Garrett Motion Inc.: Form 10-K for the period ended Dec 31, 2025

Our Company

Garrett is a cutting-edge technology leader delivering differentiated solutions for emission reduction and energy efficiency. We design, manufacture and sell highly engineered turbocharging, air and fluid compression, and high-speed electric motor technologies for original equipment manufacturers ("OEMs") and independent aftermarket distributors in the mobility and industrial fields.

We have significant expertise in delivering highly engineered products at scale for internal combustion engines ("ICE") using gasoline, diesel, natural gas and hydrogen, as well as zero-emission vehicles ("ZEV"). Our products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with greenhouse gas and other emission-reduction targets.

Our growth strategy is two-fold: (i) expand our turbocharger leadership across passenger and commercial vehicles, maritime and industrial applications, as well as the aftermarket, and (ii) apply our differentiated technologies to develop new solutions for traction (E-Powertrain) and thermal management (E-Cooling compressor). The underlying technology pillars, such as high-speed motors, controls software, oil-free foil bearings, power electronics and system integration expertise, are hard to replicate by competitors. These technologies have been developed by Garrett over time and require significant and sustained research, development and engineering ("RD&E") investments. They bring significant benefits in terms of energy efficiency (thereby reducing total cost of ownership), lower weight and compact packaging that are highly valued by our customers.

Our Industry

Overview

We provide cutting-edge technology for the mobility and industrial fields, including light vehicles, commercial vehicles (which includes both on-highway and off-highway applications) and industrial applications. Our solutions include mechanical and electrical products for turbocharging and boosting internal combustion engines, as well as for compressing air and refrigerants for industrial and mobility use (including, but not limited to, use in commercial heating, ventilation and air conditioning ("HVAC") systems, data center cooling and fuel cell systems).

As of 2025, our primary source of sales comes from the global turbocharger industry for gasoline, diesel and natural gas engines across light vehicle, on- and off-highway commercial vehicles and industrial applications as well as the aftermarket for these products. Sales also come from E-Boosting and hydrogen fuel cell air compression solutions, already manufactured at scale.

At the same time, we have developed unique technological competencies, which we are leveraging to solve our customers’ challenges in the evolution towards hybrids and electric powertrains. We are developing solutions and allocating our RD&E spend accordingly, focusing approximately 50% of total RD&E expenditure in 2025 on Electric Compression and E-Powertrain technologies for both mobile and industrial applications. On the turbocharger side, we continue investing to support our customers, especially for hybrids, while also expanding our portfolio with the development of larger turbochargers, including the new Garrett MEG product line, aimed at marine and industrial applications, including backup power generation for data centers.

Key trends affecting our industry

Ongoing geopolitical and trade tensions, persistent elevated inflation across Europe, and a slowdown in the growth of China's domestic economy, partially offset by an increase in exports, have continued to exert pressure on global industry and have adversely affected sectors such as automotive throughout 2025.

Changes in overall vehicle and machinery production

Light vehicle production increased by approximately 4% in 2025, compared to the prior year. Commercial vehicle production experienced an increase of 3% in 2025, with both the on-highway and off-highway segments increasing by roughly 4% and 2%, respectively. For 2026, Standard & Poor Global Mobility ("S&P") expects production volumes to decrease slightly from 2025 in the automotive (light vehicle) industry whereas Knibb Gormezano & Partners Automotive Intelligence ("KGP") expects a slight increase in the commercial vehicle (on-highway and off-highway) industry.

Moreover, there continues to be significant uncertainty around global economic growth, as the macroeconomic landscape continues to experience supply chain disruptions, geopolitical tensions and economic uncertainties. The shift from pure gasoline and diesel ICE to hybridized powertrains is expected to continue in response to increasingly strict fuel efficiency and regulatory standards in many of the regions in which we operate. In parallel, the share of full battery electric vehicles ("BEVs") is expected to continue to increase, with short-term dynamics, such as significant vehicle price gaps between BEVs and ICE-powered vehicles, and slower than anticipated charging infrastructure proliferation, limiting the pace of adoption.

Commercial vehicles trends in On-Highway and Off-Highway machinery

The global commercial vehicle industry continues to navigate a challenging macroeconomic and regulatory environment, with trends diverging across on- and off-highway segments. On-highway, freight demand remains subdued in North America and Europe amid economic uncertainty, high interest rates, and geopolitical tensions, leading to delayed fleet purchases and minimal pre-buy activity ahead of upcoming emissions standards. Electrification progress is slower than anticipated outside China, where battery-electric heavy-duty truck adoption is accelerating due to falling battery costs and supportive trade-in policies. In contrast, hydrogen-powered trucks face delays into the next decade, and OEMs are prioritizing cost control over rapid zero-emission deployment. Off-highway — spanning agriculture, construction, materials handling, power generation, marine, and backup power generation for data centers — is similarly constrained by high input costs and uneven demand recovery. Agricultural equipment faces margin pressure despite easing fertilizer and fuel costs, while construction activity is dampened by fiscal tightening and weak residential investment. Materials handling demand is transitioning to a replacement cycle, with electrification advancing in compact segments. Power generation and data center applications remain resilient, supported by critical infrastructure needs and hybrid solutions, while marine applications focus on compliance and efficiency. Overall, growth expectations have shifted toward 2026-2027, with near-term conditions characterized by caution and selective investment.

Global vehicle fuel efficiency and emissions standards

OEMs are facing increasingly strict constraints for vehicle fuel efficiency and emissions standards in many of the regions in which we operate. Despite recent revisions, mostly still ongoing, regulatory authorities in key regions such as the United States, the European Union, China, Japan, and Korea have instituted regulations that require sustained and significant reductions in greenhouse gas (including CO2 and NOx) and particulate matter vehicle emissions. OEMs are required to evaluate and adopt various solutions to address these stricter standards. Turbochargers allow OEMs to reduce engine size without sacrificing vehicle performance, thereby increasing fuel efficiency and decreasing harmful emissions. Furthermore, turbochargers allow more precise “air control” over both engine intake and exhaust conditions, such as gas pressures, flows and temperatures, enabling optimization of the combustion process. This combustion optimization is critical to engine efficiency, exhaust emissions, power and transient response (i.e., how the engine reacts to changes in operating conditions, such as acceleration or load changes). It also allows exhaust gas recirculation for diesel engines and Miller-cycle operation for gasoline engines. Consequently, we believe turbocharging will continue to be a key technology for automakers to meet increasingly stringent fuel economy and emissions standards without sacrificing performance.

Turbocharger penetration

Use of turbochargers and electric-boosting technologies on vehicle powertrain systems is one of the most cost-effective solutions to address stricter fuel economy and emissions standards, and OEMs are increasing their adoption of these technologies. Total turbocharger production increased globally from approximately 49 million units in 2024 to close to nearly 50 million units in 2025, increasing by more than half a million units year-over-year, and is expected to decrease in 2026 and onward (based on current expectations for BEV penetration), gradually declining to 2022 volume levels by 2030. S&P forecasts turbocharger penetration on ICE-based powertrains to grow in light vehicles from 54% in 2022 to approximately 57% in 2026, stabilizing around 56% up to 2033.

Medium-Term Powertrain Trends

Note: Years 2023 - 2025 represent actual data and years 2026 - 2030 represent forecasted data.

Source: S&P, KGP

Electrification and hybrids

In order to address stricter fuel economy standards, OEMs also have been increasing the electrification of their vehicle offerings, primarily with the addition of hybrid powertrains equipped with a gasoline or diesel internal combustion engine in combination with an electric motor. This includes growing interest for hybridized powertrains that blur the boundaries between ICE and BEVs, such as REEVs (Range Extended EVs, which have a small ICE-powered generator that recharges the battery pack). S&P estimates that hybrid vehicles (excluding mild hybrids, but including REEVs) produced globally will grow from a total of approximately 16 million vehicles in 2025 to 26 million vehicles in 2029, representing a CAGR of 11%. Many of these vehicles utilize turbos; additionally, the hybrid setup enables the use of electric turbos and compressors as well as E-Powertrain technology.

Battery electric and fuel cell technologies

OEMs are investing in BEVs in part to comply with regulatory targets across regions. S&P expects that BEVs will comprise 28% of total light vehicle production globally by 2030. Consumer adoption hinges not only on future "cost of range," which is tightly linked to the energy capacity of the battery, but also on how well that energy is used. Critical issues include energy efficiency increases (including how to best address thermal management challenges), battery price (and consequently vehicle price), weight reduction through increases in power density, and shorter recharging times. As OEMs strive to solve these issues, they are also investing in hydrogen fuel cell-powered electric vehicles for demanding applications requiring longer ranges, especially for commercial vehicles. These vehicles, like BEVs, have fully electric motor powertrains, but they rely on the hydrogen fuel cell to generate the required electricity. The hydrogen fuel cell also requires advanced electric-boosting technology to run efficiently and optimize range and cost of ownership. We are investing to address selected opportunities, sparked by the electrification trend, where our differentiated technology can bring benefits related to lighter, more compact and more energy efficient components for electric vehicles.

Our Products

We are a global leader in the $10 billion OEM turbocharger industry. We believe we will continue to benefit from global technology leadership in the turbocharger industry through our deep relationships with global OEMs. Continuous product innovation to bring innovative and differentiated technologies for electric vehicles (E-Powertrain and E-Cooling compressors), fuel cell compressors and solutions beyond automotive are the new challenges we are embracing and pursuing.

Products for light vehicle ICE

• Gasoline: The global adoption of turbochargers by OEMs on gasoline engines has increased rapidly from approximately 14% in 2013 to approximately 51% in 2025 and is forecasted by S&P to increase to 53% in 2026. In addition to the volume growth, tightening of CO2 regulations is driving a technology shift, moving away from standard waste gate technology to variable geometry turbo ("VNT"), which is a premium technology where we hold technological competitive advantages. In 2016, we launched our first high-volume VNT gasoline application, and this technology is expected to experience increased adoption in the years to come. According to a forecast by S&P, VNT represented 21% of global turbo gasoline production in 2025 and is expected to reach 29% by 2030. A key to our strategy for gasoline growth is thus to leverage our technological leadership in high-temperature materials and variable geometry, as well as our scale and global footprint to meet the demands of global OEMs.
• Diesel: We have a long history of technology leadership in diesel engine turbochargers. Although diesel is weak in certain vehicle segments, we derive most of our diesel turbocharger revenues from segments with continued strong performance: heavier and bigger vehicles like SUVs, pickup trucks and light commercial vehicles (such as delivery vans). Diesel maintains a unique advantage in terms of fuel consumption, cost of ownership, and towing capacity, which makes it the powertrain of choice for heavier vehicle applications. Diesel also remains essential for OEMs to meet their CO2 fleet average regulatory targets going forward, as diesel vehicles produce less CO2 on average than gasoline vehicles.
• Hybrid vehicles: We offer a comprehensive portfolio of turbocharger and electric-boosting technologies (including E-Turbo and E-Compressor solutions) to manufacturers of hybrid-electric powertrains. OEMs are increasingly adopting hybrid technologies to meet stricter regulatory standards. Like turbochargers for gasoline and diesel engines, turbochargers for hybrid vehicles are an essential component of maximizing fuel efficiency and overall engine performance.

Internal combustion commercial vehicles & industrial products

Our Company traces its roots to the 1950s when we helped develop a turbocharged commercial vehicle for Caterpillar. We have maintained our strategic relationship with key commercial vehicle OEMs for over 70 years as well as industry-leading positions for both on- and off-highway use. Our products improve engine performance and enable lower emissions on trucks, buses, agriculture equipment, construction equipment and mining equipment with engine sizes ranging 1.8L to more than 100L. We continue to develop our product range - including the introduction of our largest turbocharger, Garrett MEG - reinforcing our presence in marine and industrial applications, such as backup power generation for data centers.

Electric (battery electric and hydrogen fuel cell electric) vehicles & industrial products

We provide a comprehensive range of electric air compressors to manufacturers of fuel cell systems. Our system consists of efficient, powerful, and lightweight air compressors using leading automotive technologies to boost fuel cell vehicles. Air supply is critical for performance, durability and hydrogen fuel consumption and range for applications equipped with hydrogen fuel cells. We launched the auto industry's first fuel cell production car application in 2016. We now provide a comprehensive portfolio of fuel cell air compressors covering a broad range of fuel cell stack power from 30kW to 250+kW and we launched our third generation of fuel cell products in 2024.

Leveraging a set of unique technological building blocks, we now offer disruptive solutions for electric traction (E-Powertrain) and electric thermal management (E-Cooling compressor) that can enhance an application’s energy efficiency in a reduced packaging space and with significant weight savings. We are engaged in several pre-development programs with OEMs in various regions, both within mobility and industrial applications.

Aftermarket and performance products

Our Garrett aftermarket brand has strong recognition across distributors and garages globally, and is known for quality, reliability and boosting engine performance. We operate through a network of more than 370 distributors covering 165 countries. Our aftermarket business has historically provided a stable stream of revenue supported by our large installed base, currently estimated at nearly 150 million vehicles. As turbocharger penetration rates continue to increase, we expect that our installed base and aftermarket opportunities will continue to grow. We are also working to broaden our portfolio with our Remanufactured ("REMAN") offering in Europe, the Middle East and Africa and North America which so far has increased our portfolio by over 400 additional applications, and at the same time provides the additional benefit of utilizing recovered parts while maintaining our required quality standards (by using original components and original assembly processes in our REMAN workshops).

Our Competitive Strengths

We believe that we differentiate ourselves through the following competitive strengths:

• Differentiated and innovative technology in, and beyond, mobility
• Strong and collaborative relationships with leading OEMs globally
• Global and low-cost manufacturing footprint with operational excellence

Differentiated and innovative technology in, and beyond, mobility

We have led the revolution in turbocharging technology over the last 70 years and maintain a leading technology portfolio of approximately 1,350 patents and patents pending. We have a globally deployed team of approximately 1,330 engineers across six R&D centers and ten close-to-customer engineering centers. Our engineers have led the mainstream commercialization of several leading turbocharger innovations, including variable geometry turbines, dual-boost compressors, ball-bearing rotors, electrically actuated controls, and air-bearing electric compressors for hydrogen fuel cells. We maintain a culture of continuous product innovation, introducing about ten new technologies per year and upgrading our existing key product lines approximately every three years. At the end of 2023, we announced an expansion of our turbocharger portfolio to serve large bore engines used in industrial applications, including marine, power generation and other machinery. In 2024, we delivered the first prototypes of our new industrial applications to a key OEM, and in 2025 we sold our first "MEG" (very large) turbochargers. Outside of our turbocharger product lines, we apply this culture of continuous innovation to meet the needs of our customers in new areas. We are developing solutions for zero-emission technologies for mobility and beyond, such as fuel cell compressors for a broad range of cell stack power (40kW to 250kW) and high-value electric products including E-Powertrain and E-Cooling compressor technologies, with approximately 50% of total RD&E spend focused on these new solutions.

Strong and collaborative relationships with leading OEMs globally

We supply our products to more than 60 OEMs globally. Our top ten customers accounted for approximately 62% of net sales and our largest customer represented approximately 12% of our net sales in 2025. With over 70 years in the turbocharger industry, we have developed strong capabilities working with major OEMs around the world. We consistently meet their stringent design, performance and quality standards while achieving capacity and delivery timelines that are critical for customer success. Our track record of successful collaborations, as demonstrated by our strong client base and our ability to successfully launch multiple product applications every year, is well recognized. Our regional research, development and manufacturing capabilities are a key advantage in helping us to supply OEMs as they expand geographically and shift towards standardized engines and vehicle platforms. With regards to new technology offerings for zero-emission vehicles, our proven track record in bringing innovation to production is a key decision factor for our customers to engage in joint technology assessments through pre-development projects with Garrett.

Global and low-cost manufacturing footprint with operational excellence

Our geographic footprint locates RD&E and manufacturing capabilities close to our customers, enabling us to tailor technologies and products for the specific vehicle types sold in each geographic industry. In all regions where we operate, we leverage low-cost sourcing through our robust supplier development program, which continually works to develop new suppliers that can meet our specific quality, productivity and cost requirements. We now source more than two-thirds of our materials from low-cost countries and believe our high-quality, low-cost supplier network to be a significant competitive advantage. We have invested heavily to bring differentiated local capabilities to our customers in high-growth regions, including China and India.

In 2025, we manufactured more than 89% of our products in low-cost countries, including in seven manufacturing facilities in China, India, Mexico, Brazil, Romania and Slovakia. We have a long-standing culture of lean manufacturing excellence and continuous productivity improvement. We believe global uniformity and operational excellence across facilities is a key competitive advantage in our industry given that OEM powertrain platforms are often designed centrally but manufactured locally, requiring suppliers to meet the exact same specifications across all locations.

Our Strategy

Garrett invests in innovative technologies that address the needs of our customers in the ongoing auto industry transformation. This continued investment in differentiated technology, coupled with our relentless focus on customer relationships and our global capabilities, allows us to drive the following business strategies:

• Strengthen our leadership in the turbocharger industry within the light vehicle, commercial vehicle and industrial space, including product expansion to larger turbocharger frames (Garrett MEG).
• Leverage our differentiated technology to solve key challenges for zero-emission vehicles and energy efficiency needs beyond the mobility space.
• Grow our aftermarket business.

Strengthen our leadership in the turbocharger industry within the light vehicle, commercial vehicle and industrial space

We are focused on strengthening our industry position in the light vehicle, commercial vehicle and industrial turbocharger industries:

• Light vehicle gasoline turbochargers, whose adoption has historically lagged that of diesel turbochargers, are expected to grow until 2032, reaching a peak of 54%, after which a long plateau is expected, above 2020 levels until after 2036, according to S&P. We have launched the first modern 1.5L VNT gasoline application with a major OEM and expect to see increasing adoption of this technology in future years. A major key to our strategy for gasoline growth is our plan to leverage our strengths in high temperature materials, variable geometry technologies, and E-Boosting solutions, as well as our scale, global footprint and in-region capabilities, to meet the volume demands of global OEMs.
• The commercial vehicle (including both on- and off-highway applications) and industrial spaces remain a focus for us, considering their slower shift to electrification, and the increasing need for increased energy efficiency and productivity. We continue to invest in turbocharger technology upgrades, including for new types of fuels for ICE applications, like hydrogen. We also are expanding our portfolio with the launch of new frame sizes aimed at serving larger engines, mostly used in marine and power generation verticals.

Leverage our differentiated technology to solve key challenges for zero emission vehicles and energy efficiency needs beyond the mobility space

We stand to benefit from the increased adoption of electric (battery or fuel cell) vehicles. S&P estimates that the global production of electrified vehicles (battery and fuel cell electric) will increase from approximately 15 million vehicles in 2025 to approximately 28 million vehicles by 2030, representing an annualized growth rate of approximately 13%. To solve current challenges in terms of range, vehicle cost and performance, OEMs will need technologies enabling step changes in energy efficiency, weight and packaging and thermal management. We expect to continue to invest in product innovation and new technologies, and by leveraging our capabilities and expertise to develop selected offerings for electric vehicles, we believe that we are well positioned to remain a technology leader in the field of electrified vehicles. In particular, we have already developed a full portfolio of fuel cell compressors, and we are in the pre-development phase with some of our customers for differentiated E-Powertrain and E-Cooling compressor solutions.

Grow our aftermarket business

We have an opportunity to strengthen our global network of more than 370 distributors in 165 countries by deepening our channel penetration, by leveraging our well-recognized Garrett brand, by using new online technologies for customer engagement and sales, like our Installer Connect program (a global web-based platform providing self-service tools for garage technicians, which helped generate nearly 25,000 additional certified technicians in 2025), and by widening our product portfolio with an expansion initiative on large industrial turbos, for which we plan to onboard certified Service Centers to support these industrial end-customers in the years to come.

Research, Development, Engineering and Intellectual Property

We maintain technical engineering centers in major automotive production regions of the world to develop and provide advanced products, processes and manufacturing support to all of our manufacturing sites, and to provide our customers with local engineering capabilities and design developments on a global basis. As of December 31, 2025, we employed approximately 1,330 engineers. Our total RD&E expenses, net of customer reimbursements, were $151 million, $161 million and $163 million for the years ended December 31, 2025, 2024 and 2023, respectively, with approximately 50% of our total RD&E spend in 2025 focused on zero-emission technologies.

We currently hold approximately 1,350 patents and patents pending. Our current patents are expected to expire between 2026 and 2044. While no individual patent or group of patents, taken alone, is considered material to our business, taken in the aggregate, these patents provide meaningful protection for our intellectual property.

Materials

The most significant raw materials we use to manufacture our products are grey iron, aluminum, stainless steel and a nickel-, iron- and chromium-based alloy. As of December 31, 2025, we have not experienced any significant shortage of raw materials and we or our suppliers (on our behalf) do not typically carry inventories of such raw materials in excess of those reasonably required to meet our production and shipping schedules.

Our Customers

Our global customer base includes most light and commercial vehicle OEMs. Our ten largest applications in 2025 were with six different OEMs. OEM sales were approximately 86% of our 2025 revenues while our aftermarket and other products contributed approximately 14%.

Our largest customer is Stellantis N.V. (“Stellantis”). In 2025, 2024 and 2023, our sales to Stellantis accounted for 12%, 9% and 9%, respectively, of our total sales. In 2025, 2024 and 2023, our sales to Bayerische Motoren Werke AG (“BMW”), our second largest customer, were 11%, 12%, and 12%, respectively, of our total sales. In 2025, 2024 and 2023, our sales to Ford Motor Company (“Ford”), our third largest customer, were 11%, 10%, and 9%, respectively, of our total sales.

Supply relationships with our customers

We typically supply products to our OEM customers through “open” purchase orders, which are generally governed by terms and conditions negotiated with each OEM. These arrangements typically contemplate a relationship under which our customers are not required to purchase a minimum amount of product from us. These relationships typically extend over the life of the related engine platform. Prices are negotiated with respect to each business award, which may be subject to adjustments under certain circumstances, such as commodity or foreign exchange escalation/de-escalation clauses, or cost reductions achieved by us. The terms and conditions typically include a warranty on the products supplied. We may also be obligated to share in all or a part of recall costs if the OEM recalls its vehicles for defects attributable to our products.

Individual purchase orders are terminable for cause or non-performance and, in most cases, upon our insolvency and certain change of control events. In addition, many of our OEM customers have the option to terminate for convenience on certain programs, which allows them to impose pressure on pricing during the life of the vehicle program, and issue purchase contracts for less than the duration of the vehicle program, potentially reducing our profit margins and increasing the risk of losing future sales under those purchase contracts. We manufacture and ship based on customer release schedules, normally provided on a weekly basis, which can vary due to cyclical automobile production or inventory levels throughout the supply chain.

Although customer programs typically extend to future periods, and although there is an expectation that we will supply certain levels of OEM production during such future periods, customer agreements including applicable terms and conditions do not necessarily constitute firm orders. Firm orders are generally limited to specific and authorized customer purchase order releases placed with our manufacturing and distribution centers for actual production and order fulfillment. Firm orders are typically fulfilled as promptly as possible from the conversion of available raw materials, sub-components and work-in-process inventory for OEM orders and from current on-hand finished goods inventory for aftermarket orders. The dollar amount of such purchase order releases on hand and not processed at any point in time is not believed to be significant based upon the time frame involved.

Regulatory and Environmental Compliance

We are subject to the requirements of environmental and health and safety laws and regulations in each country in which we operate. These include, among other things, laws regulating air emissions, water discharge, hazardous materials and waste management. We have an environmental management structure designed to facilitate and support our compliance with these requirements globally. Although it is our intent to comply with all such requirements and regulations, we cannot provide assurance that we are at all times in compliance. Environmental requirements are complex, change frequently and have tended to become more stringent over time. Accordingly, we cannot ensure that environmental requirements will not change or become more stringent over time or that our eventual environmental costs and liabilities will not be material.

Certain environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. We are involved in various stages of investigation and clean-up related to environmental remediation matters at certain of our present and former facilities. In addition, there may be soil or groundwater contamination at several of our properties resulting from historical, ongoing or nearby activities.

As of December 31, 2025, the undiscounted reserve for environmental investigation and remediation was $14 million. We do not currently have sufficient information to reasonably estimate the amounts of environmental liabilities to be recorded upon future completion of studies, litigation or settlements, and we cannot determine either the timing or the amount of the ultimate costs associated with environmental matters, which could be material to our consolidated results of operations and operating cash flows in the periods recognized or paid. However, considering our past experience and existing reserves, we do not currently expect that environmental matters will have a material adverse effect on our consolidated financial position.

Corporate Responsibility

Our sustainability approach

We are a global innovator and technology leader delivering differentiated solutions for emission reduction and energy efficiency. At Garrett, our business growth and sustainability strategy go hand in hand. We are passionate about innovating for more sustainable mobility and industrial applications and, with a 70-year legacy, we serve customers worldwide with passenger vehicle, commercial vehicle, industrial aftermarket, and performance enhancement solutions.

Our mission to deliver differentiated solutions for emission reduction and energy efficiency is at the heart of our contribution to society. Our engineering expertise and transformative technologies help optimize fuel and energy efficiency, reduce emissions and manage growing vehicle complexity, all of which are critical to a clean transportation future. Our technologies enable sustainable automotive and industry transformation.

Our corporate sustainability framework starts from our corporate mission of spearheading technology development and continuing to deliver industry-first innovations. It relies on two main pillars - fostering a culture of innovation and operating responsibly to ensure our actions have a meaningful and long-term impact.

Sustainability is embedded in our corporate governance structure. Our Senior Executive Sustainability Committee, composed of the CEO and several members of Garrett’s senior leadership team, is sponsored by our Chief Technology Officer and oversees our sustainability strategy development, definition and deployment. Our Board of Directors, including through its committees, provides oversight of our environment, social and governance activities, corporate responsibility and sustainability strategy. Primary responsibility at the Board level for reviewing and reporting to the full Board on our sustainability programs and policies, as well as our corporate citizen commitments, resides with the Nominating & Governance Committee.

We articulate our commitments to environmental, social and governance considerations in the communities in which we operate in our Code of Business Conduct, which can be found on our website at www.garrettmotion.com (http://www.garrettmotion.com). The Company published its fiscal year 2024 Sustainability Report in 2025, the content of which is not incorporated by reference into this Annual Report or in any other report or document we file with the SEC.

Human Capital

We place a high value on developing the right working environment and skill sets to advance our performance culture and support our growth strategy. We invest in creating an inclusive, stimulating and safe work environment where our employees can deliver their workplace best every day. As of December 31, 2025, we employed approximately 6,700 employees globally, with 6,300 on a permanent basis and 400 on a temporary basis. We also had approximately 2,000 workers contracted through third-party agencies.

Diversity and inclusion

Diversity and inclusion is one of the four fundamentals for how we operate. We strive to ensure that each of our employees are involved, supported, respected and connected. Embracing diverse thoughts and ideas through an inclusive work environment leads to a competitive advantage in the market, increased innovation as we generate new and better ideas, and customer-centric decision making. We pride ourselves on the diversity at the top of the organization, with 25 different nationalities represented in our senior management team, bringing with them a wide variety of different backgrounds and experiences. Overall, we have representation of approximately 60 different nationalities in our global workforce.

In 2025, the Company continued to advance its commitment to creating an inclusive workplace. We recognize that diversity and inclusion are key drivers of performance—when people feel respected, valued, and supported, they are empowered to contribute their best ideas, make stronger decisions, and deliver superior results. This performance-driven mindset ensures that inclusion is not just a value, but a core part of how we succeed together. Our approach to diversity and inclusion is designed to embrace all backgrounds and perspectives, ensuring that no one feels excluded. Building on prior successes, we continued to build on our Employee Resource Groups ("ERGs"), which are open to all employees and foster collaboration and understanding across the organization. These include the Women in Garrett, Cultural Mosaic, Boost your Pride and Diverse Abilities ERGs—each promoting inclusivity, understanding and engagement for everyone.

Key actions during the year included:

• Conducting regular reviews of diversity initiatives in every country where we operate to help promote alignment and inclusiveness.
• Empowering our network of Diversity and Inclusion Champions to drive local initiatives. Their dedication resulted in further strengthening of more than 15 local ERGs across all three major regions where we operate, helping to promote broad participation and representation.
• Raising awareness during Pride Month through educational sessions and open dialogue, reinforcing that inclusion benefits everyone.
• Facilitating conversations related to our various ERGs through local activities that encourage mutual understanding.
• Hosting Garrett's annual Diversity and Inclusion Week in November 2025 under the theme "YOUnited in Action" featuring engaging local activities to reinforce our commitment to a welcoming workplace for all.

Talent management

We encourage our employees to develop their skills and capabilities through a comprehensive Performance and Talent Management system. From annual goal setting and performance reviews to learning opportunities for employees and leaders, the Company helps its people align their professional experience with the Company’s business objectives and encourages them to take ownership of their development and career paths.

Our learning environment offers employees access to approximately 3,300 online training programs that address a wide range of functional competencies, technical skills, and human skills. Learning can be self-paced, while our growing online peer-to-peer learning communities also allow employees to easily access courses specific to their function and to share materials and ideas on topics of interest. A variety of instructor-led virtual programs were deployed during 2025 to support employees' development and a number of dedicated programs for emerging and experienced leaders were successfully held. More than 94,500 hours of training were delivered during 2025.

We use regular talent reviews to strengthen our internal development processes and to calibrate assessment of individual performance. At least twice per year, we hold succession planning meetings up to and including the executive level, during which the bench-strength of teams are scrutinized and development plans for their talent are reviewed. Ahead of both annual and mid-year performance reviews, leaders hold calibration meetings to ensure that assessment ratings are consistent and fair amongst peer groups. To support our strategy and objectives, in 2023 we implemented a skills intelligence system. This system, enabled by artificial intelligence, can detect known and hidden capabilities of our employees. We expect this system will support us in identifying efficient paths of upskilling, reskilling and hiring for our future needs.

Be well, work well

Health and safety

World-class health and safety considerations are integrated into Garrett’s procedures and processes. Our management system aligns with the global standard ISO 45001 (and ISO 14001 and ISO 50-001) and provides protection of human health and safety during normal and emergency situations. Compliance with our standards and local regulatory requirements is monitored through a company-wide self-assessment process assured through annual audits. In 2025, we continued a rolling 4-year audit of compliance with local regulations, conducted by a global service provider. The timely development and implementation of process improvement and corrective action plans, including any improvements identified through our local regulatory compliance audits, are closely monitored.

Our safety incident numbers remain low compared to industry when measured by our Total Case Incident Rate (“TCIR”) at 0.04 for 2025. TCIR is measured as the number of recordable injuries multiplied by 200,000 and then divided by the total number of hours worked by employees.

Compensation and benefits

Our rewards programs are rooted in our “Be well, work well” principle, and aim to support employees in achieving the right work-life balance. We invest significant time and resources in establishing compensation programs that are both competitive and equitable. We constantly evaluate our positions for market competitiveness and adjust, when necessary, with the goal of ensuring the retention of top talent and continuation of equitable pay practices.

As part of our commitment to the well-being of our employees, we offer an external counselling service designed to assist employees with personal, family, or workplace matters. This service is confidential and is also available to each employee’s dependents.

Employee feedback, representation, and retention

Our Performance and Talent Management system aims to ensure that two-way dialogue is ongoing between employees and managers, punctuated by both an annual and a mid-year review, which provides employees the opportunity to express their opinions and ideas for development goals and career aspirations.

Our strategy is to build positive, direct, business-focused working relationships with all employees in order to drive business results. The Company respects employees’ rights and their wish to be part of employee representative bodies including unions, work councils and employee forums. The Company understands the value of collective bargaining in its labor and employee relations strategy and the importance of trust in its working relationships. Approximately 40% of the Company’s permanent employees (including both full-time and part-time employees) are represented by unions and works councils under current collective bargaining agreements.

The Company closely monitors employee turnover to measure retention and define improvement actions as and where necessary. The Company’s annual voluntary turnover for 2025 was 8.3%, which reflects the trends of the current global marketplace for talent. Garrett has developed a full set of actions to maximize retention, carried out at both a global and local level, with line managers as well as functional leaders held accountable for their employee turnover performance. We intend to continue to work diligently on this area to mitigate against the challenges of a highly competitive global marketplace for talent.

Educating future innovators

Garrett places a high value on STEM research and learning opportunities that provide young people with the skills needed to develop the future of sustainable mobility. The Company sponsors higher education institutes in several countries to further critical research in technical areas and provide students with opportunities to study STEM programs.

Garrett’s Internship Programs enable students to connect theoretical knowledge with practical responsibilities in the spirit of ‘living laboratories,’ during which they are encouraged to take ownership of business projects and define tactics to meet the project goals. In 2025, Garrett welcomed 305 Interns in 13 countries (approximately 82% covering Engineering, Integrated Supply Chain and IT and the remainder in Finance, HR, Marketing, Aftermarket, Sales and Legal).

Garrett also offers a graduate program, which serves as a career accelerator, equipping recent graduates with the skills and expertise needed for upcoming roles in technology. The program consists of three consecutive 12-month placements, primarily based in our major Engineering Hubs across Europe and Asia. Throughout the program, participants collaborate closely with engineering professionals and leaders, benefiting from training programs emphasizing technical skills and leadership capabilities.

In 2025, the Company sponsored 4 Formula SAE and Formula Student teams in several countries providing the students in the racing team with technical workshops in electrical powertrain, leadership coaching, parts for the racing vehicle and financial support. Garrett sponsored the Formula SAE event in the U.S. and the Formula Student race in the Czech Republic, where our experts worked as technical judges, provided technical support and awarded 2 EV Formula Student University teams with the Garrett E-Powertrain Innovation award. During 2025, the Company shared its growth vision with over 2,000 students and over 200 female engineers and automotive enthusiasts.

Every year, the Garrett engineering student programs hires over 120 students globally to support challenging projects in multiple engineering fields providing an enriching growth experience for potential future Garrett employees. The Company also supports local universities globally with master thesis projects, class speakers and technical sharing events.

Garrett supports STEM activities for high schools worldwide and in 2025, hosted or visited multiple high schools and colleges local to its main engineering sites in France, Czech Republic, India, and China. In 2025, Garrett Czech Republic, as a founding member, participated in the Future Shapers project driven by Fab Lab, a local initiative to attract primary and secondary school students to study STEM programs, including conducting workshops for students aged between 13 and 15. Garrett also sponsored the MyMachine global foundation via technical guidance from engineers, aiding primary school students to design their dream machine, which were then brought into reality by a group of secondary students. The Company continues to engage with global organizations with a focus on growing diversity interest in STEM and automotive engineering as well as intern and full time recruiting.

Garrett works closely with leading universities globally on over 20 collaboration projects at the forefront of technical innovation.

Seasonality

Our business is typically moderately seasonal. Our primary North American customers historically reduce production during the months of July and December; our European customers generally reduce production during the months of July, August and December; and our Chinese customers often reduce production during the period surrounding the Chinese New Year. Shut-down periods in the rest of the world generally vary by country. In addition, automotive production is traditionally reduced in the months of July, August and September due to the launch of parts production for new vehicle models. Accordingly, our results reflect this seasonality. Our sales predictability in the short term might also be impacted by sudden changes in customer demand, driven by our OEM customers’ supply chain management.

We also typically experience seasonality in cash flow, as a relatively small portion of our full-year cash flow is typically generated in the first quarter of the year and a relatively large portion in the last quarter. This seasonality in cash flow is mostly caused by timing of supplier payments for capital expenditures, changes in working capital balances related to the sales seasonality discussed above, and incentive payments.

Additional Information

Our Annual Reports on Form 10-K, including this Annual Report, our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as all amendments and other reports filed with or furnished to the SEC, are also available free of charge on our internet site at https://www.garrettmotion.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The contents of our internet site are not incorporated by reference into this Annual Report. The SEC maintains a website at SEC.gov that contains reports, proxy and information statements, and other information regarding issuers that file with the SEC, including our Company.

You should carefully consider the risks described below, which could materially adversely affect our business, financial condition and results of operations. These risks are not the only risks facing our Company. Risks and uncertainties not currently known to or anticipated by us or that we currently deem immaterial may also adversely affect our business, prospects, financial condition and results of operations.

Risks Relating to our Business and Strategy:

The automotive industry is evolving and if we do not deliver new products and technologies in response to changing customer needs and preferences, our business could suffer.

Our continued success depends on our ability to innovate to meet or exceed the needs of our customers. The automotive industry is increasingly focused on improved vehicle efficiency and reduced emissions, including through the development of hybrid and electric vehicles. This evolution is largely driven by increasingly stringent emissions regulations and changing consumer preferences, and we expect this trend to continue in many of the regions in which we operate. Over the past several years, there has been increased public awareness and concern in various regions in which we operate regarding global climate change, which has resulted, and may continue to result, in even more local, regional and/or federal requirements to reduce or mitigate the effects of greenhouse gas emissions further, and several regions in which we operate are already undertaking efforts to ban internal combustion vehicles altogether. These trends present an opportunity for increased incorporation of turbochargers into ICE, hybrid, REEV and fuel-cell based vehicles in the medium-term as OEMs seek to reduce emissions from their existing product portfolios. However, demand may shift away from the types of vehicles where our turbochargers generate higher profit margins and towards the types of vehicles where our turbochargers generate smaller profit margins, and in the longer-term may shift toward vehicles where no turbocharger is needed, such as with BEVs. Conversely, if emissions regulations are weakened, postponed or repealed, demand for emissions-reducing technologies, such as turbochargers, may decline. If we are unable to adapt to changes in the technological needs of our customers, if a transition to BEVs adoption accelerates faster than expected, or if we overestimate turbocharger penetration in ICE, hybrid, REEV, or fuel-cell-based vehicles, our results of operations and financial condition could be materially adversely affected.

In addition, in response to the ongoing evolution in the automotive industry and the anticipated shift toward zero-emission vehicles, we have made, and we expect to continue to make, significant investments in electrification technologies, including fuel cell compressors and high value electric vehicle components, including E-Powertrain and E-Cooling compressor technologies. Many of these new technologies are in the pre-development stage and their success is not guaranteed. We are also investing in new and expanded applications for our existing technologies, including industrial, marine, and stationary power generation applications. Investment in these new technologies is dependent on the profits generated from our turbocharger business, and reduced demand for our turbochargers could impact our ability to invest in these new technologies. There can be no assurance that any new technology will be successfully commercialized in a timely manner, if at all, that any new technology will be successful if commercialized, or that we can succeed in a new industry or application. Failure to timely and accurately predict customer needs and preferences, anticipate regulatory conditions affecting current and future products, or to develop new technologies that are accepted by our customers could have a material adverse impact on our competitive position, operations, financial condition, and cash flows. Further, if required investments exceed expectations, if consumer demand for our and our customers' new products fails to develop or develops more slowly than expected, or if competition for such technologies is more intense than we expect, our business, financial condition and results of operations may be materially adversely affected.

We operate in highly competitive industries.

We compete in various regions of the world with several other manufacturers and distributors that produce and sell turbochargers and other products that we sell, and we face intense competition in the development of technologies for electrification and other zero-emission solutions. Our competitors include independent regional and multi-regional suppliers as well as vertically integrated internal business units of major automotive OEMs. We also compete with start-ups, which may be well-funded with more operational and financial flexibility than we have, and with competitors that are larger than we are, which may have greater financial and other resources than we do. If we face increased competition or if any of our competitors more accurately respond to market developments, develop products that are superior to our products, produce similar products at a cost that is lower than our cost, or adapt more quickly to new technologies or evolving customer needs, we may not be able to compete successfully and our business, financial condition, and results of operations may be materially adversely affected.

We rely on sales to major customers, and we could be adversely impacted by the loss of any such major customers, changes in their requirements for our products or changes in their financial condition.

For the fiscal year ended December 31, 2025, our top ten customers accounted for approximately 62% of our net sales and our largest customer accounted for approximately 12% of our net sales. Changes in our business relationships with any of our major customers or in the timing, size and continuation of their various programs could have a material adverse impact on our business. We may lose major customers due to factors beyond our control, including due to mergers and acquisitions. Additionally, while we continually bid on new business with our existing customers and continually seek to diversify our customer base, there is no assurance that our efforts will be successful. The loss of any of these customers, the loss of business with respect to one or more of their vehicle models on which we have high component content, or a significant decline in the production levels of such vehicles would negatively impact our business, results of operations and financial condition. Further, to the extent that the financial condition of our largest customers deteriorates, our financial position and results of operations could be adversely affected.

Industry and economic conditions, including any economic downturns, could adversely affect our business and results of operations.

We are dependent on the continued growth and financial stability of our customers, a substantial portion of whom are OEMs in the automotive industry, which is cyclical and influenced by general economic conditions and other factors, such as consumer confidence and preferences, inflation, tax policies, interest rates and fuel costs, as well as industry-specific factors, such as rapid technological change, regulatory changes, vigorous competition, product life cycles, supplier stability, and capacity constraints. Economic and industry conditions have had, and will continue to have, an impact on our business, whether directly or indirectly through our customers and suppliers. Regional concentration could amplify these affects. A decline in economic conditions that result in significant reductions in automotive sales or production, particularly with respect to light vehicles, or slower-than-expected recovery from such declines, could have an adverse effect on our business, results of operations and financial condition.

Our aftermarket business is subject to unique risks.

Sales in our aftermarket operations are directly related to consumer demand for automotive aftermarket products, which may be affected by factors outside of our control, such as the average useful life of OEM parts and components, regional weather conditions, road infrastructure deterioration and average vehicle mileage. Given the relative importance of our off-highway aftermarket business, trends in agriculture, mining, oil and gas, marine, data centers and construction can also influence our aftermarket demand. Improvements in technology and product quality are extending the longevity of component parts, which may delay or reduce aftermarket sales. Our results of operations and financial condition could be adversely affected by these trends, including if we fail to timely and effectively respond to changes in the demand for our aftermarket products.

Additionally, we rely upon a network of independent dealers to distribute our aftermarket products. We rely on the capability of our independent dealers to develop and implement effective sales plans to create demand among purchasers for the equipment and related products and services that the dealers purchase from us. In addition, the dealer channel’s ability to support and service precision technology solutions and emerging power solutions may affect customers’ acceptance and adoption rates of these products. If our dealers are not successful in these endeavors, then we will be unable to grow our sales and revenue, which would have an adverse effect on our financial condition. Furthermore, these dealers may have trouble funding their day-to-day operations, and we or they may seek to terminate our existing relationships. The unplanned loss of any of our dealers could lead to inadequate market coverage or negative customer impressions of us and may adversely impact our ability to collect receivables that are associated with that dealer.

We may not be able to successfully negotiate favorable pricing and other terms with our customers, which may adversely affect our results of operations.

There is substantial and continuous pressure on OEMs to reduce costs, including the costs of the products we supply. Our customer supply agreements with automotive OEMs typically require step-downs in component pricing over the period of production. In addition, our customers often reserve the right to terminate their supply contracts at any time, which enhances their ability to obtain price reductions. OEMs have also exercised significant influence over their suppliers, including us, particularly because in the automotive component supply industry, which is highly competitive and serves a limited number of customers. Based on these factors, our status as a Tier I supplier (one that supplies vehicle components directly to OEMs) and the fact that our customers’ product programs typically last several years and are anticipated to encompass large volumes, our customers are often able to negotiate favorable pricing and other terms, and any cost-cutting initiatives that our customers adopt generally will result in increased downward pressure on our pricing. The resulting impacts to our sales levels and margins could significantly reduce our revenues and adversely affect our competitive standing and prospects.

We have invested substantial resources in specific foreign markets where we expect growth, and we may be unable to timely alter our strategies should such expectations not be realized.

We have identified certain countries, such as China and India, as key high-growth geographic markets. We believe these markets are likely to experience substantial long-term growth and accordingly, have made and expect to continue to make substantial investments in manufacturing operations, technical centers, RD&E activities and other infrastructure to support anticipated growth in these areas. If market demand for evolving vehicle technologies in these regions does not grow as quickly or materialize as we anticipate, or if we are unable to deepen existing and develop additional customer relationships in these regions, we may fail to realize expected rates of return or incur losses on our existing investments and may be unable to timely redeploy the invested capital to take advantage of other markets or product categories, potentially resulting in lost market share to our competitors. In particular, our ability to remain competitive and continue to grow in these regions depends in part on the absence of competing state-sponsored domestic businesses. If a state-sponsored operation entered a local market as a competitor, it might have access to significant social and financial capital that would enable it to overcome the ordinary barriers to entry in our industry and acquire potentially significant market share, likely at our expense. Further, continued trade tensions and other geopolitical concerns, particularly in China, may require us to shift our operations away from these countries. All of the foregoing could have a material adverse effect on our business, results of operations, cash flows and financial condition.

We are subject to risks associated with climate change and increased scrutiny from customers, investors, regulators and others regarding our sustainability practices.

Many customers, regulators, investors, employees, and other stakeholders in various jurisdictions in which we operate are increasingly focused on sustainability practices, including environmental and social considerations, relating to our businesses and industry, particularly with regards to climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion. Responding to these considerations and implementing related goals and initiatives involve risks and uncertainties, require investments and depend in part on third-party performance or data that is outside of our control. We cannot guarantee that we will achieve announced goals and initiatives or that our stakeholders will agree with and support them. Additionally, certain organizations have developed rating systems for evaluating companies on their approach to sustainability, and unfavorable ratings may lead to negative customer and/or investor sentiment. Furthermore, our practices may be judged against sustainability standards that are continually evolving and not always clear, and prevailing sustainability standards, expectations and regulations across jurisdictions may also reflect contrasting or conflicting values or agendas. Any failure, or perceived failure, by us to achieve these goals, further these initiatives, adhere to its public statements, comply with federal, state or international environmental, social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and materially adversely affect our business, reputation, results of operations and financial condition.

In particular, over the past several years, there has been increased public awareness and concern in various jurisdictions in which we operate regarding global climate change and climate-related risks, which has resulted, and is expected to continue to result, in increased local, regional and global regulations concerning environmental practices, including requirements to reduce and/or mitigate the effects of greenhouse gas emissions, as well as requirements to make disclosures regarding greenhouse gas emissions, climate-related matters such as enterprise risks, climate-related targets and otherwise, such as those recently adopted in California and Europe, including the Carbon Border Adjustment Mechanism and the Corporate Sustainability Reporting Directive. There continues to be a lack of consistent climate regulation across the jurisdictions in which we operate, which creates economic and regulatory uncertainty. Any future regulations aimed at mitigating climate change may negatively impact the prices of raw materials and energy as well as the demand for certain of our customers' products, which could in turn impact demand for our products and our results of operations. The costs of compliance and any changes to our operations mandated by new or amended regulations, or customer requirements, may be significant. Furthermore, any violations of climate change regulations may result in substantial fines and penalties, remediation costs, damages, or other adverse impacts on our business. Part of our strategy to address these risks includes our investment in technologies supporting zero-emission products, which presents additional risks. See “The automotive industry is evolving, and if we do not deliver new products and technologies in response to changing customer needs and preferences, our business could suffer.” Additionally, we may also be required to make changes at the level of our sourcing and production processes, including due to demands of, and commitments to carbon neutrality or net zero by, automotive OEMs. This could require us to incur additional costs in the form of investments needed to make our products and production processes compliant with such requirements.

Furthermore, the physical manifestations of climate change, such as extreme weather conditions or more frequent extreme weather events have in the past, and may in the future, disrupt our operations, damage our facilities, disrupt our supply chain, including our customers and/or suppliers, impact the availability and cost of materials needed for manufacturing or increase insurance and other operating costs, any of which could have a material adverse effect on our operating results, cash flows or financial condition.

The success of our business depends on the recruitment, development and retention of qualified personnel.

Due to the complex nature of our business, our performance is highly dependent on our ability to recruit, hire, retain and develop talented and diverse employees who are highly skilled in their areas, particularly with respect to key areas, such as engineering, manufacturing, marketing, sales and senior management. Competition for qualified personnel in our industry is intense, and we may not be successful in attracting or retaining qualified personnel. In addition to compensation considerations, current and potential employees are increasingly placing a premium on culture and other various intangibles, such as working for companies with a clear purpose, flexible work arrangements, and other considerations. The loss of key employees, our inability to attract new qualified employees or adequately train new employees, any delay in hiring or replacing key personnel, could disrupt our operations and negatively affect our business, financial condition and results of operations.

Risks Related to our Operations:

Our profitability and results of operations may be adversely affected by program launch difficulties.

The launch of new programs and product lines is a complex process, the success of which depends on a wide range of factors, including the production readiness of our manufacturing facilities and manufacturing processes and those of our suppliers, as well as factors related to tooling, equipment, employees, product quality and other considerations. Our failure to successfully launch new businesses, or our inability to accurately estimate the cost to design, develop and launch new businesses, could have an adverse effect on our profitability and results of operations. In particular, to the extent we are not able to timely and successfully launch new programs and product lines, our customers may be required to delay or shut down production, which could result in significant financial penalties to us, a diversion of personnel and financial resources and/or our customers awarding business to a competitor, any of which could have an adverse effect on our profitability and cash flows.

Volatility in the cost and availability of raw materials, components, energy, transportation and other inputs has increased, and may continue to increase, our costs.

We have experienced, and may continue to experience, volatility in the cost and availability of raw materials, components, energy, transportation, labor and other inputs as a result of a broad range of factors beyond our control, including, but not limited to, global pandemics, disruptions in the global supply chain, persistently high inflation and interest rates, new or higher tariffs and geopolitical tensions. There is no guarantee that we will be able to pass through these increased costs to our customers, and if we are otherwise unable to mitigate these cost increases, such cost increases could have a material adverse effect on our results of operations and financial condition.

Shortages of components from our suppliers, or economic distress experienced by any of our suppliers, could result in the disruption of our operations and could impact our ability to meet commitments to our customers.

Short- or long-term capacity constraints, insufficient quality control, financial distress or significant changes in business conditions at any point in our supply chain could disrupt our operations and adversely affect our financial performance, particularly when the affected suppliers and vendors are the sole sources of products that we require or that have unique capabilities, or when our customers have directed us to use those specific suppliers and vendors. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-lead time products during times of volatile demand. If our suppliers fail to deliver products, parts and components of sufficient quality on time and at reasonable prices, we could have difficulties fulfilling our orders on similar terms or at all, sales and profits could decline, and our commercial reputation could be damaged. If we fail to adequately assess the creditworthiness and operational reliability of our suppliers, if our suppliers become insolvent, if there is any unanticipated deterioration in their creditworthiness and operational reliability, or if they do not perform or adhere to contractual arrangements, we may not be able to enforce the terms of the contract or obtain alternative supply on favorable terms, if at all, which could have a material adverse effect on our financial condition and results of operations.

Furthermore, a significant portion of our supply chain is concentrated in mainland China and, as a result, our ability to continue filling our supply needs may be adversely affected by changes in, or our failure to comply with, Chinese laws, regulations and standards, and by political risks beyond our control, including but not limited to, trade policies, treaties, government regulations, customer needs and preferences, and new or higher tariffs. Our inability to fill our supply needs, on terms that we expect or at all, would jeopardize our ability to fulfil obligations under our commercial contracts and could result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.

We may not realize sales represented by awarded business or effectively utilize our manufacturing capacity.

When we win a bid to provide products and services to an automotive OEM customer, the customer typically does not commit to award us its business until a separate contract has been negotiated, generally with a term ranging from one year to the life of the model (usually three to seven years). Once business has been awarded, the OEM customer typically retains the ability to terminate the agreement for convenience and without penalty and does not commit to purchase a minimum volume of products while the contract is in effect. As a result, the volume and timing of sales to our customers may vary significantly due to: (i) variation in demand for, and the success of, our customers’ products; (ii) our customers’ attempts to manage their inventory; (iii) design changes; (iv) changes in our customers’ manufacturing strategies; and (v) consolidation among our customers. A significant decrease in demand for certain key models or a group of related models sold by any of our major customers, or the ability of a manufacturer to re-source its requirements for a particular model or group of models, could have a material adverse effect on our business and financial condition.

In addition, we may be unable to forecast the level of customer orders with sufficient certainty to allow us to optimize production schedules and maximize utilization of manufacturing capacity. If actual production orders from our customers are significantly lower than the projections we use in calculating the amount of our awarded business, we could realize substantially less revenue over the life of these projects than the projected estimate, and if we are unable to mitigate the resulting underutilization of our manufacturing lines, the increased fixed costs relative to our revenues could have an adverse effect on our profitability and results of operations. Similarly, our inability to adapt to any increased production or desired inventory levels (including as a result of accelerated launch schedules for new customer platforms), comply with customer specifications and manufacturing requirements more generally or respond to other unexpected demand changes, could result in financial penalties, increased costs, loss of sales, loss of customers or potential breaches of customer contracts, any of which could have a material adverse effect on our profitability and results of operations.

We are subject to the economic, political, regulatory, foreign exchange and other risks of our international operations.

We seek to locate RD&E, and manufacturing capabilities close to our customers and in regions with relatively lower costs than more developed markets. Our international geographic footprint subjects us to many risks, including those related to: exchange control regulations; wage and price controls; intellectual property protections; antitrust and environmental regulations; employment regulations; data privacy and data protection regulations; foreign investment laws; monetary and fiscal policies and protectionist measures that may prohibit acquisitions or joint ventures, require local content, or impact trade volumes; import, export and other trade restrictions (such as embargoes) and tariffs; anti-corruption and anti-bribery laws; transactions with state-owned enterprises; nationalization of private enterprises; natural and man-made disasters, hazards and losses; global health risks and pandemics; disputes with labor organizations related to our repositioning actions; violence, civil and labor unrest; acts of terrorism; and our ability to hire and maintain qualified staff and maintain the safety of our employees throughout our operations. For example, certain of the markets in which we operate have adopted increasingly strict data privacy and data protection requirements or may require local storage and processing of data or similar requirements, such as the General Data Protection Regulation (“GDPR”) in the European Union. The GDPR and similar data protection measures may increase the cost and complexity of our ability to deliver our services to ensure compliance. In addition, due to our position as a market leader in the turbocharger industry in many of the markets in which we operate, we could face allegations of abuse of our market position or of collusion with other market participants, which could result in negative publicity and adverse regulatory action by the relevant authorities, including the imposition of monetary fines, which could adversely affect our financial condition and results of operations.

Trade tensions have in the past, and may in the future, negatively impact our business. We may not be able to mitigate the impacts of any new or higher tariffs, and our business, results of operations and financial position could be materially adversely affected by such tariffs. Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, and any related responses from affected countries to any new or expanded U.S. trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which could have a material adverse effect on our business, results of operations and financial condition. For example, since early 2025, the U.S. government has announced broad tariff measures alongside targeted sector actions, while certain trade partners have implemented retaliatory tariffs, and aspects of this policy mix remain subject to ongoing negotiations and short-term agreements. Although the impact of such measures on our business is subject to a number of unknown factors, including the size, effective date and duration of such measures, future changes in the scope and nature of the tariffs, any retaliatory responses to such tariffs taken by the target countries, and the effectiveness of any mitigating actions that may be available to us, due to our meaningful operations in China and Mexico, the impact may be significant. In addition to potential increases in customs duties and tariffs in the United States and other countries, the United States-Mexico-Canada Agreement is subject to renewal in 2026. There can be no assurance that the results of this renegotiation will not adversely affect our business. These and other instabilities and uncertainties arising from the global geopolitical environment, along with the cost of compliance with increasingly complex and often conflicting regulations worldwide, can impair our flexibility in modifying product, marketing, pricing or other strategies for growing our businesses, as well as our ability to improve productivity and maintain acceptable operating margins.

Additionally, a significant portion of our revenues and expenses are denominated in currencies other than the U.S. dollar. As a result, we are subject to foreign currency risks and foreign exchange exposure arising from our business operations including, but not limited to, international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade. Our results of operations and financial condition have in the past been negatively impacted, and may in the future be negatively impacted, by rapidly fluctuating foreign exchange rates. While we have historically hedged foreign currency exposures and utilized foreign currency exchange forward contracts, we cannot guarantee the future success of such programs. Furthermore, a significant source of the funds attributable to our parent company is from distributions from our non-U.S. subsidiaries. Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our local subsidiaries' ability to convert local currency into U.S. dollars or to make payments outside the country. This could subject us to the risks of local currency devaluation and business disruption. We regularly monitor our foreign currency exchange exposure and often seek to reduce such foreign currency risk through hedging activities; however, foreign exchange hedging activities bear a financial cost and may not always be available to us or be successful in eliminating such volatility.

Geopolitical conditions, catastrophic events and pandemics may disrupt our business and adversely affect our results of operations and financial condition.

Geopolitical tensions, including armed conflict, such as the armed conflicts in Ukraine and the Middle East, terrorist activity or general economic disruption or instability, have in the past impacted, and may in the future impact, our operations and create or exacerbate certain risks we face to our business, financial condition and results of operations. For example, Russia’s invasion of Ukraine and the global response, including the imposition of financial and economic sanctions by the United States and other countries, have led to supply constraints that have impacted, and may continue to impact, our business. They have also led to energy shortages globally, especially in Europe. A further prolonged or intensified conflict could result in acute shortages of raw materials and price inflation on transportation costs, materials, and energy, which in turn may adversely impact our supply chain. If the conflict expands beyond Ukraine, it could negatively impact our operations in neighboring countries. Furthermore, an escalation of geopolitical tensions due to the ongoing conflict, such as increased sanctions or restrictions on global trade or otherwise, could result in further supply chain disruptions, reduced customer demand, state-sponsored cyberattacks or increased volatility in the financial markets, all of which could have a materially adverse impact on our business and operations.

In addition, catastrophic events, such as a pandemic or large-scale cyberattacks, could lead to disruption or failure of our systems or operations, harming our ability to conduct normal business operations. For example, the Covid-19 pandemic negatively impacted the global economy, disrupted supply chains and created significant volatility and disruption in financial markets, adversely impacting our business and operations including our employees, customers, suppliers, partners and communities. Prolonged negative impacts of such events on global supply chains, general macroeconomic conditions and consumer confidence, could have an adverse effect on our business, results of operations, cash flows and financial condition.

We face risks in connection with joint venture partnerships, joint development projects and other strategic opportunities.

We are engaged in many strategic business relationships and regularly evaluate strategic opportunities, including acquisitions of businesses, products and technologies, joint venture partnerships, and joint development agreements that we believe may complement our business. We may not be able to successfully identify suitable acquisition and joint venture candidates, complete transactions on acceptable terms, integrate acquired operations into our existing operations, or realize potential benefits and synergies from a transaction. Our failure to identify suitable strategic opportunities may restrict our ability to grow our business or expand into new markets. Furthermore, our joint venture, joint development and other business partners may have goals, strategies, priorities, and business incentives that are inconsistent with ours, which could negatively impact the success of the strategic relationship.

Failure to protect our intellectual property, or allegations that we have infringed on the intellectual property of others, could adversely affect us.

We rely on a combination of patents, copyrights, trademarks, tradenames, trade secrets and other proprietary rights, as well as contractual arrangements, including licenses, to establish, maintain and protect our intellectual property rights. Effective intellectual property protection may not be available, or we may not be able to acquire or maintain appropriate registered or unregistered intellectual property, in every country in which we do business. Furthermore, in some areas of our business, the maturity of the industry and product technology may leave limited opportunity for differentiation. This risk is heightened with the broad adoption of artificial intelligence tools, which is expected to enhance intellectual property creation by our competition. Accordingly, our intellectual property may not be sufficient on its own to provide us with a competitive advantage, which in turn could weaken our ability to secure business awards from our customers and/or our ability to achieve targeted product profitability.

Protecting our intellectual property may require us to spend significant amounts of money. Further, the steps we take to protect our intellectual property may not adequately protect our rights or prevent others from infringing, violating or misappropriating our intellectual property rights. Any impairment of our intellectual property rights, including due to changes in U.S. or foreign intellectual property laws or the absence of effective legal protections or enforcement measures, could adversely impact our businesses, financial condition and results of operations. Adoption of artificial intelligence tools are expected to exacerbate these risks as well.

International technical export control regulations and trade conflicts may limit our ability to use certain intellectual property in our products in some regions of the world, or customers may require assured access to intellectual property through open source-code, joint ownership of intellectual property, free license, or other measures. These constraints could cause us difficulty in securing business awards from our customers, protecting our competitive technology differentiation, and/or our ability to achieve targeted product profitability.

In addition, as we adopt new technology, we face an inherent risk of exposure to the claims of others that we have allegedly violated their intellectual property rights. Successful claims that we infringe on the intellectual property rights of others could require us to enter into royalty or licensing agreements on unfavorable terms or cause us to incur substantial monetary liability. We may also be prohibited from further use of the intellectual property in question or be required to change our business practices to stop the infringing use, which could limit our ability to compete effectively. In addition, our customer agreements may require us to indemnify the customer for infringement. The time and expense of defending against these claims, whether meritorious or not, may have a material adverse impact on our profitability, can be time-consuming and costly and may divert management’s attention and resources away from our business. Furthermore, the publicity we may receive as a result of infringing intellectual property rights may damage our reputation and adversely impact our existing customer relationships and our ability to win new business.

Work stoppages, other disruptions, or the need to relocate any of our facilities could significantly disrupt our business.

Our geographic footprint emphasizes locating engineering and manufacturing capabilities in close physical proximity to our customers and in regions with relatively lower costs than more developed markets, thereby enabling us to adapt technologies and products for the specific vehicle types sold in each geographic market in which we operate and to manage costs. We are therefore subject to risks inherent in operating in various jurisdictions at a local level. In particular, a work stoppage or other disruption at any of our facilities in a given region could have a material adverse effect on our business. Our production in each of our markets is heavily dependent upon our local manufacturing capabilities, and so if we are forced to relocate our operations from our existing facilities to new facilities due to unforeseen circumstances or factors beyond our control, we will incur substantial costs, experience program delays and sacrifice proximity to customers and geographic markets as a result, potentially for an extended period of time, each of which could cause a material adverse effect on our business.

The automotive industry, in particular, relies heavily on “just-in-time” delivery of components during the assembly and manufacture of vehicles, and when we fail to make timely deliveries to our customers in accordance with our contractual obligations, we generally have to absorb our own costs for identifying and solving the “root cause” of the problem as well as expeditiously producing replacement components or products. We typically must also carry the costs associated with “catching up,” such as overtime and premium freight. Additionally, if we are the cause for a customer being forced to halt production, the customer may seek to recoup its losses and expenses from us. These losses and expenses could be significant and may include consequential losses, such as lost profits.

In addition, a significant disruption in the supply of a key component due to a work stoppage or other disruption at one of our suppliers could impact our ability to make timely deliveries to our customers and, accordingly, have a material adverse effect on our financial results. Further, if a customer halts production because of one of its other suppliers failing to deliver on time, it is unlikely we will be fully compensated, if at all. In addition, many of our major customers have union contracts throughout their operations, and any extended work stoppage or other disruption at one or more of our customers could have an adverse effect on our business.

Failure to achieve productivity and efficiency improvements or successfully execute repositioning projects may reduce our profitability or adversely impact our business.

Our profitability and margin growth are dependent upon, among other things, our ability to drive efficiency improvements throughout our organization. In addition, we seek productivity and cost savings benefits through repositioning actions and projects, such as consolidation of manufacturing facilities, transitions to cost-competitive regions, workforce reductions, asset impairments, product line rationalizations, implementation of artificial intelligence tools and other cost-saving initiatives. Risks associated with these actions include potential delays in execution of planned initiatives, additional unexpected costs, failure to fully realize expected productivity improvements and adverse effects on employee morale. We may not realize the full operational or financial benefits we expect, the recognition of these benefits may be delayed and these actions may potentially disrupt our operations. In addition, organizational changes, attrition, labor relations difficulties, or workforce stoppages could impact our efforts to improve operational efficiencies, which could have a material adverse effect on our business, reputation, financial position and results of operations.

We may incur material losses as a result of warranty claims, product recalls or field actions, as well as product liability actions that may be brought against us or our customers.

We face the risk of warranty and product liability claims, as well as product recalls and field actions, if our products actually or allegedly fail to perform to specifications or cause property damage or personal injury or death. There can be no assurance that we will have adequate reserves to cover any such recall, repair or replacement costs. In the event that any of our products fails to perform as expected, we may face direct exposure to warranty and product liability claims or may be required to participate in government or self-imposed field actions or recalls involving such products. Depending on the terms under which we supply products to our auto manufacturer customers, we may be required to guarantee or offer warranties for our products and to bear the costs of field actions, recalls, repair or replacement of such products pursuant to new vehicle warranties. Additionally, if our auto manufacturer customers face claims or recalls of their own, they may seek contribution from us. Our agreements with our customers do not always include limitation of liability clauses or, in certain situations or legal jurisdictions, such limitation of liability clauses may not fully protect us from all losses. If any such claims or contribution requests exceed our available insurance, or if there is a product recall, there could be a material adverse impact on our results of operations and could negatively impact our reputation. In addition, a recall claim could require us to review our entire product portfolio to assess whether similar issues are present in other product lines, which could result in significant disruption to our business and result in increased costs. There can be no assurance that we will not experience any material warranty or product liability claim losses in the future or that we will not incur significant costs to defend such claims.

We cannot predict with certainty the outcome of litigation matters, government proceedings and other contingencies and uncertainties.

In the normal course of our business, we are from time-to-time party to various lawsuits, investigations and disputes arising out of our current and historical business. These proceedings may relate to commercial transactions, product liability, prior acquisitions and divestitures, employment, employee benefits plans, intellectual property, antitrust, import and export, and environmental, health and safety matters, as well as securities litigation, tax proceedings and litigation related to our debt. For additional information regarding our pending legal proceedings, see Item 3, “Legal Proceedings.” We cannot predict with certainty the outcome of legal proceedings or contingencies. The costs incurred in litigation can be substantial and result in the diversion of management’s attention and resources.

We have also made, and in the future may make, certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses, and issue guarantees of third-party obligations. Our potential liabilities are subject to change over time due to new developments in legal proceedings or changes in settlement strategy, and we may become subject to, or be required to pay, damage awards or settlements that could have a material adverse effect on our results of operations, cash flows and financial condition. If we were required to make such payments, these payments could be significant and could exceed the amounts we have accrued for such matters, adversely affecting our business, financial condition and results of operations. While we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. The occurrence of significant liabilities for which there is no or insufficient insurance coverage could adversely affect our results of operations, cash flows, liquidity and financial condition.

Our operations and the prior operations of predecessor companies may expose us to the risk of environmental liabilities.

We are subject to extensive environmental regulations and our operations may expose us to risks of environmental liabilities. There can be no assurance that we will not incur additional liabilities related to the investigation and cleanup of environmental hazards and to claims of personal injuries or property damage that may arise from hazardous substance releases and exposures, including those relating to activities of our predecessor company or companies that we have acquired or may acquire from time to time. We are also subject to potential liabilities related to the compliance of our operations with the requirements of various federal, state, local and foreign governments that regulate the discharge of materials into the environment and the generation, handling, storage, treatment and disposal of, and exposure to, hazardous substances. If we are found to be in violation of these laws and regulations, we may be subject to substantial fines and criminal sanctions and be required to install costly equipment or make operational changes to achieve compliance with such laws and regulations. In addition, changes in laws, regulations or government enforcement of policies concerning the environment, the discovery of previously unknown contamination or new information related to individual contaminated sites, the establishment of stricter state or federal toxicity standards with respect to certain contaminants, or the imposition of new clean-up requirements or remedial techniques, could require us to incur additional currently unanticipated costs in the future that would have a negative effect on our financial condition or results of operations.

System or service failures, including as a result of cyber or other security incidents, could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations.

We rely upon information technology systems to manage or support a variety of our business processes, activities and products, many of which involve sensitive information. As a result, we are subject to systems or service failures, not only resulting from failures of our systems or the failures of systems of third-party service providers, but also from exposure to cyber security threats, including hackers, computer viruses, malware, social engineering and cyber extortion. Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to IT systems to sophisticated and targeted measures known as advanced persistent threats, directed at us, our products, our customers, our suppliers and/or our third-party service providers, including cloud providers. There has been an increase in the frequency and sophistication of cybersecurity threats our industry faces, particularly in light of the proliferation of artificial intelligence technologies, which is expected to continue, and our customers, partners and regulators are increasingly requiring cyber and other security protections and mandating security standards.

We have in the past experienced, and may in the future experience, cyber or other security incidents. Depending on their nature and scope, these could potentially result in the misappropriation, destruction, corruption or unavailability of our third parties' critical data and confidential or proprietary information and the disruption of business operations. Moreover, employee error, negligence or malfeasance, as well as intentional or inadvertent non-compliance with our security protocols may result in a breach of our information systems. Cyber incidents aimed at the software embedded in our products could also lead to third-party claims that our product failures have caused a similar range of damages to our customers.

In addition, our reliance on third-party service providers could introduce new cybersecurity risks and vulnerabilities, including supply chain attacks and other threats to our business operations. We rely on third-party service providers and technologies to operate critical business systems to process confidential, proprietary, and sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, and other functions. We also rely on third-party service providers to provide other products or services to operate our business. If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences. Supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or our third-party partners’ supply chains have not been or will not be compromised.

The risks associated with cyber or other security incidents include the risks of financial loss, reputational damage resulting in the loss of business, litigation with third parties, theft of intellectual property, fines levied by governmental entities, diminution in the value of our investment in research, development and engineering, and costs associated with incident remediation. We may also be required to expend significant costs and resources to protect against cyber or other security incidents. The costs related to cyber or other security incidents may not be fully insured or indemnified by other means. The successful assertion of a large claim against us with respect to a cyber or other security incident could seriously harm our business. Even if not successful, these claims could result in significant legal and other costs, may be a distraction to our management and harm our customer relationships, as well as our reputation.

Risks Related to Our Capital Structure

Our substantial indebtedness and other obligations could adversely affect our financial health and our ability to execute our business strategy.

We have substantial consolidated indebtedness. As of December 31, 2025, we had gross outstanding debt of $1,439 million. Our ability to generate sufficient cash flows from operations to service our indebtedness, run our business and execute our growth strategy depends on a range of economic, competitive and business factors, many of which are outside of our control. If we are unable to generate sufficient cash flow to satisfy our debt service payments and other obligations, we may be required to seek alternatives that could have a negative impact on our business and financial condition, such as reducing or delaying investments or capital expenditures, selling assets, or refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at the time and we will be limited by certain operating and financial restrictions in our existing debt agreements. We may not be able to employ any of these alternatives on desirable terms or at all, which could result in a default on our indebtedness and could have a material adverse effect on our results of operations, financial condition and business.

Our substantial indebtedness could, for example: limit our ability to borrow money for our working capital, capital expenditures, debt service requirements, strategic initiatives or other purposes; make it more difficult for us to satisfy our obligations with respect to our indebtedness and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under our debt instruments;

require us to dedicate a substantial portion of our cash flow from operations to the payment of interest and the repayment of our indebtedness, thereby reducing funds available to us for other purposes; limit our flexibility in planning for, or reacting to, changes in our operations or business; make us more highly leveraged than some of our competitors, which may place us at a competitive disadvantage; impact our rent expense on leased space and interest expense from financing leases, which could be significant; make us more vulnerable to downturns in our business, our industry or the economy; restrict us from making strategic acquisitions, engaging in development activities, introducing new technologies or exploiting business opportunities; cause us to make non-strategic divestitures; limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds or dispose of assets; or expose us to the risk of increased interest rates, as certain of our borrowings are at variable rates of interest.

If our cash flows were to become insufficient to service our indebtedness or cover our capital requirements or our access to capital were to become constrained, or if costs of capital increased significantly, whether due to prevailing industry conditions, the solvency of our customers, a material decline in demand for our products, the volatility of the capital markets or other factors, our financial condition and results of operations could be materially adversely affected. These conditions may negatively impact our credit ratings, which could reduce our ability to access new capital and further increase our cost of capital, which would negatively impact our financial condition and results of operations.

Our debt agreements contain restrictions that limit our financial and operational flexibility.

Our debt agreements contain, and any other existing or future indebtedness of ours would likely contain, a number of covenants that impose significant operating and financial restrictions on us, including restrictions on our and our subsidiaries' ability to, among other things: incur additional debt, guarantee indebtedness or issue certain preferred shares; pay dividends on or make distributions in respect of, or repurchase or redeem, our capital stock or make other restricted payments; prepay, redeem or repurchase certain debt; make loans or certain investments; sell certain assets; create liens on certain assets; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into certain transactions with our affiliates; substantially alter the businesses we conduct; enter into agreements restricting our subsidiaries' ability to pay dividends; and designate our subsidiaries as unrestricted subsidiaries. In addition, the Revolving Facility requires us to comply with a consolidated total leverage ratio under certain circumstances.

As a result of these covenants, we are limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. A failure to comply with the covenants in our debt agreements or any of our other existing or future indebtedness could result in an event of default under the applicable agreements, which if not cured or waived, could have a material and adverse effect on our business, financial condition and results of operations. In the event of any such event of default, the lenders under our indebtedness agreements: will not be required to lend any additional amounts to us; could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit; could require us to apply our available cash to repay these borrowings; or could effectively prevent us from making debt service payments on our long-term notes; any of which could result in an event of default under the agreements governing our indebtedness, including cross-defaults under the agreements governing our long-term indebtedness. If we were unable to repay those amounts, the lenders under our existing or future secured indebtedness could proceed against the collateral granted to them to secure such other indebtedness. We have pledged a majority of our assets as collateral under the Senior Credit Facilities. If any of our outstanding indebtedness were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.

Our U.S. and non-U.S. tax liabilities are dependent, in part, upon the distribution of income among various jurisdictions in which we operate.

Our future results of operations could be adversely affected by changes in our effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, regulations and judicial rulings (or changes in the interpretation thereof), changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, the results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures and various other governmental enforcement initiatives. Our tax expense includes estimates of tax reserves and reflects other estimates and assumptions, including assessments of our future earnings, which could impact the valuation of our deferred tax assets. Changes in tax laws or regulations, including recent tax law changes in the United States and the ongoing global adoption and legislative implementation of the Organization for Economic Cooperation and Development's Pillar 2 initiative, establishing a global minimum corporate tax rate of 15% calculated on a country-by-country basis, could increase tax uncertainty and may adversely impact our effective tax rate and provision for income taxes.

Our ability to raise capital in the future may be limited, and any deterioration in industry, economic or financial conditions may restrict our ability to access the capital markets on favorable terms, which could make us unable to fund our capital requirements.

We require working capital to meet our projected operating needs and fund ongoing RD&E activities, capital expenditures, and other cash requirements, and may require additional capital in the future to finance our growth and development, upgrade and improve our manufacturing capabilities, implement further marketing and sales activities, fund additional RD&E activities, satisfy regulatory and environmental compliance obligations, fund acquisitions or expansion, and meet varied working capital needs. Our capital requirements depend on many factors, including acceptance of and demand for our products, the extent to which we invest in new technology and RD&E projects and the status and timing of these developments. If our cash flows from operations, cash and cash equivalents and borrowing capacity under the Revolving Facility are insufficient to satisfy our cash needs, we may need to seek additional financing, which may not be available on favorable terms, or at all. If we issue new debt securities, the debt holders would have rights senior to our equity holders and the terms of such additional debt could restrict our operations. See "Our debt agreements contain restrictions that limit our flexibility in operating our business." Further, if we issue additional equity securities, existing holders of our equity securities may experience dilution, and preferred equity securities would also have rights senior to holders of our Common Stock.

Changes in interest rates and asset returns could adversely affect our earnings and/or cash flows and increase our pension funding obligations.

A portion of our indebtedness is made at variable interest rates, which subjects our business results to fluctuations in interest rates. If interest rates increase or remain elevated for extended periods, our borrowing costs may also increase and our returns on financial investments and the valuation of derivative contracts could be negatively affected, which could adversely impact our financial condition, operating results and cash flows. There can be no assurance that we will be able to mitigate any potential material adverse impacts on our earnings and cash flows caused by fluctuations in interest rates.

In addition, we have unfunded obligations under certain of our defined benefit pension and other post-retirement benefit plans. The valuation of our future payment obligations under the plans and the related plan assets are subject to significant adverse changes if the credit and capital markets cause interest rates and projected rates of return to decline. Such declines could lead to a material increase in the unfunded obligations of these plans, which could require us to make significant additional contributions to our pension plans and increase our pension expense.

There can be no assurance that we will pay dividends or repurchase shares of our Common Stock under our share repurchase program.

There can be no assurance that we will continue to declare and pay dividends in the future at any level, or at all. Our ability to pay dividends may be limited by restrictions or limitations on our cash flows, including through restrictions in our debt agreements or our ability to obtain sufficient funds from our subsidiaries, many of which are located outside of the United States. Any declaration and payment of dividends on our Common Stock is subject to the approval of our Board of Directors and will depend on our earnings, financial condition, liquidity and capital requirements, the general economic climate, the terms of our equity securities, contractual restrictions, our ability to service our debt obligations and other factors deemed relevant by the Board of Directors from time to time.

Additionally, our Board of Directors has approved a share repurchase program, pursuant to which we may repurchase up to $250 million of shares of Common Stock from time to time during the fiscal year ended December 31, 2026. The timing, as well as the number and value of shares repurchased under the program, will be determined by the Board of Directors or an authorized committee of the Board of Directors in its discretion and will depend on a variety of factors, including our assessment of the intrinsic value of our Common Stock, the market price of our Common Stock, general market and economic conditions, available liquidity, compliance with our debt and other agreements, applicable legal requirements, the nature of other investment opportunities available to us, and other considerations. We are not obligated to purchase any shares under the share repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice.

Cybersecurity

Risk Management and Strategy

Our cybersecurity objective is to protect against data privacy breaches, information theft, and external and insider cyber threats through the use of a combination of cyber technologies, policies, and procedures. We have processes to identify, assess, monitor and mitigate material risks from cybersecurity threats, which are part of the Company’s overall enterprise risk management ("ERM") process and have been embedded in the Company’s operating procedures, internal controls and information systems. To that end, we take a holistic approach to securing our data and business systems from attack, compromise or loss.

The Company has cybersecurity capability that is managed by a dedicated Chief Information Security Officer (“CISO”) whose team is responsible for leading the Company-wide cybersecurity strategy, policy, standards, architecture, and processes. The Security Operations Center ("SOC") provides visibility across all information technology assets and includes proactive cyber security threat detection technology to facilitate the identification of misconfigurations to mitigate threats and prevent data loss. As part of the Company’s holistic approach to cybersecurity, we have implemented programs and technology associated with threat hunting, vulnerability scanning, and threat detection and response technology.

As part of its cybersecurity risk management, the Company delivers specific education to the organization on how to identify potential cybersecurity risks and protect the Company’s resources and information. This training is mandatory for all employees globally on a regular basis and may be supplemented by various testing initiatives including periodic phishing tests.

The Company uses third-party expertise for periodic effectiveness testing of its prevention, detection, and response capabilities. The Company also requires all third-party service providers to meet specific cybersecurity requirements, including risk assessment and monitoring activities. In addition, third-party service providers with access to the Company's network have additional obligations including a requirement to undertake cybersecurity training.

While Garrett focuses heavily on prevention and detection, response and recovery plans, service agreements and partner engagements are in place should there be a need for us to respond to a cybersecurity attack. The Company's response process includes identifying the incident; notifying the executive team, activating the crisis team, assessing the business risk and materiality of the incident; managing the recovery of operations; and performing a post-incident analysis. The Company maintains business continuity and disaster recovery plans. The Company also engages in cyber crisis response simulation to assess our incident response ability and effectiveness.

No cybersecurity incidents have occurred that materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, results of operations or financial condition during the year ended December 31, 2025. Notwithstanding the extensive approach we take to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us in the future. See Item 1A. "Risk Factors" for a discussion of cybersecurity risks.

Governance

Role of Management

The Company has a Cyber Risk Governance Council consisting of the Senior Vice President Chief Digital and Information Officer (“CDIO”), the CISO, the IT leadership team, and the cybersecurity team that focuses on cybersecurity and compliance risks. The Cyber Risk Governance Council meets periodically to review cybersecurity risks and related risk management methodologies. Cybersecurity risks are included in the Company’s ERM as appropriate based on potential impact and vulnerability assessed according to certain set criteria and defined ERM materiality thresholds. Regular discussions of cybersecurity developments and risk mitigation approaches are held by the CDIO & CISO with the Chief Executive Officer and the senior leadership team. The CISO has over 28 years of experience in IT in various capacities with over 22 years in cybersecurity, reporting to the CDIO, who has over 20 years of IT related experience.

Role of the Board

The Board of Directors is responsible for overseeing overall risk management for the Company, including review and approval of the enterprise risk management approach and processes implemented by management to identify, assess, manage and mitigate risk. The Board has delegated responsibility for oversight of the Company's cybersecurity framework and risk management to the Audit Committee.

The CDIO and CISO provide reports to the Audit Committee at least semi-annually on the Company’s cybersecurity program, including the external threat environment, the Company’s programs to address and mitigate the risks associated with the evolving cybersecurity threat environment, and the results of evaluation of the Company’s cybersecurity program by external experts. The Audit Committee, as well as the Board of Directors, is also promptly informed about any information security incidents that may pose significant risk to the Company.

We have created a geographic footprint that emphasizes locating RD&E and manufacturing capabilities in close physical proximity to our customers, thereby enabling us to manage our environmental footprint and to adopt technologies and products for the specific vehicle types sold in each geographic market. Over the past several years, we have invested heavily to be close to our Chinese, Indian and other high-growth region OEM customers to be able to offer world-leading technologies, localized engineering support and unparalleled manufacturing productivity.

As of December 31, 2025, we owned or leased 13 manufacturing sites, six R&D centers and ten close-to-customer engineering sites, all of which are subject to liens pursuant to the Credit Agreement (as defined herein). We also have many smaller sales offices, warehouses, cybersecurity and integrated vehicle health management sites and other investments strategically located throughout the world. The following table shows the ownership and regional distribution of our manufacturing sites, R&D centers and customer engineering sites:

We continually and proactively review our real estate portfolio and develop footprint strategies to support our customers’ global plans, while at the same time supporting our technical needs and optimizing operating cost base. We expect our evolving portfolio will meet current and anticipated future needs.

The discussion under Note 23, Commitments and Contingencies of the Notes to the Consolidated Financial Statements is incorporated by reference into this Part I, Item 3.

The following discussion and analysis of our financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with our Consolidated Financial Statements and related notes thereto and other financial information appearing elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the "Risk Factors" section of this Annual Report, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.

Executive Summary

Garrett is a cutting-edge technology leader delivering differentiated solutions for emission reduction and energy efficiency. We design, manufacture, and sell highly engineered turbocharging, air and fluid compression, and high-speed electric motor technologies for OEMs and independent aftermarket distributors in the mobility and industrial fields.

We have significant expertise in delivering highly engineered products at scale for internal combustion engines using gasoline, diesel, natural gas and hydrogen, as well as for zero-emission vehicles. Our products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with greenhouse gas and other emission reduction targets.

In 2025, turbocharger production increased globally from approximately 49 million units in 2024 to nearly 50 million units in 2025, and is expected to decrease from 2026 onward based on current expectations of electric vehicle penetration. We effectively navigated through macroeconomic and geopolitical challenges, including a very dynamic trade environment as a result of tariff actions, by implementing strategic permanent and variable cost measures, as well as leveraging commodity deflation pass-through. Our effective management allowed us to achieve Net income of $310 million and Adjusted EBIT of $510 million for the year.

We continue to achieve success in our turbocharging, hybrid, and zero-emission technology applications. This year, we secured additional pre-production contracts for both light vehicle (including hybrid and range extended electric vehicle technologies), and commercial vehicle applications. Additionally, we were awarded our first E-Powertrain application in early 2025 and have made significant progress in our air and cooling compression technologies, as evidenced with various partnerships and pre-development contracts throughout 2025 and into early 2026.

During 2025, we repaid $50 million on our 2025 Dollar Term Facility and paid cash dividends of $52 million. We also repurchased $208 million of Common Stock under our share repurchase program. These repurchases include a total of 7.5 million shares of Common Stock for $103 million from funds affiliated with Oaktree Capital Management, L.P., a related party. The repurchased shares are held as treasury stock.

Trends, Uncertainties and Opportunities

Current global economic conditions due to geopolitical conflicts, high inflation in Europe, and China's slow pace of recovery, all have adversely affected and may continue to adversely affect many industries, including the automotive industry. We believe a global increase in BEV production will persist into 2026. We anticipate that demand for turbochargers will remain steady in the short to medium term, driven by the growing penetration of hybridized powertrains in response to strict fuel efficiency and emissions standards. While we foresee continued growth in BEV adoption, we believe it will be somewhat constrained in the short term due to the price disparity compared to ICE vehicles, geopolitical risks, and the slower-than-expected development of charging infrastructure.

Disaggregated Revenue

The following tables show our revenues by geographic region and product line for the years ended December 31, 2025 and 2024.

By Region

(Dollars in millions)

By Product Line

(Dollars in millions)

Results of Operations

Year Ended December 31, 2025 Compared with Year Ended December 31, 2024

Net Sales

(Dollars in millions)

34

The change in net sales compared to the prior year is attributable to the following:

For the year ended December 31, 2025, net sales increased compared to prior year by $109 million or 3%, including a favorable impact of $62 million or 2% due to foreign currency translation primarily driven by fluctuations in global exchange rates. This increase was primarily related to favorable foreign currency impacts, and higher demand in gasoline and commercial vehicles, partially offset by weaker demand for replacement parts on aftermarket sales. Net sales also includes $40 million of recoveries on import tariffs, partially offset by unfavorable product mix.

Gasoline product sales increased by $87 million or 6% (including a favorable impact of $24 million or 2% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe, North America, South America and India.

Diesel product sales increased by $10 million or 1% (including a favorable impact of $24 million or 3% due to foreign currency translation), primarily driven by passenger vehicles in Europe pursuing transition to gasoline hybrids, partially offset by demand for pickup trucks in North America, South America and Southeast Asia.

Commercial vehicle sales increased by $25 million or 4% (including a favorable impact of $6 million or 1% due to foreign currency translation), primarily driven by growth in off-highway programs across regions.

Aftermarket sales decreased by $21 million or 5% (including a favorable impact of $7 million or 1% due to foreign currency translation), primarily driven by softer demand for off-highway replacement parts in North America, partially offset by stronger demand in Europe and China.

Cost of Goods Sold and Gross Profit

(Dollars in millions)

35

(Dollars in millions)

For the year ended December 31, 2025, cost of goods sold increased by $83 million, primarily driven by higher sales volumes which contributed to an increase of $65 million. Cost of goods sold further increased from $41 million of import tariffs, $33 million of foreign currency impacts from transactional, translational, and hedging effects and $12 million of unfavorable product mix. These increases were partially offset by $24 million of commodity, transportation and energy deflation, $24 million of productivity, net of labor inflation and repositioning costs, and $20 million of lower RD&E costs, net of customer reimbursements.

Gross profit increased by $26 million, mainly driven by higher sales volumes which contributed an increase of $29 million. Gross profit further increased from $30 million of foreign currency impacts from transactional, translational, and hedging effects, $24 million of commodity, transportation and energy deflation, $24 million of productivity, net of labor inflation and repositioning costs, and $20 million of lower RD&E costs, net of customer reimbursements. These increases were partially offset by $70 million of unfavorable impact from product mix, $30 million of price, net of inflation pass-through and $1 million of import tariffs.

Selling, General and Administrative Expenses

(Dollars in millions)

Selling, general and administrative (“SG&A”) expenses remained at the same level compared with the prior year. A $7 million reduction in personnel costs related to cost measures implemented in current and prior years and $5 million of lower outsourced activities were offset by $7 million of unfavorable foreign currency impacts and $6 million in professional fees related to merger and acquisition activity.

Other Expense, Net

(Dollars in millions)

For the year ended December 31, 2025, other expense, net amounted to $10 million compared to $6 million in the prior year. This increase was primarily due to professional fees incurred related to the Restatement Agreement (as defined herein).

Interest expense

(Dollars in millions)

Interest expense decreased by $48 million in 2025 compared to prior year. This reduction was primarily due to a $30 million reduction in debt issuance cost amortization, driven by accelerated amortization in the prior year, and $25 million of lower interest expense resulting from the amendment and restatement and repricing of our Credit Agreement. In addition, we recorded net gains of $7 million on our designated and undesignated interest derivatives in the current year, in comparison to net gains of $14 million in the prior year.

Non-operating income, net

(Dollars in millions)

For the year ended December 31, 2025, non-operating income, net amounted to $19 million compared to $13 million in the prior year. The increase was primarily driven by $5 million in higher foreign exchange transactional gains, a $2 million increase in the non-service cost components of net periodic pension benefits and a $1 million increase in interest income, partially offset by $2 million of lower equity income due to the sale of an equity interest in an unconsolidated joint venture in the second quarter of 2024.

Tax Expense

(Dollars in millions)

The effective tax rate increased by 3.1 percentage points in 2025 compared to 2024. The increase was primarily due to additional unrecognized tax benefits in Switzerland and China as well as prior year benefits associated with the release of valuation allowance related to deferred tax assets in Brazil (net of U.S. branch taxes) and prior year benefits associated with statute of limitation expiration and settlement of audits in Switzerland and Korea. These increases were partially offset by the revaluation of deferred tax assets related to intellectual property transferred within China which was subject to tax at different rates.

Net Income

(Dollars in millions)

For the year ended December 31, 2025, net income increased by $28 million compared with the prior year, primarily due to $48 million of lower interest expense, $26 million of increased gross profit and $6 million of increased non-operating income. These were partially offset by $21 million of higher tax expenses, the prior year gain of $27 million on the sale of an equity interest in an unconsolidated joint venture and $4 million of higher other expense, net.

Year Ended December 31, 2024 Compared with Year Ended December 31, 2023

For a discussion of our results of operations for the year ended December 31, 2024 compared with the year ended December 31, 2023, refer to our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 20, 2025, under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

Non-GAAP Measures

Management provides non-GAAP financial information to supplement the understanding of our business operations and performance, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the most directly comparable GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to other similarly titled measures used by other companies. Additionally, the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s operating results as reported under GAAP.

In 2025, we revised our non-GAAP reporting metric, transitioning from Adjusted EBITDA to Adjusted EBIT. This change is intended to better reflect our core operating performance and align with industry practices. We believe this change will provide investors with a clearer understanding of our operational performance.

We define “EBIT” as our net income calculated in accordance with U.S. GAAP, plus the sum of (i) interest expense net of interest income and (ii) tax expense. We define “Adjusted EBIT” as EBIT, plus the sum of (i) repositioning costs, (ii) foreign exchange (gain) loss on debt net of related hedging (gains) losses, (iii) discounting costs on factoring, (iv) gain on sale of equity investment, (v) acquisition and divestiture expenses, (vi) other non-operating income, (vii) capital structure transformation expenses, (viii) debt refinancing and redemption costs, and (ix) loss on extinguishment of debt (if any).

We believe that EBIT and Adjusted EBIT are important indicators of operating performance and provide useful information for investors because EBIT and Adjusted EBIT exclude the effects of income taxes, as well as the effects of financing activities by eliminating the effects of interest. Certain adjustment items, while periodically affecting our results, may also vary significantly from period to period and have disproportionate effect in a given period, which affects the comparability of our results.

EBIT and Adjusted EBIT (non-GAAP)

(Dollars in millions)

(1) Reflects interest income of $4 million, $3 million and $7 million for the year ended December 31, 2025, 2024 and 2023, respectively.

(2) Includes the loss on remeasurement of the Series A Preferred Stock Agreements as well as third-party legal and advisory fees that are directly attributable to the Transaction.

(3) The adjustment for other non-operating income reflects the non-service component of net periodic pension costs and other income that are not considered directly related to the Company's operations.

(4) Reflects the third-party costs directly attributable to the refinancing of our credit facilities and any amendments.

Adjusted EBIT for the year ended December 31, 2025 compared with year ended December 31, 2024

For the year ended December 31, 2025, net income increased by $28 million versus the prior year as discussed above within "Results of Operations".

Adjusted EBIT increased by $25 million compared to the prior year, mainly from $29 million of higher sales volumes from gasoline and commercial vehicles, $29 million of productivity, net of labor inflation and stock based compensation, $24 million of commodity, transportation, and energy deflation, $23 million of favorable foreign exchange impacts and $20 million of lower RD&E costs. These increases were partially offset by $70 million of unfavorable product mix and $30 million of price net of inflation pass through.

For the year ended December 31, 2025, we saw increased demand in gasoline due to new application launches and program ramp-ups in Europe, North America and India. We also saw increased demand in commercial vehicles from off-highway applications that continue to recover from prior year softness in Europe, North America, India and China. These volume increases were partially offset by lower demand in diesel driven by the impact of lower industry production mainly in Europe and aftermarket off-highway applications in North America.

The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by labor inflation and higher stock-based compensation. Gains in foreign currency from translational, transactional, and hedging effects in the year ended December 31, 2025, primarily driven by a higher Euro-to-U.S. dollar and CNY-to-U.S. dollar versus the prior period, accounted for a $23 million increase in Adjusted EBIT.

Adjusted EBIT for the year ended December 31, 2024 compared with year ended December 31, 2023

For the year ended December 31, 2024, net income increased by $21 million versus the prior year as discussed above within "Results of Operations".

Adjusted EBIT decreased by $46 million compared to the prior year, mainly from soft demand across all product lines except aftermarket, net of favorable product mix. Additionally, price net of inflation pass-through and unfavorable foreign exchange impacts further reduced Adjusted EBIT versus prior year. These declines were partially offset by operational productivity, net of labor inflation and repositioning costs, commodity, transportation, and energy deflation year-over-year and lower RD&E costs net of customer reimbursements.

During 2024, we saw a decline in demand for our gasoline, diesel, and commercial vehicle applications, partially offset by favorable demand in aftermarket for replacement parts in North America, China and Europe. Net sales also decreased due to price, net of inflation pass-through, driven by commodity price decreases.

We drove strong operational productivity in 2024, flexing our variable cost structure and driving fixed cost productivity of $82 million. This, coupled with commodity, transportation, and energy deflation of $81 million versus prior year, partially offset the impact of volume declines and allowed us to expand our Adjusted EBIT margin.

Losses in foreign currency from translational, transactional, and hedging effects accounted for $23 million of the decrease in Adjusted EBIT.

Liquidity and Capital Resources

Overview

(Dollars in millions)

On January 30, 2025, the Company entered into a Restatement Agreement (the "Restatement Agreement"), which amends and restates the Credit Agreement, dated as of April 30, 2021 by and among the Company, Garrett Motion Holdings Inc., Garrett Motion Sàrl and Garrett LX I S.à.r.l., as borrowers, the lenders and issuing banks party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent. (as amended from time to time, the "Existing Credit Agreement" and as amended and restated by the Restatement Agreement, the "Credit Agreement"), under which we refinanced in full our $692 million 2021 Dollar Term Facility with a new 2025 Dollar Term Facility for the same aggregate principal amount. The 2025 Dollar Term Facility will mature on January 30, 2032, and initially bore interest at a spread equal to, at our option, the Adjusted Term SOFR Rate plus 2.25% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.25% per annum in the case of ABR Loans (each as defined in the Credit Agreement). We also replaced our existing $600 million revolving facility under the Existing Credit Agreement with the New Revolving Facility under the Credit Agreement in an aggregate principal amount of $630 million. The maturity date of the New Revolving Facility is January 30, 2030.

On August 6, 2025, we entered into the First Amendment to the Credit Agreement, which reduced the Applicable Rate (as defined in the Credit Agreement) to the Adjusted Term SOFR Rate plus 2.00% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.00% per annum in the case of ABR Loans.

During the year ended December 31, 2025, we repaid $50 million on our 2025 Dollar Term Facility and paid cash dividends of $52 million. For more information, see Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Dividends.

For 2026, we expect capital spending to increase as compared to 2025. We expect to make net repayments of $7 million on our term loan borrowings and contributions of approximately $5 million on our non-U.S. pension plans. We expect to pay approximately $45 million related to purchase obligations which were entered into with various vendors in the normal course of business and are consistent with our expected requirements. Finally, we also expect to continue to declare and pay quarterly dividends on our Common Stock.

We fund our operations primarily through cash flows from operating activities, borrowings from our credit facilities and cash and cash equivalents. We believe the combination of expected cash flows, the term loan borrowings and the revolving credit facilities that are committed until 2030, will provide us with adequate liquidity to support the Company's operations.

Share Repurchase Program

On December 4, 2024, the Board of Directors authorized a $250 million share repurchase program valid from January 1, 2025, until December 31, 2025. For more information, see Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Issuer Purchases of Equity Securities.

During the year ended December 31, 2025, the Company repurchased $208 million of its Common Stock. The share repurchase program expired on December 31, 2025.

On December 3, 2025, the Board of Directors authorized a new $250 million share repurchase program valid from January 1, 2026, until December 31, 2026.

Off-Balance Sheet Arrangement

The Company did not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources as of December 31, 2025 and 2024.

Cash Flow Summary for the Years Ended December 31, 2025 and 2024

Our cash flows from operating, investing and financing activities for the years ended December 31, 2025 and 2024, as reflected in the Consolidated Financial Statements included in this Annual Report, are summarized as follows:

(Dollars in millions)

Cash Flow Summary for the year ended December 31, 2025

Cash provided by operating activities increased by $5 million for the year ended December 31, 2025 versus the prior year. The increase was driven by a $28 million increase in net income, a $8 million increase in non-cash charges and a $6 million change in working capital. These increases were partially offset by an unfavorable change in other assets and liabilities of $37 million.

Cash used for investing activities increased by $27 million for the year ended December 31, 2025 versus the prior year. The increase is due to $46 million of proceeds received in the prior year from the sale of our unconsolidated joint venture, and $3 million of lower proceeds from cross currency swap contracts that have been designated as net investment hedges of our Euro-denominated operations. These impacts were partially offset by $19 million in lower capital expenditures on property, plant and equipment versus the prior year and $3 million received for the first deferred payment on the sale of our unconsolidated joint venture.

Cash used for financing activities decreased by $194 million for the year ended December 31, 2025 compared with the prior year. During 2025, we made an aggregate of $139 million in debt repayments on our term loan facilities. We also made payments of $208 million for the repurchase of Common Stock under our share repurchase program, $52 million for dividends, $3 million for excise taxes related to Common Stock repurchases, $2 million for debt issuance costs and $2 million for other financing activities during the current year. These payments were partially offset by proceeds of $80 million, net of deferred financing costs, following the amendment and restatement of our Credit Agreement as further discussed in Note 15, Long-term Debt and Credit Agreements of the Notes to the Consolidated Financial Statements. In addition we borrowed and repaid $70 million from our revolving credit facilities. In comparison, cash used for financing activities in the prior year was primarily related to an aggregate of $992 million in debt repayments on our term loan facilities. We also made payments of $296 million for the repurchase of Common Stock under our share repurchase program, $8 million for debt issuance costs, $8 million for excise taxes related to Common Stock repurchases and $9 million for other financing activities during 2024. These payments were partially offset by proceeds of $794 million, net of deferred financing costs, from the issuance of our 2032 Senior Notes.

Cash Flow Summary for the year ended December 31, 2024

For a comparison of our cash flows for the year ended December 31, 2024 compared with the year ended December 31, 2023, refer to our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 20, 2025, under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

Capital Expenditures

We believe our recent capital spending has been sufficient to maintain efficient production capacity, support key product and process redesigns and expand capacity to meet increased demand. For 2026, we expect capital expenditures to increase relative to 2025, primarily due to new or additional investments in our zero emissions technology portfolio.

Critical Accounting Policies and Estimates

The preparation of our Consolidated Financial Statements in accordance with generally accepted accounting principles is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider the accounting policies and estimates discussed below to be critical to the understanding of our financial statements. Actual results could differ from our estimates and assumptions, and any such differences could be material to our Consolidated Financial Statements.

Revenue Recognition — Product sales are recognized when we transfer control of the promised goods to our customer, which is based on shipping terms. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the promised goods, adjusted for any variable consideration such as price concessions or annual price adjustments as estimated at contract inception. We estimate variable consideration at the most likely amount we will receive from customers and reduce revenues recognized accordingly. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us. We adjust our estimate of revenue at the earlier of when the value of consideration we expect to receive changes or when the consideration becomes fixed.

Contingent Liabilities — We are subject to lawsuits, investigations and claims that arise out of the conduct of our global business operations or those of previously owned entities, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, legal and environmental, health and safety matters. We continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well as potential amounts or ranges of probable losses, and recognize a liability, if any, for these contingencies based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Such analysis includes making judgments concerning matters such as the costs associated with environmental matters, the outcome of negotiations, and the impact of evidentiary requirements. Because most contingencies are resolved over long periods of time, liabilities may change in the future due to new developments (including new discovery of facts, changes in legislation and outcomes of similar cases through the judicial system), changes in assumptions or changes in our settlement strategy. See Note 23, Commitments and Contingencies of the Notes to the Consolidated Financial Statements for a discussion of management’s judgment applied in the recognition and measurement of our most significant contingencies.

Warranties and Guarantees — Expected warranty costs for products sold are recognized based on an estimate of the amount that eventually will be required to settle such obligations. These accruals are based on factors such as past experience, length of the warranty and various other considerations. Costs of product recalls, which may include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part, are accrued as part of our warranty accrual at the time an obligation becomes probable and can be reasonably estimated. These estimates are adjusted from time to time based on facts and circumstances that impact the status of existing claims. See Note 23, Commitments and Contingencies of the Notes to the Consolidated Financial Statements included herein for additional information.

Pension Benefits — We sponsor defined benefit pension plans covering certain employees, primarily in Switzerland, the U.S. and Ireland. The pension cost and liabilities for these plans are developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets, mortality rates, and compensation increases. The Company is required to consider current market conditions, including changes in interest rates, and employee demographics such as retirement patterns, in making its assumptions. Changes in the related pension benefit costs or liabilities may occur in the future due to changes in the assumptions.

The discount rate reflects the market rate on December 31 (the measurement date) for high-quality fixed-income investments with maturities corresponding to our pension obligations and is subject to change each year. The discount rate can be volatile from year to year as it is determined based upon prevailing interest rates as of the measurement date. The assumptions as to the expected long-term rates of return on plan assets are based upon historical plan asset returns over varying long-term periods combined with our expectations of future market conditions and asset mix considerations.

We recognize net actuarial gains or losses in excess of 10% of the greater of the fair value of plan assets or the plans’ projected benefit obligation (the corridor) annually in the fourth quarter each year (the “MTM Adjustment”). Net actuarial gains and losses occur when the actual experience differs from any of the various assumptions used to value our pension plans or when assumptions change. The primary factors contributing to actuarial gains and losses are changes in the discount rate used to value pension obligations as of the measurement date each year and the difference between expected and actual returns on plan assets. The mark-to-market accounting method results in the potential for volatile and difficult to forecast MTM Adjustments as the adjustments are primarily driven by events and circumstances beyond the control of the Company such as changes in interest rates and the performance of the financial markets.

Income Taxes — We account for income taxes pursuant to the asset and liability method which requires us to recognize current tax liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.

We file tax returns in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. Tax authorities have the ability to review and challenge matters that could be subject to differing interpretation of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the sustainability of tax attributes. The ultimate resolution of such uncertainties could last several years. When an uncertain tax position is identified, we consider and interpret complex tax laws and regulations in order to determine the need for recognizing a provision in our financial statements. Significant judgment is required in determining the timing and measurement of uncertain tax positions. We utilize internal and external expertise in interpreting tax laws to support our tax positions. We recognize the financial statement benefit of an uncertain tax position when it is more likely than not that, based on the underlying technical merits, the position will be sustained upon examination.

Although we believe the measurement of our liabilities for uncertain tax positions is reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals. If additional taxes are assessed as a result of an audit or litigation, they could have a material impact on our income tax provision and net income in the period or periods for which such determination is made. A change in judgment related to the expected ultimate resolution of uncertain tax positions will be recognized in earnings in the quarter in which such change occurs.

Other Matters

Litigation and Environmental Matters

See Note 23, Commitments and Contingencies of the Notes to the Consolidated Financial Statements for a discussion of material litigation and environmental matters.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Foreign Currency Risk

We are exposed to market risks from changes in currency exchange rates. These exposures may impact future earnings and/or operating cash flows. Our exposure to market risk for changes in foreign currency exchange rates arises from international financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities and transactions arising from international trade.

We historically have hedged balance sheet as well as forecasted currency exposures with natural offsets to the fullest extent possible and, once these opportunities have been exhausted, through foreign currency exchange forward contracts.

We hedge forecasted currency exposure to minimize the earnings exposures arising from foreign currency exchange risk on foreign currency purchases and sales. Under our cash flow hedging program, we designate certain foreign currency forward contracts as cash flow hedges of underlying foreign currency forecasted purchases and sales, with gains and losses on the qualifying derivatives recorded in Accumulated other comprehensive income ("AOCI") in the Consolidated Balance Sheet until the underlying forecasted transactions are recognized in earnings. These contracts have varying terms that extend through 2027. We also utilize undesignated foreign currency forward contracts to partially offset gains and losses on the foreign currency remeasurement of balance sheet positions.

Effective with our entry into the Credit Agreement, the Company entered into float-to-float cross-currency swap contracts to limit its exposure to investments in certain foreign subsidiaries exposed to foreign exchange fluctuations. The cross-currency swap contracts have been designated as net investment hedges of its Euro-denominated operations. Gains and losses on the derivatives qualifying as net investment hedges are recorded in AOCI until the net investment is liquidated or sold.

The Company also uses fixed-to-fixed cross-currency swap contracts to mitigate the foreign currency risk on its 2032 Senior Notes. The cross-currency swap contracts are designated as cash flow hedges, with changes in the fair value of the derivatives recorded in AOCI and reclassified into earnings based upon changes in the spot rate remeasurement of the underlying debt.

As of December 31, 2025, the net fair value of all financial instruments with exposure to currency risk was a $163 million liability. The potential loss or gain in fair value for such financial instruments from a hypothetical 10% adverse or favorable change in quoted currency exchange rates would be $225 million and $(229) million, respectively, at December 31, 2025 exchange rates. The model assumes a parallel shift in currency exchange rates; however, currency exchange rates rarely move in the same direction. The assumption that currency exchange rates change in a parallel fashion may overstate the impact of changing currency exchange rates on assets and liabilities denominated in currencies other than the U.S. dollar.

Interest Rate Risk

Our exposure to risk based on changes in interest rates relates primarily to our Credit Agreement. The Credit Agreement bears interest at floating rates. For variable rate debt, interest rate changes generally do not affect the fair market value of such debt assuming all other factors remain constant but do impact future earnings and cash flows. Accordingly, we may be exposed to interest rate risk on borrowings under the Credit Agreement. We manage this risk by entering into interest rate swap contracts to convert floating rate debt to fixed rate debt to reduce market risk associated with changes in interest rates. As of December 31, 2025, the net fair value of all financial instruments with exposure to interest rate risk was a $16 million liability.

For our outstanding borrowings under the Credit Agreement as of December 31, 2025, a 50 basis point increase (decrease) in interest rates would have increased (decreased) our interest expense by $3 million and ($3) million, respectively, compared to the amount of interest that would have been incurred in such period based on the rates of interest in effect at December 31, 2025. For additional information regarding our Credit Agreement, see Note 15, Long-term Debt and Credit Agreements of the Notes to the Consolidated Financial Statements.

Commodity Price Risk

We do not utilize derivative contracts to manage commodity price risk, and we are subject to changes in our cost of sales caused by movements in underlying commodity prices. Approximately 79% of our cost of sales consists of purchased components with significant raw material content. A substantial portion of the purchased parts are made of nickel, aluminum and steel alloys. We have index-based escalators in place with most of our suppliers for raw material inflation / deflation. As our costs change, we may be contractually able to pass through a portion of the changes in commodity prices to certain of our customers in accordance with long-term agreements. Where long-term pass-through agreements are not in place with customers, we generally seek to negotiate additional pricing arrangements with our customers. Assuming current levels of commodity purchases, a 10% variation in the commodity prices could impact our cost of sales by up to approximately $39 million per year prior to any price recovery from customers.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on management's evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2025.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control-Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2025.

Deloitte SA, our independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting, which is included in Item 8, Financial Statements and Supplementary Data, of this Annual Report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.