10-K: Garrett Motion Posts Strong 2025 Results Amid EV Shift

Garrett Motion Inc. reported increased net sales and net income in 2025, driven by strong turbocharger demand and strategic investments in zero-emission technologies, despite ongoing macroeconomic challenges.

Summary

• Net sales increased by 3.1% to $3,584 million in 2025, up from $3,475 million in 2024, including a 2% favorable impact from foreign currency translation.
• Net income rose by $28 million to $310 million in 2025, compared to $282 million in the prior year.
• Adjusted EBIT increased by $25 million to $510 million in 2025, up from $485 million in 2024.
• Gasoline product sales increased by 6% ($87 million), primarily due to new application launches and program ramp-ups in Europe, North America, South America, and India.
• Commercial vehicle sales grew by 4% ($25 million), driven by growth in off-highway programs across regions.
• Approximately 50% of total Research, Development, and Engineering (RD&E) expenditure in 2025 was focused on Electric Compression and E-Powertrain technologies.
• The company repaid $50 million on its 2025 Dollar Term Facility and paid cash dividends totaling $52 million in 2025.
• Garrett repurchased $208 million of Common Stock under its share repurchase program in 2025, including $103 million from Oaktree Capital Management, L.P. affiliated funds.
• The company refinanced its $692 million 2021 Dollar Term Facility with a new 2025 Dollar Term Facility and replaced its $600 million revolving facility with a new $630 million facility, both maturing in 2032 and 2030 respectively.
• Maintained effective internal control over financial reporting as of December 31, 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing positively due to strong financial performance, including increased net sales, net income, and Adjusted EBIT, coupled with strategic investments in future technologies and active capital management. However, the score is tempered by ongoing industry transition risks and macroeconomic headwinds.

Positives

• Net sales increased by 3.1% to $3,584 million in 2025, demonstrating growth despite challenging market conditions.
• Net income increased by $28 million to $310 million, reflecting improved profitability.
• Adjusted EBIT grew by $25 million to $510 million, indicating strong operational performance.
• Growth in gasoline product sales (up 6%) and commercial vehicle sales (up 4%) driven by new applications and program ramp-ups.
• Significant investment in future technologies, with approximately 50% of 2025 RD&E spend allocated to zero-emission technologies (Electric Compression and E-Powertrain).
• Successful refinancing of debt facilities, including a new $692 million 2025 Dollar Term Facility and a $630 million New Revolving Facility, extending maturities and reducing interest rates.
• Active capital return to shareholders through $52 million in cash dividends and $208 million in Common Stock repurchases in 2025.
• Strong global market position as a leader in the $10 billion OEM turbocharger industry with a large installed base of nearly 150 million vehicles for aftermarket opportunities.
• Maintained a robust patent portfolio of approximately 1,350 patents and patents pending, supporting technological leadership.

Negatives

• Aftermarket sales decreased by 5% ($21 million), primarily due to softer demand for off-highway replacement parts in North America.
• Unfavorable product mix had a $70 million negative impact on gross profit in 2025.
• Higher tax expenses increased by $21 million in 2025 compared to the prior year.
• Ongoing macroeconomic and geopolitical challenges, including high inflation in Europe and a slow recovery in China, continue to exert pressure on global industry.
• S&P expects light vehicle production volumes to decrease slightly in 2026.
• Slower than anticipated charging infrastructure proliferation and significant vehicle price gaps are limiting the pace of Battery Electric Vehicle (BEV) adoption.
• The global commercial vehicle industry faces subdued freight demand in North America and Europe amid economic uncertainty and high interest rates.
• Hydrogen-powered trucks face delays into the next decade, with OEMs prioritizing cost control over rapid zero-emission deployment outside China.

Risks

• The automotive industry is evolving, and failure to deliver new products and technologies in response to changing customer needs and preferences, or if BEV adoption accelerates faster than expected, could materially adversely affect the business.
• Operating in highly competitive industries, including competition from independent regional/multi-regional suppliers, vertically integrated OEM units, and well-funded start-ups, could impact competitive position.
• Reliance on sales to major customers (top ten accounted for 62% of net sales in 2025) means loss of any major customer or changes in their requirements could have a material adverse impact.
• Industry and economic conditions, including downturns, consumer confidence, inflation, interest rates, and fuel costs, could adversely affect business and results of operations.
• The aftermarket business is subject to unique risks such as extended longevity of component parts and reliance on independent dealers, which could adversely affect results if demand changes or dealers are unsuccessful.
• Inability to successfully negotiate favorable pricing and other terms with customers due to continuous pressure on OEMs to reduce costs may adversely affect results of operations.
• Investments in specific foreign markets (e.g., China, India) may not realize expected returns if market demand does not grow as anticipated or if state-sponsored domestic businesses emerge as competitors.
• Subject to risks associated with climate change and increased scrutiny from customers, investors, and regulators regarding sustainability practices, potentially leading to increased costs or adverse impacts.
• The success of the business depends on the recruitment, development, and retention of qualified personnel, especially in key areas like engineering, with intense competition for talent.
• Profitability and results of operations may be adversely affected by program launch difficulties, including failure to successfully launch new businesses or accurately estimate costs.
• Volatility in the cost and availability of raw materials, components, energy, transportation, and other inputs has increased and may continue to increase costs, which may not be fully passed through to customers.
• Shortages of components from suppliers or economic distress experienced by suppliers could disrupt operations and impact the ability to meet customer commitments, especially with supply chain concentration in mainland China.
• Inability to realize sales represented by awarded business or effectively utilize manufacturing capacity due to customer demand variations, inventory management, or design changes could adversely affect profitability.
• Subject to economic, political, regulatory, foreign exchange, and other risks of international operations, including exchange control regulations, trade restrictions, tariffs, and data privacy laws.
• Geopolitical conditions, catastrophic events, and pandemics (e.g., conflicts in Ukraine and the Middle East) may disrupt business, impact supply chains, and adversely affect results of operations.
• Risks in connection with joint venture partnerships, joint development projects, and other strategic opportunities, including potential for inconsistent goals with partners or failure to successfully commercialize new technologies.
• Failure to protect intellectual property, or allegations of infringement, could adversely affect the company, especially with the rise of artificial intelligence tools.
• Work stoppages, other disruptions, or the need to relocate facilities could significantly disrupt business, particularly given the automotive industry's reliance on just-in-time delivery.
• Failure to achieve productivity and efficiency improvements or successfully execute repositioning projects may reduce profitability or adversely impact the business.
• May incur material losses as a result of warranty claims, product recalls or field actions, as well as product liability actions, which could exceed insurance coverage.
• Uncertainty regarding the outcome of litigation matters, government proceedings, and other contingencies, which could result in substantial costs or damage awards.
• Operations and prior operations of predecessor companies may expose the company to the risk of environmental liabilities, with an undiscounted reserve of $14 million as of December 31, 2025.
• System or service failures, including cyber or other security incidents, could disrupt business operations, result in loss of critical information, and adversely impact reputation and results.
• Substantial indebtedness ($1,439 million gross outstanding debt as of December 31, 2025) and other obligations could adversely affect financial health and ability to execute business strategy.
• Debt agreements contain restrictions that limit financial and operational flexibility, and failure to comply with covenants could result in an event of default.
• U.S. and non-U.S. tax liabilities are dependent on income distribution among jurisdictions, and changes in tax laws or audits could adversely affect the effective tax rate.
• Ability to raise capital in the future may be limited, and any deterioration in conditions may restrict access to capital markets on favorable terms.
• Changes in interest rates and asset returns could adversely affect earnings and/or cash flows and increase pension funding obligations.
• No assurance that the company will continue to pay dividends or repurchase shares under its share repurchase program, as these are subject to Board discretion and various factors.

Future Outlook

The company anticipates a slight decrease in light vehicle production for 2026, while commercial vehicle production is expected to see a slight increase. Turbocharger demand is projected to remain steady in the short to medium term, driven by the growing penetration of hybridized powertrains. Battery Electric Vehicle (BEV) adoption is expected to continue increasing, though short-term constraints like price gaps and slower charging infrastructure development may limit its pace. Capital spending is expected to increase in 2026, primarily for new investments in zero-emission technology. The company plans to continue declaring and paying quarterly dividends on its Common Stock.

Management Comments

• "We effectively navigated through macroeconomic and geopolitical challenges, including a very dynamic trade environment as a result of tariff actions, by implementing strategic permanent and variable cost measures, as well as leveraging commodity deflation pass-through."
• "We continue to achieve success in our turbocharging, hybrid, and zero-emission technology applications."
• "We believe the combination of expected cash flows, the term loan borrowings and the revolving credit facilities that are committed until 2030, will provide us with adequate liquidity to support the Company's operations."
• "This year, we secured additional pre-production contracts for both light vehicle (including hybrid and range extended electric vehicle technologies), and commercial vehicle applications."
• "Additionally, we were awarded our first E-Powertrain application in early 2025 and have made significant progress in our air and cooling compression technologies, as evidenced with various partnerships and pre-development contracts throughout 2025 and into early 2026."

Industry Context

StockSavvy.ai notes Garrett Motion is navigating a complex and evolving automotive industry landscape. While its core turbocharger business continues to benefit from increasing penetration in internal combustion engine (ICE) and hybrid vehicles due to stringent emissions standards, the broader industry is undergoing a significant long-term shift towards Battery Electric Vehicles (BEVs). The company's strategic allocation of 50% of its RD&E spend to Electric Compression and E-Powertrain technologies positions it to capitalize on this transition, mitigating risks associated with the eventual decline of pure ICE vehicles. However, macroeconomic headwinds, geopolitical tensions, and slower-than-anticipated EV infrastructure development present ongoing challenges to market growth and stability.

Comparison to Industry Standards

• Light vehicle production increased by approximately 4% in 2025, while commercial vehicle production increased by 3%, with on-highway up 4% and off-highway up 2%. For 2026, S&P Global Mobility expects a slight decrease in automotive (light vehicle) production, whereas Knibb Gormezano & Partners Automotive Intelligence (KGP) expects a slight increase in commercial vehicle production.
• Total turbocharger production increased globally from approximately 49 million units in 2024 to nearly 50 million units in 2025, but is expected to decrease from 2026 onward due to BEV penetration, gradually declining to 2022 volume levels by 2030.
• S&P forecasts turbocharger penetration on ICE-based powertrains in light vehicles to grow from 54% in 2022 to approximately 57% in 2026, stabilizing around 56% up to 2033.
• S&P estimates global hybrid vehicle production (excluding mild hybrids, but including REEVs) will grow from approximately 16 million vehicles in 2025 to 26 million vehicles in 2029, representing an 11% CAGR.
• S&P expects BEVs to comprise 28% of total light vehicle production globally by 2030.
• The company's stock performance is compared against the S&P Small Cap 600 Index and a peer group including Adient plc, Allison Transmission Holdings, Inc., American Axle & Manufacturing Holdings, Inc., Aptiv PLC, Autoliv Inc., BorgWarner Inc., Dana Incorporated, Gentex Corporation, Lear Corporation, Magna International Inc., Tenneco Inc., Veoneer, Inc., and Visteon Corporation.

Corporate Governance

Legal Proceedings

• Brazilian Tax Matters: Brazilian tax authorities issued an infraction notice challenging the use of certain tax credits (Befiex Credits) between January 2017 and February 2020, with an estimated total contingency of $26 million as of December 31, 2025. The company believes it has meritorious arguments and currently assesses liability as not probable, so no accrual has been made.
• Product Warranties and Guarantees: The company accrues for estimated costs of product warranties and performance guarantees based on contract terms and historical experience. As of December 31, 2025, the recorded obligation for product warranties and performance guarantees was $21 million.

Related Party Transactions

• Repurchased 7.5 million shares of Common Stock for $103 million from funds affiliated with Oaktree Capital Management, L.P., a related party, under the 2025 share repurchase program.
• In 2023, in connection with the capital structure simplification, the company paid Centerbridge Partners, L.P. and Oaktree Capital Management, L.P. (C&O Investors) approximately $570 million for Series A Preferred Stock repurchases, plus additional amounts and Common Stock for accumulated dividends. Centerbridge and Oaktree are holders of Common Stock and appoint directors to the Board.
• Payments to Trane Technologies amounted to $1 million for the year ended December 31, 2024, when Mr. Paul Camuti, a director, served as an executive officer of Trane. Trane was considered a related party until December 31, 2024.

Stakeholder Impact

• Shareholders: Benefited from increased net income, cash dividends ($52 million paid in 2025), and share repurchases ($208 million in 2025), which can enhance shareholder value. However, the stock is subject to market volatility and industry transition risks.
• Employees: The company emphasizes talent management, diversity and inclusion, health and safety, and competitive compensation and benefits. Investments in training (over 94,500 hours in 2025) and STEM programs support employee development and future innovation.
• Customers (OEMs and Aftermarket): Benefit from cutting-edge technologies for emission reduction and energy efficiency, including new E-Powertrain and E-Cooling compressor solutions. However, OEMs exert pricing pressure, and aftermarket sales are sensitive to product longevity and distribution network effectiveness.
• Suppliers: The company leverages a global, low-cost manufacturing footprint and robust supplier development program, sourcing over two-thirds of materials from low-cost countries. Suppliers are subject to volatility in raw material costs and potential supply chain disruptions.
• Creditors: Debt refinancing in 2025 improved the capital structure and extended maturities. The company's substantial indebtedness and restrictive covenants require careful management to ensure compliance and financial health.
• Regulatory Authorities: The company is subject to extensive environmental, health, safety, and data privacy regulations globally. Compliance efforts and investments in emission-reducing technologies address regulatory demands.

Next Steps

• Increase capital spending in 2026, primarily for new or additional investments in zero-emission technology portfolio.
• Make net repayments of $7 million on term loan borrowings in 2026.
• Contribute approximately $5 million to non-U.S. pension plans in 2026.
• Pay approximately $45 million related to purchase obligations in 2026.
• Continue to declare and pay quarterly dividends on Common Stock.
• Execute a new $250 million share repurchase program authorized for January 1, 2026, until December 31, 2026.
• Evaluate new guidance on Income Statement Expense Disaggregation (ASU 2024-03, ASU 2025-01) for impact on disclosures, effective for fiscal years beginning after December 15, 2026.
• Evaluate new guidance on Internal-Use Software (ASU 2025-06) for impact on accounting policies and disclosures, effective for fiscal years beginning after December 15, 2027.
• Evaluate new guidance on Government Grants (ASU 2025-10) for impact on accounting policies and disclosures, effective for fiscal years beginning after December 15, 2029.

Key Dates

Recommendation

Garrett Motion delivered solid financial performance in 2025 with increased net sales, net income, and Adjusted EBIT, supported by strategic investments in zero-emission technologies and active capital management through share repurchases and dividends. The company's leadership in turbocharging and proactive pivot towards electrification are positive indicators. However, the company operates in a highly competitive and evolving automotive industry facing a long-term shift towards BEVs, which presents significant structural challenges to its core business. While the company is investing in new technologies, the success and timing of these initiatives are uncertain. Ongoing macroeconomic headwinds, geopolitical tensions, and supply chain risks also present challenges. Therefore, a 'hold' recommendation is appropriate, acknowledging current strengths and strategic positioning while recognizing significant future uncertainties and competitive dynamics that warrant careful monitoring.

Keywords

Turbocharger, Electric Vehicle, E-Powertrain, E-Cooling compressor, Fuel Cell, Automotive Industry, Aftermarket, Emission Reduction, Energy Efficiency, OEM, 10-K, Financial Results, Debt Refinancing, Share Repurchase, Dividends, Corporate Governance, Cybersecurity, Global Mobility