DEF 14A of Borgwarner Inc
Filed Mar 15, 2024 · FY20230001558370-24-003300
Our Electrification Strategy is Accelerating
Our Electrification Strategy is Accelerating Charging Forward 2027 is the latest step in BorgWarner’s journey to electrification. Since our acquisition of Delphi Technologies PLC in 2020, BorgWarner’s commitment to electrification has accelerated. We take a disciplined approach to our M&A activity and pursue opportunities that fit from a strategic and financial perspective. In 2023, we increased our global charging footprint with our acquisition of SSE’s Electric Vehicle Solution, Smart Grid, and Smart Energy businesses, optimized our combustion portfolio with the spin-off of PHINIA, and added to our existing power electronics portfolio with our acquisition of Eldor Corporation S.p.A.’s Electric Hybrid Systems business segment (“Eldor”). The SSE acquisition supports our continued expansion into the direct current fast-charging market and complements our existing European and North American EV charging footprint by adding a significant presence in China. The Eldor acquisition enhances our capabilities in engineering compact and efficient 400V and 800V on-board chargers that are compatible with a variety of regional grid configurations. In addition to M&A, our organic eProduct activity has intensified. Since 2021, we have invested approximately $2.2 billion on eProduct research and development and have announced 39 eProduct awards. For 2023, we achieved more than $2 billion in eProduct sales.
Our Electrification Strategy is Accelerating
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Our Electrification Strategy is Accelerating
Dear Fellow Stockholder: On behalf of the Board of Directors (“Board”) and the management of BorgWarner, we invite you to attend the 2024 Annual Meeting of Stockholders (the “Annual Meeting”) at our world headquarters located at 3850 Hamlin Road, Auburn Hills, Michigan 48326 on Wednesday, April 24, 2024, at 9:00 a.m., local time, for the following purposes:
Our Electrification Strategy is Accelerating
| Proposals to be Voted: | | Board Recommendation | Page | | PROPOSAL 1 | Elect eight directors to serve for the next year | vote FOR the Board’s nominees | 11 | | PROPOSAL 2 | Approve, on an advisory basis, the compensation of our named executive officers | vote FOR | 27 | | PROPOSAL 3 | Ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for 2024 | vote FOR | 64 | | | Transact such other business as may properly come before the meeting or any adjournment or postponement thereof. | | |
Our Electrification Strategy is Accelerating
| Only stockholders of record at the close of business on March 1, 2024, are entitled to vote at the Annual Meeting or any adjournment or postponement thereof. | Your Vote is Important! You can submit your vote by: | | | Please read the attached proxy statement carefully as it describes in greater detail the matters to be acted upon and your voting rights with respect to those matters. The enclosed proxy card is solicited by the Board. Along with the attached proxy statement, we are providing you with a copy of our Annual Report on Form 10-K for our fiscal year ended December 31, 2023. Stockholders should not regard our Annual Report on Form 10-K, which includes our audited financial statements, as proxy solicitation material. By Order of the Board, Tonit M. Calaway Executive Vice President, Chief Administrative Officer, General Counsel and Secretary Auburn Hills, Michigan March 15, 2024 | | | | | | Telephone Call us free of charge at 1-800-690-6903 and follow the instructions. | | | | Internet Access the internet, go to www.proxyvote.com and follow the instructions. | | | | Mail You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. See page 67 for instructions on how to receive a paper copy of our proxy materials. | | | | In Person If you attend the meeting, you may vote in person if you wish to do so, even if you have previously submitted your proxy. |
Our Electrification Strategy is Accelerating
This summary of ballot items provides information that you should consider before voting on the proposals presented at this year’s Annual Meeting. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
Our Electrification Strategy is Accelerating
| Proposal 1 To Elect Eight Directors to the Board of Directors | | Our Board recommends that you vote “FOR” the Board’s nominees. |
Our Electrification Strategy is Accelerating
| | Officer, Axel Johnson Inc. Age: 48 Director since: 2021 Committees: CC, CGC | | Age: 67 Director since: 2018 Other current directorships: Franklin Templeton ETF Trust, S&P Global Inc. Committees: AC, CC* | | | Sara A. Greenstein President and Chief Executive Officer, Axel Johnson Inc. Independent Age: 49 Director since: 2021 Other current public company directorships: None Committees: CC, CGC* | | Deborah D. McWhinney Retired Chief Executive Officer of Global Enterprise Payments, Citigroup Inc. Independent Age: 68 Director since: 2018 Other current public company directorships: Franklin Templeton ETF Trust, S&P Global Inc. Committees: AC, CC* | | | Michael S. Hanley Retired Global Automotive Leader, Ernst & Young LLP Independent Age: 68 Director since: 2016 Other current public company directorships: None Committees: AC*, EC | | Alexis P. Michas Non-Executive Chair of the Board, BorgWarner Inc.; Managing Partner, Juniper Investment Company, LLC Independent Age: 66 Director since: 1993 Other current public company directorships: AstroNova, Inc., Revvity, Inc. Committees: EC* | | | Frédéric B. Lissalde President and Chief Executive Officer, BorgWarner Inc. Non-Independent Age: 56 Director since: 2018 Other current public company directorships: Autoliv, Inc. Committees: EC | | Sailaja K. Shankar Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. Independent Age: 57 Director since: 2022 Other current public company directorships: None Committees: AC, CC | | | Shaun E. McAlmont President and Chief Executive Officer, Ninjio, LLC Independent Age: 58 Director since: 2020 Other current public company directorships: Lee Enterprises, Inc. Committees: CC, CGC | | Hau N. Thai-Tang Retired Chief Industrial Platform Officer, Ford Motor Company Independent Age: 57 Director since: 2023 Other current public company directorships: None Committees: AC, CGC |
Our Electrification Strategy is Accelerating
| Light Background: Independent | AC: Audit Committee CC: Compensation Committee | | Dark Background: Non-Independent | CGC: Corporate Governance Committee EC: Executive Committee | | | *Committee Chair |
Our Electrification Strategy is Accelerating
Director Demographics
Executive Compensation Objectives
| ■ | Motivate our executives to perform in support of the Company’s business strategies and goals (including growth and the creation of long-term stockholder value) by taking calculated risks |
Executive Compensation Objectives
| ■ | Link executives’ and stockholders’ interests through equity-based incentive plans |
2023 CEO Target Direct Compensation
| ■ Base Salary ■ Comprised 10% of total compensation ■ Remaining 90% of compensation was at-risk ■ Annual Incentive ■ Drives achievement of key business results ■ Incentivizes delivery of key short-term business objectives ■ Based on achievement of AOM% and FCF, demonstrating strength of business ■ Includes a performance modifier that allows the Compensation Committee to modify the annual payout upwards or downwards up to 10% of MIP Target awards. Annual payout remains capped at 200% of target o For 2023, the Compensation Committee did not apply the performance modifier | ■ Long-Term Incentive ■ Aligns management interests with our stockholders’ ■ Supports talent retention ■ Significant portion was performance based ■ Two Thirds of Total Value of Target Long-Term Incentive Opportunity Performance shares divided among eProducts Revenue Mix (25%), eProducts Revenue (25%), Cumulative Free Cash Flow (25%), and Relative Total Stockholder Return (25%), vesting at the end of a three-year performance period ■ One Third of Total Value of Target Long-Term Incentive Opportunity Restricted shares vest 50% after two years and the remainder vest after three years | |
2023 CEO Target Direct Compensation
The compensation of our named executive officers (“NEOs”) is largely performance-based, with approximately 83%-90% of their target direct compensation (salary and target annual and long-term incentives) at risk and based on Company performance. We continue to refine our executive compensation program to ensure it is consistent with our short- and long-term strategies and provides a strong link between pay and performance. Consistent with our Charging Forward 2027 strategy, which focuses on accelerating our path toward electrification, there are two “E” metrics in our Long-Term Incentive (“LTI”) Plan. In 2021, we introduced the eProducts revenue mix metric (the “eProducts Revenue Mix Metric”) in our 2021–2023 LTI Plan. In 2022, we included the eProducts revenue metric (the “eProducts Revenue Metric”) in our 2022-2024 LTI Plan and have maintained the same metrics for the 2023-2025 LTI plan, as follows:
Information on Nominees for Directors
Information on Nominees for Directors The following pages set forth as of March 1, 2024, each of the director nominee’s name, the year in which he or she first became a director of the Company, age, principal occupation, and his or her current directorships in other entities; a narrative description of the director nominee’s experience, qualifications, attributes, and skills; all directorships at public companies and registered investment companies held since March 1, 2019. Each of the nominees for election has agreed to serve, if elected. All the nominees are currently directors of the Company. If any nominee should become unavailable for election, our Board may designate a substitute nominee, in which event the shares represented by proxies at the meeting will be voted for such substitute nominee, unless an instruction to the contrary is indicated on the proxy card. Directors and Nominees
Information on Nominees for Directors
| Sara A. Greenstein President and Chief Executive Officer, Axel Johnson Inc. | | | Age: 49 Director Since: 2021 Other Current Public Company Directorships: None BorgWarner Committees: ■ Compensation ■ Corporate Governance (Chair) | Principal Occupation and Directorships Ms. Greenstein has served as the President and Chief Executive Officer of Axel Johnson Inc. (“Axel Johnson”), a privately held investment company that invests in global manufacturing and service businesses, since June 2022. Prior to Axel Johnson, she was the President, Chief Executive Officer, and Board Member of Lydall, Inc. (NYSE: LDL), a leading global manufacturer of value-added engineered materials and specialty filtration solutions serving the industrial, automotive, agribusiness, and medical markets, from November 2019 to October 2021. Prior to joining Lydall, Inc., Ms. Greenstein served as Senior Vice President of United States Steel Corporation (NYSE: X), an integrated steel producer, where she managed the company’s $4 billion Consumer Solutions business unit from 2014 to November 2019. Prior to United States Steel Corporation, Ms. Greenstein served as President, Supply Chain and Sustainability of UL, LLC (formerly Underwriters Laboratories) from 2012 to 2014 and various other executive roles at UL since 2001. Ms. Greenstein holds a Bachelor of Science in Business Administration, with a concentration in industrial distribution management, from the Gies College of Business at the University of Illinois, Urbana-Champaign. Ms. Greenstein earned her MBA from the University of Michigan Stephen M. Ross School of Business. From August 2018 to January 2021, she served on the board of directors of Briggs & Stratton Corporation, where she served on its Finance and Nominating and Governance Committees. Ms. Greenstein brings to the Board her executive leadership skills, including experience as a public company chief executive officer, as well as cybersecurity expertise and her knowledge of public company matters from her service on other public company boards. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| Michael S. Hanley Retired Global Automotive Leader, Ernst & Young LLP | | | Age: 68 Director Since: 2016 Other Current Public Company Directorships: None BorgWarner Committees: ■ Audit (Chair) ■ Executive | Principal Occupation and Directorships Mr. Hanley retired as a Partner from Ernst & Young LLP in 2014. He served as the firm’s Global Automotive Leader from 2003 to 2014 and was Senior Advisory Partner or Global Coordinating Partner for many automotive clients during his 24 years as a Partner. Mr. Hanley holds a Bachelor of Business Administration in accounting from the University of Toledo and is a Certified Public Accountant (Retired). Previously, he served on the board of directors of Shiloh Industries, Inc. from 2014 until the sale of the company in 2020 to private investors. Mr. Hanley brings to the Board his extensive knowledge of accounting and his financial expertise in the automotive industry including experience in assurance and industry advisory services and global automotive industry strategy and initiatives, as well as his knowledge of public company matters from his service on other public company boards. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Information on Nominees for Directors
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Information on Nominees for Directors
| Frédéric B. Lissalde President and Chief Executive Officer, BorgWarner Inc. | | | Age: 56 Director Since: 2018 Other Current Public Company Directorships: Autoliv, Inc. BorgWarner Committees: ■ Executive | Principal Occupation and Directorships Mr. Lissalde has served as the President and Chief Executive Officer of the Company since August 2018. He was Executive Vice President and Chief Operating Officer of the Company from January 2018 to July 2018. From May 2013 to December 2017, he was Vice President of the Company and President and General Manager of BorgWarner Turbo Systems LLC. Prior to joining BorgWarner, Mr. Lissalde held positions at Valeo and ZF in the areas of program management, engineering, operations, and sales in the United Kingdom, Japan, and France. Mr. Lissalde holds a Masters of Engineering from ENSAM – Ecole Nationale Supérieure des Arts et Métiers – Paris, and an MBA from HEC Paris. He is also a graduate of executive courses at INSEAD – Institut Européen d’Administration des Affaires, Harvard, and MIT. Mr. Lissalde has served on the board of directors of Autoliv, Inc. (NYSE: ALV) since December 2020. Previously, he served on the board of directors of CLEPA (European Automotive Suppliers’ Association), based in Brussels, Belgium. Mr. Lissalde brings to the Board his experience and expertise in setting and executing strategic direction; driving business performance, growth, and culture; and integrating purchased companies around the world. In addition, he brings an intimate knowledge of the Company’s operations, its business, and industry. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| Shaun E. McAlmont President and Chief Executive Officer, Ninjio, LLC | | | Age: 58 Director Since: 2020 Other Current Public Company Directorships: Lee Enterprises, Inc. BorgWarner Committees: ■ Compensation ■ Corporate Governance | Principal Occupation and Directorships Dr. McAlmont has served as President and Chief Executive Officer of Ninjio, LLC (“Ninjio”), a cybersecurity training company which provides enterprise level awareness training, since January 2022. Prior to Ninjio, he served as the President of Career Learning for Stride, Inc. (NYSE: LRN), a provider of online consumer and corporate talent development programs, from 2018 to October 2021. Prior to joining Stride, he worked as President and CEO of Neumont College of Computer Science (“Neumont”), a for-profit career college, from 2015 to 2017, and previously as CEO and Director of Lincoln Educational Services (NASDAQ: LINC), which includes the Lincoln Tech automotive training institutes. His corporate training and consumer skill development experience are balanced by early career roles in traditional education operations at Brigham Young and Stanford Universities. Dr. McAlmont holds a Bachelor of Science from Brigham Young University (“BYU”), a Master of Arts in education from the University of San Francisco, and a Doctorate in education from the University of Pennsylvania. At the University of Pennsylvania, he graduated with a rare dual distinction both for his dissertation and for the oral defense of his research on student advising and career development. In addition to his academic and career achievements, Dr. McAlmont is a former NCAA and international athlete. Dr. McAlmont currently serves on the board of Lee Enterprises, Inc. (NASDAQ: LEE). Dr. McAlmont also serves as a member of the BYU Marriott School of Management National Advisory Council. Dr. McAlmont brings to the Board his executive leadership experience, including proficiency as a public company chief executive officer, as well as expertise in corporate cybersecurity awareness training, human capital management, workforce training and development, and adult education. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Information on Nominees for Directors
| Deborah D. McWhinney Retired Chief Executive Officer of Global Enterprise Payments, Citigroup Inc. | | | Age: 68 Director Since: 2018 Other Current Public Company Directorships: Franklin Templeton ETF Trust, S&P Global Inc. BorgWarner Committees: ■ Audit ■ Compensation (Chair) | Principal Occupation and Directorships Ms. McWhinney retired from Citigroup Inc. (NYSE: C), one of the largest financial services firms, in 2014 as Chief Executive Officer of Global Enterprise Payments. She joined Citigroup in 2009 as President of Wealth Management & Personal Banking. Ms. McWhinney also co-chaired Citi Women, an internal program to improve training and sponsorship for women across the group and to develop high potential female executives. Prior to Citigroup, she spent six years as President of Charles Schwab Corp.’s (NYSE: SCHW) division that serves financial advisors and was a member of the Schwab Bank board of directors. Ms. McWhinney holds a Bachelor of Arts in Communications from the University of Montana. She currently serves on the boards of Franklin Templeton ETF Trust and S&P Global Inc. (NYSE: SPGI). In addition to her public board service, Ms. McWhinney serves as a director of LegalShield and of Fortress Net Lease REIT. She is also on the Board of Trustees for the California Institute for Technology and the Institute for Defense Analyses. Previously, she served on the boards of Fluor Corp (NYSE: FLR), Focus Financial Partners, Inc. (NYSE: FOCS), and Lloyds Banking Group PLC (NYSE: LLOY), where she was Chair of the Cyber and IT Resilience Committee, and Fresenius Medical Company (NYSE: FMS). Ms. McWhinney brings to the Board her executive leadership skills in developing and implementing global technology services for some of the world’s largest corporations and governments, including her financial expertise, knowledge of cybersecurity matters, and broad understanding of corporate governance matters. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| Alexis P. Michas Non-Executive Chair of the Board, BorgWarner Inc. Managing Partner, Juniper Investment Company, LLC | | | Age: 66 Director Since: 1993 Other Current Public Company Directorships: AstroNova, Inc., Revvity, Inc. BorgWarner Committees: ■ Executive (Chair) | Principal Occupation and Directorships Mr. Michas is the founder and has been Managing Partner of Juniper Investment Company, LLC, an investment management firm based in New York, since 2008. Mr. Michas is also a Principal of Aetolian Investors, LLC, a registered Commodity Pool Operator. Mr. Michas holds a Bachelor of Arts from Harvard College and an MBA from Harvard Business School. Mr. Michas has been the Non-Executive Chairman of Revvity, Inc. (NYSE: RVTY) (formerly PerkinElmer Inc.) since December 2019, has been a director of AstroNova, Inc. (NASDAQ: ALOT) since June 2022, and is a director of Theragenics Corporation, a privately held company. Previously, he also served as the Non-Executive Chairman of the board of directors of Lincoln Educational Services Corporation (NASDAQ: LINC) until 2015 and as a director of Allied Motion Technologies, Inc. (NASDAQ: AMOT) until July 2017. Mr. Michas brings to the Board his many years of private equity experience across a wide range of industries, and a successful record of managing investments in public companies. Mr. Michas also brings extensive transactional expertise, including mergers and acquisitions, IPOs, debt and equity offerings, and bank financing which provides valuable insight on trends in global debt and equity markets, and the impact of such trends on the capital structure of the Company. The Board also benefits from his corporate governance knowledge of public company matters from his service on other public company boards, including his service as Non-Executive Chair, lead director, and a member of the compensation, governance, audit, finance, and executive committees of such companies. Mr. Michas’ thorough knowledge of the Company and his thorough understanding of the role of boards of directors qualify him to serve on our Board and as our Non-Executive Chair. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Information on Nominees for Directors
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Information on Nominees for Directors
| Sailaja K. Shankar Senior Vice President, Engineering of the Security Business Group, Cisco Systems, Inc. | | | Age: 57 Director Since: 2022 Other Current Public Company Directorships: None BorgWarner Committees: ■ Audit ■ Compensation | Principal Occupation and Directorships Ms. Shankar has served as the Senior Vice President, Engineering of the Security Business Group (SBG) of Cisco Systems, Inc. (NASDAQ: CSCO), a leading global manufacturer of networking hardware, software, telecommunications equipment, and other high-technology services and products, since January 2023. In this role, she is responsible for engineering – including strategy execution and architecture. From September 2021 to January 2023, Ms. Shankar was the Senior Vice President and General Manager of SBG. From June 2021 to September 2021, Ms. Shankar was the Senior Vice President and General Manager of the Cloud and Network Security business unit within SBG. Prior to joining Cisco, Ms. Shankar served as Senior Vice President of Engineering, Enterprise of McAfee Corp. (NASDAQ: MCFE), a computer security software company, where she was responsible for its security and threat defense solutions across endpoint, extended detection and response, data center security, and cloud native application processes, from February 2019 to June 2021, and General Manager of Mobile and ISP Solutions Business Unit from February 2016 to February 2019. Ms. Shankar holds a Bachelor of Science in Chemistry from Maris Stella College, and a Bachelor and Master of Arts from Andhra University in Mass Communications/Journalism and English Literature, respectively. In 2022, Ms. Shankar received accolades for her executive leadership within the IT industry and beyond and was named among 10 Women Making a Difference in Cybersecurity by CRN, a top technology news and information source for solution providers, IT channel partners, and value-added resellers. Ms. Shankar brings to the Board her deep experience innovating technological solutions, driving strategic change in global enterprises, and portfolio building experience, including cybersecurity expertise. Ms. Shankar also prides herself on being a champion of diversity, mentoring the next generation of technical women, and is a global advisor with “How Women Lead.” Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| Hau N. Thai-Tang Retired Chief Industrial Platform Officer, Ford Motor Company | | | Age: 57 Director Since: 2023 Other Current Public Company Directorships: None BorgWarner Committees: ■ Audit ■ Corporate Governance | Principal Occupation and Directorships Mr. Thai-Tang retired from Ford Motor Company (NYSE: F), a global automotive manufacturer, in 2022 as Chief Industrial Platform Officer. In this position, Mr. Thai-Tang led global research and advanced engineering, product development, design, manufacturing engineering, purchasing, and supply chain teams to deliver an industry leading product portfolio of digitally connected ICE and BEV vehicles. Mr. Thai-Tang joined Ford in 1988 and held positions of increasingly significant responsibility. Previous positions included Chief Product Platform and Operations Officer from October 2020 to October 2021; Chief Product Development and Purchasing Officer from July 2017 to October 2020; and Group Vice President of Global Purchasing from August 2013 to July 2017. Mr. Thai-Tang holds a Bachelor of Science in Mechanical Engineering from Carnegie Mellon University and a Master of Business Administration from the University of Michigan Stephen M. Ross School of Business. He currently serves on the board of Bose Corporation, a private American manufacturing company of audio equipment. Mr. Thai-Tang brings to the Board extensive automotive industry experience, including his 34-year career at Ford and excellent forward-looking perspective on the industry, particularly the transformation around electrification. In addition to his engineering, product planning, product development, cybersecurity, and technology expertise, Mr. Thai-Tang has a strong operational background, including supply chain and procurement. Mr. Thai-Tang led Ford’s product development and purchasing organizations during its launches of the Mustang-E, F-150 Lightning, Bronco, Maverick, and Puma. Key Attributes, Skills, and Experience |
Information on Nominees for Directors
| | Notable Auto Industry Experience | | Experience as Chair/CEO of Multi-National Business | | Background Contributes to Desired Diversity | | Legal/Governance Experience | | | Non-U.S. Origin | | Product or Clean Technology/ Electronics Expertise | | Non-Automotive Technology Expertise | | Manufacturing Experience | | | Meets SEC Definition of “Audit Committee Financial Expert” | | Environmental/Sustainability Experience | | Cybersecurity/Risk Management Expertise | | |
Information on Nominees for Directors
Director Nominee Requirements The Corporate Governance Committee seeks to establish and maintain a board that is strong in its collective knowledge and that possesses a diversity of skills, background, and experience in areas that are relevant to guide the Company in the execution of its business strategy, recognizing that these areas may change over time. In considering whether to recommend to the full Board any candidate for inclusion in our Board’s slate of recommended director nominees, the Corporate Governance Committee will consider, among other things, the extent to which candidates possess the following factors:
Information on Nominees for Directors
| ■ | The highest personal and professional ethics, integrity, and values |
Information on Nominees for Directors
| ■ | Demonstrated business acumen, experience, and ability to use sound judgment to contribute to effective oversight of the business and financial affairs of the Company |
Information on Nominees for Directors
| ■ | Ability to evaluate strategic options and risks, form independent opinions, and state those opinions in a constructive manner |
Information on Nominees for Directors
| ■ | Active, objective, and constructive participation at meetings of our Board and its committees |
Information on Nominees for Directors
| ■ | Flexibility in approaching problems |
Information on Nominees for Directors
| ■ | Open-mindedness on policy issues and areas of activity affecting overall interests of the Company and its stockholders |
Information on Nominees for Directors
| ■ | Stature to represent the Company before the public, stockholders, and various others who affect the Company |
Information on Nominees for Directors
| ■ | Involvement only in activities and interests that do not create a conflict with the director’s responsibilities to the Company and its stockholders |
Information on Nominees for Directors
| ■ | Willingness to objectively appraise management performance in the interest of the stockholders |
Information on Nominees for Directors
| ■ | Interest and availability of time to be involved with the Company and its employees over a sustained period |
Information on Nominees for Directors
| ■ | Ability to work well with others, with deep and wide perspective in dealing with people and situations, and respect for the views of others |
Information on Nominees for Directors
| ■ | A reasoned and balanced commitment to the social responsibilities of the Company |
Information on Nominees for Directors
| ■ | Contribution to our desired diversity and balance of our Board |
Information on Nominees for Directors
| ■ | Willingness of independent directors to limit public company board service to four or fewer boards (any exceptions would require Corporate Governance Committee approval) |
Information on Nominees for Directors
| ■ | Willingness to tender, promptly following the annual meeting at which they are elected or re-elected as director, an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which they face re - election, and (ii) our Board’s acceptance of such resignation |
Information on Nominees for Directors
| ■ | Willingness to provide all information, including completion of a questionnaire, required by the Company’s Amended and Restated By-laws (“By-laws”) |
Information on Nominees for Directors
Nomination Process and Evaluation The Corporate Governance Committee accepts candidate recommendations and referrals from a variety of sources, including stockholders, directors, management, search firms, and other sources. An overview of the process undertaken by the Corporate Governance Committee when evaluating candidates includes: ■Use of a skills matrix to identify specific attributes desired to be represented on our Board ■An assessment of the candidates’ freedom from conflicts of interest and independence ■Consideration of the narrowed pool of candidates’ qualifications, expertise, and cognitive diversity ■Qualified candidates are discussed and interviewed by the Corporate Governance Committee, Non-Executive Chair, and CEO ■The Corporate Governance Committee recommends nominees to the full Board ■The full Board selects nominees ■Stockholders vote on nominees at annual stockholders’ meetings ■The Corporate Governance Committee evaluates the full Board, its committees, and individual directors annually
Information on Nominees for Directors
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Information on Nominees for Directors
Board Refreshment We routinely assess the Board’s composition to ensure we have the right mix of attributes, experiences, perspectives, qualifications, and skills to maximize our Board’s potential. We believe the Company, our employees, our stockholders, and our other stakeholders benefit from continuity of longer-tenured directors complemented by the fresh perspectives of newer directors. Over the last six years, our Board has undergone significant refreshment, resulting in a lower average tenure and broad diversity of backgrounds.
Highlights of the 2023 Executive Compensation Program
| Base Salary | | | ■ Base pay is the initial salary paid, excluding benefits, bonuses, and pay increases | ■ Reviewed annually, adjusted as appropriate to align with median-market levels (50th percentile of the Company’s peer group discussed on page 40) with actual salaries reasonably below or above the median considering scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual and business performance | | Annual Cash Incentive ■ The Management Incentive Plan (“MIP”) is our cash-based, annual incentive plan for executives ■ Reviewed annually, adjusted as appropriate to align with median-market levels (50th percentile of the Company’s peer group) with annual cash incentive targets, expressed as a percentage of base salary, reasonably below or above the median considering scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual and business performance ■ Variable pay component focused on short-term annual objectives that demonstrate the strength of the business over the long term ■ The targets for 2023 for Adjusted Operating Margin and Free Cash Flow were set contemplating the successful spin-off of our former Fuel Systems and Aftermarket segments into a separate, publicly traded company, PHINIA | ■ 50% based on Adjusted Operating Margin, which measures the Company’s profitability relative to the sales it generates. For 2023, there was no payout for AOM below 9.0%, a 100% payout for AOM of 9.5%, and maximum payout for AOM that equaled or exceeded 10.0% ■ 50% based on Free Cash Flow, which is an important measure of how much operating cash flow the Company generates net of capital expenditures that allows the Company to pursue opportunities that enhance stockholder value. For 2023, there was no payout for FCF below $340 million, a 100% payout for FCF of $440 million, and maximum payout for FCF that equaled or exceeded $540 million ■ The Compensation Committee may modify the annual payout upwards or downwards up to 10% of MIP Target awards for non-financial performance. Annual payout remains capped at 200% of target | | Long-Term Equity Incentive ■ Reviewed annually, adjusted as appropriate to align with median-market levels (50th percentile of the Company’s peer group) with target long-term equity incentives reasonably below or above the median considering scope of responsibilities and experience, development opportunity, changes in responsibilities, and individual and business performance ■ One third of the total value of target long-term incentive opportunity in Restricted Shares ■ 50% vesting after two years and the remainder vesting after three years ■ Two thirds of the total value of target long-term incentive opportunity in Performance Shares ■ 25% based on eProducts Revenue Mix (as defined on page 45) measured at the end of a three-year performance period ■ 25% based on eProducts Revenue (as defined on page 45) measured at the end of a three-year performance period ■ 25% based on Cumulative Free Cash Flow (as defined on page 45) measured over a three-year performance period ■ 25% based on Relative TSR (as defined on page 45) measured over a three-year performance period | ■ For the 2023-2025 performance period: ■ There is no payout for an eProducts Revenue Mix below 18.0%, a 100% payout for an eProducts Revenue Mix of 24.0%, and maximum payout for an eProducts Revenue Mix that equals or exceeds 30.0% ■ There is no payout for eProducts Revenue below $3.2 billion, a 100% payout for eProducts Revenue of $4.3 billion, and maximum payout for eProducts Revenue that equals or exceeds $5.4 billion ■ There is no payout for Cumulative Free Cash Flow below $1.5 billion, 100% payout for Cumulative Free Cash Flow of $1.8 billion, and maximum payout for Cumulative Free Cash Flow that equals or exceeds $2.1 billion ■ There is no payout for Relative TSR performance below the 25th percentile, 100% payout for Relative TSR Performance at median, and maximum payout for Relative TSR performance at or above the 75th percentile |
2023 CEO Target Direct Compensation
| ■ Base Salary ■ Comprised 10% of total compensation ■ Remaining 90% of compensation was at-risk ■ Annual Incentive ■ Drives achievement of key business results ■ Incentivizes delivery of key short-term business objectives ■ Based on achievement of AOM% and FCF, demonstrating strength of business ■ Includes a performance modifier that allows the Compensation Committee to modify the annual payout upwards or downwards up to 10% of MIP Target awards. Annual payout remains capped at 200% of target o For 2023, the Compensation Committee did not apply the performance modifier | ■ Long-Term Incentive ■ Aligns management interests with our stockholders’ ■ Supports talent retention ■ Significant portion was performance based ■ Two Thirds of Total Value of Target Long-Term Incentive Opportunity Performance shares divided among eProducts Revenue Mix (25%), eProducts Revenue (25%), Cumulative Free Cash Flow (25%), and Relative Total Stockholder Return (25%), vesting at the end of a three-year performance period ■ One Third of Total Value of Target Long-Term Incentive Opportunity Restricted shares vest 50% after two years and the remainder vest after three years | |
2023 CEO Target Direct Compensation
| 31 | Introduction | 47 | Other Executive Compensation Practices, Policies, and Guidelines | | 31 | Our Named Executive Officers | 47 | Stock Ownership Guidelines | | 34 | Executive Summary | 47 | Clawback Policy | | 34 | 2023 Performance Highlights | 47 | Short Sales, Pledging, and Hedging | | 35 | 2023 Key Compensation Decisions | 47 | Executive Benefits and Perquisites | | 36 | Stockholder Engagement | 48 | Employment Agreement with CEO | | 36 | Leading Compensation Governance Practices | 49 | Change of Control Agreements and Transitional Income Plan | | 36 | PHINIA Disposition | 49 | Compensation Risk Management | | 37 | What Guides Our Program | 49 | Tax Deductibility of Compensation | | 37 | Compensation Philosophy and Objectives | 50 | Compensation Committee Report | | 38 | Principal Elements of Compensation | 50 | Compensation Committee Interlocks and Insider Participation | | 39 | The Decision-Making Process | 51 | Executive Compensation Tables | | 39 | The Role of the Compensation Committee | 51 | Fiscal Year 2023 Summary Compensation Table | | 39 | The Role of Management | 52 | All Other Compensation Table | | 39 | The Role of the Independent Compensation Consultant | 53 | Grants of Plan-Based Awards in 2023 | | 40 | The Role of Peer Groups | 54 | Outstanding Equity Awards at Fiscal 2023 Year End | | 41 | 2023 Executive Compensation Program in Detail | 55 | Option Exercises and Stock Vested in 2023 | | 41 | Base Salary | 55 | Pension Benefits | | 41 | Management Incentive Plan | 56 | Non-Qualified Deferred Compensation | | 41 | 2023 MIP Target Award Opportunities | 57 | Potential Payments Upon Termination or Change of Control | | 41 | 2023 MIP Performance Goals and Results | 57 | Change of Control Employment Agreements | | 43 | 2023 MIP Performance Modifier | 58 | Terminations Not Related to a Change of Control | | 43 | 2023 MIP Payouts | 58 | CEO Pay Ratio | | 44 | Long-Term Equity Incentives | 59 | Pay Versus Performance | | 44 | 2021-2023 Performance Share Awards Earned | 62 | Director Compensation | | 45 | 2023-2025 Performance Share Awards | | | | 46 | Restricted Stock | | | | 46 | Treatment of Equity in the Event of a Change of Control | | |
2023 Key Compensation Decisions
| ■ | Annual Incentives: From a financial performance perspective, the Company delivered AOM of 9.63%, which was above the target that we set under our MIP for 2023. This resulted in a payout of 126% for the AOM portion of the MIP award. For purposes of the MIP calculation, which excludes the impact of the SSE and Eldor acquisitions, the Company also generated $581 million of Free Cash Flow. As a result of this performance, there was a 200% payout for the FCF portion of the award. With a 50% weighting for each of the designated metrics, the combined payout was 163% under the 2023 MIP. |
2023 Key Compensation Decisions
| ■ | Long-Term Equity Incentives: Long-term equity incentives that we granted in 2023 consisted of performance shares (two thirds of the total value of target long-term incentive opportunity) and restricted stock (one third of the total value of target long-term incentive opportunity). For the 2023-2025 performance cycle, the mix of performance metrics consisted of the following: |
2023 Key Compensation Decisions
The Compensation Committee believes this mix: (i) places appropriate emphasis on delivering organic and inorganic growth; (ii) drives the Company to advance its position as a leader in eProducts; and (iii) creates an incentive for Free Cash Flow generation even while investing eProducts, all of which contributes to long-term growth and stockholder value creation. We provide details about these performance metrics on pages 44 and 45. For the 2021-2023 performance cycle, participants could earn performance shares based on the achievement of three measures: Relative TSR (25%), eProducts Revenue Mix (50%), and Cumulative Free Cash Flow (25%) (“Cumulative FCF”). Results for the 2021-2023 performance cycle were as follows:
2023 Key Compensation Decisions
| ■ | Relative TSR Payout for 2021-2023: The Company’s Relative TSR was at the 80th percentile of the performance peer group, which resulted in a maximum 200% payout of TSR performance shares. |
2023 Key Compensation Decisions
| ■ | eProducts Revenue Mix Payout for 2021-2023: The Company’s eProducts Revenue Mix in 2023 was 14.6%, compared to a target of 12% and a maximum of 16%. The outperformance resulted in a 2021-2023 eProducts Revenue Mix performance share payout at 165% of target. |
2023 Key Compensation Decisions
| ■ | Cumulative FCF Payout for 2021-2023: The Company’s Cumulative FCF was $2.016 billion, which was between the target level of $2 billion and the maximum of $2.3 billion and resulted in a 2021-2023 Cumulative FCF performance share payout at 105% of target. |
PHINIA Disposition
PHINIA Disposition In July 2023, we completed the previously announced spin-off of our Fuel Systems and Aftermarket segments into a separate, publicly traded company, PHINIA Inc. In connection with the spin-off, our Compensation Committee approved an adjustment to the outstanding equity awards under our 2023 Stock Incentive Plan and our 2018 Stock Incentive Plan to prevent dilution of the benefits intended under the incentive plans as a result of the spin-off. The adjustment factor was calculated consistent with the provisions of the plans and based on typical market practice for similar transactions. The adjustment factor, which was based on the average trading price of our stock relative to PHINIA’s following the spin-off, increased the number of shares subject to the awards by 13%. We reflect the effect of these adjustments on the equity awards of our NEOs in the compensation tables following this Compensation Discussion and Analysis. We also applied the adjustment factor to the share limits under the 2023 Stock Incentive Plan. We did not make any changes to the performance metrics or targets for our outstanding performance share awards as a result of the spin-off because we had set those metrics and targets contemplating the eventual transactions that resulted in the spin-off. We set the targets relating to the MIP contemplating the successful completion of our spin-off of PHINIA, and the targets were consistent with the guidance that we communicated at our Investor Day in June 2023. We did not make any other payments to the NEOs or any other changes to their compensation or employment arrangements as a result of the spin-off.
Compensation Philosophy and Objectives
| ■ | Align the interests of our executives with the long-term interests of the business, our stockholders, and employees |
Compensation Philosophy and Objectives
| ■ | Motivate exceptional performance through metrics that support our long-term strategy of growth and create stockholder value |
Principal Elements of Compensation
| Element | How It’s Paid | Key Features | | Base Salary | Cash (Fixed) | Provides a competitive fixed rate of pay relative to similar positions in the market and enables the Company to attract and retain critical executive talent ■ Based on job scope, level of responsibilities, individual performance, experience, and market levels of pay | | Annual Cash Incentive | Cash (Variable) | Focuses executives on achieving annual financial goals that drive long-term stockholder value ■ 50% based on AOM, which measures the Company’s profitability relative to the sales it generates ■ 50% based on FCF, which measures how much operating cash flow the Company generates net of capital expenditures to allow the Company to pursue opportunities that enhance stockholder value ■ The MIP allows the Compensation Committee to apply a performance modifier of up to 10% of the target MIP award to modify the MIP payout that would otherwise result (upwards or downwards) based on the achievement of Company-wide strategic goals ■ For 2023, the Compensation Committee did not apply the performance modifier | | Long-Term Equity Incentive | Equity (Variable) | Provides incentives for executives to execute on longer-term financial goals that drive stockholder value creation and support the Company’s retention strategy ■ We grant two thirds of the total value of the target long-term incentive opportunity using Performance Shares ■ 25% based on eProducts Revenue Mix at the end of a three-year performance period ■ 25% based on eProducts Revenue at the end of a three-year performance period ■ 25% based on Cumulative FCF over a three-year performance period ■ 25% based on Relative TSR measured over a three-year performance period ■ We grant one third of the total value using Restricted Shares with 50% vesting on the second anniversary of the grant date and the remainder of the shares vesting on the third anniversary of the grant date, provided that the recipient is still employed by the Company |
The Decision-Making Process
The Decision-Making Process The Role of the Compensation Committee The Compensation Committee oversees the executive compensation program for our executives, including our NEOs, and is comprised of independent, non-employee members of the Board. The Compensation Committee works closely with an independent consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. The Compensation Committee’s charter, which can be found at www.borgwarner.com/investors/corporate-governance, specifies details of the Compensation Committee’s authority and responsibilities. Our Compensation Committee strategically reviews our executive officers’ compensation at least annually, in addition to regular discussions at Compensation Committee meetings held throughout the year. Reflecting our intent to pay for performance, the Compensation Committee evaluates our compensation philosophy and objectives to ensure they align with our business strategies, competitive realities, and our Board’s determination of what is in the best interests of stockholders. The Compensation Committee also considers feedback from our stockholders. After consideration of all these data points, the Compensation Committee determines whether the compensation program: (i) meets these objectives, (ii) provides adequate incentives and motivation to our executive officers, and (iii) appropriately compensates our executive officers relative to comparable officers at other companies with which we compete for executive talent. For compensation decisions relating to executive officers other than our CEO, our Compensation Committee considers recommendations from our CEO. The Role of Management The CEO submits his recommendations for the compensation of the Strategy Board, which includes the NEOs and other executives, to the Compensation Committee for its approval. The CEO does not participate in the deliberations of the Compensation Committee regarding his own compensation. Independent members of the Board make all final determinations regarding CEO compensation. This process: (i) ensures that the Compensation Committee routinely receives and considers management input, (ii) provides transparency, and (iii) maintains committee oversight. The Role of the Independent Compensation Consultant Our Compensation Committee retained Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its independent compensation consultant. The Compensation Committee annually reviews its relationship with Pearl Meyer to ensure continued independence. The review process includes consideration of the factors impacting independence set forth in New York Stock Exchange rules. Pearl Meyer reports directly to the Compensation Committee and provides benchmarking data to the Corporate Governance Committee with respect to Board compensation. Pearl Meyer regularly participates in Compensation Committee meetings and, in collaboration with the Compensation Committee, aids in determining the appropriate compensation program, design, levels, and peer groups for the Company. The Role of Peer Groups Compensation Peer Group: The Compensation Committee regularly assesses the market competitiveness of the Company’s executive compensation program based on data from a comparator peer group (called “the compensation peer group”). The Compensation Committee reviews and determines the compensation peer group’s composition on an annual basis, considering input from its independent compensation consultant and management. In evaluating and setting compensation, our Compensation Committee considers several factors including individual and business performance, internal equity, retention, the degree of alignment between the executive’s job duties and the benchmarked job description, as well as an assessment of market practices. The benchmarking exercise is a useful tool that allows the Company to regularly review the market in which we compete for talent and provides credibility for our compensation program with our employees and stockholders. In determining the 2023 compensation peer group, the Compensation Committee removed Navistar International Corporation from the compensation peer group following its acquisition by another company in 2021. The Compensation Committee did not make any other changes from the 2022 compensation peer group. Accordingly, the following companies comprised the 2023 compensation peer group:
The Decision-Making Process
Performance Peer Group: For performance share grants in 2023, the Compensation Committee continued to use the Automotive Parts & Supplier index performance peer group for purposes of measuring relative TSR. This performance peer group is more specific to the Company’s current industry. The Compensation Committee removed Horizon Global Corporation, Meritor, Inc., and Tenneco Inc. from the performance peer group for 2023 after they were acquired by other companies. The following companies comprise the 2023 performance peer group:
Management Incentive Plan
Management Incentive Plan The MIP is our cash-based, annual incentive plan for executives and is intended to drive executive behavior to accomplish key business strategies. The MIP plays a critical role in our continued efforts to be an employer of choice in the automotive industry as we accelerate our penetration in EV propulsion and continue to transform the Company. For this reason, management, with the support of the Compensation Committee, determined that all members of the senior leadership team, including the NEOs, should be on the same compensation plan, which is directly tied to Company performance. The Compensation Committee will continue to refine the MIP to be consistent with the Company’s strategic priorities and ensure that senior management operates as one team with the same goals and objectives. 2023 MIP Target Award Opportunities We express target bonus opportunities as a percentage of base salary and establish them based on the NEO’s level of responsibility and ability to impact the Company’s overall results. The Compensation Committee also considers market data in setting target award amounts. The 2023 target bonus opportunity for our NEOs ranged from 120% to 160% of base salary in accordance with market median total cash compensation. NEOs receive 50% of the target opportunity for achieving threshold performance and 200% of the target opportunity for achieving maximum performance or above, with results in between these levels and target linearly interpolated. 2023 MIP Performance Goals and Results Each year, the Compensation Committee establishes threshold, target, and maximum performance goals for the Company at the beginning of the fiscal year. To establish these goals, the Compensation Committee considers the broader economic environment, industry conditions, and the Company’s annual budget, current guidance and past performance with respect to operating earnings and cash flow generation. The Compensation Committee based performance under the 2023 MIP on the achievement of two pre-established financial performance metrics: AOM and FCF. The Compensation Committee selected these metrics because delivering strong operating income and free cash flow generation are critical to our long-term success. AOM and FCF were weighted equally and calculated and defined as follows:
Management Incentive Plan
| AOM% | = | Adjusted Operating Income | ÷ | Net Sales | | AOM% | | Adjusted Operating Margin is defined as (a) U.S. GAAP Operating Income adjusted to eliminate the impact of restructuring expense; merger, acquisition, and disposition expense; intangible asset amortization expense; other net expenses, discontinued operations; and other gains and losses not reflective of the Company’s ongoing operations, divided by (b) externally reported sales. For MIP purposes, the AOM% excludes the impact of any acquisitions that closed during the calendar year, which would not have been contemplated in the Company’s annual budget. | | |
Management Incentive Plan
The Compensation Committee selected AOM because it: ■ Is one of the Company’s primary internal performance metrics, which is measured and reported monthly by every manufacturing location globally; ■ Supports the Company’s longer-term goal of sustaining its historically strong margin profile; ■ Has a high degree of correlation to stock price valuation; and ■ Is strongly connected to the determination of economic value.
Management Incentive Plan
| FCF | = | Operating Cash Flow | - | Capital Expenditures, including Tooling Outlays | | FCF | | Free Cash Flow is defined as (a) the net cash provided by operating activities minus (b) capital expenditures, including tooling outlays, and (c) adjusted for operating cash inflows or outflows not reflective of the Company’s ongoing operations. For MIP purposes, FCF excludes the impact of any acquisitions that closed during the calendar year, which would not have been contemplated in the Company’s annual budget. | | |
Management Incentive Plan
The Compensation Committee selected FCF because it places emphasis on driving strong cash flow performance, which supports the Company’s ability to invest in future growth plans and to return value directly to stockholders. The Compensation Committee set the 2023 target performance levels for AOM and FCF based on the Company’s budget after contemplating the PHINIA spin-off, which was in line with our guidance range that we communicated at our Investor Day in June 2023 for these metrics. The target performance levels for AOM and FCF were set lower than those for 2022 as a result of reduction in AOM and FCF anticipated from the PHINIA spin-off. The Compensation Committee set the maximum performance levels well above the high end of those ranges to require significant outperformance to achieve a maximum payout. The Compensation Committee also set threshold performance levels to allow a payout for performance below the target that was consistent with the outperformance required for a maximum payout. The 2023 AOM and FCF performance targets and actual results were as follows:
Management Incentive Plan
| | Performance Level | | | | | | Threshold | Target | Maximum | | | | (50% | (100% | (200% | | | Performance Metric | payout) | payout) | payout) | Actual Results | | AOM | 9.00% | 9.50% | 10.00% | 9.63% | | FCF | $340 million | $440 million | $540 million | $581 million |
Management Incentive Plan
For 2023, we delivered AOM of 9.63%, which was above target, and strong levels of Free Cash Flow at $581 million, which was above the maximum. As a result of this performance, the AOM portion of the award resulted in a payout of 126%. The FCF portion of the award resulted in a 200% payout. With a 50% weighting for each of the metrics, the Company’s performance resulted in a combined payout of 163% under the 2023 MIP as illustrated below. A schedule reconciling AOM to Operating Income and Margin and FCF to Net Cash Provided by Operating Activities is available in the Appendix.
Management Incentive Plan
| 42 | | |
Management Incentive Plan
2023 MIP Performance Modifier The Compensation Committee carefully considers each element of our executive compensation program to ensure that those elements promote execution of our business strategy. To further BorgWarner’s mission to execute on our accelerated electrification strategy and continue to deliver innovative and sustainable mobility solutions for the vehicle market, the Compensation Committee added a performance modifier to the MIP plan starting in 2022. With the Performance Modifier, the Committee may apply up to plus or minus 10% of the target MIP award to modify the MIP payout that would otherwise result for all MIP participants, based on its overall assessment of Company financial performance results and the achievement of Company-wide strategic goals. However, the payout remains capped at 200% of target (i.e., if financial performance is at maximum performance level, then the modifier cannot increase the award). The Compensation Committee may apply the modifier based on progress against quantitative or qualitative targets in the following areas:
Management Incentive Plan
| ■ | Environmental, Social, and Governance initiatives including Diversity, Equity, and Inclusion |
Management Incentive Plan
| ■ | Acquisitions and dispositions, including integration |
Management Incentive Plan
| ■ | Succession planning and talent development |
Management Incentive Plan
| ■ | Leadership during unusual and challenging circumstances |
Management Incentive Plan
| ■ | Strategic change management |
Management Incentive Plan
The compensation committee was pleased with both the financial and non-financial performance of the Company and was satisfied that the MIP Payout adequately reflected the achievements of the management team. As a result, the performance modifier was not used in 2023. 2023 MIP Payouts For our President and CEO, Frédéric Lissalde, this performance provided the following bonus payout:
Management Incentive Plan
| MIP Result as a % of Target Bonus | = | AOM% 126% Payout as % of Target x 50% | | + | FCF 200% Payout as % of Target x 50% | | = | 163% | | Bonus Payout | = | Base Salary of $1,400,000 | + | Target Bonus of 160% of Base Salary | + | MIP Result of 163% of Target Bonus | = | $3,651,200 |
Management Incentive Plan
| | | Target Bonus as a | | | | | | Percentage of | MIP Payout | | | NEO | Base Salary | Base Salary | as % of Target | Bonus Payout | | Frédéric B. Lissalde | $1,400,000 | 160% | 163% | $3,651,200 | | Kevin A. Nowlan | $850,000 | 120% | 163% | $1,662,600 | | Joseph F. Fadool | $875,000 | 120% | 163% | $1,711,500 | | Stefan Demmerle | $820,000 | 120% | 163% | $1,603,920 | | Tonit M. Calaway | $700,000 | 120% | 163% | $1,369,200 |
Long-Term Equity Incentives
Long-Term Equity Incentives We believe that long-term performance is driven through an ownership culture that rewards our executives for maximizing long-term stockholder value. Our long-term incentive plans provide participants with appropriate incentives to acquire equity interests in our Company and align their interests with the interests of our stockholders. The Compensation Committee considers a mix of equity vehicles when granting long-term incentive awards. For 2023, we delivered two thirds of the total value of the target long-term incentive opportunity through performance shares and one third through restricted stock. We use a consistent methodology based on the market median for long-term incentives to determine the target dollar amount of the long-term incentive opportunity for each executive. We grant performance share awards and restricted stock in terms of a number of shares, and we convert the target dollar amount to a specific number of shares. We calculate this by using the average closing price of the Company’s common stock for all the trading days in the January immediately preceding the date of the grant. We detail below the shares that our NEOs earned, and we reflect them in the Option Exercises and Stock Vested table on page 55. 2021-2023 Performance Share Awards Earned For the 2021-2023 performance cycle, participants could earn performance shares based on the achievement of three measures: Relative TSR weighted at 25%, eProducts Revenue Mix weighted at 50%, and Cumulative FCF weighted at 25%. Results for the 2021-2023 performance cycle were as follows:
Long-Term Equity Incentives
| ■ | Relative TSR Payout for 2021-2023: The Company’s Relative TSR was at the 80th percentile of the performance peer group, which resulted in a maximum 200% payout of TSR performance shares. |
Long-Term Equity Incentives
| ■ | eProducts Revenue Mix Payout for 2021-2023: The Company’s eProducts Revenue Mix in 2023 was 14.6%, compared to a target of 12% and a maximum of 16%. The outperformance resulted in a 2021-2023 eProducts Revenue Mix performance share payout at 165% of target. |
Long-Term Equity Incentives
| ■ | Cumulative FCF Payout for 2021-2023: The Company’s Cumulative FCF was $2.016 billion, which was between the target level of $2 billion and the maximum of $2.3 billion and resulted in a 2021-2023 Cumulative FCF performance share payout at 105% of target. |
Long-Term Equity Incentives
| | Relative Total | | eProducts | | Cumulative | | | | Stockholder Return | | Revenue Mix | | Free Cash Flow | | | | Shares at | Shares | Shares at | Shares | Shares at | Shares | | NEO | Target | Earned | Target | Earned | Target | Earned | | Frédéric B. Lissalde | 50,478 | 100,956 | 100,943 | 166,556 | 50,478 | 53,002 | | Kevin A. Nowlan | 14,883 | 29,766 | 29,753 | 49,092 | 14,883 | 15,627 | | Joseph F. Fadool | 15,301 | 30,602 | 30,590 | 50,474 | 15,301 | 16,066 | | Stefan Demmerle | 13,481 | 26,962 | 26,962 | 44,487 | 13,481 | 14,155 | | Tonit M. Calaway | 9,300 | 18,600 | 18,600 | 30,690 | 9,300 | 9,765 |
Long-Term Equity Incentives
| 44 | | |
Long-Term Equity Incentives
2023-2025 Performance Share Awards The Compensation Committee designed the performance share awards for a select group of senior executives, including the NEOs, to provide a competitive payout at the end of a three-year performance period, with financial goals set at the beginning of each performance period. A new performance period begins each January 1 and ends three years later on December 31. For the 2023-2025 performance cycle, the Compensation Committee used the following mix of performance metrics for purposes of earning performance shares:
Long-Term Equity Incentives
| Performance Metric | Weighting | Definition | | eProducts Revenue Mix | 25% | Calculated as a percentage of the Company’s total Revenue in 2025 derived from eProducts*˄ | | eProducts Revenue | 25% | The Company’s total Revenue in 2025 derived from eProducts˄ | | Cumulative Free Cash Flow | 25% | Operating Cash Flow less Capital Expenditures for the three-year period from 2023-2025 | | Relative Total Stockholder Return (“TSR”) | 25% | Determined by ranking the Company’s three-year TSR among a peer group of companies (see “performance peer group” on page 40) |
Long-Term Equity Incentives
| * Total 2025 revenue derived from eProducts will be divided by total company 2025 Revenue to calculate the metric “eProducts as % of Total Revenue” for 2025. |
Long-Term Equity Incentives
| ˄ | eProducts revenue will be subject to the following adjustments: (1) For any acquisitions completed during calendar year 2025, the full amount of 2025 eProducts revenue from the acquired company will be included in the numerator and the full amount of 2025 revenue from the acquired company will be included in the denominator (on a proforma basis), as though the acquisition had been completed on January 1, 2025; and (2) for any dispositions completed during calendar year 2025, the full amount of 2025 revenue from the disposition will be excluded from the numerator (if applicable) and the denominator (on a proforma basis), as though the disposition had been completed on January 1, 2025. |
Long-Term Equity Incentives
The Compensation Committee established this mix for the 2023-2025 performance cycle to place continued emphasis on delivering organic and inorganic growth to drive higher eProducts revenue and generating FCF in our core business to help fund investments in eProducts, while maintaining a balanced focus on long-term growth and stockholder value creation. Actual award payouts for each performance metric for the 2023-2025 performance cycle can range between 0% and 200% of target based on performance results as follows:
Long-Term Equity Incentives
| eProducts Revenue Mix | | | | Performance Level | Achievement | Payout as a % of Target | | Maximum | ≥30.0% | 200% | | Target | 24.0% | 100% | | Threshold | 18.0% | 50% | | Below Threshold | <18.0% | 0% | | eProducts Revenue | | | | Performance Level | Achievement | Payout as a % of Target | | Maximum | ≥$5.4B | 200% | | Target | $4.3B | 100% | | Threshold | $3.2B | 50% | | Below Threshold | <$3.2B | 0% | | Cumulative FCF | | | | Performance Level | Achievement | Payout as a % of Target | | Maximum | ≥$2.1 billion | 200% | | Target | $1.8 billion | 100% | | Threshold | $1.5 billion | 50% | | Below Threshold | <1.5 billion | 0% | | Relative TSR | | | | Performance Level | Percentile Rank Achievement | Payout as a % of Target | | Maximum | ≥75th | 200% | | | 65th | 160% | | Target | 50th | 100% | | | 35th | 55% | | Threshold | 25th | 25% | | Below Threshold | Below 25th | 0% |
Long-Term Equity Incentives
Restricted Stock Restricted stock awards incentivize and reward executives for improving long-term stock value and serve as a retention tool. Generally, we grant restricted stock in February (however, for 2023, we made the grant in April following stockholder approval of the 2023 Stock Incentive Plan) with one half of the shares that we grant vesting on the second anniversary of the grant date and the remainder of the shares that we grant vesting on the third anniversary of the grant date, in each instance provided that the recipient is still employed by the Company. Treatment of Equity in the Event of a Change of Control All restricted stock and performance shares are subject to double-trigger vesting (rather than single-trigger vesting) upon a change of control. Specifically, to the extent the successor or purchaser in a change of control transaction honors or assumes on an equivalent basis outstanding equity-based awards, these awards will not automatically be subject to accelerated exercisability, vesting, or settlement upon the change of control. Rather, vesting will occur upon the participant’s termination of employment if he or she is terminated by the Company (or its successor) without cause or if the participant terminates for good reason (assuming the participant has such right under an employment or other agreement) during the two-year period following the change of control. If the successor or purchaser in the change of control transaction does not assume the awards or issue replacement awards, then upon the date of the change of control, restricted stock will become fully vested and performance shares will vest proportionately (based on the performance period up to the change of control date compared to the original performance period of the grant), with performance deemed to be satisfied at target.
Long-Term Equity Incentives
| 46 | | |
Employment Agreement with CEO
Employment Agreement with CEO As we previously disclosed, on September 9, 2022, we entered into an employment agreement (“Employment Agreement”) with Mr. Lissalde. Under the terms of the Employment Agreement, Mr. Lissalde will remain employed by us until his retirement on August 30, 2025 (the “Term”), unless we and Mr. Lissalde each agree to extend the Term for one or more one-year periods. If Mr. Lissalde remains employed until the end of the Term, he will retire at such time (such date, the “Retirement Date”). Mr. Lissalde will remain in his role as President and CEO until our Board appoints a successor President and CEO. If the Board appoints a successor President and CEO before the end of the Term, then Mr. Lissalde will serve as a consultant to the Board and support the transition of his duties, as reasonably requested by the successor President and CEO or by the Board from time to time, to ensure an orderly transition of such duties through the effective date of the successor’s appointment (the “Transition Date”) and through the end of the Term (the “Transition Period”). Before the Transition Date, (1) the Compensation Committee will determine, from time to time, Mr. Lissalde’s base salary, (2) he will be eligible to participate in our MIP at a level commensurate with his position as President and CEO, and (3) he will be eligible to receive awards under the Company’s 2018 Stock Incentive Plan or any applicable successor plan as determined by the Compensation Committee at a level commensurate with the position of CEO and a base salary rate equal to his then current salary rate as CEO. During the Transition Period, Mr. Lissalde’s annual base salary will be reduced to sixty-seven percent (67%) of his annual base salary as in effect immediately prior to the Transition Date, and he will not be entitled to participate in the MIP for any performance periods beginning on or after the Transition Date. He will be eligible for a pro-rata MIP payment, if otherwise earned, for the performance period in which the Transition Date occurs based on the length of time he served as President and CEO during such performance period. During the Transition Period, Mr. Lissalde will remain eligible to receive awards under the 2018 Stock Incentive Plan (or successor plan) as determined by the Compensation Committee at a level commensurate with the position of CEO and a base salary rate equal to his most recent base salary rate as CEO. The Employment Agreement also provides that, during the Term, Mr. Lissalde will receive reimbursement for reasonable expenses incurred for international financial planning and advice and international tax preparation services and remain eligible to participate in the Company’s benefit plans and receive other benefits that are provided to him as of the date he entered into the Employment Agreement. Following the Retirement Date, Mr. Lissalde will continue to receive health care and other benefits as set forth in the Company’s welfare benefit plans. Mr. Lissalde’s employment may be terminated prior to the end of the Term by the Company for cause, by Mr. Lissalde for any or no reason upon providing ninety (90) days’ advance notice to the Company, or by mutual agreement of the Company and Mr. Lissalde. Mr. Lissalde’s employment will automatically terminate upon his death or disability. In the event of any such termination, Mr. Lissalde will be entitled to any accrued but unpaid salary and vacation, as well as reimbursement of reasonable business expenses incurred prior to the date of termination. If Mr. Lissalde remains employed until his Retirement Date, has satisfied his obligations under the Employment Agreement, and executes a release of claims in favor of the Company and its affiliates, then we will treat such termination as being by reason of “Retirement” within the meaning of the 2018 Stock Incentive Plan (or successor plan) and Mr. Lissalde will: (1) vest in his restricted stock granted within 12 months prior to the Retirement Date on a pro-rata basis, determined by dividing the number of months Mr. Lissalde was employed from January 1 of the year in which the grant date occurred through the Retirement Date by 12, (2) vest in his restricted stock granted more than 12 months prior to the Retirement Date on a pro-rata basis, determined by dividing the number of months Mr. Lissalde was employed from the grant of such restricted stock through the Retirement Date and the denominator of which is the number of months in the applicable restriction period, (3) vest in his performance shares granted within 12 months of the Retirement Date, upon completion of the performance period, in the amount earned based on achievement of the applicable performance goals, but then pro-rated, determined by dividing the number of months Mr. Lissalde was employed from January 1 of the year in which the grant date occurred through the Retirement Date by 12, and (4) vest in his performance shares granted more
Employment Agreement with CEO
| 48 | | |
Employment Agreement with CEO
than 12 months prior to the Retirement Date, upon completion of the performance period, in the full number of performance shares earned, based on achievement of the applicable performance goals. The Company will also pay any pro-rated MIP bonus to which Mr. Lissalde is entitled that has not yet been paid and will provide Mr. Lissalde with its standard repatriation benefits for senior executive officers in connection with his relocation to France. If a “Change of Control” as defined in the Change of Control Employment Agreement (the “COC Agreement”) between Mr. Lissalde and the Company occurs prior to the Transition Date, then effective upon such Change of Control, the Employment Agreement will terminate automatically, and Mr. Lissalde will be entitled to the rights and benefits provided by the COC Agreement. From and after the Transition Date, the only provisions under the COC Agreement that will apply to Mr. Lissalde if a “Change of Control” occurs on or after the Transition Date are Sections 3 and 10 of the COC Agreement; otherwise, the Employment Agreement will continue in full force and effect. If on or after the Transition Date Mr. Lissalde’s restricted shares and performance shares will vest upon a change of control of the Company pursuant to the terms of the 2018 Stock Incentive Plan (or successor plan) or upon a change of control of the Company pursuant to the COC Agreement, then the number of restricted shares and performance shares that will vest will be the greater of (1) the number determined under the 2018 Stock Incentive Plan (or successor plan) or the COC Agreement, as applicable, or (2) the number determined under clauses (1) and (2), calculated as if the Retirement Date occurred on the date of such change of control. In exchange for the benefits provided by the Employment Agreement, Mr. Lissalde has agreed to certain non-competition and non-solicitation restrictions that extend for two years following the end of the Term or earlier termination of the Employment Agreement, as well as confidentiality and non-disparagement covenants.
Change of Control Agreements and Transitional Income Plan
Change of Control Agreements and Transitional Income Plan We have entered into COC Agreements with each of our NEOs and certain other executives. In establishing the COC Agreements, our Board determined that it is in the best interests of the Company and its stockholders to: (i) maintain NEOs’ continued dedication in the event of either a contemplated or actual change of control and (ii) provide three years of compensation to NEOs terminated in connection with a change of control so as to focus their attention on executing the transaction rather than the personal uncertainties and risks associated with such change of control. COC Agreements: (i) do not provide for excise tax gross-up provisions, (ii) allow a portion of any benefit received in connection with a change of control to be attributable to a non-compete agreement to reduce the potential for the excise tax, and (iii) require an executive to forego a portion of change of control payments that could otherwise trigger excise tax if such reduction would be beneficial to the executive. See pages 57 and 58 for further details. Each of our NEOs is eligible for severance benefits under the BorgWarner Inc. Transitional Income Plan, or TIP. We established the TIP to provide some financial protection to all U.S. salaried employees in the event that their employment is terminated for reasons beyond their control, subject to the terms of the plan. The TIP benefit includes a lump sum payment that is based on length of service (with a maximum benefit of 26 weeks of base salary) and medical coverage if eligible. In no event would an NEO receive a payment under both the COC Agreement and the TIP.
Compensation Risk Management
Compensation Risk Management Each year, the Compensation Committee oversees a risk assessment of the Company’s executive compensation program. Based on its most recent review, the Compensation Committee concluded that our compensation program and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. Our executive compensation program includes several features that mitigate unnecessary risk taking, including a balance of short- and long-term incentives, with long-term incentives comprising the majority of our executives’ target direct compensation; a mix of performance metrics on our short- and long-term incentives; clawback provisions; and stock ownership.
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023 The following table summarizes the grants of equity and non-equity plan awards to our NEOs in 2023. The share numbers in the table reflect the application of the adjustment factor following the spin-off:
Grants of Plan-Based Awards in 2023
| | | | | | | | | All Other | | | | | | | | | | | | | Stock | All Other | | | | | | | | | | | | Awards: | Option | Exercise | Grant Date | | | | Estimated Possible Payout Under | | | Estimated Future Payout | | | Number | Awards: | or Base | Fair Value | | | | Non-Equity Incentive | | | Under Equity Incentive | | | of Shares | Number of | Price of | of Stock | | | | Plan Awards(1) | | | Plan Awards | | | or Stock | Securities | Option | and Option | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Underlying | Awards | Awards | | Name | Grant Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | Option (#) | ($/Share) | ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) | | Frédéric B. Lissalde | | 1,120,000 | 2,240,000 | 4,480,000 | | | | | | | | | | 4/26/2023(2) | | | | 46,602 | 186,408 | 372,816 | | | | 9,249,307 | | | 4/26/2023(3) | | | | | | | 93,192 | | | 3,974,229 | | Kevin A. Nowlan | | 510,000 | 1,020,000 | 2,040,000 | | | | | | | | | | 4/26/2023(2) | | | | 16,069 | 64,276 | 128,552 | | | | 3,189,262 | | | 4/26/2023(3) | | | | | | | 32,104 | | | 1,369,078 | | Joseph F. Fadool | | 525,000 | 1,050,000 | 2,100,000 | | | | | | | | | | 4/26/2023(2) | | | | 14,092 | 56,368 | 112,736 | | | | 2,796,772 | | | 4/26/2023(3) | | | | | | | 28,194 | | | 1,202,341 | | Stefan Demmerle | | 492,000 | 984,000 | 1,968,000 | | | | | | | | | | 4/26/2023(2) | | | | 13,210 | 52,840 | 105,680 | | | | 2,621,634 | | | 4/26/2023(3) | | | | | | | 26,410 | | | 1,126,200 | | Tonit M. Calaway | | 420,000 | 840,000 | 1,680,000 | | | | | | | | | | 4/26/2023(2) | | | | 11,572 | 46,288 | 92,576 | | | | 2,296,627 | | | 4/26/2023(3) | | | | | | | 23,166 | | | 987,895 |
Grants of Plan-Based Awards in 2023
| (1) 2023 bonus opportunity under the MIP. |
Grants of Plan-Based Awards in 2023
| (2) 2023 Performance Share Grant: The shares will vest at the end of the three-year performance period 2023-2025. Value of grant = number of shares granted (prior to application of the adjustment factor) times the share price on grant date of $48.19 and Monte Carlo pricing on grant date of $79.71. |
Grants of Plan-Based Awards in 2023
| (3) 2023 Restricted Stock Grant: The shares will vest 50% on February 28, 2025 and the remainder on February 28, 2026. FMV at grant date = number of restricted shares (prior to application of the adjustment factor) times the closing stock price on April 26, 2023, of $48.19 in accordance with ASC Topic 718. |
Grants of Plan-Based Awards in 2023
The equity awards reflected in the Grants of Plan-Based Awards table are granted under the 2023 Plan. Further details regarding our incentive plans can be found in our Compensation Discussion and Analysis on pages 30-50.
Outstanding Equity Awards at Fiscal 2023 Year End
Outstanding Equity Awards at Fiscal 2023 Year End The following table summarizes all equity awards to our NEOs that remain either unexercised and/or unvested as of December 31, 2023. The share numbers in the table reflect the application of the adjustment factor following the spin-off:
Outstanding Equity Awards at Fiscal 2023 Year End
| | Option Awards | | | | Stock Awards | | | | | | | | | | | | | | Equity | | | | | | | | | | | Incentive | Equity | | | | | Equity | | | | | Plan | Incentive | | | | | Incentive | | | | | Awards: | Plan Awards: | | | | | Plan | | | | | Number of | Market or | | | | | Awards: | | | | Market | Unearned | Payout of | | | Number of | Number of | Number of | | | Number | Value of | Shares, | Unearned | | | Securities | Securities | Securities | | | of Shares | Shares | Units or | Shares, Units | | | Underlying | Underlying | Underlying | | | or Units of | or Units of | Other | or Other | | | Unexercised | Unexercised | Unexercised | Option | | Stock That | Stock That | Rights That | Rights | | | Options | Options | Unearned | Exercise | Option | Have Not | Have Not | Have Not | That Have | | | Exercisable | Unexercisable | Options | Price | Expiration | Vested(1) | Vested(1) | Vested(2) | Not Vested(2) | | Name | (#) | (#) | (#) | ($) | Date | (#) | ($) | (#) | ($) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | | Frédéric B. Lissalde | — | — | — | — | — | 237,888 | 8,528,285 | 669,883 | 24,015,306 | | Kevin A. Nowlan | — | — | — | — | — | 78,612 | 2,818,240 | 227,682 | 8,162,400 | | Joseph F. Fadool | — | — | — | — | — | 70,401 | 2,523,876 | 196,948 | 7,060,586 | | Stefan Demmerle | — | — | — | — | — | 65,049 | 2,332,007 | 184,303 | 6,607,263 | | Tonit M. Calaway | — | — | — | — | — | 55,288 | 1,982,075 | 163,954 | 5,877,751 |
Outstanding Equity Awards at Fiscal 2023 Year End
| (1) The values in column (g) represent the number of restricted shares of stock and/or stock units granted in 2021, 2022, and 2023 plus reinvested dividends and/or dividend equivalents that will vest on February 28, 2024, 2025, and 2026. The dollar value in column (h) is calculated using the closing stock price on December 31, 2023 of $35.85 per share. |
Outstanding Equity Awards at Fiscal 2023 Year End
| (2) The values of columns (i) and (j) are comprised of performance share grants made under the BorgWarner Inc. 2018 and 2023 Stock Incentive Plans, issued for the performance periods of 2022-2024 and 2023-2025. Column (i) represents the maximum potential payout for all outstanding unearned total stockholder return (TSR) 2022-2024 shares, eProducts Revenue Mix 2022-2024 and 2023-2025 shares, Cumulative Free Cash Flow 2022-2024 and 2023-2025 shares, and eProducts Revenue 2023-2025 shares, that would be paid out at the end of each performance period and the target potential payout for all outstanding unearned eProducts Revenue 2022-2024 shares and total stockholder return (TSR) 2023-2025 shares. The payout levels of the shares shown at maximum levels were determined because actual performance over the most recent period was equal to or above 100% of the target level. Column (j) represents the number of performance shares in column (i) times the closing stock price of $35.85 on December 31, 2023. Actual future payouts will depend on several factors, including (i) the number of performance shares that are earned, as determined after the end of the performance period based on the level at which the applicable performance goals have been achieved, as described on page 45; and (ii) the FMV of stock, as defined in the 2018 and 2023 Plans. |
Outstanding Equity Awards at Fiscal 2023 Year End
Regarding adjustments to shares in the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the stock, or other change in corporate structure affecting the stock, our Compensation Committee or our Board shall make such substitution or adjustments in the aggregate number, kind and option price of shares or adjustments in the consideration receivable upon exercise as it may be necessary to avoid dilution.
Outstanding Equity Awards at Fiscal 2023 Year End
| 54 | | |
Option Exercises and Stock Vested in 2023
Option Exercises and Stock Vested in 2023 The following table summarizes all option exercises and stocks vesting by our NEOs during 2023. The share numbers in the table reflect the application of the adjustment factor following the spin-off:
Option Exercises and Stock Vested in 2023
| | Option Awards | | Stock Awards | | | | Number of | | Number | | | | Shares | Value | of Shares | Value | | | Acquired | Realized | Acquired on | Realized On | | | on Exercise | On Exercise | Vesting(1) | Vesting(2) | | Name | ($) | ($) | (#) | ($) | | (a) | (b) | (c) | (d) | (e) | | Frédéric B. Lissalde | — | — | 395,950 | 15,283,349 | | Kevin A. Nowlan | — | — | 115,781 | 4,458,050 | | Joseph F. Fadool | — | — | 118,795 | 4,571,254 | | Stefan Demmerle | — | — | 104,710 | 4,029,553 | | Tonit M. Calaway | — | — | 72,056 | 2,770,812 |
Option Exercises and Stock Vested in 2023
| (1) Number of “shares” disclosed in column (d) represents the total number of relative total stockholder return, eProducts revenue mix, and cumulative free cash flow performance shares earned for the 2021-2023 performance period and paid in 2024, the total number of shares of restricted stock granted in 2020 with restrictions that lapsed in 2023, and the total number of shares of restricted stock granted in 2021 with restrictions that lapsed in 2023 (including dividends earned on the restricted stock). All the shares are shown after application of the adjustment factor. |
Option Exercises and Stock Vested in 2023
| (2) Amount in column (e) is equal to the number of performance shares earned, multiplied by $35.85, which was the closing stock price at the end of the performance period on December 31, 2023, the FMV of the shares of restricted stock granted in 2020 as to which restrictions lapsed and were paid in 2023, the FMV of the shares of restricted stock granted in 2021 as to which restrictions lapsed and were paid in 2023 (including the FMV of dividends earned relating to the restricted stock). |
Pension Benefits
Pension Benefits None of our NEOs participate or have account balances in any of the Company-sponsored qualified or non-qualified defined benefit pension plans. Accordingly, we have not included a Pension Benefits table. Our NEOs are eligible to participate in our Retirement Savings Plan, or RSP, our tax-qualified defined contribution plan. This plan, which is available to all U.S. salaried and hourly employees, allows our NEOs to take advantage of current tax-advantaged opportunities for accumulating future retirement income. The RSP is comprised of two primary components: a Company Retirement Account and a Savings Account with a match feature. In the Company Retirement Account, the Company contributes to the employee’s account each pay period based on years of service and eligible pay. For the majority of employees, including our NEOs, this ranges from 4% to 6% of compensation up to the Social Security wage base and from 8% to 11.5% of compensation above the Social Security wage base. In the Savings Account, participants may make contributions to the plan of 1% to 70% of their eligible earnings on a before-tax and/or after-tax basis (up to the statutorily prescribed annual limit on pre-tax contributions under the Internal Revenue Code (“IRC”)). The Company matches 100% of the first 3% of the employee’s pre-tax contributions. Participant contributions are held in trust as required by law. All employee contributions are 100% vested when contributed. The first 3% of compensation contributed to the Company Retirement Account vests immediately, and any other employer contributions vest 100% after three years of service.
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation The following table shows the non-qualified deferred compensation activity for our NEOs during 2023.
Non-Qualified Deferred Compensation
| | Executive | Registrant | Aggregate | Aggregate | Aggregate | | | Contributions | Contributions | Earnings in | Withdrawals/ | Balance at | | | in Last FY | in Last FY | Last FY | Distributions | Last FYE | | Name | ($) | ($) | ($) | ($) | ($) | | (a) | (b) | (c)(1) | (d) | (e) | (f)(2) | | Frédéric B. Lissalde | — | 648,193 | 188,152 | — | 2,573,810 | | Kevin A. Nowlan | — | 227,394 | 76,627 | — | 776,329 | | Joseph F. Fadool | — | 275,361 | 311,722 | — | 2,122,247 | | Stefan Demmerle | — | 254,654 | 213,125 | — | 1,579,781 | | Tonit M. Calaway | — | 180,790 | 130,634 | — | 965,363 |
Non-Qualified Deferred Compensation
| (1) The amounts shown in this column represent benefits earned under the defined contribution Retirement Savings Excess Benefit Plan, which amounts also appear in the “All Other Compensation” column in the 2023 Summary Compensation Table for fiscal 2023. |
Non-Qualified Deferred Compensation
| (2) The amount shown in this column in excess of the sum of the amounts from the preceding columns includes $1,737,465 for Mr. Lissalde, $472,308 for Mr. Nowlan, $1,535,164 for Mr. Fadool, $1,112,002 for Mr. Demmerle, and $653,939 for Ms. Calaway that was previously reported in the Summary Compensation Table for years prior to fiscal 2023. |
Non-Qualified Deferred Compensation
The Excess Plan is an unfunded, non-qualified retirement plan, which keeps certain highly compensated U.S. employees whole with regard to Company contributions that are otherwise limited under the RSP by IRC provisions. Participation is automatic once these limits are reached in a plan year. The contributions vest in the same manner as under the RSP. Distributions are made following a participant’s separation from service, with distributions attributable to amounts earned or vested before January 1, 2005 distributed within 30 days of participant’s separation from service and amounts earned or vested after December 31, 2004 distributed in the seventh month following the month in which the participant’s separation from service occurs. No in-service withdrawals or loans are available. Excess Plan balances are invested in the same investment choices that are available to the participants under the RSP. As these plans are unfunded, no money is actually invested. Rather, a notional account is maintained which mirrors the returns of these investments.
Non-Qualified Deferred Compensation
| 56 | | |
Potential Payments Upon Termination or Change of Control
Potential Payments Upon Termination or Change of Control The following table shows the post-employment payments that would be paid to each of our NEOs upon or following certain change of control related events. The calculations assume each NEO’s employment is terminated on December 31, 2023. For purposes of the calculations, the closing stock price on the last business day of 2023 ($35.85) was used to determine the market value of restricted stock and performance shares.
Potential Payments Upon Termination or Change of Control
| | Payment Triggering Events in Connection with a Change of Control(1) | | | | | | | | Involuntary Termination | | Voluntary Termination | | | | Change of | | | | without | | | Control | with | without | with Good | Good | | | only(2) | Cause | Cause(3) | Reason(3) | Reason(4) | | Name | ($) | ($) | ($) | ($) | ($) | | (a) | (b) | (c) | (d) | (e) | (f) | | Frédéric B. Lissalde | — | — | 38,129,602 | 38,129,602 | 2,492,353 | | Kevin A. Nowlan | — | — | 15,309,714 | 15,309,714 | 1,141,104 | | Joseph F. Fadool | — | — | 14,672,165 | 14,672,165 | 1,160,923 | | Stefan Demmerle | — | — | 13,595,676 | 13,595,676 | 1,060,888 | | Tonit M. Calaway | — | — | 11,438,387 | 11,438,387 | 858,103 |
Potential Payments Upon Termination or Change of Control
| (1) The amounts disclosed in the table above do not include life or disability insurance benefits or vested benefits under the qualified RSP or under the TIP, as these benefit plans are available to all U.S.-based salaried employees. The provisions of each plan would determine the timing and method of payments made under the above scenarios. |
Potential Payments Upon Termination or Change of Control
| (2) No amounts are shown in this column based on the assumption that the successor in a change in control transaction honors or assumes outstanding equity-based awards. Please refer to page 46 for a description of the equity treatment on a change in control. |
Potential Payments Upon Termination or Change of Control
| (3) For all Named Executive Officers, includes cash severance payment based on three times the average of base salary plus bonus, prorated bonus payment based on an average of past bonuses for year of termination, value of unvested restricted stock, value of unvested performance shares, retirement benefit based on three times the 2023 Company contributions to the RSP, value of welfare benefits (i.e., health care, life insurance, and disability insurance coverage) for 18 months, and outplacement services. Amounts do not reflect any impact from the potential imposition of any excise tax. |
Potential Payments Upon Termination or Change of Control
| (4) Includes prorated payment based on an average of past bonuses for year of termination. |
CEO Pay Ratio
CEO Pay Ratio For 2023, we estimate the ratio of our CEO’s total compensation to our median employee’s total compensation as 490 to 1. The median employee was identified by ranking the total cash compensation of our worldwide employees—other than our CEO, certain employees excluded under a 5% “de minimis exemption” as described below and 292 employees who became our employees during 2023 as a result of our acquisition of the Electric Hybrid Systems business segment of Eldor Corporation (“Eldor”)—who were employed by us or our affiliates on December 31, 2023. The total number of employees included in the median employee determination prior to the exclusion relating to the de minimis exemption was 35,115. Of these 35,115 employees, 29,108 were employed outside of the U.S. As permitted by the SEC’s rules, we excluded a total of 1,515 employees in non-U.S. locations reflecting 1,317 employees in India and 198 employees in Thailand. Such exclusions reflected less than 5% of our total employee population. The total number of our U.S. employees irrespective of the de minimis exemption was 6,007, the total number of our non-U.S. employees irrespective of the de minimis exemption was 29,108 and the total number of our non-U.S. employees after application of the de minimis exemption was 27,593. Total cash compensation included base wages, overtime pay, annual bonuses, and any cash allowances paid to employees. The median employee was located in Poland. Their 2023 total compensation was $39,380 and was calculated under the methodology employed for calculating Total Compensation in the Summary Compensation Table and compared to our CEO’s 2023 compensation to determine the ratio. For this purpose, we converted the median employee’s compensation into U.S. dollars using an exchange rate based on 3.94 PLN to 1 USD. Our CEO’s total annual compensation, calculated on the same basis, was $19,308,195, producing a pay ratio of 490 to 1. Given the different methodologies that various public companies use to determine an estimate of their pay ratio, as well as differences in business models and workforce strategies, the estimated ratio reported above should not be used as a basis for comparison between companies.
CEO Pay Ratio
| 58 | | |
CEO Pay Ratio
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S - K, we are providing the following information about the relationship between executive compensation actually paid and certain financial performance of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns executive compensation with the Company’s performance, refer to the section “Compensation Discussion and Analysis.” The following table summarizes the Summary Compensation Table (“SCT”) total and Compensation Actually Paid (“CAP”) to the CEO and the average for the other NEOs:
CEO Pay Ratio
| | | | | | Value of Initial Fixed $100 | | | | | | | | | | | Investment Based On: | | | | | | | | | Average | | | | | | | | | | | Summary | Average | | | | Net Income | | | | Summary | | Compensation | Compensation | | Peer Group | | From | | | | Compensation | Compensation | Table Total | Actually Paid | Total | Total | | Continuing | Adjusted | | | Table Total for | Actually Paid | for Non-CEO | to Non-CEO | Stockholder | Stockholder | Net Income | Operations | Operating | | Year | CEO(1) | to CEO(2) | NEOs(3) | NEOs(4) | Return(5) | Return(6) | ($m)(7) | ($m)(8) | Margin(9) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | | 2023 | $19,308,195 | $11,039,535 | $6,631,757 | $4,287,745 | $100.38 | $90.17 | $625 | $632 | 9.63% | | 2022 | $17,860,730 | $26,562,730 | $5,986,427 | $8,322,000 | $97.64 | $91.20 | $944 | $636 | 10.26% | | 2021 | $17,603,127 | $21,435,078 | $5,235,163 | $6,004,222 | $107.51 | $126.01 | $537 | $343 | 10.56% | | 2020 | $9,848,772 | $6,664,736 | $2,836,370 | $2,055,230 | $90.80 | $118.57 | $500 | $N/A | 9.74% |
CEO Pay Ratio
| (1) The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Lissalde (our Chief Executive Officer) for each corresponding year in the “Total” column of the Summary Compensation Table. |
CEO Pay Ratio
| (2) The dollar amounts reported in column (c) represent the amount of CAP to Mr. Lissalde, as computed in accordance with Item 402(v) of Regulation S-K. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Lissalde’s total compensation from the SCT to determine CAP: |
CEO Pay Ratio
| | | Deductions | Additions | | | Year | SCT Total | from SCT(a) | to SCT(b) | CAP | | 2023 | $19,308,195 | $(13,223,536) | $4,954,876 | $11,039,535 |
CEO Pay Ratio
| (a) Represents the grant date fair value of equity-based awards granted each year. We did not report a change in pension values for any of the years reflected in this table; therefore, a deduction from the SCT total related to pension value is not needed. |
CEO Pay Ratio
| (b) The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (iv) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (v) the dollar value of any dividends or other earnings paid on stock in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows: |
CEO Pay Ratio
| | | | | Fair Value at the | | | | | | Year-over- | Change in Fair | End of the Prior | | | | | | Year Change | Value as of Vesting | Year of Equity | | | | | Year End Fair | in Fair Value of | Date of Equity | Awards that Failed | | | | | Value of Equity | Outstanding and | Awards Granted | to Meet Vesting | Value of | | | | Awards Granted | Unvested Equity | in Prior Years that | Conditions in | Dividends Related | Total Equity Award | | Year | During the Year | Awards | Vested in the Year | the Year | to Equity Awards | Adjustments | | 2023 | $10,527,894 | $(4,060,130) | $(1,708,124) | $— | $195,236 | $4,954,876 |
CEO Pay Ratio
| (3) The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding Mr. Lissalde, our Chief Executive Officer) in the “Total” column of the SCT in each applicable year. The NEOs included for purposes of calculating the average amounts for 2023 and 2022 are as follows: Mr. Nowlan, Mr. Fadool, Mr. Demmerle, and Ms. Calaway. For 2021 and 2020, Mr. Ericson was also included. |
CEO Pay Ratio
| (4) The dollar amounts reported in column (e) represent the average amount of CAP to the NEOs as a group (excluding Mr. Lissalde), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the amount of compensation realized by the NEOs as a group (excluding Mr. Lissalde) during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation from the SCT for the NEOs as a group (excluding Mr. Lissalde) for each year to determine CAP: |
CEO Pay Ratio
| | Average | Deductions | Additions | Average | | Year | SCT Total | from SCT(a) | to SCT(b) | CAP | | 2023 | $6,631,757 | $(3,897,452) | $1,553,440 | $4,287,745 |
CEO Pay Ratio
| (a) Represents the grant date fair value of equity-based awards granted each year. We did not report a change in pension values for any of the years reflected in this table; therefore, a deduction from the SCT total related to pension value is not needed. |
CEO Pay Ratio
| (b) The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (iv) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (v) the dollar value of any dividends or other earnings paid on stock in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows: |
CEO Pay Ratio
| | | | Change in | Average Fair Value | | | | | | Year-over-Year | Average Fair Value | at the End of the | Average | | | | | Change in Average | as of Vesting Date | Prior Year of Equity | Value of | Total | | | Average Year End | Fair Value of | of Equity Awards | Awards that Failed | Dividends | Average | | | Fair Value of Equity | Outstanding and | Granted in Prior | to Meet Vesting | Related | Equity | | | Award Granted | Unvested Equity | Years that Vested | Conditions in | to Equity | Award | | Year | During the Year | Awards | in the Year | the Year | Awards | Adjustments | | 2023 | $3,103,074 | $(1,146,460) | $(457,723) | $— | $54,549 | $1,553,440 |
CEO Pay Ratio
| (5) The Total Stockholder Return shows the value at each year end (including dividend reinvestment, to the extent applicable) of $100 invested in our common stock on January 1, 2020. |
CEO Pay Ratio
| (6) The Peer Group Total Stockholder Return shows the value at each year end (including dividend reinvestment, to the extent applicable) of $100 invested on January 1, 2020, in companies within Standard Industrial Code (“SIC”) 3714 Motor Vehicle Parts. |
CEO Pay Ratio
| (7) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. |
CEO Pay Ratio
| (8) The dollar amounts reported represent the amount of net income attributable to continuing operations (i.e., reflecting the PHINIA spin-off) reflected in the Company’s audited financial statements for 2023, 2022, and 2021. |
CEO Pay Ratio
| (9) Adjusted Operating Margin is defined in the Compensation Discussion and Analysis and a reconciliation from US GAAP Operating Income is shown in the Appendix. We have selected Adjusted Operating Margin for this table as the financial performance measure we consider most important in linking compensation actually paid to our NEOs for 2023. |
CEO Pay Ratio
Most Important Performance Measures In our assessment, the most important financial performance measures used to link CAP to Company performance in 2023 are listed in the table below, not ranked in order of importance. The role of each of these performance measures in our executive compensation program is discussed in the “Compensation Discussion and Analysis.”
CEO Pay Ratio
| Adjusted Operating Margin | Relative Total Stockholder Return | | Free Cash Flow | eProducts Revenue Mix |
CEO Pay Ratio
| 60 | | |
CEO Pay Ratio
Analysis of the Information Presented in the Pay Versus Performance Table In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay Versus Performance table. Compensation Actually Paid and TSR The chart below shows the comparison of Compensation Actually Paid to the CEO and non-CEO NEOs and TSR for the Company and Peer Group. Compensation Actually Paid and Net Income The chart below shows the comparison of Compensation Actually Paid for the CEO and non-CEO NEOs and Net Income. Compensation Actually Paid and Adjusted Operating Margin The chart below shows the comparison of Compensation Actually Paid for the CEO and non-CEO NEOs and Adjusted Operating Margin.
Director Compensation
Director Compensation The following table details the compensation earned by each non-employee director who served on the Board in 2023. Pearl Meyer conducts an annual review of the non-employee director compensation. Based on Pearl Meyer’s market study of peer company compensation, no changes were made to the annual cash retainers for the non-employee directors and the Non-Executive Chair; however, Pearl Meyer recommended, and the Board approved, an increase to the non-employee director annual equity compensation from $150,000 to $160,000. The compensation levels for our Board are at the 50th percentile compared to our peers. Directors who are employees of BorgWarner are not compensated for their service on the Board:
Director Compensation
| | | | | | Changes | | | | | | | | | | in Pension | | | Aggregate | | | | | | | Value and | | | Number of | | | Fees | | | | Nonqualified | | | Outstanding | | | Earned | | | Non-Equity | Deferred | | | Stock and | | | or Paid | Stock | Option | Incentive Plan | Compensation | All Other | | Option | | | in Cash | Awards(1) | Awards | Compensation | Earnings | Compensation | Total | Awards(2) | | Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | (#) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | Sara A. Greenstein | 142,106 | 160,000 | — | — | — | — | 302,106 | 3,787 | | David S. Haffner(3) | 41,667 | — | — | — | — | — | 41,667 | — | | Michael S. Hanley | 154,000 | 160,000 | — | — | — | — | 314,000 | 3,787 | | Shaun E. McAlmont | 140,000 | 160,000 | — | — | — | — | 300,000 | 3,787 | | Deborah D. McWhinney | 152,500 | 160,000 | — | — | — | — | 312,500 | 3,787 | | Alexis P. Michas | 323,792 | 160,000 | — | — | — | — | 483,792 | 3,787 | | Sailaja K. Shankar | 140,719 | 160,000 | — | — | — | — | 300,719 | 3,787 | | Hau N. Thai-Tang(4) | 122,698 | 160,000 | — | — | — | — | 282,698 | 3,787 |
Director Compensation
| (1) The values in column (c) reported for 2023 represent the grant date fair market value of the restricted stock award granted on April 26, 2023. (FMV at grant date = number of restricted shares (prior to application of the adjustment factor) times the closing stock price on April 26, 2023, of $48.19). |
Director Compensation
| (2) Aggregate number of outstanding shares of restricted stock and outstanding vested and unvested stock options at fiscal year-end only, including dividends after application of the adjustment factor. |
Director Compensation
| (3) David S. Haffner completed his service on the Board at the 2023 Annual Meeting. |
Director Compensation
| (4) Hau N. Thai-Tang joined the Board on February 8, 2023. |
Director Compensation
Annual compensation for our non-employee directors for 2023 was comprised of the following components: annual cash retainer and equity compensation consisting of restricted stock for board service and retainers for committee service. Our non-employee directors were not granted any stock option awards and did not receive any non-equity incentive plan compensation for 2023. In 2023, non-employee directors’ target annual cash retainer for board service was $125,000 and annual equity compensation was $160,000 worth of restricted stock. Committee members received annual retainers as follows for each committee on which they served: $6,000 for the Corporate Governance Committee; $9,000 for the Compensation Committee, and $7,500 for the Audit Committee. Chairs of the committees received the following additional annual retainers for their service to the committees in view of their commitment of additional time to their oversight of the committees (unchanged from prior year): $9,000 for Corporate Governance, $11,000 for Compensation, and $17,500 for Audit. The Non-Executive Chair’s total compensation was targeted to be $471,000 consisting of an annual cash retainer of $311,000 and an equity retainer of $160,000 granted in restricted stock. In addition, the Non-Executive Chair served as the Chair of the Corporate Governance Committee through November 7, 2023, and was eligible for an additional $15,000 annual retainer during that period. Board and standing committee meeting attendance fees are not paid. Non-employee directors are paid up to $1,000 per day for their attendance requested by the Company at meetings or events not associated with board or committee meetings. Additional compensation arrangements may be made if special committees are convened, though none are planned at this time. The stock ownership expectation of non-employee directors is an amount equivalent to five times the amount of the annual cash retainer for board service within five years of joining the Board. All of our directors met the stock ownership guidelines as of March 1, 2024 or were appropriately progressing toward meeting them.
Director Compensation
| 62 | | |
Cumulative Free Cash Flow
Cumulative Free Cash Flow Cumulative Free Cash Flow is equal to net cash provided by operating activities less capital expenditures. The table below shows a summary of Free Cash Flow for the years ending 2021, 2022, and 2023.
Cumulative Free Cash Flow
| | | Year Ended | Year Ended | Year Ended | Total | | ($ in millions) | | December 31, 2021 | December 31, 2022 | December 31, 2023 | 2021-2023 | | A. | Net cash provided by operating activities | $1,306 | $1,569 | $1,397 | $4,272 | | B. | Capital expenditures, including tooling outlays | 666 | 723 | 832 | 2,221 | | C. | Free Cash Flow (A minus B) | $640 | $846 | $565 | $2,051 | | D. | Ford Settlement | (130) | | | (130) | | E. | Free Cash Flow from discontinued operations | | | (31) | (31) | | F. | Spin-off related costs | | | (134) | (134) | | G. | Free Cash Flow, excluding Ford Settlement and Discontinued Operations (C minus D plus E plus F) | $770 | $846 | $400 | $2,016 |