4 Structuring for Future Growth Our collaboration has led to better  more cost-efficient  product launches  a successful move of our corporate head- quarters to Auburn Hills  Michigan  an effective acquisition  process and unprecedented quality and workplace safety  results. In addition  we are leveraging our infrastructure  within the Engine and Drivetrain groups on two Korean  campuses and a single manufacturing campus in China. Over the past few years  we have been building a robust and  disciplined cost reduction process. This process touches all  aspects of our business and was the reason we could  manage through a situation as daunting as steep increases  “  I have challenged our people to broaden the competitive gap between us and other suppliers in three key  areas. These are qualit y and cost improvement  the use of electronic controls strategies  and harnessing  the power of collaboration and teamwork – all with a focus on our vision of Product Leadership.” in steel and other raw materials costs in 2004. We operate  in a very cost-competitive environment and must continually  adjust our cost structure to the realities of our marketplace. We have made progress in harnessing our expertise in  mechanical functioning of engines and torque management  through software controls strategies. This expertise is a  major differentiator between BorgWarner and our competi- tors for most of our product lines. Computer control is the  “brainpower” of the powertrain  and is the critical element of  new engine and drivetrain campuses in Korea  and in China   at our recently opened office in Shanghai and expanding  Ningbo manufacturing compound  we are sharing space and  support services. In the past  we would have established  individual operations by product line. Our new business model is reaching beyond emerging  market opportunities to the rest of our business. We want  to preserve the best of our entrepreneurial heritage while  taking advantage of the benefits of common systems and  prices and shifting market shares among our customers. At  BorgWarner  we will continue to manage through these  issues with a focus on delivering the results our stockholders  have come to expect.  Timothy M. Manganello Chairman and CEO We are also focused on structuring ourselves for global  growth. There is a difference between operating in multiple  countries and being a truly global company. We realize that  we must operate differently than we have in the past. Good  examples are our expansions in China and Korea. At our  powertrains of the future. BorgWarner knows more about  powertrains than any other supplier  but we need to make  sure we are leveraging that expertise where it counts. Our  acquisition of Beru shares will help us advance in this area.  processes  including information technology and supply  chain management. This report looks at those qualities that bring us together as  BorgWarner people and that differentiate us from others in  the industry: our continuing ability to supply innovative tech- nology; our diversity – both in terms of our customer base  and our geographic presence; our manufacturing excellence;  and our financial discipline. The auto industry expects to face another challenging year  in 2005  with uncertainty about production  high commodity  BorgWarner Vision BorgWarner Beliefs GLYPH<127>  Respect for Each Other GLYPH<127>  The Power of Collaboration GLYPH<127>  Passion for Excellence GLYPH<127>  Personal Integrity GLYPH<127>  Responsibility to Our Communities BorgWarner is the recognized world leader  in advanced products and technologies  that satisfy customer needs in powertrain  components and systems solutions. 77] If  7 5 “Our strategic focus proves beneficial as  market shares among the global automakers shift  in favor of our faster growing customers.” G LO B A L