Kevin Nowlan
Executive Vice President and Chief Financial Officer at BorgWarner
Thank you, Fred and good morning everyone. Before I dive into the financials, I'd like to provide a quick overview of our first quarter results. First, our revenue came in at the high end of our expectations despite significantly weaker industry volume in Europe, which is our largest light vehicle market. Second, our margin performance in the quarter was respectable given inflationary pressures that our business is currently facing. Performance was supported by our synergy and cost restructuring actions that we've been executing on for the last couple of years.
Let's turn to Slide 9 for a look at our year-over-year revenue walk for Q1. We start with last year's revenue, which was just under $4 billion after adjusting for the disposition of our Water Valley facility this past December. You can see that foreign currencies decreased revenue by about 3% from a year ago, the US dollar strengthened year-over-year and has continued to strengthen beyond the quarter end. Then you can see the increase in our organic revenue about 1% year-over-year. That compares to a 7% decrease in weighted average market production. That means we delivered another quarter of strong outperformance in the face of a challenging end market environment. This outperformance was driven by Europe, North America and Korea. The sum of all this was just under $3.9 billion of revenue in Q1.
Now let's look at our earnings and cash flow performance on Slide 10. Our first quarter adjusted operating income was $389 million or 10.0%, which compares to adjusted operating income of $464 million or 11.6% from a year ago. On a comparable basis, excluding the impact of foreign exchange and the impact of the Water Valley disposition. Adjusted operating income decreased $62 million on $30 million of higher sales. This performance includes nearly $50 million of net commodity and other material cost headwinds that we experienced in the quarter. The balance of the operating income declined year-over-year is explained by the impact of higher e-products related R&D and the acquisition of AKASOL. Moving on to free cash flow, our free cash flow was $61 million usage during the first quarter due to increased inventory as a result of ongoing production volatility.
Let's now turn to Slide 11, we can see our perspective on global light vehicle industry production for 2020. When you look at this slide, you can see that our market assumptions incorporate a range of potential outcomes. That's primarily a result of the semiconductor supply challenges, the additional supply chain impacts as a result of the conflict in Ukraine and the impact of COVID related shutdowns in China. With that background in mind, we expect our global weighted light and commercial vehicle markets to increase in the range of 2.5% to 5% this year, which is down from our previous assumption of a 6% to 9% increase. Looking at this by region, Europe is where we see the largest reduction relative to our prior guidance. We expect the blended market increase of 2% to 4%, which is down significantly from our prior outlook of plus 12% to 15%. This is driven by weaker production in both light and commercial vehicle markets.
In North America, we're planning for our weighted markets to be up 11% to 13% and in China, we expect the overall market to be down 4% to 7%, which is worth than our previous outlook. This has an underlying assumption that the COVID related shutdowns are resolved by early June and that most of the lost volumes can be recovered in the second half of the year.
Now let's talk about our full year outlook on Slide 12. First, our guidance assumes an expected $650 million headwind from weaker foreign currencies, which is based on FX rates as of the end of April. While the US dollar had already appreciated somewhat against foreign currencies through the end of March, we've seen additional meaningful appreciation of the dollar through the month of April as well. So we factored that into our outlook for the balance of the year. But remember, our strategy is to produce and purchase components in the same region as our customers. As a result, the impact of currencies on our guidance is predominantly translational in nature. Next, as I previously mentioned, we expect our end markets to be up 2.5% to 5% for the year. But we expect our overall organic revenue growth to continue to exceed industry growth.
In fact, our current outlook for outperformance is stronger than our prior outlook based on both our year-to-date performance and an increase in our expected pricing recoveries for commodity and other inflationary costs. Based on these assumptions, we expect our 2022 organic revenue to increase approximately 10% to 13% relative to 2021 pro-forma revenue. That means we expect to outgrow the market by approximately 7% to 8%, which is higher than our prior outlook of 4% to 5%. To look at it in another way, our stronger relative performance is almost entirely offsetting the impact of lower industry production. Finally, as it relates to our revenue outlook, the Central acquisition is expected to add $60 million to $70 million to 2022 revenue as Fred previously noted.
Adding these items together, we're projecting total 2022 revenue to be in the range of $15.5 billion to $16.0 billion. From a margin perspective, we expect our full year adjusted operating margin to be in the range of 9.8% to 10.2% compared to a pro-forma 2021 margin of 10.9%. This represents a 40 to 50 basis point reduction versus our prior outlook, of this, approximately 40 basis points or just over $60 million is the result of higher commodity and other inflationary costs, net of additional pricing recoveries and about 10 basis points relates to the central acquisition, which is expected to be modestly dilutive this year. As it relates to R&D investment, our guidance still anticipate $130 million to $160 million increase in e-products R&D investment in 2022. Despite this challenging environment, we are not constraining the key investments that support the long-term growth of this company. Excluding inflation and this e-products R&D investment, our 2022 to margin outlook contemplates the business delivering full year incremental in the high teens.
Based on this revenue and margin outlook, we're now expecting full year adjusted EPS of $3.90 to $4.25 per diluted share. It's important to note that the translation impact loan of the strengthening US dollar is impacting our year-over-year EPS outlook by about $0.20 per share. And finally, we expect that will deliver free cash flow in the range of $650 million to $750 million for the full year. The reduction from our prior guidance is being driven by our lower adjusted operating income, partially offset by lower capital spending expectations. That's our 2022 outlook. So let me summarize my financial remarks. Overall, we had a respectable start to the year. Our revenue proved more resilient than the decline in industry volume with our outgrowth tracking ahead of our expectations coming into the year and we still delivered double-digit margins despite significant material cost inflation and higher R&D investments. As we look after the balance of 2022 near-term industry pressures are likely to continue with ongoing production disruptions in multiple markets, as well as continuing material cost inflation pressure. As a management team, we continue to work to strike a balance between managing the present by sustaining our strong margin and cash flow profile while at the same time maintaining the momentum in delivering our long-term plans under charging forward. But we know how to meet this challenge, managing near term results and long-term profitable growth has been and will continue to be the hallmark of BorgWarner's success.
With that I'd like to turn the call back over to Pat.
