Financial Analysis

CONTINGENCIES In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, governmental investigations and related proceedings, general liability and other risks. It is not possible to predict with certainty whether the Company will ultimately be successful in any of these commercial and legal matters or what the impact might be. The Company does not believe that adverse outcomes in any of these commercial and legal claims, actions and complaints are reasonably likely to have a material adverse effect on the Companys results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations or cash flows as the ultimate resolutions of these matters are inherently unpredictable. On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (VAT) refunds that PHINIA received or expects to receive from governmental agencies as well as damages and interest. These refunds consisted of VAT paid by the Company in periods prior to or directly related to the Spin-Off that established PHINIA as an independent company. PHINIA responded to the lawsuit and also asserted counterclaims against the Company. On October 15, 2025, the Company entered into a settlement agreement (the Settlement Agreement) with PHINIA, p …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

DEBT The Company had debt outstanding as follows: December 31, (in millions) 2025 2024 Short-term borrowings $ 3 $ 61 Long-term debt 3.375% Senior notes due 03/15/25 334 2.650% Senior notes due 07/01/27 ($1,100 million par value) 1,097 1,095 7.125% Senior notes due 02/15/29 ($121 million par value) 120 120 4.950% Senior notes due 08/15/29 ($500 million par value) 496 495 1.000% Senior notes due 05/19/31 (1,000 million par value) 1,163 1,022 5.400% Senior notes due 08/15/34 ($500 million par value) 494 493 4.375% Senior notes due 03/15/45 ($500 million par value) 495 495 Term loan facilities, finance leases and other 31 46 Total long-term debt 3,896 4,100 Less: current portion 2 337 Long-term debt, net of current portion $ 3,894 $ 3,763 On March 15, 2025, the Companys 3.375% senior notes matured and were repaid in accordance with the terms of the indenture. In August 2024, the Company announced that it had commenced tender offers to purchase for cash certain of the Companys outstanding 3.375% senior notes due in March 2025 (the March 2025 Senior Notes) and the 5.000% senior notes due in October 2025 (the October 2025 Senior Notes). Pursuant to the tender offers, the Company purchased and extinguished $50 million of the March 2025 Senior Notes and $110 million of the October 2025 Senior Notes. On November 1, 2024, the Company redeemed the remaining $343 million outstanding October 2025 Senior Notes at a make-whole redemption price of 101 percent. The tender offers and redemptio …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following table represents a disaggregation of revenue from contracts with customers by Foundational products and eProducts for the years ended December 31, 2025, 2024, and 2023. Year Ended December 31, (in millions) 2025 2024 2023 Foundational products $ 11,746 $ 11,751 $ 12,161 eProducts 2,570 2,335 2,037 Total $ 14,316 $ 14,086 $ 14,198 The following table represents a disaggregation of revenue from contracts with customers by reportable segment and region for the years ended December 31, 2025, 2024, and 2023. Refer to Note 24, Reportable Segments and Related Information of the Consolidated Financial Statements for additional details. Year ended December 31, 2025 ( in millions ) Turbos & Thermal Technologies Drivetrain & Morse Systems PowerDrive Systems Battery & Charging Systems Total North America $ 1,403 $ 2,088 $ 341 $ 202 $ 4,034 Europe 2,844 1,252 683 369 5,148 Asia 1,263 2,295 1,298 2 4,858 Other 259 17 276 Total $ 5,769 $ 5,635 $ 2,322 $ 590 $ 14,316 Year ended December 31, 2024 ( in millions ) Turbos & Thermal Technologies Drivetrain & Morse Systems PowerDrive Systems Battery & Charging Systems Total North America $ 1,432 $ 1,943 $ 310 $ 199 $ 3,884 Europe 2,941 1,273 548 484 5,246 Asia 1,304 2,348 1,050 17 4,719 Other 208 29 237 Total $ 5,885 $ 5,564 $ 1,908 $ 729 $ 14,086 Year ended December 31, 2023 ( in millions ) Turbos & Thermal Technologies Drivetrain & Morse Systems PowerDrive Systems Battery & Charging Systems Total …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

STOCK-BASED COMPENSATION The Company has granted restricted common stock and restricted stock units (collectively, restricted stock) and performance stock units as long-term incentive awards to employees and non-employee directors under the BorgWarner Inc. 2018 Stock Incentive Plan, as amended (2018 Plan) and the BorgWarner Inc. 2023 Stock Incentive Plan (2023 Plan). The Companys Board of Directors adopted the 2023 Plan as a replacement to the 2018 Plan in February 2023, and the Companys stockholders approved the 2023 Plan at the annual meeting of stockholders on April 26, 2023. The 2023 Plan authorizes the issuance of a total of 11.3 million shares and approximately 3.9 million shares were available for future issuance as of December 31, 2025. Restricted Stock: The value of restricted stock is determined by the market value of the Companys common stock at the date of grant. In 2025, restricted stock in the amount of 1.0 million shares were granted to employees and less than 0.1 million shares were granted to non-employee directors. The value of the awards is recognized as compensation expense ratably over the restriction periods, generally two or three years. As of December 31, 2025, there was $30 million of unrecognized compensation expense related to restricted stock that will be recognized over a weighted average period of approximately 1.6 years. Restricted stock compensation expense from continuing operations recorded in the Consolidated Statements of Operations is as f …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

FAIR VALUE MEASUREMENTS ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows: Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC Topic 820: A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business. B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost). C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models). Fair …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

GOODWILL AND OTHER INTANGIBLES Goodwill is the excess of the purchase price over the estimated fair value of identifiable net assets acquired in business combinations. As of December 31, 2025, the Company had four reportable segments and four goodwill reporting units. 2025 Goodwill Analyses During the first quarter of 2025, as a result of the Companys plan to exit the charging business, the Company separately allocated the goodwill from its historical reporting unit of Battery & Charging Systems to the battery systems business and to the charging business on a relative fair value basis. The Company estimated the allocated fair values of the businesses from the historical reporting unit based upon the present value of their anticipated future cash flows. The estimated fair value of the charging business was determined using a cost approach. The Companys determination of fair value involved judgment and the use of estimates and assumptions. During the first quarter of 2025, the relative fair value analysis resulted in an allocation, and subsequent impairment, of $13 million related to the goodwill allocated to the charging business. Refer to Note 2, Acquisitions and Dispositions, to the Consolidated Financial Statements for more information. In conjunction with the goodwill allocation in the first quarter of 2025, the Company performed a quantitative impairment assessment of the Battery & Charging Systems goodwill after the impairment of the charging business goodwill. …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

INCOME TAXES Earnings before income taxes and the provision for income taxes are presented in the following table. Year Ended December 31, (in millions) 2025 2024 2023 Earnings (loss) before income taxes: U.S. 1 $ (177) $ (303) $ (316) Non-U.S. 701 842 1,307 Total $ 524 $ 539 $ 991 Provision for income taxes: Current: Federal 2 $ (1) $ (18) $ (1) State (3) 1 8 Foreign 2 326 284 342 Total current expense 322 267 349 Deferred: Federal (76) (198) (85) State (7) (5) Foreign (50) 47 25 Total deferred benefit (133) (156) (60) Total provision for income taxes $ 189 $ 111 $ 289 __________________________ 1 In 2023, the U.S. loss before income taxes included the realized and unrealized loss on debt and equity securities of $174 million that was primarily related to the Companys investment in Wolfspeed convertible debt securities that was sold during the year. 2 In accordance with ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires withholding tax expense to be reflected in the jurisdiction in which the tax is imposed, the Company reclassified $45 million and $43 million of withholding tax expense for 2024 and 2023, respectively, from U.S. current tax expense to foreign current tax expense. The reconciliation of the tax provision at the U.S. federal statutory rate to income tax expense is presented in the following table. Year Ended December 31, (in millions) 2025 2024 2023 U.S. federal statutory tax rate $ 110 21.0 % $ 114 21.0 % $ 209 21.0 % …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

LEASES AND COMMITMENTS The Companys lease agreements primarily consist of real estate property, such as manufacturing facilities, warehouses and office buildings, in addition to personal property, such as vehicles, manufacturing and information technology equipment. The Company determines whether a contract is or contains a lease at contract inception. The majority of the Companys lease arrangements are comprised of fixed payments, and a limited number of these arrangements include a variable payment component based on certain index fluctuations. As of December 31, 2025, a significant portion of the Companys leases were classified as operating leases. Generally, the Companys operating leases have renewal options that extend the lease terms, and some include options to terminate the agreement or purchase the leased asset. The amortizable life of these assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of being exercised at lease inception. All leases with an initial term of 12 months or less without an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (short-term leases) are not recorded on the Consolidated Balance Sheets, and lease expense is recognized on a straight-line basis over the lease term. The following table presents the lease assets and lease liabilities as of December 31, 2025 and 2024: December 31, (in millions) 2025 2024 Assets Balance Sheet Location Operating …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

New Accounting Pronouncements Recently Adopted Accounting Standards In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Updates (ASU) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. It requires entities to disaggregate information related to the effective tax rate reconciliation and income taxes paid. The standard improves transparency by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. This guidance is effective for annual reporting periods beginning after December 15, 2024. The Company adopted this guidance retrospectively, providing the additional disclosures as required in this report. Refer to Note 7, Income Taxes to the Consolidated Financial Statements for more information. Accounting Standards Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. It requires entities to disclose, in the notes to financial statements, specified information related to certain costs and expenses disaggregated by type. The standard improves transparency by providing more detailed information about the components of costs and expenses that would enable investors to better understand the major components of an entitys income statement by referencing specific disclosures in the notes to financial state …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

RETIREMENT BENEFIT PLANS The Company sponsors various defined contribution savings plans, primarily in the U.S., that allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with plan specified guidelines. Under specified conditions, the Company will make contributions to the plans and/or match a percentage of the employee contributions up to certain limits. Total expense related to the defined contribution plans was $44 million, $46 million and $45 million in the years ended December 31, 2025, 2024 and 2023, respectively. The Company has a number of defined benefit pension plans and other postemployment benefit plans covering eligible salaried and hourly employees and their dependents. The defined pension benefits provided are primarily based on (i) years of service and (ii) average compensation or a monthly retirement benefit amount. The Company provides defined benefit pension plans in Germany, India, Italy, Japan, Mexico, Poland, South Korea, Sweden, Switzerland, Thailand, Turkey, U.K. and the U.S. The other postemployment benefit plans, which provide medical benefits, are unfunded plans. The Companys U.S. and U.K. defined benefit plans are frozen, and no additional service cost is being accrued. All pension and other postemployment benefit plans in the U.S. have been closed to new employees. The measurement date for all plans is December 31. In August 2025, the Company executed an amendment to the plan document of one of the Company …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

RESTRUCTURING The Companys undertakes restructuring activities, as necessary, to execute managements strategy and streamline operations, consolidate and take advantage of available capacity and resources and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Companys business and to relocate operations to best-cost locations. The Companys restructuring expenses consist primarily of employee termination benefits (principally severance and/or other termination benefits) and other costs, which are primarily professional fees and costs related to facility closures and exits. The following table represents restructuring expenses by reportable segment for the years ended December 31, 2025, 2024, and 2023. Refer to Note 24, Reportable Segments and Related Information of the Consolidated Financial Statements for additional details. (in millions) Turbos & Thermal Technologies Drivetrain & Morse Systems PowerDrive Systems Battery & Charging Systems Corporate Total Year ended December 31, 2025 Employee termination benefits $ 44 $ (1) $ 19 $ 11 $ 5 $ 78 Other 5 2 12 4 23 Total restructuring expense $ 49 $ 1 $ 31 $ 15 $ 5 $ 101 Year ended December 31, 2024 Employee termination benefits $ 21 $ 10 $ 10 $ 1 $ 1 $ 43 Other 18 1 12 31 Total restructuring expense $ 39 $ 11 $ 22 $ 1 $ 1 $ 74 Year ended December 31, 2023 Employee termination benefits $ 63 $ 6 $ 1 $ $ $ 70 Other 7 2 9 Total restructuring expense $ 70 $ 8 $ …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

REVENUE FROM CONTRACTS WITH CUSTOMERS The Company manufactures and sells products, primarily to OEMs of light vehicles and, to a lesser extent, to OEMs of commercial vehicles and off-highway vehicles, to certain tier one vehicle systems suppliers and into the aftermarket. The Companys payment terms are based on customary business practices and vary by customer type and products offered. The Company has evaluated the terms of its arrangements and determined that they do not contain significant financing components. Generally, revenue is recognized upon shipment or delivery; however, a limited number of the Companys customer arrangements for its highly customized products with no alternative use provide the Company with the right to payment during the production process. As a result, for these limited arrangements, revenue is recognized as goods are produced and control transfers to the customer using the input cost-to-cost method. The Company recorded a contract asset of $15 million December 31, 2025 and 2024, for these arrangements. These amounts are reflected in Prepayments and other current assets in the Companys Consolidated Balance Sheets. In limited instances, certain customers have provided payments in advance of receiving related products, typically at the onset of an arrangement prior to the beginning of production. These contract liabilities are reflected as Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets. As of December …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"REPORTABLE SEGMENTS AND RELATED INFORMATION The Company discloses segment information under four reportable segments, consistent with the operating segments that are evaluated by management, including the chief operating decision maker (CODM). The Companys CODM is its Chief Executive Officer. The reportable segments are further described below. These segments are strategic business groups, which are managed separately as each represents a specific grouping of related automotive components and systems. Turbos & Thermal Technologies. This segments products include turbochargers, eBoosters, eTurbos, emissions systems, thermal systems, gasoline ignition technology, smart remote actuators, powertrain sensors, cabin heaters, battery heaters and battery cooling systems. Drivetrain & Morse Systems. This segments products include hydraulic controls, friction and mechanical clutch products for automatic transmissions and torque-management products, such as transfer cases for 4-wheel drive (4WD) and all-wheel drive (AWD) applications, electronic limited slip differentials (eLSD), and electric torque vectoring and axle disconnect systems. Additionally, the Drivetrain & Morse Systems products include chain systems and variable camshaft phasing products. PowerDrive Systems. This segments products include power electronics such as inverters, onboard chargers, DC/DC converters and combination boxes, rotating electric machines, fully integrated drive modules (consisting of invert …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following paragraphs briefly describe the Companys significant accounting policies. Basis of presentation Certain prior period amounts have been reclassified to conform to current period presentation. Additionally, in the year ended December 31, 2024, the Company recognized a $19 million increase in Net earnings attributable to BorgWarner Inc. in the Consolidated Statement of Operations for the correction of misstatements related to certain accruals, of which $12 million related to 2023 (the remainder relates to periods prior to 2023). The Company has evaluated the effect of these out-of-period adjustments for the interim and annual reporting periods in 2024, as well as on the previous interim and annual periods in which they should have been recognized, and concluded that these adjustments are not material to any of the periods affected. As discussed in the Introduction above, as a result of the Spin-Off, t he historical results of operations and the financial position of PHINIA for periods prior to the Spin-Off are presented as discontinued operations in these Consolidated Financial Statements. Refer to Note 26, Discontinued Operations, to the Consolidated Financial Statements for more information. The Companys Consolidated Financial Statements reflect the results of acquisitions following the date of the respective acquisition. Refer to Note 2, Acquisitions and Dispositions, to the Consolidated Financial Statements for more in …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing