Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 23, 2020 | |
Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 1-12162 | |
Entity Registrant Name | BORGWARNER INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 13-3404508 | |
Entity Address, Address Line One | 3850 Hamlin Road, | |
Entity Address, City or Town | Auburn Hills, | |
Entity Address, State or Province | MI | |
Entity Address, Postal Zip Code | 48326 | |
City Area Code | 248 | |
Local Phone Number | 754-9200 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 244,518,666 | |
Entity Central Index Key | 0000908255 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Common Stock, par value $0.01 per share | ||
Entity Information | ||
Title of each class | Common Stock, par value $0.01 per share | |
Trading Symbol(s) | BWA | |
Name of each exchange on which registered | NYSE | |
1.800% Senior notes due 11/07/22 (€500 million par value) | Senior Notes | ||
Entity Information | ||
Title of each class | 1.80% Senior Notes due 2022 | |
Trading Symbol(s) | BWA22 | |
Name of each exchange on which registered | NYSE |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 2,121 | $ 832 |
Receivables, net | 1,977 | 1,921 |
Inventories, net | 815 | 807 |
Prepayments and other current assets | 252 | 276 |
Total current assets | 5,165 | 3,836 |
Property, plant and equipment, net | 2,824 | 2,925 |
Investments and other long-term receivables | 305 | 318 |
Goodwill | 1,855 | 1,842 |
Other intangible assets, net | 371 | 402 |
Other non-current assets | 372 | 379 |
Total assets | 10,892 | 9,702 |
LIABILITIES AND EQUITY | ||
Notes payable and other short-term debt | 49 | 286 |
Accounts payable and accrued expenses | 2,127 | 1,977 |
Income taxes payable | 23 | 66 |
Total current liabilities | 2,199 | 2,329 |
Long-term debt | 2,787 | 1,674 |
Other non-current liabilities: | ||
Retirement-related liabilities | 290 | 306 |
Other | 698 | 549 |
Total other non-current liabilities | 988 | 855 |
Common stock | 3 | 3 |
Capital in excess of par value | 1,128 | 1,145 |
Retained earnings | 5,979 | 5,942 |
Accumulated other comprehensive loss | (730) | (727) |
Common stock held in treasury, at cost | (1,623) | (1,657) |
Total BorgWarner Inc. stockholders’ equity | 4,757 | 4,706 |
Noncontrolling interest | 161 | 138 |
Total equity | 4,918 | 4,844 |
Total liabilities and equity | $ 10,892 | $ 9,702 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Net sales | $ 2,534 | $ 2,492 | $ 6,239 | $ 7,609 |
Cost of sales | 2,017 | 1,968 | 5,101 | 6,053 |
Gross profit | 517 | 524 | 1,138 | 1,556 |
Selling, general and administrative expenses | 204 | 230 | 601 | 668 |
Other expense, net | 29 | 18 | 142 | 63 |
Operating income | 284 | 276 | 395 | 825 |
Equity in affiliates’ earnings, net of tax | (3) | (7) | (10) | (25) |
Interest income | (3) | (4) | (8) | (9) |
Interest expense | 20 | 15 | 50 | 43 |
Other postretirement (income) expense | (2) | (1) | (5) | 26 |
Earnings before income taxes and noncontrolling interest | 272 | 273 | 368 | 790 |
Provision for income taxes | 143 | 66 | 186 | 230 |
Net earnings | 129 | 207 | 182 | 560 |
Net earnings attributable to the noncontrolling interest, net of tax | 18 | 13 | 40 | 34 |
Net earnings attributable to BorgWarner Inc. | $ 111 | $ 194 | $ 142 | $ 526 |
Earnings per share - basic (in dollar per share) | $ 0.54 | $ 0.94 | $ 0.69 | $ 2.56 |
Earnings per share - diluted (in dollar per share) | $ 0.53 | $ 0.94 | $ 0.69 | $ 2.54 |
Weighted average shares outstanding: | ||||
Basic (in shares) | 206 | 205.3 | 205.9 | 205.9 |
Diluted (in shares) | 207.3 | 206.3 | 206.7 | 206.8 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | ||
Statement of Comprehensive Income [Abstract] | |||||
Net earnings attributable to BorgWarner Inc. | $ 111 | $ 194 | $ 142 | $ 526 | |
Other comprehensive income (loss) | |||||
Foreign currency translation adjustments | [1] | 49 | (114) | (11) | (136) |
Hedge instruments | [1] | 1 | 1 | 0 | 0 |
Defined benefit postretirement plans | [1] | 7 | 4 | 8 | 31 |
Total other comprehensive income (loss) attributable to BorgWarner Inc. | 57 | (109) | (3) | (105) | |
Comprehensive income attributable to BorgWarner Inc. | [1] | 168 | 85 | 139 | 421 |
Net earnings attributable to the noncontrolling interest, net of tax | 18 | 13 | 40 | 34 | |
Other comprehensive income (loss) attributable to the noncontrolling interest* | [1] | 6 | (5) | 3 | (7) |
Comprehensive income | $ 192 | $ 93 | $ 182 | $ 448 | |
[1] | Net of income taxes. |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
OPERATING | ||
Net earnings | $ 182 | $ 560 |
Adjustments to reconcile net earnings to net cash flows from operations: | ||
Depreciation and amortization | 339 | 324 |
Restructuring expense, net of cash paid | 49 | 14 |
Asset impairments | 26 | 0 |
Stock-based compensation expense | 29 | 30 |
Gain on insurance recovery received for property damage | (9) | 0 |
Deferred income tax provision | 56 | 28 |
Pension settlement loss | 0 | 26 |
Tax reform adjustments to provision for income taxes | 0 | 16 |
Equity in affiliates’ earnings, net of dividends received, and other | (1) | 9 |
Net earnings adjusted for non-cash charges to operations | 671 | 1,007 |
Changes in assets and liabilities: | ||
Receivables | (25) | (76) |
Inventories | 3 | (56) |
Prepayments and other current assets | (4) | (24) |
Accounts payable and accrued expenses | 153 | (18) |
Prepaid taxes and income taxes payable | (2) | 15 |
Other assets and liabilities | 12 | (24) |
Net cash provided by operating activities | 808 | 824 |
INVESTING | ||
Capital expenditures, including tooling outlays | (262) | (346) |
Insurance proceeds received for damage to property, plant and equipment | 23 | 0 |
Capital expenditures for damage to property, plant and equipment | (18) | 0 |
Proceeds from settlement of net investment hedges | 12 | 0 |
Payments for business acquired, net of cash acquired | (2) | (10) |
Payments for investments in equity securities | (2) | (52) |
Proceeds from sale of business, net of cash divested | 0 | 24 |
Proceeds from asset disposals and other, net | 0 | 4 |
Net cash used in investing activities | (249) | (380) |
FINANCING | ||
Net increase in notes payable | 6 | 0 |
Additions to debt | 1,163 | 45 |
Payments for debt issuance costs | (11) | 0 |
Repayments of debt, including current portion | (308) | (54) |
Payments for purchase of treasury stock | 0 | (100) |
Payments for stock-based compensation items | (13) | (15) |
Contributions from noncontrolling interest stockholders | 0 | 4 |
Dividends paid to BorgWarner stockholders | (105) | (105) |
Dividends paid to noncontrolling stockholders | (21) | (23) |
Net cash provided by (used in) financing activities | 711 | (248) |
Effect of exchange rate changes on cash | 19 | (19) |
Net increase in cash and cash equivalents | 1,289 | 177 |
Cash and cash equivalents at beginning of year | 832 | 739 |
Cash and cash equivalents at end of period | 2,121 | 916 |
Cash paid during the period for: | ||
Interest | 53 | 58 |
Income taxes, net of refunds | $ 110 | $ 148 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of BorgWarner Inc. and Consolidated Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flow activity required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair statement of results have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet as of December 31, 2019 was derived from the audited financial statements as of that date. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and accompanying notes, as well as the amounts of revenues and expenses reported during the periods covered by those financial statements and accompanying notes. Actual results could differ from these estimates. A novel strain of COVID-19/coronavirus ("COVID-19") was first identified in Wuhan, China in December 2019 and subsequently declared a pandemic by the World Health Organization on March 11, 2020. To date, COVID-19 has surfaced in nearly all regions around the world and has resulted, at times, in travel restrictions, closing of borders and business slowdowns or shutdowns in affected areas. As a result, COVID-19 has impacted the Company's business globally. Many OEMs temporarily suspended certain manufacturing operations, particularly in North America and Europe, due to market conditions and matters associated with COVID-19. Additionally, as a global manufacturer, during the nine months ended September 30, 2020, the Company responded to shelter-in-place and similar government orders in various locations around the world, including throughout the United States and Europe, which resulted in the temporary closures of or reduced operations at the Company's manufacturing and assembly facilities. Because of the impacts COVID-19 had on the Company's operations, primarily in the second quarter of 2020, the Company assessed certain accounting matters that require consideration of forecasted financial information, including, but not limited to, its allowance for credit losses, the carrying value of the Company's goodwill, intangible assets, and other long-lived assets and valuation allowances on deferred tax assets with the information reasonably available to the Company and the unknown future impacts of COVID-19. As a result of these assessments, there were no impairments or material increases in credit allowances or valuation allowances that impacted the Company's Condensed Consolidated Financial Statements. Although the Company's operations have resumed, there is no guarantee that COVID-19 will not require additional assessments in the future and these assessments would not result in material impacts to the Consolidated Financial Statements in future reporting periods. |
New Accounting Pronouncements
New Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements Recently Adopted Accounting Standards In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-4, "Reference Rate Reform (Topic 848)." It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These optional expedients and exceptions allow a company to choose not to apply certain modification accounting requirements under GAAP to contracts affected by reference rate reform. A company that makes this election would present and account for a modified contract as a continuation of the existing contract. It also enables a company to continue to apply hedge accounting for hedging relationships in which the critical terms change due to rate reform. This guidance was effective March 12, 2020 and provides relief to contract modifications through December 31, 2022. The Company adopted this guidance on March 12, 2020, and there was no impact to the Condensed Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." It requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance (Subtopic 350-40). This guidance was effective for interim and annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and the impact on its Condensed Consolidated Financial Statements was immaterial. In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820) ." It removes disclosure requirements on fair value measurements including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. It also amends and clarifies certain disclosures and adds new disclosure requirements including the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance was effective for interim and annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and there was no impact to the Condensed Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326)." It replaces the current incurred loss impairment method with a new method that reflects expected credit losses. Under this new model an entity would recognize an impairment allowance equal to its current estimate of credit losses on financial assets measured at amortized cost. This guidance was effective for annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and the impact on its Condensed Consolidated Financial Statements was immaterial. Accounting Standards Not Yet Adopted In January 2020, the FASB issued ASU No. 2020-1, " Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) ." It clarifies the interaction among the accounting for equity securities, equity method investments, and certain derivative instruments. Specifically, for the purposes of applying the ASC Topic 321 measurement alternative, a company should consider observable transactions immediately before applying or upon discontinuing the equity method. Additionally, when determining the accounting for certain forward contracts and purchased options entered into to purchase securities, a company should not consider if the underlying securities would be accounted for under the equity method (ASC Topic 323) or fair value option (ASC Topic 825). This guidance is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted. The Company does not expect this guidance to have a material impact on its Condensed Consolidated Financial Statements. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." It removes certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 and improves consistent application of and simplifies GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. The Company is currently evaluating the impact of this guidance on its Condensed Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)." It (i) requires the removal of disclosures that are no longer considered cost beneficial; (ii) clarifies specific requirements of certain disclosures; and (iii) adds new disclosure requirements, including the weighted average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and reasons for significant gains and losses related to changes in the benefit obligation. This guidance is effective for annual periods beginning after December 15, 2020, and early adoption is permitted. The Company does not expect this guidance to have a material impact, and it will include enhanced disclosures in the Consolidated Financial Statements upon adoption. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | Revenue from Contracts with Customers The Company manufactures and sells products, primarily to OEMs of light vehicles and, to a lesser extent, to other OEMs of commercial vehicles, off-highway vehicles, certain tier one vehicle systems suppliers and into the aftermarket. Although the Company may enter into long-term supply arrangements with its major customers, the prices and volumes are not fixed over the life of the arrangements, and a contract does not exist for purposes of applying ASC Topic 606, " Revenue from Contracts with Customers," until volumes are contractually known. Revenue is recognized when performance obligations under the terms of a contract are satisfied, which generally occurs with the transfer of control of the Company's products. For most of the Company's products, transfer of control occurs upon shipment or delivery; however, a limited number of the Company's customer arrangements for 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 $8 million and $10 million at September 30, 2020 and December 31, 2019, respectively, for these arrangements. These amounts are reflected in Prepayments and other current assets in the Company's Condensed Consolidated Balance Sheets. Revenue is measured at the amount of consideration the Company expects to receive in exchange for transferring the goods. The Company has a limited number of arrangements with customers where the price paid by the customer is dependent on the volume of product purchased over the term of the arrangement. In other limited arrangements, the Company will provide a rebate to customers based on the volume of products purchased during the course of the arrangement. The Company estimates the volumes to be sold over the term of the arrangement and recognizes revenue based on the estimated amount of consideration to be received from these arrangements. The Company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 90 days. The Company has evaluated the terms of its arrangements and determined that they do not contain significant financing components. The Company provides warranties on some of its products. Provisions for estimated expenses related to product warranty are made at the time products are sold. Refer to Note 9, "Product Warranty," to the Condensed Consolidated Financial Statements for more information. Shipping and handling fees billed to customers are included in sales, while costs of shipping and handling are included in cost of sales. The Company has elected to apply the accounting policy election available under ASC Topic 606 and accounts for shipping and handling activities as a fulfillment cost. 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 Accounts payable and accrued expenses and Other non-current liabilities in the Condensed Consolidated Balance Sheets and were $12 million and $4 million at September 30, 2020 and $10 million and $12 million at December 31, 2019, respectively. These amounts are reflected as revenue over the term of the arrangement (typically 3 to 7 years) as the underlying products are shipped. The Company continually seeks business development opportunities and at times provides customer incentives for new program awards. The Company evaluates the underlying economics of each amount of consideration payable to a customer to determine the proper accounting by understanding the reasons for the payment, the rights and obligations resulting from the payment, the nature of the promise in the contract, and other relevant facts and circumstances. When the Company determines that the payments are incremental and incurred only if the new business is obtained and expects to recover these amounts from the customer over the term of the new business arrangement, the Company capitalizes these amounts. The Company recognizes a reduction to revenue, when the products that any such payments are related to, are transferred to the customer based on the total amount of products expected to be sold over the term of the arrangement (generally 3 to 7 years). The Company evaluates the amounts capitalized each period end for recoverability, and any amounts that are no longer expected to be recovered over the term of the business arrangement are recognized as a reduction to revenue at that time. The Company had $41 million and $37 million recorded in Prepayments and other current assets in the Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019, respectively. The Company had $164 million and $180 million recorded in Other non-current assets in the Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019, respectively. The Company's business is comprised of two reporting segments: Engine and Drivetrain. Refer to Note 20, "Reporting Segments," to the Condensed Consolidated Financial Statements for more information. The following table represents a disaggregation of revenue from contracts with customers by segment and region: Three Months Ended September 30, 2020 2019 (In millions) Engine Drivetrain Total Engine Drivetrain Total North America $ 384 $ 456 $ 840 $ 397 $ 456 $ 853 Europe 658 186 844 716 203 919 Asia 391 429 820 357 324 681 Other 26 4 30 30 9 39 Total $ 1,459 $ 1,075 $ 2,534 $ 1,500 $ 992 $ 2,492 Nine Months Ended September 30, 2020 2019 (In millions) Engine Drivetrain Total Engine Drivetrain Total North America $ 938 $ 1,069 $ 2,007 $ 1,216 $ 1,362 $ 2,578 Europe 1,707 467 2,174 2,277 641 2,918 Asia 988 995 1,983 1,053 944 1,997 Other 64 11 75 91 25 116 Total $ 3,697 $ 2,542 $ 6,239 $ 4,637 $ 2,972 $ 7,609 |
Research and Development Expend
Research and Development Expenditures | 9 Months Ended |
Sep. 30, 2020 | |
Research and Development [Abstract] | |
Research and Development Expenditures | Research and Development Expenditures The Company's net Research & Development ("R&D") expenditures are included in Selling, general and administrative expenses of the Condensed Consolidated Statements of Operations. Customer reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost. Customer reimbursements for prototypes are recorded net of prototype costs based on customer contracts, typically either when the prototype is shipped or when it is accepted by the customer. Customer reimbursements for engineering services are recorded when performance obligations are satisfied in accordance with the contract. Financial risks and rewards transfer upon shipment, acceptance of a prototype component by the customer or upon completion of the performance obligation, as stated in the respective customer agreement. The Company has contracts with several customers at the Company's various R&D locations. None of the Company's R&D-related customer reimbursements under these contracts exceeded 5% of net R&D expenditures in any of the periods presented. The following table presents the Company’s gross and net expenditures on R&D activities: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Gross R&D expenditures $ 115 $ 123 $ 336 $ 372 Customer reimbursements (15) (21) (39) (53) Net R&D expenditures $ 100 $ 102 $ 297 $ 319 |
Other Expense, Net
Other Expense, Net | 9 Months Ended |
Sep. 30, 2020 | |
Other Income and Expenses [Abstract] | |
Other Expense, Net | Other Expense, Net Items included in Other expense, net consist of: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Restructuring expense $ 20 $ 14 $ 72 $ 41 Merger, acquisition and divestiture expense 16 4 58 10 Asset impairments — — 26 — Net gain on insurance recovery for property damage (3) — (9) — Unfavorable arbitration loss — — — 14 Other income, net (4) — (5) (2) Other expense, net $ 29 $ 18 $ 142 $ 63 Restructuring expense: During the three and nine months ended September 30, 2020, the Company recorded restructuring expense of $20 million and $72 million, respectively, primarily related to actions to reduce structural costs. During the three and nine months ended September 30, 2019, the Company recorded restructuring expense of $14 million and $41 million, respectively. This restructuring expense primarily related to Drivetrain and Engine segment actions designed to improve future profitability and competitiveness. Refer to Note 18, "Restructuring," to the Condensed Consolidated Financial Statements for more information. Merger, acquisition and divestiture expense: During the three and nine months ended September 30, 2020, the Company recorded merger, acquisition and divestiture expense of $16 million and $58 million, respectively, primarily related to professional fees associated with the Company's acquisition of Delphi Technologies PLC ("Delphi Technologies") completed on October 1, 2020. During the three and nine months ended September 30, 2019, the Company recorded merger, acquisition and divestiture expense of $4 million and $10 million, respectively, primarily professional fees related to its review of strategic acquisition targets, including its 20% equity interest in Romeo Systems, Inc. ("Romeo") and divestiture activities for non-core pipe and thermostat product lines. Asset impairments: During the nine months ended September 30, 2020, the Company recorded asset impairment charges of $26 million. In the first quarter of 2020, the Company recorded a $9 million charge to reduce its investment in Romeo to the estimated fair value of $41 million. Refer to Note 21, "Recent Transactions and Events," to the Condensed Consolidated Financial Statements for more information. The remaining asset impairment charges of $9 million in the Engine segment and $8 million in the Drivetrain segment, related to the write down of property, plant and equipment associated with the announced closures of two European facilities. Net gain on insurance recovery: On April 13, 2020, a tornado struck the Company's facility in Seneca, South Carolina (the "Seneca Plant") causing damage to the Company's assets. The Seneca Plant, which is one of the Company's largest Drivetrain plants, was not in operation at the time. The Company expects its insurance policies to cover the full repair or replacement of the Company's assets that incurred loss or damage. During the three and nine months ended September 30, 2020, the Company recorded a net gain of $3 million and $9 million, respectively, from insurance recovery proceeds, which primarily represents the amount received for replacement cost in excess of carrying value (net of deductible expense of $1 million). In addition, all clean-up and repair costs incurred through September 30, 2020 have been fully recovered through these insurance proceeds. As of September 30, 2020, the Company had received a total of $110 million in cash proceeds from insurance carriers related to this event, substantially all of which have been applied to losses and expenses associated with clean-up and repair costs and capital expenditures. The Company expects its insurance policies to provide coverage for interruption to its business and reimbursement for other expenses and costs that will be incurred relating to the damages and losses sustained. Unfavorable arbitration loss: During the nine months ended September 30, 2019, the Company recorded $14 million of expense related to the receipt of a final unfavorable arbitration decision associated with the resolution of a matter related to a previous acquisition. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company's provision for income taxes is based upon an estimated annual tax rate for the year applied to federal, state and foreign income. On a quarterly basis, the annual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter. The Company's effective tax rate for the nine months ended September 30, 2020 was 50.5%. This rate was unfavorably impacted by $51 million of additional income tax expense in the quarter ended The Company's effective tax rate for the nine months ended September 30, 2019 was 29.2%. This rate includes reductions of income tax expense of $11 million related to restructuring expense, $6 million related to other postretirement expense, and $13 million for other reductions to income tax expense. This rate also includes an increase in income tax expense of $22 million due to the U.S. Department of the Treasury's issuance of the final regulations during the first three months of 2019 related to the calculation of the one-time transition tax associated with the Tax Cuts and Jobs Act of 2017. The annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates which differ from those in the U.S., U.S. taxes on foreign earnings, the realization of certain business tax credits, including foreign tax credits, and favorable permanent differences between book and tax treatment for certain items, including equity in affiliates' earnings. Deferred tax liabilities, which are reflected in Other non-current liabilities in the Condensed Consolidated Balance Sheets, increased from $125 million at December 31, 2019 to $174 million at |
Inventories, Net
Inventories, Net | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Inventories, Net Certain U.S. inventories are measured by the last-in, first-out (“LIFO”) method at the lower of cost or market, while other U.S. and foreign operations use the first-in, first-out (“FIFO”) or average-cost methods at the lower of cost and net realizable value. Inventories, net consisted of the following: September 30, December 31, (in millions) 2020 2019 Raw material and supplies $ 529 $ 502 Work in progress 115 113 Finished goods 186 207 FIFO inventories 830 822 LIFO reserve (15) (15) Inventories, net $ 815 $ 807 |
Property, Plant and Equipment,
Property, Plant and Equipment, net | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, net | Property, Plant and Equipment, Net September 30, December 31, (in millions) 2020 2019 Land, land use rights and buildings $ 905 $ 860 Machinery and equipment 3,197 2,971 Construction in progress 291 360 Finance lease assets — 1 Total property, plant and equipment, gross 4,393 4,192 Less: accumulated depreciation (1,800) (1,513) Property, plant and equipment, net, excluding tooling 2,593 2,679 Tooling, net of amortization 231 246 Property, plant and equipment, net $ 2,824 $ 2,925 As of September 30, 2020 and December 31, 2019, accounts payable of $39 million and $102 million, respectively, were related to property, plant and equipment purchases. Interest costs capitalized for the nine months ended September 30, 2020 and 2019 were $6 million and $13 million, respectively. |
Product Warranty
Product Warranty | 9 Months Ended |
Sep. 30, 2020 | |
Product Warranties Disclosures [Abstract] | |
Product Warranty | Product WarrantyThe Company provides warranties on some, but not all, of its products. The warranty terms are typically from one The following table summarizes the activity in the product warranty accrual accounts: (in millions) 2020 2019 Beginning balance, January 1 $ 116 $ 103 Provisions for current period sales 36 36 Adjustments of prior estimates 14 9 Payments (41) (43) Translation adjustment 2 (4) Ending balance, September 30 $ 127 $ 101 The product warranty liability is classified in the Condensed Consolidated Balance Sheets as follows: September 30, December 31, (in millions) 2020 2019 Accounts payable and accrued expenses $ 73 $ 63 Other non-current liabilities 54 53 Total product warranty liability $ 127 $ 116 |
Notes Payable and Long-Term Deb
Notes Payable and Long-Term Debt | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable and Long-Term Debt | Notes Payable and Long-Term Debt As of September 30, 2020 and December 31, 2019, the Company had short-term and long-term debt outstanding as follows: September 30, December 31, (in millions) 2020 2019 Short-term debt Short-term borrowings $ 47 $ 34 Long-term debt 4.625% Senior notes due 09/15/20 ($250 million par value) — 251 1.800% Senior notes due 11/07/22 (€500 million par value) 584 558 3.375% Senior notes due 03/15/25 ($500 million par value) 497 497 2.650% Senior notes due 07/01/27 ($1,100 million par value) 1,088 — 7.125% Senior notes due 02/15/29 ($121 million par value) 119 119 4.375% Senior notes due 03/15/45 ($500 million par value) 494 494 Term loan facilities and other 7 7 Total long-term debt 2,789 1,926 Less: current portion 2 252 Long-term debt, net of current portion $ 2,787 $ 1,674 The Company may utilize uncommitted lines of credit for short-term working capital requirements. As of September 30, 2020 and December 31, 2019, the Company had $47 million and $34 million, respectively, in borrowings under these facilities, which are classified in Notes payable and short-term debt on the Condensed Consolidated Balance Sheets. The weighted average interest rate on short-term borrowings outstanding as of September 30, 2020 and December 31, 2019 was 2.2% and 2.5%, respectively. The weighted average interest rate on all borrowings outstanding, including the effects of outstanding swaps, as of September 30, 2020 and December 31, 2019 was 2.3% and 2.8%. On June 19, 2020, in anticipation of the acquisition of Delphi Technologies and to refinance the Company's $250 million 4.625% senior notes due in September 2020, the Company issued $1.1 billion in 2.650% senior notes due July 2027. Interest is payable semi-annually in arrears on January 1 and July 1 of each year. These senior notes are not guaranteed by any of the Company’s subsidiaries. On April 29, 2020, the Company entered into a $750 million delayed-draw term loan which was subsequently cancelled on June 19, 2020 in accordance with its terms, following the Company's issuance of the $1.1 billion in 2.650% senior notes. On March 13, 2020, the Company amended its multi-currency revolving credit facility by increasing the size of the facility from $1.2 billion to $1.5 billion and by extending the maturity until March 13, 2025. The multi-currency revolving credit agreement automatically increased to $2.0 billion upon the closing of the acquisition of Delphi Technologies on October 1, 2020. Additionally, the agreement allows the Company the ability to increase the facility by $1.0 billion with bank group approval. The credit agreement contains customary events of default and one key financial covenant, which is a debt to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") ratio. The Company was in compliance with the financial covenant at September 30, 2020. At September 30, 2020 and December 31, 2019, the Company h ad no outstanding borrowings under this facility. The Company's commercial paper program allows the Company to issue up to $1.5 billion of short-term, unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. The commercial paper program automatically increased to $2.0 billion upon the closing of the acquisition of Delphi Technologies on October 1, 2020. Under this program, the Company may issue notes from time to time and use the proceeds for general corporate purposes. The Company had no outstanding borrowings under this program as of September 30, 2020 and December 31, 2019. As of September 30, 2020 and December 31, 2019, the estimated fair values of the Company’s senior unsecured notes totaled $3,027 million and $2,025 million, respectively. The estimated fair values were $245 million higher than their carrying value at September 30, 2020 and $106 million higher than their carrying value at December 31, 2019. Fair market values of the senior unsecured notes are developed using observable values for similar debt instruments, which are considered Level 2 inputs as defined by ASC Topic 820. The carrying values of the Company's multi-currency revolving credit facility and commercial paper program approximates fair value. The fair value estimates do not necessarily reflect the values the Company could realize in the current markets. The Company had outstanding letters of credit of $32 million and $28 million at September 30, 2020 and December 31, 2019, respectively. The letters of credit typically act as guarantees of payment to certain third parties in accordance with specified terms and conditions. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 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 for 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). The following tables classify assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019: Basis of fair value measurements (in millions) Balance at Quoted prices in active markets for identical items Significant other observable inputs Significant unobservable inputs Valuation technique Assets: Foreign currency contracts $ 5 $ — $ 5 $ — A Net investment hedge contracts $ 2 $ — $ 2 $ — A Liabilities: Foreign currency contracts $ 5 $ — $ 5 $ — A Net investment hedge contracts $ 79 $ — $ 79 $ — A Basis of fair value measurements (in millions) Balance at Quoted prices in active markets for identical items Significant other observable inputs Significant unobservable inputs Valuation Assets: Net investment hedge contracts $ 3 $ — $ 3 $ — A Liabilities: Foreign currency contracts $ 1 $ — $ 1 $ — A Net investment hedge contracts $ 8 $ — $ 8 $ — A |
Financial Instruments
Financial Instruments | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial Instruments | Financial InstrumentsThe Company’s financial instruments typically include cash and cash equivalents, marketable securities and accounts receivable. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may also include long-term debt, interest rate and cross-currency swaps and options, commodity derivative contracts and foreign currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. At September 30, 2020 and December 31, 2019, the Company had no derivative contracts that contained credit risk-related contingent features. The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and component purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. At September 30, 2020 and December 31, 2019, the following commodity derivative contracts were outstanding: Commodity derivative contracts Commodity Volume hedged September 30, 2020 Volume hedged December 31, 2019 Units of measure Duration Copper 47 203 Metric Tons Dec - 20 The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company selectively uses interest rate swaps and options to reduce market value risk associated with changes in interest rates (fair value hedges and cash flow hedges). At September 30, 2020 and December 31, 2019, the Company had no outstanding interest rate swaps. The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. In addition, the Company uses foreign currency forward contracts and cross-currency swaps to hedge exposure associated with its net investment in certain foreign operations (net investment hedges). The Company has also designated its Euro-denominated debt as a net investment hedge of the Company's investment in European subsidiaries. Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units’ local currency. At September 30, 2020 and December 31, 2019, the following foreign currency derivative contracts were outstanding: Foreign currency derivatives (in millions) Functional currency Traded currency Notional in traded currency Notional in traded currency Ending Duration Brazilian real Euro 1 1 Jan - 21 Brazilian real US dollar 3 — Jan - 21 British pound Euro 11 9 Mar - 21 British pound US dollar — 4 Mar - 20 Chinese renminbi US dollar 51 2 Jul - 21 Euro British pound 1 — Jan - 21 Euro Chinese renminbi 1 — Oct - 20 Euro Hungarian forint 744 — Jan - 21 Euro Japanese yen 85 383 Dec - 20 Euro Polish zloty 125 — Dec - 20 Euro US dollar 3 18 Dec - 20 Indian rupee Japanese yen 32 — Oct - 20 Indian rupee US dollar 2 — Oct - 20 Japanese yen Korean won 1,255 — Dec - 20 Japanese yen US dollar 1 — Dec - 20 Korean won Euro 3 13 Dec - 20 Korean won Japanese yen 169 409 Dec - 20 Korean won US dollar 15 4 Dec - 20 Swedish krona Euro — 3 Jan - 20 Thai baht US dollar 1 — Dec - 20 US dollar Euro 79 14 Dec - 20 US dollar Japanese yen 500 — Oct - 20 US dollar Korean won 15,000 — Apr - 21 US dollar Mexican peso 188 — Mar - 21 The Company selectively uses cross-currency swaps and certain foreign currency-denominated debt to hedge the foreign currency exposure associated with its net investment in certain foreign operations (net investment hedges). At September 30, 2020 and December 31, 2019, the following cross-currency swap contracts were outstanding: Cross-Currency Swaps (in millions) September 30, 2020 December 31, 2019 Duration US dollar to Euro: Fixed receiving notional $ 1,100 $ — Jul - 27 Fixed paying notional € 976 € — Jul - 27 US dollar to Euro: Fixed receiving notional $ 500 $ 500 Mar - 25 Fixed paying notional € 450 € 450 Mar - 25 US dollar to Japanese yen: Fixed receiving notional $ 100 $ 100 Feb - 23 Fixed paying notional ¥ 10,978 ¥ 10,978 Feb - 23 At September 30, 2020 and December 31, 2019, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815: (in millions) Assets Liabilities Derivatives designated as hedging instruments Under 815: Location September 30, 2020 December 31, 2019 Location September 30, 2020 December 31, 2019 Foreign currency Prepayments and other current assets $ 1 $ — Accounts payable and accrued expenses $ 2 $ 1 Net investment hedges Other non-current assets $ 2 $ 3 Other non-current liabilities $ 79 $ 8 Derivatives not designated as hedging instruments Foreign currency Prepayments and other current assets $ 4 $ — Accounts payable and accrued expenses $ 3 $ — Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into Accumulated other comprehensive (income) loss ("AOCI") and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. The initial value of any component excluded from the assessment of effectiveness will be recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method will be recognized in AOCI. Effectiveness for net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into foreign currency translation adjustments and only released when the subsidiary being hedged is sold or substantially liquidated. The initial value of any component excluded from the assessment of effectiveness will be recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method will be recognized in AOCI. The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at September 30, 2020 market rates. (in millions) Deferred gain (loss) in AOCI at Gain (loss) expected to be reclassified to income in one year or less Contract Type September 30, 2020 December 31, 2019 Foreign currency $ (1) $ — $ (1) Net investment hedges: Foreign currency 6 5 — Cross-currency swaps (55) 16 — Foreign currency-denominated debt (43) (17) — Total $ (93) $ 4 $ (1) Derivative instruments designated as cash flow hedge instruments as defined by ASC Topic 815 held during the period resulted in the following gains and losses recorded in income: Three Months Ended September 30, 2020 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income (loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 2,534 $ 2,017 $ 204 $ 57 Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ 1 Gain (loss) reclassified from AOCI to income $ — $ — $ — Nine Months Ended September 30, 2020 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income(loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 6,239 $ 5,101 $ 601 $ (3) Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ (1) Gain (loss) reclassified from AOCI to income $ — $ — $ (1) Three Months Ended September 30, 2019 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income (loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 2,492 $ 1,968 $ 230 $ (109) Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ — Gain (loss) reclassified from AOCI to income $ (2) $ — $ 1 Nine Months Ended September 30, 2019 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income(loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 7,609 $ 6,053 $ 668 $ (105) Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ (1) Gain (loss) reclassified from AOCI to income $ (4) $ 1 $ 2 The gains or losses recorded in income related to components excluded from the assessment of effectiveness for derivative instruments designated as cash flow hedges were immaterial for the periods presented. Gains and (losses) on derivative instruments designated as net investment hedges were recognized in other comprehensive income (loss) during the periods presented below. (in millions) Three Months Ended Nine Months Ended Net investment hedges 2020 2019 2020 2019 Foreign currency $ — $ 2 $ 1 $ 2 Cross-currency swaps $ (89) $ 11 $ (71) $ 16 Foreign currency-denominated debt $ (24) $ 23 $ (26) $ 28 Derivatives designated as net investment hedge instruments as defined by ASC Topic 815 held during the period resulted in the following gains recorded in Interest expense and finance charges on components excluded from the assessment of effectiveness: (in millions) Three Months Ended Nine Months Ended Net investment hedges 2020 2019 2020 2019 Cross-currency swaps $ 6 $ 3 $ 13 $ 8 There were no gains or losses recorded in income related to components excluded from the assessment of effectiveness for foreign currency-denominated debt designated as net investment hedges. There were no gains and losses reclassified from AOCI for net investment hedges during the periods presented. Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of monetary assets and liabilities denominated in currencies other than the operating units' functional currency. These derivatives resulted in the following gains and (losses) recorded in income: (in millions) Three Months Ended Nine Months Ended Contract Type Location 2020 2019 2020 2019 Foreign Currency Selling, general and administrative expenses $ (1) $ — $ 2 $ (3) |
Retirement Benefit Plans
Retirement Benefit Plans | 9 Months Ended |
Sep. 30, 2020 | |
Retirement Benefits [Abstract] | |
Retirement Benefit Plans | Retirement Benefit Plans The Company has a number of defined benefit pension plans and other postretirement benefit plans covering eligible salaried and hourly employees and their dependents. The estimated contributions to the Company's defined benefit pension plans for 2020 range from $15 million to $25 million, of which $15 million has been contributed through the first nine months of the year. The other postretirement benefit plans, which provide medical and life insurance benefits, are funded on a pay-as-you-go basis. During the nine months ended September 30, 2019 , the Company settled approximately $50 million of its U.S. pension projected benefit obligation by liquidating approximately $50 million in plan assets through a lump-sum disbursement made to an insurance company. Pursuant to this agreement, the insurance company has unconditionally and irrevocably guaranteed all future payments to certain participants that were receiving payments from the U.S. pension plan. The insurance company has assumed all investment risk associated with the assets that were delivered as part of this transaction. Additionally, during the nine months ended September 30, 2019, the Company discharged certain U.S. pension plan obligations by making lump-sum payments of $13 million to former employees of the Company. As a result, the Company settled $63 million of U.S. pension projected benefit obligation by liquidating pension plan assets and recorded a non-cash settlement loss of $26 million related to the accelerated recognition of unamortized losses. The components of net periodic benefit cost recorded in the Condensed Consolidated Statements of Operations are as follows: Pension benefits Other postretirement (in millions) 2020 2019 Three Months Ended September 30, US Non-US US Non-US 2020 2019 Service cost $ — $ 5 $ — $ 5 $ — $ — Interest cost 1 2 2 3 — — Expected return on plan assets (2) (6) (3) (6) — — Amortization of unrecognized prior service credit (1) — (1) — (1) (1) Amortization of unrecognized loss 1 3 2 2 1 1 Net periodic benefit cost $ (1) $ 4 $ — $ 4 $ — $ — Pension benefits Other postretirement (in millions) 2020 2019 Nine Months Ended September 30, US Non-US US Non-US 2020 2019 Service cost $ — $ 15 $ — $ 14 $ — $ — Interest cost 4 7 7 9 1 2 Expected return on plan assets (7) (18) (9) (17) — — Settlement loss — — 26 — — — Amortization of unrecognized prior service credit (1) — (1) — (2) (3) Amortization of unrecognized loss 2 8 4 7 1 1 Net periodic benefit (income) cost $ (2) $ 12 $ 27 $ 13 $ — $ — The components of net periodic benefit (income) cost other than the service cost component are included in Other postretirement (income) expense in the Condensed Consolidated Statements of Operations. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company has granted restricted common stock and restricted stock units (collectively, "restricted stock") and performance share units as long-term incentive awards to employees and non-employee directors under the BorgWarner Inc. 2014 Stock Incentive Plan, as amended ("2014 Plan") and the BorgWarner Inc. 2018 Stock Incentive Plan ("2018 Plan"). The Company's Board of Directors adopted the 2018 Plan as a replacement to the 2014 Plan in February 2018, and the Company's stockholders approved the 2018 Plan at the annual meeting of stockholders on April 25, 2018. After stockholders approved the 2018 Plan, the Company could no longer make grants under the 2014 Plan. The shares that were available for issuance under the 2014 Plan were cancelled upon approval of the 2018 Plan. The 2018 Plan authorizes the issuance of a total of 7 million shares , of which approximately 5 million shares were available for future issuance as of September 30, 2020. Restricted stock: During the first nine months of 2020, the Company granted shares of restricted stock of 775,705 and 30,674 to employees and non-employee directors, respectively. Restricted stock granted to employees generally vests 50% after two years and the remainder after three years. Restricted stock granted to non-employee directors generally vests on the first anniversary of the grant date. The Company recognizes the value of the restricted stock, which is equal to the market value of the Company’s common stock on the date of grant, as compensation expense ratably over the restricted stock's vesting period. As of September 30, 2020, the Company had $38 million of unrecognized compensation expense that will be recognized over a weighted average period of 1.3 years. The Company recorded restricted stock compensation expense of $7 million and $8 million for the three months ended September 30, 2020 and 2019, respectively, and $22 million for the nine months ended September 30, 2020 and 2019. A summary of the Company’s nonvested restricted stock for the nine months ended September 30, 2020 is as follows: Shares subject to restriction Weighted average grant date fair value Nonvested at December 31, 2019 1,664 $ 44.26 Granted 766 $ 34.05 Vested (466) $ 46.00 Forfeited (9) $ 42.23 Nonvested at March 31, 2020 1,955 $ 39.87 Granted 31 $ 29.67 Vested (75) $ 41.19 Forfeited (24) $ 40.49 Nonvested at June 30, 2020 1,887 $ 39.65 Granted 9 $ 37.77 Vested (9) $ 38.68 Forfeited (33) $ 39.80 Nonvested at September 30, 2020 1,854 $ 39.64 Performance share units: The Company grants performance share units to members of senior management that vest at the end of three-year periods based the following metrics: • Total Stockholder Return Units: based on the Company's total stockholder return relative to a peer group of companies. • Relative Revenue Growth Units: based on the Company's revenue growth relative to the vehicle market. • Adjusted Earnings Per Share Units: introduced in the first quarter of 2020, this performance metric is based on the Company’s earnings per share adjusted for certain one-time items and non-operating gains and losses against a 3-year defined target. A summary of the status of the Company’s nonvested performance share units for the three and nine months ended September 30, 2020 is as follows: Total Stockholder Return Relative Revenue Growth Adjusted Earnings Per Share Number of shares (thousands) Weighted average grant date fair value Number of shares (thousands) Weighted average grant date fair value Number of shares (thousands) Weighted average grant date fair value Nonvested at December 31, 2019 240 $ 64.61 240 $ 48.52 — $ — Granted 142 $ 28.55 142 $ 34.11 115 $ 34.11 Nonvested at March 31, 2020 382 $ 48.02 382 $ 41.54 115 $ 34.11 Forfeited (8) $ 50.17 (8) $ 42.35 (3) $ 34.11 Nonvested at June 30, 2020 374 $ 47.97 374 $ 41.52 112 $ 34.11 Granted 2 $ 28.55 2 $ 37.77 2 $ 37.77 Forfeited (5) $ 73.11 (5) $ 52.64 — $ — Nonvested at September 30, 2020 371 $ 47.60 371 $ 41.35 114 $ 34.16 The Company recorded compensation expense for performance share units in the periods presented below: Three Months Ended Nine Months Ended (in millions) 2020 2019 2020 2019 Total Stockholder Return $ 1 $ 2 $ 4 $ 5 Relative Revenue Growth 4 3 3 3 Adjusted Earnings Per Share — — 1 — Total compensation expense $ 5 $ 5 $ 8 $ 8 In 2018, the Company modified the vesting provisions of restricted stock and performance share unit grants made to certain retiring executive officers to allow certain of the outstanding awards, that otherwise would have been forfeited, to vest upon retirement. This resulted in net restricted stock and performance share unit compensation expense of $2 million for the nine months ended September 30, 2019. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Statement of Financial Position [Abstract] | |
Stockholders' Equity | Stockholders' Equity The changes of the Stockholders' Equity items during the three and nine months ended September 30, 2020 and 2019, are as follows: BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, June 30, 2020 $ 3 $ 1,115 $ (1,623) $ 5,903 $ (787) $ 152 Dividends declared ($0.17 per share*) — — — (35) — (15) Net issuance for executive stock plan — 5 — — — — Net issuance of restricted stock — 8 — — — — Net earnings — — — 111 — 18 Other comprehensive income — — — — 57 6 Balance, September 30, 2020 $ 3 $ 1,128 $ (1,623) $ 5,979 $ (730) $ 161 BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, June 30, 2019 $ 3 $ 1,116 $ (1,653) $ 5,598 $ (670) $ 108 Dividends declared ($0.17 per share*) — — — (35) — 1 Contributions — — — — — 4 Net issuance for executive stock plan — 4 1 — — — Net issuance of restricted stock — 9 (1) — — — Net earnings — — — 194 — 13 Other comprehensive loss — — — — (109) (5) Balance, September 30, 2019 $ 3 $ 1,129 $ (1,653) $ 5,757 $ (779) $ 121 BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, December 31, 2019 $ 3 $ 1,145 $ (1,657) $ 5,942 $ (727) $ 138 Dividends declared ($0.51 per share*) — — — (105) — (20) Net issuance for executive stock plan — (11) 12 — — — Net issuance of restricted stock — (6) 22 — — — Net earnings — — — 142 — 40 Other comprehensive (loss) income — — — — (3) 3 Balance, September 30, 2020 $ 3 $ 1,128 $ (1,623) $ 5,979 $ (730) $ 161 BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, December 31, 2018 $ 3 $ 1,146 $ (1,585) $ 5,336 $ (674) $ 119 Dividends declared ($0.51 per share*) — — — (105) — (29) Contributions — — — — — 4 Net issuance for executive stock plan — (5) 8 — — — Net issuance of restricted stock — (12) 24 — — — Purchase of treasury stock — — (100) — — — Net earnings — — — 526 — 34 Other comprehensive loss — — — — (105) (7) Balance, September 30, 2019 $ 3 $ 1,129 $ (1,653) $ 5,757 $ (779) $ 121 ____________________________________ * The dividends declared relate to BorgWarner common stock. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The following tables summarize the activity within Accumulated other comprehensive loss during the three and nine months ended September 30, 2020 and 2019: (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, June 30, 2020 $ (557) $ (1) $ (229) $ — $ (787) Comprehensive (loss) income before reclassifications 25 1 7 — 33 Income taxes associated with comprehensive (loss) income before reclassifications 24 — 2 — 26 Reclassification from accumulated other comprehensive loss — — (3) — (3) Income taxes reclassified into net earnings — — 1 — 1 Ending balance, September 30, 2020 $ (508) $ — $ (222) $ — $ (730) (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, June 30, 2019 $ (463) $ (1) $ (208) $ 2 $ (670) Comprehensive (loss) income before reclassifications (107) — 3 — (104) Income taxes associated with comprehensive (loss) income before reclassifications (7) — (1) — (8) Reclassification from accumulated other comprehensive loss — 1 3 — 4 Income taxes reclassified into net earnings — — (1) — (1) Ending balance, September 30, 2019 $ (577) $ — $ (204) $ 2 $ (779) (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, December 31, 2019 $ (497) $ — $ (230) $ — $ (727) Comprehensive (loss) income before reclassifications (31) (1) 13 — (19) Income taxes associated with comprehensive (loss) income before reclassifications 20 — 1 — 21 Reclassification from accumulated other comprehensive loss — 1 (8) — (7) Income taxes reclassified into net earnings — — 2 — 2 Ending balance, September 30, 2020 $ (508) $ — $ (222) $ — $ (730) (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, December 31, 2018 $ (441) $ — $ (235) $ 2 $ (674) Comprehensive (loss) income before reclassifications (127) (1) 7 — (121) Income taxes associated with comprehensive (loss) income before reclassifications (9) — (2) — (11) Reclassification from accumulated other comprehensive loss — 1 34 — 35 Income taxes reclassified into net earnings — — (8) — (8) Ending balance, September 30, 2019 $ (577) $ — $ (204) $ 2 $ (779) |
Contingencies
Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | 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, general liability and various other risks. It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company's environmental contingencies are discussed below. The Company's management does not expect that an adverse outcome in any of these other commercial and legal claims, actions and complaints will have a material adverse effect on the Company's results of operations, financial position or cash flows, although such adverse outcome could be material to the results of operations in a particular quarter. Environmental 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 14 such sites as of September 30, 2020 and December 31, 2019. 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 material 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. The Company had an accrual for environmental liabilities of $3 million as of September 30, 2020 and December 31, 2019 included in Accounts payable and accrued expenses and Other non-current liabilities in the Condensed Consolidated Balance Sheets. This accrual is 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; and remediation alternatives). Securities and Exchange Commission ("SEC") I nvestigation On July 31, 2018, the Division of Enforcement of the SEC informed the Company that it was conducting an investigation related to the Company's historical accounting for asbestos-related claims not yet asserted. The Company fully cooperated with the SEC in connection with its investigation. On August 26, 2020, the SEC announced a settlement with the Company that fully resolved its investigation. Without admitting or denying the SEC’s charges, the Company agreed to the entry of a cease and desist pursuant to the reporting, books and records, and internal controls provisions of the federal securities laws in connection with the Company’s historical accounting for unasserted asbestos-related claims from 2012 to 2016. During the three months ended September 30, 2020, the Company paid a civil penalty of approximately $1 million. |
Restructuring
Restructuring | 9 Months Ended |
Sep. 30, 2020 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | Restructuring In the first quarter of 2020, the Company initiated a comprehensive plan to reduce existing structural costs. In the three and nine months ended September 30, 2020, the Company recognized restructuring expenses of $20 million and $72 million, respectively, associated with this plan. Engine segment: During the three and nine months ended September 30, 2020, the Company recorded $15 million and $40 million, respectively, primarily related to severance costs, professional fees and a voluntary termination program. During the nine months ended September 30, 2020, the Company also recorded employee termination benefits of $3 million in the Engine segment, reflecting the statutory minimum benefits, related to the announced closure of a facility in Europe, affecting approximately 200 employees. In 2019, the Company approved actions within the Engine segment to improve future profitability and competitiveness and address non-core product lines. The Company recorded restructuring expense of $3 million and $14 million, respectively, primarily related to professional fees and employee termination benefits , related to these actions. The Company also executed a voluntary termination program in 2019 in its Engine segment which resulted in expense of $10 million and $18 million during the three and nine months ended September 30, 2019, respectively. Drivetrain segment: During the three and nine months ended September 30, 2020, the Company recorded $3 million and $8 million, respectively, primarily related to severance costs and professional fees. During the nine months ended September 30, 2020, the Company also recorded employee termination benefits of $19 million in the Drivetrain segment, reflecting the statutory minimum benefits, related to the announced closure of a facility in Europe, affecting approximately 350 employees. The employee termination benefits related to the announced plant closures are subject to negotiation with labor unions, which could result in additional employee termination benefits. Future cash payments for these restructuring activities are expected to continue through 2022. The Company also recorded restructuring expense of $3 million during the nine months ended September 30, 2019, related to Corporate restructuring activities. Estimates of restructuring expense are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established accruals. The Company continues to evaluate different options across its operations and to reduce existing structural costs over the next few years. The Company will recognize restructuring expense associated with any future actions at the time they are approved and become probable or are incurred. Any future actions could result in significant restructuring expense. The following tables display a rollforward of the severance accruals recorded within the Company's Condensed Consolidated Balance Sheets and the related cash flow activity for the three and nine months ended September 30, 2020 and 2019: Severance Accruals (in millions) Drivetrain Engine Total Balance at December 31, 2019 $ 4 $ 30 $ 34 Provision 1 11 12 Cash payments — (13) (13) Balance at March 31, 2020 $ 5 $ 28 $ 33 Provision 17 11 28 Cash payments (1) (14) (15) Balance at June 30, 2020 $ 21 $ 25 $ 46 Provision 1 9 10 Cash payments (1) (11) (12) Balance at September 30, 2020 $ 21 $ 23 $ 44 Severance Accruals (in millions) Drivetrain Engine Total Balance at December 31, 2018 $ 4 $ 21 $ 25 Provision — 7 7 Cash payments — (20) (20) Balance at March 31, 2019 $ 4 $ 8 $ 12 Provision — 8 8 Cash payments — (2) (2) Balance at June 30, 2019 $ 4 $ 14 $ 18 Provision — 8 8 Cash payments (1) (7) (8) Balance at September 30, 2019 $ 3 $ 15 $ 18 |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The Company presents both basic and diluted earnings per share of common stock (“EPS”). Basic EPS is calculated by dividing net earnings attributable to the Company by the weighted average shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing net earnings attributable to the Company by the weighted average shares of common stock and common stock equivalents outstanding during the reporting period. The dilutive impact of stock-based compensation is calculated using the treasury stock method. The treasury stock method assumes that the Company uses the assumed proceeds from the exercise of awards to repurchase common stock at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized. The dilutive effects of performance-based stock awards described in the Note 14, "Stock-Based Compensation," to the Condensed Consolidated Financial Statements are included in the computation of diluted earnings per share at the level the related performance criteria are met through the respective balance sheet date. There were 113,532 of adjusted earnings per share performance share units excluded from the computation of the diluted earnings per share for the three and nine months ended September 30, 2020 because the related performance criteria had not been met as of the balance sheet date. The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share of common stock: Three Months Ended Nine Months Ended (in millions, except per share amounts) 2020 2019 2020 2019 Basic earnings per share: Net earnings attributable to BorgWarner Inc. $ 111 $ 194 $ 142 $ 526 Weighted average shares of common stock outstanding 206.0 205.3 205.9 205.9 Basic earnings per share of common stock $ 0.54 $ 0.94 $ 0.69 $ 2.56 Diluted earnings per share: Net earnings attributable to BorgWarner Inc. $ 111 $ 194 $ 142 $ 526 Weighted average shares of common stock outstanding 206.0 205.3 205.9 205.9 Effect of stock-based compensation 1.3 1.0 0.8 0.9 Weighted average shares of common stock outstanding including dilutive shares 207.3 206.3 206.7 206.8 Diluted earnings per share of common stock $ 0.53 $ 0.94 $ 0.69 $ 2.54 Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share: — 0.1 — 0.1 |
Reporting Segments
Reporting Segments | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Reporting Segments | Reporting Segments The Company's business is comprised of two reporting segments: Engine and Drivetrain. These segments are strategic business groups that are managed separately as each represents a specific grouping of related automotive components and systems. The Company allocates resources to each segment based upon the projected after-tax return on invested capital ("ROIC") of its business initiatives. Adjusted EBIT is comprised of earnings before interest, income taxes and noncontrolling interest (“EBIT") adjusted for restructuring, goodwill impairment charges, affiliates' earnings and other items not reflective of on-going operating income or loss ("Adjusted EBIT"). ROIC is comprised of Adjusted EBIT after deducting notional taxes compared to the projected average capital investment required. Adjusted EBIT is the measure of segment income or loss used by the Company. The Company believes Adjusted EBIT is most reflective of the operational profitability or loss of its reporting segments. The following tables show segment information and Adjusted EBIT for the Company's reporting segments. Net Sales by Reporting Segment Three Months Ended Nine Months Ended (in millions) 2020 2019 2020 2019 Engine $ 1,476 $ 1,514 $ 3,736 $ 4,681 Drivetrain 1,075 993 2,542 2,973 Inter-segment eliminations (17) (15) (39) (45) Net sales $ 2,534 $ 2,492 $ 6,239 $ 7,609 Adjusted EBIT Three Months Ended Nine Months Ended (in millions) 2020 2019 2020 2019 Engine $ 225 $ 241 $ 461 $ 731 Drivetrain 131 100 195 307 Adjusted EBIT 356 341 656 1,038 Restructuring expense 20 14 72 41 Merger, acquisition and divestiture expense 16 4 58 10 Asset impairments — — 26 — Net gain on insurance recovery for property damage (3) — (9) — Unfavorable arbitration loss — — — 14 Officer stock awards modification — — — 2 Corporate, including stock-based compensation 39 47 114 146 Equity in affiliates’ earnings, net of tax (3) (7) (10) (25) Interest income (3) (4) (8) (9) Interest expense 20 15 50 43 Other postretirement (income) expense (2) (1) (5) 26 Earnings before income taxes and noncontrolling interest 272 273 368 790 Provision for income taxes 143 66 186 230 Net earnings $ 129 $ 207 $ 182 $ 560 Net earnings attributable to the noncontrolling interest, net of tax 18 13 40 34 Net earnings attributable to BorgWarner Inc. $ 111 $ 194 $ 142 $ 526 Total Assets September 30, December 31, (in millions) 2020 2019 Engine $ 4,451 $ 4,536 Drivetrain 4,082 4,075 Total 8,533 8,611 Corporate * 2,359 1,091 Total assets $ 10,892 $ 9,702 ____________________________________ * Corporate assets include cash and cash equivalents, investments and other long-term receivables, and certain deferred income taxes. |
Recent Transactions and Events
Recent Transactions and Events | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Recent Transactions and Events | Recent Transactions and Events Acquisition of Delphi Technologies PLC On October 1, 2020 , the Company completed the acquisition of 100% of the outstanding ordinary shares of Delphi Technologies pursuant to a transaction agreement dated January 28, 2020, as amended on May 6, 2020. Pursuant to the terms of the agreement, the Company issued, in exchange for each Delphi Technologies share, 0.4307 of a share of common stock of the Company, par value $0.01 per share and cash in lieu of any fractional share. In the aggregate, the Company delivered consideration of approximately $2.4 billion, including 37 million shares of common stock, valued at $1.5 billion , repayment of debt of approximately $900 million and stock-based compensation of approximately $15 million . Upon closing, the Company also assumed approximately $800 million in senior notes as discussed below. The acquisition is expected to strengthen the Company’s electronics and power electronics products, capabilities and scale, position the Company for greater growth as electrified propulsion systems gain momentum and enhance key combustion, commercial vehicle and aftermarket businesses. The initial accounting for the business combination is incomplete as of the time of this filing due to the limited amount of time since the acquisition date and the ongoing status of the valuation. Therefore, it is impracticable for the Company to provide the major classes of assets acquired and liabilities assumed as of the closing date or pro forma revenue and earnings. On October 5, 2020, the Company completed its offer to exchange approximately $800 million in aggregate principal amount of the outstanding 5.000% Senior Notes due 2025 (“DT Notes”) of Delphi Technologies. Approximately $776 million in aggregate principal amount of outstanding DT Notes, representing 97% of the $800 million total outstanding principal amount of the DT Notes, were validly exchanged and cancelled for new BorgWarner notes. Following such cancellation, approximately $24 million in aggregate principal amount of the DT Notes will remain outstanding. Since the majority of the notes were exchanged, the Company was able to eliminate substantially all of the restrictive covenants and events of default not related to payment on the $800 million in outstanding Senior Notes. Romeo Systems, Inc. In May 2019, the Company invested $50 million in exchange for a 20% equity interest in Romeo, a technology-leading battery module and pack supplier. The Company accounts for this investment in Series A-1 Preferred Stock of Romeo under the measurement alternative in ASC Topic 321, " Investments - Equity Securities " for equity investments without a readily determinable fair value. Such investments are measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. During the three months ended March 31, 2020, after completing a qualitative assessment which indicated the Company's equity investment in Romeo may have been impaired, the Company recorded a $9 million asset impairment cost to record this investment at its fair value of $41 million. The estimated fair value of Romeo was determined using unobservable inputs including quantitative information from lower valuations in recently completed or proposed financings and the liquidation preferences included in the Romeo stock agreements. These unobservable inputs are considered Level 3. On October 5, 2020, Romeo entered into a definitive merger agreement with RMG Acquisition Corp., a company listed on the New York Stock Exchange. Upon the closing of this transaction, which is subject to closing conditions, the Company’s ownership in Romeo will be reduced and the investment adjusted to fair value. This event had no impact on the carrying value of the Company's investment at September 30, 2020. In September 2019, the Company and Romeo contributed total equity of $10 million and formed a new joint venture, BorgWarner Romeo Power LLC (the "Romeo JV"), in which the Company owns a 60% interest. BorgWarner Morse TEC LLC Like many other industrial companies that have historically operated in the United States, the Company, or parties that the Company was obligated to indemnify, had been named as one of many defendants in asbestos-related personal injury actions. On October 30, 2019, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with Enstar Holdings (US) LLC ("Enstar"). Pursuant to the Purchase Agreement, the Company transferred 100% of the equity interests of BorgWarner Morse TEC LLC ("Morse TEC") to Enstar. As Morse TEC was the obligor for the Company's asbestos-related liabilities and policyholder of the related insurance assets, the rights and obligations related to these items transferred upon the sale, and pursuant to the Purchase Agreement, Morse TEC has indemnified the Company and its affiliates for asbestos-related liabilities as more specifically described in the Purchase Agreement. This indemnification obligation with respect to Asbestos-Related Liabilities (as such term is defined in the Purchase Agreement) is not subject to any cap or time limitation. Following the completion of this transfer, the Company has no obligation with respect to previously recorded asbestos-related liabilities. In accordance with ASC Topic 810, "Consolidation," this subsidiary was derecognized as the Company ceased to control the entity, and the Company removed the associated assets and liabilities from the consolidated balance sheet. Rinehart Motion Systems LLC and AM Racing LLC On January 2, 2019, the Company acquired Rinehart Motion Systems LLC and AM Racing LLC, two established companies in the specialty electric and hybrid propulsion market, for approximately $15 million, of which $10 million was paid during the first three months of 2019, $2 million was paid during the first three months of 2020 and the remaining $3 million will be paid upon satisfaction of certain conditions. The Company created Cascadia Motion LLC ("Cascadia Motion") to combine assets and operations of these two acquired companies. Based in Oregon, Cascadia Motion specializes in design, development and production of hybrid and electric propulsion solutions for prototype and low-volume production applications. It allows the Company to offer design, development and production of full electric and hybrid propulsion systems for niche and low-volume manufacturing applications. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Accounting | The accompanying unaudited Condensed Consolidated Financial Statements of BorgWarner Inc. and Consolidated Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flow activity required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair statement of results have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet as of December 31, 2019 was derived from the audited financial statements as of that date. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. |
Use of Estimates | Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and accompanying notes, as well as the amounts of revenues and expenses reported during the periods covered by those financial statements and accompanying notes. Actual results could differ from these estimates. A novel strain of COVID-19/coronavirus ("COVID-19") was first identified in Wuhan, China in December 2019 and subsequently declared a pandemic by the World Health Organization on March 11, 2020. To date, COVID-19 has surfaced in nearly all regions around the world and has resulted, at times, in travel restrictions, closing of borders and business slowdowns or shutdowns in affected areas. As a result, COVID-19 has impacted the Company's business globally. Many OEMs temporarily suspended certain manufacturing operations, particularly in North America and Europe, due to market conditions and matters associated with COVID-19. Additionally, as a global manufacturer, during the nine months ended September 30, 2020, the Company responded to shelter-in-place and similar government orders in various locations around the world, including throughout the United States and Europe, which resulted in the temporary closures of or reduced operations at the Company's manufacturing and assembly facilities. Because of the impacts COVID-19 had on the Company's operations, primarily in the second quarter of 2020, the Company assessed certain accounting matters that require consideration of forecasted financial information, including, but not limited to, its allowance for credit losses, the carrying value of the Company's goodwill, intangible assets, and other long-lived assets and valuation allowances on deferred tax assets with the information reasonably available to the Company and the unknown future impacts of COVID-19. As a result of these assessments, there were no impairments or material increases in credit allowances or valuation allowances that impacted the Company's Condensed Consolidated Financial Statements. Although the Company's operations have resumed, there is no guarantee that COVID-19 will not require additional assessments in the future and these assessments would not result in material impacts to the Consolidated Financial Statements in future reporting periods. |
New Accounting Pronouncements | Recently Adopted Accounting Standards In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-4, "Reference Rate Reform (Topic 848)." It provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. These optional expedients and exceptions allow a company to choose not to apply certain modification accounting requirements under GAAP to contracts affected by reference rate reform. A company that makes this election would present and account for a modified contract as a continuation of the existing contract. It also enables a company to continue to apply hedge accounting for hedging relationships in which the critical terms change due to rate reform. This guidance was effective March 12, 2020 and provides relief to contract modifications through December 31, 2022. The Company adopted this guidance on March 12, 2020, and there was no impact to the Condensed Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." It requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance (Subtopic 350-40). This guidance was effective for interim and annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and the impact on its Condensed Consolidated Financial Statements was immaterial. In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820) ." It removes disclosure requirements on fair value measurements including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. It also amends and clarifies certain disclosures and adds new disclosure requirements including the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This guidance was effective for interim and annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and there was no impact to the Condensed Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326)." It replaces the current incurred loss impairment method with a new method that reflects expected credit losses. Under this new model an entity would recognize an impairment allowance equal to its current estimate of credit losses on financial assets measured at amortized cost. This guidance was effective for annual periods beginning after December 15, 2019. The Company adopted this guidance as of January 1, 2020, and the impact on its Condensed Consolidated Financial Statements was immaterial. Accounting Standards Not Yet Adopted In January 2020, the FASB issued ASU No. 2020-1, " Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) ." It clarifies the interaction among the accounting for equity securities, equity method investments, and certain derivative instruments. Specifically, for the purposes of applying the ASC Topic 321 measurement alternative, a company should consider observable transactions immediately before applying or upon discontinuing the equity method. Additionally, when determining the accounting for certain forward contracts and purchased options entered into to purchase securities, a company should not consider if the underlying securities would be accounted for under the equity method (ASC Topic 323) or fair value option (ASC Topic 825). This guidance is effective for interim and annual periods beginning after December 15, 2020, and early adoption is permitted. The Company does not expect this guidance to have a material impact on its Condensed Consolidated Financial Statements. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes." It removes certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 and improves consistent application of and simplifies GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. The Company is currently evaluating the impact of this guidance on its Condensed Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)." It (i) requires the removal of disclosures that are no longer considered cost beneficial; (ii) clarifies specific requirements of certain disclosures; and (iii) adds new disclosure requirements, including the weighted average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, and reasons for significant gains and losses related to changes in the benefit obligation. This guidance is effective for annual periods beginning after December 15, 2020, and early adoption is permitted. The Company does not expect this guidance to have a material impact, and it will include enhanced disclosures in the Consolidated Financial Statements upon adoption. |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of revenue | The following table represents a disaggregation of revenue from contracts with customers by segment and region: Three Months Ended September 30, 2020 2019 (In millions) Engine Drivetrain Total Engine Drivetrain Total North America $ 384 $ 456 $ 840 $ 397 $ 456 $ 853 Europe 658 186 844 716 203 919 Asia 391 429 820 357 324 681 Other 26 4 30 30 9 39 Total $ 1,459 $ 1,075 $ 2,534 $ 1,500 $ 992 $ 2,492 Nine Months Ended September 30, 2020 2019 (In millions) Engine Drivetrain Total Engine Drivetrain Total North America $ 938 $ 1,069 $ 2,007 $ 1,216 $ 1,362 $ 2,578 Europe 1,707 467 2,174 2,277 641 2,918 Asia 988 995 1,983 1,053 944 1,997 Other 64 11 75 91 25 116 Total $ 3,697 $ 2,542 $ 6,239 $ 4,637 $ 2,972 $ 7,609 |
Research and Development Expe_2
Research and Development Expenditures (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Research and Development [Abstract] | |
Schedule of research and development costs | The following table presents the Company’s gross and net expenditures on R&D activities: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Gross R&D expenditures $ 115 $ 123 $ 336 $ 372 Customer reimbursements (15) (21) (39) (53) Net R&D expenditures $ 100 $ 102 $ 297 $ 319 |
Other Expense, Net (Tables)
Other Expense, Net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Other Income and Expenses [Abstract] | |
Schedule of other expense | Items included in Other expense, net consist of: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2020 2019 2020 2019 Restructuring expense $ 20 $ 14 $ 72 $ 41 Merger, acquisition and divestiture expense 16 4 58 10 Asset impairments — — 26 — Net gain on insurance recovery for property damage (3) — (9) — Unfavorable arbitration loss — — — 14 Other income, net (4) — (5) (2) Other expense, net $ 29 $ 18 $ 142 $ 63 |
Inventories, Net (Tables)
Inventories, Net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventories, net consisted of the following: September 30, December 31, (in millions) 2020 2019 Raw material and supplies $ 529 $ 502 Work in progress 115 113 Finished goods 186 207 FIFO inventories 830 822 LIFO reserve (15) (15) Inventories, net $ 815 $ 807 |
Property, Plant and Equipment_2
Property, Plant and Equipment, net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Disclosure of property, plant and equipment | September 30, December 31, (in millions) 2020 2019 Land, land use rights and buildings $ 905 $ 860 Machinery and equipment 3,197 2,971 Construction in progress 291 360 Finance lease assets — 1 Total property, plant and equipment, gross 4,393 4,192 Less: accumulated depreciation (1,800) (1,513) Property, plant and equipment, net, excluding tooling 2,593 2,679 Tooling, net of amortization 231 246 Property, plant and equipment, net $ 2,824 $ 2,925 |
Product Warranty (Tables)
Product Warranty (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Product Warranties Disclosures [Abstract] | |
Schedule of product warranty liability | The following table summarizes the activity in the product warranty accrual accounts: (in millions) 2020 2019 Beginning balance, January 1 $ 116 $ 103 Provisions for current period sales 36 36 Adjustments of prior estimates 14 9 Payments (41) (43) Translation adjustment 2 (4) Ending balance, September 30 $ 127 $ 101 The product warranty liability is classified in the Condensed Consolidated Balance Sheets as follows: September 30, December 31, (in millions) 2020 2019 Accounts payable and accrued expenses $ 73 $ 63 Other non-current liabilities 54 53 Total product warranty liability $ 127 $ 116 |
Notes Payable and Long-Term D_2
Notes Payable and Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt instruments | As of September 30, 2020 and December 31, 2019, the Company had short-term and long-term debt outstanding as follows: September 30, December 31, (in millions) 2020 2019 Short-term debt Short-term borrowings $ 47 $ 34 Long-term debt 4.625% Senior notes due 09/15/20 ($250 million par value) — 251 1.800% Senior notes due 11/07/22 (€500 million par value) 584 558 3.375% Senior notes due 03/15/25 ($500 million par value) 497 497 2.650% Senior notes due 07/01/27 ($1,100 million par value) 1,088 — 7.125% Senior notes due 02/15/29 ($121 million par value) 119 119 4.375% Senior notes due 03/15/45 ($500 million par value) 494 494 Term loan facilities and other 7 7 Total long-term debt 2,789 1,926 Less: current portion 2 252 Long-term debt, net of current portion $ 2,787 $ 1,674 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of assets and liabilities measured at fair value | The following tables classify assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019: Basis of fair value measurements (in millions) Balance at Quoted prices in active markets for identical items Significant other observable inputs Significant unobservable inputs Valuation technique Assets: Foreign currency contracts $ 5 $ — $ 5 $ — A Net investment hedge contracts $ 2 $ — $ 2 $ — A Liabilities: Foreign currency contracts $ 5 $ — $ 5 $ — A Net investment hedge contracts $ 79 $ — $ 79 $ — A Basis of fair value measurements (in millions) Balance at Quoted prices in active markets for identical items Significant other observable inputs Significant unobservable inputs Valuation Assets: Net investment hedge contracts $ 3 $ — $ 3 $ — A Liabilities: Foreign currency contracts $ 1 $ — $ 1 $ — A Net investment hedge contracts $ 8 $ — $ 8 $ — A |
Financial Instruments (Tables)
Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of price risk derivatives | At September 30, 2020 and December 31, 2019, the following commodity derivative contracts were outstanding: Commodity derivative contracts Commodity Volume hedged September 30, 2020 Volume hedged December 31, 2019 Units of measure Duration Copper 47 203 Metric Tons Dec - 20 |
Schedule of notional amounts of outstanding derivative positions | At September 30, 2020 and December 31, 2019, the following foreign currency derivative contracts were outstanding: Foreign currency derivatives (in millions) Functional currency Traded currency Notional in traded currency Notional in traded currency Ending Duration Brazilian real Euro 1 1 Jan - 21 Brazilian real US dollar 3 — Jan - 21 British pound Euro 11 9 Mar - 21 British pound US dollar — 4 Mar - 20 Chinese renminbi US dollar 51 2 Jul - 21 Euro British pound 1 — Jan - 21 Euro Chinese renminbi 1 — Oct - 20 Euro Hungarian forint 744 — Jan - 21 Euro Japanese yen 85 383 Dec - 20 Euro Polish zloty 125 — Dec - 20 Euro US dollar 3 18 Dec - 20 Indian rupee Japanese yen 32 — Oct - 20 Indian rupee US dollar 2 — Oct - 20 Japanese yen Korean won 1,255 — Dec - 20 Japanese yen US dollar 1 — Dec - 20 Korean won Euro 3 13 Dec - 20 Korean won Japanese yen 169 409 Dec - 20 Korean won US dollar 15 4 Dec - 20 Swedish krona Euro — 3 Jan - 20 Thai baht US dollar 1 — Dec - 20 US dollar Euro 79 14 Dec - 20 US dollar Japanese yen 500 — Oct - 20 US dollar Korean won 15,000 — Apr - 21 US dollar Mexican peso 188 — Mar - 21 |
Schedule of foreign exchange contracts, statement of financial position | At September 30, 2020 and December 31, 2019, the following cross-currency swap contracts were outstanding: Cross-Currency Swaps (in millions) September 30, 2020 December 31, 2019 Duration US dollar to Euro: Fixed receiving notional $ 1,100 $ — Jul - 27 Fixed paying notional € 976 € — Jul - 27 US dollar to Euro: Fixed receiving notional $ 500 $ 500 Mar - 25 Fixed paying notional € 450 € 450 Mar - 25 US dollar to Japanese yen: Fixed receiving notional $ 100 $ 100 Feb - 23 Fixed paying notional ¥ 10,978 ¥ 10,978 Feb - 23 |
Schedule of derivatives instruments in statements of financial position | At September 30, 2020 and December 31, 2019, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815: (in millions) Assets Liabilities Derivatives designated as hedging instruments Under 815: Location September 30, 2020 December 31, 2019 Location September 30, 2020 December 31, 2019 Foreign currency Prepayments and other current assets $ 1 $ — Accounts payable and accrued expenses $ 2 $ 1 Net investment hedges Other non-current assets $ 2 $ 3 Other non-current liabilities $ 79 $ 8 Derivatives not designated as hedging instruments Foreign currency Prepayments and other current assets $ 4 $ — Accounts payable and accrued expenses $ 3 $ — |
Schedule of deferred losses reported in accumulated other comprehensive income loss | The table below shows deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at September 30, 2020 market rates. (in millions) Deferred gain (loss) in AOCI at Gain (loss) expected to be reclassified to income in one year or less Contract Type September 30, 2020 December 31, 2019 Foreign currency $ (1) $ — $ (1) Net investment hedges: Foreign currency 6 5 — Cross-currency swaps (55) 16 — Foreign currency-denominated debt (43) (17) — Total $ (93) $ 4 $ (1) Gains and (losses) on derivative instruments designated as net investment hedges were recognized in other comprehensive income (loss) during the periods presented below. (in millions) Three Months Ended Nine Months Ended Net investment hedges 2020 2019 2020 2019 Foreign currency $ — $ 2 $ 1 $ 2 Cross-currency swaps $ (89) $ 11 $ (71) $ 16 Foreign currency-denominated debt $ (24) $ 23 $ (26) $ 28 |
Schedule of derivative instruments | Derivative instruments designated as cash flow hedge instruments as defined by ASC Topic 815 held during the period resulted in the following gains and losses recorded in income: Three Months Ended September 30, 2020 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income (loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 2,534 $ 2,017 $ 204 $ 57 Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ 1 Gain (loss) reclassified from AOCI to income $ — $ — $ — Nine Months Ended September 30, 2020 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income(loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 6,239 $ 5,101 $ 601 $ (3) Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ (1) Gain (loss) reclassified from AOCI to income $ — $ — $ (1) Three Months Ended September 30, 2019 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income (loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 2,492 $ 1,968 $ 230 $ (109) Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ — Gain (loss) reclassified from AOCI to income $ (2) $ — $ 1 Nine Months Ended September 30, 2019 (in millions) Net sales Cost of sales Selling, general and administrative expenses Other comprehensive income(loss) Total amounts of earnings and other comprehensive income(loss) line items in which the effects of cash flow hedges are recorded $ 7,609 $ 6,053 $ 668 $ (105) Gain (loss) on cash flow hedging relationships: Foreign currency Gain (loss) recognized in other comprehensive income (loss) $ (1) Gain (loss) reclassified from AOCI to income $ (4) $ 1 $ 2 |
Schedule of derivative instruments, gain (loss) | Derivatives designated as net investment hedge instruments as defined by ASC Topic 815 held during the period resulted in the following gains recorded in Interest expense and finance charges on components excluded from the assessment of effectiveness: (in millions) Three Months Ended Nine Months Ended Net investment hedges 2020 2019 2020 2019 Cross-currency swaps $ 6 $ 3 $ 13 $ 8 |
Schedule of derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of monetary assets and liabilities denominated in currencies other than the operating units' functional currency. These derivatives resulted in the following gains and (losses) recorded in income: (in millions) Three Months Ended Nine Months Ended Contract Type Location 2020 2019 2020 2019 Foreign Currency Selling, general and administrative expenses $ (1) $ — $ 2 $ (3) |
Retirement Benefit Plans (Table
Retirement Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Retirement Benefits [Abstract] | |
Schedule of net benefit costs | The components of net periodic benefit cost recorded in the Condensed Consolidated Statements of Operations are as follows: Pension benefits Other postretirement (in millions) 2020 2019 Three Months Ended September 30, US Non-US US Non-US 2020 2019 Service cost $ — $ 5 $ — $ 5 $ — $ — Interest cost 1 2 2 3 — — Expected return on plan assets (2) (6) (3) (6) — — Amortization of unrecognized prior service credit (1) — (1) — (1) (1) Amortization of unrecognized loss 1 3 2 2 1 1 Net periodic benefit cost $ (1) $ 4 $ — $ 4 $ — $ — Pension benefits Other postretirement (in millions) 2020 2019 Nine Months Ended September 30, US Non-US US Non-US 2020 2019 Service cost $ — $ 15 $ — $ 14 $ — $ — Interest cost 4 7 7 9 1 2 Expected return on plan assets (7) (18) (9) (17) — — Settlement loss — — 26 — — — Amortization of unrecognized prior service credit (1) — (1) — (2) (3) Amortization of unrecognized loss 2 8 4 7 1 1 Net periodic benefit (income) cost $ (2) $ 12 $ 27 $ 13 $ — $ — |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of nonvested restricted stock units activity | A summary of the Company’s nonvested restricted stock for the nine months ended September 30, 2020 is as follows: Shares subject to restriction Weighted average grant date fair value Nonvested at December 31, 2019 1,664 $ 44.26 Granted 766 $ 34.05 Vested (466) $ 46.00 Forfeited (9) $ 42.23 Nonvested at March 31, 2020 1,955 $ 39.87 Granted 31 $ 29.67 Vested (75) $ 41.19 Forfeited (24) $ 40.49 Nonvested at June 30, 2020 1,887 $ 39.65 Granted 9 $ 37.77 Vested (9) $ 38.68 Forfeited (33) $ 39.80 Nonvested at September 30, 2020 1,854 $ 39.64 |
Schedule of share-based compensation, performance shares award unvested activity | A summary of the status of the Company’s nonvested performance share units for the three and nine months ended September 30, 2020 is as follows: Total Stockholder Return Relative Revenue Growth Adjusted Earnings Per Share Number of shares (thousands) Weighted average grant date fair value Number of shares (thousands) Weighted average grant date fair value Number of shares (thousands) Weighted average grant date fair value Nonvested at December 31, 2019 240 $ 64.61 240 $ 48.52 — $ — Granted 142 $ 28.55 142 $ 34.11 115 $ 34.11 Nonvested at March 31, 2020 382 $ 48.02 382 $ 41.54 115 $ 34.11 Forfeited (8) $ 50.17 (8) $ 42.35 (3) $ 34.11 Nonvested at June 30, 2020 374 $ 47.97 374 $ 41.52 112 $ 34.11 Granted 2 $ 28.55 2 $ 37.77 2 $ 37.77 Forfeited (5) $ 73.11 (5) $ 52.64 — $ — Nonvested at September 30, 2020 371 $ 47.60 371 $ 41.35 114 $ 34.16 The Company recorded compensation expense for performance share units in the periods presented below: Three Months Ended Nine Months Ended (in millions) 2020 2019 2020 2019 Total Stockholder Return $ 1 $ 2 $ 4 $ 5 Relative Revenue Growth 4 3 3 3 Adjusted Earnings Per Share — — 1 — Total compensation expense $ 5 $ 5 $ 8 $ 8 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Statement of Financial Position [Abstract] | |
Schedule of stockholders equity | The changes of the Stockholders' Equity items during the three and nine months ended September 30, 2020 and 2019, are as follows: BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, June 30, 2020 $ 3 $ 1,115 $ (1,623) $ 5,903 $ (787) $ 152 Dividends declared ($0.17 per share*) — — — (35) — (15) Net issuance for executive stock plan — 5 — — — — Net issuance of restricted stock — 8 — — — — Net earnings — — — 111 — 18 Other comprehensive income — — — — 57 6 Balance, September 30, 2020 $ 3 $ 1,128 $ (1,623) $ 5,979 $ (730) $ 161 BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, June 30, 2019 $ 3 $ 1,116 $ (1,653) $ 5,598 $ (670) $ 108 Dividends declared ($0.17 per share*) — — — (35) — 1 Contributions — — — — — 4 Net issuance for executive stock plan — 4 1 — — — Net issuance of restricted stock — 9 (1) — — — Net earnings — — — 194 — 13 Other comprehensive loss — — — — (109) (5) Balance, September 30, 2019 $ 3 $ 1,129 $ (1,653) $ 5,757 $ (779) $ 121 BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, December 31, 2019 $ 3 $ 1,145 $ (1,657) $ 5,942 $ (727) $ 138 Dividends declared ($0.51 per share*) — — — (105) — (20) Net issuance for executive stock plan — (11) 12 — — — Net issuance of restricted stock — (6) 22 — — — Net earnings — — — 142 — 40 Other comprehensive (loss) income — — — — (3) 3 Balance, September 30, 2020 $ 3 $ 1,128 $ (1,623) $ 5,979 $ (730) $ 161 BorgWarner Inc. stockholders' equity (in millions) Issued common stock Capital in excess of par value Treasury stock Retained earnings Accumulated other comprehensive income (loss) Noncontrolling interests Balance, December 31, 2018 $ 3 $ 1,146 $ (1,585) $ 5,336 $ (674) $ 119 Dividends declared ($0.51 per share*) — — — (105) — (29) Contributions — — — — — 4 Net issuance for executive stock plan — (5) 8 — — — Net issuance of restricted stock — (12) 24 — — — Purchase of treasury stock — — (100) — — — Net earnings — — — 526 — 34 Other comprehensive loss — — — — (105) (7) Balance, September 30, 2019 $ 3 $ 1,129 $ (1,653) $ 5,757 $ (779) $ 121 ____________________________________ |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Schedule of accumulated other comprehensive income (loss) | The following tables summarize the activity within Accumulated other comprehensive loss during the three and nine months ended September 30, 2020 and 2019: (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, June 30, 2020 $ (557) $ (1) $ (229) $ — $ (787) Comprehensive (loss) income before reclassifications 25 1 7 — 33 Income taxes associated with comprehensive (loss) income before reclassifications 24 — 2 — 26 Reclassification from accumulated other comprehensive loss — — (3) — (3) Income taxes reclassified into net earnings — — 1 — 1 Ending balance, September 30, 2020 $ (508) $ — $ (222) $ — $ (730) (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, June 30, 2019 $ (463) $ (1) $ (208) $ 2 $ (670) Comprehensive (loss) income before reclassifications (107) — 3 — (104) Income taxes associated with comprehensive (loss) income before reclassifications (7) — (1) — (8) Reclassification from accumulated other comprehensive loss — 1 3 — 4 Income taxes reclassified into net earnings — — (1) — (1) Ending balance, September 30, 2019 $ (577) $ — $ (204) $ 2 $ (779) (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, December 31, 2019 $ (497) $ — $ (230) $ — $ (727) Comprehensive (loss) income before reclassifications (31) (1) 13 — (19) Income taxes associated with comprehensive (loss) income before reclassifications 20 — 1 — 21 Reclassification from accumulated other comprehensive loss — 1 (8) — (7) Income taxes reclassified into net earnings — — 2 — 2 Ending balance, September 30, 2020 $ (508) $ — $ (222) $ — $ (730) (in millions) Foreign currency translation adjustments Hedge instruments Defined benefit retirement plans Other Total Beginning balance, December 31, 2018 $ (441) $ — $ (235) $ 2 $ (674) Comprehensive (loss) income before reclassifications (127) (1) 7 — (121) Income taxes associated with comprehensive (loss) income before reclassifications (9) — (2) — (11) Reclassification from accumulated other comprehensive loss — 1 34 — 35 Income taxes reclassified into net earnings — — (8) — (8) Ending balance, September 30, 2019 $ (577) $ — $ (204) $ 2 $ (779) |
Restructuring (Tables)
Restructuring (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Restructuring and Related Activities [Abstract] | |
Schedule of employee related and other restructuring accruals | The following tables display a rollforward of the severance accruals recorded within the Company's Condensed Consolidated Balance Sheets and the related cash flow activity for the three and nine months ended September 30, 2020 and 2019: Severance Accruals (in millions) Drivetrain Engine Total Balance at December 31, 2019 $ 4 $ 30 $ 34 Provision 1 11 12 Cash payments — (13) (13) Balance at March 31, 2020 $ 5 $ 28 $ 33 Provision 17 11 28 Cash payments (1) (14) (15) Balance at June 30, 2020 $ 21 $ 25 $ 46 Provision 1 9 10 Cash payments (1) (11) (12) Balance at September 30, 2020 $ 21 $ 23 $ 44 Severance Accruals (in millions) Drivetrain Engine Total Balance at December 31, 2018 $ 4 $ 21 $ 25 Provision — 7 7 Cash payments — (20) (20) Balance at March 31, 2019 $ 4 $ 8 $ 12 Provision — 8 8 Cash payments — (2) (2) Balance at June 30, 2019 $ 4 $ 14 $ 18 Provision — 8 8 Cash payments (1) (7) (8) Balance at September 30, 2019 $ 3 $ 15 $ 18 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share reconciliation | The following table reconciles the numerators and denominators used to calculate basic and diluted earnings per share of common stock: Three Months Ended Nine Months Ended (in millions, except per share amounts) 2020 2019 2020 2019 Basic earnings per share: Net earnings attributable to BorgWarner Inc. $ 111 $ 194 $ 142 $ 526 Weighted average shares of common stock outstanding 206.0 205.3 205.9 205.9 Basic earnings per share of common stock $ 0.54 $ 0.94 $ 0.69 $ 2.56 Diluted earnings per share: Net earnings attributable to BorgWarner Inc. $ 111 $ 194 $ 142 $ 526 Weighted average shares of common stock outstanding 206.0 205.3 205.9 205.9 Effect of stock-based compensation 1.3 1.0 0.8 0.9 Weighted average shares of common stock outstanding including dilutive shares 207.3 206.3 206.7 206.8 Diluted earnings per share of common stock $ 0.53 $ 0.94 $ 0.69 $ 2.54 Anti-dilutive stock-based awards excluded from the calculation of diluted earnings per share: — 0.1 — 0.1 |
Reporting Segments (Tables)
Reporting Segments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Schedule of net sales by reporting segment | The following tables show segment information and Adjusted EBIT for the Company's reporting segments. Net Sales by Reporting Segment Three Months Ended Nine Months Ended (in millions) 2020 2019 2020 2019 Engine $ 1,476 $ 1,514 $ 3,736 $ 4,681 Drivetrain 1,075 993 2,542 2,973 Inter-segment eliminations (17) (15) (39) (45) Net sales $ 2,534 $ 2,492 $ 6,239 $ 7,609 |
Schedule of segment earnings before interest and income taxes | Adjusted EBIT Three Months Ended Nine Months Ended (in millions) 2020 2019 2020 2019 Engine $ 225 $ 241 $ 461 $ 731 Drivetrain 131 100 195 307 Adjusted EBIT 356 341 656 1,038 Restructuring expense 20 14 72 41 Merger, acquisition and divestiture expense 16 4 58 10 Asset impairments — — 26 — Net gain on insurance recovery for property damage (3) — (9) — Unfavorable arbitration loss — — — 14 Officer stock awards modification — — — 2 Corporate, including stock-based compensation 39 47 114 146 Equity in affiliates’ earnings, net of tax (3) (7) (10) (25) Interest income (3) (4) (8) (9) Interest expense 20 15 50 43 Other postretirement (income) expense (2) (1) (5) 26 Earnings before income taxes and noncontrolling interest 272 273 368 790 Provision for income taxes 143 66 186 230 Net earnings $ 129 $ 207 $ 182 $ 560 Net earnings attributable to the noncontrolling interest, net of tax 18 13 40 34 Net earnings attributable to BorgWarner Inc. $ 111 $ 194 $ 142 $ 526 |
Schedule of segment assets | Total Assets September 30, December 31, (in millions) 2020 2019 Engine $ 4,451 $ 4,536 Drivetrain 4,082 4,075 Total 8,533 8,611 Corporate * 2,359 1,091 Total assets $ 10,892 $ 9,702 ____________________________________ * Corporate assets include cash and cash equivalents, investments and other long-term receivables, and certain deferred income taxes. |
Revenue from Contract with Cust
Revenue from Contract with Customer - Narrative (Details) $ in Millions | 9 Months Ended | |
Sep. 30, 2020USD ($)segment | Dec. 31, 2019USD ($) | |
Disaggregation of Revenue | ||
Contract with customer, asset, after allowance for credit loss | $ 8 | $ 10 |
Revenue, performance obligation, description of payment terms | 30 to 90 days | |
Contract with customer, liability, current | $ 12 | 10 |
Contract with customer, liability, noncurrent | 4 | 12 |
Contract with customers receivable, current | 41 | 37 |
Contract with customers receivable, non-current | $ 164 | $ 180 |
Number of reportable segments | segment | 2 | |
Minimum | ||
Disaggregation of Revenue | ||
Capitalized contract costs, amortization period | 3 years | |
Maximum | ||
Disaggregation of Revenue | ||
Capitalized contract costs, amortization period | 7 years |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Revenue Performance Obligation (Details) | Sep. 30, 2020 |
Minimum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 3 years |
Maximum | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, remaining performance obligation, expected timing of satisfaction, period | 7 years |
Revenue from Contracts with C_4
Revenue from Contracts with Customers - Disaggregation of revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue | ||||
Net sales | $ 2,534 | $ 2,492 | $ 6,239 | $ 7,609 |
North America | ||||
Disaggregation of Revenue | ||||
Net sales | 840 | 853 | 2,007 | 2,578 |
Europe | ||||
Disaggregation of Revenue | ||||
Net sales | 844 | 919 | 2,174 | 2,918 |
Asia | ||||
Disaggregation of Revenue | ||||
Net sales | 820 | 681 | 1,983 | 1,997 |
Other | ||||
Disaggregation of Revenue | ||||
Net sales | 30 | 39 | 75 | 116 |
Engine | ||||
Disaggregation of Revenue | ||||
Net sales | 1,459 | 1,500 | 3,697 | 4,637 |
Engine | North America | ||||
Disaggregation of Revenue | ||||
Net sales | 384 | 397 | 938 | 1,216 |
Engine | Europe | ||||
Disaggregation of Revenue | ||||
Net sales | 658 | 716 | 1,707 | 2,277 |
Engine | Asia | ||||
Disaggregation of Revenue | ||||
Net sales | 391 | 357 | 988 | 1,053 |
Engine | Other | ||||
Disaggregation of Revenue | ||||
Net sales | 26 | 30 | 64 | 91 |
Drivetrain | ||||
Disaggregation of Revenue | ||||
Net sales | 1,075 | 992 | 2,542 | 2,972 |
Drivetrain | North America | ||||
Disaggregation of Revenue | ||||
Net sales | 456 | 456 | 1,069 | 1,362 |
Drivetrain | Europe | ||||
Disaggregation of Revenue | ||||
Net sales | 186 | 203 | 467 | 641 |
Drivetrain | Asia | ||||
Disaggregation of Revenue | ||||
Net sales | 429 | 324 | 995 | 944 |
Drivetrain | Other | ||||
Disaggregation of Revenue | ||||
Net sales | $ 4 | $ 9 | $ 11 | $ 25 |
Research and Development Expe_3
Research and Development Expenditures (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Research and Development [Abstract] | ||||
Maximum value of R&D contract (in percent) | 5.00% | |||
Research and Development | ||||
Gross R&D expenditures | $ 115 | $ 123 | $ 336 | $ 372 |
Customer reimbursements | (15) | (21) | (39) | (53) |
Net R&D expenditures | $ 100 | $ 102 | $ 297 | $ 319 |
Other Expense, Net (Details)
Other Expense, Net (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Other Income and Expenses [Abstract] | ||||
Restructuring expense | $ 20 | $ 14 | $ 72 | $ 41 |
Merger, acquisition and divestiture expense | 16 | 4 | 58 | 10 |
Asset impairments | 0 | 0 | 26 | 0 |
Net gain on insurance recovery for property damage | (3) | 0 | (9) | 0 |
Unfavorable arbitration loss | 0 | 0 | 0 | 14 |
Other income, net | (4) | 0 | (5) | (2) |
Other expense, net | $ 29 | $ 18 | $ 142 | $ 63 |
Other Expense, Net - Narrative
Other Expense, Net - Narrative (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)facility | Mar. 31, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)facility | Sep. 30, 2019USD ($) | |
Schedule of Equity Method Investments | |||||
Restructuring expense | $ 20 | $ 14 | $ 72 | $ 41 | |
Merger, acquisition and divestiture expense | 16 | 4 | 58 | 10 | |
Asset impairments | 0 | 0 | 26 | 0 | |
Net gain from insurance proceeds | 3 | 0 | 9 | 0 | |
Insurance deductible expense | 1 | ||||
Proceeds from insurance settlement | 110 | ||||
Unfavorable arbitration loss | $ 0 | $ 0 | $ 0 | $ 14 | |
Closed | Europe | |||||
Schedule of Equity Method Investments | |||||
Number of properties | facility | 2 | 2 | |||
Engine | |||||
Schedule of Equity Method Investments | |||||
Impairment of assets to be disposed | $ 9 | ||||
Drivetrain | |||||
Schedule of Equity Method Investments | |||||
Impairment of assets to be disposed | $ 8 | ||||
Romeo Systems, Inc. | |||||
Schedule of Equity Method Investments | |||||
Ownership percentage in investee (in percent) | 20.00% | 20.00% | |||
Asset impairments | $ 9 | ||||
Equity method investments, fair value | $ 41 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||||||
Effective income tax rate, continuing operations (in percent) | 50.50% | 29.20% | ||||
Tax benefits related to other one-time adjustments | $ (51) | $ (44) | $ 13 | |||
Nondeductible expenses, restructuring expenses and merger, acquisition and divestiture expenses and asset impairment charges | $ 156 | |||||
Tax benefit recognized on restructuring expense | 23 | 11 | ||||
Tax benefits related to postretirement expenses | $ 6 | |||||
Tax benefits related to Tax Act | $ 22 | |||||
Deferred tax liabilities, net | $ 174 | $ 174 | $ 125 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw material and supplies | $ 529 | $ 502 |
Work in progress | 115 | 113 |
Finished goods | 186 | 207 |
FIFO inventories | 830 | 822 |
LIFO reserve | (15) | (15) |
Inventories, net | $ 815 | $ 807 |
Property, Plant and Equipment_3
Property, Plant and Equipment, net (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Property Plant and Equipment | ||
Finance lease assets | $ 0 | $ 1 |
Total property, plant and equipment, gross | 4,393 | 4,192 |
Less: accumulated depreciation | (1,800) | (1,513) |
Property, plant and equipment, net, excluding tooling | 2,593 | 2,679 |
Tooling, net of amortization | 231 | 246 |
Property, plant and equipment, net | 2,824 | 2,925 |
Land, land use rights and buildings | ||
Property Plant and Equipment | ||
Total property, plant and equipment, gross | 905 | 860 |
Machinery and equipment | ||
Property Plant and Equipment | ||
Total property, plant and equipment, gross | 3,197 | 2,971 |
Construction in progress | ||
Property Plant and Equipment | ||
Total property, plant and equipment, gross | $ 291 | $ 360 |
Property, Plant, and Equipment
Property, Plant, and Equipment - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |||
Accounts payable | $ 39 | $ 102 | |
Capitalized interest costs | $ 6 | $ 13 |
Product Warranty (Details)
Product Warranty (Details) - USD ($) $ in Millions | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | |
Product warranty rollforward | ||||
Beginning balance, January 1 | $ 116 | $ 103 | ||
Provisions for current period sales | 36 | 36 | ||
Adjustments of prior estimates | 14 | 9 | ||
Payments | (41) | (43) | ||
Translation adjustment | 2 | (4) | ||
Ending balance, September 30 | 127 | 101 | ||
Accounts payable and accrued expenses | $ 73 | $ 63 | ||
Other non-current liabilities | 54 | 53 | ||
Total product warranty liability | $ 116 | $ 101 | $ 127 | $ 116 |
Minimum | ||||
Product Warranty Liability | ||||
Product Warranty Term | 1 year | |||
Maximum | ||||
Product Warranty Liability | ||||
Product Warranty Term | 3 years |
Notes Payable and Long-Term D_3
Notes Payable and Long-Term Debt - Debt Outstanding (Details) | Sep. 30, 2020USD ($) | Sep. 30, 2020EUR (€) | Jun. 19, 2020USD ($) | Dec. 31, 2019USD ($) |
Short-term debt | ||||
Short-term borrowings | $ 47,000,000 | $ 34,000,000 | ||
Long-term debt | ||||
Total long-term debt | 2,789,000,000 | 1,926,000,000 | ||
Less: current portion | 2,000,000 | 252,000,000 | ||
Long-term debt, net of current portion | 2,787,000,000 | 1,674,000,000 | ||
Senior Notes | 4.625% Senior notes due 09/15/20 ($250 million par value) | ||||
Long-term debt | ||||
Total long-term debt | $ 0 | $ 250,000,000 | 251,000,000 | |
Debt instrument stated interest rate (in percent) | 4.625% | 4.625% | 4.625% | |
Debt instrument face value | $ 250,000,000 | |||
Senior Notes | 1.800% Senior notes due 11/07/22 (€500 million par value) | ||||
Long-term debt | ||||
Total long-term debt | $ 584,000,000 | 558,000,000 | ||
Debt instrument stated interest rate (in percent) | 1.80% | 1.80% | ||
Debt instrument face value | € | € 500,000,000 | |||
Senior Notes | 3.375% Senior notes due 03/15/25 ($500 million par value) | ||||
Long-term debt | ||||
Total long-term debt | $ 497,000,000 | 497,000,000 | ||
Debt instrument stated interest rate (in percent) | 3.375% | 3.375% | ||
Debt instrument face value | $ 500,000,000 | |||
Senior Notes | 2.650% Senior notes due 07/01/27 ($1,100 million par value) | ||||
Long-term debt | ||||
Total long-term debt | $ 1,088,000,000 | 0 | ||
Debt instrument stated interest rate (in percent) | 2.65% | 2.65% | 2.65% | |
Debt instrument face value | $ 1,100,000,000 | $ 1,100,000,000 | ||
Senior Notes | 7.125% Senior notes due 02/15/29 ($121 million par value) | ||||
Long-term debt | ||||
Total long-term debt | $ 119,000,000 | 119,000,000 | ||
Debt instrument stated interest rate (in percent) | 7.125% | 7.125% | ||
Debt instrument face value | $ 121,000,000 | |||
Senior Notes | 4.375% Senior notes due 03/15/45 ($500 million par value) | ||||
Long-term debt | ||||
Total long-term debt | $ 494,000,000 | 494,000,000 | ||
Debt instrument stated interest rate (in percent) | 4.375% | 4.375% | ||
Debt instrument face value | $ 500,000,000 | |||
Term loan | Term loan facilities and other | ||||
Long-term debt | ||||
Total long-term debt | $ 7,000,000 | $ 7,000,000 |
Notes Payable and Long-Term D_4
Notes Payable and Long-Term Debt - Narrative (Details) - USD ($) | Oct. 01, 2020 | Sep. 30, 2020 | Jun. 19, 2020 | Apr. 29, 2020 | Mar. 13, 2020 | Mar. 12, 2020 | Dec. 31, 2019 |
Line of Credit Facility | |||||||
Short-term borrowings | $ 47,000,000 | $ 34,000,000 | |||||
Short-term debt, weighted average interest rate, at point in time (in percent) | 2.20% | 2.50% | |||||
Debt weighted average interest rate (in percent) | 2.30% | 2.80% | |||||
Long-term debt | $ 2,789,000,000 | $ 1,926,000,000 | |||||
Letters of credit outstanding, amount | 32,000,000 | 28,000,000 | |||||
Estimate of Fair Value Measurement | |||||||
Line of Credit Facility | |||||||
Estimated fair value of senior unsecured notes | 3,027,000,000 | 2,025,000,000 | |||||
Change in Measurement | |||||||
Line of Credit Facility | |||||||
Estimated fair value of senior unsecured notes | 245,000,000 | 106,000,000 | |||||
Revolving Credit Facility | |||||||
Line of Credit Facility | |||||||
Maximum borrowing capacity | $ 1,500,000,000 | $ 1,200,000,000 | |||||
Potential additional increase to credit facility | $ 1,000,000,000 | ||||||
Line of credit outstanding | 0 | 0 | |||||
Revolving Credit Facility | Subsequent Event | |||||||
Line of Credit Facility | |||||||
Maximum borrowing capacity | $ 2,000,000,000 | ||||||
Short-term, Unsecured Commercial Paper Notes | |||||||
Line of Credit Facility | |||||||
Maximum borrowing capacity | 1,500,000,000 | ||||||
Line of credit outstanding | 0 | 0 | |||||
Short-term, Unsecured Commercial Paper Notes | Subsequent Event | |||||||
Line of Credit Facility | |||||||
Maximum borrowing capacity | $ 2,000,000,000 | ||||||
Senior Notes | 4.625% Senior notes due 09/15/20 ($250 million par value) | |||||||
Line of Credit Facility | |||||||
Long-term debt | $ 0 | $ 250,000,000 | 251,000,000 | ||||
Debt instrument stated interest rate (in percent) | 4.625% | 4.625% | |||||
Debt instrument face value | $ 250,000,000 | ||||||
Senior Notes | 2.650% Senior notes due 07/01/27 ($1,100 million par value) | |||||||
Line of Credit Facility | |||||||
Long-term debt | $ 1,088,000,000 | $ 0 | |||||
Debt instrument stated interest rate (in percent) | 2.65% | 2.65% | |||||
Debt instrument face value | $ 1,100,000,000 | $ 1,100,000,000 | |||||
Term loan | Delay Draw Term Loan | |||||||
Line of Credit Facility | |||||||
Debt instrument face value | $ 750,000,000 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - Valuation, Market Approach - Fair Value, Recurring - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Assets: | ||
Foreign currency contracts | $ 5 | |
Net investment hedge contracts | 2 | $ 3 |
Liabilities: | ||
Foreign currency contracts | 5 | 1 |
Net investment hedge contracts | 79 | 8 |
Fair Value, Inputs, Level 1 | ||
Assets: | ||
Foreign currency contracts | 0 | |
Net investment hedge contracts | 0 | 0 |
Liabilities: | ||
Foreign currency contracts | 0 | 0 |
Net investment hedge contracts | 0 | 0 |
Fair Value, Inputs, Level 2 | ||
Assets: | ||
Foreign currency contracts | 5 | |
Net investment hedge contracts | 2 | 3 |
Liabilities: | ||
Foreign currency contracts | 5 | 1 |
Net investment hedge contracts | 79 | 8 |
Fair Value, Inputs, Level 3 | ||
Assets: | ||
Foreign currency contracts | 0 | |
Net investment hedge contracts | 0 | 0 |
Liabilities: | ||
Foreign currency contracts | 0 | 0 |
Net investment hedge contracts | $ 0 | $ 0 |
Financial Instruments - Commodi
Financial Instruments - Commodity Derivative Contract (Details) - t | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Maturity December 2020 | Commodity contracts | ||
Derivative | ||
Copper notional amount (mass) | 47 | 203 |
Financial Instruments - Foreign
Financial Instruments - Foreign Currency Derivative Contract (Details) - Foreign currency € in Millions, ₩ in Millions, ¥ in Millions, ¥ in Millions, £ in Millions, zł in Millions, Ft in Millions, $ in Millions, $ in Millions | Sep. 30, 2020EUR (€) | Sep. 30, 2020USD ($) | Sep. 30, 2020GBP (£) | Sep. 30, 2020CNY (¥) | Sep. 30, 2020HUF (Ft) | Sep. 30, 2020JPY (¥) | Sep. 30, 2020PLN (zł) | Sep. 30, 2020KRW (₩) | Sep. 30, 2020MXN ($) | Dec. 31, 2019EUR (€) | Dec. 31, 2019USD ($) | Dec. 31, 2019GBP (£) | Dec. 31, 2019CNY (¥) | Dec. 31, 2019HUF (Ft) | Dec. 31, 2019JPY (¥) | Dec. 31, 2019PLN (zł) | Dec. 31, 2019KRW (₩) | Dec. 31, 2019MXN ($) |
Brazilian real | Maturity January 2021 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | € 1 | $ 3 | € 1 | $ 0 | ||||||||||||||
British pound | Maturity March 2021 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | € | 11 | 9 | ||||||||||||||||
British pound | Maturity March 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | 0 | 4 | ||||||||||||||||
Chinese renminbi | Maturity July 2021 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | 51 | 2 | ||||||||||||||||
Euro | Maturity January 2021 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | £ 1 | Ft 744 | £ 0 | Ft 0 | ||||||||||||||
Euro | Maturity October 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | ¥ | ¥ 1 | ¥ 0 | ||||||||||||||||
Euro | Maturity December 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | 3 | ¥ 85 | zł 125 | 18 | ¥ 383 | zł 0 | ||||||||||||
Indian rupee | Maturity October 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | 2 | 32 | 0 | 0 | ||||||||||||||
Japanese yen | Maturity December 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | 1 | ₩ 1,255 | 0 | ₩ 0 | ||||||||||||||
Korean won | Maturity December 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | 3 | 15 | 169 | 13 | 4 | 409 | ||||||||||||
Swedish krona | Maturity January 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | € | 0 | 3 | ||||||||||||||||
Thai baht | Maturity December 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | $ 1 | $ 0 | ||||||||||||||||
US dollar | Maturity March 2021 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | $ 188 | $ 0 | ||||||||||||||||
US dollar | Maturity October 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | ¥ | ¥ 500 | ¥ 0 | ||||||||||||||||
US dollar | Maturity December 2020 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | € | € 79 | € 14 | ||||||||||||||||
US dollar | Maturity April 2021 | ||||||||||||||||||
Derivative | ||||||||||||||||||
Foreign currency notional amount | ₩ | ₩ 15,000 | ₩ 0 |
Financial Instruments - Cross-C
Financial Instruments - Cross-Currency Swap Contract (Details) - Cross-currency swaps € in Millions, ¥ in Millions, $ in Millions | Sep. 30, 2020EUR (€) | Sep. 30, 2020USD ($) | Sep. 30, 2020JPY (¥) | Dec. 31, 2019EUR (€) | Dec. 31, 2019USD ($) | Dec. 31, 2019JPY (¥) |
US dollar | Maturity July 2027 | ||||||
Derivative | ||||||
Foreign currency notional amount | $ 1,100 | $ 0 | ||||
US dollar | Maturity March 2025 | ||||||
Derivative | ||||||
Foreign currency notional amount | 500 | 500 | ||||
US dollar | Maturity February 2023 | ||||||
Derivative | ||||||
Foreign currency notional amount | $ 100 | $ 100 | ||||
Euro | Maturity July 2027 | ||||||
Derivative | ||||||
Foreign currency notional amount | € | € 976 | € 0 | ||||
Euro | Maturity March 2025 | ||||||
Derivative | ||||||
Foreign currency notional amount | € | € 450 | € 450 | ||||
Japanese yen | Maturity February 2023 | ||||||
Derivative | ||||||
Foreign currency notional amount | ¥ | ¥ 10,978 | ¥ 10,978 |
Financial Instruments - Balance
Financial Instruments - Balance Sheet (Details) - Foreign currency - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Derivatives designated as hedging instruments Under 815: | Prepayments and other current assets | ||
Derivatives, Fair Value | ||
Derivative assets | $ 1 | $ 0 |
Derivatives designated as hedging instruments Under 815: | Accounts payable and accrued expenses | ||
Derivatives, Fair Value | ||
Derivative liability | 2 | 1 |
Derivatives designated as hedging instruments Under 815: | Other non-current assets | Net investment hedge | ||
Derivatives, Fair Value | ||
Derivative assets | 2 | 3 |
Derivatives designated as hedging instruments Under 815: | Other non-current liabilities | Net investment hedge | ||
Derivatives, Fair Value | ||
Derivative liability | 79 | 8 |
Derivatives not designated as hedging instruments | Prepayments and other current assets | ||
Derivatives, Fair Value | ||
Derivative assets | 4 | 0 |
Derivatives not designated as hedging instruments | Accounts payable and accrued expenses | ||
Derivatives, Fair Value | ||
Derivative liability | $ 3 | $ 0 |
Financial Instruments - AOCI (D
Financial Instruments - AOCI (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Derivatives, Fair Value | ||
Accumulated other comprehensive income (loss), cumulative changes in net gain (loss) from hedges, before tax | $ (93) | $ 4 |
Gain (loss) expected to be reclassified to income in one year or less | (1) | |
Foreign currency | ||
Derivatives, Fair Value | ||
Accumulated other comprehensive income (loss), cumulative changes in net gain (loss) from hedges, before tax | (1) | 0 |
Gain (loss) expected to be reclassified to income in one year or less | (1) | |
Foreign currency | Net investment hedge | ||
Derivatives, Fair Value | ||
Accumulated other comprehensive income (loss), cumulative changes in net gain (loss) from hedges, before tax | 6 | 5 |
Gain (loss) expected to be reclassified to income in one year or less | 0 | |
Cross-currency swaps | Net investment hedge | ||
Derivatives, Fair Value | ||
Accumulated other comprehensive income (loss), cumulative changes in net gain (loss) from hedges, before tax | (55) | 16 |
Gain (loss) expected to be reclassified to income in one year or less | 0 | |
Foreign currency-denominated debt | Net investment hedge | ||
Derivatives, Fair Value | ||
Accumulated other comprehensive income (loss), cumulative changes in net gain (loss) from hedges, before tax | (43) | $ (17) |
Gain (loss) expected to be reclassified to income in one year or less | $ 0 |
Financial Instruments - Income
Financial Instruments - Income Statement (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivatives, Fair Value | ||||
Net sales | $ 2,534 | $ 2,492 | $ 6,239 | $ 7,609 |
Cost of sales | 2,017 | 1,968 | 5,101 | 6,053 |
Selling, general and administrative expenses | 204 | 230 | 601 | 668 |
Other comprehensive income (loss) | 57 | (109) | (3) | (105) |
Gain (loss) on cash flow hedging relationships: | ||||
Gain (loss) recognized in other comprehensive income (loss) | 1 | 0 | (1) | (1) |
Cash Flow Hedging | Foreign currency | Gain (loss) reclassified from AOCI to income | ||||
Derivatives, Fair Value | ||||
Net sales | 0 | (2) | 0 | (4) |
Cost of sales | 0 | 0 | 0 | 1 |
Selling, general and administrative expenses | $ 0 | $ 1 | $ (1) | $ 2 |
Financial Instruments - Other C
Financial Instruments - Other Comprehensive Income (Loss) (Details) - Net investment hedge - Other comprehensive income (loss) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Foreign currency | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains and (losses) on derivative instruments | $ 0 | $ 2 | $ 1 | $ 2 |
Cross-currency swaps | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains and (losses) on derivative instruments | (89) | 11 | (71) | 16 |
Foreign currency-denominated debt | ||||
Derivative Instruments, Gain (Loss) | ||||
Gains and (losses) on derivative instruments | $ (24) | $ 23 | $ (26) | $ 28 |
Financial Instruments - Derivat
Financial Instruments - Derivative Instruments Gain (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Cross-currency swaps | ||||
Derivative Instruments, Gain (Loss) | ||||
Net investment hedges | $ 6 | $ 3 | $ 13 | $ 8 |
Financial Instruments - Deriv_2
Financial Instruments - Derivatives Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Foreign currency | Derivatives not designated as hedging instruments | Selling, general and administrative expenses | ||||
Derivative | ||||
Gain (loss) on derivatives not designated as hedges | $ (1) | $ 0 | $ 2 | $ (3) |
Retirement Benefit Plans - Narr
Retirement Benefit Plans - Narrative (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Defined Benefit Plan Disclosure | ||
Actual contribution to defined benefit pension plans | $ 15 | |
Settlement loss | 0 | $ 26 |
US | Pension benefits | ||
Defined Benefit Plan Disclosure | ||
Defined benefit plan, benefit obligation, payment for settlement | 50 | |
Liquidation of plan assets | 50 | |
Decrease in benefit obligation | 63 | |
Settlement loss | 0 | 26 |
US | Pension benefits | Former Employees | ||
Defined Benefit Plan Disclosure | ||
Defined benefit plan, benefit obligation, benefits paid | $ 13 | |
Minimum | ||
Defined Benefit Plan Disclosure | ||
Defined benefit plan, expected future employer contributions, current fiscal year | 15 | |
Maximum | ||
Defined Benefit Plan Disclosure | ||
Defined benefit plan, expected future employer contributions, current fiscal year | $ 25 |
Retirement Benefits - Net Benef
Retirement Benefits - Net Benefit Costs (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Defined Benefit Plan Disclosure | ||||
Settlement loss | $ 0 | $ 26 | ||
Pension benefits | US | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | $ 0 | $ 0 | 0 | 0 |
Interest cost | 1 | 2 | 4 | 7 |
Expected return on plan assets | (2) | (3) | (7) | (9) |
Settlement loss | 0 | 26 | ||
Amortization of unrecognized prior service credit | (1) | (1) | (1) | (1) |
Amortization of unrecognized loss | 1 | 2 | 2 | 4 |
Net periodic benefit cost | (1) | 0 | (2) | 27 |
Pension benefits | Non-US | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | 5 | 5 | 15 | 14 |
Interest cost | 2 | 3 | 7 | 9 |
Expected return on plan assets | (6) | (6) | (18) | (17) |
Settlement loss | 0 | 0 | ||
Amortization of unrecognized prior service credit | 0 | 0 | 0 | 0 |
Amortization of unrecognized loss | 3 | 2 | 8 | 7 |
Net periodic benefit cost | 4 | 4 | 12 | 13 |
Other postretirement employee benefits | ||||
Defined Benefit Plan Disclosure | ||||
Service cost | 0 | 0 | 0 | 0 |
Interest cost | 0 | 0 | 1 | 2 |
Expected return on plan assets | 0 | 0 | 0 | 0 |
Settlement loss | 0 | 0 | ||
Amortization of unrecognized prior service credit | (1) | (1) | (2) | (3) |
Amortization of unrecognized loss | 1 | 1 | 1 | 1 |
Net periodic benefit cost | $ 0 | $ 0 | $ 0 | $ 0 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Compensation expense | $ 2 | |||||
Restricted Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Restricted shares granted to employees (in shares) | 9,000 | 31,000 | 766,000 | |||
Unrecognized compensation | $ 38 | $ 38 | ||||
Period for recognition (in years) | 1 year 3 months 18 days | |||||
Restricted stock or unit expense | $ 7 | $ 8 | $ 22 | $ 22 | ||
Restricted Stock | Employee | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Restricted shares granted to employees (in shares) | 775,705 | |||||
Restricted Stock | Employee | Share-based Payment Arrangement, Tranche One | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Award vesting rights (in percentage) | 50.00% | |||||
Award vesting period (in years) | 2 years | |||||
Restricted Stock | Employee | Share-based Payment Arrangement, Tranche Two | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Award vesting period (in years) | 3 years | |||||
Restricted Stock | Non-employee director | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Restricted shares granted to employees (in shares) | 30,674 | |||||
Performance Shares | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Award vesting period (in years) | 3 years | |||||
Performance Shares | Share-based Payment Arrangement, Tranche One | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Award vesting rights (in percentage) | 33.00% | |||||
Performance Shares | Share-based Payment Arrangement, Tranche Two | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Award vesting rights (in percentage) | 33.00% | |||||
Performance Shares | Share-based Payment Arrangement, Tranche Three | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Award vesting rights (in percentage) | 33.00% | |||||
2018 Stock Incentive Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||
Number of shares authorized (in shares) | 7,000,000 | 7,000,000 | ||||
Number of shares available for grant (in shares) | 5,000,000 | 5,000,000 |
Stock-Based Compensation - Nonv
Stock-Based Compensation - Nonvested restricted stock (Details) - Restricted Stock - $ / shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | |
Number of shares (thousands) | ||||
Nonvested beginning balance (in shares) | 1,887 | 1,955 | 1,664 | 1,664 |
Granted (in shares) | 9 | 31 | 766 | |
Vested (in shares) | (9) | (75) | (466) | |
Forfeited (in shares) | (33) | (24) | (9) | |
Nonvested ending Balance (in shares) | 1,854 | 1,887 | 1,955 | 1,854 |
Weighted average grant date fair value | ||||
Nonvested weighted average exercise price beginning balance (in dollar per share) | $ 39.65 | $ 39.87 | $ 44.26 | $ 44.26 |
Granted the weighted average exercise price (in dollar per share) | 37.77 | 29.67 | 34.05 | |
Vested weighted average exercise price (in dollar per share) | 38.68 | 41.19 | 46 | |
Forfeited weighted average exercise price (in dollar per share) | 39.80 | 40.49 | 42.23 | |
Nonvested weighted average exercise price ending balance (in dollar per share) | $ 39.64 | $ 39.65 | $ 39.87 | $ 39.64 |
Stock-Based Compensation - No_2
Stock-Based Compensation - Nonvested performance share units (Details) - Performance Shares - $ / shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | |
Total Stockholder Return | ||||
Number of shares (thousands) | ||||
Nonvested beginning balance (in shares) | 374 | 382 | 240 | 240 |
Granted (in shares) | 2 | 142 | ||
Forfeited (in shares) | (5) | (8) | ||
Nonvested ending Balance (in shares) | 371 | 374 | 382 | 371 |
Weighted average grant date fair value | ||||
Nonvested weighted average exercise price beginning balance (in dollar per share) | $ 47.97 | $ 48.02 | $ 64.61 | $ 64.61 |
Granted the weighted average exercise price (in dollar per share) | 28.55 | 28.55 | ||
Forfeited weighted average exercise price (in dollar per share) | 73.11 | 50.17 | ||
Nonvested weighted average exercise price ending balance (in dollar per share) | $ 47.60 | $ 47.97 | $ 48.02 | $ 47.60 |
Relative Revenue Growth | ||||
Number of shares (thousands) | ||||
Nonvested beginning balance (in shares) | 374 | 382 | 240 | 240 |
Granted (in shares) | 2 | 142 | ||
Forfeited (in shares) | (5) | (8) | ||
Nonvested ending Balance (in shares) | 371 | 374 | 382 | 371 |
Weighted average grant date fair value | ||||
Nonvested weighted average exercise price beginning balance (in dollar per share) | $ 41.52 | $ 41.54 | $ 48.52 | $ 48.52 |
Granted the weighted average exercise price (in dollar per share) | 37.77 | 34.11 | ||
Forfeited weighted average exercise price (in dollar per share) | 52.64 | 42.35 | ||
Nonvested weighted average exercise price ending balance (in dollar per share) | $ 41.35 | $ 41.52 | $ 41.54 | $ 41.35 |
Adjusted Earnings Per Share | ||||
Number of shares (thousands) | ||||
Nonvested beginning balance (in shares) | 112 | 115 | 0 | 0 |
Granted (in shares) | 2 | 115 | ||
Forfeited (in shares) | 0 | (3) | ||
Nonvested ending Balance (in shares) | 114 | 112 | 115 | 114 |
Weighted average grant date fair value | ||||
Nonvested weighted average exercise price beginning balance (in dollar per share) | $ 34.11 | $ 34.11 | $ 0 | $ 0 |
Granted the weighted average exercise price (in dollar per share) | 37,770,000 | 34.11 | ||
Forfeited weighted average exercise price (in dollar per share) | 0 | 34.11 | ||
Nonvested weighted average exercise price ending balance (in dollar per share) | $ 34.16 | $ 34.11 | $ 34.11 | $ 34.16 |
Stock-Based Compensation - Expe
Stock-Based Compensation - Expense for performance based shares units (Details) - Performance Shares - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Share-based payment arrangement, expense | $ 5 | $ 5 | $ 8 | $ 8 |
Total Stockholder Return | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Share-based payment arrangement, expense | 1 | 2 | 4 | 5 |
Relative Revenue Growth | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Share-based payment arrangement, expense | 4 | 3 | 3 | 3 |
Adjusted Earnings Per Share | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Share-based payment arrangement, expense | $ 0 | $ 0 | $ 1 | $ 0 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | $ 4,844 | |||
Contributions from noncontrolling interest stockholders | $ 4 | 0 | $ 4 | |
Net earnings attributable to BorgWarner Inc. | 111 | $ 194 | 142 | 526 |
Net earnings attributable to the noncontrolling interest, net of tax | 18 | 13 | 40 | 34 |
Other comprehensive (loss) income | 192 | $ 93 | 182 | $ 448 |
Ending balance | $ 4,918 | $ 4,918 | ||
Dividends declared (in dollar per share) | $ 0.17 | $ 0.17 | $ 0.51 | $ 0.51 |
Issued common stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | $ 3 | $ 3 | $ 3 | $ 3 |
Ending balance | 3 | 3 | 3 | 3 |
Capital in excess of par value | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | 1,115 | 1,116 | 1,145 | 1,146 |
Net issuance for executive stock plan | 5 | 4 | (11) | (5) |
Net issuance of restricted stock | 8 | 9 | (6) | (12) |
Ending balance | 1,128 | 1,129 | 1,128 | 1,129 |
Treasury stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | (1,623) | (1,653) | (1,657) | (1,585) |
Net issuance for executive stock plan | 1 | 12 | 8 | |
Net issuance of restricted stock | (1) | 22 | 24 | |
Purchase of treasury stock | (100) | |||
Ending balance | (1,623) | (1,653) | (1,623) | (1,653) |
Retained earnings | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | 5,903 | 5,598 | 5,942 | 5,336 |
Dividends declared | (35) | (35) | (105) | (105) |
Net earnings attributable to BorgWarner Inc. | 111 | 194 | 142 | 526 |
Ending balance | 5,979 | 5,757 | 5,979 | 5,757 |
Accumulated other comprehensive income (loss) | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | (787) | (670) | (727) | (674) |
Other comprehensive (loss) income | 57 | (109) | (3) | (105) |
Ending balance | (730) | (779) | (730) | (779) |
Noncontrolling interests | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning balance | 152 | 108 | 138 | 119 |
Dividends declared | (15) | 1 | (20) | (29) |
Net earnings attributable to the noncontrolling interest, net of tax | 18 | 13 | 40 | 34 |
Other comprehensive (loss) income | 6 | (5) | 3 | (7) |
Ending balance | $ 161 | $ 121 | $ 161 | $ 121 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Total | ||||
Beginning balance | $ 4,844 | |||
Comprehensive (loss) income before reclassifications | $ 33 | $ (104) | (19) | $ (121) |
Income taxes associated with comprehensive (loss) income before reclassifications | 26 | (8) | 21 | (11) |
Reclassification from accumulated other comprehensive loss | (3) | 4 | (7) | 35 |
Income taxes reclassified into net earnings | (143) | (66) | (186) | (230) |
Ending balance | 4,918 | 4,918 | ||
Gain (loss) reclassified from AOCI to income | ||||
Total | ||||
Income taxes reclassified into net earnings | 1 | (1) | 2 | (8) |
Accumulated other comprehensive income (loss) | ||||
Total | ||||
Beginning balance | (787) | (670) | (727) | (674) |
Ending balance | (730) | (779) | (730) | (779) |
Foreign currency translation adjustments | ||||
Total | ||||
Beginning balance | (557) | (463) | (497) | (441) |
Comprehensive (loss) income before reclassifications | 25 | (107) | (31) | (127) |
Income taxes associated with comprehensive (loss) income before reclassifications | 24 | (7) | 20 | (9) |
Reclassification from accumulated other comprehensive loss | 0 | 0 | 0 | 0 |
Ending balance | (508) | (577) | (508) | (577) |
Foreign currency translation adjustments | Gain (loss) reclassified from AOCI to income | ||||
Total | ||||
Income taxes reclassified into net earnings | 0 | 0 | 0 | 0 |
Hedge instruments | ||||
Total | ||||
Beginning balance | (1) | (1) | 0 | 0 |
Comprehensive (loss) income before reclassifications | 1 | 0 | (1) | (1) |
Income taxes associated with comprehensive (loss) income before reclassifications | 0 | 0 | 0 | 0 |
Reclassification from accumulated other comprehensive loss | 0 | 1 | 1 | 1 |
Ending balance | 0 | 0 | 0 | 0 |
Hedge instruments | Gain (loss) reclassified from AOCI to income | ||||
Total | ||||
Income taxes reclassified into net earnings | 0 | 0 | 0 | 0 |
Defined benefit retirement plans | ||||
Total | ||||
Beginning balance | (229) | (208) | (230) | (235) |
Comprehensive (loss) income before reclassifications | 7 | 3 | 13 | 7 |
Income taxes associated with comprehensive (loss) income before reclassifications | 2 | (1) | 1 | (2) |
Reclassification from accumulated other comprehensive loss | (3) | 3 | (8) | 34 |
Ending balance | (222) | (204) | (222) | (204) |
Defined benefit retirement plans | Gain (loss) reclassified from AOCI to income | ||||
Total | ||||
Income taxes reclassified into net earnings | 1 | (1) | 2 | (8) |
Other | ||||
Total | ||||
Beginning balance | 0 | 2 | 0 | 2 |
Comprehensive (loss) income before reclassifications | 0 | 0 | 0 | 0 |
Income taxes associated with comprehensive (loss) income before reclassifications | 0 | 0 | 0 | 0 |
Reclassification from accumulated other comprehensive loss | 0 | 0 | 0 | 0 |
Ending balance | 0 | 2 | 0 | 2 |
Other | Gain (loss) reclassified from AOCI to income | ||||
Total | ||||
Income taxes reclassified into net earnings | $ 0 | $ 0 | $ 0 | $ 0 |
Contingencies (Details)
Contingencies (Details) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020USD ($) | Sep. 30, 2020USD ($)site | Dec. 31, 2019USD ($)site | |
Commitments and Contingencies Disclosure [Abstract] | |||
Waste disposal sites with potential liability under the comprehensive environmental response, compensation and liability act | site | 14 | 14 | |
Accrual for indicated environmental liabilities | $ 3 | $ 3 | $ 3 |
Potential civil penalty | $ 1 |
Restructuring- Narrative (Detai
Restructuring- Narrative (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)employee | Sep. 30, 2019USD ($) | |
Restructuring Cost and Reserve | ||||
Restructuring expense | $ 20 | $ 14 | $ 72 | $ 41 |
Corporate | ||||
Restructuring Cost and Reserve | ||||
Restructuring expense | 3 | |||
Engine | ||||
Restructuring Cost and Reserve | ||||
Restructuring and related cost, number of positions eliminated (employees) | employee | 200 | |||
Drivetrain | ||||
Restructuring Cost and Reserve | ||||
Restructuring and related cost, number of positions eliminated (employees) | employee | 350 | |||
Voluntary employee severance | Engine | ||||
Restructuring Cost and Reserve | ||||
Restructuring expense | 15 | 10 | $ 40 | 18 |
Termination benefit | Engine | ||||
Restructuring Cost and Reserve | ||||
Restructuring expense | 3 | |||
Termination benefit | Drivetrain | ||||
Restructuring Cost and Reserve | ||||
Restructuring expense | 19 | |||
Professional fees and employee termination benefits | Engine | ||||
Restructuring Cost and Reserve | ||||
Restructuring expense | $ 3 | $ 14 | ||
Severance costs and professional fees | Drivetrain | ||||
Restructuring Cost and Reserve | ||||
Restructuring expense | $ 3 | $ 8 |
Restructuring- Employee Related
Restructuring- Employee Related and Other Restructuring Accruals (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Restructuring Reserve | ||||||||
Provision | $ 20 | $ 14 | $ 72 | $ 41 | ||||
Employee Severance | ||||||||
Restructuring Reserve | ||||||||
Beginning balance | 46 | $ 33 | $ 34 | 18 | $ 12 | $ 25 | 34 | 25 |
Provision | 10 | 28 | 12 | 8 | 8 | 7 | ||
Cash payments | (12) | (15) | (13) | (8) | (2) | (20) | ||
Ending balance | 44 | 46 | 33 | 18 | 18 | 12 | 44 | 18 |
Drivetrain | Employee Severance | ||||||||
Restructuring Reserve | ||||||||
Beginning balance | 21 | 5 | 4 | 4 | 4 | 4 | 4 | 4 |
Provision | 1 | 17 | 1 | 0 | 0 | 0 | ||
Cash payments | (1) | (1) | 0 | (1) | 0 | 0 | ||
Ending balance | 21 | 21 | 5 | 3 | 4 | 4 | 21 | 3 |
Engine | Employee Severance | ||||||||
Restructuring Reserve | ||||||||
Beginning balance | 25 | 28 | 30 | 14 | 8 | 21 | 30 | 21 |
Provision | 9 | 11 | 11 | 8 | 8 | 7 | ||
Cash payments | (11) | (14) | (13) | (7) | (2) | (20) | ||
Ending balance | $ 23 | $ 25 | $ 28 | $ 15 | $ 14 | $ 8 | $ 23 | $ 15 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Performance shares excluded from diluted earnings per share (in shares) | 113,532 | 113,532 | ||
Basic earnings per share: | ||||
Net earnings attributable to BorgWarner Inc. | $ 111 | $ 194 | $ 142 | $ 526 |
Weighted average shares of common stock outstanding (shares) | 206,000,000 | 205,300,000 | 205,900,000 | 205,900,000 |
Basic (loss) earnings per share of common stock (in dollar per share) | $ 0.54 | $ 0.94 | $ 0.69 | $ 2.56 |
Diluted earnings per share: | ||||
Net earnings attributable to BorgWarner Inc. | $ 111 | $ 194 | $ 142 | $ 526 |
Weighted average shares of common stock outstanding (shares) | 206,000,000 | 205,300,000 | 205,900,000 | 205,900,000 |
Effect of stock-based compensation (shares) | 1,300,000 | 1,000,000 | 800,000 | 900,000 |
Weighted average shares of common stock outstanding including dilutive shares (shares) | 207,300,000 | 206,300,000 | 206,700,000 | 206,800,000 |
Diluted earnings per share of common stock (in dollar per share) | $ 0.53 | $ 0.94 | $ 0.69 | $ 2.54 |
Antidilutive securities excluded from computation of earnings per share (shares) | 0 | 100,000 | 0 | 100,000 |
Reporting Segments - Narrative
Reporting Segments - Narrative (Details) | 9 Months Ended |
Sep. 30, 2020segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 2 |
Reporting Segments - Net sales
Reporting Segments - Net sales by reporting segments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment Reporting Information | ||||
Net sales | $ 2,534 | $ 2,492 | $ 6,239 | $ 7,609 |
Inter-segment eliminations | ||||
Segment Reporting Information | ||||
Net sales | (17) | (15) | (39) | (45) |
Engine | ||||
Segment Reporting Information | ||||
Net sales | 1,459 | 1,500 | 3,697 | 4,637 |
Engine | Operating Segments | ||||
Segment Reporting Information | ||||
Net sales | 1,476 | 1,514 | 3,736 | 4,681 |
Drivetrain | ||||
Segment Reporting Information | ||||
Net sales | 1,075 | 992 | 2,542 | 2,972 |
Drivetrain | Operating Segments | ||||
Segment Reporting Information | ||||
Net sales | $ 1,075 | $ 993 | $ 2,542 | $ 2,973 |
Reporting Segments - Earnings b
Reporting Segments - Earnings before interest and income taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment Reporting Information | ||||
Adjusted EBIT | $ 356 | $ 341 | $ 656 | $ 1,038 |
Restructuring expense | 20 | 14 | 72 | 41 |
Merger, acquisition and divestiture expense | 16 | 4 | 58 | 10 |
Asset impairments | 0 | 0 | 26 | 0 |
Net gain on insurance recovery for property damage | (3) | 0 | (9) | 0 |
Unfavorable arbitration loss | 0 | 0 | 0 | 14 |
Officer stock awards modification | 0 | 0 | 0 | 2 |
Corporate, including stock-based compensation | 39 | 47 | 114 | 146 |
Equity in affiliates’ earnings, net of tax | (3) | (7) | (10) | (25) |
Interest income | (3) | (4) | (8) | (9) |
Interest expense | 20 | 15 | 50 | 43 |
Other postretirement (income) expense | (2) | (1) | (5) | 26 |
Earnings before income taxes and noncontrolling interest | 272 | 273 | 368 | 790 |
Provision for income taxes | 143 | 66 | 186 | 230 |
Net earnings | 129 | 207 | 182 | 560 |
Net earnings attributable to the noncontrolling interest, net of tax | 18 | 13 | 40 | 34 |
Net earnings attributable to BorgWarner Inc. | 111 | 194 | 142 | 526 |
Engine | ||||
Segment Reporting Information | ||||
Adjusted EBIT | 225 | 241 | 461 | 731 |
Drivetrain | ||||
Segment Reporting Information | ||||
Adjusted EBIT | $ 131 | $ 100 | $ 195 | $ 307 |
Reporting Segments - Segment as
Reporting Segments - Segment assets (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Segment Reporting Information | ||
Total assets | $ 10,892 | $ 9,702 |
Operating Segments | ||
Segment Reporting Information | ||
Total assets | 8,533 | 8,611 |
Corporate | ||
Segment Reporting Information | ||
Total assets | 2,359 | 1,091 |
Engine | Operating Segments | ||
Segment Reporting Information | ||
Total assets | 4,451 | 4,536 |
Drivetrain | Operating Segments | ||
Segment Reporting Information | ||
Total assets | $ 4,082 | $ 4,075 |
Recent Transactions and Events
Recent Transactions and Events (Details) $ / shares in Units, shares in Millions | Oct. 05, 2020USD ($) | Oct. 01, 2020USD ($)$ / sharesshares | Jan. 02, 2019USD ($) | Sep. 30, 2019USD ($) | May 31, 2019USD ($) | Sep. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Sep. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Oct. 30, 2019 |
Business Acquisition | ||||||||||||
Repayments of debt | $ 308,000,000 | $ 54,000,000 | ||||||||||
Stock-based compensation expense | 29,000,000 | 30,000,000 | ||||||||||
Payments for investments in equity securities | $ 50,000,000 | 2,000,000 | 52,000,000 | |||||||||
Asset impairments | $ 0 | $ 0 | 26,000,000 | 0 | ||||||||
Payments for business acquired | 2,000,000 | $ 10,000,000 | ||||||||||
Subsequent Event | Delphi Technologies PLC | ||||||||||||
Business Acquisition | ||||||||||||
Common stock, par or stated value (in per share) | $ / shares | $ 0.01 | |||||||||||
DT Notes | Subsequent Event | Senior Notes | ||||||||||||
Business Acquisition | ||||||||||||
Debt instrument face value | $ 800,000,000 | |||||||||||
Debt instrument stated interest rate (in percent) | 5.00% | |||||||||||
Redeemable principal amount | $ 776,000,000 | |||||||||||
Percentage of principal amount redeemed | 97.00% | |||||||||||
Senior notes | $ 24,000,000 | |||||||||||
Delphi Technologies PLC | Subsequent Event | ||||||||||||
Business Acquisition | ||||||||||||
Percentage of voting interests acquired | 100.00% | |||||||||||
Delphi Technologies revised exchange ratio | 0.4307 | |||||||||||
Business combination, consideration transferred | $ 2,400,000,000 | |||||||||||
Equity interest issued or issuable (in shares) | shares | 37 | |||||||||||
Equity interest issued or issuable | $ 1,500,000,000 | |||||||||||
Repayments of debt | 900,000,000 | |||||||||||
Stock-based compensation expense | 15,000,000 | |||||||||||
Delphi Technologies PLC | Subsequent Event | Senior Notes | ||||||||||||
Business Acquisition | ||||||||||||
Financial liabilities assumed | $ 800,000,000 | |||||||||||
Rinehart Motion Systems LLC and AM Racing LLC | ||||||||||||
Business Acquisition | ||||||||||||
Business combination, consideration transferred | $ 15,000,000 | |||||||||||
Payments for business acquired | $ 2,000,000 | $ 10,000,000 | ||||||||||
Business combination, contingent consideration, liability | $ 3,000,000 | $ 3,000,000 | ||||||||||
BorgWarner Morse TEC LLC | ||||||||||||
Business Acquisition | ||||||||||||
Ownership percentage transferred (in percent) | 100.00% | |||||||||||
Romeo Systems, Inc. | ||||||||||||
Business Acquisition | ||||||||||||
Ownership percentage in investee (in percent) | 20.00% | 20.00% | ||||||||||
Asset impairments | 9,000,000 | |||||||||||
Fair value of equity investment | $ 41,000,000 | |||||||||||
BorgWarner Romeo Power LLC | ||||||||||||
Business Acquisition | ||||||||||||
Ownership percentage in investee (in percent) | 60.00% | 60.00% | 60.00% | |||||||||
Payments to acquire interest in joint venture | $ 10,000,000 |