# Dear Fellow Stockholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NYSE_BWA_2020/NYSE_BWA_2020.mmd` · pages 1-7_

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Dear Fellow Stockholders,

As I write this letter in February 2021, the world remains gripped by the COVID-19 pandemic. Every person and organization on the planet have been impacted over the past year, and BorgWarner was no exception. Yet, we learned to operate effectively within the confines of the pandemic, successfully completed our largest acquisition to date, and focused on the acceleration of the company toward electrification. When I look back on 2020, I will remember the optimism and resilience of our people in the face of an extremely challenging environment.
As the pandemic took hold around the world in the first quarter of 2020, we met the challenges of managing costs and cash during the resulting production shutdowns, while ensuring our ability to maintain supply to our customers as production resumed. We did all this while putting the health and safety of our employees first. We have extraordinary safety results, and we used the exact same standard of excellence that we have built over the past decade, with regard to this during the pandemic.

In the first quarter of 2020, we activated our cross-functional Critical

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"Innovation and the appetite to share ideas that exemplify BorgWarner's culture."

Event Management Team to support our business while monitoring the COVID-19 outbreak. This team worked directly with our business unit and functional leaders to assess our local and global needs and provide a consistent response to support all stakeholders. Additionally, we formed an executive-level task force to establish the Safe-Restart Program, which included a set of 17 minimum standards and 9 additional recommended best practices to safely restart production. We saw additional innovative safety solutions developed at the plant level that were then promoted and used around the globe. It is this kind of innovation, along with the appetite to share ideas, that exemplify BorgWarner's culture.

I want to thank all involved, especially our internal team members, who have maintained their focus and strong engagement, despite the challenges of managing production. As I look at what we accomplished in this environment, I believe we are well positioned to execute in the near and long term, with financial discipline and technology driving our profitable growth.

While managing the operational challenges of 2020, we also successfully completed the largest acquisition in the company's history. In the fourth quarter, Delphi Technologies' contribution to both revenue and operating income was ahead of our expectations, and we continued to see positive progress across all former Delphi businesses. The cost synergies related to the transaction tracked in line with our plan, and customer feedback remains very positive. We have won new business across our portfolio, and the integration is on track from all perspectives.

Reflecting on the announcement of the transaction a year later, our reasons for initially pursuing the

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"Today, we are even better positioned with a more comprehensive portfolio of industry-leading products and systems, and we have also strengthened our commercial vehicle and aftermarket businesses."
deal have been confirmed. The combination of BorgWarner and Delphi Technologies has strengthened our electronics and power electronics products, capabilities, and scale, creating a leader in electrified propulsion systems that we believe is well positioned to take advantage of ongoing propulsion migration. Today, we are even better positioned with a more comprehensive portfolio of industry-leading products and systems, and we have also strengthened our commercial vehicle and aftermarket businesses. We welcomed our Delphi Technologies colleagues in the fall and are excited about the ongoing projects and opportunities to address the shift toward electrification. I am proud of our planning teams for driving the business forward, as we continue to execute a smooth integration. The fact that we were able to complete a global deal of this size during a pandemic is a huge testament to the collaboration and determination of everyone involved. I expect that we will realize significant benefits from this combination for our stockholders, customers, and suppliers.

Of course, not all challenges were related to the pandemic. In April, I was shocked to see the devastation around our facility in Seneca, South Carolina, following a tornado. Tragically, one person guarding the facility lost his life, but the toll could have been much worse. Thankfully, the facility was temporarily closed the night of the storm – normally, there would have been anywhere from 200 to 300 people on site. We were able to rebuild rapidly, and production resumed at the damaged facility approximately 500 hours after the tornado. This is a great example of the resilience and determination exhibited by the people of BorgWarner.

While these near-term projects and challenges are top of mind, it is also worth taking a step back to highlight how we view our standing in the

## SENECA, SOUTH CAROLINA

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world today and why we believe we are well positioned for the long term. Mobility is increasingly essential to people, but also increasingly costly to the environment. We make products that make mobility cleaner and more efficient.

Around the world, populations and living standards are increasing. Both factors drive demand for mobility, while steadily increasing regulations accelerate the need to make it cleaner and more efficient. We know that in the next decade, the focus on hybrid and electric vehicles will intensify, and the use of internal combustion engines will decline. We are aware of the factors driving these changes, which have also been informing our corporate evolution, to ensure we continue to meet this demand.
Part of the solution is our product leadership and manufacturing. We believe our revenue content opportunity per electrified light vehicle is more than two-and-a-half times the content opportunity per internal combustion engine vehicles. The other crucial factor is our people. We aspire to provide our employees with a workplace experience focused on physical and psychological safety, where there is a strong spirit of inclusion and a deep sense of belonging, because we live our beliefs. Finally, the close customer bonds we have nurtured for decades create predictable multiyear demand. We know customers want to partner with quality providers like BorgWarner that combine local knowledge with global scale.
If the past year has taught us anything, it is that the world is unpredictable. That is why we are diversified by market, region, and products, and place importance on embracing change. We expect to remain among the strongest, most profitable companies in the industry, and our strategy combines organic growth, technology-driven M&A, and creative venture capital engagements. It should not be overlooked that our financial strength has enabled us to invest in change. Combined, our approach ensures we are constantly evolving, and our success is proven by two key facts: Our revenue has grown more than industry volumes year after year, and the growth in content we can provide per vehicle has increased each year.

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During the previous year, we added talent and diversity to our Board of Directors with the appointment of three new directors. First, Dr. Shaun E. McAlmont joined the Board in August. Shaun is the President of Career Learning Solutions at Stride, Inc., a provider of online education programs, skills training, and talent development. As a recognized business leader with significant expertise in the education and workforce development space, his experience, skills, and passion are a great complement to our Board.

In October, Nelda J. Connors and David S. Haffner both joined our Board in conjunction with the completion of the Delphi Technologies acquisition. Nelda is the founder, Chairwoman, and Chief Executive Officer of Pine Grove Holdings, a woman- and minority-owned privately held investment company that acquires companies with a high engineering and service component in areas such as power generation, specialty logistics, and transportation. As a groundbreaking leader and board member, Nelda brings significant expertise in operations, financial management, quality, engineering, and business strategy. In 2015, David retired as the Chairman and Chief Executive Officer of Leggett & Platt, Inc., a diversified manufacturing company. David has extensive experience managing the operations of an international public company and provides the Board with experience in manufacturing operations, labor relations, compensation strategy, and financial performance.
I want to thank our existing and recently added board members for their significant contributions. As we encountered challenges not faced in modern times, their counsel has been more important than ever in the last year.

At the start of 2020, and again in 2021, we were honored to be one of just a few hundred companies included in the Bloomberg Gender-Equality Index (GEI), which tracks the performance of public companies committed to supporting gender equality through policy development, representation, and transparency. We are proud of our longstanding commitment of embracing equality, and have the drive to continue diversifying our talent pool and nurturing an inclusive culture that affords employees an equal opportunity to grow and thrive.

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In 2020, BorgWarner also joined the CEO Action for Diversity & Inclusion \( ^{™} \) , which is the largest CEO-driven business commitment to advance diversity and inclusion within the workplace. And over the years, our company has developed several programs aimed at increasing its dedication to diversity and inclusion, such as our Women in Leadership program, which focuses on nurturing women with high potential at every level of their career by giving them an array of opportunities to hone their strengths and leadership skills.

Our decentralized operating model puts ownership and decision-making authority in the hands of each individual employee. We know if we focus on our people they will focus on our products and customers, and by giving employees responsibility early on they remain engaged, which becomes a strong retention and recruiting tool. Our highly skilled engineers provide a competitive edge and have transferable skills, and our research indicates we are more successful at recruiting than our peers. In turn, this helps create unusually strong customer bonds, increasing business retention and giving us greater insight into future demand shifts. We are proud to be a global diversity, equity, and inclusion leader, achieving 98.7% gender pay parity. Today, 26% of our employees are women in a historically male sector. Our steady reduction in our own energy and GHG emissions protects the planet, saves money, and sets an example. Finally, our good governance profile supports stability, accountability, and transparency.

With everything we faced last year, we are pleased with our stronger-than-expected growth above market and cash flow performance for the year. With approximately $10.2 billion in sales, we were able to outgrow the market by approximately 630 basis points in 2020, as we delivered outgrowth in all major regions, with close to 15% in China.

Following the completion of the acquisition, Delphi Technologies added more than $1.1 billion to our fourth quarter revenue and $109