# BorgWarner (BWA) 10-Q SEC filing - Q3 FY2023

- Filed: Nov 2, 2023, 4:57 PM EDT
- Fiscal quarter: Q3 FY2023
- Calendar quarter: Q3 2023
- Accession: 0000908255-23-000051
- OpenCapital page: https://www.opencapital.sh/filings/0000908255-23-000051
- Markdown URL: https://www.opencapital.sh/filings/0000908255-23-000051.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/0000908255-23-000051-index.htm

## Filing documents

- [10-Q (bwa-20230930.htm)](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/bwa-20230930.htm)
- [EX-10.2 (borgwarner2023stockincenti.htm)](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/borgwarner2023stockincenti.htm)
- [EX-31.1 (a2023093010qexhibit311.htm)](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/a2023093010qexhibit311.htm)
- [EX-31.2 (a2023093010qexhibit312.htm)](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/a2023093010qexhibit312.htm)
- [EX-32.1 (a2023093010qexhibit321.htm)](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/a2023093010qexhibit321.htm)

---

## 10-Q

SEC source: [bwa-20230930.htm](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/bwa-20230930.htm)

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 September 30, 2023

### 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.) |
| 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 October 27, 2023, the registrant had 235,055,429 shares of voting common stock outstanding.

BORGWARNER INC.

FORM 10-Q

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023

### INDEX

Page No.

[PART I. Financial Information](#idc187296a07849bca77af57204df695e_13)

[Item 1. Financial Statements](#idc187296a07849bca77af57204df695e_13)

[Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (Unaudited)](#idc187296a07849bca77af57204df695e_16) [1](#idc187296a07849bca77af57204df695e_16)

[Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited)](#idc187296a07849bca77af57204df695e_19) [2](#idc187296a07849bca77af57204df695e_19)

[Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022 (Unaudited)](#idc187296a07849bca77af57204df695e_22) [3](#idc187296a07849bca77af57204df695e_22)

[Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)](#idc187296a07849bca77af57204df695e_25) [4](#idc187296a07849bca77af57204df695e_25)

[Notes to Condensed Consolidated Financial Statements (Unaudited)](#idc187296a07849bca77af57204df695e_28) [5](#idc187296a07849bca77af57204df695e_28)

[Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations](#idc187296a07849bca77af57204df695e_118) [38](#idc187296a07849bca77af57204df695e_118)

[Item 3. Quantitative and Qualitative Disclosures About Market Risk](#idc187296a07849bca77af57204df695e_139) [54](#idc187296a07849bca77af57204df695e_139)

[Item 4. Controls and Procedures](#idc187296a07849bca77af57204df695e_142) [55](#idc187296a07849bca77af57204df695e_142)

[PART II. Other Information](#idc187296a07849bca77af57204df695e_145)

[Item 1. Legal Proceedings](#idc187296a07849bca77af57204df695e_148) [56](#idc187296a07849bca77af57204df695e_148)

[Item 1A. Risk Factors](#idc187296a07849bca77af57204df695e_151) [56](#idc187296a07849bca77af57204df695e_148)

[Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](#idc187296a07849bca77af57204df695e_154) [56](#idc187296a07849bca77af57204df695e_154)

[Item 5. Other Information](#idc187296a07849bca77af57204df695e_157) [57](#idc187296a07849bca77af57204df695e_157)

[Item 6. Exhibits](#idc187296a07849bca77af57204df695e_160) [57](#idc187296a07849bca77af57204df695e_160)

[SIGNATURES](#idc187296a07849bca77af57204df695e_163) [58](#idc187296a07849bca77af57204df695e_163)

CAUTIONARY STATEMENTS FOR FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q (this “Form 10-Q” or “report”) (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, 2022 (“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; commodity availability and pricing, and an inability to achieve expected levels of recoverability in commercial negotiations with customers concerning these costs; competitive challenges from existing and new competitors including OEM customers; the challenges associated with rapidly changing technologies, particularly as they relate to electric vehicles, and our ability to innovate in response; 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 possibility that our recently-completed tax-free spin-off of our former Fuel Systems and Aftermarket segments into a separate publicly traded company will not achieve its intended benefits; 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 and is highly cyclical and subject to disruptions; our reliance on major OEM customers; the extent, duration, and impact of the current and any future strikes involving some of our OEM customers and any actions such OEM customers take in response; 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, or governmental investigations, including related litigation; 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 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.

PART I. FINANCIAL INFORMATION

## Item 1. Financial Statements

**BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES**

### CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

| (in millions) | September 30,2023 | December 31,2022 |
| --- | --- | --- |
| ASSETS |  |  |
| Cash, cash equivalents and restricted cash | $949 | $1,083 |
| Receivables, net | 3,351 | 2,471 |
| Inventories, net | 1,328 | 1,217 |
| Prepayments and other current assets | 272 | 230 |
| Current assets of discontinued operations | — | 1,616 |
| Total current assets | 5,900 | 6,617 |
| Property, plant and equipment, net | 3,569 | 3,426 |
| Investments and long-term receivables | 624 | 819 |
| Goodwill | 2,936 | 2,978 |
| Other intangible assets, net | 557 | 619 |
| Other non-current assets | 518 | 489 |
| Non-current assets of discontinued operations | — | 2,046 |
| Total assets | $14,104 | $16,994 |
| LIABILITIES AND EQUITY |  |  |
| Notes payable and other short-term debt | $63 | $60 |
| Accounts payable | 2,396 | 2,146 |
| Other current liabilities | 1,114 | 1,084 |
| Current liabilities of discontinued operations | — | 946 |
| Total current liabilities | 3,573 | 4,236 |
| Long-term debt | 3,665 | 4,140 |
| Retirement-related liabilities | 129 | 129 |
| Other non-current liabilities | 730 | 686 |
| Non-current liabilities of discontinued operations | — | 295 |
| Total liabilities | 8,097 | 9,486 |
| Commitments and contingencies |  |  |
| Common stock | 3 | 3 |
| Capital in excess of par value | 2,680 | 2,675 |
| Retained earnings | 6,010 | 7,454 |
| Accumulated other comprehensive loss | (915) | (876) |
| Common stock held in treasury, at cost | (2,010) | (2,032) |
| Total BorgWarner Inc. stockholders’ equity | 5,768 | 7,224 |
| Noncontrolling interest | 239 | 284 |
| Total equity | 6,007 | 7,508 |
| Total liabilities and equity | $14,104 | $16,994 |

See accompanying Notes to Condensed Consolidated Financial Statements.

**BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES**

### CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

| (in millions, except per share amounts) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Net sales | $3,622 | $3,226 | $10,676 | $9,318 |
| Cost of sales | 2,970 | 2,619 | 8,767 | 7,588 |
| Gross profit | 652 | 607 | 1,909 | 1,730 |
| Selling, general and administrative expenses | 330 | 325 | 963 | 951 |
| Restructuring expense | 56 | 5 | 68 | 42 |
| Other operating (income) expense, net | (6) | 12 | (1) | (7) |
| Operating income | 272 | 265 | 879 | 744 |
| Equity in affiliates’ earnings, net of tax | (10) | (5) | (23) | (21) |
| Realized and unrealized loss (gain) on debt and equity securities | 60 | (1) | 129 | 27 |
| Interest (income) expense, net | (19) | 12 | 3 | 41 |
| Other postretirement expense (income) | 3 | (1) | 8 | (2) |
| Earnings from continuing operations before income taxes and noncontrolling interest | 238 | 260 | 762 | 699 |
| Provision for income taxes | 133 | 68 | 230 | 177 |
| Net earnings from continuing operations | 105 | 192 | 532 | 522 |
| Net (loss) earnings from discontinued operations | (37) | 100 | (12) | 225 |
| Net earnings | 68 | 292 | 520 | 747 |
| Net earnings from continuing operations attributable to noncontrolling interest, net of tax | 18 | 19 | 49 | 58 |
| Net earnings from discontinued operations attributable to noncontrolling interest, net of tax | — | — | — | — |
| Net earnings attributable to BorgWarner Inc. | $50 | $273 | $471 | $689 |
| Amounts attributable to BorgWarner Inc.: |  |  |  |  |
| Net earnings from continuing operations | $87 | $173 | $483 | $464 |
| Net (loss) earnings from discontinued operations | (37) | 100 | (12) | 225 |
| Net earnings attributable to BorgWarner Inc. | $50 | $273 | $471 | $689 |
| Earnings per share from continuing operations — basic | $0.37 | $0.74 | 2.07 | $1.96 |
| Earnings per share from discontinued operations — basic | (0.16) | 0.43 | (0.05) | 0.95 |
| Earnings per share attributable to BorgWarner Inc. — basic | $0.21 | $1.17 | $2.02 | $2.91 |
| Earnings per share from continuing operations — diluted | $0.37 | $0.73 | $2.06 | $1.95 |
| Earnings per share from discontinued operations — diluted | (0.16) | 0.42 | (0.05) | 0.95 |
| Earnings per share attributable to BorgWarner Inc. — diluted | $0.21 | $1.15 | $2.01 | $2.90 |
| Weighted average shares outstanding: |  |  |  |  |
| Basic | 233.4 | 234.3 | 233.2 | 236.5 |
| Diluted | 235.3 | 235.6 | 234.6 | 237.5 |

See accompanying Notes to Condensed Consolidated Financial Statements.

**BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES**

### CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

_(UNAUDITED)_

| (in millions) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Net earnings attributable to BorgWarner Inc. | $50 | $273 | $471 | $689 |
| Other comprehensive loss |  |  |  |  |
| Foreign currency translation adjustments* | (16) | (274) | (72) | (554) |
| Hedge instruments* | (12) | 8 | 26 | 13 |
| Defined benefit postretirement plans* | 11 | 4 | 7 | 14 |
| Total other comprehensive loss attributable to BorgWarner Inc. | (17) | (262) | (39) | (527) |
| Comprehensive income attributable to BorgWarner Inc.* | 33 | 11 | 432 | 162 |
| Net income attributable to noncontrolling interest, net of tax | 18 | 19 | 49 | 58 |
| Other comprehensive loss attributable to noncontrolling interest* | (4) | (24) | (18) | (42) |
| Comprehensive income | $47 | $6 | $463 | $178 |

*    Net of income taxes.

See accompanying Notes to Condensed Consolidated Financial Statements.

**BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES**

### CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

| (in millions) | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- |
| OPERATING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Net cash provided by operating activities of continuing operations (see Note 23) | $510 | $552 |
| INVESTING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Capital expenditures, including tooling outlays | (624) | (427) |
| Payments for businesses acquired, net of cash acquired | (31) | (288) |
| Proceeds from settlement of net investment hedges, net | 25 | 40 |
| Proceeds from investments in debt and equity securities, net | 63 | 27 |
| Proceeds from the sale of business, net | — | 25 |
| Proceeds from asset disposals and other, net | 29 | 16 |
| Net cash used in investing activities from continuing operations | (538) | (607) |
| FINANCING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Net increase in notes payable | 3 | — |
| Additions to debt | 4 | 2 |
| Payments for debt issuance costs | (3) | — |
| Repayments of debt, including current portion | (444) | (9) |
| Payments for purchase of treasury stock | — | (240) |
| Payments for stock-based compensation items | (25) | (18) |
| Payments for contingent consideration | (23) | — |
| Purchase of noncontrolling interest | (15) | (56) |
| Net distribution from PHINIA | 401 | — |
| Dividends paid to BorgWarner stockholders | (105) | (121) |
| Dividends paid to noncontrolling stockholders | (71) | (48) |
| Net cash used in financing activities from continuing operations | (278) | (490) |
| CASH FLOWS FROM DISCONTINUED OPERATIONS |  |  |
| Operating activities of discontinued operations | (66) | 127 |
| Investing activities of discontinued operations | (86) | (79) |
| Financing activities of discontinued operations | 84 | (3) |
| Net cash (used in) provided by discontinued operations | (68) | 45 |
| Effect of exchange rate changes on cash | (15) | (103) |
| Net decrease in cash, cash equivalents and restricted cash | (389) | (603) |
| Cash, cash equivalents and restricted cash at beginning of year | 1,338 | 1,844 |
| Cash, cash equivalents and restricted cash at end of period | $949 | $1,241 |
| Less: Cash, cash equivalents and restricted cash of discontinued operations at end of period | — | $172 |
| Cash, cash equivalents and restricted cash of continuing operations at end of period | $949 | $1,069 |

See accompanying Notes to Condensed Consolidated Financial Statements.

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 nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The balance sheet as of December 31, 2022 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, 2022.

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.

On July 3, 2023, BorgWarner completed the previously announced spin-off (“Spin-Off”) of its Fuel Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of 100% of the outstanding common stock of PHINIA, Inc. (“PHINIA”) to holders of record of common stock of the Company on a pro-rata basis. Each holder of record of common stock of the Company received one share of PHINIA common stock for every five shares of common stock of the Company held on June 23, 2023, the record date for the distribution (“Distribution Date”). In lieu of fractional shares of PHINIA, shareholders of the Company received cash. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange.

The historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations in these Condensed Consolidated Financial Statements. Refer to Note 24, “Discontinued Operations,” to the Condensed Consolidated Financial Statements for more information.

In connection with the Spin-Off, the Company entered into several agreements with PHINIA on or prior to the Distribution Date that, among other things, provide a framework for the Company’s relationship with PHINIA after the Spin-Off, including a separation and distribution agreement, an employee matters agreement, a tax matters agreement, an intellectual property cross-license agreement and a transition services agreement through which the Company and PHINIA will continue to provide certain services to each other following the Spin-Off.

### NOTE 2 NEW ACCOUNTING PRONOUNCEMENTS

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 adopted this guidance prospectively as of January 1, 2023, and there was no impact in the Condensed 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.

Due to the insignificant size of the 2023 and 2022 acquisitions, both individually and in the aggregate, relative to the Company, supplemental pro forma financial information for the current and prior reporting periods is not provided.

Eldor Corporation’s Electric Hybrid Systems Business

On June 19, 2023, the Company announced that it had entered into a share purchase agreement to acquire the Electric Hybrid Systems business segment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The purchase price due at closing is €75 million ($79 million), with up to €175 million ($185 million) in contingent payments that could be paid over the two years following closing. The Company expects the acquisition to complement its existing ePropulsion product portfolio by enhancing the Company’s engineering capabilities in power electronics. The transaction is subject to satisfaction of customary closing conditions and is expected to close in the fourth quarter of 2023.

Hubei Surpass Sun Electric Charging Business

On March 1, 2023, the Company completed its acquisition of 100% of the electric vehicle solution, smart grid and smart energy businesses (“SSE”) of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition complements the Company’s existing European and North American charging footprint by adding a presence in China. The total consideration was ¥288 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of base purchase price in the nine months ended September 30, 2023. Of the remaining ¥51 million ($8 million) of base purchase price, ¥31 million ($5 million) is payable by April 30, 2024 and is recorded in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2023. The remaining ¥20 million ($3 million) of base purchase price is payable before April 30, 2025 and is recorded in Other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2023. Pursuant to the agreement, the Company’s obligation to remit up to ¥103 million ($15 million) of earn-out payments

is contingent upon the achievement of certain revenue and pre-tax profit margin targets in 2023 and 2024 as well as the retention of key employees during the same time period. As of September 30, 2023, the Company’s estimate of the earn-out payments was approximately ¥20 million ($3 million), of which half is recorded in Other current liabilities and half is recorded in Other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet.

The purchase price was allocated on a provisional basis as of March 1, 2023, and all 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. The Company subsequently finalized its valuation of the assets and liabilities of the SSE acquisition during the third quarter of 2023, and the estimated fair values of assets acquired and liabilities assumed amounted to total assets of $50 million, including goodwill and intangibles of $5 million, and total liabilities of $8 million. These final amounts were not materially different than the estimated values recorded on March 1, 2023.

Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $2 million was recorded within the Company’s Air Management segment. The goodwill consists of the Company’s expected future economic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increase. The goodwill is not deductible for tax purposes in China.

In connection with the acquisition, the Company recorded $3 million for intangible assets, primarily for customer relationships and developed technology. Identifiable intangible assets were valued using the income approach

The following table summarizes the other intangible assets acquired:

| (in millions) | Estimated Life | Estimated Fair Value |
| --- | --- | --- |
| Developed technology | 5 years | $2 |
| Customer relationships | 6 years | 1 |
| Total other intangible assets |  | $3 |

The impact of the SSE acquisition on net sales and net earnings was immaterial for the three and nine months ended September 30, 2023.

Drivetek AG

On December 1, 2022, the Company completed its acquisition of 100% of Drivetek AG (“Drivetek”), an engineering and product development company located in Switzerland. This acquisition strengthens the Company’s power electronics capabilities in auxiliary inverters, which the Company expects will help to accelerate the growth of its High Voltage eFan business. The Company paid ₣27 million ($29 million) at closing, and up to ₣10 million ($10 million) could be paid in the form of contingent earn-out payments over the three years following closing. The earn-out payments are contingent upon achievement of estimated future sales targets associated with newly awarded business and future turnover rate targets. As of September 30, 2023, the Company’s estimate of the earn-out payments was approximately ₣10 million ($11 million), which is recorded in Other non-current liabilities in the Company’s Condensed Consolidated Balance Sheet.

The purchase price was allocated on a preliminary basis as of December 1, 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. The Company subsequently finalized its valuation of the assets and liabilities of the Drivetek acquisition during the third

quarter of 2023, and the estimated fair values of assets acquired and liabilities assumed amounted to total assets of $49 million, including goodwill and intangibles of $40 million, and liabilities of $10 million. These final amounts were not materially different than the estimated values recorded on December 1, 2022.

Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $22 million was recorded within the Company’s Air Management segment. The goodwill consists of the Company’s expected future economic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increase. The goodwill is not expected to be deductible for tax purposes in Switzerland.

The following table summarizes the other intangible assets acquired:

| (in millions) | Estimated Life | Estimated Fair Value |
| --- | --- | --- |
| Developed technology | 8 years | $11 |
| Customer relationships | 12 years | 7 |
| Total other intangible assets |  | $18 |

Identifiable intangible assets were valued using the market approach.

The impact of the Drivetek acquisition on net sales and net earnings was immaterial for the three and nine months ended September 30, 2023.

Rhombus Energy Solutions

On July 29, 2022, the Company completed its acquisition of 100% of Rhombus Energy Solutions (“Rhombus”), a provider of charging solutions in the North American market, pursuant to the terms of an Agreement and Plan of Merger (the “Agreement”). The acquisition complements the Company’s existing European charging footprint to accelerate organic growth and adds North American regional presence to its charging business.

The Company paid $131 million at closing. Pursuant to the Agreement, the Company is obligated to remit up to $30 million of earn-out payments, payable in 2025, contingent upon achievement of certain sales dollars, sales volume, and gross margin targets. The Company’s current estimates indicate that the minimum thresholds for these earn-out targets will not be achieved; thus, no amount for the earn-out payments has been included in the purchase consideration or in the Company’s Condensed Consolidated Balance Sheet. Additionally, pursuant to the Agreement, the Company is obligated to remit up to $25 million over the three years following closing in key employee retention-related payments, which include certain performance targets. The amounts will be accounted for as post-combination expense.

The Company finalized its valuation of the assets and liabilities for the Rhombus acquisition during the second quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $104 million was recorded within the Company’s Air Management segment. The goodwill consists of the Company’s expected future economic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increase. The goodwill is not expected to be deductible for tax purposes.

The following table summarizes the other intangible assets acquired:

| (in millions) | Estimated Life | Estimated Fair Value |
| --- | --- | --- |
| Developed technology | 13 years | $22 |
| Customer relationships | 8 years | 5 |
| Total other intangible assets |  | $27 |

Identifiable intangible assets were valued using the income approach.

The impact of the Rhombus acquisition on net sales and net earnings was immaterial for the three and nine months ended September 30, 2023.

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 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 total final consideration was $192 million, including approximately ¥1.0 billion ($152 million) of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended December 31, 2022 and no longer expects to recapture a previously anticipated $5 million of post-closing adjustments, which has been recorded in Other operating expense, net. Pursuant to the ETA, the obligation of the Company to remit up to ¥0.3 billion (approximately $47 million) of earn-out payments was contingent upon achievement of certain sales volume targets and certain estimated future volume targets associated with newly awarded business. During the nine months ended September 30, 2023, the Company paid approximately ¥0.2 billion ($24 million) to settle the remaining earn-out liability and related adjustments.

The Company finalized its valuation of the assets and liabilities of the Santroll acquisition during the first quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $112 million was recorded within the Company’s ePropulsion 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 |

Identifiable intangible assets were valued using the income approach.

The impact of the Santroll acquisition on net sales and net earnings was immaterial for the three and nine months ended September 30, 2023.

### 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. The Company evaluated the terms of its 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 $16 million and $14 million at September 30, 2023 and December 31, 2022, 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 in the Condensed Consolidated Balance Sheets and were $11 million at September 30, 2023 and $14 million at December 31, 2022. 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 September 30, 2023 and December 31, 2022, the Company recorded customer incentive payments of $27 million and $34 million, respectively, in Prepayments and other current assets, and $75 million and $99 million, respectively, in Other non-current assets in the Condensed Consolidated Balance Sheets.

The following tables represent a disaggregation of revenue from contracts with customers by reportable segment and region. The balances for the three and nine months ended September 30, 2022 have been recast for a change in reportable segments that was made during the first quarter of 2023. Refer to Note 22, “Reportable Segments And Related Information,” to the Condensed Consolidated Financial Statements for more information.

_Three Months Ended September 30, 2023_

| (in millions) | Air Management | Drivetrain & Battery Systems | e Propulsion | Total |
| --- | --- | --- | --- | --- |
| North America | $542 | $405 | $118 | $1,065 |
| Europe | 819 | 329 | 95 | 1,243 |
| Asia | 511 | 408 | 343 | 1,262 |
| Other | 50 | 2 | — | 52 |
| Total | $1,922 | $1,144 | $556 | $3,622 |
|  | Three Months Ended September 30, 2022 |  |  |  |
| (in millions) | Air Management | Drivetrain & Battery Systems | ePropulsion | Total |
| North America | $526 | $376 | $109 | $1,011 |
| Europe | 729 | 226 | 49 | 1,004 |
| Asia | 522 | 352 | 297 | 1,171 |
| Other | 50 | — | (10) | 40 |
| Total | $1,827 | $954 | $445 | $3,226 |
|  | Nine Months Ended September 30, 2023 |  |  |  |
| (in millions) | Air Management | Drivetrain & Battery Systems | ePropulsion | Total |
| North America | $1,622 | $1,190 | $388 | $3,200 |
| Europe | 2,577 | 980 | 227 | 3,784 |
| Asia | 1,531 | 1,041 | 953 | 3,525 |
| Other | 158 | 5 | 4 | 167 |
| Total | $5,888 | $3,216 | $1,572 | $10,676 |
|  | Nine Months Ended September 30, 2022 |  |  |  |
| (in millions) | Air Management | Drivetrain & Battery Systems | ePropulsion | Total |
| North America | $1,497 | $1,020 | $375 | $2,892 |
| Europe | 2,156 | 724 | 148 | 3,028 |
| Asia | 1,490 | 1,001 | 762 | 3,253 |
| Other | 140 | — | 5 | 145 |
| Total | $5,283 | $2,745 | $1,290 | $9,318 |

### 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. The balances for the three and nine months ended September 30, 2022 have been recast for a change in reportable segments that was made during the first quarter of 2023. Refer to Note 22, “Reportable Segments And Related Information,” to the Condensed Consolidated Financial Statements for more information.

_Three Months Ended September 30, 2023_

| (in millions) | Air Management | Drivetrain & Battery Systems | e Propulsion | Corporate | Total |
| --- | --- | --- | --- | --- | --- |
| Employee termination benefits | $53 | $1 | — | — | $54 |
| Other | 1 | 1 | — | — | 2 |
| Total restructuring expense | $54 | $2 | — | — | $56 |
|  | Three Months Ended September 30, 2022 |  |  |  |  |
| (in millions) | Air Management | Drivetrain & Battery Systems | ePropulsion | Corporate | Total |
| Employee termination benefits | $5 | — | — | — | $5 |
| Other | — | — | — | — | — |
| Total restructuring expense | $5 | — | — | — | $5 |
|  | Nine Months Ended September 30, 2023 |  |  |  |  |
| (in millions) | Air Management | Drivetrain & Battery Systems | ePropulsion | Corporate | Total |
| Employee termination benefits | $62 | $1 | — | — | $63 |
| Other | 4 | 1 | — | — | 5 |
| Total restructuring expense | $66 | $2 | — | — | $68 |
|  | Nine Months Ended September 30, 2022 |  |  |  |  |
| (in millions) | Air Management | Drivetrain & Battery Systems | ePropulsion | Corporate | Total |
| Employee termination benefits | $19 | $14 | — | $(1) | $32 |
| Other | — | 9 | 1 | — | 10 |
| Total restructuring expense | $19 | $23 | $1 | $(1) | $42 |

The following tables display a roll forward 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, 2023 | $39 | $9 | $48 |
| Restructuring expense, net | 63 | 5 | 68 |
| Cash payments | (32) | (9) | (41) |
| Foreign currency translation adjustment and other | (1) | 2 | 1 |
| Balance at September 30, 2023 | 69 | 7 | 76 |
| Less: Non-current restructuring liability | 7 | — | 7 |
| Current restructuring liability at September 30, 2023 | $62 | $7 | $69 |
| (in millions) | Employee Termination Benefits | Other | Total |
| Balance at January 1, 2022 | $66 | $13 | $79 |
| Restructuring expense, net | 32 | 10 | 42 |
| Cash payments | (39) | (17) | (56) |
| Foreign currency translation adjustment and other | (12) | 2 | (10) |
| Balance at September 30, 2022 | 47 | 8 | 55 |
| Less: Non-current restructuring liability | 13 | 1 | 14 |
| Current restructuring liability at September 30, 2022 | $34 | $7 | $41 |

2023 Structural Costs Plan In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs in its Foundational products businesses. Foundational products include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains. During the three and nine months ended September 30, 2023, the Company recorded $56 million and $68 million, respectively, of restructuring costs related to this plan.

2020 Structural Costs Plan In 2020, the Company announced a $300 million restructuring plan to address structural costs. The actions under this plan are complete.

The following provides details of restructuring expense incurred by the Company’s reportable segments during the three and nine months ended September 30, 2023, and 2022, related to the plans and actions discussed above:

Air Management

2023 Structural Costs Plan

- During the three and nine months ended September 30, 2023, the segment recorded $54 million and $66 million, respectively, of restructuring costs under this plan, primarily related to employee termination benefits associated with the announced closure of a facility in Europe affecting approximately 200 employees.

2020 Structural Costs Plan

- During the three and nine months ended September 30, 2022, the segment recorded $5 million and $19 million, respectively, of restructuring costs under this plan. This primarily related to $11 million during the nine months ended September 30, 2022, for a

voluntary termination program pursuant to which approximately 47 employees accepted termination packages in 2022.

Drivetrain & Battery Systems

2023 Structural Costs Plan

- During the three and nine months ended September 30, 2023, the segment recorded $2 million of restructuring costs under this plan, primarily related to employee termination benefits and equipment moves.

2020 Structural Costs Plan

- During the nine months ended September 30, 2022, the segment recorded $9 million of restructuring costs primarily related to contractual settlements and professional fees. Separate from the 2020 Structural Costs Plan, during the nine months ended September 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 affecting approximately 80 employees.

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.

### 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:

| (in millions) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Gross R&D expenditures | $215 | $190 | $625 | $566 |
| Customer reimbursements | (23) | (12) | (84) | (32) |
| Net R&D expenditures | $192 | $178 | $541 | $534 |

### NOTE 7 OTHER OPERATING (INCOME) EXPENSE, NET

Items included in Other operating expense, net consist of:

| (in millions) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Merger and acquisition expense, net | $2 | $5 | $18 | $13 |
| Service and lease agreement termination | — | — | 9 | — |
| Asset impairments | 2 | — | 2 | — |
| Loss (gain) on sale of business | — | 9 | (5) | (15) |
| Gain on sale of assets | (7) | — | (13) | — |
| Other (income) expense, net | (3) | (2) | (12) | (5) |
| Other operating (income) expense, net | $(6) | $12 | $(1) | $(7) |

Merger and acquisition expense, net: During the three and nine months ended September 30, 2023, the Company recorded merger and acquisition expense, net of $2 million and $18 million, respectively, primarily related to professional fees for specific acquisition initiatives. During the three and nine months ended September 30, 2022, the Company recorded merger and acquisition expense, net of $5 million and $13 million, respectively, primarily related to professional fees associated with specific acquisition initiatives.

Loss (gain) on sale of business: During the three months ended September 30, 2022, the Company updated its estimate of the expected earn-out related to a previous divestiture resulting in a $9 million loss in the period. During the nine months ended September 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, in which the Company owned a 60% interest.

Gain on sale of assets: During the three months ended September 30, 2023, the Company recorded a $7 million gain related to the sale of a European manufacturing facility. The sale of the facility was pursuant to a formal restructuring plan. During the nine months ended September 30, 2023, the Company recorded a $13 million gain, primarily related to the sale of the European manufacturing facility and other fixed assets.

### 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 three months ended September 30, 2023 and 2022 was 56% and 26%, respectively. During the three months ended September 30, 2023, a discrete tax benefit of approximately $31 million was recorded in relation to various changes in filling positions for prior years, a discrete tax benefit of approximately $12 million was recorded in relation to the Spin-Off, and a discrete tax expense of approximately $87 million was recorded in relation to changes in judgement related to the realization of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies. During the three months ended September 30, 2022, a discrete tax benefit of $1 million was recorded relating to other tax adjustments.

The Company’s effective tax rate for the nine months ended September 30, 2023 and 2022 was 30% and 25%, respectively. During the nine months ended September 30, 2023, a discrete tax benefit of approximately $14 million was recorded related to the resolution of tax audits, a discrete tax benefit of

approximately $41 million was recorded in relation to the Spin-Off, a discrete tax benefit of approximately $39 million was recorded in relation to various changes in filling positions for prior years, a discrete tax expense of approximately $9 million was recorded for the impact of enacted tax law changes, and a discrete tax expense of approximately $85 million was recorded in relation to changes in judgement related to the recovery of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies. During the nine months ended September 30, 2022, a discrete tax benefit of $8 million was recorded relating to other tax adjustments.

The annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates that 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).

The Company estimates that it is reasonably possible there could be a decrease of approximately $97 million in unrecognized tax benefits and interest in the next 12 months related to the conclusion of tax audits and the lapse of statutes of limitations subsequent to the reporting period in certain taxing jurisdictions.

### NOTE 9 INVENTORIES, NET

A summary of Inventories, net is presented below:

| (in millions) | September 30, 2023 | December 31, 2022 |
| --- | --- | --- |
| Raw material and supplies | $1,005 | $919 |
| Work in progress | 154 | 136 |
| Finished goods | 202 | 187 |
| FIFO inventories | 1,361 | 1,242 |
| LIFO reserve | (33) | (25) |
| Inventories, net | $1,328 | $1,217 |

### NOTE 10 OTHER CURRENT AND NON-CURRENT ASSETS

Additional detail related to assets is presented below:

| (in millions) | September 30, 2023 | December 31, 2022 |
| --- | --- | --- |
| Prepayments and other current assets: |  |  |
| Prepaid tooling | $99 | $77 |
| Prepaid taxes | 40 | 33 |
| Derivative instruments | 34 | 12 |
| Customer incentive payments (Note 4) | 27 | 34 |
| Contract assets (Note 4) | 16 | 14 |
| Other | 56 | 60 |
| Total prepayments and other current assets | $272 | $230 |
| Investments and long-term receivables: |  |  |
| Investment in debt securities | $262 | $455 |
| Investment in equity affiliates | 232 | 235 |
| Equity securities | 73 | 73 |
| Long-term receivables | 57 | 56 |
| Total investments and long-term receivables | $624 | $819 |
| Other non-current assets: |  |  |
| Deferred income taxes | $193 | $179 |
| Operating leases | 128 | 106 |
| Derivative instruments | 83 | 68 |
| Customer incentive payments (Note 4) | 75 | 99 |
| Other | 39 | 37 |
| Total other non-current assets | $518 | $489 |

### 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 nine months ended September 30, 2023 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 | Drivetrain & Battery Systems | e Propulsion | Total |
| --- | --- | --- | --- | --- |
| Gross goodwill balance, December 31, 2022 | $1,566 | $1,434 | $480 | $3,480 |
| Accumulated impairment losses, December 31, 2022 | (502) | — | — | (502) |
| Net goodwill balance, December 31, 2022* | $1,064 | $1,434 | $480 | $2,978 |
| Goodwill during the period: |  |  |  |  |
| Acquisitions | 2 | — | — | 2 |
| Other, primarily translation adjustment | (6) | (10) | (28) | (44) |
| Ending balance, September 30, 2023 | $1,060 | $1,424 | $452 | $2,936 |

\* The December 31, 2022 balances have been recast for a change in reportable segments that was made during the first quarter of 2023. Refer to Note 22, “Reportable Segments And Related Information” for more information.

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

| (in millions) | Estimated useful lives (years) | September 30, 2023 / Gross Carrying Amount | September 30, 2023 / Accumulated Amortization | September 30, 2023 / Net Carrying Amount | December 31, 2022 / Gross Carrying Amount | December 31, 2022 / Accumulated Amortization | December 31, 2022 / Net Carrying Amount |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Amortized intangible assets: |  |  |  |  |  |  |  |
| Patented and unpatented technology | 5 - 15 | $349 | $134 | $215 | $349 | $111 | $238 |
| Customer relationships | 6 - 15 | 620 | 287 | 333 | 639 | 267 | 372 |
| Miscellaneous | 2 - 5 | 9 | 6 | 3 | 9 | 6 | 3 |
| Total amortized intangible assets |  | 978 | 427 | 551 | 997 | 384 | 613 |
| Unamortized trade names |  | 6 | — | 6 | 6 | — | 6 |
| Total other intangible assets |  | $984 | $427 | $557 | $1,003 | $384 | $619 |

### 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) | 2023 | 2022 |
| --- | --- | --- |
| Beginning balance, January 1 | $185 | $168 |
| Provisions for current period sales | 68 | 40 |
| Adjustments of prior estimates | — | (6) |
| Payments | (53) | (34) |
| Other, primarily translation adjustment | (6) | (20) |
| Ending balance, September 30 | $194 | $148 |

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

| (in millions) | September 30, 2023 | December 31, 2022 |
| --- | --- | --- |
| Other current liabilities | $99 | $110 |
| Other non-current liabilities | 95 | 75 |
| Total product warranty liability | $194 | $185 |

### NOTE 13 NOTES PAYABLE AND DEBT

As of September 30, 2023 and December 31, 2022, the Company had debt outstanding as follows:

| (in millions) | September 30, 2023 | December 31, 2022 |
| --- | --- | --- |
| Short-term borrowings | $60 | $58 |
| Long-term debt |  |  |
| 3.375% Senior notes due 03/15/25 ($500 million par value) | 384 | 499 |
| 5.000% Senior notes due 10/01/25 ($800 million par value)* | 481 | 840 |
| 2.650% Senior notes due 07/01/27 ($1,100 million par value) | 1,093 | 1,092 |
| 7.125% Senior notes due 02/15/29 ($121 million par value) | 120 | 120 |
| 1.000% Senior Notes due 05/19/31 (€1,000 million par value) | 1,041 | 1,051 |
| 4.375% Senior notes due 03/15/45 ($500 million par value) | 495 | 495 |
| Term loan facilities, finance leases and other | 54 | 45 |
| Total long-term debt | 3,668 | 4,142 |
| Less: current portion | 3 | 2 |
| Long-term debt, net of current portion | $3,665 | $4,140 |

*These notes include the fair value step-up from the Delphi Technologies acquisition. The fair value step-up was calculated based on observable market data and is amortized as a reduction to interest expense over the remaining life of the instrument using the effective interest method.

In September 2023, the Company purchased and extinguished $438 million of senior notes due in 2025, comprised of $115 million and $323 million face value of its 3.375% and 5.000% Senior Notes, respectively. Total cash consideration paid was $430 million. The Company recorded a gain of approximately $28 million during the three months ended September 30, 2023, consisting of an $8 million gain related to a cash settlement below the face value of the 2025 notes and $20 million related to the write-off of the unamortized premium and discount that was recorded at the time of note issuance. The gain was recorded to Interest (income) expense, net, in the Statements of Operations.

The Company may utilize uncommitted lines of credit for short-term working capital requirements. As of September 30, 2023 and December 31, 2022, the Company had $60 million and $58 million, respectively, in borrowings under these facilities, which are classified in Notes payable and other short-term debt in the Condensed Consolidated Balance Sheets. The short-term borrowings primarily relate to a European money market loan with an interest rate of Euribor plus 1.75% that is callable upon immediate notice by either party.

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

| (in millions) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Interest expense | $21 | $16 | $57 | $53 |
| Gain on debt extinguishment | (28) | — | (28) | — |
| Interest income | (12) | (4) | (26) | (12) |
| Interest expense, net | $(19) | $12 | $3 | $41 |

The Company has a $2 billion multi-currency revolving credit facility that allows the Company to increase the facility by $1 billion with bank group approval. This facility was renewed in September 2023 and now matures in September 2028. 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 September 30, 2023.

At September 30, 2023 and December 31, 2022, the Company had no outstanding borrowings under this facility.

The Company’s commercial paper program allows the Company to issue up to $2 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 September 30, 2023 and December 31, 2022.

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

As of September 30, 2023 and December 31, 2022, the estimated fair values of the Company’s senior unsecured notes totaled $3,099 million and $3,530 million, respectively. The estimated fair values were $515 million lower than their carrying value at September 30, 2023 and $567 million lower than their carrying value at December 31, 2022. 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 $35 million and $31 million at September 30, 2023 and December 31, 2022, respectively. The letters of credit typically act as guarantees of payment to certain third parties in accordance with specified terms and conditions.

### NOTE 14 OTHER CURRENT AND NON-CURRENT LIABILITIES

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

| (in millions) | September 30, 2023 | December 31, 2022 |
| --- | --- | --- |
| Other current liabilities: |  |  |
| Payroll and employee related | $268 | $314 |
| Customer related | 161 | 108 |
| Indirect taxes | 119 | 115 |
| Income taxes payable | 72 | 107 |
| Product warranties (Note 12) | 99 | 110 |
| Employee termination benefits (Note 5) | 62 | 20 |
| Operating leases | 41 | 22 |
| Accrued freight | 38 | 30 |
| Interest | 22 | 22 |
| Supplier related | 17 | 15 |
| Insurance | 17 | 18 |
| Deferred engineering reimbursements | 14 | 23 |
| Other non-income taxes | 14 | 12 |
| Dividends payable | 11 | 21 |
| Contract liabilities (Note 4) | 11 | 14 |
| Retirement related | 11 | 11 |
| Earn-out liability (Note 3) | 2 | 16 |
| Other | 135 | 106 |
| Total other current liabilities | $1,114 | $1,084 |
| Other non-current liabilities: |  |  |
| Other income tax liabilities | $222 | $242 |
| Deferred income taxes | 179 | 143 |
| Product warranties (Note 12) | 95 | 75 |
| Operating leases | 91 | 85 |
| Deferred income | 69 | 59 |
| Earn-out liability (Note 3) | 12 | 10 |
| Employee termination benefits (Note 5) | 7 | 17 |
| Other | 55 | 55 |
| Total other non-current liabilities | $730 | $686 |

### 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).

The following tables classify assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:

| (in millions) | Balance at September 30, 2023 | Basis of fair value measurements / Quoted prices in active markets for identical items(Level 1) | Basis of fair value measurements / Significant other observable inputs(Level 2) | Basis of fair value measurements / Significant unobservable inputs(Level 3) | Valuation technique | Assets measured at NAV1 |
| --- | --- | --- | --- | --- | --- | --- |
| Assets: |  |  |  |  |  |  |
| Investment in debt securities | $262 | — | $262 | — | A | — |
| Investment in equity securities | $28 | — | — | — | — | $28 |
| Foreign currency contracts | $39 | — | $39 | — | A | — |
| Net investment hedge contracts | $78 | — | $78 | — | A | — |
| Liabilities: |  |  |  |  |  |  |
| Current earn-out liabilities | $2 | — | — | $2 | C | — |
| Non-current earn-out liabilities | $12 | — | — | $12 | C | — |
| Foreign currency contracts | $2 | — | $2 | — | A | — |

| (in millions) | Balance at December 31, 2022 | Basis of fair value measurements / Quoted prices in active markets for identical items(Level 1) | Basis of fair value measurements / Significant other observable inputs(Level 2) | Basis of fair value measurements / Significant unobservable inputs(Level 3) | Valuationtechnique | Assets measured at NAV1 |
| --- | --- | --- | --- | --- | --- | --- |
| Assets: |  |  |  |  |  |  |
| Current earn-out receivable | $9 | — | — | $9 | C | — |
| Investment in debt securities | $455 | — | $455 | — | A | — |
| Investment in equity securities | $29 | — | — | — | — | $29 |
| Foreign currency contracts | $12 | — | $12 | — | A | — |
| Net investment hedge contracts | $68 | — | $68 | — | A | — |
| Liabilities: |  |  |  |  |  |  |
| Current earn-out liability | $21 | — | — | $21 | C | — |
| Non-current earn-out liability | $10 | — | — | $10 | C | — |
| Foreign currency contracts | $9 | — | $9 | — | A | — |
| Net investment hedge contracts | $1 | — | $1 | — | A | — |

1 Certain assets that are measured at fair value using the net asset value (“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. An adjustment for non-performance risk is considered in the estimate of fair value in derivative assets based on the counterparty credit default swap (“CDS”) rate. When the Company is in a net derivative liability position, the non-performance risk adjustment is based on its CDS rate. At September 30, 2023 and December 31, 2022, the Company had no derivative contracts that contained credit-risk-related contingent features.

The Company, at times, uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and component purchases. At September 30, 2023 and December 31, 2022, the Company had no material commodity derivative contracts.

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 September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, the following foreign currency derivative contracts were outstanding and mature through the ending duration noted below:

**Foreign currency derivatives (in millions)***

| Functional Currency | Traded Currency | Notional in traded currency September 30, 2023 | Notional in traded currency December 31, 2022 | Ending Duration |
| --- | --- | --- | --- | --- |
| British Pound | Euro | 47 | 10 | Dec - 24 |
| Chinese Renminbi | US Dollar | 225 | 276 | Dec - 24 |
| Euro | Hungarian Forint | 7,033 | — | Dec - 24 |
| Euro | Korean Won | 20,225 | 9,138 | Mar - 24 |
| Euro | Polish Zloty | 456 | 440 | Dec - 24 |
| Euro | US Dollar | 136 | 120 | Dec - 24 |
| US Dollar | Chinese Renminbi | 582 | 1,402 | Dec - 23 |
| US Dollar | Euro | 42 | 45 | Oct - 23 |
| US Dollar | Korean Won | 67,200 | 51,786 | Nov - 24 |
| US Dollar | Mexican Peso | 2,295 | 2,474 | Dec - 24 |
| US Dollar | Thailand Baht | 1,550 | — | Jun - 24 |
| *Table above excludes non-significant traded currency pairings with total notional amounts less than $10 million U.S. dollar equivalent as of September 30, 2023 and December 31, 2022. |  |  |  |  |

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). At September 30, 2023 and December 31, 2022, the following cross-currency swap contracts were outstanding:

| (in millions) | Cross-currency swaps / September 30, 2023 | Cross-currency swaps / December 31, 2022 | Cross-currency swaps / 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 | $100 | Feb - 29 |
| Fixed paying notional | ¥12,724 | ¥12,724 | Feb - 29 |

At September 30, 2023 and December 31, 2022, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815, “Derivatives and Hedging”:

| (in millions) / Derivatives designated as hedging instruments Under 815: | Assets / Location | Assets / September 30, 2023 | Assets / December 31, 2022 | Liabilities / Location | Liabilities / September 30, 2023 | Liabilities / December 31, 2022 |
| --- | --- | --- | --- | --- | --- | --- |
| Foreign currency | Prepayments and other current assets | $31 | $9 | Other current liabilities | $1 | $8 |
| Foreign currency | Other non-current assets | $5 | — | Other non-current liabilities | — | $1 |
| Net investment hedges | Other non-current assets | $78 | $68 | Other non-current liabilities | — | $1 |
| Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
| Foreign currency | Prepayments and other current assets | $3 | $3 | 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 is 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 is 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 from the assessment of effectiveness is 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 is 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 September 30, 2023 market rates.

| (in millions) / Contract Type | Deferred gain (loss) in AOCI at / September 30, 2023 | Deferred gain (loss) in AOCI at / December 31, 2022 | Gain (loss) expected to be reclassified to income in one year or less |
| --- | --- | --- | --- |
| Net investment hedges: |  |  |  |
| Foreign currency | — | $(4) | — |
| Cross-currency swaps | 78 | 67 | — |
| Foreign currency-denominated debt | 146 | 133 | — |
| Total | $224 | $196 | — |

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 September 30, 2023_

| (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 | $3,622 | $2,970 | $330 | $(17) |
| Gain (loss) on cash flow hedging relationships: |  |  |  |  |
| Foreign currency: |  |  |  |  |
| Gain (loss) recognized in other comprehensive income |  |  |  | $(11) |
|  | Nine Months Ended September 30, 2023 |  |  |  |
| (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 | $10,676 | $8,767 | $963 | $(39) |
| Gain (loss) on cash flow hedging relationships: |  |  |  |  |
| Foreign currency: |  |  |  |  |
| Gain (loss) recognized in other comprehensive income |  |  |  | $27 |

_Three Months Ended September 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 | $3,226 | $2,619 | $325 | $(262) |
| Gain (loss) on cash flow hedging relationships: |  |  |  |  |
| Foreign currency: |  |  |  |  |
| Gain (loss) recognized in other comprehensive income |  |  |  | $8 |
|  | Nine Months Ended September 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 | $9,318 | $7,588 | $951 | $(527) |
| Gain (loss) on cash flow hedging relationships: |  |  |  |  |
| Foreign currency: |  |  |  |  |
| Gain (loss) recognized in other comprehensive income |  |  |  | $12 |
| 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) / Net investment hedges | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Foreign currency | — | $3 | — | $6 |
| Cross-currency swaps | $40 | $94 | $11 | $229 |
| Foreign currency-denominated debt | $34 | $67 | $13 | $156 |

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) / Net investment hedges | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Cross-currency swaps | $6 | $7 | $19 | $20 |

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.

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 (losses) recorded in income:

| (in millions) / Contract Type | Location | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- | --- |
| Foreign Currency | Selling, general and administrative expenses | $16 | $13 | $8 | $22 |

### 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 2023 range from $15 million to $20 million, of which $14 million has been contributed through the nine months ended September 30, 2023. 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 and expense recorded in the Condensed Consolidated Statements of Operations are as follows:

| (in millions) / Three Months Ended September 30, | Pension benefits / 2023 / US | Pension benefits / 2023 / Non-US | Pension benefits / 2022 / US | Pension benefits / 2022 / Non-US | Other postemployment benefits / 2023 | Other postemployment benefits / 2022 |
| --- | --- | --- | --- | --- | --- | --- |
| Service cost | — | $4 | — | $4 | — | — |
| Interest cost | 2 | 26 | 1 | 3 | — | 1 |
| Expected return on plan assets | (1) | (25) | (3) | (5) | — | — |
| Amortization of unrecognized prior service credit | — | — | (1) | — | (1) | (1) |
| Amortization of unrecognized loss | 1 | 1 | 2 | 2 | — | — |
| Net periodic benefit expense (income) | $2 | $6 | $(1) | $4 | $(1) | — |
|  | Pension benefits |  |  |  | Other postemployment benefits |  |
| (in millions) | 2023 |  | 2022 |  |  |  |
| Nine Months Ended September 30, | US | Non-US | US | Non-US | 2023 | 2022 |
| Service cost | — | $11 | — | $14 | — | — |
| Interest cost | 5 | 37 | 3 | 10 | 1 | 1 |
| Expected return on plan assets | (4) | (33) | (6) | (16) | — | — |
| Amortization of unrecognized prior service credit | — | — | (1) | — | (2) | (2) |
| Amortization of unrecognized loss | 2 | 2 | 3 | 6 | — | — |
| Net periodic benefit expense (income) | $3 | $17 | $(1) | $14 | $(1) | $(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.

### NOTE 18 STOCKHOLDERS' EQUITY

The changes of the Stockholders’ Equity items during the three and nine months ended September 30, 2023 and 2022, are as follows:

| (in millions) | Borg Warner Inc. stockholders' equity / Issued common stock | Borg Warner Inc. stockholders' equity / Capital in excess of par value | Borg Warner Inc. stockholders' equity / Treasury stock | Borg Warner Inc. stockholders' equity / Retained earnings | Borg Warner Inc. stockholders' equity / Accumulated other comprehensive income (loss) | Borg Warner Inc. stockholders' equity / Noncontrolling interests | Borg Warner Inc. stockholders' equity / Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, June 30, 2023 | $3 | $2,657 | $(2,007) | $7,796 | $(898) | $230 | $7,781 |
| Dividends declared ($0.11 per share*) | — | — | — | (26) | — | (5) | (31) |
| Net issuance for executive stock plan | — | 10 | — | — | — | — | 10 |
| Net issuance of restricted stock | — | 13 | (3) | — | — | — | 10 |
| Net earnings | — | — | — | 50 | — | 18 | 68 |
| Other comprehensive loss | — | — | — | — | (1) | (4) | (5) |
| Spin-Off of PHINIA | — | — | — | (1,810) | (16) | — | (1,826) |
| Balance, September 30, 2023 | $3 | $2,680 | $(2,010) | $6,010 | $(915) | $239 | $6,007 |

| (in millions) | Borg Warner Inc. stockholders' equity / Issued common stock | Borg Warner Inc. stockholders' equity / Capital in excess of par value | Borg Warner Inc. stockholders' equity / Treasury stock | Borg Warner Inc. stockholders' equity / Retained earnings | Borg Warner Inc. stockholders' equity / Accumulated other comprehensive income (loss) | Borg Warner Inc. stockholders' equity / Noncontrolling interests | Borg Warner Inc. stockholders' equity / Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, June 30, 2022 | $3 | $2,633 | $(1,936) | $7,005 | $(816) | $282 | $7,171 |
| Dividends declared ($0.17 per share*) | — | — | — | (39) | — | (15) | (54) |
| Net issuance for executive stock plan | — | 6 | (1) | — | — | — | 5 |
| Net issuance of restricted stock | — | 11 | (2) | — | — | — | 9 |
| Purchase of treasury stock | — | — | (100) | — | — | — | (100) |
| Net earnings | — | — | — | 273 | — | 19 | 292 |
| Other comprehensive loss | — | — | — | — | (262) | (24) | (286) |
| Balance, September 30, 2022 | $3 | $2,650 | $(2,039) | $7,239 | $(1,078) | $262 | $7,037 |

| (in millions) | Borg Warner Inc. stockholders' equity / Issued common stock | Borg Warner Inc. stockholders' equity / Capital in excess of par value | Borg Warner Inc. stockholders' equity / Treasury stock | Borg Warner Inc. stockholders' equity / Retained earnings | Borg Warner Inc. stockholders' equity / Accumulated other comprehensive income (loss) | Borg Warner Inc. stockholders' equity / Noncontrolling interests | Borg Warner Inc. stockholders' equity / Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, December 31, 2022 | $3 | $2,675 | $(2,032) | $7,454 | $(876) | $284 | $7,508 |
| Dividends declared ($0.45 per share*) | — | — | — | (105) | — | (63) | (168) |
| Net issuance for executive stock plan | — | 10 | 5 | — | — | — | 15 |
| Net issuance of restricted stock | — | (3) | 17 | — | — | — | 14 |
| Purchase of noncontrolling interest | — | (2) | — | — | — | (13) | (15) |
| Net earnings | — | — | — | 471 | — | 49 | 520 |
| Other comprehensive loss | — | — | — | — | (23) | (18) | (41) |
| Spin-Off of PHINIA | — | — | — | (1,810) | (16) | — | (1,826) |
| Balance, September 30, 2023 | $3 | $2,680 | $(2,010) | $6,010 | $(915) | $239 | $6,007 |

| (in millions) | Borg Warner Inc. stockholders' equity / Issued common stock | Borg Warner Inc. stockholders' equity / Capital in excess of par value | Borg Warner Inc. stockholders' equity / Treasury stock | Borg Warner Inc. stockholders' equity / Retained earnings | Borg Warner Inc. stockholders' equity / Accumulated other comprehensive income (loss) | Borg Warner Inc. stockholders' equity / Noncontrolling interests | Borg Warner Inc. stockholders' equity / Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance, December 31, 2021 | $3 | $2,637 | $(1,812) | $6,671 | $(551) | $314 | $7,262 |
| Dividends declared ($0.51 per share*) | — | — | — | (121) | — | (64) | (185) |
| Net issuance for executive stock plan | — | 6 | 4 | — | — | — | 10 |
| Net issuance of restricted stock | — | 6 | 9 | — | — | — | 15 |
| Purchase/sale of noncontrolling interest | — | 1 | — | — | — | (4) | (3) |
| Purchase of treasury stock | — | — | (240) | — | — | — | (240) |
| Net earnings | — | — | — | 689 | — | 58 | 747 |
| Other comprehensive loss | — | — | — | — | (527) | (42) | (569) |
| Balance, September 30, 2022 | $3 | $2,650 | $(2,039) | $7,239 | $(1,078) | $262 | $7,037 |

* 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 nine months ended September 30, 2023 and 2022:

| (in millions) | Foreign currency translation adjustments | Hedge instruments | Defined benefit retirement plans | Total |
| --- | --- | --- | --- | --- |
| Beginning balance, June 30, 2023 | $(806) | $42 | $(134) | $(898) |
| Comprehensive income (loss) before reclassifications | 17 | (11) | 5 | 11 |
| Income taxes associated with comprehensive (loss) income before reclassifications | (13) | — | 1 | (12) |
| Reclassification from accumulated other comprehensive loss | — | — | 1 | 1 |
| Income taxes reclassified into net earnings | — | — | (1) | (1) |
| Spin-Off of PHINIA | (20) | (1) | 5 | (16) |
| Ending balance, September 30, 2023 | $(822) | $30 | $(123) | $(915) |

| (in millions) | Foreign currency translation adjustments | Hedge instruments | Defined benefit retirement plans | Total |
| --- | --- | --- | --- | --- |
| Beginning balance, June 30, 2022 | $(703) | $5 | $(118) | $(816) |
| Comprehensive (loss) income before reclassifications | (240) | 8 | 3 | (229) |
| Income taxes associated with comprehensive (loss) income before reclassifications | (34) | — | — | (34) |
| Reclassification from accumulated other comprehensive loss | — | — | 2 | 2 |
| Income taxes reclassified into net earnings | — | — | (1) | (1) |
| Ending balance, September 30, 2022 | $(977) | $13 | $(114) | $(1,078) |

| (in millions) | Foreign currency translation adjustments | Hedge instruments | Defined benefit retirement plans | Total |
| --- | --- | --- | --- | --- |
| Beginning balance, December 31, 2022 | $(750) | $4 | $(130) | $(876) |
| Comprehensive (loss) income before reclassifications | (51) | 27 | 1 | (23) |
| Income taxes associated with comprehensive (loss) income before reclassifications | (1) | — | — | (1) |
| Reclassification from accumulated other comprehensive loss | — | — | 2 | 2 |
| Income taxes reclassified into net earnings | — | — | (1) | (1) |
| Spin-Off of PHINIA | (20) | (1) | 5 | (16) |
| Ending balance, September 30, 2023 | $(822) | $30 | $(123) | $(915) |

| (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 | (474) | 12 | 9 | (453) |
| Income taxes associated with comprehensive (loss) income before reclassifications | (80) | — | 1 | (79) |
| Reclassification from accumulated other comprehensive loss | — | 1 | 6 | 7 |
| Income taxes reclassified into net earnings | — | — | (2) | (2) |
| Ending balance, September 30, 2022 | $(977) | $13 | $(114) | $(1,078) |

### 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, governmental investigations and related proceedings, 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 believe that adverse outcomes in any of these commercial and legal claims, actions and complaints are reasonably likely to 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 be presently liable for the cost of clean-up and other remedial activities at 17 and 22 such sites as of September 30, 2023 and December 31, 2022, respectively. 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.

The Company had an accrual for environmental liabilities of $6 million as of both September 30, 2023 and December 31, 2022, included in Other current and Other non-current liabilities in the Condensed Consolidated Balance Sheets. As of September 30, 2023, this accrual, which relates to six 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 which 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 11 sites, for which there was no accrual as of September 30, 2023.

### 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 0.8 million and 0.9 million performance share units excluded from the computation of the diluted earnings for both the three months ended September 30, 2023 and 2022, respectively. There were 0.7 million and 0.9 million performance share units excluded from the computation of the diluted earnings for the nine months ended September 30, 2023 and 2022, 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:

| (in millions, except per share amounts) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Basic earnings per share: |  |  |  |  |
| Net earnings from continuing operations | $87 | $173 | $483 | $464 |
| Weighted average shares of common stock outstanding | 233.4 | 234.3 | 233.2 | 236.5 |
| Basic earnings per share of common stock | $0.37 | $0.74 | $2.07 | $1.96 |
| Diluted earnings per share: |  |  |  |  |
| Net earnings from continuing operations | $87 | $173 | $483 | $464 |
| Weighted average shares of common stock outstanding | 233.4 | 234.3 | 233.2 | 236.5 |
| Effect of stock-based compensation | 1.9 | 1.3 | 1.4 | 1.0 |
| Weighted average shares of common stock outstanding including dilutive shares | 235.3 | 235.6 | 234.6 | 237.5 |
| Diluted earnings per share of common stock | $0.37 | $0.73 | $2.06 | $1.95 |

### NOTE 22 REPORTABLE SEGMENTS AND RELATED INFORMATION

The Company’s business is aggregated into three reportable segments: Air Management, Drivetrain & Battery Systems, and ePropulsion. These segments are strategic business groups that are managed separately as each represents a specific grouping of related automotive components and systems. In previous quarters, the Company presented two additional segments, Fuel Systems and Aftermarket, for a total of five reportable segments. As a result of the Spin-Off, Fuel Systems and Aftermarket are no longer reportable segments.

In the first quarter of 2023, the Company elected to disaggregate the former e-Propulsion & Drivetrain reportable segment into two separate reportable segments of Drivetrain & Battery Systems and ePropulsion. The Drivetrain & Battery Systems segment’s technologies include battery management systems and control modules, software, friction and mechanical products for automatic transmissions and torque-management products. The ePropulsion segment primarily includes rotating electrical components, power electronics, electronic control units, inverters and electric motors.

In the first quarter of 2022, the Company announced that the Americas starter and alternator business, previously reported in its former e-Propulsion & Drivetrain segment, would transition to the Aftermarket segment. The Company also announced in 2022 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 second quarter of 2022. Additionally, in the fourth quarter of 2022, the Company moved its battery systems business, previously reported in its Air Management segment, to the former e-Propulsion & Drivetrain segment.

The reportable segment disclosures have been updated accordingly, including recasting prior period information for the new reporting structures and to reflect the discontinued operations related to the Spin-Off.

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

The following tables show segment information and Segment Adjusted Operating Income (Loss) for the Company’s reportable segments:

Net Sales by Reportable Segment

| (in millions) | Three Months Ended September 30, 2023 / Customers | Three Months Ended September 30, 2023 / Inter-segment | Three Months Ended September 30, 2023 / Net | Nine Months Ended September 30, 2023 / Customers | Nine Months Ended September 30, 2023 / Inter-segment | Nine Months Ended September 30, 2023 / Net |
| --- | --- | --- | --- | --- | --- | --- |
| Air Management | $1,922 | $23 | $1,945 | $5,888 | $63 | $5,951 |
| Drivetrain & Battery Systems | 1,144 | 1 | 1,145 | 3,216 | 2 | 3,218 |
| ePropulsion | 556 | 15 | 571 | 1,572 | 52 | 1,624 |
| Inter-segment eliminations | — | (39) | (39) | — | (117) | (117) |
| Net sales | $3,622 | — | $3,622 | $10,676 | — | $10,676 |

| (in millions) | Three Months Ended September 30, 2022 / Customers | Three Months Ended September 30, 2022 / Inter-segment | Three Months Ended September 30, 2022 / Net | Nine Months Ended September 30, 2022 / Customers | Nine Months Ended September 30, 2022 / Inter-segment | Nine Months Ended September 30, 2022 / Net |
| --- | --- | --- | --- | --- | --- | --- |
| Air Management | $1,827 | $16 | $1,843 | $5,283 | $45 | $5,328 |
| Drivetrain & Battery Systems | 954 | — | 954 | 2,745 | — | 2,745 |
| ePropulsion | 445 | 44 | 489 | 1,290 | 71 | 1,361 |
| Inter-segment eliminations | — | (60) | (60) | — | (116) | (116) |
| Net sales | $3,226 | — | $3,226 | $9,318 | — | $9,318 |

Total Assets of Continuing Operations by Reportable Segment

| (in millions) | September 30, 2023 | December 31, 2022 |
| --- | --- | --- |
| Air Management | $5,559 | $5,329 |
| Drivetrain & Battery Systems | 3,954 | 3,963 |
| ePropulsion | 2,847 | 2,349 |
| Total | 12,360 | 11,641 |
| Corporate | 1,744 | 1,691 |
| Consolidated | $14,104 | $13,332 |

Segment Adjusted Operating Income (Loss)

| (in millions) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Air Management | $294 | $291 | $884 | $793 |
| Drivetrain & Battery Systems | 147 | 103 | 400 | 330 |
| ePropulsion | (20) | (33) | (74) | (89) |
| Segment Adjusted Operating Income | 421 | 361 | 1,210 | 1,034 |
| Corporate, including stock-based compensation | 72 | 61 | 194 | 198 |
| Restructuring expense (Note 5) | 56 | 5 | 68 | 42 |
| Intangible asset amortization expense | 17 | 16 | 51 | 52 |
| Merger and acquisition expense, net | 3 | 5 | 22 | 13 |
| Service and lease agreement termination | — | — | 9 | — |
| Loss (gain) on sale of business | — | 9 | (5) | (15) |
| Gain on sale of assets | (7) | — | (13) | — |
| Other non-comparable items | 8 | — | 5 | — |
| Equity in affiliates’ earnings, net of tax | (10) | (5) | (23) | (21) |
| Realized and unrealized loss (gain) on debt and equity securities | 60 | (1) | 129 | 27 |
| Interest (income) expense, net | (19) | 12 | 3 | 41 |
| Other postretirement expense (income) | 3 | (1) | 8 | (2) |
| Earnings from continuing operations before income taxes and noncontrolling interest | 238 | 260 | 762 | 699 |
| Provision for income taxes | 133 | 68 | 230 | 177 |
| Net earnings from continuing operations | $105 | $192 | $532 | $522 |

### NOTE 23 OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION

| (in millions) | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- |
| OPERATING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Net earnings | $520 | $747 |
| Net (loss) earnings from discontinued operations | (12) | 225 |
| Net earnings from continuing operations | 532 | 522 |
| Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations: |  |  |
| Depreciation and tooling amortization | 376 | 360 |
| Intangible asset amortization | 51 | 52 |
| Restructuring expense, net of cash paid | 61 | 39 |
| Stock-based compensation expense | 50 | 36 |
| Gain on debt extinguishment | (28) | — |
| Gain on sale of business | (5) | (17) |
| Deferred income tax expense (benefit) | 19 | (14) |
| Realized and unrealized loss on debt and equity securities | 129 | 27 |
| Other non-cash adjustments | (80) | (1) |
| Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations | 1,105 | 1,004 |
| Retirement plan contributions | (13) | (18) |
| Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency translation adjustments: |  |  |
| Receivables | (767) | (544) |
| Inventories | (126) | (187) |
| Prepayments and other current assets | (16) | 11 |
| Accounts payable and accrued expenses | 301 | 274 |
| Prepaid taxes and income taxes payable | (44) | 14 |
| Other assets and liabilities | 70 | (2) |
| Net cash provided by operating activities from continuing operations | $510 | $552 |
| SUPPLEMENTAL CASH FLOW INFORMATION |  |  |
| Cash paid during the period for: |  |  |
| Interest | $105 | $95 |
| Income taxes, net of refunds | $284 | $204 |
|  | Balance as of: |  |
| Non-cash investing transactions: | September 30,2023 | December 31,2022 |
| Period end accounts payable related to property, plant and equipment purchases | $124 | $165 |

### NOTE 24 DISCONTINUED OPERATIONS

The historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations in these Condensed Consolidated Financial Statements.

The following table summarizes the assets and liabilities from discontinued operations of PHINIA.

| (in millions) | December 31, 2022 | December 31, 2022 |
| --- | --- | --- |
| ASSETS |  |  |
| Cash, cash equivalents and restricted cash | $ | $255 |
| Receivables, net | 852 |  |
| Inventories, net | 470 |  |
| Prepayments and other current assets | 39 |  |
| Total current assets of discontinued operations | $ | $1,616 |
| Property, plant and equipment, net | 939 |  |
| Investments and long-term receivables | 77 |  |
| Goodwill | 419 |  |
| Other intangible assets, net | 432 |  |
| Other non-current assets | 179 |  |
| Total non-current assets of discontinued operations | $ | $2,046 |
| LIABILITIES |  |  |
| Notes payable and other short-term debt | $ | $2 |
| Accounts payable | 538 |  |
| Other current liabilities | 406 |  |
| Total current liabilities of discontinued operations | $ | $946 |
| Long-term debt | 26 |  |
| Retirement-related liabilities | 94 |  |
| Other non-current liabilities | 175 |  |
| Total non-current liabilities of discontinued operations | $ | $295 |

The following table summarizes the financial results from discontinued operations of PHINIA.

| (in millions) | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Net sales | — | $857 | $1,723 | $2,496 |
| Cost of sales | — | 658 | 1,362 | 1,958 |
| Gross profit | — | 199 | 361 | 538 |
| Selling, general and administrative expenses | — | 72 | 173 | 228 |
| Restructuring expense | — | 3 | 7 | 8 |
| Other operating expense, net | 52 | — | 117 | 33 |
| Operating (loss) income | (52) | 124 | 64 | 269 |
| Equity in affiliates’ earnings, net of tax | — | (5) | (5) | (8) |
| Interest expense, net | — | — | — | 1 |
| Other postretirement expense (income) | — | (7) | — | (24) |
| Earnings from discontinued operations before income taxes | (52) | 136 | 69 | 300 |
| Provision for income taxes | (15) | 36 | 81 | 75 |
| Net (loss) earnings from discontinued operations attributable to PHINIA | $(37) | $100 | $(12) | $225 |

In connection with the Spin-Off, the Company entered into a transition services agreement through which the Company and PHINIA will continue to provide certain services to each other following the Spin-Off. These services include IT, HR, finance, facilities, procurement, sales, IP & engineering costs. The combined impact of these services is reported in results of continuing operations in the Condensed Consolidated Financial Statements. The Company provided $7 million to PHINIA, and PHINIA provided $2 million to the Company, for these services during the three months ended September 30, 2023.

The Company incurred $52 million and $117 million of costs relating to the Spin-Off during the three and nine months ended September 30, 2023, respectively, that are reflected within Net (loss) earnings from discontinued operations in our Condensed Consolidated Statements of Operations. Spin-Off costs are primarily comprised of professional fees and costs to separate certain operational activities.

## 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. BorgWarner’s products help improve vehicle performance, propulsion efficiency, stability and air quality. The Company manufactures and sells these products 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.

Charging Forward - Electrification Portfolio Strategy

In 2021, the Company announced its strategy to aggressively grow its eProducts over time through organic investments and technology-focused acquisitions. eProducts include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs. The Company believes it is well positioned for the industry’s anticipated migration to EVs.

In June 2023, the Company announced the next phase of its Charging Forward strategy which focuses on profitably growing eProducts while maximizing the value of the Company’s Foundational products portfolio. Foundational products include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains. As a result of executing its strategy, the Company expects that by 2027, it will achieve over $10 billion in annual eProducts sales, deliver eProducts adjusted operating margin of approximately 7% and maintain its double-digit adjusted operating margins for its Foundational products portfolio. During the nine months ended September 30, 2023, the Company’s eProducts revenue was approximately $1.5 billion, or 14% of its total revenue.

On July 3, 2023, BorgWarner completed the previously announced spin-off (“Spin-Off”) of its Fuel Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of 100% of the outstanding common stock of PHINIA, Inc. (“PHINIA”) to holders of record of common stock of the Company on a pro-rata basis. Each holder of record of common stock of the Company received one share of PHINIA common stock for every five shares of common stock of the Company held on June 23, 2023, the record date for the distribution (“Distribution Date”). In lieu of fractional shares of PHINIA, shareholders of the Company received cash. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange.

The historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations in the accompanying Condensed Consolidated Financial Statements.

Acquisitions

Eldor Corporation’s Electric Hybrid Systems Business

On June 19, 2023, the Company announced that it had entered into a share purchase agreement to acquire the Electric Hybrid Systems business segment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The purchase price due at closing is €75 million ($79 million), with up to €175 million ($185 million) in contingent payments that could be paid over the two years following closing. The Company expects the acquisition to complement the Company’s existing ePropulsion product portfolio by enhancing the Company’s engineering capabilities in power electronics. The transaction is subject to satisfaction of customary closing conditions and is expected to close in the fourth quarter of 2023.

Hubei Surpass Sun Electric Charging Business

On March 1, 2023, the Company completed its acquisition of the electric vehicle solution, smart grid and smart energy businesses of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition complements the Company’s existing European and North American charging footprint by adding a presence in China. The total consideration was ¥288 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of the base purchase price in the nine months ended September 30, 2023. The remaining ¥51 million ($8 million) of base purchase price is payable in two installments with the last payment due before April 30, 2025. In addition, pursuant to the agreement, the Company

could be obligated to remit up to ¥103 million ($15 million), in the form of contingent payments over approximately two years following the closing.

Drivetek AG

On December 1, 2022, the Company acquired Drivetek AG, an engineering and product development company located in Switzerland. This acquisition strengthens the Company’s power electronics capabilities in auxiliary inverters, which the Company expects will help to accelerate the growth of its High Voltage eFan business. The Company paid ₣27 million ($29 million) at closing, and up to ₣10 million ($10 million) could be paid in the form of contingent earn-out payments over three years following the closing.

Rhombus Energy Solutions

On July 29, 2022, the Company acquired Rhombus Energy Solutions, a provider of charging solutions in the North American market. The acquisition complements the Company’s existing European charging footprint to accelerate organic growth and adds North American regional presence to its charging business. The Company paid $131 million at closing, and up to $30 million could be paid in the form of contingent payments over three years following the closing.

Santroll Automotive Components

On March 31, 2022, the Company acquired Santroll Automotive Components, a carve-out of Santroll Electric Auto’s eMotor business. 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 total final consideration was $192 million, including approximately ¥1.0 billion ($152 million) of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended December 31, 2022 and no longer expects to recapture a previously anticipated $5 million of post-closing adjustments, which has been recorded in Other operating expense, net. Pursuant to the Equity Transfer Agreement for the acquisition, the obligation of the Company to remit up to ¥0.3 billion (approximately $47 million) of earn-out payments was contingent upon achievement of certain sales volume targets and certain estimated future volume targets associated with newly awarded business. During the nine months ended September 30, 2023, the Company paid approximately ¥0.2 billion ($24 million) to settle the remaining earn-out liability and related adjustments.

Refer to Note 3, “Acquisitions,” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

Key Trends and Economic Factors

UAW Strike. Prior to the United Auto Workers (“UAW”) strikes that commenced in September 2023, the Company expected its aggregate sales to Ford, Stellantis, and General Motors in North America to be just under $250 million per month on average during 2023. In October 2023, the UAW strikes expanded to include facilities that the Company currently supplies. However, in late October the UAW reached tentative agreements with Ford, Stellantis and General Motors and production has resumed at some of their manufacturing facilities. These tentative agreements have not yet been ratified by the UAW. If they are not ratified, it remains possible that there could be prolonged strikes that could have a material impact on the Company.

Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and since the beginning of 2021, 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, most economies where the Company operates have experienced elevated levels of inflation more generally, which is driving an increase in other input costs. As a result, the Company has experienced, and is continuing to experience, higher costs.

Outlook

The Company expects global industry production to increase year-over-year in 2023. The Company also expects net new business-related sales growth, due to the increased penetration of BorgWarner products and increasing eProduct revenue, to drive a sales increase in excess of the growth in its industry production outlook. Recoveries by the Company from its customers of material cost inflation arising from non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements are also expected to increase net sales year-over-year. As a result, the Company expects increased revenue in 2023, excluding the impact of foreign currencies.

The Company expects the earnings benefit of this revenue growth to be partially offset by a planned increase in eProduct-related Research & Development (“R&D”) expenditures during 2023. This planned R&D increase is to support growth in the Company’s eProducts and is primarily related to supporting the launch of awarded programs.

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.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022

The following table presents a summary of our operating results:

**Three Months Ended September 30,**

| 2023 | 2022 | 2022 / % of net sales |
| --- | --- | --- |
| $1,945 | $$1,843% | 57.1% |
| 1,145 | 954 | 29.6 |
| 571 | 489 | 15.2 |
| (39) | (60) | (1.9) |
| 3,622 | 3,226 | 100.0 |
| 2,970 | 2,619 | 81.2 |
| 652 | 607 | 18.8 |
| 192 | 178 | 5.5 |
| 138 | 147 | 4.6 |
| 56 | 5 | 0.2 |
| (6) | 12 | 0.4 |
| 272 | 265 | 8.2 |
| (10) | (5) | (0.2) |
| 60 | (1) | — |
| (19) | 12 | 0.4 |
| 3 | (1) | — |
| 238 | 260 | 8.1 |
| 133 | 68 | 2.1 |
| 105 | 192 | 6.0 |
| (37) | 100 | 3.1 |
| 68 | 292 | 9.1 |
| 18 | 19 | 0.6 |
| $50 | $$273% | 8.5% |
| $0.37 | $$0.73 |  |

Net sales

Net sales for the three months ended September 30, 2023 totaled $3,622 million, an increase of $396 million, or 12%, compared to the three months ended September 30, 2022. The change in net sales for the three months ended September 30, 2023 was primarily driven by the following:

- Favorable volume, mix and net new business increased sales approximately $322 million, or 10%. This increase was primarily driven by higher weighted average market production as estimated by the Company, which was up approximately 6% from the three months ended September 30, 2022. The remaining portion of this increase primarily reflected sales growth above market production, which the Company believes reflected higher demand for its products. Weighted average market production reflects light and commercial vehicle production as reported by IHS weighted for the Company’s geographic exposure, as estimated by the Company.
- Fluctuations in foreign currencies resulted in a year-over-year increase in sales of approximately $44 million primarily due to the strengthening of the Euro, partially offset by the weakening of the Chinese Renminbi, in each case relative to the U.S. Dollar.
- Recoveries from the Company’s customers of material cost inflation arising from non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements increased net sales by approximately $23 million.
- Acquisitions contributed $8 million in additional sales during the three months ended September 30, 2023.

Cost of sales and gross profit

Cost of sales and cost of sales as a percentage of net sales were $2,970 million and 82.0%, respectively, during the three months ended September 30, 2023, compared to $2,619 million and 81.2%, respectively, during the three months ended September 30, 2022. The change in cost of sales for the three months ended September 30, 2023 was primarily driven by the following:

- Higher sales volume, mix and net new business increased cost of sales by approximately $236 million.
- Fluctuations in foreign currencies resulted in a year-over-year increase in cost of sales of approximately $50 million primarily due to the strengthening of the Euro, partially offset by the weakening of the Chinese Renminbi, in each case relative to the U.S. Dollar.
- Cost of sales was also impacted by material cost inflation of approximately $24 million arising from non-contractual commercial negotiations and normal contractual supplier commodity pass-through arrangements with the Company’s suppliers.

Gross profit and gross margin were $652 million and 18.0%, respectively, during the three months ended September 30, 2023, compared to $607 million and 18.8%, respectively, during the three months ended September 30, 2022. The decrease in gross margin was primarily due to the factors discussed above.

Selling, general and administrative expenses (“SG&A”)

SG&A for the three months ended September 30, 2023 was $330 million as compared to $325 million for the three months ended September 30, 2022. SG&A as a percentage of net sales was 9.1% and 10.1% for the three months ended September 30, 2023 and 2022, respectively. The change in SG&A was primarily attributable to:

- Research and Development (“R&D”) costs increased by $14 million. R&D costs, net of customer reimbursements, were 5.3% of net sales for the three months ended September 30, 2023, compared to 5.5% of net sales for the three months ended September 30, 2022. The Company will continue to invest in R&D programs, which are necessary to support short- and long-term growth.
- Administrative expenses decreased by $15 million, which included various items such as professional fees.

Restructuring expense was $56 million and $5 million for the three months ended September 30, 2023 and 2022, respectively, primarily related to employee termination benefits. Refer to Note 5 “Restructuring” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs in its Foundational products businesses. During the three months ended September 30, 2023, the Company recorded $56 million of restructuring costs related to this plan.

Other operating (income) expense, net was income of $6 million and expense of $12 million for the three months ended September 30, 2023 and 2022, respectively.

During the three months ended September 30, 2023, the Company recorded a $7 million gain related to the sale of a European manufacturing facility. The sale of the facility was pursuant to a formal

restructuring plan. During the three months ended September 30, 2022, the Company revised its estimate of the expected earn-out related to a previous divestiture resulting in a $9 million loss in the period.

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 $10 million and $5 million for the three months ended September 30, 2023 and 2022, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Realized and unrealized loss (gain) on debt and equity securities was a loss of $60 million and a gain of $1 million for the three months ended September 30, 2023 and 2022, respectively. This line item reflects the net realized and unrealized gains or losses recognized due to valuing the Company’s investments at fair value. For the three months ended September 30, 2023, this primarily related to losses recognized to adjust the Company’s investment in Wolfspeed Inc. (“Wolfspeed”) convertible debt securities to fair value.

Interest (income) expense, net was income of $19 million and expense of $12 million for the three months ended September 30, 2023 and 2022, respectively. During the three months ended September 30, 2023, the Company recorded a $28 million gain on extinguishment of the Company’s 3.375% and 5.000% Senior Notes.

Provision for income taxes was $133 million for the three months ended September 30, 2023, resulting in an effective rate of 56%. This compared to $68 million, or an effective rate of 26%, for the three months ended September 30, 2022. During the three months ended September 30, 2023, a discrete tax benefit of approximately $31 million was recorded in relation to various changes in filling positions from prior years, a discrete tax benefit of approximately $12 million was recorded in relation to the Spin-Off, and a discrete tax expense of approximately $87 million was recorded in relation to changes in judgement related to the realization of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies. During the three months ended September 30, 2022, a discrete tax benefit of $1 million was recorded relating to other tax adjustments.

Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022

The following table presents a summary of our operating results:

**Nine Months Ended September 30,**

| 2023 | 2022 | 2022 / % of net sales |
| --- | --- | --- |
| $5,951 | $$5,328% | 57.2% |
| 3,218 | 2,745 | 29.5 |
| 1,624 | 1,361 | 14.6 |
| (117) | (116) | (1.2) |
| 10,676 | 9,318 | 100.0 |
| 8,767 | 7,588 | 81.4 |
| 1,909 | 1,730 | 18.6 |
| 541 | 534 | 5.7 |
| 422 | 417 | 4.5 |
| 68 | 42 | 0.5 |
| (1) | (7) | (0.1) |
| 879 | 744 | 8.0 |
| (23) | (21) | (0.2) |
| 129 | 27 | 0.3 |
| 3 | 41 | 0.4 |
| 8 | (2) | — |
| 762 | 699 | 7.5 |
| 230 | 177 | 1.9 |
| 532 | 522 | 5.6 |
| (12) | 225 | 2.4 |
| 520 | 747 | 8.0 |
| 49 | 58 | 0.6 |
| $471 | $$689% | 7.4% |
| $2.06 | $$1.95 |  |

Net sales

Net sales for the nine months ended September 30, 2023 totaled $10,676 million, an increase of $1,358 million, or 15%, compared to the nine months ended September 30, 2022. The change in net sales for the nine months ended September 30, 2023 was primarily driven by the following:

- Favorable volume, mix and net new business increased sales approximately $1,305 million, or 14%. This increase was primarily driven by higher weighted average market production as estimated by the Company, which was up approximately 11% from the nine months ended September 30, 2022. The remaining portion of this increase primarily reflected sales growth above market production, which the Company believes reflected higher demand for its products. Weighted average market production reflects light and commercial vehicle production as reported by IHS weighted for the Company’s geographic exposure, as estimated by the Company.
- Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $121 million primarily due to the weakening of the Chinese Renminbi and Korean Won, partially offset by the strengthening of the Euro, in each case relative to the U.S. Dollar.
- Recoveries from the Company’s customers of material cost inflation arising from non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements increased net sales by approximately $155 million.
- Acquisitions contributed $48 million in additional sales during the nine months ended September 30, 2023.

Cost of sales and gross profit

Cost of sales and cost of sales as a percentage of net sales were $8,767 million and 82.1%, respectively, during the nine months ended September 30, 2023, compared to $7,588 million and 81.4%, respectively, during the nine months ended September 30, 2022. The change in cost of sales for the nine months ended September 30, 2023 was primarily driven by the following:

- Higher sales volume, mix and net new business increased cost of sales by approximately $1,016 million.
- Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $80 million primarily due to the weakening of the Chinese Renminbi and Korean Won, partially offset by the strengthening of the Euro, in each case relative to the U.S. Dollar.
- Cost of sales was also impacted by material cost inflation of approximately $142 million arising from non-contractual commercial negotiations and normal contractual supplier commodity pass-through arrangements with the Company’s suppliers.

Gross profit and gross margin were $1,909 million and 17.9%, respectively, during the nine months ended September 30, 2023, compared to $1,730 million and 18.6%, respectively, during the nine months ended September 30, 2022. The decrease in gross margin was primarily due to the factors discussed above.

Selling, general and administrative expenses (“SG&A”)

SG&A for the nine months ended September 30, 2023 was $963 million as compared to $951 million for the nine months ended September 30, 2022. SG&A as a percentage of net sales was 9.0% and 10.2% for the nine months ended September 30, 2023 and 2022, respectively. The change in SG&A was primarily attributable to:

- Research and Development (“R&D”) costs remained relatively flat. R&D costs, net of customer reimbursements, were 5.1% of net sales for the nine months ended September 30, 2023, compared to 5.7% of net sales for the nine months ended September 30, 2022.
- Employee-related costs increased $25 million.
- Administrative expenses decreased by $11 million, which included various items such as professional fees.

Restructuring expense was $68 million and $42 million for the nine months ended September 30, 2023 and 2022, respectively, primarily related to employee termination benefits. Refer to Note 5 “Restructuring” to the Condensed Consolidated Financial Statements in Item 1 of this report for more information.

In 2023, the Company announced a $130 million to $150 million restructuring plan to address structural costs in its Foundational products businesses. During the nine months ended September 30, 2023, the Company recorded $68 million of restructuring costs related to this plan.

Other operating (income) expense, net was income of $1 million and $7 million for the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023 and September 30, 2022, the Company recorded merger and acquisition expense, net of $18 million and $13 million, respectively, primarily related to professional fees associated with specific acquisition initiatives.

During the nine months ended September 30, 2023, the Company recorded a $13 million gain, primarily related to the sale of a European manufacturing facility and other fixed assets. The sale of the facility was pursuant to a formal restructuring plan.

During the nine months ended September 30, 2022, the Company recorded a $24 million pre-tax gain in connection with the sale of its interest in BorgWarner Romeo Power LLC, in which the Company owned a 60% interest.

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 $23 million and $21 million for the nine months ended September 30, 2023 and 2022, respectively. This line item is driven by the results of the Company’s unconsolidated joint ventures.

Realized and unrealized loss on debt and equity securities was $129 million and $27 million for the nine months ended September 30, 2023 and 2022, respectively. This line item reflects the net unrealized gains or losses recognized due to valuing the Company’s investments at fair value. For the nine months ended September 30, 2023, this primarily related to losses recognized to adjust the Company’s investment in Wolfspeed convertible debt securities to fair value. For the nine months ended September 30, 2022, the Company recorded a loss and sold all of its remaining investment in Romeo Power, Inc.

Interest expense, net was $3 million and $41 million for the nine months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2023, the Company recorded a $28 million gain on extinguishment of the Company’s 3.375% and 5.000% Senior Notes.

Provision for income taxes was $230 million for the nine months ended September 30, 2023, resulting in an effective rate of 30%. This compared to $177 million, or an effective rate of 25%, for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, a discrete tax benefit of approximately $14 million was recorded related to the resolution of tax audits, a discrete tax benefit of approximately $41 million was recorded in relation to the Spin-Off, a discrete tax benefit of approximately $39 million was recorded in relation to various changes in filling positions for prior years, a discrete tax expense of approximately $9 million was recorded for the impact of enacted tax law changes, and a discrete tax expense of approximately $85 million was recorded in relation to changes in judgement related to the recovery of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies. During the nine months ended September 30, 2022, a discrete tax benefit of $8 million was recorded relating to other tax adjustments.

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

The Company’s earnings per diluted share were $0.37 and $0.73 for the three months ended September 30, 2023 and 2022, respectively, and $2.06 and $1.95 for the nine months ended September 30, 2023 and 2022, respectively. 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. The Company believes the following table is useful in highlighting non-comparable items that impacted its earnings per diluted share:

| Non-comparable items: | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- | --- | --- |
| Merger, acquisition and divestiture expense, net | $(0.01) | $(0.01) | $(0.05) | $(0.07) |
| Restructuring expense | (0.17) | (0.02) | (0.21) | (0.17) |
| Service and lease agreement termination | — | — | (0.03) | — |
| Loss (gain) on sale of business | — | (0.03) | 0.02 | 0.05 |
| Gain on sale of assets | 0.03 | — | 0.04 | — |
| Gain on debt extinguishment | 0.09 | — | 0.09 | — |
| Other non-comparable items | (0.05) | 0.01 | (0.06) | 0.03 |
| Realized and unrealized (loss) gain on debt and equity securities | (0.32) | — | (0.55) | (0.11) |
| Tax adjustments | (0.18) | — | — | 0.04 |
| Total impact of non-comparable items per share - diluted | $(0.61) | $(0.05) | $(0.75) | $(0.23) |

Results by Reportable Segment

The Company’s business is aggregated into three reportable segments: Air Management, Drivetrain & Battery Systems, and ePropulsion. These segments are strategic business groups that are managed separately as each represents a specific grouping of related automotive components and systems. In previous quarters, the Company presented two additional segments, Fuel Systems and Aftermarket, for a total of five reportable segments. As a result of the Spin-Off, Fuel Systems and Aftermarket are no longer reportable segments. The historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations in the accompanying Condensed Consolidated Financial Statements.

In the first quarter of 2023, the Company elected to disaggregate the former e-Propulsion & Drivetrain reportable segment into two separate reportable segments of Drivetrain & Battery Systems and ePropulsion. The Drivetrain & Battery Systems segment’s technologies include battery management systems and control modules, software, friction and mechanical products for automatic transmissions and torque-management products. The ePropulsion segment primarily includes rotating electrical components, power electronics, electronic control units, inverters and electric motors.

In the first quarter of 2022, the Company announced that the Americas starter and alternator business, previously reported in its former e-Propulsion & Drivetrain segment, would transition to the Aftermarket segment. The Company also announced in 2022 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 second quarter of 2022. Additionally, in the fourth quarter of 2022, the Company moved its battery systems business, previously reported in its Air Management segment, to the former e-Propulsion & Drivetrain segment.

The reportable segment disclosures have been updated accordingly, including recasting prior period information for the new reporting structures and to reflect the discontinued operations related to the Spin-Off.

Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by the Company. Segment Adjusted Operating Income (Loss) 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. The Company believes Segment Adjusted Operating Income (Loss) is most reflective of the operational profitability or loss of our reportable segments. Segment Adjusted Operating Margin is the Segment Adjusted Operating Income (Loss) divided by net sales of the reportable segment.

The following tables presents net sales and Segment Adjusted Operating Income (Loss) for the Company’s reportable segments:

Three Months Ended September 30, 2023 vs. Three Months Ended September 30, 2022

| (in millions) | Three Months Ended September 30, 2023 / Net sales | Three Months Ended September 30, 2023 / Segment Adjusted Operating Income (Loss) | Three Months Ended September 30, 2023 / % margin | Three Months Ended September 30, 2022 / Net sales | Three Months Ended September 30, 2022 / Segment Adjusted Operating Income (Loss) | Three Months Ended September 30, 2022 / % margin |
| --- | --- | --- | --- | --- | --- | --- |
| Air Management | $1,945 | $294 | 15.1% | $1,843 | $291 | 15.8% |
| Drivetrain & Battery Systems | 1,145 | 147 | 12.8% | 954 | 103 | 10.8% |
| ePropulsion | 571 | (20) | (3.5)% | 489 | (33) | (6.7)% |
| Inter-segment eliminations | (39) | — |  | (60) | — |  |
| Totals | $3,622 | $421 |  | $3,226 | $361 |  |

The Air Management segment’s net sales increased $102 million, or 6%, and Segment Adjusted Operating Income increased $3 million from the three months ended September 30, 2022. Foreign currencies resulted in a year-over-year increase in sales of approximately $45 million primarily due to the strengthening of the Euro, partially offset by the weakening of the Chinese Renminbi, in each case relative to the U.S. Dollar. Acquisitions contributed $8 million in additional sales during the three months ended September 30, 2023. The increase excluding these items was primarily due to approximately $58 million of volume, mix, net new business driven by increased demand for the Company’s products, higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers. Segment Adjusted Operating Margin was 15.1% for the three months ended September 30, 2023, compared to 15.8% during the three months ended September 30, 2022. The Segment Adjusted Operating Income increase was primarily due to conversion on higher sales and customer recoveries of inflation, partially offset by higher input costs due to inflation and eProducts investments.

The Drivetrain & Battery Systems segment’s net sales increased $191 million, or 20%, and Segment Adjusted Operating Income increased $44 million from the three months ended September 30, 2022. Foreign currencies resulted in a year-over-year increase in sales of approximately $12 million primarily due to the strengthening of the Euro, partially offset by the weakening of the Chinese Renminbi, in each case relative to the U.S. Dollar. The increase excluding the impact of foreign currencies was primarily due to approximately $164 million of volume, mix and net new business driven by increased demand for the Company’s battery systems, higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers. Segment Adjusted Operating Margin was 12.8% for the three months ended September 30, 2023, compared to 10.8% during the three months ended September 30, 2022. The Segment Adjusted Operating Income increase was primarily due to conversion on higher sales and customer recoveries of inflation, partially offset by higher input costs due to inflation and battery systems operating losses.

The ePropulsion segment’s net sales increased $82 million, or 17%, and Segment Adjusted Operating

Loss decreased $13 million from the three months ended September 30, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $13 million primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar. The increase excluding these items was primarily due to approximately $93 million of volume, mix and net new business driven by increased demand for the Company’s products, higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers. Segment Adjusted Operating Margin was (3.5)% for the three months ended September 30, 2023, compared to (6.7)% during the three months ended September 30, 2022. The Segment Adjusted Operating Loss was primarily due to investments in R&D for eProducts. The Segment Adjusted Operating Loss improvement was due to conversion on higher sales, customer recoveries of inflation, lower R&D and SG&A spending, partially offset by higher input costs due to inflation and depreciation.

Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022

| (in millions) | Nine Months Ended September 30, 2023 / Net sales | Nine Months Ended September 30, 2023 / Segment Adjusted Operating Income (Loss) | Nine Months Ended September 30, 2023 / % margin | Nine Months Ended September 30, 2022 / Net sales | Nine Months Ended September 30, 2022 / Segment Adjusted Operating Income (Loss) | Nine Months Ended September 30, 2022 / % margin |
| --- | --- | --- | --- | --- | --- | --- |
| Air Management | $5,951 | $884 | 14.9% | $5,328 | $793 | 14.9% |
| Drivetrain & Battery Systems | 3,218 | 400 | 12.4% | 2,745 | 330 | 12.0% |
| ePropulsion | 1,624 | (74) | (4.6)% | 1,361 | (89) | (6.5)% |
| Inter-segment eliminations | (117) | — |  | (116) | — |  |
| Totals | $10,676 | $1,210 |  | $9,318 | $1,034 |  |

The Air Management segment’s net sales increased $623 million, or 12%, and Segment Adjusted Operating Income increased $91 million from the nine months ended September 30, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $44 million primarily due to the weakening of the Chinese Renminbi and Korean Won, partially offset by the strengthening of the Euro, in each case relative to the U.S. Dollar. Acquisitions contributed $23 million in additional sales during the nine months ended September 30, 2023. The increase excluding these items was primarily due to approximately $658 million of volume, mix and net new business driven by increased demand for the Company’s products, higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers. Segment Adjusted Operating Margin was 14.9% for the nine months ended September 30, 2023 and September 30, 2022. The Segment Adjusted Operating Income increase was primarily due to conversion on higher sales and customer recoveries, which was offset by higher input costs due to inflation.

The Drivetrain & Battery Systems segment’s net sales increased $473 million, or 17%, and Segment Adjusted Operating Income increased $70 million from the nine months ended September 30, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $31 million primarily due to the weakening of the Chinese Renminbi, partially offset by the strengthening of the Euro, in each case relative to the U.S. Dollar. The increase excluding the impact of foreign currencies was primarily due to approximately $490 million of volume, mix and net new business driven by increased demand for the Company’s battery systems, higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers. Segment Adjusted Operating Margin was 12.4% for the nine months ended September 30, 2023, compared to 12.0% during the nine months ended September 30, 2022. The Segment Adjusted Operating Income increase was primarily due to conversion on higher sales and customer recoveries, partially offset by higher input costs due to inflation and investments in R&D for battery systems.

The ePropulsion segment’s net sales increased $263 million, or 19%, and Segment Adjusted Operating Loss decreased $15 million from the nine months ended September 30, 2022. Foreign currencies resulted in a year-over-year decrease in sales of approximately $46 million primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar. Acquisitions contributed $25 million in additional sales during the nine months ended September 30, 2023. The increase excluding these items was primarily due to approximately $282 million of volume, mix and net new business driven by increased demand for the Company’s products, higher weighted average market production compared to the prior year, non-contractual commercial negotiations and normal contractual customer commodity pass-through arrangements with the Company’s customers. Segment Adjusted Operating Margin was (4.6)% for the nine months ended September 30, 2023, compared to (6.5)% during the nine months ended September 30, 2022. The Segment Adjusted Operating Loss was primarily due to investments in R&D for eProducts. The Segment Adjusted Operating Loss improvement was due to conversion on higher sales related to eProducts growth.

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 September 30, 2023, the Company had liquidity of $2,949 million, comprised of cash and cash equivalent balances of $949 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 September 30, 2023, cash balances of $625 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 September 2028. 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 September 30, 2023. At September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022.

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 statement filed with the U.S. Securities and Exchange Commission provides the Company with the ability to issue various debt and equity securities subject to market conditions.

On February 8, 2023, April 26, 2023 and July 26, 2023, the Company’s Board of Directors declared quarterly cash dividends of $0.17, $0.17 and $0.11 per share of common stock, respectively. The dividends were paid on March 15, 2023, June 15, 2023 and September 15, 2023, respectively. The Company’s third quarter cash dividend rate compared to the second quarter dividend rate reflects the impact of the Spin-Off.

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 each of Fitch, Standard & Poor’s and Moody’s is stable. None of the Company's debt agreements require accelerated repayment in the event of a downgrade in credit ratings.

Cash Flows

Operating Activities

| (in millions) | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- |
| OPERATING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Net earnings | $532 | $522 |
| Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations: |  |  |
| Depreciation and tooling amortization | 376 | 360 |
| Intangible asset amortization | 51 | 52 |
| Restructuring expense, net of cash paid | 61 | 39 |
| Stock-based compensation expense | 50 | 36 |
| Gain on debt extinguishment | (28) | — |
| Gain on sale of business | (5) | (17) |
| Deferred income tax expense (benefit) | 19 | (14) |
| Realized and unrealized loss on debt and equity securities | 129 | 27 |
| Other non-cash adjustments | (80) | (1) |
| Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities from continuing operations | 1,105 | 1,004 |
| Retirement plan contributions | (13) | (18) |
| Changes in assets and liabilities, excluding effects of acquisitions, divestitures and foreign currency translation adjustments: |  |  |
| Receivables | (767) | (544) |
| Inventories | (126) | (187) |
| Accounts payable and accrued expenses | 301 | 274 |
| Other assets and liabilities | 10 | 23 |
| Net cash provided by operating activities from continuing operations | $510 | $552 |

Net cash provided by operating activities was $510 million for the nine months ended September 30, 2023 compared to net cash provided by operating activities of $552 million for the nine months ended September 30, 2022. The decrease for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022 was primarily due to increased working capital investments.

Investing Activities

| (in millions) | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- |
| INVESTING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Capital expenditures, including tooling outlays | $(624) | $(427) |
| Payments for businesses acquired, net of cash acquired | (31) | (288) |
| Proceeds from settlement of net investment hedges, net | 25 | 40 |
| Proceeds from investments in debt and equity securities, net | 63 | 27 |
| Proceeds from the sale of business, net | — | 25 |
| Proceeds from asset disposals and other, net | 29 | 16 |
| Net cash used in investing activities from continuing operations | $(538) | $(607) |

Net cash used in investing activities was $538 million during the first nine months of 2023 compared to $607 million during the first nine months of 2022. In 2023, the Company paid $31 million related to the acquisition of the electric vehicle solution, smart grid and smart energy businesses of Hubei Surpass Sun Electric. In 2022, the Company paid $288 million related to the acquisitions of Rhombus Energy Solutions and Santroll Automotive Components. As a percentage of sales, capital expenditures were 5.8% and 4.6% for the nine months ended September 30, 2023 and 2022, respectively. The increase in capital expenditures was to support the planned growth of eProducts.

Financing Activities

| (in millions) | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 |
| --- | --- | --- |
| FINANCING ACTIVITIES OF CONTINUING OPERATIONS |  |  |
| Net increase in notes payable | $3 | — |
| Additions to debt | 4 | 2 |
| Payments for debt issuance costs | (3) | — |
| Repayments of debt, including current portion | (444) | (9) |
| Payments for purchase of treasury stock | — | (240) |
| Payments for stock-based compensation items | (25) | (18) |
| Payments for contingent consideration | (23) | — |
| Purchase of noncontrolling interest | (15) | (56) |
| Net distribution from PHINIA | 401 | — |
| Dividends paid to BorgWarner stockholders | (105) | (121) |
| Dividends paid to noncontrolling stockholders | (71) | (48) |
| Net cash used in financing activities from continuing operations | $(278) | $(490) |

Net cash used in financing activities was $278 million during the first nine months of 2023 compared to $490 million during the first nine months of 2022. Net cash used in financing activities during the nine months ended September 30, 2023 was primarily related to $105 million in dividends paid to the Company’s stockholders, $71 million in dividends paid to noncontrolling stockholders of the Company’s consolidated joint ventures and $23 million in contingent consideration payments. Additionally, during the nine months ended September 30, 2023, the Company used $15 million to purchase the noncontrolling interest of a joint venture in Korea. Finally, during the nine months ended September 30, 2023, the Company executed the Spin-Off and received a net distribution, which was primarily utilized to purchase and extinguish a portion of senior notes due in 2025.

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, governmental investigations and related proceedings, 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 believe that adverse outcomes in any of these commercial and legal claims, actions and complaints are reasonably likely to 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 be presently liable for the cost of clean-up and other remedial activities at 17 and 22 such sites as of September 30, 2023 and December 31, 2022, respectively. 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.

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, 2022.

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, Korean Won, Mexican Peso, Polish Zloty, Singapore Dollar and Thailand Baht. 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 September 30, 2023 and December 31, 2022, the Company recorded a deferred gain of $224 million and $196 million, respectively, both before taxes, for designated net investment hedges within accumulated other comprehensive income (loss).

The significant foreign currency translation adjustments during the three and nine months ended September 30, 2023 and 2022 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 September 30, 2023 | Nine Months Ended September 30, 2023 |
| --- | --- | --- |
| Chinese renminbi | $(1)% | $(101)% |
| Euro | $(47)% | $(48)% |
| Korean won | $(12)% | $(30)% |

| (in millions, except for percentages) | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 |
| --- | --- | --- |
| Chinese renminbi | $(138)% | $(270)% |
| Euro | $(61)% | $(135)% |
| Korean won | $(62)% | $(116)% |
| British pound | $(28)% | $(65)% |

## 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.

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. 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 nine months ended September 30, 2023, 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, 2022.

## Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

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. This share repurchase authorization does not expire. As of September 30, 2023, the Company has repurchased $456 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 and 2023 Stock Incentive Plan provide that the withholding obligations be settled by the Company retaining stock that is part of the award. Withheld 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 September 30, 2023:

**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) |
| --- | --- | --- | --- | --- |
| July 1, 2023 - July 31, 2023 |  |  |  |  |
| Common Stock Repurchase Program | — | — | — | $544 |
| Employee transactions | — | — | — |  |
| August 1, 2023 - August 31, 2023 |  |  |  |  |
| Common Stock Repurchase Program | — | — | — | $544 |
| Employee transactions | 11 | $45.44 | — |  |
| September 1, 2023 - September 30, 2023 |  |  |  |  |
| Common Stock Repurchase Program | — | — | — | $544 |
| Employee transactions | 816 | $40.56 | — |  |

## Item 5. Other Information

During the three months ended September 30, 2023, no director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

## Item 6. Exhibits

Exhibit 10.1 [Fifth Amended and Restated Credit Agreement dated as of September 22, 2023, among BorgWarner Inc., Bank of America, N.A., as Administrative Agent for the Lenders and as Swingline Lender and an Issuing Bank, and the Lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 22, 2023).](https://www.sec.gov/Archives/edgar/data/908255/000110465923103177/tm2326744d1_ex10-1.htm)

Exhibit 10.2 [BorgWarner Inc. 2023 Stock Incentive Plan, as Amended and Restated.\*](borgwarner2023stockincenti.htm)

Exhibit 31.1 [Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer.\*](a2023093010qexhibit311.htm)

Exhibit 31.2 [Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer.\*](a2023093010qexhibit312.htm)

Exhibit 32.1 [Section 1350 Certifications.\*](a2023093010qexhibit321.htm)

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/ Craig D. Aaron

(Signature)

Craig D. Aaron

Vice President and Controller

(Principal Accounting Officer)

Date: November 2, 2023

---

## EX-10.2

SEC source: [borgwarner2023stockincenti.htm](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/borgwarner2023stockincenti.htm)

EXHIBIT 10.2

BORGWARNER INC.  
2023 STOCK INCENTIVE PLAN

SECTION 1.Purpose and Effective Date.

1.1Purpose. The purpose of the Plan is to give the Company a significant advantage in attracting, retaining and motivating officers, employees and directors and to provide the Company, its subsidiaries and its Affiliates with the ability to provide incentives more directly linked to the profitability of the Company’s businesses and increases in stockholder value.

1.2Effective Date. The Plan will become effective, and Awards may be granted under the Plan, on and after the date the Company’s stockholders approve the Plan (the “Effective Date”). The Plan will terminate as provided in Section 16.1. Upon the Effective Date, the Prior Plan will terminate and no new awards will be granted under the Prior Plan, although awards previously granted under the Prior Plan and still outstanding will continue to be subject to all the terms and conditions of the Prior Plan.

SECTION 2.Definitions.

For purposes of the Plan, the following terms are defined as set forth below:

2.1“Affiliate” means a corporation or other entity controlled by the Company and designated by the Committee as such.

2.2“Award” means a Stock Appreciation Right, Stock Option, Restricted Stock, Stock Unit, Performance Unit, Performance Stock Unit or Cash Incentive Award granted pursuant to the Plan.

2.3“Award Agreement” means a written agreement or notice memorializing the terms and conditions of an Award.

2.4“Board” means the Board of Directors of the Company.

2.5“Breach of Conduct” means, for purposes of the Plan, any of the following:

(a)actions by the participant resulting in the termination of the participant’s employment with the Company or any Affiliate for Cause,

(b)the participant’s violation of the Company’s Code of Ethical Conduct where such business standards have been distributed or made available to the participant,

(c)the participant’s unauthorized disclosure to a third party of confidential information, intellectual property, or proprietary business practices, processes, or methods of the Company; or willful failure to protect the Company’s confidential information, intellectual property, proprietary business practices, processes, or methods from unauthorized disclosure, or

(d)the participant’s soliciting, inducing, or attempting to induce employees of the Company and its Affiliates to terminate their employment with the Company or an Affiliate.

2.6“Cash Incentive Award” means the right granted under Section 12 to receive a cash payment to the extent Performance Goals are achieved (or other requirements are met).

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2.7“Cause” means:

(a)the participant’s conviction of, or entering a guilty plea, no contest plea or nolo contendre plea to any felony or to any crime involving dishonesty or moral turpitude under Federal law or the law of the state in which such action occurred,

(b)the participant’s commission of any material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Affiliates,

(c)dishonesty in the course of fulfilling the participant’s employment duties,

(d)the participant’s misappropriation of material funds or assets of the Company for personal use or any act of theft or fraud as determined by the Company,

(e)the participant’s engagement in harassment or discrimination based on a legally protected status with respect to any employee of the Company or any of its subsidiaries,

(f)the participant’s breach of material Company policy,

(g)the participant’s refusal to perform lawful duties as directed in good faith by the Company,

(h)willful and deliberate failure on the part of the participant to perform his employment duties in any material respect,

(i)the participant’s substantial or repeated neglect of duties (even if not willful and deliberate) after notice and an opportunity to cure,

(j)the participant’s gross negligence or willful misconduct that results or is reasonably expected to result in substantial harm to the Company (either singly or on a consolidated basis), or

(k)the participant’s breach of written obligations to the Company or any subsidiary in respect of confidentiality and/or the use or ownership of proprietary information.

2.8“CEO” means the chief executive officer of the Company or any successor corporation.

2.9“Change in Control” has the meaning set forth in Section 15.2.

2.10“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. Any reference to a section of the Code shall include all the rules and regulations promulgated thereunder.

2.11“Commission” means the Securities and Exchange Commission or any successor agency.

2.12“Committee” means the Committee referred to in Section 3.1.

2.13“Company” means BorgWarner Inc., a Delaware corporation.

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EXHIBIT 10.2

2.14“Disability” means that the participant:

(a)is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or

(b)is, by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident or health plan covering the Company’s employees, or

(c)is determined to be permanently disabled by the Social Security Administration.

“Disability” shall be determined by the plan administrator of the RSP under the disability claims procedures of the RSP but applying the foregoing definition of “Disability.”

2.15“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. Any reference to a section of the Exchange Act shall include all the rules and regulations promulgated thereunder.

2.16 “Fair Market Value” means, per Share on a particular date, (i) if the Shares are listed on a national securities exchange, the last sales price on that date on the national securities exchange on which the Shares are then listed (including without limitation, the New York Stock Exchange or the NASDAQ Stock Market), as reported on the composite tape or other reporting system of such exchange, or if no sales of Shares occur on such exchange on such date, then on the last preceding date on which there was a sale on such exchange; or (ii) if the Shares are not listed on a national securities exchange, but are traded in an over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the closing bid and asked prices) for the Shares on that date, or on the last preceding date on which there was a sale of Shares on that market; or (iii) if the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price determined by the Committee, in its sole discretion.

2.17“Full-Value Award” means Restricted Stock, Stock Units, Performance Stock Units and any other Award under which the value of the Award is measured as the full value of a Share, rather than the increase in the value of a Share.

2.18“Incentive Stock Option” means any Stock Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.

2.19“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

2.20“Performance Goals” means a target or targets of performance (which may be objective or subjective) as established by the Committee in its sole discretion. A Performance Goal may include a threshold level of performance below which no payout or vesting will occur, target levels of performance at which a full payout or full vesting will occur, and/or a maximum level of performance at which a specified additional payout or vesting will occur.

2.21“Performance Period” means the period of one year or longer established by the Committee in connection with the grant of an Award for which the Committee has established Performance Goals.

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EXHIBIT 10.2

2.22“Performance Unit” means an Award granted under Section 10, the value of which is expressed in terms of cash or in property other than Stock.

2.23“Performance Stock Unit” means an Award granted under Section 11, the value of which is expressed in terms of, or valued by reference to, a Share.

2.24“Plan” means the BorgWarner Inc. 2023 Stock Incentive Plan, as set forth herein and as hereinafter amended from time to time.

2.25“Prior Plan” means the BorgWarner Inc. 2018 Stock Incentive Plan.

2.26“Restricted Stock” means an Award granted under Section 8.

2.27“Restricted Stock Agreement” means an Award Agreement memorializing the terms and conditions of a grant of Restricted Stock.

2.28“Restriction Period” means, for purposes of an Award granted under Section 8, the time or times within which such Award may be subject to forfeiture and during which the participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock.

2.29“Retirement” means, the participant’s Termination of Employment with the Company and all Affiliates:

(a)on or after the last day of the calendar month coincident with or immediately following the day on which the participant attains age 55 if the participant has been credited with at least 10 Years of Service, or

(b)in the case of Section 8 (Restricted Stock), Section 9 (Stock Units), Section 10 (Performance Units), and Section 11 (Performance Stock Units) only, with the written consent of the Company that such Termination of Employment shall constitute “Retirement”.

2.30 “RSP” means the BorgWarner Inc. Retirement Savings Plan, or any successor plan thereto.

2.31“Rule 16b-3” means Rule 16b-3, as promulgated by the Commission under Section 16(b) of the Exchange Act, as amended from time to time or any successor definition adopted by the Commission.

2.32“Share” means a share of Stock.

2.33“Specified Employee” means a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code and using the methodology selected by the Company from time to time (including any permitted alternate means selected by the Company to identify specified employees), or if none, the default methodology provided by applicable Income Tax Regulations.

2.34“Stock” means common stock, par value $.01 per share, of the Company.

2.35“Stock Appreciation Right” means a right granted under Section 7.

2.36“Stock Option” means an option granted under Section 6 to purchase Shares at a stated price for a specified period of time.

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EXHIBIT 10.2

2.37“Stock Unit” means a right granted under Section 9 to receive a Share or cash in an amount equal to the Fair Market Value of a Share sometime in the future.

2.38 “Termination of Employment” means the termination of the participant’s employment with the Company and any subsidiary or Affiliate. A participant employed by a subsidiary or an Affiliate shall also be deemed to incur a Termination of Employment if the subsidiary or Affiliate ceases to be such a subsidiary or Affiliate, as the case may be, and the participant does not immediately thereafter become an employee of the Company or another subsidiary or Affiliate. In the case of a participant who is a member of the Board but not an employee of the Company or any subsidiary or Affiliate, “Termination of Employment” means the termination of the participant’s services as a member of the Board. For purposes of Section 15.1(b), a Termination of Employment” must constitute a “Separation from Service” for purposes of Section 409A of the Code.

2.39“Year of Service” means each twelve (12) month period of employment (or fraction of a 12-month period of employment) with the Company or any subsidiary or Affiliate, based on the participant’s aggregate elapsed time of employment. Credit toward Years of Service runs continuously beginning on the first day a participant performs an hour of service (upon initial employment or reemployment) and ending on the date of the participant’s Termination of Employment. Any period during which a participant is on an authorized leave of absence will be considered as service for determining Years of Service. If a participant is reemployed following a Termination of Employment, the participant’s Years of Service, including fractional years, credited before the Termination of Employment will be restored after the participant performs an hour of service after reemployment.

In addition, certain other terms used herein have definitions given to them in the first place in which they are used.

SECTION 3.Administration.

3.1Compensation Committee Administration. Subject to Section 3.2, the Plan shall be administered by the Compensation Committee of the Board or such other committee of the Board, composed of not less than three (3) members of the Board, each of whom shall be appointed by and serve at the pleasure of the Board and who shall also be:

(a)“non-employee directors” within the meaning of Rule 16b-3, and

(b)“independent directors” within the meaning of any applicable stock exchange rule.

3.2Awards Granted to the Board. With respect to Awards granted to members of the Board who are not officers or employees of the Company, a subsidiary, or an Affiliate, the Plan shall be administered by the Committee subject to the approval of a majority of all members of the Board (including members of the Committee) who are “non-employee directors” within the meaning of Rule 16b-3 and “independent directors” with the meaning of any applicable stock exchange rule. With respect to such Awards, all references to the “Committee” contained in the Plan shall be deemed and construed to mean the Committee, the decisions of which shall be subject to the approval of a majority of such members of the Board who are both “non-employee directors” within the meaning of Rule 16b-3 and “independent directors” within the meaning of any applicable stock exchange rule.

3.3Committee Authority. Among other things, the Committee shall have the authority, subject to the terms of the Plan:

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EXHIBIT 10.2

(a)to interpret the provisions of the Plan or any agreement covering an Award;

(b)to select the officers, employees and directors to whom Awards may from time to time be granted;

(c)to determine whether and to what extent Awards are to be granted hereunder and the type or types of Awards to be granted;

(d)to determine the number of Shares to be covered by each Award granted hereunder;

(e)to determine the terms and conditions of any Award granted hereunder (including, but not limited to, the exercise price (subject to Section 6.3(a)), any vesting restriction or limitation and any vesting acceleration or forfeiture waiver regarding any Award and the Shares relating thereto, based on such factors as the Committee shall determine);

(f)to modify, amend or adjust the terms and conditions of any Award, at any time or from time to time to the extent required or permitted by the Plan or by applicable law, including but not limited to any clawback requirements or policy of the Company as may be in effect from time to time;

(g)to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan;

(h)to determine to what extent and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred; and

(i)to determine under what circumstances a Stock Option or a Stock Appreciation Right may be settled in cash or Stock under Section 6 or Section 7, respectively.

3.4Grants by the CEO. The Committee may authorize the CEO to grant Awards pursuant to the terms of the Plan with respect to thirty-three thousand nine hundred (33,900)1 Shares or fewer per individual, per year, to:

(a) officers and employees of the Company and its subsidiaries and Affiliates who are not, at the time of grant, subject to Section 16 of the Exchange Act; and

(b) any individual as an inducement to accept an offer of employment (including Awards to individuals who may become, upon accepting an offer of employment, officers of the Company and its subsidiaries and Affiliates who are subject to Section 16 of the Exchange Act).

Any such authorization so made shall be consistent with recommendations made by the Board’s Compensation Committee to the Board regarding non-CEO compensation, incentive-compensation plans and equity-based plans. When such authorization is so made by the Committee, the CEO shall have the authority of the Committee described in Sections 3.3(a),

1 Adjusted by a factor of 1.13 to reflect spinoff of PHINIA as contemplated in section 4.4.

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3.3(b), 3.3(c), and 3.3(d) with respect to the granting of such Awards; provided, however, that the Committee may limit or qualify such authorization in any manner it deems appropriate.

3.5Committee Actions. The Committee may act only by a majority of its members then in office, except that the members thereof may:

(a)delegate all or a portion of the administration of the Plan to one or more officers of the Company, provided that no such delegation may be made that would cause Awards or other transactions under the Plan to cease to be exempt from Section 16(b) of the Exchange Act, and

(b)authorize any one or more of its members or any officer of the Company to execute and deliver documents on behalf of the Committee.

3.6Determinations Final. Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to the Plan or any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan participants.

3.7Indemnification. In addition to such other rights of indemnification from the Company as they may have, the members of the Committee shall be indemnified by the Company against reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except that such member is liable for negligence or misconduct in the performance of his duties; provided that within sixty days after institution of any such action, suit or proceeding, the member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

SECTION 4.Stock Subject To Plan; Individual Limitations.

4.1Share Reserve. Subject to adjustment as provided herein, 11,300,0002 Shares are reserved for issuance under the Plan, all of which may be issued pursuant to the exercise of Incentive Stock Options. The Stock to be delivered under the Plan may be made available from authorized but unissued Shares, treasury stock, or Shares purchased on the open market. The aggregate number of Shares reserved under this Section 4.1 shall be depleted on the date of grant of an Award by the maximum number of Shares, if any, that may be payable with respect to the Award, as determined at the time of grant.

4.2Replenishment of Shares. If (i) an Award lapses, expires, terminates or is cancelled without the issuance of Shares under the Award (whether due currently or on a deferred basis), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares with respect to which the Award was granted will not be issuable on the basis that the conditions for such issuance will not be satisfied, (iii) Shares are forfeited under an Award, (iv) an Award that is denominated in Shares (in whole or in part) is settled in cash or (v) Shares are issued under any Award and the Company subsequently reacquires them

2 Adjusted by a factor of 1.13 to reflect spinoff of PHINIA as contemplated in section 4.4.

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pursuant to rights reserved upon the issuance of the Shares, then such Shares shall be recredited to the Plan’s reserve and may again be used for new Awards under the Plan, but Shares recredited to the Plan’s reserve pursuant to clause (v) may not be issued pursuant to Incentive Stock Options. Notwithstanding the foregoing, in no event shall the following Shares be recredited to the Plan’s reserve: (x) Shares purchased by the Company using proceeds from Option exercises; (y) Shares tendered or withheld in payment of the exercise price of an Option or as a result of the net settlement in Shares of an outstanding Stock Appreciation Right; or (z) Shares tendered or withheld to satisfy federal, state or local tax withholding obligations.

4.3Individual Award Limits. Subject to adjustment as provided in Section 4.4, during any fiscal year of the Company, no individual non-employee director may be granted:

(a)Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Units, or Performance Stock Units that, in total, could result in a maximum payout on settlement of more than thirty-three thousand nine hundred (33,900)3 Shares, but excluding from this limitation any additional Stock Units or Shares credited to the participant as dividend equivalents on any Award or cash or stock dividends on Restricted Stock that are paid or credited to a participant as additional Restricted Stock; and

(b)an Award or payment or payment right outside the Plan that is payable or settleable in cash (or property other than Shares) that could result in a maximum payment of more than four hundred fifty thousand dollars ($450,000), but excluding from this limitation any additional amounts paid or credited to a participant as interest or dividend equivalents on any Award.

4.4Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the Stock, other change in corporate structure affecting the Stock or any other event, which other event the Committee determines necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, adjust any or all of the following:

(a)the number and type of Shares reserved for issuance and future grant under the Plan and the individual award limits under the Plan;

(b)the exercise, purchase or grant prices with respect to any Award;

(c)the number and type of Shares subject to outstanding Awards;

(d)the maximum number of Shares that may be issued as ISOs set forth in Section 4.1; and

(e)the Performance Goals of an Award,

and in all cases subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws and rules of the stock exchange on which the Shares are then traded. Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or stock split or combination of the Shares (including a reverse stock split), if no action is taken by the Committee,

3 Adjusted by a factor of 1.13 to reflect spinoff of PHINIA as contemplated in section 4.4.

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adjustments contemplated by this Section that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or stock split or combination of the Shares.

However, if any adjustment results in fractions of a Share, such fractional shares shall not be issued and shall be canceled for no consideration. Notwithstanding the forgoing, no adjustment will be made to outstanding Stock Options if (i) the adjustment would cause the Stock Options to provide for a deferral of compensation subject to Section 409A of the Code (and any applicable related regulations and guidance) or (ii) in the case of Incentive Stock Options, such adjustment would cause the Plan to violate Section 422 of the Code.

If any of the transactions or events described in this Section constitutes a Change in Control or occurs subsequent to any Change in Control occurring after the Effective Date, then, subject to participants’ rights under Section 15 and the cash payment provisions of the following sentence, and unless the Committee otherwise determines prior to the first Change in Control occurring after the Effective Date, proportionate adjustments of the type described in this Section shall be made automatically such that the full economic value of the Awards to participants that are outstanding at the time of the transaction or event shall be preserved and not diminished as a result of the transaction or event. If any of the events described in this Section occur, the Committee may also (or in lieu of the adjustments described in this Section) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of the Award) in an amount determined by the Committee effective at such time as the Committee specifies (which may be the time such transaction or event is effective), but if such transaction or event constitutes a Change in Control, then (i) such payment shall be at least as favorable to the holder as the greatest amount the holder could have received in respect of such Award under Section 15, (ii) if Section 15 applies to the Award, such payment shall be allowed only to the extent Section 15(b) would allow acceleration of exercisability, vesting, issuance of shares or other payment in respect of such Award in connection with the Change in Control and (iii) from and after the Change in Control, the Committee may make such a provision only if the Committee determines that doing so is necessary to substitute, for each Share subject to an Award, the number and kind of shares of stock, other securities, cash or other property to which holders of Shares are or will be entitled in respect of each Share pursuant to the transaction or event in accordance with the last sentence of this Section. Further, and without limitation, subject to a participant’s rights under Section 15, in the event of any such merger or similar transaction, stock dividend, stock split or combination of Shares, distribution or other event described above, whether or not constituting a Change in Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Shares are not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Committee shall substitute, on an equitable basis as the Committee determines, for each Share then subject to an Award, the number and kind of shares of stock, securities, cash or other property to which holders of Shares are or will be entitled with respect to each Share pursuant to the transaction.

SECTION 5.Eligibility.

The Committee may grant Awards under the Plan to any of the following individuals: (i) officers and other employees of the Company, its subsidiaries and Affiliates who are responsible for or contribute to the management, growth and profitability of the business of the Company, its subsidiaries and Affiliates, as determined by the Committee, (ii) any individual that the Company, a subsidiary or an Affiliate has engaged to become an officer or employee and (iii) directors of the Company.

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SECTION 6.Stock Options.

6.1Types. Stock Options granted under the Plan may be of two types: Incentive Stock Options and Non-Qualified Stock Options, provided however, that Incentive Stock Options may be granted only to employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.

6.2Grant. The Committee shall have the authority to grant participants Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights). The grant of a Stock Option shall be evidenced by an Award Agreement, which shall be delivered to the optionee and indicate on its face whether it is intended to be an agreement for an Incentive Stock Option or a Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date the Committee by resolution selects an individual to receive a grant of a Stock Option, determines the number of Shares to be subject to such Stock Option to be granted to such individual and specifies the terms and provisions of the Stock Option.

6.3Option Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions and any additional terms and conditions as the Committee shall deem desirable:

(a)Exercise Price. The exercise price per Share purchasable under a Stock Option shall be determined by the Committee and set forth in the Award Agreement, provided that the exercise price shall never be less than the Fair Market Value of the Shares subject to the Stock Option on the date of grant.

(b)Option Term. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the date of grant.

(c)Exercisability. Except as otherwise provided herein, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the Committee may at any time, in whole or in part, accelerate the exercisability of any Stock Option.

6.4Exercise. Stock Options may be exercised by following the procedures the Committee establishes from time to time. The exercise price shall be paid in full in cash (by certified or bank check or such other instrument as the Company may accept) at the time of exercise or, if and to the extent set forth in the Award Agreement, may also be paid by one or more of the following:

(a)in the form of unrestricted Stock already owned by the optionee having a Fair Market Value on the date of exercise equal to the exercise price; provided, however, that, in the case of an Incentive Stock Option, the right to make a payment in the form of already owned Shares may be authorized only at the time the Stock Option is granted;

(b)by requesting that the Company withhold from the number of Shares otherwise issuable upon exercise of the Stock Option that number of shares having an

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aggregate Fair Market Value on the date of exercise equal to the exercise price for all of the Shares subject to such exercise; or

(c)by a combination thereof, in each case in the manner provided in the Award Agreement.

In the discretion of the Committee and if not prohibited by law, payment for any Shares subject to a Stock Option may also be made by delivering a properly executed exercise notice to the Company or its agent, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms.

6.5Rights as a Stockholder. No Shares shall be issued until full payment of the option exercise price has been made. An optionee shall have all of the rights of a stockholder of the Company holding the Stock that is subject to such Stock Option (including, if applicable, the right to vote the shares and the right to receive dividends) when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 18.4, but shall have no rights of a stockholder of the Company prior to such notice of exercise, full payment, and if requested providing the representation described in Section 18.4. For the avoidance of doubt, in no event will dividends or dividend equivalents be distributed to a participant unless, until and to the same extent as the related shares of Stock have vested.

6.6Cash Out. On receipt of a notice of exercise of a Stock Option, the Committee may elect to cash out all or part of the portion of the Shares for which a Stock Option is being exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Shares over the exercise price times the number of Shares for which the Option is being exercised on the effective date of such cash out.

SECTION 7.Stock Appreciation Rights.

7.1Grant. Stock Appreciation Rights may be granted as Awards under the Plan and may be granted alone or in addition to other Awards under the Plan. Each grant of a Stock Appreciation Right shall be confirmed by, and be subject to the terms of, an Award Agreement.

7.2Stock Appreciation Rights Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Committee, including the following:

(a)A Stock Appreciation Right shall be exercisable as determined by the Committee and specified in the Award Agreement, but in no event after ten years from the date of grant. A Stock Appreciation Right may be exercised by giving written notice of exercise to the Company or its designated agent specifying the number of Shares as to which Stock Appreciation Right is being exercised.

(b)The base price of a Stock Appreciation Right shall not be less than the Fair Market Value of a Share on date of grant.

(c)Upon the exercise of a Stock Appreciation Right, a participant shall be entitled to receive an amount in cash, Shares, or a combination thereof, as determined by the Committee in its discretion, equal to the product of (i) the difference between the base price of the Stock Appreciation Right and the Fair Market Value of a Share on the date of

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exercise of the Stock Appreciation Right, and (ii) the number of Shares as to which such Stock Appreciation Right shall have been exercised.

7.3No Rights as a Stockholder. In the case of any Stock Appreciation Right providing for, or in which the Committee has determined to make, payment in whole or in part in Stock, the holder thereof shall have no rights of a stockholder of the Company prior to the proper exercise of such Stock Appreciation Right, and if requested, prior to providing the representation described in Section 18.4, and the issuance of Stock in respect thereof. For the avoidance of doubt, in no event will dividends or dividend equivalents be distributed to a participant unless, until and to the same extent as the related shares of Stock have vested.

SECTION 8.Restricted Stock.

8.1Grant. The Committee shall determine the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any participant, the Restriction Period and any other terms and conditions of the Awards. Each grant of Restricted Stock shall be confirmed by, and be subject to the terms of, a Restricted Stock Agreement.

The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance measures of the participant or of the Company or subsidiary, division or department of the Company for or within which the participant is primarily employed or upon such other factors or criteria as the Committee shall determine. Where the grant or vesting of Restricted Stock is subject to the attainment of one or more Performance Goals, such shares of Restricted Stock shall be released from such restrictions only after the attainment of such Performance Goals has been certified by the Committee, unless the Committee determines otherwise.

The provisions of Restricted Stock Awards need not be the same with respect to each participant.

8.2Issuance of Restricted Stock; Stop Transfer Orders and Legends. Shares of Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. All shares of Restricted Stock shall be subject to such stop transfer orders or bear such legends as the Committee may deem advisable under the Plan or under applicable laws, rules or regulations or the requirements of any national securities exchange.

8.3Termination of Employment. Shares of Restricted Stock shall be subject to the following terms and conditions:

(a)Except to the extent otherwise provided in the applicable Restricted Stock Agreement and Sections 8.3(b) and 15.1(b)(2), upon a participant’s Termination of Employment for any reason during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant.

(b)Except to the extent otherwise provided in Section 15.1(b)(2), the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions with respect to any or all of a participant’s shares of Restricted Stock in the event that such participant’s employment is involuntarily terminated (other than for Cause), or in the event of the participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement.

8.4Rights as a Stockholder; Dividends. Except as provided in this Section 8 and the applicable Restricted Stock Agreement, the participant shall have, with respect to the shares of

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Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any dividends, provided, however, that cash dividends will either, at the discretion of the Committee, (i) be automatically deferred and reinvested in additional Restricted Stock that shall be subject to the same restrictions, terms and conditions, including the vesting period, as the original grant of Restricted Stock, or (ii) be paid out in cash at the time that the Restricted Stock vests. If dividends are credited to the participant as additional shares of Restricted Stock, then the number of additional shares of Restricted Stock that shall be credited to the participant shall not exceed the amount that is the result of multiplying the number of shares of Restricted Stock held by the participant on the dividend record date by the dividend paid on each Share, and then dividing the amount by the Fair Market Value of a Share on the dividend payment date. For the avoidance of doubt, in no event will dividends be distributed to a participant unless, until and to the same extent as the underlying Restricted Stock vests.

SECTION 9.Stock Units.

9.1Grant. The Committee shall determine the time or times at which grants of Stock Units will be awarded, the number of Stock Units to be awarded to any participant, the time or times within which such Awards may be subject to forfeiture, and any other terms and conditions of the Awards, in addition to those contained in Section 9.2. The provisions of Stock Units Awards need not be the same with respect to each participant. Each grant of Stock Units shall be confirmed by, and be subject to, the terms of an Award Agreement.

9.2Terms and Conditions. All grants of Stock Units shall be subject to the following terms and conditions.

(a)Except to the extent otherwise provided in the applicable Award Agreement and Section 9.2(b) and Section 15.1(b)(3), upon a participant’s Termination of Employment for any reason prior to the date on which Stock Units awarded to the participant shall have vested, all rights to receive cash or Stock in payment of such Stock Units shall be forfeited by the participant.

(b)The Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all of a participant’s Stock Units in the event that such participant’s employment is involuntarily terminated (other than for Cause), or in the event of the participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement.

(c)In any case in which the Committee has waived, in whole or in part, any or all remaining payment limitations with respect to any or all of a participant’s Stock Units, payment of such participant’s Stock Units shall occur on the time(s) or event(s) otherwise specified pursuant to Section 9.2(e), in such participant’s Award Agreement.

(d)With respect to any grant of Stock Units, the participant who receives such grant shall acquire no rights of a stockholder unless and until the participant becomes the holder of Shares delivered to such participant with respect to such Stock Units.

(e)The Award Agreement for each award of Stock Units shall specify the time(s) or event(s) of payment of vested Stock Units, which time(s) or event(s) shall be limited to one or more of the following:

(1) the date on which the Stock Units shall have vested,

(2) the date of the participant’s Termination of Employment, or

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(3) a specified date.

In the case of an Award of Stock Units providing for payment upon the vesting of the Stock Units, payment shall be made as soon as administratively practicable thereafter, but in no event later than March 15 of the year following the year in which the vesting of the Stock Units occurs. In the case of an Award of Stock Units providing for payment upon Termination of Employment, payment shall be made on or after the Termination of Employment in the year in which the Termination of Employment occurs, except that in the case of a Specified Employee, payment shall be made on the first day of the seventh month following the month in which such Termination of Employment occurs or, if earlier, the date of the participant’s death. In the case of an Award of Stock Units providing for a specified date for payment, payment shall be made as soon as practicable on or after the specified date, but in no event no later than December 31 of the year in which the specified date occurs.

(f)On the time(s) or event(s) specified in the applicable Award Agreement for the payment of cash or Stock with respect to vested Stock Units, the Company shall deliver to the participant either (1) a number of Shares equal to the number of vested Stock Units, or (2) cash equal to the Fair Market Value of such number of Shares. The form of payment shall be determined by the Committee in its discretion or as provided in the applicable Award Agreement.

9.3Dividend Equivalents. The Committee may in its discretion provide that a participant shall be entitled to receive dividend equivalents on outstanding Stock Units. Such dividend equivalents may, as determined by the Committee at the time the Award is granted, be:

(a)paid in cash at the time the Stock Unit to which it relates is settled;

(b)credited to the participant as additional Stock Units, which shall vest and be settled at the same time as the Stock Unit to which it relates; or

(c)paid or credited (as appropriate) in any combination of cash and additional Stock Units; provided that in no event may dividend equivalents relating to a Stock Unit provide for payment prior to such Stock Unit’s vesting and, notwithstanding anything to the contrary herein, dividend equivalents paid or credited with respect to Stock Units shall only be paid out to or earned by a participant to the extent that the vesting conditions applicable to the underlying Stock Units are satisfied.

If dividend equivalents are credited to the participant as additional Stock Units, then the number of additional Stock Units that shall be credited to the participant with respect to any dividend on Stock shall not exceed the amount that is the result of multiplying the number of Stock Units credited to the participant on the dividend record date by the dividend paid on each Share and then dividing this amount by the Fair Market Value of a Share on the dividend payment date.

For the avoidance of doubt, in no event will dividends or dividend equivalents be distributed to a participant unless, until and to the same extent as the related shares of Stock or Stock Units have vested.

SECTION 10.Performance Units.

10.1Grant. The Committee shall determine the time or times at which Performance Units shall be awarded, the number of Performance Units to be awarded to any participant, the duration of the Performance Period and any other terms and conditions of the Award, in addition

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to those contained in Section 10.2. Each grant of Performance Units shall be confirmed by, and be subject to, the terms of an Award Agreement.

10.2Terms and Conditions. Performance Units shall be subject to the following terms and conditions.

(a)The Committee may condition payment with respect to Performance Units on the attainment of Performance Goals. The Committee may also condition Performance Unit payments upon the continued service of the participant. The provisions of such Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each participant.

(b)Except to the extent otherwise provided in the applicable Award Agreement, Section 10.2(c) and Section 15.1(b)(4), upon a participant’s Termination of Employment for any reason during the Performance Period or before any applicable Performance Goals are satisfied, all rights to receive cash or Stock in payment of the Performance Units shall be forfeited by the participant.

(c)The Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all of such participant’s Performance Units in the event that such participant’s employment is involuntarily terminated (other than for Cause), or in the event of the participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement.

(d)In any case in which the Committee has, prior to the expiration of the Performance Period, waived, in whole or in part, any or all payment limitations with respect to a participant’s Performance Units, such participant shall receive payment with respect to his or her Performance Units in the year following the year in which the Performance Period ends or would have ended, at the same time as the Committee has provided for payment to all other Award recipients.

(e)At the expiration of the Performance Period, unless otherwise determined by the Committee, the Committee shall evaluate the extent to which the Performance Goals for the Award have been achieved and shall determine the number of Performance Units granted to the participant that have been earned, and the cash value thereof. The Company shall then deliver to the participant either a cash payment equal in amount to the cash value of the Performance Units or Shares equal in value to the cash value of the Performance Units, with the form of payment determined by the Committee in its discretion or as provided in the applicable Award Agreement. Payment shall occur as soon as administratively practicable thereafter, but in no event later than March 15 of the year following the year in which the Performance Period ends.

SECTION 11.Performance Stock Units.

11.1Grant. The Committee shall determine the time or times at which Performance Stock Units shall be awarded, the number of Performance Stock Units to be awarded to any participant, the duration of the Performance Period and any other terms and conditions of the Award, in addition to those contained in Section 11.2. Each grant of Performance Stock Units shall be confirmed by, and be subject to, the terms of an Award Agreement. Performance Stock Units may be conditioned upon the attainment of Performance Goals and continued employment or service of the participant. The provisions of such Awards (including without limitation any applicable Performance Goals) need not be the same with respect to each recipient.

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11.2Terms and Conditions.

(a)Unless otherwise provided in Section 11.2(b) or Section 15.1(b)(4), upon a participant’s Termination of Employment during the Performance Period or before any applicable Performance Goals are satisfied, all rights to receive cash or Stock in payment of the Performance Stock Units shall be forfeited.

(b)Except to the extent otherwise provided in Section 15.1(b)(4), the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations with respect to any or all such participant’s Performance Stock Units in the event that a participant’s employment is involuntarily terminated (other than for Cause), or in the event of a participant’s death, Disability, or Retirement, or the Committee may provide for such waiver in the applicable Award Agreement.

(c)In any case in which the Committee has waived, in whole or in part, prior to the expiration of the Performance Period, any or all payment limitations with respect to a participant’s Performance Stock Units, such participant shall receive payment with respect to his or her Performance Stock Units in the year following the year in which Performance Period ends, at the same time as the Committee has provided for payment to all other Award recipients.

(d)At the expiration of the Performance Period, unless otherwise determined by the Committee, the Committee shall evaluate the extent to which the Performance Goals for the Award have been achieved and shall determine the number of Performance Stock Units granted to the participant which shall have been earned, and the cash value thereof. The Company shall then deliver to the participant either (1) a number of Shares equal to the number of Performance Stock Units determined by the Committee to have been earned, or (2) cash equal to the Fair Market Value of such number of Shares, as determined by the Committee in its discretion or as provided in the applicable Award Agreement. Payment shall occur as soon as administratively practicable thereafter, but in no event later than March 15 of the year following the year in which the Performance Period ends.

11.3Dividend Equivalents. The Committee may in its discretion provide that a participant shall be entitled to receive dividend equivalents on outstanding Performance Stock Units. Such dividend equivalents may, as determined by the Committee at the time the Award is granted, be:

(a)paid in cash at the time the Performance Stock Units to which it relates are settled;

(b)credited to the participant as additional Performance Stock Units, which shall vest and be earned and settled at the same time as the Performance Stock Units to which they relate; or

(c)paid or credited (as appropriate) in any combination of cash and additional Performance Stock Units;

provided that in no event may dividend equivalents relating to Performance Stock Units provide for payment prior to the time at which such Performance Stock Units are earned and vested and, notwithstanding anything to the contrary herein, dividend equivalents paid or credited with respect to Performance Stock Units shall only be paid out to or earned by a participant to the extent that the vesting and performance conditions applicable to the underlying Performance Stock Units are satisfied.

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If dividend equivalents are credited to the participant as additional Performance Stock Units, then the number of additional Performance Stock Units that shall be credited to the participant with respect to any dividend on Stock shall not exceed the amount that is the result of multiplying the number of Performance Stock Units credited to the participant on the dividend record date by the dividend paid on each Share and then dividing this amount by the Fair Market Value of a Share on the dividend payment date.

For the avoidance of doubt, in no event will dividends or dividend equivalents be distributed to a participant unless, until and to the same extent as the related shares of Stock or Performance Stock Units have vested.

SECTION 12.Cash Incentive Awards.

Subject to the terms of the Plan, the Committee will determine all terms and conditions of Cash Incentive Awards, including but not limited to the Performance Goals, the Performance Period, the potential amount payable, and the timing of payment; provided that the Committee must require that payment of all or any portion of the amount subject to the Cash Incentive Award is contingent on the achievement or partial achievement of one or more Performance Goals during the period the Committee specifies, although the Committee may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a participant’s death, Disability, or Retirement or in the event that such participant’s employment is involuntarily terminated (other than for Cause). Notwithstanding the foregoing, nothing hereunder shall preclude or limit the Company or the Administrator from granting annual incentive awards that are solely payable in cash outside of the terms of the Plan.

SECTION 13.Minimum Vesting Period.

All Awards shall have a minimum vesting period of one year from the date of grant. For purposes of Awards granted to non-employee directors, “one year” may mean the period of time from one annual meeting of stockholders to the next annual meeting of stockholders, provided that such period of time is not less than 50 weeks. Notwithstanding the foregoing, the Committee may grant Awards with less than a one-year vesting requirement, provided such Awards do not relate to more than 5% of the number of shares reserved under Section 4.1.

SECTION 14.Repricing and Backdating Prohibited.

Notwithstanding anything in the Plan to the contrary, and except for the adjustments provided for under the Plan, neither the Committee nor any other person may (i) amend the terms of outstanding Options or Stock Appreciation Rights to reduce the exercise or base price of such outstanding Options or Stock Appreciation Rights; (ii) cancel outstanding Options or Stock Appreciation Rights in exchange for Options or Stock Appreciation Rights with an exercise or base price that is less than the exercise or base price of the original Options or Stock Appreciation Rights; or (iii) cancel outstanding Options or Stock Appreciation Rights with an exercise or base price above the current Fair Market Value of a Share in exchange for cash or other securities, in each case, without prior approval of the Company’s stockholders. In addition, the Committee may not make a grant of an Option or SAR with a grant date that is effective prior to the date the Committee takes action to approve such Award.

SECTION 15.Change in Control Provisions.

15.1Impact of Event. If a participant has in effect an employment, retention, change in control, severance or similar agreement with the Company, a subsidiary or any Affiliate that provides a more favorable result upon a Change in Control on the participant’s Awards, then such agreement shall control in respect of such Awards. In all other cases, unless the Committee

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provides for a more favorable result in an Award Agreement (in which case such Award Agreement shall control over the provisions hereof), in the event of a Change in Control:

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

(1) have substantially equivalent economic value to the Award (as determined by the Committee as constituted immediately prior to the Change in Control);

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

(3) provide the participant 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 Code, if applicable), including all provisions applicable in respect of such Award that provide for accelerated vesting;

(4) with respect to Awards that vest upon the attainment of one or more Performance Goals, if the Change in Control occurs during the course of a Performance Period applicable to the Award, then (i) the Performance Goals shall be deemed to have been satisfied at the target level specified in the participant’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 as constituted immediately prior to the Change in Control; and

(5) have terms and conditions providing that, if within two (2) years following a Change in Control either (i) the successor or purchaser in the Change in Control transaction (or any affiliate thereof) terminates the participant’s employment or service without Cause or (ii) if the participant is subject to any employment, retention, change in control, severance or similar agreement with the successor, purchaser, the Company or any affiliate thereof under which the participant has the right to certain benefits if the participant terminates his or her employment or service for “good reason” (as such term is defined in such agreement), such participant does, in fact, terminate his or her employment or service 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 participant’s termination of employment or service, all of such participant’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 a participant, at the time of exercise or settlement of such Awards or replacement awards, the participant may elect to receive, in lieu of the issuance of

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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” under the Plan as applied to the equity otherwise issuable under the assumed Award or replacement award).

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

(1) Any Stock Options and Stock Appreciation Rights outstanding as of the date such Change in 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.

(2) The restrictions applicable to any outstanding Restricted Stock shall lapse as of the date such Change in 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.

(3) The restrictions applicable to any outstanding Stock Units shall lapse as of the date such Change in 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 15.1(b)(3) shall occur on the time(s) or event(s) otherwise specified in the Award recipient’s Award Agreement.

(4) The restrictions applicable to any outstanding Performance Units and Performance Stock Units shall lapse as of the date such Change in Control is determined to have occurred, the Performance Goals of all such outstanding Performance Units and Performance Stock Units 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 in Control, and all other terms and conditions thereto shall be deemed to have been satisfied. If due to a Change in 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 Stock Units that vest as a result of the Change in Control shall be made in cash or 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 Stock Units shall have vested pursuant to this Section 15.1(b)(4). Payment for Performance Units and Performance Stock Units that have vested prior to the Change in Control as a result of the Committee’s waiver of payment limitations prior to the date of the Change in Control shall be made in cash or Stock (as determined by the Committee):

(A)in the year following the year in which the Performance Period would have otherwise ended absent a Change in Control, or

(B)if earlier, as soon as practicable in the year in which the Award recipient’s Termination of Employment occurs; provided, however, that in the case of a “Specified Employee” who becomes entitled

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to payment of Performance Units or Performance Stock Units under this Section 15.1(b)(4)(B) by reason of his or her Termination of Employment, payment shall be made on the first day of the seventh month following the month in which such Termination of Employment occurs, or, if earlier, the date of the Specified Employee’s death.

15.2Definition of Change in Control. For purposes of the Plan, a “Change in Control” shall mean the happening of any of the following events:

(a)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of 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:

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

(2) 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 Section 15.2(a), the following acquisitions shall not constitute a Change in Control:

(W)any acquisition directly from the Company,

(X)any acquisition by the Company,

(Y)any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or

(Z)any acquisition by any corporation pursuant to a transaction described in paragraphs (1), (2) and (3) of Section 15.2(c); or

(b)Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) and cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date 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; or

(c)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 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,

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EXHIBIT 10.2

(1) all or substantially all of the individuals and entities who 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 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,

(2) no Person (excluding any corporation resulting from such Business Combination or any employee 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

(3) 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

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

Notwithstanding the foregoing, if an Award is considered deferred compensation subject to the provisions of Section 409A of the Code, and if a payment under such Award is triggered upon a “Change in Control,” then the foregoing definition shall be deemed amended as necessary to comply with Section 409A of the Code.

SECTION 16.Term, Amendment and Termination.

16.1Term of Plan. Unless terminated sooner by the Board, the Plan will terminate on the tenth (10th) anniversary of the date on which it has most recently been approved by the Company’s stockholders. Awards outstanding as of the date on which the Plan terminates shall not be affected or impaired by the termination of the Plan.

16.2Amendment by the Board. The Board may amend, alter, or discontinue the Plan at any time, but no amendment, alteration or discontinuation shall be made which would

(a)impair the rights of a participant under an Award theretofore granted without the participant’s consent, except such an amendment made to cause the Plan to qualify for the exemption provided by Rule 16b-3, or

(b)disqualify the Plan from the exemption provided by Rule 16b-3,

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except that the Board shall always have the authority to amend the Plan and the terms of any Award theretofore granted to take into account changes in law and tax and accounting rules.

16.3Amendment by the Committee. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without the holder’s consent except:

(a)to the extent required or permitted by the Plan or by applicable law, including but not limited to any clawback requirements or policy of the Company as may be in effect from time to time, or

(b)an amendment made to cause the Plan or Award to qualify for the exemption provided by Rule 16b-3.

16.4Approval by Stockholders. No amendment shall be made to the Plan without the approval of the Company’s stockholders to the extent such approval is required by law, rules of the stock exchange on which the Shares are then traded, or agreement.

SECTION 17.Cancellation and Rescission of Awards.

17.1Reasons for Cancellation or Recession. The Committee may cancel, declare forfeited, or rescind any unexercised, undelivered, or unpaid Award upon its determining that

(a)a participant has violated the terms of the Plan or the Award Agreement under which such Award has been made, or

(b)the participant has committed a Breach of Conduct.

In addition, for a period of one year following the exercise, payment or delivery of an Award, the Committee may rescind any such exercise, payment or delivery of an Award upon its determining that the participant committed a Breach of Conduct prior to the exercise, payment or delivery of the Award, or within six months thereafter subject to any clawback requirements or policy of the Company as may be in effect from time to time.

17.2Committee’s Determination Binding. In the case of an Award’s cancellation, forfeiture, or rescission due to a Breach of Conduct by reason of the participant’s conviction of, or entering a guilty plea, no contest plea or nolo contendre plea to any felony or to any crime involving dishonesty or moral turpitude, the Committee’s determination that a participant has committed a Breach of Conduct, and its decision to require rescission of an Award’s exercise, payment or delivery shall be conclusive, binding, and final on all parties. In all other cases, the Committee’s determination that a participant has violated the terms of the Plan or the Award, or has committed a Breach of Conduct, and the Committee’s decision to cancel, declare forfeited or rescind an Award or to require rescission of an Award’s exercise, payment or delivery shall be conclusive, binding, and final on all parties unless the participant makes a written request to the Committee to review such determination and decision within thirty days of the Committee’s written notice of such actions to the participant. In the event of such a written request, the members of the Board who are “independent directors” within the meaning of the applicable stock exchange rule (including members of the Committee) shall review the Committee’s determination no later than the next regularly scheduled meeting of the Board. If, following its review, such directors approve, by a majority vote,

(a)the Committee’s determination that the participant violated the terms of the Plan or the Award or committed a Breach of Conduct, and

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EXHIBIT 10.2

(b)the Committee’s decision to cancel, declare forfeited, or rescind the Award,

such determination and decision shall thereupon be conclusive, binding, and final on all parties.

17.3Rescinded Awards. In the event an Award is rescinded or recovered, the affected participant shall repay or return to the Company any cash amount, Stock, or other property received from the Company upon the exercise, payment or delivery of such Award (or, if the participant has disposed of the Stock or other property received and cannot return it, its cash value at the time of exercise, payment or delivery), and, in the case of Stock or other property delivered to the participant, any gain or profit realized by the participant in a subsequent sale or other disposition of such Stock or other property. Such repayment and (or) delivery shall be on such terms and conditions as the Committee shall prescribe.

17.4Disgorgement of Awards. Any Awards granted pursuant to the Plan, and any Stock issued or cash paid pursuant to an Award, shall be subject to any recoupment or clawback policy that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.

SECTION 18.General Provisions.

18.1Prohibition on Certain Dividends and Dividend Equivalent Payments. Notwithstanding anything to the contrary in the Plan, in no event may dividends or dividend equivalents be awarded with respect to Options, Stock Appreciation Rights or any other Award that is not a Full-Value Award; and, for the avoidance of doubt, this Plan expressly prohibits the payment of dividends or dividend equivalents on unvested Awards for all equity Award types.

18.2Unfunded Status. The Plan constitutes an “unfunded” plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.

18.3Transferability. Participants shall not be permitted to sell, assign, transfer, pledge or otherwise encumber any Award granted under the Plan, unless and to the extent the Committee allows a participant to designate in writing a beneficiary to exercise the Award or receive payment under the Award after the participant’s death, other than:

(a)by will or by the laws of descent and distribution, or, in the Committee’s discretion, pursuant to a written beneficiary designation,

(b)pursuant to a qualified domestic relations order (as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder), or

(c)in the Committee’s discretion, pursuant to a gift to such optionee’s “immediate family” members directly, or indirectly by means of a trust, partnership, or limited liability company, provided that the participant may not receive consideration for such transfer of an Award,

provided that an Incentive Stock Option may only be transferred according to subsection (a).

Subject to the terms of the Plan and the relevant Award Agreement, all Stock Options shall be exercisable only by the optionee, guardian, legal representative or beneficiary of the

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EXHIBIT 10.2

optionee or permitted transferee, it being understood that the terms “holder” and “optionee” include any such guardian, legal representative or beneficiary or transferee. For purposes of this Section 18.3, “immediate family” shall mean, except as otherwise defined by the Committee, the optionee’s spouse, children, siblings, stepchildren, grandchildren, parents, stepparents, grandparents, in-laws and persons related by legal adoption. Such transferees may transfer an Award only by will or by the laws of descent and distribution.

18.4Representations; Issuance of Shares. The Committee may require each person purchasing or receiving shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to the distribution thereof. All Shares issued under the Plan shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. All Shares delivered (whether in book-entry or certificated form) pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders or bear such legends as the Committee may deem advisable under the Plan or under applicable laws, rules or regulations or the requirements of any national securities exchange.

The Company shall have no obligation to issue, or make a book -entry transfer or deliver certificates for, Shares under the Plan prior to:

(a)obtaining approval from any governmental agency which the Company determines is necessary or advisable,

(b)admission of such shares to listing on the stock exchange on which the Stock may be listed, and

(c)completion of any registration or other qualification of such shares under any state or federal law or ruling of any governmental body which the Company determines to be necessary or advisable.

18.5Other Compensation. Nothing contained in the Plan shall prevent the Company or any subsidiary or Affiliate from adopting other or additional compensation arrangements for its employees.

18.6No Right to Employment. The adoption of the Plan shall not confer upon any employee any right to continued employment nor shall it interfere in any way with the right of the Company or any subsidiary or Affiliate to terminate the employment of any employee at any time.

18.7Tax Withholding. In the event the Company or one of its Affiliates is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company may deduct (or require an Affiliate to deduct) from any payments of any kind otherwise due to the participant cash, or with the consent of the Committee, Shares otherwise deliverable or vesting under an Award, to satisfy such tax or other obligations. Alternatively, the Company or its Affiliate may require such participant to pay to the Company or its Affiliate, in cash, promptly on demand, or make other arrangements satisfactory to the Company or its Affiliate regarding the payment to the Company or its Affiliate of the aggregate amount of any such taxes and other amounts. If Shares are deliverable upon exercise or payment of an Award, then the Committee may permit a participant to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with such Award by electing to (i) have the Company or its Affiliate withhold Shares otherwise issuable under the Award, (ii) tender back Shares received in connection with such Award or (iii) deliver other previously owned Shares, in each case having a Fair Market Value

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equal to the amount to be withheld; provided that, to the extent needed for the Company and its Affiliates to avoid an accounting charge, the amount to be withheld in Shares may not exceed the total maximum statutory tax withholding obligations associated with the transaction. If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Committee requires. In any case, the Company and its Affiliates may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction.

18.8Right of First Refusal. At the time of grant, the Committee may provide in connection with any grant made under the Plan that the Shares received as a result of such grant shall be subject to a right of first refusal pursuant to which the participant shall be required to offer to the Company any shares that the participant wishes to sell at the then Fair Market Value of the Stock, subject to such other terms and conditions as the Committee may specify at the time of grant.

18.9Reinvestment of Dividends. The reinvestment of cash dividends in additional shares of Restricted Stock, and the crediting of dividend equivalents or interest equivalents (if such interest equivalents are payable in Stock when distributed) on Stock Units or on the deferred payment of Stock Units, Performance Units or Performance Stock Units, shall only be permissible if sufficient shares of Stock are available under Section 4 (taking into account then outstanding Awards).

18.10Beneficiary Designations. The Committee shall establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant’s death are to be paid.

18.11Code Section 409A. It is intended that Stock Options awarded pursuant to Section 6, Stock Appreciation Rights awarded pursuant to Section 7, and Restricted Stock awarded pursuant to Section 8 not constitute a “deferral of compensation” within the meaning of Section 409A of the Code. It is further intended that Performance Stock Units and Performance Units granted pursuant to Sections 10 and 11 not constitute a “deferral of compensation” within the meaning of Section 409A of the Code excepting, however, Performance Stock Units and Performance Units that become vested as a result of the Committee’s waiver of payment limitations prior to the end of the applicable Performance Period. It is also intended that Stock Units awarded pursuant to Section 9, and Performance Units and Performance Stock Units that are or become vested as a result of the Committee’s waiver of payment limitations prior to the end of the applicable Performance Period satisfy the requirements of Sections 409A(2) through (a)(4) of the Code in all material respects to the extent required to avoid the imposition of any additional tax upon a participant under Section 409A of the Code. The Plan shall be interpreted for all purposes and operated to the extent necessary to comply with the intent expressed in this Section 18.11.

18.12No Guarantee of Tax Treatment. Notwithstanding any provisions of the Plan to the contrary, the Company does not guarantee to any participant or any other Person with an interest in an Award that (i) any Award intended to be exempt from Section 409A of the Code shall be so exempt, (ii) any Award intended to comply with Section 409A of the Code or Section 422 of the Code shall so comply, or (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate be required to indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.

18.13Severability. If any provision of the Plan is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be impaired or affected thereby. The invalid, illegal, or unenforceable

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provision shall be treated as amended to the minimum extent necessary to make the provision valid, legal, and enforceable and to accomplish the Company’s original objectives for establishing the Plan.

18.14Choice of Law; Legal Actions. The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware without taking into account its conflict of laws provisions. The exclusive venue for any legal action or proceeding with respect to this Plan or any Award, or for recognition and enforcement of any judgment in respect of this Plan or any Award, shall be a court sitting in Oakland County, Michigan. Any legal action or proceeding with respect to the Plan or any Award must be brought within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint. Any such legal action may be heard only in a “bench” trial, and any party to such action shall agree to waive his, her or its right to a jury trial.

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---

## EX-31.1

SEC source: [a2023093010qexhibit311.htm](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/a2023093010qexhibit311.htm)

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 control 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: November 2, 2023

/s/ Frederic B. Lissalde

Frederic B. Lissalde

President and Chief Executive Officer

---

## EX-31.2

SEC source: [a2023093010qexhibit312.htm](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/a2023093010qexhibit312.htm)

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 control 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: November 2, 2023

/s/ Kevin A. Nowlan

Kevin A. Nowlan

Executive Vice President, Chief Financial Officer

---

## EX-32.1

SEC source: [a2023093010qexhibit321.htm](https://www.sec.gov/Archives/edgar/data/908255/000090825523000051/a2023093010qexhibit321.htm)

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 September 30, 2023 (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: November 2, 2023

/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.