We're going to kick off the next fireside chat. Is this on? Yes. Yeah, with BorgWarner. So just to give you a little bit of an introduction, so for BorgWarner is a $14 billion revenue company, historically driven by technologies that deliver greater efficiency in internal combustion, hybrid, and electric vehicles. At a high level, about $2 billion of the company's $14 billion of revenue last year, around 15%, was derived from EVs and hybrids. That was expected to grow to about $2.7 billion this year and potentially as much as $4.5 billion next year. So a huge amount of growth. And because BorgWarner has higher content on a hybrid or an EV versus internal combustion, the company will exceed, will actually achieve net growth as the industry continues to shift towards electrification. Joining us today, I'm very pleased to welcome the company's CEO, Fred Lissalde. CFO Craig Aaron is in the audience. Pat Nolan, who runs Investor Relations, is with me on the podium. So, I think first of all, I'd like to just start with a high-level question about the shift in drive line technology. So, look, the market, there's a lot of debate, obviously, right now on what is the magnitude of the shift to EV. What are you actually hearing right now from your customers? So, Rod, thanks for having us. And good morning, everyone. So what we see from a launch and booking perspective on BEV, it's pretty much launching as we speak. We're launching a lot of programs in BEV right now. And I would say that even if we see maybe a few months of delays in sourcing of next-generation BEVs, it's launching as we're planning to. Now, the take rate is what makes it very difficult once the product is launched. For hybrids, the activity has been very high in China and in Europe. In North America, it's, you know, people start talking about hybrids. But out of the $1.9 billion of eP roducts that we have for both BEV and hybrid, 40% of those $1.9 billion is for hybrid powertrain and 60% is for BEV. What's important for us is that our eP roduct, what we call the eP roduct, which is BEV product plus the electric side of hybrid, they're the same. The same motors, the same inverters, the same power electronics, the same, same cybersecurity software, the same transmission, the same thermal management. So we use the same R&D centers, the same engineers, pretty much also a lot of the same equipment and plants. So for us, mid- to long-term, we're convinced that electrification is here to happen because regulation's pushing for it. For us, we're pretty much agnostic whether we go in EV or in hybrid. Last year, EVs were 11% of the global auto industry, just around 10 million vehicles. 5 million of those were in China. 2 million were in Europe. So what, what are your expectations for EV penetration in the light vehicle market in the next couple of years? And are there brackets that you can kind of put around the low end and the high end of those, those expectations based on what you're hearing from your customers and, and, and regulatory, of course? We feel that electric vehicles and hybrids are going to grow 20% year-over-year, 2023 to 2024, which is going to put the EV penetration rate globally at around 15% and the hybrid penetration rate globally around 24%-25%. Okay. And that, that's going to be 15% EV penetration in this year. In this year. In 2024. In 2024. Okay. Is this something that you think gets to 30%-40% beyond that? You know, that's what's difficult to forecast, right? If you have the answer, just tell us. It's tough to forecast. What we think we know is that electrification overall is growing. Will you have a third EV, a third hybrids and combustion or a bit more EV, a little less? It's difficult to forecast for us. What's really important and what we are pretty proud of is that we've created a portfolio that's resilient no matter what. We can't control the volume, but we can control the steps that we're taking to create a very resilient portfolio that has higher product efficiency than competition. And more importantly, what we can control is converting meetings all in. And so we've done that last year. We're guiding for that this year. So wherever the volume goes with the ups and downs and the sentiment and stuff for us, when we convert margins and when that market grows anyhow, we're going to create, create earnings growth. Is it fair to say that, really, the markets that we need to focus on are primarily the European and the Chinese market, that the U.S. business is really not that meaningful at this point? For us, maybe you need to chime in. For us, out of the $1.9 billion of light vehicle eP roducts this year, about 45% is China and the rest of the world. China and a little bit of Korea, as you know, supplying the iDM for Hyundai. 15% is North America. Okay. So North America is relatively small. Relatively small. Do you want? The only part that's larger in North America is the battery systems business. That's $700 million-$800 million of revenue that is from the battery side, all CV battery packs. That's about 60% North America, 40% Europe. But when you look at eP roducts ex battery packs, that North American portion is about 15%, relatively small, growing over time, but small. The growth rate that you talked about on your Q4 earnings call, $2.7 billion growing to $4.5-$5 billion, just seems like a really big number. Growth rate certainly well in excess of what we're seeing broadly in the industry. Can you give us a little bit of more insight into what gives you confidence in that magnitude of growth? Is there some specific platforms or things that you can point to that they're driving that? So here's what I would say. We've booked the business that is building to $4.5 billion. We're launching those p roducts on time. 60% of all the 39, I think it's 39 bookings that we've been able to disclose, 60% of those bookings have launched end of last year or launching this year. It's all going to be around volume take rate. If customer volume do happen the way they think it's going to happen, we have a path there. But it's very difficult to predict. That's why not going to answer 2025. We focus on 2024. We're growing 65% year-over-year on battery packs, which is not a demand issue. It's a supply issue. So when we put capacity in place, those products are going to see daylight in the marketplace. We laser focus on launching our products and converting. That's what we can control. How those ramp up and the take rate will happen in the next 12-18 months, I think we'll have a clearer picture in 6-9 months from now. Is it a similar mix where it's 40% hybrid and 60% BEV when we think about that growth, or is it really going to shift the company's portfolio more towards BEV? In 25? Well, in 2024 or 2025, that inflection going from $2.7 billion to $4.5 billion. If you x out the battery pack business route, I think you're going to see growth on both sides of that portfolio. I think how it depends versus the 60/40 will ultimately come down to the individual programs and how they perform. I think you should expect growth on both sides of that ledger. Of the $4.5 billion, how much of that is commercial? What we disclosed this year is that revenue is $700 million-$800 million. Of the $2.7 billion. Of the $2.7-$2.8. It should be growing next year. I mean, we previously said that that business could be a $1.3 billion business by 2027. But clearly, the trajectory of that business is dictated by our ability to produce. If we could produce the $800 million this year, we'd sell it. If we could produce more than the $800 million, we could probably sell it too. Most of what we are asked, and I'm sure most of what you're being asked is on the light vehicle side, but it sounds like this commercial vehicle business is actually pretty important for you. Could you talk about it? It's mostly battery packs, right? Battery packs. What, what's compelling about the battery pack business? How big could this ultimately become? So right now, we're literally the only independent battery pack supplier for commercial vehicles. And the $750 million of revenue at the midpoint this year and the growth in the next two years is going to be linked to NMC technology, which is nickel-based technology, very high power density, and not as competitive as some other technology. That's why we're now creating that alliance with BYD. And I'm very excited about it because I like the simplicity, right? BYD is one of the key leaders in LFP battery manufacturing. And for commercial vehicle, we're going to get the LFP technology, the licensing, and we'll be the manufacturing and customer intimacy arms outside of China for commercial vehicle. So very rapidly, we'll be not only the only battery pack maker on NMC outside of in-house production, but NMC and LFP. LFP brings cost competitiveness versus NMC. Pretty excited about this alliance, pretty excited about the simplicity of the setup. So this is BYD will be making their, their LFP batteries in China. You have the exclusive right in the commercial vehicle market outside of China to put those into your battery packs. We will manufacture for Western customers outside of China. The pack. The pack. They will supply the cells. From FinDreams Battery, which is a subsidiary of BYD. Okay. Doing the batteries. All right. So. It's limited for commercial vehicles. As of today, most of that $700 or $800 million business, most of it is NMC technology. All of it is NMC. It's all that. All of it is NMC. Okay. Interesting. So this is going to reduce the cost of the cells probably by 20%, something like that, I would imagine. I won't quote your number, but it's certainly more cost efficient. What's the penetration likely to be? I mean, just getting back to how big this business could eventually become. You're an enormous player in that market. It doesn't sound like any of the major truck commercial truck makers really are focusing on this. I can't give you a number on how big that market can be, but the content per vehicle is very big. Like, how? What is the content for? Content for an electric bus, if you're talking about the battery pack per vehicle, can be $100,000 per vehicle. So you quickly, very quickly can see how relatively low volume from an OEM basis translates into pretty significant revenue dollars for BorgWarner. I would say as you look forward today, we are trying to keep up with demand. So I think our customers are also trying to get the vehicles out there, both from a city bus perspective, a school bus perspective, and other medium duty trucks. And then I think as you look forward into the future, clearly as they grow the business beyond that, we'll start focusing on ways to improve the cost base, which NMC is a, excuse me, LFP is a big driver of that cost. Interesting. You see that buses and light trucks and medium-sized trucks are going to be electrified. You know, the regulators cannot put pressure on people like you and I buy electric cars or electrified cars. You still have those big fuming buses in the middle of the city. So we think that it's going to be electrified. We have a very compelling product offer for that. We're hearing a lot about hybrids now, much more so from the OEMs. Ford is talking about bringing that and making that more prominent in their portfolio. GM is now saying that they're going to be bringing plug-in technology back from China. And it's kind of a reflection of what is the pace of adoption in the consumer to pure BEV. Could you just remind us again what your content is on an ICE, a BEV, and a hybrid? I know that in addition to the electric component, there's a lot of mechanical things that you do in a hybrid that I would imagine would be very positive for BorgWarner. So simply put, hybrids or BEV have 5x the content, the content opportunity per vehicle that we have in combustion. About $500 in combustion. Should we sell all the products in engine and transmission versus $2,500 per hybrid or BEV? This is excluding the commercial vehicle because it's skewed all the numbers. It's only, only light vehicles. And again, we're leveraging engineering, validation, tech centers, production, supply chain, supply power. It's the same products that go into a BEV versus a hybrid. It's the same. Sometimes it's the same product physically. Sometimes we announce motors in China that are being SOP nine months after we get the nomination. It's because the product is existing or the machine is flexible enough so that we can tweak the product and put it into the marketplace. So for us, back to that product resiliency, we've set up that product portfolio that works no matter what. At a very high level, the faster the electrification, the higher the top line, slightly lower bottom line. The slower the electrification, the lower the top line, the higher bottom line, the higher margins. But the hybrid side, that $2,500 includes the mechanical side as well as that. This is the combustion side. This is the combustion side, which is a pretty high margin business, and it's leveraging things that you already have. Correct. Okay. So to the extent that hybrid is, let's say you gain a point of revenue from hybrid at the expense of BEV, is that net positive for BorgWarner? From a margin standpoint or a revenue standpoint? A revenue standpoint. It sounds like from a revenue standpoint, it's the same. Kind of a wash. From a margin standpoint, wouldn't that be a better outcome? I think it will become down to the details. At the end of the day, if it's an incremental program, we're pricing the programs with the same return on capital hurdle rates, whether or not it's a hybrid program or an E program. So on that standpoint, if it's a new program, should be about similar. Now, the only partial caveat, if you're using some programs on the combustion side that are already existing, maybe you get a slightly higher incremental on that. But in general, that should come out in the wash. We're pricing the business that we achieve that seem mid to high teens incremental, kind of irregardless of where the growth comes from. Okay. In some cases, OEMs are kind of making last minute decisions and bringing things back because they've miscalculated. Farley acknowledged that this morning. The signals that they were getting in 2021 and 2022 on what the demand trajectory would be turned out to be wrong. So now I would imagine that there are a lot of companies that are scrambling. Do you have off the shelf technologies and hybrid that you can actually sell and bring to those companies today to actually help them get things off the ground quicker? I think so. We've not started the discussion because I think those announcements are very recent. But with the scales that we have in combustion, in the clutching mechanism between combustion propulsion and electric propulsion, and the scales that we've created with inverter motor and I think we can help customers being passed in the marketplace. And you see that in some of the product wins. Hybrid, I mean, this inflection point in hybrid is very American. Outside of North America. It's always been. It's always been okay. And we've always said that our portfolio was fungible across those two types of powertrain architectures. In China, the NEV market, which is pretty much 35%-37% of the market right now, 40% is hybrid and 60% is BEV. Yeah, it's already that ratio, right? So this, this, this narrative around reinvigorating hybrid is very American. Let's talk about the pricing environment because it just comes up a lot just given the pressure that these companies are under. I'm sure it's the same everywhere. I mean, GM has got negative contribution margins on their EVs. I've estimated they're losing $4 billion on their EVs. Ford actually discloses that they lose $5-$5.5 billion. Stellantis somehow is making money in this. But, you know, there's certainly a lot of pressure, financial pressure on these companies. Typically, that winds up affecting suppliers. We're hearing a little bit about that in China as well with the massive price deflation that's occurring there. So ultimately, it comes down to what are your competitive moats and how defendable your pricing is. So can you talk a little bit about the eP roduct portfolio and what are the technologies that you think are just very difficult for anyone to replicate that allows you to defend your pricing? We have several eP roduct portfolio, but let me take maybe one of the most prominent, which is the inverter, right? The inverter is the computer and the nervous system that control the muscles, which is the motor, right? And the motor drives the wheel through transmission. It is a very, very complex animal. Average price we disclose about $750. You've got a computer, you've got thermal management, you've got power electronics, you've got power modules, you've got software, you've got cybersecurity software. And, you know, a few years ago, I was being asked a lot of questions about newcomers in this field, right? Well, there's no newcomers in this field in a meaningful way. You're back to the high volume electronics tier one suppliers that you know. Four or five people in the world can do that. The more you get scale, the more difficult it is for somebody else to come in, not counting patents and trade secrets that exist around those products. That's the competitive moat. Is there pricing pressure? There's always been pricing pressure in this industry. In powertrain. The inverter is what percentage of the overall business? When you get to $4.5 billion. We haven't broken it out by 2025, but when you think about that addressable market that we disclose of about $2,500, the inverter, if one inverter averages anywhere from $450-$800 per vehicle, you're going to have on average 1.2-1.3 per vehicle. And we skew probably heavier to that than our addressable concept because we're a stronger inverter. It's going to be a significant chunk of that. A big part of our driver. And then the other technologies that you have, the battery cooling and heating and motors and things. Yeah, it's in this field, in powertrain, product efficiency, which is a direct outcome of technology mastering, has always been in the forefront of everything we do. We're not talking about fuel efficiency anymore because there's technically no fuel into BEV. There is a little bit into hybrid. That's why you need all the turbos and EGRs and timing systems into hybrid because you need an efficient engine. On the E side, we're talking about electrons efficiency. And I would say electrons efficiency, I'm oversimplifying it. It's not electrons efficiency, but it's even more important than fuel efficiency. Because when you had a car, combustion car, we still have some combustion cars, you would overcome the lack of efficiency by fueling and filling up your tank. For BEVs and hybrid, you have efficiency of using electrons to propel the vehicle as an immediate impact on battery pack size, range. So it has an immediate impact on our direct customer. And also it has an immediate impact to how many electrons you can do to do the infotainment, the ADAS and things. So we are in a business of efficiency, and that's BorgWarner's DNA. We're looking every time in that 1%-2% a year of additional efficiency. That's how we keep competitive mode. Let's talk about the financial implications of these scenarios. So you alluded to this before. Higher EV as you get out to 2027, 2030 means higher revenue, slightly lower margin. More ICE would be the opposite, lower revenue, slightly higher margin, but this kind of the same EBIT. And I would say, and I would not say. Excuse me, in the higher EV, I would say higher electrified powertrain. Right. So hybrid or EV and anything in that. Can you help us think about what does that mean in the next year or two? So to the extent that there's variability, it's not exactly the same, right, as you think about 2024, 2025. How can we kind of walk through the financial implications of higher or lower? Yeah, two things I'd point to. I'd point to number one, you can look at how we performed last year. So we provided a guidance coming out of the ahead of this spin-off of PHINIA in June of last year. When you look at where we tracked versus that revenue, where we ended the year, our eP roducts business came in about $400 million light versus that initial guide. We didn't make that up dollar for dollar in terms of what we picked up on the foundational side, but we picked up about $300 million of that revenue. The margin, though, actually came in above the midpoint of our guidance, actually get closer to the high end of that guidance. So when you look at the midpoint to the midpoint of EBIT guidance, we pretty much came in line with that, if not slightly better. So we did better on the margin side, better on overall operating profit dollars. How I think we have to manage the business very near term here, given the volatility that we're seeing in volumes, is managing the business on an all-in incremental basis. No caveats, no excluding various cost items. Given the volatility that we're going to see in volumes, a 15%-17% or mid- to high-teens incremental, kind of irregardless of how that revenue growth comes, is how we need to manage the business. If E comes faster, continue to increment that. If E comes slower, well, then we have to manage our costs and take advantage of the foundational side of the business that we're delivering that incremental kind of irregardless of where that driver of revenue. Okay. So are you saying that, let's say it would still be enormous growth, but let's say the eP roducts business comes in at $3.5-$4 billion instead of $4.5 billion next year, up from the $2.7 billion this year. It's a little bit short. If there's some upside to the ICE business, you sort of manage that and we should be thinking about your normal incrementals on whatever the revenue growth is. That kind of mid to high teens, that 15%-17%. There isn't like a lot of cost that you're absorbing just to ramp up to a certain size. You can manage that up or down. Even within that 15%-17% incremental that we have this year, we have costs for our eP roducts business going up. Our ER&D is up based on our guidance, $40-$50 million year-over-year. And that's part of that 15%-17% incremental. So we have to manage it on an all-in basis is really the message. Another question I wanted to ask you, and I think that you may actually be better positioned than people realize. A big theme that we're talking about is just shift and mix amongst OEMs in the industry. And from 2019 till last year, there was 900 basis points of market share loss for the Western OEMs, Europeans and Americans versus the Chinese primarily, but also Tesla to a certain extent. So as you think about that, I'm sure you've made that observation yourselves. Maybe it wasn't as meaningful in the past couple of years because the market went from $72 million to $89, but now in a flatter market, it's going to matter. So how do you think BorgWarner is positioned vis-à-vis some of the shifts that you're seeing? I give you two or three points of color. First, and your question is essentially on electrification, right? I'm talking about just broadly, broadly for BorgWarner. So broadly, I start with electrification. We work with 7 out of 10 largest OEMs from an electrification powertrain standpoint. And as I mentioned before, the $1.9 billion of this year's revenue, about half of it is in China. 95% of that half of $1.9 billion is with Chinese OEM. We've listed the BYDs, the Geelys, the Changans, but it is them and all of the above. And it's normal because that's where the music has been played, playing for the past years. And it's normal that we are overweight China. Absolutely normal. For the overall company, you want to comment? Overall, I mean, it's interesting when you look at the difference of that mix of the eP roducts business. If you were to look at our business today, it's about 20% China, 35% Europe, and 30% North America, with the balance being rest of world. If you were to exit out the battery pack business, you'll see China again is 45%, North America is 15%, and then Europe is the balance. So clearly we're making a lot of progress with the OEMs as they grow. But I think at the end of the day, this comes down to not tying yourselves to one or two horses, right? Really having the diversity in the customer base is what's going to help us manage through any volatility on one program to the next or what OEM is ultimately successful versus the other. You said 95% of your China business is with domestic OEMs. Right, over the E. In the E side. So when they expand into Europe, are they taking you with them? Traditionally, when Chinese OEM export cars, they tend to use more Western content for critical components than pure Chinese. So, that meaning yes? Export. For the export. When they localize manufacturing, I think we are in a pretty good shape to be their partners too, once they want to localize manufacturing. The BYD CV battery pack example is a good example of that dynamic. Yeah. So the BYD export business would likely be, it'd be yours. Is there expanding more and more into Europe? Could be ours. Okay. One last one from me. You're sub 2x gross leverage, 1x net leverage. You're going to generate $475-$575 of free cash flow. Could you just talk a little bit about uses of cash? Should we be expecting more acquisitions or should we be thinking about more capital deployment to shareholders? Sure. I'll take that one. So I think you started right with the right thing. I mean, I think first and foremost, when we think about cash generation, how we're going to deploy that, we want to make sure that we're in a good position from both a liquidity standpoint and a balance sheet standpoint. And I think as we look at where we ended 2023, both of those are checkmarks, right? We want to be two times or below on a gross leverage basis, and we want to have ample liquidity to basically manage through any potential economic downturn. Beyond that, how are we looking to deploy our free cash flow? Well, I think we will continue to look at inorganic investments that can continue to fund our future profitable growth, particularly on the eP roduct side. I think you'll look at when you see our portfolio, it's going to be expanding that portfolio, adding capabilities. After those inorganic investments, the excess cash, you can look at our history, we've deployed that cash to shareholders. Since we closed on the Delphi transaction, we've repurchased $633 million of stock. Over the past four years, we've done just under $600 million in dividends. And we did a tax-free spin to our shareholder base of PHINIA, which has roughly a $1.4 billion equity market cap today. So I think the message you should take away in terms of our capital allocation going forward, it's going to be the same balanced approach that we've had over the past year. Are there significant M&A, compelling M&A opportunities for BorgWarner today? We always look at M&A. We always look at it, looking at electric efficiency technology. We're not buying companies that are for sale. We hone in on a few and then we place a phone call. Usually takes a long time to create that relationship and create the common goals. So there are a few things, difficult to time. Very disciplined. We're going to take that short-term volatility into account when we price those businesses. I also think that the current environment is making M&A maybe a little more affordable. Valuations have come down. Valuation has come down. Also, you know, let's take Eldor as a proxy. It was difficult for Eldor to book significant high volume business on onboard charger and DC-DC converter, and looking at their balance sheet and financial strength. We strongly believe that we're going to unlock value when this business is under the BorgWarner umbrella. Like we did with AKASOL. Our growth is much faster now than we thought it would be when we closed on AKASOL. Like we did with Delphi. Delphi balance sheet was suboptimal. Under the BorgWarner umbrella, we have leveraged our balance sheet and our customer intimacy to grow that business. Inverter is one example and create a lot of profitable growth. Despite where your valuation is now and you think about buying back your stock or acquisitions, you're still seeing opportunities out there that ultimately are more compelling, you think, for shareholders? We're going to have a balanced approach and look at both. Great. I think we're out of time. Thank you very much, Fred and Pat. Good to see you. Pleasure, Rod. Appreciate it.