SECURITIES AND EXCHANGE COMMISSION

BorgWarner Inc.

200 South Michigan Avenue

Securities registered pursuant to Section 12(b) of the Act:

      Securities registered pursuant to Section 12(g) of the Act: None

     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 X     No

      The aggregate market value of the voting stock of the registrant held by stockholders (not including voting stock held by directors and executive officers of the registrant) on March 8, 2001 was approximately $1.18 billion. As of March 8, 2001, the registrant had 26,259,219 shares of Common Stock outstanding.

      Indicate by check-mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [X]

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the following documents are incorporated herein by reference into the Part of the Form 10-K indicated.

BORGWARNER INC.

FORM 10-K

YEAR ENDED DECEMBER 31, 2000

INDEX

PART I

Item 1. Business

      BorgWarner Inc. (the "Company"), a Delaware corporation, was incorporated in 1987. The Company is a leading, global Tier I supplier of highly engineered systems and components, primarily for vehicle powertrain applications. These products are manufactured and sold worldwide, primarily to original equipment manufacturers ("OEMs") of passenger cars, sport utility vehicles, trucks, commercial transportation products and industrial equipment. The Company operates 56 manufacturing and technical facilities in 13 countries serving customers in North America, South America, Europe and Asia, and is an original equipment supplier to every major automotive OEM in the world.

Financial Information About Segments

      Incorporated herein by reference is Note 13 of the Notes to the Consolidated Financial Statements on pages 44 through 46 of the Company's Annual Report for the year ended December 31, 2000 (the "Company's Annual Report") filed as an exhibit to this report.

Narrative Description of Operating Segments

      The Company's products fall into five reportable operating segments: Air/Fluid Systems, Cooling Systems, Morse TEC, TorqTransfer Systems and Transmission Systems. Net revenues by segment for the three years ended December 31, 2000, 1999 and 1998, are as follows (in millions of dollars):

      The sales information presented above excludes the sales by the Company's unconsolidated joint ventures. See "Joint Ventures." Such sales totaled approximately $348 million in 2000, $287 million in 1999 and $247 million in 1998. Divested operations and businesses held for sale includes Kysor-Westran which was sold in 2000, the forged powdered metal race business sold in 1999, the torque converter and connecting rod businesses sold in 1998 and the fuel systems' business which is currently held for sale.

Air/Fluid Systems

      Air/Fluid Systems designs and manufactures sophisticated electro-mechanical, mechanical and electronic components and systems used for automated transmissions, fluid pumps, engine air intake modules, engine emission controls and actuation systems. Key products for transmission controls include single function solenoids, complex solenoids and multi-function modules. We also manufacture a wide variety of fluid pumps, including engine hydraulic pumps for variable cam timing and engine lubrication. Key products for engine air intake management include throttle bodies, intake manifolds, throttle position sensors and complete engine induction systems. We also manufacture products to control emissions and improve gas mileage such as electric air pumps, air control valves and exhaust gas recirculation valves.

Cooling Systems

      Cooling Systems, the Company's newest segment, is a combination of the businesses acquired from Eaton Corporation and the Schwitzer cooling businesses acquired as part of the Kuhlman Corporation acquisition in 1999. Cooling Systems manufactures viscous and electronically activated fan clutches, on-off fan drives and fans which are used as part of the engine cooling system. Product features include improved fuel economy and emissions control by minimizing parasitic power loss. These products are provided from facilities in the U.S., Germany, U.K., Brazil, Korea and China. The Company believes it is a leading global supplier of such products but competes with other large independent producers as well as divisions of its OEM customers. This business serves the light, medium and heavy duty truck markets.

Morse TEC

      Morse TEC manufactures chain and chain systems, including HY-VO® front-wheel drive ("FWD") transmission chain and four-wheel drive ("4WD") chain, MORSE GEMINI® Chain Systems, timing chain and timing chain systems, crankshaft and camshaft sprockets, chain tensioners and snubbers and turbochargers for passenger car and commercial vehicle applications. These products are provided from facilities in North America, Europe and Japan.

      HY-VO® chain is used in transmissions and for 4WD transfer case applications. Transmission chain is used to transfer power from the engine to the transmission. The Company's MORSE GEMINI® Chain System emits significantly less chain pitch frequency noise than conventional transmission chain systems. The chain in a transfer case distributes power between the front and rear output shafts which, in turn, drive the front and rear wheels. The Company believes it is the world's leading manufacturer of chain for FWD transmissions and 4WD transfer cases. The Company is an original equipment supplier to every major manufacturer that uses chain for such applications.

      The Company's timing chain system is used on Ford's new family of overhead cam engines, including the Duratech and Triton engines, as well as Chrysler's 2.7 liter, 3.7 liter and 4.7 liter overhead cam engines. The Company has been selected to provide timing systems for a number of Japanese and European applications. The Company believes that it is the world's leading manufacturer of timing chain systems.

      This segment also provides turbochargers for passenger car, commercial vehicle and industrial applications for diesel and gasoline engine manufacturers in Europe, North America, South America and Asia. A turbocharger is a device designed to force additional intake air into the engine to create a cleaner and more powerful ignition. Benefits of turbocharging in both passenger car and commercial vehicle applications include greater power for a given engine size, improved fuel economy and significantly reduced emissions. The Company believes it is a leading manufacturer of turbochargers worldwide.

TorqTransfer Systems

      TorqTransfer Systems' products include 4WD and all-wheel drive transfer cases and torque management systems to transfer torque within the drivetrain for rear wheel drive and FWD based vehicles. The main focus is on electronically controlled torque management devices and systems.

      Transfer cases are installed primarily on light trucks and sport-utility vehicles. A transfer case attaches to the transmission and distributes torque to the front and rear axles for 4WD, improving vehicle control during off-road use and in a variety of road conditions. The Company has designed and developed an exclusive 4WD TORQUE-ON-DEMAND® ("TOD") transfer case system, which allows vehicles to automatically shift from two-wheel drive to 4WD when electronic sensors indicate it is necessary. The TOD® transfer case is available on the Ford Explorer, the best selling sport-utility vehicle in the United States in 2000, 1999 and 1998, and the Ford Expedition, Lincoln Navigator, Isuzu Trooper and SsangYong Musso from Daewoo.

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      Sales of 4WD transfer cases represented 19%, 22% and 27% of the Company's total revenues for 2000, 1999 and 1998, respectively. The Company believes it is the world's leading independent manufacturer of 4WD transfer cases, producing approximately 1.1 million transfer cases in 2000. The Company's largest customer of 4WD transfer cases is Ford Motor Company. The Company supplies the majority of the 4WD transfer cases for Ford, including those installed in the Ford Explorer, the Ford Expedition, the Ford F-150 and Ranger pick-up trucks, the Mercury Mountaineer and the Lincoln Navigator.

      Our newest four-wheel drive product is the INTERACTIVE TORQUE MANAGEMENT™ system, which is featured on the new Acura MDX crossover vehicle under a five year supply agreement. This product uses electronically controlled clutches to distribute power to the individual rear wheels when traction is required. The Company is actively involved in developing this technology for new applications in both front wheel drive based crossover vehicles and passenger cars.

Transmission Systems

      The Company engineers and manufactures components for automatic transmissions and the systems that combine such components around the world. Principal product lines include friction plates, one-way clutches, transmission bands and torque converter lock-up clutches for automatic transmissions. The Company is a supplier to virtually every major automatic transmission manufacturer in the world. The Company's 50%-owned joint venture in Japan, NSK-Warner Kabushiki Kaisha ("NSK Warner"), is a leading producer of friction plates and one-way clutches in Japan.

Joint Ventures

      The Company currently has five joint ventures in which it has a less-than-100% ownership interest. Results from three of these ventures, in which the Company is the majority owner, are consolidated as part of the Company's results. The Company's ownership interest in NSK-Warner is 50%. This is reported using the equity method of accounting. The Company also has an 80% ownership interest in BorgWarner TorqTransfer Systems (Beijing) Co., Ltd., a newly formed joint venture which will manufacture transfer cases in China. Results from this venture will be consolidated.

      Management of the unconsolidated joint ventures is shared with the Company's respective joint venture partners. Certain information concerning the Company's joint ventures is set forth below:

      See Note 13 of the Notes to Consolidated Financial Statements on pages 44 through 46 of the Company's Annual Report for geographic information.

Customers

      Approximately 75% of the Company's total sales in 2000 were to automotive OEMs, with the remaining 25% of the Company's sales to a diversified group of industrial, construction and agricultural vehicle manufacturers, auto part manufacturers and to distributors of automotive aftermarket and replacement parts.

      The Company's worldwide sales in 2000 to Ford, DaimlerChrysler Corporation and General Motors Corporation constituted approximately 26%, 17% and 12%, respectively, of its 2000 consolidated sales. Approximately 26% of consolidated sales for 2000 were outside the United States, including exports. However, a substantial portion of such sales were to foreign OEMs of vehicles that are, in turn, exported to the United States. See Note 12 of the Notes to Consolidated Financial Statements on pages 44 through 46 of the Company's Annual Report.

      The Company's automotive products are generally sold directly to OEMs substantially pursuant to either negotiated long term supply agreements or terms and conditions as may be modified by the Company. Deliveries are subject to periodic authorizations based upon the production schedules of the OEMs. The Company ships its products directly from its plants to the OEMs.

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Sales and Marketing

      Each of the Company's operating segments has its own sales function headed by a vice president of sales. Account executives for each group are assigned to serve specific OEM customers for one or more of a business group's products. Such account executives spend the majority of their time in direct contact with OEM purchasing and engineering employees and are responsible for servicing existing business and for identifying and obtaining new business. Because of their close relationship with the OEMs, account executives are able to identify and meet customers' needs based upon their knowledge of the Company's products and design and manufacturing capabilities. Upon securing a new order, account executives participate in product launch team activities as a key interface to the customers.

Research and Development

      Each of the Company's operating segments has its own research and development ("R&D") organization. Over 600 employees, including engineers, mechanics and technicians, are engaged in R&D activities at Company facilities worldwide. The Company also operates testing facilities such as prototype, measurement and calibration, life testing and dynamometer laboratories.

      By working closely with the OEMs and anticipating their future product needs, the Company's R&D personnel conceive, design, develop and manufacture new proprietary automotive components and systems. R&D personnel also work to improve current products and production processes. The Company believes its commitment to R&D will allow it to obtain new orders from its OEM customers.

      Consistent with its strategy of developing technologically innovative products, the Company spent approximately $112.0 million, $91.6 million and $65.1 million in 2000, 1999 and 1998, respectively, on R&D activities. Not included in the reported R&D activities were customer-sponsored R&D activities that were approximately $12.5 million, $9.4 million and $8.4 million in 2000, 1999 and 1998, respectively.

Patents and Licenses

      The Company has approximately 2,800 active domestic and foreign patents and patent applications pending or under preparation, and receives royalties from licensing patent rights to others. While it considers its patents on the whole to be important, the Company does not consider any single patent, group of related patents or any single license essential to its operations in the aggregate or to the operations of any of the Company's business groups individually. The expiration of the patents individually and in the aggregate is not expected to have a material effect on the Company's financial position or future operating results. The Company owns numerous trademarks, some of which are valuable but none of which are essential to its business in the aggregate.

      The Company owns the "BorgWarner" and "Borg-Warner Automotive" trade names and housemarks, and variations thereof, which are material to the Company's business.

Competition

      Each of the Company's operating segments competes worldwide with a number of other manufacturers and distributors which produce and sell similar products. Price, quality and technological innovation are the primary elements of competition. Competitors include vertically integrated units of the Company's major OEM customers, as well as a large number of independent domestic and international suppliers (some of which were formerly part of our OEM customers). Many of these companies are larger and have greater resources than the Company.

      A number of the Company's major OEM customers manufacture, for their own use and for others, products which compete with the Company's products. Although these OEM customers have indicated that they will continue to rely on outside suppliers, the OEMs could elect to manufacture products to meet their own requirements or to compete with the Company. There can be no assurance that the Company's business will not be adversely affected by increased competition in the markets in which it operates.

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      The competitive environment has changed dramatically over the past few years as the Company's traditional United States OEM customers, faced with intense international competition, have expanded their worldwide sourcing of components with the stated objective of better competing with lower-cost imports. As a result, the Company has experienced competition from suppliers in other parts of the world enjoying economic advantages such as lower labor costs, lower health care costs and, in some cases, export subsidies and/or raw materials subsidies.

Employees

      As of December 31, 2000, the Company and its consolidated subsidiaries had approximately 14,000 salaried and hourly employees (as compared with approximately 14,400 employees at December 31, 1999), of which approximately 9,219 were U.S. employees. Approximately 39% of the Company's domestic hourly workers are unionized. The hourly workers at the Company's European facilities are also unionized. The Company believes its present relations with employees to be satisfactory.

Raw Materials

      Each of the Company's operating segments believes that its supplies of raw materials for manufacturing requirements in 2001 are adequate and are available from multiple sources. It is common, however, for customers to require their prior approval before certain raw materials or components can be used, thereby reducing sources of supply that would otherwise be available. Manufacturing operations for each of the Company's operating segments are dependent upon natural gas, fuel oil, propane and electricity.

Environmental Regulation and Proceedings

      The Company's operations are subject to federal, state, local and foreign laws and regulations governing, among other things, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials. The Company believes that it has operated its business and facilities in compliance in all material respects with applicable environmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. However, the operation of automotive parts manufacturing plants entails risks in these areas even for a company complying with all laws, and there can be no assurance that the Company will not incur material costs or liabilities. In addition, through various acquisitions over the years, the Company has acquired a number of manufacturing facilities and there can be no assurance that the Company will not incur material costs and liabilities relating to activities which predate the Company's ownership. In addition, potentially significant expenditures could be required in order to comply with evolving environmental and health and safety laws, regulations or requirements that may be adopted or imposed in the future.

      The Company believes that the overall impact of compliance with regulations and legislation protecting the environment will not have a material effect on its financial position or future operating results, although no assurance can be given in this regard. Capital expenditures and expenses in 2000 attributable to compliance with such legislation were not material.

      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 cleanup and other remedial activities at 42 such sites. Responsibility for cleanup and other remedial activities at a Superfund site is typically shared among PRPs based on an allocation formula.

      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 costs apportioned to them; currently available information from PRPs and/or federal or state environmental agencies concerning the scope of contamination and estimated remediation costs; remediation alternatives; estimated legal fees; and other factors, the

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