BWA
#Hey, <UNK>.
Correct.
No.
I see what you're getting at, <UNK>.
Let me just take a moment maybe and give a little bit more color around this instead of just answering it quickly.
So basically, over the last several years, Management has done some strategic initiatives on the defense side of this and put some stringent litigators in place.
That resulted in a very predictable environment for us on that side of it.
That, coupled with a very stabilized tort system, came together at the same time so that we were able to take a look at some actuaries, people come in, some other professionals, and have a very predictable stable environment where now we're comfortable in actually making a 50-year estimate.
In the past we didn't have that type of environment.
So it's a convergence of several things coming together that's mostly predictable.
That's the most important word that I'm going to say here: it's predictable now.
It wasn't predictable before.
Yes, I can ---+ I'll try and take a shot at it for Q4, <UNK>.
So as I ---+ I think earlier, if you caught the earlier question, so from a China perspective, let me start there, <UNK> said that we grew at 30% in the quarter, year over year, which was pretty amazing.
Obviously if you look at what the production numbers were in China, that represents obviously very significant outperformance from us.
We grew just about double digit in North America, which again represents pretty solid outperformance.
Europe, I would say we were below the market, light vehicle market, in Europe, but that's a little bit distorted where we have commercial vehicle and aftermarket revenue a lot in Europe.
So that's a quick characterization.
We can ---+ Pat and I or <UNK> can give you a bit more of a full-year view if you want, off-line, <UNK>, or in a follow-up call.
I just don't have good visibility on that in front of me.
But that gives you a little bit of a sense for the quarter.
Strong outgrowth in North America and China; in Europe, about in line, slightly down, would be a way to think of it.
Yes, I can spend a couple of minutes on that, <UNK>.
So just a real quick recap.
Obviously, we talked about the three architectures: combustion, hybrid, and electric.
What we basically said around combustion back at Investor Day was, combustion is a flat market, basically.
There's about 88 million vehicles in 2016, and it stays about that, slightly down.
BorgWarner's revenue growth is about 5% over that same period, 2016 through 2023.
And we get there two ways.
We get there through increased penetration rates, and we also ramp up a little bit on our content per vehicle.
So combustion goes from 185 to 215.
So if you bear with me, and if I do that same kind of approach on hybrid, <UNK>, we have a compound annual growth rate of about 50%-something over that period, 2016 through 2023.
Again, that's delivered through significant vehicle penetration, where we go from about 20% up to 40%-something, and, again, content per vehicle climbs significantly.
Similar story on electrics, where we continue to see significant growth.
Content per vehicle evolves there as well.
The upshot of all of that, <UNK>, if I was to say where are we sitting here today in February versus where we were when we were in Investor Day, I would say we're on track, if anything slightly better or slightly ahead of where we thought we were back in September.
And slightly ahead means, what I'm actually seeing us get over the line in bookings in hybrids and electrics and combustion.
So we feel probably slightly more comfortable than what we even did back in September based on the evidence over the last four or five months of booking in all three areas, <UNK> ---+ that's the key, all three.
Thanks, <UNK>.
Let me take a shot if I can, <UNK>.
We're about a year into this, and so, real briefly, I would say fundamentally it's performed pretty much as we had expected.
Top line is pretty much there, other than a little bit of endmarket weakness.
Operating-wise, it performed pretty much as expected.
I would say the technology strength and depth, we've been pleased with, in terms of the breadth and the strength of the product portfolio.
I think the one incremental area that I would say is a little better than what we thought from when we went in is, we're seeing the opportunity to combine the Remy product with the traditional BorgWarner product to differentiate ourselves with our customers on technology solutions.
We saw that with the electric drive module, would be a great example very recently.
So I would say that's how I would characterize that.
I think the other element that we feel very good about was the divestiture of the non-core light vehicle aftermarket business.
I think that was a really important move for us in a number of fronts.
So we feel good about that.
So now, as we go into this year, the focus, <UNK>, just to give you a number: in the three-year backlog we characterized the rotating electric portion of our backlog was about 12%, which was up significantly from a year ago.
And that's coming from two aspects: One is what I alluded to earlier, which is the combining of the Remy core technology with the BorgWarner technology to offer system solutions for our customers.
Then the second area is finding ways to gain share with the more legacy products out of Remy.
So basically selling more starters and alternators.
Now we have the leverage of BorgWarner than Remy did in its former life.
So net-net, all around, <UNK>, we're feeling good about it.
It's contributing from a top line perspective in a good way.
We're starting to get some traction on the margin improvements.
Remember, we started this business, it was a 4% operating margin business.
We will get some incremental uplift this year without having the non-core aftermarket business.
We're comfortable we can expand margins on the core Remy business.
Hopefully, if that gives you a little bit of color <UNK> to help.
Yes, so just from a turbo perspective in its general sense, the core story there really is, we're seeing obviously significant penetration uplifts in North America and China.
That's where the growth story is playing out.
Europe is obviously pretty much a saturated space in terms of turbo charger penetration.
And I would say to you that's playing out as we expected.
We're seeing rapid adoption rates in China and in North America.
Pat could give you some detailed numbers off-line if it's helpful, <UNK>.
We're seeing that play out.
From our BorgWarner perspective, our market share expectations are playing out exactly as we thought.
We're winning wring we thought we would win, and we're doing well from a share perspective.
So I would say that's encouraging, too.
And eBooster, we continue to get more and more traction there.
We have a couple of production awards, or in production, I should say, in 2017 with a couple of key customer programs.
We see continued pull and demand for eBooster programs that we're quoting on them, doing very well with.
So we see that trend continuing from a technology point of view.
And we're getting our share and doing quite well in winning that business.
So hopefully that gives you a sense.
Good morning, <UNK>.
Hey, <UNK>.
I can take a shot at that, <UNK>, at least start on that for you.
I would say, first, your assumption is right, where the lead space, if I can call it that, for electric, is in China.
So we are seeing more focus, more drive around pure electrics in China regionally than other parts of the world.
But we are obviously seeing electric adoption rates in Europe and North America also.
I would say all three regions somewhat equally are looking to optimize combustion technologies.
So we're seeing that.
I would say that's pretty uniform around the world in terms of refinement optimization on combustion.
Hybrid, also I would say regionally there's a pull, probably an equal pull of ---+ for hybrids in the different regions of the world.
<UNK>, what I would say to you on hybrids, where there's not a lot of difference regionally, you are getting different customer strategies around hybrids.
That's where Borg's playing a really key role.
They're looking at different hybrid architectures, different ways of getting there.
That's where we're playing a strong role in helping them.
A little bit of regional variation, but ultimately, <UNK>, the critical 30,000 point for us is, we're seeing all the OEMs needing a balance of the three architectures, and we're there to help them with that balance of that three.
That's the really critical part.
Thanks, <UNK>.
I will go to buyback.
I said on the buyback, it's all going to depend on our M&A activity, <UNK>.
We have some things that we're looking at right now.
If they look like they're not going to materialize until the end of the year or next year we would move it up.
In terms, <UNK>, of the new wins, so to speak, it is pretty balanced regionally.
I put those four examples up.
I think that's a good characterization or a good representation of actually how it is playing out.
You've got a really advanced electric vehicle system that's out of China.
You've got the latest and greatest turbocharger technology that's in Asia and China.
Suzuki, as you see, Alfa Romeo is a European.
But I wouldn't be surprised when I show you in the next call, another four.
They could be North America, or whatever.
It is pretty balanced, both regionally, <UNK>, but also across the combustion, hybrid, and electric propulsion space.
It's pretty balanced.
Yes, <UNK> this is <UNK>.
I would say that's a pretty good description you gave.
And I would give you a little bit of color of why I think that is.
Because I think it's ---+ if I can say it this way, it's an incremental evolution to the end game.
And I think you have seen this yourself.
It's not a light switch where we're turning off combustion and turning on electric.
It's kind of a journey, and it's an evolution.
The reason that's important, that does a couple of things: that allows us to be thoughtful and balanced in terms of making our investments and evolving the portfolio, as opposed to throw a third of it away and bring a brand-new third on that we've never done before.
That's why we have the comfort and the confidence in the evolution, because it's not a light switch type event.
The other quick comment I would make, <UNK>, that gives us incremental confidence is, as I have alluded to through last year, we are in production with hybrid technology.
We're in production with electric vehicle technology.
And we have been doing that over the last three or four years and still delivering the incrementals over that period of time.
And what we're also seeing is the financial performance of those electric and hybrid vehicles is very good.
So I don't want to characterize, <UNK>, that this is easy.
I don't want to tell you that, but I would tell you we feel comfortable that this is more of an evolution than an event, and we're comfortable we can manage through it and deliver what we say we're going to do.
Thanks for bringing that up, <UNK>.
I think your note characterized it pretty well, frankly.
[Brash Marlow] is, rough numbers is 4% or 5% market share, and I think what it really confirmed is that barriers to entry in that turbo space are pretty hard.
It's pretty tough.
And I think you alluded to that, and we would confirm that.
A lot of technology, a lot of IP, a lot of manufacturing capabilities, et cetera.
It's an investment business.
Yes, we defend that very, very strongly.
And I think you see that it's a tough space for them to do.
In terms of how it plays out, I think we'll have to see, candidly, we will see what plays out in terms of what happens with that asset.
We do feel extremely positive about our position, frankly speaking, in turbo.
We have about a third share.
We talked about that.
Win rates are good, our booking rates are good, our technology leadership we feel really good about.
And so we're feeling good about is the quick answer, <UNK>.
But in terms of the specifics of how it plays out, we'll have to give that a little bit of time.
Thanks.
Correct.
All we really did is, we ---+ there's two types of liabilities out there.
One of them, when people file claims, we had to do an estimate of what we expected those settlements to be, which we've always had out there.
We had an asset and a liability.
What we did is, we trued that up; but more importantly, we took a look at the universe of what we call IB&R, incurred but not reported yet.
What we did is, we took a look at that as well.
And what we did is, we took a look at for 50 years, put that on the balance sheet.
Our insurance receivables are still out there.
I encourage you really to take a look at the K that we filed today.
It gives more clarity around it and also gives you more of what the asset values and liabilities are on the balance sheet.
I don't want to spend a lot of time on the call going through all those details, but there's a lot of clarity, I think, in the K that we're going to put out around this issue.
Great.
Thank you very much.
Much appreciated.
And I'll look at the K.
Thanks, guys.
Good morning.
I would say, <UNK>, if you think of what we did in the three-year backlog, where we broke out the products, actually by discrete products, but also you can clearly see what's engine and what's drivetrain.
My sense is, I would see that's probably a pretty good barometer for on an annual basis, is a good way to think of it.
So we provided the detailed breakdown there by product and by segment for you in the three-year view.
I don't think will you go too far wrong if you view the one-year view somewhat similar to the three-year view, if that's helpful for you.
No, I don't think there's ---+ no, it would be my quick answer.
And in terms of margins, the quick answer, from an engine point of view, we're pretty high up there.
So we're kind of keeping pace at an incremental basis and absolute are pretty much there.
We talked on the drivetrain side.
We've always said there's a little room for incremental uplift there, and we continue to drive that for sure.
Thank you.
With that, we're going to end our call.
I would like to thank you all for participating today, and thank you for your helpful questions.
Denise, you can close the call.
