Thank you, Shelby. Good morning, everyone, and thank you for joining us today.

We issued our earnings release earlier this morning. It's posted on our Web site, borgwarner.com, on our homepage and on our Investor Relations home page.

With regard to our IR calendar, we will be attending multiple conferences between now and our next earnings release. Please see the Events section of our IR page for a full list.

Before we begin, I need to inform you that during this call, we may make forward-looking statements, which involve risks and uncertainties as detailed in our 10-K. Our actual results may differ significantly from the matters discussed today.

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

When you hear us say adjusted, that means excluding non-comparable items. When you hear us say organic, that means excluding the impact of FX and net M&A.

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

Please note that we posted an earnings call presentation to the IR page of our Web site. We encourage you to follow along with these slides during our discussion.

With that, I'm happy to turn the call over to Fred.

Thank you, Pat, and good day, everyone. We're pleased to share our results for the third quarter 2022, and provide an overall company update, starting on slide five.

I continue to be impressed with the strength of our revenue relative to the overall industry; with about $4.1 billion in sales, we were up over 29% organically. This is approximately 7% better than the year-over-year growth in industry production.

This outperformance was in part supported by the execution of the pricing actions with our customers around the world. From a margin perspective, our performance was very strong in the quarter, and also benefited from our customer pricing.

While navigating the near-term industry environment, we continued to take steps to drive our long-term positioning during this quarter. Year-to-date, we have repurchased $240 million of stock.

During the third quarter, we announced the acquisition of the charging business of SSE, in China. And we secured new electrification program awards.

Next, on slide six, I would like to discuss the acquisition of the charging business of SSE, which we announced last month. SSE will add a China presence to our existing European and North American footprint.

So, we have now established global charging capability upon which to build. The SSE acquisition is expected to close in early 2023, so there will be no revenue impact in 2022.

However, we now expect our total DC fast charging-related annual revenue to be in a range of $225 million to $275 million by 2025. Our charging strategy can be summarized in four points.

One, our initial focus will be on high-value DC fast charging hardware enabling software and services. Two, our objective is to establish product leadership and competitiveness in this category.

We will improve the chargers' quality that is key to enabling electric mobility. Also, over 50% of the different material in a DC fast charger is in components where BorgWarner has existing expertise and global scale.

Three, we plan to leverage BorgWarner's regional sales capabilities and government interaction. And four, we want to explore potential sales synergies with our CV customers, and especially the customers buying our battery packs.

As we look ahead, we believe you will see further success as we continue to strengthen our capabilities in the charging area. Now, let's look at some new electrification awards, on slide seven.

First, BorgWarner will supply its integrated drive module to a leading Chinese automotive manufacturer. This marks the first time that we have supplied our iDM on a hybrid P4.

And this is also the first time that this manufacturer has awarded this system to an external supplier. Importantly, this iDM is substantially similar to the iDM used in future EV-specific application which will drive additional scale benefits for this product.

Second, BorgWarner will supply electric motors for the E-Axles of a European commercial vehicle OEM. This E-Axel is designed to equip new electric light commercial trucks ranging up to 7.5 tons.

Production is expected to begin in early 2023. It will use our very modular HVH250 motors, and we can supply them in various stack length and winding configuration, either as fully assembled motors or as rotor/stator assemblies.

Lastly, BorgWarner has been granted a production increase supply its 800 volt silicon carbide inventors for a premium European OEM. The initial order has now been significantly increased.

The suitability of our product has been further endorsed by this uplift. Our power loss reducing silicon carbide inverter technology is helping our customer reach its strategic goals of a high-energy efficient drive train with exceptional electric driving range.

Importantly, the increase of volumes to previously awarded programs is more and more becoming the new normal for many of our EV products. As you can see, we have made progress on key aspects of our Charging Forward strategy.

So, let's look at what this means in the progress report, on slide eight, starting first with organic electric vehicle revenue growth. With the awards secured as of this goal, we now have electric vehicle programs that we believe will account for about $3.1 billion of booked revenue in 2025.

Turning to M&A, we have now completed or announced four acquisitions since the start of Charging Forward, AKASOL, Santroll, Rhombus, and SSE. Based on our due diligence, we believe those businesses will generate $900 million of additional EV-related revenue in 2025.

We're not done here though. We expect to take additional M&A steps and are actively engaged with several potential targets which could enhance various part of our EV portfolio.

So, we are already on track to achieve about $4 billion of electric vehicle revenue by 2025 based on new business awards and actions announced to date. This is a great achievement by the BorgWarner teams, and a significant milestone for the company.

And we believe it puts us well on our way towards our $4.5 billion EV revenue target for 2025. So, let me summarize our third quarter results and our outlook.

Overall, our third quarter performance was strong. We delivered strong organic growth.

We also made key progress in the quarter on the pricing actions with multiple customers. As Kevin will detail shortly, we have increased the low-end of our full-year 2022 outlook for both organic growth and margins based on our performance year-to-date, and our full-year EPS guide has also increased.

Looking beyond this year, I'm very proud of the steady progress on Charging Forward, and extremely excited that we're now on track to achieve $4 billion in pure electric vehicle revenue by 2025. It is clear to me that our EV business is accelerating, but I expect more to come.

We intend to carry on booking more new business across our vast portfolio. We expect to utilize our strong cash generation to acquire great assets, to become even strong as the world continues to accelerate towards electrification.

And I look forward to sharing with you additional progress in the future. With that, let me turn the call over to Kevin.

Thank you, Fred, and good morning, everyone. Before I dive into the financial details, I'm going to provide you the key takeaways coming out of our third quarter.

First, we reported strong organic growth driven by customer pricing actions and industry volumes that were at the high end of our expectations going into the quarter. Second, our year-over-year margin performance benefited from normalized conversion on higher revenue and successful execution of our customer pricing actions.

However, these benefits were partially mitigated by our planned increase in e-products R&D investment. Let's turn to slide nine for a look at our year-over-year revenue walk for Q3.

After adjusting for the disposition of our Water Valley facility, last year's Q3 revenue was almost $3.4 billion. You can see that the strengthening U.S.

dollars drove a year-over-year decrease in revenue of over 9% or approximately $320 million. Then, you can see the increase in our organic revenue about 29% year-over-year.

That compares to a 22% increase in weighted average market production, which means we delivered another quarter of strong outperformance. The sum of all this was just under $4.1 billion of revenue in Q3.

Turning to slide 10, you can see our earnings and cash flow performance for the quarter. Our third quarter adjusted operating income was $438 million or 10.8%, which compares to adjusted operating income of $336 million or 9.8% from a year ago.

On a comparable basis, excluding the impact of foreign exchange and the impact of the Water Valley disposition, adjusted operating income increased $138 million on $990 million of higher sales. The biggest positive driver of this performance was that we converted at approximately 17% on our additional sales.

But this conversion was partially offset by two things. First, we continued to execute on our planned increase in e-products R&D.

In Q3, we increased these investments by $24 million relative to last year. Second, material cost inflation net of customer pricing recoveries was an $8 million year-over-year headwind in the quarter.

Our adjusted EPS improved by $0.44 in the third quarter driven by the $138 million improvement in our adjusted operating income and a much lower effective tax rate that we have been experiencing in the last couple of years. This tax rate reduction was a driven by a favorable mix of earnings across taxing jurisdictions and the impacts of ongoing tax planning initiatives.

And finally, free cash flow; we generated $167 million of positive free cash flow during the third quarter. Let's now turn to slide 11.

We can see our perspective on global light vehicle industry production for 2022. As we can see our market assumptions incorporate a range of potential outcomes.

However, we have incorporated several adjustments to prior assumption including a small decrease in the high end of the North American market, continued production increases in China as we expect third quarter strength to continue into Q4, and a further decrease in European production due to the market uncertainty associated with the ongoing conflict in Ukraine. As a result of these assumptions, we now expect our global weighted light and commercial vehicle markets to increase in the range of 3% to 4.5% this year, which is a bit narrower than the range underlined in our prior guidance.

Now let's take a look at our full-year outlook on slide 12. First, it's important to note that our guidance assumes an expected full-year headwind from weaker foreign currencies of more than $1 billion.

This represents an additional headwind of $230 million versus prior guidance. While the appreciation of the U.S.

dollar is having a significant top line impact, remember that our strategy is generally to purchase and produce components in the same region as our customer. As a result, the impact of currencies in our guidance is predominantly translational in nature.

Next as I previously mentioned, we expect our end markets to be up 3% to 4.5% for the year, which contributes to the organic net sales changes you see on the slide. But the much bigger impact on that line item is the continued revenue growth we expect to generate above growth in end market production.

That's about $1.4 billion of our organic revenue growth or just over 9% growth above market. That current outlook for our outperformance is stronger than our prior outlook, primarily due to the impact of estimated pricing recoveries for material inflation, which we now estimate will contribute just under 4% of our growth for the full year.

Finally, as it relates to our revenue outlook, the Santroll and Rhombus acquisitions are expected to cumulatively add $45 million to $55 million to 2022 revenue. Adding these items together, we're projecting total 2022 revenue to be slightly lower than before in the range of $15.4 to $15.7 billion.

This slightly lower revenue outlook is being driven almost entirely by the additional FX headwinds. However, our expectation for organic growth is increased at 12% to 14% compared to our previous outlook of 11% to 14%.

That is helping to mitigate the FX impact we're seeing. Switching to margin, we're updating our full year adjusted margin outlook to 10.0% to 10.2%, compared to our prior outlook of 9.8% to 10.2%.

So, higher material costs inflation continues to negatively impact our financials, we're pleased with the progress we've made in negotiating recoveries of a portion of these costs from our customers. And that's helping mitigate the impact on our P&L.

For the full year, we now expect net material cost inflation to negatively impact our results by $110 million to $120 million, which is lower than our previous expectation of $145 million to $155 million. As it relates to R&D investments, our guidance anticipates a $145 million to $150 million increase in e-products related R&D investment in 2022.

Excluding the impact of net material cost inflation, and the increase in e-products related R&D investments. Our 2022 margin outlook contemplates the business delivering full year incremental in the high teens.

We're now expecting full year adjusted EPS of $4.25 to $4.45 per diluted share. This is an increase from our prior guidance reflecting two things.

First, we're expecting a lower full year tax rate of 25% down from our prior guidance of 27% driven by our expected mix of earnings and the benefits of tax planning initiatives we've been executing the last couple years. Second, we're benefiting a bit from the lower average share count, which is a result of the stock buyback we executed during the quarter.

And finally, we continue to expect that we'll deliver free cash flow in the range of $650 million to $750 million for the full year. That's our 2022 outlook.

So, let me summarize. Overall, we had a strong quarter.

We delivered robust organic growth. Our margin performance was strong driven by incremental margin performance and successfully negotiated pricing recoveries with our customers.

And we are increasing the midpoint of our EPS outlook for the full year driven by our strong year-to-date performance and a lower tax rate going forward. Year-to-date, we've taken a number of actions to drive our future profitable growth and to create value for our shareholders.

We've continued our disciplined M&A with the completed acquisitions of Santroll and Rhombus, as well as the announced acquisition of SSE. We've returned more than $360 million of cash to our shareholders to our buybacks and dividends.

And we've secured meaningful New Business Awards for electric vehicles across multiple parts of our portfolio. These awards have added more than $800 million to our booked electric vehicle revenue for 2025 compared to the same point last year.

As a result of our bookings and M&A, we believe that we have already achieved an important milestone $4 million of secured EV revenue for 2025. We view this as a huge success for the company.

But we've done all of this while still delivering on our near-term commitment, once again showing the balance that is the key to our ongoing success. With that, I'd like to turn the call back over to Pat.

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

Good morning, guys, and thanks for the time this morning. A first question just around what's going on with customers on recoveries and settlements, and pricing, which is all kind of being put together in the same basket in discussions often from suppliers and automakers.

But I'm just curious, as you're going through the process of getting recoveries, is some of this one-time in nature or do you think there's kind of a little bit of a paradigm shift here in what's going on with pricing with some of your customers or pass-throughs in the indexing? I'm just trying to understand if this is true-ups or is this a change in attitude going forward?

And I think we've heard from some of the automakers, they didn't realize how much the volatility was impacting the suppliers, which is intriguing because they're in the middle of it. But they -- and some of this stuff was a result of making up for some of the inefficiencies around volatility.

And then as schedules normalize, maybe these recoveries might not be as great going forward. So, what is your take on this?

Hi, John. So, some of it is in price some of it is one-time.

But it's true that when we negotiate and when we talk to our customers, they realize that this is a big hit, and that big hit may be to stay. So, I expect that, for 2023, we will have ongoing discussions with our customers around inflation.

What's important is that we make sure that the nature of the recovery that we get from our customer base match pretty much the nature of the help that we giving to our supply base. And that will be our goal also going forward.

And maybe, John, I'll just jump in and add on the one-time nature of certain elements of recoveries that we generated in the quarter. Included in that 10.8% margin that we posted was about a 40 basis point margin benefit arising from retroactive pricing recoveries partially offset by retroactive supplier costs.

So, there was a little bit of a tailwind in the quarter, about 40 basis points coming from that in our margin.

But that 40 basis point is the net of those two, Kevin, is that correct?

That's the net of the two.

Okay. And just really one quick follow-up, on slide eight, it looks like, as you've mentioned, you did $4 billion combined here versus the total target of $4.5 billion.

So, you're overperforming on organic, and a little bit underperforming on M&A so far. Fred, as you think about this going forward, is it necessary to catch up on M&A or chase things if you're winning more and more on organic and it might get you to your total goal more on the organic side as opposed to the M&A side?

Or is there something specifically on the technology side that might not be as associated with a dollar number here that you're trying to get to in M&A, instead of just bolstering that, the total revenue number? How do you think the balance of these two is really the key question?

Yes, John. First, I would say that I'm very proud at where we are, 18 months into Charging Forward we're already 45% on our way into a five-year plan, so very proud of that.

From an M&A perspective, what we are focusing on is building capabilities, product leadership, and scale from grid to wheel in this, that's the target. And so, we're not chasing a number, we're chasing that type of mindset really.

Okay, that's helpful, thank you very much, guys.

Good morning. Thanks for taking the questions.

Next to the traction on those pricing recovery, just illustratively, how should we think about rollover benefits for 2023 at this point just given the timing of these actions seems reasonable to assume a couple points benefit for next year. Maybe you could comment on that.

And I think, Fred, you mentioned that some of the recovery discussions would remain dynamic. So, maybe you can help us think about timing of potential further recoveries as we look over the coming quarters?

Yes, I'll start. As it relates to 2023, as we look at 2022 and the recoveries and the costs that we've been incurring, if -- we don't have an expectation that we're going to ultimately fully offset all the costs that come into the P&L.

We've been negotiating recoveries to defer a portion of those cost increases, a substantial portion, but not entirely. So, we're bearing some of that cost.

So, as you look ahead to 2023, I wouldn't necessarily look there -- at there being a tailwind for our margin because we don't ultimately expect to offset all the cost increase that we're incurring in 2022.

Right. I mean, the question is for the top line, that there'll be some benefit to the top line from those recoveries rolling over.

Yes, I mean to the extent that those -- that the inflationary impacts continue as we head into 2023, and that pricing needs to stay in place to defray the continued inflationary costs, if that's where it goes, then we would expect to continue to generate that top line benefit within our revenue. If you just take a step back, if you look at our outgrowth for the year, we're delivering about 9% outgrowth underlying our guidance, a little bit north of 9%.

And just under 4% of that is coming from these -- the customer pricing recoveries associated with material inflation costs, which means then we have five points or so of outgrowth coming from everything else. But that's the way to think about what's happening in 2022.

And then you can make assumptions about how you expect the inflationary environment to play out in '23, and how that nearly 4% pricing would carry over.

Right. And then just to clarify, Kevin, have your expectations of that material cost inflation changed relative to last quarter or are we still looking at the same number?

They have. I think, last quarter, we were expecting that the contribution to our outgrowth from the pricing recoveries was closer to 3%.

I think now we're suggesting in our guidance that the full-year impact of those pricing recoveries is a little bit under 4%. And that's part of the reason that you see in my remarks, that the net impact that we're now expect on a year from material cost inflation is down from our prior guide, it's $110 million to $120 million, which is a $35 million improvement from what we guided to last quarter.

And it's being driven by improved customer pricing actions.

All right, great, and nice to see that improving. And then, I guess, sort of shifting to, Fred, some of your commentary around the management of the portfolio and how you view M&A.

That certainly makes sense on a high level, strategically. I'm curious to know what the tenor and the -- like the activity within the pipeline is like at this point?

Obviously, there's still a volatile production environment and lots of challenges for nascent EV businesses. But maybe you can talk a little bit about the depth and kind of the actionability of the pipeline at this point?

Right. It's very active.

We are engaged with a certain number of companies as targets, still focusing on the same things, again scale on products from grid to wheel, product leadership which -- and I mean by that, essentially, around efficiency of moving electrons across that grid to wheel, and potentially new products too in the field of EV. So, it's pretty active.

Terrific, thank you.

Great, thanks for taking my questions. You mentioned, at the midpoint, the inflationary costs were down about $35 million.

If I look at operating margins, the outlook for the year is still fairly flat, looks like sales down just a bit at the midpoint of guidance. What is offsetting that underlying $35 million of good news?

Well, I think it depends when you look at the guide. I mean, if you look at the top end of our guide, one of the things to keep in mind is we took industry production down, and so that has an impact on organic growth in the high end of our guidance range.

And then at the low end of our guidance range, as you look at Q4, that it's actually not being offset, it's really flowing through that $35 million benefit, which is why we raised the bottom end from 9.8% to 10%.

Okay. And then as I look into the implied guidance implies sort of a sales decline into Q4.

Again, I think like IHS has light vehicle production up. Are you not seeing the market up, is it just FX that's washing all that out, is it commercial offsetting some of that, what's causing the softness into Q4?

Yes, sequentially going into Q4, we do have an almost $90 million FX headwind Q3 to Q4. So, that is a big piece of what's impacting revenue.

And then the range of outlook that we have going from basically with underlying our $15.4 billion to $15.7 billion revenue guide is at the lower end and at the midpoint some pressure on organic growth. Sequentially that is.

Got it. And then just lastly, the 110 to 120 impact, how was in Q3?

And how much would be less for Q4 as headwind, so we can model that? Thanks.

We didn't break that out in terms of Q3 and Q4. But because of the nature of some the retroactive recoveries on a net basis that we generated in Q3, it really mitigated the impact on Q3 relative to the other quarters that we have seen.

So, in Q3 we had a negative $8 million impact. I think as we looked at Q4, it's on a year-over-year basis a little bit larger because we don't expect the same size of retroactive-related benefits of what we got in Q3.

Got it. Thank you very much for taking my questions.

Thanks so much guys. Maybe we could start on actually some of the ICE products.

In particularly, the margins, the revenue, the fuel injection aftermarket has been quite good. And we haven't really discussed sort of individual segment margins some of them are new.

Maybe you could talk about some of the strength you have been seeing and ways to think about some of the segment margins for fuel injection or aftermarket on a go-forward basis?

Chris, I think the team has done a formidable job right after the closing of the Delphi transaction to turn this business around. Should look back the fuel system margins that we took the business at and what it is now, it's been pretty good both on the fuel system side and aftermarket as well.

Perfect. And then anything -- is there any extraordinaries in sort of some of the margins we are seeing Q3 in terms of the some of the benefits on onetime price recovery?

We are just trying to trend it out. It has been pretty variable on a margin perspective over the first three quarters.

So, just anything qualitative on just the rate of margin here, what sort of normalized?

Yes, I mean I think it's hard to compare on quarter-to-quarter this year because there has been such volatility. Q2 obviously we were pretty significantly impacted by the combination of revenue being relatively low as well as material cost inflation and the recoveries haven't entirely been kicking in yet.

As you go to Q3, you see obviously we delivered over $4 billion of revenue in the quarter and a strong level of customer recoveries. And so, you are seeing a lot of swings quarter to quarter right now in this volatile environment.

And that's really pushing through the segments as well. So, I think that's why you look in Q2 going to Q3 you saw air management up quite a bit.

You saw fuel systems up quite a bit as well. And I think it's really function of what we are seeing from both the revenue and cost recovery perspective.

Okay, great, super helpful. And then if we move to the EV outlook and then obviously the $4 billion -- I really appreciate the consistency as you guys are updating.

In terms of the methodology as we see global EV volumes increasing, can you just talk about how often you're marking to market sort of the 24-25 assumptions on base business? Is that something that's done on quarterly basis or yearly?

Just curious when you are booking the business obviously projections go up if that's a benefit? And then just a second, anything you could add on what you are seeing in Europe for EV outlook maybe next year?

So, the way we compute those EV wins is we look at the individual businesses, the volume that we are booking the business at. We sometime apply some market intelligence adjustments and that's how we are monitoring the 2025 organic revenue bookings.

As far as your second question around Europe, I would say overall EV is accelerating. And we can see that in the marketplace.

We can see that with the intensity with which we are discussing with our customers and we can see that with our business too. And that also applies for Europe, and very happy to see our growth in EV being across the three continents and also across a pretty sizable product portfolio.

Okay. Thanks much guys.

Thank you for taking the question. I apologize, if just said this in the prepared comments, I had to log on late here, but just wondering first question regarding the granting of increased production on the inverter award that you disclosed this quarter, to possibly give us a better feel of how widespread this sort of activity might be going forward?

Especially thinking relative to the 2025 Organic EV awards that you've booked already? Are we talking tens of millions, or maybe even hundreds of millions of potential upside from these sorts of activities?

Yes, it is. I won't quantify that.

But it's sizable and I would say that this is not a one-off. There is a lot of discussions with uplifting volumes.

And I would say that, one thing that it's important is that the scale that we have in electronics and in power electronics, in both purchasing and manufacturing, electronics and power electronics, allows us to offer our customers specific supply chains that are not are not intertwined. And so and so, I think this is a very, very good success for us.

It enforces the fact that we have great products, great efficiency, and also that resiliency of our supply chain is something that our customers have trust in.

Okay. That's helpful.

And then it kind of leads into my second question on the E-Axle award, so you said in the release that this can scale up to seven and a half ton trucks. I'm wondering, was that the customer's specific need, or could you've scale that up to even larger trucks with your current portfolio?

And then related question, bigger pictures wondering how important scale is in the e-motor business as it relates to pursuing commercial vehicle opportunities? Can you leverage your scale in light vehicle as you go into that world and you clearly very important in color electronics, just learning how transferable that would be in commercial vehicle as well, any modern thinking?

Yes, no, for sure our motors can go above seven and a half tons. And this came from the customer's specification on all this can go much higher than that.

And yes, the answer to your second question is absolutely yes. Scale matters in CV for product leadership, but also competitiveness.

This is a strategy that has been applied for one or for many, many years, where we have numerous products that cut across fast car, and commercial vehicle. We learn from both segments, and we can offer our commerce commercial vehicle customers, products that one fit for their function, but also our competitive because we have that scale.

I will leave it there. Thank you.

Thank you.

Hi, team. This is Gavin Kennedy on for David Kelley.

First question, can you just remind us of your disposition strategy? I believe prior expectations were for $3.5 billion in targeted dispositions by 2025?

Yes, we're still that's still part of our charging for a plan. As I mentioned last quarter, that challenging, and market environments really disrupted those potential disposition processes in the short-term.

And that's really due to two things. The uncertainty and industry production and the inflationary impacts and how those are going to play out impacts potential buyers and those types of businesses in the near term.

And second, there're obviously challenges in the capital markets and the financing markets more generally. So, those things have really slowed down our ability to transact over the last couple quarters.

But it doesn't change the direction where we're headed over time here. But that pause is okay, because as you know, we have a lot of high quality cash flow generating assets in our portfolio.

So, we're not under pressure at all to sell anything. And we're perfectly content to continue to generate the benefits of the cash flows from those businesses, and then assess those as the market situation improves to look at reengaging in some of those disposition processes to make sure that we deliver a disposition that's going to generate appropriate value for our shareholders.

But until the markets clear up from that, we're perfectly content to continue to generate strong cash flows from these businesses.

Got it? That makes sense.

And then as a follow up switching gears, you raise your DC fast charging expectations to $225 million to $275 million by 2025, which is good to see. Can you give us any commentary on margins today, and expectations for margins going forward as these charging businesses scale?

Thank you.

We're not giving margin guidance yet as it relates to any of the specific acquisitions. But I think the strategy of BorgWarner and establishing product leadership as we get into different product categories and driving top quartile margin performance as a company over time.

And so you should expect that as we get into any of these product lines, that the expectations for what we ultimately deliver financially on those products, is the same as what we expect to deliver from all parts of our business.

Great. Thanks, everyone.

I guess I wanted to ask about AKASOL noted as a growth driver in Europe. And while we first ask about the revenue trajectory, maybe just any color relative to the targets that you laid out for AKASOL then also as it relates to IRA in the battery, the battery pack assembly credit, is there an opportunity for AKASOL to benefit at least from the 10 kilowatt hour, 10 megawatt per kilowatt hour portion of that subsidy in the U.S.?

James, we get a lot of good customer tool for battery packs, and from AKASOL. We are increasing year-over-year about 200 million from '21 to '22.

And we're pretty confident that this business is going to -- is going to grow to plan. We have the right technology.

We are going to expand AKASOL. We are actually expanding AKASOL as we speak in North America.

And this is -- these products really are answering a lot of our customers' questions and feeding a lot of their needs. Kevin, do you want to take the IRA question?

Yes, I mean, we think there's a real opportunity for us to benefit from the IRA as we continue to invest to increase our capacity and manufacturing capability in the U.S. So, we'll continue to look at the opportunities afforded by the Inflation Reduction Act and see what opportunities are afforded to us.

But we think there's a real opportunity there.

And AKASOL has somewhat of a U.S. footprint right, there's at least one facility, I believe.

Yes, there is one facility in the U.S. right now in Michigan.

And we're looking at extending the U.S. footprint, actually, as we speak.

Got it, understood. And then, for China, the industry production obviously picked up pretty dramatically in the third quarter.

It appears that there's some customer mix, normalization of programs. Just curious is it tied to one or two important customers in China?

And is there a path? Is this something that's a sustainable, a sustained dynamic or something that could revert to the positive figures in terms of trying to production in your mix there?

I'm not sure I have that granularity for you, James, at this point. Maybe Pat can follow-up with you offline?

I don't know if that's going right for the Chinese country.

Thank you.

Thank you very much and would now apologize again for joining the call later with some of this was discussed before I apologize, but I was curious if you could give us sort of a high level walk of search quarter through in place fourth quarter outlook, it looks like you basically going for the lower revenues, but also in the lower margins. And so, just if you could just discuss some of the puts and takes there?

Were you saying both outgrowth and margin, Emmanuel, is that what you said or just -- [multiple speakers]…

Yes, revenue and margin.

Revenue and margin going Q3 to Q4, I think as you look -- let me start with revenue. As you go from Q3 to Q4 and you look at the range, the $300 million range we're providing on revenue.

At the upper-end of that range we have -- you see revenue a little bit down, and that's really driven entirely by foreign exchange, it's about a $90 million headwind going sequentially from Q3 to Q4. If you look at the low end of the range, we're still assuming about that $90 million foreign exchange related headwind, but then there's about $280 million sequential headwind in organic growth.

So, that's the way to think about revenue going Q3 to Q4. When you look at margin, you've got to start by looking at Q3, that 10.8%.

And remember my comments earlier, there's about 40 basis points of that margin coming from the net benefit of retroactive customer pricing recoveries net of the retroactive supplier cost increases. So, that's about a 40 basis point tailwind in Q3.

So, as you then adjust Q3 and look ahead to Q4, say Q4 at the high end of our guide is relatively flat, maybe slightly up from that adjusted level. And if you look at the low end of our guide, which is around 9.5% or so in Q4, it's really jumping off that adjusted Q3 level, and then recognizing that we have downside conversion on that, roughly, $280 million organic decline sequentially.

And that's how you really get to the math of it.

And the $280 million headwind sequentially itself, could you please just provide a little bit more color, and again, apologies if I missed it?

I'm sorry the -- that what's really driving the sequential is the production assumptions that are underlying the guide. And we saw at the low end of the range, you can see that production is down sequentially going from Q3 to Q4.

And I think it represents the volatility that still exists in this marketplace, Emmanuel. And especially, I would say in Q4, especially in Europe with everything that is happening.

So, taking in consideration also in our Q4 top line guide, which is a little wider than usual, but it represents the market environment.

Yes, so if you're looking at like IHS as an example, our Q4, at the low end of the range, is almost a million units below IHS from a light vehicle perspective, globally.

Okay, that's helpful. And then just about your free cash flow use priorities in the current environment, you obviously mentioned that disruptive environments for dispositions, I assume that some of it applies to acquisitions as well.

So, is this the kind of environment where return to shareholders will be prioritized or would you'd rather -- positive drive for future uses on the M&A side?

Yes, I mean you can obviously see we've been deploying cash really for -- in a couple different ways over the course of 2022. We've been executing on our acquisition strategy, as we've communicated, as part of Charging Forward with the deals that we've done to date, this year.

And we've also been repurchasing stock as well, $100 million in the quarter, which means it's $240 million year-to-date. And so, we've been pleased with deploying cash to support both of those objectives.

While we continue to assess the right moments to be opportunistic in buying back our stock, I'd say, as you look ahead, I want to continue to emphasis what we've been emphasizing in prior quarters, that investing in attractive electrification opportunities, including M&A, is really the near-term priority for our uses of capital. That's what we're going to focus it as a priority.

All right, thank you.

Thanks so much for squeezing me in, everyone. Fred, maybe just, first, to go back to some of your comments on IRA, the expansion of AKASOL in the U.S.

or the potential expansion, is that sort of a BorgWarner initiative or is that something being driven by customer demand asking you to sort of help build that out? And then also, I know like the IRA Bill sort of talks about inverters really more in a solar sense.

But we've heard that there's some -- and I guess we'll wait for a treasury ruling, but we've heard there's some talk that maybe that could apply for vehicles as well. So, do you think there's any opportunity in that bill from inverters or even charging hardware?

Yes, Joe, first, the expansion in the U.S. is definitely driven by programs secured with the customers that we've -- that the customers that we've had when we acquired AKASOL, plus new customers that we've announced over the past quarters.

Kevin, do you want to take this?

Yes, in terms of the question about inverter, I think based on our read of the legislation to date and our understanding of it; it doesn't apply to the inverters for automotive. I think the opportunity for us as it relates to IRA is really more around battery modules and battery packs.

And so, we're assessing that as we're looking to increase our manufacturing footprint, here in the U.S., to support our customer demands.

Would you consider inverters for solar applications or it's sort of a different competency?

They are slightly different, but not dramatically different. Actually, as part of our acquisition of SSE, as part of some charging integration that they do, they include solar battery pack and chargers.

And that might be something we look at. I would tell you that it's not currently the priority but, in the future, that might be a nice diversification going forward based on the current technology.

Okay. And then, I guess, finally, you've talked about the sort of overall enterprise-level R&D and highlight, I guess, some of the changes there.

I was wondering though if -- I mean, it seems to me, but correct me if I'm wrong, that like that sort of predominantly centered in that E-Propulsion & Drivetrain segment. And I was wondering if you could give us a sense of like how much of a basis point drag has that additional or step-up investment weighed specifically in that segment?

Yes, I mean if you look at the -- you're right; the eProducts-related R&D is disproportionately in the E-Propulsion & Drivetrain segment. And so, when you look at our eProducts investment to date, it's been over $300 million, and for the full-year it'll be over $400 million.

And the bulk of that is really coming in that segment, and so that -- you can really see the impact that that's had on the margin of that business. Now, as we look at ahead to 2023, we would expect that as our EV revenue is growing, that we would expect the contributions margins on that growth in EV revenue to be growing at a faster pace than our eProducts-related R&D.

And so, we'll start to get some improvement in margin in that segment as that contribution grows at a faster pace than that eProducts-related R&D.

And that R&D, Kevin, is really -- it's sort of engineering ahead of launch or is it sort of some more like truly like research-type for future product, like how should we think about how quickly you guys start to get a return on that investment?

It is definitely application engineering and engineering for launch that business that we have booked, or engineering for businesses that we are at the verge of booking.

Okay, thank you so much.

And I would like to thank you all for your questions today. Shelby, you can go ahead and conclude the call.