“  Our technology, our customer diversity, our financial discipline and our  staunch commitment to Product Leadership in every aspect of our busi- ness have built a foundation that continues to prove strong enough to  support our ambitious growth plan. BorgWarner’s record performance  in 2004 affirms my view that there is no other automotive supplier better positioned for continued global growth.”  BorgWarner’s performance during 2004 dis- tinguishes us from other auto systems suppliers  as we continue to lay the groundwork for our  global growth. In an industry with little growth, our sales were up  15% to a record $3.5 billion. Earnings hit another record high.  A stock split in May signaled our continued confidence in the  future of the company. We increased our dividend for the  third time in the past three years. By year-end, BorgWarner  stock had chalked up 29 52-week highs. We have strengthened our Engine and Drivetrain focus with  the creation of technology leadership positions in each  group, the continued development of new products and the  acquisition of a majority stake in Beru AG on January 4, 2005.  The Beru acquisition is expected to be accretive  in 2005 and enhance our diesel and controls  technology, as well as expand our customer  base and geographic presence – all reasons we  have previously cited for making acquisitions.  New business amounting to $1.4 billion is expected to  come on stream over the next three years. About 66%  is expected to be engine-related products such as turbo- chargers, engine timing systems, variable cam timing  modules and emissions/thermal products. The other 34%  is expected to be in transmission modules and all-wheel  drive systems. As a global business, we serve customers throughout the  world. In addition to supporting the domestic automakers  in North America, we have significantly diversified our  FROM LEFT TO RIGHT: Alfred Weber Vice President,  President and  General Manager Emissions/Thermal  Systems Cynthia A. Niekamp Vice President, President and  General Manager TorqTransfer Systems Robin J. Adams Executive  Vice President, Chief Financial  Officer and  Chief Administrative  Officer Roger J. Wood Vice President,  President and  General Manager  Morse TEC Timothy M. Manganello Chairman and  Chief Executive Officer customer base. Because of tremendous growth with custom- ers like Honda, Hyundai/Kia and VW/Audi, our sales are well  balanced. This strategic focus proves beneficial as market  shares among the global automakers shift in favor of our  faster growing customers. We further enhanced our strong and talented management  team with key appointments from within the company and by  attracting exceptional outside talent. To help manage the  complexities of our more global business, we strengthened  the role of the CFO to include administration and created a  new position for global supply chain management and  emerging markets. Our Board of Directors is actively engaged in guiding our  business. I want to thank Bill Butler for his leadership and  wise counsel as a board member since 1997. Bill retires  from the board in April 2005. I also want to welcome David  Brown, CEO of Owens Corning, as the newest member of  the board. We look forward to his contributions. Since becoming chief operating officer in 2002, and now as  CEO, I have challenged our people to broaden the competi- tive gap between us and other suppliers in three key areas.  These are quality and cost improvement, the use of elec- tronic controls strategies, and harnessing the power of  collaboration and teamwork -- all with a focus on our vision  of Product Leadership. I am proud of our achievements in  each area. We are demonstrating that Product Leadership  is everyone’s job, and each employee has a role to play in  the success of the company. Implementing Initiatives Focused Growth 2 to  our s tockho l der s Mark A. Perlick Vice President, President and  General Manager  Transmission  Systems F. Lee Wilson Vice President,  President and  General Manager Turbo Systems 3