), this Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(a)All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

[EXECUTIVE NAME]

[EXECUTIVE ADDRESS]

If to the Company: BorgWarner Inc. 3850 Hamlin Road Auburn Hills, Michigan 48326     Attention: General Counsel

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or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(a)The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(b)The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(c)The Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 6(c)(i)-(v), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

(d)The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, subject to Section 1(a), prior to the Effective Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.

(e) The Agreement is intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A of the Code, shall in all respects be administered in accordance with Section 409A of the Code. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. If the Executive dies following the Date of Termination and prior to the payment of the any amounts delayed on account of Section 409A of the Code, such amounts shall be paid to the personal representative of the Executive’s estate within 30 days after the date of the Executive’s death. All reimbursements and in-kind benefits provided under this Agreement that constitute deferred compensation within the meaning of Section 409A of the Code shall be made or provided in accordance with the requirements of Section 409A of the Code, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred, provided, that the Executive shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated to pay or provide in any given calendar year shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) the Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the Executive’s remaining lifetime (or if longer, through the 20th anniversary of the Effective Date). Prior to the Effective Date but within the time period permitted by the applicable Treasury Regulations, the Company may, in consultation with the Executive, modify the Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Executive, in order to cause the provisions of the Agreement to comply with the requirements of Section 409A of the

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Code, so as to avoid the imposition of taxes and penalties on the Executive pursuant to Section 409A of the Code.

14.Survivorship. Upon the expiration or other termination of this Agreement or the Executive’s employment, the respective rights and obligations of the parties hereto shall survive to the extent necessary to carry out the intentions of the parties under this Agreement.

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

EXECUTIVE

______________________________

[NAME]

BORGWARNER INC.

By: ____________________________

Tonit M. Calaway

Executive Vice President, Chief Administration Officer, General Counsel and Secretary

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Document

EXHIBIT 31.1

Certification of the Principal Executive Officer

Pursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Frederic B. Lissalde, certify that:

1.I have reviewed this quarterly report on Form 10-Q of BorgWarner Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2022
/s/ Frederic B. Lissalde
Frederic B. Lissalde
President and Chief Executive Officer

Document

EXHIBIT 31.2

Certification of the Principal Financial Officer

Pursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Kevin A. Nowlan, certify that:

1.I have reviewed this quarterly report on Form 10-Q of BorgWarner Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2022
/s/   Kevin A. Nowlan
Kevin A. Nowlan
Executive Vice President, Chief Financial Officer

Document

EXHIBIT 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of BorgWarner Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2022 (the “Report”), each of the undersigned officers of the Company certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of such officer's knowledge:

(1)  the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 3, 2022
/s/   Frederic B. Lissalde
Frederic B. Lissalde
President and Chief Executive Officer
/s/   Kevin A. Nowlan
Kevin A. Nowlan
Executive Vice President, Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to BorgWarner Inc. and will be retained by BorgWarner Inc. and furnished to the Securities and Exchange Commission or its staff upon request.