Good morning. My name is Melissa, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2014 Fourth Quarter and Full Year End Results Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Ken Lamb, VP of Investor Relations. Mr. Lamb, you may begin your conference.

Thank you, Melissa. Good morning, and thank you, all, for joining us. We issued our earnings release this morning at around 8 a.m. Eastern time. It's posted on our website, borgwarner.com, on our Investor Relations home page. A replay of today's conference call will be available through February 20, also on our website. The dial-in number for that replay is (855) 859-2056. You'll need the conference ID, which is 63271907. With regard to our Investor Relations calendar, we will be attending the following conferences between now and our next earnings release: February 18, next week, we will be at the Barclays Industrial Select Conference in Miami; April 1, we will be at the Bank of America Merrill Lynch New York Auto Summit. Now 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. Now moving on to our results. James Verrier, President and CEO, will review highlights of our quarterly and full year operating results as well as some of our recent noteworthy accomplishments. And then Ron Hundzinski, our CFO, will discuss the details of our quarterly and full year operating results. With that, I'll turn it over to James.

Thank you, Ken, and good day, everybody. Ron and I are very pleased to review our fourth quarter and full year results with you as well as some of our recent accomplishments. Let me take a moment, though, before I begin to thank all of our employees around the world for another outstanding quarter, and it's really tremendous 2014. Your efforts drove great results that continue to lead our industry. Now onto our results. First of all, the fourth quarter, reported sales were just under $2 billion, which is up 6% from a year ago or 7% when we exclude the impact of foreign currencies on the Wahler acquisition. U.S. GAAP earnings of $0.61 per share or $0.75 per share when we exclude nonrecurring charges. Our operating income margin, again excluding nonrecurring charges, was an impressive 12.4% in the quarter. And 2 key factors drove the strong results: solid sales growth and operational efficiency in the Engine segment and good cost controls across the corporation. Again, it's outstanding performance by our operations. If I look at the 2 segments, let me start with the Engine segment. We have fourth quarter sales of $1.4 billion, which is up 9% from a year ago. Our sales growth excluded the impact of foreign currencies in Wahler, which also a 9%, as these items offset each other in the quarter. Strong results were led primarily by strong turbocharger sales in Europe, China and Korea. In the Drivetrain segment, we saw sales of $615 million, which is down 2% from a year ago or up 2% when we exclude the foreign currencies. Drivetrain's sales growth, excluding currency, was driven by higher dual-clutch transmission volumes in Europe, and that was partially offset by a planned slow ramp-up of a major program by a North American customer.…

Thanks, James, and good day, everyone. Before I begin reviewing the financials, I would like to also commend all of our employees for their hard work and congratulate them on yet another great year. Now on to our financials. James already provided a detailed review of our sales performance in the quarter. In summary, sales were up 6% from a year ago or 7% excluding the impact of foreign currencies and the Wahler acquisition. The growth in the quarter came primarily from the Engine segment, which I'll talk more about later. Overall, it was a strong quarter for sales. Working down the income statement. Gross profit as a percentage of sales was 20.7% in the quarter. During the same period, SG&A as a percent of sales was 8.5%. R&D spending, which is included in SG&A, was at 4%. Reported operating income in the quarter was $212 million. However, this includes nonrecurring items related to restructuring activities, a pension plan settlement and intangible asset impairment. The $23 million pretax restructuring charge includes expenses related to the continued relocation of 2 drivetrain facilities from Western to Eastern Europe, the continuing investment in improving Wahler's operational efficiency and footprint and the global legal entity realignment plan intended to enhance treasury management flexibility. The $10 million pretax intangible asset impairment was related to Engine segment on amortized trade names. And the $400,000 pension plan settlement is the remainder of the lump sum payments made to former employees to discharge our obligation under the plan, activity which began in the third quarter. Excluding nonrecurring items, operating income was $246 million or 12.4% of sales, down 30 basis points from the same period a year ago. Excluding nonrecurring items, very strong performance considering the cost incurred ramping up new plants and restructuring related inefficiencies that we're…

Thanks, Ron. Melissa, can you re-announce the Q&A procedure?

[Operator Instructions] Your first question comes from the line of Rich Kwas with Wells Fargo Securities.

James, I just wanted to discuss the buyback. So pretty significant number. Does this have any implications for M&A, future M&A and what you're seeing out there?

Yes, Rich, the way I would think about it is not at all in terms of any concern around M&A. Our pipeline is still strong. It's robust and we continue to drive, and that's very, very much in our focus to do M&A in addition to the buyback. So there's -- yes, there's no signal there. There's no indication. I think we outlined the primary drivers and purpose for why we're doing the share buyback but don't, for a minute, think that's going to slow down our intensity and commitment around trying to drive M&A because we will.

Okay. All right. And then -- and Ron, the $5 million to $6 million of inefficiencies [Audio Gap] you think about over the course of '15? Or is it -- do you expect it to be kind of a lumpy number from quarter-to-quarter?

Rich, I can tell you that, that was the number in the fourth quarter. And going forward, I think, I would -- it's going to be lumpy. I don't see that's a predictable number. We're going to have to take each quarter by quarter and how their performance is. I think that was the number for the fourth quarter.

Okay. All right. And then on CapEx and free cash flow for the fourth quarter. So working capital was below our expectation. CapEx was definitely much higher. The 8% number, that seems much higher relative to the trend. I think you were talking north of 6% this year. How should we think about this for -- as it plays out in '15? And then working capital, were there any headwinds in the quarter that were unique?

Okay, a couple of things. First, CapEx, Rich. I think for 2015, we're going to continue with this upper -- actually, above the upper end of our 5% to 6% of sales CapEx that we typically have as guidance. We're running on the high end of that and I always expect that to go through 2015 as well. I think it's 2016 when we'll we start to see that to come back down into the range. I think we've talked about we're putting in some brick-and-mortar over the last 2 years in various parts of the world, and that bubble, so to speak, will pass through and will go back to more normal machinery and equipment. Getting back to the cap, the working capital, a couple of things, a couple of challenges. Some of -- are decision of our customers took some liberties out of this, I guess, maybe on payments, which typically we don't see. So that was one of the headwinds. So I think we'll get back to a more normal level there.

Okay. All right. And then just to clarify on the CapEx, though, is the 8% present level, is that a realistic outcome for '15? Or is it somewhere between 6% and 8%?

No. No, I think that what you saw there is you saw a spike in spending in the quarter, given where the sales were. So I think that's just a 1-quarter number that you saw. That's not a number for a full year, Rich.

Rich, this is Ken. Our actual guidance for CapEx is in our investor presentation. It's around 6.5% to 7% of sales last year.

Right. So just a quarter thing, Rich, is what it was.

Okay. Yes, I was just trying to gauge kind of how things will play out for you in a way.

Your next question comes from Ravi Shanker with Morgan Stanley.

Ron, I've been asked on the major North American customer that's kind of hurting comps for our drivetrain. When does that normalize? Is that early 2015?

So if you take a look at '14, I believe that customer was running pretty high on volumes in the first 2 quarters of '14 as well. And so it would be more in the second half where you start to see the comps would even out.

Okay, understood. And when you say that you're going to revisit or update the guidance after 1Q, can you remind us what are the moving parts that you are tracking? Is it entirely FX you're kind of waiting for things to stabilize before figuring out what the mark-to-market do? Or are there other items as well?

I'm glad you asked that, Ravi. Yes, currency is probably the most volatile piece that we're thinking about right now, but there are other factors at play here. Commodity prices, for instance. Volumes are also in play. So our message is that our organic growth, we're still very comfortable with that guidance that we gave back in January, but there other variables at work here that we want to get a few months behind us, kind of see how they play out and then we'll give an update at the end of April.

If I can just follow up on that, both the commodities and given your kind of underlying guidance, the volume assumption you've made for global growth, I'd assume that both are very -- are being revised up, they're going to be tailwinds.

Ravi, I think we're going to wait for that in the first quarter to give you guidance on that. Okay?

Okay. I won't jump the gun there. And just finally, on the corporate expenses, $36 million in the quarter, that's -- I think a new record high for you and it was much higher than what we were expecting. Can you help us understand what's going on there and what's a good run rate for 2015?

Absolutely, Ravi. So you're right. That number is very high, but a couple of things I want to point out. One is the items in there, which I talked about in the second were noncash items. They were not spendings. So to answer your question, the run rate is going to come back to more what you saw probably in the 3 quarters of the year of 2014. So what was in there? Basically, at the end of the year, there's a couple, I'll call them mumbo-jumbo accounting, transactions we have to do. So for example, intercompany profits on inventory, we have to adjust for and LIFO adjustments we have to adjust for. And they were actually a bit higher than normal than we anticipated and that's what's sitting in there. That's basically the whole difference. So that was just a 1 quarter adjustment. It's -- that's all that was, noncash and we go back to more normal run rate going forward.

Great. I'll clarify the CPA definition of mumbo-jumbo offline.

It's interesting I used mumbo-jumbo, but the other thing is if you take that off, the performance at the segment level was outstanding. That was the focus here, right? [indiscernible] if you're looking for performance. Okay. All right.

Your next question comes from John Murphy with Bank of America Merrill Lynch.

Just a first question, as we think about the pace of buybacks because obviously it's a big program. I'm just curious, do you think you're going to be soaking up your free cash flow to do this? Or would you be willing to take on some net leverage to get this done maybe sooner rather than later? And I'm just trying to understand what would be your sort of net leverage limits or targets as you kind of work through this process and think about acquisitions as well?

Yes, I'll talk about the first part and then maybe James can talk about the acquisition side of that. We have a lot of opportunities, John, to use. We have existing cash, we have free cash flow that's being generated and we also have indebtedness that we can use as well. So I have a full suite of possibilities that I can pull triggers on to execute this plan. We're very confident and comfortable we can do that as well. So I have no issues in that part of our execution. On the M&A front and how that plays in the M&A, again -- actually, James, I want to answer this. On the M&A front, we still have a lot of capacity on the balance sheet for M&A activity. So James was asked this question earlier. This, by no means, takes away anything on the M&A front. We have capacity to execute the share buyback. We have capacity to execute M&A activity. We're very comfortable.

Okay. And maybe just to follow up on that. I'm just trying to understand if we look at the end of 2015, and the shares haven't moved much. I mean, could we be looking at the bulk of this buyback having been executed? I'm just trying to gauge the pace. I mean, is there a target of 1/3, 1/3, 1/3 over the next 3 years? Or is this going to be opportunistic and you've got a lot of room on leverage?

John, we're not going to give guidance as far as any numbers in this area. But to answer your question, yes, we're going to take advantage of opportunities when they present themselves. And when they do, we'll be more aggressive, for example. And that's how we're going to do the buybacks. It's not going to be any kind of linear number or anything we're going to do. But we'll use all of our balance sheet, we'll use the cash flow -- free cash flow and the existing cash balances to do it as well.

Okay, that's very helpful. And then as we look at Drivetrain, I mean, the margins this year, in aggregate, aren't anything really to apologize for but obviously there's some near-term headwinds here with the F-150 changeover and the restructuring you're executing in Europe. Just curious, as we think about those margins and ultimately where they can go as you work through these sort of transitory issues, I mean, is there any reason to think that you might not be able to get the Drivetrain margins near with the engine group margins are over time? I'm just trying to understand the potential magnitude of upside as we get into 16, '17 and '18.

Yes, yes. And that's a good thought, John, and I appreciate your acknowledgment that ours still a pretty strong year, particularly if we kind of look back a couple of years. I think a really critical part for me, John, is that this restructuring activity that we're undertaking, which is causing a little bit of short-term headwind is all to support our growth. And so there's 2 primary drivers that we've got going for us. One, we've got a strong growth outlook that, obviously, are more capitalized on the incremental revenue plus we're coming from a better cost optimization because of the restructuring. Those 2 things combined are going to take margins up that -- I feel very comfortable with that. In terms of putting up a precise number, John, in terms of 2 or 3 years out, I think we still want to get through this year. But we've not peaked on Drivetrain margins. We've got room to grow and we will over the next couple of years, John.

Okay. And then just lastly on gas prices. I mean, there's a lot of concern we're hearing from investors just on the short run that there could be some pressure on the business. I mean, have you seen anything on mix on a gross basis or on a net basis between the 2 groups that would cause you any concern just in the short run?

The quick -- the real quick answer, John, is there's actually no concern from a BorgWarner viewpoint. And I would articulate that in 2 aspects. One, if you take the short run, the short-term stuff that you're alluding to, first of all, as we know, it's predominantly a U.S.-related issue. I think that's fair to say. So that's about 25% of our total revenue. But even so, even when we see that mix shift in a quarter or over a period of time, in the mix between cars and trucks, it's actually neutral to favorable for us. We have a lot of gas price. And if you think about that intuitively, if you look at the typical content that you would see on the larger vehicles, when you think of things like transport cases, you think of turbos and other things, we benefit from the low price in the short run in North America. And then over the long run, which is the other question obviously we're asked, could this influence CapEx pushouts or adjustments, our view on that is we don't see anything meaningful there. We think the trend is in place for continued push on drive on fuel economy and emissions and we're not seeing anything at all in terms of adoption rates of technology or discussions around technologies that will launch in 3 years, 5 years, 6 years out. So quick answer, really in the short run, it's neutral to favorable and in the long term, no change.

Your next question comes from Brian Johnson with Barclays.

Just want to kind of go in a little bit on some of the stuff you talked about in pricing in Detroit Auto Show, how that actually kind of played out as you kind of locked down the quarter and kind of went in to the price discussions for 2015. You talked about 2% price-downs in 2015. We've been typically seeing 1.5% before. Were you being conservative there? We had a period of low oil prices or OEMs kind of pushing back a little bit more than they used to. Is there any change in the competitive dynamic and, I guess, related to that my follow-on question will be kind of how does nickel and commodities play in to those discussions?

Brian, this is Ken. So -- first of all, let me clarify for you. The guidance that we gave around pricing was around a 2% decline this year versus last year, which is very much in line with what we've given guidance -- or the guidance that we've given over the long term. It was not a change from previous guidance. So I want to make sure that, that's clear. So the idea around commodity prices playing into that, doesn't really have an effect on that. We have quite a bit of pass-through on nickel. I think you flagged nickel, so pricing is affected by that. But this particular discussion around price-downs is a bit separate from that. And I just want to reiterate that, that 2% decline was no different than any guidance we've given in the past.

Okay. And in terms of the timing of pass-through on nickel, how should we be thinking about that vis-à-vis the quarterly cadence?

Yes, Brian, this is Ron. I'm not just going to focus on nickel. I'd like to focus on commodities, in general. You have a myriad number of options when you talk about commodity pass-throughs. Sometimes they're set on a quarter basis, sometimes they're set on a half-year basis and some commodities are actually done yearly. So to put one simple number on it is very difficult. It all depends on the commodity, all depends on the customers. But generally, there are lags. I will say that there's lags when you pass them up and there's lags when you pass them down. It's not everything single month, you mark-to-market, so to speak. But there are lags, and the lags, can -- like I said, depend on 1 quarter to 2 quarters to a full year.

The next question comes from David Leiker with Robert W. Baird & Company. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Your actions on Drivetrain in Europe as you work through that near the end of this year and the next year or so, what kind of opportunities does that present you for going after new businesses? I guess a different way, has your cost structure been an impediment to getting new business or just margins? And does this open an opportunity to be more aggressive?

I would say, David, what I was maybe trying to articulate earlier, our growth is still very strong for Drivetrain. What this does is it just keeps us or makes us very competitive, I mean, as we optimize that footprint. It just makes us competitive. When I look at -- over the over the last few years in terms of our win rates and how we've been doing in market share type metrics, we've been doing well, and I think this will continue to keep that momentum going. In addition to that, it's absolutely helping us from a margin perspective and we'll continue to do. So it's a little bit of both, David. It helps fuel and support our growth while being competitive and it's helping in the margin side as well by the competitiveness as well. David Leiker - Robert W. Baird & Co. Incorporated, Research Division: Okay, great. And then one other item here. We've been hearing here in the last couple of months more discussions about dual-clutch transmissions coming into the commercial vehicle space. Is that an area that you're able to play in and participate?

Yes, David. That is an area that I think you're going to see us participate in. We are very much participating now, and that we expect that to continue going forward.

Your next question comes from Patrick Archambault with Goldman Sachs.

Just a couple of, like, clarifications. First, just on the impact of lower gas prices, just one item I was curious about. How much flexibility in programs is there for customers on the take rate whether they have a turbopower -- a turbocharge powertrain or a naturally aspirated? I know that exists for certain programs like the F-150, but my impression was that it wasn't really there in a lot of vehicles and a lot of engines. So one would be tempted to conclude that no matter what gas prices do, a lot of what's in going in for the next few years is kind of baked in. Is that correct or incorrect?

I think you're more right than wrong on that. The backlog, as you know, is booked. So as we look at programs for the next 3 years, that gives it, as you put it, kind of locked and loaded. So we feel comfortable with that. And when we get out 5, 6 years from now, there's a little bit more flexibility, but certainly over the next few years, we feel very comfortable with that. And you did highlight that turbochargers is maybe one potential where people can pick that option or not, but that's maybe the only one. As we think about it, the rest of our technology, they're on those engines, they're on those transmissions and there's not a lot of consumer options or they're thinking about different options as it relates to those other technologies. So I think that overall, that our backlog will not be affected by this change in oil prices. And let's not forget, this is a U.S. phenomenon and a lot of our backlog is outside of the U.S. as well, where this change in oil prices doesn't affect the consumer much at all.

Well, that's helpful. One other clarification for from me. Just -- I mean, you guys have given a pretty good breakdown of some of those items that are potentially weighing on contribution margin over the year, all right, the new facilities, the restructuring in Drivetrain. But from a quarterly perspective, by the end of this year, beginning of next, is it -- are those front-end loaded costs that really have the bulk of their impact in the first and second quarter? Or do they kind of stretch all the way through the year?

Well, I think, when we talk about the Drivetrain restructuring -- I'll do this in pieces. The Drivetrain restructuring, Ron has said earlier, is going to be kind of lumpy, hard to predict. But we think that there's going to be impact throughout the year to varying degrees. One impediment was the large North American program that impacted that. That should be in the first half of this year and we should be about have that behind us when we get to the second half of the year. And the new plants ramping up, that's probably going to continue through the year as well, again lumpy. We're ramping them up. We're talking about hiring people, getting the plant ready to go, so that's not a straight line either. I think the way to think about it is this stuff will be behind us by the end of the year. And 2016 is going to be very good launching off point for improved performance.

Understood. Okay, so perhaps a little bit more front-end loaded with the large program piece, but the other guys are kind of spread throughout?

Yes, I think that's fair.

[indiscernible]

Okay. And then last, just more of a structural question, I mean, you mentioned it on the call, 30% contribution margins for the last 2 years, which is higher than most of us had thought you would get to. And now even with -- beyond the restructuring and some of the transitional issues that you have this year, you're talking to something more in the mid-teens, right, on a sustainable basis. And I don't want to sound like a spoiled brat or something, but why -- like, what is the structural difference between 2 years ago and in the future once you're beyond some of this frictional issues? Why -- is it just sort of later in the cycle, higher levels of utilization, why structurally is the business not staying at the 30? Again, I don't want to make it sound like a complaint. Just trying to understand the drivers.

Sure, Pat. So really, what you have going on is if I go back a little bit of history and understand that as volumes start to ramp up, you're able to leverage more of your manufacturing utilization to a certain point. And once you meet that, you hit this mass point of utilization in your capital, you have to put in more capital infrastructure. What that does is it starts to bring down those incremental margins. You're not running very efficiently is what you're doing. So for a short period of time, you're seeing good margins, incremental margins because you're utilizing your capital. As you reach this fixed point, you have to put in capital. As you put this capital in, which is what we've been doing in the last half of this year, the incremental margins start to come down. So that's 2 points I'm bringing up -- I'm talking about as you expand and when you in capital. On a steady-state basis, which is what I typically use, Ken is a little bit different, on a steady state, you're putting capital at the same rate of your growth. So your incremental margins tend to blend at mid-teens. We hadn't been in that steady state. We would be in one state, we're in another state. The business needs to run at steady state. And at steady state, you put in capital at the same rate your sales grow, your cost structure, you're adding a plant here and there. You're adding people in those plants and those incremental margins will be the mid-teens as you're in steady state.

Your next question comes from Emmanuel Rosner with Credit Agricole Securities. Emmanuel Rosner - Credit Agricole Securities (USA) Inc., Research Division: I wanted to ask you first a quick clarification on the buyback program. Is it -- this new $1 billion, is it in addition to what you had left on the existing authorization? I think as of last quarter, if I remember well, it was something like 10 million shares which is at current stock price also a decent amount of change?

So this program is going to utilize the shares that were existing on that authorization. So we had about 8.6 million shares remaining. We'll use those shares as part of this $1 billion share repurchase program. Emmanuel Rosner - Credit Agricole Securities (USA) Inc., Research Division: Okay. So it's $1 billion from now basically including those?

That's correct.

Yes. Emmanuel Rosner - Credit Agricole Securities (USA) Inc., Research Division: And so just another point of clarification, the -- I think back at the Detroit Auto Show, you were saying you're essentially waiting for some clarity on your legal restructuring before making a move. Is that -- do you have that clarity now? Or did you just decide to go ahead and then announce the program now and then you will eventually get this legal restructuring done?

Yes. So we've been, for the last 2 years, working on a legal restructuring program. And as we come into 2015, we do now have complete clarity that we're going to be able to execute and finalize this program in 2015. So yes, that came into the decision. Emmanuel Rosner - Credit Agricole Securities (USA) Inc., Research Division: Okay, perfect. And then one final one for me. Just wanted to speak about the topic of diesel. We've seen some, I guess, pressure on the diesel mix in Europe as well as Western countries, making some efforts to sort of, in fact, maybe reduce the diesel penetration at the government level. I wanted to ask you, can you please just go over the math of what impact it has on you when, I guess, with equal purchase the oil produced, I guess, is gas versus diesel oil, specifically in Europe if possible?

Yes, Emmanuel, this is James. I would say our view, which we talked about in Detroit also, was we see over the next year or 2 there may be some slight erosion in terms of diesel share versus gas in Europe, primarily. We don't see a big shift change. We do see a couple of percentage points it may move. That generally won't move the needle meaningfully for BorgWarner because we have pretty good content on gas as well as diesel. If you break it down into more detail, in the short run, we'll probably have a little more benefit from diesel. But over the next 2, 3, 4 years, that's going to balance out as we see more and more of our technologies getting adopted onto gasoline vehicles. And therefore, those shifts will become neutral for BorgWarner over the next 2 or 3 years. So not a big deal for us is the quick summary, Emmanuel.

All right. Your next question comes from Ryan Brinkman with JPMorgan. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: I think a lot has been answered, but maybe just going back to the backlog call in November. Remember when you moved from a single-point estimate to a range. Obviously, it's very early in 2015, but a few months have passed since then. I'm curious if you have any insight into whether you might be tracking in more toward the higher or lower end of that range. $850 million to $950 million so, for example, for 2015, let's say.

Yes, that range is fully represented in our guidance. And you may actually do the math on the guidance, and it pretty closely ties to $850 million at the low end and $950 million at the high end. And as you know, we haven't really had a change since that initial guidance was given. So I think that's a very long way of saying we haven't really given any sort of guidance as where we're falling within that range as of yet. What we did say today was we feel very comfortable about the organic growth of this business. And that range, we're still very comfortable with. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: Okay. That's great. And then with the repurchase announcement, I mean, we had expected that you would buy back almost that amount of stock, but maybe that the announcement might come a little bit later. Does this mean that you had made a little bit more progress than you earlier thought when you had that dinner last year about repatriating cash from overseas? Is that process been going well or is that not necessarily related like we thought maybe it would be through an announcement.

Yes, I would say that when we talked about it last summer, we had a plan and we're on track on that plan. And a good thing happens as we got into this year and we kept on track, our confidence level was enhanced, right, whereby we're comfortable making the decision of making an announcement of the buyback. So we stayed on track, the confidence was gained and then we thought that the announcement was appropriate this time. Ryan J. Brinkman - JP Morgan Chase & Co, Research Division: Okay. And then your response to an earlier question about how consumers are changing their behaviors as a result of lower gas prices. It was really interesting, really helpful and I understand you got some all-wheel drive stuff that benefit from CDs and stuff. And it was touched on what could happen with CAFE standards, but maybe if you could just revisit that in a little bit greater depth. There's this potential, I guess, medium term review, but it's very soft review. Can you just kind of maybe describe the process? I'm sure you're more familiar with it than we are or the investors are. And Ford made a comment at the Detroit Auto Show saying something's got to give here. We agreed to this stuff, not that they had a whole lot of choice in agreeing to it, when gas was substantially higher. And they're even saying that like if the government doesn't relent somewhat, then maybe people won't buy as many vehicles, and the new vehicles are more efficient than the old vehicles or it could be counterproductive and they want to talk with them. So I'm just curious if you had any sort of better insight than us into how the process might play out in 2017 or what the rules are or whatnot.

Sure. James here, Ryan. So the way I think about it is that midterm review, it's part of the process. It's part of the scheduled review. And I think I'm going to go through that meaningful review as planned. I think that'll play out. Our view, as we sit here and talk to a lot of different people, is we're not anticipating or envisaging any significant change in the CAFE standards. That doesn't mean there may not be minor tweaks in language or numbers, but I don't think there's going to be anything materially moving, from our viewpoint, around CAFE standards. Let me maybe just give you one example of why you think that. When you look at the development cycle for, particularly powertrain type product transmission or an engine, that splits along -- that's a long gestation period of 2, 3 or 4 years to get that technology ready to go. And those programs often have a 7- to 10-year life. So -- and those are very, very capital-intensive, big investments that are made. So all of that stuff that's been going on, that's all being put into the works. And I -- based on that, I just don't -- I don't think that's going to be a meaningful shift. So I think it'll -- I think I'll go through the process as outlined, as you articulated. But I don't see any meaningful change or difference to the OE strategies and, therefore, the BorgWarner strategies.

Your next question comes from Joseph Spak with RBC Capital Markets.

Ron, just to follow up on the tax repatriation strategy which is helpful color. I mean, who knows what will happen with Obama's recent proposal, but if something along those lines does go through, will that throw off your current strategy or change your thinking at all?

Joe, a couple of years ago we were hoping for some sort of tax reform, and we didn't get it. I'd say that we just have to stay with our plan and if anything happens then, it's a benefit that will be great for everybody. But at the end of the day, you have to run your business and execute your plan, and that's the path I'm on.

Okay. And then maybe just -- well, one more quick one on -- I appreciate the $4 million to $5 million hit that you talked about in powertrain, and that will be -- continue to be lumpy. That does seem to be maybe a little bit towards the higher end. So is it fair to say that $4 million to $5 million is higher on a lumpy scale?

No, because I don't have absolute knowledge of they're going to be going forward. All I can tell you is that given the stuff we saw in the fourth quarter, it is that amount of money and as -- Ken did a good job as well saying that we have a start-up in China. That's a different issue, and then you've got relocation in Eastern Europe, which is actually a different issue. The reason I say that is the start-up has a planned cost base in there and we're getting ready for sales and shipments. So that's a little bit more predictable. Now the European structure side of it is a little more unpredictable because they're moving equipment and you're getting inefficiencies and then you may get efficiencies and they may come across something that's not working well. So one is a little bit more predictable and one is less predictable.

Okay. And then just real quick on equity income, which is down a little bit. I'm assuming that you had some FX hit in there? Is that fair and is it is possible to quantify?

[indiscernible] That's a good question. I'm surprised that no one really asked that earlier, and you're absolutely right. It was FX related for the quarter or translation. I want to be more specific, translational currency effects in there, yes.

All right. Is it possible to sort of give an indication of what that venture is doing organically?

I would say that we have 2 major joint ventures there. One is in India that's been -- very good performance. And this K1 that ships into China. So the performance over there has been very good as well.

We have time for one final question, and that question comes from Itay Michaeli with Citi.

So I just want to go back to the raw material incremental margin discussion. Ron, can you just remind us what percentage of your raw material buy is passed through? And how should we think about the impact on incremental margins? So I would think that even for the pass-through element as raw materials decline and you kind of get back pass-through lower revenue, will that optically help the incremental module for you in 2015?

Itay, there's a lot of commodities involved and a lot of timing differences to put a simple analysis around what you're trying to do. I know logically what you're trying to get at and there is a calculation but it's much, much more complex to make it that simple. But what I would say is that over a period of time, there -- the shift and those timings are not material to our business where it would affect incremental margins significantly on BorgWarner. I can say that, okay? Maybe in other businesses, it can. We're too large of an organization with a lot of different commodities to have any significant impact on our total numbers.

Great. That's helpful. And then just a big picture, a product development question. You launched a lot of product recently, particularly on electrified vehicles, both for stop/start and others. So just a question, just an update on how things are going there in terms of both developing product, going to market and your discussions with automakers as you pursue some of these new products that you have.

Yes, Itay, the thrust, if you wish, around continued electrification focus for BorgWarner particularly remains strong and we've seen over recent years product, specifically enabling and supporting stop/start type of technologies, just to name a couple. And we continue to be very engaged with the automakers on the electrification of our current products, as an example. But also, as we see the evolution towards different forms of hybrid and 48-volt architectures that, that's leading to enhanced product opportunities for us. A quick example there would be different forms of electrical turbochargers would be an example. And then in the pure battery electric vehicle space, we've participated there and we anticipate playing in that space as we go forward, too. So in other words, saying it is, electrification absolutely is a content-add growth opportunity for BorgWarner and we're seeing more and more of that play out both through our organic actions and also as we look to acquisitions as well. I think it will be complementary as we look forward.

James, and then just back on the midterm review. Yes, it was my understanding, just wondering if you have the same understanding that the review really is for the 2022 to 2025 time frame and not before that. So if there are any changes in the next few years, that's really the period in focus. Is that your understanding as well? Or is there some flexibility in terms of if there are changes made maybe affecting regulations prior to that?

No, I'm sure pretty much of a similar view that you talked. We may both be wrong but, I guess, we're at least having a similar view there. That's my interpretation.

Great. And just lastly, just a clarification. If the company's leverage target, Ron, still in that 15% to 30% net debt-to-capital or has that changed at all?

No, no change. That is our target.

Thank you, Itay. And I'd like to thank all of you for joining us. We expect to file our 10-K before the end of the day, which will provide details of our results. If you have any follow-up questions about our earnings release, the matters discussed during this call or our 10-K, please direct them to me. Melissa, please close up the call.

That does conclude the BorgWarner 2014 Fourth Quarter and Full Year Results Earnings Conference Call. You may now disconnect.