PHINIA INC.

Previous wording

Adverse changes in general business and economic conditions, including recessions, adverse market conditions or downturns impacting the vehicle and industrial equipment industries, have in the past and may in the future adversely affect our business, financial condition, and results of operations.

Current wording

Adverse changes in general business and economic conditions, including recessions, adverse market conditions or downturns and other factors, including geopolitical tensions and related trade restrictions, impacting the transportation and industrial equipment industries, have in the past and may in the future adversely affect our business, financial condition, and results of operations.

Previous wording

Our business, financial condition and results of operations are sensitive to global and regional business and economic conditions, particularly those specific to the global vehicle and industrial equipment industries. Commercial vehicle, industrial application and light vehicle production and sales are cyclical and sensitive to general economic conditions and other factors, including inflation, interest rates, consumer credit, and consumer spending and preferences. 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. Many global economies have continued to experience elevated levels of inflation more generally, which has led to an increase in other input costs. As a result, the Company has experienced, and may continue to experience, higher costs. Although the Company has had success offsetting higher costs through a combination of productivity and customer recoveries, there can be no guarantee that the Company will continue to be successful doing so in the future, should inflation remain at elevated levels.

Current wording

Our business, financial condition and results of operations are sensitive to global and regional business and economic conditions, particularly those specific to the global automotive and industrial equipment industries. Commercial vehicle, light commercial vehicle, light passenger vehicle, and industrial application production and sales are cyclical and sensitive to general economic conditions and other factors, including geopolitical tensions, inflation (including related to the cost of labor and the price of commodities), interest rates, consumer credit, and consumer spending and preferences. Economic declines resulting in significant reductions in commercial vehicle, light commercial vehicle and light passenger vehicle production have in the past adversely affected our business, financial condition and results of operations, including our sales to OEMs, and could have similar effects in the future. Many global economies have experienced elevated levels of inflation more generally, which has led to an increase in other input costs. As a result, the Company has experienced, and may continue to experience, higher costs. In addition, geopolitical tensions and related trade restrictions, including export controls, and tariff increases could have a material impact on our business, financial condition and results of operations, including increasing our input costs and decreasing demand in the commercial vehicle and light vehicle markets, although the nature of those trade restrictions and tariffs remains unclear. These new trade restrictions and tariffs increase the risk for further elevated inflation more generally, which may drive an increase in other input costs. Although the Company has offset higher costs through a combination of productivity and customer recoveries in the past, there can be no guarantee that the Company will continue to be successful in doing so in the future should inflation remain at elevated levels or further increase.

Previous wording

If we do not deliver new products, services and technologies in response to changing consumer preferences and increased regulation of greenhouse gas emissions, or if the market for electric vehicles grows faster than expected, our business, financial condition, and results of operations could be adversely impacted.

Current wording

If we do not deliver new products, services and technologies in response to changing consumer preferences and evolving exhaust emissions- regulations, or if the market for electric vehicles grows faster than expected and the market for alternative fuel technologies, including for use in internal combustion engines, develops slower than expected, our business, financial condition, and results of operations could be adversely impacted.

Previous wording

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. In past years, electric vehicle use has increased, with some cities limiting access to, and a number of countries and jurisdictions implementing regulations that require a reduction or phase-out of sales of, certain commercial and light combustion-powered vehicles, accelerating toward 2030 and beyond. While rates of growth of electric vehicle adoption and production have slowed in recent years compared to earlier expectations due to several factors, in particular lower than anticipated consumer acceptance, the regulatory landscape remains challenging. In the event that reductions or phase outs are ultimately required that would have an impact on production at OEMs and, in turn, sales of our products. We will continue to consider these trends and related shifts in the industry, including in the context of our product line, growth and innovation and development strategies.

Current wording

The global transportation industry has been, and is largely expected to continue to be, focused on increased fuel efficiency and reduced emissions, including the development of hybrid electric and alternative fuel vehicles, primarily as a result of changing consumer preferences and increasingly stringent regulatory requirements in certain jurisdictions related to the impacts of climate change. In past years, electric vehicle use has increased, with some cities limiting access to, and a number of countries and jurisdictions implementing regulations that require a reduction or phase-out of sales of, certain commercial and light combustion-powered vehicles, accelerating toward 2030 and beyond. While growth rates of electric vehicle adoption and production have slowed in recent years compared to earlier expectations due to several factors, particularly lower than anticipated consumer acceptance and infrastructure challenges, the regulatory landscape remains challenging. If reductions or phase outs are ultimately required, that would have an impact on production at OEMs and, in turn, sales of our products. The ongoing energy transition away from fossil fuels in certain jurisdictions and the adoption of electrified powertrains in some markets (notably the passenger car segment, and to some degree in the light and medium duty commercial vehicle segments) has resulted, and could continue to result, in lower demand for certain of our products. We will continue to consider these trends and related shifts in the global transportation and other industries in which we operate, including in the context of our product line, growth and innovation and development strategies.

Previous wording

Through our products and solutions, we are focused on enhancing fuel efficiency and driving growth through our ability to capitalize on other trends, such as the adoption of alternative fuels (e.g., hydrogen, ammonia, ethanol, compressed natural gas and other zero- or lower-carbon fuel types) for combustion-powered vehicles, industrial machinery and other applications. Given the early stages of development of some of these new products and solutions, there can be no guarantee of the future market acceptance and investment returns with respect to our planned products. The ongoing energy transition away from fossil fuels and the adoption of electrified powertrains in some market segments, notably the passenger car market segment, has resulted, and could continue to result, in lower demand for certain of our products. 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.

Current wording

Through our products and solutions, we are focused on enhancing fuel efficiency and driving growth through our ability to capitalize on other strategies for lower carbon mobility, such as the transition to alternative fuels (e.g., hydrogen, ammonia, ethanol, methanol, compressed natural gas, bio-fuels and other zero- and lower-carbon fuel types) for combustion-powered vehicles, industrial machinery and other applications. Given the early stages of development of some of these products and solutions and the infrastructure challenges that accompany certain alternative fuel adoption, there can be no guarantee of future market acceptance, regulatory acceptance and investment returns with respect to our planned products and solutions.

Previous wording

We compete globally with a number of manufacturers and distributors that produce and sell products that are similar to ours. Price, quality, speed of delivery, technological innovation, supply chain resilience, sourcing strategies (which could include the use of artificial intelligence and machine learning), engineering development, and program launch support are primary elements of competition. Our competitors include a large number of independent domestic and international suppliers, primarily in the automotive and industrial equipment sectors. A number of our competitors are larger than us and have more diverse product portfolios, and some competitors have greater financial and other resources than we do. Our customers, faced with intense international competition, have continued to expand their global sourcing of components. 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. 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. 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.

Current wording

We compete globally with a number of manufacturers and distributors that produce and sell products and solutions that are similar to ours. Price, quality, speed of delivery, technological innovation, supply chain resilience, sourcing strategies, engineering development, scope of product technology system solutions, and program launch support are primary elements of competition. Our competitors include a large number of independent domestic and international suppliers, primarily in the global transportation and industrial equipment industries. A number of our competitors are larger than us and have more diverse product portfolios, and some competitors have greater financial and other resources than we do. Our customers, faced with intense international competition, have continued to expand their global sourcing of components. As a result, we have experienced increased competition from suppliers in other parts of the world, including suppliers that may enjoy economic advantages, such as lower labor costs, lower healthcare costs, lower tax rates and, in some cases, export or raw material subsidies. In addition, the global transportation industry is experiencing a period of technological change, including related to advances in artificial intelligence (AI) technologies. We expect AI, including machine learning and neural network capabilities, to play an increasing role in our design, manufacturing, sourcing and other activities, which will generate both opportunities and risks for our business.

Previous wording

The failure to identify, consummate, effectively integrate or realize the expected benefits from acquisitions or partnerships could adversely affect our growth and our business, financial condition, and results of operations.

Current wording

The failure to identify, consummate, effectively integrate or realize the expected benefits from acquisitions, partnerships or other strategic investments could adversely affect our growth and our business, financial condition, and results of operations.

Previous wording

We periodically evaluate selective acquisitions, partnerships, and strategic investments in connection with our growth strategy. The success of our growth strategy is dependent, in part, on our ability to identify suitable acquisition or partnership candidates, prevail against competing potential acquirers or partners and negotiate and consummate acquisitions or partnerships on terms attractive to us. It is also dependent on our ability to effectively integrate and realize the expected benefits from acquisitions or partnerships.

Current wording

We periodically evaluate selective acquisitions, partnerships, and other strategic investments in connection with our growth strategy. The success of our growth strategy is dependent, in part, on our ability to identify suitable acquisition or partnership candidates, prevail against competing potential acquirers or partners and negotiate and consummate acquisitions or partnerships on terms attractive to us. It is also dependent on our ability to effectively integrate and realize the expected benefits from acquisitions or partnerships. On August 1, 2025, we completed our first acquisition as an independent publicly traded company, acquiring 100% of SEM, a prominent provider of advanced natural gas, hydrogen and other alternative fuel ignition systems, injector stators, and linear position sensors, and our integration efforts are ongoing.

Previous wording

To realize the anticipated benefits of acquisitions or partnerships, both companies must be successfully combined. The combination of independent businesses is a complex, costly, and time-consuming process that requires significant management attention and resources. 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. 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. In addition, many of these factors are outside of our control, and any one of these factors could result in additional or unforeseen costs, decreases in the amount of expected revenues and additional diversion of management’s time and energy, which could adversely impact our business, financial condition and results of operations.

Current wording

To realize the anticipated benefits of acquisitions or partnerships, including the SEM acquisition, the combination must be successful. The combination of independent businesses is a complex, costly, and time-consuming process that requires significant management attention and resources. 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. Any or all of these factors could adversely affect our ability to maintain relationships with customers, suppliers, and employees, or achieve the anticipated benefits of the acquisition on the timeline expected, and could have an adverse effect on the combined company. In addition, many of these factors are outside of our control, and any one of these factors could result in additional or unforeseen costs, decreases in the amount of expected revenues and additional diversion of management’s time and energy, which could adversely impact our business, financial condition, and results of operations.

Previous wording

A failure of or disruption in our information technology infrastructure, including a disruption related to cybersecurity, could adversely impact our business, financial condition and results of operations.

Current wording

A failure of or disruption in our technology infrastructure, including a disruption related to cybersecurity, could adversely impact our business, financial condition, and results of operations.

Previous wording

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. In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. 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. 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. We have implemented cybersecurity and data protection policies, processes and strategies that are informed by regulatory and business requirements and industry practices. 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.

Current wording

We rely on the capacity, reliability, and security of our technology systems and infrastructure, including operational technology and industrial control systems that support our global manufacturing, testing, and quality assurance processes. We also depend on third‑party service providers, software suppliers (including providers of enterprise resource planning applications), and manufacturing partners. These systems are vulnerable to disruptions (including those resulting from cybersecurity attacks), failures or vulnerabilities in third-party provided products and services (including relating to certain end-of-life or unsupported systems or hardware), and natural disasters or adverse weather events. Although we employ due diligence, ongoing monitoring, risk assessments, system and hardware modernization initiatives and other protective measures, vulnerabilities or failures (including previously unknown vulnerabilities) of these systems could result in production delays, increased costs, or other adverse impacts that we may not be able to prevent or fully mitigate. In addition, the rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks, including risks of model manipulation, data leakage, the introduction of insecure code and social engineering using AI-generated content. Disruptions in, attacks on, and the integrity of our technology systems and infrastructure, 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. Some cybersecurity attacks or incidents result from human error or manipulation(including phishing, business email compromise, or other schemes or attacks 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. Threat actors increasingly deploy phishing attacks and business email compromise schemes aimed at disrupting operations, extorting payments, or redirecting funds. Such attacks could encrypt or corrupt critical systems or data, impede access to design or manufacturing systems, or result in fraudulent disbursements, any of which could materially increase costs and adversely affect our business or results of operations. To date, risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are not reasonably likely to materially affect the Company or our business, results of operations or financial condition.

Previous wording

Despite these efforts, we have experienced targeted and non-targeted cybersecurity attacks and incidents in the past that have resulted in unauthorized persons gaining access to our information and systems, and we could in the future experience similar attacks. 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. 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. 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. 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.

Current wording

We continue to monitor, assess, and protect against these risks, as future cybersecurity attacks or incidents on the Company could cause 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. 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, impair the operation of our financial systems and internal controls over financial reporting, delay our ability to timely close our books, require disclosure under the federal securities laws, or lead to governmental investigations or claims against us, and ultimately, adversely affect our business, financial condition and results of operations. We have incurred, and expect to continue to incur, significant costs to protect against damage that may be caused by cybersecurity attacks or incidents in the future.

Previous wording

We are under substantial pressure from OEMs to reduce the prices of our products.

Current wording

We are under substantial pressure from our customers to reduce the prices of our products.

Previous wording

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. 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. 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. Our inability to reduce costs (in an amount equal to or less than) annual price reductions, increases in tariffs, increases in raw material costs, increases in employee wages and benefits and other inflationary headwinds could have an adverse effect on our business, financial condition and results of operations.

Current wording

There is substantial and continuing pressure from our customers to reduce costs. Our customers often expect annual price reductions in our business. 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, including the impact of tariffs. Although we seek to recover inflationary and other costs and surcharges, including relating to tariffs, 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 customers can be limited (with any cost recovery sometimes less than 100% and on a delayed basis) and there can be no assurance that such recoveries will continue in the future. Our inability to reduce costs (in an amount equal to or less than) annual price reductions, increases in tariffs, increases in raw material costs, increases in employee wages and benefits and other inflationary headwinds could have an adverse effect on our business, financial condition and results of operations.

Previous wording

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. 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 discontinuation or lessening of our ability to pass through or hedge increasing commodity costs could adversely affect our business, financial condition and results of operations.

Current wording

We use a variety of commodities (including aluminum, copper, nickel, plastic resins, steel, certain alloy elements, semiconductor chips, and energy) and materials purchased in various forms (including 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. 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 discontinuation or lessening of our ability to pass through or hedge increasing commodity costs could adversely affect our business, financial condition and results of operations.

Previous wording

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. In addition, beginning in 2023, many global economies, including the United States, experienced elevated levels of inflation more generally, which drove an increase in input costs. We have pricing-related agreements with various customers, but these agreements do not enable us to recover 100 percent of our increased costs, and as a result, our operating margins have been negatively impacted. While we will continue to negotiate the pass through and recovery of higher costs with our customers, perpetuation of this trend could adversely affect our business, financial condition and results of operations.

Current wording

Prices for commodities remain volatile, and since the beginning of 2024, the Company has experienced price increases for energy and base metals (such as steel, aluminum and copper). In addition, since 2023, many global economies, including the United States, have experienced elevated levels of inflation and trade restrictions, which has led to an increase in other input costs. We have pricing-related agreements with various customers, but these agreements do not enable us to recover 100% of our increased costs, and as a result, our operating margins could be negatively impacted. While we will continue to negotiate the pass through and recovery of higher costs with our customers, perpetuation of this trend could adversely affect our business, financial condition and results of operations.

Previous wording

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. Our failure to successfully launch vehicle programs, or our inability to accurately estimate costs to design, develop and launch new vehicle programs, could have an adverse effect on our business, financial condition, and results of operations.

Current wording

The launch of a new machine, engine or 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 and customers, as well as factors related to tooling, equipment, employees, initial product quality and other factors. Our failure to successfully launch new programs, or our inability to accurately estimate costs to design, develop and launch new machine, engine or vehicle programs, could have an adverse effect on our business, financial condition and results of operations.

Previous wording

To the extent we are not able to successfully launch a new vehicle program, our customer’s vehicle production could be significantly delayed or shut down. 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.

Current wording

To the extent we are not able to successfully launch a new program, our customer’s vehicle production could be significantly delayed or shut down. 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 the foregoing 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.

Previous wording

Changes in U.S. and foreign administrative policy, including changes to existing trade agreements and any resulting changes in international trade relations, may adversely affect our business, financial condition and results of operations.

Current wording

Changes in U.S. and foreign administrative policy, including increases in tariffs, changes to existing trade agreements and import or export licensing requirements and exchange controls, and any resulting changes in international trade relations, have in the past and may in the future adversely affect our business, financial condition and results of operations.

Previous wording

We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products. 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. Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement. Efforts to withdraw from, or substantially modify, such agreements or arrangements, or actions taken in contravention of such agreements or arrangements, or the implementation of more restrictive trade policies, such as higher tariffs relevant to our operations (particularly in Mexico and China), import or export licensing requirements and exchange controls or new barriers to entry, could limit our ability to capitalize on current and future growth opportunities in international markets, impair our ability to expand the business by offering new technologies, products and services, and adversely impact our production costs, customer demand, our competitiveness and our relationships with customers and suppliers. Such actions can be announced with little or no advance notice, and we may not be able to effectively mitigate all adverse impacts from such measures. Any of these consequences could have an adverse effect on our business, financial condition and results of operations.

Current wording

Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement. Efforts to withdraw from, or substantially modify, such agreements or arrangements, or actions taken in contravention of such agreements or arrangements, or the implementation of more restrictive trade policies, such as higher tariffs relevant to our operations (particularly in Mexico and China), import or export licensing requirements and exchange controls or new barriers to entry, could adversely impact our business. Such potential adverse impacts include: limiting our ability to capitalize on current and future growth opportunities in international markets impairing our ability to expand the business by offering new technologies, products and services; increases to our input and production costs and decreases in customer demand (particularly in the commercial vehicle (CV), light commercial vehicle (LCV), and light passenger vehicle (LPV) markets); and impairing our competitiveness and our relationships with customers and suppliers. Furthermore, there is uncertainty regarding the application, scope, duration, and timing for implementation of certain new trade restrictions (including export controls on rare earth metals and semiconductors) and increases in tariffs (including related offsets) announced in 2025 that are applicable to our business. There is also uncertainty regarding any additional tariffs or other measures that may be announced or implemented by the United States and other governments in the future, and the potential related market impacts. Such actions can be announced with little or no advance notice, and we may not be able to effectively mitigate all adverse impacts from such measures.

Previous wording

Our continued success depends in part on our ability to identify, attract and onboard qualified candidates with the requisite education, background, skills and experience, and our ability to retain, develop and engage employees across our business, including our sales, manufacturing, research and development, information technology, corporate and other operations and functions. 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. These factors could adversely affect our business, financial condition and results of operations, and impair our ability to meet our strategic objectives and the needs of our customers.

Current wording

Our continued success depends in part on our ability to identify, attract, and onboard qualified candidates with the requisite education, background, skills, and experience. It also depends on our ability to retain, develop, and engage employees across our business, including our sales, manufacturing, research and development, information technology, corporate, and other operations and functions. 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. These factors could adversely affect our business, financial condition and results of operations, and impair our ability to maintain our competitive position, drive our strategic objectives, and meet the needs of our customers.

Previous wording

We own important intellectual property, including patents, trademarks, copyrights, and trade secrets, and are involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design alternatives to the technologies utilizing the patents we own or license. Further, as we expand our operations in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies or supplying counterfeit goods at lower prices under confusingly similar or identical trademarks, increases, despite the efforts we undertake to protect our intellectual property. Our inability to protect or enforce our intellectual property rights, or claims that we are infringing on the intellectual property rights of others, could adversely affect our competitive position, as well as our business, financial condition and results of operations.

Current wording

We own important intellectual property, including patents, trademarks, copyrights, and trade secrets, and are involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the segments that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design alternatives to our patented or licensed technologies. Additionally, our customers may seek ownership or exclusivity rights over intellectual property that arises in connection with products and solutions that we develop for them. Further, as we expand our operations in jurisdictions where the enforcement of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies or supplying counterfeit goods at lower prices under confusingly similar or identical trademarks, increases, despite the efforts we undertake to protect our intellectual property. Our inability to protect, enforce or further develop our intellectual property rights, or claims that we are infringing on the intellectual property rights of others, could adversely affect our competitive position, as well as our business, financial condition and results of operations.

Previous wording

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.

Current wording

Our execution of restructuring and other actions in an effort to improve future profitability and competitiveness, optimize our product portfolio and operations and execute our strategy has caused us and could cause us in the future to incur restructuring charges, and we may not achieve the anticipated savings and benefits from these actions.

Previous wording

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. 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. Failure to realize anticipated savings or benefits from our actions could have an adverse effect on our business, financial condition and results of operations.

Current wording

We have initiated, and may continue to initiate, restructuring and other actions that are designed to execute our strategy and enhance our business. Through these actions we may seek to improve the competitiveness of our business and sustain our margin profile, optimize our product portfolio, technical capability and operations, consolidate and take advantage of available capacity and resources, create an optimal legal entity structure, or reduce existing structural costs. During 2025, the Company implemented actions as part of a strategic effort to align its legacy infrastructure with current business needs and reduce costs in response to ongoing industry headwinds. We may not realize the anticipated annual savings from these actions, or future savings or benefits from 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. Failure to realize anticipated savings or benefits from our actions could have an adverse effect on our business, financial condition and results of operations.

Previous wording

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. Any of these disruptions or other extraordinary events outside of our control that impact our operations or the operations of our suppliers or customers could have a future adverse effect on our business, financial condition and results of operations. In addition, these types of events could negatively impact consumer spending or result in changes in the demand for certain products and solutions in the impacted regions or globally, which could have an adverse effect on our business, financial condition and results of operations.

Current wording

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. Any of these disruptions or other extraordinary events outside of our control that impact our operations or the operations of our suppliers or customers could have a future adverse effect on our business, financial condition and results of operations. In addition, these types of events could negatively impact consumer spending or result in changes in the demand for certain of our products and solutions in the impacted regions or globally, which could have an adverse effect on our business, financial condition and results of operations.

Previous wording

Nearly all of our manufacturing facilities are outside the U.S., including other regions in the Americas, Europe, and Asia. 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. Compliance with multiple and potentially conflicting laws and regulations of various countries is challenging, burdensome, and expensive.

Current wording

Nearly all of our manufacturing facilities are outside the United States, including other regions in the Americas, Europe and Asia. Consequently, our results have been and may continue to be adversely affected by fluctuations in foreign currency exchange rates and higher tariffs, and by other trade restrictions or prohibitions, import tariffs or other charges or taxes, changes in trade, monetary and fiscal policies, limitations on the repatriation of funds, changing economic conditions, higher labor costs, unreliable intellectual property protection and legal systems, insufficient infrastructures, social unrest, political and geopolitical instability and disputes, international terrorism, acts of war and other factors that may be discrete to a particular country or geography. Compliance with multiple and potentially conflicting laws and regulations of various countries is challenging, burdensome, and expensive.

Previous wording

The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for each period for revenues, expenses and capital expenditures. 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. Additionally, significant changes in currency exchange rates, particularly the Euro, Chinese Renminbi, British Pound, Brazilian Real and Indian Rupee could cause fluctuations in the reported results of our businesses’ operations that could negatively affect our business, financial condition and results of operations.

Current wording

The financial statements of foreign subsidiaries are translated to U.S. Dollars using the period-end exchange rate for assets and liabilities and an average exchange rate for each period for revenues, expenses and capital expenditures. The local currency is typically the functional currency for our foreign subsidiaries. While we did not experience significant adverse foreign currency impacts during 2025, significant foreign currency fluctuations and the associated translation of those foreign currencies could adversely affect our business. Additionally, significant changes in currency exchange rates, particularly the Euro, Chinese Renminbi, British Pound, Brazilian Real and Indian Rupee could cause fluctuations in the reported results of our businesses’ operations that could negatively affect our business, financial condition and results of operations.

Previous wording

Because we are a U.S. holding company, one significant source of our funds is distributions from our non-U.S. subsidiaries. Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our local subsidiaries’ ability to convert local currency into U.S. Dollars or to make payments outside the country. This could subject us to the risks of local currency devaluation and business disruption.

Current wording

Because we are a U.S. holding company, one significant source of our funds is distributions from our non-U.S. subsidiaries. Certain countries in which we operate have adopted or could institute currency exchange controls that limit or prohibit our local subsidiaries’ ability to convert local currency into U.S. Dollars or to make payments outside the country. This could subject us to the risks of local currency devaluation and business disruption, which could negatively impact our business, financial condition and results of operations.

Previous wording

Our business in China is subject to aggressive competition and is sensitive to economic, political, social and market conditions.

Current wording

Our business in China is subject to aggressive competition and is sensitive to economic, geopolitical, social and market conditions.

Previous wording

Maintaining a strong position in the Chinese market is a key component of our global strategy. 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. 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. If we are unable to maintain our position in the Chinese market or if vehicle sales in China decrease, our business, financial condition and results of operations could be adversely affected. In addition, there continues to be significant uncertainty about the future relationships between the U.S. and China, including with respect to trade policies, treaties, government regulations and tariffs. 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.

Current wording

Maintaining a strong position in the Chinese market is a key component of our global strategy. The transportation and industrial 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. 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, geopolitical, social and market conditions that drive sales volumes in China. If we are unable to maintain our position in the Chinese market or if vehicle or industrial equipment sales in China decrease, our business, financial condition and results of operations could be adversely affected. In addition, there continues to be significant uncertainty regarding the future relationship between the United States and China, including with respect to trade policies, treaties, government regulations, tariffs and rare earth-related controls and trade restrictions. While the impact of trade restrictions and tariffs implemented in 2025 has not had a material impact on our business, 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.

Previous wording

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. 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. 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.

Current wording

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, tariffs and import and export controls), cybersecurity attacks or incidents, manufacturing disasters (such as burn downs), financially distressed suppliers and other circumstances. For the global transportation 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, trade restrictions, terrorist attacks, 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. These circumstances and other rapidly changing industry conditions (such as volatile production volumes, credit tightness, 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, commercial disputes with suppliers and customers. In addition, new trade regulations, including export controls on rare earth metals and semiconductors, increases in tariffs, other changes in trade policy and relations and elevated levels of steel mill plant closures, could have a material, adverse impact on our business by increasing our input costs or limiting supplies, ultimately requiring more flexibility in our supply locations through near shoring and dual sourcing.

Previous wording

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%. The loss of, or a significant decrease in business from, one or more of these customers could have a materially adverse impact on our business, financial condition and results of operations. In addition, any consolidation among our top customers may further increase our customer concentration risk.

Current wording

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, 2025, our top five customers accounted for approximately 37% of our net sales, with General Motors Company representing 18%. The loss of, or a significant decrease in business from, one or more of these customers could have a materially adverse impact on our business, financial condition and results of operations. In addition, any consolidation among our top customers may further increase our customer concentration risk.

Previous wording

Because the vehicle and equipment industries rely heavily on just-in-time delivery of components during the assembly and manufacture of products, a work stoppage or production shutdown at one or more of our suppliers’ facilities, including as a result of a prolonged dispute with unionized employees at such facilities, could impact our ability to manufacture and assemble our products and solutions, or meet the needs of our customers, which could have significant adverse effects on our business, financial condition and results of operations. Similarly, if one or more of our customers were to experience a work stoppage or production shutdown, that customer would likely halt or limit purchases of our products, which could result in the shutdown of the related manufacturing facilities. Strikes against certain of our customers adversely impacted our results of operations during 2023, as automakers limited purchases of our products during the strikes due to the halt of their own production. Any future strikes that continue for a prolonged period could adversely affect our business, financial condition and results of operations.

Current wording

Because the transportation and industrial equipment industries rely heavily on just-in-time delivery of components during the assembly and manufacture of products, a work stoppage or production shutdown at one or more of our suppliers’ facilities, including as a result of a prolonged dispute with unionized employees at such facilities, could impact our ability to manufacture and assemble our products and solutions, or meet the needs of our customers, which could have significant adverse effects on our business, financial condition and results of operations. Similarly, if one or more of our customers were to experience a work stoppage or production shutdown, that customer would likely halt or limit purchases of our products, which could result in the shutdown of the related manufacturing facilities. Strikes against certain of our customers adversely impacted our results of operations during 2023, as automakers limited purchases of our products during the strikes due to the halt of their own production. Any future strikes that continue for a prolonged period could adversely affect our business, financial condition and results of operations.

Previous wording

In addition to our suppliers and customers, a work stoppage or production shutdown at one or more of our manufacturing and assembly facilities, including as a result of a prolonged dispute with the unionized employees at certain of our international facilities, could adversely affect our business, financial condition and results of operations.

Current wording

In addition to our suppliers and customers, a work stoppage or production shutdown at one or more of our manufacturing and assembly facilities, including as a result of a prolonged dispute with unionized employees at certain of our international facilities, could adversely affect our business, financial condition and results of operations.

Previous wording

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. As suppliers become more integrally involved in the design of vehicles and equipment and assume more of the assembly functions, OEMs are increasingly looking to their suppliers for contribution when faced with recalls and product warranty claims. A recall claim or product warranty claim brought against us could adversely impact our business, financial condition and results of operations. In addition, a recall claim could require us to review our entire product portfolio to assess whether similar issues are present in other product lines, which could result in significant disruption to our business and could have an adverse impact on our financial condition and results of operations. Factors outside our control, including the quality of fuel in end user markets or our products operating under conditions not originally contemplated, may increase our exposure for warranty or recall 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. We cannot assure that costs and expenses associated with these claims will not be material or that those costs will not exceed any amounts accrued for such claims in our financial statements.

Current wording

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, including for the repair or replacement of these products. As suppliers become more integrally involved in the design of vehicles and equipment and assume more of the assembly functions, OEMs are increasingly looking to their suppliers for contribution when faced with recalls and product warranty claims. A recall claim or product warranty claim brought against us could adversely impact our business, financial condition and results of operations. In addition, a recall claim could require us to review the relevant portion of our product portfolio to assess whether similar issues are present in other product lines, which could result in significant disruption to our business and could have an adverse impact on our financial condition and results of operations. Factors outside our control, including the quality of fuel in end-user markets or our products operating under conditions not originally included in our customer’s technical requirements specification, or contemplated by either our customers or ourselves, may increase our exposure for warranty or recall claims. We may also incur costs and expenses to defend against alleged claims whereby our products are ultimately determined not to be at fault. In addition, as we continue to develop and invest in products and solutions involving alternative fuels (e.g., hydrogen, ammonia, ethanol, methanol, compressed natural gas and other zero- and lower-carbon fuel types) designed to enhance fuel efficiency and reduce emissions, we may experience an increase in claims. Actual costs and expenses associated with these claims could be material or exceed any amounts accrued for such claims in our financial statements.

Previous wording

In addition, we are currently, and may in the future become, subject to other commercial or contractual disputes and legal proceedings. These claims typically arise in the normal course of business and may include, but not be limited to, commercial or contractual disputes with our customers and suppliers, intellectual property matters, personal injury, product liability, environmental and employment claims. 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. As previously disclosed, the Company and the Former Parent are currently involved in a dispute relating to the Tax Matters Agreement entered into by the parties in connection with the Spin-Off (the BorgWarner Dispute). For more information regarding the BorgWarner Dispute, refer to Note 18, “Contingencies,” to the Consolidated Financial Statements.

Current wording

In addition, we are currently, and may in the future become, subject to other commercial or contractual disputes and legal proceedings. These claims typically arise in the normal course of business and may include commercial or contractual disputes with our customers and suppliers, intellectual property, personal injury, product liability, environmental and employment claims. 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, or the Amended and Restated Tax Matters Agreement entered into with the Former Parent during 2025 to resolve a dispute relating to the Tax Matters Agreement entered into by the parties in connection with the Spin-Off.

Previous wording

There is a possibility that any such claims may have an adverse impact on our business that is greater than we anticipate. While we maintain insurance that provides protection against certain potential losses relating to such claims and other risks, including those resulting from cybersecurity threats and incidents, the amount and extent of such insurance may not be adequate to insure us against all claims, costs and liabilities related to these matters. 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.

Current wording

It is possible that any such claims may have an adverse impact on our business that is greater than we anticipate. While we maintain insurance that provides protection against certain potential losses relating to such claims and other risks, including those resulting from cybersecurity threats and incidents, the amount and extent of such insurance may not be adequate to insure us against all claims, costs and liabilities related to these matters. 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.

Previous wording

We are subject to extensive environmental, health and safety, human rights and other laws and regulations that are subject to change and may involve significant risks.

Current wording

We are subject to extensive environmental, health and safety, human rights and other laws and regulations related to corporate sustainability that are subject to change, and may in the future be supplemented by additional such laws and regulations and may involve significant risks.

Previous wording

Our operations and products are subject to laws governing, among other things: emissions to air; discharges to waters; the generation, management, transportation and disposal of waste and other materials; packaging; health and safety; human rights; and other matters relating to corporate sustainability. Our global supply chain and the operation of vehicle and industrial equipment parts manufacturing plants entails risks in these areas, and we may incur material costs or liabilities as a result. 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. In addition, potentially significant expenditures could be required to comply with evolving interpretations of existing environmental, health and safety, human rights and 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). Costs associated with compliance, or the failure to comply, with such laws and regulations, or customer requirements relating to or stemming from such regulations, could have an adverse effect on our business, financial condition and results of operations.

Current wording

Our operations and products, and those of our customers, are subject to laws governing, among other things: emissions to air; discharges to waters; the generation, management, transportation and disposal of waste and other materials; packaging; the use of natural resources; health and safety; human rights; and other matters relating to corporate sustainability. Our global supply chain and the operation of automotive and industrial equipment parts manufacturing plants entails risks in these areas, and we may incur material costs or liabilities as a result. 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. In addition, potentially significant expenditures could be required to comply with new and evolving customer requirements and environmental, health and safety, human rights and other laws and regulations currently in effect or that are expected to be in effect in the near future (particularly new reporting requirements relevant to our operations and those of our customers in the United States, United Kingdom, Europe and Mexico), or additional new such laws and regulations that may be adopted (including due to ongoing concerns regarding the impacts of climate change). Failure to comply with such evolving and increasingly complex laws and regulations, or related customer requirements, could impact our competitive position, and costs and penalties associated with non-compliance could have an adverse effect on our business, financial condition and results of operations.

Previous wording

Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions where we conduct business. We have received tax assessments from various taxing authorities and are currently at varying stages of appeals and/or litigation regarding these matters. These audits may result in assessment of additional taxes that are resolved with the authorities or through the courts. We believe these assessments may occasionally be based on erroneous and even arbitrary interpretations of local tax law. Although Mexico levies value added taxes and customs duties on temporary imports, in the course of the conduct of our manufacturing operations, we generally do not pay that tax due to a special certification, the availability of which depends upon our compliance with certain requirements and regulations, such as maintaining accurate records and providing periodic reports to authorities. 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. 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. Resolution of any tax matters involves uncertainties, and there are no assurances that the outcomes will be favorable.

Current wording

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. If taxing authorities were to disagree with our tax positions in connection with any such restructurings, our effective tax rate could be materially affected. Our tax filings for various periods are subject to audit by the tax authorities in most jurisdictions where we conduct business. We have received tax assessments from various taxing authorities and are currently at varying stages of appeals and/or litigation regarding these matters. These audits may result in assessment of additional taxes that are resolved with the authorities or through the courts. We believe these assessments may occasionally be based on erroneous and even arbitrary interpretations of local tax law. Although Mexico levies value added taxes and customs duties on temporary imports, in the course of the conduct of our manufacturing operations, we generally do not pay that tax due to a special certification, the availability of which depends upon our compliance with certain requirements and regulations (such as maintaining accurate records and providing periodic reports to authorities). Non-compliance (or alleged non-compliance due to enhanced enforcement efforts or otherwise) with these requirements and regulations could result in suspension of the certification, which could adversely affect our business, financial condition and results of operations. We are aware of instances in which we may not have complied with these requirements and regulations in the past, and as a result, pursued voluntary processes with the relevant authorities to reconstruct records that resulted in immaterial value added taxes being assessed and penalties imposed, which were ultimately the responsibility of the Former Parent pursuant to the Amended and Restated Tax Matters Agreement. Resolution of any tax matters involves uncertainties, and there are no assurances that the outcomes will be favorable in the future.