Good morning. My name is Tina and I will be your conference facilitator today. At this time, I would like to welcome everyone to the BorgWarner 2008 second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer period. (Operator instructions) I would now like to turnover the call over to Mary Brevard, Vice President, Investor Relations. Ms. Brevard, you may begin.

Thank you, Tina and good morning. Thank you all for joining us today. You should have received the releases. Copies were sent out today before the market opened. We've also posted financial talking points that should help you follow the financial discussions. They are located at borgwarner.com on the Investor Information page, the webcast section, second quarter 2008 conference call talking point. The conference call today will also be replayed through August 7. The number for call-in is 800-642-1687. It's also being webcast on the web and available for replay there as well. Before we begin, I just want to give you an idea of the – we've got an active conference schedule in the next three months. We will be at the JP Morgan Harbor Conference in Dearborn on August 13, the Credit Suisse conference in New York on September 4, Wachovia is having a one-on-one conference in Baltimore on September 22, Citigroup is having an environmental topics conference on September 24 in New York, the JP Morgan Mid Cap Growth conference in London on September 30, and then we will see many of you I hope at Ferris Auto Show IAA conference as well. I also need to remind 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 we discuss today. Moving on to our results, Tim Manganello, Chairman and CEO, will be providing comments on the quarter and Robin Adams, CFO, will discuss operating results in the rest of the year. Tim?

Thank you Mary and good day everyone. We are pleased to deliver another record quarter in a tough environment. Our performance reaffirms the benefits of our diversified customer base, our focus on fuel-efficient technologies, and our broad geographic footprint. Strong demand for our fuel-efficient technologies in Europe and Asia more than offset the declines in North America during the quarter. For the quarter, sales were up 11%, earnings were up 16% to $0.74 per share. Excluding a BERU adjustment, second quarter earnings were $0.78 per share. The engine group sales were up 16%, our Drivetrain group sales were down slightly. Our sales outside the U.S. were up 13% excluding the impact of currency compared with 9 U.S. vehicle productions which was up 6%. And our U.S. sales were down 17% consistent with U.S. vehicle production which was down 18% during the quarter. I was a little surprised that we are managing our global business in two very distinct operating environments. In Europe and Asia, our businesses are expected to experience sustained growth. Conversely, in North America, our operations remained focus on fuel efficiency and cost management especially given the reason of dramatic production declines. As a result, we have may be proactive but difficult decision to restructure our North American operations in the third quarter specifically during the first week of August. I grew up in the North America auto industry, and it is personally very distressing for me to see the difficulties facing our industry here in the U.S. and knowing that these difficulties affect the families, the lives of the people and our employee base. Our decision to restructure was not made lightly or without regard for the interest of our employees. However, our people take pride in working for a successful company. But even our global success…

Thank you Tim. Good morning everyone. We had another record quarter as Tim said despite the significant declines in the North American market. Production in the U.S. was – it seemed set down by 18% with the Detroit 3 light truck SUV down by 21%, and as you look at Europe, production was up 5%, production in Asia was up 6% in the quarter as well. As Tim mentioned, our second quarter sales grew 11% or 2% excluding the impact of currency and our 2% growth rate is in line with global production in the quarter which was 2%. However, again, Tim talked about the story is dramatically different for BorgWarner by geography. Our sales in the U.S. were down 17% in the quarter in line with the decline in U.S. industry production. This is the largest quarterly drop in U.S. sales in BorgWarner’s history since going public in 1993. Our sales in U.S. now represent 20% of the total versus 37% in the second quarter last year and despite that dramatic decline, we still achieved record second quarter overall sales and record second quarter earnings and this is a direct result of our strategic focus and leading Powertrain technology and our customer and geographic diversity. Our sales outside the U.S. excluding the impact of currency continue to grow at a double digit rate of 13% which is double the 6% non-U.S. industry growth production rate. Now before I get into the details of the financial statements, let me try to explain the accounting implications of recent actions with respect to BERU. During the second quarter we completed the domination and profit transfer agreement with BERU given Borg Warner effective a 100% control of BERU. Under this agreement, minority share holders of BERU have no further interest in the profits…

Thank you very much Robin. I will now ask the call coordinator. Tina, would you please announce the question-and-answer portion of the call.

(Operator instructions) Our first question will come from the line of Brian Johnson with Lehman Brothers. Brian Johnson – Lehman Brothers: Hey. Questions are more strategic this morning. Can you give us any update on the likely pace through 2009, 2010, and 2011 of turbo rollout in turbocharged gas in the U.S.?

What you’re going to see is continued increased penetration of gas turbocharged engines as they come, as they're develop and launched through the U.S. just like you said. I don’t know the whole market, but I can tell you on the BorgWarner side of the equation, we’ll going to be rolling out 22 gas turbocharged vehicle platforms or vehicle engines in the next couple of years. So that’s a pretty healthy rollout plan and pretty healthy launch schedule for gas, and we’re going to have a significant amount of diesels that we would be rolling out. Now, these vehicles maybe start out as European vehicles that are sold in North America and some are maybe North American vehicles that are manufactured by North Americans, but it’s going to be a very healthy penetration of turbocharged gas engines in North America. Brian Johnson – Lehman Brothers: On the Ford ones in particular, can you clarify which EcoBoost you’re on versus your competitor?

Yes, very easily. We are on the high-volume rear-wheel drive 3.5 liter V6 Ford EcoBoost which we’ve been told by Ford will be the high-volume portion of the V6 EcoBoost family. Brian Johnson – Lehman Brothers: Okay, have they said what platforms they will put that in?

Well, I don’t know if they've said it or not, but let’s just say this, it will be replacing V8s, and V8s – there’s a significant amount of V8s used in rear-wheel drive vehicles and so you can pretty much figure out that there’s a – the rear-wheel drive platforms within Ford are significant – mainly passenger car and trucks. Brian Johnson – Lehman Brothers: Pickups and taxicabs. And is that –?

Some SUV – and some SUVs. Brian Johnson – Lehman Brothers: Right. Is that a move forward of their plans?

Well, I know, I can’t tell you what their plans are but I can tell you this, Ford in general is accelerating their focus on fuel-efficient engines. In North America, they are pulling their programs ahead as fast as they can to improve fuel efficiency. And as you already know, they’re moving very quickly. They’re bringing European power trains and European vehicles over to North America to increase their fleet fuel economy average. Brian Johnson – Lehman Brothers: Okay. Final question. Was this reflected in last November’s backlog items or will this be part of the puts and takes rolling in that we’re going to hear about this November?

Brian, help me out with – specifically – Brian Johnson – Lehman Brothers: Well, you have [ph] announced backlog through last November, did it contemplate this level of North American turbocharger development in this timeframe?

No. Brian Johnson – Lehman Brothers: Okay. Okay. So therefore, we could think that’s going to be a net add to backlog.

It’s a net add on the turbocharger side. You got to remember that we do have some content on some of the engines that are being replaced. But all and all, it makes for a healthy BorgWarner. Brian Johnson – Lehman Brothers: Okay and where could this take engine margins over time? Do you have a long-term goal?

I couldn't hear that, what was that last question? Brian Johnson – Lehman Brothers: Where could it take engine margins over time, does it have a long-term goal?

We don't talk about margins on specific – but let us just say this, all of our programs that we launched are focused on returning at least a 15% return on invested capital. Brian Johnson – Lehman Brothers: Okay. Thanks Tim.

Sure, thanks Brian.

Our next question will come from the line of Chris Ceraso with Credit Suisse. Your line is open please go ahead with your question. Chris Ceraso – Credit Suisse: Okay, thanks guys, can you hear me?

Yes, hi Chris.

Go ahead Chris.

We can hear you.

I am sorry sir, he has disconnected his line. Next we will from the line Rich Kwas with Wachovia. Rich Kwas – Wachovia: Good Morning.

Good Morning Rich. Rich Kwas – Wachovia: I think, Tim, you mentioned commercial vehicle strength, is that going to help you in the – I guess it helped you in the second quarter and you expect it to continue to help you. Is that a global comment or is that specific to a particular region?

Specifically it is global, but we know first hand that we are seeing continued strength in Europe, Eastern, and Western Europe and it is more European oriented than North American oriented in terms of the strength of the growth in the commercial sector, but we are not being hurt on the North American side, there is slight growth in North America also. Rich Kwas – Wachovia: Okay. And then on the –

Rich? Rich Kwas – Wachovia: Yes.

One thing I would add is we are continuing seeing increased strength in the off-highway side of the commercial side of our business, which puts us well-positioned with the traditional players like Cat and Deer. Rich Kwas – Wachovia: And that is helping your North American business?

Yes, it is. Rich Kwas – Wachovia: All right. And then in the press release you talked about Europe, you expect some slowing there, how comfortable are you with the financial potential downside in Europe, how much cushion have you baked in into your guidance for the rest of the year?

Well, we are still comfortable with our guidance relative to Europe. We are watching Europe closely like I said. There is some softness in Spain, Italy, and the UK, but there is continued strength in Germany because Germany is not only seeing some strength here – holding in solid in Germany but there they have a lot of export into Eastern Europe and France is still strong but maybe not as strong as it used to be. What we are seeing now is there has been a slight softening but what it has done is it has relieved some of the pressure between the demand which was very high and our capacity which was slightly less than demand. So we still have more demand than capacity, but it has taken a little bit of a pressure on. Like you already know Rich, there is a continued shift from large-sized engines to downsized smaller engines, and that plays to our strength. Rich Kwas – Wachovia: Okay. And then, Robin, on the restructuring, is that largely cash?

Yes, at this point in time, it is all cash. Rich Kwas – Wachovia: And then you mentioned $12 million related to this BERU transaction in terms of interest. Should we assume that starts to hit in the second half?

On an annualized basis, it is interest and it is amortization of excess purchase price. That is an annualized number and you will see half of that in the back half of the year. So when you think of our guidance for the year, we did roll in about a $0.03 a share penalty for this change in ownership of BERU and the accounting implications. Rich Kwas – Wachovia: Okay. But going forward, you talked about interest expense running about $8.5 million and you stripped out the swap treatment, but should we assume that the $12 million is going to be another $4 million ahead of quarter or is that – ?

Yes, that is right. And again, a portion of that will be operating income and a portion will be interest expense. About $8 million of the $12 million will be interest expense-related and then the other $4 million will sit above operating income as amortization of intangibles. Rich Kwas – Wachovia: Okay, great. Thank you.

Our next question will come from the line of David Leiker with Robert W. Baird. David Leiker – Robert W. Baird: Can you hear me all right?

Hey David, how’re you doing? David Leiker – Robert W. Baird: I’m doing well, thanks. A number question first. The BERU item here in the quarter, what line item does it fall in?

The one-time charge in the income statement? David Leiker – Robert W. Baird: Yes.

$3.3 million of it sits in SG&A and the other $1.8 million is in cost of goods sold. David Leiker – Robert W. Baird: Great. Thanks.

I just want to ask how the Brewer is doing against the Cubs, David? David Leiker – Robert W. Baird: I'm grumpy today, okay? We’ll see what happened at the end of the year, all right?

All right. David Leiker – Robert W. Baird: Tim, can you give me some perspective of competitive landscape on gas turbos?

I think that the market is increasing globally for increased penetration and gas turbos. We’re getting a significant share. I don’t know what the proportions are, all I can tell you is I think BorgWarner has demonstrated we are the technology leader and the market leader for gas turbocharged engines. As such, we are getting a significant number of programs awarded to us on gas engines. Like I said, in the next couple of years, just in North American market – not all of these vehicles will be manufactured in North America, but they’ll be 22 gas applications in North America with BorgWarner turbochargers on them. David Leiker – Robert W. Baird: Do you think you’ve stronger competitive position in gas than diesel or you think they’re comparable?

Well, I think we have a strong competitive position in both and the market is increasing for both. What I will say is we’re increasing on market share in an increasing market and we’re doing it both in turbochargers in total and I can tell you we’re really strong in gas. We’re doing extremely well also in diesels. David Leiker – Robert W. Baird: The commercial vehicles that you talk about – a piece of that is turbos. Is it all turbos or is there something else in there?

I couldn’t hear – what was that question, David? David Leiker – Robert W. Baird: In commercial vehicles –

Yes. David Leiker – Robert W. Baird: And in terms of product offering there, I would guess that a meaningful amount of that is turbos but do you have other products that you’re selling into the commercial vehicle market?

Yes. We have cooling products, fan and fan drives, and we’re doing very well on the fan drives. It’s a profitable business. It’s a growing business. I like it – I wish it was a larger business for us but we’re doing extremely well. We've get about a million units of turbocharged gas engines coming at us in the United States for this year. David Leiker – Robert W. Baird: Okay.

I’m sorry. That’s globally. David Leiker – Robert W. Baird: Global.

We got a million of gas engines globally. David Leiker – Robert W. Baird: That you’re selling.

For turbochargers, yes. David Leiker – Robert W. Baird: Okay. And then one last item, in terms of the restructuring actions you’re taking, what’s the savings from that?

The savings on that – David Leiker – Robert W. Baird: (inaudible) charge is that a one-year pay back on that or –

Yes. It’s less than one year, David. David Leiker – Robert W. Baird: Less than one year. Okay, thank you.

(Operator instructions) Our next question will come from the Chris Ceraso from Credit Suisse. Chris Ceraso – Credit Suisse: Hey, better luck this time guys? Can you hear me?

Yes, thanks.

Yes, thank you. Chris Ceraso – Credit Suisse: Okay. All right. I think Honeywell had some comments on its quarter that turbos in Europe weren’t going so well. Is that a function of the engine size bias where you’re better in smaller engines? Are you picking up share in diesel turbos in Europe?

Yes. That’s a very easy answer. We’re picking up share because the market is shifting from larger engines to smaller engines. We have a significant market share in small engines. Chris Ceraso – Credit Suisse: Okay. What is the trend these days in diesel penetration in Europe? Has that slowed down at all or is it still increasing?

The rate of increase is starting to slow down. People are starting to look at the price of gas versus the price of diesel since diesel fuel has risen recently. But we don’t know if that’s a short-term or long-term phenomena. But, diesel is hanging in there around 50%, it’s been in there like 53%, 54% range. There’s projections that it’s going to slow down to maybe – the penetration rates is going to slow down though like 50%, 51% while at the same time gas penetration on turbocharges is increasing significantly. Chris Cerasco – Credit Suisse: Okay. Can you take us through briefly your remaining exposure in the U.S. market to truck-based products? We know you’ve got the transfer cases on the Ford trucks but can you just kind of take us quickly through the overall U.S. market and let us know where you’ve got content on truck-type vehicles body-on-frame?

We have significant content at Ford, but a lot of the volume has been washed out of the pickup and SUV market. So we’re – there’s not a whole lot – let’s just say this, we can’t be hurt too badly in the future based on reduced truck sales because a lot of that stuff has been washed out. We’re down at a point where the people are just – that have to buy trucks are buying trucks and that’s where we’re at. We have some content on GM and some content on Chrysler. Chrysler, at its pas car, GM at the pas car and some truck, and at Ford it’s mainly the truck. So our transfer case volume is the major customers, Ford followed by GM and Chrysler. Now that’s the Detroit 3. We’re shipping transfer cases to Audi and the Q7; that’s holding strong so far. We’re doing well in Asia so far; Korea and China, we’re shipping transfer cases. We’re manufacturing in Asia and shipping to Russia. So those parts of the world are still holding up well. It’s just North America that’s causing us a big problem. Chris Cerasco – Credit Suisse: Okay, last one. Robin, if you hold everything else equal, what did the change in your foreign exchange exemption do to your guidance for the year?

Yes. That’s a good question. Here’s a real easy way to think about it. North American sales declined versus what we thought before, it is about $150 million at a 25% incremental rate, that’s about $0.24 a share decline from our previous guidance. Currency will give us about $0.14 a share, so that’s net down $0.10. The tax rate will give us an improvement of about $0.04 a share. The BERU acquisition with the additional run rate cost us about $0.03 a share, so it’s about $0.11 a share swing. Chris Cerasco – Credit Suisse: Perfect, thanks.

And we have no further questions at this time. I would like to turn the call back over for closing remarks.

Once again, thank you all for joining us. If you have any follow-up questions, you can direct them to me and we will talk to you again and hope to see you at some of our upcoming conferences. Thank you very much.

Ladies and gentlemen, this does conclude today’s BorgWarner 2008 second quarter results conference call. Thank you for joining and you may now disconnect.