Garrett Motion Inc.

04/30/2026 | Press release | Distributed by Public on 04/30/2026 05:00

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations, which we refer to as our "MD&A," should be read in conjunction with our Consolidated Interim Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the audited annual Consolidated Financial Statements for the year ended December 31, 2025, included in our 2025 Form 10-K. Some of the information contained in this MD&A or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve various risks and uncertainties. Please refer to the "Special Note Regarding Forward-Looking Statements" below.
The following MD&A is intended to help you understand the results of operations and financial condition of Garrett Motion Inc. for the three months ended March 31, 2026.
Executive Summary
During the first quarter of 2026, we outperformed the light vehicle industry across all verticals. This was driven by growth in diesel and gasoline volumes from new program launches, increased commercial vehicle demand in all key regions, as well as continued industrial strength. Aftermarket growth further contributed to a favorable product mix. We continued to deliver productivity year-over-year across both variable and fixed costs; however, these benefits were offset by the timing of foreign exchange pass-through. Our financial results were also impacted by the timing of customer recoveries. As a result, Net income for the quarter was $95 million, and Adjusted EBIT was $151 million. As the broader macroeconomic and geopolitical conditions evolve, we continue to actively monitor developments and their potential impacts on the industry and our operations.
We continue to have success across our differentiated technologies by winning business in both turbo and zero emission offerings. We secured light vehicle turbo, commercial vehicle and industrial awards across multiple regions, including turbo technology for data centers. We have also received favorable feedback from mobility and industrial customers related to expected efficiency gains from our E-Cooling oil-free compressor over existing recognized technologies.
For the three months ended March 31, 2026, we repurchased $87 million of Common Stock under our share repurchase program. These repurchases include a total of 2,500,000 shares from funds affiliated with Oaktree Capital Management, L.P., a related party, for $50 million. As of March 31, 2026, we had $163 million of the authorized amount remaining under our share repurchase program. The repurchased shares are held as treasury stock.
On February 19, 2026, the Board of Directors declared a cash dividend of $0.08 per share of Common Stock, payable on March 16, 2026, to shareholders of record as of March 2, 2026. The total amount of dividends paid on March 16, 2026 amounted to $16 million.
Disaggregated Revenue
The following tables show our revenues by geographic region and product line for the three months ended March 31, 2026 and 2025, respectively.
By Region
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
United States
$ 179 18% $ 176 20%
Europe
503 51% 425 49%
Asia
277 28% 257 29%
Other
26 3% 20 2%
Total
$ 985 $ 878
By Product Line
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Diesel $ 232 24% $ 208 24%
Gas 443 45% 403 46%
Commercial Vehicles / Industrial 181 18% 155 18%
Aftermarket 114 12% 98 11%
Other 15 1% 14 1%
Total $ 985 $ 878
Results of Operations for the Three Months Ended March 31, 2026
Net Sales
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Net sales $ 985 $ 878
% change compared with prior period 12.2 %
Net Sales for the Three Months Ended March 31, 2026
For the three months ended March 31, 2026, net sales compared to the prior period increased by $107 million or 12% (including a favorable impact of $58 million or 6% due to foreign currency translation primarily driven by higher Euro-to-U.S. dollar exchange rates). The increase was primarily related to higher demand across all verticals, favorable foreign currency impacts and favorable product mix partially offset by price net of inflation pass-through. Net sales also increased by $5 million driven by recoveries on import tariffs.
Gasoline product sales increased by $40 million or 10% (including a favorable impact of $27 million or 7% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe.
Diesel product sales increased by $24 million or 12% (including a favorable impact of $18 million or 9% due to foreign currency translation), primarily driven by strong demand for light commercial vehicles and pickup trucks in North America, Brazil, Southeast Asia and application launches in India.
Commercial vehicles/industrial sales increased by $26 million or 17% (including a favorable impact of $6 million or 4% due to foreign currency translation), primarily driven by growth in all key regions as well as continued industrial growth.
Aftermarket sales increased by $16 million or 16% (including a favorable impact of $6 million or 6% due to foreign currency translation), primarily driven by stronger demand for commercial vehicle parts in all key regions.
Cost of Goods Sold and Gross Profit
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Cost of goods sold $ 789 $ 699
% change compared with prior period 12.9 %
Gross profit percentage 19.9 % 20.4 %
Cost of Goods Sold and Gross Profit for the Three Months Ended March 31, 2026
Cost of Goods Sold Gross Profit
(Dollars in millions)
Cost of Goods Sold / Gross Profit for the three months ended March 31, 2025
$ 699 $ 179
Increase/(decrease) due to:
Volume 42 19
Product mix 4 4
Price, net of inflation pass-through - (11)
Commodity, transportation & energy deflation (2) 2
Productivity, net 7 (21)
Import tariffs 6 (1)
Research, development & engineering (7) 7
Foreign exchange rate impacts 40 18
Cost of Goods Sold / Gross Profit for the three months ended March 31, 2026
$ 789 $ 196
For the three months ended March 31, 2026, cost of goods sold increased by $90 million, primarily driven by $42 million from higher sales volumes, $40 million from foreign currency impacts, $7 million of lower productivity net of labor inflation and repositioning costs, $6 million from import tariffs and $4 million of unfavorable product mix. These increases were partially offset by $7 million of lower RD&E costs and $2 million of commodity, transportation and energy deflation.
For the three months ended March 31, 2026, gross profit increased by $17 million, primarily driven by $19 million from higher sales volumes, $18 million from foreign currency impacts, $7 million of lower RD&E costs, $4 million of favorable product mix and $2 million from commodity, transportation and energy deflation. These increases were partially offset by $21 million of lower productivity net of labor deflation and repositioning costs, $11 million of pricing, net of inflation pass-through and $1 million from import tariffs.
Selling, General and Administrative Expenses
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Selling, general and administrative expense $ 58 $ 59
% of sales 5.9 % 6.7 %
Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2026, decreased by $1 million compared with the prior period, primarily driven by $3 million of lower professional services, $2 million of bad debt recovery and $1 million of lower personnel costs, partially offset by $5 million of unfavorable foreign currency impacts.
Other Expense, Net
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Other expense, net $ 1 $ 7
Other expense, net for the three months ended March 31, 2026 decreased by $6 million compared to the prior period, primarily driven by $6 million in professional fees incurred in the prior year related to our Restatement Agreement.
Interest Expense
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Interest expense $ 27 $ 29
For the three months ended March 31, 2026, interest expense decreased by $2 million compared to the prior period. This decrease was primarily due to $3 million in lower interest expense due to a different notional amount of debt outstanding during the period.
Non-Operating Income, Net
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Non-operating income, net $ (8) $ (1)
For the three months ended March 31, 2026, we had non-operating income of $8 million versus $1 million in the prior period. The increase in non-operating income was primarily driven by the resolution of certain environmental liabilities and foreign exchange transactional gains.
Tax Expense
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Tax expense $ 23 $ 23
Effective tax rate 19.5 % 27.1 %
The effective tax rates for the three months ended March 31, 2026 and 2025 were 19.5% and 27.1%, respectively.
The change in the effective tax rate for the three months ended March 31, 2026, compared to the prior period is primarily related to a decrease in U.S. taxes on international operations, the global mix of earnings, and deductions related to employee share-based compensation.
The effective tax rate can vary from quarter to quarter due to changes in the Company's global mix of earnings, the resolution of income tax audits, changes in tax laws (including updated guidance on U.S. tax reform), deductions related to employee share-based payments, internal restructurings, and pension mark-to-market adjustments.
Net Income
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Net income $ 95 $ 62
Net income margin 9.6 % 7.1 %
Net income for the three months ended March 31, 2026, increased by $33 million compared with the prior period, primarily due to $17 million of higher gross profit, $7 million of higher non-operating income, $6 million of lower other expense, net, $2 million of lower interest expense and $1 million of lower SG&A expense.
Non-GAAP Measures
It is management's intent to provide non-GAAP financial information to supplement the understanding of our business operations and performance, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the most directly comparable GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to other similarly titled measures used by other companies. Additionally, the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, an analysis of the Company's operating results as reported under GAAP.
EBIT and Adjusted EBIT
We define "EBIT" as our net income calculated in accordance with U.S. GAAP, plus the sum of (i) interest expense net of interest income and (ii) tax expense. We define "Adjusted EBIT" as EBIT, plus the sum of (i) repositioning costs, (ii) foreign exchange (gain) loss on debt net of related hedging (gains) losses, (iii) discounting costs on factoring, (iv) gain on sale of equity investment, (v) acquisition and divestiture expenses, (vi) other non-operating income, and (vii) debt refinancing and redemption costs, if any.
We believe that EBIT and Adjusted EBIT are important indicators of operating performance and provide useful information for investors because EBIT and Adjusted EBIT exclude the effects of income taxes, as well as the effects of financing activities by eliminating the effects of interest. Certain adjustment items, while periodically affecting our results, may also vary significantly from period to period and have disproportionate effect in a given period, which affects the comparability of our results.
The following table reconciles Net income under GAAP to Adjusted EBIT:
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Net income $ 95 $ 62
Interest expense, net of interest income (1)
26 29
Tax expense 23 23
EBIT 144 114
Repositioning costs (2)
12 7
Foreign exchange gain on debt, net of related hedging loss - 1
Factoring and notes receivables discount fees
1 1
Other non-operating income (3)
(6) (1)
Debt refinancing and redemption costs (4)
- 6
Acquisition and divestiture expenses - 3
Adjusted EBIT $ 151 $ 131
(1)Reflects interest income of $1 million and $0 million for the three months ended March 31, 2026 and 2025, respectively.
(2)Repositioning costs includes severance costs related to restructuring projects to improve future productivity.
(3)Reflects the non-service component of net periodic pension income and, for the three months ended March 31, 2026, also includes $5 million related to the resolution of certain environmental liabilities not directly related to the Company's operations.
(4)Reflects third-party costs directly attributable to the refinancing of our credit facilities and any amendments.
Adjusted EBIT for the Three Months Ended March 31, 2026
For the three months ended March 31, 2026, net income increased by $33 million versus the prior period as discussed above within Results of Operations for Three Months Ended March 31, 2026.
Adjusted EBIT increased by $20 million compared to the prior period driven by $19 million of higher volumes, $13 million of benefit from foreign currency impacts, $7 million of lower RD&E costs, $4 million of favorable impacts from product mix and $2 million of commodity, transportation and energy deflation. This increase was partially offset by $14 million of lower productivity and $11 million of pricing net of inflation pass-through.
During the three months ended March 31, 2026, we saw volume growth across all verticals. Gasoline growth was driven by new application launches and program ramp-ups in Europe. Diesel growth was due to strong demand for light commercial vehicles and pickup trucks in North and South America, Southeast Asia and application launches in India. Commercial vehicles/industrial growth was driven by strong demand for commercial vehicles in all key regions, as well as continued industrial growth. Aftermarket volumes also increased across all regions for commercial vehicle parts, resulting in a favorable product mix.
The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was more than offset by year-over-year labor inflation, higher stock based compensation and the timing of our productivity actions. Our overall financial results for the three months ended March 31, 2026 were also impacted by the timing of customer recoveries.
Gains in foreign currency from translational, transactional, and hedging effects in the three months ended March 31, 2026, primarily driven by a higher Chinese Yuan-to-U.S. dollar versus the prior period, accounted for a $13 million increase in Adjusted EBIT.
Liquidity and Capital Resources
Overview
March 31,
2026 		December 31,
2025
(Dollars in millions)
Cash and cash equivalents $ 142 $ 177
Restricted cash 2 2
Revolving Facility - available borrowing capacity 630 630
Revolving Facility - borrowings or letters of credit outstanding - -
Term Loan Facilities - principal outstanding 635 637
Senior Notes - principal outstanding 800 800
Bilateral letter of credit facility - utilized capacity 10 10
During the three months ended March 31, 2026, we paid cash dividends of $16 million. On April 30, 2026, we declared a cash dividend of $0.08 per share of Common Stock, payable on June 15, 2026, to shareholders of record as of June 1, 2026.
We employ several means to manage our liquidity, and our sources of financing include cash flows from operations, cash and cash equivalents on hand, the 2032 Senior Notes, and our Credit Agreement, including our 2025 Dollar Term Facility and our New Revolving Facility. We expect to continue investing in our facilities as we expand our manufacturing capacity for new product launches and invest in new technologies and strategic growth opportunities, in particular in connection with our zero-emission technologies. We believe the combination of expected cash flows, the term loan borrowings, the 2032 Senior Notes, and the New Revolving Facility, will provide us with adequate liquidity to support the Company's operations.
Share Repurchase Program
On December 3, 2025, the Board of Directors authorized a $250 million share repurchase program valid from January 1, 2026, until December 31, 2026. During the three months ended March 31, 2026, we repurchased $87 million of Common Stock, with $163 million remaining under the share repurchase program as of that date. These repurchases include a total of 2,500,000 shares repurchased from funds affiliated with Oaktree Capital Management, L.P., a related party, for $50 million. We may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise. The timing, as well as the number and value of shares repurchased under the program, will depend on a variety of factors. We are not obligated to purchase any shares under the share repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. For more information, see Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Cash Flow Summary for the Three Months Ended March 31, 2026
Three Months Ended
March 31,
2026 2025
(Dollars in millions)
Cash provided by (used for):
Operating activities $ 98 $ 56
Investing activities (26) (22)
Financing activities (105) (31)
Effect of exchange rate changes on cash and restricted cash (2) 2
Net (decrease) increase in cash, cash equivalents and restricted cash
$ (35) $ 5
Cash provided by operating activities increased by $42 million for the three months ended March 31, 2026, versus the prior year. The increase was primarily driven by $21 million of higher net income net of non-cash charges, $18 million of favorable impacts from working capital changes and $3 million of favorable impact from changes in other assets and liabilities.
Cash flow used for investing activities increased by $4 million for the three months ended March 31, 2026, compared to the same period in the prior year. The increase was driven by $3 million in higher capital expenditures on property, plant and equipment versus the prior year and $1 million in reduced proceeds from our cross currency swaps.
Cash used for financing activities was $105 million for the three months ended March 31, 2026, compared with $31 million in the prior year. During the three months ended March 31, 2026, we made payments of $87 million for the repurchase of Common Stock under our share repurchase program, payments of $16 million for dividends on our Common Stock and debt repayments of $2 million.
In comparison, cash used for financing activities was $31 million for the three months ended March 31, 2025 primarily driven by debt repayments of $71 million, payments of $30 million for Common Stock repurchases and payments of $12 million for dividends on our Common Stock. These payments were partially offset by proceeds of $68 million from the Credit Facilities and $17 million of bank overdrafts.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Policies
The preparation of our Consolidated Interim Financial Statements in accordance with GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. Actual results could differ from our estimates and assumptions, and any such differences could be material to our financial statements. Our critical accounting policies are summarized in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our 2025 Form 10-K.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies of the Notes to the Consolidated Interim Financial Statements for further discussion of recent accounting pronouncements.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q and the other reports filed by us with the SEC from time to time, as well as statements incorporated by reference herein and related comments by our management, contain forward-looking statements within the meaning of the U.S. federal securities laws. All statements other than statements of historical fact, including without limitation statements regarding our future results of operations and financial position, expectations regarding the growth of the turbocharger and electric vehicle markets and other industry trends, the sufficiency of our cash and cash equivalents, anticipated sources and uses of cash, anticipated investments in our business, our business strategy, pending litigation, anticipated interest expense, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements. In many cases, you can identify forward-looking statements by terms such as "aim," "anticipate," "appears," "approximately," "believe," "continue," "could," "designed," "effect," "estimate," "evaluate," "expect," "forecast," "goal," "initiative," "intend," "may," "objective," "outlook," "plan," "potential," "priorities," "project," "pursue," "seek," "should," "target," "when," "will," "would," or the negative of these terms or other similar expressions. In making these forward-looking statements, we rely on our current expectations and projections about possible future events and financial trends that we believe may affect our business, financial condition and results of operations. We believe these judgments are reasonable, but these statements are not guarantees of any future events or financial results, and our actual results may differ materially due to a variety of important factors, many of which are beyond our control. These factors, which may be revised or supplemented in subsequent reports we file with the SEC, include, among other things, risks related to the following: (1) the ongoing evolution of the automotive industry; (2) the highly competitive markets in which we operate; (3) our reliance on sales to major customers; (4) changing industry and economic conditions; (5) the unique aspects of our aftermarket business; (6) pricing pressures from our original equipment manufacturer customers; (7) the foreign markets in which we operate; (8) climate change and increased scrutiny from customers, investors, regulators and other stakeholders; (9) recruitment, development, and retention of qualified personnel;
(10) program launch difficulties; (11) volatility in the cost of raw materials, components, energy, transportation, and other inputs; (12) supply shortages or supplier distress leading to a disruption of our operations; (13) realization of sales from awarded business; (14) economic, political, regulatory, foreign exchange and other risks of our international operations; (15) geopolitical conditions, catastrophic events and pandemics; (16) joint venture partnerships, joint development projects and other strategic opportunities; (17) intellectual property rights; (18) work stoppages or other disruptions at our facilities; (19) realization of productivity and efficiency improvements and repositioning projects; (20) warranty claims, product recalls, field actions or product liability actions; (21) litigation, government proceedings and other contingencies and uncertainties; (22) environmental matters and liabilities; (23) information technology and data privacy considerations, including cybersecurity and other security concerns; (24) our substantial indebtedness and restrictive covenants related to such indebtedness; (25) tax considerations; (26) our ability to raise capital; (27) our pension funding obligations; or (28) payment of dividends and share repurchases. For a further discussion of these and other risks, refer to Part I, Item 1A. "Risk Factors" of our 2025 Form 10-K.
You should read this Quarterly Report and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from those envisioned by these forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances, or otherwise.
Garrett Motion Inc. published this content on April 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 30, 2026 at 11:00 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]