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Happiness In BW Land: BorgWarner Earns $3.23 Per Share in 2001 Before Charge

CHICAGO, Feb. 4 -- BorgWarner Inc.today reported that it earned $3.23 per share, before a non-recurring charge, on sales of $2.35 billion in 2001. The company delivered improvements in gross margins throughout the year and strong cash flow that allowed it to reduce debt. Results were bolstered by the company's broad customer base, geographic growth and key technologies for more efficient engines and transmissions, which helped offset industry instability and production declines.

Financial Results: For the 2001 fourth quarter, sales were $583 million compared with $596 million in the 2000 fourth quarter. Net income in the quarter was $21.2 million, or $0.80 per share, compared with 2000 earnings of $26.8 million, or $1.02 per share, before restructuring and other non-recurring charges in each year. The 2001 charge was $19.0 million or $0.72 per share, resulting in net income for the quarter of $2.2 million or $0.08 per share. The charge in 2000, recognized in the fourth quarter, totaled $19.1 million or $0.72 per share, resulting in net income for the quarter of $7.7 million or $0.30 per share.

Sales for 2001 totaled $2.35 billion compared with $2.65 billion in 2000. Full-year 2001 net income was $85.4 million, or $3.23 per share before the charge, compared with $132.7 million, or $5.01 per share before charges in 2000. The 2001 charge was taken to adjust the carrying values of certain assets and liabilities, principally related to business acquisitions and divestitures over the past three years. As a result, full-year net income was $66.4 million or $2.51 per share compared with $94.0 million, or $3.54 per share, in 2000. The company recorded a total of $38.7 million or $1.47 per share in 2000 as restructuring and other non-recurring charges.

Comments and Outlook: ``We are very encouraged that our fourth quarter sales in North America were up 2% while industry production was down 3%,'' said John F. Fiedler, Chairman and CEO. ``We also ended the year in a strong financial position, with reduced debt and strong cash flow. While we cut back on capital spending during the downturn, we maintained our commitment to research and development, which is key to our future growth. We clearly demonstrated the viability of our technology driven growth strategy by securing anticipated new business of $1.1 billion over the next three years. This pipeline of expected new programs benefits all of our groups and puts us in a strong position as the auto industry recovers around the world.''

Commenting on the outlook, Fiedler said: ``We expect 2002 earnings per share in a range of $4.30 to $4.50, on an expected sales increase of 5%. While we anticipate that demand in the first half of the year will continue to be weak, we expect to benefit from new business launches in the later part of 2002 and hope to see a general strengthening in the U.S. economy.''

Operating Results: Revenue at Morse TEC, the company's chain and turbocharger business, was $215.5 million for the 2001 fourth quarter and $869.4 million for the full year. North American production softness impacted sales of the group's chain products while demand continued in Europe for both chain engine timing systems and turbochargers. Earnings before interest and taxes, while down for the full year, were up in the fourth quarter.

Sales for Air/Fluid Systems were $88.9 million for the quarter and $357.8 million for the year. The group was hurt by weak vehicle sales at DaimlerChrysler, which reduced demand for the group's air management and control products.

TorqTransfer Systems' sales were $131.0 million for the quarter and $500.1 million for the year. This group's earnings were hurt by erratic customer production scheduling in the first part of the year and the continued effects of the Ford/Firestone tire issue.

Transmission Systems' sales were $108.2 million for the quarter and $428.8 million for the year. Strong demand from European and Asian customers partially offset the weakness in North American sales. Although full year sales were slightly below 2000, operating improvements enabled the group to increase earnings by 5%.

Cooling Systems reported sales of $50.8 million for the quarter and $220.5 million for the year. The group was heavily affected by deteriorating North American market conditions since 80% of its business is with North American sport-utility, and light and commercial truck makers. Commercial vehicle builds in North America were off 34% in 2001 versus 2000.

BorgWarner Inc. is a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. The company operates manufacturing and technical facilities in 50 locations in 14 countries including joint ventures, with combined worldwide sales of $2.7 billion in 2001. Customers include Ford, DaimlerChrysler, General Motors, Toyota, Honda, Caterpillar, Navistar International, PSA and VW Group. The Internet address for BorgWarner is: http://www.bwauto.com .