Presentation

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I would now like to turn the call over to Patrick Nolan, Vice President and President of Investor Relations.
Mr. Nolan, you may begin your conference.
Badger, Tony, and good morning, everyone.
Thank you for joining us today.
We issued earlier this morning is posted on our website, borgwarner.com, both on our homepage and our Investor Relations homepage.
With regard to our investor relations calendar, we will be trending multiple conferences between now and our next earnings release.
Please see the Events section of our Investor Relations homepage.
Full lists.
Before we begin, I need to inform you that during this call, we may make statements which involve risks and uncertainties.
As detailed in our 10 K.
Our actual results may differ significantly from the matters discussed today.
During today's presentation, we will highlight certain non-GAAP measures in order to provide a clearer picture of how the core performed.
And for comparison purposes with prior periods, when you hear us say on a comparable basis, that means excluding the impact of FX, net M&A and other noncomparable items, when he heresy adjusted, that means excluding non-comparable items, what do you see organic?
That means excluding the impact of FX and M&A, we will also refer to our incremental margin performance.
Our incremental margin is defined as the organic change in our adjusted operating income divided by the organic change in our sales.
Our all incremental includes our investment plan to invest me any impact from net inflationary items and other cost items.
Lastly, we are first compared to our market when you hear versus a market, that means the change in light and commercial vehicle production waited for our geographic exposure.
Please note that earnings call presentation to the IR page of our website.
I encourage you to follow along with these slides during our discussion.
With that, I'm happy to turn the call over to Fred.
Thank you, Beth, and good day, everyone.
I'm very pleased to share our results for the third quarter and provide an overall company update.
Starting on Slide 5.
From $3.4 billion of Q. three.
Organic sales were down about 5% year over year.
Modus, the outperforming is 6% decline in our market.
Year to date, we have outgrown our market by about 270 basis points.
This demonstrates the resilience of our technology focused portfolio that we believe is positioned to outgrow the market production.
We secured multiple new product awards for both foundational and E products, which we believe further support our long-term profitable growth.
Turning to our bottom line for the quarter, we delivered a very strong 10.1% margin, which was 50 basis points higher than last year.
We also delivered earnings per share of $1.9, which was $0.11 higher than prior year.
This strong underlying operational growth was primarily driven by our focus on cost controls across the business.
Our strong year-to-date margin and cash performance enables once again to increase our full-year margin and earnings guidance as retail later.
Lastly, we remained focused on the deployment of our capital and complete our planned 2020 for repurchase of $400 million of one-time stock.
Now let's look at some new product.
To date, first full loss furthered its business with the major North American OEM base tensions on to transfer cases for full-size pickups for one or we supplied to type So of transfer cases to BOEM for use on three platforms.
South of production for two of the platforms are slated for 2027, with the third expected to begin in 28, we have to play this OEM was transfer cases for over three years.
We believe this extension by our teams, reputation and the proven architecture, field performance and quality of our products.
Next, BorgWarner has secured three hiring needs of business wins in Asia, expanding our technological reach in the Asian electric vehicle markets.
In China.
Our high-voltage coolant needs will be used in a leading domestic OEM.s, fully electric SUV, with production expected to start in this quarter of 2025.
This partnership marks a significant step forward in our continued expansion is rapidly growing electric vehicle industry in Korea.
The product will be used in electric pickup vehicle with production is estimated to begin in March 2025.
The EBITDA will be critical in managing cabin temperatures, improving energy efficiency and enhancing the driving experience.
In Japan, our high-voltage coolant ETA has been chosen by Japanese OEM, which small battery electric vehicle with production expected to start in 20.
This marks the Company's first each program in the country.
The compact.
Either design offers a perfect fit for smaller vehicle platforms, delivering superior performance and efficiency.
These three important business wins demonstrate the strength of BorgWarner in this growing field and further solidify our presence in the Asia Pacific region.
And lastly, for Warner will deliver its turbo chargers for use on GM's COVID ZR. one that sports count platform marking the largest passenger car twin turbo charges to be and produced to date.
We're proud to secure these contracts and support General Motors in making the most powerful covet ever built.
This technology has been in the works for some time now and to see it come to fruition is both exciting and fulfilling for our passionate teams, BorgWarner and General Motors, OE of producing market leading application across a wide range of segments.
And we look forward to continuing to develop new technologies with them and push industry boundaries.
Now let's turn to Slide 7, where I would like to share our net sales breakdown following our business unit realignment that was effective July first, our business on NOW Alliance with our externally reported segments.
On the left side of this slide, you see that our thermal technologies and drivetrain and more systems segments each represent approximately 40% of net sales.
These segments generate most of their net sales foundational products.
They both and giant number one or number two positions in the different product market segments they serve.
These are mature businesses with strong margin and cash flow profiles that we expect will continue to strive as the world looks for more efficient combustion and hybrid powertrains.
The remaining 20% of our net sales is comprised of our power Drive System business unit, which we use the reported as e-Propulsion battery and charging systems business unit except for engine control products.
All of these sales generated from these two segments product for hybrid and battery electric vehicles.
These segments are expected to be signatures of our future growth.
As these businesses continue to scale, we expect to capitalize on the growth by converting at mid 10s, which is what we are seeing this year.
I also want to highlight our regional and customer diversity from on the right side of this slide, regionally, Americas, Europe and Asia.
Rest of the World, each represents approximately a third of BorgWarner's net sales.
We are also strongly positioned in terms of exposure to various customer.
For example, our sales to the Chinese local OEMs represents roughly 15% of our overall net sales so far this year.
This is comparable to our net sales to the German OEMs in Europe and our North American sales to the Detroit three.
I think this chart clearly shows fullness sales resiliency and highlights the benefits of strong diversification across products, customers and regions.
To summarize, the takeaways from today are BorgWarner's third quarter results were strong.
Sales performance was slightly better than market.
Our adjusted operating margin was over 10%, and our cash generation was very strong.
This allowed us to accelerate our second half 300 million share replan, taking our full-year repurchases to $400 million.
We secured noodle and a product business awards in the quarter, which we believe once again demonstrate our product leadership on both sides of our portfolio, further supporting our focus on profitable growth of production.
As we look forward, our formula for success is unchanged.
We expect to continue to secure businesses that will allow us to continue to grow faster than market production.
As I mentioned before, for one is DNA is to focus on propulsion efficiency, which includes both combustion fuel efficiency and electrons efficiency for hybrids or beds.
I expect efficiency to remain an industry trend for years to come and a strong drivers of BorgWarner's growth regardless of propulsion architecture.
We continue to seek to appropriately our cost structure as industry volumes and propulsion mix outlooks chain while continuing to preserve long-term profitable growth and product leadership.
Edge with this will allow, but wanted to continue to de-lever sales performance through organic growth above market, convert that growth into higher earnings and create long-term shareholders.
With that, let me turn the call over to Greg.
Thank you, Brian, and good morning, everyone.
Before I dive into the financials and provide a quick overview of our third quarter results.
First, we reported just over $3.4 billion in sales, down approximately 5% versus prior.
Excluding FX and M&A, this was slightly above market production in the quarter, which was down approximately 6%.
So we saw modest sales growth in the quarter of 50 basis points, which was primarily driven by European battery growth.
Second, we had strong margin performance in the quarter at 10.1%.
This was driven by solid operational performance, the continued benefit of restructuring actions we announced in July.
You'd focus on cost controls across the business and customer recoveries.
Third, we had strong cash flow in the quarter of 201 million, which allowed us to accelerate our second half 300 million share repurchase plan.
Importantly, we delivered this result while also continuing to organically in that business to support our focus on long-term profitable growth.
Now let's turn to Slide 8 for Q. three.
Last year's Q3 sales from continuing operation was just over 3.6 billion.
You can see that the weakening USD per year increase in sales of $4 million.
Then you can see a decrease in organic sales of approximately 5%, which was 50 basis points above market production, primarily due to strong European battery group.
Finally, the acquisition of outdoor at a $9 million in the sales year over year.
The sum of all, this was just over 3.4 billion of sales in Q three.
Turning to slide 9, you can see our earnings and cash flow performance for the quarter.
Our third or adjusted operating income was $300 million of equating to a strong 10.1% margin.
That compares to adjusted operating income from continuing operations of 349 million or 9.6% margin from a year ago.
Basis, adjusted operating income increased $15 million on a honey 6 million on lower sales.
This is a great result and reflects our ability to deliver profitability despite a declining production environment.
This performance was partially helped by 24 million of favorable items related to customer recoveries for E. problem shortfalls and the benefit of our power Drive Systems restructuring that we announced in July.
The net impact of Outdoor was a 14 million drag on operating income year over year.
Our adjusted EPS from continuing operations was up $0.11 compared to a year ago as a result of operating income, a decline in our effective tax rate and the impact of $300 million in share repurchases during the quarter.
And finally, free cash flow from operations was 201 million during the third quarter, which was up 116 from a year ago as a result of strong working capital and capital expenditure performance.
Now let's take a look at our full-year outlook.
We are projecting total 2020 for sales in the range of 14.0 to 14.2 million, which is a reduction from our prior guidance of 0.1 to 14.4 billion.
This reduction is due to a lower market production outlook and modestly lower sales.
But the sales reduction, we expect the Company to outgrow market production by 200 to 300 basis points, which once again demonstrates the resiliency of the focused portfolio that we believe is positioned to outgrow market production.
Starting with foreign currencies.
Our guidance now assumes an expected full year sales headwind from fees of $20 million compared to 2023.
Within this guidance, our full year end market assumption has been reduced down 3% to 3.5% versus down 2% to 3% previously.
Finally, the outdoor and SSE acquisitions are approximately 30 million to 2020 for sales.
Based on our updated outlook, we expect our organic sales change to be flat to down 1.5% year over year, or our growth above adoption of 200 to 300 basis points.
Now let's switch to margin increasing our full year margin outlook to 9.8% to 10.0% from our prior guidance of 9.6% to 9.8%.
This is based on our year-to-date performance and continued of our power Drive Systems restructuring that we announced in July.
The resiliency of our technology focused portfolio, our ability to drive profitability in very challenging end markets.
Our implied 4Q assumes that our boat business delivers a mid 10s decremental conversion compared to our average year to date results, exclusive of third quarter volume related product customer recoveries and second quarter stuff related to a senior executive retirement.
We view this mid 10s decremental conversion, a strong performance given the anticipated 5% to 7% year over year decline in market production during the fourth quarter of 2024.
Based on the sales outlook, we're expecting full year adjusted EPS in the range of $4.15 to $4.30 per diluted share.
This 4% EPS increase compared to our prior outlook, being driven by the impact of our strong third quarter results, a lower share count due to the third quarter execution of our share repurchase plan and a reduction in our full year effective tax rate.
We continue to expect full year free cash flow to be in the range of 475 to $575 million.
Ability to increase our margin and even during a challenging production environment demonstrates our focus on managing costs in order to hold our prior guidance.
Absolute income that and we're doing this despite a significant reduction in global industry volumes.
Now let's turn to slide 11 and take a look at how we will deploy our expected 475 to 75 million in 2020 for free cash flow.
As I just highlighted, we expect another strong year of free cash generation.
At the midpoint of our guidance.
We expect to generate 585 million in free cash flow.
It is important to note that 475 million of this cash flow has already been deployed to shareholders with $400 million of shares repurchased and 75 million of dividends paid through the end of the third quarter.
If we assume Claire and pay our consistent quarterly dividend in the fourth quarter, almost expected free cash flow will be deployed to shareholders in 2024.
We believe our ability to return capital to shareholders while also investing in business demonstrates the underlying strength of the importance of maintaining a strong balance sheet that allows us to invest in our long-term profitable growth and follow a balanced capital allocation approach that reward shareholders.
So let me summarize my financial remarks.
Overall, we delivered a strong third quarter with sales outperformance compared to industry production.
We delivered a very strong 0.1% margin, which was 50 basis points higher than 2023 and the second quarter in a row with a margin above 10%.
Additionally, we generated EUR201 million free cash flow, which allowed us to accelerate our second half 300 million share repurchase plan.
And we despite challenging market production in the quarter.
This once again shows the resiliency of our technology focused portfolio leave is positioned to outgrow industry production and deliver strong profitability and free cash flow.
We are proud to be increasing our margin and EPS our second time this year despite a declining industry volume, all of them all are we are Hi, Connie Yuhara.
I apologize for the audio interruption, Connie organ here.
As we can open up the call up for questions.
Press star one on your telephone keypad.
If you're using a speakerphone, please pickup the handset before asking your questions.
And the timing and the interest of time, please limit yourself to one question and one follow-up question while pause for just a moment to compile the Q&A roster.
And we'll take our first question from Dan <unk>, Wells Fargo.
Okay, great.
Thanks for taking my questions and congrats on a good quarter in a pretty tough market.
Wanted to ask if we go back to the Investor Day in June of last year, you actually talked about 8% margin in 2027.
Now, I think at the high end of your guidance, you could be there at this year was pretty impressive oral that's actually a bit worse over the last year-and-a-half.
How should we think about margins from here?
Is there anything kind of that might prevent you from getting above that 10%?
That sounds like you expect to convert easier, right at the same contribution.
So that would imply if we have growth kind of get that 27 target already.
You have a count for the question.
Can you hear me?
Okay.
Yes.
Okay, great.
Let's start with the quarter.
Overall, the quarter really strong operational performance.
As I mentioned in my script, we benefited from our actions real focus on cost controls across the business.
And I mention that we also had a bit of a tailwind from PDS. volume related customer recoveries.
So really pleased with our performance in the quarter.
As you look to the fourth quarter, and I think you should look at our performance really two ways to look at it first against our average performance focus for the full year.
If you look at that at the midpoint of our guys were expecting revenue to be down, let's just call it roughly 3%.
And when you remove the onetime items in the second quarter in the third quarter that I mentioned in my script or decrement in the mid 10s, which is what you had it one way to look at our Q4 performance, that gets up to 9.6%.
Yes, for the gap.
If you look at our year over year performance for the fourth quarter, again, revenue down about 2% year over year and were actually income again back to 9.6% at the midpoint.
So either way, you look at it from our perspective, good operational performance in the fourth quarter, and I think we're focused on delivering that guidance at the midpoint again, right, around 9.6 on the long term, 10% target, you're pretty close to anything that with that we should be thinking about as we think about 25, 26, that would sort of getting above that, that target consumers like payoff close?
No, it has not that sensitive about longer term.
We're focusing on 24.
We're focusing on controlling our incremental decremental for that matter and that the agency to navigate.
And we've talked about 25 and in the Q4 call, kind of think con call.
And your next question comes from Dan Levy, Car Park Place.
Hi, good morning thing.
I wanted to just double click on on on the margin in 3Q.
Based on the revenue decline at a 20% decrementals that would have been at, um, you know, CAD37 million EBIT, but instead you are plus 15 on a $50 million of swing, it's even more if you're adjusting for outdoor.
So decompose that I know you mentioned there was the $24 million benefit e-Propulsion on the app.
And then maybe on the under $24 million, how much of that is sort of recurring NOI through the ongoing restructuring benefit versus maybe a one-time benefit?
Yes.
Overall, when you look at it that it was just really strong operational performance.
We're benefiting from the PDS restructuring we announced in July were better, but we're benefiting from our focus on cost controls, product, the restructuring savings, et cetera, you're flexing the 24 million of volume related PS. customer recoveries.
That's a one-time item in the quarter.
You should not expect that to repeat next quarter.
The PDF restructuring that 30 million for the full year.
Okay.
Got it.
Thank you.
Second, I appreciate with the new segment structure, we can now better see the battery business on its double click on on the growth there.
How much of that, as you know, just strong demand versus getting new supply online?
I think of it is new supply, what type of growth profile we can executive business and then interesting to see that it's a new breakeven on.
Should we just assume that this is going to increment that your mid to high 10s that you're working your way up as you continue to grow in a way to think about sort of the margin profile of that business over time?
Then as I said, up on a on the battery and challenging for the quarter, it was a good incremental of about 36%, a strong sales, especially especially in Europe.
And I think for when you look at the segments, the other segment, there was a very, very efficient decremental and the way down, right?
So we're really focused on controlling what we can control, adjusting to the volatility of the market and driving margin performance.
And I think you can see that in the US a reason why this business should not carry on incrementing at the meeting and the versus demand dynamics, how much of this is just sort of new supply hitting?
I would say the supply versus demand dynamic is not a dynamic where we are.
This is a short delay.
We now have nine capacity to demand in both regions, North America and Europe.
So this is behind us.
Thank you.
We'll take our next question from Joe Spak, UBS.
Thank you.
I guess maybe just a sort of follow on on Tim's question there with some of the some of the new segmentation like we've had seen pretty improvement in the margins in battery and charging.
And I know I think your capacity is sort of fully built out by the end of this year and you're in sort of fill that up.
So is it is getting to positive margins?
Just sort of the remaining out that sort of remaining capacity?
Or are there other actions in that segment?
Yes, it really at scale, we got to continue to scale the business.
So you saw revenue in the quarter coming in right around 200 million.
As we continue to scale that business and increment in the mid 10s, then we'll get to breakeven and about that's what we're focused on doing and the build-out effectively put on this quarter, it's complete.
Right.
And then just from Craig, you sort of stressed, I think a couple of times, right.
All the cash generation was redeployed to shareholders this year between the buyback and the dividend.
I appreciate we're sort of not talking about 25.
Yes.
I mean, does that sort of similar paradigm that we should expect going forward here over the coming years?
Yes, I will comment on 25 and we get to 25 really happy with the weight of cash this year.
Again, as you mentioned, we have line of sight to 525 million at the midpoint of our guide will effectively to all of that.
Others really pleased with the way that we've allocated can steer.
Again, we'll give you insight into 25 as we get into February.
Okay.
Thank you.
And your next question comes from Adam Jonas with Morgan Stanley.
Thanks, everybody.
Joe, just asset, a free cash flow paradigm and how much of that return.
So just one left for me.
I know I know you're saying that 24 million of recoveries is one-time won't be repeated, but it does seem like that narrative from your customers is or pushed out written off canceled Amy programs and some of them are quite sizable included from the likes of Ford and some others that will continue.
As I didn't know if that was again not calling out a specific quarter or the air one and temporary occurrence of a one-time items.
But if I am I right that if I'm looking at 12 months, there is a possibility for more recoveries from OEMs given what has been announced and what you're seeing in your discussions so far of cancellations of product and any related products that you spent money on and may not be made at anywhere near the volumes you expected or at all times and I'm yes, eight cases specific, we see that these cases will exceptional.
What we're focusing on at BorgWarner is also bringing flexibility from Motorola design standpoint, stability from a production standpoint, reusing the four walls and transforming our OP plus from combustion into electrification at a measured way.
So we are with our customers for the long run.
And I would say that each case is very specific and we're going to manage the business going forward depending on what's happening.
Thanks, Trevor.
And your next question comes from John Murphy from cat.
Good morning, guys.
In French with the Asco.
And when you look at something like the transfer case of extension or a new capital into go into investing in sort of that next gen product from is it minimal.
And as we see these extensions on the IT side for the profits and returns be significantly, are margins and returns significantly better than they have been historically or even just a bit better?
Yes, I won't comment specifically on the under this console case program.
But what we see from a from a combustion standpoint is, yes, three elements of funding in the marketplace.
First is program extension, like the transfer case where some capital may be asked to put to be put in place to cope with the extension and sometimes sometimes that.
So that's the first case.
Second cases, program prolongations, where the combustion engine is going to be around for longer.
And the third case is hybrids carrying over combustion gasoline engines for an avenue to abrogate application.
And then what's driving also the outgrowth of the combustion market in that in this specific case.
Okay.
That's helpful.
And then just a second question on a lot of other suppliers are kind of alluding to the bidding process or their program bidding process being pushed out a quite dramatically.
But once again, on slide 6, you're showing some good wins.
I just wonder if you could characterize the quoting activity right now and if you think at some very different than history or IEV.s, I mean, what's your current take on that?
And is there anything has really shifted maybe in absolute terms and maybe just timing terms?
Digital, John.
So what we're seeing is that in the Western world, there is a build-out in new quoting activities for the site offline.
And I think one of the key reason is that we're all focused on launching, including at BorgWarner of many, many electrified hybrid embedded launches in Europe and North America.
And again, that opens, although both on the combustion with what I alluded to before, extensions that the translocation prolongation or and or hiring over combustor, that's the dynamic that would be seeing the market place.
But would it be fair to say that that does not have a significant impact on your main growth over market prospects we expect to have for you that is resilient on the various propulsion architecture, MiSeq scenario and regional mixed scenario.
And we expect to carry on outgrowing our respective markets very much.
And your next question comes from Ed Young from Baird.
Good morning.
First question, Fred, just hoping you could building on the response that you just comment on your hybrid pipeline and specifically in, but just be interested if you're seeing any evolution more into a bigger picture standpoint, I guess relative to the regular tourists in Europe, it's fairly simple fungible.
The most advanced hybrid powertrains carry of our combustion products.
And on and a product standpoint, I as we mentioned in the past and inverter for have is the same as it inverts it vibrates.
So I'm buying, but the guts of the same, the motors is actually pretty much the same and a P4 for hybrid can be done in IDM for the same types of products.
So we are in a position to serve our customers globally into wherever they want to go from a from a powertrain architecture forward.
So for us, I wouldn't I wouldn't say that it doesn't really matter, but this is why we think we can count carry-on outgrowing the market or the market and and convert on that.
And then for my follow-up, Craig, I'm just wondering if we could get some flavor for incrementals productivity.
Just help us understand some of the areas that you're leaning into and what might carry over into 2025 for the back half of this year?
I think we're leaning into all of those things across the business and cost controls loop for items that you mentioned.
We've helped us in the quarter, whether it's restructuring actions, whether it's continued focus on savings, whether that supply chain or productivity, we're leaning into all that across the business.
And I think you can see that in our segment performance through the first nine months will continue to have to have that focus, especially as the top line stays very volatile.
Your next question comes from James Picariello from BNP Paribas.
Just on the TL VPN for for this year.
You're signaling down to 2.5% and there are other suppliers out there that are constant down for now, right, which implies a fourth quarter precipitous down something close to percent.
Just curious on your thoughts there and the visible schedules in your own customer mix on that point of.
Yes.
My first question, James, to argue it will be down 3% to 3.5% year over year because reductions North America Europe down five to 5.5 year over year.
And with a slight increase in China.
That's what we see.
And we are to carry on managing our costs effectively and and adjust to a potential production environments.
And I think this is evidenced in our updated guide to.
Okay.
Yes.
I was I was referring to just the light vehicle component, but the splitting hairs, I suppose my follow-up is just as we think about your foundational product suite and the potential for hybrids to run much stronger in demand between your turbos and Thermo potential turbos and Thermal segment versus the drive train and more systems, how do you view hybrid demand between those and on the foundational side of this one positioned?
And then the other thing is some kind of breaking that you could you could share fixed?
I think we all kind of down the that potential.
I would say that it would touch both segments of the most advanced hybrids carry engine component of it in malls in total, those and other subsystems.
It will also carry everything related to a shift shifting mechanism between the E, Dr. Alison drive a hybrid.
So I would say that advanced hybrid powertrain will draw products from from those two essentially foundational segments.
Thanks.
And your next question comes from Mark Delaney with Box.
I guess second morning and thanks for taking my questions.
Questions.
First, I believe you are now assuming growth over market of 2 to 300 basis points.
And I think you have been three 50 to 4 or 50 a share for 2024 previously.
So maybe you can have us better understand what's changing in the growth of our market outlook for this year.
So a bug outgrowth drops of about 200 million.
Half of it is coming from a product portfolio.
The other half is coming from our foundational business, which is about 100 million out of 12 billion, I would say is not extremely mix also.
And from the from a quarter-over-quarter, our global, I would not really look at it.
We are year to date at 270 basis points.
And I think you know, always smooth quarter to quarter.
Okay.
That's helpful.
Just following up on John's question around the pace of games and understand in the western and OEM bookings activity has slowed.
And Bruce, if you think push US election results, if there's the potential for award activity to accelerate once they have a better sense on the likely path of CO2 requirements in the coming.
Thanks.
I am not sure I can comment on this.
I see that that's let's wait and see.
At least at both already, we have other customers want to go.
Understood.
Thank you.
We have time for one final question, and that question comes from and then Raj Nair with Wolfe Research.
Great.
I was hoping you can help us put a finer points on the cost actions and how to think about them on the how should we saw the amount of structural costs are in that you're taking out of this year?
How do they annualize that going into next year?
Like how much of it is left over from more recent actions?
And generally speaking, the programs you've announced since you are you have in place are much costs is left to pay accounts?
Yes, thanks for the question of.
So I'll point to the PDS restructure.
Those are structural changes that we're making.
What we indicated this year is 20 to $30 million.
We announced that in July.
So if you annualize that 40 to 60 million next with a target of $100 million by 2026, those are structural changes that we're making.
As you think about our business as we move for our even with these restructuring actions, what's our goal?
Our goal over the market from a sales perspective, turn that into income in the mid 10s, regardless of the growth is on the foundational product side of the portfolio and to generate cash.
Ultimately you should think about our growth is incrementing in the mid-teens.
That's a great way to go on the color, and I was hoping to come on in a little bit more again on the O, the commercial vehicle battery business.
Can you maybe tell us about more Warner's competitive advantages in that business this and then also the operating leverage on this business, specifically, obviously, very strong incrementals that we just saw that I think your earlier comments spoke about, you know, no reason why you shouldn't see in the mid teen.
That's obviously a big difference between 40% and and the mid-teen.
So maybe the longer term question is for a BorgWarner's competitive advantages that maybe shorter term as to what you're saying about the operating leverage.
So from a product perspective, in general, as you know, we already on commercial vehicles, trucks and buses.
With this, we are pretty agnostic from a cell phone perspective.
We're in production with an end and MC. and preparing for that FP. in the light of our association with fin dreams, we have capacity is still in both sides of the points I in the U.S. than in Europe.
And we are into software cyber security at somebody of the pack, a single everything that goes around the fact which I think it's pretty differentiate.
And then we are one of the only one in the Western world, building CapEx for commercial vehicles, trucks and buses.
And as that as an independent supplier.
And I'll comment on the margin profile radically really have the performance of that business grew significantly in the quarter, converted at a really high-level, like you mentioned, about $0.35 on the dollar.
As we move forward.
I wouldn't say one quarter makes it.
So we're focused on that business incrementing in the mid 10s, like all of our other businesses.
That's how we measure success for the battery business charging business.
With that, I'd like to apologize for the audio issues that we had today.
And thank you all for your great questions.
If you have any follow-ups, feel free to reach out to me or my team.
With that content, you can go ahead and conclude today's call.
This does conclude the BorgWarner 2020 for third quarter results conference call.
You may now disconnect.
Boom, boom, Um-hum, some of them, um, phone.