10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT

(Mark One)
R	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2012

OR

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from  to

Commission file number:1-12162

BORGWARNER INC.

________________________________________________

(Exact name of registrant as specified in its charter)

Delaware	13-3404508
State or other jurisdiction of	(I.R.S. Employer
Incorporation or organization	Identification No.)
3850 Hamlin Road, Auburn Hills, Michigan	48326
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (248) 754-9200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES R  NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES R  NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer R Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o  NO R

As of April 20, 2012, the registrant had114,613,535 shares of voting common stock outstanding.

BORGWARNER INC.

FORM 10-Q

THREE MONTHS ENDED MARCH 31, 2012

INDEX

	Page No.
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2012 and December 31, 2011 (Unaudited)	3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 (Unaudited)	4
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2012 and 2011 (Unaudited)	5
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011 (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	33
PART II. Other Information
Item 1. Legal Proceedings	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (Repurchases and Authorization of Equity Securities)	34
Item 6. Exhibits	34
SIGNATURES	35
EX-10.1
EX-31.1
EX-31.2
EX-32.1

PART I. FINANCIAL INFORMATION

Item 1. Financial Information

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(millions of dollars)	March 31, 2012			December 31, 2011
ASSETS
Cash	$	396.9		$	359.6
Receivables, net	1,369.4			1,183.0
Inventories, net	480.8			454.3
Deferred income taxes	69.6			58.5
Prepayments and other current assets	93.3			82.4
Total current assets	2,410.0			2,137.8
Property, plant and equipment, net	1,696.4			1,664.3
Investments and advances	345.6			345.3
Goodwill	1,200.5			1,186.2
Other non-current assets	628.8			625.0
Total assets	$	6,281.3		$	5,958.6
LIABILITIES AND EQUITY
Notes payable and other short-term debt	$	184.2		$	196.3
Current portion of long-term debt	377.1			381.5
Accounts payable and accrued expenses	1,291.3			1,297.8
Income taxes payable	28.6			29.8
Total current liabilities	1,881.2			1,905.4
Long-term debt	848.7			751.3
Other non-current liabilities:
Retirement-related liabilities	457.5			457.0
Other	373.1			391.9
Total other non-current liabilities	830.6			848.9
Common stock	1.2			1.2
Capital in excess of par value	1,205.0			1,134.3
Retained earnings	2,268.3			2,110.3
Accumulated other comprehensive loss	(94.8		)	(150.8		)
Common stock held in treasury	(721.7		)	(707.1		)
Total BorgWarner Inc. stockholders’ equity	2,658.0			2,387.9
Noncontrolling interest	62.8			65.1
Total equity	2,720.8			2,453.0
Total liabilities and equity	$	6,281.3		$	5,958.6

See accompanying Notes to Condensed Consolidated Financial Statements.

3

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended March 31,
(in millions, except per share amounts)	2012			2011
Net sales	$	1,912.5		$	1,730.4
Cost of sales	1,516.7			1,387.6
Gross profit	395.8			342.8
Selling, general and administrative expenses	169.0			165.1
Other (income) expense	1.1			(1.6		)
Operating income	225.7			179.3
Equity in affiliates’ earnings, net of tax	(9.2		)	(8.4		)
Interest income	(1.4		)	(1.0		)
Interest expense and finance charges	15.1			18.4
Earnings before income taxes and noncontrolling interest	221.2			170.3
Provision for income taxes	57.5			40.9
Net earnings	163.7			129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7			4.9
Net earnings attributable to BorgWarner Inc.	$	158.0		$	124.5
Earnings per share — basic	$	1.46		$	1.13
Earnings per share — diluted	$	1.28		$	1.00
Weighted average shares outstanding:
Basic	108.420			110.634
Diluted	127.742			130.224

See accompanying Notes to Condensed Consolidated Financial Statements.

4

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Net earnings attributable to BorgWarner Inc.	$	158.0		$	124.5
Foreign currency translation adjustments	44.8			91.2
Hedge instrument adjustments
Market value change of hedge instruments	14.2			(4.5		)
Income taxes associated with the market value change of hedge instruments	(5.1		)	0.7
Loss reclassified into net earnings	0.7			0.2
Income taxes reclassified into net earnings	(0.2		)	(0.2		)
Net change in hedge instruments	9.6			(3.8		)
Defined benefit post employment plans
Amortization of prior service benefit and unrecognized loss into net earnings	2.2			2.0
Income taxes reclassified into net earnings	(0.6		)	(0.6		)
Acquisition	—			(5.4		)
Income taxes associated with acquisition	—			1.4
Net change in defined benefit post employment plans	1.6			(2.6		)
Comprehensive income	214.0			209.3
Comprehensive income attributable to the noncontrolling interest	0.9			1.4
Comprehensive income attributable to BorgWarner Inc.	$	214.9		$	210.7

See accompanying Notes to Condensed Consolidated Financial Statements.

5

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Three Months Ended March 31,
(millions of dollars)	2012			2011
OPERATING
Net earnings	$	163.7		$	129.4
Adjustments to reconcile net earnings to net cash flows from operations:
Non-cash charges (credits) to operations:
Depreciation and tooling amortization	63.8			60.9
Amortization of intangible assets and other	7.4			6.9
Bond amortization	4.4			4.8
Stock-based compensation expense	21.0			4.8
Deferred income tax benefit	(22.1		)	(18.2		)
Equity in affiliates’ earnings, net of dividends received, and other	(7.4		)	(12.3		)
Net earnings adjusted for non-cash charges to operations	230.8			176.3
Changes in assets and liabilities:
Receivables	(167.6		)	(179.5		)
Inventories	(19.9		)	(33.6		)
Prepayments and other current assets	(10.2		)	(7.2		)
Accounts payable and accrued expenses	(4.0		)	8.8
Income taxes payable	(1.5		)	(8.5		)
Other non-current assets and liabilities	3.2			2.3
Net cash provided by (used in) operating activities	30.8			(41.4		)
INVESTING
Capital expenditures, including tooling outlays	(95.0		)	(70.2		)
Net proceeds from asset disposals	1.0			6.1
Payments for business acquired, net of cash acquired	—			(203.7		)
Net proceeds from sale of business	1.6			—
Net cash used in investing activities	(92.4		)	(267.8		)
FINANCING
Net (decrease) increase in notes payable	(11.7		)	42.3
Additions to long-term debt, net of debt issuance costs	191.4			206.7
Repayments of long-term debt, including current portion	(99.9		)	(3.9		)
Payments for purchase of treasury stock	—			(181.9		)
Proceeds from stock options exercised, including the tax benefit	47.0			27.9
Taxes paid on employees' restricted stock award vestings	(17.5		)	(12.5		)
Dividends paid to noncontrolling stockholders	(12.0		)	—
Net cash provided by financing activities	97.3			78.6
Effect of exchange rate changes on cash	1.6			3.6
Net increase (decrease) in cash	37.3			(227.0		)
Cash at beginning of year	359.6			449.9
Cash at end of period	$	396.9		$	222.9
SUPPLEMENTAL CASH FLOW INFORMATION
Net cash paid during the period for:
Interest	$	13.2		$	12.6
Income taxes	47.4			48.8
Non-cash investing transactions:
Liabilities assumed from business acquired	—			5.3
Non-cash financing transactions:
Debt assumed from business acquired	—			5.9

See accompanying Notes to Condensed Consolidated Financial Statements.

6

BORGWARNER INC. AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(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 presentation of results have been included. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The balance sheet as of December 31, 2011 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, 2011.

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.

The Company retrospectively adopted the amendment to Accounting Standards Codification ("ASC") Topic 220, "Comprehensive Income," which requires companies to separately disclose reclassifications from other comprehensive income into net income on the face of the financial statements. Prior year balances within the Condensed Consolidated Statement of Comprehensive Income conform to this requirement.

(2) Research and Development

The Company's net Research & Development ("R&D") expenditures are included in selling, general and administrative expenses of 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 and accepted by the customer. 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 following table presents the Company’s gross and net expenditures on R&D activities:

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Gross R&D expenditures	$	76.2		$	69.1
Customer reimbursements	(8.5		)	(8.1		)
Net R&D expenditures	$	67.7		$	61.0

The Company has contracts with several customers at the Company's various R&D locations. No such contract exceeded 5% of annual net R&D expenditures in any of the periods presented.

7

(3) 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.

At March 31, 2012, the Company's annual effective tax rate is estimated to be 26%. The Company's annual effective tax rate was estimated to be 24% at March 31, 2011. These rates differ from the U.S. statutory rate primarily due to foreign rates which differ from those in the U.S., the realization of certain business tax credits, including foreign tax credits, and favorable permanent differences between book and tax treatment for certain items, including equity in affiliates' earnings. The estimated annual effective tax rate for 2012 is higher than the estimated annual effective tax rate for 2011 primarily due to the Company's increased profitability in higher taxed jurisdictions.

(4) Inventories, net

Inventories are valued at the lower of cost or market. The cost of U.S. inventories is determined by the last-in, first-out (“LIFO”) method, while the operations outside the U.S. use the first-in, first-out (“FIFO”) or average-cost methods. Inventories consisted of the following:

	March 31,			December 31,
(millions of dollars)	2012			2011
Raw material and supplies	$	272.0		$	254.4
Work in progress	94.9			90.9
Finished goods	131.2			124.3
FIFO inventories	498.1			469.6
LIFO reserve	(17.3		)	(15.3		)
Inventories, net	$	480.8		$	454.3

(5) Property, Plant and Equipment, net

	March 31,			December 31,
(millions of dollars)	2012			2011
Land and buildings	$	697.1		$	687.9
Machinery and equipment	2,084.4			2,006.9
Capital leases	2.4			2.3
Construction in progress	192.8			206.8
Total property, plant & equipment, gross	2,976.7			2,903.9
Less: accumulated depreciation	(1,385.0		)	(1,343.9		)
Property, plant & equipment, net, excluding tooling	1,591.7			1,560.0
Tooling, net of amortization	104.7			104.3
Property, plant and equipment, net	$	1,696.4		$	1,664.3

As of March 31, 2012 and December 31, 2011, accounts payable of $27.6 million and $48.9 million, respectively, were related to property, plant and equipment purchases.

Interest costs capitalized for the three months ended March 31, 2012 and 2011 were $4.5 million and $3.0 million, respectively.

8

(6) Product Warranty

The Company provides warranties on some, but not all, of its products. The warranty terms are typically from one to three 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. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. Management believes that the warranty accrual is appropriate, however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual. The following table summarizes the activity in the product warranty accrual accounts:

(millions of dollars)	2012			2011
Beginning balance, January 1	$	72.7		$	66.8
Acquisition	—			4.5
Provisions	10.0			15.6
Payments	(7.9		)	(15.0		)
Translation adjustment	1.9			2.7
Ending balance, March 31	$	76.7		$	74.6

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

	March 31,		December 31,
(millions of dollars)	2012		2011
Accounts payable and accrued expenses	$	42.7	$	38.6
Other non-current liabilities	34.0		34.1
Total product warranty liability	$	76.7	$	72.7

9

(7) Notes Payable and Long-Term Debt

As of March 31, 2012 and December 31, 2011, the Company had short-term and long-term debt outstanding as follows:

	March 31,		December 31,
(millions of dollars)	2012		2011
Short-term debt
Short-term borrowings	$	104.2	$	116.3
Receivables securitization	80.0		80.0
Total short-term debt	$	184.2	$	196.3
Long-term debt
3.50% Convertible senior notes due 04/15/12	$	370.6	$	368.5
5.75% Senior notes due 11/01/16 ($150 million par value)	149.5		149.5
8.00% Senior notes due 10/01/19 ($134 million par value)	133.9		133.9
4.625% Senior notes due 09/15/20 ($250 million par value)	247.7		247.7
7.125% Senior notes due 02/15/29 ($121 million par value)	119.3		119.3
Multi-currency revolving credit facility	170.0		70.0
Term loan facilities & other	11.7		19.8
Unamortized portion of debt derivatives	23.1		24.1
Total long-term debt	1,225.8		1,132.8
Less: current portion	377.1		381.5
Long-term debt, net of current portion	$	848.7	$	751.3

The weighted average interest rate on all borrowings outstanding as of March 31, 2012 and December 31, 2011 was 5.7% and 5.9%, respectively.

The Company's $650 million multi-currency revolving credit facility, which includes a feature that allows the Company's borrowings to be increased to $1 billion, provides for borrowings through June 30, 2016 and is guaranteed by the Company's material domestic subsidiaries. The Company has two key financial covenants as part of the credit agreement. These covenants are a debt compared to EBITDA (“Earnings Before Interest, Taxes, Depreciation and Amortization”) test and an interest coverage test. The Company was in compliance with all covenants at March 31, 2012 and expects to remain compliant in future periods. At March 31, 2012 and December 31, 2011, the Company had outstanding borrowings of $170.0 million and $70.0 million, respectively, under this facility.

On April 9, 2009, the Company issued $373.8 million in convertible senior notes. Under ASC Topic 470, “Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)," the Company accounted for the convertible senior notes by bifurcating the instruments between its liability and equity components. The value of the debt component was based on the fair value of issuing a similar nonconvertible debt security. The value of the equity component was calculated by deducting the value of the liability from the proceeds received at issuance. The Company's March 31, 2012 Condensed Consolidated Balance Sheet includes current debt of $370.6 million, which was settled in April 2012, and capital in excess of par value of $36.5 million. Additionally, ASC Topic 470 requires the Company to accrete the discounted carrying value of the convertible notes to their face value over the term of the notes. The Company's interest expense associated with this amortization is based on the effective interest rate of the convertible senior notes of 9.365%. The total interest expense related to the convertible senior notes in the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 is as follows:

10

	Three Months Ended March 31,
(millions of dollars)	2012		2011
Interest expense	$	7.6	$	8.0
Non-cash portion	$	4.4	$	4.8

The notes pay interest semi-annually of $6.5 million, which is at a coupon rate of 3.50% per year.

Holders of the notes could convert their notes at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date of the notes, in multiples of $1,000 principal amount. The initial conversion rate for the notes is 30.4706 shares of the Company’s common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $32.82 per share of common stock). The conversion price represents a conversion premium of 27.50% over the last reported sale price of the Company’s common stock on the New York Stock Exchange on April 6, 2009 of $25.74 per share. Since the Company's stock price was above the convertible senior notes conversion price of $32.82, the if-converted value was approximately $581.7 million and $352.1 million higher than the face value of the convertible senior notes at March 31, 2012 and December 31, 2011, respectively. In conjunction with the note offering, the Company entered into a bond hedge overlay, including both warrants and call options, at a net pre-tax cost of $25.2 million, effectively raising the conversion premium to 50.0%, or approximately $38.61 per share.

Subsequent to the Balance Sheet date, in April 2012, the Company settled its convertible senior notes by delivering approximately 11.4 million shares of common stock held in treasury to the note holders, which increased the weighted average basic shares outstanding and had no impact on weighted average dilutive shares outstanding. The second quarter 2012 financial impact of this settlement will result in a reduction in the current portion of long-term debt of $373.8 million, a reduction in common stock held in treasury of $617.3 million and a reduction in capital in excess of par value of $243.5 million.

Subsequent to the Balance Sheet date, on April 16, 2012, the Company separately and concurrently settled the call option portion of the convertible note related bond hedge overlay, receiving approximately 6.5 million shares of its common stock, which reduced the weighted average basic and dilutive shares outstanding. The second quarter 2012 financial impact of this settlement will result in an increase in common stock held in treasury of $503.9 million and an increase to capital in excess of par value of $503.9 million. The Company's bond hedge overlay also includes warrants, which are scheduled to mature on October 9, 2012. The dilutive impact of these warrants is currently included in the Company's weighted average dilutive shares outstanding.

As of March 31, 2012 and December 31, 2011, the estimated fair values of the Company’s senior unsecured notes totaled $1,706.5 million and $1,454.4 million, respectively. The estimated fair values were $685.5 million and $435.5 million higher at March 31, 2012 and December 31, 2011, respectively, than their carrying values. Fair market values are developed based on Level 2 inputs, as defined by ASC Topic 820, using observable values for similar debt instruments. 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 $50.0 million at March 31, 2012 and December 31, 2011, respectively. The letters of credit typically act as guarantees of payment to certain third parties in accordance with specified terms and conditions.

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(8) 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 in 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 and 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 table classifies the assets and liabilities measured at fair value on a recurring basis as of March 31, 2012:

			Basis of fair value measurements
(millions of dollars)	Balance at March 31, 2012		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.6	$	—	$	2.6	$	—	A
Other non-current assets (insurance settlement agreement note receivable)	$	11.5	$	—	$	11.5	$	—	C
Liabilities:
Foreign currency contracts	$	1.8	$	—	$	1.8	$	—	A
Commodity contracts	$	0.1	$	—	$	0.1	$	—	A
Net investment hedge contracts	$	70.0	$	—	$	70.0	$	—	A

12

The following table classifies the assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:

			Basis of fair value measurements
(millions of dollars)	Balance at December 31, 2011		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.7	$	—	$	2.7	$	—	A
Other non-current assets (insurance settlement agreement note receivable)	21.3		—		21.3		—		C
Liabilities:
Foreign currency contracts	$	2.9	$	—	$	2.9	$	—	A
Net investment hedge contracts	$	85.0	$	—	$	85.0	$	—	A

(9) Financial Instruments

The Company’s financial instruments include cash and marketable securities. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments also include long-term debt, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivatives. 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. At March 31, 2012, the Company had no derivative contracts that contained credit risk related contingent features.

The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated with our net investment in certain foreign operations (net investment hedges). At March 31, 2012 and December 31, 2011, the following cross-currency swaps were outstanding:

	Cross-currency swaps
(in millions)	Notional in USD		Notional in local currency		Duration
Floating $ to floating €	$	75.0	€	58.5	Oct - 19
Floating $ to floating ¥	$	150.0	¥	17,581.5	Nov - 16

The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and supplies purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. At March 31, 2012 and December 31, 2011, the following commodity derivative contracts were outstanding:

	Commodity derivative contracts
Commodity	Volume hedged March 31, 2012	Volume hedged December 31, 2011	Units of measure	Duration
Natural gas	264,311	—	MMBtu	Dec - 12

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including 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.

13

As of March 31, 2012 and December 31, 2011, the following foreign currency derivative contracts were outstanding:

Foreign currency derivatives (in millions)
Functional currency	Traded currency	Notional in traded currency March 31, 2012	Notional in traded currency December 31, 2011	Duration
British pound	Euro	55.8	64.8	Dec - 13
Euro	British pound	5.6	7.0	Dec - 12
Euro	Hungarian forint	4,050.0	5,400.0	Dec - 12
Euro	Japanese Yen	1,809.7	—	Dec - 12
Euro	Polish zloty	24.5	24.5	Dec - 12
Euro	US dollar	14.7	16.1	Jan - 13
Japanese yen	US dollar	5.8	7.4	Dec - 12
Korean won	Euro	34.5	34.5	Dec - 13
Korean won	US dollar	10.6	2.4	Dec - 12
Mexican peso	Euro	5.3	9.2	Jun - 12
Mexican peso	US dollar	30.9	40.7	Dec - 12
Swedish Krona	Euro	5.1	6.1	Dec - 12
US dollar	Euro	2.3	3.0	Dec - 12
US dollar	Japanese yen	3,000.0	3,000.0	Jun - 12

At March 31, 2012 and December 31, 2011, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:

	Assets					Liabilities
(millions of dollars)	Location	March 31, 2012		December 31, 2011		Location	March 31, 2012		December 31, 2011
Foreign currency contracts	Prepayments and other current assets	$	2.6	$	2.6	Accounts payable and accrued expenses	$	1.5	$	2.4
	Other non-current assets	$	—	$	0.1	Other non-current liabilities	$	0.3	$	0.5
Commodity contracts	Prepayments and other current assets	$	—	$	—	Accounts payable and accrued expenses	$	0.1	$	—
Net investment hedge contracts	Other non-current assets	$	—	$	—	Other non-current liabilities	$	70.0	$	85.0

Effectiveness for cash flow and net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. To the extent that derivative instruments are deemed to be effective as defined by ASC Topic 815, gains and losses arising from these contracts are deferred in accumulated other comprehensive income (loss) ("AOCI"). Such gains and losses will be reclassified into income as the underlying operating transactions are realized. Gains and losses not qualifying for deferral treatment have been credited/charged to income as they are recognized.

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The table below shows deferred gains and losses at the end of the period reported in AOCI and amounts expected to be reclassified to income within the one year or less. The gain or loss expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at March 31, 2012 market rates.

(millions of dollars)	Deferred gain (loss) in AOCI at						Gain (loss) expected to be reclassified to income in one year or less
Contract Type	March 31, 2012			December 31, 2011
Foreign currency	$	0.4		$	(0.6	)	$	0.6
Commodity	(0.1		)	—			(0.1		)
Net investment hedges	(64.9		)	(78.9		)	—
Total	$	(64.6	)	$	(79.5	)	$	0.5

Net investment hedges are derivative contracts entered into to hedge against changes in exchange rates that affect the overall value of net investments in foreign entities. Gains and losses on net investment hedges are recorded in AOCI and are used to offset equivalent gains or losses in the value of net investments that are recorded in translation gains and losses which is also a component of AOCI. Net investment hedges, designated under ASC Topic 815, held during the period resulted in the following gains or losses recorded in income:

		Gain (loss) reclassified from AOCI to income (effective portion)					Gain (loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended					Three Months Ended
Contract Type	Location	March 31, 2012		March 31, 2011		Location	March 31, 2012		March 31, 2011
Cross-currency swap	Interest expense	$	—	$	—	Interest expense	$	0.9	$	2.0

Cash flow hedges are derivative contracts entered into to hedge against fluctuations in foreign exchange rates and commodity prices. The effective portion of gains or losses exactly offset gains or losses in the underlying transaction that they were designated to hedge, and are recorded on the same line in the statement of operations. Ineffectiveness resulting from imperfect matches between changes in value of hedge contracts and changes in value of the underlying transaction are immediately recognized in income. Cash flow hedges, designated under ASC Topic 815, held during the period resulted in the following gains and losses recorded in income:

		Gain (Loss) reclassified from AOCI to income (effective portion)						Gain (Loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended						Three Months Ended
Contract Type	Location	March 31, 2012		March 31, 2011			Location	March 31, 2012		March 31, 2011
Foreign currency	Sales	$	0.3	$	(0.2	)	SG&A expense	$	—	$	—
Foreign currency	Cost of goods sold	0.4		(0.1		)	SG&A expense	—		—
Foreign currency	SG&A expense	—		0.2			SG&A expense	—		—
Commodity	Cost of goods sold	—		—			Cost of goods sold	—		—

At March 31, 2012, derivative instruments that were not designated as hedging instruments as defined by ASC Topic 815 were immaterial.

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(10) Retirement Benefit Plans

The Company has a number of defined benefit pension plans and other post employment benefit plans covering eligible salaried and hourly employees and their dependents. The estimated contributions to the Company's defined benefit pension plans for 2012 range from $30 million to $40 million, of which $4.7 million has been contributed through the first three months of the year. Included in the Company's estimated 2012 contributions is $15 million related to the Company's March 24, 2010 settlement agreement with the Pension Benefit Guaranty Corporation regarding the closure of the Company's BorgWarner Diversified Transmission Products Plant in Muncie, Indiana. The Company anticipates making the $15 million required contribution in December of 2012. The other post employment benefit plans, which provide medical and life insurance benefits, are unfunded plans.

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

	Pension benefits												Other post employment benefits
(millions of dollars)	2012						2011						2012			2011
Three Months Ended March 31,	US			Non-US			US			Non-US
Service cost	$	—		$	2.3		$	—		$	2.5		$	0.1		$	0.2
Interest cost	3.6			4.4			4.0			4.6			2.6			2.9
Expected return on plan assets	(4.7		)	(2.3		)	(5.2		)	(2.8		)	—			—
Amortization of unrecognized prior service benefit	(0.2		)	—			(0.1		)	—			(1.6		)	(1.7		)
Amortization of unrecognized loss	2.0			0.3			1.6			0.2			1.7			2.0
Net periodic benefit cost	$	0.7		$	4.7		$	0.3		$	4.5		$	2.8		$	3.4

(11) Stock-Based Compensation

Under the Company's 1993 Stock Incentive Plan (“1993 Plan”), the Company granted options to purchase shares of the Company's common stock at the fair market value on the date of grant. The options vest over periods up to three years and have a term of ten years from date of grant. As of December 31, 2003, there were no options available for future grants under the 1993 Plan. The 1993 Plan expired at the end of 2003 and was replaced by the Company's 2004 Stock Incentive Plan, which was amended at the Company's 2009 Annual Stockholders Meeting, among other things, to increase the number of shares available for issuance under the Plan. Under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan (“2004 Stock Incentive Plan”), 12.5 million shares were authorized for grant, of which 1.9 million shares are available for future award.

Stock options A summary of the Plans’ shares under option for the three months ended March 31, 2012 is as follows:

	Shares under option (thousands)		Weighted average exercise price		Weighted average remaining contractual life (in years)	Aggregate intrinsic value (in millions)
Outstanding and exercisable at December 31, 2011	2,220		$	29.36	4.1	$	76.3
Exercised	(602	)	$	26.97
Outstanding and exercisable at March 31, 2012	1,618		$	30.19	4.0	$	87.6

Restricted stock At its November 2007 meeting, the Company's Compensation Committee decided that restricted common stock awards and stock units ("restricted stock") would be awarded in place of stock options for long-term incentive award grants to employees. Restricted stock granted to employees vest 50% after two years and the remainder after three years from the date of grant. Restricted stock granted to non-employee directors generally vests on the anniversary date of the grant.

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The value of restricted stock is determined by the market value of the Company’s common stock at the date of grant. In February and March 2012, restricted stock in the amount of 326,638 shares was granted to employees under the 2004 Stock Incentive Plan. The value of the awards is recorded as unearned compensation within capital in excess of par value in equity and is amortized as compensation expense over the restriction periods.

Restricted stock compensation expense recorded in the Condensed Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
(millions of dollars, except per share data)	2012		2011
Restricted stock compensation expense	$	4.7	$	2.9
Restricted stock compensation expense, net of tax	$	3.5	$	2.2

A summary of the Company’s nonvested restricted stock for the three months ended March 31, 2012 is as follows:

	Shares subject to restriction (thousands)		Weighted average price
Nonvested at December 31, 2011	1,430		$	39.02
Granted	327		$	78.27
Vested	(631	)	$	26.42
Forfeited	(23	)	$	42.49
Nonvested at March 31, 2012	1,103		$	57.79

Performance share plans The 2004 Stock Incentive Plan provides for awarding of performance shares to members of senior management at the end of successive three-year periods based on the Company's performance in terms of total shareholder return relative to a peer group of automotive companies. In the first quarter of 2012, the Company modified all outstanding Performance Share Award Agreements to allow for the payment of these awards entirely in the Company's common stock, rather than 40% in cash and 60% in the Company's common stock. Using the lattice model (Monte Carlo simulation) at the date of modification, the Company determined the first quarter 2012 compensation expense associated with the modification to be negligible. Within the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2011, prior to the modification, the Company recorded the expense associated with the 40% cash portion of the award, $10.6 million, in the changes in accounts payable and accrued expenses and other non-current assets and liabilities line items.

(12)  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, general liability and various other risks. It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company's environmental and product liability contingencies are discussed separately below. The Company's management does not expect that the results in any of these commercial and legal claims, actions and complaints will have a material adverse effect on the Company's results of operations, financial position or cash flows.

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Litigation

In January 2006, BorgWarner Diversified Transmission Products Inc. ("DTP"), a subsidiary of the Company, filed a declaratory judgment action in United States District Court, Southern District of Indiana (Indianapolis Division) against the United Automobile, Aerospace, and Agricultural Implements Workers of America (“UAW”) Local No. 287 and Gerald Poor, individually and as the representative of a defendant class. DTP sought the Court's affirmation that DTP did not violate the Labor-Management Relations Act or the Employee Retirement Income Security Act (ERISA) by unilaterally amending certain medical plans effective April 1, 2006 and October 1, 2006, prior to the expiration of the then-current collective bargaining agreements. On September 10, 2008, the Court found that DTP's reservation of the right to make such amendments reducing the level of benefits provided to retirees was limited by its collectively bargained health insurance agreement with the UAW, which did not expire until April 24, 2009. Thus, the amendments were untimely. In 2008, the Company recorded a charge of $4.0 million as a result of the Court's decision.

DTP filed a declaratory judgment action in the United States District Court, Southern District of Indiana (Indianapolis Division) against the UAW Local No. 287 and Jim Barrett and others, individually and as representatives of a defendant class, on February 26, 2009 again seeking the Court's affirmation that DTP did not violate the Labor - Management Relations Act or ERISA by modifying the level of benefits provided retirees to make them comparable to other Company retiree benefit plans after April 24, 2009. Certain retirees, on behalf of themselves and others, filed a mirror-image action in the United States District Court, Eastern District of Michigan (Southern Division) on March 11, 2009, for which a class has been certified. During the last quarter of 2009, the action pending in Indiana was dismissed, while the action in Michigan is continuing. The Company is vigorously defending against the suit.  This contingency is subject to many uncertainties, therefore based on the information available to date, the Company cannot reasonably estimate the amount or the range of potential loss, if any. 

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 state 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 laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 38 such sites. 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.

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 whom are large, solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation and consulting costs; and remediation alternatives), the Company has an accrual for indicated environmental liabilities with a balance of $6.7 million and $10.4 million at March 31, 2012 and at December 31, 2011, respectively. The Company expects to pay out substantially all of the amounts accrued for environmental liability over the next five years.

In connection with the sale of Kuhlman Electric Corporation, the Company agreed to indemnify the buyer and Kuhlman Electric for certain environmental liabilities, then unknown to the Company, relating to certain operations of Kuhlman Electric that pre-date the Company's 1999 acquisition of Kuhlman Electric. In 2007

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and 2008, lawsuits were filed against Kuhlman Electric and others, including the Company, on behalf of approximately 340 alleging personal injury relating to alleged environmental contamination at its Crystal Springs, Mississippi plant. The Company entered into a settlement in July 2010 regarding the personal injury claims of the plaintiffs and those of approximately 2,700 unfiled claimants represented by those plaintiffs' attorneys. In exchange for, among other things, the dismissal with prejudice of these lawsuits and the release of claims by the unfiled claimants, the Company agreed to pay up to $28 million in settlement funds, which was expensed in the second quarter of 2010. The Company paid $13.9 million in November 2010 and made the final payment of $13.9 million in February 2011. Litigation concerning indemnification is pending and the Company may in the future become subject to further legal proceedings.

Product Liability

Like many other industrial companies who have historically operated in the U.S., the Company (or parties the Company is obligated to indemnify) continues to be named as one of many defendants in asbestos-related personal injury actions. We believe that the Company's involvement is limited because, in general, these claims relate to a few types of automotive friction products that were manufactured many years ago and contained encapsulated asbestos. The nature of the fibers, the encapsulation and the manner of use lead the Company to believe that these products are highly unlikely to cause harm. As of both March 31, 2012 and December 31, 2011, the Company had approximately 16,000 pending asbestos-related product liability claims, respectively. Of the approximately 16,000 outstanding claims at March 31, 2012, approximately half were pending in jurisdictions that have undergone significant tort and judicial reform activities subsequent to the filing of these claims.

The Company's policy is to vigorously defend against these lawsuits and the Company has been successful in obtaining dismissal of many claims without any payment. The Company expects that the vast majority of the pending asbestos-related product liability claims where it is a defendant (or has an obligation to indemnify a defendant) will result in no payment being made by the Company or its insurers. In 2012, of the approximately 800 claims resolved, 74 (9.3%) resulted in any payment being made to a claimant by or on behalf of the Company. In the full year of 2011, of the approximately 1,800 claims resolved, 288 (16%) resulted in any payment being made to a claimant by or on behalf of the Company.

Prior to June 2004, the settlement and defense costs associated with all claims were paid by the Company's primary layer insurance carriers under a series of funding arrangements. In addition to the primary insurance available for asbestos-related claims, the Company has substantial excess insurance coverage available for potential future asbestos-related product claims. In June 2004, primary layer insurance carriers notified the Company of the alleged exhaustion of their policy limits.

A declaratory judgment action was filed in January 2004 in the Circuit Court of Cook County, Illinois by Continental Casualty Company and related companies (“CNA”) against the Company and certain of its other historical general liability insurers. The court has issued a number of interim rulings and discovery is continuing. CNA and the Company have entered into a settlement agreement resolving their coverage disputes, pursuant to which CNA will pay amounts over a four year period from 2011 - 2015 to the Company. The Company is vigorously pursuing the litigation against the remaining insurers.

Although it is impossible to predict the outcome of pending or future claims or the impact of tort reform legislation that may be enacted at the state or federal levels, due to the encapsulated nature of the products, the Company's experience in vigorously defending and resolving claims in the past, and the Company's significant insurance coverage with solvent carriers as of the date of this filing, management does not believe that asbestos-related product liability claims are likely to have a material adverse effect on the Company's results of operations, financial position or cash flows.

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To date, the Company has paid and accrued $200.6 million in defense and indemnity in advance of insurers' reimbursement and has received $81.1 million in cash and notes from insurers, including CNA. The net balance of $119.5 million, is expected to be fully recovered, of which approximately $34.7 million is expected to be recovered within one year. Timing of recovery is dependent on final resolution of the declaratory judgment action referred to above or additional negotiated settlements. At December 31, 2011, insurers owed $109.8 million in association with these claims.

In addition to the $119.5 million net balance relating to past settlements and defense costs, the Company has estimated a liability of $64.1 million for claims asserted, but not yet resolved and their related defense costs at March 31, 2012. The Company also has a related asset of $64.1 million to recognize proceeds from the insurance carriers. Insurance carrier reimbursement of 100% is expected based on the Company's experience, its insurance contracts and decisions received to date in the declaratory judgment action referred to above. At December 31, 2011, the comparable value of the insurance asset and accrued liability was $61.7 million.

The amounts recorded in the Condensed Consolidated Balance Sheets related to the estimated future settlement of existing claims are as follows:

(millions of dollars)	March 31, 2012		December 31, 2011
Assets:
Prepayments and other current assets	$	28.9	$	28.8
Other non-current assets	35.2		32.9
Total insurance assets	$	64.1	$	61.7
Liabilities:
Accounts payable and accrued expenses	$	28.9	$	28.8
Other non-current liabilities	35.2		32.9
Total accrued liabilities	$	64.1	$	61.7

The Company cannot reasonably estimate possible losses, if any, in excess of those for which it has accrued, because it cannot predict how many additional claims may be brought against the Company (or parties the Company has an obligation to indemnify) in the future, the allegations in such claims, the possible outcomes, or the impact of tort reform legislation that may be enacted at the State or Federal levels.

(13) Earnings Per Share

The Company presents both basic and diluted earnings per share of common stock (“EPS”) 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 equivalent stock 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 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, compensation cost for future service that the Company has not yet recognized and any windfall/(shortfall) tax benefits that would be credited/(debited) to capital in excess of par value when the award generates a tax deduction. Options are only dilutive when the average market price of the underlying common stock exceeds the exercise price of the options.

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The potential common shares associated with the Company's 3.50% convertible senior notes due April 15, 2012, which were settled in April 2012, are reflected in diluted EPS using the “if-converted” method. Under this method, if dilutive, the common stock is assumed issued as of the beginning of the reporting period and included in calculating diluted EPS. In addition, if dilutive, interest expense, net of tax, related to the convertible notes is added back to the numerator in calculating diluted EPS.

Separately and concurrently with the issuance of the Company's 3.50% convertible senior notes, the Company entered into a bond hedge overlay, including warrants and call options. If the Company's weighted-average share price exceeds $38.61 per share, the warrants will be dilutive to the Company's earnings. If the Company's weighted average share price exceeds $32.82 per share, the offsetting bond hedge will be anti-dilutive.

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

	Three Months Ended March 31,
(in millions, except per share amounts)	2012		2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Weighted average shares of common stock outstanding	108.420		110.634
Basic earnings per share of common stock	$	1.46	$	1.13
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Adjustment for net interest expense on convertible notes	5.0		5.2
Diluted net earnings attributable to BorgWarner Inc.	$	163.0	$	129.7
Weighted average shares of common stock outstanding	108.420		110.634
Effect of 3.50% convertible senior notes	11.389		11.389
Effect of warrant	5.813		5.416
Effect of stock-based compensation	2.120		2.785
Total dilutive effect on weighted average shares of common stock outstanding	19.322		19.590
Weighted average shares of common stock outstanding including dilutive shares	127.742		130.224
Diluted earnings per share of common stock	$	1.28	$	1.00
Total anti-dilutive shares:
Call options	6.650		6.312

(14) Reporting Segments

The Company's business is comprised of two reporting segments: Engine and Drivetrain. These segments are strategic business groups, which are managed separately as each represents a specific grouping of related automotive components and systems.

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The Company allocates resources to each segment based upon the projected after-tax return on invested capital ("ROIC") of its business initiatives. ROIC is comprised of Adjusted EBIT after deducting notional taxes compared to the projected average capital investment required. Adjusted EBIT is comprised of earnings before interest, income taxes and noncontrolling interest (“EBIT") adjusted for restructuring, goodwill impairment charges, affiliates' earnings and other items not reflective of on-going operating profit or loss.

Adjusted EBIT is the measure of segment profit or loss used by the Company. The Company believes Adjusted EBIT is most reflective of the operational profitability or loss of our reporting segments. The following tables show segment information and Adjusted EBIT for the Company's reporting segments.

Net Sales by Reporting Segment

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	1,308.2		$	1,249.4
Drivetrain	611.4			486.4
Inter-segment eliminations	(7.1		)	(5.4		)
Net sales	$	1,912.5		$	1,730.4

Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest (“Adjusted EBIT”)

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	209.8		$	186.1
Drivetrain	61.2			32.0
Adjusted EBIT	271.0			218.1
Corporate, including equity in affiliates' earnings and stock-based compensation	36.1			30.4
Interest income	(1.4		)	(1.0		)
Interest expense and finance charges	15.1			18.4
Earnings before income taxes and noncontrolling interest	221.2			170.3
Provision for income taxes	57.5			40.9
Net earnings	163.7			129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7			4.9
Net earnings attributable to BorgWarner Inc.	$	158.0		$	124.5

Total Assets

(millions of dollars)	March 31, 2012		December 31, 2011
Engine	$	3,495.9	$	3,329.0
Drivetrain	1,673.5		1,562.8
Total	5,169.4		4,891.8
Corporate (a)	1,111.9		1,066.8
Total assets	$	6,281.3	$	5,958.6

____________________________________

(a) Corporate assets include investments and advances and deferred income taxes.

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(15) New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board ("FASB") amended ASC Topic 210, "Balance Sheet," requiring companies to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective retrospectively for interim and annual periods beginning on or after January 1, 2013. The Company anticipates the adoption of this guidance will not have a material impact on the Consolidated Financial Statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

BorgWarner Inc. and Consolidated Subsidiaries (the “Company”) is a leading global supplier of highly engineered automotive systems and components primarily for powertrain applications. Our products help improve vehicle performance, fuel efficiency, stability and air quality. These products are manufactured and sold worldwide, primarily to original equipment manufacturers (“OEMs”) of light vehicles (passenger cars, sport-utility vehicles ("SUVs"), vans and light-trucks). The Company's products are also sold to other OEMs of commercial vehicles (medium-duty trucks, heavy-duty trucks and buses) and off-highway vehicles (agricultural and construction machinery and marine applications). We also manufacture and sell our products to certain Tier One vehicle systems suppliers and into the aftermarket for light, commercial and off-highway vehicles. The Company operates manufacturing facilities serving customers in the Americas, Europe and Asia, and is an original equipment supplier to every major automotive OEM in the world.

The Company's products fall into two reporting segments: Engine and Drivetrain. The Engine segment's products include turbochargers, timing devices and chain products, emissions systems, thermal systems, diesel coldstart, gasoline ignition technology and cabin heaters. The Drivetrain segment's products include transmission components and systems and all-wheel drive torque management systems.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2012 vs. Three Months Ended March 31, 2011

Net sales for the three months ended March 31, 2012 totaled $1,912.5 million, a 10.5% increase from the three months ended March 31, 2011. This increase occurred while light vehicle production was up 4% worldwide, including a 15% increase in North America and an 8% increase in Asia, partially offset by a 7% decrease in Europe from the previous year's first quarter. Excluding the impact of the first quarter 2011 acquisition of Haldex Traction Holding AB, fourth quarter 2011 dispositions and the impact of weakening foreign currencies, primarily the Euro, net sales increased approximately 13%. The industry's focus on fuel economy and lower emissions continued to drive the adoption of BorgWarner technology and above-market growth for the Company.

Cost of sales as a percentage of net sales decreased to 79.3% in the first quarter of 2012 from 80.2% in the first quarter 2011. Gross profit and gross margin were $395.8 million and 20.7% for the first quarter of 2012 as compared to $342.8 million and 19.8% for the first quarter 2011. The Company's material cost of sales was approximately 50% of net sales in both the first quarter of 2012 and 2011. The Company's remaining cost to convert raw material to finished product (conversion cost) improved compared to the first quarter of 2011. 

First quarter selling, general and administrative (“SG&A”) costs increased $3.9 million to $169.0 million from $165.1 million, and decreased as a percentage of net sales to 8.8% from 9.5% from the first quarter 2011. Research and development ("R&D") costs, which are included in SG&A expenses, increased $6.7 million to $67.7 million from $61.0 million as compared to the first quarter of 2011. As a percentage of net sales, R&D costs were 3.5% in both the first quarter 2012 and 2011. Our continued investment in a number of cross-business R&D programs, as well as other key programs, is necessary for the Company’s short and long-term growth.

Equity in affiliates’ earnings of $9.2 million increased $0.8 million as compared with the first quarter of 2011 primarily due to improved earnings from the Company's 50% interest in NSK-Warner.

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Interest expense and finance charges of $15.1 million decreased $3.3 million as compared with the first quarter of 2011 due to increased capitalized interest associated with higher capital spending, lower foreign debt and lower interest rates.

At March 31, 2012, the Company's annual effective tax rate is estimated to be 26%. The Company's annual effective tax rate was estimated to be 24% at March 31, 2011. These rates differ from the U.S. statutory rate primarily due to foreign rates which differ from those in the U.S., the realization of certain business tax credits, including foreign tax credits, and favorable permanent differences between book and tax treatment for certain items, including equity in affiliates' earnings. The estimated annual effective tax rate for 2012 is higher than the estimated annual effective tax rate for 2011 primarily due to the Company's increased profitability in higher taxed jurisdictions.

The Company’s earnings per diluted share were $1.28 and $1.00 in the first quarter of 2012 and 2011, respectively.

Reporting Segments

The Company's business is comprised of two reporting segments: Engine and Drivetrain. These segments are strategic business groups, which are managed separately as each represents a specific grouping of related automotive components and systems.

The Company allocates resources to each segment based upon the projected after-tax return on invested capital ("ROIC") of its business initiatives. ROIC is comprised of Adjusted EBIT after deducting notional taxes compared to the projected average capital investment required. Adjusted EBIT is comprised of earnings before interest, income taxes and noncontrolling interest (“EBIT") adjusted for restructuring, goodwill impairment charges, affiliates' earnings and other items not reflective of on-going operating profit or loss.

Adjusted EBIT is the measure of segment profit or loss used by the Company. The Company believes Adjusted EBIT is most reflective of the operational profitability or loss of our reporting segments.

Net Sales by Reporting Segment

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	1,308.2		$	1,249.4
Drivetrain	611.4			486.4
Inter-segment eliminations	(7.1		)	(5.4		)
Net sales	$	1,912.5		$	1,730.4

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Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest (“Adjusted EBIT”)

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	209.8		$	186.1
Drivetrain	61.2			32.0
Adjusted EBIT	271.0			218.1
Corporate, including equity in affiliates' earnings and stock-based compensation	36.1			30.4
Interest income	(1.4		)	(1.0		)
Interest expense and finance charges	15.1			18.4
Earnings before income taxes and noncontrolling interest	221.2			170.3
Provision for income taxes	57.5			40.9
Net earnings	163.7			129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7			4.9
Net earnings attributable to BorgWarner Inc.	$	158.0		$	124.5

The Engine segment net sales increased $58.8 million, or 4.7%, from the first quarter 2011. Excluding the impact of the fourth quarter 2011 dispositions and weakening foreign currencies, primarily the Euro, net sales increased approximately 8% from the first quarter 2011. The Engine segment Adjusted EBIT margin was 16.0% in the first quarter 2012 up from 14.9% in the first quarter 2011. The net sales and Adjusted EBIT margin increases were primarily driven by strong global growth in all major product groups and continued cost management.

The Drivetrain segment net sales increased $125.0 million, or 25.7%, from the first quarter 2011. Excluding the acquisition of Haldex Traction AB and the impact of weakening foreign currencies, primarily the Euro, net sales increased approximately 24% from the first quarter of 2011. The Drivetrain segment Adjusted EBIT margin was 10.0% in the first quarter 2012 up from 6.6%in the first quarter 2011. The net sales and Adjusted EBIT margin increases were primarily driven by strong global growth in all major product groups, operational improvements, a reduction in Haldex Traction AB acquisition related expenses and continued cost management.

Corporate represents headquarters' expenses not directly attributable to the individual segments, expenses associated with divested operations and equity in affiliates' earnings. The net expense increased $5.7 million from the first quarter 2011 primarily due to increased stock-based compensation expense.

Outlook for the Remainder of 2012

Our overall outlook for 2012 is generally positive. The Company expects global production volumes to be higher in 2012 compared with 2011. In Europe, we expect production volumes to decline in 2012 compared with 2011. However, we expect that higher adoption rates of BorgWarner products around the world will result in sales growth for the Company above global production growth in 2012.

The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic capital investments to enhance its product leadership strategy. The trends that are driving our long-term growth are expected to continue, including the growth of direct injection diesel and gasoline engines worldwide, the increased adoption of automated transmissions in Europe and Asia-Pacific, and the move to variable cam and chain engine timing systems in both Europe and Asia-Pacific.

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FINANCIAL CONDITION AND LIQUIDITY

The Company had $396.9 million of cash on hand at March 31, 2012. The Company's $650 million multi-currency revolving credit facility, which includes a feature that allows the Company's borrowings to be increased to $1 billion, provides for borrowings through June 30, 2016 and is guaranteed by the Company's material domestic subsidiaries. The Company has two key financial covenants as part of the credit agreement. These covenants are a debt compared to EBITDA (“Earnings Before Interest, Taxes, Depreciation and Amortization”) test and an interest coverage test. The Company was in compliance with all covenants at March 31, 2012 and expects to remain compliant in future periods. At March 31, 2012 and December 31, 2011, the Company had outstanding borrowings of $170.0 million and $70.0 million, respectively, under this facility.

Subsequent to the Balance Sheet date, in April 2012, the Company settled its convertible senior notes by delivering approximately 11.4 million shares of common stock held in treasury to the note holders, which increased the weighted average basic shares outstanding and had no impact on weighted average dilutive shares outstanding. The second quarter 2012 financial impact of this settlement will result in a reduction in the current portion of long-term debt of $373.8 million, a reduction in common stock held in treasury of $617.3 million and a reduction in capital in excess of par value of $243.5 million.

Subsequent to the Balance Sheet date, on April 16, 2012, the Company separately and concurrently settled the call option portion of the convertible note related bond hedge overlay, receiving approximately 6.5 million shares of its common stock, which reduced the weighted average basic and dilutive shares outstanding. The second quarter 2012 financial impact of this settlement will result in an increase in common stock held in treasury of $503.9 million and an increase to capital in excess of par value of $503.9 million. The Company's bond hedge overlay also includes warrants, which are scheduled to mature on October 9, 2012. The dilutive impact of these warrants is currently included in the Company's weighted average dilutive shares outstanding.

The Company's debt to capital ratio was 27.1% at the end of the first quarter versus 28.3% at the end of 2011.

In addition to the credit facility, the Company's universal shelf registration with the Securities and Exchange Commission, has unlimited amount of various debt and equity instruments, which could be issued.

From a credit quality perspective, the Company has a credit rating of Baa2 from Moody's. In April 2012, the Company's credit rating was raised to BBB+ from BBB by both Standard & Poor’s and Fitch Ratings. The current outlook from Moody's, Standard & Poor’s and Fitch Ratings is stable. None of the Company’s debt agreements require accelerated repayment in the event of a downgrade in credit ratings.

Net cash provided by operating activities increased $72.2 million to $30.8 million in the first three months of 2012, compared to net cash used in operating activities of $41.4 million in the first three months of 2011. This increase primarily reflects higher earnings and improved working capital management during the first three months of 2012 compared with the first three months of 2011.

Net cash used in investing activities decreased $175.4 million to $92.4 million for the first three months of 2012 from $267.8 million in the first three months of 2011. This decrease is primarily due to lower payments for businesses acquired, net of cash acquired, which was partially offset by increased capital spending. Capital spending, including tooling outlays, increased $24.8 million to $95.0 million in the first three months of 2012 from $70.2 million in the first three months of 2011. This increase is largely due to higher spending levels required to meet an increase in program launches around the world.

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Net cash provided by financing activities was $97.3 million and $78.6 million for the first three months of 2012 and 2011, respectively. The $18.7 million increase primarily reflects increased proceeds from stock options exercised, including the tax benefit, partially offset by increased dividend payments to non-controlling shareholders.

We believe that the combination of cash from operations, cash balances, available credit facilities, and the remaining shelf registration capacity will be sufficient to satisfy our cash needs for our current level of operations and our planned operations for the foreseeable future. We will continue to balance our needs for internal growth, external growth, debt reduction and cash conservation.

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, general liability and various other risks. It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company's environmental and product liability contingencies are discussed separately below. The Company's management does not expect that the results in any of these commercial and legal claims, actions and complaints will have a material adverse effect on the Company's results of operations, financial position or cash flows.

Litigation

In January 2006, BorgWarner Diversified Transmission Products Inc. ("DTP"), a subsidiary of the Company, filed a declaratory judgment action in United States District Court, Southern District of Indiana (Indianapolis Division) against the United Automobile, Aerospace, and Agricultural Implements Workers of America (“UAW”) Local No. 287 and Gerald Poor, individually and as the representative of a defendant class. DTP sought the Court's affirmation that DTP did not violate the Labor-Management Relations Act or the Employee Retirement Income Security Act (ERISA) by unilaterally amending certain medical plans effective April 1, 2006 and October 1, 2006, prior to the expiration of the then-current collective bargaining agreements. On September 10, 2008, the Court found that DTP's reservation of the right to make such amendments reducing the level of benefits provided to retirees was limited by its collectively bargained health insurance agreement with the UAW, which did not expire until April 24, 2009. Thus, the amendments were untimely. In 2008, the Company recorded a charge of $4.0 million as a result of the Court's decision.

DTP filed a declaratory judgment action in the United States District Court, Southern District of Indiana (Indianapolis Division) against the UAW Local No. 287 and Jim Barrett and others, individually and as representatives of a defendant class, on February 26, 2009 again seeking the Court's affirmation that DTP did not violate the Labor - Management Relations Act or ERISA by modifying the level of benefits provided retirees to make them comparable to other Company retiree benefit plans after April 24, 2009. Certain retirees, on behalf of themselves and others, filed a mirror-image action in the United States District Court, Eastern District of Michigan (Southern Division) on March 11, 2009, for which a class has been certified. During the last quarter of 2009, the action pending in Indiana was dismissed, while the action in Michigan is continuing. The Company is vigorously defending against the suit.  This contingency is subject to many uncertainties, therefore based on the information available to date, the Company cannot reasonably estimate the amount or the range of potential loss, if any. 

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 state environmental agencies and private parties as potentially responsible parties (“PRPs”) at various hazardous waste disposal sites under the Comprehensive Environmental Response, Compensation

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and Liability Act (“Superfund”) and equivalent state laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 38 such sites. 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.

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 whom are large, solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation and consulting costs; and remediation alternatives), the Company has an accrual for indicated environmental liabilities with a balance of $6.7 million and $10.4 million at March 31, 2012 and at December 31, 2011, respectively. The Company expects to pay out substantially all of the amounts accrued for environmental liability over the next five years.

In connection with the sale of Kuhlman Electric Corporation, the Company agreed to indemnify the buyer and Kuhlman Electric for certain environmental liabilities, then unknown to the Company, relating to certain operations of Kuhlman Electric that pre-date the Company's 1999 acquisition of Kuhlman Electric. In 2007 and 2008, lawsuits were filed against Kuhlman Electric and others, including the Company, on behalf of approximately 340 alleging personal injury relating to alleged environmental contamination at its Crystal Springs, Mississippi plant. The Company entered into a settlement in July 2010 regarding the personal injury claims of the plaintiffs and those of approximately 2,700 unfiled claimants represented by those plaintiffs' attorneys. In exchange for, among other things, the dismissal with prejudice of these lawsuits and the release of claims by the unfiled claimants, the Company agreed to pay up to $28 million in settlement funds, which was expensed in the second quarter of 2010. The Company paid $13.9 million in November 2010 and made the final payment of $13.9 million in February 2011. Litigation concerning indemnification is pending and the Company may in the future become subject to further legal proceedings.

Product Liability

Like many other industrial companies who have historically operated in the U.S., the Company (or parties the Company is obligated to indemnify) continues to be named as one of many defendants in asbestos-related personal injury actions. We believe that the Company's involvement is limited because, in general, these claims relate to a few types of automotive friction products that were manufactured many years ago and contained encapsulated asbestos. The nature of the fibers, the encapsulation and the manner of use lead the Company to believe that these products are highly unlikely to cause harm. As of both March 31, 2012 and December 31, 2011, the Company had approximately 16,000 pending asbestos-related product liability claims, respectively. Of the approximately 16,000 outstanding claims at March 31, 2012, approximately half were pending in jurisdictions that have undergone significant tort and judicial reform activities subsequent to the filing of these claims.

The Company's policy is to vigorously defend against these lawsuits and the Company has been successful in obtaining dismissal of many claims without any payment. The Company expects that the vast majority of the pending asbestos-related product liability claims where it is a defendant (or has an obligation to indemnify a defendant) will result in no payment being made by the Company or its insurers. In 2012, of the approximately 800 claims resolved, 74 (9.3%) resulted in any payment being made to a claimant by or on behalf of the Company. In the full year of 2011, of the approximately 1,800 claims resolved, 288 (16%) resulted in any payment being made to a claimant by or on behalf of the Company.

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Prior to June 2004, the settlement and defense costs associated with all claims were paid by the Company's primary layer insurance carriers under a series of funding arrangements. In addition to the primary insurance available for asbestos-related claims, the Company has substantial excess insurance coverage available for potential future asbestos-related product claims. In June 2004, primary layer insurance carriers notified the Company of the alleged exhaustion of their policy limits.

A declaratory judgment action was filed in January 2004 in the Circuit Court of Cook County, Illinois by Continental Casualty Company and related companies (“CNA”) against the Company and certain of its other historical general liability insurers. The court has issued a number of interim rulings and discovery is continuing. CNA and the Company have entered into a settlement agreement resolving their coverage disputes, pursuant to which CNA will pay amounts over a four year period from 2011 - 2015 to the Company. The Company is vigorously pursuing the litigation against the remaining insurers.

Although it is impossible to predict the outcome of pending or future claims or the impact of tort reform legislation that may be enacted at the state or federal levels, due to the encapsulated nature of the products, the Company's experience in vigorously defending and resolving claims in the past, and the Company's significant insurance coverage with solvent carriers as of the date of this filing, management does not believe that asbestos-related product liability claims are likely to have a material adverse effect on the Company's results of operations, financial position or cash flows.

To date, the Company has paid and accrued $200.6 million in defense and indemnity in advance of insurers' reimbursement and has received $81.1 million in cash and notes from insurers, including CNA. The net balance of $119.5 million, is expected to be fully recovered, of which approximately $34.7 million is expected to be recovered within one year. Timing of recovery is dependent on final resolution of the declaratory judgment action referred to above or additional negotiated settlements. At December 31, 2011, insurers owed $109.8 million in association with these claims.

In addition to the $119.5 million net balance relating to past settlements and defense costs, the Company has estimated a liability of $64.1 million for claims asserted, but not yet resolved and their related defense costs at March 31, 2012. The Company also has a related asset of $64.1 million to recognize proceeds from the insurance carriers. Insurance carrier reimbursement of 100% is expected based on the Company's experience, its insurance contracts and decisions received to date in the declaratory judgment action referred to above. At December 31, 2011, the comparable value of the insurance asset and accrued liability was $61.7 million.

The amounts recorded in the Condensed Consolidated Balance Sheets related to the estimated future settlement of existing claims are as follows:

(millions of dollars)	March 31, 2012		December 31, 2011
Assets:
Prepayments and other current assets	$	28.9	$	28.8
Other non-current assets	35.2		32.9
Total insurance assets	$	64.1	$	61.7
Liabilities:
Accounts payable and accrued expenses	$	28.9	$	28.8
Other non-current liabilities	35.2		32.9
Total accrued liabilities	$	64.1	$	61.7

The Company cannot reasonably estimate possible losses, if any, in excess of those for which it has accrued, because it cannot predict how many additional claims may be brought against the Company (or parties the Company has an obligation to indemnify) in the future, the allegations in such claims, the possible outcomes, or the impact of tort reform legislation that may be enacted at the State or Federal levels.

30

NEW ACCOUNTING PRONOUNCEMENTS

In December 2011, the Financial Accounting Standards Board ("FASB") amended ASC Topic 210, "Balance Sheet," requiring companies to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective retrospectively for interim and annual periods beginning on or after January 1, 2013. The Company anticipates the adoption of this guidance will not have a material impact on the Consolidated Financial Statements.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Statements contained in this Form 10-Q (including Management's Discussion and Analysis of Financial Condition and Results of Operations) may contain forward-looking statements as contemplated by the 1995 Private Securities Litigation Reform Act (the "Act") that are based on management's current outlook, expectations, estimates and projections. Words such as "anticipates," "believes," "continues," "could," "designed," "effect," "estimates," "evaluates," "expects," "forecasts," "goal," "initiative," "intends," "outlook," "plans," "potential," "project," "pursue," "seek," "should," "target," "when," "would," variations of such words and similar expressions are intended to identify such forward-looking statements. All statements, other than statements of historical fact contained or incorporated by reference in this Form 10-Q, that we expect or anticipate will or may occur in the future regarding our financial position, business strategy and measures to implement that strategy, including changes to operations, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success and other such matters, are forward-looking statements. Accounting estimates are inherently forward-looking. These statements are based on assumptions and analysis made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.

You should not place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-Q. Forward-looking statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those expressed, projected or implied in or by the forward-looking statements. Such risks and uncertainties include: fluctuations in domestic or foreign vehicle production, the continued use by original equipment manufacturers of outside suppliers, fluctuations in demand for vehicles containing our products, changes in general economic conditions, as well as the other risks noted under Item 1A, "Risk Factors" within the Form 10-K for the fiscal year ended December 31, 2011 and in other reports that we file with the Securities and Exchange Commission. We do not undertake any obligation to update or announce publicly any updates to or revision to any of the forward-looking statements in this Form 10-Q to reflect any change in our expectations or any change in events, conditions, circumstances, or assumptions underlying the statements.

This section and the discussions contained in Item 1A, "Risk Factors," and in Item 7, subheading "Critical Accounting Policies" identified within the Form 10-K for the fiscal year ended December 31, 2011, are intended to provide meaningful cautionary statements for purposes of the safe harbor provisions of the Act. This should not be construed as a complete list of all of the economic, competitive, governmental, technological and other factors that could adversely affect our expected consolidated financial position, results of operations or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, operations, liquidity, financial condition and prospects.

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Item 3.Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes to the information concerning our exposures to market risk as stated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4.Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to provide reasonable assurance that the information required to be disclosed in the reports it files with the Securities and Exchange Commission is collected and then processed, summarized and disclosed within the time periods specified in the rules of the Securities and Exchange Commission. Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that these procedures are effective. There have been no changes in internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

33

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to a number of claims and judicial and administrative proceedings (some of which involve substantial amounts) arising out of the Company’s business or relating to matters for which the Company may have a contractual indemnity obligation. See Note 12 — Contingencies to the Condensed Consolidated Financial Statements for a discussion of environmental, product liability and other litigation, which is incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (Repurchases and Authorization of Equity Securities)

The Company's Board of Directors authorized the purchase of up to 19.8 million shares of the Company's common stock. As of March 31, 2012, the Company had repurchased 17,513,558 shares. All shares purchased under this authorization have been and will continue to be repurchased in the open market at prevailing prices and at times and in amounts to be determined by management as market conditions and the Company's capital position warrant. The Company may use Rule 10b5-1 plans to facilitate share repurchase. Repurchased shares will be deemed common stock held in treasury and may subsequently be reissued for general corporate purposes.

Employee transactions include restricted shares withheld to offset statutory minimum tax withholding that occurs upon vesting of restricted shares. The BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan provides that the withholding obligations be settled by the Company retaining stock that is part of the Award. Withheld shares will be deemed common stock held in treasury and may subsequently be reissued for general corporate purposes.

The following table provides information about the Company's purchases of its equity securities that are registered pursuant to Section 12 of the Exchange Act during the quarter ended March 31, 2012:

Issuer Repurchases of Equity Securities
Period	Total number of shares repurchased	Average price per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased
Month Ended February 29, 2012
Common Stock Repurchase Program	—	$	—	—	2,286,442
Employee transactions	228,415	$	76.60	—	—

____________

NOTE: No purchases were made in January or March 2012.

Item 6. Exhibits

Exhibit 10.1	Form of BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan Amended Performance Share Award Agreement
Exhibit 31.1	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer
Exhibit 31.2	Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer
Exhibit 32.1	Section 1350 Certifications

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BorgWarner Inc.
	(Registrant)
By	/s/ Robin J. Adams
	(Signature)
	Robin J. Adams
	Vice Chairman, Executive Vice President, Chief Administrative Officer and Interim Corporate Controller and Principal Accounting Officer

Date: April 26, 2012

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EX-10.1

EXHIBIT 10.1

BorgWarner Inc.

Amended and Restated 2004 Stock Incentive Plan

Amended Performance Share Award Agreement

You have been selected to receive a Performance Share Award under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan (the “Plan”), as specified below:

Participant: _________________________________

Address: ___________________________________________________________

Target Number of Performance Shares: _________________________________

Performance Period: [January 1, 2010 to December 31, 2012/ January 1, 2011 to December 31, 2013/ January 1, 2012 to December 31, 2014]

Performance Measure: Relative Increase in Total Shareholder Return Versus Market Cap Weighted Total Shareholder Return of Peer Group

THIS AMENDED AGREEMENT, effective [ ] (the "Effective Date"), represents the grant of Performance Shares by BorgWarner Inc., a Delaware corporation (the “Company”), to the Participant named above, pursuant to the provisions of the Plan. This amended agreement replaces and supersedes all prior Performance Share Award Agreements for the Performance Period specified in Section 1. All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1.Performance Period. The Performance Period commences on [January 1, 2010, and ends on December 31, 2012/ January 1, 2011, and ends on December 31, 2013/ January 1, 2012, and ends on December 31, 2014].

2.Value of Performance Shares. Each Performance Share shall represent and have a value equal to one share of common stock, par value $0.01, of the Company, subject to adjustment as provided in Section 4(e) of the Plan.

3.Performance Shares and Achievement of Performance Goal. The number of Performance Shares to be earned under this Agreement shall be based upon the Company's Total Shareholder Return as compared to the Total Shareholder Return of the Company's Peer Group (identified in Exhibit A) weighted by market capitalization (“Market Cap”) [Text of the 2010 Form of Agreement: “during the Performance Period.”] [Text of the2011 and 2012 Forms of Agreement: “at the beginning of the Performance Period.”]

For this purpose, “Total Shareholder Return” shall be determined as follows:

Total Shareholder=Change in Stock Price + Dividends Paid

Return (“TSR”)Beginning Stock Price

“Market Cap” shall be determined as follows: Stock Price x Shares Outstanding

[Text of the 2010 Form of Agreement:

'“Market Cap Weighted TSR of Peer Group” shall be determined as follows:

Market Cap Weighted = Change in Peer Group Market Cap + Total Dividends

TSR of Peer GroupTotal Peer Group Beginning Market Cap' ]

[Text of the 2011 and 2012 Forms of Agreement:

'“Market Cap Weighted TSR of Peer Group” shall be determined as the sum of each Peer Group Member's TSR multiplied by the ratio of the Peer Group Member's Beginning Market Cap to the Total Beginning Market Cap of the Peer Group

“Peer Group Member's Beginning Market Cap” shall mean the Market Cap at the beginning of the Performance Period

“Total Beginning Market Cap” shall mean the sum of the Peer Group Member's Beginning Market Cap' ]

“Beginning Stock Price” shall mean the closing price as reported on the New York Stock Exchange Composite Tape of one (1) share of stock on the last trading day immediately prior to the first day of the Performance Period. “Ending Stock Price” shall mean the closing price as reported on the New York Stock Exchange Composite Tape of one (1) share of stock for the last trading day immediately prior to the end of the Performance Period. “Change in Stock Price” shall mean the difference between the Ending Stock Price and the Beginning Stock Price. “Change in Peer Group Market Cap” shall mean the difference between the Ending Market Cap for the Peer Group and the Beginning Market Cap of the Peer Group. Finally, “Dividends Paid” shall mean the total of all dividends paid on one (1) share of stock during the Performance Period, provided that dividends shall be treated as though they are reinvested [Text of the 2010 Form of Agreement: “at the end of each calendar quarter.” ][Text of the 2011 and 2012 Forms of Agreement: “on their respective ex-dividend dates.”]

Following the calculation of BorgWarner's TSR and the Market Cap Weighted TSR of Peer Group, the relative increase is calculated as follows:

Relative Increase = BorgWarner TSR

Market Cap Weighted TSR of Peer Group

The percent of Target Number of Performance Shares earned shall then be determined based on the following chart:

Relative Increase	Company's Relative Increase Percentile Rank	Percent of Target Number of Performance Shares Earned
[141.1% 118.8% 112.5% 100.0% 87.5% 81.3% <81.3%	90th and above 75th 65th 50th 35th 25th Below 25th	200.000% 140.000% 100.000% 71.875% 43.750% 25.000% 0.000%]

The Committee shall have no discretion to increase the number of Performance Shares earned under this Agreement (or the amount payable with respect thereto) in excess of the number of Performance Shares determined under this Section 3 (taking into consideration any pro rata adjustment in the event the Committee waives the requirement that the Participant be employed by the Company through the end of the Performance Period, as provided in Section 4 hereof).

4.Termination Provisions. Except as provided in Section 11(a) of this Agreement and in the next paragraph, a Participant shall be eligible for payment of earned Performance Shares, as specified in Section 3, only if the Participant's employment with the Company continues through the end of the Performance Period [Additional text in the 2011 and 2012 Forms of Agreement: “and the Participant does not give notice of the Participant's voluntary Termination of Employment on or before the end of the Performance Period”].

If a Participant suffers a Disability, dies, is terminated involuntarily without Cause during the Performance Period, or in the event of the Participant's Retirement, the Committee, in its sole discretion, may waive the requirement that the Participant be employed by the Company through the end of the Performance Period. In such a case, the Participant (or in the event of the Participant's death, the Participant's beneficiary) shall be eligible for all or that proportion of the number of Performance Shares earned under Section 3 (determined at the end of the Performance Period and based on actual results) that his number of full months of participation during the Performance Period bears to the total number of months in the Performance Period.

In the event of the Participant's Termination of Employment for Cause [Additional text in the 2011 and 2012 Forms of Agreement: “, the Participant's giving of notice of voluntary Termination of Employment or the Participant's actual] or voluntary Termination of Employment during the Performance Period, or if the Committee does not exercise its discretion to waive the requirement that the Participant be employed by the Company through the end of the Performance Period in the event of the Participant's Termination of Employment by reason of the Participant's death, Disability, involuntary termination without Cause, or Retirement prior to the close of the Performance Period, the Participant shall forfeit this entire award, with no payment to the Participant. The Participant's transfer of employment to the Company or any Subsidiary from another Subsidiary or the Company during the Performance Period shall not constitute a Termination of Employment.

5.Dividends. The Participant shall have no right to any dividends which may be paid with respect to shares of Stock until any such shares are delivered to the Participant following the completion of the Performance Period.

6.Form and Timing of Payment of Performance Shares. The earned Performance Shares shall be paid out one hundred percent (100%) in Stock. Payment of earned Performance Shares shall be made as soon as administratively practicable in the year after the year in which the Performance Period ends, but in any event, no later than March 15 of the year following the year in which the Performance Period ends.

7.Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require the Participant or beneficiary to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Agreement. At the request of the Company, the Participant will adopt a written plan that satisfies the requirements of Rule 10b5-1(c) promulgated under the Securities Exchange Act of 1934 under which the Participant directs the sale of Performance Shares sufficient to satisfy federal, state, and local tax withholding requirements, with the sale to occur on the date the Performance Shares are paid under Section 6, provided that at the time of the Company's request the Participant is not aware of material non-public information about the Company and the Participant is not subject to any blackout period.

8.Nontransferability. Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

9.Administration. This Agreement and the rights of the Participant hereunder are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant. Any inconsistency between the Agreement and the Plan shall be resolved in favor of the Plan.

10.Specific Restrictions Upon Shares. The Participant hereby agrees with the Company as follows:

(a) The Participant shall acquire the shares of Stock issuable with respect to the Performance Shares granted hereunder for investment purposes only and not with a view to resale or other distribution thereof to the public in violation of the Securities Act of 1933, as amended (the “1933 Act”), and shall not dispose of any such Stock in transactions which, in the opinion of counsel to the Company, violate the 1933 Act, or the rules and regulations thereunder, or any applicable state securities or “blue sky” laws.

(b) If any shares of Stock acquired with respect to the Performance Shares shall be registered under the 1933 Act, no public offering (otherwise than on a national securities exchange, as defined in the Exchange Act) of any such Stock shall be made by the Participant under such circumstances that he or she (or such other person) may be deemed an underwriter, as defined in the 1933 Act; and

(c) The Company shall have the authority to endorse upon the certificate or certificates representing the Shares acquired hereunder such legends referring to the foregoing restrictions.

11.Miscellaneous.

(a) Change in Control. As provided by Section 12 of the Plan, in the event of a Change in Control, the restrictions applicable to the Performance Shares granted under this Agreement that remain outstanding as of the date of the Change of Control shall lapse, the Performance Goal shall be deemed to have achieved at target level, and all other terms and conditions shall be deemed to have been satisfied. In the event that the Performance Period is shortened due to a Change in Control, the amount of the Performance Shares deemed earned shall be prorated by multiplying the Target Number of Performance Shares by a fraction, the numerator of which is the actual number of whole months in the shortened Performance Period and the denominator of which is the number of whole months in the original Performance Period. Subject to Section 11(h) of this Agreement, payment shall be made in Stock or cash, at the discretion of the Committee, within thirty (30) days following the effective date of the Change in Control.

(b) Adjustments to Shares. Subject to Plan Section 4(e), in the event of any merger, reorganization, recapitalization, stock dividend, stock split, extraordinary distribution with respect to the Stock or other change in corporate structure affecting the Stock, the Committee or Board of Directors of the Company may make such substitution or adjustments in the aggregate number and kind of shares of Stock subject to this Performance Share Award as it may determine, in its sole discretion, to prevent dilution or enlargement of rights.

(c) Notices. Any written notice required or permitted under this Agreement shall be deemed given when delivered personally, as appropriate, either to the Participant or to the Executive Compensation Department of the Company, or when deposited in a United States Post Office as registered mail, postage prepaid, addressed, as appropriate, either to the Participant at his or her address set forth above or such other address as he or she may designate in writing to the Company, or to the Attention: Executive Compensation, BorgWarner Inc., at its headquarters office or such other address as the Company may designate in writing to the Participant.

(d) Failure To Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

(e) Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed according to the internal law, and not the law of conflicts, of the State of Delaware, except that questions concerning the relative rights of the Company and the Participant with respect to Shares, shall be governed by the corporate law of the State of Delaware.

(f) Provisions of Plan. The Performance Shares provided for herein are granted pursuant to the Plan, and said Performance Shares and this Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement solely by reference or expressly cited herein. If there is any inconsistency between the terms of this Agreement and the terms of the Plan, the Plan's terms shall completely supersede and replace the conflicting terms of this Agreement.

(g) Code section 162(m). It is intended that payments pursuant to this Agreement to a Participant who is a “covered employee” within the meaning of section 162(m) of the Internal Revenue Code constitute “qualified performance-based compensation” within the meaning of section 1.162.27(e) of the Income Tax Regulations. To the maximum extent possible, this Agreement and the Plan shall be so interpreted and construed. Except in the case of a Change in Control, no amounts in excess of the number of Performance Shares earned under Section 3 of this Agreement (determined at the end of the Performance Period and based on actual results) shall be paid to the Participant. There shall be no waiver by the Committee of any payment limitations in the event of the Participant's Retirement pursuant to Section 11(b)(iii) of the Plan.

(h) Section 16 Compliance. If the Participant is subject to Section 16 of the Exchange Act, except in the case of death or disability, at least six months must elapse from the date of acquisition of the Performance Shares granted hereunder to the date of the Participant's disposition of such Performance Shares or the underlying shares of Stock.

(i) Year. All references to “year” in this Agreement refer to the calendar year.

IN WITNESS WHEREOF, the Company has executed this Agreement in duplicate on the Effective Date.

BORGWARNER INC.

    By: _______________________

The undersigned hereby accepts, and agrees to, all terms and provisions of the forgoing Agreement.

__________________________

Exhibit A

BorgWarner Inc.

Amended and Restated 2004 Stock Incentive Plan

Amended Performance Share Award Agreement

Peer Group Companies

[American Axle

ArvinMeritor, Inc.

Autoliv, Inc.

Gentex

Johnson Controls, Inc.

Lear Corporation

Magna International, Inc.

Modine Manufacturing Co.

Tenneco Automotive, Inc.

TRW

[Additional text in the 2011 and 2012 Forms of Agreement: "Visteon Corporation"]]

EX-31.1

EXHIBIT 31.1

Certification of the Principal Executive Officer

Pursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Timothy M. Manganello, certify that:

1. I have reviewed this quarterly report on Form10-Q of BorgWarner Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: April 26, 2012

/s/   Timothy M. Manganello

Timothy M. Manganello

Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of the Principal Financial Officer

Pursuant to 15 U.S.C. 78m(a) or 78o(d)

(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Ronald T. Hundzinski, certify that:

1. I have reviewed this quarterly report on Form10-Q of BorgWarner Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting

Date: April 26, 2012

/s/   Ronald T. Hundzinski

Ronald T. Hundzinski

Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report of BorgWarner Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012 (the “Report”), each of the undersigned officers of the Company certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of such officer's knowledge:

(1)  the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 26, 2012

/s/   Timothy M. Manganello

Timothy M. Manganello

Chairman and Chief Executive Officer

/s/   Ronald T. Hundzinski

Ronald T. Hundzinski

Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to BorgWarner Inc. and will be retained by BorgWarner Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Fair Value Measurements (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2011
Assets:
Assets, Valuation Techniques	A	A
Fair Value Assets Measured on Recurring Basis Other Assets Assets Valuation Techniques	C	C
Liabilities:
Liabilities, Valuation Techniques	A	A
Fair Value, Inputs, Level 1 [Member]
Assets:
Foreign currency contracts	0	0
Insurance settlement agreement note receivable	0	0
Liabilities:
Foreign currency contracts	0	0
Commodity contracts	0
Net investment hedge contracts	0	0
Fair Value, Inputs, Level 2 [Member]
Assets:
Foreign currency contracts	2.6	2.7
Insurance settlement agreement note receivable	11.5	21.3
Liabilities:
Foreign currency contracts	1.8	2.9
Commodity contracts	0.1
Net investment hedge contracts	70.0	85.0
Fair Value, Inputs, Level 3 [Member]
Assets:
Foreign currency contracts	0	0
Insurance settlement agreement note receivable	0	0
Liabilities:
Foreign currency contracts	0	0
Commodity contracts	0
Net investment hedge contracts	0	0
Estimate of Fair Value, Fair Value Disclosure [Member]
Assets:
Foreign currency contracts	2.6	2.7
Insurance settlement agreement note receivable	11.5	21.3
Liabilities:
Foreign currency contracts	1.8	2.9
Commodity contracts	0.1
Net investment hedge contracts	70.0	85.0

XML

Earnings Per Share (Details) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$ 158.0	$ 124.5
Weighted average shares of common stock outstanding	108,420	110,634
Earnings per share - basic	$ 1.46	$ 1.13
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	158.0	124.5
Adjustment for net interest expense on convertible notes	5.0	5.2
Diluted net earnings attributable to BorgWarner Inc.	$ 163.0	$ 129.7
Weighted average shares of common stock outstanding	108,420	110,634
Effect of 3.50% convertible notes	11,389	11,389
Effect of warrant	5,813	5,416
Effect of stock-based compensation	2,120	2,785
Total dilutive effect on weighted average shares of common stock outstanding	19,322	19,590
Weighted average shares of common stock outstanding including dilutive shares	127,742	130,224
Earnings per share - diluted	$ 1.28	$ 1.00
Debt Instrument, Interest Rate, Stated Percentage	3.50%	3.50%
Warrant Exercise Price	$ 38.61	$ 38.61
Bond Hedge Per Share Price	$ 32.82	$ 32.82
Bond hedge [Member]
Diluted earnings per share:
Anti-dilutive securities	6,650	6,312

XML

Research and Development (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Research and Development
Gross R&D expenditures	$ 76.2	$ 69.1
Customer reimbursements	(8.5)	(8.1)
Net R&D expenditures	$ 67.7	$ 61.0
Maximum value of R&D contract	5.00%	5.00%

XML

Notes Payable and Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2012

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

As of March 31, 2012 and December 31, 2011, the Company had short-term and long-term debt outstanding as follows:

	March 31,		December 31,
(millions of dollars)	2012		2011
Short-term debt
Short-term borrowings	$	104.2	$	116.3
Receivables securitization	80.0		80.0
Total short-term debt	$	184.2	$	196.3
Long-term debt
3.50% Convertible senior notes due 04/15/12	$	370.6	$	368.5
5.75% Senior notes due 11/01/16 ($150 million par value)	149.5		149.5
8.00% Senior notes due 10/01/19 ($134 million par value)	133.9		133.9
4.625% Senior notes due 09/15/20 ($250 million par value)	247.7		247.7
7.125% Senior notes due 02/15/29 ($121 million par value)	119.3		119.3
Multi-currency revolving credit facility	170.0		70.0
Term loan facilities & other	11.7		19.8
Unamortized portion of debt derivatives	23.1		24.1
Total long-term debt	1,225.8		1,132.8
Less: current portion	377.1		381.5
Long-term debt, net of current portion	$	848.7	$	751.3

Total interest expense related to the convertible notes in the Company's Consolidated Statement of Operations

The total interest expense related to the convertible senior notes in the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 is as follows:

	Three Months Ended March 31,
(millions of dollars)	2012		2011
Interest expense	$	7.6	$	8.0
Non-cash portion	$	4.4	$	4.8

XML

Financial Instruments - Income Statement (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		3 Months Ended		3 Months Ended												3 Months Ended				3 Months Ended
	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Foreign Currency Contract [Member]	Dec. 31, 2011 Foreign Currency Contract [Member]	Mar. 31, 2012 Foreign Currency Contract [Member] Sales [Member]	Mar. 31, 2011 Foreign Currency Contract [Member] Sales [Member]	Mar. 31, 2012 Foreign Currency Contract [Member] Selling General And Administrative Expenses [Member]	Mar. 31, 2011 Foreign Currency Contract [Member] Selling General And Administrative Expenses [Member]	Mar. 31, 2012 Foreign Currency Contract [Member] Selling General And Administrative Expenses Two [Member]	Mar. 31, 2011 Foreign Currency Contract [Member] Selling General And Administrative Expenses Two [Member]	Mar. 31, 2012 Foreign Currency Contract [Member] Cost of Sales [Member]	Mar. 31, 2011 Foreign Currency Contract [Member] Cost of Sales [Member]	Mar. 31, 2012 Foreign Currency Contract [Member] Selling General And Administrative Expenses One [Member]	Mar. 31, 2011 Foreign Currency Contract [Member] Selling General And Administrative Expenses One [Member]	Mar. 31, 2012 Commodity Contract [Member]	Dec. 31, 2011 Commodity Contract [Member]	Mar. 31, 2012 Commodity Contract [Member] Cost of Sales [Member]	Mar. 31, 2011 Commodity Contract [Member] Cost of Sales [Member]	Mar. 31, 2012 Net Investment Hedge [Member]	Dec. 31, 2011 Net Investment Hedge [Member]	Mar. 31, 2012 Currency Swap [Member] Interest Expense [Member]	Mar. 31, 2011 Currency Swap [Member] Interest Expense [Member]
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income, Effective Portion, Net [Abstract]
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	$ (64.6)	$ (79.5)	$ 0.4	$ (0.6)											$ (0.1)	$ 0			$ (64.9)	$ (78.9)
Gain (loss) expected to be reclassified in one year or less	0.5		0.6												(0.1)				0
Derivatives Designated As Net Investment Hedges Under Topic 815 Abstract
Gain (loss) reclassified from accumulated OCI into net income, effective portion, net					0.3	(0.2)	0	0.2			0.4	(0.1)					0	0			0	0
Gain (loss) recognized in net income, ineffective portion and amount excluded from effectiveness testing, net							0	0	0	0			0	0			0	0			0.9	2.0
Derivative Instruments Not Designated as Hedging Instruments [Abstract]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ 0

XML

Product Warranty (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Product warranty rollforward
Beginning balance	$ 72.7	$ 66.8
Acquisition	0	4.5
Provisions	10.0	15.6
Payments	(7.9)	(15.0)
Translation adjustment	1.9	2.7
Ending balance	76.7	74.6
Product warranty liability
Accounts payable and accrued expenses	42.7		38.6
Other non-current liabilities	34.0		34.1
Total product warranty liability	$ 76.7	$ 74.6
Minimum warranty term (in years)	1
Maximum warranty term (in years)	3

XML

Reporting Segments (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012		Mar. 31, 2011	Dec. 31, 2011
Net Sales by Reporting Segment
Segment Reporting, Entity Consolidated Revenue	$ 1,912.5		$ 1,730.4
Adjusted earnings before interest, income taxes and noncontrolling interest
Adjusted EBIT	271.0		218.1
Corporate, including equity in affiliates' earnings and stock-based compensation	36.1		30.4
Interest income	(1.4)		(1.0)
Interest expense and finance charges	15.1		18.4
Earnings before income taxes and noncontrolling interest	221.2		170.3
Provision for income taxes	57.5		40.9
Net earnings	163.7		129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7		4.9
Net earnings attributable to BorgWarner Inc.	158.0		124.5
Segment Reporting Information - Assets
Total assets	6,281.3			5,958.6
Operating Segments [Member]
Segment Reporting Information - Assets
Total assets	5,169.4			4,891.8
Engine [Member]
Net Sales by Reporting Segment
Segment Reporting, Entity Consolidated Revenue	1,308.2		1,249.4
Adjusted earnings before interest, income taxes and noncontrolling interest
Adjusted EBIT	209.8		186.1
Segment Reporting Information - Assets
Total assets	3,495.9			3,329.0
Drivetrain [Member]
Net Sales by Reporting Segment
Segment Reporting, Entity Consolidated Revenue	611.4		486.4
Adjusted earnings before interest, income taxes and noncontrolling interest
Adjusted EBIT	61.2		32.0
Segment Reporting Information - Assets
Total assets	1,673.5			1,562.8
Business Intersegment, Eliminations [Member]
Net Sales by Reporting Segment
Segment Reporting, Entity Consolidated Revenue	(7.1)		(5.4)
Corporate [Member]
Segment Reporting Information - Assets
Total assets	$ 1,111.9	[1]		$ 1,066.8	[1]

[1] Corporate assets include investments and advances and deferred income taxes

XML

Inventories

3 Months Ended

Mar. 31, 2012

Inventory Disclosure [Abstract]

Inventories

Inventories, net

Inventories are valued at the lower of cost or market. The cost of U.S. inventories is determined by the last-in, first-out (“LIFO”) method, while the operations outside the U.S. use the first-in, first-out (“FIFO”) or average-cost methods. Inventories consisted of the following:

	March 31,			December 31,
(millions of dollars)	2012			2011
Raw material and supplies	$	272.0		$	254.4
Work in progress	94.9			90.9
Finished goods	131.2			124.3
FIFO inventories	498.1			469.6
LIFO reserve	(17.3		)	(15.3		)
Inventories, net	$	480.8		$	454.3

XML

Retirement Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		3 Months Ended
	Mar. 31, 2012	Dec. 31, 2012	Mar. 31, 2012 United States Pension Plans of US Entity, Defined Benefit [Member]	Mar. 31, 2011 United States Pension Plans of US Entity, Defined Benefit [Member]	Mar. 31, 2012 Foreign Pension Plans, Defined Benefit [Member]	Mar. 31, 2011 Foreign Pension Plans, Defined Benefit [Member]	Mar. 31, 2012 Other Postretirement Benefit Plans, Defined Benefit [Member]	Mar. 31, 2011 Other Postretirement Benefit Plans, Defined Benefit [Member]	Dec. 31, 2012 Minimum [Member]	Dec. 31, 2012 Maximum [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Estimated Future Employer Contributions in Next Fiscal Year									$ 30	$ 40
Actual contribution to defined benefit pension plans	4.7
Settlement Agreement For Cash Contribution To Plan		15
Components of net periodic benefit cost:
Service cost			0	0	2.3	2.5	0.1	0.2
Interest cost			3.6	4.0	4.4	4.6	2.6	2.9
Expected return on plan assets			(4.7)	(5.2)	(2.3)	(2.8)	0	0
Amortization of unrecognized prior service benefit			(0.2)	(0.1)	0	0	(1.6)	(1.7)
Amortization of unrecognized loss			2.0	1.6	0.3	0.2	1.7	2.0
Net periodic benefit cost			$ 0.7	$ 0.3	$ 4.7	$ 4.5	$ 2.8	$ 3.4

XML

Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options Activity

Stock options A summary of the Plans’ shares under option for the three months ended March 31, 2012 is as follows:

	Shares under option (thousands)		Weighted average exercise price		Weighted average remaining contractual life (in years)	Aggregate intrinsic value (in millions)
Outstanding and exercisable at December 31, 2011	2,220		$	29.36	4.1	$	76.3
Exercised	(602	)	$	26.97
Outstanding and exercisable at March 31, 2012	1,618		$	30.19	4.0	$	87.6

Allocation of Share-based Compensation Costs by Plan

Restricted stock compensation expense recorded in the Condensed Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
(millions of dollars, except per share data)	2012		2011
Restricted stock compensation expense	$	4.7	$	2.9
Restricted stock compensation expense, net of tax	$	3.5	$	2.2

Nonvested Restricted Stock Activity

A summary of the Company’s nonvested restricted stock for the three months ended March 31, 2012 is as follows:

	Shares subject to restriction (thousands)		Weighted average price
Nonvested at December 31, 2011	1,430		$	39.02
Granted	327		$	78.27
Vested	(631	)	$	26.42
Forfeited	(23	)	$	42.49
Nonvested at March 31, 2012	1,103		$	57.79

XML

Retirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs

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

	Pension benefits												Other post employment benefits
(millions of dollars)	2012						2011						2012			2011
Three Months Ended March 31,	US			Non-US			US			Non-US
Service cost	$	—		$	2.3		$	—		$	2.5		$	0.1		$	0.2
Interest cost	3.6			4.4			4.0			4.6			2.6			2.9
Expected return on plan assets	(4.7		)	(2.3		)	(5.2		)	(2.8		)	—			—
Amortization of unrecognized prior service benefit	(0.2		)	—			(0.1		)	—			(1.6		)	(1.7		)
Amortization of unrecognized loss	2.0			0.3			1.6			0.2			1.7			2.0
Net periodic benefit cost	$	0.7		$	4.7		$	0.3		$	4.5		$	2.8		$	3.4

XML

Stock Based Compensation (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended			3 Months Ended		12 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011	Mar. 31, 2012 Restricted Stock [Member]	Mar. 31, 2011 Restricted Stock [Member]	Dec. 31, 2011 Performance Share Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awarding of performance shares earned payable in cash						40.00%
Number of shares authorized for grant	12,500,000
Shares available for future issuance	1,911,768
Options Roll Forward
Shares outstanding under option, Beginning Balance	2,220,000
Weighted average exercise price, Beginning Balance	$ 29.36
Shares outstanding under option, Exercised	(602,000)
Shares outstanding under option, Exercised, Weighted average exercise price	$ 26.97
Shares outstanding under option, Ending Balance	1,618,000
Weighted average exercise price, Ending Balance	$ 30.19
Weighted average remaining contractual term	4.0		4.1
Aggregate intrinsic value, outstanding	$ 87.6		$ 76.3
Restricted stock compensation expense
Restricted stock expense				4.7	2.9
Restricted stock expense, net of tax				3.5	2.2
Status of nonvested restricted stock
Nonvested shares subject to restriction, Beginning Balance	1,430,000
Nonvested shares subject to restriction, weighted average exercise price	$ 39.02
Restricted shares granted to employees	327,000			326,638
Granted shares subject to restriction, weighted average exercise price	$ 78.27
Shares subject to restriction, Vested	(631,000)
Vested shares subject to restriction, weighted average exercise price	$ 26.42
Shares subject to restriction, Forfeited	(23,000)
Forfeited shares subject to restriction, weighted average exercise price	$ 42.49
Nonvested shares subject to restriction, Ending Balance	1,103,000
Nonvested shares subject to restriction, weighted average exercise price	$ 57.79
Awarding of performance shares earned payable in common stock						60.00%
Performance Share Plan Expense Associated with Liability		$ 10.6

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Contingencies (Tables)

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Estimated future settlement of existing claims

The amounts recorded in the Condensed Consolidated Balance Sheets related to the estimated future settlement of existing claims are as follows:

(millions of dollars)	March 31, 2012		December 31, 2011
Assets:
Prepayments and other current assets	$	28.9	$	28.8
Other non-current assets	35.2		32.9
Total insurance assets	$	64.1	$	61.7
Liabilities:
Accounts payable and accrued expenses	$	28.9	$	28.8
Other non-current liabilities	35.2		32.9
Total accrued liabilities	$	64.1	$	61.7

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share Reconciliation

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

	Three Months Ended March 31,
(in millions, except per share amounts)	2012		2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Weighted average shares of common stock outstanding	108.420		110.634
Basic earnings per share of common stock	$	1.46	$	1.13
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Adjustment for net interest expense on convertible notes	5.0		5.2
Diluted net earnings attributable to BorgWarner Inc.	$	163.0	$	129.7
Weighted average shares of common stock outstanding	108.420		110.634
Effect of 3.50% convertible senior notes	11.389		11.389
Effect of warrant	5.813		5.416
Effect of stock-based compensation	2.120		2.785
Total dilutive effect on weighted average shares of common stock outstanding	19.322		19.590
Weighted average shares of common stock outstanding including dilutive shares	127.742		130.224
Diluted earnings per share of common stock	$	1.28	$	1.00
Total anti-dilutive shares:
Call options	6.650		6.312

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Income Taxes

3 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

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.

At March 31, 2012, the Company's annual effective tax rate is estimated to be 26%. The Company's annual effective tax rate was estimated to be 24% at March 31, 2011. These rates differ from the U.S. statutory rate primarily due to foreign rates which differ from those in the U.S., the realization of certain business tax credits, including foreign tax credits, and favorable permanent differences between book and tax treatment for certain items, including equity in affiliates' earnings. The estimated annual effective tax rate for 2012 is higher than the estimated annual effective tax rate for 2011 primarily due to the Company's increased profitability in higher taxed jurisdictions.

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Reporting Segments (Tables)

3 Months Ended

Mar. 31, 2012

Segment Reporting [Abstract]

Net Sales by Reporting Segment

Net Sales by Reporting Segment

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	1,308.2		$	1,249.4
Drivetrain	611.4			486.4
Inter-segment eliminations	(7.1		)	(5.4		)
Net sales	$	1,912.5		$	1,730.4

Segment Earnings Before Interest and Income Taxes

Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest (“Adjusted EBIT”)

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	209.8		$	186.1
Drivetrain	61.2			32.0
Adjusted EBIT	271.0			218.1
Corporate, including equity in affiliates' earnings and stock-based compensation	36.1			30.4
Interest income	(1.4		)	(1.0		)
Interest expense and finance charges	15.1			18.4
Earnings before income taxes and noncontrolling interest	221.2			170.3
Provision for income taxes	57.5			40.9
Net earnings	163.7			129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7			4.9
Net earnings attributable to BorgWarner Inc.	$	158.0		$	124.5

Segment assets

Total Assets

(millions of dollars)	March 31, 2012		December 31, 2011
Engine	$	3,495.9	$	3,329.0
Drivetrain	1,673.5		1,562.8
Total	5,169.4		4,891.8
Corporate (a)	1,111.9		1,066.8
Total assets	$	6,281.3	$	5,958.6

____________________________________

(a) Corporate assets include investments and advances and deferred income taxes

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Financial Instruments (Details) In Millions, unless otherwise specified	Mar. 31, 2012 USD ($)	Mar. 31, 2012 Maturity October 2019 Currency Swap [Member] USD ($)	Mar. 31, 2012 Maturity October 2019 Currency Swap [Member] EUR (€)	Dec. 31, 2011 Maturity October 2019 Currency Swap [Member] USD ($)	Dec. 31, 2011 Maturity October 2019 Currency Swap [Member] EUR (€)	Mar. 31, 2012 Maturity November 2016 Currency Swap [Member] USD ($)	Mar. 31, 2012 Maturity November 2016 Currency Swap [Member] JPY (¥)	Dec. 31, 2011 Maturity November 2016 Currency Swap [Member] USD ($)	Dec. 31, 2011 Maturity November 2016 Currency Swap [Member] JPY (¥)	Mar. 31, 2012 Natural Gas [Member] Maturity December 2012	Dec. 31, 2011 Natural Gas [Member] Maturity December 2012	Mar. 31, 2012 Functional Currency British Pound Maturity December 2013 EUR (€)	Dec. 31, 2011 Functional Currency British Pound Maturity December 2013 EUR (€)	Mar. 31, 2012 Functional Currency Euro Maturity December 2012 GBP (£)	Mar. 31, 2012 Functional Currency Euro Maturity December 2012 HUF	Mar. 31, 2012 Functional Currency Euro Maturity December 2012 JPY (¥)	Mar. 31, 2012 Functional Currency Euro Maturity December 2012 PLN	Dec. 31, 2011 Functional Currency Euro Maturity December 2012 GBP (£)	Dec. 31, 2011 Functional Currency Euro Maturity December 2012 HUF	Dec. 31, 2011 Functional Currency Euro Maturity December 2012 JPY (¥)	Dec. 31, 2011 Functional Currency Euro Maturity December 2012 PLN	Mar. 31, 2012 Functional Currency Euro Maturity January 2013 USD ($)	Dec. 31, 2011 Functional Currency Euro Maturity January 2013 USD ($)	Mar. 31, 2012 Functional Currency Japanese Yen Maturity December 2012 USD ($)	Dec. 31, 2011 Functional Currency Japanese Yen Maturity December 2012 USD ($)	Mar. 31, 2012 Functional Currency Korean Won Maturity December 2012 EUR (€)	Dec. 31, 2011 Functional Currency Korean Won Maturity December 2012 EUR (€)	Mar. 31, 2012 Functional Currency Korean Won Maturity December 2013 EUR (€)	Dec. 31, 2011 Functional Currency Korean Won Maturity December 2013 EUR (€)	Mar. 31, 2012 Functional Currency Mexican Peso Maturity December 2012 USD ($)	Dec. 31, 2011 Functional Currency Mexican Peso Maturity December 2012 USD ($)	Mar. 31, 2012 Functional Currency Mexican Peso Maturity Of Derivatives Period Four [Member] EUR (€)	Dec. 31, 2011 Functional Currency Mexican Peso Maturity Of Derivatives Period Four [Member] EUR (€)	Mar. 31, 2012 Functional Currency Swedish Krona Maturity December 2012 EUR (€)	Dec. 31, 2011 Functional Currency Swedish Krona Maturity December 2012 EUR (€)	Mar. 31, 2012 Functional Currency US Dollar Maturity December 2012 EUR (€)	Dec. 31, 2011 Functional Currency US Dollar Maturity December 2012 EUR (€)	Mar. 31, 2012 Functional Currency US Dollar Maturity Of Derivatives Period Four [Member] JPY (¥)	Dec. 31, 2011 Functional Currency US Dollar Maturity Of Derivatives Period Four [Member] JPY (¥)
Derivative [Line Items]
Derivative Contract With Credit Risk Contingent Features	$ 0
Notional Amount of Derivatives, Total [Abstract]
Notional amount of cross currency swaps		75.0	58.5	75.0	58.5	150.0	17,581.5	150.0	17,581.5
Commodity derivative contracts outstanding [Abstract]
Commodity volume hedged (in Metric tons/MMBTu)										264,311	0
Foreign exchange derivative contracts outstanding [Abstract]
Notional Amount of Foreign Currency Derivatives												€ 55.8	€ 64.8	£ 5.6	4,050.0	¥ 1,809.7	24.5	£ 7.0	5,400.0	¥ 0	24.5	$ 14.7	$ 16.1	$ 5.8	$ 7.4	€ 10.6	€ 2.4	€ 34.5	€ 34.5	$ 30.9	$ 40.7	€ 5.3	€ 9.2	€ 5.1	€ 6.1	€ 2.3	€ 3.0	¥ 3,000.0	¥ 3,000.0
Number of Fixed to Floating Interest Rate Swap Contracts	0

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash	$ 396.9	$ 359.6
Receivables, net	1,369.4	1,183.0
Inventories, net	480.8	454.3
Deferred income taxes	69.6	58.5
Prepayments and other current assets	93.3	82.4
Total current assets	2,410.0	2,137.8
Property, plant and equipment, net	1,696.4	1,664.3
Investments and advances	345.6	345.3
Goodwill	1,200.5	1,186.2
Other non-current assets	628.8	625.0
Total assets	6,281.3	5,958.6
LIABILITIES AND EQUITY
Notes payable and other short-term debt	184.2	196.3
Current portion of long-term debt	377.1	381.5
Accounts payable and accrued expenses	1,291.3	1,297.8
Income taxes payable	28.6	29.8
Total current liabilities	1,881.2	1,905.4
Long-term debt	848.7	751.3
Other non-current liabilities:
Retirement-related liabilities	457.5	457.0
Other	373.1	391.9
Total other non-current liabilities	830.6	848.9
Common stock	1.2	1.2
Capital in excess of par value	1,205.0	1,134.3
Retained earnings	2,268.3	2,110.3
Accumulated other comprehensive (loss)	(94.8)	(150.8)
Common stock held in treasury	(721.7)	(707.1)
Total BorgWarner Inc. stockholders' equity	2,658.0	2,387.9
Noncontrolling interest	62.8	65.1
Total equity	2,720.8	2,453.0
Total liabilities and equity	$ 6,281.3	$ 5,958.6

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Contingencies (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended			12 Months Ended		24 Months Ended
	Jul. 31, 2010	Mar. 31, 2012	Mar. 31, 2011	Jun. 30, 2010	Dec. 31, 2010	Dec. 31, 2008	Dec. 31, 2008	Dec. 31, 2011	Feb. 28, 2011	Nov. 30, 2010
Contingencies (Textuals) [Abstract]
Loss as a result of the September 2008 DTP ruling						$ 4.0
Waste disposal sites with potential liability under the Comprehensive Environmental Response, Compensation and Liability Act		38
Accrual for indicated environmental liabilities		6.7						10.4
Timeframe most environmental liabilities will be paid out			5
Number of plaintiffs included in lawsuits in 2007 and 2008							340
Number of unfiled claimants settled in July 2010	2,700
Amount agreed to pay against settlement of unfiled claimants				28.0
First Settlement Payment Made										13.9
Final Settlement Payment Due									13.9
Pending asbestos related product liability claims		16,000						16,000
Claims resolved		800			1,800
Payment being made to a claimant by or on behalf of the company		74			288
Payment being made to a claimant by or on behalf of the company, percentage		9.30%			16.00%
Company paid in defense and indemnity in advance of insurers reimbursement		200.6
Cash and notes received from insurers		81.1
Outstanding balance to be fully recovered		119.5						109.8
Outstanding balance expected to be recovered in the next twelve months		34.7
Insurance carrier reimbursement		100.00%
Estimated future settlement of existing claims [Member]
Assets:
Prepayments and other current assets		28.9						28.8
Other non-current assets		35.2						32.9
Total insurance assets		64.1						61.7
Liabilities:
Accounts payable and accrued expenses		28.9						28.8
Other non-current liabilities		35.2						32.9
Total accrued liabilities		$ 64.1						$ 61.7

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Basis of Presentation

3 Months Ended

Mar. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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 presentation of results have been included. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The balance sheet as of December 31, 2011 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, 2011.

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.

The Company retrospectively adopted the amendment to Accounting Standards Codification ("ASC") Topic 220, "Comprehensive Income," which requires companies to separately disclose reclassifications from other comprehensive income into net income on the face of the financial statements. Prior year balances within the Condensed Consolidated Statement of Comprehensive Income conform to this requirement.

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Inventories (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Inventory Disclosure [Abstract]
Raw material and supplies	$ 272.0	$ 254.4
Work in progress	94.9	90.9
Finished goods	131.2	124.3
FIFO inventories	498.1	469.6
LIFO reserve	(17.3)	(15.3)
Inventories, net	$ 480.8	$ 454.3

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Inventories (Tables)

3 Months Ended

Mar. 31, 2012

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventories consisted of the following:

	March 31,			December 31,
(millions of dollars)	2012			2011
Raw material and supplies	$	272.0		$	254.4
Work in progress	94.9			90.9
Finished goods	131.2			124.3
FIFO inventories	498.1			469.6
LIFO reserve	(17.3		)	(15.3		)
Inventories, net	$	480.8		$	454.3

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Property, Plant and Equipment (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Dec. 31, 2011
Property Plant and Equipment
Total property, plant and equipment	$ 2,976.7		$ 2,903.9
Less accumulated depreciation	(1,385.0)		(1,343.9)
Property, plant and equipment - net of accumulated depreciation	1,591.7		1,560.0
Tooling, net of amortization	104.7		104.3
Property, plant and equipment - net	1,696.4		1,664.3
Accounts payable related to property, plant and equipment purchases	27.6		48.9
Capitalized interest costs	4.5	3.0
Land and Building [Member]
Property Plant and Equipment
Total property, plant and equipment	697.1		687.9
Machinery and Equipment [Member]
Property Plant and Equipment
Total property, plant and equipment	2,084.4		2,006.9
Assets Held under Capital Leases [Member]
Property Plant and Equipment
Total property, plant and equipment	2.4		2.3
Construction in Progress [Member]
Property Plant and Equipment
Total property, plant and equipment	$ 192.8		$ 206.8

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Product Warranty (Tables)

3 Months Ended

Mar. 31, 2012

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability

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

(millions of dollars)	2012			2011
Beginning balance, January 1	$	72.7		$	66.8
Acquisition	—			4.5
Provisions	10.0			15.6
Payments	(7.9		)	(15.0		)
Translation adjustment	1.9			2.7
Ending balance, March 31	$	76.7		$	74.6

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

	March 31,		December 31,
(millions of dollars)	2012		2011
Accounts payable and accrued expenses	$	42.7	$	38.6
Other non-current liabilities	34.0		34.1
Total product warranty liability	$	76.7	$	72.7

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Research and Development

3 Months Ended

Mar. 31, 2012

Research and Development [Abstract]

Research and Development

Research and Development

The Company's net Research & Development ("R&D") expenditures are included in selling, general and administrative expenses of 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 and accepted by the customer. 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 following table presents the Company’s gross and net expenditures on R&D activities:

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Gross R&D expenditures	$	76.2		$	69.1
Customer reimbursements	(8.5		)	(8.1		)
Net R&D expenditures	$	67.7		$	61.0

The Company has contracts with several customers at the Company's various R&D locations. No such contract exceeded 5% of annual net R&D expenditures in any of the periods presented.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Income Statement [Abstract]
Net sales	$ 1,912.5	$ 1,730.4
Cost of sales	1,516.7	1,387.6
Gross profit	395.8	342.8
Selling, general and administrative expense	169.0	165.1
Other (income) expense	1.1	(1.6)
Operating income	225.7	179.3
Equity in affiliates’ earnings, net of tax	(9.2)	(8.4)
Interest income	(1.4)	(1.0)
Interest expense and finance charges	15.1	18.4
Earnings before income taxes and noncontrolling interest	221.2	170.3
Provision for income taxes	57.5	40.9
Net earnings	163.7	129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7	4.9
Net earnings attributable to BorgWarner Inc.	$ 158.0	$ 124.5
Earnings per share - basic	$ 1.46	$ 1.13
Earnings per share - diluted	$ 1.28	$ 1.00
Weighted average shares outstanding (thousands):
Basic	108,420	110,634
Diluted	127,742	130,224

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Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Contingencies

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, general liability and various other risks. It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company's environmental and product liability contingencies are discussed separately below. The Company's management does not expect that the results in any of these commercial and legal claims, actions and complaints will have a material adverse effect on the Company's results of operations, financial position or cash flows.

Litigation

In January 2006, BorgWarner Diversified Transmission Products Inc. ("DTP"), a subsidiary of the Company, filed a declaratory judgment action in United States District Court, Southern District of Indiana (Indianapolis Division) against the United Automobile, Aerospace, and Agricultural Implements Workers of America (“UAW”) Local No. 287 and Gerald Poor, individually and as the representative of a defendant class. DTP sought the Court's affirmation that DTP did not violate the Labor-Management Relations Act or the Employee Retirement Income Security Act (ERISA) by unilaterally amending certain medical plans effective April 1, 2006 and October 1, 2006, prior to the expiration of the then-current collective bargaining agreements. On September 10, 2008, the Court found that DTP's reservation of the right to make such amendments reducing the level of benefits provided to retirees was limited by its collectively bargained health insurance agreement with the UAW, which did not expire until April 24, 2009. Thus, the amendments were untimely. In 2008, the Company recorded a charge of $4.0 million as a result of the Court's decision.

DTP filed a declaratory judgment action in the United States District Court, Southern District of Indiana (Indianapolis Division) against the UAW Local No. 287 and Jim Barrett and others, individually and as representatives of a defendant class, on February 26, 2009 again seeking the Court's affirmation that DTP did not violate the Labor - Management Relations Act or ERISA by modifying the level of benefits provided retirees to make them comparable to other Company retiree benefit plans after April 24, 2009. Certain retirees, on behalf of themselves and others, filed a mirror-image action in the United States District Court, Eastern District of Michigan (Southern Division) on March 11, 2009, for which a class has been certified. During the last quarter of 2009, the action pending in Indiana was dismissed, while the action in Michigan is continuing. The Company is vigorously defending against the suit.  This contingency is subject to many uncertainties, therefore based on the information available to date, the Company cannot reasonably estimate the amount or the range of potential loss, if any. 

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 state 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 laws and, as such, may presently be liable for the cost of clean-up and other remedial activities at 38 such sites. 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.

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 whom are large, solvent public companies, will fully pay the cost apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation and consulting costs; and remediation alternatives), the Company has an accrual for indicated environmental liabilities with a balance of $6.7 million and $10.4 million at March 31, 2012 and at December 31, 2011, respectively. The Company expects to pay out substantially all of the amounts accrued for environmental liability over the next five years.

In connection with the sale of Kuhlman Electric Corporation, the Company agreed to indemnify the buyer and Kuhlman Electric for certain environmental liabilities, then unknown to the Company, relating to certain operations of Kuhlman Electric that pre-date the Company's 1999 acquisition of Kuhlman Electric. In 2007 and 2008, lawsuits were filed against Kuhlman Electric and others, including the Company, on behalf of approximately 340 alleging personal injury relating to alleged environmental contamination at its Crystal Springs, Mississippi plant. The Company entered into a settlement in July 2010 regarding the personal injury claims of the plaintiffs and those of approximately 2,700 unfiled claimants represented by those plaintiffs' attorneys. In exchange for, among other things, the dismissal with prejudice of these lawsuits and the release of claims by the unfiled claimants, the Company agreed to pay up to $28 million in settlement funds, which was expensed in the second quarter of 2010. The Company paid $13.9 million in November 2010 and made the final payment of $13.9 million in February 2011. Litigation concerning indemnification is pending and the Company may in the future become subject to further legal proceedings.

Product Liability

Like many other industrial companies who have historically operated in the U.S., the Company (or parties the Company is obligated to indemnify) continues to be named as one of many defendants in asbestos-related personal injury actions. We believe that the Company's involvement is limited because, in general, these claims relate to a few types of automotive friction products that were manufactured many years ago and contained encapsulated asbestos. The nature of the fibers, the encapsulation and the manner of use lead the Company to believe that these products are highly unlikely to cause harm. As of both March 31, 2012 and December 31, 2011, the Company had approximately 16,000 pending asbestos-related product liability claims, respectively. Of the approximately 16,000 outstanding claims at March 31, 2012, approximately half were pending in jurisdictions that have undergone significant tort and judicial reform activities subsequent to the filing of these claims.

The Company's policy is to vigorously defend against these lawsuits and the Company has been successful in obtaining dismissal of many claims without any payment. The Company expects that the vast majority of the pending asbestos-related product liability claims where it is a defendant (or has an obligation to indemnify a defendant) will result in no payment being made by the Company or its insurers. In 2012, of the approximately 800 claims resolved, 74 (9.3%) resulted in any payment being made to a claimant by or on behalf of the Company. In the full year of 2011, of the approximately 1,800 claims resolved, 288 (16%) resulted in any payment being made to a claimant by or on behalf of the Company.

Prior to June 2004, the settlement and defense costs associated with all claims were paid by the Company's primary layer insurance carriers under a series of funding arrangements. In addition to the primary insurance available for asbestos-related claims, the Company has substantial excess insurance coverage available for potential future asbestos-related product claims. In June 2004, primary layer insurance carriers notified the Company of the alleged exhaustion of their policy limits.

A declaratory judgment action was filed in January 2004 in the Circuit Court of Cook County, Illinois by Continental Casualty Company and related companies (“CNA”) against the Company and certain of its other historical general liability insurers. The court has issued a number of interim rulings and discovery is continuing. CNA and the Company have entered into a settlement agreement resolving their coverage disputes, pursuant to which CNA will pay amounts over a four year period from 2011 - 2015 to the Company. The Company is vigorously pursuing the litigation against the remaining insurers.

Although it is impossible to predict the outcome of pending or future claims or the impact of tort reform legislation that may be enacted at the state or federal levels, due to the encapsulated nature of the products, the Company's experience in vigorously defending and resolving claims in the past, and the Company's significant insurance coverage with solvent carriers as of the date of this filing, management does not believe that asbestos-related product liability claims are likely to have a material adverse effect on the Company's results of operations, financial position or cash flows.

To date, the Company has paid and accrued $200.6 million in defense and indemnity in advance of insurers' reimbursement and has received $81.1 million in cash and notes from insurers, including CNA. The net balance of $119.5 million, is expected to be fully recovered, of which approximately $34.7 million is expected to be recovered within one year. Timing of recovery is dependent on final resolution of the declaratory judgment action referred to above or additional negotiated settlements. At December 31, 2011, insurers owed $109.8 million in association with these claims.

In addition to the $119.5 million net balance relating to past settlements and defense costs, the Company has estimated a liability of $64.1 million for claims asserted, but not yet resolved and their related defense costs at March 31, 2012. The Company also has a related asset of $64.1 million to recognize proceeds from the insurance carriers. Insurance carrier reimbursement of 100% is expected based on the Company's experience, its insurance contracts and decisions received to date in the declaratory judgment action referred to above. At December 31, 2011, the comparable value of the insurance asset and accrued liability was $61.7 million.

The amounts recorded in the Condensed Consolidated Balance Sheets related to the estimated future settlement of existing claims are as follows:

(millions of dollars)	March 31, 2012		December 31, 2011
Assets:
Prepayments and other current assets	$	28.9	$	28.8
Other non-current assets	35.2		32.9
Total insurance assets	$	64.1	$	61.7
Liabilities:
Accounts payable and accrued expenses	$	28.9	$	28.8
Other non-current liabilities	35.2		32.9
Total accrued liabilities	$	64.1	$	61.7

The Company cannot reasonably estimate possible losses, if any, in excess of those for which it has accrued, because it cannot predict how many additional claims may be brought against the Company (or parties the Company has an obligation to indemnify) in the future, the allegations in such claims, the possible outcomes, or the impact of tort reform legislation that may be enacted at the State or Federal levels.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	Apr. 20, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	BORGWARNER INC.
Entity Central Index Key	0000908255
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		114,613,535

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Earnings Per Share

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The Company presents both basic and diluted earnings per share of common stock (“EPS”) 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 equivalent stock 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 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, compensation cost for future service that the Company has not yet recognized and any windfall/(shortfall) tax benefits that would be credited/(debited) to capital in excess of par value when the award generates a tax deduction. Options are only dilutive when the average market price of the underlying common stock exceeds the exercise price of the options.

The potential common shares associated with the Company's 3.50% convertible senior notes due April 15, 2012, which were settled in April 2012, are reflected in diluted EPS using the “if-converted” method. Under this method, if dilutive, the common stock is assumed issued as of the beginning of the reporting period and included in calculating diluted EPS. In addition, if dilutive, interest expense, net of tax, related to the convertible notes is added back to the numerator in calculating diluted EPS.

Separately and concurrently with the issuance of the Company's 3.50% convertible senior notes, the Company entered into a bond hedge overlay, including warrants and call options. If the Company's weighted-average share price exceeds $38.61 per share, the warrants will be dilutive to the Company's earnings. If the Company's weighted average share price exceeds $32.82 per share, the offsetting bond hedge will be anti-dilutive.

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

	Three Months Ended March 31,
(in millions, except per share amounts)	2012		2011
Basic earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Weighted average shares of common stock outstanding	108.420		110.634
Basic earnings per share of common stock	$	1.46	$	1.13
Diluted earnings per share:
Net earnings attributable to BorgWarner Inc.	$	158.0	$	124.5
Adjustment for net interest expense on convertible notes	5.0		5.2
Diluted net earnings attributable to BorgWarner Inc.	$	163.0	$	129.7
Weighted average shares of common stock outstanding	108.420		110.634
Effect of 3.50% convertible senior notes	11.389		11.389
Effect of warrant	5.813		5.416
Effect of stock-based compensation	2.120		2.785
Total dilutive effect on weighted average shares of common stock outstanding	19.322		19.590
Weighted average shares of common stock outstanding including dilutive shares	127.742		130.224
Diluted earnings per share of common stock	$	1.28	$	1.00
Total anti-dilutive shares:
Call options	6.650		6.312

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Net earnings attributable to BorgWarner Inc.	$ 158.0	$ 124.5
Foreign currency translation adjustments	44.8	91.2
Market value change of hedge instruments	14.2	(4.5)
Income taxes associated with the market value change of hedge instruments	(5.1)	0.7
Hedge instrument adjustments - (Gain) loss reclassified into net earnings	0.7	0.2
Hedge instruments adjustments - Income taxes reclassified into net earnings	(0.2)	(0.2)
Net change in hedge instruments	9.6	(3.8)
Defined benefit post employment plans - Amortization of prior service benefit and net loss into net earnings	2.2	2.0
Defined benefit post employment plans - Income taxes reclassified into net earnings	(0.6)	(0.6)
Defined benefit post employment plans - Acquisition	0	(5.4)
Defined benefit post employment plans - Income taxes associated with acquisition	0	1.4
Net change in defined benefit post employment plans	1.6	(2.6)
Comprehensive income	214.0	209.3
Comprehensive income (loss) attributable to noncontrolling interest	(0.9)	(1.4)
Comprehensive income (loss) attributable to BorgWarner Inc.	$ 214.9	$ 210.7

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Notes Payable and Long-Term Debt

3 Months Ended

Mar. 31, 2012

Debt Disclosure [Abstract]

Notes Payable and Long-Term Debt

Notes Payable and Long-Term Debt

As of March 31, 2012 and December 31, 2011, the Company had short-term and long-term debt outstanding as follows:

	March 31,		December 31,
(millions of dollars)	2012		2011
Short-term debt
Short-term borrowings	$	104.2	$	116.3
Receivables securitization	80.0		80.0
Total short-term debt	$	184.2	$	196.3
Long-term debt
3.50% Convertible senior notes due 04/15/12	$	370.6	$	368.5
5.75% Senior notes due 11/01/16 ($150 million par value)	149.5		149.5
8.00% Senior notes due 10/01/19 ($134 million par value)	133.9		133.9
4.625% Senior notes due 09/15/20 ($250 million par value)	247.7		247.7
7.125% Senior notes due 02/15/29 ($121 million par value)	119.3		119.3
Multi-currency revolving credit facility	170.0		70.0
Term loan facilities & other	11.7		19.8
Unamortized portion of debt derivatives	23.1		24.1
Total long-term debt	1,225.8		1,132.8
Less: current portion	377.1		381.5
Long-term debt, net of current portion	$	848.7	$	751.3

The weighted average interest rate on all borrowings outstanding as of March 31, 2012 and December 31, 2011 was 5.7% and 5.9%, respectively.

The Company's $650 million multi-currency revolving credit facility, which includes a feature that allows the Company's borrowings to be increased to $1 billion, provides for borrowings through June 30, 2016 and is guaranteed by the Company's material domestic subsidiaries. The Company has two key financial covenants as part of the credit agreement. These covenants are a debt compared to EBITDA (“Earnings Before Interest, Taxes, Depreciation and Amortization”) test and an interest coverage test. The Company was in compliance with all covenants at March 31, 2012 and expects to remain compliant in future periods. At March 31, 2012 and December 31, 2011, the Company had outstanding borrowings of $170.0 million and $70.0 million, respectively, under this facility.

On April 9, 2009, the Company issued $373.8 million in convertible senior notes. Under ASC Topic 470, “Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)," the Company accounted for the convertible senior notes by bifurcating the instruments between its liability and equity components. The value of the debt component was based on the fair value of issuing a similar nonconvertible debt security. The value of the equity component was calculated by deducting the value of the liability from the proceeds received at issuance. The Company's March 31, 2012 Condensed Consolidated Balance Sheet includes current debt of $370.6 million, which was settled in April 2012, and capital in excess of par value of $36.5 million. Additionally, ASC Topic 470 requires the Company to accrete the discounted carrying value of the convertible notes to their face value over the term of the notes. The Company's interest expense associated with this amortization is based on the effective interest rate of the convertible senior notes of 9.365%. The total interest expense related to the convertible senior notes in the Company’s Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 is as follows:

	Three Months Ended March 31,
(millions of dollars)	2012		2011
Interest expense	$	7.6	$	8.0
Non-cash portion	$	4.4	$	4.8

The notes pay interest semi-annually of $6.5 million, which is at a coupon rate of 3.50% per year.

Holders of the notes could convert their notes at their option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date of the notes, in multiples of $1,000 principal amount. The initial conversion rate for the notes is 30.4706 shares of the Company’s common stock per $1,000 principal amount of notes (representing an initial conversion price of approximately $32.82 per share of common stock). The conversion price represents a conversion premium of 27.50% over the last reported sale price of the Company’s common stock on the New York Stock Exchange on April 6, 2009 of $25.74 per share. Since the Company's stock price was above the convertible senior notes conversion price of $32.82, the if-converted value was approximately $581.7 million and $352.1 million higher than the face value of the convertible senior notes at March 31, 2012 and December 31, 2011, respectively. In conjunction with the note offering, the Company entered into a bond hedge overlay, including both warrants and call options, at a net pre-tax cost of $25.2 million, effectively raising the conversion premium to 50.0%, or approximately $38.61 per share.

Subsequent to the Balance Sheet date, in April 2012, the Company settled its convertible senior notes by delivering approximately 11.4 million shares of common stock held in treasury to the note holders, which increased the weighted average basic shares outstanding and had no impact on weighted average dilutive shares outstanding. The second quarter 2012 financial impact of this settlement will result in a reduction in the current portion of long-term debt of $373.8 million, a reduction in common stock held in treasury of $617.3 million and a reduction in capital in excess of par value of $243.5 million.

Subsequent to the Balance Sheet date, on April 16, 2012, the Company separately and concurrently settled the call option portion of the convertible note related bond hedge overlay, receiving approximately 6.5 million shares of its common stock, which reduced the weighted average basic and dilutive shares outstanding. The second quarter 2012 financial impact of this settlement will result in an increase in common stock held in treasury of $503.9 million and an increase to capital in excess of par value of $503.9 million. The Company's bond hedge overlay also includes warrants, which are scheduled to mature on October 9, 2012. The dilutive impact of these warrants is currently included in the Company's weighted average dilutive shares outstanding.

As of March 31, 2012 and December 31, 2011, the estimated fair values of the Company’s senior unsecured notes totaled $1,706.5 million and $1,454.4 million, respectively. The estimated fair values were $685.5 million and $435.5 million higher at March 31, 2012 and December 31, 2011, respectively, than their carrying values. Fair market values are developed based on Level 2 inputs, as defined by ASC Topic 820, using observable values for similar debt instruments. 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 $50.0 million at March 31, 2012 and December 31, 2011, respectively.

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Product Warranty

3 Months Ended

Mar. 31, 2012

Product Warranties Disclosures [Abstract]

Product Warranty

Product Warranty

The Company provides warranties on some, but not all, of its products. The warranty terms are typically from one to three 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. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims. Management believes that the warranty accrual is appropriate, however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual. The following table summarizes the activity in the product warranty accrual accounts:

(millions of dollars)	2012			2011
Beginning balance, January 1	$	72.7		$	66.8
Acquisition	—			4.5
Provisions	10.0			15.6
Payments	(7.9		)	(15.0		)
Translation adjustment	1.9			2.7
Ending balance, March 31	$	76.7		$	74.6

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

	March 31,		December 31,
(millions of dollars)	2012		2011
Accounts payable and accrued expenses	$	42.7	$	38.6
Other non-current liabilities	34.0		34.1
Total product warranty liability	$	76.7	$	72.7

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Property, Plant and Equipment (Tables)

3 Months Ended

Mar. 31, 2012

Property, Plant and Equipment [Abstract]

Disclosure of Property, Plant and Equipment

	March 31,			December 31,
(millions of dollars)	2012			2011
Land and buildings	$	697.1		$	687.9
Machinery and equipment	2,084.4			2,006.9
Capital leases	2.4			2.3
Construction in progress	192.8			206.8
Total property, plant & equipment, gross	2,976.7			2,903.9
Less: accumulated depreciation	(1,385.0		)	(1,343.9		)
Property, plant & equipment, net, excluding tooling	1,591.7			1,560.0
Tooling, net of amortization	104.7			104.3
Property, plant and equipment, net	$	1,696.4		$	1,664.3

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Reporting Segments

3 Months Ended

Mar. 31, 2012

Segment Reporting [Abstract]

Segment Reporting Disclosure

Reporting Segments

The Company's business is comprised of two reporting segments: Engine and Drivetrain. These segments are strategic business groups, which are managed separately as each represents a specific grouping of related automotive components and systems.

The Company allocates resources to each segment based upon the projected after-tax return on invested capital ("ROIC") of its business initiatives. ROIC is comprised of Adjusted EBIT after deducting notional taxes compared to the projected average capital investment required. Adjusted EBIT is comprised of earnings before interest, income taxes and noncontrolling interest (“EBIT") adjusted for restructuring, goodwill impairment charges, affiliates' earnings and other items not reflective of on-going operating profit or loss.

Adjusted EBIT is the measure of segment profit or loss used by the Company. The Company believes Adjusted EBIT is most reflective of the operational profitability or loss of our reporting segments. The following tables show segment information and Adjusted EBIT for the Company's reporting segments.

Net Sales by Reporting Segment

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	1,308.2		$	1,249.4
Drivetrain	611.4			486.4
Inter-segment eliminations	(7.1		)	(5.4		)
Net sales	$	1,912.5		$	1,730.4

Adjusted Earnings Before Interest, Income Taxes and Noncontrolling Interest (“Adjusted EBIT”)

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Engine	$	209.8		$	186.1
Drivetrain	61.2			32.0
Adjusted EBIT	271.0			218.1
Corporate, including equity in affiliates' earnings and stock-based compensation	36.1			30.4
Interest income	(1.4		)	(1.0		)
Interest expense and finance charges	15.1			18.4
Earnings before income taxes and noncontrolling interest	221.2			170.3
Provision for income taxes	57.5			40.9
Net earnings	163.7			129.4
Net earnings attributable to the noncontrolling interest, net of tax	5.7			4.9
Net earnings attributable to BorgWarner Inc.	$	158.0		$	124.5

Total Assets

(millions of dollars)	March 31, 2012		December 31, 2011
Engine	$	3,495.9	$	3,329.0
Drivetrain	1,673.5		1,562.8
Total	5,169.4		4,891.8
Corporate (a)	1,111.9		1,066.8
Total assets	$	6,281.3	$	5,958.6

____________________________________

(a) Corporate assets include investments and advances and deferred income taxes.

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Retirement Benefit Plans

3 Months Ended

Mar. 31, 2012

Compensation and Retirement Disclosure [Abstract]

Retirement Benefit Plans

Retirement Benefit Plans

The Company has a number of defined benefit pension plans and other post employment benefit plans covering eligible salaried and hourly employees and their dependents. The estimated contributions to the Company's defined benefit pension plans for 2012 range from $30 million to $40 million, of which $4.7 million has been contributed through the first three months of the year. Included in the Company's estimated 2012 contributions is $15 million related to the Company's March 24, 2010 settlement agreement with the Pension Benefit Guaranty Corporation regarding the closure of the Company's BorgWarner Diversified Transmission Products Plant in Muncie, Indiana. The Company anticipates making the $15 million required contribution in December of 2012. The other post employment benefit plans, which provide medical and life insurance benefits, are unfunded plans.

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

	Pension benefits												Other post employment benefits
(millions of dollars)	2012						2011						2012			2011
Three Months Ended March 31,	US			Non-US			US			Non-US
Service cost	$	—		$	2.3		$	—		$	2.5		$	0.1		$	0.2
Interest cost	3.6			4.4			4.0			4.6			2.6			2.9
Expected return on plan assets	(4.7		)	(2.3		)	(5.2		)	(2.8		)	—			—
Amortization of unrecognized prior service benefit	(0.2		)	—			(0.1		)	—			(1.6		)	(1.7		)
Amortization of unrecognized loss	2.0			0.3			1.6			0.2			1.7			2.0
Net periodic benefit cost	$	0.7		$	4.7		$	0.3		$	4.5		$	2.8		$	3.4

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Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 in 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 and 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 table classifies the assets and liabilities measured at fair value on a recurring basis as of March 31, 2012:

			Basis of fair value measurements
(millions of dollars)	Balance at March 31, 2012		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.6	$	—	$	2.6	$	—	A
Other non-current assets (insurance settlement agreement note receivable)	$	11.5	$	—	$	11.5	$	—	C
Liabilities:
Foreign currency contracts	$	1.8	$	—	$	1.8	$	—	A
Commodity contracts	$	0.1	$	—	$	0.1	$	—	A
Net investment hedge contracts	$	70.0	$	—	$	70.0	$	—	A

The following table classifies the assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:

			Basis of fair value measurements
(millions of dollars)	Balance at December 31, 2011		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.7	$	—	$	2.7	$	—	A
Other non-current assets (insurance settlement agreement note receivable)	21.3		—		21.3		—		C
Liabilities:
Foreign currency contracts	$	2.9	$	—	$	2.9	$	—	A
Net investment hedge contracts	$	85.0	$	—	$	85.0	$	—	A

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Financial Instruments

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

The Company’s financial instruments include cash and marketable securities. Due to the short-term nature of these instruments, their book value approximates their fair value. The Company’s financial instruments also include long-term debt, interest rate and cross-currency swaps, commodity derivative contracts and foreign currency derivatives. 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. At March 31, 2012, the Company had no derivative contracts that contained credit risk related contingent features.

The Company selectively uses cross-currency swaps to hedge the foreign currency exposure associated with our net investment in certain foreign operations (net investment hedges). At March 31, 2012 and December 31, 2011, the following cross-currency swaps were outstanding:

	Cross-currency swaps
(in millions)	Notional in USD		Notional in local currency		Duration
Floating $ to floating €	$	75.0	€	58.5	Oct - 19
Floating $ to floating ¥	$	150.0	¥	17,581.5	Nov - 16

The Company uses certain commodity derivative contracts to protect against commodity price changes related to forecasted raw material and supplies purchases. The Company primarily utilizes forward and option contracts, which are designated as cash flow hedges. At March 31, 2012 and December 31, 2011, the following commodity derivative contracts were outstanding:

	Commodity derivative contracts
Commodity	Volume hedged March 31, 2012	Volume hedged December 31, 2011	Units of measure	Duration
Natural gas	264,311	—	MMBtu	Dec - 12

The Company uses foreign currency forward and option contracts to protect against exchange rate movements for forecasted cash flows, including 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.

As of March 31, 2012 and December 31, 2011, the following foreign currency derivative contracts were outstanding:

Foreign currency derivatives (in millions)
Functional currency	Traded currency	Notional in traded currency March 31, 2012	Notional in traded currency December 31, 2011	Duration
British pound	Euro	55.8	64.8	Dec - 13
Euro	British pound	5.6	7.0	Dec - 12
Euro	Hungarian forint	4,050.0	5,400.0	Dec - 12
Euro	Japanese Yen	1,809.7	—	Dec - 12
Euro	Polish zloty	24.5	24.5	Dec - 12
Euro	US dollar	14.7	16.1	Jan - 13
Japanese yen	US dollar	5.8	7.4	Dec - 12
Korean won	Euro	34.5	34.5	Dec - 13
Korean won	US dollar	10.6	2.4	Dec - 12
Mexican peso	Euro	5.3	9.2	Jun - 12
Mexican peso	US dollar	30.9	40.7	Dec - 12
Swedish Krona	Euro	5.1	6.1	Dec - 12
US dollar	Euro	2.3	3.0	Dec - 12
US dollar	Japanese yen	3,000.0	3,000.0	Jun - 12

At March 31, 2012 and December 31, 2011, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:

	Assets					Liabilities
(millions of dollars)	Location	March 31, 2012		December 31, 2011		Location	March 31, 2012		December 31, 2011
Foreign currency contracts	Prepayments and other current assets	$	2.6	$	2.6	Accounts payable and accrued expenses	$	1.5	$	2.4
	Other non-current assets	$	—	$	0.1	Other non-current liabilities	$	0.3	$	0.5
Commodity contracts	Prepayments and other current assets	$	—	$	—	Accounts payable and accrued expenses	$	0.1	$	—
Net investment hedge contracts	Other non-current assets	$	—	$	—	Other non-current liabilities	$	70.0	$	85.0

Effectiveness for cash flow and net investment hedges is assessed at the inception of the hedging relationship and quarterly, thereafter. To the extent that derivative instruments are deemed to be effective as defined by ASC Topic 815, gains and losses arising from these contracts are deferred in accumulated other comprehensive income (loss) ("AOCI"). Such gains and losses will be reclassified into income as the underlying operating transactions are realized. Gains and losses not qualifying for deferral treatment have been credited/charged to income as they are recognized.

The table below shows deferred gains and losses at the end of the period reported in AOCI and amounts expected to be reclassified to income within the one year or less. The gain or loss expected to be reclassified to income in one year or less assumes no change in the current relationship of the hedged item at March 31, 2012 market rates.

(millions of dollars)	Deferred gain (loss) in AOCI at						Gain (loss) expected to be reclassified to income in one year or less
Contract Type	March 31, 2012			December 31, 2011
Foreign currency	$	0.4		$	(0.6	)	$	0.6
Commodity	(0.1		)	—			(0.1		)
Net investment hedges	(64.9		)	(78.9		)	—
Total	$	(64.6	)	$	(79.5	)	$	0.5

Net investment hedges are derivative contracts entered into to hedge against changes in exchange rates that affect the overall value of net investments in foreign entities. Gains and losses on net investment hedges are recorded in AOCI and are used to offset equivalent gains or losses in the value of net investments that are recorded in translation gains and losses which is also a component of AOCI. Net investment hedges, designated under ASC Topic 815, held during the period resulted in the following gains or losses recorded in income:

		Gain (loss) reclassified from AOCI to income (effective portion)					Gain (loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended					Three Months Ended
Contract Type	Location	March 31, 2012		March 31, 2011		Location	March 31, 2012		March 31, 2011
Cross-currency swap	Interest expense	$	—	$	—	Interest expense	$	0.9	$	2.0

Cash flow hedges are derivative contracts entered into to hedge against fluctuations in foreign exchange rates and commodity prices. The effective portion of gains or losses exactly offset gains or losses in the underlying transaction that they were designated to hedge, and are recorded on the same line in the statement of operations. Ineffectiveness resulting from imperfect matches between changes in value of hedge contracts and changes in value of the underlying transaction are immediately recognized in income. Cash flow hedges, designated under ASC Topic 815, held during the period resulted in the following gains and losses recorded in income:

		Gain (Loss) reclassified from AOCI to income (effective portion)						Gain (Loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended						Three Months Ended
Contract Type	Location	March 31, 2012		March 31, 2011			Location	March 31, 2012		March 31, 2011
Foreign currency	Sales	$	0.3	$	(0.2	)	SG&A expense	$	—	$	—
Foreign currency	Cost of goods sold	0.4		(0.1		)	SG&A expense	—		—
Foreign currency	SG&A expense	—		0.2			SG&A expense	—		—
Commodity	Cost of goods sold	—		—			Cost of goods sold	—		—

At March 31, 2012, derivative instruments that were not designated as hedging instruments as defined by ASC Topic 815 were immaterial.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Under the Company's 1993 Stock Incentive Plan (“1993 Plan”), the Company granted options to purchase shares of the Company's common stock at the fair market value on the date of grant. The options vest over periods up to three years and have a term of ten years from date of grant. As of December 31, 2003, there were no options available for future grants under the 1993 Plan. The 1993 Plan expired at the end of 2003 and was replaced by the Company's 2004 Stock Incentive Plan, which was amended at the Company's 2009 Annual Stockholders Meeting, among other things, to increase the number of shares available for issuance under the Plan. Under the BorgWarner Inc. Amended and Restated 2004 Stock Incentive Plan (“2004 Stock Incentive Plan”), 12.5 million shares were authorized for grant, of which 1.9 million shares are available for future award.

Stock options A summary of the Plans’ shares under option for the three months ended March 31, 2012 is as follows:

	Shares under option (thousands)		Weighted average exercise price		Weighted average remaining contractual life (in years)	Aggregate intrinsic value (in millions)
Outstanding and exercisable at December 31, 2011	2,220		$	29.36	4.1	$	76.3
Exercised	(602	)	$	26.97
Outstanding and exercisable at March 31, 2012	1,618		$	30.19	4.0	$	87.6

Restricted stock At its November 2007 meeting, the Company's Compensation Committee decided that restricted common stock awards and stock units ("restricted stock") would be awarded in place of stock options for long-term incentive award grants to employees. Restricted stock granted to employees vest 50% after two years and the remainder after three years from the date of grant. Restricted stock granted to non-employee directors generally vests on the anniversary date of the grant.

The value of restricted stock is determined by the market value of the Company’s common stock at the date of grant. In February and March 2012, restricted stock in the amount of 326,638 shares was granted to employees under the 2004 Stock Incentive Plan. The value of the awards is recorded as unearned compensation within capital in excess of par value in equity and is amortized as compensation expense over the restriction periods.

Restricted stock compensation expense recorded in the Condensed Consolidated Statements of Operations is as follows:

	Three Months Ended March 31,
(millions of dollars, except per share data)	2012		2011
Restricted stock compensation expense	$	4.7	$	2.9
Restricted stock compensation expense, net of tax	$	3.5	$	2.2

A summary of the Company’s nonvested restricted stock for the three months ended March 31, 2012 is as follows:

	Shares subject to restriction (thousands)		Weighted average price
Nonvested at December 31, 2011	1,430		$	39.02
Granted	327		$	78.27
Vested	(631	)	$	26.42
Forfeited	(23	)	$	42.49
Nonvested at March 31, 2012	1,103		$	57.79

Performance share plans The 2004 Stock Incentive Plan provides for awarding of performance shares to members of senior management at the end of successive three-year periods based on the Company's performance in terms of total shareholder return relative to a peer group of automotive companies. In the first quarter of 2012, the Company modified all outstanding Performance Share Award Agreements to allow for the payment of these awards entirely in the Company's common stock, rather than 40% in cash and 60% in the Company's common stock. Using the lattice model (Monte Carlo simulation) at the date of modification, the Company determined the first quarter 2012 compensation expense associated with the modification to be negligible. Within the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2011, prior to the modification, the Company recorded the expense associated with the 40% cash portion of the award, $10.6 million, in the changes in accounts payable and accrued expenses and other non-current assets and liabilities line items.

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Income Taxes (Details)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Income Tax Disclosure [Abstract]
Effective income tax rate, continuing operations	26.00%	24.00%

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Research and Development (Tables)

3 Months Ended

Mar. 31, 2012

Research and Development [Abstract]

Gross and net expenditures on research and development ("R&D") activities

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

	Three Months Ended March 31,
(millions of dollars)	2012			2011
Gross R&D expenditures	$	76.2		$	69.1
Customer reimbursements	(8.5		)	(8.1		)
Net R&D expenditures	$	67.7		$	61.0

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

The following table classifies the assets and liabilities measured at fair value on a recurring basis as of March 31, 2012:

			Basis of fair value measurements
(millions of dollars)	Balance at March 31, 2012		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.6	$	—	$	2.6	$	—	A
Other non-current assets (insurance settlement agreement note receivable)	$	11.5	$	—	$	11.5	$	—	C
Liabilities:
Foreign currency contracts	$	1.8	$	—	$	1.8	$	—	A
Commodity contracts	$	0.1	$	—	$	0.1	$	—	A
Net investment hedge contracts	$	70.0	$	—	$	70.0	$	—	A

The following table classifies the assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:

			Basis of fair value measurements
(millions of dollars)	Balance at December 31, 2011		Quoted prices in active markets for identical items (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Valuation technique
Assets:
Foreign currency contracts	$	2.7	$	—	$	2.7	$	—	A
Other non-current assets (insurance settlement agreement note receivable)	21.3		—		21.3		—		C
Liabilities:
Foreign currency contracts	$	2.9	$	—	$	2.9	$	—	A
Net investment hedge contracts	$	85.0	$	—	$	85.0	$	—	A

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Financial Instruments - Balance Sheet (Details) (USD $) In Millions, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Foreign Currency Contract [Member] | Prepayments and Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative assets	$ 2.6	$ 2.6
Foreign Currency Contract [Member] | Other Non Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative assets	0	0.1
Foreign Currency Contract [Member] | Accounts payable and accrued expenses [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability Designated as Hedging Instrument, Fair Value	1.5	2.4
Foreign Currency Contract [Member] | Other Non Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability Designated as Hedging Instrument, Fair Value	0.3	0.5
Commodity Contract [Member] | Prepayments and Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative assets	0	0
Commodity Contract [Member] | Accounts payable and accrued expenses [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability Designated as Hedging Instrument, Fair Value	0.1	0
Net Investment Hedge [Member] | Other Non Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative assets	0	0
Net Investment Hedge [Member] | Other Non Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability Designated as Hedging Instrument, Fair Value	$ 70.0	$ 85.0

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
OPERATING
Net earnings	$ 163.7	$ 129.4
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and tooling amortization	63.8	60.9
Amortization of intangible assets and other	7.4	6.9
Bond amortization	4.4	4.8
Stock-based compensation expense	21.0	4.8
Deferred income tax benefit	(22.1)	(18.2)
Equity in affiliates' earnings, net of dividends received and other	(7.4)	(12.3)
Net earnings adjusted for non-cash charges to operations	230.8	176.3
Changes in assets and liabilities:
Receivables	(167.6)	(179.5)
Inventories	(19.9)	(33.6)
Prepayments and other current assets	(10.2)	(7.2)
Accounts payable and accrued expenses	(4.0)	8.8
Income taxes payable	(1.5)	(8.5)
Other non-current assets and liabilities	3.2	2.3
Net cash provided by (used in) operating activities	30.8	(41.4)
INVESTING
Capital expenditures, including tooling outlays	(95.0)	(70.2)
Net proceeds from asset disposals	1.0	6.1
Payments for businesses acquired, net of cash acquired	0	(203.7)
Proceeds from sale of business	1.6	0
Net cash used in investing activities	(92.4)	(267.8)
FINANCING
Net (decrease) increase in notes payable	(11.7)	42.3
Additions to long-term debt, net of debt issuance costs	191.4	206.7
Repayments of long-term debt, including current portion	(99.9)	(3.9)
Payments for purchase of treasury stock	0	(181.9)
Proceeds from stock options exercised, including the tax benefit	47.0	27.9
Taxes paid on restricted stock award vestings	(17.5)	(12.5)
Dividends paid to noncontrolling stockholders	(12.0)	0
Net cash provided by financing activities	97.3	78.6
Effect of exchange rate changes on cash	1.6	3.6
Net increase (decrease) in cash	37.3	(227.0)
Cash at beginning of year	359.6	449.9
Cash at end of period	396.9	222.9
Net cash paid during the period for:
Interest	13.2	12.6
Income taxes	47.4	48.8
Non-cash investing transactions:
Liabilities assumed from business acquired	0	5.3
Non-cash financing transactions:
Debt assumed from business acquired	$ 0	$ 5.9

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Property, Plant and Equipment

3 Months Ended

Mar. 31, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, Plant and Equipment, net

	March 31,			December 31,
(millions of dollars)	2012			2011
Land and buildings	$	697.1		$	687.9
Machinery and equipment	2,084.4			2,006.9
Capital leases	2.4			2.3
Construction in progress	192.8			206.8
Total property, plant & equipment, gross	2,976.7			2,903.9
Less: accumulated depreciation	(1,385.0		)	(1,343.9		)
Property, plant & equipment, net, excluding tooling	1,591.7			1,560.0
Tooling, net of amortization	104.7			104.3
Property, plant and equipment, net	$	1,696.4		$	1,664.3

As of March 31, 2012 and December 31, 2011, accounts payable of $27.6 million and $48.9 million, respectively, were related to property, plant and equipment purchases.

Interest costs capitalized for the three months ended March 31, 2012 and 2011 were $4.5 million and $3.0 million, respectively.

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Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Cross Currency Swaps Outstanding

At March 31, 2012 and December 31, 2011, the following cross-currency swaps were outstanding:

	Cross-currency swaps
(in millions)	Notional in USD		Notional in local currency		Duration
Floating $ to floating €	$	75.0	€	58.5	Oct - 19
Floating $ to floating ¥	$	150.0	¥	17,581.5	Nov - 16

Commodity Derivative Contracts Outstanding

At March 31, 2012 and December 31, 2011, the following commodity derivative contracts were outstanding:

	Commodity derivative contracts
Commodity	Volume hedged March 31, 2012	Volume hedged December 31, 2011	Units of measure	Duration
Natural gas	264,311	—	MMBtu	Dec - 12

Foreign Exchange Derivative Contracts Outstanding

As of March 31, 2012 and December 31, 2011, the following foreign currency derivative contracts were outstanding:

Foreign currency derivatives (in millions)
Functional currency	Traded currency	Notional in traded currency March 31, 2012	Notional in traded currency December 31, 2011	Duration
British pound	Euro	55.8	64.8	Dec - 13
Euro	British pound	5.6	7.0	Dec - 12
Euro	Hungarian forint	4,050.0	5,400.0	Dec - 12
Euro	Japanese Yen	1,809.7	—	Dec - 12
Euro	Polish zloty	24.5	24.5	Dec - 12
Euro	US dollar	14.7	16.1	Jan - 13
Japanese yen	US dollar	5.8	7.4	Dec - 12
Korean won	Euro	34.5	34.5	Dec - 13
Korean won	US dollar	10.6	2.4	Dec - 12
Mexican peso	Euro	5.3	9.2	Jun - 12
Mexican peso	US dollar	30.9	40.7	Dec - 12
Swedish Krona	Euro	5.1	6.1	Dec - 12
US dollar	Euro	2.3	3.0	Dec - 12
US dollar	Japanese yen	3,000.0	3,000.0	Jun - 12

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

At March 31, 2012 and December 31, 2011, the following amounts were recorded in the Condensed Consolidated Balance Sheets as being payable to or receivable from counterparties under ASC Topic 815:

	Assets					Liabilities
(millions of dollars)	Location	March 31, 2012		December 31, 2011		Location	March 31, 2012		December 31, 2011
Foreign currency contracts	Prepayments and other current assets	$	2.6	$	2.6	Accounts payable and accrued expenses	$	1.5	$	2.4
	Other non-current assets	$	—	$	0.1	Other non-current liabilities	$	0.3	$	0.5
Commodity contracts	Prepayments and other current assets	$	—	$	—	Accounts payable and accrued expenses	$	0.1	$	—
Net investment hedge contracts	Other non-current assets	$	—	$	—	Other non-current liabilities	$	70.0	$	85.0

Deferred Losses Reported In Other Comprehensive Income Loss

March 31, 2012 market rates.

(millions of dollars)	Deferred gain (loss) in AOCI at						Gain (loss) expected to be reclassified to income in one year or less
Contract Type	March 31, 2012			December 31, 2011
Foreign currency	$	0.4		$	(0.6	)	$	0.6
Commodity	(0.1		)	—			(0.1		)
Net investment hedges	(64.9		)	(78.9		)	—
Total	$	(64.6	)	$	(79.5	)	$	0.5

Derivatives Designated As Net Investment Hedges

		Gain (loss) reclassified from AOCI to income (effective portion)					Gain (loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended					Three Months Ended
Contract Type	Location	March 31, 2012		March 31, 2011		Location	March 31, 2012		March 31, 2011
Cross-currency swap	Interest expense	$	—	$	—	Interest expense	$	0.9	$	2.0

Derivatives Designated As Cash Flow Hedging Instruments

		Gain (Loss) reclassified from AOCI to income (effective portion)						Gain (Loss) recognized in income (ineffective portion)
(millions of dollars)		Three Months Ended						Three Months Ended
Contract Type	Location	March 31, 2012		March 31, 2011			Location	March 31, 2012		March 31, 2011
Foreign currency	Sales	$	0.3	$	(0.2	)	SG&A expense	$	—	$	—
Foreign currency	Cost of goods sold	0.4		(0.1		)	SG&A expense	—		—
Foreign currency	SG&A expense	—		0.2			SG&A expense	—		—
Commodity	Cost of goods sold	—		—			Cost of goods sold	—		—

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Notes Payable and Long-Term Debt (Details) (USD $)	0 Months Ended										3 Months Ended		12 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended		3 Months Ended
	Apr. 16, 2012	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2011	Mar. 31, 2012 Short Term Borrowings [Member]	Dec. 31, 2011 Short Term Borrowings [Member]	Mar. 31, 2012 Receivables Securitization [Member]	Dec. 31, 2011 Receivables Securitization [Member]	Mar. 31, 2012 Total Short Term Debt [Member]	Dec. 31, 2011 Total Short Term Debt [Member]	Mar. 31, 2012 3.50 % Convertible Notes [Member]	Mar. 31, 2011 3.50 % Convertible Notes [Member]	Dec. 31, 2011 3.50 % Convertible Notes [Member]	Apr. 09, 2009 3.50 % Convertible Notes [Member]	Mar. 31, 2012 5.75% Senior Notes [Member]	Dec. 31, 2011 5.75% Senior Notes [Member]	Mar. 31, 2012 8.00% Senior Notes [Member]	Dec. 31, 2011 8.00% Senior Notes [Member]	Mar. 31, 2012 4.625% Senior Notes [Member]	Dec. 31, 2011 4.625% Senior Notes [Member]	Mar. 31, 2012 7.125% Senior Notes [Member]	Dec. 31, 2011 7.125% Senior Notes [Member]	Mar. 31, 2012 Multi Currency Revolving Credit Facility [Member]	Dec. 31, 2011 Multi Currency Revolving Credit Facility [Member]	Mar. 31, 2012 Term Loan Facilities And Other [Member]	Dec. 31, 2011 Term Loan Facilities And Other [Member]	Mar. 31, 2012 Unamortized portion of debt derivative [Member]	Dec. 31, 2011 Unamortized portion of debt derivative [Member]
Short-term debt
Short-term Borrowings					$ 104,200,000	$ 116,300,000	$ 80,000,000	$ 80,000,000	$ 184,200,000	$ 196,300,000
Long-term debt
Long-term Debt		1,225,800,000	1,132,800,000								370,600,000		368,500,000		149,500,000	149,500,000	133,900,000	133,900,000	247,700,000	247,700,000	119,300,000	119,300,000	170,000,000	70,000,000	11,700,000	19,800,000	23,100,000	24,100,000
Current portion of long-term debt		377,100,000	381,500,000
Long-term debt, net of current portion		848,700,000	751,300,000
Debt instrument par value														373,800,000
Debt instrument stated interest rate		3.50%		3.50%							3.50%				5.75%		8.00%		4.625%		7.125%
Debt instrument maturity date											Apr. 15, 2012				Nov. 01, 2016		Oct. 01, 2019		Sep. 15, 2020		Feb. 15, 2029
Debt weighted average interest rate		5.70%	5.90%
Multi-currency revolving credit facility, current borrowing capacity																							650,000,000
Multi-currency revolving credit facility, maximum borrowing capacity																							1,000,000,000
Capital in excess of par, equity component of convertible debt											36,500,000
Effective interest rate of convertible senior notes											9.365%
Interest expense											7,600,000	8,000,000
Amortization of Debt Discount (Premium)											4,400,000	4,800,000
Semi-annually payment of interest for notes											6,500,000
Per principal amount of notes for initial conversion rate											1,000
Initial conversion rate for notes											30.4706
Debt instrument conversion price											$ 32.82
Debt Instrument, Convertible, If-converted Value in Excess of Principal											581,700,000		352,100,000
Conversion premium											27.50%
BorgWarner Inc. stock price - April 6, 2009											$ 25.74
Bond hedge overlay at a net pre-tax cost											25,200,000
Conversion premium after bond hedge overlay											50.00%
Conversion price per share after bond hedge overlay											$ 38.61
Conversion of convertible securities, shares issued	11,400,000
Conversion of convertible securities, value of shares issued	617,300,000
Debt Conversion, Original Debt, Amount	374,000,000
Adjustments to additional paid in capital, equity component of convertible debt, subsequent adjustments	243,500,000
Treasury stock received from bond hedge, shares	6,500,000
Treasury stock received from bond hedge, value	503,900,000
Adjustments to Additional Paid in Capital, Convertible Bond Hedge	504,000,000
Estimated fair value of senior unsecured notes		1,706,500,000	1,454,400,000
Fair value higher than carrying value for senior unsecured notes		685,500,000	435,500,000
Outstanding letter of credit		$ 50,000,000	$ 50,000,000

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New Accounting Pronouncements

3 Months Ended

Mar. 31, 2012

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New accounting pronouncements

New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board ("FASB") amended ASC Topic 210, "Balance Sheet," requiring companies to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. This guidance is effective retrospectively for interim and annual periods beginning on or after January 1, 2013. The Company anticipates the adoption of this guidance will not have a material impact on the Consolidated Financial Statements.