I would like to welcome everyone to the BorgWarner 2008 first quarter results conference call. (Operator Instructions) I would now like to turn the call over to Ms. Mary Brevard, Vice President, Investor Relations. Ms. Brevard, you may begin your conference.

Thank you Dennis and thanks to all of you for joining us today. Copies of our release went out today before the market opened and hopefully you have all received them. We have also posted financial talking points that should help you to follow the financial discussion. They are located at borgwarner.com, Investor Information under webcast first quarter 2008. These notes will be helpful to you as we review the financials and operations as I said. Our conference call today is also being replayed through May 9. The call-in number is 800-642-1687. The call ID is 41792620, there’s also replay available on our website. Just for your information we will be participating in a number of investor conferences in the next few months. The KeyBanc Automotive and Industrial Conference in Boston on June 5 and the Wachovia conference in Massachusetts on June 25. Before we begin our call today I need to inform you that during this call, we may have make forward-looking statements, which involve risks and uncertainties as detailed in our 10-K. Our actual results may differ significantly from the matters we discussed today as well. Moving onto our results, Tim Manganello, our Chairman and CEO will be providing comments on the quarter and industry trends and Robin Adams, CFO will discuss our operating results for the rest of the year. With that I will turn it over to Tim.

Thank you Mary and good day everyone. Once again we delivered record sales and record profits that outpaced the industry despite week auto sales in North America. The year is off to a strong start for us with excellent results in Europe and Asia and despite recession worries, we are seeing stable growth driven by our products that improve fuel economy, reduce emissions and provide better performance. Now, let’s take a look at first quarter highlights. We had record sales of $1.5 billion up 17% from the first quarter of 2007, up 8% if we exclude currency. Our earnings were at $0.75 per share, up 50% from the first quarter of ’07, adjusted for our two-for-one stock split. Operating income margin was 8.5%. Now, moving onto our group highlights, the Engine Group’s first quarter results include strong global demand for our turbochargers, which boosted the engine group sales 23% to $1.1 billion. Demand outside of the U.S. for our engine timing, ignition, emissions and thermal products helped to offset lower domestic sales of these same products. In the Drivetrain Group, 2008 sales were up 5% to $410 million and sales outside of the U.S. were up 12% excluding the impact of foreign currency. Sales in the U.S. were down 10%, primarily due to lower vehicle or domestic vehicle production and the group continues to benefit from increased global demand for dual-clutch transmission technology. However, the Drivetrain Group struggled in the quarter from a cost prospective and I can assure you that actions are being taken to improve their performance. Comments on our outlook include the following. We expect 2008 to be another record year for BorgWarner and today we reaffirmed our 2008 earnings guidance in the range of $2.85 to $3 per share. The strength of the platforms, which we…

Thank you Tim and good morning to everyone; as Tim said, we had great quarter and it’s look even stronger relative to what’s going on the industry. So, lets take a look at the industry environment to the first quarter. Global production as Tim said was up about 2% and not a very robust growth for the industry around the world and it’s typically as the case, the picture varied by regions. Production in the U.S. was down 8%, with the Detroit Three light trucks in SUV’s down about 16%. European production was flat, while production in Asia was up about 8% in the quarter. Our growth continues to outpace the markets, our sales grew a little over 17% as Tim said, we are little over 8% excluding the impact of currency and that’s compared to the global production environment to 2%. Looking at our regional performance, sales in the U.S. were down 4% compared to the 8% decline in the market and outside of the U.S. we posted solid growth of 50% excluding the impact of currency compared to 4% market growth outside the U.S. Then geographic diversions has put our U.S. operation sales and 30% of our total down form 36% in the first quarter of last year and 42% in the first quarter of 2006 and that’s a 12 percentage points shift in geographic share in just the past 24 months within BorgWarner. In the quarter, our gross margin was 18.9% versus 16.9 in first quarter of 2007 and our operating income margin was 8.5% versus 7%. Now some of you have adjusted our first quarter 2007 numbers to exclude a $14 million warranty charge. So, throughout this call I will also give you numbers for 2007 that exclude that charge to help you do your year-over-year…

Thanks Robin and we will ask Dennis to initiate the question-and-answer session. Dennis?

(Operator Instructions) Your first question will come from the line of Rich Kwas with Wachovia.

Question on the launch cost issue Robin; I know it’s an emerging market, but how do we think about it from a product prospective given that you are being pretty aggressive with the new product launches overseas right now?

Yeah, Rich actually a good portion of that was in Europe and an inside to our dual-clutch transmission product area and as I said it’s predominantly supply chain issues both from a capacity prospective and a quality prospective. As you point out we have got a number of new launches, VCT is growing quite rapidly for us and our supply chain is struggling to keep up those.

Rich, it was an issue with a relatively new supplier. We have a sense -- we are working to improve the things at that supplier and we made progress there and they’re coming out of the words. We are also capacitating ourselves to do the same thing, so we don’t have to rely on this suppliers much and with the growth we have we’re actually bringing on other suppliers, so this issues is going to be fade away reasonably soon.

Okay, thank you for that and then, in terms on the guidance relatively to where we were three months ago, you maintained it for the year and I know, you talked about currency be conservative at least right now, but what’s changed in last three or four months in terms of puts and takes relative to initial expectation?

Well, as I mentioned raw material prices -- we are at this point in time looking at least $10 million increase where we thought we were three months ago. The second, I think, if we look at the U.S. markets, as we expected about $50 million a quarter decline in our sales in the U.S. in our base operations and the first quarter was about 45, so pretty close. The second quarter, we are looking more like 75. So, as we look at the year right now we are seeing more deterioration in the U.S. market than we actually had expected three months ago and again it’s primarily on the light truck and SUV side. We are not sure how much it is this Industry labor, disruption related or a real decline in demand for these products. When you think actually most of it is the latter, the real decline in demand for these types of products, but certainly the U.S. looks weaker than we thought. It look three months ago -- raw material prices again our inching up that -- and those are the two major factors that we are looking at right now.

Anything on the plus side in terms what’s better than expected?

Yes, we have got much higher demand for turbo-chargers particularly in Europe as they downsize from larger engines to smaller engines both on diesel and gas. We are seeing a lot of interest in twin turbos now with -- we are generating a two stage turbochargers as our guys call it and so there is a lot of plus there and we are starting to see -- you saw that in terms of our numbers and so things are actually really positive for us in almost every parts of the world, in every part of the world with the exception of North America and like you and Robin have both discussed, I think it’s going to be more structural in North America than we originally anticipated.

Okay and then final question, Tim in terms of the quoting activity and the changes to that over the last 3 or 6 months, what's different relative to 3 or 6 months ago given the news coming out with government changes to fuel economy?

A couple of things Rich; Rich there is a lot of activity going on in the development side and the quoting side for turbocharged gas engines with direct-injection in North America. I have said all along for two or three years now; you are going to see turbocharged gas engines in North America first and with higher volumes and then followed by turbocharged diesel engines in North America. We are seeing a lot of activity on both the gases first as you saw by the Ford announcement; there is other programs and projects we are working on; there is a tremendous amount of dual-clutch actively going on in the world right now and actually in addition your questions was related to quotes but I will tell you in terms of awards we’re staring to see an increase in the pace of our awards too.

Your next question will comes from the line of Brett Hoselton with Keybanc Capital.

Steel price, Robin I wondered what’s your factor and into your thinking regarding higher steel prices and the impact in the year?

Well, we’re certainly looking at price levels that are in the market today and we’re not expecting significant increases from those levels, but at the same time we’re not expecting those prices to fall off dramatically as well. So, the current thought process is pretty much steel levels at about the current state extending through the rest of the year.

Okay and given that, its sounds like you feel quite confident in your margin expectations for the year. The -- as you look at your sales and earnings expectations for the remainder of the year, I think what you clearly state and I just want to make sure I understand that; is that the FX stays or the Euro stays were exact versus the dollar that you are more than likely going to be raising our earnings guidance coming to second quarter?

Yes, we’d have to Brett, we have to. I mean, we -- again right now, we believe that we are now at 140 euro to the share or 140 dollar to the euro and Yen 1.12, we are going to earn $2.85 to $3 and then if you put a different currency assumption on that obviously it’s going to be higher earnings.

And I think, what you are going to see there is upside based on currency Brett and there is downside based on material and steel is not the only materials on quite the bad line I think by the end of this year.

And then as you think about -- Tim as you kind of think about upside or downside to your current book of business in terms of products, which ones would you say you are particularly more bullish on, which products would you say particularly any you are more bearish on?

Your next question comes from Rod Lache with Deutsche Bank.

No, that’s a great question Rod. Now in the first quarter it was more or like $5 million, it will ramp up later in the year.

Okay and can you quantify the supplier launch issue for us and just diving a little bit that segment a little bit more, was there any benefit from the monthly restructuring?

We didn’t quantify this supplier issue.

Well you said that there were some launch issues, qualities issues related to the supplier, so is there some kind of number that you can put around that that you think it hurt you in the quarter?

Well, I have not got the number in front me I think Robin's got it and he is picking it up, but it was enough to get noticed I will tell you that and I made an impact, but the issue really, there is a couple of things that was one issue and Robin said that -- and I will go back and repeat it. We are doing within the truck transfer business and then the transmission business -- let's just take the transmission business. In North America, we’re rearranging product lines in three different plants to become more efficient. So, there is some inefficiency there that we are struggling to as we rearrange products within three different plants and that's causing a little bit of a headwind for us. The issues and quality that we talked about on dual-clutch in Europe is mostly the highness but that caused a little -- some issue and then on the truck transfer side, as you know we are closing the monthly plan down in April next year and we are going through a tremendous amount of rearranging. We are going to be shipped -- we are staffing and we are under construction, but we are also in the process of moving product towards Mexico moving product to our Longview plant and moving product to our Seneca plant, so we have three plants in the truck transfer business that are also rearranging product at the same time which is causing some level of disruption and inefficiency. I don't see these as excuses, just only as factors to what's kind of hit, what hit the Drivetrain Group and then on top of all that you put the schedule cuts in on North America and it just makes things a little bit more difficult. I don’t know if you found the ….

Yeah Rod let me quantify that. Our launch related issues our challenges outside the U.S. including supplier issues costs us about $5 million in EBIT in the quarter in the Drivetrain Group

Alright and can you quantify roughly the size of your U.S. transfer case business now I know it's been declining?

You know it's less than 10% of the company, I can tell you that....

Lastly, pretty substantial premium for diesel versus gas right now; at least here it offsets some of the fuel economy advantage are you hearing anything from customers about you know expectations for growth being affected by that or do you have any thoughts on how that kind of place out for your business?

Well, a couple things. We are not hearing any direct answer to your question, we are not hearing anything from our customers about them not bringing diesels or slowing down their plans to bring diesels to North America. I think that the difference in the fuel price gap between diesels and gasoline fuel fluctuates up and down. So, a year ago diesel was cheaper than gas, now diesel is higher than gas. Things will change, gas is creping up, so the gap is between diesel fuel and gasoline is not as great as I think as it was I think a month or two ago and you hit 30% to 40% better fuel economy and diesel, on a diesel engine than a gas. So, you can afford to pay let's say on a $3 gallon of gas, which was cheap now, but $3 gallon of gas you can pay up to a buck more for diesel fuel and still save breakeven and your total expense for fuel for a year. I know that people talk about the up-charge on diesel engines but that data is starting to role in now that you pay a little bit more at the purchase price for diesel, but on the resale price you get all your diesel, all your up-charge back when you resell a diesel vehicle. So, I’m not too worried about -- I think what’s going to happen is that the gap will close between that diesel fuel prices and the gasoline prices and some day you might find diesel cheaper than gas even.

Your next question comes from Chris Ceraso with Credit Suisse.

Let see a couple of things, can you tell us a little bit more about the award with Ford. Are these some of your advanced technology turbochargers or are they some of the basic turbos and what do you expect in terms of -- I know I don’t like to talk about specifics profitability on a customer program basis, but how do you think it would be relative for your overall turbo business, better or worse?

Well, it will be typical of our overall turbo business. All of our business when we take, it has to at least return 15% cost of capital or so it will meet that threshold, it’s on the higher-tech turbo-charging, it’s going to be used on their rear-wheel drive EcoBoost to applications and it’s -- I don’t know -- I don’t remember exactly, hold on a second, Okay it’s two per engine and its normal turbocharger technology…

Okay. You’ve had a lot of announcements over the past few months about adding capacity and you probably have these numbers handy? Can you just quickly sum up for us, how much capacity you’re adding in terms of you know X number of millions of turbos and how do that compared to your current capacity?

Well, we’re adding 3 million units of capacity and that takes us up to over 11 million units of capacity and so that tells you -- it takes us up to a 11, a little over of 11. This is all on -- what I’m talking about is, pass car or light vehicle capacity, I am not talking about commercial truck, I am talking light vehicle. It takes us up to a little over a 11 million units and it’s 3 million, so obviously you can tell that we add capacity. Today at for about 8 million units or between what we herein production less, plus the capacity we are already putting in based on last year’s and this year’s expansion.

Is that 3 million just the North America, are there other turbos…

No that’s global. That’s 3 million in total and it spread out between Thailand, Mexico, Poland and Oroszlany plant in Hungary.

Okay and the -- what do you expect the SG&A level to be for the balance of the year in terms of a percent of sales?

We are focused on trying to bring that below 10%.

Is that your full-year target or is that where you are going to run in Q3?

Full-year target

Your next question comes form Joe Amaturo with the Buckingham Research. Joseph Amaturo – Buckingham Research: How are you? Robin. Are you considering hedging the euro by any chance giving that you have a lot of visibility with the backlog predominately in Europe over the couple of years?

As we look at our business Joe, we has -- where we sell in Europe, we actually also pretty much manufacture in Europe. So, our day-to-date transactions have not a lot exposure there. The only exposure is investment exposure and we typically as we grow in those regions of the world, we typically borrow local currency. So, as we grow and in Europe and we are borrowing or financing that growth in Europe, so the cash flow future cash flow stream turn off by that businesses is repaying Europe denominated liabilities. As far as income statement hedging now, we don't hedge our income statement basically, but that currency gets translated at whatever the effective rate is and what we try to make sure is we explain to our investors, the impact of currencies on our operations and try and strip that out of the equation so they understand fundamentally how strong our business is doing in those regions of the world excluding currency, but we don’t have a lot of cross order transactions that require day-to-date transactional hedging and obviously we don’t hedge for speculation either. Joseph Amaturo – Buckingham Research: Okay. Next could you just give us -- you said truck transfer was the only business that was down, could you tell us to what extent it was down year-over-year in the first quarter?

I don’t have that right in front of me Joe, but we will keep talking and I’ll get you the number, okay. All right. Joseph Amaturo – Buckingham Research: Last one how many shares did you repurchased?

About 300,000 give or take. Joseph Amaturo – Buckingham Research: Okay. All right, that's all I have good quarter thank you.

Joe, truck transfer was down a little bit less than 10%.

Your next question will come from Patrick Archambault with Goldman Sachs.

Well, let met start with nickel and then we will go to steel. Yeah, and nickel over the past -- the early part of 2007 we spent a lot of time with our customers ensuring that they shared in the movement in basic nickel prices, so we have a majority of our nickel purchase which is -- we don’t nickel per se we buy it in castings and as one of the raw materials in the blend. We have passed through this with the majority of our contracts with respect to nickel. So, nickel is much less an issue for us right now as it was over a year ago and also nickel prices are down which are good. On the steel side we have virtually no pass-through whatsoever on steel. Steel is our responsibility to manage and we do have contracts with our suppliers from contracts or prices with our suppliers. The majority of the buy in the U.S. and the majority to buy in Europe is covered under contracts for this year. However, when you get into a situation were raw material prices strike significantly, we get into a situation sometimes where there are surcharges and that’s the unpredictability with respect to the steel buy that we have, although we do have contracts, it gets to a point in time where our suppliers can pay the cost of the basic commodity increase and someone's got to help them pay for it. Does that answer your question?

Yeah we’ve been. This is Tim, we’ve been approached by the steel guys and we’re in middle of let’s just say very deep negotiations regarding steel pricing. We’re seeing -- they are coming to us with surcharges. They’re being very aggressive with the whole industry and they are being aggressive with the OEMs themselves so -- and we certainly don't buy as much steel as the OEMs and the OEMs are back and are starting to get hit on steel so, we are fighting it the best we can, but we will see where we end up, but we do not use material cost as an excuse. We still plan and figure another way to make our numbers and meet our guidance for the year in spite of what happens on material, but it just means we have to work a whole lot more harder to figure out ways to offset either directly with negations or indirectly through better ways of doing business inside our company.

Your next question comes from Itay Michaeli with Citi

Hi, good morning. Just as the follow-up on that question. Does your new steel cost guidance assume some assumptions for what the surcharge negotiations will look like, or could that be an incremental hit later on the year?

No, we have assumed some increased raw material prices in the back half for the year, yes.

Okay, great. And then Robin just remind us again where you are assuming now for North American production level. I think we were at 14-3 back in January, has that come down to let say 14-1, 14-2?

We will pretty much assuming the current levels or maybe a slight downtick from here. As the April numbers were pretty atrocious in the 14s, but we are not assuming anything very rosy for the rest of this year in North America.

I don’t have the exact number, but as I said earlier I think we are looking about $50 million decline in our U.S. sales first and second quarters to start the year of and as I said first quarter was about 45, so pretty close, second quarter is looking like 75 right now. So, we are -- and some of that is mix as well, so we are looking at overall lower production levels in the U.S. and that 14-3 number. I don’t know exactly what I translate to as Tim said, but, certainly it’s lower than 143.

We tend to be much more conservative, and we tend to anticipate these lower schedules much more than the OEMs do, so we have already accounted for it. A significant amount of the downturn that we are seeing in North America, but, we are now getting into the point were we are going to have to go back and re-look at what were doing because things are starting to get a lot deeper than we originally anticipated and we anticipated for some fairly deep schedule cuts.

No, on the flip side the good thing as Tim mentioned earlier, our sales outside the U.S. are stronger than we expected as well so that, from a sales perspective, we are still looking at excluding the $150 to the euro currency but it’s back to our original assumption for guidance for the year that 140 in the dollar. We are still looking at you know 8% to 10% growth in the year for the year from the sales perspective and close to the 10% level. Despite the decline in the U.S. we are still look for good solid growth outside the U.S.

That’s terrific and just one final question may be for you Tim. It’s a report that I thought was very favorable for a lot of your technologies. Any customer reaction to that reports so far, maybe any signs of change in long-term plans or what are you hearing in terms of reactions so far to those job numbers?

If I answered some of the -- one of the earlier questions and they are all the customers are very aggressive now to improve fuel economy and lower emissions. So, I don’t think to report caused them too much more effort because they are already working at extremely high efforts on technology to lower fuel economy and I can tell you we are seeing it. We are in -- we are actively engaged with every major OEM in the world and fuel economy because every market’s got the changing regulations, the Euro market, the American market, so I can’t say that their efforts any and greater now than it was a month ago, or two months ago before the report, because everybody was really on high levels of aggressiveness in terms of lowering fuel economy. So, I think that we -- like I said many we times before we are in the sweet spot and the sweet spot just seems to be getting sweeter.

We have time for one final question and that question comes from Jonathan Steinmetz with Morgan Stanley.

Hi guys. This is Ravi Shankar in for Jonathan. I had a couple of questions on the Ford EcoBoost. It seems like your release only mentions the rear-wheel drive and pick up applications, so can you help us to understand what’s going on there with the front-wheel drive applications; are you on that program is it different kind of turbo involved there? - Morgan Stanley : Hi guys. This is Ravi Shankar in for Jonathan. I had a couple of questions on the Ford EcoBoost. It seems like your release only mentions the rear-wheel drive and pick up applications, so can you help us to understand what’s going on there with the front-wheel drive applications; are you on that program is it different kind of turbo involved there?

Well, lets put it this way. The Ford uses the EcoBoost as a -- to describe a family of fuel-efficient engines. We will probably not be the supplier of all the volume for all the EcoBoost families, but so far we have been chosen for the rear-wheel drive. I don’t know all the specifics on the front-wheel drive, but we haven’t been chosen for that and I don’t know if it’s been placed, but -- I would have to check with my people, but, I will tell you this. At this point in time, as far as we know at Ford, this is the highest application, turbo charger application, now helping their EcoBoost families so far.

Okay and Ford has spoken about 500,000 units over the next five years or EcoBoost, do you know what proportion of that is real wheel drive and pickup only and what are you looking at in terms of volumes? - Morgan Stanley: Okay and Ford has spoken about 500,000 units over the next five years or EcoBoost, do you know what proportion of that is real wheel drive and pickup only and what are you looking at in terms of volumes?

I think that the best question is best to the answer by Ford. All I can tell you as we are very pleased to have Ford as a customer for turbochargers, we are very pleased to be on the EcoBoost family and I have heard from a number of people and that are all friends within Ford that we have got a significant volume and there is so far from their EcoBoost awards.

Great, and is this already part of your backlog? - Morgan Stanley: Great, and is this already part of your backlog?

No.

Okay, so this is incremental to your backlog. Do you have a new backlog number? - Morgan Stanley: Okay, so this is incremental to your backlog. Do you have a new backlog number?

This is not part of our 3 -- the 3 year backlog of $1.95 billion that we have announced last fall.

Now we -- this is Robin. We update that backlog number once in a year. So, we don’t have a revisit right now, as Tim said quoting activities have been pretty, pretty strong.

Very good and finally are you looking at some kind of long-term structural reduction in production that was in North America and are you doing anything at your end to adjust for that and improve the contribution margin here? Will there be another level of restructuring required to adjust for that? - Morgan Stanley: Very good and finally are you looking at some kind of long-term structural reduction in production that was in North America and are you doing anything at your end to adjust for that and improve the contribution margin here? Will there be another level of restructuring required to adjust for that?

I am sure you asked that question knowing that we did restructure in the second half of 2006. 2006, third and fourth quarter, we restructured mainly due to the sale and downsizing of our monthly plan and downsize -- that’s the sale and the downsizing has to do with other parts of BorgWarner in North America. As things continue to go the way they are we will continue and we are looking at plans to see what we have to do to meet the future needs of North American schedules. I think I agree with you, the schedules are probably going to be more permanent than we’d like and we tend to be on the -- we are in the early stages or we tend to be one of the early suppliers to restructure and when we say we restructure we do it right away and all I can tell you at this point in time we are looking at it.

You know as just Tim point he had to remember we are in the midst right now of our restructuring, although we took the charge at late 2006, the actions a part to complete that aren’t finished yet. That requires relocating to a new facility in Mexico and rearranging some manufacturing capacities and closing down of facilities in Muncie, Indiana and none of that has been completed yet. It won’t be completed until 2009, so we are adjusting our capacity in the North America; we have taken some actions to adjust for what we think is a permanent lower level of activity for those product areas, but we’re in the midst to that yet; it hasn’t been completed and frankly we haven’t seen all the benefits so that. We expect to see more benefits in 2009 as we complete that restructuring.

And I will add one more thing; we are carrying some extra costs, because of that -- what we are doing now between now and April of next year in terms and I think I’ve said this before, but I will repeat it. We are carrying extra cost because of the Muncie plant closure, because of rearranging five different plants, all to be ready and able to handle the lower schedules both now and in the future, but the schedules are actually get a little bit lower than we anticipated, and that they go another 5% or 10% we are going to really have to look at this rate again.

Thank you for joining us today. That concludes our call. You can direct any follow-up questions to me and we’ll talk to you next quarter.

That does concludes the BorgWarner 2008 first quarter results conference call. Thank you for joining. You may now disconnect.