e10vk
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
þ Annual Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2006
OR
o 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)
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Delaware
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13-3404508
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(State of Incorporation)
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(I.R.S. Employer Identification
No.)
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3850 Hamlin Road
Auburn Hills, Michigan 48326
(Address of principal executive
offices) (Zip Code)
Registrants telephone
number, including area code 248-754-9200
Securities registered pursuant to
Section 12(b) of the Act:
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Name of each exchange on
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Title of each class
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which registered
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Common Stock, par value
$0.01 per share
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New York Stock Exchange
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Securities registered Pursuant to
Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the voting common stock of the
registrant held by stockholders (not including voting common
stock held by directors and executive officers of the
registrant) on June 30, 2006 (the last business day of the
most recently completed second fiscal quarter) was approximately
$3.7 billion. As of February 16, 2007, the registrant
had 57,972,874 shares of voting common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the following documents are incorporated herein by
reference into the Part of the
Form 10-K
indicated.
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Part of
Form 10-K
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into which
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Document
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incorporated
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BorgWarner Inc. 2006 Annual Report
to Stockholders
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Parts I, II and IV
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BorgWarner Inc. Proxy Statement for
the 2007 Annual Meeting of Stockholders
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Part III
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BORGWARNER
INC.
FORM 10-K
YEAR
ENDED DECEMBER 31, 2006
INDEX
2
CAUTIONARY
STATEMENTS FOR FORWARD-LOOKING INFORMATION
BorgWarner Inc. and its Consolidated Subsidiaries (the
Company) make forward-looking statements in this
document that are based on managements current
expectations, estimates, and projections. Words such as
expects, anticipates,
intends, plans, believes,
estimates, variations of such words and similar
expressions are intended to identify such forward-looking
statements. Forward-looking statements are subject to risks and
uncertainties, many of which are difficult to predict and
generally beyond the control of the Company. Such risks and
uncertainties could cause our actual results to differ
materially from those expressed, projected, or implied in or by
our forward-looking statements. Such risks and uncertainties
include: fluctuations in global or regional vehicle production;
the continued use of outside suppliers by original equipment
manufacturers, fluctuations in demand for vehicles containing
the Companys products, general economic conditions, as
well as other risks noted under Risk Factors. The
Company does not undertake any obligation to update any
forward-looking statement.
3
PART I
The Company is a Delaware corporation that was incorporated in
1987. The Company is a leading, global supplier of highly
engineered systems and components, primarily for powertrain
applications. The Companys products help improve vehicle
performance, fuel efficiency, air quality and vehicle stability.
These products are manufactured and sold worldwide, primarily to
original equipment manufacturers (OEMs) of
light-vehicles (passenger cars, sport-utility vehicles, vans and
light-trucks). The Companys products are also sold to OEMs
of commercial trucks, buses and agricultural and off-highway
vehicles. The Company operates manufacturing facilities serving
customers in the Americas, Europe and Asia, and is an original
equipment supplier to every major automotive OEM in the world.
Financial
Information About Segments
Incorporated herein by reference is Note 19 of the Notes to
Consolidated Financial Statements of the Companys Annual
Report for the year ended December 31, 2006 (the
Companys Annual Report) filed as an exhibit to
this report.
Narrative
Description of Operating Segments
The Company reports its results under two reportable operating
segments: Engine and Drivetrain. Net revenues by segment for the
three years ended December 31, 2006, 2005 and 2004, are as
follows (in millions of dollars):
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Year Ended December 31,
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2006
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2005
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2004
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Engine
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$
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3,154.9
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$
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2,855.4
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$
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2,059.9
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Drivetrain
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1,461.4
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1,472.9
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1,509.2
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Inter-segment eliminations
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(30.9
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(34.5
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(43.8
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Net sales
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$
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4,585.4
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$
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4,293.8
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$
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3,525.3
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The sales information presented above excludes the sales by the
Companys unconsolidated joint ventures (See Joint
Ventures section). Such sales totaled approximately
$676 million in 2006, $635 million in 2005, and
$500 million in 2004.
Effective January 1, 2006, the Company assigned an
operating facility previously reported in the Engine segment to
the Drivetrain segment due to changes in the facilitys
product mix. Prior year segment amounts have been reclassified
to conform to the current years presentation.
Engine
The Engine Group develops products to manage engines for fuel
efficiency, reduced emissions, and enhanced performance. Its
products currently fall into the following major categories:
turbochargers, chain products, emissions systems, thermal
systems, diesel cold start and gasoline ignition technology,
tire pressure monitoring systems and diesel cabin heaters.
The Engine Group provides turbochargers for light-vehicle,
commercial-vehicle and off-road applications for diesel and
gasoline engine manufacturers in Europe, North America, South
America and Asia. The Engine Group has greatly benefited from
the growth in turbocharger demand in Europe. This growth is
linked to increasing demand for diesel engines in light-vehicles
which typically utilize turbochargers and for turbocharged
gasoline engines. Benefits of turbochargers in both
light-vehicle and commercial-vehicle applications include
increased power for a given engine size, improved fuel economy
and significantly reduced emissions. The Company believes it is
a leading manufacturer of turbochargers worldwide.
4
Sales of turbochargers for light-vehicles represented
approximately 18%, 16%, and 16% of the Companys total
revenues for 2006, 2005 and 2004, respectively. The Company
currently supplies light-vehicle turbochargers to VW/Audi,
Renault, PSA, DaimlerChrysler, Hyundai and Fiat, and supplies
commercial-vehicle turbochargers to Caterpillar, John Deere,
DaimlerChrysler, International, Deutz and MAN. The Company
expects to supply the next generation of light-vehicle
turbochargers in Europe to VW/Audi, Renault, PSA, BMW, Ford and
Fiat. In 2004, the Company announced that it would supply the
3.0 liter, 6-cylinder engine for the BMW 5-series with its
regulated two-stage turbocharging system known as
R2S®.
The system allows continuously variable adaptation of the
turbine and compressor side for every operating point of the
engine. In 2005, the Company announced the start of production
of its
R2S®
for medium truck applications and that it would supply
turbochargers for VW/Audis 2.0 liter gasoline direct
injection engine and for their first dual-charged 1.4 liter
gasoline direct injection engine. In 2006, the Company launched
a high temperature variable geometry turbine
(VTG®)
for Porsche 3.6 liter gasoline application, another
R2S®
application for a DaimlerChrysler light-truck called the
Sprinter and a
VTG®
for the Hyundai A-engine family. These products are provided
from facilities in Europe, North America, South America and Asia.
The Engine Group designs and manufactures products to control
emissions and improve fuel economy such as electric air pumps,
turbo actuators which use integrated electronics to precisely
control turbocharger speed and pressure ratio, and exhaust gas
recirculation valves for gasoline and diesel applications. The
Engine Group also manufactures a wide variety of fluid pumps,
including engine oil pumps for engine and transmission
lubrication, and products for engine air intake management.
Other products for engine air intake management include throttle
bodies, electronic throttle control, and complete engine
induction modules. These products are provided from facilities
in North America, Europe and Asia.
The Engine Groups chain and chain systems products include
timing chain and timing drive systems, crankshaft and camshaft
sprockets, tensioners, guides and snubbers,
HY-VO®
Front-Wheel Drive (FWD) transmission chain and
Four-Wheel Drive (4WD) chain, and MORSE
GEMINI®
chain systems for light-vehicle and commercial-vehicle
applications.
The Companys timing chain systems are used on Fords
family of overhead cam engines, including the Duratech and
Triton, and in-line 4 cylinder engines, as well as on
Chryslers 2.7 liter, 3.7 liter, 4.7 liter, 5.7 liter and
6.1 liter engines, including the Hemi applications. In addition,
the Company provides timing systems to a number of Asian OEMs
and their North American transplant operations, including Honda,
Nissan, and Hyundai, and to several European OEMs. The Company
believes that it is the worlds leading manufacturer of
timing chain systems.
The Engine Group has reached full production of its first
high-volume variable cam timing (VCT) systems for a
new family of GM V6 engines. VCT is a means of precisely
controlling the flow of air into and out of an engine by
allowing the camshaft to be dynamically phased relative to its
crankshaft. The Companys VCT system includes Torsional
Assisttm
technology, which utilizes camshaft torque as its main actuation
energy, instead of the conventional oil-pressure actuated
approach. The VCT systems are utilized by GMs new 3.5
liter and 3.9 liter
V-6 engines
in the all-new Saturn Aura, Chevrolet Impala and Pontiac G6.
HY-VO®
chain is used to transfer power from the engine to the
drivetrain. The Companys MORSE
GEMINI®
chain system emits significantly less chain pitch frequency
noise than conventional transmission chain systems. The chain in
a transfer case distributes power between the front and rear
output shafts which, in turn, drive the front and rear wheels.
The Company believes it is the worlds leading manufacturer
of chain for FWD transmissions and 4WD transfer cases. These
products are provided from facilities in North America, Europe
and Asia.
The Engine Group believes it is a leading global provider of
engine thermal solutions for truck, agricultural and off-highway
applications. The group designs, manufactures and markets
viscous fan drives that control fans to sense and respond to
multiple cooling requirements. The Engine Group also
manufactures and markets polymer fans for engine cooling
systems. The Companys thermal products provide improved
vehicle fuel economy and reduced engine emissions while
minimizing parasitic horsepower loss. These advanced thermal
systems products are provided from facilities in North America,
South America, Europe and Asia. The Company has been awarded the
standard position for its products at the major
global heavy truck producers, rather than its previous
optional position.
5
In 2005, the Company acquired 69.4% of the outstanding shares of
BERU Aktiengesellschaft (BERU), headquartered in
Ludwigsburg, Germany. BERUs operating results are included
within the Engine Group. BERU is a leading global automotive
supplier of diesel cold starting technology (glow plugs and
instant starting systems); gasoline ignition technology (spark
plugs and ignition coils); and electronic control units and
sensor technology (tire pressure sensors, diesel cabin heaters
and selected sensors). BERU is represented in Europe, Asia and
North America.
Drivetrain
The Drivetrain Group leverages the Companys expertise in
wet friction clutches, mechanical coupling devices, and control
systems, enabling efficient transmission of engine torque to the
vehicle drivetrain, and management of torque distribution to the
driven wheels. The Drivetrain Groups major products are
transmission components and systems, and all-wheel drive
(AWD) torque management systems.
Drivetrain Group designs and manufactures automatic transmission
components and modules in North America, Asia and Europe.
Principal product lines include:
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Friction products: friction plates,
transmission bands, torque converter clutches, friction clutch
modules.
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Mechanical products: One-way clutches,
torsional vibration dampers
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Controls products: Electro-hydraulic
solenoids, solenoid modules, high pressure solenoids for
automated manual transmissions (AMTs).
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Dual clutch transmissions products: Dual
clutch modules, torsional vibration dampers, Mechatronic control
modules.
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The Company is a supplier to virtually every major automatic
transmission manufacturer in the world. The Companys
50%-owned joint venture in Japan, NSK-Warner Kabushiki Kaisha
(NSK-Warner), is a leading producer of friction
plates and one-way clutches in Japan. NSK-Warner is also the
joint venture partner with a 40% interest in the Drivetrain
Groups Korean subsidiary, BorgWarner Transmission Systems
Korea, Inc.
In 2006 the Drivetrain Group acquired the high-pressure solenoid
product lines of Eaton Corporation. These solenoids are used in
AMTs installed on manual gearboxes. AMTs are a growing niche of
the entry-level city-car and light commercial-vehicle segments
in Europe and some Asian markets.
In 2003, the Drivetrain Group launched its proprietary dual
clutch transmission technology known as
DualTronic®
on Volkswagen Audi Groups revolutionary Direct Shift
Gearbox (DSG), featured in the VW Golf R32 and the
Audi TT 3.2. This technology provides the smooth-shifting
convenience of an automatic transmission with the fuel
efficiency of a manual transmission, and quicker shifts than
either. Through advanced electro-hydraulic controls and a unique
two-clutch wet-friction system,
DualTronic®
technology eliminates the interruption in powerflow that drivers
experience with a manual or automated manual transmission. This
technology is expanding across the entire VW Group vehicle
family, including VW, Audi, Skoda and SEAT vehicles sold
worldwide.
In conventional automatic transmissions, there has been a global
market trend from four and five speeds to six, seven, and even
eight speed transmissions. Transmissions with more speeds
improve fuel economy and vehicle performance. The Company is a
leading supplier of friction, mechanical, and controls products
to every major automatic transmission producer worldwide.
The Drivetrain Groups torque management products include
4WD, AWD transfer cases and systems for rear-wheel drive
vehicles, and torque management products and systems to transfer
torque within the drivetrain for FWD/AWD based vehicles. The
main focus is on electronically controlled (active) torque
management devices and systems. Other torque management products
include synchronizer rings and systems for application in
manual, automated manual, and dual clutch transmissions.
Transfer cases are installed primarily on light-trucks,
sport-utility vehicles (SUVs), and rear-wheel drive
based cross-over utility vehicles (CUVs) and
passenger cars. A transfer case attaches to the transmission and
6
distributes torque to the front and rear axles for 4WD,
improving vehicle control during off-road use and in a variety
of road conditions. The Company has designed and developed an
exclusive 4WD
TORQUE-ON-DEMAND®
(TOD®)
transfer case system, which allows vehicles to automatically
shift from two-wheel drive to 4WD when electronic data and
sensors indicate it is necessary. The
TOD®
transfer case is available on the Ford Explorer, Ford
Expedition, Lincoln Navigator, Kia Sorrento, and certain
SsangYong vehicles.
Sales of rear-wheel drive based transfer cases and components
represented approximately 10%, 12% and 18% of the Companys
total revenues for 2006, 2005 and 2004, respectively. The
Company supplies the majority of the 4WD transfer cases to Ford,
including those installed in the Ford Explorer, the Ford
Expedition, the Ford F-150, Ranger
pick-up
trucks, the Mercury Mountaineer and the Lincoln Navigator. The
Company also supplies transfer cases to a number of General
Motors applications including the Hummer H2 and H3; the Cadillac
Escalade, STS and SRX; and the GMC Yukon Denali. The Company
began supplying transfer cases for the Audi Q7 in 2005 and to
Great Wall Motor Company Limited, a leading light-truck and SUV
manufacturer in China, in 2006. The Company also supplies 4WD
transfer cases to several other Asia-based OEMs.
The Company supplies a family of AWD products for both volume
and performance applications. One of the Companys AWD
iTractm
products is the
T-Tractm
torque transfer system, formerly called ITM
II®.
The Company is actively involved in developing this technology
for new applications in both FWD based CUVs and passenger cars.
This product was launched on the Honda Pilot in 2002 and on the
Honda Ridgeline, a midsize pickup, in 2005.
ITM®
uses electronically controlled clutches to distribute power to
the individual rear wheels when traction is required. A variant
of this product,
ITM2etm,
which features a single clutch pack in front of the rear axle
differential is supplied to Hyundai for the Hyundai Tucson and
KIA Sportage The latest design,
ITM3e®,
was launched on the new Hyundai Santa Fe and Chrysler
Pacifica in 2006.
The Companys drivetrain products are manufactured in North
America, Europe and Asia.
Joint
Ventures
As of December 31, 2006, the Company had 12 joint ventures
in which it had a less-than-100% ownership interest. Results
from the seven ventures in which the Company is the majority
owner are consolidated as part of the Companys results.
Where the Companys effective ownership interest is 50% or
less, the Company reported using the equity method of accounting.
Management of the unconsolidated joint ventures is shared with
the Companys respective joint venture partners. Certain
information concerning the Companys joint ventures is set
forth below:
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Percentage
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Owned by
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Location
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Fiscal 2006
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Year
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the
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of
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Sales ($ in
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Joint Venture
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Products
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Organized
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Company (a)
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Operation
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Joint Venture Partner
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millions) (b)
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Unconsolidated:
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NSK-Warner K.K.
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Transmission components
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1964
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50
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%
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Japan
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Nippon Seiko K.K.
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$
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535.4
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Turbo Energy Limited(c)
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Turbochargers
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1987
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32.6
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%
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India
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Sundaram Finance Limited; Brakes
India Limited
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$
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97.5
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Impco-BERU Technologies B.V.
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Alternative Drive Systems and
equipment for gas engines
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1999
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49
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%
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Netherlands
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Impco Technologies Inc.
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$
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22.1
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BERU Diesel Start Systems Pvt.
Ltd.
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Glow Plugs
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1996
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49
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%
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India
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Jayant Dave
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$
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3.6
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BERU-Eichenauer GmbH
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Sub-systems
for diesel cabin heaters
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2000
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50
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%
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Germany
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Fritz Eichenauer GmbH &
Co. KG
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$
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17.6
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Consolidated:
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BorgWarner Transmission Systems
Korea, Inc.
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Transmission components
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1987
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60
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%(d)
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Korea
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NSK-Warner K.K.
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$
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131.9
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Divgi-Warner Pvt. Ltd.
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Transfer cases and automatic
locking hubs
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1995
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60
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%
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India
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Divgi Metalwares, Ltd.
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$
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13.0
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Borg-Warner Shenglong (Ningbo) Co.
Ltd.
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Fans, fan drives
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1999
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70
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%
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China
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Ningbo Shenglong Group Co., Ltd.
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$
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20.2
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7
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Percentage
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Owned by
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Location
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Fiscal 2006
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Year
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the
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of
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Sales ($ in
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Joint Venture
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Products
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Organized
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Company (a)
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Operation
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Joint Venture Partner
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millions) (b)
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BorgWarner TorqTransfer Systems
Beijing Co. Ltd.
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Transfer cases
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2000
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80
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%
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China
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Beijing Automotive Industry
Corporation
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$
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16.1
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BorgWarner Morse TEC Murugappa Pvt.
Ltd
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Chain products and engine timing
system components
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2002
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74
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%
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India
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TI Diamond Chain Ltd.
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$
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5.2
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SeohanWarner TurboSystems Ltd.
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Turbochargers
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2003
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71
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%
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Korea
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Korea Flange Company
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$
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27.5
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BERU Korea Co. Ltd.
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Ignition coils and pumps
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2001
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51
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%
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Korea
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Mr. K.B. Mo and Mr. D.H. Kim
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$
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29.2
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(a) |
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The Company owns 69.4% of the outstanding shares of BERU. For
the joint ventures in which BERU is a party, the percentage of
ownership for each joint venture reflects BERUs ownership
percentage. |
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(b) |
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All sales figures are for the year ended December 31, 2006,
except for NSK-Warner and Turbo Energy Limited.
NSK-Warners sales are reported for the 12 months
ended November 30, 2006. Turbo Energy Limiteds sales
are reported for the 12 months ended September 30,
2006. |
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(c) |
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The Company made purchases from Turbo Energy Limited totaling
$25.1 million, $18.7 million, and $17.4 million
for the years ended December 31, 2006, 2005, and 2004,
respectively. |
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(d) |
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BorgWarner Inc. owns 50% of NSK-Warner, which has a 40% interest
in BorgWarner Transmission Systems Korea, Inc. This gives the
Company an additional indirect effective ownership percentage of
20%. This results in a total indirect effective ownership
interest of 80%. |
Financial
Information About Geographic Areas
See Note 21 of the Notes to Consolidated Financial
Statements in the Companys Annual Report for financial
information about geographic areas, which is incorporated herein
by reference.
Approximately 60% of consolidated sales for 2006 was outside the
United States, including exports. However, a portion of such
sales was to OEMs headquartered outside the United States that
produce vehicles that are, in turn, exported to the United
States.
Customers
Approximately 75% of the Companys total sales in 2006 was
for light-vehicle applications, with the remaining 25% of the
Companys sales to a diversified group of commercial truck,
bus, construction and agricultural vehicle manufacturers, and to
distributors of aftermarket replacement parts.
For the most recent three-year period, the Companys
worldwide sales to the following customers were approximately as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Ford
|
|
|
13
|
%
|
|
|
16
|
%
|
|
|
21
|
%
|
Volkswagen
|
|
|
13
|
%
|
|
|
13
|
%
|
|
|
10
|
%
|
DaimlerChrysler
|
|
|
11
|
%
|
|
|
12
|
%
|
|
|
14
|
%
|
General Motors
|
|
|
9
|
%
|
|
|
9
|
%
|
|
|
10
|
%
|
The Companys 2006 consolidated sales do not include the
approximately $676 million of sales made by the
Companys unconsolidated joint ventures. If sales from
these unconsolidated joint ventures were included in 2006
consolidated sales, our worldwide sales to Toyota Motor
Corporation and its affiliates would be approximately 7% of
consolidated sales.
The Companys automotive products are generally sold
directly to OEMs substantially pursuant to negotiated annual
contracts, long-term supply agreements or terms and conditions
as may be modified by
8
the parties. Deliveries are subject to periodic authorizations
based upon the production schedules of the OEMs. The Company
typically ships its products directly from its plants to the
OEMs.
Sales and
Marketing
Each of the Companys business units within its two
operating segments has its own sales function. Account
executives for each business unit are assigned to serve specific
OEM customers for one or more of a business units
products. Such account executives spend the majority of their
time in direct contact with OEM purchasing and engineering
employees and are responsible for servicing existing business
and for identifying and obtaining new business. Because of their
close relationship with the OEMs, account executives are able to
identify and meet customers needs based upon their
knowledge of the Companys products and design and
manufacturing capabilities. Upon securing a new order, account
executives participate in product launch team activities and
serve as a key interface with the customers.
In addition, between the Engine segment and the Drivetrain
segment, sales and marketing employees work together to explore
cross-development opportunities for the business units. The
development of
DualTronic®,
the Companys wet-clutch and control-system technology for
a new-concept automated transmission, is an example of a
successful collaboration.
Seasonality
The Companys business is moderately seasonal because the
Companys largest North American customers typically halt
vehicle production for approximately two weeks in July and one
week in December. Additionally, customers in Europe and Asia
typically shut down vehicle production during portions of July
or August and one week in the fourth quarter. Accordingly, the
Companys third and fourth quarters may reflect those
practices.
Research
and Development
The Company conducts advanced engine and drivetrain research at
the segment level. This advanced engineering function looks to
leverage electronics and the Companys expertise across
product lines to create new engine and drivetrain systems and
modules that can be commercialized. A venture capital fund that
was created by the Company as seed money for new innovation and
collaboration across businesses is managed by this function.
In addition, each of the Companys operating segments has
its own research and development (R&D)
organization. The Company has approximately 800 employees,
including engineers, mechanics and technicians, engaged in
R&D activities at facilities worldwide. The Company also
operates testing facilities such as prototype, measurement and
calibration, life cycle testing and dynamometer laboratories.
By working closely with the OEMs and anticipating their future
product needs, the Companys R&D personnel conceive,
design, develop and manufacture new proprietary automotive
components and systems. R&D personnel also work to improve
current products and production processes. The Company believes
its commitment to R&D will allow it to obtain new orders
from its OEM customers.
The following table presents the Companys gross and net
expenditures on research and development activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Millions of dollars
|
|
Gross R&D expenditures
|
|
$
|
219.5
|
|
|
$
|
194.3
|
|
|
$
|
154.9
|
|
Customer reimbursements
|
|
|
(31.8
|
)
|
|
|
(33.3
|
)
|
|
|
(31.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net R&D expenditures
|
|
$
|
187.7
|
|
|
$
|
161.0
|
|
|
$
|
123.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys net R&D expenditures are included in the
selling, general, and administrative expenses of the
Consolidated Statements of Operations. Customer reimbursements
are netted against gross R&D
9
expenditures upon billing of services performed. The Company has
contracts with several customers at the Companys various
R&D locations. No such contract exceeded $5.0 million
in any of the years presented.
Patents
and Licenses
The Company has approximately 3,800 active domestic and foreign
patents and patent applications pending or under preparation,
and receives royalties from licensing patent rights to others.
While it considers its patents on the whole to be important, the
Company does not consider any single patent, any group of
related patents or any single license essential to its
operations in the aggregate or to the operations of any of the
Companys business groups individually. The expiration of
the patents individually and in the aggregate is not expected to
have a material effect on the Companys financial position
or future operating results. The Company owns numerous
trademarks, some of which are valuable, but none of which are
essential to its business in the aggregate.
The Company owns the BorgWarner and
Borg-Warner Automotive trade names and housemarks,
and variations thereof, which are material to the Companys
business.
Competition
The Companys operating segments compete worldwide with a
number of other manufacturers and distributors which produce and
sell similar products. Many of these competitors are larger and
have greater resources than the Company. Price, quality and
technological innovation are the primary elements of competition.
The Companys major competitors include:
|
|
|
Product Type: Engine
|
|
Name of Competitor
|
|
Turbochargers:
|
|
Honeywell International Inc.
Mitsubishi Heavy Industries, Ltd.
|
Chains:
|
|
Tsubaki Group
Iwis
|
Emissions products:
|
|
Kolbenschmidt Pierburg AG
Valeo
Bosch
|
Thermal products:
|
|
Behr GmbH & Co.
Horton/Sachs
Usui
|
Diesel cold start technology:
|
|
Bosch
NGK
|
|
|
|
Product Type: Drivetrain
|
|
Name of Competitor
|
|
Torque transfer products:
|
|
Magna International Inc.
JTEKT
|
Transmission products:
|
|
Dynax Corporation
INA-Schaeffler
|
In addition, a number of the Companys major OEM customers
manufacture, for their own use and for others, products which
compete with the Companys products. Although these OEM
customers have indicated that they will continue to rely on
outside suppliers, the OEMs could elect to manufacture products
to meet their own requirements or to compete with the Company.
There can be no assurance that the Companys business will
not be adversely affected by increased competition in the
markets in which it operates.
For many of its products, the Companys competitors include
suppliers in other parts of the world that enjoy economic
advantages such as lower labor costs, lower health care costs
and, in some cases, export subsidies
and/or raw
materials subsidies. See also Item 1A. Risk Factors.
10
Employees
As of December 31, 2006, the Company and its consolidated
subsidiaries had approximately 17,400 salaried and hourly
employees (as compared with approximately 17,400 employees at
December 31, 2005), of which approximately 7,000 were
U.S. employees. Included in these 17,400 employees are
approximately 2,600 BERU employees. Approximately 23% of the
Companys U.S. work force is unionized. The hourly
workers at the Companys
non-U.S. operations
are typically unionized. The Company believes its present
relations with employees to be satisfactory.
Raw
Materials
Continuing a trend which began in 2004, several raw materials
used in the Companys products hit record pricing levels,
including steel, copper, resins, nickel and certain alloying
elements. This was due to a host of supply and demand factors.
Despite these challenges, the Company used a variety of tactics
in order to limit the impact of inflationary prices and supply
shortages. The Company formed a global procurement organization
to accelerate: cost reductions, purchases from lower cost
regions, risk mitigation efforts, and collaborative buying
activities. In addition, the Company used long-term contracts,
cost sharing arrangements, design changes, customer buy
programs, and hedging instruments to help control costs. The
Company intends to use similar measures in 2007 and beyond.
For 2007, each of the Companys operating segments believes
that its supplies of raw materials and energy are adequate and
available from multiple sources to support its manufacturing
requirements. Manufacturing operations for each of the
Companys operating segments are dependent upon natural
gas, fuel oil, and electricity.
Environmental
Regulation and Proceedings
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 presently be liable for the cost of
clean-up and
other remedial activities at 35 such sites. 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 large 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.
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 whom 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;
remediation alternatives; estimated legal fees; and other
factors), the Company has established an accrual for indicated
environmental liabilities with a balance at December 31,
2006, of approximately $20 million. Excluding the Crystal
Springs site discussed below for which $10.8 million has
been accrued, the Company has accrued amounts that do not exceed
$3.0 million related to any individual site and management
does not believe that the costs related to any of these other
individual sites will have a material adverse effect on the
Companys results of operations, cash flows or financial
condition. The Company expects to pay out substantially all of
the accrued environmental liability over the next three to five
years.
In connection with the sale of Kuhlman Electric Corporation
(Kuhlman Electric), the Company agreed to indemnify
the buyer and Kuhlman Electric for certain environmental
liabilities, then unknown to the Company, relating to the past
operations of Kuhlman Electric. The liabilities at issue result
from the operations of Kuhlman
11
Electric that pre-date the Companys acquisition of Kuhlman
Electrics parent company, Kuhlman Corporation, in 1999.
During 2000, Kuhlman Electric notified the Company that it
discovered potential environmental contamination at its Crystal
Springs, Mississippi plant while undertaking an expansion of the
plant. The Company is continuing to work with the Mississippi
Department of Environmental Quality and Kuhlman Electric to
investigate and remediate to the extent necessary, if any,
historical contamination at the plant and surrounding area.
Kuhlman Electric and others, including the Company, were sued in
numerous related lawsuits, in which multiple claimants alleged
personal injury and property damage.
The Company and other defendants, including the Companys
subsidiary Kuhlman Corporation, entered into a settlement in
July 2005 regarding approximately 90% of personal injury and
property damage claims relating to the alleged environmental
contamination. In exchange for, among other things, the
dismissal with prejudice of these lawsuits, the defendants
agreed to pay a total sum of up to $39.0 million in
settlement funds. The settlement was paid in three approximately
equal installments. The first two payments of $12.9 million
were made in the third and fourth quarters of 2005 and
$13.0 million was paid in the first quarter of 2006.
The same group of defendants entered into a settlement in
October 2005 regarding approximately 9% of personal injury and
property damage claims relating to the alleged environmental
contamination. In exchange for, among other things, the
dismissal with prejudice of these lawsuits, the defendants
agreed to pay a total sum of up to $5.4 million in
settlement funds. The settlement was paid in two approximately
equal installments in the fourth quarter of 2005 and the first
quarter of 2006. With this settlement, the Company and other
defendants have resolved about 99% of the known personal injury
and property damage claims relating to the alleged environmental
contamination. The cost of this settlement has been recorded in
other income in the Consolidated Statements of Operations.
Available
Information
Through its Internet website (www.borgwarner.com), the Company
makes available, free of charge, its Annual Report on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
all amendments to those reports, and other filings with the
Securities and Exchange Commission, as soon as reasonably
practicable after they are filed or furnished. The Company also
makes the following documents available on its Internet website:
the Audit Committee Charter; the Compensation Committee Charter;
the Corporate Governance Committee Charter; the Companys
Corporate Governance Guidelines; the Companys Code of
Ethical Conduct; and the Companys Code of Ethics for CEO
and Senior Financial Officers. You may also obtain a copy of any
of the foregoing documents, free of charge, if you submit a
written request to Mary Brevard, Vice President, Investor
Relations and Corporate Communications, 3850 Hamlin Road, Auburn
Hills, Michigan 48326.
12
Executive
Officers of the Registrant
Set forth below are the names, ages, positions and certain other
information concerning the executive officers of the Company as
of February 16, 2007.
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position With Company
|
|
Timothy M. Manganello
|
|
|
57
|
|
|
|
Chairman and Chief Executive
Officer
|
|
Robin J. Adams
|
|
|
53
|
|
|
|
Executive Vice President, Chief
Financial Officer and Chief Administrative Officer
|
|
Mary E. Brevard
|
|
|
60
|
|
|
|
Vice President, Investor Relations
and Corporate Communications
|
|
William C. Cline
|
|
|
57
|
|
|
|
Vice President, Acquisition
Coordination
|
|
Angela J. DAversa
|
|
|
60
|
|
|
|
Vice President, Human Resources
|
|
Jamal M. Farhat
|
|
|
47
|
|
|
|
Vice President, Chief Information
Officer
|
|
John J. Gasparovic
|
|
|
49
|
|
|
|
Vice President, General
Counsel & Secretary
|
|
Anthony D. Hensel
|
|
|
48
|
|
|
|
Vice President and Treasurer
|
|
Laurene H. Horiszny
|
|
|
51
|
|
|
|
Chief Compliance
Officer & Assistant Secretary
|
|
Bernd W. Matthes
|
|
|
46
|
|
|
|
Vice President
|
|
John J. McGill
|
|
|
52
|
|
|
|
Vice President, Global Supply Chain
|
|
Cynthia A. Niekamp
|
|
|
47
|
|
|
|
Vice President
|
|
Jeffrey L. Obermayer
|
|
|
51
|
|
|
|
Vice President and Controller
|
|
Mark A. Perlick
|
|
|
60
|
|
|
|
Vice President, Technology
|
|
Christopher H. Vance
|
|
|
47
|
|
|
|
Vice President, Business
Development and M&A
|
|
Alfred Weber
|
|
|
49
|
|
|
|
Vice President
|
|
Roger J. Wood
|
|
|
44
|
|
|
|
Vice President
|
|
Mr. Manganello has been Chairman of the Board since June
2003 and Chief Executive Officer since February 2003. He was
also President and Chief Operating Officer of the Company from
February 2002 until February 2003. He was Executive Vice
President from June 2001 until February 2002. He was Vice
President of the Company from February 1999 to June 2001 and
President and General Manager of BorgWarner TorqTransfer Systems
Inc. (TorqTransfer Systems) from February 1999 until
February 2002.
Mr. Adams has been Executive Vice President, Chief
Financial Officer and Chief Administrative Officer since April
2004 and was elected to the Board of Directors in April 2005. He
was Executive Vice President Finance and Chief
Financial Officer of American Axle & Manufacturing
Holdings Inc. (American Axle) from July 1999 until
April 2004. Prior to joining American Axle, he was Vice
President and Treasurer and principal financial officer of
BorgWarner from May 1993 until June 1999.
Ms. Brevard has been Vice President of the Company since
November 2003. She was Director of Investor Relations and
Communications from February 1997 until November 2003.
Mr. Cline has been Vice President, Acquisition Coordination
since January 2005. He was Acting Chief Financial Officer of the
Company from November 2003 until April 2004 and was Vice
President and Controller of the Company from May 1993 until
December 2004.
Ms. DAversa has been Vice President, Human Resources
of the Company since October, 2004. She was Acting Vice
President, Human Resources from April 2004 until September 2004
and Senior Director, Management and Organization Development
from April 2004 until September 2004. She was Director
Management & Organization Development from January 1995
until March 2004.
Mr. Farhat has been Vice President and Chief Information
Officer of the Company since August 2004. He was Chief
Information Officer and Executive Director of supply chain
management at LDM Technologies, a $600 million Tier I
supplier to the automotive industry, from April 1999 until March
2004.
13
Mr. Gasparovic has been Vice President, General Counsel and
Secretary of the Company since January 2007. After working
as a private investor from January 2004 until January 2005, he
was Senior Vice President and General Counsel of Federal-Mogul
Corporation from February 2005 until December 2006. From
February 2003 until December 2003, he was Executive Vice
President, General Counsel, Corporate Secretary and Chief
Compliance Officer and from May 2000 until January 2003 he was
Vice President , General Counsel (and Secretary since January
2001) of Roadway Corporation.
Mr. Hensel has been Vice President of the Company since
July 2002 and Treasurer since January 2005. He was Vice
President, Business Development of the Company from July 2002
until December 2004. He was Vice President, Finance of
BorgWarner Morse TEC Inc. from July 1999 to June 2002.
Ms. Horiszny has been Chief Compliance Officer and
Assistant Secretary since January 2007. She was
Vice President, General Counsel and Secretary of the
Company from May 1993 until December 2006.
Dr. Matthes has been Vice President of the Company and
President and General Manager of BorgWarner Transmission Systems
Inc. (Transmission Systems) since July 2005. He was
General Manager, Operations Europe for Transmission Systems from
August 2004 to July 2005. He was Vice President
Operations Europe for Transmission Systems from January 2003 to
August 2004. He was Managing Director for Transmission Systems
Europe from December 2002 to January 2003. He was General
Manager,
DualTronic®
from November 2000 to July 2005.
Mr. McGill has been Vice President of the Company since
October 1999 and Vice President, Global Supply Chain since July
2004. He was President and General Manager of TorqTransfer
Systems from December 2002 until July 2004. He was President and
General Manager of BorgWarner Cooling Systems Inc. from October
1999 until December 2002.
Ms. Niekamp has been Vice President of the Company and
President and General Manager of TorqTransfer Systems since July
2004. She was Senior Vice President and Chief Financial Officer
of Mead Westvaco Corporation (Mead) from April 2003
until March 2004. She was Senior Vice President,
Strategy & Specialty Operations of Mead from February
2002 until April 2003. She was President and General Manager of
the Mead Specialty Paper Division from July 1998 until January
2002.
Mr. Obermayer has been Vice President of the Company since
December 1999 and Controller since January 2005. He was Vice
President and Treasurer of the Company from December 1999 until
December 2004.
Mr. Perlick has been Vice President, Technology of the
Company since July 2005. He was Vice President of the Company
and President of Transmission Systems from September 2004 until
June 2005. He was Acting President of Transmission Systems from
November 2003 until August 2004. He was Vice
President Engineering of TorqTransfer Systems from
February 1999 until October 2003 and was Acting President of
TorqTransfer Systems from February 2002 to December 2002.
Mr. Vance has been Vice President Business
Development and M&A since January 2005. He was
Vice President, Finance for Transmission Systems from
January 2000 until December 2004.
Mr. Weber has been Vice President of the Company since July
2002. He has been President and General Manager of BorgWarner
Morse TEC Inc. (Morse TEC) since August 2005 and
BorgWarner Thermal Systems Inc. since January 2003. He was
President and General Manager of BorgWarner Emissions Systems
Inc. from July 2002 until July 2005. He was Vice President,
Passenger Car Operations, BorgWarner Turbo Systems Inc. from
January 1999 to June 2002.
Mr. Wood has been Vice President of the Company since
January 2001 and President of BorgWarner Turbo Systems Inc. and
BorgWarner Emissions Systems Inc. since August 2005. He was
President and General Manager of Morse TEC from January 2001
until July 2005.
14
Our
industry is cyclical and our results of operations will be
adversely affected by industry downturns.
Automotive and truck production and sales are cyclical and
sensitive to general economic conditions and other factors.
Significant reduction in automotive or truck production would
have a material adverse effect on our sales to original
equipment manufacturers and our financial position and operating
results.
We are
dependent on sport-utility vehicle and light-truck market
segments.
Some of our products, in particular four-wheel drive transfer
cases, are currently used exclusively in four-wheel drive
systems for sport-utility vehicles and light-trucks. For 2006
for example, sales of rear-wheel drive transfer cases
represented 10% of our total consolidated revenue. Any
significant reduction in production in this market segment or
loss of business in this market segment would have a material
adverse effect on our sales to original equipment manufacturers
and our financial position and operating results.
We
face strong competition.
We compete worldwide with a number of other manufacturers and
distributors that produce and sell products similar to ours.
Price, quality and technological innovation are the primary
elements of competition. Our competitors include vertically
integrated units of our major original equipment manufacturer
customers, as well as a large number of independent domestic and
international suppliers. We are not as large as a number of
these companies and do not have as many financial or other
resources. The competitive environment has changed dramatically
over the past few years as our traditional U.S. original
equipment manufacturer customers, faced with intense
international competition, have expanded their worldwide
sourcing of components. As a result, we have experienced
competition from suppliers in other parts of the world that
enjoy economic advantages, such as lower labor costs, lower
health care costs and, in some cases, export or raw materials
subsidies. Increased competition could adversely affect our
businesses.
We are
under substantial pressure from original equipment manufacturers
to reduce the prices of our products.
There is substantial and continuing pressure on original
equipment manufacturers to reduce costs, including costs of
products we supply. Although original equipment manufacturers
have indicated that they will continue to rely on outside
suppliers, a number of our major original equipment manufacturer
customers manufacture products for their own uses that directly
compete with our products. These original equipment
manufacturers could elect to manufacture such products for their
own uses in place of the products we currently supply. We
believe that our ability to develop proprietary new products and
to control our costs will allow us to remain competitive.
However, we cannot assure you that we will be able to improve or
maintain our gross margins on product sales to original
equipment manufacturers or that the recent trend by original
equipment manufacturers towards increased outsourcing will
continue.
Annual price reductions to original equipment manufacturer
customers appear to have become a permanent feature of our
business environment. In 2006 and 2005, the combination of price
reductions to customers and cost increases for material, labor
and overhead, totaled approximately $155 million and
$140 million, respectively. To maintain our profit margins,
we seek price reductions from our suppliers, improve production
processes to increase manufacturing efficiency, update product
designs to reduce costs and develop new products the benefits of
which support stable or increased prices. Our ability to pass
through increased raw material costs to our original equipment
manufacturer customers is limited, with cost recovery less than
100% and often on a delayed basis. We cannot assure you that we
will be able to reduce costs in an amount equal to annual price
reductions and increases in raw material costs.
15
We are
sensitive to the effects of our major customers labor
relations.
All three of our primary North American customers, Ford,
DaimlerChrysler and General Motors, have major union contracts
with the United Automobile, Aerospace and Agricultural Implement
Workers of America. Because of domestic original equipment
manufacturers dependence on a single union, we are
affected by labor difficulties and work stoppages at original
equipment manufacturers facilities. Similarly, a majority
of our global customers operations outside of North
America are also represented by various unions. Any extended
work stoppage could have a material adverse effect on our
financial position and operating results.
Part
of our labor force is unionized.
As of December 31, 2006, approximately 23% of our
U.S. employees was unionized. Our two most significant
domestic collective bargaining agreements are for our Muncie,
Indiana plant and our Ithaca, New York plants. The Muncie
agreement expires in April 2009 and the Ithaca agreement expires
in October 2008. The hourly employees at certain of our
international facilities are also unionized. While we believe
that our relations with our employees are satisfactory, a
prolonged dispute with our employees could have a material
adverse effect on our financial position and operating results.
We are
subject to extensive environmental regulations.
Our operations are subject to laws governing, among other
things, emissions to air, discharges to waters and the
generation, handling, storage, transportation, treatment and
disposal of waste and other materials. We believe that our
business, operations and activities have been and are being
operated in compliance in all material respects with applicable
environmental and health and safety laws. However, the operation
of automotive parts manufacturing plants entails risks in these
areas, and we cannot assure you that we will not incur material
costs or liabilities as a result. Furthermore, through various
acquisitions over the years, we have acquired a number of
manufacturing facilities, and we cannot assure you that we will
not incur material costs and liabilities relating to activities
that predate our ownership. In addition, potentially significant
expenditures could be required in order to comply with evolving
environmental and health and safety laws that may be adopted in
the future.
We believe that the overall impact of compliance with
regulations and legislation protecting the environment will not
have a material adverse effect on our future financial position
or operating results, but we cannot assure you that this will
always be the case. Capital expenditures and expenses in 2006
attributable to compliance with environmental laws were not
material.
We
have contingent liabilities related to environmental, product
warranties, regulatory matters, litigation and other
claims.
We and certain of our 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 at various hazardous waste
disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act and equivalent state laws. As a
result, as of December 31, 2006, we may be liable for the
cost of
clean-up and
other remedial activities at 35 of these sites.
We work with outside experts to determine a range of potential
liability for environmental sites. The ranges for each
individual site are then aggregated into a loss range for the
total accrued liability. Managements estimate of the loss
range for 2006 is between $18.1 million and
$29.5 million. We record an accrual at the most probable
amount within the range unless one cannot be determined; in
which case we record the accrual at the low end of the range.
Based on information available to us, we have established an
accrual in our financial statements for indicated environmental
liabilities, with a balance of $20.0 million at
December 31, 2006. We currently expect this amount to be
expended over the next three to five years.
We believe that none of these matters, individually or in the
aggregate, will have a material adverse effect on our future
financial position or operating results, either because
estimates of the maximum potential liability at a
16
site are not large or because liability will be shared with
other potentially responsible parties. However, we cannot assure
you of the ultimate outcome.
We are also party to, or have an obligation to defend a party
to, various legal proceedings, including those described in
Note 15 to the Notes to the Consolidated Financial
Statements in the Companys Annual Report. Although we
believe that none of these matters is likely to have a material
adverse effect on our financial condition or future operating
results, there can be no assurance as to the ultimate outcome of
any such matter or proceeding.
We provide warranties to our customers for some of our products.
Under these warranties, we may be required to bear costs and
expenses for the repair or replacement of these products. We
cannot assure you that costs and expenses associated with these
product warranties will not be material, or that those costs
will not exceed any amounts accrued for such warranties in our
financial statement.
Based upon information available to us, we have established an
accrual in our financial statements for product warranties of
$60.0 million at December 31, 2006.
Our
growth strategy may prove unsuccessful.
We have a stated goal of increasing revenues and operating
revenues at a rate greater than global vehicle production by
increasing content per vehicle with innovative new components
and through select acquisitions. We may not meet our goal
because of any of the following: (a) a significant decrease
in the production of sport-utility vehicles and light-trucks,
high content vehicles for us; (b) the failure to develop
new products which will be purchased by our customers;
(c) technology changes rendering our products obsolete;
(d) a reversal of the trend of supplying systems (which
allows us to increase content per vehicle) instead of
components; and (e) the failure to find suitable
acquisition targets or the failure to integrate operations of
acquired businesses quickly and cost effectively.
We are
subject to risks related to our international
operations.
We have manufacturing and technical facilities in many regions
and countries, including North America, Europe, China, India,
South Korea, Japan, and Brazil and sell our products worldwide.
For 2006, approximately 60% of our sales were outside North
America. Consequently, our results could be affected by changes
in trade, monetary and fiscal policies, trade restrictions or
prohibitions, import or other charges or taxes, and fluctuations
in foreign currency exchange rates, changing economic
conditions, and political instability and disputes. See
Note 20 of the Notes to Consolidated Financial Statements
in the Companys Annual Report.
We may
not realize sales represented by awarded business.
We base our growth projections, in part, on commitments made by
our customers. These commitments generally renew yearly during a
program life cycle. If actual production orders from our
customers do not approximate such commitments, it could have a
material adverse effect on our growth and financial performance.
We are
impacted by the rising cost of providing pension and other post
employment benefits.
The automotive industry, like other industries, continues to be
impacted by the rising cost of providing pension and other post
employment benefits. To partially address this impact, we
adjusted certain retiree medical plans effective April 1,
2006 to provide certain participating retirees with continued
access to group health coverage while reducing our subsidy of
the program. See Note 12 of the Notes to Consolidated
Financial Statements in the Companys Annual Report.
Certain
defined benefit pension plans we sponsor are currently
underfunded.
We sponsor certain defined benefit pension plans worldwide that
are underfunded and will require cash payments. Additionally, if
the performance of the assets in our pension plans does not meet
our expectations, or if
17
other actuarial assumptions are modified, our required
contributions may be higher than we expect. See Note 12 of
the Notes to Consolidated Financial Statements in the
Companys Annual Report.
Negative
or unexpected tax consequences could adversely affect our
results of operations.
Adverse changes in the underlying profitability and financial
outlook of our operations in several jurisdictions could lead to
changes in our valuation allowances against deferred tax assets
and other tax accruals that could materially and adversely
affect our results of operations.
Additionally, we are subject to tax audits by governmental
authorities in the U.S. and numerous
non-U.S. jurisdictions.
Because the results of tax audits are inherently uncertain,
negative or unexpected results from one or more such tax audits
could adversely affect our results of operations.
We
rely on sales to several major customers.
Our worldwide sales in 2006 to Ford Motor Company, Volkswagen,
DaimlerChrysler and General Motors Corporation constituted
approximately 13%, 13%, 11% and 9%, respectively, of our 2006
consolidated sales. These four customers constituted
approximately 46% of our 2006 sales. Credit rating agencies rate
two of these customers below investment grade. The corresponding
percentages of sales to these customers for 2005 were 16%, 13%,
12% and 9%. No other single customer accounted for more that 10%
of our consolidated sales in 2006 or 2005.
Our 2006 consolidated sales do not include the approximately
$676 million of sales made by our unconsolidated joint
ventures. If sales from these unconsolidated joint ventures were
included in 2006 consolidated sales, our worldwide sales to
Toyota Motor Corporation and its affiliates would be
approximately 7% of consolidated sales.
Economic
distress of suppliers could result in disruption of our
operations and have a material effect on our
business.
Some automotive parts suppliers continue to experience commodity
cost pressures and the effects of industry overcapacity. These
factors have increased pressure on the industrys supply
base, as suppliers cope with higher commodity costs, lower
production volumes and other challenges. The Company receives
certain of its raw materials from sole suppliers or a limited
number of suppliers. The inability of a supplier to fulfill
supply requirements of the Company could materially affect
future operating results.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
The Company has received no written comments regarding its
periodic or current reports from the staff of the Securities and
Exchange Commission that were issued 180 days or more
preceding the end of its 2006 fiscal year and that remain
unresolved.
As of December 31, 2006, the Company had 64 manufacturing,
assembly, and technical locations worldwide. In addition to its
15 U.S. manufacturing locations, the Company has 10
locations in Germany, five locations in each of India and Korea,
three locations in each of the United Kingdom, France and China,
two locations in each of Japan, Mexico, Hungary, and Italy, and
one location in each of Brazil, Canada, Ireland, Spain, and
Taiwan. The Company also has several sales offices, warehouses
and technical centers. The Companys worldwide headquarters
are located in a leased facility in Auburn Hills, Michigan. In
2002, the Company completed construction of the BorgWarner
Powertrain Technical Center (the PTC) in Auburn
Hills, Michigan, which serves as a primary research and
development facility and contains many of the administrative
personnel for the Engine and Drivetrain segments. There are
approximately 500 employees located at the PTC. In general, the
Company believes its facilities to be suitable and adequate to
meet its current and reasonably anticipated needs. The majority
of the locations are operating at normal levels based on
capacity.
18
The following is additional information concerning the principal
manufacturing, assembly, and technical facilities operated by
the Company, its subsidiaries, and affiliates.(1)
ENGINE
|
|
|
|
|
Americas:
|
|
Europe:
|
|
Asia:
|
|
Asheville, North Carolina
Auburn Hills, Michigan
Cadillac, Michigan
Campinas, Brazil
Civac-Juitepec, Mexico (2) (3)
Cortland, New York
Dixon, Illinois
Fletcher, North Carolina
Guadalajara, Mexico
Ithaca, New York
Marshall, Michigan
Sallisaw, Oklahoma
Simcoe, Ontario, Canada
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|
Arcore, Italy
Biassano, Italy (2) (3)
Bradford, England
Bretten, Germany (3)
Chazelles, France (3)
Diss, England (3)
Kandel, Germany (50% JV) (2) (3)
Kirchheimbolanden, Germany
La Ferte Mace, France (3)
Ludwigsburg, Germany (3)
Markdorf, Germany
Muggendorf, Germany (3)
Neuhas, Germany (3)
Oroszlany, Hungary
Tiszakecske, Hungary (3)
Tralee, Ireland (3)
Vitoria, Spain (3)
|
|
Aoyama, Japan
Changwon, South Korea (2)
Chennai, India
Chennai, India(JV)
Chungju-City, South Korea (51% JV) (3)
Kakkalur, India (74% JV)
Nabari City, Japan
Ningbo, China (70% JV)
Ningbo, China
Pune, India (JV)
Pyongtaek, South Korea (2)
Shihung-City, South Korea (3)
Tainan Shien, Taiwan
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|
|
|
|
|
DRIVETRAIN
|
|
|
|
|
|
|
|
|
|
Americas:
|
|
Europe:
|
|
Asia:
|
|
Auburn Hills, Michigan
Bellwood, Illinois
Frankfort, Illinois
Livonia, Michigan
Longview, Texas
Muncie, Indiana
Seneca, South Carolina
Water Valley, Mississippi
|
|
Arnstadt, Germany
Heidelberg, Germany
Ketsch, Germany
Margam, Wales
Principality of Monaco
Tulle, France
|
|
Beijing, China (80% JV)
Eumsung, South Korea (60% JV)
Fukuroi City, Japan (50% JV)
Ningbo, China
Ochang, South Korea (2)
Pune, India (60% JV)
Shanghai, China (JV)
Sirsi, India (60% JV)
|
|
|
|
(1) |
|
The table excludes joint ventures owned less than 50% and
administrative offices in Auburn Hills, Michigan USA and
Shanghai, China. |
|
(2) |
|
Indicates a leased facility. |
|
(3) |
|
Indicates a BERU facility. |
|
|
Item 3.
|
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 Companys business or relating
to matters for which the Company may have a contractual
indemnity obligation. See Note 15 of the Notes to
Consolidated Financial Statements in the Companys Annual
Report for a discussion of environmental, asbestos and other
litigation, which is incorporated herein by reference.
A declaratory judgment action was filed by a subsidiary of the
Company, BorgWarner Diversified Transmission Products Inc.
(DTP), in January 2006 in the United Stated District
Court, Southern District of Indiana, Indianapolis Division,
against the United Automobile, Aerospace, and Agricultural
Implements Workers of America, Local No. 287 and Gerald
Poor, individually and as the representative of a defendant
class. DTP is seeking the Courts affirmation that DTP will
not violate the Labor-Management Relations Act or the Employee
Retirement Income Security Act by amending certain
retirees medical plans, effective March 12,
19
2006. DTP believes that it is within its rights to amend the
plan and that it will be successful on the merits of the
lawsuit, although there can be no guarantee of success in any
litigation.
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|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
There were no matters submitted to the Companys security
holders during the fourth quarter of 2006.
PART II
|
|
Item 5.
|
Market
for the Registrants Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
|
The Companys Common Stock is listed for trading on the New
York Stock Exchange under the symbol BWA. As of February 9,
2007, there were 2,651 holders of record of Common Stock.
The Company has increased its dividend during each of the last
four years. During 2004, the Company paid a quarterly dividend
of $0.25 on a pre-split basis. In May 2004, the Company declared
a
two-for-one
stock split, thereby adjusting the quarterly dividend to $0.125.
For the first quarter of 2005, the Company announced an increase
in the cash dividend from $0.125 per share to
$0.14 per share. The Company announced an increase of the
cash dividend from $0.14 per share to $0.16 per share
for the first quarter of 2006. The Company announced an increase
of the cash dividend from $0.16 per share to $0.17 per
share for the first quarter of 2007. While the Company currently
expects that comparable quarterly cash dividends will continue
to be paid in the future, the dividend policy is subject to
review and change at the discretion of the Board of Directors.
High and low sales prices (as reported on the New York Stock
Exchange composite tape) for the Common Stock for each quarter
in 2005 and 2006 were:
|
|
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Quarter Ended
|
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High
|
|
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Low
|
|
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March 31, 2005
|
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$
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54.50
|
|
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$
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48.13
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June 30, 2005
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$
|
56.07
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$
|
44.85
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September 30, 2005
|
|
$
|
61.07
|
|
|
$
|
53.41
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|
December 31, 2005
|
|
$
|
61.73
|
|
|
$
|
53.46
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|
March 31, 2006
|
|
$
|
61.77
|
|
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$
|
53.22
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June 30, 2006
|
|
$
|
67.47
|
|
|
$
|
58.48
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|
September 30, 2006
|
|
$
|
65.35
|
|
|
$
|
50.46
|
|
December 31, 2006
|
|
$
|
61.58
|
|
|
$
|
55.83
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|
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Item 6.
|
Selected
Financial Data
|
The Selected Financial Data for the five years ended
December 31, 2006 with respect to the following line items
in the Companys Annual Report is incorporated herein by
reference and made a part of this report: net sales; net
earnings; net earnings per share; total assets; total debt; and
cash dividend declared per share. See the material incorporated
herein by reference in response to Item 7 of this report
for a discussion of the factors that materially affect the
comparability of the information contained in such data.
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|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The Managements Discussion and Analysis of Financial
Condition and Results of Operations in the Companys Annual
Report to Stockholders is incorporated herein by reference and
made a part of this report.
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Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Information with respect to interest rate risk and foreign
currency exchange risk is contained in Note 11 of the Notes
to Consolidated Financial Statements in the Companys
Annual Report and is incorporated herein by reference.
Information with respect to the levels of indebtedness subject
to interest rate fluctuation is contained
20
in Note 10 of the Notes to Consolidated Financial
Statements of the Companys Annual Report and is
incorporated herein by reference. Information with respect to
the Companys level of business outside the United States
which is subject to foreign currency exchange rate market risk
is contained in Note 20 of the Notes to Consolidated
Financial Statements under the caption Geographic
Information and is incorporated herein by reference.
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Item 8.
|
Financial
Statements and Supplementary Data
|
The Consolidated Financial Statements (including the notes
thereto, except as noted below) of the Company and the
Independent Registered Public Accounting Firms Report as
set forth in the Companys Annual Report are incorporated
herein by reference and made a part of this report. For a list
of financial statements filed as part of this report, see
Item 15, Exhibits and Financial Statement
Schedules beginning on page 25.
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Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
Not applicable.
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|
Item 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
The Company has adopted and maintains disclosure controls and
procedures that are designed to provide reasonable assurance
that information required to be disclosed in the reports filed
under the Exchange Act, such as this
Form 10-K,
is collected, recorded, processed, summarized and reported
within the time periods specified in the rules of the Securities
and Exchange Commission. The Companys disclosure controls
and procedures are also designed to ensure that such information
is accumulated and communicated to management to allow timely
decisions regarding required disclosure. As required under
Exchange Act
Rule 13a-15,
the Companys management, including the Chief Executive
Officer and Chief Financial Officer, has conducted an evaluation
of the effectiveness of disclosure controls and procedures as of
the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures
are effective.
Managements
Report on Internal Control Over Financial Reporting
The Companys management is responsible for establishing
and maintaining adequate internal control over financial
reporting, as defined in Exchange Act
Rule 13a-15(f).
The Companys internal control over financial reporting is
designed to provide reasonable assurance to the Companys
management and Board of Directors regarding the preparation and
fair presentation of published financial statements. Management
conducted an assessment of the Companys internal control
over financial reporting based on the framework and criteria
established by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control Integrated
Framework. Based on the assessment, management concluded that,
as of December 31, 2006, the Companys internal
control over financial reporting is effective based on those
criteria. Managements assessment of the effectiveness of
the Companys internal control over financial reporting as
of December 31, 2006, has been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report below.
The Companys management, including its Chief Executive
Officer and the Chief Financial Officer, does not expect that
the Companys disclosure controls and procedures and its
internal control processes will prevent all error and all fraud.
A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of
a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of
error or fraud, if any, within the Company have been detected.
These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls
21
can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of
the control. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of
changes in conditions, or the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements
due to error or fraud may occur and may not be detected.
However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate,
this risk.
Changes
in Internal Control
There have been no changes in internal controls over the
financial reporting that occurred during the most recent fiscal
quarter that have materially affected, or are reasonably likely
to materially affect our internal controls over financial
reporting.
22
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of BorgWarner Inc.:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control Over
Financial Reporting, that BorgWarner Inc. and Consolidated
Subsidiaries (the Company) maintained effective
internal control over financial reporting as of
December 31, 2006, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel 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. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2006, is fairly stated, in all material
respects, based on the criteria established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
December 31, 2006 of the Company and our report dated
February 16, 2007 expressed an unqualified opinion on those
financial statements and included an explanatory paragraph
regarding the Companys changes in its methods of
accounting in 2006 for employee stock-based compensation as a
result of adopting SFAS No. 123(R), Share Based
Payment, and for defined benefit pension and other post
retirement plans as a result of adopting SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans.
/s/ DELOITTE &
TOUCHE LLP
Detroit, Michigan
February 16, 2007
23
|
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Item 9B.
|
Other
Information
|
Not applicable.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The following information from the Companys Proxy
Statement is incorporated herein by reference and made a part of
this report: Election of Directors;
Information on Nominees for Directors and Continuing
Directors; Board of Directors and Its
Committees; Involvement in Certain Legal
Proceedings; Section 16(a) Beneficial Ownership
Reporting Compliance; and Code of Ethics.
Information with respect to executive officers of the Company is
set forth in Part I of this report.
|
|
Item 11.
|
Executive
Compensation
|
Information with respect to compensation of executive officers
and directors of the Company under the captions Director
Compensation, Executive Compensation,
Compensation Discussion and Analysis, Stock
Options, Long-Term Incentive Plans, and
Change of Control Employment Agreements in the
Companys Proxy Statement is incorporated herein by
reference and made a part of this report.
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|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Information under the captions Security Ownership of
Certain Beneficial Owners and Management and Equity
Compensation Plan Information in the Companys Proxy
Statement is incorporated herein by reference and made a part of
this report.
|
|
Item 13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
None.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Information with respect to the fees and services of our
principal accountant under the caption Principal
Accountant Fees and Services in the Companys Proxy
Statement is incorporated herein by reference and made a part of
this report.
24
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) 1. The following consolidated financial statements of
the Company in the Companys Annual Report are incorporated
herein by reference:
|
|
|
|
|
Independent Registered Public
Accounting Firms Report
|
|
|
|
|
Consolidated Statements of
Operations years ended December 31, 2006, 2005
and 2004
|
|
|
|
|
Consolidated Balance
Sheets December 31, 2006 and 2005
|
|
|
|
|
Consolidated Statements of Cash
Flows years ended December 31, 2006, 2005 and
2004
|
|
|
|
|
Consolidated Statements of
Stockholders Equity and Comprehensive Income
years ended December 31, 2006, 2005 and 2004
|
|
|
|
|
Notes to Consolidated Financial
Statements
|
|
|
|
|
2. Financial Statement Schedules. All financial statement
schedules are omitted because they are not applicable, or the
required information is shown in the financial statements or
notes thereto.
Financial statements of 50% or less-owned companies accounted
for under the equity method of accounting, have been omitted
because the proportionate share of their profit before income
taxes and total assets is less than 20% of the respective
consolidated amounts and investments in such companies are less
than 20% of total consolidated assets for all periods presented.
3. The exhibits filed in response to Item 601 of
Regulation S-K
are listed in the Exhibit Index on
page A-1.
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BORGWARNER INC.
|
|
|
|
By:
|
/s/ Timothy
M. Manganello
|
Timothy M. Manganello
Chairman and Chief Executive Officer
Date: February 16, 2007
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
this 16th day of February, 2007.
|
|
|
|
|
Signature
|
|
Title
|
|
/s/ Timothy
M.
Manganello
Timothy
M. Manganello
|
|
Chairman and Chief Executive
Officer
(Principal Executive Officer)
|
|
|
|
/s/ Robin
J. Adams
Robin
J. Adams
|
|
Executive Vice President, Chief
Financial Officer and
Chief Administrative Officer & Director
(Principal Financial Officer)
|
|
|
|
/s/ Jeffrey
L.
Obermayer
Jeffrey
L. Obermayer
|
|
Vice President and Controller
(Principal Accounting Officer)
|
|
|
|
/s/ Phyllis
O. Bonanno
Phyllis
O. Bonanno
|
|
Director
|
|
|
|
/s/ David
T. Brown
David
T. Brown
|
|
Director
|
|
|
|
/s/ Jere
A. Drummond
Jere
A. Drummond
|
|
Director
|
|
|
|
/s/ Paul
E. Glaske
Paul
E. Glaske
|
|
Director
|
|
|
|
/s/ Alexis
P. Michas
Alexis
P. Michas
|
|
Director
|
|
|
|
/s/ Ernest
J.
Novak, Jr.
Ernest
J. Novak, Jr.
|
|
Director
|
|
|
|
/s/ Richard
O. Schaum
Richard
O. Schaum
|
|
Director
|
|
|
|
/s/ Thomas
T.
Stallkamp
Thomas
T. Stallkamp
|
|
Director
|
26
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*3
|
.1
|
|
Restated Certificate of
Incorporation of the Company (incorporated by reference to
Exhibit No. 3.1 of the Companys Quarterly Report on
Form 10-Q
for the quarter ended September 30, 1993).
|
|
*3
|
.2
|
|
Amended and Restated By-laws of
the Company (incorporated by reference to Exhibit No. 3.2
of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
*3
|
.3
|
|
Certificate of Designation,
Preferences and Rights of Series A Junior Participating
Preferred Stock (incorporated by reference to Exhibit 3.3
of the Companys Annual Report on
Form 10-K
for the year ended December 31, 1999).
|
|
*3
|
.4
|
|
Certificate of Ownership and
Merger Merging BorgWarner Inc. into Borg-Warner Automotive, Inc.
(incorporated by reference to Exhibit 99.1 of the
Companys Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2000).
|
|
*4
|
.1
|
|
Indenture, dated as of
February 15, 1999, between Borg-Warner Automotive, Inc. and
The First National Bank of Chicago (incorporated by reference to
Exhibit No. 4.1 to Amendment No. 1 to Registration
Statement No.
333-66879).
|
|
*4
|
.2
|
|
Indenture, dated as of
September 23, 1999, between Borg-Warner Automotive, Inc.
and Chase Manhattan trust Company, National Association, as
trustee, (incorporated by reference to Exhibit No. 4.1 to the
Companys Report on
Form 8-K
filed October 6, 1999).
|
|
*4
|
.3
|
|
Rights Agreement, dated as of
July 22, 1998, between Borg-Warner Automotive, Inc. and
ChaseMellon Shareholder Services, L.L.C. (incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form 8-A
filed on July 24, 1998).
|
|
*4
|
.4
|
|
First Supplemental Indenture by
and between the registrant and The Bank of New York Trust
Company, N.A., as the indenture trustee (incorporated by
reference to Exhibit 4.1 to the Current Report on
Form 8-K
filed on October 30, 2006).
|
|
*10
|
.1
|
|
Credit Agreement dated as of
July 22, 2004 among BorgWarner Inc., as Borrower, the
Lenders Party Hereto, JPMorgan Chase Bank, Administrative Agent,
Bank of America, N.A. as Syndication Agent and Calyon New York
Branch (incorporated by reference to Exhibit No. 10.1 to
the Companys Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004).
|
|
*10
|
.2
|
|
BorgWarner Inc. 2004 Deferred
Compensation Plan (incorporated by reference to Exhibit
No. 10.2 to the Companys Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004).
|
|
*10
|
.3
|
|
Form of BorgWarner Inc. 2004 Stock
Incentive Plan, Non-Qualified Stock Option Award Agreement
(incorporated by reference to Exhibit No. 99.1 to the
Current Report on
Form 8-K
dated July 27, 2005).
|
|
*10
|
.4
|
|
BorgWarner Inc. Amended and
Restated 2004 Stock Incentive Plan (incorporated by reference to
Appendix B of the Companys Proxy Statement dated
March 23, 2006 for its 2006 Annual Meeting of Stockholders).
|
|
*10
|
.5
|
|
Distribution and Indemnity
Agreement dated January 27, 1993 between Borg-Warner
Automotive, Inc. and Borg-Warner Security Corporation
(incorporated by reference to Exhibit No. 10.2 to
Registration Statement No.
33-64934).
|
|
*10
|
.6
|
|
Tax Sharing Agreement dated
January 27, 1993 between Borg-Warner Automotive, Inc. and
Borg-Warner
Security Corporation (incorporated by reference to Exhibit No.
10.3 to Registration Statement
No. 33-64934).
|
|
*10
|
.7
|
|
Receivables Transfer Agreement
dated as of January 28, 1994 among BWA Receivables
Corporation, ABN AMRO Bank N.V. as Agent and the Program LOC
Provider and Windmill Funding Corporation (incorporated by
reference to Exhibit No. 10.12 to the Companys Annual
Report on
Form 10-K
for the year ended December 31, 1993).
|
|
*10
|
.8
|
|
Second Amended and Restated
Receivables Loan Agreement dated as of December 6, 2004
Among BWA Receivables Corporation, as Borrower, BorgWarner Inc.,
as Collection Agent, ABN AMRO Bank N.V., as Agent, The Banks
from Time to Time Party Hereto, and Windmill Funding Corporation
(incorporated by reference to Exhibit 10.10 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2005).
|
A-1
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.9
|
|
First Amendment dated as of
April 29, 2005 to Second Amended and Restated Receivables
Loan Agreement (incorporated by reference to Exhibit 10.11 of
the Companys Annual Report on
Form 10-K
for the year ended December 31, 2005).
|
|
*10
|
.10
|
|
Second Amendment Dated as of
April 28, 2006 to Second Amended and Restated Receivables
Loan Agreement (incorporated by reference to Exhibit No. 10.1 to
the Companys Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2006).
|
|
*10
|
.11
|
|
Borg-Warner Automotive, Inc.
Management Incentive Bonus Plan dated January 1, 1994
(incorporated by reference to Exhibit 10.18 the
Companys Annual Report on
Form 10-K
for the year ended December 31, 1993).
|
|
*10
|
.12
|
|
Borg-Warner Automotive, Inc.
Retirement Savings Excess Benefit Plan dated January 27,
1993 (incorporated by reference to Exhibit No. 10.20 of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 1993).
|
|
*10
|
.13
|
|
Borg-Warner Automotive, Inc.
Retirement Savings Plan dated January 27, 1993 as further
amended and restated effective as of April 1, 1994
(incorporated by reference to Exhibit 10.18 to the
Companys Annual Report on
Form 10-K
for the year ended December 31, 1995).
|
|
*10
|
.14
|
|
BorgWarner Inc. Board of Directors
Deferred Compensation Plan dated April 18, 1995 and further
amended effective January 1, 2007 (incorporated by
reference to Exhibit No. 10.23 of the Companys Annual
Report on
Form 10-K
for the year ended December 31, 2002).
|
|
*10
|
.15
|
|
Form of Change of Control
Employment Agreement for Executive Officers (incorporated by
reference to Exhibit No. 10.1 to the Companys
Quarterly Report on
Form 10-Q
for the Quarter ended September 30, 1997).
|
|
*10
|
.16
|
|
Assignment of Trademarks and
License Agreement (incorporated by reference to Exhibit
No. 10.0 of the Companys Quarterly Report on
Form 10-Q
for the quarter ended September 30, 1994).
|
|
*10
|
.17
|
|
Amendment to Assignment of
Trademarks and License Agreement (incorporated by reference to
Exhibit No. 10.23 of the Companys
Form 10-K
for the year ended December 31, 1998).
|
|
*10
|
.18
|
|
Borg-Warner Automotive, Inc.
Executive Stock Performance Plan, Revised and Re-approved
February 2, 2000 (incorporated by reference to Appendix B
of the Companys Proxy Statement dated March 22, 2000).
|
|
*10
|
.19
|
|
BorgWarner Inc. 2005 Executive
Incentive Plan (incorporated by reference to Appendix B of the
Companys Proxy Statement dated March 24, 2005).
|
|
*10
|
.20
|
|
Form of BorgWarner Inc. 2004 Stock
Incentive Plan Performance Share Award Agreement (incorporated
by reference to Exhibit 10.1 of Current Report on
Form 8-K
dated February 7, 2005).
|
|
13
|
.1
|
|
Annual Report to Stockholders for
the year ended December 31, 2006 with manually signed
Independent Registered Public Accounting Firms Report.
(The Annual Report, except for those portions which are
expressly incorporated by reference in the
Form 10-K,
is furnished for the information of the Commission and is not
deemed filed as part of the
Form 10-K).
|
|
21
|
.1
|
|
Subsidiaries of the Company.
|
|
23
|
.1
|
|
Independent Registered Public
Accounting Firms Consent.
|
|
31
|
.1
|
|
Rule 13a-14(a)/15d-14(a)
Certification by Chief Executive Officer.
|
|
31
|
.2
|
|
Rule 13a-14(a)/15d-14(a)
Certification by Chief Financial Officer.
|
|
32
|
.1
|
|
Section 1350 Certifications.
|
|
|
|
* |
|
Incorporated by reference. |
|
|
|
Indicates a management contract or compensatory plan or
arrangement required to be filed pursuant to Item 14(c). |
A-2