BORGWARNER INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements of BorgWarner Inc. and Consolidated Subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a comprehensive presentation of financial position, results of operations and cash flow activity required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair statement of results have been included. Certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The balance sheet as of December 31, 2025 was derived from the audited financial statements as of that date. For further information, refer to the Consolidated Financial Statements and Footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and accompanying notes, as well as the amounts of revenues and expenses reported during the periods covered by those financial statements and accompanying notes. Actual results could differ from these estimates.

NOTE 2 NEW ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Standards

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Updates (“ASU”) No. 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” The standard provides entities with a practical expedient and accounting policy election when estimating expected credit losses on current accounts receivable and current contract assets arising from transactions under FASB Accounting Standards Codification Topic 606, “Revenue From Contracts With Customers”, including assets acquired in business combinations. This guidance is effective for annual reporting periods beginning after December 15, 2025 including interim reporting periods within those annual reporting periods. The Company adopted this guidance prospectively and elected to apply the practical expedient for current accounts receivable and current contract assets. The adoption of this ASU did not have an impact on the Company’s Consolidated Financial Statements for the nine months ended September 30, 2026.

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” It requires entities to disclose, in the notes to financial statements, specified information related to certain costs and expenses disaggregated by type. The standard improves transparency by providing more detailed information about the components of costs and expenses that would enable investors to better understand the major components of an entity’s income statement by referencing specific disclosures in the notes to financial statements. This guidance is effective for annual reporting periods beginning after December 15, 2026 and interim periods within fiscal years beginning after

December 15, 2027. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements other than related incremental disclosures.

In September 2025, the FASB issued ASU No. 2025-06, “Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal Use Software.” The standard modernizes and simplifies guidance for internal-use software costs. This guidance is effective for annual reporting periods beginning after December 15, 2027, including interim reporting periods within those annual reporting periods. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements.

In December 2025, the FASB issued ASU No. 2025-10, “Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities.” The standard provides comprehensive recognition, measurement and presentation guidance for monetary and tangible non-monetary government grants received by business entities. This guidance is effective for annual reporting periods beginning after December 15, 2028, including interim reporting periods within those annual reporting periods. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements.

In December 2025, the FASB issued ASU No. 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements.” The standard clarifies the application of interim reporting guidance and reorganizes existing disclosures. This guidance is effective for interim reporting periods beginning after December 15, 2027. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements.

In May 2026, the FASB issued ASU No. 2026-2, “Environmental Credits and Environmental Credit Obligations (Topic 818).” The standard establishes new authoritative guidance for the recognition, measurement, presentation and disclosure of environmental credits and environmental credit obligations, including compliance credits and voluntary credits. This guidance is effective for annual reporting periods beginning after December 15, 2027, including interim reporting periods within those annual reporting periods. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements other than related incremental disclosures.

NOTE 3 ACQUISITIONS AND DISPOSITIONS

Acquisitions

In accordance with Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations,” acquisitions are recorded using the acquisition method of accounting. The Company recognizes and measures the acquisition date fair value of the identifiable assets acquired, liabilities assumed and any non-controlling interest using a range of methodologies as indicated by generally accepted valuation practices. Various valuation techniques are used to determine the fair value of intangible assets, with the primary techniques being forms of the income approach, specifically the relief-from-royalty and multi-period excess earnings valuation methods. Under these valuation approaches, the Company is required to make estimates and assumptions from a market participant perspective and may include revenue growth rates, estimated earnings, royalty rates, obsolescence factors, contributory asset charges, customer attrition and discount rates.

Due to the insignificant size of the Company’s 2023 and 2022 acquisitions described below, both individually and in the aggregate, relative to the Company, supplemental pro forma financial information for the current and prior reporting periods is not provided.

Hubei Surpass Sun Electric Charging Business

On March 1, 2023, the Company completed its acquisition of 100% of the electric vehicle solution, smart grid and smart energy businesses (“SSE”) of Hubei Surpass Sun Electric, pursuant to an Equity Transfer Agreement. The acquisition was expected to complement the Company’s existing European and North American charging footprint by adding a presence in China. The total consideration was ¥287 million ($42 million), including ¥268 million ($39 million) of base purchase price and ¥19 million ($3 million) of estimated earn-out payments. The Company paid ¥217 million ($31 million) of base purchase price during the year ended December 31, 2023 and ¥25 million ($4 million) during the year ended December 31, 2024. During the year ended December 31, 2025, the Company recorded a post-closing adjustment of ¥6 million ($1 million) following the review of final closing payment details. The remaining ¥20 million ($3 million) of base purchase price was recorded in Other current liabilities in the Condensed Consolidated Balance Sheet as of December 31, 2025. In January 2026, the negotiations of the remaining ¥20 million ($3 million) of base purchase price were completed, and the Company made the final payment. In accordance with ASC Topic 230, the payment made in 2026 was classified as financing activities in the Condensed Consolidated Statement of Cash Flows, as it occurred more than three months after the acquisition closing date.

As described further below, in February 2025, the Company made the decision to exit its charging business within the reportable segment formerly called Battery & Charging Systems, which included SSE. In the first quarter of 2026, as a result of the exit of the charging business, this reportable segment was renamed Battery Energy Systems. The name change reflects the segment’s revised focus after the divestiture. The change did not impact the composition of the segment or require recasting of prior period segment results. Prior periods continue to be presented as previously reported.

Drivetek AG

On December 1, 2022, the Company completed its acquisition of 100% of Drivetek AG (“Drivetek”), an engineering and product development company located in Switzerland. This acquisition strengthened the Company’s power electronics capabilities in auxiliary inverters, which has helped to accelerate the growth of the Company’s High Voltage eFan business. The total consideration was ₣37 million ($39 million), including ₣27 million ($29 million) of base purchase price and ₣10 million ($10 million) of estimated earn-out payments. The Company paid ₣27 million ($29 million) of base purchase price at closing. The Company’s obligation to remit up to ₣10 million ($10 million) of earn-out payments, over thethree years following closing, was contingent upon achievement of estimated future sales targets associated with newly awarded business and future turnover rate targets. During the year ended December 31, 2025, the Company paid ₣2 million ($2 million) of earn-out-related amounts. During the nine months ended September 30, 2026, the Company recorded a post-closing adjustment of ₣2 million ($2 million) reducing the remaining obligation to ₣1 million ($1 million) following the review of final closing payment details. In accordance with ASC Topic 805, the change in estimate was recorded in Other operating expense (income), net in the Condensed Consolidated Statements of Operations. During the three and nine months ended September 30, 2026, the Company paid the remaining earn-out of approximately ₣1 million ($1 million).

Dispositions

Exit of Charging Business

In February 2025, the Company decided to exit its charging business within the Battery Energy Systems reportable segment. This decision was made following the Company’s continuing evaluation of its product portfolio and future investments.

The majority of the charging business related to the SSE business, which was marketed for sale and met the criteria to be reported as held-for-sale as of March 31, 2025. During the nine months ended September 30, 2025, the Company recorded charges of $22 million related to the estimated loss on the sale of the SSE business. The Company’s exit of its charging business did not meet the criteria for presentation as a discontinued operation.

During the nine months ended September 30, 2025, the Company recorded charges of $32 million related to the exit of its charging business within the Battery Energy Systems reportable segment. These charges include the previously mentioned $22 million estimated loss on the sale of the SSE business during the nine months ended September 30, 2025, which was recorded in Other operating expense (income), net, and the write off of $9 million of inventory during the nine months ended September 30, 2025, which was recorded in Cost of sales in the Condensed Consolidated Statements of Operations. In addition, the Company recorded charges totaling $39 million during the nine months ended September 30, 2025, which included impairments of intangible assets, goodwill and fixed assets of $22 million, $13 million and $4 million, respectively. Refer to Note 11, “Goodwill and Other Intangibles,” to the Condensed Consolidated Financial Statements for more information.

PHINIA, Inc.

On July 3, 2023, BorgWarner completed the spin-off (“Spin-Off”) of its Fuel Systems and Aftermarket segments in a transaction intended to qualify as tax free to the Company’s stockholders for United States (“U.S.”) federal income tax purposes, which was accomplished by the distribution of 100% of the outstanding common stock of PHINIA, Inc. (“PHINIA”) to holders of record of common stock of the Company on a pro-rata basis. The Company entered into several agreements, including a tax matters agreement, with PHINIA on or prior to the distribution that provided a framework for the Company’s relationship with PHINIA after the Spin-Off. On September 19, 2024, the Company commenced a lawsuit against PHINIA, Inc. (“PHINIA”), seeking to recover value added tax (“VAT”) refunds. On October 15, 2025, the Company entered into a settlement agreement with PHINIA, and in connection with the settlement agreement, the Company and PHINIA also entered into an amended and restated tax matters agreement that, among other things, limits the Company’s responsibility to certain defined tax obligations. Refer to Note 20, “Contingencies” to the Condensed Consolidated Financial Statements for more information.

NOTE 4 REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company manufactures and sells products, primarily to OEMs of light vehicles and, to a lesser extent, to other OEMs of commercial vehicles and off-highway vehicles, to certain tier one vehicle systems suppliers and into the aftermarket. The Company’s payment terms are based on customary business practices and vary by customer type and products offered. The Company has evaluated the terms of its arrangements and determined that they do not contain significant financing components.

Generally, revenue is recognized upon shipment or delivery; however, a limited number of the Company’s customer arrangements for its highly customized products with no alternative use provide the Company with the right to payment during the production process. As a result, for these limited arrangements, a contract asset and revenue is recognized as goods are produced and control transfers to the customer using the input cost-to-cost method. Other contract assets are recognized when a conditional right to consideration from a customer exists and transfer of control has occurred. The Company recorded a contract asset of $35 million and $15 million at September 30, 2026 and December 31, 2025, respectively, for these arrangements. These amounts are reflected in Prepayments and other current assets in the Condensed Consolidated Balance Sheets.

In limited instances, the Company has received consideration related to unsatisfied or partially unsatisfied performance obligations resulting in deferred recognition of revenue and reflected as a contract liability. As of September 30, 2026, these contract liabilities are reflected as Other current liabilities and Other non-current liabilities in the Condensed Consolidated Balance Sheets and were $26 million and $2 million, respectively. As of December 31, 2025, Other current liabilities and Other non-current liabilities were each $1 million. These amounts are reflected as revenue over the term of the arrangement (typically three toseven years) as the underlying products are shipped and represent the Company’s remaining performance obligations as of the end of the period.

The Company continually seeks business development opportunities and, at times, provides customer incentives for new program awards. When the Company determines that the payments are incremental and incurred only if the new business is obtained and expects to recover these amounts from the customer over the term of the new business arrangement, the Company capitalizes these amounts. As of September 30, 2026 and December 31, 2025, the Company recorded customer incentive payments of $9 million and $7 million, respectively, in Prepayments and other current assets, and $33 million and $22 million, respectively, in Other non-current assets in the Condensed Consolidated Balance Sheets. The Company evaluates the amounts capitalized each period end for recoverability and writes off any amounts that are no longer expected to be recovered over the term of the business arrangement.

The Company’s products can be disaggregated by two types: eProducts and Foundational products. eProducts include all products utilized on or for electric vehicles (“EVs”) plus those same products and components that are included in hybrid powertrains whose underlying technologies are adaptable or applicable to those used in or for EVs. Foundational products include all products utilized on internal combustion engines plus those same products and components that are also included in hybrid powertrains. The following table represents a disaggregation of revenue from contracts with customers by Foundational products and eProducts for the three and nine months ended September 30, 2026 and 2025.

The following tables represent a disaggregation of revenue from contracts with customers by reportable segment and region. Refer to Note 22, “Reportable Segments,” to the Condensed Consolidated Financial Statements for more information.

NOTE 5 RESTRUCTURING

The Company undertakes restructuring activities, as necessary, to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company’s business and to relocate operations to best-cost locations.

The Company’s restructuring expenses consist primarily of employee termination benefits (principally severance and/or termination benefits) and other costs, which are primarily professional fees and costs related to facility closures and exits.

The following tables display the Company’s restructuring expense by reportable segment:

The following table displays a rollforward of the restructuring liability recorded within the Condensed Consolidated Balance Sheets and the related cash flow activity:

2026 Voluntary Separation Program In the third quarter of 2026, the Company approved a $26 million restructuring plan for a voluntary separation program (“VSP”). The VSP was made available to employees in the U.S. who met certain requirements and included a separation package based upon years of service. During the three and nine months ended September 30, 2026, the Company recorded $25 million of restructuring costs related to this plan. The actions under this plan are expected to be completed in 2027.

2024 Structural Cost Plan In June 2024, the Company approved an approximately $75 million restructuring plan to address the cost structure in its PowerDrive Systems reportable segment due to electric vehicle adoption volatility across different regions, which could include realignment of the segment’s manufacturing footprint. During the three and nine months ended September 30, 2026, the Company recorded $17 million and $19 million, respectively, of restructuring charges related to this plan. During the three and nine months ended September 30, 2025, the Company recorded $12 million and $29 million, respectively, of restructuring costs related to this plan. Cumulatively, the Company has incurred $63 million of restructuring charges related to this plan as of September 30, 2026. The actions under this plan are expected to be completed in 2027.

2023 Structural Cost Plan In 2023, the Company announced a restructuring plan to address structural costs primarily in its Foundational products businesses. During the nine months ended September 30, 2025, the Company recorded $8 million of restructuring costs related to this plan. Cumulatively, the Company incurred $148 million of restructuring charges related to this plan. The actions under this plan are complete.

Other Actions During the three and nine months ended September 30, 2026, the Company recorded $8 million and $45 million, respectively, of restructuring costs for individually approved restructuring actions. During the three and nine months ended September 30, 2025, the Company recorded $11 million and $34 million, respectively, of restructuring costs related to individually approved restructuring actions, as more fully described below.

Except for the matters described above, there have been no changes in previously initiated plans that have resulted (or are expected to result) in a material change to the Company’s restructuring costs.

The following provides details of restructuring expense incurred by the Company’s reportable segments during the three and nine months ended September 30, 2026 and 2025, related to the plans discussed above:

Turbos & Thermal Technologies

•During the three and nine months ended September 30, 2026, the segment recorded $5 million of restructuring costs related to this plan.

2023 Structural Cost Plan

•During the nine months ended September 30, 2025, the segment recorded $7 million of restructuring costs under this plan. These costs primarily related to $5 million of employee termination benefits and $2 million of professional fees for facilities in Europe and Asia.

•During the three and nine months ended September 30, 2026, the segment recorded $3 million and $16 million, respectively, of restructuring costs for individually approved restructuring actions. For the nine months ended September 30, 2026, these costs were primarily comprised of $13 million of employee termination benefits and $3 million of contractual settlement expense and professional fees for facilities in North America and Europe.

•During the three and nine months ended September 30, 2025, the segment recorded $5 million and $15 million, respectively, of restructuring costs for individually approved restructuring actions. For the nine months ended September 30, 2025, these costs were primarily comprised of $13 million of employee termination benefits and $2 million of contractual settlement expense for facilities in Europe and Asia.

Drivetrain & Morse Systems

•During the three and nine months ended September 30, 2026, the segment recorded $9 million of restructuring costs related to this plan.

•During the three and nine months ended September 30, 2026, the segment recorded $4 million and $10 million, respectively, of restructuring costs for individually approved restructuring actions. For the nine months ended September 30, 2026, these costs were primarily comprised of $3 million of employee termination benefits and $7 million primarily for equipment relocation costs for a facility in North America.

•During the three and nine months ended September 30, 2025, the segment recorded $1 million and $2 million, respectively, of restructuring costs for individually approved restructuring actions. For the nine months ended September 30, 2025, these costs were primarily comprised of $2 million related to equipment relocation costs for a facility in North America.

PowerDrive Systems

•During the three and nine months ended September 30, 2026, the segment recorded $9 million of restructuring costs related to this plan.

2024 Structural Cost Plan

•During the three and nine months ended September 30, 2026, the segment recorded $17 million and $19 million, respectively, of restructuring costs under this plan. For the nine months ended September 30, 2026, the majority of these costs were comprised of $18 million of employee termination benefits, primarily for a facility in Europe.

•During the three and nine months ended September 30, 2025, the segment recorded $12 million and $29 million, respectively, of restructuring costs under this plan. For the nine months ended September 30, 2025, these costs were primarily comprised of $19 million of employee termination benefits and $10 million of equipment relocation costs and professional fees for facilities in North America, Asia and Europe.

Battery Energy Systems

•During the three and nine months ended September 30, 2026, the segment recorded $1 million and $17 million, respectively, of individually approved restructuring costs. For the nine months ended September 30, 2026, these costs were primarily comprised of $16 million of employee termination benefits associated with an overhead cost reduction initiative.

•During the three and nine months ended September 30, 2025, the segment recorded $5 million and $16 million, respectively, of individually approved restructuring costs. For the nine months ended September 30, 2025, these costs were primarily comprised of $13 million of employee termination benefits and $3 million of contract cancellations and professional fees for facilities in North America and Asia, including the consolidation of the Company’s North American battery systems business footprint and the exit of its charging business. Refer to Note 3, “Acquisitions and Dispositions” for more information.

Corporate

•During the three and nine months ended September 30, 2026, $2 million of restructuring costs were recorded related to this plan.

•During the nine months ended September 30, 2026, $2 million of individually approved restructuring costs were recorded. For the nine months ended September 30, 2026, these costs primarily related to employee termination benefits associated with a global overhead cost reduction initiative.

Estimates of restructuring expense are based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts paid for such activities may differ from amounts initially recorded. Accordingly, the Company may record revisions of previous estimates by adjusting previously established accruals.

The Company continues to evaluate different options across its operations to reduce existing structural costs over the next few years. The Company will recognize restructuring expense associated with any future actions at the time they are approved and become probable or are incurred. Any future actions could result in significant restructuring expense.

NOTE 6 RESEARCH AND DEVELOPMENT COSTS

The Company’s net Research & Development (“R&D”) expenditures are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. Customer reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost. Customer reimbursements for prototypes are recorded net of prototype costs based on customer contracts, typically either when the prototype is shipped or when it is accepted by the customer. Customer reimbursements for engineering services are recorded when performance obligations are satisfied in accordance with the contract. Financial risks and rewards transfer upon shipment, acceptance of a prototype component by the customer or upon completion of the performance obligation, as stated in the respective customer agreement. The Company has contracts with several customers for R&D activities performed at its various R&D locations.

The following table presents the Company’s gross and net expenditures on R&D activities:

NOTE 7 OTHER OPERATING EXPENSE (INCOME), NET

Items included in Other operating expense (income), net consist of:

Adjustments associated with Spin-Off related balances: These amounts relate primarily to adjustments for the contract manufacturing and tax matters agreements between the Company and PHINIA, unrelated to the legal settlement discussed below.

Legal settlement: The amount relates to a legal settlement, inclusive of associated fees. Refer to Note 20, “Contingencies,” to the Condensed Consolidated Financial Statements for more information.

Costs to exit charging business: The amount relates to the exit of the charging business within the Battery Energy Systems reportable segment. Refer to Note 3, “Acquisitions and Dispositions,” and Note 11, “Goodwill and Other Intangibles,” to the Condensed Consolidated Financial Statements for more information.

Chief Executive Officer ("CEO") transition compensation: These amounts relate to duplicative compensation.

Loss on sale of assets: These amounts relate to the sale of equipment from a closed facility in North America.

Loss on sale of businesses: These amounts relate to a business closure in North America, plant disposal in Asia and the sale of an operation in Europe.

Merger and acquisition expense (income), net: These amounts primarily relate to professional fees associated with specific acquisition initiatives, offset by a revision to the Company’s expected earn-out related to the Drivetek acquisition during thenine months ended September 30, 2026. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements for more information.

NOTE 8 INCOME TAXES

The Company’s provision for income taxes is based upon an estimated annual tax rate for the year applied to federal, state and foreign income. On a quarterly basis, the annual effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and each interim period thereafter.

The Company’s effective tax rate for the three months ended September 30, 2026 and 2025 was approximately 22% and 30%, respectively. During the three months ended September 30, 2026, the Company recorded a discrete tax expense of $16 million related to net changes to valuation allowances and a discrete tax benefit of $13 million related to various changes in filing positions for prior years. During the three months ended September 30, 2025, the Company recordeda discrete tax expense of $7 million related to various changes in filing positions for prior years and a discrete tax benefit of $6 million related to the exit of the charging business.

The Company’s effective tax rate for the nine months ended September 30, 2026 and 2025 was approximately 22% and 25%, respectively. During the nine months ended September 30, 2026, the Company recorded a discrete tax expense of $17 million related to net changes to valuation allowances and a discrete tax benefit of $13 million related to various changes in filing positions for prior years. During the nine months ended September 30, 2025, the Company recorded a discrete tax benefit of $12 million related to the exit of the charging business, a discrete tax expense of $4 million related to net changes to valuation allowances and a discrete tax expense of $3 million related to various changes in filing positions for prior years.

The Company’s annual effective tax rates differ from the U.S. statutory rate primarily due to foreign rates that vary from those in the U.S., jurisdictions with pretax losses for which no tax benefit could be realized, U.S. taxes on foreign earnings, the realization of certain business tax credits (including foreign tax credits) and permanent differences between book and tax treatment for certain items (including the Foreign-Derived Intangible Income deduction and the enhanced deduction of research and development expenses in certain jurisdictions).

The Company estimates that it is reasonably possible there could be a decrease of approximately $65 million in unrecognized tax benefits and interest in the next 12 months related to the upcoming conclusion of tax audits and the lapse of statutes of limitations subsequent to the reporting period in certain taxing jurisdictions.

NOTE 9 INVENTORIES

A summary of Inventories is presented below:

NOTE 10 OTHER ASSETS

Additional detail related to assets is presented below:

NOTE 11 GOODWILL AND OTHER INTANGIBLES

Goodwill is the excess of the purchase price over the estimated fair value of identifiable net assets acquired in business combinations. As of September 30, 2026, the Company hadfour reportable segments andfour goodwill reporting units. During the fourth quarter of each year, the Company assesses its goodwill and indefinite-lived intangible assets assigned to each of its reporting units. In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value.

During the first quarter of 2025, as a result of the Company’s plan to exit the charging business, the Company separately allocated the goodwill from its Battery Energy Systems reportable segment to the battery systems business and to the charging business on a relative fair value basis. The Company estimated the allocated fair values of the businesses from the historical reporting unit based upon the present value of their anticipated future cash flows. The estimated fair value of the charging business was determined using a cost approach. The Company’s determination of fair value involved judgment and the use of estimates and assumptions. During the nine months ended September 30, 2025, the relative fair value analysis resulted in an allocation, and subsequent impairment, of $13 million related to the goodwill and $22 million related to other intangible assets allocated to the charging business. Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements for more information.

As a result of the Company’s annual goodwill and indefinite-lived intangible assets assessment during the fourth quarter of 2025, the Company performed a quantitative impairment assessment of the remaining Battery Energy Systems reportable segment’s goodwill after the impairment of the goodwill associated with the charging business during the first quarter of 2025. The estimated fair value of the Battery Energy Systems business was determined using an income approach. The most critical assumptions used in the calculation of the fair value of the battery systems business were projected revenue growth rates, projected operating income and discount rates. As a result, during the fourth quarter of 2025, the Battery Energy Systems recorded an incremental impairment charge of $410 million. The goodwill impairment charges related to Battery Energy Systems represent the difference between carrying value and fair value, resulting in the carrying value for this reporting unit to approximate its fair value.

The fair value of the goodwill of the Battery Energy Systems reportable segment is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margin and discount rate used to evaluate the fair value of these assets and market multiples assumptions applied by the Company. Future changes in the judgments, assumptions and estimates from those used in valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.

No events or circumstances were noted related to any of the Company’s reporting units in the three and nine months ended September 30, 2026, that required additional assessment or testing.

A summary of the changes in the carrying amount of goodwill is as follows:

The Company’s other intangible assets, primarily from acquisitions, consist of the following:

NOTE 12 PRODUCT WARRANTY

The Company provides warranties on some, but not all, of its products. The warranty terms are typically fromone tothree years. Provisions for estimated expenses related to product warranty are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements, as well as product manufacturing and industry developments and recoveries from third parties. The Company actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. Costs of product recalls, which may include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are accrued as part of the Company’s warranty accrual at the time an obligation becomes probable and can be reasonably estimated. The Company believes that the warranty accrual is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual. The product warranty accrual is allocated to current and non-current liabilities in the Condensed Consolidated Balance Sheets.

The following table summarizes the activity in the product warranty accrual accounts:

The product warranty liability is classified in the Condensed Consolidated Balance Sheets as follows:

During the three and nine months ended September 30, 2026, the Company recognized warranty cost recoveries of $12 million and $39 million, respectively, related to certain product claims. The Company recognized the recovery upon concluding the realization of the receivable was probable and the amount was reasonably estimable. The recovery and related warranty costs were recorded within Cost of sales in the Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2025, the Company recognized an insurance recovery of $21 million related to a resolved historical warranty matter as a reduction of Cost of sales in the Condensed Consolidated Statements of Operations.

NOTE 13 DEBT

As of September 30, 2026 and December 31, 2025, the Company had debt outstanding as follows:

In August 2026, the Company executed tender offers to purchase for cash certain of the Company’s outstanding 7.125% senior notes due February 2029 (the “February 2029 Senior Notes”),4.950% senior notes due August 2029 (the “August 2029 Senior Notes”),5.400% senior notes due August 2034 (the “August 2034 Senior Notes”) and 4.375% senior notes due March 2045 (the “March 2045 Senior Notes”). Pursuant to the tender offers, the Company purchased and extinguished aggregate principal amounts of $27 million of the February 2029 Senior Notes, $273 million of the August 2029 Senior Notes, $340 million of the August 2034 Senior Notes and $130 million of the March 2045 Senior Notes. In September 2026, the Company redeemed the remaining $94 million aggregate principal amount outstanding February 2029 Senior Notes through a make-whole redemption. The tender offer and make-whole redemption resulted in a net loss on extinguishment of $4 million, which was recorded to Interest expense (income), net in the Condensed Consolidated Statements of Operations.

The Company may utilize uncommitted lines of credit for short-term working capital requirements. As of September 30, 2026 and December 31, 2025, the Company had $5 million and $3 million, respectively, in borrowings under these facilities, which are classified in Short-term debt in the Condensed Consolidated Balance Sheets.

The following table provides details on Interest expense (income), net included in the Condensed Consolidated Statements of Operations:

The Company has a $2 billion multi-currency revolving credit facility that allows the Company to increase the facility by $1 billion with bank group approval. This facility matures in September 2028. The credit agreement contains customary events of default and one key financial covenant, which is a debt-to-EBITDA (“Earnings Before Interest, Taxes, Depreciation and Amortization”) ratio. The Company was in compliance with the financial covenant at September 30, 2026. At September 30, 2026 and December 31, 2025, the Company hadno outstanding borrowings under this facility.

The Company’s commercial paper program allows the Company to issue up to $2 billion of short-term, unsecured commercial paper notes under the limits of its multi-currency revolving credit facility. Under this program, the Company may issue notes from time to time and use the proceeds for general corporate purposes. The Company hadno outstanding borrowings under this program as of September 30, 2026 and December 31, 2025.

The total current combined borrowing capacity under the multi-currency revolving credit facility and commercial paper program cannot exceed $2 billion.

As of September 30, 2026 and December 31, 2025, the estimated fair values of the Company’s senior unsecured notes totaled $2,725 million and $3,690 million, respectively. The estimated fair values were $247 million lower than their carrying value at September 30, 2026 and $175 million lower than their carrying value at December 31, 2025. Fair market values of the senior unsecured notes are developed using observable values for similar debt instruments, which are considered Level 2 inputs as defined by ASC Topic 820. The carrying values of the Company's multi-currency revolving credit facility, commercial paper program and other debt facilities approximate fair value. The fair value estimates do not necessarily reflect the values the Company could realize in the current markets.

The Company had outstanding letters of credit of $39 million and $36 million at September 30, 2026 and December 31, 2025, respectively. The letters of credit typically act as guarantees of payment to certain third parties in accordance with specified terms and conditions.

NOTE 14 OTHER LIABILITIES

Additional detail related to liabilities is presented in the table below:

NOTE 15 FAIR VALUE MEASUREMENTS

ASC Topic 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC Topic 820 establishes a fair value hierarchy, which prioritizes the inputs used in measuring fair values as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC Topic 820:

A. Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.

B. Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C. Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The following tables classify assets and liabilities measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025:

1 Certain assets that are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. These amounts represent investments in commingled and managed funds that have underlying assets in fixed income securities, equity securities and other assets and the fair values have been estimated using the NAV of the Company's ownership interest in partners' capital. The Company’s redemption of its investments with the funds is governed by the partnership agreements and subject to approval from the general partners. With the exception of annual distributions in connection with the Company’s deemed tax liability, distributions from each fund will be received as the underlying investments of the funds are liquidated, the timing of which is unknown.

The following table provides a reconciliation of the Company’s Level 3 earn-out assets and liabilities:

Refer to Note 3, “Acquisitions and Dispositions,” to the Condensed Consolidated Financial Statements for more information regarding earn-outs.

Fair Value Measurements on a Nonrecurring Basis

The Company measures certain assets at fair value on a nonrecurring basis. These fair value measurements are classified within Level 3 of the fair value hierarchy. During the nine months ended September 30, 2025, the Company recorded asset impairment charges of $7 million related to certain property, plant and equipment at locations in the Company’s Battery Energy Systems reportable segment.

NOTE 16 FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash and cash equivalents, marketable securities and accounts receivable. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments may also include long-term debt, investments in equity securities, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivative contracts. All derivative contracts are placed with counterparties that have an S&P, or equivalent, investment grade credit rating at the time of the contracts’ placement. An adjustment for non-performance risk is considered in the estimate of fair value in derivative assets based on the counterparty credit default swap (“CDS”) rate. When the Company is in a net derivative liability position, the non-performance risk adjustment is based on its CDS rate. At September 30, 2026 and December 31, 2025, the Company had no derivative contracts that contained credit-risk-related contingent features.

Cash Flow Hedges

The Company, at times, uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and component purchases. At September 30, 2026 and December 31, 2025, the Company had no material commodity derivative contracts.

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to optimize its interest costs. The Company, at times, selectively uses interest rate swaps and options to reduce market value risk associated with changes in interest rates. At September 30, 2026 and December 31, 2025, the Company had no outstanding interest rate swaps or options.

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including capital expenditures, purchases, operating expenses or sales transactions designated in currencies other than the functional currency of the operating unit. Foreign currency derivative contracts require the Company, at a future date, to either buy or sell foreign currency in exchange for the operating units’ local currency.

Effectiveness for cash flow hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into accumulated other comprehensive income (loss) (“AOCI”) and reclassified into income as the underlying operating transactions are recognized. These realized gains or losses offset the hedged transaction and are recorded on the same line in the statement of operations. The initial value of any component excluded from the assessment of effectiveness is recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method is recognized in AOCI.

At September 30, 2026, the following notional amounts related to foreign currency derivative contracts were outstanding, which mature through December 2028:

Net Investment Hedges

In addition, the Company is also exposed to the risk that adverse changes in foreign currency exchange rates could impact its net investment in non-U.S. subsidiaries.

The Company selectively uses cross-currency swaps to hedge that foreign currency exposure. At September 30, 2026 and December 31, 2025, the following cross-currency swap contracts were outstanding and mature through August 2030:

During the three and nine months ended September 30, 2026, the Company unwound $175 million and $325 million, respectively, of cross-currency swap contracts originally maturing in July 2027, resulting in cash outflows of approximately $3 million and $7 million, respectively. The corresponding loss is expected to remain in AOCI until the net investment is sold, completely liquidated or substantially liquidated. In addition, the Company executed a U.S. Dollar to Japanese Yen cross-currency swap contract of $50 million maturing in February 2030 and a U.S. Dollar to Chinese Renminbi cross-currency swap contract of $100 million maturing in March 2027.

In addition, in 2021 the Company designated the €1,000 million 1.000% Senior Notes due May 19, 2031, as a net investment hedge of the foreign currency exposure of its investments in certain Euro-denominated subsidiaries. Refer to Note 13, “Debt,” to the Condensed Consolidated Financial Statements for more information.

The Company assesses the effectiveness for net investment hedges at the inception of the hedging relationship and quarterly, thereafter. Gains and losses arising from these contracts that are included in the assessment of effectiveness are deferred into foreign currency translation adjustments and only released when the subsidiary being hedged is sold or substantially liquidated. The initial value of any component excluded from the assessment of effectiveness is recognized in income using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in income under that systematic and rational method is recognized in AOCI.

Fair Value of Derivative Instruments in the Balance Sheet

At September 30, 2026 and December 31, 2025, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties for derivative instruments under ASC Topic 815, “Derivatives and Hedging”:

Effect of Derivatives on the Statements of Operations and Statements of Comprehensive Income (Loss)

The table below shows deferred gain (loss) reported in AOCI as well as the amount expected to be reclassified to income in one year or less for designated hedges. The amount expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at September 30, 2026 market rates.

Derivative instruments designated as hedging instruments as defined by ASC Topic 815 held during the period resulted in the gains and losses recorded in income shown in the table below.

There were no gains or losses recorded in income related to components excluded from the assessment of effectiveness for derivative instruments designated as cash flow hedges for the periods presented.

Gains and losses on derivative and non-derivative instruments designated as net investment hedges were recognized in other comprehensive income (loss) during the periods presented below.

Derivatives designated as net investment hedge instruments, as defined by ASC Topic 815, held during the period resulted in the following gains recorded in Interest expense (income), net in the Condensed Consolidated Statements of Operations on components excluded from the assessment of effectiveness:

There were no gains or losses recorded in income related to components excluded from the assessment of effectiveness for foreign currency-denominated debt designated as net investment hedges. There were no gains and losses reclassified from AOCI for net investment hedges during the periods presented.

Derivatives Not Designated as Hedges

Derivatives not designated as hedging instruments are used to hedge remeasurement exposures of monetary assets and liabilities denominated in currencies other than the operating units’ functional currency. These derivatives resulted in gains (losses) recorded in income as shown in the table below.

NOTE 17 RETIREMENT BENEFIT PLANS

The Company has defined benefit pension plans and other postemployment benefit plans covering eligible salaried and hourly employees and their dependents. The Company expects to contribute a total of approximately $25 million into its defined benefit pension plans during 2026, of which $17 million has been contributed through the nine months ended September 30, 2026. The other postemployment benefit plans, which provide medical and life insurance benefits, are funded on a pay-as-you-go basis.

The components of net periodic benefit expense recorded in the Condensed Consolidated Statements of Operations are as follows:

The components of net periodic benefit expense other than the service cost component are included in Other postretirement expense (income) in the Condensed Consolidated Statements of Operations.

In August 2025, the Company executed an amendment to the plan document of one of the Company’s U.S. defined benefit pension plans (“U.S. Pension Plan”) to terminate the plan effective October 31, 2025. As part of the termination process, the Company’s benefit obligations under the U.S. Pension Plan are settled through a combination of lump sum payments to eligible plan participants and the purchase of a group annuity contract, under which future benefit obligations and administration are transferred to a third-party insurance company. During the three months ended September 30, 2026, the Company paid $15 million of lump sum payments to eligible participants from plan assets which resulted in a non-cash settlement loss of $10 million. In October 2026, the Company purchased a group annuity contract through a third-party insurance company and transferred the related plan assets to the insurer. The Company expects to recognize an incremental estimated non-cash settlement loss in the range of $50 million to $70 million during the three months ending December 31, 2026 when the termination of the U.S. Pension Plan is expected to be finalized. At December 31, 2025, the projected benefit obligation of the U.S. Pension Plan exceeded the fair value of the plan’s assets by $4 million under U.S. GAAP.

In December 2024, the Company entered into a second buy-in contract (the first buy-in contract was entered into in 2019) with an insurance company related to its U.K. pension plan. Pursuant to this agreement, the Company liquidated approximately $50 million of pension plan assets to invest in an insurance annuity. At December 31, 2025, the U.K. pension plan had plan assets of $131 million, all held by the insurance company. The U.K. pension plan was overfunded by $27 million as of December 31, 2025, under U.S. GAAP.

NOTE 18 STOCKHOLDERS' EQUITY

The changes of the Stockholders’ Equity items during the three and nine months ended September 30, 2026 and 2025, are as follows:

• Per share dividends amount declared relate to BorgWarner common stock.

NOTE 19 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the activity within accumulated other comprehensive income (loss) during the three and nine months ended September 30, 2026 and 2025.

NOTE 20 CONTINGENCIES

In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, governmental investigations and related proceedings, general liability and other risks. It is not possible to predict with certainty whether the Company will ultimately be successful in any of these commercial and legal matters or what the impact might be. The Company does not believe that adverse outcomes in any of these commercial and legal claims, actions and complaints are reasonably likely to have a material adverse effect on the Company’s results of operations, financial position or cash flows. An adverse outcome could, nonetheless, be material to the results of operations or cash flows as the ultimate resolutions of these matters are inherently unpredictable.

On September 19, 2024, the Company commenced a lawsuit against PHINIA, seeking to recover from PHINIA approximately $120 million of value added tax (“VAT”) refunds that PHINIA received or expected to receive from governmental agencies as well as damages and interest. These refunds consisted of VAT paid by the Company in periods prior to or directly related to the Spin-Off that established PHINIA as an independent company. PHINIA responded to the lawsuit and also asserted counterclaims against the Company. On October 15, 2025, the Company entered into a settlement agreement (the “Settlement Agreement”) with PHINIA, pursuant to which PHINIA agreed to pay the Company $78 million, resolving the lawsuit and certain other matters relating to the Spin-Off. In connection with the Settlement Agreement, the Company and PHINIA also entered into an amended and restated tax matters agreement that, among other things, limits the Company’s responsibility to certain defined tax obligations. During the year ended December 31, 2025, the Company recorded a net charge of $40 million, for the reduction of VAT-related receivables, the elimination of certain Company liabilities under the amended and restated tax matters agreement and related legal fees. As of September 30, 2026, after giving effect to the Settlement Agreement and the $57 million received in total, the Company had assets related to these VAT refunds of approximately $21 million in Receivables, net in the Condensed Consolidated Balance Sheet, which is due no later than December 1, 2026.

Environmental

The Company and certain of its current and former direct and indirect corporate predecessors, subsidiaries and divisions have been identified by the United States Environmental Protection Agency and certain local environmental agencies and private parties as potentially responsible parties (“PRPs”) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation and Liability Act (“Superfund”) and equivalent state or local laws and, as such, may have been liable for the cost of clean-up and other remedial activities at 16 such sites as of both September 30, 2026 and December 31, 2025. Responsibility for clean-up and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula.

The Company believes that none of these matters, individually or in the aggregate, will have a material adverse effect on its results of operations, financial position or cash flows. Generally, this is because either the estimates of the maximum potential liability at a site are not material or the liability will be shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any such matter.

The Company had an accrual for environmental liabilities of $4 million and $6 million as of September 30, 2026 and December 31, 2025, respectively, included in Other current liabilities in the Condensed Consolidated Balance Sheets. As of September 30, 2026, this accrual, which relates tofour of the sites, is based on information available to the Company (which, in most cases, includes an estimate of allocation of liability among PRPs; the probability that other PRPs, many of which are large, solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or local environmental agencies concerning the scope of contamination and estimated remediation and consulting costs; and remediation alternatives). Clean-up and other remedial activities are complete or nearing completion at the other 12 sites, for which there was no accrual as of September 30, 2026.

NOTE 21 EARNINGS PER SHARE

The Company presents both basic and diluted earnings per share (“EPS”) of common stock amounts. Basic EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock outstanding during the reporting period. Diluted EPS is calculated by dividing net earnings attributable to BorgWarner Inc. by the weighted average shares of common stock and common stock equivalents outstanding during the reporting period.

The dilutive impact of stock-based compensation is calculated using the treasury stock method. The treasury stock method assumes that the Company uses the assumed proceeds from the exercise of awards to repurchase common stock at the average market price during the period. The assumed proceeds under the treasury stock method include the purchase price that the grantee will pay in the future and compensation cost for future service that the Company has not yet recognized. The dilutive effects of performance-based stock awards are included in the computation of diluted EPS at the level the related performance criteria are met through the respective balance sheet date. There were 1.2 million and 1.4 million performance share units excluded from the computation of the diluted earnings for the three months ended September 30, 2026 and 2025, respectively. There were 1.2 million and 1.3 million performance share units excluded from the computation of the diluted earnings for the nine months ended September 30, 2026 and 2025, respectively. These units were excluded because the related performance criteria had not been met as of the balance sheet dates.

The following table reconciles the numerators and denominators used to calculate basic and diluted EPS of common stock:

NOTE 22 REPORTABLE SEGMENTS

The Company discloses segment information under four reportable segments: Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems and Battery Energy Systems. Thefour reportable segments are consistent with the operating segments that are evaluated by management, including the chief operating decision maker (“CODM”). The Company’s CODM is its Chief Executive Officer. The reportable segments are further described below. These segments are strategic business groups that are managed separately as each represents a specific grouping of related automotive components and systems.

As further described in Note 3, “Acquisitions and Dispositions,” in February 2025, the Company made the decision to exit its charging business within its Battery Energy Systems reportable segment. This plan did not result in a change to the Company’s reportable segments.

Segment Adjusted Operating Income (Loss) is the measure of segment income or loss used by the Company. Segment Adjusted Operating Income (Loss) is comprised of operating income for the Company’s reportable segments adjusted to exclude restructuring, merger, acquisition and divestiture expense, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss. The Company believes Segment Adjusted Operating Income (Loss) is most reflective of the operational profitability or loss of our reportable segments.

The Company’s CODM uses Segment Adjusted Operating Income (Loss) and the expenses disclosed below to assess the performance of its reportable segments. The CODM uses this information to assist with decisions about future growth, capital investments and cost reduction initiatives by reviewing trends in the business, monitoring variances to historical results and previously forecasted information and performing other analytical comparisons.

The following tables show net sales, segment expenses, Segment Adjusted Operating Income (Loss) and other segment information for the Company’s reportable segments. The segment expenses do not include non-comparable items that are excluded in the calculation of Segment Adjusted Operating Income (Loss):

Net Sales and Expenses by Reportable Segment

1 Other segment items include other income and expenses to derive Segment Adjusted Operating Income (Loss).

Segment Adjusted Operating Income (Loss)

1 Accelerated depreciation represents charges related to property, plant and equipment that were decommissioned or are in the process of being decommissioned.

2 Refer to Note 7, “Other Operating Expense (Income), Net,” to the Condensed Consolidated Financial Statements for more information.

Segment Information

1 Long-lived asset expenditures include tooling outlays and capital expenditures, excluding customer advances.

2 Corporate assets include cash and cash equivalents, investments and long-term receivables and deferred income taxes.

NOTE 23 OPERATING CASH FLOWS AND OTHER SUPPLEMENTAL FINANCIAL INFORMATION