a proven leader, James is another great example of BorgWarner’s ability to develop its senior leadership team. Under his stewardship, I am confident the BorgWarner team will continue to build upon the progress made throughout our company’s history.

BorgWarner’s technology leadership, strong global presence, financial discipline and focus on attracting and cultivating talented people have been instrumental to our long-term success and will continue to drive our business going forward.

The transformation that has occurred over the last several decades is remarkable. In 1995, we were a small company with a market capitalization of approximately $500 million. BorgWarner more than doubled in size under John Fiedler’s successful leadership, amassing a market capitalization of over $1 billion by the time I became the new CEO. Building on our success, BorgWarner is now a global technology leader in powertrain solutions with a market capitalization of nearly $9 billion and a bright future as the company continues to lead the industry in powertrain technology.

Over the years, our sales profile has become increasingly diverse. The demand for our technology pulls BorgWarner into every major market across our entire product portfolio. As a truly global company, we partner with every major automotive original equipment manufacturer (“OEM”) in the world, in every major region of the world.

In 2003, less than half of our business was focused outside of North America. BorgWarner now generates approximately 75% of sales outside of North America, which is a testament to our global expansion. Over the last ten years, our sales have grown where new powertrain technology was valued the most, primarily in Europe. However, over the last six years, we have seen a surge in demand for our products in Asia, particularly China, and we expect this to continue. As we look ahead, we expect our growth in Asia to outpace our growth in the rest of the world. And, our diverse customer base has experienced a notable shift from over reliance on a handful of North American customers, to today when only two OEMs represent more than 10% of sales.

BorgWarner has a long history of providing the right technology at the right time in every product category we supply. This success has been built on our ability to anticipate the needs of both our OEM customers and vehicle drivers around the world. This isn’t limited to passenger vehicles; we have continued to increasingly supply the commercial vehicle market in recent years. BorgWarner has either led or has created technology waves in the industry from automatic transmissions in the 1950s to dual-clutch transmissions and turbochargers today. BorgWarner was one of the first auto suppliers to primarily focus on fuel economy and emissions improvements, a powertrain trend in which our company will continue to play a major role in the future.

The awards and recognition we have received for our technologies, customer quality and delivery are a true testament to our industry leadership. For example, BorgWarner has received numerous Automotive News PACE (Premier Automotive Suppliers’ Contribution to Excellence) awards over the years, which are recognized around the world as a symbol of excellence acknowledging automotive suppliers for superior innovation, technological advancement and business performance. Since 2005, BorgWarner has won six PACE awards, three partnership & collaboration awards and one environmental award. The success continues, as three BorgWarner technologies have been named finalists for the 2013 PACE awards. We are proud of our record and pleased to have our technologies in the final competition once again. With these innovations, BorgWarner has become one of the most decorated companies in the history of the PACE Awards.

From a macroeconomic perspective, 2012 was a challenging year. The production environment in Europe, our largest market, was weak. This was also true for most of the commercial vehicle markets around the world. However, BorgWarner’s sound financial results underscored our operational proficiency and ability to manage costs during challenging times. Across three key growth and profitability metrics—sales, earnings and operating income margin—we achieved all-time records in 2012 on a comparable basis; a tremendous accomplishment considering the weak market conditions in which it was achieved.

We continue to deliver industry-leading shareholder returns. During the year, our stock appreciated 12% and reached another all-time high of $87.45 in March. Furthermore, total shareholder return for BorgWarner shareholders over the last five years was approximately 50%, compared with 9% for both our peer group and the S&P 500, providing outstanding results for you, our shareholders.

During the year, our strong balance sheet and cash flow enabled us to execute a number of important initiatives:

All of this was done while maintaining our investment grade credit rating, which is a clear signal that our balance sheet remains strong and provides opportunities for the future.

With our broad geographic and customer diversification, as well as a strong portfolio of innovative products, the future is bright for BorgWarner. To highlight part of our continued growth, in November 2012 we announced $2.3 billion of expected net new powertrain business over the next three years (2013-2015). This backlog of net new business encompasses some of the most promising technologies and geographies in the auto sector and is representative of how BorgWarner is leading the way in important powertrain developments around the world.

We continue to experience increased demand for our company’s advanced powertrain technologies, such as gasoline and diesel

turbochargers, dual-clutch transmission technology, variable cam timing systems and emissions products. With the development of our fuel-efficient technologies, we have outpaced the growth of the industry to meet the increasing needs of the global market. We expect this to continue as the regional mix of our backlog is aligned with this worldwide trend.

Overall, the European market accounts for thirty percent of our expected new business compared with forty-five percent in the previous three-year net new business. Europe remains a leader in the adoption of new powertrain technology; however the general economic slowdown in the region has reset volume expectations in that market. Fifty percent of our new business is in Asia, which continues to expand in importance for our company, not only for its rapid growth, but also for its demand for leading edge technologies. More specifically, approximately thirty-two percent of our expected new business is in China as our sales to the world’s fastest growing market continue to accelerate. Twenty percent of our backlog is in North America, including eleven percent with the North American domestic OEMs, where we see intensified customer focus on programs aimed at improved fuel economy and lower emissions.

In China, we are well positioned for growth as our strong brand is built on relationships with every major OEM in China, both Chinese-Western OEM joint ventures and domestic manufacturers. In addition, we have developed relationships with the leading domestic Chinese OEMs that are now bringing new technologies to China. Our advanced technologies help them offer features and options that were typically available only on imported vehicles. For example, we recently opened a new manufacturing facility and engineering center in Ningbo. Our latest manufacturing expansion increases our existing product lines and enhances our ability to produce products for our customers locally. Our newest engineering center expands BorgWarner’s global network of technical centers and allows us to better support our local Chinese and global customers. BorgWarner has delivered advanced technologies to the Chinese market for nearly 20 years and we look forward to continuing our growth in China over the next 20 years.

Over the long-term, fuel economy and emissions improvements will remain key objectives for automakers around the world and BorgWarner’s product portfolio is very much synonymous with these trends. Therefore, the adoption of such products such as downsized turbocharged engines, automatic transmissions, EGR systems and enhanced engine timing systems should continue to drive growth for our company.

We expect that more of our components and modules will be added to smaller engines to improve fuel economy and lower emissions as regulations are making these essential technologies for the future. We expect our products to be key components for the fuel economy and emissions strategies of tomorrow and OEMs to continue to rely on BorgWarner as a partner.

Looking ahead, we believe increased demand for the electrification of vehicle systems provides another growth opportunity for our company. More specifically, there will be opportunities in both stop-start and hybrid technologies, which should employ BorgWarner technology in combination with electrification.

Aside from passenger vehicles, opportunities for both on-road and off-road commercial vehicles are also important parts of our future. These vehicles face the same global challenges of fuel economy improvement and emissions reduction that passenger vehicles face. Having already established a strong reputation for reliability and performance, BorgWarner is at the forefront of innovation for applications in this market.

Our innovative offerings and capabilities continue to enhance our market position as a leading supplier of highly engineered components and systems for powertrain applications worldwide. As James takes over as CEO, our senior leadership believes our company’s continued success lies in our ability to apply principles from our past accomplishments to today’s initiatives. The eight Enterprise Strategies that will guide BorgWarner to 2020 therefore remain unchanged:

As I step back from management of BorgWarner, I reflect on our record of shareholder value creation with a sense of satisfaction. I am personally gratified that, even after ten years of repeated successful execution, the culture of value creation and focus on future trends remain intact. Building on the collaborative efforts of our entire BorgWarner team, I look forward with enthusiasm and confidence to following the future success of the company. Led by an outstanding management team, we have almost 20,000 dedicated people driving the future of our company.

Technology leadership has been the cornerstone of our company’s success, and will remain the top priority going forward. The team will continue to drive our company forward, building on the strong foundation currently in place. As I sign off with my last shareholder letter, I want to express my deepest appreciation to our employees, customers, partners, suppliers, Board members and shareholders for their support over the years, as well as their contributions to BorgWarner’s enduring success.