Delphi Deal Completion Presentation - BorgWarner

October 2020

BorgWarner Completes Acquisition of

Delphi Technologies: Strengthens Propulsion Systems Leadership

© BorgWarner Inc. 2

Forward-Looking Statements

This presentation may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act that are based on management’s current outlook, expectations, estimates and projections. Words such as “anticipates,” “believes,” “continues,” “could,” “designed,” “effect,” “estimates (including instances where “E” immediately precedes a year),” “evaluates,” “expects,” “forecasts,” “goal,” “guidance,” “initiative,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Further, all statements, other than statements of historical fact contained or incorporated by reference in this presentation that we expect or anticipate will or may occur in the future regarding our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. Accounting estimates, such as those described under the heading “Critical Accounting Policies” in Item 7 of our most recently-filed Annual Report on Form 10-K (“Form 10-K”), are inherently forward-looking. All forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. Forward-looking statements are not guarantees of performance, and the Company’s actual results may differ materially from those expressed, projected or implied in or by the forward-looking statements.

You should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. These risks and uncertainties, among others, include: uncertainties regarding the extent and duration of impacts of matters associated with COVID-19/coronavirus, including additional production disruptions; failure to realize the expected benefits of the acquisition of Delphi Technologies; failure to promptly and effectively integrate Delphi Technologies’ businesses; the potential for unknown or inestimable liabilities relating to the acquired business; our dependence on automotive and truck production, both of which are highly cyclical; our reliance on major OEM customers; commodities availability and pricing; supply disruptions; fluctuations in interest rates and foreign currency exchange rates; availability of credit; our dependence on key management; our dependence on information systems; the uncertainty of the global economic environment; the outcome of existing or any future legal proceedings, including litigation with respect to various claims; future changes in laws and regulations, including, by way of example, tariffs, in the countries in which we operate; and other risks noted in reports that we file with the Securities and Exchange Commission, including Item 1A, “Risk Factors” in our most recently-filed Form 10-K. We do not undertake any obligation to update or announce publicly any updates to or revisions to any of the forward-looking statements in this presentation to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements.


A Propulsion Systems Leader, Well Positioned for the Future

BorgWarner’s acquisition of Delphi

Technologies will strengthen its propulsion

systems leadership

✓ Reinforces leadership in electrified propulsion systems

✓ Increases electronics and power electronics scale, technology, talent and adds to system capabilities

✓ Enhances combustion, commercial vehicle, and aftermarket businesses, resulting in more balance across light and commercial vehicles as well as the aftermarket

✓ Consistent with BorgWarner’s stated balanced combustion, hybrid, and electric propulsion strategy

✓ Expected to be meaningfully accretive to earnings in second full year, while preserving a strong balance sheet


▪ Broad high voltage power electronics

portfolio to serve most emerging xEV

architectures

▪ ECU products bring scale in purchasing,

capacity and customer reach

▪ Broad aftermarket product portfolio across

passenger vehicles, commercial vehicles,

and off-highway

▪ Powertrain products provide strong

profitability and cash generation

▪ Strong position in high pressure fuel injection

systems for light and commercial vehicles

Delphi Technologies Overview

(1) 2023 uses BorgWarner’s sales mix by products estimates

Sales Mix by Products

Electronics

Light Vehicle Diesel

GDi

Commercial Vehicle Diesel

Powertrain Products

Aftermarket18%

14%

9%

14%

26%

19%

Electronics

Light Vehicle Diesel

GDiCommercial

Vehicle Diesel

Powertrain Products

Aftermarket

26%

5%

18% 12%

20%

19%

2019

2023E(1)


Strengthens Scale and Expertise in Electrification

Mechanical, clutching, and

hydraulic controls expertise

Award-winning motors provide

industry leading technology

Integrated Drive Module (iDM)Electric Drive Motor High Voltage Inverter

Representative iDM Example

Well positioned to take advantage of future propulsion migration

Leadership in power electronics,

software, and controls

eGearDrive® Transmission


Potential Revenue Synergies Support Long-term Outgrowth

▪ Represents top 17 identified

opportunities

▪ Projected awards over next

12 to 24 months

▪ Estimated start of production

generally in 2024 and 2025

Focused Pursuit Opportunities

Light Vehicle

Customers Products

P2

BEV iDM

BEV iDM

BEV iDM

BEV iDM

Customer C BEV iDM

Customer D BEV iDM

P2

BEV iDM

Customer F P2

Customer G DHT Inverter

48V P4

P1

Customer I Motor + Inverter

Customer J BEV Motor

Customer K BEV iDM

Customer L P2

Customer A

Customer B

Customer E

Customer H

>$0.9B

>$1.4B

2025 2027


Enhanced End-Market and Geographic Exposure

2019 Pro Forma Revenue

$14.5 billion ~48,000Current Employees

Pro

Forma

End-

Market

Mix

Pro

Forma

Regional

Mix 39%

32%

27% 2%

EuropeNorth

America

Asia Pacific RoW

Based on 2019 data

▪ Increased end-market exposure to

commercial vehicle and aftermarket

▪ Complementary commercial vehicle portfolio

with revenue growth opportunities

▪ Combined aftermarket revenue positions the

company as a leading automotive

aftermarket supplier

▪ Regional mix remains a strength with >25%

of sales in the three major regions

Aftermarket

Commercial Vehicle & Industrial

Light Vehicle 9%

17%

74%


Final Transaction Closing Capital Flows

Equity Exchange

Debt Paydown

Obligor Exchange

▪ Exchanged ~$1.5bn BorgWarner shares

for Delphi Technologies’ common stock

▪ Repaid ~$0.9bn Delphi Technologies’ term

loan and revolver as planned, which was

funded by Q2 bond issuance

▪ Completed ~$0.8bn exchange offering for

Delphi Technologies’ notes on Oct 5th


Believe Balance Sheet Strength Remains a Competitive Advantage

LTM Gross Leverage Ratio

(1) See reconciliation of leverage ratio in the appendix.

2.3x

3.0x

1.7x

BorgWarner (excl. Delphi) Combined Pro Forma Adjusted Pro Forma

Q2’2020

▪ Leverage temporarily elevated due to

COVID-19 impact on Q2 EBITDA

▪ Adjusted pro forma leverage is more

consistent with historical leverage

profile

Pro Forma

▪ After debt paydowns

▪ Q1 2020 LTM EBITDA


Driving Cost Synergies Above Initial Guidance

SG&A

Targeted Cost Synergies Driven by

SG&A and Procurement Savings ($ in millions)

Procurement

Targeting ~$175 million of cost

synergies which is above initial

guidance of $125 million

▪ Additional SG&A and procurement synergies

identified over past eight months

▪ Synergies measured net of incremental P&L

costs

▪ Incremental to previously announced

restructuring plans

Long-Term Revenue Synergies Provide Additional Opportunity


Meaningful EPS Accretion Expected

Sustaining Top-Quartile Margin Performance

(1) Includes estimated purchase accounting of $55 million to $60 million for incremental depreciation and amortization related to acquired PPE and intangibles, and includes $175 million of run-rate cost synergies.

(2) Reconciliation of Adjusted Operating Margin in Appendix.

7.2%

12.1%

>11%(1)

2019 Adjusted

Operating Margin(2)

2019 Adjusted

Operating Margin(2)

Pro Forma

Pro Forma with

Synergies

▪ BorgWarner expects to remain among the

strongest, most profitable companies in

our industry

Pro Forma Adj. Margin Outlook


Financial Benefits Remain Compelling

(1) Represents expected accretion to Adjusted EPS. A full reconciliation to GAAP EPS is not practicable without unreasonable efforts.

(2) Excludes estimated purchase accounting adjustment of $55 million to $60 million for incremental depreciation and amortization related to acquired PPE and intangibles.

▪ Adjusted EPS accretion in line with prior

expectations

▪ Supports previously announced $1 billion

share repurchase program

Adj. GAAP (1)

Meaningful Adj. EPS Accretion Expected

Excl. Amort. of

Intangibles(2)

Appendix


Pro Forma LTM Gross Leverage Ratio Reconciliation($ in millions)

(1) BorgWarner debt matured and was paid in September 2020.

(2) Delphi Technologies term loan A facility and revolving credit facility were paid off at closing. Levels above reflect the balances as of Q2’2020.

(3) See Net Income to LTM Adj. EBITDA reconciliations for BorgWarner and Delphi Technologies, also in Appendix.

(4) Represents an adjustment to exclude BorgWarner Adjusted EBITDA of $106 million and Delphi Technologies Adjusted EBITDA of $10 million for the quarter ended

June 30, 2020 and include BorgWarner Adjusted EBITDA of $419 million and Delphi Technologies Adjusted EBITDA of $133 million for the quarter ended June 30,

2019. As previously disclosed Adjusted EBITDA for both companies for the quarter ended June 30, 2020 includes the impact of COVID-19 on operations of the

business.

Description Q2’2020 BorgWarnerQ2’2020 Delphi

Technologies

Q2’2020 Combined

Pro Forma

Less Sept. 2020

Debt Maturity(1)

Less Delphi

Technologies Term

Loan and Revolver

Pay Down(2)

Subtotal After

Adjusted Debt

Levels

Adjust to Q1’2020

LTM EBITDA

Adjusted Pro

Forma(4)

External Debt $3,059 $1,972 $5,031 $250 $1,169 $3,612 $3,612

LTM Adj. EBITDA(3) $1,332 $357 $1,689 $1,689 $436 $2,125

LTM Gross Leverage Ratio 2.3x 5.5x 3.0x 2.1x 1.7x


BorgWarner LTM Adj. EBITDA Reconciliation($ in millions)

BorgWarnerThree Months

Ended June 30,

2019

Three Months

Ended

September 30,

2019

Three Months

Ended December

31, 2019

Three Months

Ended March 31,

2020

Three Months

Ended June 30,

2020

LTM Adj. EBITDA

Ended June 30,

2020

Operating (loss) income $ 285 $ 276 $ 478 $ 186 $ (78) $ 862

Non-comparable items:

Depreciation & amortization 107 110 115 112 112 449

Restructuring expense 13 13 32 15 37 97

Merger, acquisition and divestiture expense 5 4 1 21 21 47

Other expenses 9 8 6 10 (3) 21

Asset impairment and loss on divestiture - - 7 9 17 33

Gain on derecognition of subsidiary - - (177) - - (177)

Adjusted EBITDA $ 419 $ 411 $ 462 $ 353 $ 106 $ 1,332


Delphi Technologies LTM Adj. EBITDA Reconciliation($ in millions)

Delphi TechnologiesThree Months

Ended June 30,

2019

Three Months

Ended

September 30,

2019

Three Months

Ended December

31, 2019

Three Months

Ended March 31,

2020

Three Months

Ended June 30,

2020

LTM Adj. EBITDA

Ended June 30,

2020

Operating (loss) income $ 56 $ 45 $ (15) $ (20) $ (60) $ (50)


Depreciation & amortization 52 53 52 56 53 214

Asset impairment and non-cash charges 5 1 26 - 2 29

Restructuring Expense 5 13 59 43 9 124

Other expenses 2 2 2 2 2 8

Separation expenses from spin-off 13 10 9 3 (1) 21

Merger and acquisition expense - - - 12 5 17

Non-recurring or extraordinary income or gains - - (6) - - (6)

Adjusted EBITDA $ 133 $ 124 $ 127 $ 96 $ 10 $ 357


Adj. Operating Income Reconciliations($ in millions)

BorgWarner

Twelve

Months Ended

December 31,

2019

Sales $ 10,168

Operating income $ 1,303

Operating margin % 12.8%


Restructuring expense 72

Merger, acquisition and divestiture expense 11

Officer stock awards modification 2

Unfavorable arbitration loss 14

Gain on derecognition of subsidiary (177)

Asset impairment and loss on divestiture 7

Adjusted operating income $ 1,232

Adjusted operating income margin % 12.1%

Delphi Technologies

Twelve

Months Ended

December 31,

2019

Sales $ 4,361

Operating income $ 141

Operating margin % 3.2%


Restructuring expense 80

Separation and transformation costs 44

Asset impairments 35

Pension charges 14

Adjusted operating income $ 314

Adjusted operating income margin % 7.2%

Delphi Deal Completion Presentation - BorgWarner

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