SecProbe.io

CORRESP
1
filename1.htm

[BorgWarner logo and letterhead]

December
2, 2005

VIA EDGAR

Amy
Geddes

United
States Securities and Exchange Commission

100
F. Street N.E.

Washington
D.C. 20549-3561

Re:      BorgWarner Inc.

            Form 10-K for the year ended December 31, 2004

            Form 10-Q for the quarterly period ended September 30, 2005

            Commission File Number: 001-12162

Dear
Ms. Geddes:

  We
have prepared the following responses to address the comments contained in your
letter dated November 17, 2005 regarding the above-referenced filings.  As
requested in your letter, we have prepared, where appropriate, proposed
expanded disclosure for future filings and, in other instances, provided
supplemental information to help you better understand our disclosure, and have
cited the appropriate accounting literature where applicable.  For your
convenience, we have incorporated sections of your letter preceding our
responses.

Form 10-K for the year ended December 31, 2004

Management's Discussion and Analysis

Results by Operating Segment

Earnings Before Interest and Taxes (EBIT), page
26

SEC
Comment # 1:

We
note that you have included EBIT as a performance measure in your discussion of
results by segment.  Please revise your disclosure to include a discussion of
why the measure is useful to investors, specifically including why investors
would find it valuable in the context in which it is presented, given the
excluded items.  Include a draft of your intended disclosure with your
response. See
FR 65 for guidance.

Ms. Amy Geddes

December 2, 2005

Page 2 of 9

__________________

Company
Response:

We will expand our future disclosures.  Our proposed, expanded
disclosure relating to EBIT would appear as the introductory section under
Results By Operating Segment in future filings and read as follows:

Results
By Operating Segment

The Company's business is comprised of
two operating segments:  Drivetrain and Engine.  These reportable segments are
strategic business units, which are managed separately because each represents
a specific grouping of automotive components and systems.  The Company
evaluates the operating segments' performance and makes decisions about
allocating resources to segments based upon return on invested capital.  The
return on invested capital is comprised of earnings before interest and taxes (EBIT) and the average
capital invested in each operating segment.

EBIT is considered a "non-Generally Accepted Accounting Principle
("GAAP") financial measure."  Generally, a non-GAAP financial measure is a
numerical measure of a company's financial performance, financial position or
cash flows that excludes (or includes) amounts that are included in (or
excluded from) the most directly comparable measure calculated and presented in
accordance with GAAP.  EBIT is defined as earnings before interest and taxes.
"Earnings" is intended to mean net earnings as presented in the Consolidated
Statements of Operations under GAAP.

The Company believes that EBIT is useful to investors and management to
demonstrate the operational profitability of our segments by excluding interest
and taxes, which are generally accounted for across the entire company on a
consolidated basis.  EBIT is also one of the measures used by the Company to
determine resource allocation within the Company, and is often used by credit
rating agencies, financial institutions and investors in assessing a company's
financial strength relative to interest expense obligations, sometimes referred
to as "interest coverage ratio."  Although the Company believes that EBIT
enhances our investors' understanding of our business and performance, it
should not be considered an alternative to, or more meaningful than, net
earnings or cash flows from operations as determined in accordance with GAAP.
The following tables present net sales and EBIT by segment for the years 2005,
2004 and 2003.

Ms. Amy Geddes

December 2, 2005

Page 3 of 9

__________________

SEC Comment #2:

As a related matter, please reconcile EBIT to net income as presented in
your statement of operations.  For guidance, see Question 15 of the staff's
outline Frequently Asked Questions Regarding the Use of Non-GAAP Financial
Measures, dated June 13, 2003.

Company Response:

Set forth below is a reconciliation of EBIT to net earnings as presented
in the Company's Statements of Operations.  This reconciliation will also
appear in the Results by Operating Segment in future filings, including the
year ended December 31, 2005, when completed:

Consolidated Financial Statements

Note II - Contingencies

Environmental Liability, page 50

Ms. Amy Geddes

December 2, 2005

Page 4 of 9

__________________

SEC
Comment #3:

We note from your disclosure that you have accrued a total of $25.7
million for environmental liabilities, and that such amount represents the
lower end of the range of loss for your clean-up responsibilities.  We also
note that you discuss the environmental indemnification associated with the
sale of Kuhlman Electric as part of this disclosure.  From your current
disclosures it is unclear whether the Kuhlman Electric liability is the only
environmental liability of which you are aware, and whether the stated range is
comprised only of this liability.  Please supplementally tell us and expand
your disclosure to include a description of each and every material or
potentially material environmental liability of which you are aware, including
the amount related to each liability included in the $25.7 million accrual.
This discussion should include situations in which you are aware of a potential
liability but cannot yet estimate the impact.  Your expanded disclosure should
adhere to the requirements set forth in paragraphs 160-172 of SOP 96-1.

Company Response:

We will expand our future disclosures to separately identify Kuhlman
Electric Crystal Springs ("Crystal Springs") and any other material
environmental liabilities.  Regarding our environmental liability disclosure as
of December 31, 2004, the Crystal Springs liability represented $16.0 million
of our accrual balance of $25.7 million. The $16.0 million accrual balance was
comprised of $12.0 million for continuing contamination remediation and $4.0
million for legal defense.  Crystal Springs was one of 39 sites as of December
31, 2004 (and one of 37 sites as of September 30, 2005) for which we have been
named as a potentially responsible party (PRP), and, in our opinion, is the
only material site.  Other than the Crystal Springs site, no individual site
represented more than $3.0 million of our accrual balance as of December 31,
2004 or September 30, 2005.

As
of December 31, 2004, the Company was among the defendants named in numerous
lawsuits alleging personal injury and property damage related to Crystal
Springs contamination. The Company had moved to be dismissed from some of the lawsuits,
the first of which  was scheduled to begin trial in March 2005.   The Company's
legal experts believed these cases were defensible subject to the uncertainties
surrounding the jury trial process.  Information concerning the value, if any,
of all of the personal injury and property damage claims was not available as
of December 31, 2004.  The liability, if any, associated with all of the
personal injury and property damage claims was not reasonably estimable as of
December 31, 2004.

As
of March 31, 2005, the Company was prepared to defend the personal injury and
property damage claims, beginning with the lawsuit that had been scheduled for
trial in March 2005, but that was rescheduled for trial in May 2005.
Information concerning the value, if any, of all of the personal injury and
property damage claims was not available as of March 31, 2005. The liability,
if any, associated with all of the personal injury and property damage claims
was not reasonably estimable as of March 31, 2005.

Ms. Amy Geddes

December 2, 2005

Page 5 of 9

__________________

Before
the trial scheduled for May 2005, an opportunity to initiate negotiations for
the possible settlement of that case and approximately 90% of all of the
personal injury and property damage claims arose. The parties engaged a
mediator, and protracted settlement negotiations occurred, ultimately providing
us with the information necessary to reasonably estimate the liability
associated with settlement of substantially all of the personal injury and
property damage claims.  As a result of this information, a $45.5 million
charge for settlement of 100% of estimated Crystal Springs related personal
injury and property damage claims was recorded in the second quarter 2005.  On
July 8, 2005, the Company announced that it had entered into a settlement
regarding approximately 90% of claims related to previously disclosed alleged
environmental contamination personal injury and property damage claims related
to the Crystal Springs plant site.  As of September 30, 2005, the Crystal
Springs liability represented $42.1 million of the $54.9 million accrual
balance.   The $42.1 million accrual balance was comprised of $31.6 million of
estimated settlement costs, $10.0 million of continuing remediation and $0.5
million of legal fees.  For the third quarter of 2005, the Company funded $12.9
million of the settlement regarding personal injury and property damage claims.

We regularly evaluate the potential exposure related to each site and
assess the need to disclose additional details based on the facts,
circumstances and materiality of each site.  At present, we do not believe any
of the sites other than Crystal Springs warrant additional disclosure, but we
propose to add the following language (under "Other Matters Environmental" in
Management's Discussion and Analysis and under "Environmental" in the
Contingencies Note to Consolidated Financial Statements) to our future filings
based upon current information:

For the other 36 sites, we have accrued amounts that
do not exceed $3.0 million related to any individual site and management does
not believe that the costs related to any of these other
individual sites will
have a material adverse effect on the Company's results of operations, cash
flows or financial condition.

SEC
Comment #4:

As
a related matter, it appears from your disclosure that your range of loss
includes an estimate of insurance recoveries.  If so, supplementally explain to
us why you believe these insurance recoveries should be considered in your
assessment of total liability.  If not, please clarify your disclosure to
indicate that potential insurance recoveries are not considered in estimation
of your total liability.  Refer to paragraphs 140 and 141 of SOP 96-1.

Company
Response:

Ms. Amy Geddes

December 2, 2005

Page 6 of 9

__________________

The
accrual for environmental liabilities of $25.7 million as of December 31, 2004
has not been reduced by any amounts for estimated insurance recoveries.
Should we meet the requirements for recording an insurance asset in the future
(i.e. it becomes probable and reasonably estimable), the asset would be
recorded separately from the underlying liability in accordance with paragraphs
140 and 141 of SOP 96-1.  Although we believe insurance recoveries may be
available to us, they are not currently reasonably estimable.  Therefore, we
will delete the wording regarding any insurance recoveries in future filings
until circumstances merit the recognition of an insurance recovery asset.

Consolidated Financial Statements

Note II - Contingencies

Product Liability, page
51

SEC
Comment #5:

We
note from your disclosure on page 31 and throughout your filing that, as of
December 31, 2004, you have a recorded liability of $40.8 million related to
product liability suits, with a corresponding receivable of $40.8 million
representing the insurance proceeds receivable from your second tier insurers for
estimated claims losses.  We also note that you paid $1.0 million in defense
and settlement costs, and that such amount plus an additional $3.4 million had
not been recovered as of September 30, 2005.  Supplementally explain to us your
basis in GAAP for recording a receivable for insurance proceeds not yet
received.  Also, please clarify whether the $1.0 million at December 31, 2004
and $4.4 million (aggregate) at September 30, 2005 are included in the
insurance proceeds receivable figures at each date respectively.

Company Response:

The $40.8 million loss
accrual related to product liability suits represents the Company's estimate of
the amounts likely to be paid regarding claims filed with sufficient evidence
to link plaintiffs' claims to products for which the Company may be
responsible. The Company believes it is fully insured for these claims.
Insurance carrier reimbursement of 100% is expected based upon the Company's
experience with these carriers settling claims since the early 1980's and past practices
in this area.  Any insurance receivable for these claims (recorded gross of any
loss accrual), would be recorded when the amounts are probable, estimable and
do not exceed the related loss, in accordance with SFAS 5.  Hence, a corresponding $40.8 million insurance
receivable has been recorded.

Ms. Amy Geddes

December 2, 2005

Page 7 of 9

__________________

The insurance proceeds
receivables of $1.0 million at December 31, 2004 and $4.4 million at September
30, 2005 are due to the Company settling and funding portions of these claims in
advance of the insurance reimbursement.  These amounts have been submitted
to the insurance carriers for reimbursement and the Company expects full
reimbursement.   These amounts are not included in the $40.8 million referred
to above.

Form 10-Q for the quarterly period ended September 30, 2005

Note 2 - Acquisition of Beru Aktiengesselleshaft, page 6

SEC Comment #6:

We note from your
disclosure that you acquired 62.2% of the outstanding shares of Beru on January
4, 2005, and an additional 7.22% through a tender offer terminating on January
24, 2005 for a total ownership of 69.42% at a cost of EURO 420 million.  Please
provide us with a complete summary of your preliminary asset allocation as well
as detailed explanations of the specific contingencies extending your allocation
period and the specific line items affected.  Your response should also include
any adjustments that have been made from the initial asset allocations to the
current date and the facts and circumstances surrounding such adjustments.
Refer to the guidance in paragraphs 51e and 51h of SFAS 141.

Company Response:

We based our interim
disclosures on the guidance in paragraph 58 of SFAS 141, which includes the
disclosures in paragraphs 51a - 51d.  Below is our preliminary asset and
liability allocation related to the acquisition of 69.42% of Beru
Aktiengesellschaft as of September 30, 2005, which will be updated through
December 31, 2005 and included in our annual financial statements.

Ms. Amy Geddes

December 2, 2005

Page 8 of 9

__________________

The excess of the purchase
price over the fair values of assets acquired and liabilities assumed has been
allocated to goodwill.  To date, we have made no significant adjustments to our
initial asset and liability allocations based on our preliminary allocation
analysis as of March 31, 2005.

Ms. Amy Geddes

December 2, 2005

Page 9 of 9

__________________

Management uses a variety
of assessments for evaluating the fair values of the assets and liabilities
acquired, including independent appraisals.   We knew at the time of the
preliminary asset allocation that a more comprehensive, detailed, thorough and
integrated review would be needed of the following items during the allocation
process: current assets, property, plant and equipment, sales order backlog,
in-process research and development ("IPR&D"), customer relationships,
current liabilities and goodwill.  This was due to the numerous legal entities,
joint ventures, and th