Joseph Spack

Joseph Spack asked for clarification on the data center power generation opportunity, specifically the correlation between the $300 million revenue and 2 gigawatts of capacity, and how BorgWarner sizes the revenue opportunity at full capacity. He also inquired about the outlook for BorgWarner's turbocharger business, competitive dynamics, and customer trends.

Answer

Joseph F. Fadool (CEO, BorgWarner) clarified that the $300 million is initial revenue for the ramp-up year, while 2 GW refers to installed capacity, and the full revenue opportunity will be sized closer to 2027. He highlighted the product's fuel flexibility, fast transient response, and modularity. Regarding turbos, Joseph F. Fadool noted continued growth, increasing penetration, and BorgWarner's strong market leadership, expecting to conquest business and invest in future technology generations.

Joseph Spack sought clarification on the Novelis impact, specifically if the $1 billion lower impact in 2026, inclusive of $1.5 billion-$2 billion in temporary costs, implies a higher underlying EBIT. He also asked Kumar Galhotra about the variability of Novelis costs and the reliability of aluminum supply. Additionally, he inquired about Ford's market impact given competitors regaining share in North American trucks and European LCVs, and for more granularity on Ford-specific market mix factors aiding profitability.

Answer

Sherry House, CFO, confirmed the interpretation of the Novelis impact, noting the net positive $1 billion for 2026 with tailwinds into 2027. Kumar Galhotra, Chief Operating Officer, stated the mill is expected to restart between May and September, with contingency plans in place for supply. Andrew Frick, President of Ford Blue and Model E, addressed the competitive pickup segment, highlighting Ford's growing revenue and volume share, disciplined market approach, and mix optimization. Alicia Boler Davis, President of Ford Pro, commented on strong demand and solid pricing in the competitive European LCV market, supported by services.

Joseph Spack from UBS asked for detailed commentary on the organic end market and the implied Q4 guidance, noting it was softer than expected. He specifically questioned the lower Q4 revenue contribution from SEM despite it being a full quarter, asking about seasonality and future run rates. Spack also inquired about the low flow-through to EBIT from fuel systems' volume mix and the growing opportunity in power generation.

Answer

CEO Brady Ericson attributed the softer Q4 guidance to a return to normal seasonality (Q1 and Q4 being lighter) and caution due to market uncertainties. He explained SEM's lower Q4 contribution by its second-half seasonality and current CV market softness, expecting recovery in 2026. CFO Chris Gropp clarified that the low flow-through in fuel systems' EBIT was partly due to zero-margin ECU sales from BorgWarner and strong productivity offsetting lower contribution margins. Ericson confirmed increased business in the industrial sector, including power generation, and indicated future disclosures for CV and other OE segments.