Garrett Motion Inc.

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts)

Note 1. Background and Basis of Presentation

Background

Garrett Motion Inc. (the “Company” or “Garrett”) is a cutting-edge technology leader delivering differentiated solutions for emission reduction and energy efficiency. We design, manufacture, and sell highly engineered turbocharging, air and fluid compression, and high-speed electric motor technologies to original equipment manufacturers (“OEMs”) and distributors within the mobility and industrial space. We have significant expertise in delivering products at scale for internal combustion engines using gasoline, diesel, natural gas, and hydrogen, as well as for zero-emission technologies using hydrogen fuel cell systems, both for mobility and industrial use. As our customers continue to progress on electrification, we are applying our technological pillars to develop highly engineered E-Powertrain and E-Cooling compressor products to support their ambition. These products are key enablers for fuel economy, energy efficiency, thermal management, and compliance with emissions standards and overall greenhouse gas and other emission reduction targets.

Basis of Presentation

The accompanying unaudited Consolidated Interim Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to interim financial statements. While these statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by United States generally accepted accounting principles (“GAAP”) for complete financial statements. The unaudited Consolidated Interim Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and accompanying notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K, as filed with the SEC on February 20, 2025 (our “2024 Form 10-K”). The results of operations for thethree and six months ended June 30, 2025 and cash flows for thesix months ended June 30, 2025 should not necessarily be taken as indicative of the entire year. All amounts presented are in millions, except per share amounts.

We evaluate segment reporting in accordance with ASC 280, Segment Reporting. We concluded that Garrett operates in a single operating segment and a single reportable segment based on the operating results available and evaluated regularly by the chief operating decision maker (“CODM”), which is our Chief Executive Officer, to make decisions about resource allocation and performance assessment. The CODM makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the Company’s products across channels and geographies.

The preparation of the financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates on assumptions that it believes to be reasonable under the circumstances. Actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

Note 2. Summary of Significant Accounting Policies

The accounting policies of the Company are set forth in Note 3 to the Consolidated Financial Statements for the year ended December 31, 2024 included in our 2024 Form 10-K.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update increase the transparency around income tax information through improvements to disclosures primarily related to the rate reconciliation and income taxes paid information. The Company adopted the new guidance prospectively as of January 1, 2025.

Accounting Standards Issued But Not Yet Adopted

In March 2024, the SEC adopted a final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, to enhance and standardize climate-related disclosures. The rule will require companies to disclose material Scope 1 and Scope 2 greenhouse gas emissions; climate-related risks, governance, and oversight; and the financial effects of severe weather events and other natural conditions. These disclosures are required to be phased in starting with annual reporting periods beginning in 2025; however, this rule has been stayed pending the outcome of legal challenges, and on March 27, 2025, the SEC withdrew its legal defense of the rule. The Company is currently evaluating the guidance to determine the impact of adoption on its disclosures in the event that the stay is lifted.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disclosure of specified information about certain costs and expenses. The guidance is effective for fiscal years beginning after December 15, 2026 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the guidance to determine the impact on its disclosures.

There are no other recently issued, but not yet adopted, accounting pronouncements that are expected to have a material impact on the Company's Consolidated Interim Financial Statements and related disclosures.

Note 3. Revenue Recognition and Contracts with Customers

Disaggregated Revenue

Net sales by region (determined based on country of shipment) and channel is included in Note 21, Segments and Concentrations.

Contract Balances

The following table summarizes our contract assets and liabilities balances:

Note 4. Research, Development and Engineering

Garrett conducts research, development, and engineering (“RD&E”) activities, which consist primarily of the development of new products and product applications. RD&E costs are charged to expense as incurred unless the Company has a contractual guarantee for reimbursement from the customer. Customer reimbursements are netted against gross RD&E expenditures as they are considered a recovery of cost. Such costs are included in Cost of goods sold as follows:

(1) Engineering-related expenses include customer reimbursements of $13 million and $16 million for the three months ended June 30, 2025 and 2024, respectively, and $25 million and $24 million for the six months ended June 30, 2025 and 2024, respectively.

Certain engineering expenses related to long-term supply arrangements are capitalized when defined criteria, such as the existence of a contractual guarantee for reimbursement, are met. As of June 30, 2025 and December 31, 2024,$40 million and$29 million, respectively, of such contractually reimbursable costs were capitalized. These amounts are recorded within Other current assets in the Consolidated Interim Balance Sheet.

Note 5. Income Taxes

The effective tax rates for the three months ended June 30, 2025 and 2024 were 14.7% and 26.4%, respectively. The effective tax rates for the six months ended June 30, 2025 and 2024 were 20.3% and 22.6%, respectively.

The change in the effective tax rate for the three months ended June 30, 2025 compared to the prior period is primarily related to a one-time sale of an equity interest in an unconsolidated joint venture in the prior year and a one-time benefit attributable to the revaluation of deferred tax assets in China, partially offset by an increase in U.S. taxes on international operations.

The change in the effective tax rate for the six months ended June 30, 2025 compared to the prior period is primarily related to a one-time sale of an equity interest in an unconsolidated joint venture in the prior year and a one-time benefit attributable to the revaluation of deferred tax assets in China, partially offset by an increase in U.S. taxes on international operations and additional tax reserve positions in the current year.

The effective tax rate for the three months ended June 30, 2025 was lower than the U.S. federal statutory rate of 21% as a result of a one-time benefit attributable to the revaluation of deferred tax assets in China, partially offset by U.S. taxes on international operations.

The effective tax rate for the six months ended June 30, 2025 was lower than the U.S. federal statutory rate of 21% as a result of a one-time benefit attributable to the revaluation of deferred tax assets in China, partially offset by U.S. taxes on international operations and additional tax reserve positions.

Note 6. Accounts, Notes and Other Receivables—Net

Trade receivables include $51 million and $40 million of unbilled customer contract asset balances as of June 30, 2025 and December 31, 2024, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate. See Note 3, Revenue Recognition and Contracts with Customers.

Notes receivable is related to guaranteed bank notes without recourse that the Company receives in settlement of accounts receivables, primarily in the Asia Pacific region. See Note 7, Factoring and Notes Receivable.

Other receivables includes VAT receivables of $41 million and $50 million as of June 30, 2025 and December 31, 2024, respectively.

Note 7. Factoring and Notes Receivable

The Company enters into arrangements with financial institutions to sell eligible trade receivables. The receivables are sold without recourse and the Company accounts for these arrangements as true sales. The Company also receives guaranteed bank notes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region. The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third-party financial institutions in exchange for cash. Bank notes sold to third-party financial institutions without recourse are likewise accounted for as true sales.

The expenses related to the sale of trade receivables and guaranteed bank notes are recognized within Other expense, net in the Consolidated Interim Statements of Operations, and were $1 million for the three months ended June 30, 2025 and 2024, respectively, and $2 million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025 and December 31, 2024, the Company hadno guaranteed bank notes pledged as collateral.

Note 8. Inventories—Net

Note 9. Other Assets

Note 10. Supplier Financing

The Company has supplier financing arrangements withtwo third-party financial institutions under which certain suppliers may factor their receivables from Garrett. The Company also enters into arrangements with banking institutions to issue bankers acceptance drafts in settlement of accounts payables, primarily in the Asia Pacific region. The bankers acceptance drafts, or guaranteed bank notes, have a contractual maturity ofsix months or less, and may be held by suppliers until maturity, transferred to their suppliers, or discounted with financial institutions in exchange for cash. The supplier financing obligations and guaranteed bank notes outstanding are recorded within Accounts payable in our Consolidated Interim Balance Sheet.

Note 11. Accrued Liabilities

(1)Customer advances and deferred income include $15 millionand $8 million of contract liabilities as of June 30, 2025 and December 31, 2024, respectively. See Note 3, Revenue Recognition and Contracts with Customers.

The Company accrues repositioning costs related to projects to optimize its product costs and right-size our organizational structure. Expenses related to the repositioning accruals are included in Cost of goods sold and Selling, general and administrative expenses in our Consolidated Interim Statements of Operations.

The following tables summarize the activity in our repositioning accrual:

Note 12. Other Liabilities

Note 13. Leases

We have operating leases that primarily consist of real estate, machinery, and equipment. As of June 30, 2025, the Company does not have any material finance leases. Our leases have remaining lease terms of up to 13 years, some of which include options to extend the leases for up totwo years, and some of which include options to terminate the leases within the year.

The components of lease expense are as follows:

Supplemental cash flow information related to operating leases is as follows:

Supplemental balance sheet information related to operating leases is as follows:

Maturities of operating lease liabilities as of June 30, 2025 were as follows:

Note 14. Long-Term Debt and Credit Agreements

Senior Notes

On May 21, 2024, Garrett Motion Holdings Inc. and Garrett LX I S.à.r.l. (the "Issuers"), wholly owned subsidiaries of the Company, completed an offering of $800 million in aggregate principal amount of 7.75% Senior Unsecured Notes due 2032 (the "2032 Senior Notes"). The 2032 Senior Notes mature on May 31, 2032. The Company incurred $12 million of debt issuance costs, which have been capitalized and will be amortized on a straight-line basis.

The 2032 Senior Notes are guaranteed by the Company and each of the Company's wholly owned subsidiaries that guarantee obligations under the Credit Agreement (as defined below), subject to certain exceptions. The proceeds from the sale of the 2032 Senior Notes, together with cash on hand, were used to repay approximately $800 million of term loan indebtedness and to pay related fees and expenses. The 2032 Senior Notes bear interest at a rate of 7.75% per annum. Interest on the 2032 Senior Notes is payable semi-annually in arrears on May 31 and November 30 of each year, commencing on November 30, 2024.

The 2032 Senior Notes indenture contains certain covenants that limit the ability of the Company and its restricted subsidiaries to incur certain additional debt, incur certain liens securing debt, pay certain dividends or make other restricted payments, make certain investments, make certain asset sales, and enter into certain transactions with affiliates. These covenants are subject to a number of exceptions, limitations, and qualifications as set forth in the 2032 Senior Notes indenture. Additionally, the indenture contains certain change of control provisions that, under certain conditions, would require the Company to make an offer to repurchase all of the outstanding 2032 Senior Notes at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest. The indenture also contains customary events of default.

Credit Facilities

On January 30, 2025, the Company entered into that certain Restatement Agreement (the "Restatement Agreement"), which amends and restates that certain Credit Agreement, dated as of April 30, 2021 (as amended from time to time, the "Existing Credit Agreement" and as amended and restated by the Restatement Agreement, the "Credit Agreement"), by and among the Company, Garrett Motion Holdings Inc., Garrett Motion Sàrl and Garrett LX I S.à.r.l., as borrowers (the "Borrowers"), the lenders and issuing banks part thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent. Under the Restatement Agreement, the Company refinanced in full its $692 million U.S. Dollar term loan facility (the "2021 Dollar Term Facility") under the Existing Credit Agreement with a new $692 million term loan (the "2025 Dollar Term Facility") in an aggregate principal amount of $692 million. The 2025 Dollar Term Facility will mature on January 30, 2032, and bear interest at a rate equal to, at the Company's option, the Adjusted Term SOFR Rate (as defined in the Restatement Agreement) plus 2.25% per annum in the case of Term Benchmark Loans (as defined in the Restatement Agreement) and the Alternate Base Rate (as defined in the Restatement Agreement) plus 1.25% per annum in the case of ABR Loans (as defined in the Restatement Agreement).

Also on January 30, 2025, pursuant to the Restatement Agreement, the Company replaced its existing $600 million revolving commitments under the Existing Credit Agreement with new revolving commitments under the Credit Agreement in an aggregate principal amount of $630 million (the "New Revolving Facility" and, together with the New Term Loans, the "Credit Facilities"). The maturity date of the New Revolving Facility is January 30, 2030. The New Revolving Facility, when drawn, will bear interest at a rate equal to the applicable benchmark plus an applicable margin that varies based on the Company's leverage ratio. The applicable margin for revolving borrowings ranges from 2.25% to 1.75% per annum in the case of Term Benchmark Loans and 1.25% to 0.75% per annum in the case of ABR Loans. In addition to paying interest on outstanding borrowings under the New Revolving Facility, the Company must also pay a quarterly commitment fee based on the average daily unused portion of the New Revolving Facility during such quarter, which is determined by its leverage ratio and ranges from 0.25% to 0.50% per annum.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type. The Credit Agreement also contains certain customary events of default. The New Revolving Facility is subject to a financial covenant requiring the maintenance of a consolidated total leverage ratio of not greater than 4.7 to 1.00 as of the end of each fiscal quarter if, on the last day of any such fiscal quarter, the aggregate amount of loans and letters of credit (excluding backstopped or cash collateralized letters of credit and other letters of credit with an aggregate face amount not exceeding $30 million) outstanding under the New Revolving Facility exceeds 35% of the aggregate commitments in effect thereunder on such date. The Credit Facilities are secured on a first-priority basis by: (1) a perfected security interest in the equity interests of each direct material subsidiary of each guarantor under the Credit Facilities and (ii) perfected security interests in, and mortgages on, substantially all tangible and intangible personal property and material real property of each of the guarantors under the Credit Facilities, subject, in each case, to certain exceptions and limitations, including the agreed guaranty and security principles.

As of June 30, 2025, the Company was in compliance with all covenants under the 2032 Senior Notes indenture and Credit Agreement.

The principal outstanding and carrying amounts of our long-term debt as of June 30, 2025 and December 31, 2024 are as follows:

Separate from the Revolving Facility, the Company has a bilateral letter of credit facility with outstanding letters of credit in the amount of $8 million at June 30, 2025 and December 31, 2024, respectively. The letters of credit typically support customs arrangements and other obligations at our local affiliates.

Minimum scheduled principal repayments of long-term debt as of June 30, 2025 are as follow:

Note 15. Equity

Common Stock

On December 5, 2024, the Board of Directors declared a cash dividend of $0.06 per share of Common Stock, payable on January 31, 2025, to shareholders of record as of January 15, 2025. The total amount of dividends paid on January 31, 2025 amounted to $12 million.

On May 1, 2025, the Board of Directors declared a cash dividend of $0.06 per share of Common Stock, payable on June 16, 2025, to shareholders of record as of June 2, 2025. The total amount of dividends paid on June 16, 2025 amounted to $13 million.

Treasury Stock

Treasury stock represents shares of the Company's Common Stock that have been issued and subsequently repurchased by the Company or withheld to satisfy withholding tax obligations in connection with the vesting of equity awards, and that have not been retired or cancelled. The Company accounts for treasury stock under the cost method and includes treasury stock as a component of Equity (Deficit) on the Consolidated Interim Balance Sheet. The Company accounts for the reissuance of treasury stock using the average cost method. The Company did not reissue or retire any shares of treasury stock during the three and six months ended June 30, 2025.

Share Repurchase Program

On December 4, 2024, the Board of Directors authorized a $250 million share repurchase program valid January 1, 2025 until December 31, 2025. The Company may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise. The timing, as well as the number and value of shares repurchased under the program, will depend on a variety of factors. The Company is not obligated to purchase any shares under the repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. During the six months ended June 30, 2025, the Company repurchased $52 million of Common Stock, and had $198 million remaining under the share repurchase program as of that date. The repurchased shares are held as treasury stock.

Note 16. Financial Instruments and Fair Value Measures

Our credit, market, and foreign currency risk management policies are described in Note 19, Financial Instruments and Fair Value Measures, to the Consolidated Financial Statements for the year ended December 31, 2024 included in our 2024 Form 10-K. As of June 30, 2025 and December 31, 2024, we had contracts with aggregate gross notional amounts of $973 million and $928 million, respectively, to hedge foreign currencies, principally the U.S. Dollar, Swiss Franc, British Pound, Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech Koruna, Australian Dollar, and Korean Won.

Fair Value of Financial Instruments

The FASB’s accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2025 and December 31, 2024:

(a) Recorded within Other current assets

(b) Recorded within Other assets

(c) Recorded within Accrued liabilities

(d) Recorded within Other liabilities

Cash Flow Hedges

During 2023, the Company entered into float-to-fixed interest rate swap contracts with an aggregate notional amount of $200 million and maturities in July 2024 and October 2024. The Company also entered into a float-to-fixed cross-currency swap contract comprised of an amortizing swap with an aggregate notional amount of €280 million ($300 million) and notional exchanges in June 2026, June 2027, and June 2028. The interest rate swap and cross-currency swap contracts were early settled in the second quarter of 2024, resulting in net gains of $18 million recorded to Interest expense and a $4 million loss recorded to Non-operating expense in the Consolidated Interim Statement of Operations.

During 2025, the Company entered into float-to-fixed interest rate swap contracts with an aggregate notional amount of $675 million and maturities in January 2027, January 2028, January 2029, January 2030 and January 2031. Changes in the fair value of the interest rate swap contracts are recorded in Accumulated Other Comprehensive Income ("AOCI") and will be reclassified to Interest expense in the Consolidated Interim Statement of Operations upon maturity.

The Company also has outstanding forward currency exchange contracts with maturities up to 18 months and an aggregate notional amount of $520 million and $331 million as of June 30, 2025 and December 31, 2024, respectively. These forward currency exchange contracts have been designated as cash flow hedges to mitigate foreign currency exposures primarily on our inventory purchases and manufacturing costs. The gains and losses on the forward currency exchange contracts are recorded in AOCI and reclassified to Cost of goods sold in the Consolidated Interim Statement of Operations when the underlying transactions are recognized in earnings.

In order to mitigate foreign currency risk on its 2032 Senior Notes, the Company entered into fixed-to-fixed cross-currency swap contracts with an aggregate notional amount of €507 million ($550 million) and notional exchanges occurring in May 2027, May 2028, May 2029, and May 2030. Changes in the fair value of the cross-currency swap contracts are recognized in AOCI and reclassified to Non-operating (income) expense in the Consolidated Interim Statement of Operations, based upon changes in the spot rate remeasurement of the underlying debt. The net interest settlements on the cross-currency swap contracts are recorded in Interest expense in the Consolidated Interim Statements of Operations.

All of the Company's cash flow hedges are assessed as highly effective.

Net Investment Hedges

The Company has designated cross-currency swaps with aggregate notional amounts of €1,381 million ($1,490 million) and €858 million ($965 million) as of June 30, 2025 and December 31, 2024, respectively, as net investment hedges of its Euro-denominated operations. Changes in the fair value of the net investment hedges are recorded in AOCI until the net investment is liquidated or sold. The fair values of the net investment hedges were a net liability of $123 million and a net asset of $70 millionas of June 30, 2025 and December 31, 2024, respectively. No ineffectiveness has been recorded on the net investment hedges.

Non-Designated Derivatives

As of December 31, 2024, the Company had outstanding float-to-fixed interest rate swap contracts with an aggregate notional amount of €450 million ($470 million) and maturities of April 2025, April 2026, April 2027, and April 2028. Changes in the fair value of the undesignated interest rate swap contracts are recorded in Interest expense in the Consolidated Interim Statements of Operations. These interest rate swap contracts were early settled in 2025.

The Company also has outstanding forward currency exchange contracts with maturities generally up to 3 months and an aggregate notional amount of $453 million and $597 million as of June 30, 2025 and December 31, 2024, respectively. Changes in the fair value of the forward currency exchange contracts are recorded in Non-operating (income) expense in the Consolidated Interim Statements of Operations.

Effect of Derivatives on the Statements of Operations and Statements of Comprehensive Income (Loss)

The following tables present the pretax impact that changes in the fair values of derivatives designated as cash flow hedges and net investment hedges had on OCI, AOCI and earnings:

(1) Includes a settlement loss of $3 million for the three and six months ended June 30, 2024, respectively.

(2) Includes a settlement loss of $4 million for the three and six months ended June 30, 2024, respectively.

The following table summarizes the pretax gain (loss) that changes in the fair values of derivatives not designated as hedging instruments had on earnings:

(1) Includes settlement gain of $21 million and interest income of $8 million, partially offset by marked-to-market remeasurement losses of $24 million, for the three months ended June 30, 2024. Includes settlement gain of $21 million and interest income of $16 million, partially offset by marked-to-market remeasurement losses of $24 million, for the six months ended June 30, 2024.

Fair Value Measurement

The foreign currency exchange, interest rate swap and cross-currency swap contracts are valued using market observable inputs. As such, these derivative instruments are classified within Level 2. The assumptions used in measuring the fair value of the cross-currency swap are considered Level 2 inputs, which are based upon market-observable interest rate curves, cross-currency basis curves, credit default swap curves, and foreign exchange rates.

The carrying value of Cash, cash equivalents, and restricted cash, Account receivables and Notes and Other receivables contained in the Consolidated Interim Balance Sheet approximates fair value.

The following table sets forth the Company’s financial assets and liabilities that were not carried at fair value:

The Company determined the fair value of its Term Loan Facilities and related current maturities utilizing transactions in the listed markets for similar liabilities. As such, the fair value of the Term Loan Facilities and related current maturities is considered Level 2. The fair value of the 2032 Senior Notes was determined using quoted prices from exchange traded markets and is classified as a Level 1 measurement.

Note 17. Accumulated Other Comprehensive Income

The changes in AOCI by component are set forth below:

Reclassifications from AOCI to income were as follows:

(1) Cumulative translation losses reclassified to Net income related to the sale of an equity interest in an unconsolidated joint venture. See Note 22 for discussion.

Note 18. Earnings Per Share

Basic earnings per share ("EPS") is computed using the weighted-average number of common shares outstanding during the period.

Diluted earnings per share is calculated based on the weighted-average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method.

The details of the EPS calculations for the three and six months ended June 30, 2025 and 2024 are as follows:

Note 19. Commitments and Contingencies

We are involved in various lawsuits, claims, and proceedings incident to the operation of our businesses, including those pertaining to product liability, product safety, environmental, health and safety, intellectual property, employment, commercial and contractual matters and various other matters. We regularly assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses based on a careful analysis of each matter. We identify below the individual proceedings where we believe a material loss is reasonably possible or probable, and we accrue for matters when we believe that losses are probable and the amount of the potential loss is reasonably estimable. It is inherently difficult to determine whether a loss is probable or reasonably possible or to estimate the size or range of any potential loss. Accordingly, while we believe that appropriate accruals have been established for losses that are probable and can be reasonably estimated, it is possible that adverse outcomes from such proceedings could exceed the amounts accrued by an amount that could be material to our financial position, results of operations or cash flows.

Brazilian Tax Matter

In September 2020, the Brazilian tax authorities issued an infraction notice against Garrett Motion Industria Automotiva Brasil Ltda, challenging the use of certain tax credits between January 2017 and February 2020. The estimated total amount of the loss contingency arising from this matter as of June 30, 2025 was $25 million, including penalties and interest. The Company believes, based on management’s assessment and the advice of external legal counsel, that it has meritorious arguments in connection with the infraction notice and any liability for the infraction notice is currently not probable. Accordingly, no accrual is required at this time.

Warranties and Guarantees

In the normal course of business, we issue product warranties and product performance guarantees. We accrue for the estimated cost of product warranties and performance guarantees based on contract terms and historical experience at the time of sale to the customer. Adjustments to initial obligations for warranties and guarantees are made as changes to the obligations become reasonably estimable. Product warranties and product performance guarantees are included in Accrued liabilities and Other liabilities. The following table summarizes information concerning our recorded obligations for product warranties and product performance guarantees.

Other Commitments and Contingencies

We are subject to other lawsuits, investigations, and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employment and employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurring and reasonably estimable. We regularly assess the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.

Note 20. Pension Benefits

We sponsor several funded U.S. and non-U.S. defined benefit pension plans. Significant plans outside the U.S. are in Switzerland and Ireland. Other pension plans outside the U.S. are not material to the Company, either individually or in the aggregate.

Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. We are not required to make any contributions to our U.S. pension plan in 2025. We expect to make contributions of cash and/or marketable securities of approximately $5 million to our non-U.S. pension plans to satisfy regulatory funding standards in 2025, of which $2 million has been contributed as of June 30, 2025.

Net periodic benefit costs for our significant defined benefit plans include the following components:

For both our U.S. and non-U.S. defined benefit pension plans, we estimate the service and interest cost components of net periodic benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows. This approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates.

Note 21. Segments and Concentrations

The Company has identified our CODM as the Chief Executive Officer. The CODM reviews consolidated net income when assessing the Company's performance, allocating resources, and establishing management's compensation. In addition to consolidated net income, the CODM receives discrete information for net sales by product and by geographical location. Consolidated net income is used to monitor budget versus actual results.

The accounting policies of our operating segment are the same as those described in the Company's summary of significant accounting policies.

The Company derives revenues from customers through sales of air and fluid compression and high-speed electric motor technologies for OEMs and distributors within the mobility and industrial space. In addition to consolidated net income, the CODM regularly reviews sales by region and product line.

Sales concentration - Net sales by region (determined based on country of shipment) and product line are as follows:

The table below provides segment information about the Company:

(1) Variable manufacturing costs include freight, duties, direct and indirect labor costs, repairs and maintenance, repositioning costs and variable overhead costs.

(2) Fixed manufacturing costs include depreciation and amortization, rent, overhead labor costs, utilities and other fixed costs.

(3) Other segment items consist of gain on sale of equity interest in unconsolidated joint venture, non-service components of net periodic pension expense, interest income, equity income and other non-operating income items (if any).

The measure of segment assets is reported on the balance sheet as total consolidated assets. The Company had capital expenditures of $15 million and $17 million for the three months ended June 30, 2025 and 2024, respectively, and $41 million and $49 million for the six months ended June 30, 2025 and 2024, respectively.

Note 22. Acquisitions and Divestitures

On April 3, 2024, the Company divested its equity interest in an unconsolidated joint venture for approximately $58 million, subject to customary debt and working capital adjustments. We received cash consideration on the divestiture date of $46 million, with an additional $7 million to be received in equal installments duetwelve months andthirty-six months from the divestiture date. A pre-tax gain of $27 million was recognized related to this divestiture, including $5 million of cumulative translation losses reclassified from AOCI to Net income. Transaction fees of $1 million were incurred in connection with the divestiture and are included in Selling, general, and administrative expenses in our Consolidated Interim Statement of Operations.

Note 23. Subsequent Events

On July 4, 2025, the United States enacted H.R. 1, comprehensive legislation that introduced changes to federal tax law, among other things. The Company is currently evaluating the implications of the new tax law and the impact on its Consolidated Interim Financial Statements.

On July 24, 2025, the Board of Directors declared a cash dividend of $0.06 per share of Common Stock, payable on September 16, 2025, to shareholders of record as of September 2, 2025.