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Item 2. Management’s Discussion and Analysis

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The following MD&A is intended to help you understand the results of operations and financial condition of Garrett Motion Inc.

for the three and six months ended June 30, 2025.

for the three and nine months ended September 30, 2025.

Executive Summary

During the second quarter of 2025, we continued to navigate macro-economical challenges.

Increased demand in light vehicle gasoline, primarily driven by new program launches in Europe, North America and India, was offset by declines in light vehicle volumes, particularly in Europe, and decreased demand for replacement parts in North America.

Our sustainable cost measures implemented in the prior year, along with our effective recoveries on enacted import tariffs and a favorable foreign exchange environment, enabled us to achieve Net income of $87 million and Adjusted EBIT of $124 million for the quarter.

We continue to have success across our differentiated technologies by winning business across our turbo and zero emission technologies offerings.

We have secured ongoing business through the extension of light vehicle programs, and won a significant E-Turbo program in Europe.

We have been awarded serial production for our Fuel cell compressor by a leading Asian OEM.

Additionally, we received positive testing feedback on the application of our E-Cooling Compressor, laying the foundation for future business growth.

For the three months ended June 30, 2025, we repurchased $22 million of Common Stock under our share repurchase program.

As of June 30, 2025, we had $198 million of the authorized amount remaining under our share repurchase program.

On May 1, 2025, the Board of Directors declared a cash dividend of $0.06 per share of Common Stock, payable on June 16, 2025, to shareholders of record as of June 2, 2025.

The total amount of dividends paid on June 16, 2025 amounted to $13 million.

During the third quarter of 2025, we continued to navigate macro-economic challenges.

Increased demand in light vehicle gasoline, primarily driven by new program launches in Europe, China, India and North America, was partially offset by decreased demand for Aftermarket off-highway replacement parts in North America, resulting in unfavorable product mix.

Driven by sustainable cost initiatives implemented over the last year and the current year, successful recovery of import tariffs, and a favorable foreign exchange environment, we delivered Net income of $77 million and Adjusted EBIT of $133 million for the quarter.

We continue to have success across our differentiated technologies by winning business in both turbo and zero emission offerings.

We secured light vehicle turbo awards in the US, India and Brazil and continued to win commercial vehicle and industrial business across multiple regions, including turbo technology for data centers.

With respect to our zero-emission offerings, we deepened our strategic collaborations with OEMs by executing additional E-Powertrain proof-of-concept initiatives.

Furthermore, we received favorable feedback related to the efficiency gains for our E-Cooling oil-free compressor from mobility and industrial customers.

These zero-emission technologies lay the foundation for future business growth.

For the three months ended September 30, 2025, we repurchased $84 million of Common Stock under our share repurchase program.

These repurchases include a total of 5 million shares from funds affiliated with Oaktree Capital Management, L.P., a related party, for approximately $62 million.

As of September 30, 2025, we had $114 million of the authorized amount remaining under our share repurchase program.

The repurchased shares are held as treasury stock.

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

The total amount of dividends paid on September 16, 2025 amounted to $11 million.

Disaggregated Revenue

The following tables show our revenues by geographic region and product line for the three and six months ended June 30, 2025 and 2024, respectively.

The following tables show our revenues by geographic region and product line for the three and nine months ended September 30, 2025 and 2024, respectively.

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Total $ 902 $ 826 $ 2,693 $ 2,631

Results of Operations for the Three and Six Months Ended June 30, 2025

Results of Operations for the Three and Nine Months Ended September 30, 2025

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% change compared with prior period 9.2 % 2.4 %

For the three months ended June 30, 2025, net sales compared to the prior period increased by $23 million or 3% (including a favorable impact of $23 million or 3% due to foreign currency translation primarily driven by higher Euro-to-U.S.

Net Sales for the Three Months Ended September 30, 2025

For the three months ended September 30, 2025, net sales compared to the prior period increased by $76 million or 9% (including a favorable impact of $26 million or 3% due to foreign currency translation primarily driven by higher Euro-to-U.S.

dollar exchange rates).

This increase was driven by foreign currency impacts and recoveries on newly enacted import tariffs.

Strong demand for gasoline and commercial vehicle applications was more than offset by weaker demand for replacement parts on aftermarket sales and diesel products.

Gasoline product sales increased by $23 million or 6% (including a favorable impact of $9 million or 2% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe, North America and India.

Diesel product sales decreased by $3 million or 1% (including a favorable impact of $8 million or 4% due to foreign currency translation), primarily driven by passenger vehicles in Europe transitioning to gasoline hybrids, partially offset by sustained demand for pickup trucks in North and South America.

Commercial vehicle sales increased by $9 million or 6% (including a favorable impact of $3 million or 2% due to foreign currency translation), primarily driven by recovering demand in off-highway across Europe, North America and China as well as the launch of a new on-highway program in Europe.

This increase was primarily related to favorable foreign currency impacts and higher demand in gasoline and diesel, partially offset by weaker demand for replacement parts on aftermarket sales and unfavorable product mix.

Net sales also includes $12 million of recoveries on enacted import tariffs.

Gasoline product sales increased by $45 million or 13% (including a favorable impact of $11 million or 3% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe, China, India and North America.

Diesel product sales increased by $21 million or 12% (including a favorable impact of $9 million or 5% due to foreign currency translation), primarily driven by strong light commercial vehicle performance in Europe combined with sustained demand for pickup trucks in North America, South America and Southeast Asia.

Commercial vehicle sales increased by $9 million or 6% (including a favorable impact of $2 million or 2% due to foreign currency translation), primarily driven by launch of an on-highway program in Europe and partial recovery of prior year softness in the construction and agriculture industries.

Aftermarket sales decreased by $1 million or 1% (including a favorable impact of $3 million or 3% due to foreign currency translation), primarily due to softer demand for off-highway replacement parts in North America.

The decrease was partially offset by stronger demand for replacement parts through the independent aftermarket channels in Europe, China, South America and India.

For the six months ended June 30, 2025, net sales compared to the prior period decreased by $14 million or 1% (including a favorable impact of $2 million or 0% due to foreign currency translation, primarily driven by fluctuations in global exchange rates).

This decrease was mainly driven by soft demand in diesel and replacement parts on aftermarket sales, partially offset by higher demand for gasoline and commercial vehicle applications, recoveries on newly enacted import tariffs, and favorable foreign exchange impacts.

Net sales further decreased due to price, net of inflation pass-through driven by commodity deflation.

Gasoline product sales increased by $38 million or 5% (including an unfavorable impact of $1 million or 0% due to foreign currency translation) driven by new application launches and program ramp-ups in Europe, North America and India.

Diesel product sales decreased by $36 million or 8% (including a favorable impact of $2 million or 0% due to foreign currency translation), primarily driven by passenger vehicles in Europe pursuing transition to gasoline hybrids, partially offset by sustained demand for pickup trucks in North and South America.

Commercial vehicle sales increased by $3 million or 1% (including a favorable impact of $1 million or 0% due to foreign currency translation), primarily driven by recovering demand in off-highway across Europe, North America and China as well as the launch of a new on-highway program in Europe.

Aftermarket sales decreased by $24 million or 10% (with no impact from foreign currency translation), primarily due to softer demand for off-highway replacement parts in North America.

Net Sales for the Nine Months Ended September 30, 2025

For the nine months ended September 30, 2025, net sales compared to the prior period increased by $62 million or 2% (including a favorable impact of $28 million or 1% due to foreign currency translation, primarily driven by fluctuations in global exchange rates).

This increase was primarily related to favorable foreign currency impacts and higher demand in gasoline and commercial vehicles, partially offset by weaker demand for replacement parts on aftermarket sales and weakness in light vehicle diesel in Europe.

Net sales also include $30 million of recoveries on enacted import tariffs.

Gasoline product sales increased by $83 million or 7% (including a favorable impact of $10 million or 1% due to foreign currency translation), primarily driven by new application launches and program ramp-ups in Europe, North America and India.

Diesel product sales decreased by $15 million or 2% (including a favorable impact of $11 million or 2% due to foreign currency translation), primarily driven by passenger vehicles in Europe pursuing transition to gasoline hybrids, partially offset by sustained demand for pickup trucks in North America, South America and Southeast Asia.

Commercial vehicle sales increased by $12 million or 3% (including a favorable impact of $3 million or 1% due to foreign currency translation), primarily driven by launch of an on-highway program in Europe and partial recovery of prior year softness in the construction and agriculture industries.

Aftermarket sales decreased by $25 million or 7% (including a favorable impact of $3 million or 1% due to foreign currency translation), primarily driven by softer demand for off-highway replacement parts in North America.

Cost of Goods Sold and Gross Profit

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Gross profit percentage 20.6 % 20.1 % 20.3 % 19.9 %

Cost of Goods Sold and Gross Profit for the Three Months Ended September 30, 2025

Cost of Goods Sold Gross Profit

(Dollars in millions)

Cost of Goods Sold / Gross Profit for the three months ended June 30, 2024

Cost of Goods Sold / Gross Profit for the three months ended September 30, 2024

Increase/(decrease) due to:

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Foreign exchange rate impacts 11 14

Cost of Goods Sold / Gross Profit for the three months ended June 30, 2025

For the three months ended June 30, 2025, cost of goods sold increased by $27 million, primarily driven by $16 million from foreign currency impacts, $15 million from the impact of newly enacted import tariffs, $6 million due to unfavorable product mix and $3 million of higher sales volumes.

These increases were partially offset by $8 million of productivity net of labor inflation, $4 million of commodity, transportation and energy deflation, and $1 million of lower R&D costs.

For the three months ended June 30, 2025, gross profit decreased by $4 million, primarily driven by $25 million of unfavorable product mix, and $2 million of pricing, net of inflation pass-through.

These decreases were partially offset by $9 million from foreign currency impacts, $9 million of productivity, net of labor inflation, $4 million of commodity, transportation and energy deflation, $1 million from higher sales volumes, and $1 million of lower R&D costs.

We also saw a $1 million impact to gross profit from newly enacted import tariffs due to the timing of negotiated recoveries.

Cost of Goods Sold / Gross Profit for the three months ended September 30, 2025

For the three months ended September 30, 2025, cost of goods sold increased by $56 million, primarily driven by $61 million from higher sales volumes, $12 million from enacted import tariffs and $11 million from foreign currency impacts.

These increases were partially offset by $9 million of favorable product mix, $7 million of commodity, transportation and energy deflation, $6 million of productivity net of labor inflation and $6 million of lower R&D costs.

For the three months ended September 30, 2025, gross profit increased by $20 million, primarily driven by $28 million from higher sales volumes, $14 million from foreign currency impacts, $10 million from productivity net of labor inflation, $7 million from commodity, transportation and energy deflation and $6 million of lower R&D costs.

These increases were partially offset by $28 million of unfavorable product mix and $17 million of pricing, net of inflation pass-through.

Cost of Goods Sold and Gross Profit for the Nine Months Ended September 30, 2025

Cost of Goods Sold Gross Profit

(Dollars in millions)

Cost of Goods Sold / Gross Profit for the six months ended June 30, 2024

Cost of Goods Sold / Gross Profit for the nine months ended September 30, 2024

$ 2,108 $ 523

Increase/(decrease) due to:

Volume (12) (6)

Product mix 1 (60)

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Foreign exchange rate impacts 12 15

Cost of Goods Sold / Gross Profit for the six months ended June 30, 2025

Cost of Goods Sold / Gross Profit for the nine months ended September 30, 2025

$ 2,147 $ 546

For the six months ended June 30, 2025, cost of goods sold decreased by $17 million, primarily driven by $24 million of productivity net of labor inflation, $13 million of commodity, transportation and energy deflation, $12 million of lower sales volumes and $1 million of lower R&D costs.

These decreases were partially offset by $19 million of higher cost of goods sold due to the impact of newly enacted import tariffs, $12 million from unfavorable product mix and $2 million of foreign currency impact.

For the six months ended June 30, 2025, gross profit increased by $3 million, primarily driven by $25 million of productivity, net of labor inflation, $13 million of commodity, transportation and energy deflation, $2 million of pricing, net of inflation pass-through, $1 million of lower R&D costs and $1 million of foreign currency impact.

These increases were partially offset by $32 million from unfavorable product mix and $6 million of lower sales volumes.

We also saw a $1 million impact to gross profit from newly enacted import tariffs due to the timing of negotiated recoveries.

For the nine months ended September 30, 2025, cost of goods sold increased by $39 million, primarily driven by $52 million from higher sales volumes, $31 million from enacted import tariffs, $12 million from foreign currency impacts and $1 million from unfavorable product mix.

These increases were partially offset by $30 million of productivity net of labor inflation, $20 million of commodity, transportation and energy deflation and $7 million of lower R&D costs.

For the nine months ended September 30, 2025, gross profit increased by $23 million, primarily driven by $35 million of productivity, net of labor inflation, $22 million of higher sales volumes, $20 million of commodity, transportation and energy deflation, $15 million from foreign currency impacts and $7 million of lower R&D costs.

These increases were

partially offset by $60 million from unfavorable product mix and $15 million of price net of inflation pass through.

We also had a $1 million impact to gross profit from newly enacted import tariffs due to the timing of negotiated recoveries.

Selling, General and Administrative Expenses

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% of sales 6.3 % 6.4 % 6.5 % 6.8 %

Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2025, decreased by $2 million compared with the prior period, primarily driven by $3 million lower personnel costs partially offset by $2 million of unfavorable foreign currency impact.

SG&A expenses for the six months ended June 30, 2025, decreased by $7 million compared with the prior period, primarily driven by $4 million lower personnel costs and $2 million of lower legal fees.

Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2025, increased by $4 million compared with the prior period, primarily driven by $4 million unfavorable foreign currency impacts and $2 million of higher bad debt expense.

These increases were partially offset by a $3 million reduction in personnel costs, driven by sustainable cost measures implemented in the current and prior years.

SG&A expenses for the nine months ended September 30, 2025, decreased by $3 million compared with the prior period, primarily driven by a $5 million reduction in personnel costs related to cost measures implemented in current and prior years and $3 million of lower outsourced activities partially offset by $6 million primarily related to acquisition and divestiture expenses.

Other Expense, Net

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Other expense, net $ 1 $ 1 $ 9 $ 5

Other expense, net for the three months ended June 30, 2025 decreased by $2 million compared to the prior period, primarily due to professional fees incurred in the prior year associated with our 2032 Senior Notes.

Other expense, net for the six months ended June 30, 2025 increased by $4 million compared to the prior period, primarily driven by $6 million in professional fees related to our Restatement Agreement partially offset by $2 million of professional fees associated with our 2032 Senior Notes in the prior year.

Other expense, net for the three months ended September 30, 2025 was consistent with the prior period.

Other expense, net for the nine months ended September 30, 2025 increased by $4 million compared to the prior period, primarily driven by $6 million in third-party costs related to our Restatement Agreement partially offset by $2 million of professional fees associated with our 2032 Senior Notes in the prior year.

Interest Expense

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Interest expense $ 29 $ 37 $ 83 $ 130

For the three months ended June 30, 2025, interest expense decreased by $37 million compared to the prior period.

This decrease was primarily due to a $29 million reduction in debt issuance cost amortization, driven by accelerated amortization in the prior year, and $8 million in lower interest expense resulting from a change in the notional amount of debt outstanding during the period.

Additionally, we recorded net gains of $4 million on designated and undesignated interest rate derivatives, consistent with the prior year's net gains of $4 million.

For the six months ended June 30, 2025, interest expense decreased by $39 million compared to the prior period.

This decrease was primarily due to a $30 million reduction in debt issuance cost amortization, driven by accelerated amortization in the prior year, and $18 million of lower interest expense resulting from a change in the notional amount of debt outstanding during the period.

For the three months ended September 30, 2025, interest expense decreased by $8 million compared to the prior period.

This decrease was primarily due to $3 million in lower interest expense resulting from the Amendment and Restatement of our Credit Agreement.

Additionally, we did not record any net gains on designated and undesignated interest rate derivatives in the current year, in comparison to net gains of $5 million in the prior year.

For the nine months ended September 30, 2025, interest expense decreased by $47 million compared to the prior period.

This decrease was primarily due to a $30 million reduction in debt issuance cost amortization, driven by accelerated amortization in the prior year, and $22 million of lower interest expense resulting from the Amendment and Restatement of our Credit Agreement.

In addition, we recorded net gains of $4 million on our designated and undesignated interest derivatives in the current year, in comparison to net gains of $9 million in the prior year.

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Non-operating income, net $ (3) $ (1) $ (10) $ (7)

For the three months ended June 30, 2025, we had non-operating income of $6 million versus $1 million in the prior period.

The increase in non-operating income was primarily driven by foreign exchange transactional gains.

For the six months ended June 30, 2025, we had non-operating income of $7 million versus $6 million in the prior period.

The increase in non-operating income was primarily driven by $2 million in foreign exchange transactional gains and $1 million of lower other non-operating expense, partially offset by lower equity income of $2 million due to the prior year sale of an equity interest in an unconsolidated joint venture.

For the three months ended September 30, 2025, we had non-operating income of $3 million versus $1 million in the prior period.

The increase in non-operating income was primarily driven by higher interest income.

For the nine months ended September 30, 2025, we had non-operating income of $10 million versus $7 million in the prior period.

The increase in non-operating income was primarily driven by higher foreign exchange transactional gains, partially offset by lower equity income due to the prior year sale of an equity interest in an unconsolidated joint venture.

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Effective tax rate 24.5 % 31.6 % 21.8 % 25.4 %

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

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

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

taxes on international operations.

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

taxes on international operations and additional tax reserve positions in the current year.

The effective tax rates for the three months ended September 30, 2025 and 2024 were 24.5% and 31.6%, respectively.

The effective tax rates for the nine months ended September 30, 2025 and 2024 were 21.8% and 25.4%, respectively.

The change in the effective tax rate for the three months ended September 30, 2025, compared to the prior period is primarily related to a decrease in U.S.

taxes on international operations and the global mix of earnings.

The change in the effective tax rate for the nine months ended September 30, 2025 , compared to the prior period is primarily related to a one-time benefit attributable to the revaluation of deferred tax assets in China.

The Organization for Economic Cooperation and Development reached agreement among over 140 countries to implement a minimum 15% tax rate on certain multinational enterprises, commonly referred to as Pillar Two.

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Net income margin 8.5 % 6.3 % 8.4 % 6.9 %

Net income for the three months ended June 30, 2025, increased by $23 million compared with the prior period, primarily due to $37 million of lower interest expense, $8 million of lower tax expense, $2 million of lower SG&A expense, $2 million of lower other expense, net, and a $5 million increase in non-operating income.

These were partially offset by $4 million of decreased gross profit and the prior year gain of $27 million on the sale of an equity interest in an unconsolidated joint venture.

Net income for the six months ended June 30, 2025, increased by $19 million compared with the prior period, primarily due to $39 million of lower interest expense, $7 million of lower SG&A expense, $3 million of higher gross margin and a $1 million increase in non-operating income.

Net income for the three months ended September 30, 2025, increased by $25 million compared with the prior period, primarily due to $20 million of increased gross profit, $8 million of lower interest expense, and a $2 million increase in non-operating income.

These were partially offset by $4 million of increased SG&A expense and $1 million of higher tax expense.

Net income for the nine months ended September 30, 2025, increased by $44 million compared with the prior period, primarily due to $47 million of lower interest expense, $23 million of increased gross profit, $3 million of lower SG&A expense, and a $3 million increase in non-operating income.

These were partially offset by $4 million of higher other expense, net and the prior year gain of $27 million on the sale of an equity interest in an unconsolidated joint venture.

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Gain on sale of equity investment

— (27) — (27)

Other non-operating income (3)

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Adjusted EBIT $ 133 $ 117 $ 388 $ 361

(1) Reflects interest income of $2 million and $1 million for the three months ended June 30, 2025 and 2024, respectively, and $2 million and $3 million for the six months ended June 30, 2025 and 2024, respectively.

(1) Reflects interest income of $1 million and $0 million for the three months ended September 30, 2025 and 2024, respectively, and $3 million and $3 million for the nine months ended September 30, 2025 and 2024, respectively.

(2) Repositioning costs includes severance costs related to restructuring projects to improve future productivity.

(3) Reflects the non-service component of net periodic pension income.

(4) Reflects the third-party costs directly attributable to the refinancing of our term loan and revolving credit facility.

Adjusted EBIT for the Three Months Ended June 30, 2025

For the three months ended June 30, 2025 , net income increased by $23 million versus the prior period as discussed above within Results of Operations for Three and Six Months Ended June 30, 2025 .

Adjusted EBIT increased by $1 million compared to the prior period, driven by $11 million of foreign currency impacts, $11 million of productivity, $4 million of commodity, transportation and energy deflation, and $1 million of higher volumes.

(4) Reflects third-party costs directly attributable to the refinancing of our credit facilities and any amendments.

Adjusted EBIT for the Three Months Ended September 30, 2025

For the three months ended September 30, 2025 , net income increased by $25 million versus the prior period as discussed above within Results of Operations for Three and Nine Months Ended September 30, 2025 .

Adjusted EBIT increased by $16 million compared to the prior period, driven by $28 million of higher sales volumes, $11 million of productivity, net of labor inflation and higher stock based compensation, $9 million of foreign currency impacts, $7 million of commodity, transportation and energy deflation and $6 million lower R&D costs.

These increases were partially offset by $28 million of unfavorable product mix and $17 million of lower pricing net of inflation pass-through.

During the three months ended June 30, 2025, diesel volume declined, driven by lower industry production in Europe and Aftermarket softness in off-highway applications in North America.

These volume decreases were partially offset by favorable demand in gasoline due to new application launches and program ramp-ups in Europe, North America, and India.

The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation.

Gains in foreign currency from translational, transactional, and hedging effects in the three months ended June 30, 2025, primarily driven by a higher Euro-to-U.S.

During the three months ended September 30, 2025, we saw growth in gasoline from new application launches and program ramp-ups in Europe, China, India and North America.

Volumes for diesel and commercial vehicles also increased due to higher demand in Europe and North America, and the launch of an on-highway program in Europe, respectively.

Aftermarket volumes, however, showed continued softness primarily due to lower demand for off-highway replacement

parts in North America.

The combination of these volume dynamics, led by the strong growth in gasoline, resulted in an unfavorable product mix.

The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation and higher stock based compensation.

Gains in foreign currency from translational, transactional, and hedging effects in the three months ended September 30, 2025, primarily driven by a higher Euro-to-U.S.

dollar versus the prior period, accounted for a $9 million increase in Adjusted EBIT.

Adjusted EBIT for the Six Months Ended June 30, 2025

For the six months ended June 30, 2025 , net income increased by $19 million versus the prior period as discussed above within Results of Operations for Three and Six Months Ended June 30, 2025 .

Adjusted EBIT increased by $11 million compared to the prior year, mainly from $29 million of operational productivity, net of labor inflation and repositioning costs, $13 million of commodity, transportation, and energy deflation, $4 million of favorable foreign exchange impacts and $2 million price net of inflation pass through.

These increases were partially offset by $32 million unfavorable product mix and $6 million of lower sales volume from diesel and aftermarket products.

During the six months ended June 30, 2025 , diesel volume declined, driven by impact of lower industry production mainly in Europe and Aftermarket Off-highway applications in North America.

These volume decreases were partially

offset by favorable demand in gasoline driven by new application launches and program ramp-ups in Europe, North America and India.

Adjusted EBIT for the Nine Months Ended September 30, 2025

For the nine months ended September 30, 2025 , net income increased by $44 million versus the prior period as discussed above within Results of Operations for Three and Nine Months Ended September 30, 2025 .

Adjusted EBIT increased by $27 million compared to the prior year, mainly from $40 million of productivity, net of labor inflation and higher stock based compensation, $22 million of higher sales volumes from gasoline and commercial vehicles, $20 million of commodity, transportation, and energy deflation, $13 million of favorable foreign exchange impacts and $7 million of lower R&D costs.

These increases were partially offset by $60 million of unfavorable product mix and $15 million of pricing net of inflation pass through.

During the nine months ended September 30, 2025, we saw growth in gasoline from new application launches and program ramp-ups in Europe, North America and India.

Volumes for commercial vehicles also increased due to a launch of an on-highway program in Europe and partial recovery of prior year softness in the construction and agriculture industries .

Aftermarket volumes, however, showed continued softness primarily due to lower demand for off-highway replacement parts in North America.

The combination of these volume dynamics resulted in an unfavorable product mix.

The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation.

Gains in foreign currency from translational, transactional, and hedging effects in the nine months ended September 30, 2025, primarily driven by a higher Euro-to-U.S.

dollar versus the prior period, accounted for a $13 million increase in Adjusted EBIT.

Liquidity and Capital Resources

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Bilateral letter of credit facility - utilized capacity 9 8

On January 30, 2025, the Company entered into the Restatement Agreement, which amends and restates the Existing Credit Agreement, under which the Company refinanced in full its $692 million 2021 Dollar Term Facility with a new 2025 Dollar Term Facility in an aggregate principal amount of $692 million.

The 2025 Dollar Term Facility will mature on January 30, 2032, and bear interest at a spread equal to, at the Company's option, the Adjusted Term SOFR Rate plus 2.25% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.25% per annum in the case of ABR Loans.

The Company also replaced its existing $600 million revolving facility under the Existing Credit Agreement with the New Revolving Facility under the Credit Agreement in an aggregate principal amount of $630 million.

On January 30, 2025, we entered into the Restatement Agreement, which amends and restates the Existing Credit Agreement, under which we refinanced in full our $692 million 2021 Dollar Term Facility with a new 2025 Dollar Term Facility in an aggregate principal amount of $692 million.

The 2025 Dollar Term Facility will mature on January 30, 2032, and initially bore interest at a spread equal to, at our option, the Adjusted Term SOFR Rate plus 2.25% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.25% per annum in the case of ABR Loans.

We also replaced our existing $600 million revolving facility under the Existing Credit Agreement with the New Revolving Facility under the Credit Agreement in an aggregate principal amount of $630 million.

The maturity date of the New Revolving Facility is January 30, 2030.

On August 6, 2025, we entered into the First Amendment to the Restatement Agreement, which reduced the Applicable Rate to the Adjusted Term SOFR Rate plus 2.00% per annum in the case of Term Benchmark Loans and the Alternate Base Rate plus 1.00% per annum in the case of ABR Loans.

During the nine months ended September 30, 2025, we paid cash dividends of $36 million.

On October 23, 2025, we declared a cash dividend of $0.08 per share of Common Stock, payable on December 15, 2025, to shareholders of record as of December 1, 2025.

We employ several means to manage our liquidity, and our sources of financing include cash flows from operations, cash and cash equivalents on hand, the 2032 Senior Notes, and our Credit Agreement, including our 2025 Dollar Term Facility and our New Revolving Facility.

We expect to continue investing in our facilities as we expand our manufacturing capacity for new product launches and invest in new technologies and strategic growth opportunities, in particular in connection with our zero-emission technologies.

We believe the combination of expected cash flows, the term loan borrowings, the 2032 Senior Notes, and the New Revolving Facility being committed until 2030, will provide us with adequate liquidity to support the Company's operations.

We believe the combination of expected cash flows, the term loan borrowings, the 2032 Senior Notes, and the New Revolving Facility, will provide us with adequate liquidity to support the Company's operations.

Share Repurchase Program

On December 4, 2024, the Board of Directors authorized a $250 million share repurchase program valid from January 1, 2025, until December 31, 2025.

During the six months ended June 30, 2025, the Company repurchased $52 million of Common Stock, with $198 million remaining under the share repurchase program as of that date.

The Company may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise.

During the nine months ended September 30, 2025, we repurchased $136 million of Common Stock, with $114 million remaining under the share repurchase program as of that date.

These repurchases include a total of 5 million shares repurchased from funds affiliated with Oaktree Capital Management, L.P., a related party, for approximately $62 million.

We may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise.

The timing, as well as the number and value of shares repurchased under the program, will depend on a variety of factors.

The Company is not obligated to purchase any shares under the share repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice.

We are not obligated to purchase any shares under the share repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice.

For more information, see Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds .

Cash Flow Summary for the Six Months Ended June 30, 2025

Six Months Ended

Cash Flow Summary for the Nine Months Ended September 30, 2025

Nine Months Ended

September 30,

(Dollars in millions)

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Cash provided by operating activities increased by $4 million for the six months ended June 30, 2025, versus the prior year.

The increase was primarily driven by $22 million of favorable impacts from working capital changes and $19 million of higher net income, partially offset by a decrease of $16 million of non-cash charges, as well as $21 million of unfavorable impacts from changes in other assets and liabilities.

Cash flow used for investing activities decreased by $44 million for the six months ended June 30, 2025, compared to t he same period in the prior year.

Cash provided by operating activities increased by $37 million for the nine months ended September 30, 2025, versus the prior year.

The increase was primarily driven by $44 million of higher net income and $39 million of favorable impacts from working capital changes, partially offset by a decrease of $34 million of non-cash charges and $12 million of unfavorable impacts from changes in other assets and liabilities.

Cash flow used for investing activities decreased by $28 million for the nine months ended September 30, 2025, compared to the same period in the prior year.

The decrease was primarily driven by $46 million in proceeds from the sale of our unconsolidated joint venture realized in the prior year, along with $3 million in reduced proceeds from the cross currency swap.

These impacts were partially offset by $8 million in lower capital expenditures on property, plant and equipment.

Cash used for financing activities was $89 million for the six months ended June 30, 2025, compared with $384 million in the prior year.

During the six months ended June 30, 2025, we made debt repayments of $73 million, payments of $52 million for the repurchase of Common Stock under our share repurchase program and payments of $25 million for dividends on our Common Stock.

These impacts were partially offset by $18 million in lower capital expenditures on property, plant and equipment and $3 million received for the first deferred payment on the sale of our unconsolidated joint venture.

Cash used for financing activities was $187 million for the nine months ended September 30, 2025, compared with $439 million in the prior year.

During the nine months ended September 30, 2025, we made debt repayments of $87 million, payments of $136 million for the repurchase of Common Stock under our share repurchase program and payments of $36 million for dividends on our Common Stock.

These payments were partially offset by proceeds of $80 million from the Credit Facilities.

In comparison, cash used for financing activities was $384 million for the six months ended June 30, 2024 primarily driven by aggregate debt repayments of $989 million on our term loan facilities.

In comparison, cash used for financing activities was $439 million for the nine months ended September 30, 2024 primarily driven by aggregate debt repayments of $991 million on our credit facilities.

We also made payments of $226 million for Common Stock repurchases, $7 million for debt issuance costs and $9 million for other financing activities.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis