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What changed in PHINIA INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PHINIA INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+333 added−349 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-28)

Top changes in PHINIA INC.'s 2024 10-K

333 paragraphs added · 349 removed · 265 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

37 edited+12 added−13 removed28 unchanged
Biggest changeAnderson (54) Vice President and Chief Technology Officer (July 2023) • Vice President and General Manager, Fuel Systems – Europe, Middle East, Africa, BorgWarner (2021-July 2023) • Vice President and Managing Director, Diesel Fuel Injection Systems, BorgWarner (2020-2021) • Vice President and Managing Director, Diesel Fuel Injection Systems, Delphi Technologies (2019-2021) • Private Equity Advisor, Falfurrias Capital Partners (private capital investment firm) (2019) Robert Boyle (44) Vice President, General Counsel and Secretary (July 2023) • Vice President and General Counsel (Europe), BorgWarner (2020-July 2023) • Vice President, Corporate and Securities, and Assistant Secretary, Delphi Technologies (2018-2020) Michael Coetzee (57) Vice President and General Manager, Fuel Systems Americas (July 2023) • Vice President and General Manager, Morse Systems, Americas, BorgWarner (2020-July 2023) • Vice President and General Manager,Transmission Systems, Americas, BorgWarner (2016-2020) Alisa Di Beasi (49) Vice President and Chief Human Resource Officer (July 2023) • Vice President, Global Human Resources, Morse Systems, BorgWarner (2020-July 2023) • Global Vice President, Human Resources, Low Voltage, Smart Buildings and Smart Charging, ABB AG (power and automation technology manufacturer) (2016-2019) Sebastian Dori (43) Vice President and Chief Purchasing Officer (July 2023) • Vice President, Global Supply Management, Fuel Systems, BorgWarner (2021-July 2023) • Director, Global Supply Chain Management, Morse Systems, BorgWarner (2020-2021) • Supply Chain Director, Europe and South America, Turbo Systems, BorgWarner (2017-2020) Christopher Gustanski (50) Vice President, Operational Excellence (July 2023) • Vice President Manufacturing Strategy and Quality, BorgWarner (2020-July 2023) • Vice President Manufacturing Engineering, Powertrain Products and Corporate Manufacturing Engineering, Lean, and Footprint Planning, Delphi Technologies (2019-2020) • Director of Manufacturing Engineering – Internal Combustion Engine, Delphi Technologies (2017-2019) Neil Fryer (62) Vice President and General Manager, Global Aftermarket (July 2023) • Vice President and General Manager, Global Aftermarket, BorgWarner (2022-July 2023) • Vice President Global Marketing, Product and Strategic Planning, Aftermarket, BorgWarner (2020-2022) • Vice President Global Marketing, Product and Strategic Planning Aftermarket, Delphi Technologies (2017-2020) 11 Table of Contents John Lipinski (56) Vice President and General Manager, Fuel Systems Europe (July 2023) • Vice President, Global Manufacturing Engineering, PowerDrive Systems, BorgWarner (2022-July 2023) • Senior Director Global Manufacturing Engineering and Operations, PowerDrive Systems, BorgWarner (2020-2022) • Global Operations Senior Director, Delphi Technologies (automotive company) (2019-2020) • Europe Operations Director, Electrification and Electronics, Delphi Technologies (2018-2019) Matthew Logar (48) Vice President and Chief Information Officer (July 2023) • Chief Information Officer, Gentherm Incorporated (thermal management technologies company) (2020-July 2023) • Executive Director, Information Technology, Gentherm (2019-2020) • Vice President, Account Management, General Electric Co.
Biggest changeAnderson (55) Vice President and Chief Technology Officer (July 2023) • Vice President and General Manager, Fuel Systems (Europe, Middle East, Africa), BorgWarner (2021-July 2023) • Vice President and Managing Director, Diesel Fuel Injection Systems, BorgWarner (2020-2021) • Vice President and Managing Director, Diesel Fuel Injection Systems, Delphi Technologies (2019-2021) Robert Boyle (45) Vice President, General Counsel and Secretary (July 2023) • Vice President and General Counsel (Europe), BorgWarner (2020-July 2023) • Vice President, Corporate and Securities, and Assistant Secretary, Delphi Technologies (2018-2020) Michael Coetzee (58) Vice President and General Manager, Fuel Systems Americas (July 2023) • Vice President and General Manager, Morse Systems, Americas, BorgWarner (2020-July 2023) • Vice President and General Manager, Transmission Systems, Americas, BorgWarner (2016-2020) Alisa Di Beasi (50) Vice President and Chief Human Resource Officer (July 2023) • Vice President, Global Human Resources, Morse Systems, BorgWarner (2020-July 2023) • Global Vice President, Human Resources, Low Voltage, Smart Buildings and Smart Charging, ABB AG (power and automation technology manufacturer) (2016-2019) Sebastian Dori (44) Vice President and Chief Purchasing Officer (July 2023) • Vice President, Global Supply Management, Fuel Systems, BorgWarner (2021-July 2023) • Director, Global Supply Chain Management, Morse Systems, BorgWarner (2020-2021) • Supply Chain Director, Europe and South America, Turbo Systems, BorgWarner (2017-2020) Christopher Gustanski (51) Vice President, Operational Excellence (July 2023) • Vice President Manufacturing Strategy and Quality, BorgWarner (2020-July 2023) • Vice President Manufacturing Engineering, Powertrain Products and Corporate Manufacturing Engineering, Lean, and Footprint Planning, Delphi Technologies (2019-2020) Neil Fryer (63) Vice President and General Manager, Global Aftermarket (July 2023) • Vice President and General Manager, Global Aftermarket, BorgWarner (2022-July 2023) • Vice President Global Marketing, Product and Strategic Planning, Aftermarket, BorgWarner (2020-2022) • Vice President Global Marketing, Product and Strategic Planning Aftermarket, Delphi Technologies (2017-2020) John Lipinski (57) Vice President and General Manager, Fuel Systems Europe (July 2023) • Vice President, Global Manufacturing Engineering, PowerDrive Systems, BorgWarner (2022-July 2023) • Senior Director Global Manufacturing Engineering and Operations, PowerDrive Systems, BorgWarner (2020-2022) • Global Operations Senior Director, Delphi Technologies (2019-2020) Matthew Logar (49) Vice President and Chief Information Officer (July 2023) • Chief Information Officer, Gentherm Incorporated (thermal management technologies company) (2020-July 2023) • Executive Director, Information Technology, Gentherm (2019-2020) Samantha M.
Our global procurement organization works to accelerate cost reductions, purchase from best-cost regions, optimize the supply base, mitigate risk, and collaborate on our buying activities. In addition, we use long-term contracts, cost sharing arrangements, design changes, customer buy programs, and limited financial instruments to help control costs wherever beneficial. The Company intends to use similar measures in 2024 and beyond.
Our global procurement organization works to accelerate cost reductions, purchase from best-cost regions, optimize the supply base, mitigate risk, and collaborate on our buying activities. In addition, we use long-term contracts, cost sharing arrangements, design changes, customer buy programs, and limited financial instruments to help control costs wherever beneficial. The Company intends to use similar measures in 2025 and beyond.
Upon securing a new order, account managers participate in product launch team activities and serve as a key interface with customers. In addition, sales and marketing employees of our reportable segments often work together to explore cross-development opportunities where appropriate. 6 Table of Contents Seasonality Our operations are directly related to the commercial vehicle and light vehicle industry.
Upon securing a new order, account managers participate in product launch team activities and serve as a key interface with customers. In addition, sales and marketing employees of our reportable segments often work together to explore cross-development opportunities where appropriate. 6 Table of Contents Seasonality Our operations are directly related to the commercial vehicle and light vehicle industries.
On July 3, 2023, BorgWarner completed the Spin-Off in a transaction intended to qualify as tax-free to the Company’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis.
On July 3, 2023, BorgWarner completed the Spin-Off in a transaction intended to qualify as tax-free to BorgWarner’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis.
The Company’s worldwide net sales to General Motors Company during the years ended December 31, 2023 and 2022 were 16% and 12%, respectively. No other single customer accounted for more than 10% of the Company’s consolidated net sales in any of the years presented.
The Company’s worldwide net sales to General Motors Company during the years ended December 31, 2024, 2023, and 2022 were 17%, 16% , and 12%, respectively. No other single customer accounted for more than 10% of the Company’s consolidated net sales in any of the years presented.
Additionally, our compensation infrastructure for salaried employees provides a globally consistent framework, with appropriate flexibility and country specific market data informing pay decisions and supporting our ability to provide market competitive compensation, which allows us to attract and retain highly qualified talent.
Additionally, our compensation infrastructure for salaried employees provides a globally consistent framework, with appropriate flexibility and country specific market data informing pay decisions and supporting our ability to provide market competitive compensation, which enables us to attract and retain highly qualified talent.
Also, see Item 1A, “Risk Factors.” 7 Table of Contents Human Capital Management Our ability to attract, retain and develop a highly skilled and diverse management team and workforce globally is critical to our sustained success and the growth of our business.
Also, see Item 1A, “Risk Factors.” 7 Table of Contents Human Capital Management Our ability to attract, retain and develop a highly skilled workforce globally is critical to our sustained success and the growth of our business.
The Company is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increase efficiency and reduce emissions in combustion and hybrid propulsion for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and industrial applications) and light vehicles (passenger cars, trucks, vans and sport-utility vehicles).
The Company is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increase efficiency and reduce emissions in combustion and hybrid propulsion for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and industrial applications), light commercial vehicles (vans and trucks) and light passenger vehicles (passenger cars, mini-vans, cross-overs and sport-utility vehicles).
Our net R&D expenditures are primarily included in selling, general and administrative expenses of the Consolidated Statements of Operations. Customer reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost.
Our net R&D costs are primarily included in selling, general and administrative expenses of the Consolidated Statements of Operations. Customer reimbursements are netted against gross R&D costs as they are considered a recovery of cost.
Sales to the Company’s top five customers represented 35% of sales for the year ended December 31, 2023. The Company’s products are generally sold directly to OEMs, substantially pursuant to negotiated annual contracts, long-term supply agreements or terms and conditions as may be modified by the parties. Deliveries are subject to periodic authorizations based upon OEM production schedules.
Sales to the Company’s top five customers represented 40% of sales for the year ended December 31, 2024. The Company’s products are generally sold directly to OEMs, substantially pursuant to negotiated annual contracts, long-term supply agreements or terms and conditions as may be modified by the parties. Deliveries are subject to periodic authorizations based upon OEM production schedules.
We respect and support those rights, including the right to collective bargaining, in accordance with local laws. Education and Development. We provide formal development opportunities for our employees to enable them to build the skills needed to reach their short- and long-term career goals.
We respect and support those rights, including the right to collective bargaining, in accordance with local laws. Learning and Development. We provide training and formal development opportunities for our employees to enable them to build the skills needed to reach their short- and long-term career goals.
We currently hold over 2,000 active pending and issued patents worldwide, and numerous pending and registered trademarks worldwide. Many of our trademarks are well-known in the markets in which we operate, and are key differentiators in particular for our aftermarket business.
We currently hold over 2,500 active pending applications and issued patents worldwide, and numerous pending and registered trademarks worldwide. Many of our trademarks are well-known in the markets in which we operate, and are key differentiators in particular for our aftermarket business.
These opportunities are delivered in a variety of formats to make our portfolio of education and development solutions flexible, accessible, scalable and translatable to meet the needs of our evolving global workplace and workforce.
These opportunities are delivered to employees in a variety of formats to make our portfolio of learning and development solutions flexible, accessible, scalable and translatable to meet the needs of our evolving global workplace and workforce.
New regulations and changes to existing regulations are managed in collaboration with our OEM customers and implemented through our global systems and procedures designed to ensure compliance with existing laws and regulations. We demonstrate material content compliance through the International Material Data System (IMDS), which is the vehicle industry material data system.
New regulations and changes to existing regulations are managed in 9 Table of Contents collaboration with our OEM customers and implemented through our global systems and procedures designed to ensure compliance with existing laws and regulations. We demonstrate material content compliance through the International Material Data System (IMDS), which is the vehicle industry material data system.
Our major competitors are Robert Bosch GmbH, Cummins Inc., Denso Corporation, Dorman Products, Inc., Hitachi Astemo, Ltd., Hyundai KEFICO, Marelli, Valeo, Schaeffler Group, SEG Automotive, Aisan Industry Co., Ltd., Tenneco, ZF Group, SMP Auto Inc., and Vitesco Technologies.
Our major competitors are Robert Bosch GmbH, Cummins Inc., Denso Corporation, Dorman Products, Inc., Hitachi Astemo, Ltd., Hyundai KEFICO, Marelli, Valeo, Schaeffler Group, SEG Automotive, Aisan Industry Co., Ltd., Tenneco, ZF Group, SMP Auto Inc., Vitesco Technologies, Kayser, Mahle GmbH, and TI Fluid Systems.
Name (Age) Present Position (Effective Date) Positions Held During the Past Five Years (Effective Date) Brady D. Ericson (52) President and Chief Executive Officer (July 2023) • President and General Manager, Fuel Systems and Aftermarket BorgWarner (2022-July 2023) • President and General Manager, Morse Systems, BorgWarner (2019-2022) • Executive Vice President and Chief Strategy Officer, BorgWarner (2017-2019) Chris P.
Name (Age) Present Position (Effective Date) Positions Held During the Past Five Years (Effective Date) Brady D. Ericson (53) President and Chief Executive Officer (July 2023) • President and General Manager, Fuel Systems and Aftermarket BorgWarner (2022-July 2023) • President and General Manager, Morse Systems, BorgWarner (2019-2022) Chris P.
Our manufacturing locations that supply directly to OEM customers are certified to the ISO 45001 Health and Safety Management standard. We engage employees across different roles and geographies through ongoing workplace safety training and prevention initiatives, sharing best practices, hosting safety meetings, and sponsoring recognition programs.
Our manufacturing locations that supply directly to OEM customers are certified to the ISO 45001:2018 Occupational health and safety management standard. We engage employees across different roles and geographies through ongoing workplace safety training and prevention initiatives, best practice sharing, safety meetings, and recognition programs.
We believe the skills, experiences, and industry knowledge of our talented employees advance our efforts in cultivating an inclusive culture, driving operational excellence, and providing innovative products and solutions designed to optimize performance, increase efficiency and solve our customers’ biggest challenges.
We believe the broad array of skills, backgrounds, experiences, and industry knowledge of our talented employees advance our efforts in cultivating an inclusive culture, driving operational excellence, executing our business strategy and providing innovative products and solutions designed to optimize performance, increase efficiency and solve our customers’ biggest challenges.
As of December 31, 2023, our workforce was composed of salaried and hourly employees in the following geographic regions as follows.
As of December 31, 2024, our workforce was composed of salaried and hourly employees in the following geographic regions.
Financial Information About Reportable Segments Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this report for financial information about the Company's reportable segments. Joint Venture As of December 31, 2023, the Company had one unconsolidated joint venture in which it exercises significant influence but has a less-than-100% ownership interest.
Financial Information About Reportable Segments Refer to Note 22, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for financial information about the Company's reportable segments. Joint Venture As of December 31, 2024, the Company had one unconsolidated joint venture in which it exercises significant influence but has a less-than-100% ownership interest.
During the year ended December 31, 2023, approximately 29% of the Company’s net sales were generated in the United States, and 71% were generated outside the United States. Refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional financial information about geographic areas.
During the year ended December 31, 2024, approximately 37% of the Company’s net sales were generated in the United States, and 63% were generated outside the United States. Refer to Note 22, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional financial information about geographic areas.
Net sales by reportable segment were as follows: Year Ended December 31, (in millions) 2023 2022 2021 Fuel Systems $ 2,407 $ 2,293 $ 2,233 Aftermarket 1,329 1,284 1,218 Inter-segment eliminations (236) (229) (224) Net sales $ 3,500 $ 3,348 $ 3,227 The sales information presented above does not include the sales by the Company’s unconsolidated joint venture (see sub-heading “Joint Venture” below).
Net sales by reportable segment were as follows: Year Ended December 31, (in millions) 2024 2023 2022 Fuel Systems $ 2,264 $ 2,407 $ 2,293 Aftermarket 1,393 1,329 1,284 Inter-segment eliminations (254) (236) (229) Net sales $ 3,403 $ 3,500 $ 3,348 The sales information presented above does not include the sales by the Company’s unconsolidated joint venture (see sub-heading “Joint Venture” below).
We regularly review our policies, programs and processes to promote an inclusive workforce and confirm alignment with our EDI strategy and efforts to foster a highly qualified talent and leadership pipeline consisting of individuals with diverse perspectives, skills and experiences.
We regularly review our policies, programs and initiatives designed to promote an inclusive workforce and confirm their alignment with our strategies and efforts to foster a highly qualified talent and leadership pipeline consisting of individuals with diverse perspectives, skills and experiences.
The safety of our employees is a top priority, and we are dedicated to continually improving safety performance through education, focusing our efforts on managing and mitigating risk and building a culture where safety comes first and is embedded as a value. We maintain safety management systems at all of our manufacturing facilities.
We are dedicated to continually improving health and safety performance through education, managing and mitigating risk and building a culture where safety comes first and is embedded as a value. We maintain safety management systems at all of our manufacturing facilities.
Dissemination of Company Information The Company intends to make future announcements regarding Company developments and financial performance through its websites, www.phinia.com and investors.phinia.com, as well as through press releases, filings with the SEC, conference calls and webcasts. 10 Table of Contents Information About Our Executive Officers Set forth below are the names, ages, positions and certain other information concerning the executive officers of the Company as of February 28, 2024.
Dissemination of Company Information The Company intends to make future announcements regarding Company developments and financial performance through its websites, www.phinia.com and investors.phinia.com, as well as through press releases, filings with the SEC, conference calls and webcasts. 10 Table of Contents Information About Our Executive Officers Set forth below are the names, ages, positions and certain other information concerning the Company’s executive officers and officers within the meaning of Rule 16a-1(f) of the Exchange Act as of February 13, 2025.
Year Ended December 31, (in millions) 2023 2022 2021 Gross R&D expenditures $ 188 $ 200 $ 247 Customer reimbursements (80) (96) (115) Net R&D expenditures $ 108 $ 104 $ 132 Net R&D expenditures as a percentage of net sales were 3.1%, 3.1% and 4.1% for the years ended December 31, 2023, 2022 and 2021, respectively.
Year Ended December 31, (in millions) 2024 2023 2022 Gross R&D costs $ 209 $ 188 $ 200 Customer reimbursements (97) (80) (96) Net R&D costs $ 112 $ 108 $ 104 Net R&D costs as a percentage of net sales were 3.3%, 3.1% and 3.1% for the years ended December 31, 2024, 2023 and 2022, respectively.
Gropp (59) Vice President and Chief Financial Officer (July 2023) • Vice President of Finance, Fuel Systems and Aftermarket, BorgWarner (2020-July 2023) • Vice President of Finance, Transmission Systems, BorgWarner (2014-2020) Pedro Abreu (46) Vice President and General Manager, Fuel Systems Asia Pacific (July 2023) • Vice President and General Manager Asia, Fuel Systems, BorgWarner (2021-July 2023) • Plant Manager Tulle, France, BorgWarner (2019-2021) • Plant Manager, Vigo Spain, BorgWarner (2017-2018) • Plant Manager, Portugal, BorgWarner (2015-2019) Todd L.
Gropp (60) Vice President and Chief Financial Officer (July 2023) • Vice President of Finance, Fuel Systems and Aftermarket, BorgWarner (2020-July 2023) • Vice President of Finance, Transmission Systems, BorgWarner (2014-2020) Pedro Abreu (47) Vice President and Chief Strategy Officer (July 2024) • Vice President and General Manager, Fuel Systems Asia Pacific (July 2023 - July 2024) • Vice President and General Manager Asia, Fuel Systems, BorgWarner (2021-July 2023) • Plant Manager Tulle, France, BorgWarner (2019-2021) Todd L.
Supplies of other raw materials are adequate and available from multiple sources to support its manufacturing requirements. 9 Table of Contents Government Regulations We are subject to extensive and varied laws and regulations in the jurisdictions in which we operate, including those relating to anti‑corruption and trade, anti-money laundering, environmental matters, import and export compliance, antitrust, data security and privacy, employment, public health and safety, intellectual property, transportation, zoning, and fire codes.
Government Regulations We are subject to extensive and varied laws and regulations in the jurisdictions in which we operate, including those relating to anti‑corruption and trade, anti-money laundering, environmental matters, import and export compliance, antitrust, data security and privacy, employment, public health and safety, intellectual property, transportation, zoning, and fire codes.
Our Code of Ethical Conduct outlines our expectations for employees to act ethically and responsibly and sets the tone for employee interactions with each other and external stakeholders to create a respectful, inclusive and productive business environment. During 2023, we rolled out our inaugural annual Code of Ethical Conduct compliance training to our global workforce.
Our Code of Ethical Conduct outlines our expectations for employees to act ethically and responsibly and sets the tone for employee interactions with each other and external stakeholders to create a respectful, inclusive and productive business environment. We seek to reinforce our employees’ understanding of the Code by requiring training for new hires and refresher training for other employees.
Product Lines and Customers During the year ended December 31, 2023, approximately 44% of the Company’s net sales were for light-vehicle applications; approximately 25% were for commercial vehicle and industrial applications; approximately 8% were for OES, and 23% for independent aftermarket customers.
Product Lines and Customers During the year ended December 31, 2024, approximately 34% of the Company’s net sales were for independent aftermarket customers and OES, approximately 27% were for light passenger vehicle applications; approximately 20% were for commercial vehicle and industrial applications; approximately 18% were for light commercial vehicle applications, and 1% for other markets.
Globally, we provide comprehensive benefit programs through our various locations to support health and wellness, including disease prevention, management of chronic conditions, and emotional health resources. All full and part-time employees are eligible to participate in our retirement plans, family-friendly leave programs, and flexible work policies, unless precluded by collective bargaining agreements or national statutory plans.
All full- and part-time employees are eligible to participate in our retirement plans, family-friendly leave programs, and flexible work policies, unless precluded by collective bargaining agreements or national statutory plans.
Such unconsolidated sales totaled approximately $228 million, $235 million, and $201 million for the years ended December 31, 2023, 2022 and 2021, respectively. In addition, the sales information for the year ended December 31, 2023 includes $50 million of certain contract manufacturing agreements with BorgWarner that were entered into at the time of the Spin-Off.
In addition, the sales information for the years ended December 31, 2024 and 2023 includes $23 million and $50 million, respectively, of certain contract manufacturing agreements with BorgWarner that were entered into at the time of the Spin-Off. Fuel Systems The Fuel Systems segment provides advanced fuel injection systems, fuel delivery modules, canisters, sensors, electronic control modules and associated software.
We offer pay and 8 Table of Contents benefits that are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. Employees at certain international facilities are unionized. We recognize that, in many of the locations where we operate, employees have freedom of association rights with third-party organizations such as labor unions.
Additionally, we give our employees the opportunity to give back to their local communities, through community service, environmental initiatives, and educational involvement. 8 Table of Contents Employees at some of our non-U.S. facilities are unionized. We recognize that, in many of the locations where we operate, employees have freedom of association rights with third-party organizations such as labor unions.
Refer to Note 16, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for information related to the Company’s hedging activities. For 2024, the Company believes there will be continued inflationary pressures in certain raw materials, labor and energy.
Refer to Note 14, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for information related to the Company’s hedging activities. Prices for commodities remain volatile, and since the beginning of 2021, the Company has experienced price increases for energy and base metals (e.g., steel, aluminum and copper) while slightly decreasing in 2024.
Our Compensation Committee also oversees our compensation philosophies governing our executive compensation plans and programs, with our full Board and Corporate Governance Committee overseeing management talent development and succession planning. Raw Materials We use a variety of raw materials in the production of our products including aluminum, copper, nickel, plastic resins, steel, certain alloy elements, and semiconductor chips.
These initiatives and programs aim to facilitate engagement, share successes and focus employees on continually improving the safety of our work environments and fostering safe and healthy practices. Raw Materials We use a variety of raw materials in the production of our products including aluminum, copper, nickel, plastic resins, steel, certain alloy elements, and semiconductor chips.
We recently began an initiative through our “CONNECT” channel, our employee communications platform, that shares educational content with employees to raise awareness of cultural events and celebrations. As a multinational organization, we believe recognition, and appreciation for, cultural differences is an important part of creating a greater understanding of each other at the Company.
We believe recognition, and appreciation for, differences in backgrounds and experiences is an important part of creating a greater understanding of each other. Through our various initiatives, we support this belief and showcase the broad spectrum of backgrounds, experiences, and skills of our talented employees.
Our team closely monitors employee turnover as part of our efforts to identify potential opportunities for improving employee retention. Additionally, we give our employees the opportunity to give back to their local communities, through community service, environmental initiatives, and educational involvement.
We incorporate this feedback into actions plans across the organization with the aim of continually improving the employee experience and ensuring our workforce remains engaged and motivated to deliver outstanding results. Our team closely monitors employee turnover as part of our efforts to identify potential opportunities for improving employee retention.
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Fuel Systems The Fuel Systems segment provides advanced fuel injection systems, fuel delivery modules, canisters, sensors, electronic control modules and associated software.
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Such unconsolidated sales totaled approximately $224 million, $228 million, and $235 million for the years ended December 31, 2024, 2023 and 2022, respectively.
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Americas 5,800 Asia 1,600 Europe 5,800 Total Employees 13,200 Salaried 4,600 Hourly 8,600 Total Employees 13,200 To achieve our human capital management strategies and objectives, we use an array of measures to attract, develop, engage and retain highly qualified talent.
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This belief is core to our human capital management strategy, which is focused on creating an inclusive and performance-based environment that fosters learning and development and empowers our people to deliver business results while supporting our Company values and vision for powering a better tomorrow.
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These measures are advanced through programs and initiatives focused on equity, diversity and inclusion (EDI), engagement and sentiment, education and development, and health and safety. Equity, Diversity and Inclusion. Inclusivity, integrity and accountability are among the Company’s core values. We strive to cultivate a culture where employees are treated with respect and their differences are valued.
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Americas 5,600 Asia 1,600 Europe 5,500 Total Employees 12,700 Salaried 4,800 Hourly 7,900 Total Employees 12,700 We advance our human capital management strategy through programs and initiatives focused on inclusion, total rewards, culture and engagement, learning and development, and health and safety. Inclusion. Humility, inclusivity, integrity and accountability are the Company’s people-focused core values.
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This training includes promoting a diverse, inclusive and respectful workplace in addition to many other important topics. Engagement and Sentiment. We actively deploy strategies to attract highly qualified talent and engage and retain our global workforce, including our YOU Matter total rewards program. We deliver culturally appropriate reward and recognition programs with competitive pay and benefit categories.
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We strive to cultivate a culture where differences are valued, respected and embraced and provide tools and opportunities to help all employees reach their full potential.
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Our benefits toolkit is available to all global employees on our CONNECT channel to encourage health and wellness engagement and provide confidential access to our insurance and other benefit partners.
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Total Rewards. Our total rewards program is aligned to our employee value proposition and critical to our ability to attract, engage and retain a highly talented workforce. Through this program, we deliver reward and recognition programs and competitive pay and benefit packages, including benefits to support health and wellbeing, disease prevention, management of chronic conditions, and emotional health.
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Our formal performance appraisal system enables managers and employees the opportunity to provide formal feedback in the middle and at the end of the calendar year, as well as the ability to identify development opportunities and goals for the coming year. In 2023, our formal reverse mentoring program was launched, which paired early career talent with senior leadership.
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We offer pay and benefits that are competitive and consistent with employee positions, skill levels, experience, knowledge, and geographic location. Culture and Engagement. We regularly conduct engagement surveys to solicit feedback from employees on a variety of topics.
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Finally, we have annual talent reviews and conduct succession planning for key roles within the Company. Health and Safety .
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Our formal performance management system enables managers and employees to set goals that align to our strategy and core values, provide formal feedback throughout the year, and identify professional development goals and opportunities to assist employees in reaching their full potential. We also offer employees the opportunity to participate in traditional and reverse mentoring programs.
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Since the Spin-Off, we have established our Global Safety Leadership Team, which is comprised of members of our management team and other senior leaders across the organization who are responsible for overseeing our safety performance and initiatives. We also created a health and safety page on our CONNECT channel and held our first annual PHINIA Global Safety Week in 2023.
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Our reverse mentoring program pairs early career talent with more senior leadership and is designed to promote collaboration, foster dialogue, and raise awareness and understanding of different perspectives to deliver on our collective goals.
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Each of these programs and policies aim to continually improve the safety of our work environments and foster safe and healthy practices among our employees. Governance. Our human capital management measures, strategies and objectives are managed within a governance structure that is designed to enable broad engagement and appropriate oversight at various levels within the Company.
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Finally, we have a regular cadence of talent reviews and robust succession plans for key roles in the Company, which includes the use of talent pools to help tailor development in line with career aspirations and trajectories. Health and Safety . The health and safety of our employees is a top priority.
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This structure facilitates regular updates to our Chief Human Resource Officer (CHRO) and Strategy Board (consisting of our Chief Executive Officer (CEO), CHRO and other members of management), as well as periodic updates provided by the CHRO and other senior leaders to our Board of Directors and the Compensation Committee of the Board.
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In addition, many global economies are experiencing elevated levels of inflation more generally, which is driving an increase in other input costs. As a result, the Company has experienced, and is continuing to experience, higher costs. For 2025, the Company believes there will be lower levels of continued inflationary pressures in certain raw materials, labor and energy.
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Our Compensation Committee assists the Board in overseeing the Company’s approach to human capital management, including EDI, and receives updates from members of our management team and other senior leaders regarding the Company’s key strategies and initiatives.
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Supplies of other raw materials are adequate and available from multiple sources to support our manufacturing requirements.
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The Company also believes there will continue to be supply constraints related to semiconductor chips resulting in price increase pressure.
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Pombier (43) Vice President and Controller (July 2023) • Assistant Controller, BorgWarner (2020-July 2023) • Director, External Reporting, BorgWarner (2019-2020) Hank Yang (50) Vice President and General Manager, Fuel Systems Asia Pacific (July 2024) • Country Director (China) and General Manager Fuel Systems (China) (July 2023-July 2024) • General Manager Fuel Systems (China), BorgWarner (2021-July 2023) • Managing Director, Powertrain System (China), Gnutti-Carlo (2018-2020) 11 Table of Contents
Removed
(energy equipment, solutions, and services provider) (2019) • Vice President, Digital Operations — Infrastructure, Enterprise Resource Planning, Apps. Ops., General Electric Company (2016 — 2018) Samantha M. Pombier (42) Vice President and Controller (July 2023) • Assistant Controller, BorgWarner (2020-July 2023) • Director, External Reporting, BorgWarner (2019-2020) • Plant Controller, Hungary, BorgWarner (2017-2019) 12 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

116 edited+21 added−41 removed58 unchanged
Biggest changeIn addition, potentially significant expenditures could be required to comply with evolving interpretations of existing environmental and health and safety laws and regulations or any new such laws and regulations (including concerns about global climate change and its impact) that may be adopted in the future.
Biggest changeIn addition, potentially significant expenditures could be required to comply with evolving interpretations of existing environmental, health and safety, human rights and 18 Table of Contents other laws and regulations, new such laws and regulations currently in effect and that are expected to be in effect in the near future (including the European Union’s Corporate Sustainability Reporting Directive and other new reporting requirements established by regulators in the U.S. and Europe), or additional new such laws and regulations that may be adopted (including due to ongoing concerns regarding global climate change and its impact).
Risks Related to Our Business and Operations We are under substantial pressure from OEMs to reduce the prices of our products. There is substantial and continuing pressure on OEMs to reduce costs, including costs of products we supply. OEM customers expect annual price reductions in our business.
Risks Related to Our Business and Operations We are under substantial pressure from OEMs to reduce the prices of our products. There is substantial and continuing pressure on OEMs to reduce costs, including the costs of products we supply. OEM customers expect annual price reductions in our business.
Although we seek to recover inflationary and other costs and surcharges from our customers and have had some success in the past in recovering a portion of these costs and surcharges, our ability to pass through increased costs to our OEM customers is limited, with any cost recovery often less than 100% and often on a delayed basis, and there can be no assurance that such recoveries will continue in the future.
Although we seek to recover inflationary and other costs and surcharges from our customers and have had some success in the past in recovering a portion of these costs and surcharges, our ability to pass through increased costs to our OEM customers is limited (with any cost recovery often less than 100% and on a delayed basis) and there can be no assurance that such recoveries will continue in the future.
The launch of a new vehicle program for a customer 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, initial product quality and other factors.
The launch of a new vehicle program for a customer is a complex process, the success of which depends on a wide range of factors, including the production readiness of our manufacturing facilities and processes and those of our suppliers, as well as factors related to tooling, equipment, employees, initial product quality and other factors.
We could incur restructuring charges as we execute restructuring and other actions in an effort to improve future profitability and competitiveness and to optimize our product portfolio, and may not achieve the anticipated savings and benefits from these actions.
We could incur restructuring charges as we execute restructuring and other actions in an effort to improve future profitability and competitiveness and to optimize our product portfolio, and we may not achieve the anticipated savings and benefits from these actions.
Greenhouse gas regulations could increase the price of the electricity we purchase, increase costs for use of natural gas, potentially restrict access to or the use of natural gas, require us to purchase allowances to offset our own emissions or result in an overall increase in costs of raw materials, any one of which could increase our costs, reduce competitiveness in a global economy, impact our reputation, or otherwise negatively affect our business, financial condition and results of operations.
Greenhouse gas emissions regulations could increase the price of the electricity we purchase, increase costs for use of natural gas, potentially restrict access to or the use of natural gas, require us to purchase allowances to offset our own emissions or result in an overall increase in costs of raw materials, any one of which could increase our costs, reduce competitiveness in a global economy, impact our reputation, or otherwise negatively affect our business, financial condition and results of operations.
Item 1A. Risk Factors Our business is subject to various risks and uncertainties. While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties not presently known to PHINIA or that PHINIA currently deems immaterial that also may materially adversely affect us in future periods.
Item 1A. Risk Factors Our business is subject to various risks and uncertainties. While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties not presently known to PHINIA or that PHINIA currently deems immaterial that may materially adversely affect us in future periods.
As a result, our products may not be able to compete successfully with our competitors’ products, and we may not be able to meet the growing demands of customers. These trends may adversely affect our business, financial condition and results of operations, including our sales and the profit margins on our products.
As a result, our products may not be able to compete successfully with our competitors’ products, and we may not be able to meet the growing demands of customers. These trends could adversely affect our business, financial condition and results of operations, including our sales and the profit margins on our products.
We may not realize anticipated savings or benefits from past or future actions in full or in part or within the time periods we expect. We are also subject to the risks of labor unrest, negative publicity and business disruption in connection with our actions.
We may not realize anticipated savings or benefits from past or future actions in full or in part or within the time periods anticipated. We are also subject to the risks of labor unrest, negative publicity and business disruption in connection with our actions.
Many of our suppliers face similar risks. Supply disruptions relating to such regulations could result in increased costs, jeopardize the continuity of production, and have an adverse effect on our business, financial condition and results of operations.
Many of our customers and suppliers face similar risks. Supply disruptions relating to such regulations could result in increased costs, jeopardize the continuity of production, and have an adverse effect on our business, financial condition and results of operations.
Any or all of these factors could adversely affect our ability to maintain relationships with customers and employees, achieve the anticipated benefits of the acquisition at all or on the timeline expected, and could have an adverse effect on the combined company.
Any or all of these factors could adversely affect our ability to maintain relationships with customers and employees, or achieve the anticipated benefits of the acquisition on the timeline expected, and could have an adverse effect on the combined company.
It is possible that the integration process could result in the loss of key employees, the disruption of our operations, the inability to maintain or increase our competitive presence, inconsistencies in standards, controls, procedures and policies, difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition, the diversion of management’s attention to integration matters, difficulties in the assimilation of operations, employees and corporate cultures, and/or the realization of unknown or inestimable liabilities relating to the acquired business or inaccurate assessment of undisclosed, contingent or other liabilities or problems.
It is possible that the integration process could result in the loss of key employees, the disruption of our operations, the inability to maintain or increase our competitive presence, inconsistencies in standards, controls, procedures and policies, difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the acquisition, the diversion of management’s attention to integration matters, difficulties in the assimilation of operations, employees and corporate cultures, and/or the realization of unknown or inestimable liabilities relating to the acquired business or inaccurate assessment of undisclosed, contingent or other liabilities or complexities.
Our ability to identify, attract, retain and develop a qualified global workforce could adversely impact our business, financial condition and results of operations and impair our ability to meet our strategic objectives and the needs of our customers.
Our inability to identify, attract, retain and develop a qualified global workforce could adversely impact our business, financial condition and results of operations and impair our ability to meet our strategic objectives and the needs of our customers.
Consequently, our results could be affected by changes in trade, monetary and fiscal policies, trade restrictions or prohibitions, import or other charges or taxes, fluctuations in foreign currency exchange rates, limitations on the repatriation of funds, changing economic conditions, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political instability and disputes, international terrorism, acts of war and other factors that may be discrete to a particular country or geography.
Consequently, our results would be affected by changes in trade, monetary and fiscal policies, trade restrictions or prohibitions, import tariffs or other charges or taxes, fluctuations in foreign currency exchange rates, limitations on the repatriation of funds, changing economic conditions, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political instability and disputes, international terrorism, acts of war and other factors that may be discrete to a particular country or geography.
The consequences of a cybersecurity attack or incident could ultimately cause significant damage to our reputation, affect our relationships with our employees, customers, suppliers, and other business partners, lead to claims against us and ultimately adversely affect our business, financial condition and results of operations.
The consequences of a cybersecurity attack or incident could cause significant damage to our reputation, affect our relationships with our employees, customers, suppliers, and other business partners, or lead to governmental investigations or claims against us, and ultimately, adversely affect our business, financial condition and results of operations.
These circumstances and other rapidly changing industry conditions (such as volatile production volumes; credit tightness; changes in foreign currencies; raw material, commodity, tariffs, transportation and energy price escalation; drastic changes in consumer preferences; and other factors) have resulted or could in the future result in significant supply disruptions, supplier financial instability or distress, and commercial disputes with suppliers and customers.
These circumstances and other rapidly changing industry conditions (such as volatile production volumes; credit tightness; tariffs and changes in trade policy and relations; changes in foreign currencies; raw material, commodity, transportation and energy price escalation; drastic changes in consumer preferences; and other factors) have resulted or could in the future result in significant supply disruptions, supplier financial instability or distress, or commercial disputes with suppliers and customers.
These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may maximize the value of our business, and might discourage or delay a strategic transaction that our stockholders may consider favorable.
These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may maximize the value of our business, and they may discourage or delay a strategic transaction that our stockholders may consider favorable.
We derived the historical financial information prior to July 3, 2023 included in this Form 10-K from BorgWarner’s consolidated financial statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future.
We derived the historical financial information prior to July 3, 2023 included in this Form 10-K from the Former Parent’s consolidated financial statements, and this information does not necessarily reflect the results of operations and financial position we would have achieved as an independent, publicly traded company during the periods presented, or those that we will achieve in the future.
If, as a result of any of our representations being untrue or our covenants being breached, the Spin-Off were determined not to qualify for its intended tax-free treatment, we could be required by the Tax Matters Agreement to indemnify BorgWarner for the resulting taxes and related expenses. Those amounts could be material.
If, as a result of any of our representations being untrue or our covenants being breached, the Spin-Off were determined not to qualify for its intended tax-free treatment, we could be required by the Tax Matters Agreement to indemnify the Former Parent for the resulting taxes and related expenses. Those amounts could be material.
Specifically, we are subject to certain restrictions on our ability to enter into acquisition, merger, liquidation, sale and stock redemption transactions with respect to our stock or assets, and we may be required to indemnify BorgWarner against any resulting tax liabilities even if we do not participate in or otherwise facilitate the acquisition.
Specifically, we are subject to certain restrictions on our ability to enter into acquisition, merger, liquidation, sale and stock redemption transactions with respect to our stock or assets, and we may be required to indemnify the Former Parent against any resulting tax liabilities even if we do not participate in or otherwise facilitate the acquisition.
Changes in tax laws or tax rates, the resolution of tax assessments or audits or similar processes by various tax authorities, and the inability to fully utilize our tax loss carryforwards and tax credits could adversely affect our 20 Table of Contents business, financial condition and results of operations. In addition, we may periodically restructure our legal entity organization.
Changes in tax laws or tax rates, the resolution of tax assessments or audits or similar processes by various tax authorities, and the inability to fully utilize our tax loss carryforwards and tax credits could adversely affect our business, financial condition and results of operations. In addition, we may periodically restructure our legal entity organization.
The Spin-Off was intended to qualify as a tax-free “reorganization” within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (Code). In connection with the Spin-Off, BorgWarner received a written opinion from Ernst & Young, LLP to such effect.
The Spin-Off was intended to qualify as a tax-free “reorganization” within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (Code). In connection with the Spin-Off, the Former Parent received a written opinion from Ernst & Young, LLP to such effect.
These claims may also arise under the Separation and Distribution Agreement we entered into with BorgWarner in connection with the Spin-Off, which allocated responsibility to us for various legacy matters, including certain items that are otherwise unrelated to our business.
These claims may also arise under the Separation and Distribution Agreement we entered into with the Former Parent in connection with the Spin-Off, which allocated responsibility to us for various legacy matters, including certain items that are otherwise unrelated to our business.
Such situations could result in significant financial penalties to us or a diversion of employees and financial resources to improving launches rather than investment in continuous process improvement or other growth initiatives and could result in our customers shifting work away from us to a competitor, all of which could result in loss of revenue or loss of market share and could have an adverse effect on our business, financial condition and results of operations.
Such situations could result in significant financial penalties to us, or a diversion of employees and financial resources to improving launches rather than investing in continuous process improvement or other growth initiatives, and could result in our customers shifting work away from us to a competitor, any of which could result in loss of revenue or loss of market share and could have an adverse effect on our business, financial condition and results of operations.
Following the Spin-Off, we also face additional costs and demands on management’s time associated with being an independent, publicly traded company, including costs and demands related to investor and public relations, public financial reporting and corporate governance, including board of director fees and expenses.
Following the Spin-Off, we have also faced additional costs and demands on management’s time associated with being an independent, publicly traded company, including costs and demands related to investor and public relations, public financial reporting and corporate governance, including board of director fees and expenses.
These policies, processes and strategies are designed to help (i) identify, prevent and mitigate cybersecurity threats to the Company; (ii) preserve the confidentiality, security and availability of the information that we collect and store for use in operating our business; (iii) protect the Company’s intellectual property; (iv) maintain the confidence of our 15 Table of Contents customers, suppliers, other business partners and employees; and (v) provide appropriate public disclosure of cybersecurity risks and incidents when required.
These policies, processes and strategies are designed to help (i) identify, prevent and mitigate against evolving cybersecurity threats to the Company; (ii) preserve the confidentiality, security and availability of the information that we collect and store for use in operating our business; (iii) protect the Company’s intellectual property; (iv) maintain the confidence of our customers, suppliers, other business partners and employees; and (v) provide appropriate public disclosure of cybersecurity risks and incidents when required.
If we do not continue to innovate and develop, or acquire, new and compelling products that gain acceptance with OEMs, if the market adoption for electric vehicles (particularly commercial vehicles) grows faster than expected, or if authorities implement additional or more stringent limits or phase-outs for combustion powered vehicles on a broad basis, our business, financial condition and results of operations could be adversely impacted.
If we do not continue to develop or acquire new and compelling products that gain acceptance with OEMs, if we do not expand our offerings of combustion-agnostic products and solutions, if the market adoption for electric vehicles (particularly commercial vehicles) grows faster than expected, or if authorities implement additional or more stringent limits or phase-outs for combustion-powered vehicles on a broad basis, our business, financial condition and results of operations could be adversely impacted.
We are aware of instances in which we may not have complied with those requirements and regulations and are pursuing voluntary processes with the relevant authorities to reconstruct records, which have resulted and may continue to result in value added taxes being assessed for periods in which we claimed an ability to not make payments and/or in the imposition of penalties, either of which could be material.
We are aware of instances in which we may not have complied with those requirements and regulations and pursued voluntary processes with the relevant authorities to reconstruct records, which resulted in value added taxes being assessed for periods in which we claimed an ability to not make payments and/or in the imposition of penalties, either of which could be material.
This is primarily because of the following factors: • Prior to the Spin-Off, we operated as part of BorgWarner, and BorgWarner performed various corporate functions for us. Our historical combined financial information reflects allocations of corporate expenses from BorgWarner for these functions.
This is primarily because of the following factors: • Prior to the Spin-Off, we operated as part of the Former Parent, and the Former Parent performed various corporate functions for us. Our historical combined financial information reflects allocations of corporate expenses from the Former Parent for these functions.
Changes in laws, regulations and government policies on foreign trade and investment can affect the demand for our products and services, cause non-U.S. customers to shift preferences towards domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries.
Changes in laws, regulations and government policies on foreign trade and investment can affect the demand for our products and services, cause customers to shift preferences towards domestically manufactured or branded products, and impact the competitive position of our products or prevent us from being able to sell or manufacture products in certain countries.
In connection with the Spin-Off, BorgWarner transferred to us plan assets and obligations primarily associated with our active, retired, and other former BorgWarner employees in certain jurisdictions, and we will provide the benefits directly from the plan assets. The actual assumed net benefit plan obligations and related expenses could change significantly from our estimates.
In connection with the Spin-Off, the Former Parent transferred to us plan assets and obligations primarily associated with our active, retired, and other of the Former Parent’s former employees in certain jurisdictions, and we will provide the benefits directly from the plan assets. The actual assumed net benefit plan obligations and related expenses could change significantly from our estimates.
A number of our manufacturing facilities were acquired prior to the completion of the Spin-Off, and as a result, we may incur material costs and liabilities relating to activities that predate our ownership or the ownership of BorgWarner.
A number of our manufacturing facilities were acquired prior to the completion of the Spin-Off, and as a result, we may incur material costs and liabilities relating to activities that predate our ownership or the ownership of the Former Parent.
Under the Separation and Distribution Agreement we entered into with BorgWarner in connection with the Spin-Off, we are generally allocated responsibility for any consequences arising out of the German investigation and any similar investigations.
Under the Separation and Distribution Agreement we entered into with the Former Parent in connection with the Spin-Off, we are generally allocated responsibility for any consequences arising out of the German investigation and any similar investigations.
As previously reported, German authorities announced a diesel defeat device investigation in 2022, which we believe is focused on engines sold by two of our light vehicle OEM customers prior to 2020, when BorgWarner acquired Delphi Technologies PLC.
As previously reported, German authorities announced a diesel defeat device investigation in 2022, which we believe is focused on engines sold by two of our light vehicle OEM customers prior to 2020, when the Former Parent acquired Delphi Technologies PLC.
To the extent we are unable to remain competitive with our total rewards programs (which includes compensation and benefits programs and practices), human capital management strategies and objectives, or inclusive workplace culture, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we may experience higher labor-related costs and significant employee turnover, and may be unable to attract and retain a qualified global workforce, including members of management and employees with engineering, technical and software capabilities, in numbers sufficient for our needs.
To the extent we are unable to remain competitive with our total rewards programs (which includes compensation and benefits programs and practices), human capital management strategies and objectives, or inclusive workplace culture, or if qualified candidates or employees become more difficult to attract or retain under reasonable terms, we may experience higher labor-related costs and significant employee turnover, and may be unable to attract and retain a qualified global workforce, including members of management, other senior leaders and employees with key engineering and technical skills, in numbers sufficient for our needs.
Among other things, the level of production orders we receive is dependent on the ability of our OEM customers to design 17 Table of Contents and sell products that consumers desire to purchase.
Among other things, the level of production orders we receive is dependent on the ability of our OEM customers to design and sell products that consumers desire to purchase.
Extraordinary events, including natural disasters or extreme weather events, including those that may result from the impacts of climate change, political disruptions, terrorist attacks, pandemics or other public health crises, such as the COVID-19 pandemic, and acts of war have in the past and may in the future disrupt our business, impact our supply chain and access to necessary raw materials, or adversely affect the global economy generally, resulting in a loss of sales and customers.
Extraordinary events, including natural disasters or extreme weather events (including those that may result from the impacts of climate change), fires or similar catastrophic events, political disruptions, terrorist attacks, pandemics or other public health crises, such as the COVID-19 pandemic, and acts of war have in the past and may in the future disrupt our business or operations, impact our supply chain and access to necessary raw materials, or adversely affect the global economy generally, resulting in a loss of sales and customers and an increase in costs.
This could subject us to the risks of local currency devaluation and business disruption. Our business in China is subject to aggressive competition and is sensitive to economic, political, and market conditions. Maintaining a strong position in the Chinese market is a key component of our global strategy.
This could subject us to the risks of local currency devaluation and business disruption. 16 Table of Contents Our business in China is subject to aggressive competition and is sensitive to economic, political, social and market conditions. Maintaining a strong position in the Chinese market is a key component of our global strategy.
As a result, we have experienced competition from suppliers in other parts of the world that enjoy economic advantages, such as lower labor costs, lower health care costs, lower tax rates and, in some cases, export or raw materials subsidies. Increased competition could adversely affect our business, financial condition and results of operations.
As a result, we have experienced competition from suppliers in other parts of the world that enjoy economic advantages, such as lower labor costs, lower healthcare costs, lower tax rates and, in some cases, export or raw material subsidies. Increased competition could adversely affect our business, financial condition and results of operations.
Any tax liability is ultimately a BorgWarner responsibility under the Tax Matters Agreement to the extent it relates to any period prior to the distribution. To the extent we are unable to comply with those requirements and regulations after the distribution, any consequences would be our responsibility.
Any tax liability is ultimately a responsibility of the Former Parent under the Tax Matters Agreement to the extent it relates to any period prior to the distribution. To the extent we are unable to comply with those requirements and regulations after the distribution, any consequences would be our responsibility.
The Credit Agreement includes, and any debt we incur in the future may include, covenants limiting our ability to, among other things, pay cash dividends, redeem or repurchase stock, incur debt or liens, enter into transactions with affiliates, merge, dissolve, repay subordinated indebtedness, make investments and dispose of assets.
The agreements governing our current indebtedness include, and any debt we incur in the future may include, covenants limiting our ability to, among other things, pay cash dividends, redeem or repurchase stock, incur debt or liens, enter into transactions with affiliates, merge, dissolve, repay subordinated indebtedness, make investments and dispose of assets.
If we experience a prolonged shortage of critical components from any of our suppliers and cannot procure such components from other sources, we may be unable to meet the production schedules for some of our key products and could miss customer delivery expectations.
If we experience a prolonged shortage of critical components from any of our suppliers and cannot procure such components from other sources, we may be unable to meet the production schedules for some of our key products 17 Table of Contents and customer delivery expectations.
Disruptions and attacks on our information technology systems, or on the information systems of third parties with which we engage, pose a risk to the security of our systems and data, including the data of our employees, customers and suppliers.
Disruptions in, attacks on and the integrity of our information technology systems, or on the information systems, products or services of third parties with which we engage, pose a risk to the security of our systems and data, including the data of our employees, customers and suppliers.
To date, no cybersecurity attack or incident, or any risk from cybersecurity threats, has materially affected or has been determined to be reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition.
To date, no cybersecurity attack or incident, or any risk from cybersecurity threats, has materially affected or is reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition.
Developments in our business or events beyond our control, including prevailing economic, financial, and industry conditions, could affect our ability to comply with the covenants and other requirements under the Credit Agreement.
Developments in our business or events beyond our control, including prevailing economic, financial, and industry conditions, could affect our ability to comply with the covenants and other requirements under our debt agreements.
We are also subject to total net leverage ratio and interest coverage ratio financial covenants under the Credit Agreement. In addition, our Credit Agreement requires, and any future debt may require, us to dedicate a significant portion of our cash flows from operations to paying amounts due under the Credit Agreement, thereby reducing funds available for other corporate purposes.
We are also subject to total net leverage ratio and interest coverage ratio financial covenants under such agreements. In addition, our current debt agreements require, and any future debt may require, us to dedicate a significant portion of our cash flows from operations to paying amounts due under such agreements, thereby reducing funds available for other corporate purposes.
We have in the past and likely will in the future derive a significant portion of our net sales from a relatively limited number of OEM customers. For the year ended December 31, 2023, our top five customers accounted for approximately 35% of our net sales, with General Motors Company representing 16%.
We have in the past and likely will in the future derive a significant portion of our net sales from a relatively limited number of OEM customers. For the year ended December 31, 2024, our top five customers accounted for approximately 40% of our net sales, with General Motors Company representing 17%.
These allocations may not reflect the costs we will incur for similar services in the future as an independent, publicly traded company. • We entered into transactions with BorgWarner that did not exist prior to the Spin-Off, such as BorgWarner’s provision of transition and other services, and undertook indemnification obligations, which caused us to incur new costs. • Our historical combined financial information does not reflect changes that we expect to experience in the future as a result of our separation from BorgWarner, including changes in the financing, cash management, operations, cost structure, and employee needs of our business.
These allocations may not reflect the costs we have incurred, and will continue to incur in the future, for similar services as an independent, publicly traded company. • We entered into transactions with the Former Parent that did not exist prior to the Spin-Off, such as the Former Parent’s provision of transition and other services, and undertook indemnification obligations, which caused us to incur new costs. • Our historical combined financial information does not reflect changes that we expected to experience, and have experienced, as a result of our separation from the Former Parent, including changes in the financing, cash management, operations, cost structure, and employee needs of our business.
In recent years, prices for many of these commodities have increased. We have sought to alleviate the impact of increasing costs by including a material pass-through provision in our customer contracts wherever possible and by selectively hedging certain commodity exposures. Customers frequently challenge these contractual provisions and rarely pay the full cost of any increases in the cost of materials.
We have sought to alleviate the impact of increasing costs by including a material pass-through provision in our customer contracts wherever possible and by selectively hedging certain commodity exposures. Customers frequently challenge these contractual provisions and rarely pay the full cost of any increases in the cost of materials.
The vehicle industry is focused on increased fuel efficiency and reduced emissions, including the development of hybrid and electric vehicles, largely as a result of changing consumer preferences and increasingly stringent global regulatory requirements related to the impacts of climate change.
The global vehicle industry has been, and is largely expected to continue to be, focused on increased fuel efficiency and reduced emissions, including the development of hybrid and electric vehicles, primarily as a result of changing consumer preferences and increasingly stringent global regulatory requirements related to the impacts of climate change.
Economic declines resulting in significant reductions in commercial vehicle or light vehicle production have in the past and would in the future adversely affect our business, financial condition and results of operations, including our sales to OEMs.
Economic declines resulting in significant reductions in commercial vehicle or light vehicle production have in the past adversely affected our business, financial condition and results of operations, including our sales to OEMs, and could again in the future.
We have initiated, and we may continue to initiate, restructuring and other measures designed to improve the competitiveness of our business and sustain our margin profile, optimize our product portfolio or global footprint, or create an optimal legal entity structure.
We have initiated, and we may continue to initiate, restructuring and other measures, including those designed to improve the competitiveness of our business and sustain our margin profile, optimize our product portfolio or global footprint, create an optimal legal entity structure, or reduce existing structural costs.
In addition, any of our competitors may foresee the course of market development more accurately than we do, develop products that are 13 Table of Contents superior to our products, produce similar products at a cost that is lower than our cost, or adapt more quickly than we do to new technologies or evolving customer requirements.
In addition, any of our competitors may foresee the course of market development more accurately than we do, develop products that are superior to our offerings, produce similar products at a cost that is lower than our production cost, or adapt more quickly than we do to new technologies or evolving customer and regulatory requirements.
Some cybersecurity attacks or incidents result from human error or manipulation, including phishing attacks or other schemes that use social engineering to gain access to systems or carry out disbursement of funds or other frauds, which increase the risks and costs associated with protecting against such attacks.
Some cybersecurity attacks or incidents result from human error or manipulation (including phishing attacks or other schemes that use social engineering to gain access to systems), carry out disbursement of funds or other frauds, or involve ransomware, malware and other advanced persistent threats that increase the risks and costs associated with protecting against such attacks.
The vehicle and other equipment supply markets in China are highly competitive, with competition from many of the largest global manufacturers and numerous smaller domestic manufacturers. As the Chinese market evolves, we anticipate that market participants will act aggressively to increase or maintain their market share.
The vehicle and other equipment supply markets in China are highly competitive, with competition from many of the largest global manufacturers and numerous smaller domestic manufacturers. As the Chinese market evolves, many market participants have acted aggressively to increase or maintain their market share.
Despite our expectations, the global economy and entire industries have experienced an increased risk of, and actual, global supply chain shortages and other disruptions, including due to labor or social unrest, natural disasters or extreme weather events, political disruptions, pandemics or other public health crises, terrorist attacks, acts of war, government actions (such as relating to trade laws and tariffs), cybersecurity attacks or incidents and other circumstances.
In recent years, the global economy and entire industries have experienced global supply chain shortages and other disruptions, including due to natural disasters or extreme weather events, political disruptions, pandemics or other public health crises, terrorist attacks, acts of war, labor or social unrest, government actions (such as relating to trade laws and tariffs), cybersecurity attacks or incidents and other circumstances.
Future cybersecurity attacks or incidents could potentially lead to the inappropriate disclosure of confidential information, including our intellectual property, improper use of our systems and networks, access to and manipulation and destruction of our or third-party data, production downtimes, lost revenues, inappropriate disbursement of funds, and both internal and external supply shortages.
Nevertheless, cybersecurity attacks on the Company continue unabated and future cybersecurity attacks or incidents could potentially lead to the inappropriate disclosure of confidential information (including our intellectual property or employee, customer or supplier data), improper use of our systems and networks, access to and manipulation and destruction of our third-party data, production downtimes or delays, lost revenues, inappropriate disbursement of funds, and both internal and external supply shortages.
To maintain our profit margins, we seek price reductions from our suppliers, improved production processes to increase manufacturing efficiency, and streamlined product designs to reduce costs. In recent years, however, many of our suppliers have sought to increase prices in order to offset inflationary and other costs and surcharges.
To maintain our profit margins, we seek periodic price reductions from our suppliers in response to this expectation, to improve production processes to increase manufacturing efficiency, and to streamline product designs to reduce costs. In recent years, however, many of our suppliers have sought to increase prices in order to offset inflationary and other costs and surcharges.
Violations of these laws, which are complex, may result in criminal penalties, sanctions or fines that could have an adverse effect on our business, financial condition, results of operations and reputation.
Compliance violations may result in criminal penalties, sanctions or fines that could have an adverse effect on our business, financial condition, results of operations and reputation.
In addition, our historical combined financial statements do not include an allocation of interest expense comparable to the interest expense we will incur as a result of the Internal Restructuring and the Spin-Off, including interest expense in connection with our incurrence of indebtedness.
In addition, our historical combined financial statements do not include an allocation of interest expense comparable to the interest expense we incurred as a result of the Spin-Off, including interest expense in connection with our incurrence of indebtedness relating to the Spin-Off.
We provide product warranties to our customers for some of our products. Under these product warranties, we may be required to bear costs and expenses for the repair or replacement of these products.
We have liabilities related to product warranties, litigation and other claims. We provide product warranties to our customers for some of our products. Under these product warranties, we may be required to bear costs and expenses for the repair or replacement of these products.
In addition, as we continue to develop and invest in products and solutions involving alternative fuels (such as hydrogen, ethanol and e-fuels) designed to enhance fuel efficiency and reduce emissions, we may experience an increase in fuel and product quality-related product warranty or other claims.
In addition, as we continue to develop and invest in products and solutions involving alternative fuels (such as hydrogen, ammonia, ethanol, compressed natural gas and other zero- or lower-carbon fuel types) designed to enhance fuel efficiency and reduce emissions, we may experience an increase in fuel and product quality-related product warranty or other claims.
In addition, we may be required to incur significant costs to protect against damage caused by such attacks or incidents in the future.
In addition, we expect, and may be required, to continue to incur significant additional costs to protect against damage caused by cybersecurity attacks or incidents in the future.
Risks Related to the Spin-Off We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off. We may be unable to achieve the full strategic and financial benefits expected to result from the separation and distribution, or such benefits may be delayed or not occur at all.
We may be unable to achieve the full strategic and financial benefits expected to result from the separation and distribution, or such benefits may be delayed or not occur at all.
We have internal policies and procedures relating to compliance with such laws; however, there is a risk that such policies and procedures will not always protect us from the improper acts of employees, agents, business partners, joint venture partners, or representatives, particularly in the case of recently acquired operations that may not have significant training in applicable compliance policies and procedures.
We have internal policies and procedures and supplier policies and requirements relating to compliance with anti-corruption, sanctions, import and export control laws and exchange control laws, and we conduct periodic compliance training on such laws for our employees; however, there is a risk that such policies, procedures and requirements will not always protect us from the improper acts of employees, agents, suppliers, other business partners, joint venture partners, or representatives, particularly in the case of recently acquired operations that may not have significant training in applicable compliance policies and procedures.
Any increased trade barriers or restrictions on global trade, particularly trade with China, could adversely impact our business, financial condition and results of operations. Risks Related to Our Customers and Suppliers We face credit, operational and sales concentration risks related to our customers. We rely on sales to OEMs around the world of varying credit quality and manufacturing demands.
Any increased trade barriers or restrictions on global trade, particularly trade with China, could adversely impact our competitiveness in the Chinese market and our business, financial condition and results of operations. Risks Related to Our Customers and Suppliers We face credit, operational and sales concentration risks related to our customers.
Changes that could impact the legal environment include new legislation, regulations, and policies, investigations and legal proceedings, and new interpretations of existing rules and regulations, in particular, changes in import and export control laws or exchange control laws, additional limitations on greenhouse gas emissions or other matters related to the impacts of climate change, and other changes in laws in countries where we operate or intend to operate.
Changes that could impact the legal environment include new legislation, regulations, and policies, investigations and legal proceedings, and new interpretations of existing rules and regulations, in particular, changes in sanctions, import and export control laws or exchange control laws, and other changes in laws in countries where we operate or intend to operate.
The local currency is typically the functional currency for our foreign subsidiaries. Significant foreign currency fluctuations and the associated translation of those foreign currencies could adversely affect our business.
The local currency is typically the functional currency for our foreign subsidiaries. While we did not experience significant foreign currency impacts during 2024, significant foreign currency fluctuations and the associated translation of those foreign currencies could adversely affect our business.
Failures or delays (whether actual or perceived) in achieving our strategies or expectations related to climate change and other environmental matters could adversely affect our business, financial condition and results of operations, and reputation, and increase the risk of litigation. We have liabilities related to product warranties, litigation and other claims.
Failures or delays (whether actual or perceived) in achieving our strategies or expectations related to climate change and other environmental matters could adversely affect our business, financial condition and results of operations, harm our reputation, result in our inability to meet the expectations of our customers and other stakeholders, and increase the risk of litigation.
Supply to several of these customers requires significant investment by us. We base our growth projections, in part, on commitments made by our customers. These commitments by OEMs generally renew yearly during a program life cycle.
We rely on sales to OEMs around the world of varying credit quality and manufacturing demands. Supply to several of these customers requires significant investment by us. We base our growth projections, in part, on commitments made by our customers. These commitments by OEMs generally renew yearly during a program life cycle.
We are cooperating with the German investigation, which is ongoing and has resulted, and will continue to result in, us incurring significant costs and could ultimately lead to any of the consequences we outline above. We are subject to extensive environmental and health and safety laws and regulations that are subject to change and involve significant risks.
We are cooperating with the German investigation, which is ongoing and has resulted, and will continue to result in, us incurring significant costs and could ultimately lead to any of the consequences we outline above.
Examples of such factors include, but are not limited to, evolving legal, regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon markets.
Examples of such factors include, but are not limited to, evolving legal, regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, the availability of renewable energy sources, changes in carbon markets, government incentives and tax credits, and changes in general economic, financial and industry conditions.
We select suppliers based on a variety of factors, including price, quality, technology, production capacities, customer requirements, reliability, financial condition and geographic location. We expect our suppliers to deliver components in accordance with our stated written expectations.
We select and maintain relationships with suppliers considering a variety of factors, including price, quality, technology, production capacities, reliability, customer requirements, environmental sustainability and other responsible business practices, financial condition and geographic location. We expect our suppliers to deliver components in accordance with our stated expectations.
For the automotive industry in particular, although global supply chains have continued to recover from the disruption caused by COVID-19 lockdowns, other circumstances (such as Russia’s invasion of Ukraine in 2022, natural disasters and extreme weather events) have caused supply constraints for certain components that continue to impact global industry production levels.
For the automotive industry in particular, although global supply chains have recovered from the disruption caused by the COVID-19 pandemic, other circumstances (such as the ongoing conflict between Russia and Ukraine, natural disasters and extreme weather events) have caused supply constraints for certain components that have impacted, and some of which continue to impact, global industry production levels.
Information technology systems are vulnerable to disruptions, including those resulting from cybersecurity attacks, failures or vulnerabilities in third-party provided services and natural disasters or adverse weather events.
We rely on the capacity, reliability and security of our information technology systems and infrastructure. Information technology systems are vulnerable to disruptions, including those resulting from cybersecurity attacks, failures or vulnerabilities in third-party provided products and services, and natural disasters or adverse weather events.
Increased competition may result in price reductions, reduced margins and our inability to gain or hold market share. Our business in China is also sensitive to economic, political, social and market conditions that drive sales volumes in China.
Increased competition has contributed to pricing pressure, reduced margins and limited our ability to gain or hold market share. Our business in China is also sensitive to economic, political, social and market conditions that drive sales volumes in China.
All of these agreements also govern our relationship with BorgWarner following the Spin-Off. We rely on BorgWarner to satisfy its performance obligations under these agreements. If we or BorgWarner are unable to 24 Table of Contents satisfy our or its respective obligations under these agreements, including indemnification obligations, our business, financial condition and results of operations could be adversely affected.
We rely on the Former Parent to satisfy its performance obligations under these agreements. If we or the Former Parent are unable to satisfy our or its respective obligations under these agreements, including indemnification obligations, our business, financial condition and results of operations could be adversely affected.
The physical and transitional impacts of climate change could also disrupt our operations, including by impacting the availability and cost of materials within our supply chain, and could also increase insurance and other operating costs.
The physical and transitional impacts of climate change could also disrupt our operations, including by impacting the availability and cost of materials within our supply chain, and could also increase insurance and other operating costs. These factors may also impact our decisions to construct new facilities in certain geographic locations.
The incurring of significant liabilities for which there is no, or insufficient, insurance coverage could adversely affect our business, financial condition and results of operations. Compliance with and changes in laws could be costly and could affect our business, financial condition and results of operations.
The incurring of significant liabilities for which there is no, or insufficient, insurance coverage could adversely affect our business, financial condition and results of operations. Changes in tax laws or tax rates taken by taxing authorities and tax audits or similar processes could adversely affect our business, financial condition and results of operations.
We continue to face volatile costs of commodities used in the production of our products and elevated levels of inflation. We use a variety of commodities (including aluminum, copper, nickel, plastic resins, steel, other raw materials and energy) and materials purchased in various forms, such as castings, powder metal, forgings, stampings and bar stock, in the production of our products.
We use a variety of commodities (including aluminum, copper, nickel, plastic resins, steel, other raw materials and energy) and materials purchased in various forms, such as castings, powder metal, forgings, stampings and bar stock, in the production of our products. In recent years, prices for many of these commodities have increased.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

14 edited+1 added−1 removed6 unchanged
Biggest changeThe Company requires personnel to complete training regarding cybersecurity threats and incident reporting procedures, which reinforces the Company’s information security policies and processes. We also require new hires to complete training regarding cybersecurity threats and acceptable use of our information systems. • Incident Response Planning.
Biggest changeThe Company has processes in place for identifying and overseeing cybersecurity risks presented by third-party users of the Company’s systems, as well as third-party systems used by the Company. • Training. The Company requires personnel, including new hires, to complete training regarding cybersecurity threats, incident reporting procedures and acceptable use of our information systems. • Incident Response Planning.
We have experienced leaders responsible for assessing and managing risks arising from cybersecurity threats. Our CISO reports to the CIO and has served in various roles in information technology and information security for over 28 years, including most recently leading the Information Security Office of BorgWarner Inc. He holds a Bachelor of Science in Physics.
We have experienced leaders responsible for assessing and managing risks arising from cybersecurity threats. Our CISO reports to the CIO and has served in various roles in information technology and information security for over 29 years, including most recently leading the Information Security Office of BorgWarner Inc. He holds a Bachelor of Science in Physics.
Our cybersecurity and data protection policies, processes and strategies are informed by regulatory and business requirements, our prior experience addressing cybersecurity attacks and incidents (including with our former affiliates) and industry practices, and are periodically adjusted based on the results of assessments conducted through our ERM practices, third-party audits and independent reviews, and other processes.
Our cybersecurity and data protection policies, processes and strategies are informed by regulatory and business requirements, our prior experience addressing cybersecurity attacks and incidents (including with our 24 Table of Contents former affiliates) and industry practices, and are periodically adjusted based on the results of assessments conducted through our ERM practices, third-party audits and independent reviews, and other processes.
The cybersecurity team, in coordination with other Incident Response Team members, works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incident.
The cybersecurity team, in coordination with other Incident Response Team members, works collaboratively across the Company to implement a program designed to protect the Company’s information systems from cybersecurity threats and to promptly respond to cybersecurity incidents.
Item 1C. Cybersecurity Risk Management and Strategy As part of our overall risk management system and processes, we assess, identify and manage material risks from cybersecurity threats through our Enterprise Risk Management (ERM) process.
Item 1C. Cybersecurity Risk Management and Strategy As part of our overall risk management system and processes, we assess, identify and manage material risks from cybersecurity threats through our Enterprise Risk Management (ERM) program.
Consistent with the Company’s ERM practices, our cybersecurity policies, processes and layers of defense focus on the following areas: • Vigilance.
Consistent with the Company’s ERM practices, our cybersecurity policies, processes and layers of defense focus on the following areas: • Surveillance and Monitoring.
The Company’s cybersecurity team, which is led by our CISO, is responsible for overseeing the Company’s cybersecurity and data security operations, programs, policies and processes and their general effectiveness.
The Company’s cybersecurity team, which is led by our CISO, oversees the Company’s cybersecurity and data security operations, programs, policies and processes and their general effectiveness.
The Company’s CIO reports to our CEO and has served in various roles in information technology and information security for over 25 years, including most recently as CIO of Gentherm Incorporated. Our CIO holds a Bachelor of Science in Business, with a concentration in Computer Information Systems, and an MBA in Finance and Strategic Management.
The Company’s CIO reports to our CEO and has served in various roles in information technology and information security for over 26 years, including CIO of Gentherm Incorporated immediately prior to joining the Company. Our CIO holds a Bachelor of Science in Business, with a concentration in Computer Information Systems, and an MBA in Finance and Strategic Management.
Third-party audits and independent reviews of our cybersecurity measures, information security control environment and operating effectiveness are conducted on at least an annual basis to assist us with enhancing, implementing and monitoring our cybersecurity risk management programs. As a global company, we have experienced cybersecurity attacks and incidents in the past, and we could in the future experience similar attacks.
Third-party audits and independent reviews of our cybersecurity measures, information security control environment and operating effectiveness are conducted on at least an annual basis. As a global company, we have experienced cybersecurity attacks and incidents in the past, and we could in the future experience similar attacks.
The team also informs and coordinates with the Company’s Disclosure Committee in timely reporting such incidents, as appropriate and depending on the severity of the incident, to the Strategy Board (consisting of our CEO, Chief Financial Officer (CFO), General Counsel, CIO and other members of management), Audit Committee and Board, and providing updates regarding such incidents until addressed.
The team is also responsible for informing and coordinating with the Company’s Disclosure Committee in timely reporting such incidents, as appropriate and depending on the severity 25 Table of Contents of the incident, and facilitating updates to the Strategy Board (consisting of our CEO, Chief Financial Officer (CFO), General Counsel, CIO and other members of management), Audit Committee and Board regarding such incidents until addressed.
The Company deploys system safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including early detection and response antivirus tools, data leak prevention tools and systems, vulnerability scans of data centers, firewalls, and anti-malware functionality and access controls. • Third-Party Collaboration.
The Company deploys system safeguards that are designed to protect the Company’s information systems from cybersecurity threats, including early detection and response antivirus tools, data leak prevention tools and systems, vulnerability scans of data centers, firewalls, anti-malware functionality and access controls, and programs to support remediation, replacement or isolation of systems that have reached, or are expected to reach, end of security life. • Third-Party Collaboration.
The Board and Audit Committee receive regular updates regarding cybersecurity risks from the Company’s Chief Information Security Officer (CISO) and Chief Information Officer (CIO), including with respect to the assessment and management of such risks and recent developments, trends and the general threat environment.
The Audit Committee receives updates regarding cybersecurity risks from the Company’s Chief Information Security Officer (CISO) and Chief Information Officer (CIO), including with respect to the assessment and management of such risks and recent developments, trends and the general threat environment, on at least a quarterly basis.
The Company has established and maintains a cybersecurity incident response plan that outlines an organized and timely approach for responding to and handling security incidents affecting the Company’s systems or data, as well as taking appropriate action when the source of the intrusion or incident involved data from a third party.
The Company has established and maintains a cybersecurity incident response plan that outlines an organized and timely approach for responding to and handling security incidents affecting the Company’s systems or data, including the intrusions or incidents involving data from a third party.
To date, we have not experienced a cybersecurity incident or attack, or any risk from cybersecurity threats, that has materially affected or is reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition. 26 Table of Contents Governance The Board, in coordination with the Audit Committee, oversees the Company’s policies with respect to the assessment and management of risks from cybersecurity threats.
To date, we have not experienced a cybersecurity incident or attack, or any risk from cybersecurity threats, that has materially affected or is reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition.
Removed
The Company has processes in place for identifying and overseeing cybersecurity risks presented by third-party users of the Company’s systems, as well as third-party systems that could adversely impact our business in the event of a cybersecurity incident affecting those systems. • Training.
Added
Governance The Board, in coordination with the Audit Committee, oversees the Company’s policies with respect to the assessment and management of risks from cybersecurity threats. The Board receives updates regarding cybersecurity risks primarily in connection with its oversight of the Company’s risk management practices.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed1 unchanged
Biggest changeOf the 24 facilities, 16 are leased sites, four of which contain Company-owned building and infrastructure with land lease contracts. 27 Table of Contents
Biggest changeOf the 23 facilities, 15 are leased sites, four of which contain Company-owned building and infrastructure with land lease contracts.
Item 2. Properties As of December 31, 2023, the Company had 24 principal manufacturing, assembly and technical facilities worldwide, including our global headquarters and excluding unconsolidated joint venture and administrative offices. Our global headquarters is located in a leased facility in Auburn Hills, Michigan.
Item 2. Properties As of December 31, 2024, the Company had 23 principal manufacturing, assembly and technical facilities worldwide, including our global headquarters and excluding unconsolidated joint venture and administrative offices. Our global headquarters is located in a leased facility in Auburn Hills, Michigan.
The Company, its subsidiaries and affiliates operate principal manufacturing, assembly and technical facilities in the following regions: Americas Europe Asia Total Number of principal manufacturing, assembly and technical facilities (1) 8 10 6 24 ___________ (1) Excludes unconsolidated joint venture and administrative offices.
The Company, its subsidiaries and affiliates operate principal manufacturing, assembly and technical facilities in the following regions: Americas Europe Asia Total Number of principal manufacturing, assembly and technical facilities (1) 8 9 6 23 ___________ (1) Excludes unconsolidated joint venture and administrative offices.
Added
Compared to the prior year, one of the leased sites in Europe ceased operations in early November 2024, was no longer a principal facility leased by the Company at December 31, 2024 and, as a result, is excluded from the above facility totals.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed2 unchanged
Biggest changeItem 3. Legal Proceedings In the ordinary course of its business, the Company is involved in a number of lawsuits and claims, both actual and potential.
Biggest changeItem 3. Legal Proceedings In the normal course of its business, the Company is involved in various commercial and legal claims, actions and complaints, both actual and potential.
See Note 20, “Contingencies,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold.
See Note 18, “Contingencies,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. SEC regulations require disclosure of certain environmental matters when a governmental authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company reasonably believes will exceed a specified threshold.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−2 removed5 unchanged
Biggest changeIn consideration of these shares, BorgWarner contributed to PHINIA certain assets of BorgWarner’s Fuel Systems and Aftermarket businesses. 29 Table of Contents The following table provides information about the Company’s purchases of its equity securities that are registered pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2023: Issuer Purchases of Equity Securities Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under plans or programs (in millions) (2) October 1, 2023 - October 31, 2023 Common Stock Repurchase Program $ 141 November 1, 2023 - November 30, 2023 Common Stock Repurchase Program 425,148 $ 25.87 425,148 $ 130 December 1, 2023 - December 31, 2023 Common Stock Repurchase Program 150,428 $ 26.59 150,428 $ 126 Employee transactions (1) 42,017 $ 30.29 (1) An aggregate of 42,017 shares of the Company’s common stock were withheld by the Company in connection with employees’ payment of taxes associated with the vesting of their restricted stock units granted under the PHINIA Inc. 2023 Stock Incentive Plan.
Biggest changeJuly 5, 2023 December 31, 2023 December 31, 2024 PHINIA Inc. $ 100 $ 84 $ 137 S&P 600 Index $ 100 $ 110 $ 120 S&P 600 Automotive Parts & Equipment Index $ 100 $ 98 $ 96 27 Table of Contents The following table provides information about the Company’s purchases of its equity securities that are registered pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2024: Issuer Purchases of Equity Securities Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under plans or programs (in millions) (2) October 1, 2024 - October 31, 2024 Common Stock Repurchase Program — $ — — $ 188 Employee transactions (1) 1,332 $ 39.67 November 1, 2024 - November 30, 2024 Common Stock Repurchase Program 223,178 $ 53.41 223,178 $ 176 December 1, 2024 - December 31, 2024 Common Stock Repurchase Program 225,709 $ 53.46 225,709 $ 164 Employee transactions (1) 25,353 $ 48.17 (1) An aggregate of 26,685 shares of the Company’s common stock were withheld by the Company in connection with employees’ payment of taxes associated with the vesting of their restricted stock units granted under the PHINIA Inc. 2023 Stock Incentive Plan.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed for trading on the New York Stock Exchange under the symbol PHIN. As of February 23, 2024, there were 1,262 holders of record of common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is listed for trading on the New York Stock Exchange under the symbol PHIN. As of February 7, 2025, there were 1,168 holders of record of common stock.
(2) On August 31, 2023, the Company announced that its Board of Directors authorized a $150 million share repurchase program. As of December 31, 2023, $126 million remained available for repurchase under this authorization.
(2) In August 2023, the Company announced that its Board of Directors authorized a $150 million share repurchase program. In August 2024, the Company’s Board of Directors increased the authorization by $250 million for a total share repurchase program of $400 million.
Removed
July 5, 2023 December 31, 2023 PHINIA Inc. $ 100 $ 84 S&P 600 Index $ 100 $ 110 S&P 600 Automotive Parts & Equipment Index $ 100 $ 98 Sale of Unregistered Securities On February 16, 2023, the Company issued 100 shares of its common stock to BorgWarner pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
Added
As of December 31, 2024, the Company repurchased $236 million of common stock under its repurchase program, excluding the impact of Federal excise tax, and $164 million remained available for repurchase. On February 13, 2025, the Company announced that its Board of Directors increased the authorization by $200 million for a total share repurchase program of $600 million.
Removed
We did not register the issuance of the issued shares under the Securities Act of 1933, as amended, because such issuance did not constitute a public offering.

Item 7. Management's Discussion & Analysis

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

82 edited+32 added−23 removed44 unchanged
Biggest changeThe change in cost of sales for the year ended December 31, 2023 was primarily driven by the following: • Higher sales volume, mix and net new business increased cost of sales by approximately $50 million. 32 Table of Contents • Cost of sales increased $50 million related to certain contract manufacturing agreements with Former Parent that were entered into in connection with the Spin-Off. • Cost of sales was also impacted by higher supplier-related and inflationary costs of approximately $49 million, primarily driven by $87 million non-contractual commercial negotiations with the Company’s suppliers and normal contractual supplier commodity pass-through arrangements partially offset by $30 million of net supply chain savings initiatives and other savings of $8 million. • Other manufacturing costs increased cost of sales by $13 million compared to the year ended December 31, 2022. • Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $13 million primarily due to the weakening of the Chinese Renminbi relative to the U.S.
Biggest changeThis decrease was primarily driven by lower commercial vehicle sales in Europe and lower sales in China in the Fuel Systems segment, partially offset by favorable volume in Europe within the Aftermarket segment. • Cost of sales was impacted by lower supplier costs of approximately $56 million arising primarily from supplier savings and recoveries. 30 Table of Contents • Cost of sales decreased $27 million related to certain contract manufacturing agreements with Former Parent that were entered into in connection with the Spin-Off. • Employee costs increased cost of sales by $27 million, primarily related to inflation and incentive compensation. • Fluctuations in foreign currencies resulted in a year-over-year decrease in cost of sales of approximately $2 million primarily due to the weakening of the Chinese Renminbi and Brazilian Real, offset by the strengthening of the British Pound, each relative to the U.S.
The Company has certain U.S. state income tax returns and certain non-U.S. income tax returns that are currently under various stages of audit by applicable tax authorities. At December 31, 2023, the Company had a liability for tax positions the Company estimates are not more-likely-than-not to be sustained based on the technical merits, which is included in other non-current liabilities.
The Company has certain U.S. state income tax returns and certain non-U.S. income tax returns that are currently under various stages of audit by applicable tax authorities. At December 31, 2024, the Company had a liability for tax positions the Company estimates are not more-likely-than-not to be sustained based on the technical merits, which is included in other non-current liabilities.
The increase in the net unfunded position was a result of lower asset returns, partially offset by higher discount rates. The Company believes it will be able to fund the requirements of these plans through cash generated from operations or other available sources of financing for the foreseeable future.
The decrease in the net unfunded position was a result of higher discount rates, partially offset by lower asset returns. The Company believes it will be able to fund the requirements of these plans through cash generated from operations or other available sources of financing for the foreseeable future.
On July 3, 2023, BorgWarner completed the Spin-Off in a transaction intended to qualify as tax-free to the Company’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis.
On July 3, 2023, BorgWarner completed the Spin-Off in a transaction intended to qualify as tax-free to BorgWarner’s stockholders for U.S. federal income tax purposes, which was accomplished by the distribution of the outstanding common stock of PHINIA to holders of record of common stock of BorgWarner on a pro rata basis.
The Company also has intangible assets related to acquired trade names that are classified as indefinite-lived when there are no foreseeable limits on the periods of time over which they are expected to contribute cash flows. Costs to renew or extend the term of acquired intangible assets are recognized as expense as incurred.
The Company also has intangible assets related to acquired trade names that are classified as indefinite-lived when there are no foreseeable limits on the periods of time over which they are expected to contribute cash flows. Costs to renew or extend the term of acquired intangible assets are recognized as expenses are incurred.
Management’s Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION PHINIA is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increase efficiency and reduce emissions in combustion and hybrid propulsion for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and industrial applications) and light vehicles (passenger cars, trucks, vans and sport-utility vehicles).
Management’s Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION PHINIA is a leader in the development, design and manufacture of integrated components and systems that are designed to optimize performance, increase efficiency and reduce emissions in combustion and hybrid propulsion for commercial vehicles and industrial applications (medium-duty and heavy-duty trucks, buses and other off-highway construction, marine, agricultural and industrial applications), light commercial vehicles (vans and trucks) and light passenger vehicles (passenger cars, mini-vans, cross-overs and sport-utility vehicles).
The primary assumptions affecting the Company’s accounting for employee benefits under ASC Topic 715 as of December 31, 2023 are as follows: • Expected long-term rate of return on plan assets : The expected long-term rate of return is used in the calculation of net periodic benefit cost.
The primary assumptions affecting the Company’s accounting for employee benefits under ASC Topic 715 as of December 31, 2024 are as follows: • Expected long-term rate of return on plan assets The expected long-term rate of return is used in the calculation of net periodic benefit cost.
R&D costs, net of customer reimbursements, were 3.1% of net sales in the year ended December 31, 2023, compared to 3.1% of net sales in the year ended December 31, 2022. The Company will continue to invest in R&D programs, which are necessary to support short- and long-term growth.
R&D costs, net of customer reimbursements, were 3.3% of net sales in the year ended December 31, 2024, compared to 3.1% of net sales in the year ended December 31, 2023. The Company will continue to invest in R&D programs, which are necessary to support short- and long-term growth.
Segment Adjusted Operating Income (AOI) is the measure of segment income or loss used by the Company. Segment AOI is comprised of segment operating income adjusted for restructuring, separation and transaction costs, intangible asset amortization expense, impairment charges and other items not reflective of ongoing 34 Table of Contents operating income or loss.
Segment Adjusted Operating Income (AOI) is the measure of segment income or loss used by the Company. Segment AOI is comprised of segment operating income adjusted for restructuring, separation and transaction 32 Table of Contents costs, intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss.
Certain assumptions, including the expected long-term rate of return on plan assets, discount rate and rates of increase in compensation are described in Note 18, “Retirement Benefit Plans,” to the Consolidated Financial Statements in this Form 10-K.
Certain assumptions, including the expected long-term rate of return on plan assets, discount rate and rates of increase in compensation are described in Note 15, “Retirement Benefit Plans,” to the Consolidated Financial Statements in this Form 10-K.
In addition, we believe we are well positioned to continue to expand differentiated offerings in electronics, software and complete systems capabilities. Relationship with BorgWarner Historically, we have relied on BorgWarner to provide various corporate functions.
In addition, we believe we are well positioned to continue to expand our differentiated offerings and capabilities across electronics, software and complete systems. Relationship with BorgWarner Historically, we have relied on BorgWarner to provide various corporate functions.
Refer to Note 17, “Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding costs and assumptions for employee retirement benefits.
Refer to Note 15, “Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding costs and assumptions for employee retirement benefits.
The required use of the expected long-term rate of return on plan assets may result in recognized returns that are greater or less than the actual returns on those plan assets in any given year. Over time, however, the expected long-term rate of return on plan assets is designed to approximate actual earned long-term returns.
The required use of the expected long-term rate of return on plan assets may result in recognized returns that are greater or less than the actual returns on those plan assets in any 37 Table of Contents given year. Over time, however, the expected long-term rate of return on plan assets is designed to approximate actual earned long-term returns.
Accruals for unrecognized tax benefits are established when, despite the belief that tax positions are supportable, there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more-likely-than- 40 Table of Contents not to be sustained upon examination by the applicable taxing authority.
Accruals for unrecognized tax benefits are established when, despite the belief that tax positions are supportable, there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more-likely-than-not to be sustained upon examination by the applicable taxing authority.
New Accounting Pronouncements Refer to Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding new applicable accounting pronouncements.
New Accounting Pronouncements Refer to Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding new applicable accounting pronouncements. 39 Table of Contents
Management believes that the warranty accrual is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual: Year Ended December 31, (in millions) 2023 2022 Net sales $ 3,500 $ 3,348 Warranty provision $ 41 $ 41 Warranty provision as a percentage of net sales 1.2 % 1.2 % The sensitivity to a 25 basis-point change (as a percentage of net sales) in the assumed warranty trend on the Company’s accrued warranty liability was approximately $9 million.
Management believes that the warranty accrual is appropriate; however, actual claims incurred could differ from the original estimates, requiring adjustments to the accrual: Year Ended December 31, (in millions) 2024 2023 Net sales $ 3,403 $ 3,500 Warranty provision $ 48 $ 41 Warranty provision as a percentage of net sales 1.4 % 1.2 % The sensitivity to a 25 basis-point change (as a percentage of net sales) in the assumed warranty trend on the Company’s accrued warranty liability was approximately $9 million.
During 2022, the Company recognized discrete tax benefits of $7 million, primarily due to certain unrecognized tax benefits and accrued interest related to a matter for which the statute of limitations had lapsed. For further details, see Note 6, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this Form10-K.
In 2023, the Company recognized discrete tax benefits of $7 million, primarily due to certain unrecognized tax benefits and accrued interest related to a matter for which the statute of limitations had lapsed. For further details, see Note 5, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this Form10-K.
Equity in affiliates’ earnings, net of tax was $10 million and $11 million in the years ended December 31, 2023 and 2022, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture. Interest expense was $56 million and $20 million in the years ended December 31, 2023 and 2022, respectively.
Equity in affiliates’ earnings, net of tax was $11 million and $10 million in the years ended December 31, 2024 and 2023, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture. Interest expense was $99 million and $56 million in the years ended December 31, 2024 and 2023, respectively.
None of the Company’s debt agreements require accelerated repayment in the event of a downgrade in credit ratings. Cash Flows Operating Activities Net cash provided by operating activities was $250 million and $303 million in the years ended December 31, 2023 and 2022, respectively.
None of the Company’s debt agreements require accelerated repayment in the event of a downgrade in credit ratings. Cash Flows Operating Activities Net cash provided by operating activities was $308 million and $250 million in the years ended December 31, 2024 and 2023, respectively.
The Tax Matters Agreement generally governs our and the Former Parent’s respective rights, responsibilities and obligations after the distribution with respect to taxes for any tax period ending on or before the distribution date, as well as tax periods beginning before and ending after the distribution date.
The Tax Matters Agreement generally governs our and the Former Parent’s respective rights, responsibilities and obligations after the distribution with respect to taxes for any tax period ending on or before the 38 Table of Contents distribution date, as well as tax periods beginning before and ending after the distribution date.
Contractual Obligations The Company’s significant cash requirements for contractual obligations as of December 31, 2023, primarily consisted of the principal and interest payments on its notes payable and long-term debt, non-cancelable lease obligations, and capital spending obligations. The principal amount of revolving credit facility, notes payable and long-term debt was $822 million as of December 31, 2023.
Contractual Obligations The Company’s significant cash requirements for contractual obligations as of December 31, 2024, primarily consisted of the principal and interest payments on its notes payable and long-term debt, non-cancelable lease obligations, and capital spending obligations. The principal amount of revolving credit facility, notes payable and long-term debt was $1,001 million as of December 31, 2024.
The Company’s management does not expect that an adverse outcome in any of these commercial and legal claims, actions and complaints that are currently pending will have a material adverse effect on the Company’s results of operations, financial position or cash flows.
Except as set forth below, the Company’s management does not expect that an adverse outcome in any of these commercial and legal claims, actions and complaints that are currently pending will have a material adverse effect on the Company’s results of operations, financial position or cash flows.
The Company believes Segment AOI is most reflective of the operational profitability or loss of its reportable segments. Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $64 million and $79 million for the years ended December 31, 2023 and 2022, respectively.
The Company believes Segment AOI is most reflective of the operational profitability or loss of its reportable segments. Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $92 million and $47 million for the years ended December 31, 2024 and 2023, respectively.
LIQUIDITY AND CAPITAL RESOURCES Borrowing Facilities and Long-Term Debt On July 3, 2023, the Company entered into a $1.225 billion Credit Agreement consisting of a $500 million revolving credit facility (the “Revolving Facility”), a $300 million Term Loan A Facility (the “Term Loan A Facility”) and a $425 million Term Loan B Facility (the “Term Loan B Facility”; together with the Revolving Facility and the Term Loan A Facility, collectively, the “Facilities”) in connection with the Spin-Off that occurred on the same date.
LIQUIDITY AND CAPITAL RESOURCES Borrowing Facilities and Long-Term Debt Credit Agreement On July 3, 2023, the Company entered into a $1.225 billion Credit Agreement (as amended, the Credit Agreement) consisting of a $500 million revolving credit facility (the Revolving Facility), a $300 million Term Loan A Facility (the Term Loan A Facility) and a $425 million Term Loan B Facility (the Term Loan B Facility; together with the Revolving Facility and the Term Loan A Facility, collectively, the Facilities) in connection with the Spin-Off that occurred on the same date, maturing on July 3, 2028.
The Company also considers the impact of active management of the plans’ invested assets. In determining its pension expense for the year ended December 31, 2023, the Company used long-term rates of return on plan assets ranging from 2.3% to 7.8%.
The Company also considers the impact of active management of the plans’ invested assets. In determining its pension expense for the year ended December 31, 2024, the Company used long-term rates of return on plan assets ranging from 2.5% to 8.0%.
Actual returns on U.K. pension assets were 2.4% and (35.3)% for the years ended December 31, 2023 and 2022, respectively, compared to the expected rate of return assumption of 5.5% and 4.3%, respectively, for the same years ended. • Discount rate : The discount rate is used to calculate pension obligations.
Actual returns on U.K. pension assets were (6.2)% and 2.4% for the years ended December 31, 2024 and 2023, respectively, compared to the expected rate of return assumption of 5.25% and 5.5%, respectively, for the same years ended. • Discount rate The discount rate is used to calculate pension obligations.
Foreign currencies resulted in a year-over-year decrease in sales of approximately $18 million primarily due to the weakening of the Chinese Renminbi, partially offset by the strengthening of the Euro and British Pound relative to the U.S. Dollar.
Foreign currencies resulted in a year-over-year decrease in sales of approximately $5 million primarily due to the weakening of the Chinese Renminbi and Brazilian Real, partially offset by the strengthening of the British Pound, each relative to the U.S. Dollar.
Refer to Note 21, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information. Capital spending obligations were $48 million as of December 31, 2023.
Refer to Note 19, “Leases and Commitments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information. Capital spending obligations were $51 million as of December 31, 2024.
The Company does not expect Pillar 2 to have a material impact on its effective tax rate or our consolidated results of operation, financial position or cash flows. Refer to Note 6, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding income taxes.
Pillar 2 does not have a material impact to the Company’s effective tax rate or consolidated results of operation, financial position or cash flows. Refer to Note 5, “Income Taxes,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding income taxes.
The projected interest payments over the terms of that debt were $343 million as of December 31, 2023. Refer to Note 13, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information. As of December 31, 2023, non-cancelable lease obligations were $70 million.
The projected interest payments over the terms of that debt were $399 million as of December 31, 2024. Refer to Note 12, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information. As of December 31, 2024, non-cancelable lease obligations were $62 million.
Of the $4 million to $8 million in projected 2024 contributions, $2 million are contractually obligated, while any remaining payments would be discretionary. The funded status of all pension plans was a net unfunded position of $133 million and $79 million at December 31, 2023 and 2022, respectively.
Of the $5 million to $9 million in projected 2025 contributions, $2 million are contractually obligated, while any remaining payments would be discretionary. The funded status of all pension plans was a net unfunded position of $113 million and $133 million at December 31, 2024 and 2023, respectively.
At December 31, 2023, the total accrued warranty liability was $56 million. The accrual is represented as $30 million in Other current liabilities and $26 million in Other non-current liabilities on the Consolidated Balance Sheets. Refer to Note 12, “Product Warranty,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding product warranties.
At December 31, 2024, the total accrued warranty liability was $61 million. The accrual is represented as $36 million in Other current liabilities and $25 million in Other non-current liabilities on the Consolidated Balance Sheets. Refer to Note 11, “Product Warranty,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding product warranties.
At December 31, 2023, all legal funding requirements had been met. The Company contributed $5 million and $3 million to its defined benefit pension plans in the years ended December 31, 2023 and 2022, respectively. The Company expects to contribute a total of $4 million to $8 million into its defined benefit pension plans during 2024.
At December 31, 2024, all legal funding requirements had been met. The Company contributed $5 million to its defined benefit pension plans in each of the years ended December 31, 2024 and 2023. The Company expects to contribute a total of $5 million to $9 million into its defined benefit pension plans during 2025.
As a result of these transactions, all of the assets, liabilities, and legal entities comprising BorgWarner’s Fuel Systems and Aftermarket businesses are now owned directly, or indirectly through its subsidiaries, by PHINIA. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange. Key Trends and Economic Factors Commodities and Other Inflationary Impacts.
As a result of these transactions, all of the assets, liabilities, and legal 28 Table of Contents entities comprising BorgWarner’s Fuel Systems and Aftermarket businesses are now owned directly, or indirectly through its subsidiaries, by PHINIA. PHINIA is an independent public company trading under the symbol “PHIN” on the New York Stock Exchange.
As a percentage of sales, capital expenditures were 4.3% and 3.2% for the years ended December 31, 2023 and 2022, respectively. Financing Activities Net cash provided by financing activities was $20 million during the year ended December 31, 2023 compared to net cash used in financing activities of $185 million in the year ended December 31, 2022.
As a percentage of sales, capital expenditures were 3.1% and 4.3% for the years ended December 31, 2024 and 2023, respectively. 34 Table of Contents Financing Activities Net cash used in financing activities was $96 million during the year ended December 31, 2024 compared to net cash provided by financing activities of $20 million in the year ended December 31, 2023.
Transition to Standalone Company On December 6, 2022, BorgWarner announced plans for the complete legal and structural separation of its Fuel Systems and Aftermarket businesses by the spin-off of its wholly-owned subsidiary, PHINIA, which was formed on February 9, 2023.
Transition to Standalone Company On December 6, 2022, BorgWarner Inc., a manufacturer and supplier of automotive industry components and parts (BorgWarner, or Former Parent), announced plans for the complete legal and structural separation of its Fuel Systems and Aftermarket businesses by the spin-off of its wholly-owned subsidiary, PHINIA, which was formed on February 9, 2023 (the Spin-Off).
Cost of sales and gross profit Cost of sales and cost of sales as a percentage of net sales were $2,776 million and 79.3%, respectively, during the year ended December 31, 2023, compared to $2,627 million and 78.5%, respectively, during the year ended December 31, 2022.
Cost of sales and gross profit Cost of sales and cost of sales as a percentage of net sales were $2,647 million and 77.8%, respectively, during the year ended December 31, 2024, compared to $2,776 million and 79.3%, respectively, during the year ended December 31, 2023.
While we do not depend on these arrangements for our liquidity, if we elected to terminate these arrangements, there would be a one-time unfavorable timing impact on the collection of the outstanding receivables.
We may terminate any or all of these arrangements at any time subject to prior written notice. While we do not depend on these arrangements for our liquidity, if we elected to terminate these arrangements, there would be a one-time unfavorable timing impact on the collection of the outstanding receivables.
For its significant plans, the Company used discount rates ranging from 2.0% to 23.3% to determine its pension obligations as of December 31, 2023, including weighted average discount rates of 5.0% 39 Table of Contents (including 4.6% in the U.K.). The U.K. discount rate reflects the fact that the pension plan has been closed for new participants.
For its significant plans, the Company used discount rates ranging from 1.7% to 22.3% to determine its pension obligations as of December 31, 2024, including weighted average discount rates of 5.9% (including 5.6% in the U.K.). The U.K. discount rate reflects the fact that the pension plan has been closed for new participants.
The following table illustrates the sensitivity to a change in assumptions for expected rate of return on assets related to 2023 pre-tax pension expense and on its pension obligations for Company sponsored pension plans: (in millions) Impact on expected return on plan assets Impact on PBO 25 basis point decrease in discount rate $ 2 $ 31 25 basis point increase in discount rate $ (2) $ (29) Refer to Note 17, “Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding the Company’s retirement benefit plans.
The following table illustrates the sensitivity to a change in the discount rate for Company sponsored pension plans on its pension obligations: (in millions) Impact on PBO 25 basis point decrease in discount rate $ 23 25 basis point increase in discount rate $ (22) Refer to Note 15, “Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding the Company’s retirement benefit plans.
These royalty arrangements have not continued subsequent to the completion of the Spin-Off. 33 Table of Contents • For the years ended December 31, 2023 and 2022, the Company recognized income related to application testing and other R&D services for other BorgWarner businesses of $2 million and $11 million, respectively.
These royalty arrangements did not continue subsequent to the completion of the Spin-Off. 31 Table of Contents • For the year ended December 31, 2023, the Company recognized income related to application testing and other R&D services for other Former Parent businesses of $2 million. These services did not continue subsequent to the completion of the Spin-Off.
The increase was primarily due to increased cash and cash equivalents balances, as well as higher interest rates on cash and cash equivalents balances. Other postretirement loss (income) was a loss of $2 million and income of $32 million in the years ended December 31, 2023 and 2022, respectively.
Interest income was $16 million and $13 million in the years ended December 31, 2024 and 2023, respectively. The increase was primarily due to increased cash and cash equivalents balances, as well as higher interest rates on cash and cash equivalents balances.
We believe our existing cash and cash flows generated from operations and indebtedness incurred in conjunction with the Spin-Off discussed below will be responsive to the needs of our current and planned operations for at least the next 12 months and the foreseeable future thereafter.
We believe our existing cash and cash flows generated from operations and the revolving credit facility will be responsive to the needs of our current and planned operations for at least the next 12 months and the foreseeable future thereafter.
OTHER MATTERS Contingencies In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, general liability and other risks.
OTHER MATTERS Contingencies In the normal course of business, the Company is party to various commercial and legal claims, actions and complaints, including matters involving warranty claims, intellectual property claims, governmental investigations and related proceedings, including relating to alleged or actual violations of vehicle emissions standards, general liability and various other risks.
On August 31, 2023 and November 15, 2023, the Company’s Board of Directors declared quarterly cash dividends of $0.25 per share of common stock. These dividends were paid on September 22, 2023 and December 15, 2023, respectively.
On February 1, 2024, May 9, 2024, August 1, 2024 and November 14, 2024, the Company’s Board of Directors declared quarterly cash dividends of $0.25 per share of common stock. These dividends were paid on March 15, 2024, June 14, 2024, September 13, 2024 and December 13, 2024, respectively.
The following table presents net sales and Segment AOI for the Company’s reportable segments: Year Ended December 31, 2023 Year Ended December 31, 2022 (in millions) Net sales to customers Segment AOI % margin Net sales to customers Segment AOI % margin Fuel Systems $ 2,177 $ 215 9.9 % $ 2,072 $ 252 12.2 % Aftermarket 1,323 196 14.8 % 1,276 191 15.0 % Totals $ 3,500 $ 411 $ 3,348 $ 443 The Fuel Systems segment’s net sales for the year ended December 31, 2023 increased $105 million, or 5%, and Segment AOI decreased $37 million, or 14.7%, from the year ended December 31, 2022.
The following table presents net sales and Segment AOI for the Company’s reportable segments: Year Ended December 31, 2024 Year Ended December 31, 2023 (in millions) Net sales to customers Segment AOI % margin Net sales to customers Segment AOI % margin Fuel Systems $ 2,020 $ 218 10.8 % $ 2,177 $ 215 9.9 % Aftermarket 1,383 220 15.9 % 1,323 196 14.8 % Totals $ 3,403 $ 438 $ 3,500 $ 411 The Fuel Systems segment’s net sales for the year ended December 31, 2024 decreased $157 million, or 7%, and Segment AOI increased $3 million, or 1.4%, from the year ended December 31, 2023.
On February 1, 2024, the Company’s Board of Directors declared quarterly cash dividends of $0.25 per share of common stock, payable on March 15, 2024. The Company has a credit rating of BB+ from Standard & Poor's and Ba1 from Moody's. The current outlook from both Standard & Poor’s and Moody’s is stable.
On February 13, 2025, the Company announced that its Board of Directors declared an increased quarterly cash dividend of $0.27 per share of common stock, payable on March 14, 2025. The Company has a credit rating of BB+ from Standard & Poor's and Ba1 from Moody's. The current outlook from both Standard & Poor’s and Moody’s is stable.
Sales from these agreements are expected to continue through 2024. • Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $18 million primarily due to the weakening of the Chinese Renminbi relative to the U.S. Dollar, slightly offset by the strengthening of the Euro and British Pound relative to the U.S. Dollar.
No additional sales from these agreements are expected. • Fluctuations in foreign currencies resulted in a year-over-year decrease in sales of approximately $1 million primarily due to the weakening of the Chinese Renminbi and Brazilian Real, offset by the strengthening of the British Pound, each relative to the U.S. Dollar. • Customer pricing increased net sales by approximately $35 million.
RESULTS OF OPERATIONS A detailed comparison of the Company’s 2021 operating results to its 2022 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s final Information Statement filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on June 13, 2023. 31 Table of Contents The following table presents a summary of the Company’s 2023 and 2022 operating results: Year Ended December 31, (in millions, except per share data) 2023 2022 Net sales % of net sales % of net sales Fuel Systems 2,407 68.8 2,293 68.5 Aftermarket 1,329 38.0 1,284 38.4 Inter-segment eliminations (236) (6.7) (229) (6.8) Total net sales 3,500 100.0 3,348 100.0 Cost of sales 2,776 79.3 2,627 78.5 Gross profit 724 20.7 721 21.5 Selling, general and administrative expenses 413 11.8 407 12.2 Restructuring expense 12 0.3 11 0.3 Other operating expense (income), net 58 1.7 (15) (0.4) Operating income 241 6.9 318 9.5 Equity in affiliates’ earnings, net of tax (10) (0.3) (11) (0.3) Interest expense 56 1.6 20 0.6 Interest income (13) (0.4) (6) (0.2) Other postretirement loss (income) 2 0.1 (32) (1.0) Earnings before income taxes 206 5.9 347 10.4 Provision for income taxes 104 3.0 85 2.5 Net earnings 102 2.9 262 7.8 Earnings per share — diluted $ 2.17 $ 5.57 Net sales Net sales for the year ended December 31, 2023 totaled $3,500 million, an increase of $152 million, or 5%, from the year ended December 31, 2022.
RESULTS OF OPERATIONS A detailed comparison of the Company’s 2023 operating results to its 2022 operating results can be found in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in the Company’s Annual Report on Form 10-K filed on February 28, 2024. 29 Table of Contents The following table presents a summary of the Company’s 2024 and 2023 operating results: Year Ended December 31, (in millions, except per share data) 2024 2023 Net sales % of net sales % of net sales Fuel Systems 2,264 66.5 2,407 68.8 Aftermarket 1,393 40.9 1,329 38.0 Inter-segment eliminations (254) (7.4) (236) (6.8) Total net sales 3,403 100.0 3,500 100.0 Cost of sales 2,647 77.8 2,776 79.3 Gross profit 756 22.2 724 20.7 Selling, general and administrative expenses 442 13.0 413 11.8 Other operating expense, net 55 1.6 70 2.0 Operating income 259 7.6 241 6.9 Equity in affiliates’ earnings, net of tax (11) (0.3) (10) (0.3) Interest expense 99 2.9 56 1.6 Interest income (16) (0.5) (13) (0.4) Other postretirement expense — — 2 0.1 Earnings before income taxes 187 5.5 206 5.9 Provision for income taxes 108 3.2 104 3.0 Net earnings 79 2.3 102 2.9 Earnings per share — diluted $ 1.76 $ 2.17 Net sales Net sales for the year ended December 31, 2024 totaled $3,403 million, a decrease of $97 million, or 3%, from the year ended December 31, 2023.
It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be.
It is not possible to predict with certainty whether or not the Company will ultimately be successful in any of these commercial and legal matters or, if not, what the impact might be. The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount can be reasonably estimated.
In addition, the Company may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value. The Company has definite-lived intangible assets related to developed technology and customer relationships. The Company amortizes definite-lived intangible assets over their estimated useful lives.
In addition, the Company 36 Table of Contents may test goodwill in between annual test dates if an event occurs or circumstances change that could more-likely-than-not reduce the fair value of a reporting unit below its carrying value.
The decrease for the year ended December 31, 2023, compared with the year ended December 31, 2022, was primarily due to lower net earnings, partially offset by improved working capital. 36 Table of Contents Investing Activities Net cash used in investing activities was $150 million and $105 million in the years ended December 31, 2023 and 2022, respectively.
The increase for the year ended December 31, 2024, compared with the year ended December 31, 2023, was primarily due to improved working capital and higher net earnings adjusted for non-cash items. Investing Activities Net cash used in investing activities was $101 million and $150 million in the years ended December 31, 2024 and 2023, respectively.
The Company estimates the fair value of indefinite-lived intangibles using the relief-from-royalty method, which it believes is an appropriate and widely used valuation technique for such assets.
The Company estimates the fair value of indefinite-lived intangibles using the relief-from-royalty method, which it believes is an appropriate and widely used valuation technique for such assets. The fair value derived from the relief-from-royalty method is measured as the discounted cash flow savings realized from owning such trade names and not being required to pay a royalty for their use.
These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and industry developments and recoveries from third parties. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty claims.
Provisions for estimated expenses related to product warranty are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and industry developments and recoveries from third parties.
The increase excluding the impact of foreign currencies was primarily due to approximately $43 million from non-contractual commercial negotiations with the Company’s customers and normal contractual customer commodity pass-through arrangements, $50 million related to certain contract manufacturing agreements with BorgWarner, and approximately $30 million of volume, mix and net new business driven by higher weighted average market production compared to the prior year.
The decrease excluding the impact of foreign currencies was primarily due to approximately $130 million of unfavorable volume and net new business driven by lower commercial vehicle sales in Europe and lower sales in China, $27 million related to the end of certain contract manufacturing agreements with BorgWarner, partially offset by approximately $5 million from non-contractual commercial negotiations with the Company’s customers and normal contractual customer commodity pass-through arrangements.
As of December 31, 2023 the Company had cash and cash equivalent balance of $365 million, of which $347 million was held by our subsidiaries outside of the United States.
During the year ended December 31, 2024, the Company sold $122 million of receivables under these arrangements. As of December 31, 2024 the Company had cash and cash equivalent balance of $484 million, of which $409 million was held by our subsidiaries outside of the United States.
There are several trends that are driving the Company’s long-term growth that management expects to continue, including market share expansion in the CV market, increased overall vehicle parc driving that supports aftermarket demand, adoption of product offerings enabling renewable fuels and hydrogen solutions for combustion vehicles to serve as a viable alternative to electrification or fuel cell solutions and increasingly stringent global emissions standards that support demand for the Company’s products driving efficiency and reduced emissions.
There are several trends that are driving the Company’s long-term growth that management expects to continue, including market share expansion in the CV market, growth in overall vehicle parc that supports aftermarket demand, increased consumer interest in hybrid and plug-in vehicles, and adoption of additional product offerings enabling zero- and lower-carbon fuel solutions for combustion vehicles.
Selling, general and administrative expenses Selling, general and administrative (SG&A) expenses for the year ended December 31, 2023 were $413 million as compared to $407 million for the year ended December 31, 2022. SG&A expenses as a percentage of net sales were 11.8% and 12.2% for the years ended December 31, 2023 and 2022, respectively.
SG&A expenses as a percentage of net sales were 13.0% and 11.8% for the years ended December 31, 2024 and 2023, respectively.
The decrease in other postretirement loss (income) for the year ended December 31, 2023 was primarily due to higher interest and inflationary costs in 2023. Provision for income taxes was $104 million for the year ended December 31, 2023 resulting in an effective tax rate of 50%.
Provision for income taxes was $108 million for the year ended December 31, 2024 resulting in an effective tax rate of 58%. This compared to $104 million or 50% for the year ended December 31, 2023.
The change in SG&A expenses was primarily attributable to: • Employee-related costs were $138 million for the year ended December 31, 2023, an increase of $35 million, primarily related to additional corporate costs incurred as a stand-alone Company, incentive compensation and inflation. • IT costs incurred directly by the Company were $33 million for the year ended December 31, 2023, an increase of $6 million. • Research and development (R&D) costs were $108 million for the year ended December 31, 2023, an increase of $4 million.
The change in SG&A expenses was primarily attributable to: • Employee-related costs were $163 million for the year ended December 31, 2024, an increase of $25 million, primarily due to inflation, incentive compensation, and increases in headcount associated with the transition to a standalone company. • Research and development (R&D) costs were $112 million for the year ended December 31, 2024, an increase of $4 million.
Assuming constant foreign exchange rates, in 2024 PHINIA expects modest year-over-year growth driven by higher Aftermarket segment sales. The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
The Company maintains a positive long-term outlook for its global business and is committed to new product development and strategic investments to enhance its product leadership strategy.
While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company's pension and its future expense. The sensitivity to a 25 basis-point change in the assumptions for discount rate related to 2023 pre-tax pension expense for Company sponsored pension plans is expected to be negligible.
While the Company believes that these assumptions are appropriate, significant differences in actual experience or significant changes in these assumptions may materially affect the Company's pension and its future expense.
In connection with the Spin-Off, we have been installing and implementing information technology infrastructure to support certain of our business functions, including accounting and financial reporting, human resources, legal and compliance, communications, engineering, manufacturing and distribution, and sourcing.
As of June 30, 2024, the Company had successfully exited all transition services agreements. We have installed and implemented information technology infrastructure to support certain of our business functions, including accounting and financial reporting, human resources, legal and compliance, communications, engineering, manufacturing and distribution, and sourcing.
The Company’s current long-term expectation for R&D spending is 3% of net sales. • Intangible amortization expense was $28 million for each of the years ended December 31, 2023 and 2022. • General expense allocations from BorgWarner, which ended subsequent to the Spin-off, were $16 million for the year ended December 31, 2023, a decrease of $37 million. • Other SG&A expenses were $90 million for the year ended December 31, 2023, a decrease of $2 million .
The Company’s current long-term expectation for R&D spending is 3% of net sales. • Intangible amortization expense was $28 million for each of the years ended December 31, 2024 and 2023. Other operating expense, net was $55 million and $70 million for the years ended December 31, 2024 and 2023, respectively.
An adverse outcome could, nonetheless, be material to the results of operations or cash flows. 37 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP).
It is reasonably possible, but not probable, that the resolution of this matter could have a material adverse effect on the Company’s financial position, results of operations and/or cash flows. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP).
Year Ended December 31, 2023 2022 Net earnings per diluted share $ 2.17 $ 5.57 Separation and transaction costs 1.57 0.66 Intangibles amortization expense 0.53 0.60 Restructuring expense 0.19 0.23 Royalty income from Former Parent (0.36) (0.66) Asset impairments and lease modifications — 0.11 Tax adjustments 0.03 — Adjusted net earnings per diluted share $ 4.13 $ 6.51 Results by Reportable Segment The Company’s business is aggregated into two reportable segments: Fuel Systems and Aftermarket.
Year Ended December 31, 2024 2023 Net earnings per diluted share $ 1.76 $ 2.17 Separation and transaction costs 0.69 1.70 Intangibles amortization expense 0.63 0.60 Loss on debt extinguishment 0.49 — Asset impairments 0.47 — Restructuring expense 0.31 0.26 Royalty income from Former Parent — (0.36) (Gains) losses for other one-time events (0.16) 0.06 Tax effects and adjustments (0.33) (0.24) Adjusted net earnings per diluted share $ 3.86 $ 4.19 Results by Reportable Segment The Company’s business is comprised of two reportable segments: Fuel Systems and Aftermarket.
The change in net sales for the year ended December 31, 2023 was primarily driven by the following: • Customer pricing increased net sales by approximately $64 million.
The change in net sales for the year ended December 31, 2024 was primarily driven by the following: • Unfavorable volume and net new business decreased sales by approximately $104 million or 3%.
The Aftermarket segment’s net sales for the year ended December 31, 2023 increased $47 million, or 4%, and Segment AOI increased $5 million, or 2.6%, from the year ended December 31, 2022. Foreign currencies did not have a significant impact on year-over-year sales.
The Aftermarket segment’s net sales for the year ended December 31, 2024 increased $60 million, or 5%, and Segment AOI increased $24 million, or 12.2%, from the year ended December 31, 2023.
We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from BorgWarner. The Company entered into several agreements with BorgWarner that govern the relationship between the parties following the Spin-Off and are described in our Form 8-K filed on July 7, 2023.
The Company entered into several agreements with BorgWarner that govern the relationship between the parties following the Spin-Off that are described in our Form 8-K filed on July 7, 2023. BorgWarner was only obligated to provide the transition services for limited periods following the completion of the Spin-Off.
Segment Adjusted Operating margin was 9.9% in the year ended December 31, 2023, compared to 12.2% in the year ended December 31, 2022. The Segment Adjusted Operating margin decrease was primarily due to product mix and higher supplier costs.
Segment Adjusted Operating margin was 10.8% in the year ended December 31, 2024, compared to 9.9% in the year ended December 31, 2023. The Segment Adjusted Operating margin increase was primarily due to a lump sum supplier settlement.
The increase was primarily due to approximately $26 million of volume, mix and net new business driven by increased demand for the Company’s products and approximately $21 million of pricing. Segment Adjusted Operating margin was 14.8% in the year ended December 31, 2023, compared to 15.0% in the year ended December 31, 2022.
The increase excluding the impact of foreign currencies was primarily due to approximately $30 million of pricing and $26 million of favorable volume and net new business driven by increased demand for the Company’s products, primarily in Europe.
Following the Spin-Off, BorgWarner does not provide us with assistance other than the limited transition and other services described under “Certain Relationships and Related Person Transactions” in our Information Statement furnished with the Company’s Registration Statement on Form 10-12B/A filed on June 9, 2023.
Following the Spin-Off, BorgWarner has not provided us with assistance other than the limited transition and other services described under the heading “Certain Relationships and Related Party Transactions” in the Company’s proxy statement for its 2024 Annual Meeting of Stockholders filed on March 27, 2024.
This includes an increase of approximately $57 million related to recoveries from the Company’s customers for cost inflation arising from non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements. • Favorable volume, mix and net new business increased sales by approximately $56 million or 2%.
This is primarily related to an increase in recoveries of inflationary costs from the Company’s customers due to non-contractual commercial negotiations with those customers and normal contractual customer commodity pass-through arrangements.
Product warranties The Company provides warranties on some, but not all, of its products sold to OEMs. The warranty terms are typically from one to three years. Provisions for estimated expenses related to product warranty are made at the time products are sold.
Refer to Note 10, “Goodwill and Other Intangibles,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for more information regarding goodwill. Product warranties The Company provides warranties on some, but not all, of its products sold to OEMs. The warranty terms are typically from one to three years.
Other Operating Expense (Income), Net was comprised of the following: • For the years ended December 31, 2023 and 2022, separation and transaction costs were $80 million and $31 million, respectively, primarily related to professional fees associated with the Spin-Off. • For the years ended December 31, 2023 and 2022, the Company recognized royalty income related to licensing of the Delphi Technologies trade name and product-related intellectual properties to other BorgWarner businesses in the amount of $17 million and $31 million, respectively.
Other operating expense, net was comprised of the following: • For the years ended December 31, 2024 and 2023, separation and transaction costs were $31 million and $80 million, respectively, primarily related to professional fees and other costs associated with the Spin-Off. • During the year ended December 31, 2024, the Company recorded a non-cash impairment expense of $21 million related to the write down of property, plant and equipment associated with a Fuel Systems manufacturing plant in Europe. • Restructuring expense was $14 million and $12 million for the years ended December 31, 2024 and 2023, respectively, related to individually approved restructuring actions that primarily related to reductions in headcount.
Prices for commodities remain volatile, and since the beginning of 2021, the Company’s business has experienced price increases for base metals (e.g., steel, aluminum and nickel) 30 Table of Contents and precious metals (e.g., palladium). In addition, many global economies are experiencing elevated levels of inflation more generally, which is driving an increase in other input costs.
In addition, many global economies are experiencing elevated levels of inflation more generally, which is driving an increase in other input costs. As a result, the Company has experienced, and is continuing to experience, higher costs.
Dollar, slightly offset by the strengthening of the Euro relative to the U.S. Dollar. Gross profit and gross margin were $724 million and 20.7%, respectively, during the year ended December 31, 2023 compared to $721 million and 21.5%, respectively, during the year ended December 31, 2022. The decrease in gross margin was primarily due to the factors discussed above.
Dollar. • Other manufacturing costs increased cost of sales by $7 million compared to the year ended December 31, 2023. Gross profit and gross margin were $756 million and 22.2%, respectively, during the year ended December 31, 2024 compared to $724 million and 20.7%, respectively, during the year ended December 31, 2023.
We utilize certain arrangements with various financial institutions to sell eligible trade receivables from certain customers in North America and Europe. We may terminate any or all of these arrangements at any time subject to prior written notice.
“Notes Payable and Debt” for further information on the Credit Agreement, the 2029 Notes and the 2032 Notes. Other Sources of Liquidity and Capital We utilize certain arrangements with various financial institutions to sell eligible trade receivables from certain customers in North America and Europe.
Net cash provided by financing activities during the year ended December 31, 2023 was primarily related to external borrowings, largely offset by payments to Former Parent.
Net cash used in financing activities during the year ended December 31, 2024 was primarily related to the repayment of Term Loan A and Term Loan B Facilities, stock repurchases, dividend payments to PHINIA stockholders, largely offset by the issuances of the 2029 Notes and 2032 Notes.
This increase was primarily driven by higher demand for the Company’s products, partially offset by lower commercial vehicle sales in China. • Sales increased $50 million related to certain contract manufacturing agreements with Former Parent that were entered into in connection with the Spin-Off.
This decrease was primarily driven by lower commercial vehicle sales in Europe and lower sales in China within the Fuel Systems segment, partially offset by favorable volume in Europe within the Aftermarket segment. • Due to the contract manufacturing agreements with the Former Parent coming to an end, sales decreased $27 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−4 removed6 unchanged
Biggest change(in millions, except for percentages) December 31, 2023 Euro 3 % $ 58 British Pound 5 % $ 28 Brazilian Real 9 % $ 14 India Rupee 1 % $ 7 Chinese Renminbi (3) % $ (14) (in millions, except for percentages) December 31, 2022 British Pound (11) % $ (45) Chinese Renminbi (8) % $ (28) Euro (6) % $ (14) India Rupee (10) % $ (8) Brazilian Real 5 % $ 8 For additional information regarding the level of business outside the United States, which is subject to foreign currency exchange rate market risk, refer to Note 24, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this Form 10-K.
Biggest change(in millions, except for percentages) December 31, 2024 Brazilian Real (21) % $ (38) Euro (6) % $ (17) Chinese Renminbi (3) % $ (12) British Pound (2) % $ (9) Korean Won (13) % $ (4) (in millions, except for percentages) December 31, 2023 Euro 3 % $ 58 British Pound 5 % $ 28 Brazilian Real 9 % $ 14 India Rupee 1 % $ 7 Chinese Renminbi (3) % $ (14) For additional information regarding the level of business outside the United States, which is subject to foreign currency exchange rate market risk, refer to Note 22, “Reportable Segments and Related Information,” to the Consolidated Financial Statements in Item 8 of this Form 10-K. 40 Table of Contents Commodity Price Risk Commodity price risk is the possibility that the Company will incur economic losses due to adverse changes in the cost of raw materials used in the production of its products.
Currency translation adjustments, including the impact of the net investment hedges discussed above, during the years ended December 31, 2023 and 2022, are shown in the following tables, which provide the percentage change in U.S. Dollars against the respective currencies and the approximate impacts of these changes recorded within other comprehensive income (loss) for the respective periods.
Currency translation adjustments, including the impact of the net investment hedges discussed above, during the years ended December 31, 2024 and 2023, are shown in the following tables, which provide the percentage change in U.S. Dollars against the respective currencies and the approximate impacts of these changes recorded within other comprehensive income (loss) for the respective periods.
For quantitative disclosures about market risk, refer to Note 16, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for information with respect to interest rate risk, currency exchange rate risk and commodity purchase price risk.
For quantitative disclosures about market risk, refer to Note 14, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of this Form 10-K for information with respect to currency exchange rate risk and commodity purchase price risk.
As of December 31, 2023 and 2022, the Company deferred a pre-tax loss of $6 million and $4 million, respectively, for the designated net investment hedge within the cumulative translation account within accumulated other comprehensive income, a component of total shareholders’ equity.
As of December 31, 2024 and 2023, the Company deferred a pre-tax loss of $11 million and $6 million, respectively, for the designated net investment hedge within the cumulative translation account within accumulated other comprehensive income, a component of total shareholders’ equity.
The Company operates globally and transacts in multiple currencies in addition to its reporting currency, the U.S. dollar. Although the Company generally uses the national or regional currency as the functional currency of its local entities, the Company has a significant amount of transactions in non-functional currency denominations including U.S. Dollar, Euro, Chinese Renminbi, Great British Pound and Mexico Peso.
Although the Company generally uses the national or regional currency as the functional currency of its local entities, the Company has a significant amount of transactions in non-functional currency denominations including U.S. Dollar, Euro, Chinese Renminbi, Great British Pound and Mexico Peso.
As of December 31, 2023 and 2022, the Company had no outstanding commodity swap contracts. 42 Table of Contents Disclosure Regarding Forward-Looking Statements The matters discussed in this Item 7 include forward looking statements. See “Forward Looking Statements” at the beginning of this Form 10-K. 43 Table of Contents
As of December 31, 2024 and 2023, the Company had no outstanding commodity swap contracts. Disclosure Regarding Forward-Looking Statements The matters discussed in this Item 7 include forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Information” at the beginning of this Form 10-K. 41 Table of Contents
Commodity forward and option contracts are occasionally executed to offset exposure to potential change in prices mainly for various non-ferrous metals and natural gas consumption used in the manufacturing of vehicle components.
The Company uses long-term contracts, cost sharing arrangements, design changes, customer buy programs, and limited financial instruments to help control costs wherever beneficial. Commodity forward and option contracts are occasionally executed to offset exposure to potential change in prices mainly for various non-ferrous metals and natural gas consumption used in the manufacturing of vehicle components.
Interest Rate Risk Interest rate risk refers to the possibility that the Company may incur economic losses due to adverse changes in interest rates. The Company manages its interest rate risk by monitoring its exposure to fixed and variable rates while attempting to optimize its interest costs.
Currency Exchange Rate Risk Currency exchange rate risk refers to the possibility that the Company may incur economic losses due to adverse changes in currency exchange rates. The Company operates globally and transacts in multiple currencies in addition to its reporting currency, the U.S. dollar.
Removed
The Company maintains a written policy that permits the use of 41 Table of Contents financial derivative instruments to mitigate the financial impact attributable to changes in interest rates. At December 31, 2023, the Company had no outstanding derivative transactions related to interest rate risk management.
Removed
A 50 basis points increase or decrease in the interest rates on our variable rate debt outstanding at December 31, 2023 would be a $4 million increase or decrease in interest expense.
Removed
For information regarding the levels of indebtedness subject to interest rate fluctuation, refer to Note 13, “Notes Payable and Debt,” to the Consolidated Financial Statements in Item 8 of this Form 10-K. Currency Exchange Rate Risk Currency exchange rate risk refers to the possibility that the Company may incur economic losses due to adverse changes in currency exchange rates.
Removed
Commodity Price Risk Commodity price risk is the possibility that the Company will incur economic losses due to adverse changes in the cost of raw materials used in the production of its products. The Company uses long-term contracts, cost sharing arrangements, design changes, customer buy programs, and limited financial instruments to help control costs wherever beneficial.

Other PHIN 10-K year-over-year comparisons