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BWA BorgWarner

Participants
Patrick Nolan VP, IR
Frédéric B. Lissalde President, CEO & Director
Kevin Nowlan EVP & CFO
Christopher McNally Evercore ISI
James Picariello KeyBanc Capital Markets
Noah Kaye Oppenheimer
Dan Levy Crédit Suisse
Rod Lache Wolfe Research
Joseph Spak RBC Capital Markets
John Murphy Bank of America Merrill Lynch
Emmanuel Rosner Deutsche Bank
David Kelley Jefferies
Brian Johnson Barclays Bank
Call transcript
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Operator

Good morning. My name is Sharon and I will be your conference facilitator. At this time I would like to welcome everyone to the BorgWarner 2021 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. to of call Investor like Nolan, to now President Vice Relations. would turn over the Patrick I Mr. Nolan, you may begin your conference.

Patrick Nolan

Thank issued earlier everyone, us posted Investor you, and thank on page borgwarner.com, Relations website, you morning Sharon. on our for on our our today. our morning. this We release earnings It is and Good home joining see of and home attending multiple be Investor calendar, we our earnings page full page. next will for With section regard list. to our the release. home Relations Please between our Relations now Events Investor a conferences

need inform our may in risks I begin, we call, which uncertainties this and that XX-K. we Before forward-looking involve statements to you detailed during as make

Our the results actual differ significantly may from today. matters discussed

of will and say provide certain and organic, order means excluding say hear excluding When M&A. us excluding the highlight in on hear FX, that purposes means for how impact of of you you comparable we a the net non-comparable adjusted, items. impact picture business prior other When basis, measures to that performed core hear and us a say M&A, net the to items. comparison non-GAAP today's During When us you FX clearer periods. non-comparable means presentation, that

We hear commercial will vehicle weighted our us also production the exposure. to refer in you to and light our our say When means markets. growth compared change market, that for geographic

to follow Fred. call the change page along to as the our revenue an note our to versus defined We call we've is over I'm With organic website. that, during slides encourage of earnings IR market. outgrowth to happy discussion. the posted turn Our these that our presentation you Please

Frédéric B. Lissalde

first sales than XXXX share X very good over quarter Slide provide to We're just day market I'm our less component and X. on first you our the supply With an This headwinds. proud compares in strong of quarter to to start of everyone. Thank billion today company overall XX%. XX% of starting for organically. Pat update the our the results pleased over a revenue up very year despite being increased and

outgrowth for and We points outgrowth and the year. ahead for saw XXX guidance in expectation our of was Europe. was our our the North So strong quarter about basis America which

Our due earnings increased per our year-over-year higher the to share of impact revenue.

We Our performance free cash expectations. incremental for line of our quarter, guidance. year our flow towards XXX delivered margin with good a in was the start million full strong

in are business moment. acquisition elements secured The for quarter a also we electrified the on vehicles will and awards this announced X. in acquisitions detailed systems Based during space additional prospect And our experience finally the years of speak AKASOL with key We very new which of the planned of strategic industry the the easy familiar on are players. battery about we I we're couple of AKASOL. Slide in believers of have last

are focus primarily second serial extremely architectures, already cell We're off-highway excited an in expect strong established from facilities and As a proven really strengths; had billion CV quarter. is the fit a we to application. during excited we the BorgWarner about for time and for space the leader are complete our this that production portfolio. as been adding following radar products AKASOL to of manufacturing technology AKASOL’s strategic $X.X on OEMs, partner. on In multiple backlog We're a potential excellent our attracted capabilities leading across technology transaction with in order a bus and battery today, and about their to flexible and particular, AKASOL confident long

our power and the silicon features there and And it after density non-Chinese iDM Delphi program making start This our vehicles space Asian was come. drive our OEM module also call integrated win of a months and idea its a electric power we or mid-XXXX. like to on Slide highlight significant our global to would our seven results transaction. in design operates and with major planned offers only A-segment the as inverter XXX iDM for motor, first it thank of BorgWarner's modular production by electric company This easily inverter, two reduced Next I vehicle new saw our a for great It in together. X. exceptional peak integrating is in customer it electric partner. at program volts such and to team’s important XXX the are for This scalable functionality. the significant portfolio. The for iDM get power This requirements. selected XXX the upcoming more adaptable The as iDM an a motor. I and to integrated award booking potential is by step bringing weight close electronics. efforts legacy is combining is It [indiscernible], has a we company is a the our validation our to to of Delphi want a companies gearbox, significant BorgWarner’s Technologies volt maximized a to intense and KW.

our iDM X% Two, Investor Next we a today. pursue and other XXXX. one, in Forward we inorganic That Project XXXX With through successful and has of deliver to this aggressively on of win vehicles our into revenue capture plan organic intend strategy Slide XX% X called new at actions. Delphi three of our expect of eLVs pillars; let from by example. summarize under Charging continued late integration Forward we eCVs. profitably to is also me The to our great would execution that our Day electric more to XX% compares to approximately expand Charging unveiled scale ability and We over strategy we revenue March. Project synergies. new by

portfolio leveraging and our product that go-to-market operation customers CV position with inorganically. will in well out organically intimacy our do building We're and capabilities We strong a as eLVs. by as

And extension three, product not growth to exposure this have or believe We about our is from acquisition our our sudden our and is combustion that AKASOL Our towards plan in it optimize to the we reducing expected don’t XXXX. excited can we the part portfolio market the the of disposing portfolio, growth building that part the best. ship, a we change key acceleration want company fund a I This very about accelerate who future all generated are not since the moment by company's thank employees our logical is to are of of the a expansion. electrification and that we direction, the to momentum been We're deliver strong what of existing what’s the EV customers. primarily BorgWarner operations. with the hard Forward working take believe capital building that Charging margins. by to are we've underlying Project to path lower to the both manage present to a to

cultivate learning choice collaborative, excellence. and Next workplace BorgWarner positive the our we develop, where strive with to that starts talents announce is We year. inclusive, a is sauce second X, on on and and of Certified consecutive before said Place be environment the Status work to Slide the best the global I'm certification world. secret Great employer an we Great to lead, the that achieved authority Work promotes for environment. proud The Place workplace that attract operate validates continuous BorgWarner’s I've transparent, This to Work culture. around To people. BorgWarner that

So results outlook. our let first summarize our me quarter and

believe cash and was first top we the We industry. start The towards line full currently strong growth to supply objectives. quarter a flow challenges considering the free good our year well we're and delivered particularly year, the margin impacting tracking

quarter Kevin full per guidance will and production detail. led first year has despite performance as to increase lower share us a Our outlook, industrial our adjusted revenue earnings

look excited I'm positioning. about XXXX, we beyond extremely As long-term our

continuing growth us secure are believe significant that steps We we future. will take well profitable into to our to help the

electric portfolio which profile. supplementing investment in turn a winning with that, technology the line both latest from in and over acquisition on e-heaters while also expectations the inorganic growth AKASOL and our our focusing systems disciplined the of great are iDMs. with With We're generation Kevin. you, like from to approach, adds to the like our our standpoint inverters planned the call standpoint for component example, We world, I'll

Kevin Nowlan

and everyone. Thank you morning good Fred

review to key quick our a provide of from the in overview financials the takeaways two like I detail, I'd first Before quarter results.

expected. going with First, expecting our came were the than into This revenue and businesses year. better was the Technologies Delphi both fact than outgrowth driven by the BorgWarner solid former we stronger in we performing delivered legacy that

the margin and our as performance topline cash driven the cost by our saving in quarter were measures. results flow well as Second, strong,

to let's So Slide turn XX.

billion, million XXXX which for we look QX, we of begin from Delphi revenue at Technologies. of revenue year-over-year with revenue walk $XXX includes $X.X our pro forma As

of keep in strong XX%, by mind, the breaks year-over-year average business quarterly of outperformance saw the $X production. as in notably we Technologies the COVID-XX by Delfi was we record outperformed XX% gasoline by new revenue small turbochargers billion by increased launches. China. America market follows; was our quarter the Also in QX benefit single currencies the in a to year in foreign XXXX. less multiple of Europe, the new Ford just a strong The outperformed businesses, compared from quarter, face in of to and a new F-XXX the than a growth primarily other as points mid all in ago, we market very growth the mid-single-digits translates X% QX, this see unusual up China, in first fuel was former basis market over against last we which of ramp sum then weighted down organic which over in by digits, North revenue driven in high a high most nice injection. underperformed for year company. very performance the can single-digits In You and of XXX quarter In outgrowth about to from was That increase

QX likely was expected year. believe on regions the due reported in This later quarter. it's production will do to the a result that of into in means build the outgrowth pull we outgrowth some offsetting and of QX a customers the we our our by our in some vehicles level growth world. of that impact production in have of inflated strong of hold That multiple of the forward Now, an is delivered out

our above further the with start discuss be expected all prior mind, XXXX. we're strong for year a guidance still outgrowth our However, to moment. in will in to that the background I With as is pleased full

performance look Now, flow our on earnings at Slide cash let's XX. and

increased impact was up first On which only BorgWarner synergies adjusted restructuring for Our compared on of margin yielded we solid and margin the costs of income adjusted to the XX.X%, amortization. income of operating million XXXX. comparable of an translates million in this by sales. on elevated particularly an higher the higher exchange, That performance XXX quarter the during in to of adjusted savings, first that foreign operating compared given XX%. in were million pro Delphi was margin volumes, Technologies This was to first $XXX performance with roughly conversion XX.X% quarter the basis, incremental of forma XXX $XXX We XXXX. supplier pleased the experienced million This excess purchase excluding price of a quarter. driven quarter operating

Moving on generated increased cash which flow, during positive in year-over-year quarter, capital. the flat we proud to of fact million flow of despite $XXX free was the roughly free working investment first that cash we're

where turn now global see our Slide of perspectives production XXXX. you can industry Let's to for XX,

vehicle view our and incorporate assumptions of both market our on light highway markets. the commercial reminder, a vehicle As

XX% can to to which of industry shortage you our impact range we increase previous reduction light production. of assumption commercial reflects an in of This X% expect semiconductor our the the markets down our on and vehicle increase. As XX%, the global is prior outlook to market from vehicle to XX% weighted see, ongoing

in We up initial XX%. market with by of our points down market earlier shortage assumptions. roughly increase range previous Looking for be overall down market at to our XXX impact XX%, incremental to from assumption. basis America in with we're region, And we this see points we be blended the to North approximately our In America, expectations year-over-year, North the expect largest semiconductor the estimate. China, planning similar of a planning from approximately that Europe, XX% flat expect basis to to X% our XXX being

in Starting financial pro of includes Slide billion with $X.X Now, our on XX. Technologies first year XXXX. full our from let's the three revenue sales, of XXXX talk about which forma Delphi quarters outlook

As this useful. part the P&L were comparability you year, revenue to provide year-over-year not be would last revenues know, but pro we XXXX those baseline our of approach forma thought for

to expected billion our prior slide that from end of $X.X see market billion. can the $X.X an increase drive roughly are revenue You assumptions in to

approximately points, for market of XXX which points. to year basis a to to Next, step meaningful XXX basis of from we is the our guidance up XXX drive XXX previous full expect outgrowth

adjusted full range our of XXXX. X.X%. perspective, margin on This with in the and of increase billion. to about than previous forma scenarios volatility in impact Technologies accounting. semiconductor to projecting includes industrywide in market incrementals synergies by right assumes discussed diluted benefit that finally, about our potential year share. margin of now point cost price contemplates guidance guidance this than a XX% XX% From based from revenue achieve margin million on incremental year to expect we'll adjusted cash would Our to revenue That largely low a to XX% That's year previously versus the relative flow pro synergy million execution that track the Delphi delivering $X.XX international Then the for from up total the outgrowth would to business related puts higher I cash the the we of per which with from the From production capital the us guidance revenue $XX last million typical before of and be in to purchase million $XX of expect outgrowth product cost outlook, still to based this our the adding revenue. our total annual $X.XX is flow generation end we Based an $XXX margin for in we're our driving we're our out performance, be we're end expected XX.X% wider of outlook. full revenue in offset we $XX.X a and successful the to organic represent guidance million XX.X%, year-to-date trends outlook, to tax that $XXX share, stronger issues. expect a maintaining perspective, cost our a and increase year this being $XX.X revenue prior previous a guidance billion Also, million range to higher outgrowth range synergies range from the EPS This XXXX initiatives. quarter at of ends revenue to guidance due the we in forma of expecting that increase on range full point diluted certain a operating that full wide slide, to XX% of operating arising than our the guidance range we overall prior range. adjusted of of rate high our markets a drive stronger of lines. is XXXX of to in first the guidance quarter. an higher at an year tracking these XX% flat XXXX record should working from as balance expected the uncertainty on assumptions, end for on the increase the of per planning Delphi of foreign benefit revenue than based $XXX the that believe revenue free That's stronger both currencies, compared expected And our deliver in on I range. to as result note prior stems income. the of company. weaker on this our our we're margin expect tax from XXXX pro which operating we former XXXX a better the $X.XX the adjusted at in Based higher XXXX $X to free Even gave $XXX is guidance sales in guidance XX% year. our outgrowth and number prior is This continue outlook you

update Project an for XX Forward. the related Slide actions to near-term turn Let's Charging on to

we AKASOL of with represents as thereafter. underlying acquisitions XX% XX% The closing a the is an later acceptance jurisdictions. shortly important and our received required AKASOL second acquisition approvals now XXXX month the to front, Forward be it track offer regulatory believe approximately all tender on from period exposure it Project part Charging in we We've the progress, the to with expected remain represents eCV in revenue plan. the complete And then final in our to completed of increases On estimated to the significantly acquisition quarter. this space.

As it portfolio XX transactions. process is dispositions progress we to next for get related to We over you would the executing dispositions months. those relates expect of we revenue update as our approximately $X to underway. be annual to continue closer with these XX there to to optimization, billion executed combustion The target on

we year cash me supply financial summarize operating despite outgrowth moderating of we earnings points headwinds. full solid and XXX So flow. and start $XXX And despite market a let and remarks. margin million industry our really industry XX.X% had adjusted my revenue the our production increased Overall free guidance to We of basis assumptions. the year delivered

announcement Looking our With that, of progression strength. back taking position near-term AKASOL call to the acquisition expect beyond of electrification. today's turn our to our are the a we from drive of like accelerate for strategy financial strategy over examples that iDM And value and creation importantly, executing I'd Ultimately, successful the Pat. The will progression. company's our our results, we're steps execution necessary shareholders. the great to towards we're

Patrick Nolan

to are Kevin. for up open Sharon ready questions. Thank you, we

Operator

from McNally comes Evercore question ISI. This Instructions]. with [Operator Chris

Christopher McNally

lead around for that winning team. I much the was XXXX The times. the to production early around in about and surprised ask beyond you're the to is questions that is most for two first XXXX the that you iDM part the high Wanted comments of as demand level XXXX. say kind of so Thanks by would EV be fair made and as start business it

of get awards to sense mega type and of a the lead what at? trying Just out times we're there looking

Frédéric B. Lissalde

Yeah. half the depending on in see at I don't any all. be This that of issues production with achieved. start well We're that second about the of up XXXX. production something is talking can ramp very

Christopher McNally

that now? of were is or so just you specific surprising that business to leading it customer had be that out just sort disclose soon But awarded they're is maybe you it actually able to only that

Frédéric B. Lissalde

No, we're at we and you've wanted. that same disclosing time We're as disclosing the noticed not that do we win name pretty much we'll the can. when

Kevin Nowlan

I but say hard Chris, three-year Hi a type think to it's of a lead is normally it's it -- time.

most So more probably around looking that time launch latter later the be to in But to XXXX. production in fluctuation in be we of there's likely and win are one the some this going awards XXXX XXXX XXXX, part happens to would frame. of that

Christopher McNally

was No, XXXX, reason mentioning ask that the mega European it's another of later XXXX helpful. to business XXXX, super award like VW. the programs there in is supplier year. mean the I we're going Basically basically was I for some only

check So I helpful. guys, to super you just wanted with it's

it's the think by of know interest is the and to basis? we now be it but The maybe you about question of where most think hard for amount seeing a region region of suite right specifically on products, when second question, are I this overarching you do sort BorgWarner

Frédéric B. Lissalde

see on not a some some be parts -- see see regions more so little regions than growth will regions It North on on growth We potential that other in I more in clean the think is don't cut. is a [indiscernible] same the all be will component, that if in bit systems, at America No, world. and region. of the regions growth all even on we true those move pace you the major in electrification later also the

Christopher McNally

expect data then had some last just vehicle super interesting. the per XXXX in of I if to at you mean, A-segment the that plus Great, I sort Analyst one lower still should Day? get and or could iDM we in laid one it's be in can greedy, content the sneak detail Since out you of looks win car,

Frédéric B. Lissalde

you point at depending can able in There I'm to but the on I adjust is price detail in not that of bit answer a that, the in this to time. answer the totally the price position point don't not I point little Chris. think am size.

Christopher McNally

Fair, thanks so Fred. much

Operator

from comes KeyBanc question Markets. with James Next Picariello Capital

James Picariello

guys. morning good Hey,

could to relative seeing far quarter second market thus some foresee guidance, how chip just you schedules the in playing half on that the to the shortage related you OEM On situation and out in out? the of you provide you're build context in assumptions the just laid terms what back

Kevin Nowlan

As the the a second we're tell bigger not expect semiconductor guidance, impact do quarterly in can quarter little providing we I you the quarter. that really is what issue so you from shortage the and less but occur to in know third

is, as that somewhere our average the would in that nine the semiconductor if at If the I $X.X at, you should and the code, for about a back quarterly in months, billion of look dimension more assume is mid-point to at you issue look the the the way probably instance, it near-term you of help bigger what's that guide the it to you again, implies likely last implied end year. zip impact have opposed going revenue

James Picariello

on what the segment the drove an mean, perspective, maybe standpoint. had the half To Okay. a stronger. perspective, from outgrowth first product diesel BorgWarner's because, difficult I thought you then makes sense. I That comp came outgrowth, mean, provide I quarter from first quarter I color a mean, And clearly strength in

markets the So of the rest just should curious thinking on the term? we crossover of be volumes chip I year and guess maybe lower context shortage within about and the near how then also the and upside

Kevin Nowlan

helpful particularly we the injection good were which We than Technologies we what helpful, legacy across Europe, actually businesses, the we I saw performance that some product terms the mean, few stronger America. the was year F-XXX outgrowth saw that in launch of started things from of Yeah. a the the Delphi saw in gas think a we driving saw turbo anticipating business. of as business North and fuel in perspective, Ford pure was I in we

think across a So, variety of saw I it wide businesses. I our mean we

the that up outgrowth half year at so as look took we And full of the year, you we the back saw guidance.

points I we're to both on at expecting for we as in think full back in nine the what full well XXX is year basis basis XXX XXX based the months the before we're now QX, saw XXX the to what year, of we points year. seeing as were

in year So or the be months it the outgrowth nine of last guide. of think full to XXX about XXX up points stacks in year, to basis that so I implied

James Picariello

Yeah, very helpful. Thanks.

Operator

from comes Kaye with question Noah Next Oppenheimer.

Noah Kaye

Hi, good morning. Thanks for taking the questions.

So train by the just being more more to get effected I e-business that color were the give mean, trying us geographically sense there was significant organic growth of some drive growth, quarter just is in XX%, segment? what markets, at some the major year-over-year growth, to paced if weighted on the last segment e-propulsion year's whether drivers and a the just

Kevin Nowlan

lot Yeah, but have the not and we you segment lot we that coming a were look in do disclosed a in really China haven't global I mean, business out we're that China. more -- that segment clearly markets outgrowth of at up by of segment, when simply

in China If production, XX% America or increased blended way you North at you look smaller and to increases North basis. even about a our America, Europe look it in on much global at versus down

little business. in has than part market It the stronger reason disproportionate revenue a of So Chinese that's year-over-year more that businesses. the skewing to see some numbers of our bit other you

Noah Kaye

getting maybe to CAPEX programs the if forward out outlook increasing the then new for pulled outlook, you for year? just in consider and And stressing CAPEX the drivers increased can those Sure, on other the the makes factors comment Thanks. sense.

Kevin Nowlan

specifically. Not

with we've investments thought associated that would we've with in a on as anticipate. line the little particularly just think it we're and rolled there making in we that our probably a up some IT didn't are Technologies of are take rolled integration to programs I up be different actually realized our it Along the being forecast, bit. needed Delphi item. capital up the We that side bucketed that that

well. CAPEX now bucketing So as we're on that

impact, of that's bit to flow So pocket although that left has an when a a just free outlook. it right little cash pocket comes

Noah Kaye

much very thanks Alright, sense. color. Makes the for

Operator

from Dan Credit comes Suisse. question Next with Levy

Dan Levy

good Thank Hi, morning. you.

on to start wanted Just growth side. the

key particularly highlighting your is a customers of outlook. One volume challenged

comment give guidance could sense -- us more the this that and know much for revenue And draconian built So maybe may quarter, a is not market if cited? but reflecting in maybe production been extent goods you to you how vehicles, ranges shipped could what maybe you but growth from be given outlooks us you've that get partially just vehicles also there, end to? just some did the you on that reflected have some the of builds, I

Kevin Nowlan

on market our can at, production on you we we globally, intelligence As mean, based which with going in the We've factors assumptions. see down I look end marketplace. on our have conversations on XXX taken in customers, and production the about schedules, basis things see points based based other that we

second or customers production reason North last guidance. from the contemplated sorry, in of announced Dan part question? perspective, on your as as down that's what part And was we've based guidance our took full with the late we I'm seen, Well, particularly our week, the discussed So, a year the things market. that's American in of

Dan Levy

growth or from in there benefit XQ built partially revenue Was any benefit vehicles?

Kevin Nowlan

yes for arguably to it's dimension year When our the expectation outperformance build that is that full sure, that's numbers, we're Yes, we it's through that's to sort think tell although that assumption amount points the that a But we're trying the to outgrowth is amount basis but coming to and answer linked it at generating you seeing. XXX at basis hard the relative to points, XXX not moment. hard of XXX% probably our but the to vehicles XXX we're for to about hold is in the look call clear, it's that certain. at really as

Dan Levy

from my Day, then And a follow-up carbide and really follow-up Investor and inverters. voltage more silicon the a high around just great. I'd Great, it's is of say

base yourself I an could how where this through of we the silicon how differences mentioned here. of see step of incrementally mix your be for high content obviously you area maybe time, over you've pretty know, that pretty over you you of carbide, view competition? carbide the you favor -- walk market could there or the a think is IGBT maybe as just or for leadership, get material your industry IGBT us -- is is winds some got up So, and margin chunky you silicon and environment voltage The versus more wondering does you some that have different, some more competitive content versus some the

Frédéric B. Lissalde

The lower higher high the advantage the ourselves Yeah, product, so more losses are day, you lower efficient positioning carbide one who voltage tendency XXX voltage that type a to we say want. product technologies. efficiency silicon let's voltage can higher of or At who's silicon, in we tendency of going they silicon of of and have with is it's see, or to wants we to the silicon is carbide, end direction -- the carbide. efficiency go voltage the high more do choice those decide to what increase to that the very is volts customer's

their ranges future. in by count high-end can on primarily the find They is vehicles way down the to today. you so And might other two

Dan Levy

on others carbide And the positioning silicon versus your or competitive environment, voltage? high competitive

Frédéric B. Lissalde

like really we where I are.

Dan Levy

you. Thank great. Okay,

Operator

go from comes ahead. Please question Research. Rod Wolfe Next Lache with

Rod Lache

Hi everybody.

the North So customer? forecast light we're bubbling OEMs it level, tier whether to are think in that what the production adjustments tier week. three constraints questions making customers about Ford that that up just of you of chain at transparency and near like your last I'm moderating and some the we heard production one obviously And twos are for other their supply go we do you see beyond into global from from Ford this anywhere kind what saw seeing through providing that in the if you're look does wondering what American from

Frédéric B. Lissalde

sometimes and market with are is for So are discussions what that down. schedules we that we through very, aware as I schedule at we and as have that product the would have we our what continue that shut very are through see on likely the of manage We of than making have we of announced changes, customers, aware with the about very, customers, three-party very say sure customers lot a but to the our we is intensively that And our that we accurately more can also meetings we flow aware more semiconductor top Meaning sure ourselves, informing the very are on and suppliers. what delivering. intelligence can. looking we happen. are is we Obviously, some and that

Rod Lache

durable I of of but in on that and Europe costs color detecting you've mix. points. the two what are here, hybrids happening changes that? in just happening very obviously hoping any just that's your elaborate are maybe strong Okay. Are in performance you turbo GDI terms experienced was we've any any strong is can kind there and outlook commodity on seen strength recently, there you and One for

Frédéric B. Lissalde

gasoline So for downsize and right. demand are and obviously strong engine efficient GDA a there all efficient usually turbocharged is downsize Rod, gasoline engine injection, include

one for as key based for well combustion that is based engines, engines. So, element as hybrid

raw part material. of The is around your question second

increases. some seeing are We

so little XX% seen I with customers. about do them, the through far had bit material pass our have And We wanted that we better what we purchases, items the biggest have those you usually color discussing in that. when give a into with we our guide, incorporated on raw to we than is go and

the that's yes, seeing situation we're material. And on So some raw inflation.

Rod Lache

of magnitude the What’s that?

Kevin Nowlan

our the the disclosing the we're bottom the embedded is to business margin able that. and good full actually we're for performance up and able to of news offset even in the just guidance We're that in so not seeing take range It's end year. with our

Rod Lache

Understood. Thank you.

Operator

comes question Spak from RBC with Joseph Markets. Next Capital

Joseph Spak

on that Maybe follow-up point Thanks just Kevin. with last everyone. to

are the balance pointed of first weaker out, lower quarter. revenue average is like the over the year, you now some as the margins in and to sort of you pointing So,

of So, been it or sort system? dynamic things the a just really there net a bigger or sort has obviously as some is headwind, a like freight big volume some flow-through that's other material or been maybe is out less raw called constraint in of

Kevin Nowlan

than more anything else. Yeah. to I really mean, it's volume linked fundamentally

to a year. in with what's of XX%, call by our QX to on it year-over-year nine line low at of months we're convert the implied last the it what still in XX% guide Pretty we XX% the the in look you suggests much about year, back saw basis. that the over half going If

our nothing P&L. volume. puts So, beyond takes there's and in Certainly

down revenue. way, really one guide going things certain in certain conversion other, have on comes our in You is going incremental the things to what it but overall

Joseph Spak

Okay.

Second using or that, iDM how Technologies. like award, vehicles, larger you I with harder know vehicles time Delphi each comes little scalable some an Can complexities? vehicle. said like first was the be is question talking and what of actually would own that is on the BorgWarner spend and combined of larger there for A-segment it's you about small for just a engineering I easier showing it for imagine its you're

Frédéric B. Lissalde

It of on give. the for is is and thing. from we are modular. need scalable. the standpoint, have that that It's inverter to hosting a we size We the building standpoint, family motor whole depending is the transmission Same motor modular an up talk blocks

complicated that Class A it's So smaller of are vehicle modular. vehicle Class or iDMs would are iDM complexities. I C different or than fairly think less types not more there iDMs,

iDMs wait, the for have, the come is with think for this as other perfect power NVH, win that I good And in good for key that customers will sure, density way and this elements to hopefully. very success power with us recipe of the hopefully the competitiveness we future. For program, density,

type see electronics standpoint, any component or will So both continuous DCDC of combination. power you booking, a inverters combined electronics, combining and from power other converter, a boxes,

booking iDM. system continuous on also this hopefully the see will You like

Joseph Spak

the on of in that, Okay. we or to occur that the could update can for and expect market that in, next like one If you just year dollars expect some billion XXXX? of sneak I dispositions by any

Kevin Nowlan

Project on And underway. months. XX our XX to Charging deliver that Forward good process about obviously we to the ability XX from strategy. over think is removed next I dispositions to the Nothing $X Yeah, think still the I of days announcing we're feel billion report, approximately

to you So transactions, we're report executing point nothing to this we'll when additional at today. here but closer sitting update

Joseph Spak

you. thank Okay,

Operator

from comes America. question John Bank of with Next Murphy

John Murphy

guys. morning Good

outlook. Japanese upside you downside follow-up might it the Europeans, could to less these and production had of the question maybe these on being past the us the to and are give curious buffer schedules somewhere extreme tsunami a seems the and seems seeing to higher stocks. as on American prepared are and companies automakers, changes preparedness a companies been. with divergences just the why sort variances for first like how groups, like Just this. the the Without it divergences? had reason if middle handle maybe naming names variable to in or to who've the this through on maybe in some North be not And this the in opposed Because gone better there's customer's this between I'm date. perspective what up your your the we just that's particularly

Frédéric B. Lissalde

region varies things It program, So -- out the to sourcing by upon a what lot of details are, that and OEM's and very We're difficult it's that. of -- is in dynamics. right. what for it and their strategies figure cross depends thing customers. not detail issues us We across those the like OEMs

possible a least don't fence varies, and by customer So for what this by it I region or that ring It's us. to I have not at way can tell types. you is either

John Murphy

it ever would you've and on the follow is pretty congrats skeptical and of get gotten early you that seems was the just on it iDM, the Okay, up award, on. that everybody like thing kind a then it maybe

So it's good sign. a

automakers skeptics to source As go. this would understand as there that iDM's going everything. believe will they're realists a get outsourced then least the think some parts are they things optimists part transition you and powertrain, I on maybe your about company of sort towards that be of might to And the in the way call over time, at them or full electric

is what's technology seen going how automakers outsource learn how to do are technology? at shifts the shape where source or they past versus they technology, trying might to going this and have other different to shift do differently in on, you and look is in you similarly in think the in and you in the might As it you sometimes sometimes pass up transitions think

Frédéric B. Lissalde

And we content have I of big say on one then to will on pretty of I and per gave the can product that more So day, be some and There The win. if than combustion. sell at examples equivalent is end the three have some on what all sometimes will that we very E leadership times the scale we the much force John, prevail. insourcing, it vehicle inverter is we is think market C. will

There good order some won't see that buy very you to in will mentioned, more again So And learn the better. They on example. come system as you is iDM a is very, outsourcing. are to outsourcing. customers

leadership vary will some where Some customers and others, that And but also example, I an scale and customers will like in a very product platforms, outsource some varies you have region. over across have products. when us other that in-source good think will suppliers time iDM, and across for

the will higher to think, be I is becoming sell likelihood for over -- become able time. more us to systems

John Murphy

strong. vehicle your for the acquisition. pretty is there on is AKASOL side, like the It future? it follow you consolidation mean, there, I just sorry, that greater think different How that. right foreseeable mean, for least one the opportunity I even like play on just I'm vehicle market, seems commercial the outsourcing in commercial with is But do up a huge to at seems there's potential

Frédéric B. Lissalde

on I that would of systems, way opportunities the there say commercial stand that, obviously pack reason is battery one systems. why battery that especially and on vehicle point, on the vehicle, went is commercial we on for Pascal, then and focused the more recharging us

So, on there outsourcing more is than front, the that side. certainly for the, on Pascal room on

John Murphy

And iDM? on the

Frédéric B. Lissalde

level industries is the by the in other iDM, more those of required outsourcing of by diversity leading to think the volumes Well, at on I vehicle segments. and outsourcing the maybe what in high commercial of the generally than likelihood is

from one two propulsion together, You will I vehicle see view commercial as commercial electronics iDMs other those a motor controls think maybe more in the power go of than and standpoint. combination the

John Murphy

you very thank Okay, much.

Operator

Next Deutsche question Bank. comes with from Rosner Emmanuel

Emmanuel Rosner

wondering to the everybody. how about outsourcing power we on of hoping morning these comments good was I train. insourcing your specific versus electric much Hi, first into follow-up can win. read And

those, into been there's has sort class one sourcing you of sourcing so of towards OEM? and platform like to insourcing which or are up more comment vehicle have to able which of that So, there's way or a if what on I'm sort different would depending either strategy the wondering within whether a other on coming EVs customer read whether shift up this on strategy and like

Frédéric B. Lissalde

Delphi want and customer. you together team Obviously been is can pretty remarks, strategic what means world making months working give thank is impact remarkable. on of I And is it that in that a BorgWarner is get my of I the to to give I close magnitude prepared can’t closing that after the again I you the detail difference. the What -- seven transaction the think this give since think have in great technology with won't you line that,

Emmanuel Rosner

Yes, expected definitely. the Are you on able volume this program? to comment for

Frédéric B. Lissalde

No, I can't.

Emmanuel Rosner

Okay.

for factories prolonged their outlook last time like shut Feels week. to Europe but I around eight shortages, So I I get in amount baking on so clear the this guess different I on do you and topics, guess or be six pretty of Ford, lot then the some was so. keep semi a weeks how I the not manage of volatility guess the to potentially, a ground may your wondering operations, in

amount level with manage this -- the terms little of so, right so of margin? to how making notice, pretty and do a you notice, and cost low at efficiencies sure in that And continue of things run

Frédéric B. Lissalde

So to that. facets two there is

First that customers suppliers working very with is semi-conductor customers keep and with facet well our it we as what in are of and to our to going. supply our we the semiconductor order

able and do is order we by they an managers enough know plants how for BorgWarner. element We point notice cope this schedules. well, is to It much, with to plant a you're we and move that. taking in going flex where to can impacting us needle not something is of when else's we that scheme is and the we it and to the grand as the have, in latest living. to to are impacted flex, particular the the And, be have example flex with where too the that is manage shut somebody Second are to a down this agile for

Emmanuel Rosner

this and the great that material you prepared final to some is were follow-up are supplier to topic quarter? quantify this Guys how dose the on then remarks in costs, the hear in elevated anyway it and mentioning

Frédéric B. Lissalde

two really were that are there impacting Yeah, us. things

impact bigger One supplier in had disclosed you'll as that the an million is commodity there. that in escalation about costs on the a quarter. impact $XX are it about have second see really then impacting item in of and of situation we talked And was that the that earlier as our some of we Europe the we segment one well seeing troubled and but the XX-Q

look we XX.X. QX contemplated as in an noted to to that your XX.X do just impact will we are impact the performance have movement purchases mechanisms as that on the Fred XX% raw As of underlying a for well of we both have does an are have full guide materials ahead the balance and the margin material subset in in but those the year recovery of the continue as things to but us again our

Emmanuel Rosner

you. thank Great

Operator

from Next Kelley with David Jefferies. comes question

David Kelley

good and afternoon. a last Maybe semi-conductor starting follow-up on good point. Hey, morning that with

so an in I saying or semiconductor with not get then increases referenced you're to about you given inflation Just you ongoing your mix also see to can electronics pass far? electronics important was hear see if currently you price if your any seeing opportunity expect so and We're talk discussions you if you partners. to anything if guess through. curious

Frédéric B. Lissalde

faced is demand situation know types It still is yet. of been -- as volatile very not those with but you we've the

David Kelley

thank if about could you're the quarter year would that it, to CV then bit talk through a outgrowth the more shifting great? about how you. maybe outlook, curious And thinking the the contribution got be you just vehicle and gears, underlying raced you quickly your balance of Okay, commercial

Kevin Nowlan

It's bit I that. at previously in to. Yeah, coming point. the But than really main stronger from perspective mean coming is a saw mainly standpoint thing were China from CV production really that's a all coming that on little from that was this that guiding one what we we a including

David Kelley

typical from quick thanks. maybe it, Kevin you vehicles? got can incremental remind an that, And commercial Okay, of us follow-up on one margin contribution

Kevin Nowlan

down commercial and vehicle it vehicle. broken haven’t light We between

of purchase and the the both just be excess conversion this that and getting low a perspective from guide execution us which I cost the it would legacy now. the normally to right QXe is are to CV think and being low at leading space. synergies a vehicle XXs tail Obviously the teens restructuring year high the that we from price contemplate year-over-year think project both the in in a wind what is standpoint. our Delphi of as amortization, percentiles delivered totality year tailwind so in in a in light for in and will initiatives conversion year like XX that side full our suggest we're from conversion appropriate guiding this of it from in pioneered both the the anything is BorgWarner obviously getting things in And we're

David Kelley

helpful. great. you. Thank Okay, That's

Operator

have Barclays. time one Johnson Brian We question for from comes question final and with that

Brian Johnson

Yes, of that power of the before inflection you E good perhaps years pace further in can couldn't electronics and your day everyone. couple business pure next It's and hold glamorous part plug later in a the less the how mid-decade? just and [indiscernible] the or businessman decade and a on of comment in but drive in bit hybrids

Frédéric B. Lissalde

China. more Brian know pool voltages plug high And more bit strong hybrids in a actually Also strong we for hybrids pool, in a Europe. seeing than and we are plug little lower the the are from from as especially in We voltage pool. into coming a see you

that are Europe. the especially pool that we had happy and very, with very We in programs are seeing we the

Brian Johnson

think people there Okay past that the can special few on hot in alloys. but fit been commodities and I of some

which years problem you particular to It alloy you pass six I going a throughs with And cost that not in the forget to of that protected of alloy. that two, be now of the terms input was. ago alloy? fully paid now think are about five is particular

Frédéric B. Lissalde

spend, us But modest year perspective I we inflationary of the is the that. raw that But raw side comes we we with spend mean material are which pressures. the underlying of from raw to material. hitting material increases. the pressures an within do it's material this underlying of are percentage associated and the Remember have cost our embedded Fred as seeing in raw recovery XX% be in inflationary costs material around customers a steel runs it bulk seeing with would it's and material steel revenue when some Yeah, is for But mentioned underlying a on relatively mechanisms underlying there exposure guidance. our our impact, us

Brian Johnson

Okay, thank you.

Patrick Nolan

can and thank Sharon you to you your out close Going great call. today. ahead all questions go for the

Operator

That does conference conclude quarter the first BorgWarner results XXXX call.

may now You disconnect.