The Company has granted restricted common stock and restricted stock units (collectively, “restricted stock”) and performance stock units as long-term incentive awards to employees and non-employee directors under the BorgWarner Inc. 2018 Stock Incentive Plan, as amended (“2018 Plan”) and the BorgWarner Inc. 2023 Stock Incentive Plan (“2023 Plan”). The Company’s Board of Directors adopted the 2023 Plan as a replacement to the 2018 Plan in February 2023, and the Company’s stockholders approved the 2023 Plan at the annual meeting of stockholders on April 26, 2023. The 2023 Plan authorizes the issuance of a total of 11.3 million shares and approximately 3.9 million shares were available for future issuance as of December 31, 2025.

Restricted Stock: The value of restricted stock is determined by the market value of the Company’s common stock at the date of grant. In 2025, restricted stock in the amount of 1.0 million shares were granted to employees and less than 0.1 million shares were granted to non-employee directors. The value of the awards is recognized as compensation expense ratably over the restriction periods, generally two or three years. As of December 31, 2025, there was $30 million of unrecognized compensation expense related to restricted stock that will be recognized over a weighted average period of approximately 1.6 years.


	Year Ended December 31,
(in millions, except per share data)	2025		2024		2023
Restricted stock compensation expense	$	37	$	36	$	37
Restricted stock compensation expense, net of tax	$	28	$	27	$	28


	Shares subject to restriction (thousands)	Weighted average grant date fair value
Nonvested at January 1, 2023	2,373	$	42.47
Granted	1,099	$	48.19
Vested	(917)	$	39.80
Forfeited	(111)	$	44.63
PHINIA Spin-Off awards transferred1	(389)	$	45.80
PHINIA Spin-Off adjustment2	274	$	—

Nonvested at December 31, 2023	2,329	$	40.57
Granted	1,317	$	33.75
Vested	(923)	$	44.21
Forfeited	(198)	$	43.04
Nonvested at December 31, 2024	2,525	$	35.49
Granted	1,039	$	31.21
Vested	(1,068)	$	44.11
Forfeited	(222)	$	35.89
Nonvested at December 31, 2025	2,274	$	29.45

1 Represents the cancellation of awards outstanding as of Distribution Date held by PHINIA employees. PHINIA employees were granted PHINIA restricted stock after the Spin-Off replacing the cancelled awards.

2 Represents the adjustment of unvested awards using a conversion ratio of 1.13 to 1 to preserve the intrinsic value of the awards prior to Spin-Off as authorized by the 2023 Plan and 2018 Plan.

Performance stock units: The Company grants performance stock units to members of senior management that vest at the end of three-year periods based the following metrics:

•Total Stockholder Return Units: This performance metric is based on the Company’s market performance in terms of total shareholder return relative to a peer group of automotive companies. Based on the Company’s relative ranking within the performance peer group, it is possible for awards to vest in a range of 0% up to 200% of target shares.

The Company recognizes compensation expense relating to this performance stock unit award ratably over the performance period regardless of whether the market conditions are expected to be achieved. Compensation expense associated with the performance stock unit award is calculated using a lattice model (Monte Carlo simulation).

As of December 31, 2025, there was $15 million of unrecognized compensation expense related to total stockholder return units that will be recognized over a weighted average period of approximately 1.8 years.

•eProduct Revenue Mix: Introduced in the first quarter of 2021, this performance metric is based on the Company’s total revenue derived from eProducts in relation to its total proforma revenue in the third year of the performance period. Based on the Company’s eProduct revenue mix, it is possible for awards to vest in a range of 0% up to 200% of target shares.

The value of this performance stock unit award is determined by the market value of the Company’s common stock at the date of grant. The Company recognizes compensation expense relating to this performance stock unit award over the performance period based on the number of shares expected to vest at the end of each reporting period. The actual performance of the Company is evaluated quarterly and the expense is adjusted according to projections at that time.

•Cumulative Free Cash Flow: Introduced in the first quarter of 2021, this performance metric is based on the Company’s performance in terms of its operating cash flow less capital expenditures over the three-year performance periods. Based on the Company’s cumulative free cash flow, it is possible for awards to vest in a range of 0% up to 200% of target shares.

•eProduct Revenue: Introduced in the first quarter of 2022, this performance metric is based on the amount of the Company’s total revenue derived from eProducts in the third year of the performance period. Based on the Company’s eProduct revenue, it is possible for awards to vest in a range of 0% up to 200% of target shares.

As of December 31, 2025, there was $2 million of unrecognized compensation expense related to the eProduct revenue units that will be recognized over a weighted average period of approximately 1.0 year. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2025.

•eProduct Adjusted Operating Margin: Introduced in the first quarter of 2024, this performance metric is based on the amount of the Company’s operating income derived from eProducts adjusted to eliminate the impact of expenses not reflective of the Company’s ongoing operations attributable to eProducts, divided by externally reported sales derived from eProducts, both measured in the third year of the performance period. Based on the Company’s eProduct Adjusted Operating Margin, it is possible for awards to vest in a range of 0% up to 200% of target shares.

As of December 31, 2025, there was $2 million of unrecognized compensation expense related to the eProduct Adjusted Operating Margin units that will be recognized over a weighted average period of approximately 1.0 year. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2025.

•Foundational Adjusted Operating Margin: Introduced in the first quarter of 2024, this performance metric is based on the amount of the Company’s operating income derived from Foundational products adjusted to eliminate the impact of expenses not reflective of the Company’s ongoing operations attributable to Foundational products, divided by externally reported sales on Foundational products, both measured in the third year of the performance period. Based on the Company’s Foundational Adjusted Operating Margin, it is possible for awards to vest in a range of 0% up to 200% of target shares.

As of December 31, 2025, there was $2 million of unrecognized compensation expense related to the Foundational Adjusted Operating Margin units that will be recognized over a weighted average period of approximately 1.0 year. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2025.

•Relative Revenue Growth: Introduced in the first quarter of 2025, this performance metric is defined as the percentage by which the Company’s annual percentage change in revenue, excluding the impact of changes in foreign currency exchange rates and merger, acquisition and divestiture activity, for the performance period exceeds the annual percentage change in the market for the performance period. Based on the Company’s Relative Revenue Growth, it is possible for awards to vest in a range of 0% up to 200% of target shares.

The value of this performance stock unit award is determined by the market value of the Company’s common stock at the date of grant. The performance against this metric is determined by change in vehicle production over the performance period among the passenger car and on-highway commercial vehicle markets across the geographic markets of North America, Europe, China and Rest of World in proportion to the Company’s revenue distribution at the end of the performance period across those same geographic market segments.

As of December 31, 2025, there was $5 million of unrecognized compensation expense related to the Relative Revenue Growth units that will be recognized over a weighted average period of approximately 2.0 years. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2025.

•Cumulative Adjusted Earnings Per Share: Introduced in the first quarter of 2025, this performance metric is based upon the Company’s Cumulative Adjusted Earnings per Share calculated by adding the Adjusted Earnings per Share for fiscal years 2025, 2026 and 2027 together. Based on the Company’s Cumulative Adjusted Earnings per Share, it is possible for awards to vest in a range of 0% up to 200% of target shares.

The value of this performance stock unit award is determined by the market value of the Company’s common stock at the date of grant. The performance against this metric is determined as net earnings attributable to BorgWarner Inc. adjusted to eliminate the impact of restructuring expense, merger, acquisition and divestiture expense, other net expenses, discontinued operations; other gains and losses not reflective of the Company’s ongoing operations, and related tax effects, divided by the weighted average shares of common stock outstanding, including dilutive shares.

As of December 31, 2025, there was $5 million of unrecognized compensation expense related to the Cumulative Adjusted Earnings per Share units that will be recognized over a weighted average period of approximately 2.0 years. The unrecognized amount of compensation expense is based on projected performance as of December 31, 2025.

The amounts expensed and common stock issued from continuing operations for performance stock units for the years ended December 31, 2025, 2024 and 2023 were as follows:


	Year Ended December 31,
	2025			2024			2023
	Expense (in millions)		Number of shares issued (in thousands)	Expense (in millions)		Number of shares issued (in thousands)	Expense (in millions)		Number of shares issued (in thousands)
Total Stockholder Return	$	15	232	$	8	257	$	8	107
Other Performance-Based	14		400	18		558	13		313
Total	$	29	632	$	26	815	$	21	420


	Total Stockholder Return			Other Performance-Based
	Number of shares (in thousands)	Weighted average grant date fair value		Number of shares (in thousands)	Weighted average grant date fair value
Nonvested at January 1, 2023	250	$	76.68	765	$	45.51
Granted	135	$	79.39	405	$	48.06
Vested	(114)	$	70.39	(341)	$	45.14
Forfeited	(11)	$	68.66	(34)	$	44.96
PHINIA Spin-Off awards transferred1	(22)	$	72.33	(67)	$	46.03
PHINIA Spin-Off adjustment2	35	$	—	106	$	—
Nonvested at December 31, 2023	273	$	71.37	834	$	41.08
Granted	205	$	46.54	616	$	33.91
Vested	(104)	$	66.89	(315)	$	44.23
Forfeited	(37)	$	70.32	(111)	$	45.07


Nonvested at December 31, 2024	337	$	57.72	1,024	$	35.36
Granted	553	$	40.92	583	$	31.23
Vested	(144)	$	62.25	(431)	$	37.04
Forfeited	(25)	$	44.70	(40)	$	32.42
Nonvested at December 31, 2025	721	$	44.38	1,136	$	32.71

2 Represents the adjustment of unvested awards using a conversion ratio of 1.13 to 1 to preserve the intrinsic value of the awards prior to Spin-Off as authorized by the 2023 Plan and 2018 Plan.