Investor Presentation. November 2018

Transcription

1 Investor Presentation November 2018

2 Safe Harbor Statement Statements in this presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform 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, initiative, intends, outlook, plans, potential, project, pursue, seek, should, target, when, would, variations of such words and similar expressions are intended to identify such forward-looking statements. Forwardlooking 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: our dependence on automotive and truck production, both of which are highly cyclical; our reliance on major OEM customers; commodities availability and pricing; supply disruptions; fluctuations in interest rates and foreign currency exchange rates; availability of credit; our dependence on key management; 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; and future changes in laws and regulations, including by way of example, tariffs, in the countries in which we operate, as well as other risks noted in reports that we file with the Securities and Exchange Commission, including the Risk Factors identified in our most recently filed Annual Report on Form 10-K/A. We do not undertake any obligation to update or announce publicly any updates to or revision to any of the forward-looking statements. BorgWarner Inc. 2

3 BorgWarner Today Executing Balanced Propulsion Strategy Product Leadership Remains the Driver of Our Business Strong Operational Discipline, with Areas to Improve Delivering Growth, Growth, Growth BorgWarner Inc. 3

4 Addressing Vehicle Mobility Trends autonomous driving shared cars and rideshare connected cars efficiency/co 2 emissions THERE WILL ALWAYS BE A NEED FOR A PROPULSION SYSTEM BorgWarner Inc. 4

5 IHS Light Vehicle Projections Electric Hybrid Combustion 0.9M 3M 95M 2% CAGR 36% CAGR 41% CAGR 108M 26M 5.6M 91M -3% CAGR 83M 76M *Source market data: IHS Light Vehicle Forecast (June 2018*) IHS UNITS* 2023 IHS UNITS* BorgWarner Inc. 5

6 Overweight Hybrid and Electric by % 5.2% 26.6% 5.2% 73% Revenue CAGR 36% Market CAGR 73% Revenue CAGR 41% Market CAGR 70.8% 68.2% 1% Revenue CAGR -3% Market CAGR 2023 IHS UNITS* 2023 BWA REV OUTLOOK (USD) *Source market data: IHS Light Vehicle Forecast (Jun 2018) BorgWarner Inc. 6

7 2023 Revenue Outlook of $14.0 Billion CV & AM Electric Hybrid Combustion ~6% CAGR $14.0 $1.7 <$0.1 $0.1 $9.8 2% CAGR 73% CAGR 73% CAGR $1.8 21M $0.6 $3.2 $8.0 1% CAGR 83M $8.3 Source: As of 2018 Investor Day 2017 *All values in Billions 2023 BorgWarner Inc. 7

8 Combustion Still Growing Demand for BorgWarner products continues to grow in combustion propulsion Innovation focused on efficient and clean combustion Hybrids are an additional demand driver for efficient ICE products BorgWarner Inc. 8

9 Combustion Propulsion Technology* * Includes engines, transmissions and all-wheel drive systems with no electrification, includes stop/start. All prices are estimates, actual prices will vary. Combustion Products: Timing system Variable cam timing Exhaust gas recirculation Clutch plates All-wheel drive systems Enhanced starters Variable Cam Timing Exhaust Gas Management Fans & fan drives $100 Pictured products and many more $45 Boosting Technologies Transmission Technologies $250 $350 BorgWarner Inc. 9

10 Penetration Rates Continue to Grow Technology Penetration % - Combustion Only Turbochargers Exhaust Gas Recirculation Variable Cam Timing Stop/Start BorgWarner Inc. 10

11 Combustion Still Growing Revenue 2023 CAGR Market and Participation 91M 76M acpv acpv 1% 47% $187 $210 52% NEW 2023 Estimate IHS UNITS* 2023 IHS UNITS* acpv (Average Content Per Vehicle) Combustion Vehicles with BW Content *Source market data: IHS Light Vehicle Forecast (June 2018). All values are approximate. BorgWarner Inc. 11

12 Significant Revenue Growth Strong global market growth Right products and portfolio depth is driving leading position Overweight hybrid business by 2023 BorgWarner Inc. 12

13 Hybrid Propulsion Technology* * Includes mild, full and plug-in hybrid. All prices are estimates, actual prices will vary. Combustion Products PLUS Hybrid Specific Products: Exhaust heat recovery systems Electric drive motors Disconnect clutch and controls Pictured products and ebooster ibas Systems Power Electronics P2 Hybrid Modules Electric All-Wheel Drive many more $200 $600 On/Off Axis $250 $900 $1200 BorgWarner Inc. 13

14 Penetration Rates Continue to Grow Technology Penetration % Turbochargers Dual Clutch Modules Variable Cam Timing BorgWarner Inc. 14

15 Customers Pursuing Broad Electrification Strategies producing/developing Hybrid Electric P0 P1 P2 P3 P4 PS BEV Customer A B C D E F G H I J BorgWarner Inc. 15

16 Broad Expertise Across Hybrid Platforms ibas Integrated Belt Alternator Starter BISG Belt Integrated Starter Generator MGU Motor Generator Unit PS Power Split BorgWarner Inc. 16

17 Significantly Increasing Penetration and acpv Revenue 2023 Market and Participation 26M CAGR 73% acpv $ M 25% acpv $275 46% NEW 2023 Estimate IHS UNITS* 2023 IHS UNITS* acpv (Average Content Per Vehicle) Hybrid Vehicles with BW Content *Source market data: IHS Light Vehicle Forecast (June 2018). All values are approximate. BorgWarner Inc. 17

18 Full System Expertise Driving Growth Uniquely positioned to provide complete propulsion solutions for Electric vehicles Wide variety of products fitting customers needs Leveraging system competence to win business BorgWarner Inc. 18

19 Electric Propulsion Technology* * Includes battery electric vehicles, range extenders and fuel cells. All prices are estimates, actual prices will vary. Electric Vehicle Products: Battery Heater Fuel Cell air supply Transmission Chain Battery Charger On-Board Charger Friction Plates Pictured products and many more Cabin Heater $150 EV Transmission Electric Drive Motor Power Electronics Electric Drive Module egeardrive $500 $700 $600 $1100 BorgWarner Inc. 19

20 Full Electric Propulsion System Expertise HV Off-Axis EV Transmission Electric Drive Motor Power Electronics egeardrive Specify, Develop and Manufacture Integrated Electric Drive Module HV On-Axis BorgWarner Inc. 20

21 EV Portfolio Provides Numerous Opportunities BorgWarner Inc. 21

22 Full System Expertise Driving Growth Revenue 2023 Market and Participation 5.6M CAGR 73% acpv $ M 13% acpv $340 33% NEW 2023 Estimate IHS UNITS* 2023 IHS UNITS* acpv (Average Content Per Vehicle) Electric Vehicles with BW Content *Source market data: IHS Light Vehicle Forecast (June 2018). All values are approximate. BorgWarner Inc. 22

23 Electrification Accelerates Revenue Opportunities 52% C O M B U S T I O N $ Revenue Outlook of $14.0 Billion 46% H Y B R I D $275 33% E L E C T R I C $340 Estimated Participation Rate & Average Content Per Light Vehicle 2023 BorgWarner Inc. 23

24 Margins Poised to Expand Through Operating Margin Guidance 12.3% % 2023 Operating Margin Outlook Low 13% Range BorgWarner Inc. 24

25 Capital Deployment Discipline Electric Hybrid Combustion ROIC% 20%+ 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% SOP Year BorgWarner Inc. 25

26 Competitive Landscape Average number of major competitors is similar for each product category Turbochargers Belt Alternator Starters Drive Motors VCT Hybrid Drive Motors Transmissions EGR Transmission Friction Transmission Controls ~6 Disconnect Clutches Hybrid Modules Power Electronics ~5 Power Electronics Battery Thermal Mgmt Cabin Heating ~6 Timing Systems ebooster Starters/Alternators All-Wheel Drive BorgWarner Inc. 26

27 Significant Free Cash Flow Leverage 2018 Free Cash Flow Guidance $550M - $575M 2023 Free Cash Flow Outlook $1.0B + 12% FCF CAGR through 2023 BorgWarner Inc. 27

28 Recent Product Announcements Electric Drive Module (edm) for New Electric Vehicles from Great Wall Motors. P2 On-Axis Hybrid Module for two Leading Chinese automakers. High-Voltage Coolant Heater for two New Electric Vehicles, one located in Europe and one in Asia. High-Voltage Cabin Heater For NIO ES8 Electric SUV. BorgWarner Inc. 28

29 BorgWarner: Driving Forward $14 Billion Revenue Outlook Overweight Hybrid and Electric by 2023 $1 Billion Free Cash Flow Outlook Electrification Accelerates Opportunities BorgWarner Inc. 29

30 Appendix

31 2018 Guidance Sales $ $10.58 billion EPS Guidance $ $4.40 Free Cash Flow CapEx Share Repurchases R&D Spending Tax Rate FY 18 FX Revenue Impact $550 - $575 million $575 - $625 million $150+ million ~4% of sales Low 26% range ~$192M BorgWarner Inc. 31

32 Diesel Transition Manageable Over the Mid-term Diesel Turbocharger Diesel EGR Module Glow Plug Gasoline Turbocharger Gasoline EGR Module Variable Cam Timing Revenue impact is neutralized by the end of the backlog period BorgWarner Inc. 32

33 Long-Standing Relationships Paying Off China 16% Americas 34% Ford FCA GM Asian OEMs Commercial Vehicles Other 9% 7% 5% 3% 4% 6% Europe 38% VW/Audi Daimler Renault Ford BMW PSA Volvo JLR CV Other 11% 5% 3% 2% 2% 2% 2% 2% 3% 6% Asia ex. China 12% Hyundai/Kia Other Asia ex. China VW/Audi Great Wall Ford SAIC GM SGMW Other China 7% 5% 2% 2% 1% 1% 1% 1% 8% Based on 2016 Sales excluding Remy Aftermarket BorgWarner Inc. 33

34 Combustion Awards Secured Into Next Decade Gas <2.0L turbocharger EU (2020, 2021, 2022), Asia (2018, 2020, 2021) Gas <1.5L turbocharger EU (2020), Asia (2018, 2019, 2020, 2022) Variable Cam Timing EU (2019, 2021), Asia (2019, 2020, 2021), Americas (2020) Dual Clutch Module EU (2022), Asia (2019, 2020) AWD Systems EU (2019, 2020), Asia (2019, 2020), Americas (2020) EGR Cooler EU (2018, 2019, 2020, 2021, 2022), Asia (2018, 2019, 2020, 2021), Americas (2018, 2020) BorgWarner Inc. 34

35 Significant Revenue Contribution from Hybrid Awards Complete P2 On-Axis Module Asia (2020, 2021) P2 On-Axis Stator EU (2019) Wet disconnect and controls for P2 Asia (2019, 2020) Chain drive for P3 EU (2018) 200V MGU for P0 EU (2019), Asia (2019) Exhaust Heat Recovery System Americas (2019) 48V ebooster EU (2019, 2021) BorgWarner Inc. 35

36 Awards Across Products, Regions and Customers egeardrive Transmission Asia (2018 (3), 2019 (3), 2021) Electric Drive Module Asia (2018 (3) 2019 (3)) Electric Drive Module N. America (2019) Electric Drive Motor N. America (2018) CV Electric Drive Motor EU (2019, 2020) Cabin Air Heater Asia (2018) HV Coolant Cabin & Battery Heaters EU (2021), Asia (2021) Power Electronics EU (2020, 2021), Asia (2018, 2019) Turbine Range Extender (2019) Commercial Vehicle (Bus) Charging Station EU (2018) BorgWarner Inc. 36

37 Combustion Opportunity BorgWarner Addressable Market $55B $47B Takeaways Combustion remains largest market opportunity Growth despite declining market volumes Market Volumes 91M 76M / (3%) Revenues continue to rise BorgWarner Content Opportunity Per Vehicle BorgWarner Rev. CAGR ( 17-23) $607 $613 1% Driven by product penetration gains BorgWarner Inc. 37

38 Hybrid Opportunity BorgWarner Addressable Market $39B Takeaways Average Hybrid Cost to Customers declines Current volumes low, led by PS Higher volume content on P0/P1/P2, shifting from PS $6.5B Opportunity in Hybrid is 2.5x that of Combustion Market Volumes 3.3M 26M / 41% Revenue CAGR close to double that of market BorgWarner Content Opportunity Per Vehicle BorgWarner Rev. CAGR ( 17-23) $1,994 $1,501 73% Significant share gains BorgWarner Inc. 38

39 Electric Opportunity Takeaways BorgWarner Addressable Market $1.7B $11B Average content opportunity increasing Despite prices decreasing Driven by higher AWD penetration Opportunity in Electric is more the 3x that of Combustion Market Volumes 0.9M 5.6M / 36% CAGR more than double that of market BorgWarner Content Opportunity Per Vehicle BorgWarner Rev. CAGR ( 17-23) $1,854 $1,947 73% Significant share gains BorgWarner Inc. 39

40 Significantly Higher Content Opportunities in Hybrid and Electric 2023 BorgWarner Content Opportunity Per Vehicle Summary Combustion Hybrid Electric ~2.5X $$ ~3.0X $$ $1,501 $1,947 $613 Market Volumes 76M 26M 5.6M Addressable Market $47B $39B $11B BorgWarner Inc. 40

41 Our Content Opportunity Continues to Grow BorgWarner Takeaways 2023 BorgWarner Content Opportunity Per Vehicle Summary $664 $896 Average content opportunity up over 35% Driven by higher share of Hybrid and Electric Revenue opportunity up 54% Market Volumes 95M 108M / 2% BorgWarner Addressable Market BorgWarner LV Revenue CAGR ( 17-23) $63B $97B / 7% ~7% Content and volume driven Equates to 7% CAGR BorgWarner light vehicle growth at ~7% Hybrid & Electric addressable market $50B BorgWarner Inc. 41