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ACQUISITIONS AND DISPOSITIONS | 12 Months Ended
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Dec. 31, 2023
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DISPOSITIONS | ACQUISITIONS AND DISPOSITIONS Acquisitions In accordance with ASC Topic 805, “Business Combinations,” acquisitions are recorded using the acquisition method of accounting. The Company recognizes and measures the acquisition date fair value of the identifiable assets acquired, liabilities assumed, and any non-controlling interest using a range of methodologies as indicated by generally accepted valuation practices. Various valuation techniques are used to determine the fair value of intangible assets, with the primary techniques being forms of the income approach, specifically the relief-from-royalty and multi-period excess earnings valuation methods. Under these valuation approaches, the Company is required to make estimates and assumptions from a market participant perspective and may include revenue growth rates, estimated earnings, royalty rates, obsolescence factors, contributory asset charges, customer attrition and discount rates. For each acquisition disclosed below, management used a third-party valuation firm to assist in the determination of the provisional purchase accounting fair values; however, management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company. Due to the insignificant size of the 2023, 2022 and 2021 acquisitions, both individually and in the aggregate, relative to the Company, supplemental pro forma financial information for the current and prior reporting periods is not provided. Eldor Corporation’s Electric Hybrid Systems Business On December 1, 2023, the Company completed its acquisition of the electric hybrid systems business segment of Eldor Corporation (“Eldor”), which is headquartered in Italy. The Company expects the acquisition to complement its existing ePropulsion product portfolio by enhancing the Company’s engineering capabilities in power electronics. The Company pa id €72 million ($78 million) at closing. Pursuant to the Agreement, the Company is obligated to remit up to €175 million ($191 million) of earn-out payments contingent upon booked business for future periods from new customer awards. The Company’s current estimates indicate that the minimum threshold for the earn-out target will not be achieved, thus no amount of the earn-out payment has been included in the purchase consideration or in the Company’s Consolidated Balance Sheet. The purchase price was allocated on a provisional basis as of December 1, 2023. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assu mptions that management considered reasonable. Certain estimated values for the acquisition, including goodwill, tangible, and intangible assets and deferred taxes, are not yet finalized, and the provisional purchase price allocations are subject to change as the Compa ny completes its analysis of the fair value at the date of acquisition. The final valuation of assets acquired and liabilities assumed may be materially different than the estimated values shown below. T he estimated fair values of assets acquired and liabilities assumed as of December 1, 2023 were assets of $86 million, including goodwill and intangibles of $25 million, and liabilities of $8 million. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $14 million was recorded within the Company’s ePropulsion segment. Goodwill consists of the Company’s expected future eco nomic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increas e. Goodwill is not expected to be deductible for tax purposes in Italy. In connection with the acquisition, the Company preliminarily recorded $11 million for intangible assets, primarily for customer relationships and developed technology. The provisional fair values of goodwill and identifiable intangible assets were valued using the market approach. The impact of the Eldor acquisition on net sales and net earnings was immaterial for the year ended December 31, 2023. Hubei Surpass Sun Electric Charging Business On March 1, 2023, the Company completed its acquisition of 100% of the electric vehicle solution, smart grid and smart energy businesses (“SSE”) of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition is expected to complement the Company’s existing European and North American charging footprint by adding a presence in China. The total consideration was ¥288 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥20 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of base purchase price in the year ended December 31, 2023. Of the remaining ¥51 million ($8 million) of base purchase price, ¥31 million ($5 million) is payable by April 30, 2024 and is recorded in Other current liabilities in the Company’s Consolidated Balance Sheet as of December 31, 2023. The remaining ¥20 million ($3 million) of base purchase price is payable before April 30, 2025 and is recorded in Other non-current liabilities in the Company’s Consolidated Balance Sheet as of December 31, 2023. Pursuant to the agreement, the Company’s obligation to remit up to ¥103 million ($15 million) of earn-out payments is contingent upon the achievement of certain revenue and pre-tax profit margin targets in 2023 and 2024 as well as the retention of key employees during the same time period. As of December 31, 2023, the Company’s estimate of the earn-out payments was approximately ¥20 million ($3 million), of which half is recorded in Other current liabilities and half is recorded in Other non-current liabilities in the Company’s Consolidated Balance Sheet. The purchase price was allocated on a provisional basis as of March 1, 2023, and all assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable. The Company subsequently finalized its valuation of the assets and liabilities of the SSE acquisition during the third quarter of 2023, and the estimated fair values of assets acquired and liabilities assumed amounted to total assets of $50 million, including goodwill and intangibles of $5 million, and total liabilities of $8 million. These final amounts were not materially different than the estimated values recorded on March 1, 2023. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $2 million was recorded within the Company’s Air Management segment. Goodwill consists of the Company’s expected future economic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not deductible for tax purposes in China. The following table summarizes the other intangible assets acquired:
(in millions) | Estimated Life |  | Estimated Fair Value
Developed technology | 5 years |  | $ | 2 |
Customer relationships | 6 years |  | 1 |
Total other intangible assets |  |  | $ | 3 |
Identifiable intangible assets were valued using the income approach. The impact of the SSE acquisition on net sales and net earnings was immaterial for the year ended December 31, 2023. Drivetek AG On December 1, 2022, the Company completed its acquisition of 100% of Drivetek AG (“Drivetek”), an engineering and product development company located in Switzerland. This acquisition is expected to strengthen the Company’s power electronics capabilities in auxiliary inverters to accelerate the growth of the High Voltage eFan business. The Company paid ₣27 million ($29 million) at closing, and up to ₣10 million ($10 million) could be paid in the form of contingent earn-out payments over the three years following closing. The earn-out payments are contingent upon achievement of estimated future sales targets associated with newly awarded business and future turnover rate targets. As of December 31, 2023, the Company’s estimate of the earn-out payments was approximately ₣10 million ($12 million), which is recorded in Other non-current liabilities in the Company’s Consolidated Balance Sheet. The purchase price was allocated on a preliminary basis as of December 1, 2022. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable. The Company subsequently finalized its valuation of the assets and liabilities of the Drivetek acquisition during the third quarter of 2023, and the estimated fair values of assets acquired and liabilities assumed amounted to total assets of $49 million, including goodwill and intangibles of $40 million, and liabilities of $10 million. These final amounts were not materially different than the estimated values recorded on December 1, 2022. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $22 million was recorded within the Company’s Air Management segment. Goodwill consists of the Company’s expected future economic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not expected to be deductible for tax purposes. The following table summarizes the other intangible assets acquired:
(in millions) | Estimated Life |  | Estimated Fair Value
Developed technology | 8 years |  | $ | 11 |
Customer relationships | 12 years |  | 7 |
Total other intangible assets |  |  | $ | 18 |
Identifiable intangible assets were valued using the market approach. The impact of the Drivetek acquisition on net sales and net earnings was immaterial for the year ended December 31, 2022. Rhombus Energy Solutions On July 29, 2022, the Company completed its acquisition of 100% of Rhombus Energy Solutions (“Rhombus”), a provider of charging solutions in the North American market, pursuant to the terms of an Agreement and Plan of Merger (the “Agreement”). The acquisition is expected to complement the Company’s existing European charging footprint to accelerate organic growth and adds North American regional presence to its charging business. The Company paid $131 million at closing. Pursuant to the Agreement, the Company is obligated to remit up to $30 million of earn-out payments, payable in 2025, contingent upon achievement of certain sales dollars, sales volume, and gross margin targets. The Company’s current estimates indicate that the minimum thresholds for these earn-out targets will not be achieved, thus no amount for the earn-out payments has been included in the purchase consideration or in the Company’s Consolidated Balance Sheet. Additionally, pursuant to the Agreement, the Company is obligated to remit up to $25 million over the three years following closing in key employee retention related payments, which include certain performance targets. The amounts will be accounted for as post-combination expense. The Company finalized its valuation of the assets and liabilities for the Rhombus acquisition during the second quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $104 million was recorded within the Company’s Air Management segment. Goodwill consists of the Company’s expected future economic benefits that will be realized from expanding the Company’s electric vehicle portfolio as electric vehicle production continues to increase. Goodwill is not expected to be deductible for tax purposes. The following table summarizes the other intangible assets acquired:
(in millions) | Estimated Life |  | Estimated Fair Value
Developed technology | 13 years |  | $ | 22 |
Customer relationships | 8 years |  | 5 |
Total other intangible assets |  |  | $ | 27 |
Identifiable intangible assets were valued using the income approach. The impact of the Rhombus acquisition on net sales and net earnings was immaterial for the year ended December 31, 2022. Santroll Automotive Components On March 31, 2022, the Company completed its acquisition of 100% of Santroll Automotive Components (“Santroll”), a carve-out of Santroll Electric Auto’s eMotor business, pursuant to the terms of an Equity Transfer Agreement (“ETA”). The acquisition is expected to strengthen the Company’s vertical integration, scale and portfolio breadth in light vehicle eMotors while allowing for increased speed to market. The total final consideration was $192 million, including approximately ¥1.0 billion ($152 million) of base purchase price and ¥0.25 billion ($40 million) of originally estimated earn-out payments. The Company paid approximately ¥1.0 billion ($157 million) of base purchase price in the year ended December 31, 2022 and no longer expects to recapture a previously anticipated $5 million of post-closing adjustments, which has been recorded in Other operating expense, net. Pursuant to the ETA, the obligation of the Company to remit up to ¥0.3 billion (approximately $47 million) of earn-out payments was contingent upon achievement of certain sales volume targets and certain estimated future volume targets associated with newly awarded business. As of December 31, 2023, the Company paid ¥0.2 billion ($24 million) to settle the remaining earn-out liability and related adjustments. The Company finalized its valuation of the assets and liabilities of the Santroll acquisition during the first quarter of 2023. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. Goodwill of $112 million was recorded within the Company’s ePropulsion segment. Goodwill consists of the Company’s expected future economic benefits that will arise from future product sales and the added capabilities from vertical integration of eMotors. Goodwill is not expected to be deductible for tax purposes in China. The following table summarizes the other intangible assets acquired:
(in millions) | Estimated Life |  | Estimated Fair Value
Customer relationships | 12 years |  | $ | 62 |
Manufacturing processes (know-how) | 10 years |  | 25 |
Total other intangible assets |  |  | $ | 87 |
Identifiable intangible assets were valued using the income approach. The impact of the Santroll acquisition on net sales and net earnings was immaterial for the year ended December 31, 2022. AKASOL AG On June 4, 2021, the Company completed its voluntary public takeover offer for shares of AKASOL AG (“AKASOL”), resulting in ownership of 89% of AKASOL’s outstanding shares. The Company paid approximately €648 million ($788 million) to settle the offer. During 2021, the Company purchased additional shares of AKASOL for €28 million ($33 million) increasing its ownership to 93% as of December 31, 2021. At December 31, 2021, the noncontrolling interest in AKASOL of approximately €51 million ($58 million), which was to be acquired through a merger squeeze-out process (the “Squeeze Out”). On February 10, 2022, the Company completed the registration of the Squeeze Out resulting in 100% ownership. The Company settled the Squeeze Out with AKASOL minority shareholders in the first quarter of 2022. The acquisition is expected to further strengthen BorgWarner’s commercial vehicle and industrial electrification capabilities, which positions the Company to capitalize on what it believes to be a fast-growing battery module and pack market. Following the June 4, 2021 acquisition date, AKASOL’s operations had net sales of $67 million for the year ended December 31, 2021. The impact on net earnings was immaterial for the year ended December 31, 2021. Romeo Power, Inc. In May 2019, the Company invested $50 million in exchange for a 20% equity interest in Romeo Systems, Inc. (“Romeo”), a technology-leading battery module and pack supplier that was then privately held. On December 29, 2020, through the business combination of Romeo Systems, Inc. and special purpose acquisition company RMG Acquisition Corporation, a new entity, Romeo Power, Inc., became a publicly listed company. The Company’s ownership in Romeo was reduced to 14%, and the investment was recorded at fair value on an ongoing basis with changes in fair value being recognized in Realized and unrealized loss on debt and equity securities in the Consolidated Statements of Operations. During the years ended December 31, 2021 and 2020, the Company recorded a loss of $362 million and a gain of $382 million, respectively, to adjust the carrying value of the Company’s investment to fair value. During the year ended December 31, 2022, the Company recorded a loss of $39 million and liquidated its investment in Romeo shares at a fair value of $31 million. As of March 17, 2022, the Company no longer held any investment in Romeo. In September 2019, the Company and Romeo contributed total equity of $10 million and formed a new joint venture, BorgWarner Romeo Power LLC (“Romeo JV”), in which the Company owned a 60% interest. Romeo JV was a variable interest entity focusing on producing battery module and pack technology. The Company was the primary beneficiary of Romeo JV and had consolidated Romeo JV in its consolidated financial statements. On October 25, 2021, the Company delivered written notice to Romeo that the Company was electing to exercise its right to put its ownership stake in Romeo JV to Romeo. Based on an independent appraisal, the Company’s interest in Romeo JV was valued at $30 million. In February 2022, the Company completed the sale of its 60% interest in the Romeo JV for $29 million, the fair value of $30 million reduced by a 5% discount pursuant to the joint venture agreement. During the year ended December 31, 2022, the Company recorded a gain of $22 million in Other operating expense, net, which represented the difference between the Company’s book value of its interest in Romeo JV compared to the fair value of consideration received. As a result of the sale, the Company has no further rights in or involvement with Romeo JV. Dispositions PHINIA Inc. On July 3, 2023, BorgWarner completed the previously announced Spin-Off of its Fuel Systems and Aftermarket segments by the distribution of 100% of the outstanding common stock of PHINIA to holders of record of common stock of the Company on a pro-rata basis. Each holder of record of common stock of the Company received one share of PHINIA common stock for every five shares of common stock of the Company held on June 23, 2023, the record date for the distribution (“Distribution Date”). In lieu of fractional shares of PHINIA, shareholders of the Company received cash. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange. In connection with the Spin-Off, the Company entered into several agreements with PHINIA on or prior to the Distribution Date that, among other things, provide a framework for the Company’s relationship with PHINIA after the Spin-Off, including a separation and distribution agreement, an employee matters agreement, a tax matters agreement, an intellectual property cross-license agreement and a transition services agreement through which the Company and PHINIA will continue to provide certain services to each other following the Spin-Off. Refer to Note 26, “Discontinued Operations” to the Consolidated Financial Statements for more information. Water Valley In 2021, the Company announced its strategy to aggressively grow its electrification product portfolio over time through organic investments and technology-focused acquisitions. Additionally, the Company announced a plan to dispose of certain internal combustion assets in support of that strategy. In December 2021, the Company entered into a definitive agreement to sell its Water Valley, Mississippi manufacturing facility (“Water Valley”) and the associated solenoid, transmission control module and stop/start accumulator system business for an estimated $57 million. The consideration consisted of $39 million in cash and promissory notes and up to $30 million in potential earn-out payments. The Company included $18 million as contingent consideration in the proceeds, which reflected its original estimate of the payout pursuant to the earn-out. During the year ended December 31, 2022, the Company changed its estimate of the expected earn-out and recorded a pre-tax loss of $9 million in Other operating expense, net. During the year ended December 31, 2023, the Company and the buyer agreed on a final settlement of $14 million for the earn-out and recorded a pre-tax gain of $5 million in Other operating expense, net. As of December 31, 2023, the unpaid portion of $5 million of the contingent consideration and the $10 million remaining on the promissory notes were included in Receivables, net and Investments and long-term receivables, respectively, on the Consolidated Balance Sheet. Water Valley had net sales of $177 million during the year ended December 31, 2021 and was included in the Company’s Drivetrain & Battery Systems segment. On December 31, 2021, upon the closing of the transaction, based upon the final transaction price agreed to in the fourth quarter of 2021, the Company recorded a loss on divestiture of $22 million.

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