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Item 1. Business

2023-02-14 compared with 2022-02-14 · 152 added, 201 removed, 224 unchanged (61% of the section changed)

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These OEMs, in turn, ship to consumers globally.

We are a global technology leader with significant expertise in delivering products for internal combustion engines using gasoline, diesel, natural gas and electrified powertrains (hybrid and fuel cell).

Additionally, we are currently in the development stage of turbochargers for internal combustion engines using producing hydrogen as fuel.

These products are key enablers for fuel economy and emissions standards compliance.

The turbocharger industry is expected to increase from approximately 44 million units in 2021 to approximately 55 million units by 2026, according to IHS Markit (“IHS”) for light vehicle and Knibb, Gormezano and Partners ("KGP") and Power Systems Research ("PSR") for commercial vehicle on-highway and off-highway.

The turbocharger industry growth is mainly driven by an expected increase in the penetration of hybrid vehicles, from 10 million hybrid cars globally in 2021 to an anticipated 31 million hybrid cars globally in 2026.

In 2021, a significant increase in battery electric vehicle (“BEV”) sales has been observed in Europe and China, with BEV representing, respectively, 6% and 11% of vehicles sold.

We are a global technology leader with significant expertise in delivering products for internal combustion engines ("ICE") using gasoline, diesel, natural gas and electrified powertrains (hybrid and fuel cell).

Additionally, we are currently in the development stage of turbochargers for internal combustion engines using hydrogen as fuel and other highly engineered components for zero emission vehicles.

These products are key enablers for fuel (and/or energy) economy and emissions standards compliance.

The turbocharger industry is expected to increase from approximately 46 million units in 2022 to approximately 48 million units by 2024, then gradually plateau and drop to approximately 41 million units by 2028, according to S&P ("S&P", formerly IHS) for light vehicles and Knibb, Gormezano and Partners ("KGP") and Power Systems Research ("PSR") for on-highway and off-highway commercial vehicles.

The turbocharger industry growth is mainly driven in the short and medium term by an expected increase in the penetration of hybrid vehicles, from approximately 13 million hybrid cars globally in 2022 to an anticipated 29 million hybrid cars globally in 2026.

In 2022, a significant increase in battery electric vehicle (“BEV”) production has been observed in Europe and China, with BEV representing, respectively, 8% and 18% of light vehicles produced.

In China, renewed sales incentives, especially in Tier 2 and Tier 3 cities, as well as non-financial incentives such as more generous license-plate quotas for major metropolitan areas, have b olstered Chinese BEV penetration.

In Europe, the COVID-19 stimulus packages are mostly directed to electric vehicles, as well as sales mix management by OEMs to achieve their fleet average CO2 targets which are supporting BEV penetration.

The Company acknowledges that short-term, selling price, charging time, charging infrastructure availability and profitability issues for OEMs remain challenges to adoption.

In the long-term, the revision of CO2 reduction targets by 2030 proposed by the E.U.

could drive a further increase of BEV penetration in Europe beyond currently forecasted levels.

In the long-term, the proposal in the European Union ("E.U.") for all new cars to be zero-emission at tail pipe by 2035, as well as local regulations, could drive a further increase of BEV penetration in Europe beyond currently forecasted levels.

In the United States of America ("US" or "United States"), the tightening of CO2/mileage targets is expected to drive higher turbo penetration in the short to medium-term.

The President of the United States signed an executive order with the goal of making half of all new vehicles sold in 2030 zero-emissions vehicles, including battery electric, plug-in hybrid electric, or fuel cell electric vehicles, which is expected to accelerate the electrification trend in the mid-to-long term .

Garrett's portfolio for hybrid powertrains includes new electric boosting solutions that leverage our unique technologies for electrical high speed turbo machinery.

Garrett's product portfolio also includes fuel cell compressors for which we are currently designing the third generation and we are well positioned to take advantage of growing opportunities especially in the application of commercial vehicles.

Garrett's portfolio for hybrid powertrains includes new electric boosting solutions that leverage our unique technologies for electrical high speed boosting machinery.

Garrett's product portfolio also includes fuel cell compressors for which we are developing the third generation.

We are well positioned to take advantage of growing opportunities especially in the application of commercial vehicles.

In China, the roadmap released by the China Society of Automotive Engineers, Energy-saving and New Energy Vehicle Technology Roadmap 2.0 , outlines a technology path for the next ten years that aims to find a balance between fuel consumption improvement for hybrids and the introduction of electric vehicles.

In that context, the turbocharger industry is expected to keep contributing to fuel economy optimization of both conventional gasoline and diesel vehicles as well as hybrid vehicles.

In the short to medium term, we believe that turbocharger demand will grow as turbochargers remain one of the most cost-efficient levers to improve the fuel efficiency of conventional gasoline and diesel vehicles as well as hybrid vehicles.

In 2021, Garrett won the prestigious Automotive News PACE™ award for the industry's first E-turbo to be launched in 2022.

The unique high speed electric motor technology developed for this product provides synergistic opportunities for additional electric offerings like fuel cell compressors that are required by fuel cell vehicles.

In that context, the turbocharger industry is expected to keep contributing to fuel economy optimization of gasoline, diesel vehicles and hybrid vehicles.

In the short to medium term, we continue to believe that turbocharger demand will grow as turbochargers remain one of the most cost-efficient levers to improve the fuel efficiency of gasoline, diesel and hybrid vehicles.

In 2021, Garrett won the prestigious Automotive News PACE™ award for the industry's first E-turbo that successfully launched in 2022.

The unique high speed electric motor technology developed for this product came from Garrett's fuel cell compressors that are required by fuel cell vehicles.

Additionally, this technology also offers opportunities for new products to support all types of electrified drivetrains.

In the commercial vehicle industry, we expect a slower transition to BEVs due to specific mission profile and associated range and charging time constraints, which translates into more resilient turbocharger demand, as most commercial vehicles are turbocharged.

In addition, low or zero emission alternative fuels for internal combustion engines ("ICE"), like natural gas or hydrogen, are expected to gain momentum in coming years, supporting continued turbocharger demand.

Growth in the turbocharger industry is expected in all regions, with special mention for high-growth regions in Asia, where rising income levels continue to drive long-term automotive and vehicle component demand.

While these positive factors do not isolate the turbocharger industry from fluctuations in global vehicle production volumes, such factors may mitigate the negative impact of macroeconomic cycles.

In addition, approximately 30% o f our revenues come from commercial vehicle applications and aftermarket sales that are less sensitive to the trend of electrification.

In the commercial vehicle industry, we expect a slower transition to BEVs due to the requirements of specific applications and associated range and charging time constraints, which translates into more resilient turbocharger demand, as most commercial vehicles are turbocharged.

In addition, low or zero emission alternative fuels for ICE, like natural gas or hydrogen, are expected to gain momentum in coming years, supporting continued turbocharger demand.

Growth in the turbocharger industry is expected globally, with special mention for high-growth regions in Asia, where rising income levels continue to drive long-term automotive demand.

While these positive factors do not isolate the turbocharger industry from fluctuations in global vehicle production volumes, such factors may assist in mitigating the negative impact of macroeconomic cycles.

In addition, approximately 30% of our revenue comes from commercial vehicle and aftermarket sales that are less sensitive to the trend of electrification.

Emergence from Chapter 11

On September 20, 2020 (the “Petition Date”), the Company and certain of its subsidiaries (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).

The Debtors’ chapter 11 cases (the “Chapter 11 Cases”) were jointly administered under the caption “In re:

Debtors’ chapter 11 cases (the “Chapter 11 Cases”) were jointly administered under the caption “In re:

Garrett Motion Inc., 20-12212.” On April 20, 2021, the Debtors filed the Revised Amended Plan of Reorganization (the “Plan”).

On April 26, 2021, the Bankruptcy Court entered an order (the “Confirmation Order”) among other things, confirming the Plan.

On April 30, 2021 (the “Effective Date”), the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

We emerged from bankruptcy with a new board of directors, new equity owners and a significantly improved financial position.

Under the Plan, among other things, all of our outstanding pre-emergence indebtedness under our credit facilities and senior notes was cancelled.

At emergence, we entered into new secured credit facilities consisting of a $715 million term loan, a €450 million term loan and a $300 million revolving credit facility.

Our post-emergence capital structure also included the issuance of $1,301 million of Series A Preferred Stock and Series B Preferred Stock with a net present value of $585 million.

For more detailed information regarding our emergence from Chapter 11, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Emergence from Chapter 11 and Note 2, Plan of Reorganization of the Notes to the Consolidated Financial Statements.

On April 30, 2021 (the “Effective Date”), the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy (the "Emergence").

Macroeconomic disruptions

The global COVID-19 pandemic, as well as the semiconductor shortage, are creating uncertainty across multiple industries, including the automotive industry.

Supply-side constraints, in particular, will keep influencing our operating activity throughout 2022 as well.

Automotive OEMs have reduced production plans in the first two quarters of 2022.

The Company is currently reviewing production levels at OEM plants and is closely monitoring supply-chain disruptions related to semiconductor shortages in an effort to minimize the impact of the bottleneck in supply and to mitigate any potential disruption in production.

In addition, our business uses substantial amounts of energy in production, and our production activities may therefore be impacted by power outages in the places where we produce or source our products, such as China.

As of December 31, 2021, Garrett plants in China have not experienced power outage impacts at our own production facilities.

However, reduced supplier capacity may not meet our demands, and we may also encounter demand reduction from customers or power cuts in our own plants going forward.

Any power outage impacts are closely monitored.

In addition, as of December 31, 2021, the global economy has experienced an increased risk of shortages and other disruptions to global supply chains, including as a result of the continuing impact of the COVID-19 pandemic.

If the COVID-19 pandemic, despite vaccination campaigns, drives new lockdown measures impacting our manufacturing facilities, our facilities may be forced to shut down or operate at reduced capacity again.

Additional or continued facility closures or reductions in operations could significantly reduce our production volumes and have a material adverse impact on our business, results of operations and financial condition.

See "- Risks Relating to our Business - Raw material price fluctuations, the ability of key suppliers to meet quality and delivery requirements, or catastrophic events can increase the cost of our products and services, impact our ability to meet commitments to customers and cause us to incur significant liabilities." and "- The COVID-19 pandemic has adversely impacted and is expected to further adversely impact our business and results of operations ." in Item 1A - Risk Factors of this Annual Report.

Analyst consensus for the full year 2021 estimates growth of approximately 2% in global light vehicle production and approximately 4% increase in commercial vehicle production.

As a result, a slight decrease for the combined light and commercial vehicle turbocharger industry volume occurred in 2021.

In 2022, 9% growth is expected for light vehicle production and commercial vehicles are expected to grow at 3%.

The automotive industry continues to be impacted by uncertainty due to worldwide semiconductor shortages, the Covid-19 pandemic, governmental responses to the pandemic including the lockdown measures in China, and geopolitical tensions.

The semiconductor shortage is expected to continue into 2023 although to a lesser extent compared to the previous year, and production levels may be reduced further should Covid-related lockdown measures persist or extend.

The evolution of geopolitical conflicts and the consequent energy shortage in Europe, especially during the winter season, may further expose supply related challenges for the automotive industry while adding inflationary pressure and triggering recessionary scenarios.

The Company continues to review production levels at OEM plants and closely monitor supply-chain disruptions related to logistics and component shortages in order to minimize the impact of the bottleneck in supply and mitigate any potential disruption in production.

Additionally, we have in place procedures for the monitoring of supplier risks and we believe we have substantially addressed such risks with manageable economic impacts including use of premium freight or adjusted payment terms that are limited in time.

We have prepared contingency plans for multiple scenarios that we believe will allow us to react swiftly to changes in customer demand while protecting Garrett’s long-term growth potential.

See "- Risks Relating to our Business - Volatility in the cost and availability of raw materials, components, energy and transportation, in addition to disruptions in the supply chain, including supplier insolvency, has increased, and may continue to increase, the cost of our products and services, and may impact our ability to meet commitments to customers and cause us to incur significant liabilities." - in Item 1A - Risk Factors of this Annual Report.

Analyst consensus for the full year 2022 estimates growth of approximately 6% in global light vehicle production and approximately 15% drop in commercial vehicle production.

As for the turbocharger industry, a 5% increase for the combined light and commercial vehicle turbocharger industry volume occurred in 2022.

In 2023, 4% growth is expected by S&P for light vehicle production, and commercial vehicles are expected by KGP and PSR to grow at 5%.

We have prepared contingency plans for multiple scenarios that we believe will allow us to react swiftly to changes in customer demand while protecting Garrett’s long-term growth potential.

The supplies needed for our operations were generally available throughout 2022.

In limited circumstances, certain suppliers experienced financial distress during 2022, resulting in supply disruptions.

However, during 2021, we implemented new procedures for monitoring of supplier risks associated with COVID-19 and we believe we have substantially addressed such risks with manageable economic impacts including use of premium freight or adjusted payment terms that are limited in time.

However, we had implemented new procedures in 2021 for monitoring of supplier risks associated with Covid-19 and we believe we have substantially addressed such risks with manageable economic impacts including use of premium freight or adjusted payment terms that are limited in time.

As the global supply chain restarts, it is possible that additional supply constraints will appear for the industry.

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• Restricting external hiring.

The following charts show our percentage of revenues by geographic region and product line for the years ended December 31, 2021, 2020 and 2019 and the percentage change from the prior year comparable period.

The following charts show our percentage of revenues by geographic region and product line for the years ended December 31, 2022, 2021 and 2020, and the percentage changes from the prior years.

Revenue Summary

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At the same time, we have developed unique technological competencies, which we aim to continue leveraging to solve our customers’ energy related challenges in the electrification evolution related to ICE, hybrids and electric powertrains.

We are developing solutions and increasing our research and development ("R&D") spend, focusing more than 40% of total R&D expenditure on new technologies like the Garrett E-Turbo that was recognized with the 2021 Automotive News PACE™ award for superior innovation, technological advancement and business performance among automotive suppliers.

We are developing solutions and increasing our research and development ("R&D") spend, focusing more than 50% of total R&D expenditure in 2023 on electrification technologies like fuel cell compressors for a broad range of stack power (40kW to 250kW) and high value electric vehicle components.

We are also continuing to develop Model Predictive Controls ("MPC") algorithms and cybersecurity software solutions that leverage our knowledge of vehicle powertrains and experience working closely with OEM manufacturers.

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The global turbocharger industry includes turbochargers for new light and commercial vehicles as well as turbochargers for replacement use in the global aftermarket.

According to IHS, KGP and PSR, the global turbocharger industry consisted of approximately 44 million unit sales with an estimated total value of approximately $10 billion in 2021.

Within the global turbocharger industry, light vehicles accounted for approximately 84% of total unit volume and commercial vehicles accounted for the remaining 16%.

IHS, KGP and PSR project that the turbocharger production volume will grow at a CAGR of approximately 5% from 2021 through 2026, driven mainly by turbochargers for light vehicle gasoline engines and continued slow growth for commercial vehicles, offset by a decline in diesel turbochargers given a decline in diesel powertrains, particularly for light vehicles.

This annual sales estimate would add approximately 314 million new turbocharged vehicles on the road globally between 2021 and 2026.

According to S&P, KGP and PSR, the global turbocharger industry consisted of approximately 46 million turbocharged vehicles with an estimated total value of approximately $10 billion in 2022.

Within the global turbocharger industry in 2022, light vehicles accounted for approximately 86% of total unit volume and commercial vehicles accounted for the remaining 14%.

S&P, KGP and PSR project that the turbocharger production volume will peak in 2024 and return to 2022 levels by 2026, driven mainly by turbochargers for light vehicle gasoline engines and continued slow growth for commercial vehicles, offset by a decline in diesel turbochargers given a decline in diesel powertrains, particularly for light vehicles.

This annual sales estimate would add 230 million new turbocharged vehicles on the road globally between 2023 and 2027.

Key trends affecting our industry

Current global economic conditions due to COVID-19 have adversely affected and may continue to adversely affect many industries including the Automotive sector.

Chip shortages and rising raw material prices also had significant impacts on the automotive industry, making it unable to serve the recovery in demand.

Consequently, IHS reduced its light vehicle production volume forecast for 2022 from 88 million units that they forecasted in 2020 to 83 million units in their January 2022 light vehicle industry production volume forecast.

While this resets the volume outlook for the automotive industry, the underlying growth drivers for the turbocharger industry remain unchanged:

Growth in the overall vehicle industry (albeit from a lower base), increasingly tight fuel efficiency and emission standards, and growing turbocharger penetration (especially in gas light vehicles).

Current global economic conditions due to Covid-19 and geopolitical conflicts have adversely affected and may continue to adversely affect many industries including the automotive sector.

Chip shortages and rising raw material prices and inflation also had significant impacts on the automotive industry, making it unable to serve the recovery in demand.

Consequently, S&P reduced its light vehicle production volume forecast for 2023 from approximately 91 million units that they forecasted in 2021 to between 80 to 88 million units in their January 2023 light vehicle industry production volume forecast.

Growth in overall vehicle production .

After a decrease of 16% in Light Vehicle production and 5% in Commercial Vehicle production in 2020, a partial recovery was expected in 2021.

After a strong start, the automotive industry was strongly hit by the impact of COVID-19 waves and supply chain disruptions, in particular semiconductor shortages.

Because of that, vehicle production in 2021 ended up almost flat vs 2020, despite a strong pent up demand.

For 2022, considering this pent up demand and very low levels of inventory, especially in Europe and US, IHS, KGP and PSR expect a 9% growth in light vehicle ("LV") production and a 3% growth in commercial vehicle ("CV") production.

After an increase of 3% in light vehicle production and 1% in commercial vehicle production in 2021, a stronger growth was expected in 2022.

However, supply chain disruptions, driven by shortages in semiconductors and the continuous impact of Covid-19 particularly in China, affected vehicle production in 2022 resulting in flat volumes versus 2021.

For 2023, S&P, KGP and PSR expect limited growth in light vehicle production and growth in commercial vehicle production of approximately 6%.

However, significant uncertainty level remains with further Covid-19 waves, continued supply chain disruptions and geopolitical tensions.

The shift from pure gasoline and diesel internal combustion engines to hybridized powertrains is expected to

continue in response to increasingly strict fuel efficiency and regulatory standards.

The shift from pure gasoline and diesel ICE to hybridized powertrains is expected to continue in response to increasingly strict fuel efficiency and regulatory standards.

In parallel, the share of pure electric vehicles is expected to continue to increase from a low base as technology and supporting infrastructure continue to improve.

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This combustion optimization is critical to engine efficiency, exhaust emissions, power and transient response and enables such concepts as exhaust gas recirculation for diesel engines and Miller-cycle operation for gasoline engines.

Consequently, we believe turbocharging will continue to be a key technology for automakers to meet future tough fuel economy and emissions standards without sacrificing performance.

Consequently, we believe turbocharging will continue to be

a key technology for automakers to meet future tough fuel economy and emissions standards without sacrificing performance.

Turbocharger penetration.

The utilization of turbochargers and electric-boosting technologies on vehicle powertrain systems is one of the most cost-effective solutions to address stricter standards, and OEMs are increasing their adoption of these technologies.

IHS, KGP and PSR expect total turbocharger penetration to increase globally from approximately 44 million units in 2021 to approximately 55 million units by 2026.

IHS forecasts particularly strong turbocharger penetration growth for gasoline turbochargers, expecting an increase on light vehicles from approximately 43% in 2021 to 54% in 2026.

S&P, KGP and PSR expect total turbocharger penetration to increase globally from approximately 46 million units in 2022 to approximately 48 million units by 2024;

after this year, the turbocharger penetration will plateau then start decreasing based on current expectations on hybrid solutions adopted by different OEMs, reaching the same volumes from 2022 in 2026.

S&P forecasts turbocharger penetration growth for gasoline turbochargers, expecting an increase in light vehicles from approximately 47% in 2022 to 51% in 2025.

Medium-Term Powertrain Trends

Note - Years 2020 - 2022 represent actual data and years 2023 - 2027 represent forecasted data.

IHS, KGP, PSR

S&P, KGP, PSR

Engine size and complexity .

In order to address stricter fuel economy standards, OEMs have used turbochargers to reduce the average engine size on their vehicles over time without compromising performance.

2021 and 2026, in an industry with a predicted total automobile sales volume CAGR of approximately 5% over the same period, in each case according to IHS, KGP and PSR.

In addition, increasingly demanding fuel economy standards require continuous increases in turbocharger technology content (e.g., variable geometry, electronic actuation, multiple stages, ball bearings, electrical control, etc.) which results in steady increases in average turbocharger content per vehicle.

Stricter pollutants emissions standards (primarily for NOx and particulates) have driven higher turbocharger adoption as well, which we believe will continue in the future, with a predicted total automotive turbocharger production volume CAGR of 1% between 2022 and 2025, in an industry with a predicted total automobile production volume CAGR of approximately 3% over the same period, in each case according to S&P, KGP and PSR.

Electrification .

To address stricter fuel economy standards, OEMs also have been increasing the electrification of their vehicle offerings, primarily with the addition of hybrid vehicles, which have powertrains equipped with a gasoline or diesel internal combustion engine in combination with an electric motor.

IHS estimates that hybrid vehicles produced globally will grow from a total of approximately 10.3 million vehicles in 2021 to 30.6 million vehicles by 2026, representing a CAGR of 24%.

S&P estimates that hybrid vehicles produced globally will grow from a total of approximately 17.4 million vehicles in 2023 to 28.6 million vehicles by 2026, representing a CAGR of 17%.

The electrified powertrain of hybrid vehicles enables the usage of highly synergistic electric-boosting technologies which augment standard turbochargers with electrically assisted boosting and electrical-generation capability.

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Battery electric and fuel cell technologies .

OEMs are investing in full battery-electric vehicles to comply with increasingly tight regulatory targets across regions.

IHS, KGP and PSR expect that BEV will compose 19% of total light and commercial vehicle production globally by 2026.

OEMs are investing in full BEVs to comply with increasingly tight regulatory targets across regions.

S&P, KGP and PSR expect that BEVs will compose 26% of total light and commercial vehicle production globally by 2026.

Consumer adoption hinges on future "cost of range”, tightly linked to the energy capacity of the battery, but also how well that energy is used.

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Simultaneously, our cybersecurity solutions protect those vehicles against outside interference to ensure correct functionality.

Vehicle ownership in China and other high-growth regions.

Vehicle ownership in China and other emerging regions remains well below ownership levels in developed areas and will be a key driver of future vehicle production.

Vehicle ownership in China, India and other high-growth regions.

Vehicle ownership in China, India and other emerging regions remains well below ownership levels in developed areas and will be a key driver of future vehicle production.

At the same time, these regions are following the lead of developed countries by instituting stricter emission standards.

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Global and broad industry leadership

We are a global leader in the $10 billion turbocharger industry.

We are a global leader in the $10 billion OEM turbocharger industry.

We believe we will continue to benefit from the increased adoption of turbochargers, as well as our global technology leadership, comprehensive portfolio, continuous product innovation and our deep-seated relationships with all global OEMs.

We maintain a leadership position across all vehicle types, engine types and regions, including:

Light Vehicles

The global adoption of turbochargers by OEMs on gasoline engines has increased rapidly from approximately 14% in 2013 to approximately 43% in 2021 and is forecasted by IHS to increase to 54% by 2026.

In addition to the volume growth, tightening of CO2 regulations is driving a technology shift, moving away from standard waste gate technology to variable geometry turbo ("VNT") which is a premium technology that offers Garrett technological competitive advantages.

In 2016, we launched the first high volume VNT gasoline application, and this technology is expected to experience a fast increase in adoption in years to come.

According to forecast by IHS, VNT should represent 8% of global turbo gasoline production in 2024, with 23% in Europe and 4% in China.

In 2026, forecasted penetration is 16% at global level, with 30% in Europe and 18% in China.

Key to our strategy for gasoline growth is thus to leverage our technology strengths in high-temperature materials and variable geometry as well as our scale, global footprint and in-market capabilities to meet the volume demands of global OEMs.

The global adoption of turbochargers by OEMs on gasoline engines has increased rapidly from approximately 14% in 2013 to approximately 47% in 2022 and is forecasted by S&P to increase to 51% by 2025.

In 2016, we launched our first high volume VNT gasoline application, and this technology is expected to experience increased adoption in years to come.

According to forecast by S&P, VNT should represent 10% of global turbo gasoline production by 2027, with 25% in Europe and 18% in China.

In 2028, forecasted penetration maintains the same at a global level, with 25% in Europe and 19% in China.

A key to our strategy for gasoline growth is thus to leverage our technology strengths in high-temperature materials and variable geometry as well as our scale, global footprint and in-market capabilities to meet the volume on technology demands of global OEMs.

We have a long history of technology leadership in diesel engine turbochargers.

Despite diesel industry weakness for some vehicle segments, the majority of our diesel turbochargers revenue comes from heavier and bigger vehicles like SUVs, pickup trucks and light commercial vehicles (such as delivery vans), which remain a stable part of the diesel industry.

Diesel maintains a unique advantage in terms of fuel consumption, hence cost of ownership, and towing capacity makes it still the powertrain of choice for heavier vehicle applications.

Diesel maintains a unique advantage in terms of fuel consumption, hence cost of ownership, and towing capacity makes it the powertrain of choice for heavier vehicle applications.

Diesel also remains essential for OEMs to meet their CO2 fleet average regulatory target going forward, as diesel vehicles produce less CO2 on average than gasoline vehicles.

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We provide a comprehensive portfolio of turbocharger and electric-boosting technologies to manufacturers of hybrid-electric and fuel cell vehicles.

OEMs have increased their adoption of these electrified technologies given regulatory standards and consumer demands driving an expected CAGR globally of approximately 24% from 2021 to 2026, according to IHS.

OEMs have increased their adoption of these

electrified technologies given regulatory standards and consumer demands driving an expected CAGR globally of approximately 25% from 2022 to 2026, according to S&P.

Similar to turbochargers for gasoline and diesel engines, turbochargers for hybrid vehicles are an essential component of maximizing fuel efficiency and overall engine performance.

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High-growth regions.

We have a strong track record serving global and emerging OEMs, including customers in China and India, with an in-market, for-market strategy and operate full R&D and three manufacturing facilities in the high-growth regions that serve light and commercial vehicle OEMs.

Our local presence in high-growth regions has helped us win business with key international and domestic Chinese OEMs, and we grew significantly faster than the vehicle production in these regions between 2013 and 2021.

We have a strong track record serving global and local OEMs, including customers in China and India, with an in-market and for-market strategy.

We operate two R&D centers and three manufacturing facilities in these high-growth regions that serve light and commercial vehicle OEMs.

Our local presence in high-growth regions has helped us win business with key international and domestic Chinese and Indian OEMs, and we grew significantly faster than the vehicle production in these regions between 2013 and 2022.

Strong and collaborative relationships with leading OEMs globally

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We consistently meet their stringent design, performance and quality standards while achieving capacity and delivery timelines that are critical for customer success.

Our track record of successful collaborations, as demonstrated by our strong client base and our ability to successfully launch between 65 and 100 product applications annually, is well recognized.

For example, we received a 2017 Automotive News PACE™ Innovation Partnership Award in supporting Volkswagen’s first launch of an industry-leading VNT turbocharged gasoline engine, which is just one example of our strong collaborative relationships with OEMs.

Our track record of successful collaborations, as demonstrated by our strong client base and our ability to successfully launch multiple product applications annually, is well recognized.

Our regional research, development and manufacturing capabilities are a key advantage in helping us to supply OEMs as they expand geographically and shift towards standardized engines and vehicle platforms globally.

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Our aftermarket business has historically provided a stable stream of revenue supported by our large installed base, currently estimated at over 120 million vehicles.

As turbocharger penetration rates continue to increase, we expect that our installed base and aftermarket opportunity will grow.

As turbocharger penetration rates continue to increase, we expect that our installed base and aftermarket opportunities will continue to grow.

Highly-engineered portfolio with continuous product innovation

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We have a globally deployed team of more than 1,220 engineers across five R&D centers and 11 close-to-customer engineering centers.

Our engineers have led the mainstream

commercialization of several leading turbocharger innovations, including variable geometry turbines, dual-boost compressors, ball-bearing rotors, electrically actuated controls and air-bearing electric compressors for hydrogen fuel cells.

Our engineers have led the mainstream commercialization of several leading turbocharger innovations, including variable geometry turbines, dual-boost compressors, ball-bearing rotors, electrically actuated controls and air-bearing electric compressors for hydrogen fuel cells.

We maintain a culture of continuous product innovation, introducing about ten new technologies per year and upgrading our existing key product lines approximately every 3 years.

Outside of our turbocharger product lines, we apply this culture of continuous innovation to meet the needs of our customers in new areas, particularly in connected automotive technologies.

We are developing solutions and increasing our R&D spend, focusing more than 40% of total R&D expenditure on new technologies like the Garrett E-Turbo that was recognized with the 2021 Automotive News PACE™ award for superior innovation, technological advancement and business performance among automotive suppliers.

We are developing solutions and increasing our R&D spend, focusing more than 50% of total R&D expenditure in 2023 on electrification technologies like fuel cell compressors for a broad range of stack power (40kW to 250kW) and high value electric vehicle components.

We are also continuing to develop MPC algorithms and cybersecurity software solutions that leverage our knowledge of vehicle powertrains and experience working closely with OEM manufacturers.

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In all regions where we operate, we leverage low-cost sourcing through our robust supplier development program, which continually works to develop new suppliers that are able to meet our specific quality, productivity and cost requirements.

We now source more than two-thirds of our materials from low-cost countries and believe our high-quality, low-cost supplier network to be a significant competitive advantage.

We now source more than two-thirds of our materials from low-cost countries and believe our high-quality, low-cost supplier network to be a

significant competitive advantage.

We have invested heavily to bring differentiated local capabilities to our customers in high-growth regions, including China and India.

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Garrett invests in innovative technologies that address the needs of our customers in the ongoing auto industry transformation.

This continued investment into differentiated technology, coupled with our relentless focus on deep customer relations and our global capabilities, allows us to drive the following business strategies:

This continued investment into differentiated technology, coupled with our relentless focus on customer relations and our global capabilities, allows us to drive the following business strategies:

Strengthen industry leadership across powertrain technologies

We are focused on strengthening our industry position in light vehicles:

• Gasoline turbochargers, which historically lagged adoption of diesel turbochargers, are expected to grow at an 7% annual CAGR from 2021 to 2026, according to IHS, exceeding the growth of diesel turbochargers.

• Gasoline turbochargers, which historically lagged adoption of diesel turbochargers, are expected to increase at a 2.1% annual CAGR from 2022 to 2025, according to S&P.

We expect to benefit from this higher growth given the gasoline platforms we have been awarded over the past several years.

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• We believe growth in our share of the diesel turbochargers industry will be driven by new product introductions focused on emissions-enforcement technologies and supported by our favorable positioning with large vehicles and high-growth regions within this industry.

The more stringent emissions standards require higher turbocharger technology content such as variable geometry, 2-stage systems, advanced bearings and materials which increase our content per vehicle.

We expect to grow our commercial vehicle business through new product introductions and targeted platform wins with key on-highway customers and underserved OEMs.

The more stringent emissions standards require greater turbocharger technology content such as variable geometry, 2-stage systems, advanced bearings and materials which increase our content per vehicle.

Leverage our differentiated technology to solve key challenges in electrification

We stand to benefit from the increased adoption of hybrid-electric and fuel cell vehicles and the increased need for turbochargers associated with increased sales volumes for these engine types.

IHS estimates that the global production of electrified vehicles (ranging from mild-hybrids to plugin-hybrids to battery and fuel cell electric vehicles) will increase from approximately 15 million vehicles in 2021 to approximately 51 million vehicles by 2026, representing an annualized growth rate of approximately 28%.

OEMs will need to further improve engine performance for their increasingly hybrid electrified offerings, and our comprehensive portfolio of turbocharger and electric-boosting technologies are designed to

help OEMs do so.

S&P estimates that the global production of electrified vehicles (ranging from mild-hybrids to plugin-hybrids to battery and fuel cell electric vehicles) will increase from approximately 22 million vehicles in 2022 to approximately 60 million vehicles by 2027, representing an annualized growth rate of approximately 18%.

We expect to continue to invest in product innovations and new technologies and believe that we are well positioned to continue to be a technology-leader in the propulsion of electrified vehicles.

As we keep strengthening our electrical know-how, we believe our capabilities and technological expertise can be pivoted in the electrification arena for selected electric powertrain opportunities.

With approximately 40% of our R&D investment in 2021 and a team of more than 300 specialized engineers, we keep strengthening our electrical know-how, and we believe our capabilities and technological expertise can be pivoted in the electrification arena for selected electric powertrain opportunities.

Increase industry position in high-growth regions

In 2022, after a steep drop in the first quarter due to strict lockdowns, vehicle production in China continued to experience further challenges through the third quarter from supply chain disruptions caused by shortage of semiconductor components whereas fourth quarter recovery partly compensated for the decline in the first three quarters, with a 4% full year growth, aligned to average growth in the other regions.

IHS expects vehicle production in China to be stable next year.

S&P expects vehicle production in China to be stable next year.

We plan to continue to strengthen our relationships with OEMs in high-growth, emerging regions by demonstrating our technology leadership through our local research, development and manufacturing capabilities.

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Our operations in China are expected to continue to benefit us as OEMs build global platforms in low cost regions.

Our commitment to providing high-touch technology support to OEMs has allowed us to be recognized as a local player in other key high-growth regions, such as India.

commitment to providing high-touch technology support to OEMs has allowed us to be recognized as a local player in other key high-growth regions, such as India.

Grow our aftermarket business

We have an opportunity to strengthen our global network of more than 250 distributors in 165 countries by deepening our channel penetration, leveraging our well-recognized Garrett brand, utilizing new online technologies for customer engagement and sales, and widening the product portfolio.

Installer Connect, a global web-based platform providing self-service tools aimed at connecting garage technicians attracted 265 thousand visitors and more than 65 thousand garage technicians have registered on the platform to use Garrett self-learning and certification steps in 2021.

Additionally, the Garrett Web Racing & Performance section of our website attracted more than one million visitors in 2021.

Drive continuous product innovation across connected vehicles, software and controls

We are actively investing in software and services that leverage our capabilities in powertrains, vehicle performance management, and electrical/mechanical design to capitalize on the growth relating to connected and electric vehicles.

More than 85% of passenger vehicles sold in Europe and the United States and almost 50% of vehicles sold in China in 2021 were estimated to be connected in some way to the Internet according to Strategy &, a consultancy firm.

According to the same report, that number is expected to reach 100% in Europe and the United States and >90% in China by 2025.

Building on our software and connected vehicle capabilities, we have assembled a team of engineers, software and technical experts and have opened design centers in North America, India, China, Korea, Romania and Czech Republic.

We continue to target key areas of the industry where we are best positioned to leverage our existing technology platforms and capabilities to serve our customers.

We execute a portion of our connectivity investment in collaboration with OEMs and other Tier 1 suppliers and have multiple production programs with customers underway.

Installer Connect, a global web-based platform providing self-service tools aimed at connecting garage technicians generated more than 15 thousand additional technicians certified, and our Turbo Service Replacement website attracted more than 800 thousand visitors.

Additionally, the Garrett Web Racing & Performance section of our website attracted more than 1.4 million visitors in 2022.

Research, Development and Intellectual Property

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As of December 31, 2022, we employed approximately 1,260 engineers.

Our total R&D expenses were $136 million, $111 million and $129 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Additionally, the Company incurs engineering-related expenses which are also included in Cost of goods sold of $22 million, $13 million, and $5 million for the years ended December 31, 2021, 2020 and 2019.

While it already represents approximately 40% of our R&D expenditures, we expect to further increase this percentage to support our new strategic growth opportunities in 2022, in particular in the domain of electrification of drivetrains and fuel cell technology .

Our total R&D expenses were $153 million, $136 million and $111 million for the years ended December 31, 2022, 2021 and 2020, respectively, with more than 50% of our total R&D spend in 2022 focused on electrification technologies.

Additionally, the Company incurred engineering-related expenses which are also included in Cost of goods sold of $11 million, $22 million, and $13 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We currently hold approximately 1,700 patents and patents pending.

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The most significant raw materials we use to manufacture our products are grey iron, aluminum, stainless steel and a nickel-, iron- and chromium-based alloy.

As of December 31, 2021, we have not experienced any significant shortage of raw materials and normally we or our suppliers (on our behalf) do not carry inventories of such raw materials in excess of those reasonably required to meet our production and shipping schedules.

As of December 31, 2022, we have not experienced any significant shortage of raw materials and we or our suppliers (on our behalf) do not typically carry inventories of such raw materials in excess of those reasonably required to meet our production and shipping schedules.

Our global customer base includes nine of the ten largest light vehicle OEMs and nine of the ten largest commercial vehicle engine makers.

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In addition, many of our OEM customers have the option to terminate for convenience on certain programs, which permits our customers to impose pressure on pricing during the life of the vehicle program, and issue purchase contracts for less than the duration of the vehicle program, which potentially reduces our profit margins and increases the risk of our losing future sales under those purchase contracts.

We manufacture, and ship based on customer release schedules, normally provided on a weekly basis, which can vary due to cyclical automobile production or inventory levels throughout the supply chain.

We manufacture, and ship based on customer

release schedules, normally provided on a weekly basis, which can vary due to cyclical automobile production or inventory levels throughout the supply chain.

Although customer programs typically extend to future periods, and although there is an expectation that we will supply certain levels of OEM production during such future periods, customer agreements including applicable terms and conditions do not necessarily constitute firm orders.

Firm orders are generally limited to specific and authorized customer purchase order releases placed with our manufacturing and distribution centers for actual production and order fulfillment.

Firm orders are generally limited to specific and authorized customer purchase order releases placed with our manufacturing and distribution centers for actual production and order fulfilment.

Firm orders are typically fulfilled as promptly as possible from the conversion of available raw materials, sub-components and work-in-process inventory for OEM orders and from current on-hand finished goods inventory for aftermarket orders.

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Certain environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances.

At this time, we are involved in various stages of investigation and

cleanup related to environmental remediation matters at certain of our present and former facilities.

At this time, we are involved in various stages of investigation and cleanup related to environmental remediation matters at certain of our present and former facilities.

In addition, there may be soil or groundwater contamination at several of our properties resulting from historical, ongoing or nearby activities.

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However, considering our past experience and existing reserves, we do not expect that environmental matters will have a material adverse effect on our consolidated financial position.

The Company previously had asbestos-related liability payments and accounts payable primarily reflecting the terms of the Honeywell Indemnity Agreement with Honeywell entered into on September 12, 2018, under which our wholly owned indirect subsidiary Garrett ASASCO Inc.

was expected to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to Honeywell’s former Bendix business in the United States, as well as certain environmental-related liability payments and accounts payable and non-United States asbestos-related liability payments and accounts payable, in each case related to legacy elements of the Bendix business, including the legal costs of defending and resolving such liabilities, less 90% of Honeywell’s net insurance receipts and, as may be applicable, certain other recoveries associated with such liabilities (the "Honeywell Indemnity Agreement").

The Plan as confirmed by the Bankruptcy Court includes a global settlement with Honeywell providing for, among other things, the full and final satisfaction, settlement, release, and discharge of all liabilities under or related to the certain agreements with Honeywell, including under the Honeywell Indemnity Agreement.

Human Capital

Corporate Responsibility

WeCare4 Sustainability Approach

Garrett’s mission to enable cleaner, safer vehicles is at the heart of its contribution to society.

We develop solutions for the auto industry's most pressing sustainability issues, from emissions reduction to vehicle cybersecurity.

Our governance model demonstrate that the Senior Leadership and The Board of Directors are committed to promoting and developing corporate responsibility and sustainability, assessing and prioritizing topics that are material to the business and monitoring adherence to Company standards.

These commitments are formalized in the charter of the Nominating & Governance Committee.

Garrett WeCare4 global sustainability approach is focused on the essential building blocks required to successfully achi eve its mission:

a culture of innovation and responsible operations.

Culture of innovation:

Investing on people both inside and outside the company.

• Developing Garrett’s people:

We promote respect, diversity, and encourage everyone to fulfil their potential.

We support our employees in their careers, offering a comprehensive training and development program, and leadership training for managers.

Garrett global network of Diversity and Inclusion ("D&I")_champions drive an inclusive culture and develop awareness activities.

In 2021, through the Garrett Together communications platform, the company continued to help employees globally to stay connected as work for many moved from office to home and to promote a positive mindset while navigating work and life through COVID-19.

Garrett also re-focused part of its community outreach programs to provide help to the local populations where it was most urgently needed.

In India, Garrett donated 5 live-saving adult ventilators to the Sassoon hospital in Pune for the intensive care unit beds.

Following the floods in Maharashtra, state where the Garrett production site in Pune is located, the company organized the transportation and distribution of Hygiene kits provided to 874 families.

• Educating future innovators:

Garrett sponsors internship, graduate program, and higher education institutes in several countries.

The company is providing students with a tailor-made Science, Technology, Engineering and Math (“STEM”) program and holding regular open days for schoolchildren.

In Romania, Garrett employees continued to focus their action in helping young people.

A team of volunteers helped 70 students to find the right career path while another team joined the “Give a Byte of Help” cause and organized a donation of 90 fully equipped computers which benefited to over 1,000 children in institutions in disadvantaged areas of Romania.

Responsible operations:

Being responsible in what we do and in the way we behave as a company and as employees.

• Managing our environmental footprint:

In addition to the considerable impact we have on reducing harmful emissions from vehicles, we are also committed to reducing our own impact on the environment.

As a worldwide business, Garrett applies global standards to environmental impact as part of our lifecycle management, assessing end-to-end performance from design through to manufacturing and service support.

All of our sites are certified ISO 14001.

In 2021 Garrett improved its EcoVadis silver rating with a score of 63, putting the company in the top 5% in the industry and consolidated its Carbon Disclosure Project B rating.

• Behaving ethically:

Garrett people share a responsibility to act ethically and with the highest professional standards at all times.

We hold our suppliers to the same high standards and have a Regulatory Materials Compliance Process for Suppliers.

We have clear policies for the responsible procurement of raw materials and Conflict Minerals.

Our Supplier Code of Business Conduct outlines our requirements for suppliers to treat their employees with dignity and respect.

Garrett articulates its commitments to social and environmental considerations in the communities in which it operates in the Company’s Code of Business Conduct, which can be found on our website at www.garrettmotion.com under "Corporate – Sustainability".

The Company published its first sustainability report in 2021, the content of which is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC.

Human Capital Disclosure

Our Sustainability Approach

Garrett’s mission to enable cleaner, more efficient and connected vehicles is at the heart of our contribution to society.

Our engineering expertise and transformative technologies help optimize fuel efficiency, reduce harmful emissions and manage growing vehicle complexity, all of which are critical areas on the road to a clean transportation future.

Our corporate sustainability framework, called WeCare4, starts from our mission to enable cleaner, more efficient vehicles by spearheading technology development and continuing to deliver industry-first innovations.

It is built on two main pillars - investing in a culture of innovation and operating responsibly to ensure long-term impact.

We embed sustainability in our governance structure.

Our Sustainability Committee, composed of the CEO and several members of Garrett’s senior leadership team, is sponsored by our Chief Technology Officer and oversees our sustainability strategy development, definition and deployment.

Our Board of Directors, including its committees, provide Board oversight of our environment, social and governance ("ESG") activities, corporate responsibility and sustainability strategy.

Primary responsibility at Board level for reviewing and reporting to the full Board on our sustainability programs and policies, as well as our corporate citizen commitments, resides with the Nominating & Governance Committee.

The Company published its fiscal year 2021 Sustainability Report in 2022, the content of which is not incorporated by reference into this Annual Report or in any other report or document we file with the SEC.

Human Capital

At Garrett, we place a high value on developing the right working environment and the right skillsets to advance our performance culture, support our growth strategy and ensure that the world at large can continue to benefit from breakthroughs in sustainable mobility.

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Embracing diverse thoughts and ideas through inclusion leads to a competitive advantage in the market, increased innovation as we generate new and better ideas, and customer-centric decision making.

We pride ourselves that Diversity is represented from the top of the organisation, for example 15 different

nationalities are represented in our senior management team and they bring with them a wide variety of different backgrounds and experiences.

We pride ourselves that diversity is represented from the top of the organization, for example 25 different nationalities are represented in our senior management team and they bring with them a wide variety of different backgrounds and experiences.

Overall, in our global workforce we have representation of approximately 60 different nationalities.

As of December 31, 2022, Garrett's Board of Directors had 33% female representation.

In 2022, the Company continued to strengthen and develop its approach to diversity, equity and inclusion.

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• Regular reporting and review of existing diversity and inclusion metrics and initiatives

• Work by 14 Diversity and Inclusion Champions in key countries to develop local D&I initiatives suitable for the local context while aligning with the global strategy

• Holding Garrett’s annual Diversity and Inclusion Week during October based on the themes of 'Small Actions Make a Big Difference'.

During the year Garrett increased the percentage of female representation in the total workforce from 20.4% in 2020 to 21.8% in 2021.

This continues the progress being made to achieve our ambition of reaching a representation percentage of 25% by 2025.

In addition, the percentage of female representation in Senior Management roles increased from 19.5% in 2020 to 20.0% in 2021.

This compares to our 2025 ambition, again at 25%

The table below shows the evolution of our gender diversity representation over the last four years:

• Work by 14 Diversity and Inclusion Champions in key countries to develop local Diversity and Inclusion initiatives suitable for the local context while aligning with the global strategy

• Holding Garrett’s annual Diversity and Inclusion Week in November based on the themes of Beyond Bias.

The percentage of female employees in Garrett was 21.8% in 2022.

The percentage of female employees in Senior Management roles was 19.0% in 2022.

Over the past four years, Garrett increased the percentage of female employees in Garrett by 5.8% (from 20.6% to 21.8%) and by 13.8% in Senior Management over the same four year period (from 16.7% to 19.0%).

The table below shows the evolution of our gender diversity representation over the last four years and our 2025 ambition:

2019 2020 2021 2022 2025 Ambition

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% Women in Senior Management 16.7% 19.5% 20.0% 19.0% 25.0%

As of December 31, 2021, Garrett’s Board of Directors had 33% female representation.

Talent Management

At Garrett, we encourage our employees to develop their skills and capabilities through a comprehensive Performance and Talent Management system.

From annual goal-setting and performance reviews to learning opportunities for employees and leaders, Garrett helps its people align their professional experience with the Company’s business objectives and encourages them to take ownership of their development and career paths.

From annual goal-setting and performance reviews to learning opportunities for employees and leaders, the Company helps its people align their professional experience with the Company’s business objectives and encourages them to take ownership of their development and career paths.

Our learning environment offers employees access to more than 1,000 online trainings that address a wide range of functional competencies, technical skills, and human skills.

Learning can be self-paced, while Garrett’s growing online peer-to-peer learning communities also allow employees to easily access courses specific to their function and to share materials and ideas on topics of interest.

Learning can be self-paced, while the Company’s growing online peer-to-peer learning communities also allow employees to easily access courses specific to their function and to share materials and ideas on topics of interest.

A variety of instructor led virtual programs were deployed during 2022 to support employees' development and a number of dedicated programs for emerging and experienced leaders were successfully held.

Approximately 80,000 hours of online training was delivered during 2022.

Garrett uses regular talent reviews to strengthen the Company’s internal development processes and to calibrate assessment of individual performance.

We use regular talent reviews to strengthen the Company’s internal development processes and to calibrate assessment of individual performance.

Twice per year we hold succession planning meetings up to and including the executive level, during which the bench-strength of teams are scrutinized and development plans for their talent are reviewed.

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World-class health and safety considerations are integrated into Garrett’s procedures and processes.

Our management systems apply global standards that have transitioned from Occupational Health & Safety Assessment Series ("OHSAS") 18001 to ISO 45001 and that provide protection of human health and safety during normal and emergency situations.

Our management system aligns with the global standard ISO 45001 (and ISO 14001 and ISO 50 001) and provides protection of human health and safety during normal and emergency situations.

Compliance with our standards and local regulatory requirements is monitored through a company-wide self-assessment process assured through annual audits.

In 2022 we supplemented this with a rolling 4-year compliance audit against local regulations by a global service provider.

The timely development and implementation of process improvement and corrective action plans are closely monitored.

From early 2020, Garrett’s global Health and Safety team worked tirelessly to deliver and implement best practice safety guidelines relating to COVID-19.

A global safety campaign was rolled out alongside dedicated employee newsletters

to support the entire workforce with rules on staying safe and healthy.

The global safety campaign and newsletter remained in place throughout 2021.

The particular focus on the health of our employees to address the challenges posed by COVID-19 also provided a benefit in the focus on their safety in which we maintained good performance in our Total Case Incident Rate (“TCIR”).

TCIR is measured as the number of recordable injuries and illnesses multiplied by 200,000 and then that number is divided by the total number of hours worked by employees, TCIR was maintained at 0.11 in 2021, which is consistent with the TCIR in the previous two years, even during a return to full production, and despite the additional challenges of protecting our teams from COVID-19 during the pandemic.

As the Covid-19 pandemic started to recede in the first quarter of 2022, through government and international action, we transitioned to more normal working with continued support for the health and well being of our employees.

This transition is now complete with the emergence of China from their zero-Covid policy.

Our safety performance was maintained in our Total Case Incident Rate (“TCIR”).

Compensation and benefits

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We constantly evaluate our positions for market competitiveness and adjust when necessary with the goal of ensuring the retention of top talent and continuation of equitable pay practices.

As part of our commitment to the well-being of our employees, Garrett offers an Employee Assistance Program (EAP).

As part of our commitment to the well-being of our employees, the Company offers an Employee Assistance Program.

It is an external counselling service designed to assist employees with personal, family, or workplace matters.

This service is confidential and is also available to each employee’s dependents.

In late 2020, Garrett made a number of well-being resources available to all its connected employees, including useful tools and techniques for managing mental and physical health, in addition to dedicated online events.

These remained in place throughout 2021.

In late 2020, the Company made a number of well-being resources available to all its connected employees, including useful tools and techniques for managing mental and physical health, in addition to dedicated online events.

These remained in place throughout 2021 and 2022.

Employee feedback, representation, and retention

Garrett’s Performance Management system aims to ensure that two-way dialogue is ongoing between employees and managers, punctuated by both an annual and a mid-year review, which provides employees the opportunity to express their opinions and ideas in terms of their development goals and career aspirations.

Garrett’s Performance and Talent Management system aims to ensure that two-way dialogue is ongoing between employees and managers, punctuated by both an annual and a mid-year review, which provides employees the opportunity to express their opinions and ideas in terms of their development goals and career aspirations.

Garrett’s strategy is to build positive, direct, business-focused working relationships with all employees in order to drive business results.

Garrett respects employees’ rights and their wish to be part of employee representative bodies including unions, work councils and employee forums.

The Company understands the value of collective bargaining in its labour and employee relations strategy and the importance of trust in its working relationships.

The Company respects employees’ rights and their wish to be part of employee representative bodies including unions, work councils and employee forums.

The Company understands the value of collective bargaining in its labor and employee relations strategy and the importance of trust in its working relationships.

Approximately 40% of the Company’s permanent employees (including both full-time and part-time employees) are represented by unions and works councils under current collective bargaining agreements.

Garrett closely monitors employee turnover to measure retention and define improvement actions as and where necessary.

As of December 2021, the Company’s annual voluntary turnover for 2021 was 11.3%.

which reflect the trends of the current global marketplace for talent.

Garrett has developed a full set of actions to maximise retention that are carried out at both a global and local level, with line managers as well as functional leaders held accountable for their employee turnover performance.

The Company closely monitors employee turnover to measure retention and define improvement actions as and where necessary.

As of December 31, 2022, the Company’s annual voluntary turnover for 2022 was 13.6%, which reflects the trends of the current global marketplace for talent.

Garrett has developed a full set of actions to maximize retention that are carried out at both a global and local level, with line managers as well as functional leaders held accountable for their employee turnover performance.

We intend to continue to work diligently on this area to mitigate against the challenges of a highly competitive global marketplace for talent.

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Garrett’s Internship Programs enable students to connect theoretical knowledge with practical responsibilities in the spirit of ‘living laboratories’ during which they are encouraged to take ownership of business projects and define tactics to meet the project goals.

Despite the challenging context of COVID-19, Garrett offered 124 internships (approximately 50% in Engineering, 19% in IT, 10% in Integrated Supply Chain and the remainder in Finance, HR, Marketing and Sales) in 11 countries during 2021.

Garrett runs a Graduate Program which in 2021 provided 11 graduates in 5 countries with a unique 3 to 2 year opportunity to gain experience and exposure to Garrett’s cutting-edge technologies while at the same time building their leadership skills in a fast-paced and professional work environment.

The Company sponsors Formula SAE and Formula Student teams in several countries and in 2021 sponsored the European BEST Engineering Competition, the biggest international technical competition in Central Europe, where Garrett defined an assignment for 24 students around the concept of sustainable future mobility.

Prior to COVID-19, Garrett teams regularly held open days for school children in their host communities, with a specific focus on encouraging girls to take an interest in STEM.

With many host communities forced into lockdown in 2021, Garrett instead supported local first responders in several countries with the donation of PPE, and provided food and sanitation products for 2,000 vulnerable families around Garrett’s sites in India.

In 2022, Garrett offered 261 internships in 11 countries, which is twice as many compared to 2021 (approximately 37% in Engineering, 32% in Integrated Supply Chain, 12% in IT and the remainder in Finance, HR, Marketing and Sales, Legal and Internal Audit).

Garrett runs a Graduate Program which in 2022 provided 25 graduates in 2 countries to gain experience and exposure to Garrett’s cutting-edge technologies while at the same time building their leadership skills in a fast-paced and professional work environment.

The Company sponsors Formula SAE and Formula Student teams in several countries providing the students in the racing team with leadership coaching, technical guidance, parts for the vehicle and financial support.

Our engineers and leaders take part on Formula Student and Formula SAE races as judges and technical support.

In 2022, the Company sponsored the European BEST Engineering Competition, the biggest international technical competition in Central Europe, where Garrett defined an assignment for over 50 students on a case study comparing pros and cons for a cooling unit with conventional pump and radial impeller driven compressor.

Garrett supports the local Universities globally with master thesis projects, class speakers and technical sharing events and is involved in the community supporting STEM activities for high schools worldwide.

The Company continues to enhance the engagement with global organizations at the university focused on diversity students increasing intern and full time recruiting.

Garrett works closely with leading Universities globally on over 10 collaboration projects that push the envelope of technical innovation.

Our business is typically moderately seasonal.

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This seasonality in cash flow is mostly caused by timing of supplier payments for capital expenditures, changes in working capital balances related to the sales seasonality discussed above, and incentive payments.

These trends were less significant during 2021 because of the COVID-19 pandemic, but we expect them to continue in the future once the pandemic is resolved.

Cybersecurity

Cybersecurity and protection of our data is a top priority across the entire organization.

To that end, we take a holistic approach to securing our data and business systems from attack, compromise or loss.

The Company's cybersecurity objective is to protect Garrett data privacy, information theft, and protection from external and insider cyber threats.

This includes the combination of leading technologies, policies, and procedures, and the Company’s Security Operation Center (“SOC”).

The Company's SOC provides visibility across all information technology assets and includes proactive cyber security Threat Detection Technology to facilities the identification of misconfigurations to mitigate threats and prevent data loss.

As part of the Company’s holistic approach to cybersecurity, there are incremental programs and technology associated with threat hunting, vulnerability scanning and threat detection and response technology.

We continually evaluate risks, threats, intelligence feeds and vulnerabilities to adapt, mitigate or respond as necessary to preserve a secure state.

Combining technology, processes, and threat intelligence we deliver specific and timely education and training to the organization, including mandatory training for all employees.

While Garrett focuses heavily on prevention and detection, response and recovery plans, service agreements and partner engagements are in place should there be a need for us to respond to an attack.

There have been no material cybersecurity events during the year ended December 31, 2022.

Additional Information

Our Company was incorporated on March 14, 2018 as a Delaware corporation in connection with the Spin-Off from Honeywell, and we maintain our headquarters in Rolle, Switzerland.

On the Petition Date, the Debtors each filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

On April 20, 2021, the Debtors filed the Plan, and on April 26, 2021, the Bankruptcy Court entered an order, among other things, confirming the Plan.

On the Effective Date, the conditions to the effectiveness of the Plan were satisfied or waived and the Company emerged from bankruptcy.

This Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as all amendments and other reports filed with or furnished to the SEC, are also available free of charge on our internet site at https://www.garrettmotion.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Our Annual Reports on Form 10-K, including this Annual Report, our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as all amendments and other reports filed with or furnished to the SEC, are also available free of charge on our internet site at https://www.garrettmotion.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The contents of our internet site are not incorporated by reference into this Annual Report.

The SEC maintains a website at SEC.gov that contains reports, proxy and information statements, and other information regarding issuers that file with the SEC, including our Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business