Good morning. My name is Catherine, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2022 fourth quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you'd like to ask a question during this time, simply press star one on your telephone keypad. If you are using a speakerphone, please pick up the handset before you ask in your question. I would now like to turn the call over to Patrick Nolan, Vice President of Investor Relations. Mr. Nolan, you may begin your conference. Good morning, everyone. This is Patrick Nolan. I apologize about the technical difficulties we've had this morning, we're gonna kick off today's call. We issued our press release earlier this morning. It's posted on our website, borgwarner.com. It's on our homepage and on our investor relations homepage. 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 to prepare it for purposes of 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'll also refer to our growth compared to our market. When you hear us say, "Market," that means the change in light vehicle and commercial vehicle production weighted for our geographic exposure. Please note that we've posted an earnings call presentation to the IR page of our website. We encourage you to follow these slides during our discussion. Happy to turn the call over to Fred. Thank you, Pat. Good morning, everyone. I have a bit of an allergic reaction this morning impacting my speech. Kevin will cover the prepared remarks. I'll stay with you and answer the questions. Kevin? All right. Thanks, Fred. Good morning, everyone. We're pleased to share our results for 2022 and provide an overall company update starting on slide five. We continue to be very proud of the strength of our sales relative to the overall industry. With about $15.8 billion in sales, we were up approximately 14% compared to our market, which was up a little less than 4%. Importantly, our BEV-related sales contributed meaningfully to this growth. We're also pleased with our solid margin performance, which we delivered despite the significant production volatility and inflationary headwinds that we faced during 2022. This performance was achieved while continuing to significantly increase our E R&D investment to support the continued growth in our E product portfolio. We also delivered record free cash flow, which allowed us to continue to make inorganic investments that support our future while at the same time returning cash to our shareholders. Beyond our near-term results, we continue to drive our long-term positioning during the quarter. We took several leading steps in our sustainability efforts. I'll detail those more in just a moment. We made a significant advancement in Charging Forward with the announcement of the planned separation of the fuel systems and aftermarket segments. We also secured multiple new electrification program awards since our last earnings report. Next on slide six, I'd like to give you more color with respect to our progress in our SBTI targets. In mid-December, BorgWarner announced its commitment to reduce its absolute Scope 3 emissions by at least 25% by 2031 from a 2021 baseline. This Scope 3 target, along with our previously announced target to achieve 85% absolute Scope one and Scope two emissions reductions by 2030, was formally submitted for validation to SBTI. These science-based targets align with Charging Forward our accelerated path to electrification by aiming to achieve a net zero carbon emissions future for all. We've made some meaningful progress in 2022 toward achieving our Scope one and Scope two emissions targets as we have tied employee bonus opportunities across our global operations to reducing energy intensity while also promoting energy management certification and the procurement of renewable energy. To meet the Scope 3 target, BorgWarner intends to focus its efforts on a number of actions, including transitioning the product portfolio to electrification, increasing content of recyclable remanufactured material, reducing product weight, and driving sustainable raw material selection. We'll also be working with our supply base to do the same. Next on slide seven, I'd like to summarize the planned separation of our fuel systems and aftermarket segments, which we refer to as NewCo. We announced this planned separation in December as we believe that now is the right time to separate these businesses and unlock shareholder value. For NewCo, we've driven significant margin improvement over the last couple of years, despite the challenging industry environment. From a product leadership standpoint, we've solidified NewCo's position in the commercial vehicle segment, including with hydrogen injection, in the passenger car segment with our cutting-edge GDI technologies, and in the aftermarket business. We believe these things position NewCo well for success as a standalone public company. For BorgWarner, we believe the intended separation accelerates our Charging Forward strategy and focuses all of our energy towards electrified propulsion. It enhances all of our management attention, our focus, and our flexibility to pursue attractive EV investments and supports our vision of a clean energy efficient world. The intended separation will allow each company to pursue its own strategies with an overarching focus on maximizing the value opportunity for our shareholders. The teams are progressing well through the various work streams. We plan to provide updates as appropriate. We continue to expect the intended separation to close in late 2023. Let's look at some new electrification awards on slide eight. BorgWarner will supply a major German vehicle manufacturer with innovative battery cooling plates for the OEM's next generation electric vehicles in Europe and the United States. This is our first award for this new organically developed product with an expected launch in 2025. Compared to alternative solutions, the BorgWarner cooling plates provide greater cooling capacity within a smaller installation space, as well as reduced weight and cost. We believe that as a global market leader in exhaust gas recirculation cooler technology, BorgWarner's expertise in thermal management and the associated manufacturing processes positions the company to be an ideal pioneer of new developments for the battery cooling market. On the right side of the slide, you can see that we're announcing a sizable expansion of our Silicon Carbide Inverter business with a top global OEM with an 800 volt award. After partnering with this car manufacturing on a 400 volt inverter product, we're now being sourced to launch two new 800 volt variants in 2025. 250 kilowatts for an all-wheel drive crossover utility vehicle and a 350 kilowatt module for the OEM's performance vehicles. This expanded business strengthens our position as one of the strategic inverter suppliers for this long-standing customer as that customer transitions to the next phase of its BEV strategy. As you can see, we've made further progress toward our Charging Forward objectives. Let's look at what this means in our progress report on slide nine. Starting first with organic electric vehicle sales growth. With the award secured as of this call, we now have pure BEV programs that we estimate account for about $3 billion of book sales in 2025. Of note, this estimate reflects about a $150 million headwind versus our prior disclosure stemming from an update to reflect the FX rates underlying our 2023 guidance. This FX headwind was partially offset by the new business wins I discussed on the prior slide. Turning to M&A, we've now completed or announced five acquisitions since the start of Charging Forward, AKASOL, Santroll, Rhombus, SSE, and Drivetek. Based on our due diligence, we believe those businesses will generate about $1.3 billion of EV-related sales in 2025. This is higher than our previous outlook based on our revised projections for AKASOL, which is seeing a faster ramp-up in sales than we initially anticipated. We're not done here. We continue to expect that we'll execute additional acquisitions and are actively engaged with a handful of potential targets that we think will enhance various parts of our EV portfolio. Finally, the planned separation of NewCo will address the third pillar of Charging Forward, for which we set an original goal to complete about $3.5 billion in dispositions by 2025. With all that we've accomplished in the last couple years, we believe we're already on track to achieve about $4.3 billion of pure electric vehicle sales in 2025, and we believe it puts us within striking distance of our $4.5 billion EV sales target for 2025. Let's move into the financials, starting on slide 10 for a look at our year-over-year revenue walk for Q4. After adjusting for the disposition of our Water Valley facility, last year's Q4 revenue was just over $3.6 billion. You can see that the strengthening US dollar drove a year-over-year decrease in revenue of over 8% or approximately $307 million. You can see the increase in our organic revenue, about 21% year-over-year. That compares to a less than 1% increase in weighted average market production, which means we delivered another quarter of strong outperformance. The sum of all this was just over $4.1 billion of revenue in Q4, a strong finish to the year. Turning to slide 11, you can see our earnings and cash flow performance for the quarter. Our fourth quarter adjusted operating income was $428 million, equating to a 10.4% margin. That compares to adjusted operating income of $398 million or 10.9% from a year ago. On a comparable basis, excluding the impact of foreign exchange and the impact of M&A, adjusted operating income increased $74 million on $769 million of higher sales. The biggest positive driver of this performance was that we converted at approximately 15% on our additional sales. This conversion was partially offset by our planned increase in e-products R&D. In Q4, we increased these R&D investments by $38 million relative to last year. Our adjusted EPS improved by $0.20 in the fourth quarter, driven by the improvement in our adjusted operating income and a nearly 400 basis points lower year-over-year tax rate. That lower tax rate was driven by a favorable mix of earnings across taxing jurisdictions, qualifying for more favorable tax rates in certain jurisdictions, and the impact of ongoing tax structuring initiatives, all of which we believe should contribute to a lower tax rate going forward than what we've experienced over the last few years. Finally, free cash flow. We generated $670+ million of positive free cash flow during Q4. The year-over-year increase was driven by three things: the improvement in operating income, the timing of collection of a meaningful amount of inflationary price recoveries from our customers, and the non-recurrence of a one-time $130 million warranty payment to a customer last year. Let's now turn to slide 12, where you can see our perspective on global industry production for 2023. When you look at this slide, you can see that our market assumptions continue to contemplate the types of macro uncertainty we've been experiencing over the last few years. With that background in mind, we expect our global weighted light and commercial vehicle markets to be flat to up 3% this year. Looking at this by region, we're planning for our weighted North American markets to be up about 2%-5%. In Europe, we expect our blended market to be up 1% to down 2% year-over-year. In China, we expect the overall market to be roughly flat to up 3%. Now let's take a look at our full year outlook on slide 13. First, it's important to note that our guidance assumes an expected full year headwind from weaker foreign currencies of $285 million. Second, as I previously mentioned, we expect our end markets to be flat to up 3% for the year, which contributes to the organic net sales change you see on the slide. More important than that slight growth in end markets, we expect our revenue to continue to grow well in excess of industry production, driven by new business launches and higher electric vehicle revenue. In fact, in 2023, we're expecting to deliver between $1.5 billion and $1.8 billion in EV revenue, which is up significantly from the $870 million we generated in 2022. Finally, the Santroll and Rhombus acquisitions are expected to add approximately $35 million to 2023 revenue. Based on these assumptions, we're projecting total 2023 revenue in the range of $16.7 billion-$17.5 billion, which equates to organic growth of approximately 7%-12%. Switching to margin, we expect our full year adjusted operating margin to be in the range of 10.0%-10.4% compared to our 2022 margin of 10.1%. We do expect some variation in the margin level across the quarters in 2023. Specifically, we believe that Q1 is likely to be the weakest reported margin during the year as we work with our customers and suppliers on finalizing the extent to which inflationary pricing actions negotiated in 2022 carry over into 2023. Our current expectations are that the year-over-year impact of inflationary pressures on full-year margins is likely to be negligible. We could see some negative impact in Q1. As it relates to R&D, our full-year 2023 guidance anticipates a $60 million-$70 million increase in e-products related R&D investment. With our continued success securing new electrified business wins, we're continuing to lean forward and invest more in E R&D to support our e-products portfolio. Importantly, as you see on the slide, the year-over-year increase in 2023 is expected to be lower than the year-over-year increase in 2022. Excluding the impact of this increase in e-products related E R&D, our 2023 margin outlook contemplates the business delivering full year incrementals in the mid-teens, which we view as a solid conversion given the amount of product launches and ramp-ups occurring this year. Based on this revenue and margin outlook, we're expecting full year adjusted EPS of $4.50-$5.00 per diluted share. This EPS guidance contemplates two slight headwinds relative to 2022. First, we expect an effective tax rate of approximately 25%, up a couple percentage points relative to last year. That rate remains far lower than what we've experienced in recent years, and we think it's a rate that's likely to be sustainable on a go-forward basis. Second, our EPS guidance assumes a $0.13 per share negative impact coming from higher net pension expense as a result of higher discount rates. Turning to free cash flow, we expect it will deliver free cash flow in the range of $550 million-$650 million for the full year. This cash flow outlook includes a one-time cash cost of approximately $150 million related to the intended spin-off of our Fuel Systems and Aftermarket businesses, arising from outside advisor fees, cash tax payments to facilitate the separation, and IT costs to create a standalone IT environment for NewCo. Excluding these one-time costs, our cash flow guidance would be $700 million-$800 million, which is only slightly lower than the record free cash flow of $846 million we generated in 2022. That's our 2023 outlook. Let me summarize this morning's remarks. Overall, we delivered strong performance in 2022, despite a volatile end market environment and significant inflation headwinds. In the face of this environment, we outgrew the market significantly. We maintained our adjusted operating margins above 10% by delivering incremental margins on our higher sales and successfully completing commercial negotiations with our customers, while also investing $150 million more in R&D to support the future growth of our e-business. Finally, we delivered a record year of free cash flow. As we continue to successfully manage the present, we will also continue to successfully deliver on the future by making significant progress on our Charging Forward plan. As we look ahead to 2023, we'll be keenly focused on continuing to manage the present by sustaining strong high single-digit revenue outperformance compared to industry volumes and driving conversion on this revenue growth, successfully executing the intended spin-off of our fuel systems and aftermarket businesses, and continuing to make disciplined investments, both organic and inorganic, that will help secure our growth and financial strength long into the future. With that, I'd like to turn the call back over to Pat. Thank you, Kevin. Operator, we're ready to open up for questions. At this time, I would like to remind everyone, if you would like to ask a question, press star one on your telephone keypad. If you are using a speakerphone, please pick up the handset before asking your question. In the interest of time, please limit yourself to one question and one follow-up question. We'll take our first question from Colin Langan with Wells Fargo. Your line is open. Just a little follow-up on the co-comments on inflationary costs. I think you said the guidance implies a negligible impact. I mean, so far it seems like other suppliers have kind of guided to pretty large headwinds, particularly around labor. You know, any color on the underlying gross impact that you're expecting that you'll need to get price concessions to offset? Any color why you're not seeing as big of a factor as other suppliers is just the business structure or some other benefits? Yeah, I think our expectation right now is that we're gonna continue to manage inflationary levels at the way we exited 2022. To the extent that we continue to see elevated levels of inflation from the supply base, we would expect to continue to maintain the pricing in place with our customers on a go-forward basis to mitigate that. That's really what's underlying the guidance. Based on your comments, it sounds like you're really just renegotiating what you've gotten last year, or are you seeing more increases in these costs this year too, or no? Well, I think we're expecting that we're going to enter the year much the same way we exited last year. The focus of the negotiations last year was really about how we address the inflationary environment in 2022. Then we essentially aligned with the customer base that we would look at ahead to 2023 as we were entering the new year and see what types of pricing levels were appropriate to continue to mitigate those impacts. So as you can imagine, we'll have those discussions here as we enter the new year about the pricing and cost environment. Got it. Your outlook based on your market guidance looks like it's about 8% over market, and I believe that you used to historically talk about more 4%-5%. What's driving the strong growth over market this year? Is that sustainable? How should we think about it going forward? Yeah, Colin, the outgrowths next year is you're right around mid point of 8%, and very proud of that. About two-third of it is BEV products and other products for plug-in hybrids. You know, next year will be between one and a half to $1.8 billion of pure BEV revenue, which is approaching 10% of our revenue. Very proud about this acceleration. Is there anything one time in nature in the growth for this year or? not at all. you know, this confirms that we are on track marching towards our target of $4.5 billion of fuel BEV revenue in 2025. you see a 2x increase this year versus prior year, and that's pretty much part of the plan. Got it. All right. Yeah, thanks for taking my questions. We'll take our next question from Emmanuel Rosner with Deutsche Bank. Your line is open. Hi, thank you very much. Was hoping you could give us a little bit more color around the year-over-year walk and puts and takes in terms of your margin outlook. As you mentioned yourself, the at midpoint, it's basically just slightly better than flat, sort of like operating margin despite what seems to be incredibly strong organic growth and I guess growth overall. I understand the E R&D piece of that going up a bit, but anything else going on? Can you just maybe talk about R&D overall? Like, are you offsetting some of that E R&D increase by cutting back on X R&D, or is that sort of like how much the full R&D will be going up by? Yeah, I mean, the walk going from 2022 and to 2023 is fairly simple. It's really as we look at that organic net sales change, we're converting on that effectively in the mid-teens, call it in that 15%, 16% range. Then we're also investing incrementally in e-products related R&D of about $60 million-$70 million on a year-over-year basis, which is what brings the overall conversion down and shows only then a slight improvement in our margin profile on a year-over-year basis. We're pretty pleased with that mid-teens conversion, given that the bulk of the revenue growth we're seeing in 2023 is really related to product launches and ramp-up, not recovery in end markets. So with some of the startup costs you see there, we're pretty pleased with that performance. Fred, did you wanna comment on the R&D? Yeah. Emmanuel, morning. On the R&D side, as Kevin mentioned, we expect to be up again this year-over-year. We're also looking at a lot of R&D efficiency on the combustion side. I think we expect that mid-term, the R&D is gonna stay between 5% and 5.5% of revenue, looking in, not constraining the e-growth, but also making sure that we're doing the right thing on the foundation and products. Following up on this then, is this year within this range as well, the total R&D 5%-5.5%? I guess in the past, you've sort of like spoken about the tail end of 2023 as sort of like being this turning point where sort of like your EV business is essentially breakeven or getting profitable, basically fully loaded as you have enough revenue scale to sort of like, you know, match the size of this E R&D. Is that still the case, or with these additional investment, does that push out the timeline a bit? Yeah, a couple things. On the question about R&D, I mean, we're really only guiding at the moment to the e-products related R&D, which we are seeing an increase in investment that we're choosing to make of $60 million-$70 million. The overall R&D budget, or I'll say the foundational R&D, is just being managed in totality with the way that we manage the profitability of those foundational businesses. As it relates to EV, the trajectory of profitability, you know, as you see the growth that we're generating this year and the incremental margin that we're generating on that revenue growth this year, two-thirds of which comes from our e-product portfolio, you can see that the growth and contribution margin is effectively outpacing the growth in e-products related R&D. Which means that 2023, we are seeing improving profitability coming from that portfolio in totality and continue to believe that we're on track, that as we exit 2023 and head into the beginning of 2024, that portfolio is approaching breakeven. Sounds good. Thank you very much. Our next question will come from James Picariello with BNP Paribas. Your line is open. Hi. Good morning, everyone. Just back to the growth over market. I saw that in 2022, you know, there was almost like a 4-point benefit from commodity recovery embedded within your revenue growth. I do just wanna clarify that the 2023, you know, high single digit 8 points of outgrowth, that does not include any, you know, ongoing commodity recovery, cost recovery type benefit. That's correct. I mean, pricing is not a net tailwind in that, effectively that organic growth number, as you look at the 2023 guide. Okay. Understood. Just back to the EV profitability timeframe. Any, you know, given the $60 million-$70 million R&D step-up, you know, I think previously you guys had talked about maybe late 2023, early 2024 in terms of achieving breakeven for the business. What does that timeframe, you know, look like now given, you know, better visibility on the R&D commitments you have? I think as I was just mentioning to Emmanuel, it's essentially unchanged. I mean, we think last year and heading into the beginning of this year was really the inflection point of the business from an electrification standpoint. We leaned forward pretty significantly last year with a $150+ million step up in e-products related R&D. Now as we head into 2023, and you're seeing all that EV related revenue growth coming through and the contribution coming on that revenue growth, that contribution margin growth this year is outpacing the growth in e-products R&D and continues to put us on pace, as I mentioned to Emmanuel, for us to be approaching breakeven as we exit 2023 and enter the beginning of 2024. Got it. just any clarity on what the spin co's targeted net leverage could be? I know you previously communicated it'll have a healthy cap structure. Just curious if there's a finer point on that. Thank you. I'm not gonna provide any more color on that at this point, we're still on target to execute the spin in late 2023. As we approach the spin-off date, get closer to that, you should expect that both companies are gonna hold investor days, at which point in time we'll provide more clarity around the financial outlook and capital structures of both businesses. The overall concept is, as it relates to both NewCo and BorgWarner on a go-forward basis, that we're gonna continue to maintain moderate levels of leverage in a way that supports the ability of both companies to execute their respective strategies. Thanks. Our next question comes from Rod Lache with Wolfe Research. Your line is open. Good morning, everybody. Fred, hope you feel better. Kevin, I think I have a few questions for you. First of all, is it correct that I guess I'm understanding that you reflected already a significant amount of additional inflation in your numbers in 2023, but you are not assuming any real recovery in terms of incremental pricing on that, and that if you do achieve incremental recovery, that would actually be accretive to your revenue forecast and your earnings forecast. Am I understanding that right? I mean, the way to think about it, we exited 2022 at a level of pricing from the supply base and pricing with the customers that we think is likely gonna continue at or around that level heading into 2023. That's effectively what's underlying the guide. Okay. In other words, you already had this from the beginning of the year. There's no, like, spillover effect from negotiations that you had benefited from over the course of the year or in the middle of the year, last year? Yeah. I think the spillover effect is what I mentioned in with respect to my comments about the potential volatility in margins in Q1. You know, as we negotiated with our customers in 2022, their focus was really on how we made sure that we're recovering a fair share of the inflationary impacts we were seeing in 2022. As we head into 2023, we would discuss with our customers and our suppliers the extent to which some of those pricing increases need to continue to offset the inflationary environment. We could see a little bit of choppiness in Q1 as we go through some of those discussions. Overall, our outlook for the full year is that we don't expect to see a material impact from the net pricing environment on a year-over-year basis relative to 2022. Understood. Can you maybe clarify what the magnitude of the inflationary burden is for you that is already embedded in your numbers and you're seemingly offsetting in part through additional productivity? Is it correct that the scope of that inflationary burden is beyond parts and materials, like it's extending to things like energy, labor, and other factors at this point? Yeah, that's fair to say, Rod. I mean, what we've disclosed to date is that the biggest impact we see is really on the material cost inflation side. The net impact on our P&L on material costs from last year, the cost net of recoveries from customers was about $90 million of headwind. Obviously we have other productivity issues that we're managing through from a labor, freight, and other things. Thank you. Our next question comes from John Murphy with Bank of America. Your line is open. Good morning, guys. I just wanted to follow up on something you had in your other investor deck that's outside of the slides you showed here. I mean, you showed, like, the content per vehicle opportunity on EVs, through 2025 and what you've developed through your acquisitions. I'm just curious, I mean, 'cause we're looking at a big chunk of the business, you know, still being ICE. Just curious if you had a view of how you think about the content per vehicle on an ICE vehicle developing through 2025 and 2030 and maybe in a similar way that you showed the EV content per vehicle? Yeah. I would say if you look at 2023, the ICE products, whether in pure combustion powertrain or in hybrid powertrain are a positive contributor to the outgrowth. We see still a lot of pull from the market for our energy efficient ICE types of products. Okay. Also, I mean, it looks like in the slide, you're kind of indicating a break even on an operating basis in EV starts occurring sometime between 2023 and 2024, roughly, just in the slide that you showed. You know, when do you think that the return on invested capital starts to become sort of adequate. I mean, it looks like it's 2024, 2025, 2026 that you're kind of highlighting the margins might get, you know, closer to, you know, quote-unquote, normal. I mean, when do you think the return on invested capital hits sort of an adequate level for you? John, maybe I start and turn it over to Kevin. The EV products that we are booking, announcing are going through the same ROIC threshold as appropriation request processes than any other products. The ROIC program by program is there. There's no doubt about that. From a timing standpoint, I'll turn it over to Kevin. No, I mean, I think that's the key point. We price all of these programs so that on a standalone basis they're profitable. As we've mentioned in the past, that what makes the e-business a little bit different than some of our other businesses, our foundational businesses today, is that to drive the revenue growth in these product categories, we have to invest a lot in upfront e-products related R&D. That provides an overhang to the in-year margins any given year. You see that this year, even in our 2023 guide, where we have good levels of conversion that we're pretty happy with, but we're continuing to invest another $60 million-$70 million to support new business wins three, four and five years out. As long as we continue to see the prospects for growth in this business, we're gonna continue to invest in the e-products related R&D to make sure that we have long-term viable business here. Again, as long as those programs are all individually meeting our ROIC targets on a standalone basis, we're very happy to continue to invest in that e-R&D. Maybe just lastly, I mean, to kind of put this all together, I mean, it looks like the margins on the ICE business in 2023 will be, you know, 12%-13%, maybe even better. You know, if we think about, you know, the aggregate margins being in the 10% range, I mean, do you think we're at a point where those ICE margins may improve even a bit over time, and that this transition is kind of hitting sort of a low point on margins and returns in 2023? Or do you think that's still in front of us? I mean, that chart that you show on the EV business getting to break even, sometime between 2023 and 2024 roughly, you know, kind of indicates that we may be hitting this low point and that as we get into 2024, things may actually sort of on an average basis start to improve. I know we're kind of looking far out, people are just trying to really understand what this transition between EV may mean for margins and returns. John, our product leadership and scale in the foundational products is very strong. I would say the margin will remain top quartile and strong as you've seen in the past. Also don't forget that the foundational products that we have have an impact too on our EV growth. One of the announcements that we made this morning around the battery cooling plate is a great example of that. We're leveraging product foundational know-how with cooler application in the world of combustion. We are leveraging processes know-how around brazing, leakage control from our cooling technology into the battery cooling plate. This is a great example of using foundational know-how to create a new organically developed product for the EV world. Okay. I mean, is it, I mean, is it fair to say, I mean, given the volatility that's going in the markets right now and this transition, this kind of being the last, you know, year where you might be losing money as based on what you're showing on an operating basis, that we may be looking at a sort of a point in time where 2023, I know this is hard to say, but just in the transition conceptually it may mark a low watermark in margins as it relates to this transition all else equal. John, is we are approaching breakeven? Is it end of 2023? Is it beginning 2024? I mean, it's tough to say. It is absolutely clear that now is the turning point, both from a revenue and a path to breakeven. That's absolutely pretty visible. Okay. That's exactly what I want. Thank you so much, guys. As a reminder, if you would like to ask a question, please press star and one to join the question queue. You may remove yourself from the queue by pressing star and two. That is star and one to ask a question. We'll take our next question from Luke Junk with Baird. Your line is open. Good morning. Thanks for taking the questions. To start, Frederic, Kevin, it'd be great if just get your perspective on what you're seeing industry-wide in terms of the push and pull between 400 volt and 800 volt architectures. Do you think the consensus, if you will, is moving more towards 800 volt? Just curious with what happened with the customer award that you mentioned today, does that animate this industry-wide dynamic at all? Luke, the two voltages will live and have a space in the market. 800 volts leads to a few efficiency improvements, but also comes with additional features and cost. We believe that depending on the end application, the vehicle type and the price point, that the OE wants to set the vehicle at, and both technologies will remain active. What we're doing at BorgWarner is really focusing on the modular design of those inverters, so that we have building blocks depending on level of voltages or silicon carbide or level of outputs necessary, so that we are using a modular approach that will be pretty agnostic to the voltages. Good. Appreciate that. For my follow-up, I was just hoping you could comment on the Wolfspeed partnership that you announced in November, specifically around your ability to compete incrementally and ensure supply before and after that partnership. Most importantly, to what extent you think your supply chain position now could be advantage versus peers in silicon carbide. Thank you. We're very happy with the fact that we've secured a corridor of supply that is pretty significant and can meet our expectations going forward and our fast growth. Two points. One, this supply agreement is not exclusive, meaning we can work with other silicon carbide supplier should we want, but also if our OEM want us to work with other silicon carbide suppliers, the door is absolutely open, too. I think we've secured a significant capacity corridor, but we also have the ability to be flexible to decide who we work with down the road. Okay. I'll leave it there. Thank you. Our next question will come from Adam Jonas with Morgan Stanley. Your line is open. Hey, thanks everybody. Fred, hope you're feeling better, buddy. Hope you feel better. I noticed on slide eight the cooling plates kind of so beautifully nestling that 4680 cylindrical cell. I'm curious what you're thinking about pouch and prismatic versus cylindrical because it seems like given some reports around GM maybe not doing their fourth plant or possibly changing form factor and Tesla ramping up 4680 and getting others to make it, that might become more of an industry standard, even though there's still a lot of form factors. I was curious whether you're witnessing a bit of a gravitational shift or momentum, not just from Tesla to 4680, but others as well. Is that possibly what's going on? I thought that the argument was pouch and prismatic was more energy dense, but are some of your products, like your cooling plate, able to get around that with the cylinders and get the better energy density with a cylinder versus a pouch? Yeah. First in the commercial vehicle site where we are really active from a battery pack manufacturer... ... standpoint, we see cylindrical as the mainstream. In pass car, where we won that business with a major German OEM, we have different technologies that will be in the marketplace. What we've created here is focused on cylindrical. Not gonna comment on the applicability to other technologies, but to answer your question simply on CV, we see cylindrical going mainstream. ... PEV PEV there are different views. again, different technologies will be, you know, hitting the market, and they all have their pros and cons. Okay. Fred, appreciate that. The only- Yeah, please. The only thing that I would add, Adam, is that, you know, those battery cooling plates for those types of battery architecture. ... are generating a pretty significant market opportunity, and we estimate that market opportunity to be around $3.5 billion in 2028 already. It's not insignificant. Got it, Fred. Thanks. Just to follow up, the world's really changed, continues to change in terms of cost of capital, interest rates, consumer slowing, Tesla's dramatic price cuts, et cetera. Your electrification portfolio gives you a really long dated view into the forward. Are you seeing any hesitation or maybe pushing out of the commitment from OEMs on EV investment at the margin? I know they're still committed, but I didn't know if there was a rate of change you might have picked up on when you're forward over the last quarter or so. No. I would say to the contrary, I see, ... an acceleration of those program, a tremendous focus on management, both sides, OEM and tier one, to launch. Also as I mentioned in prior calls, when we book a program, a few months after we're already talking about capacity increase. Okay. What we see, though, is that also from a customer side, what we see is that they want to partner with someone who can be impactful on the E side but also on the foundational side, so that we pivot together. Great, Fred. Thanks. Our next question comes from Noah Kaye with Oppenheimer. Your line is open. Thanks. I'll stick with the battery theme for a minute here. Just given, you know, BEV is driving the majority of the organic growth outlook for this year. You mentioned battery as a significant contributor this quarter, then you also called out higher growth expectations at AKASOL, I guess, over the medium term. Just help us understand what's driving your increased expectations for your own battery business. Is it just higher sell-through on the commercial EV side, or are you picking up share gains in new platforms? It's simple. We have multiple customer awards plus higher volume from our core customers, and that's leading to Akasol moving slightly from under slightly $300 million last year to about $1 billion in 2025. The impact that you see this year is part of that glide path. Very pleased with our inverter growth, too, and also very pleased on our motor and other wins across the portfolio. On Akasol, yeah, about $1 billion already in 2025. Okay. Just a follow-up. I'm curious how much of your 2023 CapEx might be allocated to battery manufacturing in the U.S. and how the 45X production tax credit might benefit you if you're making any investments. Yeah, I mean, because of the acceleration we're seeing in the revenue in AKASOL, as Fred mentioned, even up through 25, we are accelerating some of the investments that we're making both in Europe and North America related to that business. We're also seeing part of the increase in CapEx on a year-over-year basis related to our other electrification businesses on the light vehicle side. So definitely a contributor. As it relates to North America, you know, we're looking at the tax credits and how those might apply to us from a production standpoint as we go through 23 and beyond. Just waiting for Treasury guidance to get full clarification? I mean, there's some of that, making sure that we understand that any clarifications that need to be had, but we're pursuing the credits that we think that are available to us, based on the production that we are executing here in the United States. Thank you. We have time for one final question, and that question comes from Mark Delaney with Goldman Sachs. Your line is open. Yes. Good morning. Thank you very much for taking my question. When you speak to your auto OEM customers, what do you think the gating factor is to light vehicle production volumes in 2023? To what extent is volume gated by supply as opposed to demand? The semiconductor availability is still alive, unfortunately. I would say to answer your question, it's more capped from a supply availability standpoint than from a demand standpoint in 2023. Thanks, Fred. The second question was just in terms of how customers have responded to the announced separation of the business. You spoke about all the great momentum BorgWarner's having on the e-product side. I'm wondering, though, have you seen any change in customer engagement to design in NewCo products with the announced separation? Not at all. No, we've obviously talked to, almost all our customers, and they understand, and they're actually happy to see those two strong companies being able to execute their own respective strategy. They're happy with the announced spin-off. There's no noise from that end at all. Thanks so much. I'd like to thank you all for your questions today. We apologize for the technical difficulties earlier in the call. If you have any additional follow-ups, feel free to reach out directly to me and my team. Operator, you can conclude today's call. That does conclude the BorgWarner 2022 fourth quarter results conference call. You may now disconnect.