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Garrett Motion Inc.

Garrett Motion Inc.GTXEarnings & Financial Report

Nasdaq · Industrials · Motor Vehicle Parts & Accessories

Garrett Motion Inc., formerly Honeywell Transportation Systems and Honeywell Turbo Technologies, is an American company primarily involved in engineering, development and manufacturing of turbochargers and related forced induction systems for ground vehicles from small passenger cars to large trucks and industrial equipment and construction machinery. It originated as part of Garrett AiResearch's Industrial Division in Phoenix, Arizona, in 1954, after which they entered a contract to provide ...

What changed in Garrett Motion Inc.'s 10-K — 2023 vs 2024

Top changes in Garrett Motion Inc.'s 2024 10-K

394 paragraphs added · 415 removed · 297 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

80 edited+10 added−7 removed53 unchanged
We are developing solutions and increasing our R&D spend, focusing almost 60% of total research, development and engineering expenditures in 2024 on zero emission technologies for mobility and beyond, 9 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.
We are developing solutions and increasing our R&D spend, focusing almost 60% of total research, development and engineering expenditures in 2024, on 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.
Similar to turbochargers for gasoline and diesel engines, turbochargers for hybrid vehicles are an essential component of maximizing fuel efficiency and overall engine performance. Our products provide 8 OEMs with solutions that further optimize engine performance and position us well as they add more hybrid-electric vehicles into their fleets.
Similar to turbochargers for gasoline and diesel engines, turbochargers for hybrid vehicles are an essential component of maximizing fuel efficiency and overall engine performance. Our products provide OEMs with solutions that further optimize engine performance and position us well as they add more hybrid-electric vehicles into their fleets.
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, global footprint and in-market capabilities to meet the volume of technological demands of global OEMs. • Diesel: We have a long history of technology leadership in diesel engine turbochargers.
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, global footprint and in-market capabilities to meet the technological demands of global OEMs. • Diesel: We have a long history of technology leadership in diesel engine turbochargers.
With a 70-year legacy, we serve customers worldwide with passenger vehicle, commercial vehicle, aftermarket replacement, and performance enhancement solutions. Garrett’s mission to deliver differentiated solutions for emission reduction and energy efficiency is at the heart of our contribution to society.
With a 70-year legacy, we serve customers worldwide with passenger vehicle, commercial vehicle, aftermarket replacement, and performance enhancement solutions. 12 Garrett’s mission to deliver differentiated solutions for emission reduction and energy efficiency is at the heart of our contribution to society.
Be well, work well 14 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.
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.
Although the terms and conditions vary from customer to customer, 11 they 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.
Although the terms and conditions vary from customer to customer, they 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.
Our Products We are a global leader in the $11 billion OEM turbocharger industry. We believe we will continue to benefit from global technology leadership in the turbocharger industry through our deep-seated relationships with all global OEMs.
Our Products We are a global leader in the $11 billion OEM turbocharger industry. We believe we will continue to benefit from global technology leadership in the turbocharger industry through our deep-seated relationships with global OEMs.
These technology pillars have been developed by Garrett over the past decade and require significant and sustained research and development ("R&D") investments, resulting in the successful launch of E-Boosting and fuel cell compressor applications. They bring unique features to our offerings in terms of energy efficiency, lower weight and packaging requirements that are highly valued by our customers.
These technology pillars have been developed by Garrett over the past decade and require significant and sustained research and development ("R&D") investments, and have resulted in the successful launch of E-Boosting and fuel cell compressor applications. They bring unique features to our offerings in terms of energy efficiency, lower weight and packaging requirements that are highly valued by our customers.
Electric (battery electric and H2 fuel cell electric) vehicles & industrial products Leveraging a set of unique technological building blocks, we are now offering to our customers 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.
Electric (battery electric and hydrogen fuel cell electric) vehicles & industrial products Leveraging a set of unique technological building blocks, we are now offering to our customers 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.
This combustion optimization is critical to engine efficiency, exhaust emissions, power and transient response and enables such concepts as 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 future tough fuel economy and emissions standards without sacrificing performance.
This combustion optimization is critical to engine efficiency, exhaust emissions, power and transient response and enables such concepts as 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 tough fuel economy and emissions standards without sacrificing 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 60 years as well as industry-leading positions for both on- and off-highway use.
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.
As of 2023, our primary source of sales is associated with the global turbocharger industry for gasoline, diesel and natural gas engines across light vehicle, commercial vehicle and industrial applications. Sales also come from E-Boosting solutions and hydrogen fuel cell compression solutions, already manufactured at scale.
As of 2024, our primary source of sales is associated with the global turbocharger industry for gasoline, diesel and natural gas engines across light vehicle, commercial vehicle and industrial applications. Sales also come from E-Boosting solutions and hydrogen fuel cell compression solutions, already manufactured at scale.
The Garrett student programs hires over 90 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.
The Garrett 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.
Our growth strategy in zero emission technologies is to focus on solving OEMs' pain points with existing technologies and bring differentiated technologies for traction (E-Powertrain) and thermal management (E-Cooling compressor), leveraging a unique set of technology pillars that are hard to replicate by competitors like high-speed motors and power electronics, controls software, oil-less bearings and system integration.
Our growth strategy in zero-emission technologies is to focus on solving OEMs' pain points with existing technologies and bring differentiated technologies for traction (E-Powertrain) and thermal management (E-Cooling compressor), leveraging a unique set of technology pillars that are hard to replicate by competitors, such as high-speed motors and power electronics, controls software, oil-less bearings and system integration.
As of December 31, 2023, 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.
As of December 31, 2024, 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.
Compliance with our standards and local regulatory requirements is monitored through a company-wide self-assessment process assured through annual audits. In 2023 we continued a rolling 4-year compliance audit against local regulations by a global service provider.
Compliance with our standards and local regulatory requirements is monitored through a company-wide self-assessment process assured through annual audits. In 2024 we continued a rolling 4-year compliance audit against local regulations by a global service provider.
We maintain a culture of continuous product innovation, introducing about ten new technologies per year and upgrading our existing key product lines approximately every 3 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.
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 9 turbocharger portfolio to serve large bore engines used in industrial applications, including marine, power generation and other machinery.
The Company published its fiscal year 2022 Sustainability Report in 2023, 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.
The Company published its fiscal year 2023 Sustainability Report in 2024, 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.
TCIR is measured as the number of recordable injuries and illnesses multiplied by 200,000 and then that number is divided by the total number of hours worked by employees. Compensation and benefits Garrett’s rewards programs are rooted in our “Be well, work well” principle, and aim to support employees in achieving the right work-life balance.
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 15 Garrett’s rewards programs are rooted in our “Be well, work well” principle, and aim to support employees in achieving the right work-life balance.
Air supply is critical for performance, durability and H2 fuel consumption / range for applications equipped with H2 fuel cells. We launched the auto industry's first fuel cell production car application in 2016.
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.
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. At this time, we are involved in various stages of investigation and cleanup related to environmental remediation matters at certain of our present and former facilities.
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. At this time, we are involved in various stages of investigation and clean-up related to environmental remediation matters at certain of our present and former facilities.
We have a globally deployed team of approximately 1,300 engineers across five R&D centers and 11 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 have a globally deployed team of approximately 1,400 engineers across five R&D centers and nine 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.
Our learning environment offers employees access to approximately 1,800 online trainings that address a wide range of functional competencies, technical skills, and human skills. Learning can be self-paced, while the Company’s 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.
Our learning environment offers employees access to approximately 3,200 online trainings that address a wide range of functional competencies, technical skills, and human skills. Learning can be self-paced, while the Company’s 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.
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.
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.
With regards to new technology offerings for zero emissions, 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.
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.
As OEMs strive to solve these issues, they are increasing investment in hydrogen fuel cell powered electric vehicles for demanding applications requiring long range, especially in the commercial vehicle space. These vehicles, like battery electric vehicles, have fully electric motor powertrains, but they rely on the hydrogen fuel cell to generate the required electricity.
As OEMs strive to solve these issues, they are increasing investment in hydrogen fuel cell-powered electric vehicles for demanding applications requiring longer ranges, especially in the commercial vehicle space. These vehicles, like battery electric vehicles, have fully electric motor powertrains, but they rely on the hydrogen fuel cell to generate the required electricity.
We have invested heavily to bring differentiated local capabilities to our customers in high-growth regions, including China and India. In 2023, we manufactured more than 89% of our products in low-cost countries, including seven manufacturing facilities in China, India, Mexico, Romania and Slovakia. We have a long-standing culture of lean manufacturing excellence and continuous productivity improvement.
We have invested heavily to bring differentiated local capabilities to our customers in high-growth regions, including China and India. In 2024, we manufactured more than 87% of our products in low-cost countries, including 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.
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, 2023, the undiscounted reserve for environmental investigation and remediation was $18 million.
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, 2024, the undiscounted reserve for environmental investigation and remediation was $16 million.
This continued investment into 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; • Use of our differentiated technology to solve key challenges for zero emission vehicles; • 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, which have historically lagged the adoption of diesel turbochargers, after reaching a peak in 2023, are now expected to decrease at a 4% annual CAGR from 2023 to 2026, according to S&P.
This continued investment into 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; • Leverage our differentiated technology to solve key challenges for zero-emission vehicles; and • 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, which have historically lagged the adoption of diesel turbochargers, after reaching a peak in 2024, are now expected to decrease at a roughly 2% annual CAGR from 2024 to 2027, according to S&P.
Internal combustion light vehicle products • Gasoline: The global adoption of turbochargers by OEMs on gasoline engines has increased rapidly from approximately 14% in 2013 to approximately 48% in 2023 and is forecasted by S&P to increase to 51% by 2025.
Internal combustion light vehicle products • Gasoline: The global adoption of turbochargers by OEMs on gasoline engines has increased rapidly from approximately 14% in 2013 to approximately 49% in 2024 and is forecasted by S&P to increase to 51% by 2025.
The Company closely monitors employee turnover to measure retention and define improvement actions as and where necessary. As of December 31, 2023, the Company’s annual voluntary turnover for 2023 was 10.3%, which reflects the trends of the current global marketplace for talent.
The Company closely monitors employee turnover to measure retention and define improvement actions as and where necessary. As of December 31, 2024, the Company’s annual voluntary turnover for 2024 was 10.1%, which reflects the trends of the current global marketplace for talent.
Our total R&D expenses were $175 million, $153 million and $136 million for the years ended December 31, 2023, 2022 and 2021, respectively, with more than 50% of our total R&D spend in 2023 focused on zero emission technologies.
Our total R&D expenses were $187 million, $175 million and $153 million for the years ended December 31, 2024, 2023 and 2022, respectively, with more than 50% of our total R&D spend in 2024 focused on zero-emission technologies.
Additionally, the Company incurred engineering-related expenses, net of customer (reimbursements) which are also included in Cost of goods sold of $(12) million , $11 million and $22 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Additionally, the Company incurred engineering-related expenses, net of customer reimbursements, which are also included in Cost of goods sold of $(26) million, $(12) million and $11 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Research, Development and Intellectual Property We maintain technical engineering centers in major automotive production regions of the world to develop and provide advanced products, process 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, 2023, we employed approximately 1,300 engineers.
Research, Development 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, 2024, we employed approximately 1,400 engineers.
We are developing solutions and increasing our research and development (“R&D”) spend, focusing more than 50% of total R&D expenditure in 2024 on technologies for electrification including zero emission technologies, fuel cell compressors for a broad range of cell stack power (40kW to 250kW) and high value electric vehicle components including E-Powertrain and E-Cooling Compressor technologies.
We are developing solutions and allocating our R&D spend appropriately, focusing more than 50% of total R&D expenditure in 2024 on zero-emission technologies, including for electrification, fuel cell compressors for a broad range of cell stack power (40kW to 250kW) and high-value electric vehicle components, including E-Powertrain and E-Cooling Compressor technologies.
Our Industry Overview We provide cutting-edge technology for the mobility and industrial space, including light vehicles, commercial vehicles and industrial applications. Our products include mechanical and electrical products for turbocharging and boosting internal combustion engines, as well as compressing air for fuel cell compressors, and compressing refrigerant for electric cooling compressors.
Our Industry Overview We provide cutting-edge technology for the mobility and industrial space, including light vehicles, commercial vehicles (which includes both on-highway and off-highway applications) and industrial applications. Our products include mechanical and electrical products for turbocharging and boosting internal combustion engines, as well as compressing air for fuel cell compressors, and compressing refrigerant for electric cooling compressors.
Garrett articulates its commitments to social and environmental considerations in the communities in which it operates in the Company’s Code of Business Conduct, which can be found on our website at www.garrettmotion.com under "About Us – Investors – Leadership & Governance".
Garrett articulates its commitments to social, environmental and governance considerations in the communities in which it operates in the Company’s Code of Business Conduct, which can be found on our website at www.garrettmotion.com.
Diesel also remains essential for OEMs to meet their CO2 fleet average regulatory target going forward, as diesel vehicles produce less CO2 on average than gasoline vehicles. • Hybrid vehicles: We provide a comprehensive portfolio of turbocharger and electric-boosting technologies to manufacturers of hybrid-electric powertrains. OEMs have increased their adoption of hybrid technologies given regulatory standards.
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 provide a comprehensive portfolio of turbocharger and electric-boosting technologies to manufacturers of hybrid-electric powertrains. OEMs have increased their adoption of hybrid technologies in 8 light of stricter regulatory standards.
We operate through a distribution network of more than 300 distributors covering 165 countries. Our aftermarket business has historically provided a stable stream of revenue supported by our large installer base, currently estimated at over 130 million vehicles. As turbocharger penetration rates continue to increase, we expect that our installer base and aftermarket opportunities will continue to grow.
We operate through a distribution network of more than 340 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 140 million vehicles. As turbocharger penetration rates continue to increase, we expect that our installed base and aftermarket opportunities will continue to grow.
We now provide a comprehensive portfolio of fuel cell air compressors covering a broad range of fuel cell stack power from 40kW to 250+kW and we will launch our third generation of fuel cell products in 2024.
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.
A variety of instructor led virtual programs were deployed during 2023 to support employees' development and a number of dedicated programs for emerging and experienced leaders were successfully held. More than 68,500 hours of online training was delivered during 2023. We use regular talent reviews to strengthen the Company’s internal development processes and to calibrate assessment of individual performance.
A variety of instructor led virtual programs were deployed during 2024 to support employees' development and a number of dedicated programs for emerging and experienced leaders were successfully held. More than 86,200 hours of training were delivered during 2024. We use regular talent reviews to strengthen the Company’s internal development processes and to calibrate assessment of individual performance.
Battery electric and fuel cell technologies OEMs are investing in full battery electric vehicles ("BEV"s) to comply with increasingly tight regulatory targets across regions. S&P and KGP expect that BEVs will compose 26% of total light and commercial vehicle production globally by 2026.
Battery electric and fuel cell technologies OEMs are investing in full battery electric vehicles ("BEVs") to comply with increasingly tight regulatory targets across regions. S&P and KGP expect that BEVs will comprise 22% of total light and commercial vehicle production globally by 2027.
Our engineering expertise and transformative technologies help optimize fuel efficiency, reduce emissions and manage growing vehicle complexity, all of which are critical areas on the road to a clean transportation future.
Our engineering expertise and transformative technologies help optimize fuel efficiency, reduce emissions and manage growing vehicle complexity, all of which are critical areas on the road to a clean transportation future. Garrett's technologies enable sustainable automotive and industry transformation.
Key trends affecting our industry 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 sector. Growth in overall vehicle production Light vehicle production increased 9% in 2023, compared to prior year.
Key trends affecting our industry 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 sector. Changes in overall vehicle production Light vehicle production decreased by approximately 1% in 2024, compared to prior year.
S&P estimates that hybrid vehicles produced globally will grow from a total of approximately 17 million vehicles in 2023 to 27 million vehicles by 2027, representing a CAGR of 12%. The electrified powertrain of hybrid vehicles enables the usage of highly synergistic electric-boosting technologies which augment standard turbochargers with electrically assisted boosting and electrical-generation capability.
S&P estimates that hybrid vehicles produced globally will grow from a total of approximately 20 million vehicles in 2024 to 31 million vehicles by 2028, representing a CAGR of 9%. The electrified powertrain of hybrid vehicles enables the usage of highly synergistic electric-boosting technologies, which augment standard turbochargers with electrically assisted boosting and electrical-generation capability.
Total turbocharger production increased globally from approximately 46 million units in 2022 to 50 million units in 2023 and is expected to decrease from 2024 onward based on current expectations of electric vehicle penetration, gradually decreasing to 2022 volume levels by 2026.
Total turbocharger production decreased globally from approximately 50 million units in 2023 to 49 million units in 2024 and is expected to further decrease in 2025 and onward based on current expectations of electric vehicle penetration, gradually decreasing to 2022 volume levels by 2028.
In 6 parallel, the share of pure electric vehicles is expected to continue to increase, with short-term dynamics such as China's economic slow down, significant vehicle price gaps between gasoline and ICE-powered vehicles, and slower than planned charging infrastructure, limiting the pace of adoption.
In parallel, the share of pure electric vehicles is expected to continue to increase, with short-term dynamics, such as significant vehicle price gaps between electric vehicles and ICE-powered vehicles, and slower than anticipated charging infrastructure proliferation, limiting the pace of adoption.
Garrett's technologies enable sustainable automotive and industry transformation. 12 Our corporate sustainability framework, called WeCare4, starts from our mission by spearheading technology development and continuing to deliver industry-first innovations for mobility and beyond. It is built on two main pillars - investing in a culture of innovation and operating responsibly to ensure long-term impact.
Our corporate sustainability framework starts from our mission by spearheading technology development and continuing to deliver industry-first innovations for mobility and beyond. It is built on two main pillars - investing in a culture of innovation and operating responsibly to ensure long-term impact. Sustainability is embedded in our governance structure.
In 2016, we launched our first high volume VNT gasoline application, and this technology is expected to experience increased adoption in years to come. According to a forecast by S&P, VNT represented 24% of global turbo gasoline production in 2023, reaching 36% by 2028.
In 2016, we launched our first high-volume VNT gasoline application, and this technology is expected to experience increased adoption in years to come. According to a forecast by S&P, VNT represented 38% of global turbo gasoline production in 2024, and is expected to reach 60% by 2029.
During 2023, the Company shared its growth vision with over 1,500 students and over 300 female engineers and automotive enthusiasts. The Company also sponsored the European BEST Engineering Competition, the biggest international competition in Central Europe.
During 2024, the Company shared its growth vision with over 3,000 students and over 400 female engineers and automotive enthusiasts. The Company also sponsored the European BEST Engineering Competition, the biggest international competition in Central Europe.
Engineering-related expenses include customer reimbursements of $46 million, $25 million and $21 million for the years ended December 31, 2023, 2022 and 2021, respectively. We currently hold approximately 1,300 patents and patents pending. Our current patents are expected to expire between 2024 and 2043.
Customer reimbursements included in engineering-related expenses amounted to $67 million, $46 million and $25 million for the years ended December 31, 2024, 2023 and 2022, respectively. We currently hold approximately 1,300 patents and patents pending. Our current patents are expected to expire between 2025 and 2044.
S&P forecasts turbocharger penetration on ICE-based powertrains to grow in light vehicles from 52% in 2021 to approximately 57% in 2025 and to then come back to approximately 51% in 2030. Medium-Term Powertrain Trends Note: Years 2021 - 2023 represent actual data and years 2024 - 2028 represent forecasted data.
S&P forecasts turbocharger penetration on ICE-based powertrains to grow in light vehicles from 54% in 2022 to approximately 58% in 2028 and to then come back to approximately 54% in 2032. Medium-Term Powertrain Trends Note: Years 2022 - 2024 represent actual data and years 2025 - 2029 represent forecasted data.
S&P estimates that the global production of electrified vehicles (battery and fuel cell electric) will increase from approximately 11 million vehicles in 2023 to approximately 31 million vehicles by 2027, representing an annualized growth rate of approximately 29%.
S&P estimates that the global production of electrified vehicles (battery and fuel cell electric) will increase from approximately 12 million vehicles in 2024 to approximately 26 million vehicles by 2028, representing an annualized growth rate of approximately 20%.
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 105L. We continue to develop our product range to serve more engine needs, even beyond automotive (e.g. our new GT80 product presented in 2023, our biggest turbocharger to date).
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 to serve more engine needs, even beyond automotive.
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.
For example, we are expanding the application of our turbochargers to power generation, marine applications, and data centers. 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.
In 2023, Garrett welcomed 205 Interns in 11 countries, versus 261 internships in 2022 (approximately 44% in Engineering, 18% in Integrated Supply Chain, 16% in IT and the remainder in Finance, HR, Marketing and Sales, Legal and Internal Audit).
In 2024, Garrett welcomed 322 Interns in 13 countries, versus 205 internships in 2023 (approximately 44% in Engineering, 26% in Integrated Supply Chain, 11% in IT and the remainder in Finance, HR, Marketing, Aftermarket, Sales and Legal).
Our Board of Directors, including its committees, provide Board oversight of our environment, social and governance ("ESG") activities, corporate responsibility and sustainability strategy. Primary responsibility at 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.
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.
Outside of our turbocharger product lines, we apply this culture of continuous innovation to meet the needs of our customers in new areas.
In 2024, we delivered the first prototypes of our new industrial applications to a key OEM. Outside of our turbocharger product lines, we apply this culture of continuous innovation to meet the needs of our customers in new areas.
As such, we strive to ensure that our employees are each involved, supported, respected and connected. Embracing diverse thoughts and ideas through inclusion leads to a competitive advantage in the market, increased innovation as we generate new and better ideas, and customer-centric decision making.
Embracing diverse thoughts and ideas through inclusion leads to a competitive advantage in the market, increased innovation as we generate new and better ideas, and customer-centric decision making.
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 performance improved when measured by our Total Case Incident Rate (“TCIR”), which reduced to 0.04 in 2023, compared to 0.12 in 2022.
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 0.11 for 2024.
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 61% of net sales and our largest customer represented approximately 12% of our net sales in 2023. With over 60 years in the turbocharger industry, we have developed strong capabilities working with all major OEMs.
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 2024.
Moreover, significant uncertainty remains on global economic growth, with some supply chain disruptions, geopolitical tensions, and China facing low inflation and job market deterioration. 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.
Moreover, significant uncertainty remains around global economic growth, as the macroeconomic landscape continues to experience supply 6 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.
Consumer adoption hinges on future "cost of range", tightly linked to the energy capacity of the battery, but also how well that energy is used. 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 are all critical problems to solve.
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 are all critical problems to solve.
Our primary North American customers historically reduce production during the month of July and halt operations for approximately one week in December; our European customers generally reduce production during the months of July and August and for one week in December; and our Chinese customers often reduce production during the period surrounding the Chinese New Year.
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.
Our Customers Our global customer base includes nine of the ten largest light vehicle OEMs and nine of the ten largest commercial vehicle engine makers. Our ten largest applications in 2023 were with six different OEMs. OEM sales were approximately 86% of our 2023 revenues while our aftermarket and other products contributed 14%.
Our Customers Our global customer base includes most light vehicle commercial vehicle OEMs, including top global OEMs. Our ten largest applications in 2024 were with six different OEMs. OEM sales were approximately 85% of our 2024 revenues while our aftermarket and other products contributed 15%. Our largest customer is Bayerische Motoren Werke AG (“BMW”).
In 2023, Garrett onboarded 10 graduates into our Graduate Program in China and India to join existing Graduate Program cohorts moving through their rotational cycles and to gain experience and exposure to Garrett's cutting-edge technologies while at the same time building their leadership skills in a fast-paced and professional work environment. 15 In 2023, the Company sponsored 5 Formula SAE and Formula Student teams in several countries providing the students in the racing team with over 10 technical workshops in electrical powertrain, leadership coaching, parts for the racing vehicle and financial support.
In 2024, Garrett onboarded 15 graduates into our Graduate Program in China and India to join existing Graduate Program cohorts moving through their rotational cycles and to gain experience and exposure to Garrett's cutting-edge technologies while at the same time building their leadership skills in a fast-paced and professional work environment.
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, 2023, we employed approximately 7,600 permanent employees and 2,100 temporary and contract workers globally. 13 Diversity, equity and inclusion Diversity and Inclusion is one of Garrett’s four fundamentals.
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, 2024, we employed approximately 7,000 employees globally, with 6,600 on a permanent basis and 400 on a temporary basis.
We embed sustainability in our governance structure. Our 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 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 ("ESG") activities, corporate responsibility and sustainability strategy.
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 globally.
Our track record of successful collaborations, as demonstrated by our strong client base and our ability to successfully launch multiple product applications annually, 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.
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.
In 2024, 2023 and 2022, our sales to Ford Motor Company (“Ford”), our second largest customer, were 10%, 9%, and 10%, respectively, of our total sales. 11 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.
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.
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.
Garrett is involved in the community supporting STEM activities for high schools worldwide and in 2023, Garrett sponsored a high school team from the Czech Republic competing in hydrogen-powered racing. The Company continues to enhance the engagement with global organizations with a focus on growing diversity interest in STEM and automotive engineering as well as intern and full time recruiting.
Garrett is involved in the community supporting STEM activities for high schools worldwide and in 2024, Garrett sponsored a high school team from the Czech Republic competing in hydrogen-powered racing.
Grow our aftermarket business We have an opportunity to strengthen our global network of more than 300 distributors in 165 countries by deepening our channel penetration, leveraging our well-recognized Garrett brand, utilizing new online technologies for customer engagement and sales, and widening the product portfolio.
Grow our aftermarket business We have an opportunity to strengthen our global network of more than 340 distributors in 165 countries by deepening our channel penetration, by leveraging our well-recognized Garrett brand, by utilizing 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 generated nearly 16,000 additional technicians certified in 2024), 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.
This also includes E-Boosting solutions for hybrids with many high volume application launches planned in coming years. • The commercial vehicle and industrial spaces remain a focus for us, considering its slower shift to electric, and the increasing need for higher energy efficiency and productivity.
This also includes E-Boosting solutions. 10 • The commercial vehicle (including both on- and off-highway applications) and industrial spaces remain a focus for us, considering its slower shift to electric, and the increasing need for higher energy efficiency and productivity. We continue to invest in turbocharger technology upgrades, including for new types of fuels for ICE, like hydrogen.
We continue to invest in turbocharger technology upgrades, including for new types of fuels for ICE, like hydrogen. We also are expanding our 10 portfolio with the launch of new frame sizes aimed at serving larger engines, mostly used in marine and power generation verticals.
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 We stand to benefit from the increased adoption of electric (battery or fuel cell) vehicles.
Garrett works closely with leading Universities globally on over 12 collaboration projects that push the envelope of technical innovation. Seasonality Our business is typically moderately seasonal.
The Company continues to enhance the engagement with 16 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 that push the envelope of technical innovation. Seasonality Our business is typically moderately seasonal.
The table below shows the evolution of our gender diversity representation over the last four years and our 2025 ambition: 2020 2021 2022 2023 2025 Ambition % Women in total workforce 20.8% 22.2% 21.8% 22.8% 25.0% % Women in Senior Management 19.5% 20.0% 19.0% 19.5% 25.0% Talent management At Garrett, we encourage our employees to develop their skills and capabilities through a comprehensive Performance and Talent Management system.
The table below shows the evolution of our gender diversity representation over the last three years: 2022 2023 2024 % Women in total workforce 21.8% 22.8% 22.6% % Women in salaried workforce 25.8% 26.6% 26.3% % Women in senior management 19.0% 19.5% 22.4% As of December 31, 2024, Garrett's Board of Directors had 22% female representation.
Our largest customer is Bayerische Motoren Werke AG (“BMW”). In 2023, 2022 and 2021, BMW accounted for 12%, 12%, and 13%, respectively, of our total sales. In 2023, 2022 and 2021, our sales to Ford Motor Company (“Ford”) were 9%, 10%, and 10%, respectively, of our total sales.
In 2024, 2023 and 2022, BMW accounted for 12%, 12%, and 12%, respectively, of our total sales.
Commercial vehicle production remained steady in 2023 while the on-highway segment increased 12%, and the off-highway sector decreased by 7%. For 2024, S&P and KGP expect an overall drop of approximately 1% in the automotive (light vehicle and commercial vehicle) industry.
Commercial vehicle production experienced a decrease of almost 4% in 2024, with both the on-highway and off-highway segments decreasing by 5% and 4%, respectively. For 2025, Standard & Poor ("S&P") and KGP Automotive Intelligence ("KGP") expect a similar production to 2024 in the automotive (light vehicle and commercial vehicle) industry.
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 annually, is well recognized.
With over 60 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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If we fail to adequately assess the creditworthiness and operational reliability of existing or future suppliers, 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 our existing or future contractual arrangements, any resulting increase in non performance by them, our inability to otherwise obtain the supplies or our inability to enforce the terms of the contract or seek other remedies could have a material adverse effect on our financial condition and results of operations.
If we fail to adequately assess the creditworthiness and operational reliability of existing or future 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 our existing or future contractual arrangements, any resulting increase in non-performance by them, our inability to otherwise obtain the supplies or our inability to enforce the terms of the contract or seek other remedies could have a material adverse effect on our financial condition and results of operations.
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. 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.
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.
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 even 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.
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.
Our future results of operations could be adversely affected by changes in the 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 24 assessments of our tax exposures and various other governmental enforcement initiatives.
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.
Any failure, or perceived failure, by the Company to achieve its goals, further its 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 the Company and materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Any failure, or perceived failure, by the Company 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 the Company and materially adversely affect the Company’s business, reputation, results of operations and financial condition.
Furthermore, an escalation of geopolitical tensions due to the ongoing conflict, such as increased sanctions or restrictions on global trade, could result in further supply chain disruptions, reduced customer demand, state-sponsored cyberattacks as well as increased volatility in the financial markets, all of which could have a materially adverse impact on our business and operations.
Furthermore, an escalation of geopolitical tensions due to the ongoing conflict, such as increased sanctions or restrictions on global trade, 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.
The automotive industry relies heavily on “just-in-time” delivery of components during the assembly and manufacture of vehicles, and when we fail to make timely deliveries 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.
The automotive industry 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.
The costs of compliance and any changes to our operations mandated by new or amended regulations, or customer 21 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.
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.
We may face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships. Additionally, third parties who license to our competitors could refuse to license to us on equally favorable terms or at all.
We may also face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships. Additionally, third parties who license to our competitors could refuse to license to us on equally favorable terms or at all.
The timing, as well as the number and value of shares repurchased under the program, will be determined by the Board or an authorized committee of the Board at its discretion and will depend on a variety of factors, including our assessment of the intrinsic value of the Company's common stock, the market price of the Company's common stock, general market and economic conditions, available liquidity, compliance with the Company's debt and other agreements, applicable legal requirements, the nature of other investment opportunities available to the Company, and other considerations.
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 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 the Company's debt and other agreements, applicable legal requirements, the nature of other investment opportunities available to the Company, and other considerations.
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 and tariffs.
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 and new or higher tariffs.
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, injury or death. There can be no assurance that we will have adequate reserves to cover such recall, repair and replacement costs.
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.
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 proprietary rights.
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.
When we win a bid to offer products and services to an 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).
When we win a bid to provide products and services to an 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).
We may also be prohibited preliminarily or permanently 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.
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.
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 the turbocharger industry and acquire potentially significant market share at our expense.
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.
The risks associated with cyber security incidents include the risks of financial loss, reputational damage, 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.
The risks associated with cyber 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.
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.
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.
In addition, organizational changes, attrition, labor relations difficulties, or workforce stoppage 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.
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.
Additionally, we may need to incur significant costs in order to remain in compliance with the terms of our licenses, including to carefully monitor and manage our use of third-party components. Proprietary and open source license terms may also require us to license or publicly disclose our intellectual property without compensation or on undesirable terms.
Additionally, we may incur significant costs in order to remain in compliance with the terms of our licenses, including the need to carefully monitor and manage our use of third-party components. The license terms may also require us to license or publicly disclose our intellectual property without compensation or on undesirable terms.
Responding to these sustainability/ESG 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 sustainability/ESG goals and initiatives or that our stakeholders will agree with them.
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.
We may incur material losses and costs 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 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.
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 us. We may lose customers from time to time due to factors beyond our control, including due to mergers and acquisitions.
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.
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.
These and other instabilities and uncertainties arising from the global geopolitical environment and the recent U.S. elections, 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.
If our cash flows were to become insufficient to cover our capital requirements and our access to capital were to become constrained significantly, or if costs of capital increased significantly, due to lowered credit ratings, 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, results of operations and cash flows could be adversely affected.
If our cash flows were to become insufficient to cover our capital requirements or our access to capital were to become constrained, or if costs of capital increased significantly, whether due to lowered credit ratings, 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 cash flows and financial condition could be materially adversely affected.
Sales in our aftermarket operations are also directly related to consumer demand and spending for automotive aftermarket products, which may be affected by additional factors such as the average useful life of OEM parts and components, severity of regional weather conditions, highway and roadway infrastructure deterioration and the average number of miles vehicles are driven by owners.
Sales in our aftermarket operations are directly related to consumer demand and spending 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, severity of regional weather conditions, highway and roadway infrastructure deterioration and the average number of miles vehicles are driven by owners.
The time and expense of defending against these claims, whether meritorious or not, may have a material and adverse impact on our profitability, can be time-consuming and costly and may divert management’s attention and resources away from our 22 businesses.
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.
Additionally, 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.
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.
Our ability to pay dividends may be limited by restrictions or limitations on our cash flows, including our ability to obtain sufficient funds through dividends from subsidiaries, many of which are located outside of the United States.
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.
This could subject the Company to the risks of local currency devaluation and business disruption. We monitor and seek to reduce such 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.
This could subject the Company 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.
Any declaration and payment of dividends on our common stock will depend on our earnings and financial condition, including our consolidated EBITDA, our 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.
Any declaration and payment of dividends on our 28 Common Stock 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, while we continually bid on new business with our existing customers, as well as seek to diversify our customer base, there is no assurance that our efforts will be successful.
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.
Based on these factors, our status as a Tier I supplier (one that supplies vehicle components directly to manufacturers) and the fact that our customers’ product programs typically last a number of years and are anticipated to encompass large volumes, our customers are able to negotiate favorable pricing, and any cost-cutting initiatives that our customers adopt generally will result in increased downward pressure on our pricing.
Based on these factors, our status as a Tier I supplier (one that supplies vehicle components directly to manufacturers) 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.
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.
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.
Depending on the terms under which we supply products to an auto manufacturer, we may be required to guarantee or offer warranties for our products and to bear the costs of recalls, repair or replacement of such products pursuant to new vehicle warranties.
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.
Economic declines that result in significant reductions in automotive sales or production, particularly with respect to light vehicles, or the failure to recover from such economic declines on timelines that we anticipate, would have an adverse effect on our business, results of operations and financial condition.
Economic declines that result in significant reductions in automotive sales or production, particularly with respect to light vehicles, or the failure to recover from such economic declines on timelines that we anticipate, would have an adverse effect on our business, results of operations and financial condition. Our aftermarket business is subject to unique risks.
Accordingly, our intellectual property may not be sufficient on its own to provide us a strong product differentiation and 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. The protection of our intellectual property may require us to spend significant amounts of money.
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.
Many customers, regulators, investors, employees, and other stakeholders are increasingly focused on sustainability practices, including ESG considerations, relating to businesses, particularly with regards to climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion.
Many customers, regulators, investors, employees, and other stakeholders 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.
A further prolonged or intensified conflict could 20 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 such as Romania and Slovakia.
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 22 our operations in neighboring countries.
In the event that any of our products 23 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 recall involving such products.
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.
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 established industry maturity of product technology may leave limited opportunity for new intellectual property to differentiate our products.
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.
Cyber and other security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations.
Depending on their nature and scope, these could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations.
Should such emerging products become a significant part of our product offerings, our reliance on third-party licenses may present various risks to our business, including the risk that our ability to access these third-party software components could be interrupted due to factors beyond our control, or could become obsolete, defective or incompatible with future versions of our emerging technology offerings.
Should such emerging products become a significant part of our product offerings, our reliance on third-party licenses may present various risks to our business, including the risk that our ability to access these third-party technologies could be interrupted, or the technologies could become obsolete, defective or incompatible with future versions of our emerging technology offerings.
The concentration of ownership of our shares may have the effect of delaying, preventing or deterring a change of control of our Company, could deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our Company, and consequently may affect the market price of our shares.
The concentration of ownership of our shares and representation by these stockholders on our Board of Directors may have the effect of delaying, preventing or deterring a change of control of our Company, could deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our Company, and consequently may affect the market price of our shares.
We cannot assure 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.
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. 24 We cannot predict with certainty the outcome of litigation matters, government proceedings and other contingencies and uncertainties.
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 and discontinue purchasing from us its requirements for a particular model or group of models, could have a material adverse effect on us.
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.
The launch of new business is a complex process, the success of which depends on a wide range of factors, including the production readiness of the Company’s manufacturing facilities and manufacturing processes and those of its suppliers, as well as factors related to tooling, equipment, employees, initial product quality and other considerations.
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.
Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other 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 would have a material adverse effect on our business, results of operations and financial condition.
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.
Furthermore, the regional concentration of our sales may exacerbate the impact of regional economic conditions on our results of operations, including in China, where we conduct a significant portion of our sales, and which has recently experienced low inflation, deterioration of the job market, and a slower than anticipated economic recovery from Covid-19.
Furthermore, the regional concentration of our sales may exacerbate the impact of regional economic conditions on our results of operations, including in China, where we conduct a significant portion of our sales, and which has recently experienced low inflation and a deterioration of the job market.
This international geographic footprint subjects us to many risks, including: exchange control regulations; wage and price controls; antitrust and environmental regulations; employment regulations; foreign investment laws; monetary and fiscal policies and protectionist measures that may prohibit acquisitions or joint ventures, establish local content requirements, or impact trade volumes; import, export and other trade restrictions (such as embargoes); violations by our employees of anti-corruption laws; changes in regulations regarding transactions with state-owned enterprises; nationalization of private enterprises; natural and man-made disasters, hazards and losses; global health risks and pandemics; backlash from foreign 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 in these regions.
This international geographic footprint subjects us to many risks, including those related to: exchange control regulations; wage 21 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, establish local content requirements, 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; backlash from foreign 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.
These risks could be heightened in the case of a future merger or acquisition we may be involved in. Additionally, as a result of any such transaction, third parties may obtain licenses to some of our intellectual property rights or our business may be subject to certain restrictions that were not in place prior to such transaction.
These risks could be heightened in the case of future mergers or acquisitions. Additionally, as a result of any such transaction, third parties may 25 obtain licenses to some of our intellectual property, or our business may be subject to certain restrictions that were not in place prior to such transaction.
Risks associated with these actions include delays in execution of the planned initiatives, additional unexpected costs, realization of fewer than estimated 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.
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.
If we were required to make such payments, these payments could be significant and could exceed the amounts we have accrued with respect thereto, adversely affecting our business, financial condition and results of operations.
If we were required to make such payments, these payments could be significant and could exceed the amounts we have therefore accrued for such matters, adversely affecting our business, financial condition and results of operations.
If we are unable to generate sufficient cash flow to satisfy our debt service payments and other obligations, we may be required to seek one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive.
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.
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.
We may also be required to expend significant costs and resources to protect against 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.
Similarly, a significant failure or inability to adapt to increased production or desired inventory levels (including as a result of accelerated launch schedules for new automobile and truck platforms), comply with customer specifications and manufacturing requirements more generally or respond to other unexpected fluctuations, as well as any delays or other problems with existing or new products could result in financial penalties, increased costs, loss of sales, loss of customers or potential breaches of customer contracts, which 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 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 all of its losses and expenses from us.
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.
The declaration and payment of any dividend is subject to the approval of our Board of Directors in accordance with its bylaws. There can be no assurance that we will declare and pay dividends in the future in any particular amounts, or at all.
The actual declaration and payment of any dividend is subject to the approval of our Board of Directors. There can be no assurance that we will declare and pay dividends in the future at any level, or at all.
We have substantial consolidated indebtedness. As of December 31, 2023, we had outstanding debt of $1,696 million. Our ability to generate sufficient cash flows from operations depends on a range of economic, competitive and business factors, many of which are outside of our control.
We have substantial consolidated indebtedness. As of December 31, 2024, we had gross outstanding debt of $1,493 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.
Catastrophic events, such as a pandemic or cyberattack, could lead to disruption or failure of our systems or operations, harming our ability to conduct normal business 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.
Where a customer halts production because of one of its other suppliers failing to deliver on time, or as a result of a work stoppage or other disruption, it is unlikely we will be fully compensated, if at all.
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.
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 deploy and maintain IT and engineering systems which involve sensitive information.
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.
Our inability to fill our supply needs, on terms that we expect or at all, would jeopardize our ability to fulfil obligations under commercial contracts, and could result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships.
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.
Geopolitical tensions, including but not limited to armed conflict, terrorist activity and instability or general economic disruption regionally or globally, have in the past impacted, and may in the future impact our results of operations and create or exacerbate certain risks we face to our business, financial condition and results of operations.
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.
While the majority of our current product offerings are not covered by third-party licenses, many of our emerging technology offerings that we are developing use software components or other intellectual property licensed from third parties, including both through proprietary and open source licenses.
Our emerging opportunities in technology, products and services depend in part on intellectual property and technology licensed from third parties. While the majority of our current product offerings are not covered by third-party licenses, many of our emerging technology offerings use software components or other intellectual property licensed from third parties, including through proprietary and open-source licenses.
In particular, there is increased public awareness and concern regarding global climate change and climate related risks, which has resulted, and is expected to continue to result, in local, regional and global requirements, 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 Boarder Adjustment Mechanism ("CBAM"), which includes future tariff and reporting requirements for embedded carbon content of certain imports.
In particular, there is increased public awareness and concern 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.
Additionally, 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 or suppliers, impact the availability and cost of materials needed for manufacturing or increase insurance and other operating costs.
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.
Our capital requirements will depend on many factors, including acceptance of and demand for our products, the extent to which we invest in new technology and R&D projects and the status and timing of these developments.
Our capital requirements will depend on many factors, including acceptance of and demand for our products, the extent to which we invest in new technology and R&D projects and the status and timing of these developments. Additional financing may not be available on favorable terms, or at all.
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 could have a further adverse impact on our results of operations.
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.
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 numerous manufacturing operations worldwide, technical centers, R&D activities and other infrastructure to support anticipated growth in these areas.
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, R&D activities and other infrastructure to support anticipated growth in these areas.
There continues to be a lack of consistent climate legislation, 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.
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 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 also require us to make significant additional contributions to our pension plans in the future.
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.
We will 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 ongoing R&D activities, satisfy regulatory and environmental compliance obligations, and meet general working capital needs.
We require working capital to meet our projected operating needs and fund ongoing R&D 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 R&D activities, satisfy regulatory and environmental compliance obligations, fund acquisitions or expansion, and meet varied working capital needs.
We may not be able to mitigate the impacts of any future tariffs, and our business, results of operations and financial position would be materially adversely affected by such tariffs.
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 would be materially adversely affected by such tariffs.
We are subject to the economic, political, regulatory, foreign exchange and other risks of international operations. We have created a geographic footprint that emphasizes locating R&D, engineering and manufacturing capabilities in close physical proximity to our customers.
We are subject to the economic, political, regulatory, foreign exchange and other risks of our international operations. We operate within a geographic footprint that emphasizes locating R&D, engineering and manufacturing capabilities in close physical proximity to our customers and in regions with relatively lower costs than more developed markets.
We cannot assure that we will not incur additional liabilities related to the investigation and cleanup of environmental hazards and to claims of personal injuries or property damages that may arise from hazardous substance releases and exposures, including those relating to activities of our predecessor company.
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.
There has been an increase in the frequency and sophistication of cyber and other security threats we face, and our customers, partners and regulators are increasingly requiring cyber and other security protections and mandating cyber and other security standards.
There has been an increase in the frequency and sophistication of cyber threats our industry faces, 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.
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.
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.
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 and other cost-saving initiatives.
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 and other cost-saving initiatives.
Additionally, because the Company is a U.S. holding company, one significant source of its funds is distributions from its non-U.S. subsidiaries. Certain countries in which the Company operates have adopted or could institute currency exchange controls that limit or prohibit the Company’s local subsidiaries' ability to convert local currency into U.S. Dollars or to make payments outside the country.
Furthermore, a significant source of the funds attributable to Garrett Motion Inc. are derived 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 the Company’s local subsidiaries' ability to convert local currency into U.S. Dollars or to make payments outside the country.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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The Company has processes in place to identify, assess and monitor 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 28 procedures, internal controls and information systems.
The Company has processes in place to identify, assess and monitor 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.
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. 29
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.
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, 2023.
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, 2024.
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.
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.
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 legal and cybersecurity teams that focuses on cybersecurity and compliance risks. The Cyber Risk Governance Council meets monthly to review cybersecurity risks and related risk management methodologies.
"Risk Factors" for a discussion of cybersecurity risks. 29 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 legal and cybersecurity teams that focuses on cybersecurity and compliance risks.
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 over cybersecurity developments and risk mitigation approaches are held by the Cyber Risk Governance Council with the Chief Executive Officer and the senior leadership team.
The Cyber Risk Governance Council meets monthly 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.
Added
Regular discussions over cybersecurity developments and risk mitigation approaches are held by the Cyber Risk Governance Council with the Chief Executive Officer and the senior leadership team. The CISO has over 27 years of experience in IT in various capacities with over 21 years in cybersecurity, reporting into the CDIO, who has over 20 years of IT related experience.

Item 2. Properties

Properties — owned and leased real estate

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The following table shows the ownership and regional distribution of our manufacturing sites, R&D centers and customer engineering sites: Ownership Regional distribution Owned Leased North America Europe, Middle East & Africa South Asia & Asia Pacific South America Total Manufacturing Sites 9 4 2 5 5 1 13 R&D Centers 1 4 1 2 2 — 5 Close-to-Customer Engineering Sites — 11 2 5 3 1 11 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.
The following table shows the ownership and regional distribution of our manufacturing sites, R&D centers and customer engineering sites: Ownership Regional distribution Owned Leased North America Europe, Middle East & Africa South Asia & Asia Pacific South America Total Manufacturing Sites 9 4 2 5 5 1 13 R&D Centers 1 4 1 2 2 — 5 Close-to-Customer Engineering Sites 4 5 2 3 3 1 9 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.
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, 2023, we owned or leased 13 manufacturing sites, five R&D centers and 11 close-to-customer engineering sites.
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, 2024, we owned or leased 13 manufacturing sites, five R&D centers and nine close-to-customer engineering sites.
Removed
We expect our evolving portfolio will meet current and anticipated future needs.
Added
We expect our evolving portfolio will meet current and anticipated future needs. Item 3. Legal Proceedings The discussion under Note 25, Commitments and Contingencies of the Notes to the Consolidated Financial Statements is incorporated by reference into this Part I, Item 3. Item 4. Mine Safety Disclosures 30 Not Applicable. 31 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Common Stock trades on the Nasdaq Global Select Market under the ticker symbol "GTX". Holders of Record As of February 9, 2024, there were 28,036 stockholders of record of our Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Common Stock trades on the Nasdaq Global Select Market under the ticker symbol "GTX". Holders of Record As of February 14, 2025, there were 26,859 stockholders of record of our Common Stock.
The following graph and table illustrate the total return from April 30, 2021, the date of the Company's emergence from Chapter 11 bankruptcy proceedings ("Emergence") through December 31, 2023, for (i) our Common Stock, (ii) the Standard and Poor’s (“S&P”) Small Cap 600 Index, (iii) the average stock performance of a group consisting of the peer companies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Peer Group”), consisting of Adient plc, Allison Transmission Holdings, Inc., American Axle & Manufacturing Holdings, Inc., Aptiv PLC, Autoliv Inc., BorgWarner Inc., Dana Incorporated, Gentex Corporation, Lear Corporation, Magna International Inc., Tenneco Inc., Veoneer, Inc. and Visteon Corporation, and (iv) the average stock performance of a group consisting of the peer companies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Peer Group”), consisting of Adient plc, Allison Transmission Holdings, Inc., American Axle & Manufacturing Holdings, Inc., Aptiv PLC, Autoliv Inc., BorgWarner Inc., Dana Incorporated, Gentex Corporation, Lear Corporation, Magna International Inc. and Visteon Corporation.
The following graph and table illustrate the total return from April 30, 2021, the date of the Company's emergence from Chapter 11 bankruptcy proceedings ("Emergence") through December 31, 2024, for (i) our Common Stock, (ii) the Standard and Poor’s (“S&P”) Small Cap 600 Index, and (iii) the average stock performance of a group of peer companies consisting of Adient plc, Allison Transmission Holdings, Inc., American Axle & Manufacturing Holdings, Inc., Aptiv PLC, Autoliv Inc., BorgWarner Inc., Dana Incorporated, Gentex Corporation, Lear Corporation, Magna International Inc., Tenneco Inc., Veoneer, Inc., and Visteon Corporation (the "Peer Group").
The 2022 Peer Group is used routinely by management for benchmarking purposes. The graph and the table assume that $100 was invested on April 30, 2021 in shares of each of our Common Stock, the S&P Small Cap 600 Index, the Common Stock of the 2022 Peer Group, and that any dividends were reinvested.
The graph and the table assume that $100 was invested on April 30, 2021, in shares of each of our Common Stock, the S&P Small Cap 600 Index, and the Common Stock of the Peer Group, with any dividends reinvested.
Other than the amounts repurchased as part of our share repurchase program, there were no purchases of equity securities by the issuer or affiliated purchasers during the quarter ended December 31, 2023. On February 13, 2024, the Board of Directors authorized a new $350 million share repurchase program valid until December 31, 2024. Item 6. Reserved Not applicable.
(2) The share repurchase program expired on December 31, 2024, with an unused balance of $54 million. Other than the amounts repurchased as part of our share repurchase program, there were no purchases of equity securities by the issuer or affiliated purchasers during the quarter ended December 31, 2024.
Period Total Number of Common Shares Purchased Average Price Paid per Share Total Number of Preferred Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program October 1, 2023 - October 31, 2023 1,657,420 $ 7.29 — $ — 1,657,420 60,101,840 November 1, 2023 - November 30, 2023 2,816,714 $ 7.45 — $ — 2,816,714 39,125,995 December 1, 2023 - December 31, 2023 268,829 $ 7.82 — $ — 268,829 — (1) Total 4,742,963 $ 7.41 — $ — 4,742,963 (1) The share repurchase program expired on December 31, 2023 with an unused balance of $37 million.
The following table summarizes our share repurchase activity for the three months ended December 31, 2024, and additional information regarding our share repurchase program. 33 Period Total Number of Common Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program October 1, 2024 - October 31, 2024 2,284,922 $ 7.92 2,284,922 106,284,643 November 1, 2024 - November 30, 2024 2,150,475 $ 7.89 2,150,475 89,324,715 December 1, 2024 - December 31, 2024 3,963,585 $ 8.95 3,963,585 — (2) Total 8,398,982 $ 8.40 8,398,982 (1) Excludes shares withheld to satisfy tax withholding obligations in connection with the vesting of equity awards.
Removed
Dividend Policy We do not currently anticipate declaring or paying any cash dividends on our Common Stock in the foreseeable future. The timing, declaration, amount and payment of future dividends to stockholders on shares of our Common Stock, if any, will fall within the discretion of our Board of Directors.
Added
Dividend Policy In December 2024, the Board of Directors announced that it intends to declare and pay quarterly dividends on our Common Stock in an aggregate amount of approximately $50 million in 2025.
Removed
Among the items we will consider when establishing a policy with respect to the payment of dividends on our Common Stock will be the capital needs of our business and opportunities to retain future earnings for use in the operation of our business and to fund future growth.
Added
The timing, declaration, amount and payment of dividends to stockholders on shares of our Common Stock falls within the discretion of the Board 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.
Removed
Additionally, the terms of our credit facilities limit our ability to pay cash dividends on our Common Stock.
Added
On December 5, 2024, the Board of Directors declared a cash dividend of $0.06 per share of our Common Stock, payable on January 31, 2025, to shareholders of record as of January 15, 2025.
Removed
The comparisons reflected in the graph and table are not intended to forecast the future performance of our Common Stock and may not be indicative of our future performance. 31 Indexed Price Performance Global Markets Intelligence Group Recent Sales of Unregistered Securities In connection with the Transactions (as described below under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations ), on June 12, 2023, each share of our then-outstanding Series A Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), was converted into one share of Common Stock.
Added
The comparisons reflected in the graph and table are not intended to forecast the future performance of our Common Stock and may not be indicative of our future performance. 32 Recent Sales of Unregistered Securities During the period covered by this Annual Report on Form 10-K, we did not offer or sell any equity securities that were not registered under the Securities Act.
Removed
Additionally, on June 20, 2023, all prior holders of Series A Preferred Stock received, in respect of each share of Series A Preferred Stock held immediately prior to the conversion, a payment in lieu of the accrued and unpaid dividends on the Series A Preferred Stock through June 30, 2023, plus an additional amount representing the dividends that would have accrued on the Series A Preferred Stock through September 30, 2023.
Added
Issuer Purchases of Equity Securities On February 15, 2024, the Company announced that the Board of Directors had authorized a $350 million share repurchase program valid from February 13, 2024, until December 31, 2024.
Removed
The 175,337,712 shares issued in the conversion and the 18,301,481 shares issued as part of the additional payment were issued pursuant to the exemption from registration contained in Section 3(a)(9) of the Securities Act.
Added
The Company may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise. The timing, as well as the number and value of shares repurchased under the program, will depend on a variety of factors.
Removed
Additionally, on June 5, 2023, as part of the consideration paid in respect of the purchase of approximately $570 million of shares of Series A Preferred Stock from entities related to each of Centerbridge Partners, L.P. and Oaktree Capital Management, L.P., the Company issued to such entities an aggregate of 7,276,036 in shares of Common Stock, as part of the accrued and unpaid dividends and additional amounts that such entities would have received upon the conversion of the repurchased shares of Series A Preferred Stock (if they had held such shares on the conversion date).
Added
The Company is not obligated to purchase any shares under the repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. The share repurchase program expired on December 31, 2024.
Removed
These shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
Added
On December 4, 2024, the Board of Directors authorized a new $250 million share repurchase program valid from January 1, 2025, until December 31, 2025. Item 6. Reserved Not applicable.
Removed
See "Capital Structure Transformation Transactions" under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations below. 32 Issuer Purchases of Equity Securities On November 16, 2021, the Board of Directors authorized a $100 million share repurchase program valid until November 15, 2022, providing for the purchase of shares of Series A Preferred Stock and Common Stock (the "share repurchase program").
Removed
On November 2, 2022, the Board of Directors authorized the extension of the share repurchase program until November 15, 2023. On April 12, 2023, the Board of Directors further authorized an increase in the size of the share repurchase program to an aggregate amount of $250 million available as of that date.
Removed
On November 1, 2023, the Board of Directors authorized the further extension of the share repurchase program until December 31, 2023, at which date the share repurchase program expired. The following table summarizes our share repurchase activity for the three months ended December 31, 2023, and additional information regarding our share repurchase program.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Financial Statements and Supplementary Data 48 Report of Independent Registered Public Accounting Firm ( PCAOB ID No. 1235 ) 48 Consolidated Statements of Operations 52 Consolidated Statements of Comprehensive Income 53 Consolidated Balance Sheets 54 Consolidated Statements of Cash Flows 55 Consolidated Statements of Equity (Deficit) 56 Notes to the Consolidated Financial Statements 57 Item 9 .
Financial Statements and Supplementary Data 49 Report of Independent Registered Public Accounting Firm ( PCAOB ID No. 1235 ) 49 Consolidated Statements of Operations 52 Consolidated Statements of Comprehensive Income 53 Consolidated Balance Sheets 54 Consolidated Statements of Cash Flows 55 Consolidated Statements of Equity (Deficit) 56 Notes to the Consolidated Financial Statements 57 Item 9 .
Item 6. Reserved 33 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risks 46 Item 8.
Item 6. Reserved 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risks 47 Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 96 Item 9A. Controls and Procedures 96
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 96 Item 9A. Controls and Procedures 96 Item 9B. Other Information 96

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+43 added−48 removed51 unchanged
More than 135 OECD member countries have agreed to the key parameters of the model rules, which allow those OECD member countries to begin implementing the GloBE rules in a manner consistent with the agreement reached. The rules were adopted by a number of countries in 2023, with an effective date for fiscal years beginning after December 31, 2023.
More than 135 OECD member countries have agreed to the key parameters of the model rules, which allow those OECD member countries to begin implementing the GloBE rules in a manner consistent with the agreement reached. The rules were adopted by a number of countries, with an effective date for fiscal years beginning after December 31, 2023.
The increase was driven by $63 million of working capital contribution related primarily build-ups of inventory in the prior year. An increase of $32 million in net income, excluding the effects of non-cash items, also contributed to the increase in cash provided by operating activities, partially offset by a decrease in other assets and liabilities of $5 million.
The increase was driven by $63 million of working capital contribution related primarily to build-ups of inventory in the prior year. An increase of $32 million in net income, excluding the effects of non-cash items, also contributed to the increase in cash provided by operating activities, partially offset by a decrease in other assets and liabilities of $5 million.
We consider the accounting policies 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.
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.
In comparison, cash used for financing activities in the prior year was primarily related to the Company's payment of $381 million for the final early redemption of our Series B Preferred Stock (exclusive of $28 million attributable to interest and included in cash from operating activities) and $83 million for dividends on Series A Preferred Stock, while in the current year, there were $42 million in payments of accrued dividends on the Series A Preferred Stock through June 2023.
In comparison, cash used for financing activities in the prior year was primarily related to the Company's payment of $381 million for the final early redemption of our Series B Preferred Stock (exclusive of $28 million attributable to interest and included in cash from operating activities) and $83 million for dividends on Series A Preferred Stock, while in 2023, there were $42 million in payments of accrued dividends on the Series A Preferred Stock through June 2023.
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. We believe that EBITDA and Adjusted EBITDA are important indicators of operating performance and provide useful information for investors because: 1.
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. We believe that EBITDA and Adjusted EBITDA are important indicators of operating performance and provide useful information for investors. 1.
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.
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, 45 for these contingencies based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.
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.
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 46 positions.
The impact of foreign currency impact was zero for the year. During 2023, we saw strong customer demand increases in diesel and gasoline product lines, in a less disruptive supply chain environment, as the industry recovered from semiconductor shortages experienced in the prior year.
The impact of foreign currency impact was zero for the year. 42 During 2023, we saw strong customer demand increases in diesel and gasoline product lines, in a less disruptive supply chain environment, as the industry recovered from semiconductor shortages experienced in the prior year.
We define “EBITDA” as our net income calculated in accordance with U.S. GAAP, plus the sum of interest expense net of interest income, tax expense and depreciation.
We define “EBITDA” as our net income calculated in accordance with U.S. GAAP, plus the sum of interest expense net of interest income, tax expense, depreciation and amortization.
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, 2023 and 2022.
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, 2024 and 2023.
The decrease in non-operating income was primarily driven by a $30 million decrease in the non-service components of net periodic pension benefits, a $13 million loss on the remeasurement of the Series A Preferred Stock Agreement during the three months ended June 30, 2023, and a $4 million increase in foreign exchange transactional losses.
The decrease in non-operating income was primarily driven by a $30 million decrease in the non-service components of net periodic pension benefits, a $13 million loss on the remeasurement of the Series A Preferred Stock Agreements during the three months ended June 30, 2023, and a $4 million increase in foreign exchange transactional losses.
These increases in interest expense were partially offset by $10 million of interest accretion in the prior year on our Series B Preferred Stock that was fully redeemed in June 2022, and $28 million of gains on our interest derivatives in the current year.
These increases in interest expense were partially offset by $10 million of interest accretion in the prior year on our Series B Preferred Stock that was fully redeemed in June 2022, and $28 million of gains on our interest derivatives in 2023.
We have significant expertise in delivering products at scale for ICE using gasoline, diesel, natural gas and hydrogen, as well as for zero emission vehicles using hydrogen fuel cell systems, both for mobility and industrial use.
We have significant expertise in delivering products at scale for ICE-powered vehicles using gasoline, diesel, natural gas and hydrogen, as well as for zero-emission technologies using hydrogen fuel cell systems, both for mobility and industrial use.
Cash used for financing activities decreased by $79 million for the year ended December 31, 2023 compared with the prior year. Cash flows used for financing activities during the current year included $667 million from the 2023 Dollar Term Facility net of debt financing costs.
Cash used for financing activities decreased by $79 million for the year ended December 31, 2023 compared with the prior year. Cash flows used for financing activities included $667 million from the 2023 Dollar Term Facility net of debt financing costs.
Cost of goods sold further increased due to $30 million of inflation on commodities, transportation and energy, as well as a $14 million increase in R&D costs which reflects our continued investment in new technologies and related headcount year-over-year.
Cost of goods sold further increased due to $30 million of inflation on commodities, transportation and energy, as well as a $14 million increase in R&D costs, net of customer reimbursements, which reflects our continued investment in new technologies and related headcount year-over-year.
These increases were partially offset by $30 million of inflation on commodities, transportation and energy costs, $79 million of unfavorable impacts from product mix primarily from growth in small-engine gasoline applications, as well as $14 million of higher R&D costs.
These increases were partially offset by $30 million of inflation on commodities, transportation and energy costs, $79 million of unfavorable impacts from product mix primarily from growth in small-engine gasoline applications, as well as $14 million of higher R&D costs, net of customer reimbursements.
Further, withholding tax and other taxes on foreign earnings have comparatively increased due to a one-time non-recurring benefit recorded in 2022 related to accrued taxes on distributable reserves. These increases were partially offset by tax benefits in 2023 in Switzerland due to law changes and in Korea for prior year tax settlements.
Further, withholding tax and other taxes on foreign earnings have comparatively increased due to one-time non-recurring benefit recorded in 2022 related to accrued taxes on distributable reserves. These increases were partially offset by 2023 tax benefits in Switzerland due to law changes (net of valuation allowance) and in Korea for prior year tax settlements.
We define “Adjusted EBITDA” as EBITDA, plus the sum of net reorganization items, stock compensation expense, repositioning costs, foreign exchange (gain) loss on debt net of related hedging (gain) loss, loss on extinguishment on debt, discounting costs on factoring, other non-operating income and capital structure transformation expense s; a nd 2. certain adjustment items, while periodically affecting our results, may vary significantly from period to period and have disproportionate effect in a given period, which affects the comparability of our results.
We define “Adjusted EBITDA” as EBITDA, plus the sum of stock compensation expense, repositioning costs, foreign exchange (gain) loss on debt net of related hedging (gain) loss, discounting costs on factoring, gain on sale of equity investment, acquisition and divestiture expenses, other non-operating income, capital structure transformation expense s, debt refinancing and redemption costs, net reorganization items and loss on extinguishment of debt (if any); a nd 2. certain adjustment items, while periodically affecting our results, may vary significantly from period to period and have disproportionate effect in a given period, which affects the comparability of our results. 40 For 2024, we revised our definition of Adjusted EBITDA to exclude acquisition and divestiture expenses, and debt refinancing and redemption costs.
Non-GAAP Measures Management provides non-GAAP financial information, including EBITDA and Adjusted EBITDA, to supplement the understanding of our business operations and performance, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP.
These decreases were partially offset by $73 million of increased gross profit. Non-GAAP Measures Management provides non-GAAP financial information, including EBITDA and Adjusted EBITDA, to supplement the understanding of our business operations and performance, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP.
Cash Flow Summary for the Years Ended December 31, 2023, 2022 and 2021 43 Our cash flows from operating, investing and financing activities for the years ended December 31, 2023, 2022 and 2021, as reflected in the Consolidated Financial Statements included in this Annual Report, are summarized as follows: Year Ended December 31, 2023 2022 2021 (Dollars in millions) Cash provided by (used for): Operating activities $ 465 $ 375 $ (310) Investing activities (55) (91) (71) Financing activities (403) (482) 139 Effect of exchange rate changes on cash 5 (18) 13 Net increase in cash and cash equivalents $ 12 $ (216) $ (229) Cash Flow Summary for the year ended December 31, 2023 Cash provided by operating activities increased by $90 million for the year ended December 31, 2023 versus the prior year.
Cash Flow Summary for the Years Ended December 31, 2024, 2023 and 2022 Our cash flows from operating, investing and financing activities for the years ended December 31, 2024, 2023 and 2022, as reflected in the Consolidated Financial Statements included in this Annual Report, are summarized as follows: Year Ended December 31, 2024 2023 2022 (Dollars in millions) Cash provided by (used for): Operating activities $ 408 $ 465 $ 375 Investing activities (14) (55) (91) Financing activities (520) (403) (482) Effect of exchange rate changes on cash (8) 5 (18) Net (decrease) increase in cash and cash equivalents $ (134) $ 12 $ (216) Cash Flow Summary for the year ended December 31, 2024 Cash provided by operating activities decreased by $57 million for the year ended December 31, 2024 versus the prior year.
This increase was mainly due to $33 million of marked-to-market remeasurement losses recorded in the current year on our undesignated interest rate swap contracts versus $68 million of marked-to-market remeasurement gains in the prior year.
For the year ended December 31, 2023, interest expense increased by $151 million compared to prior year. This increase was mainly due to $33 million of marked-to-market remeasurement losses recorded in 2023 on our undesignated interest rate swap contracts versus $68 million of marked-to-market remeasurement gains in the prior year.
Cost of Goods Sold and Gross Profit 2023 2022 2021 (Dollars in millions) Cost of goods sold $ 3,130 $ 2,920 $ 2,926 % change compared with prior period 7.2 % (0.2) % 17.3 % Gross profit percentage 19.5 % 19.0 % 19.5 % 36 Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for year ended December 31, 2022 $ 2,920 $ 683 Volume 217 89 Product mix 27 (79) Price, net of inflation pass-through — 38 Commodity, transportation and energy inflation 30 (30) Productivity, net (55) 60 Research & development 14 (14) Foreign exchange rate impacts (23) 9 Cost of Goods Sold / Gross Profit for year ended December 31, 2023 $ 3,130 $ 756 For the year ended December 31, 2023, cost of goods sold increased by $210 million, primarily driven by our higher sales volumes and an unfavorable product mix, which contributed to increases of $217 million and $27 million, respectively.
These decreases were partially offset by $81 million of commodity, transportation and energy deflation, $72 million of productivity, net of labor inflation and repositioning costs, and $7 million of favorable impact from product mix. 37 Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for year ended December 31, 2022 $ 2,920 $ 683 Volume 217 89 Product mix 27 (79) Price, net of inflation pass-through — 38 Commodity, transportation & energy inflation 30 (30) Productivity, net (55) 60 Research & development 14 (14) Foreign exchange rate impacts (23) 9 Cost of Goods Sold / Gross Profit for year ended December 31, 2023 $ 3,130 $ 756 For the year ended December 31, 2023, cost of goods sold increased by $210 million, primarily driven by our higher sales volumes and an unfavorable product mix, which contributed to increases of $217 million and $27 million, respectively.
Interest expense 2023 2022 2021 (Dollars in millions) Interest expense $ 159 $ 8 $ 83 For the year ended December 31, 2023, interest expense increased by $151 million compared to prior year.
Interest expense Year Ended December 31, 2024 2023 2022 (Dollars in millions) Interest expense $ 156 $ 159 $ 8 For the year ended December 31, 2024, interest expense decreased by $3 million compared to prior year.
The 45 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.
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.
On February 13, 2024, the Board of Directors authorized a new $350 million share repurchase program valid until December 31, 2024.
On December 4, 2024, the Board of Directors authorized a new $250 million share repurchase program valid January 1, 2025 until December 31, 2025.
Disaggregated Revenue The following tables show our revenues by geographic region and product line for the years ended December 31, 2023, 2022 and 2021. 34 By Region Year Ended December 31, 2023 2022 2021 (Dollars in millions) United States $ 744 19 % $ 694 19 % $ 565 16 % Europe 1,874 48 % 1,734 48 % 1,784 49 % Asia 1,201 31 % 1,102 31 % 1,231 34 % Other International 67 2 % 73 2 % 53 1 % $ 3,886 $ 3,603 $ 3,633 By Product Line Year Ended December 31, 2023 2022 2021 (Dollars in millions) Diesel $ 992 25 % $ 949 26 % $ 1,041 29 % Gas 1,720 44 % 1,485 41 % 1,420 39 % Commercial Vehicle 656 17 % 673 19 % 705 19 % Aftermarket 456 12 % 442 12 % 406 11 % Other 62 2 % 54 2 % 61 2 % $ 3,886 $ 3,603 $ 3,633 Results of Operations for the Years Ended December 31, 2023, 2022 and 2021 Net Sales 2023 2022 2021 (Dollars in millions) Net sales $ 3,886 $ 3,603 $ 3,633 % change compared with prior period 7.9 % (0.8) % 19.7 % The change in net sales compared to the prior year is attributable to the following: For the year ended December 31, 2023, net sales increased compared to prior year by $283 million or 8%, including an unfavorable impact of $14 million or 0% due to foreign currency translation driven by lower Chinese yuan-to-US dollar, partially offset by higher Euro-to-US dollar exchange rates.
By Region Year Ended December 31, 2024 2023 2022 (Dollars in millions) United States $ 700 20 % $ 744 19 % $ 694 19 % Europe 1,642 47 % 1,874 48 % 1,734 48 % Asia 1,056 31 % 1,201 31 % 1,102 31 % Other International 77 2 % 67 2 % 73 2 % $ 3,475 $ 3,886 $ 3,603 By Product Line Year Ended December 31, 2024 2023 2022 (Dollars in millions) Diesel $ 827 24 % $ 992 25 % $ 949 26 % Gas 1,505 43 % 1,720 44 % 1,485 41 % Commercial Vehicle 629 18 % 656 17 % 673 19 % Aftermarket 459 13 % 456 12 % 442 12 % Other 55 2 % 62 2 % 54 2 % $ 3,475 $ 3,886 $ 3,603 Results of Operations for the Years Ended December 31, 2024, 2023 and 2022 Net Sales 35 Year Ended December 31, 2024 2023 2022 (Dollars in millions) Net sales $ 3,475 $ 3,886 $ 3,603 % change compared with prior period (10.6) % 7.9 % (0.8 %) The change in net sales compared to the prior year is attributable to the following: For the year ended December 31, 2024, net sales decreased compared to prior year by $411 million or 11%, including an unfavorable impact of $34 million or 1% due to foreign currency translation driven by lower Chinese Yuan-to-US dollar and lower Japanese Yen-to-US dollar exchange rates, partially offset by higher Euro-to-US dollar exchange rates.
Net Income 2023 2022 2021 (Dollars in millions) Net Income $ 261 $ 390 $ 495 39 For the year ended December 31, 2023, net income decreased by $129 million compared with the prior year, primarily due to $151 million of higher interest expense, $31 million of higher SG&A expenses and $45 million of lower non-operating income, as discussed above.
These increases were partially offset by $51 million of decreased gross profit. For the year ended December 31, 2023, net income decreased by $129 million compared with the prior year, primarily due to $151 million of higher interest expense, $31 million of higher SG&A expenses and $45 million of lower non-operating income, as discussed above.
Selling, General and Administrative Expenses 2023 2022 2021 (Dollars in millions) Selling, general and administrative expense $ 247 $ 216 $ 216 % of sales 6.4 % 6.0 % 5.9 % For the year ended December 31, 2023, selling, general and administrative (“SG&A”) expenses increased by $31 million compared with the prior year, primarily due to $9 million of legal and advisory fees related to the Transaction , $5 million of labor inflation impact, $6 million of employee repositioning costs, $3 million of higher incentive compensation expense and $5 million unfavorable impact from foreign exchange.
For the year ended December 31, 2023, SG&A expenses increased by $31 million compared with the prior year, primarily due to $9 million of legal and advisory fees related to the Transaction (as defined below) , $5 million of labor inflation impact, $6 million of employee repositioning costs, $3 million of higher incentive compensation expense and $5 million of unfavorable impacts from foreign exchange.
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, 2023, the Company repurchased less than $1 million of Series A Preferred Stock and $213 million of its Common Stock. The share repurchase program expired on December 31, 2023.
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, 2024, the Company repurchased $296 million of its Common Stock. The share repurchase program expired on December 31, 2024.
Recovery in China from the end of the Chinese government's zero Covid-19 policy as well as new product introductions and favorable pricing impact also contributed to the growth. For the year ended December 31, 2022, sales decreased compared to prior year by $30 million or 1%.
Recovery in China from the end of the Chinese government's zero Covid-19 policy as well as new product introductions and favorable pricing impact also contributed to the growth.
Tax Expense 2023 2022 2021 (Dollars in millions) Tax expense $ 86 $ 106 $ 43 Effective tax rate 24.8 % 21.4 % 7.9 % The effective tax rate increased by 3.4 percentage points in 2023 compared to 2022.
Tax Expense Year Ended December 31, 2024 2023 2022 (Dollars in millions) Tax expense $ 61 $ 86 $ 106 Effective tax rate 17.8 % 24.8 % 21.4 % The effective tax rate decreased by 7.0 percentage points in 2024 compared to 2023.
We believe the combination of expected cash flows, the term loan borrowings and the revolving credit facilities being committed until 2028, will provide us with adequate liquidity to support the Company's operations.
We believe the combination of expected cash flows, the term loan borrowings and the 43 revolving credit facilities being committed until 2030, will provide us with adequate liquidity to support the Company's operations. Share Repurchase Program On February 13, 2024, the Board of Directors authorized a $350 million share repurchase program valid until December 31, 2024.
EBITDA and Adjusted EBITDA (non-GAAP) Year Ended December 31, 2023 2022 2021 (Dollars in millions) Net income — GAAP $ 261 $ 390 $ 495 Interest expense, net of interest income 152 6 82 Tax expense 86 106 43 Depreciation 90 84 92 EBITDA (Non-GAAP) $ 589 $ 586 $ 712 Discounting costs on factoring 4 2 — Non-operating (income) expense (1) (6) (41) (12) Reorganization items, net (2) — 3 (125) Stock compensation expense (3) 14 11 7 Repositioning costs 13 4 16 Foreign exchange (gain) loss on debt, net of related hedging (gain) loss (1) — 9 Capital structure transformation expenses (4) 22 — — Loss on extinguishment of debt — 5 — Adjusted EBITDA (Non-GAAP) $ 635 $ 570 $ 570 $ 607 40 (1) The adjustment for non-operating (income) expense reflects the non-service component of net periodic pension costs and other income that are non-recurring or not considered directly related to the Company's operations.
EBITDA and Adjusted EBITDA (non-GAAP) Year Ended December 31, 2024 2023 2022 (Dollars in millions) Net income — GAAP $ 282 $ 261 $ 390 Interest expense, net of interest income (1) 153 152 6 Tax expense 61 86 106 Depreciation 90 90 84 EBITDA (Non-GAAP) $ 586 $ 589 $ 586 Factoring and notes receivables discount fees 4 4 2 Other non-operating income (2) (12) (6) (41) Reorganization items, net (3) — — 3 Stock compensation expense (4) 23 14 11 Repositioning costs 21 13 4 Foreign exchange gain on debt, net of related hedging gain — (1) — Capital structure transformation expenses (5) — 22 — Gain on sale of equity investment (27) — — Acquisition and divestiture expenses (6) 1 — — Debt refinancing and redemption costs (7) 2 — — Loss on extinguishment of debt — — 5 Adjusted EBITDA (Non-GAAP) $ 598 $ 635 $ 570 (1) Reflects interest income of $3 million, $7 million and $2 million for the year ended December 31, 2024, 2023 and 2022, respectively.
Gasoline product sales increased by $235 million or 16% (including an unfavorable impact of $20 million or 1% due to foreign currency translation) driven by industry recovery from prior year’s global semiconductor shortages and Covid-related lockdown measures in China, combined with new product launches and ramp-ups across all regions. 35 Diesel product sales increased by $43 million or 5% (including a favorable impact of $10 million or 2% due to foreign currency translation), driven by strong performance in Europe where diesel remains essential to meet fleet CO2 targets in addition to strong light commercial vehicle performance on existing platforms.
Diesel product sales increased by $43 million or 5% (including a favorable impact of $10 million or 2% due to foreign currency translation), driven by strong performance in Europe where diesel remains essential to meet fleet CO2 targets in addition to strong light commercial vehicle performance on existing platforms.
R&D expenses increased $14 million which reflects our continued investment in new technologies, increased hiring to accelerate growth in the new technologies and year-over-year labor inflation.
R&D expenses increased $14 million which reflects our continued investment in new technologies, increased hiring to accelerate growth in the new technologies and year-over-year labor inflation, net of customer reimbursements. There was no impact from foreign currency with translational and transactional impacts being offset by hedge remeasurement.
These increases in cash used for financing activities were partially offset by $12 million less of repurchases of Series A Preferred Stock and Common Stock in 2022 versus 2021. 44 Capital Expenditures We believe our capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns and to expand capacity to meet increased demand.
Capital Expenditures We believe our capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns and to expand capacity to meet increased demand.
For 2024, we expect capital spending to increase slightly as compared to 2023. We expect to repay $7 million on our 2021 Dollar Term Facility. We also expect to pay approximately $36 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.
We expect to pay approximately $42 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. We expect to make contributions of approximately $5 million to our non-U.S. pension plans.
Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for year ended December 31, 2021 $ 2,926 $ 707 Volume (19) (8) Product mix 124 25 Price, net of inflation pass-through — 125 Commodity & transportation inflation 154 (154) Productivity, net (58) 84 Research & development 17 (17) Foreign exchange rate impacts (224) (79) Cost of Goods Sold / Gross Profit for year ended December 31, 2022 $ 2,920 $ 683 For the year ended December 31, 2022, cost of goods sold decreased by $6 million compared to prior year, primarily driven by our lower sales volumes and foreign currency impacts which contributed to decreases of $19 million and $224 million, respectively.
Cost of Goods Sold and Gross Profit Year Ended December 31, 2024 2023 2022 (Dollars in millions) Cost of goods sold $ 2,770 $ 3,130 $ 2,920 % change compared with prior period (11.5) % 7.2 % (0.2 %) Gross profit percentage 20.3 % 19.5 % 19.0 % Cost of Goods Sold Gross Profit (Dollars in millions) Cost of Goods Sold / Gross Profit for year ended December 31, 2023 $ 3,130 $ 756 Volume (290) (122) Product mix 104 7 Price, net of inflation pass-through — (50) Commodity, transportation and energy deflation (81) 81 Productivity, net (98) 72 Research & development 12 (12) Foreign exchange rate impacts (7) (27) Cost of Goods Sold / Gross Profit for year ended December 31, 2024 $ 2,770 $ 705 For the year ended December 31, 2024, cost of goods sold decreased by $360 million, primarily driven by lower sales volumes which contributed a decrease of $290 million.
As our customers continue to progress on electrification, we apply our technological pillars to develop highly engineered E-Powertrain and E-Cooling compressor products to support their ambition.
As our customers continue to progress on electrification, we are applying our technological pillars to develop highly engineered E-Powertrain and E-Cooling compressor products to support their ambition. These products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with emissions standards and overall greenhouse gas and other emission reduction targets.
For the year ended December 31, 2022, non-operatin g income increased by $41 million compared to prior year.
For the year ended December 31, 2023, non-operating income, net amounted to $2 million compared to $47 million in the prior year.
We expect capital expenditures in 2024 to increase slightly as compared to 2023, reflecting an increase in investments for zero emission technologies partially offset with lower investments on turbo technologies.
We expect capital expenditures in 2025 to increase slightly as compared to 2024, primarily driven by higher investments for new product launches across our zero emission and turbo technologies.
In addition, our management may use Adjusted EBITDA in setting performance incentive targets to align performance measurement with operational performance.
We did not revise prior years' Adjusted EBITDA because there were no such charges similar in nature. In addition, our management uses Adjusted EBITDA in setting performance incentive targets to align performance measurement with operational performance.
Liquidity and Capital Resources Overview December 31, 2023 2022 2021 (Dollars in millions) Cash and cash equivalents $ 259 $ 246 $ 423 Restricted cash 1 2 41 Revolving Facility - available borrowing capacity 570 475 297 Revolving Facility - borrowings or letters of credit outstanding — — 3 Term Loan Facilities - principal outstanding 1,696 1,186 1,223 Bilateral letter of credit facility - remaining available capacity 3 1 27 Bilateral letter of credit facility - utilized capacity 12 14 8 On April 27, 2023, the Company entered into an amendment to its existing credit agreement which provided for additional financing of $700 million in the form of the 2023 Dollar Term Facility and an increase of $95 million in maximum borrowings available under the Company's revolving credit facility (the "Revolving Facility") to an aggregate of $570 million.
Liquidity and Capital Resources Overview December 31, 2024 2023 2022 (Dollars in millions) Cash and cash equivalents $ 125 $ 259 $ 246 Restricted cash 1 1 2 Revolving Facility - available borrowing capacity 600 570 475 Revolving Facility - borrowings or letters of credit outstanding — — — Term Loan Facilities - principal outstanding 692 1,696 1,186 Senior Notes - principal outstanding 800 — — Bilateral letter of credit facility - utilized capacity 8 12 14 On May 21, 2024, our wholly owned subsidiaries, Garrett Motion Holdings Inc. and Garrett LX I S.a.r.l., completed an offering of $800 million in aggregate principal amount of the 2032 Senior Notes.
Cash used for financing activities increased by $621 million for the year ended December 31, 2022 compared with the prior year.
Cash used for financing activities increased by $117 million for the year ended December 31, 2024 compared with the prior year. During 2024, we made an aggregate of $992 million in debt repayments on our term loan facilities.
These decreases were partially offset by $14 million of additional interest expense in 2022 on our current credit facilities entered into at Emergence. Non-operating income 2023 2022 2021 (Dollars in millions) Non-operating income $ (2) $ (47) $ (6) For the year ended December 31, 2023, non-operating income amounted to $2 million compared to $47 million in the prior year.
Non-operating income, net Year Ended December 31, 2024 2023 2022 (Dollars in millions) Non-operating income, net $ (13) $ (2) $ (47) For the year ended December 31, 2024, non-operating income, net amounted to $13 million compared to $2 million in the prior year.
(2) The Company applied ASC 852 for periods subsequent to the Petition Date to distinguish transactions and events that were directly associated with the Company’s reorganization from the ongoing operations of the business. Accordingly, certain expenses and gains incurred during the Chapter 11 Cases are recorded within Reorganization items, net in the Consolidated Statements of Operations.
A Revised Amended Plan of Reorganization was confirmed by the Bankruptcy Court on April 26, 2021, and the Company emerged from bankruptcy on April 30, 2021. The Company applied ASC 852 for periods subsequent to the Petition Date to distinguish transactions and events that were directly associated with the Company’s reorganization from the ongoing operations of the business.
See Note 2, Plan of Reorganization of the Notes to the Consolidated Financial Statements. (3) Stock compensation expense includes only non-cash expenses. (4) 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.
(5) 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. (6) Reflects third-party costs incurred for the sale of an equity interest in an unconsolidated joint venture.
Finally, we expect to make contributions of approximately $7 million to our non-U.S. pension plans. We fund our operations primarily through cash flows from operating activities, borrowings from our credit facilities and cash and cash equivalents.
Finally, we also expect to declare and pay quarterly dividends on our Common Stock in an aggregate amount of approximately $50 million in 2025, of which $12 million was paid on January 31, 2025. We fund our operations primarily through cash flows from operating activities, borrowings from our credit facilities and cash and cash equivalents.
This increase was driven primarily by a $24 million increase in the non-service components of net periodic pension benefits and a $12 million decrease in foreign exchange transactional losses. 38 Reorganization items, net 2023 2022 2021 (Dollars in millions) Reorganization items, net $ — $ 3 $ (125) For the year ended December 31, 2023, there were no expenses incurred for Reorganization items, net.
Reorganization items, net Year Ended December 31, 2024 2023 2022 (Dollars in millions) Reorganization items, net $ — $ — $ 3 For the years ended December 31, 2024 and 2023, there were no expenses incurred for Reorganization items, net.
There is no impact on our 2023 tax provision as any tax cost associated with the implementation of the model rules is treated as a period cost and therefore not recorded until 2024. We do not expect that Pillar One will have an impact on our operations or effective tax rate.
We do not expect that Pillar One will have an impact on our operations or effective tax rate. For 2024, Pillar Two does not have a material impact to our effective tax rate.
There was no impact from foreign currency with translational and transactional impacts being offset by hedge remeasurement. 41 Adjusted EBITDA for the year ended December 31, 2022 compared with year ended December 31, 2021 For the year ended December 31, 2022, net income decreased $105 million versus the prior year as discussed above within the Results of Operations section.
(7) Reflects the third-party costs directly attributable to the repricing of our 2021 Dollar Term Facility. 41 Adjusted EBITDA 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 the Results of Operations section.
Strong demand for new product launches and ramp-ups along with inflation recoveries net of pricing across all product lines also contributed to the net sales growth.
Strong demand for new product launches and ramp-ups along with inflation recoveries net of pricing across all product lines also contributed to the net sales growth. 36 Gasoline product sales increased by $235 million or 16% (including an unfavorable impact of $20 million or 1% due to foreign currency translation) driven by industry recovery from prior year’s global semiconductor shortages and Covid-related lockdown measures in China, combined with new product launches and ramp-ups across all regions.
Gasoline product sales increased by $64 million or 5% (including an unfavorable impact of $119 million or 8% due to foreign currency translation), primarily driven by new product launches in North America which delivered incremental sales year over year.
Diesel product sales decreased by $165 million or 17% (including an unfavorable impact of $6 million or 1% due to foreign currency translation), primarily driven by passenger vehicles in Europe, partially offset by sustained demand for pickup trucks in North and South America.
This increase was partially offset by lower Euro-to-dollar exchange rates and lower sales in China due to the increased Covid-related lockdown measures implemented by the Chinese government throughout 2022. Diesel product sales decreased by $91 million or 9% (including an unfavorable impact of $103 million or 10% due to foreign currency translation).
For the year ended December 31, 2023, net sales increased compared to prior year by $283 million or 8%, including an unfavorable impact of $14 million or 0% due to foreign currency translation driven by lower Chinese Yuan-to-US dollar, partially offset by higher Euro-to-US dollar exchange rates.
During the year ended December 31, 2023, we repaid $200 million on our 2023 Dollar Term Facility and $7 million on our 2021 Dollar Term Facility. As previously disclosed, the Company entered into the Agreements with the C&O Investors to repurchase certain shares and convert all remaining Series A Preferred Stock.
During the year ended December 31, 2024, we repaid $500 million on our 2023 Dollar Term Facility, $485 million (€450 million) on our Euro Term Facility and $7 million on our 2021 Dollar Term Facility. For 2025, we expect capital spending to increase slightly as compared to 2024.
Commercial vehicle sales decreased by $32 million or 5% (including an unfavorable impact of $51 million or 8% due to foreign currency translation), primarily driven by lower volumes in China during the year after a strong pre-buy effect in the first half of 2021, more than offset by a favorable mix in the rest of the world.
Commercial vehicle sales decreased by $27 million or 4% (including an unfavorable impact of $8 million or 1% due to foreign currency translation), primarily driven by soft demand in the construction and agriculture industries due to high interest rates and lower crop prices, partially offset by sustained demand in the on-highway industry, especially in China and North America.
Aftermarket sales improved by $36 million or 9% (including an unfavorable impact of $25 million or 6% due to foreign currency translation), primarily due to strong demand in North America and Europe related to favorable aftermarket conditions such as increased off-highway demand for new and service parts, increased revenues from our Performance & Motorsport Turbo business, new distributor openings, as well as growth through new product introductions and favorable pricing impacts.
Aftermarket sales increased by $3 million or 1% (including an unfavorable impact of $3 million or 0% due to foreign currency translation), primarily driven by favorable aftermarket conditions and continued high demand for replacement parts in China, Europe, India, Brazil and Japan, partially offset by softer sales in Australia.
Removed
These products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with emissions standards and overall greenhouse gas and other emission reduction targets. 33 In 2023, the turbocharger industry increased from approximately 46 million units in 2022 to approximately 50 million units in line with increased volumes in the light vehicle industry.
Added
In 2024, turbocharger production decreased globally from approximately 50 million units in 2023 to 49 million units in 2024 and is expected to further decrease from 2025 onward based on current expectations of electric vehicle penetration. We effectively navigated through macroeconomic and geopolitical challenges by implementing strategic permanent and variable cost measures, as well as leveraging commodity deflation pass-through.
Removed
This enabled us to achieve $3,886 million of Net sales for the year. 2023 was also a year of economic volatility which saw elevated interest rates and continued commodity inflation pressures globally.
Added
Our effective management allowed us to achieve Net income of $282 million and Adjusted EBITDA of $598 million for the year. We continue to achieve success in our turbocharging, hybrid, and zero-emission technology applications.
Removed
We continued to leverage our variable cost structure to successfully navigate this macroeconomic environment, while increasing our R&D investments by $22 million versus the prior year from 4.2% to 4.6% of Net sales. Our agility furthermore allowed us to achieve Net income of $261 million and Adjusted EBITDA of $635 million for the year.
Added
This year, we secured additional pre-production contracts for both light vehicle and commercial vehicle applications, were awarded our first turbo application for a Range Extended Electric Vehicle with a leading Chinese technology company, and made significant progress in testing our new turbo off-highway applications. 34 On April 3, 2024, we divested our equity interest in an unconsolidated joint venture for approximately $58 million, subject to customary debt and working capital adjustments.
Removed
We continue to build momentum with our turbocharging and zero emission technologies. During 2023, we won nine pre-development contracts for our breakthrough E-Powertrain and E-Cooling applications and six series production awards for our highly differentiated fuel cell compressors.
Added
We received cash consideration on the divestiture date of $46 million, with an additional $7 million still to be received, and recognized a gain of $27 million related to this divestiture.
Removed
Capital Structure Transformation As previously announced, on April 12, 2023, we entered into separate definitive agreements (the "Agreements") with each of Centerbridge Partners, L.P. and funds managed by Oaktree Capital Management, L.P.
Added
During the second quarter of 2024, we completed an offering of $800 million in aggregate principal amount of 7.75% Senior Unsecured Notes due 2032 (the "Senior Notes") and made early debt repayments totaling $985 million on our €450 million secured first-lien Euro Term Facility (the "Euro Term Facility") and $500 million secured first-lien U.S.
Removed
(collectively, the "C&O Investors") to effect a series of integrated transactions (the "Transaction") designed to increase the attractiveness of the Company to investors, including simplifying our capital structure through a conversion of the Series A Preferred Stock into shares of Common Stock.
Added
Dollar term loan facility (the "2023 Dollar Term Facility"), both of which were fully repaid as of June 30, 2024. In December 2024, the Board of Directors announced that it intends to declare and pay quarterly dividends on our Common Stock in an aggregate amount of approximately $50 million in 2025.
Removed
Under the Transaction, the Company repurchased 69,707,719 shares of Series A Preferred Stock and converted 175,337,712 shares of Series A Preferred Stock into an equivalent number of Common Stock.
Added
The first quarter dividend of $0.06 per share was declared on December 5, 2024, payable to holders of our Common Stock as of January 15, 2025, and was settled in cash for $12 million on January 31, 2025.
Removed
Total consideration paid to the holders of Series A Preferred Stock under the Transaction amounted to cash payments of $605 million and the issuance of an additional 25,577,517 shares of Common Stock in settlement of accumulated and unpaid preference dividends on the Series A Preferred Stock through June 30, 2023.
Added
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 2025.
Removed
The Transaction was financed through a new $700 million Term Loan B (the "2023 Dollar Facility") under the framework of the Company's existing credit agreement.
Added
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.
Removed
As part of the Agreement, the C&O Investors agreed with the Company to certain changes to each of their respective governance rights under the Company’s governance documents, including a reduction of their existing board nomination rights, as well as lock-up restrictions on their equity securities of the Company for up to twelve months, and certain limits on their ability to purchase additional equity securities of the Company and to voting limitations, in each case for a period of up to eighteen months.
Added
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.
Removed
Other 2023 Events During 2023, we repaid $200 million on our 2023 Dollar Term Facility and repurchased $213 million of Common Stock in line with our capital allocation priorities. Our share repurchase program expired on December 31, 2023. Trends, Uncertainties and Opportunities The macroeconomic environment around us continues to evolve rapidly.
Added
Disaggregated Revenue The following tables show our revenues by geographic region and product line for the years ended December 31, 2024, 2023 and 2022.
Removed
Significant uncertainty remains on global economic growth, with continued supply chain disruptions and geopolitical tensions, as well as China facing deflationary pressures and job market deterioration. In 2023, an increase in BEV production has been observed globally and especially in Europe and China. We expect this trend to continue into 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
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. 47 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.
Approximately 76% 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.
Approximately 83% 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.
These contracts have varying terms that extend through 2025. We also utilize undesignated foreign currency forward contracts to partially offset gains and losses on the foreign currency remeasurement of balance sheet positions.
These contracts have varying terms that extend through 2026. We also utilize undesignated foreign currency forward contracts to partially offset gains and losses on the foreign currency remeasurement of balance sheet positions.
For our outstanding borrowings under the Credit Agreement as of December 31, 2023, a 50 basis point increase (decrease) in interest rates would have increased (decreased) our interest expense by $9 million and ($9) 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, 2023.
For our outstanding borrowings under the Credit Agreement as of December 31, 2024, a 50 basis point increase (decrease) in interest rates would have increased (decreased) our interest expense by $4 million and ($4) 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, 2024.
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, 2023, the net fair value of all financial instruments with exposure to interest rate risk was a $43 million asset.
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, 2024, the net fair value of all financial instruments with exposure to interest rate risk was a $6 million asset.
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 $187 million and $(170) million, respectively, at December 31, 2023 exchange rates. The model assumes a parallel shift in currency exchange rates; however, currency exchange rates rarely move in the same direction.
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 $196 million and $(196) million, respectively, at December 31, 2024 exchange rates. The model assumes a parallel shift in currency exchange rates; however, currency exchange rates rarely move in the same direction.
Assuming current levels of commodity purchases, a 10% variation in the commodity prices could impact our cost of sales by up to approximately $55 million per year prior to any price recovery from customers. 47
Assuming current levels of commodity purchases, a 10% variation in the commodity prices could impact our cost of sales by up to approximately $43 million per year prior to any price recovery from customers. 48
As of December 31, 2023, the net fair value of all financial instruments with exposure to currency risk was a $20 million asset.
As of December 31, 2024, the net fair value of all financial instruments with exposure to currency risk was a $87 million asset.
Gains and losses on the derivatives qualifying as net investment hedges are recorded in Accumulated other comprehensive income within the Consolidated Balance Sheet until the net investment is liquidated or sold. The Company also uses a float-to-fixed cross-currency swap contract to mitigate the foreign currency risk, as well as interest rate risk, on its 2023 Dollar Facility.
Gains and losses on the derivatives qualifying as net investment hedges are recorded in Accumulated other comprehensive income within the Consolidated Balance Sheet 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 contract is designated as a cash flow hedge, with changes in the fair value of the derivative recorded in AOCI and reclassified into earnings based upon changes in the spot rate remeasurement of the underlying debt.
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.
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. 46 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 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.
Removed
We hedge forecasted currency exposure to minimize the earnings exposures arising from foreign currency exchange risk on foreign currency purchases and sales.
Added
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.

Other GTX 10-K year-over-year comparisons