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to our s tockho l der s 

“ Our technology, our customer diversity, our financial discipline and our staunch commitment to Product Leadership in every aspect of our busi- ness have built a foundation that continues to prove strong enough to support our ambitious growth plan. BorgWarner’s record performance in 2004 affirms my view that there is no other automotive supplier better positioned for continued global growth.” 

BorgWarner’s performance during 2004 dis- tinguishes us from other auto systems suppliers as we continue to lay the groundwork for our global growth. 

In an industry with little growth, our sales were up 15% to a record $3.5 billion. Earnings hit another record high. A stock split in May signaled our continued confidence in the future of the company. We increased our dividend for the third time in the past three years. By year-end, BorgWarner stock had chalked up 29 52-week highs. 

## Focused Growth 

We have strengthened our Engine and Drivetrain focus with the creation of technology leadership positions in each group, the continued development of new products and the acquisition of a majority stake in Beru AG on January 4, 2005. 

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The Beru acquisition is expected to be accretive in 2005 and enhance our diesel and controls technology, as well as expand our customer base and geographic presence – all reasons we have previously cited for making acquisitions. 

New business amounting to $1.4 billion is expected to come on stream over the next three years. About 66% is expected to be engine-related products such as turbo- chargers, engine timing systems, variable cam timing modules and emissions/thermal products. The other 34% is expected to be in transmission modules and all-wheel drive systems. 

As a global business, we serve customers throughout the world. In addition to supporting the domestic automakers in North America, we have significantly diversified our 

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FROM LEFT TO RIGHT: 

Alfred Weber Vice President, President and General Manager Emissions/Thermal Systems 

customer base. Because of tremendous growth with custom- ers like Honda, Hyundai/Kia and VW/Audi, our sales are well balanced. This strategic focus proves beneficial as market shares among the global automakers shift in favor of our faster growing customers. 

We further enhanced our strong and talented management team with key appointments from within the company and by attracting exceptional outside talent. To help manage the complexities of our more global business, we strengthened the role of the CFO to include administration and created a new position for global supply chain management and emerging markets. 

Our Board of Directors is actively engaged in guiding our business. I want to thank Bill Butler for his leadership and wise counsel as a board member since 1997. Bill retires 

Cynthia A. Niekamp Vice President, President and General Manager TorqTransfer Systems 

Robin J. Adams Executive Vice President, Chief Financial Officer and Chief Administrative Officer 

Roger J. Wood Vice President, President and General Manager Morse TEC 

from the board in April 2005. I also want to welcome David Brown, CEO of Owens Corning, as the newest member of the board. We look forward to his contributions. 

## Implementing Initiatives 

Since becoming chief operating officer in 2002, and now as CEO, I have challenged our people to broaden the competi- tive gap between us and other suppliers in three key areas. These are quality and cost improvement, the use of elec- tronic controls strategies, and harnessing the power of collaboration and teamwork -- all with a focus on our vision of Product Leadership. I am proud of our achievements in each area. We are demonstrating that Product Leadership is everyone’s job, and each employee has a role to play in the success of the company. 

Timothy M. Manganello Chairman and Chief Executive Officer 

Mark A. Perlick Vice President, President and General Manager Transmission Systems 

F. Lee Wilson Vice President, President and General Manager Turbo Systems 

