Good morning. My name is Savannah, and I will be your conference facilitator. At this time, I would like to welcome everyone to the BorgWarner 2023 Fourth Quarter and Full Year Financial Results Call. All lines have been placed on mute to prevent any background noise, and after the speakers' remarks there will be a question-and-answer period. [Operator Instructions] I would now like to turn the conference over to Patrick Nolan, Vice President of Investor Relations. Mr. Nolan, you may begin your conference.

Thank you, Savannah. Good morning, everyone, and thank you for joining us today. We issued our earnings release earlier this morning. It's posted on our website, borgwarner.com, both on our home page and our Investor Relations home page. With regard to our Investor Relations calendar, we will be attending multiple conferences between now and our next earnings release. Please see the Events section of our IR page for a full list. Before we begin I need to inform you that during this call, we may make forward-looking statements, which involve risks and uncertainties and details in our 10-K. Our actual results may differ significantly from the matters discussed today. During today's presentation, we will highlight certain non-GAAP measures in order to provide a clearer picture of how the core business performed and for comparison purposes with prior periods. When you hear us say on a comparable basis, that means excluding the impact of FX, net M&A and other non-comparable items. When you hear us say adjusted that means excluding non-comparable items. And finally, when you hear us say organic, that means excluding the impact of FX and net M&A. We will also refer to our growth compared to our market. When you hear us say market that means the change in light and commercial vehicle production weighted for our geographic exposure. Please note that we've posted today's earnings call presentation to the IR page of our website. We encourage you to follow along with these slides during our discussion. With that, I'm happy to turn the call over to Fred.

Thank you, Pat, and good day, everyone. We're pleased to share our results for 2023 and provide an overall company update, starting on Slide 5. With approximately $14 billion in sales, we delivered more than 12% organic growth in 2023. Our margin performance was strong, coming at the high end of our guide. During the course of '23, we adjusted our eProducts top line to reflect what we saw in the marketplace. It resulted in a slightly lower top line for the Company but higher margins. This is a good example of the product portfolio resilience that exists at BorgWarner. We delivered $565 million of free cash flow in 2023. This free cash flow supported the $177 million of share repurchases that we executed during the fourth quarter as well as the closing of the Eldor acquisition. Our challenging forward progress continues on multiple fronts. We secured multiple new eProduct awards during the fourth quarter, adding to the already announced over the course of the year. These awards were across our portfolio for both BEV and hybrid architectures. We continue to see a strong sourcing pool for our products based on the strength of our portfolio globally. Lastly, we took steps to enable new business awards by executing several strategic actions to further strengthen our eProduct portfolio, like the acquisition of Eldor Electronics business as well as the strategic agreement with BYD, FinDreams Battery for LFP packs outside of China. Now let's look at some new eProduct awards on Slide 6. First, BorgWarner has been selected by XPeng to supply its eMotor rotor and stator for the X9 MPV as well as for their next electric B-class sedan. Production began in January 2024 for the X9 and we're planning to start producing for the B-class sedan in Q3 '24. Our…

Thank you, Fred, and good morning, everyone. Before I dive into the financials, I'd like to provide a quick overview of our fourth quarter results. First, revenue was at the midpoint of our guidance, supported by stronger-than-expected industry production in the quarter. Second, our margin performance was at the high end of our guidance, driven by strong conversion on higher revenue. And finally, we delivered strong free cash flow performance to finish out the year. Let's turn to Slide 10 for a look at our year-over-year revenue walk for Q4. Last year's Q4 revenue from continuing operations was just over $3.3 billion. You can see that the weakening U.S. dollar drove a year-over-year increase in revenue of almost 2% or $55 million. Then you can see the increase in our organic revenue, which was roughly 4.5% year-over-year. The reason why our growth wasn't stronger is that we were negatively impacted in the quarter by customer launch and ramp up the BEVs key eProduct programs in China, lower customer volumes on a North American EV program and lost sales due to the UAW strike in North America. Finally, the acquisitions of Eldor and SSE added $5 million to revenue year-over-year. The sum of all this was just over $3.5 billion of revenue in Q4. Turning to Slide 11. You can see our earnings and cash flow performance for the quarter. Our fourth quarter adjusted operating income was $332 million, equating to a 9.4% margin. That compares to adjusted operating income from continuing operations of $321 million or 9.7% from a year ago. On a comparable basis, excluding the impact of foreign exchange and the impact of M&A, adjusted operating income increased $16 million on $145 million of higher sales. This performance includes a planned eProduct-related R&D increase of $15 million. Excluding…

Thank you, Kevin. With that, we're ready to open up for questions.

[Operator Instructions] Our first question will come from John Murphy with Bank of America. Please go ahead.

Just a first question here. I understand you have to run a business and sometimes it makes sense in the volatile wall that we live in to take a slightly conservative tack. But if I were to tell you, instead of your volumes being flat to down 2.5%, they might be flat to up 2.5%. At the midpoint of the range, that would add about $355 million in revenue to your outlook. Would it be reasonable to sort of assume that those could convert about 15% to 20% incremental margin, and that would kind of really translate into about 5% upside to earnings and potentially cash flow. Is that a reasonable way to think about it, if that were to happen?

It's a reasonable way to think about it. Yes, I mean our guide is promised on our expectation that our markets are flat to down 2.5%. But if markets come in stronger, we fully expect that we would execute on that, deliver the revenue and convert on it. And you can see the conversion on an all-in basis implied in our guide is a mid-teens conversion. And so, if we see upside revenue, you should expect to see us converting on that incremental revenue.

And then just a quick follow-up. I mean the market is shifting all over the place, although it's not moving as quickly as it's kind of some of the commentary would lead you to believe. If we saw a greater hybrid penetration not just in 2024, but maybe in 2025 and beyond, Fred, is there potentially a shift in cap allocation and slightly in strategy that you could execute and not leave capital stranded? I mean, how sensitive are you to shifts between EVs and hybrids? And how much would you have to ship the strategy and cap allocation?

The products for the each side of hybrids are similar than the products on BEV. They are the same motors, the same power electronics, they are the same transmission cases, they are the same high-voltage coolant heaters. So, it's from an R&D perspective, it's extremely fungible, they're the same engineers, and from a capital standpoint, it's pretty fungible too. So, we've developed an eProduct portfolio that is, I would say, very fungible across hybrids and BEV very much so.

Question will come from [Technical Difficulty]

Just talking on contribution margins, it does come out to something like a 16% if you exclude Eldor. Any other puts and takes you mentioned R&D, how much of a headwind is there, any commodity or labor issues that we should be thinking about? And then when we think about Eldor, when does this drag start to go away? Or is that sort of going to be here for several years?

With respect to the year-over-year conversion in '24, there's nothing unusual to really think about. I mean you're right, we're looking at the mid-teens and that is on an all-in basis. If you look at -- we are investing a little bit more in eProduct R&D again in 2024. It will be up organically about $40 million to $50 million, but that's embedded within that conversion. So we're looking at our conversion now given the scale of the business from an eProduct perspective on an all-in basis, and we expect to contribute in the mid-teens with that in mind.

And Eldor, any thoughts on when that moderate?

So let me take a step back here. I think Borg is very good at taking great technologies and commercializing them and globalizing them. Look at what we've done with Delphi, look at what we've done with Akasol, which was -- which literally had lower revenue. This year, we had about $750 million at the midpoint. The plan with Eldor on DC/DC converters on both charges is exactly that. And so, I'm very optimistic about the drive that we can generate and profitable growth that we can generate from the engineering base that we acquired with Eldor.

And maybe I'd just add to that, [Colin], this is something we anticipated when we gave guidance back at our Investor Day as well because Eldor was well in flight and we knew that would have an impact on our margin in the short term, position us for long-term success in a $30 billion addressable market in 2030, so it is impacting the near term. But over time, as we start to have some success in that business looking to the next few years out, it will start to be a positive for us, but that's still several years away. We expect to have operating losses in that business for the next couple of years as we were support the R&D necessary to support our capitalizing on that business.

And just you touched today on this year's guidance being sort of flexible between EV and ICE profitability. And at your Investor Day, you talked about '27 same dynamics of it, EV mix is higher to sort of offset higher or lower, you'd add a dollar basis to be similar in '27. But you're still forecasting like a fivefold increase in your EV powertrain sales through I mean that would imply probably a lot of ER&D as you try to prepare for those launches. So is that flexibility going to be consistent over the midterm? Or is there going to be some puts and takes because you have some pretty chunky R&D needs to get ready for that $10 billion that you talked about in '27?

Yes. When you look at the eProduct related R&D, as we've mentioned in the past, we thought the real peak in that was going to be in 2022 in terms of the growth in the eProduct R&D. You might remember, it stepped up $150 million that year. But then we said we expect the pace of the growth in the R&D to step down year-over-year. And you can see that happening. Last year, it stepped up about $60 million so not as big an increase as what we saw in 2022. And as we look ahead to '24, it's going to step up about $40 million to $50 million organically. So the pace of the growth in that ER&D is definitely slowing but still growing because it's supporting our ability to successfully launch and ramp up programs as well as to capitalize on continued profitable opportunity down to the future. So, we think the pace of what we're seeing right now is supportive of our long-term outlook for electrification.

Our next question will come from Joe Spak with UBS.

I guess I wanted to sort of touch on a couple of the midterm factors here in light of what's going on in your strategy. So first, if I look at Slide 13 and I look at combustion plus hybrid of the industry, you're showing about a 4% decline roughly at the industry level. Your implied foundational revenue growth is like minus 1.5%. So that's like 2% to 3% at growth. Is that like a reasonable level of outperformance on the foundational stuff as ICE continues to decline over the coming years? And can you still hit that 13% foundational margin target that you laid out if ICE continues to decline?

So I would say, Joe, that we're outgrowing the inflational side by about 300 basis points. I would tell you that on the side, I see more upside than downside at this point in time. And we are constantly as we presented a few months ago and as we review the team regularly, we're constantly restructuring in a position of strength. And that, I believe, will allow us to maintain the foundation of margins as it is called by our third pillar of Charging Forward.

And then I guess a second question maybe to build off of [Colin's] [ph] question a little bit. Let's call it, $2.5 billion eProducts guidance for this year. Your prior '25 was $4.5 billion to $5 billion. So that looks like a big jump. So maybe a couple of things there like it seems like maybe some of that product launches through the year. So maybe the '24 exit rate is a better sense. And I don't know if you would agree with that. And I guess just secondly, is that sort of '25 level for your products still attainable? I mean, it doesn't seem like the market really believes it is, but I'd be curious to understand how year-over-year.

So if you take the CV packs, growing 65% CAGR year-over-year. And we are ramping up in U.S. significantly in Q2 and in Europe at the end of the year and more to come. So I would say that the end of 2024 jump-off point on CV is much higher than the current year. On light-vehicle, roughly 60% of the programs that we've disclosed so far, we're launching this year or we've launched at the tail end of last year. So even if there is some variability possible, I think you're right, the jump-off point at the end of this year is going to be from a much bigger base on a light-vehicle standpoint, as it is, I just alluded to on the CV side. So I would say that if the customer volumes are holding as our country forecasting, we would expect to be within that range in 2025.

Obviously, in volatile market we need to monitor but based on what you see now and sort of the growth through the year on what you just sort of talked about, it still seems achievable?

For now, we're focusing on '24. We're launching so many products. We're focusing on '24, and we'll let you know what we think finally on '25 in due course. '24 is our focus, but I just wanted to give you the color of the different building blocks between CV and light vehicles.

Our next question will come from Rod Lache with Wolfe Research. Please go ahead.

I just want to, first of all, confirm on the question that Joe just asked is based on the growth in eProducts and in a flat market, it would appear that there's some moderation in the foundational business, but you are maintaining that 13% margin. So you're not delevering? And secondly, can you remind us what's embedded for M&A within the eProducts revenue target for 2025? I'm referring to the $4.5 billion to $5 billion.

So I'll take the second part of the question. There is no M&A in the $4.5 billion to $5 billion. It is booked business. There is a significant portion of about $2 billion of M&A in 2027.

And then on the foundational margin, one of our key strategies is that we know over time, as electrification continues to grow at the expense of underlying combustion-based technology that will put pressure over time on our revenue outlook. And our challenge is to make sure we're managing the cost structure of that business I should even say the overall P&L of that business, whether that's on the price side or the cost side to make sure we're delivering and sustaining our margin profile, we fully expect that to be the case as we go through 2024 and well beyond that.

And maybe just bigger picture, when we take a step back and you kind of analyze the regulatory requirements for your light vehicle customers, I'm curious if you have any thoughts on how much flexibility the OEMs really have to defer electric vehicles? Do you think that they would be able to shift to plug-ins or hybrids to a much greater extent? And are you seeing any benefit from the fact that you have a lot of kind of off-the-shelf hybrid technology? Which if these are sort of late decisions, I would imagine they might accelerate.

Yes. So for customers, I think most probably you need to ask them. I think there is some flexibility. We are hearing commentaries as you do that in the U.S., there is some intention to report hybrids outside of the U.S., hybrid is a big portion of the new energy vehicles. In China, it’s 30% to 40%. In Europe, it's a big percentage, too. What's important to me is that we've built a product portfolio that is totally fungible across hybrid and BEV. R&D is the same engineers, power electronics, motors, transmission, thermal, it's the same thing. For us, it does not matter. We can support our customers to wherever they want to go.

So Fred, just to clarify, are you actually seeing that? We're reading about it. We're hearing about this increased interest in the U.S? Are your customers now sort of accelerating activity with you in that area?

Rod, I think it's a little too early to see the communication and the RFQ materializing on the hybrid side. But I would say that with the scale that we have in our eProducts that cuts the grass hybrid, different types of hybrids and BEV, we can be one of the enablers of a rapid launch of hybrid powertrain for those customers.

Your next question will come from Dan Levy with Barclays.

And maybe we could just start with Eldor, the broader M&A strategy, specifically, how are you managing, I guess, we could say the integration deals because you have done a lot in the way of M&A. What is the process for integration? How do you manage any integration risks? And then maybe you could just remind us on Eldor, are these losses in line with what you originally anticipated? Or is this a function of maybe a weaker EV environment than when you originally did the deal?

So first of all, the financial profile of Eldor was fully comprehended when we did the due diligence and it was fully comprehended into the views of our financials. Integrating companies becoming, I think, a real strength of BorgWarner. And we do that in a very disciplined way, and we're doing it with a very disciplined way with Eldor too. We are locating BorgWarner people on location. And we are managing the business starting Day one where we've owned Eldor for a couple of months now. But we are going to just manage the Eldor business as we manage the BorgWarner business with financial discipline. There are attractive businesses in onboard chargers, DC/DC converter and one-box, which again is totally the same products, either it's hybrid or BEV. And we see a lot of pools and a large event from our customers in those electronics technologies too.

And maybe I'll just piggyback on that, Dan, back to the losses being in line. Keep in mind, if you look at what's implied in our guidance this year, we're at 9.6% to 9.9% without Eldor and as we look out the 2027, we thought we were on track to be a 10% margin business. So, we'd already be on the cusp of that without doing Eldor, but Eldor was contemplated that and -- impacting us to the tune of 30 to 40 basis points in the short term because we knew we were investing in a strong engineering shop that doesn't have a lot of revenue today. And so that was contemplated in our original guidance.

And then maybe just as a follow-up on that. Given we've seen some shifts in product plans, maybe you could just give us a sense of what the go-forward capital allocation? I mean, Fred, you mentioned a moment ago that there's $2 billion of M&A assumed in the 2027 targets. I know we're not going to get an update on that today. But maybe you can give us a sense of how this environment shifts what your appetite is for perhaps, how does the capital allocation change? And what else is remaining that still isn't in your portfolio from a capability or product or customer exposure standpoint that still would require some M&A?

I would say that the capital allocation strategy is pretty much unchanged. We are looking at M&A as an important part of strengthening electrification capabilities. We are very disciplined in the way we look at M&A. We are looking at way more companies than we're actually putting the trigger on. And we think that the current environment could provide some attractive buying opportunities and be rest assured that we will include and consider the near-term impact in the valuation assessment. We are looking at M&As with discounted cash flows. We're taking those near-term impacts are really importantly, the policy on capital allocation also includes the dividends that we've left unchanged even during covet. We've repurchased stocks and buyback is start of the strategy. I alluded to in my prepared remarks on how much we've given back to our shareholders and the spin-off of PHINIA, which I think was a great success. It is also part of the capital allocation strategy. Kevin, do you want to add anything?

No, I think that's it.

Our next question will come from Adam Jonas with Morgan Stanley.

Just two simple questions. First one, what portion of your 2024 budget of CapEx and R&D is allocated to eSystems?

We don't really break that out, but publicly in terms of what we've been disclosing in terms of an overall R&D or CapEx allocated that way. But what I would tell you is, if you look at R&D first and foremost, we invested about $475 million in eProduct-related R&D in 2023 versus the $700 million or $715 million or so of R&D in total. As we look ahead to '24 organically, we'll add another $40 million to $50 million there from eProduct R&D perspective. And you can expect that the foundational based R&D will probably come down a little bit on a year-over-year basis as it's been doing the last few years. So the R&D will continue to be increasingly weighted towards eProduct, and it is the majority of the investment. From a capital perspective, you can see we stepped up our capital investment last year pretty meaningfully, a couple of hundred million dollars relative to 2022, and that was really focused on investing in some of the eProduct portfolio ramp ups that we needed, particularly within our ePropulsion segment as well as our battery pack business and you'll see a comparable level of investment in capital in 2024 going toward that. I think these will be a couple of the peak years of investment from a CapEx perspective, particularly on that battery pack business. And then you'll probably see it come back down a little bit to more normalized levels as we hit '25 and beyond.

And then what's really important is to understand that the RMB CapEx are for EV and hybrids. And again, I'd say it's wonderful times, the products are the same for us in light vehicle, whether it goes in the hybrid or above. It's the same people it's the same R&D, it's the same CapEx.

And then just going to temp on that point, Fred, that there are many aspects of eSystems that are agnostic between BEV and hybrid, I'll ask you -- I won't hold you to specifics, but what would be your best guess or a range of how much of your 2024 eSystems and foundational business are going into hybrid include plug-in hybrids? If you were to isolate just hybrid specifically before some of your foundational stuff increasingly is going into hybrids as well, as we all know. So I didn't know if you could isolate a guess of how much hybrid would account for the revenue in '24? A range would be great.

Yes. I guess maybe just a couple from me. I think Pat can come back to you on the details. But what I would say is when you look at the $2.5 billion to $2.8 billion guide, the first thing I'd say is off the top the $700 million to $800 million associated with battery is all EV. It's EV in the commercial space in the CV space. So then what you're really looking at is the other $1.8 billion to $2 billion of eProduct revenue, and we'll come back to you with the specific breakdown. I don't want to put a number and have it a little bit off.

Our next question will come from James Picariello with BNP Paribas.

Just a clarification question first. So based on the margin guidance, excluding Eldor, the implied loss rate for Eldor this year is roughly $50 million, is that right? And then in addition to that impact, you're stepping up organic products R&D by $40 million to $50 million. So all in at an additional $90 million to $100 million in spend, is that right?

Roughly, yes. The portion of the Eldor loss, that's engineering related it's somewhere around $40 million. So you're right, it's $40 million to $50 million of organic step-up of to the R&D. And then Eldor adds about another $40 million, the overall loss and Eldor is around -- the midpoint is around what you said.

And then can you just confirm what the eProduct margin was in 2023? And then based on what we just covered, is it possible eProduct losses are close to flat year-over-year? Just how should we be thinking about that? Or asked another way, part of the impetus behind separating out of the propulsion was to provide that clarity and transparency on the product progression. Is there a segment-specific guidance to share maybe on the ePropulsion?

We're not going to give any segment-specific guidance this year. But what I would say, when you look at the ePropulsion segment, obviously, we were focused on driving toward breakeven in the fourth quarter of last year. That was the guidance as we started out the year last year, and that was truly premised on our ability to successfully convert on the incremental revenue and we were disappointed that we had to pull back on that when we saw some of the volatility in the eMarkets and how that was impacting our revenue. So as we ended the year, you can see when you look at the ePropulsion segment, we ended up coming in at about $540 million of revenue in the fourth quarter, which is about $200 million to $300 million short of our original guidance when we were expecting to get to break even. So that business ended up losing about I think $16 million or so in the fourth quarter. I think what gives us some comfort in the way we're managing the profitability of that business is the fact that we were down $200 million to $300 million in revenue versus our original guidance. If we had simply let contribution margin flow through on that lower revenue, we probably would have had a bigger loss than $16 million in the quarter. So I think we feel good about the fact that we're managing the profitability of that business in light of some of the near-term volatility. But ultimately, the path to breakeven into long-term profitability of that business comes from successfully converting on the incremental revenue. And what we take a lot of comfort in is that we see the contribution margin really flowing through the business. I mean you can see it in the 2024 guide right? We're converting on an all-in basis at mid-teens. And all of the growth in 2024 is coming from the eBusinesses. So, we see the underlying fundamentals of the profitability coming through it. So as we scale that business, we see the path towards the profitability objectives of the Company intact for that portfolio.

Our next question will come from Emmanuel Rosner with Deutsche Bank.

I was hoping to follow up on the incremental margins. And just trying to understand a little bit how the math would work for the foundational side of your business. So, we've basically reached a point that where within your 2024 guidance, foundation revenues are already down, I guess, even with the growth of the market. And so I guess, how should we think about contribution margin within foundational? Like does it become sort of like the decremental margin? Do you need sort of like restructuring to sort of like offset this? And if I think about some of our [indiscernible] basically cash-in decisions in the future? Like how quickly can you go from having sort of incremental, if the volume plays out better versus having to sort of like restructure to offset any potential downside?

I mean with respect to the foundational business, implicitly, you're right. The revenue is down a little bit. Year-over-year, somewhere in our guidance implicitly around $60 million to $260 million, which means we're down about 0.5 point to 2 points in that portfolio year-over-year. If you look at the underlying markets that those products support being the combustion and hybrid markets, those are down anywhere from 3% to 6% on a year-over-year basis. So we are outperforming those markets as those are going down a little bit year-over-year, but we are seeing a revenue line. And as you know, at our Investor Day, we talked about our expectation that overtime, we're going to see revenue in the foundational portfolio is coming under some pressure. And what we needed to do is make sure we're managing that P&L holistically, pricing cost restructuring to make sure that we would sustain that margin profile over time. And we fully expect to do that and we expect to execute that in '24 as well as all the way through the end of the Charging Forward plan.

I would add one thing is that on the combustion side. We don't really see no new -- we don't really see new engines or new transmissions being developed. It is more a longer life or slightly higher volume on the current product. So even if combustion, as you mentioned, may go back up or longer tail that doesn't prevent us to adjust the [SA] and the engineering as I mentioned, of the foundational P&L.

Just to make sure I understand, so 2024 could help us really understand also the mid- or longer-term picture because you have a guidance obviously about it, but so you mentioned this mid-teens incremental margins all in for this year. Any way to directionally think about it on what does that does look like on a foundational versus new eProduct because, obviously, as I mentioned, foundational is actually down revenues and then eProduct is up a lot. So what does that look like? And I think you could help us a little bit better understand how you manage this going forward.

I mean, fundamentally, we're not going to break out the details in terms of our guide, but fundamentally, in order for us to execute on our foundational margin profile over the coming years in line with Charging Forward. It means we need to decrement on an all-in basis in that mid-teens. And for our eProduct portfolio to deliver on its margin expectations we need to convert in the mid-teens. And I think you see the blend of that actually coming through the financials and the P&L in our '24 guidance.

And we have time for one final question, and that question will come from Noah Kaye with Oppenheimer. Please go ahead.

First, just a clarification, what was said earlier. You talked about really this year in [indiscernible] kind of the peak for CapEx, is that meant to be CapEx in absolute dollars? Should we think about sort of reversion to more like 5% of sales on a go-forward basis, that being the '26, '27? I'm just trying to understand the intent of your comments.

Yes. Fair question, I mean, typically, we've run in the past at 5%. We've had years where we've dipped below, and we've been in the 4.5% to 5% range. But then you see the last couple of years, we've been elevated running closer to 6% than 5%. My expectation over time is that as we get to more of a normalized run rate environment, we're probably coming back down toward that 5% range.

And then, Fred, there was good color earlier on the battery pack expectations for this year. But I'd honestly love to delve a little bit more into where you're at in terms of tooling and automation, staffing up cell supply to just help us understand your true visibility into the production ramp as you go throughout the year?

Yes, we are ramping up a second production line in Seneca, North Carolina. We have our first production line in the Michigan area. This is ramping up in Q2. And the same line is being commissioned for Europe, and this will ramp up data in the year. And that is the 65% year-over-year growth at the midpoint for those daypacks. The demand is much higher than what we can produce. And we don't see in the commercial vehicle, any noise of any slowdown whatsoever to the contrary. So that's pretty much what we're doing on the very back. We don't see any issues on sales of the play. And all that is reviewed and monitored very in a very focused way and a very precise way.

Maybe I can ask one more. It's more generally to help our understanding of your insights into customer behavior given the shifting dynamics around powertrain of choice versus increase in labor costs for some of the OEMs well publicized in North America, but more broadly, how has this translated to the customer expectations around pricing versus value proposition. Do you still feel comfortable in being able to hit the ROIC target, but you've always quoted for this program. Is there anything that you'd call out in terms of kind of customer expectations and there you're in right now?

Noah, I think we're always quoting businesses with 15% return on invested capital. We have volume based closes and everything that I see is tending towards meeting those 15% return on invested capital, and we very experienced on how to do that. For us, it doesn't change whether it is a new product or eProduct, the rules are all the same.

Thank you all for your great questions today. If you have any follow ups, feel free to reach out to me or my team. With that, Savannah, you can go ahead and close today's call.

And that does conclude the BorgWarner 2023 Fourth Quarter and Full Year Results Conference Call. You may now disconnect.