Craig Aaron
Executive Vice President and Chief Financial Officer at BorgWarner
Thank you, Joe, and good morning, everyone. Before I dive into the financials, I'd like to provide a quick overview of our 4th-quarter results. First, we reported just over $3.4 billion in sales, which was down approximately 2% versus prior year, excluding FX and M&A. Market production in the quarter was down approximately 4%. So we saw sales outgrowth in the quarter of approximately 220 basis-points, which was slightly below our full-year outgrowth of 280 basis-points.
Second, we had strong adjusted operating margin and performance in the quarter at 10.2%. This was driven by solid operational performance, a continued focus on cost controls across the business and restructuring actions. This strong 4th-quarter performance allowed us to deliver a full-year adjusted operating margin above 10%, which was up 50 basis-points from 2023. Third, we had strong free-cash flow-in the quarter of $539 million, which allowed us to outperform our 2024 free-cash flow guidance and deliver $729 million in free-cash flow for the full-year.
Now let's turn to Slide nine for a look at our year-over-year sales walk for Q4. Last year's Q4 sales from continuing operations were just over $3.5 billion. You can see that the weakening US dollar drove a year-over-year decrease in sales of $32 million. Then you can see a decrease in organic sales of about 1.5%, which was 220 basis-points above-market production. This outgrowth was primarily due to a strong e-product growth in Europe and Asia, as well as strong foundational growth in Europe, North-America and the rest of the world. In China, we saw challenges in the quarter due to lower volumes on an existing EV program, which we previously highlighted and declining foundational sales. And finally, the acquisition of Eldor added $6 million of sales year-over-year. Some of all this was just over $3.4 billion of sales in Q4.
Turning to Slide 10, you can see our earnings and cash-flow performance for the quarter. Our 4th-quarter adjusted operating income was $352 million, equating to a strong 10.2% adjusted operating margin. That compares to adjusted operating income from continuing operations of $332 million or a 9.4% adjusted operating margin from a year-ago.
On a comparable basis, excluding the impact of foreign-exchange and M&A, adjusted operating income increased $37 million on $57 million of lower sales. This is a great result and reflects our ability to deliver profitability despite a declining production environment. This performance was driven by the benefit of our PowerDrive systems restructuring that we announced in July, as well as our continued focus on cost controls across our business. The net impact of Eldor was a $12 million drag on operating income year-over-year. Our adjusted EPS from continuing operations was up $0.11 compared to a year-ago as a result of strong adjusted operating income, lower net interest expense and the impact of our share repurchases during 2024. This was partially offset by a higher effective tax-rate due to various tax restructuring initiatives that we executed in the quarter.
Free-cash flow from continuing operations was $539 million during the 4th-quarter, which was down $140 million from a year-ago as a result of lower business activity compared to 2023 and the timing of customer payments. Our free-cash flow for the full-year was strong at $729 million. And finally, I'd like to briefly address the $646 million of goodwill and fixed asset impairment charges that we recorded during the 4th-quarter. In the 4th-quarter of each year, we performed an impairment test of our tangible and intangible assets. The discounted cash-flow analysis we perform requires us to make long-term estimates of our sales and operating income and compare that to the carrying value of each business unit.
Due to the continuing delay of BEV adoption across the Western world, our discounted cash-flow estimates for our power drive system and battery and charging systems business units from prior years had to be reduced and pushed out. As a result, the company recorded a goodwill impairment charge of $577 million in the 4th-quarter. We also recorded a charge of $69 million, primarily related to certain property, plant and equipment. It's important to note that these items are non-cash and have a minimal impact on the future earnings or margin profile of the company. In our opinion, the delay of BEV adoption in parts of the Western world is exactly why we have built a resilient technology focused portfolio that we believe will provide strong results no matter the pace of regional propulsion adoption. If regional BEV adoption continues to be delayed, then we believe our foundational portfolio will compensate with significant margin and free-cash flow generation.
Next, on Slide 11, I would like to review our perspective on global industry production for 2025. We expect our global weighted and light commercial vehicle markets to be down 1% to 3% this year, following a 3% decrease in 2024. This forecast includes potential industry volume headwinds of global tariffs. Looking at this by region from a light-vehicle perspective, we're planning for our weighted North American markets to be down approximately 3% to 4%, primarily driven by inventory headwinds and potential inflation due to tariffs. In Europe, we expect our weighted market to be down approximately 4% to 6% year-over-year as we see signs of a lower backlog economic headwinds. And in China, we expect the overall market to be flat-to-down 1%. This is due to a tough comparison following last year's growth and the possible economic impact of tariffs.
With that in mind, now let's take a look at our full-year outlook on Slide 12. First, as I just highlighted, we have included some level of industry volume headwinds from tariffs in our market volume assumptions. However, we have not incorporated the net cost of tariffs in our financial guidance at this time since the impact to is influenced by multiple factors. These include, but are not limited to the timing of implementation, any exception on imported materials and our ability to share the impact with our customers and suppliers.
Now let's move to our outlook. We are projecting total 2025 sales in the range of $13.4 billion to $14 billion. Starting with foreign currencies, our guidance assumes an expected full-year sales headwind from weaker foreign currencies of $410 million compared to 2024. As I just highlighted, we expect our end-markets to be down 1% to 3% for the year. However, we expect the company to outperform market production by 100 to 300 basis-points, which once again demonstrates the resiliency of our portfolio that we believe is positioned to outgrow market production. It's important to note that our guidance includes a 30 basis-point outgrowth headwind from lower battery cell prices, which we directly pass-through to our customers. Based on our updated outlook, we expect our organic sales change to be down 2% to up 2% year-over-year.
Now let's switch to margin. We expect our full-year adjusted operating margin to be in the range of 10.0% to 10.2% compared to our 2024 adjusted operating margin of 10.1%. The low-end of our margin outlook contemplates the business delivering a full-year decremental conversion in the low-double-digits. While the high-end of our outlook assumes an incremental conversion in the high-teens, we view this as strong underlying performance, building off a of 2024 that well exceeded our expectations. Based on this sales and margin outlook, we're expecting full-year adjusted EPS in the range of $4.05 to $4.40 per diluted share. We expect full-year free-cash flow to be in the range of $650 million to $750 million with the 2025 midpoint being a decline versus 2024 strong result due to FX headwinds. With that, that's our 2025 outlook.
So let me summarize my financial remarks. Overall, we delivered solid 2024 results despite a difficult production environment. We delivered a very strong 10.1% margin, which was 50 basis-points higher than 2023 and well-ahead of the 9.2% to 9.6% margin reflected in our initial 2024 guidance. This great performance is a result of our focus on appropriately managing our costs across our business. We generated strong free-cash flow of $729 million.
Now as we look-ahead to 2025, our outlook aligns with the priorities Joe highlighted earlier. First, we expect to continue to outperform market production with an expected full-year outgrowth of 100 to 300 basis-points despite headwinds from battery cell pricing and BEV program delays. Second, we expect to once again deliver an adjusted operating margin above 10%. We believe this shows our ability to manage our cost structure effectively even in light of a declining production environment.
Finally, we expect to have another year of strong free-cash flow, which we believe in combination with our investment-grade balance sheet will allow us to continue to invest in our business while navigating a challenging and uncertain market backdrop. As I look-back on our 2024 results and our 2025 outlook, I'm extremely proud of the BorgWarner team around the globe and their ability to deliver strong financial results during a challenging and volatile market backdrop.
With that, I'd like to turn the call-back over to Pat.
