# Dear Fellow Stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_BWA_2021/NYSE_BWA_2021.mmd` · pages 1-7_

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Dear Fellow Stockholders,

As I reflect on the past year, it is clear 2021 was an important time for BorgWarner. Through the dedication and perseverance of our team, we were able to succeed on many fronts despite facing significant adversity impacting our end markets. The resilience of our team is simply amazing.

While the pandemic has tested everyone over the past two years, I am immensely proud of everything we were able to achieve during 2021. In short, it was a challenging yet very productive year. We completed the integration of our largest acquisition to date and dramatically accelerated the company's charge forward towards
The year 2021 was one of significant transformation.

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electrification. While much was accomplished, as we look to the future, we have many exciting opportunities ahead.

## Charging Forward

The year 2021 was one of significant transformation. Most importantly, in March, we unveiled Project Charging Forward – the acceleration of our electrification strategy, which is expected to bring the company's electric vehicle (EV) revenue to approximately 45% in 2030 from less than 3% in 2021. We've been building toward capitalizing on this opportunity for years and are confident we have the scale, portfolio, financial strength and team to execute successfully. As part of that strategy – and aligned with our vision of a clean and energy-efficient world – we are also committed to achieving carbon neutrality by 2035.

## The Charging Forward Plan
Comprises Three Pillars:

We strive to deliver profitable growth in EVs. We are working to achieve this through the addition of Delphi Technologies and our ability to capture synergies. The Integrated Drive Module (iDM), which combines our inverter, motor and gearbox, is a perfect example. We are pursuing EV-focused mergers and acquisitions. We are focused on opportunities to gain scale, to improve diversity in technology, customers and geography, and to vertically integrate our EV portfolio.

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## PROJECT
CHARGING FORWARD

![](images/2_0.jpg)

ORGANIC EV
GROWTH

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EV FOCUSED
M&A

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OPTIMIZE
COMBUSTION
PORTFOLIO

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We plan to optimize our combustion portfolio and reduce our exposure by disposing of parts of the portfolio that are lower growth, lower margin or lack product leadership. The sale of our Water Valley, Mississippi facility to Atar Capital is an excellent example of this process, and we plan to deliver further progress in 2022.

We expect to execute this strategy while sustaining top-quartile, double-digit margin performance and generating approximately $4.5 billion in free cash flow between 2021 and 2025 (before the impact of dispositions). We believe we can fund our growth in EVs primarily from the free cash flow generated by our existing operations.

## Growth Through Acquisitions

As we have stated, acquisitions will play an important role in our future. We entered 2021 having just successfully completed the largest acquisition in the company's history, but we still had a lot of work left to do to fully integrate Delphi Technologies. Today, that integration is essentially complete, with our teams operating effectively as one company, cost synergies tracking ahead of plan, and, most importantly, positive feedback from our customers!

Our combined companies have significant potential to accelerate new business wins. For instance, we were able to secure a program with the Hyundai Group for an iDM program on its upcoming global A-segment EVs, with an expected launch in mid-2023. This is a significant program for the company – our first iDM award combining BorgWarner's and legacy Delphi Technologies' portfolios. It is a validation of the potential we saw in bringing our two companies together. I want to acknowledge the team's intense efforts to win this award just a few months after we completed the acquisition. The combination of Delphi Technologies' technology with BorgWarner's customer intimacy, operational excellence and strong balance sheet is a testament to why we won this business award and bodes well for the future!

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Building upon this accomplishment, we planned and executed the acquisition of AKASOL AG (AKASOL) during the year, significantly expanding our commercial vehicle electrification capabilities. AKASOL designs and manufactures customizable battery packs for use in buses, commercial vehicles, rail vehicles and industrial vehicles, as well as in marine applications. As a leader in the space, AKASOL had been on our radar for a long time as a potential partner. AKASOL's proprietary system technology is cell agnostic, providing a low cost, flexible solution to world-class customers, with a strong order backlog primarily from leading OEMs. We have welcomed the AKASOL team to BorgWarner and look forward to our first full year with them as part of the team.

## Recording Our Success

We are proud of our strong top-line performance in 2021, especially when compared to the industry declines. We produced approximately \(14.8B in sales, which is an approximately 12%* increase organically, outperforming all major regional markets, which increased only 2% on combined basis.

It is because of our strong team that we were able to produce double-digit, adjusted operating margin performance despite the significant production volatility that disrupted the industry during 2021. We achieved this while continuing to increase our R&D spending to support future growth and delivering a solid cash flow performance.

During 2021, we were awarded a number of significant EV awards, and I'd like to highlight some of the most interesting projects.

We earned an award for a North American high-voltage silicon inverter program with a global OEM, expected to launch in 2024 – our largest inverter award to date in terms of expected annual revenue and

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## Significant awards
across electrification
product portfolio

![](images/5_0.jpg)

N.A. Global OEM
HV SiC Inverter

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European OEM
800V Inverter

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Geely ZEEKR O01 HV
Coolant Heater

![](images/5_3.jpg)

Global CV Customer
800V Inverter

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European OEM
400V Inverter

our first major silicon-carbide-based (SiC) inverter win for the North American market.

We received an 800-volt electric motor award with a large global commercial vehicle (CV) EV customer, expected to launch in 2024. This multi-faceted platform will support the manufacturer's goal of a common electric drivetrain. These products are available in multiple variants to serve our expanding commercial vehicle EV market and will allow customers to significantly reduce charging time while achieving a higher power density.

We were awarded an 800-volt SiC inverter project with a German OEM, expected to launch in early 2025, which expands upon our existing 400-volt inverter business with that customer. Our inverter offers superior operational characteristics such as enhanced driving performance and longer range. Our technology delivers a lighter and smaller system at lower cost with greater durability.

We received multiple iDM awards during 2021, including with Hyundai for its upcoming global A-segment EV production, planned to start in mid-2023, as well as an iDM with a leading luxury new-energy vehicle maker in China.

We were recently awarded a third generation battery system with GILLIG, a leading North American bus manufacturer. Developed for long-distance applications, the product can be scaled for customers' needs and aligns with transit agencies who are converting their fleets to zero-emissions, with greater range to meet duty cycles. This project will be produced in our Hazel Park, Michigan facility, which we expect will have production capacity of 2 GWh by the end of 2023.

## Investing in a
Sustainable Future

Together, the BorgWarner team embraces our vision of a clean, energy-efficient world. Our people are making our mission – "to deliver innovative and sustainable mobility solutions for the vehicle market" – a reality through their efforts every single day.