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What product leadership means to me What product leadership
means to
me
2 0 0 4 A N N U A L R E P O R T and me.
and me.
and me.
A t B o r g W a r n e r , t h e r e a r e m a n y d e f i n i t i o n s o f


P
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1
7 ,
1
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t . Product leadership means growing at a rate
that is almost triple that of our industry.
F i n a n c i a l H i g h l i g h t s
04

2004 2003
% Change
Net sales
$3,525.3
$3,069.2
14.9%
Net earnings
218.3
174.9
24.8%
Net earnings per share diluted
3.86
3.20
20.6%
Average number of shares outstanding diluted (millions)
56.5 54.6
Capital spending
204.9
172.0
19.1%
Research and development
123.1
118.2
4.1%
Cash and cash equivalents
229.7
113.1
103.1%
Debt
584.5 655.5
(10.8)%
Stockholders equity
1,534.2
1,260.4
21.7%
Total stockholder return
29.5%
70.7%
millions of dollars, except per share data
Industry
58
134
B o r g W a r n e r S a l e s
v s. G l o b a l
A u t o I n d u s t r y
1 9 9 3
2 0 0 4
BorgWarner
I N D E X : 1 9 9 3 = 1 0 0
1 from the board in April 2005. I also want to welcome David
Brown, CEO of Owens Corning, as the newest member of
the board. We look forward to his contributions.
Implementing Initiatives
Since becoming chief operating officer in 2002, and now as
CEO, I have challenged our people to broaden the competi-
tive gap between us and other suppliers in three key areas.
These are quality and cost improvement, the use of elec-
tronic controls strategies, and harnessing the power of
collaboration and teamwork -- all with a focus on our vision
of Product Leadership. I am proud of our achievements in
each area. We are demonstrating that Product Leadership
is everyones job, and each employee has a role to play in
the success of the company.
BorgWarners performance during 2004 dis-
tinguishes us from other auto systems suppliers
as we continue to lay the groundwork for our
global growth.
In an industry with little growth, our sales were up
15% to a record $3.5 billion. Earnings hit another record high.
A stock split in May signaled our continued confidence in the
future of the company. We increased our dividend for the
third time in the past three years. By year-end, BorgWarner
stock had chalked up 29 52-week highs.
Focused Growth
We have strengthened our Engine and Drivetrain focus with
the creation of technology leadership positions in each
group, the continued development of new products and the
acquisition of a majority stake in Beru AG on January 4, 2005.
t o o u r s t o c k h o l d e r s
customer base. Because of tremendous growth with custom-
ers like Honda, Hyundai/Kia and VW/Audi, our sales are well
balanced. This strategic focus proves beneficial as market
shares among the global automakers shift in favor of our
faster growing customers.
We further enhanced our strong and talented management
team with key appointments from within the company and by
attracting exceptional outside talent. To help manage the
complexities of our more global business, we strengthened
the role of the CFO to include administration and created a
new position for global supply chain management and
emerging markets.
Our Board of Directors is actively engaged in guiding our
business. I want to thank Bill Butler for his leadership and
wise counsel as a board member since 1997. Bill retires
The Beru acquisition is expected to be accretive
in 2005 and enhance our diesel and controls
technology, as well as expand our customer
base and geographic presence all reasons we
have previously cited for making acquisitions.
New business amounting to $1.4 billion is expected to
come on stream over the next three years. About 66%
is expected to be engine-related products such as turbo-
chargers, engine timing systems, variable cam timing
modules and emissions/thermal products. The other 34%
is expected to be in transmission modules and all-wheel
drive systems.
As a global business, we serve customers throughout the
world. In addition to supporting the domestic automakers
in North America, we have significantly diversified our
Our technology, our customer diversity, our financial discipline and our
staunch commitment to Product Leadership in every aspect of our busi-
ness have built a foundation that continues to prove strong enough to
support our ambitious growth plan. BorgWarners record performance
in 2004 affirms my view that there is no other automotive supplier
better positioned for continued global growth.
Alfred Weber
Vice President,
President and
General Manager
Emissions/Thermal
Systems
Cynthia A. Niekamp
Vice President,
President and
General Manager
TorqTransfer Systems
Robin J. Adams
Executive
Vice President,
Chief Financial
Officer and
Chief Administrative
Officer
Roger J. Wood
Vice President,
President and
General Manager
Morse TEC
Timothy M. Manganello
Chairman and
Chief Executive Officer
Mark A. Perlick
Vice President,
President and
General Manager
Transmission
Systems
F. Lee Wilson
Vice President,
President and
General Manager
Turbo Systems
F R O M L E F T T O R I G H T :
2
3 Our collaboration has led to better, more cost-efficient
product launches, a successful move of our corporate head-
quarters to Auburn Hills, Michigan, an effective acquisition
process and unprecedented quality and workplace safety
results. In addition, we are leveraging our infrastructure
within the Engine and Drivetrain groups on two Korean
campuses and a single manufacturing campus in China.
Over the past few years, we have been building a robust and
disciplined cost reduction process. This process touches all
aspects of our business and was the reason we could
manage through a situation as daunting as steep increases
processes, including information technology and supply
chain management.
This report looks at those qualities that bring us together as
BorgWarner people and that differentiate us from others in
the industry: our continuing ability to supply innovative tech-
nology; our diversity both in terms of our customer base
and our geographic presence; our manufacturing excellence;
and our financial discipline.
The auto industry expects to face another challenging year
in 2005, with uncertainty about production, high commodity
powertrains of the future. BorgWarner knows more about
powertrains than any other supplier, but we need to make
sure we are leveraging that expertise where it counts. Our
acquisition of Beru shares will help us advance in this area.
Structuring for Future Growth
We are also focused on structuring ourselves for global
growth. There is a difference between operating in multiple
countries and being a truly global company. We realize that
we must operate differently than we have in the past. Good
examples are our expansions in China and Korea. At our
Timothy M. Manganello
Chairman and CEO
Our strategic focus proves beneficial as
market shares among the global automakers shift
in favor of our faster growing customers.
BorgWarner is the recognized world leader
in advanced products and technologies
that satisfy customer needs in powertrain
components and systems solutions.
B o r g W a r n e r V i s i o n
B o r g W a r n e r B e l i e f s Respect for Each Other The Power of Collaboration Passion for Excellence Personal Integrity Responsibility to Our Communities
in steel and other raw materials costs in 2004. We operate
in a very cost-competitive environment and must continually
adjust our cost structure to the realities of our marketplace.
We have made progress in harnessing our expertise in
mechanical functioning of engines and torque management
through software controls strategies. This expertise is a
major differentiator between BorgWarner and our competi-
tors for most of our product lines. Computer control is the
brainpower of the powertrain, and is the critical element of
new engine and drivetrain campuses in Korea, and in China,
at our recently opened office in Shanghai and expanding
Ningbo manufacturing compound, we are sharing space and
support services. In the past, we would have established
individual operations by product line.
Our new business model is reaching beyond emerging
market opportunities to the rest of our business. We want
to preserve the best of our entrepreneurial heritage while
taking advantage of the benefits of common systems and
prices and shifting market shares among our customers. At
BorgWarner, we will continue to manage through these
issues with a focus on delivering the results our stockholders
have come to expect.
G
L
O
B
A
L
I have challenged our people to broaden the competitive gap between us and other suppliers in three key
areas. These are quality and cost improvement, the use of electronic controls strategies, and harnessing
the power of collaboration and teamwork all with a focus on our vision of Product Leadership.
5
4 Gasoline T
u
rbochar
g
ers
Exhaust Gas Recir
culation
Diesel T
u
rbochar
gers
Gasoline Engine Timing
Be