10-K: BorgWarner Navigates EV Volatility, Posts Mixed 2025 Results

BorgWarner reports a 2% net sales increase to $14.3 billion in 2025, driven by eProducts growth and foreign currency, but net earnings declined due to significant impairment charges and restructuring costs.

Summary

• Net sales increased 2% to $14,316 million in 2025 from $14,086 million in 2024.
• eProducts revenue grew to $2.6 billion (18% of total revenue) in 2025 from $2.3 billion (17%) in 2024.
• Foundational products revenue decreased to $11.7 billion (82% of total revenue) in 2025 from $11.8 billion (83%) in 2024.
• Gross profit increased to $2,674 million (18.7% margin) in 2025 from $2,648 million (18.8% margin) in 2024.
• Operating income decreased to $536 million (3.7% margin) in 2025 from $546 million (3.9% margin) in 2024.
• Net earnings attributable to BorgWarner Inc. decreased to $277 million ($1.28 diluted EPS) in 2025 from $338 million ($1.50 diluted EPS) in 2024.
• Impairment charges totaled $624 million in 2025, including $423 million for goodwill at Battery & Charging Systems and $174 million for property, plant, and equipment.
• Restructuring expense increased to $101 million in 2025 from $74 million in 2024, including $31 million for the PowerDrive Systems plan and $62 million for individually approved actions.
• Exited the charging business in February 2025, ceasing production in Q2 2025, resulting in $23 million in charges and a $22 million loss on the sale of the SSE business.
• Settled a lawsuit with PHINIA for $78 million, resulting in a net charge of $40 million in 2025.
• Cash and cash equivalents were $2,313 million as of December 31, 2025, with $2,000 million available under the revolving credit facility.
• Repurchased $400 million of common stock under a new $1 billion authorization in 2025.
• Paid quarterly cash dividends of $0.56 per share in 2025.
• Net R&D expenditures decreased to $710 million (5.0% of net sales) in 2025 from $736 million (5.2%) in 2024.
• Capital expenditures decreased to $469 million (3.3% of sales) in 2025 from $671 million (4.8%) in 2024, reflecting lower eProduct investments.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging year for BorgWarner, marked by declining profitability and significant impairment charges, particularly in its Battery & Charging Systems segment, despite overall sales growth and strategic eProducts expansion. The negative financial impacts outweigh the operational improvements in other segments and the successful legal settlement.

Positives

• Net sales increased by 2% year-over-year to $14,316 million in 2025.
• eProducts revenue grew to $2.6 billion in 2025, representing 18% of total revenue, indicating progress in electrification strategy.
• PowerDrive Systems net sales increased by 21% ($410 million) and reduced its Segment Adjusted Operating Loss by $61 million, improving its margin from (7.4)% to (3.5)%.
• Drivetrain & Morse Systems net sales increased by 1% ($77 million) and Segment Adjusted Operating Income increased by $31 million, with margin improving from 18.1% to 18.4%.
• Turbos & Thermal Technologies Segment Adjusted Operating Income increased by $2 million, and its margin improved from 14.9% to 15.2% due to supply chain savings, manufacturing efficiencies, and restructuring savings.
• Successfully settled the lawsuit against PHINIA, receiving $78 million and limiting future tax obligations.
• Strong liquidity position with $2,313 million in cash and cash equivalents and an undrawn $2,000 million revolving credit facility.
• Achieved top quartile performance for Total Recordable Incident Rate (TRIR) at 0.36 and Lost Time Incident Rate (LTIR) at 0.23.
• 95% of manufacturing sites were ISO 45001 certified, demonstrating commitment to health and safety.
• Completed the 2023 Structural Costs Plan, expecting $80 million to $90 million in annual gross savings by 2027.
• Lower pension contributions in 2025 ($24 million) compared to 2024 ($45 million).
• Insurance recovery of $21 million for a resolved historical warranty matter.

Negatives

• Net earnings attributable to BorgWarner Inc. decreased to $277 million in 2025 from $338 million in 2024.
• Diluted EPS decreased to $1.28 in 2025 from $1.63 in 2024.
• Operating income decreased to $536 million in 2025 from $546 million in 2024.
• Gross margin slightly decreased to 18.7% in 2025 from 18.8% in 2024.
• Significant goodwill impairment charge of $423 million related to the Battery & Charging Systems reporting unit in 2025.
• Impairment charges of $174 million related to property, plant, and equipment in Battery & Charging Systems and PowerDrive Systems in 2025.
• Restructuring expense increased to $101 million in 2025 from $74 million in 2024.
• Other operating expense, net, increased significantly to $109 million in 2025 from $32 million in 2024, driven by legal settlement costs, charging business exit costs, and investment impairment.
• Interest expense, net, increased to $39 million in 2025 from $20 million in 2024 due to higher interest rates and refinancing.
• Effective tax rate increased to 36% in 2025 from 21% in 2024, partly due to non-deductible goodwill impairment.
• Battery & Charging Systems net sales decreased by 19% ($139 million) and continued to report an operating loss of $39 million.
• Deterioration in the forecast for Battery & Charging Systems due to dual sourcing actions by customers, pricing pressures, and EV adoption delays in North America.
• Turbos & Thermal Technologies net sales decreased by 2% ($115 million) in 2025.
• Net cash used in financing activities increased significantly to $1,116 million in 2025 from $167 million in 2024, primarily due to share repurchases and debt repayments.
• Expected global industry production to be flat to down modestly year-over-year in 2026.
• Expected negative sales impact from declining sales in the Battery & Charging Systems segment in 2026.
• Anticipates continued inflationary pressures in certain raw materials, labor, and energy in 2026.

Risks

• The portfolio strategy may prove unsuccessful due to factors like failure to develop new products, technology changes, or inability to adapt to market shifts.
• Difficulty in forecasting demand for electric vehicles and achieving expected eProducts revenue growth, potentially leading to losses on existing investments.
• Risks associated with business ventures, acquisitions, and strategic alliances, including challenges in due diligence, integration, and realizing expected benefits, as well as potential for unknown liabilities and goodwill impairment.
• Challenges in successfully executing dispositions of assets or businesses, potentially leading to less desirable terms or unexpected liabilities.
• Financial performance is dependent on conditions in the global automotive industry, which is cyclical and sensitive to general economic conditions, geopolitical issues, and consumer preferences.
• Strong global competition from other manufacturers, vertically integrated OEM customers, and new electrification start-ups, which could adversely affect market share and profit margins.
• Failure to innovate and develop new and compelling products that capitalize on new technologies, including artificial intelligence (AI) and machine learning, or to improve in response to OEM and consumer preferences.
• Potential governmental investigations and related proceedings relating to alleged or actual violations of vehicle emissions standards, which could result in recalls, fines, or reputational harm.
• Substantial and continuing pressure from OEMs to reduce product prices, limiting the ability to pass through increased raw material or other inflationary costs.
• Volatile costs of commodities (e.g., aluminum, copper, nickel, steel, semiconductor chips) and elevated levels of inflation, which negatively impact operating margins.
• Restructuring plans may be costly and disruptive, and the company may not realize anticipated cost savings, operational improvements, or workforce reductions.
• Changes in administrative policy, including the imposition of or increases in tariffs, changes to existing trade agreements (e.g., USMCA renewal), and international trade relations (e.g., U.S.-China relations), could adversely affect the supply chain and costs.
• Inability to protect intellectual property rights or assertions by third parties of infringement could adversely affect business and competitive position.
• Business continuity risks associated with increasing centralization of information technology (IT) systems, and potential disruptions from cyber-attacks or failures in IT infrastructure.
• Cybersecurity risks, including inappropriate disclosure of confidential information, production downtimes, and risks related to the use of AI in product development and internal systems.
• Dependence on attracting and retaining qualified personnel, particularly those with engineering, technical, and software capabilities.
• New business launch difficulties, which could lead to significant delays, financial penalties, or loss of customers/market share.
• Work stoppages or production shutdowns due to unionized workforce at BorgWarner or its major OEM customers.
• Fluctuations in benefit plan expenses and unfunded obligations under defined benefit pension and other postemployment benefit plans due to changes in interest rates, regulations, and asset returns.
• Extensive and evolving environmental regulations, including those related to greenhouse gas emissions and climate change, which could increase costs or disrupt operations.
• Exposure to liabilities related to environmental clean-up, product warranties, product recalls, and various legal proceedings and commercial disputes.
• Compliance with and changes in complex laws and regulations across multiple international jurisdictions, including anti-corruption laws and tax laws.
• Risks related to international operations, such as changes in trade, monetary, and fiscal policies, currency exchange rate fluctuations, limitations on fund repatriation, and political instability.
• Aggressive competition and sensitivity to economic, political, and market conditions in China, including increased insourcing by domestic OEMs.
• A downgrade in the ratings of the company's debt could restrict access to debt capital markets and increase borrowing costs.
• Reliance on sales to major OEM customers and requirements contracts, making the company vulnerable to declines in their production or changes in business relationships.
• Supply shortages of components from a rationalized supply base, and economic distress of suppliers.
• Possible insolvency of financial counterparties in various financial transactions and derivative contracts.
• The 2023 spin-off of PHINIA Inc. may not achieve its intended tax benefits and could expose BorgWarner to additional tax risks or liabilities from related agreements.

Future Outlook

BorgWarner expects global industry production to be flat to down modestly in 2026, with total sales declining year-over-year, excluding foreign currency impacts, primarily due to declining sales in the Battery & Charging Systems segment. The company maintains a positive long-term outlook, committed to new product development and strategic investments to capitalize on electrified vehicle adoption and increasingly stringent global emissions standards.

Management Comments

• Our balanced portfolio is particularly critical as the automotive industry continues to see electric vehicle adoption volatility across different regions.
• The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
• There are several trends that are driving the Companys long-term growth that management expects to continue, including adoption of product offerings for electrified vehicles and increasingly stringent global emissions standards that support demand for the Companys products that drive vehicle efficiency.
• Management will continue to balance the Companys needs for organic growth, inorganic growth, debt reduction, cash conservation and return of cash to shareholders.

Industry Context

StockSavvy.ai notes that BorgWarner's 2025 performance reflects the broader automotive industry's ongoing transition towards electrification, characterized by both growth in eProducts and significant volatility in EV adoption rates across regions. The company's strategic decision to exit its charging business and consolidate battery systems operations aligns with a trend of companies refining their EV portfolios amidst market uncertainties and competitive pressures. The continued reliance on Foundational products, despite a slight decline, underscores the persistent demand for internal combustion and hybrid components, providing a crucial buffer against the uneven pace of EV transition. The substantial impairment charges in the Battery & Charging Systems and PowerDrive Systems segments highlight the challenges and risks associated with rapid investment in emerging EV technologies and the difficulty in forecasting market demand and competitive dynamics.

Comparison to Industry Standards

• BorgWarner's global workforce accident TRIR of 0.36 is within the top quartile for motor vehicle parts manufacturing, which is lower than or equal to 1.4 according to the BLS, indicating strong safety performance compared to industry benchmarks.
• The global workforce accident LTIR of 0.23 is above the top quartile for motor vehicle parts manufacturing, which is lower than or equal to 0.2 according to the BLS, suggesting room for improvement in preventing lost-time incidents.
• 95% of manufacturing sites are ISO 45001 certified, demonstrating a high level of adherence to international occupational health and safety management standards, comparable to leading industry players.
• The company's strategy to balance eProducts and Foundational products is a common approach among traditional automotive suppliers like Robert Bosch GmbH, Denso Corporation, and Magna Powertrain, who are also navigating the transition to electrification while maintaining core combustion business.
• The significant impairment charges in EV-related segments (Battery & Charging Systems, PowerDrive Systems) reflect a broader industry challenge, where companies like LG Energy Solution or SK On have also faced profitability pressures and investment re-evaluations due to slower-than-expected EV demand or intense competition.

Management Changes

Corporate Governance

Legal Proceedings

• Settled a lawsuit against PHINIA Inc. on October 15, 2025, where BorgWarner sought to recover approximately $120 million in VAT refunds. PHINIA agreed to pay BorgWarner $78 million, resolving the lawsuit and other spin-off related matters.
• The company is a potentially responsible party (PRP) at 16 hazardous waste disposal sites under Superfund and equivalent state laws as of December 31, 2025, with an accrual for environmental liabilities of $6 million.
• The company is involved, from time to time, in other legal proceedings and commercial or contractual disputes, including warranty claims, intellectual property matters, personal injury, product liability, tax matters, and employment claims.

Related Party Transactions

• The company has nine joint ventures, three of which are unconsolidated (NSK-Warner K.K., Turbo Energy Private Limited, Fast Warner Intelligent Control Systems (Xian) Co., Ltd.) where it holds less than 100% ownership.
• The company entered into a settlement agreement with PHINIA Inc. (a spun-off entity) on October 15, 2025, resolving a lawsuit over VAT refunds and other matters related to the spin-off.
• The company and PHINIA also entered into an amended and restated tax matters agreement that limits BorgWarner's responsibility to certain defined tax obligations.
• The company provided and received transition services from PHINIA following the spin-off, which concluded on September 30, 2025.

Stakeholder Impact

• Shareholders: Experienced a decline in net earnings and diluted EPS, but continued to receive dividends and benefit from share repurchases. The PHINIA settlement provided a cash inflow.
• Employees: Restructuring actions led to employee termination benefits, while the company continued its focus on attraction, retention, education, development, and health/safety initiatives. Unionized employees are covered by collective bargaining agreements.
• Customers: Faced continued pressure for price reductions from OEMs. The exit of the charging business and consolidation of battery systems may impact certain customer relationships. Delays in EV adoption and dual sourcing actions by customers affected BorgWarner's business.
• Suppliers: Rationalization of the supply base could increase dependence on fewer sources, potentially raising the risk of supply shortages. Updated purchase order terms address supplier cybersecurity.
• Creditors: Maintained stable credit ratings (BBB from S&P, Baa1 from Moody's, BBB+ from Fitch), indicating good credit quality, with no debt agreements requiring accelerated repayment due to downgrades.

Next Steps

• Continue to focus on profitable growth across its technology-focused product portfolio that supports electric, hybrid, and combustion vehicles.
• Grow its product portfolio through organic investments and technology-focused acquisitions.
• Complete the termination process for the U.S. defined benefit pension plan, expected to take up to eighteen months.
• Fund benefit obligations under the U.S. Pension Plan through lump sum payments and purchase of a group annuity contract.
• Continue to evaluate different options across operations to reduce existing structural costs over the next few years.
• Recognize restructuring expense associated with any future actions at the time they are approved and become probable or are incurred.
• Continue to balance needs for organic growth, inorganic growth, debt reduction, cash conservation, and return of cash to shareholders.
• Contribute approximately $25 million into defined benefit pension plans during 2026.
• Evaluate the impact of new accounting guidance (ASU No. 2025-06 and ASU No. 2025-10) on Consolidated Financial Statements.

Key Dates

Recommendation

BorgWarner's 2025 results present a mixed picture. While the company achieved a modest increase in net sales and continued growth in eProducts, significant impairment charges and a decline in net earnings raise concerns about the profitability and execution of its electrification strategy, particularly in the Battery & Charging Systems segment. The successful resolution of the PHINIA lawsuit and strong liquidity are positives, but the outlook for flat to modestly declining global industry production and continued inflationary pressures suggest a challenging environment. The company is actively restructuring and investing in future growth, but the near-term headwinds and the need for successful integration and market adaptation warrant a 'hold' recommendation. Investors should monitor the effectiveness of restructuring, the pace of EV adoption, and the company's ability to improve profitability in its eProducts segments.

Keywords

Automotive Supplier, Electric Vehicles, Hybrid Vehicles, eProducts, Foundational Products, Powertrain, Goodwill Impairment, Restructuring, Share Repurchase, Dividends, Cybersecurity, Trade Policy, OEMs, Global Automotive Industry, Annual Report, Financial Results, Battery Systems, Charging Business Exit, Corporate Governance, Risk Factors