What changed in this filing

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Item 1A. Risk Factors

2022-02-10 compared with 2021-02-10 · 91 added, 76 removed, 157 unchanged (52% of the section changed)

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Due to the overall global economic conditions in 2020, largely as a result of the COVID-19 pandemic, the automotive industry experienced a decline in global customer sales and production volumes.

In 2020, global vehicle production decreased 17% as compared to 2019.

In Asia, vehicle production decreased 12%, including 5% in China and 23% in India.

Vehicle production also decreased 20% and 22% in North America and Europe and Africa, respectively.

Although industry production increased 3% in 2021 over 2020, production remains well below recent historic levels and consumer demand.

This was largely due to the continuing impact of the COVID-19 pandemic in 2021, particularly through supply shortages.

In 2021, the automotive industry suffered from supply chain delays and stoppages due to shipping delays resulting in increased freight costs and closed supplier facilities and distribution centers.

The industry also faced workforce and staffing shortages, as well as scarcity and increases in prices of raw materials.

As a result, we have experienced and may continue to experience reductions in orders from our customers in certain regions.

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We may not be successful in such diversification.

• Increases in the costs and restrictions on the availability of raw materials, energy, commodities and product components could adversely affect our financial performance.

Raw material, energy and commodity costs can be volatile.

Although we have developed and implemented strategies to mitigate the impact of higher raw material, energy and commodity costs, these strategies, together with commercial negotiations with our customers and suppliers, typically do not offset all of the adverse impact.

Certain of these strategies also may limit our opportunities in a declining commodity price environment.

In addition, the availability of raw materials, commodities and product components fluctuates from time to time due to factors outside of our control, including trade laws and tariffs, natural disasters, global pandemics like COVID-19 and resulting supply chain disruptions, and may impact our ability to meet the production demands of our customers.

Currently, due to a variety of global factors, the insufficient availability of semiconductor chips is adversely affecting, and may continue to adversely affect, a number of industries, including the automotive industry.

If the costs of raw materials, energy, commodities and product components increase or the availability thereof is restricted, it could adversely affect our financial condition, operating results and cash flows.

• Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, our business, which could adversely affect our financial performanc e.

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The automotive industry was particularly negatively impacted by the situation with a sudden and sharp decline in consumer demand and automotive manufacturers suspending or severely limiting automobile production globally during portions of 2020.

In 2020, we experienced, and we may continue to experience, reductions in orders from our customers globally, which in turn adversely affected, and may continue to affect, our financial performance.

Although industry production increased 3% in 2021 over 2020, production remains well below recent historic levels and consumer demand, and we experienced, and we may continue to experience, reductions in orders from our customers globally, which in turn adversely affected, and may continue to affect, our financial performance.

This reduction in orders may be further exacerbated by a continued global economic downturn resulting from the pandemic, which could decrease consumer demand for vehicles or result in the financial distress of one or more of our customers or suppliers.

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During the COVID-19 pandemic, our reliance on internet technology has increased due to the number of employees working remotely.

This reliance has resulted in increased cybersecurity risks, including the risk that we fail to appropriately maintain the security of the data we hold.

This reliance has resulted in increased data privacy and cybersecurity risks, including the risk that we fail to appropriately maintain the security of the data we hold.

See "— A disruption in our information technology systems, or those of our customers or suppliers, including a disruption related to cybersecurity, could adversely affect our financial performance" below.

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In addition, it is possible that our customers could elect to manufacture our products internally or increase the extent to which they require us to utilize specific suppliers or materials in the manufacture of our products.

The loss of business with respect to, the lack of commercial success of or an increase in directed component sourcing for a vehicle model for which we are a significant supplier could reduce our sales or margins and thereby adversely affect our financial condition, operating results and cash flows.

The loss of business with respect to, the lack of commercial success of or an increase in directed component sourcing for a vehicle model for which

we are a significant supplier could reduce our sales or margins and thereby adversely affect our financial condition, operating results and cash flows.

• Our inability to achieve product cost reductions to offset customer-imposed price reductions could adversely affect our financial performance.

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Our inability to achieve product cost reductions that offset customer-imposed price reductions could adversely affect our financial condition, operating results and cash flows.

• Increases in the costs and restrictions on the availability of raw materials, energy, commodities and product components could adversely affect our financial performance.

Raw material, energy and commodity costs can be volatile.

Certain of these strategies also may limit our opportunities in a declining commodity environment.

In addition, the availability of raw materials, commodities and product components fluctuates from time to time due to factors outside of our control, including trade laws and tariffs.

• Adverse developments affecting or the financial distress of one or more of our suppliers could adversely affect our financial performance.

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An economic downturn or other unfavorable industry conditions in one or more of the regions in which we operate could cause a supply disruption and thereby adversely affect our financial condition, operating results and cash flows.

• A significant labor dispute involving us or one or more of our customers or suppliers or that could otherwise affect our operations could adversely affect our financial performance.

A substantial number of our employees and the employees of our largest customers and suppliers are members of industrial trade unions and are employed under the terms of various labor agreements.

We have labor agreements covering approximately 77,500 employees globally.

In the United States and Canada, each of our unionized facilities has a separate collective bargaining agreement with the union that represents the workers at such facility, with each such agreement having an expiration date that is independent of the other agreements.

Labor agreements covering approximately 86% of our global unionized work force, including labor agreements in the United States and Canada covering approximately 3% of our global unionized workforce, are scheduled to expire in 2022.

There can be no assurances that future negotiations with the unions will be resolved favorably or that we will not experience a work stoppage or disruption that could adversely affect our financial condition, operating results and cash flows.

A labor dispute involving us, any of our customers or suppliers or any other suppliers to our customers or that otherwise affects our operations, or the inability by us, any of our customers or suppliers or any other suppliers to our customers to negotiate, upon the expiration of a labor agreement, an extension of such agreement or a new agreement on satisfactory terms could adversely affect our financial condition, operating results and cash flows.

In addition, if any of our significant customers experience a material work stoppage, such as the General Motors labor strike in the fall of 2019, that customer may halt or limit the purchase of our products.

This could require us to shut down or significantly reduce production at facilities relating to such products, which could adversely affect our business and harm our profitability.

• Our ability to attract, develop, engage and retain qualified employees could affect our ability to execute our strategy.

Our success depends, in part, on our ability to identify and attract qualified candidates with the requisite education, background and experience, as well as our ability to develop, engage and retain qualified employees.

Failure to attract, develop, engage and retain qualified employees, whether as a result of an insufficient number of qualified applicants, difficulty in recruiting new employees or inadequate resources to train, integrate and retain qualified employees, could impair our ability to execute our business strategy and could adversely affect our business.

In addition, while we strive to reduce the impact of the departure of employees, our operations and/or our ability to execute our business strategy and meet our business objectives may be affected by the loss of employees, particularly when departures involve larger

numbers of employees, such as with a surge in the number of employees voluntarily terminating their employment similar to that experienced by other employers and industries since 2020.

Higher rates of employee separations may adversely affect us through decreased employee morale, the loss of knowledge of departing employees and the devotion of resources to recruiting and onboarding new employees.

• Our substantial international operations make us vulnerable to risks associated with doing business in foreign countries.

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However, any such occurrences could adversely affect our financial condition, operating results and cash flows.

• We operate in a highly competitive industry and efforts by our competitors, as well as new non-traditional entrants to the industry, to gain market share could adversely affect our financial performance.

We operate in a highly competitive industry.

We and most of our competitors are seeking to expand market share with new and existing customers, including in Asia and other potential high growth regions.

Our customers award business based on, among other things, price, quality, service and technology.

Our competitors’ efforts to grow market share could exert downward pressure on our product pricing and margins.

In addition, the automotive industry has attracted, and will continue to attract, non-traditional entrants as a result of the evolving nature of the automotive vehicle market, including autonomous vehicles, ride sharing and on-demand transportation.

Further, the global automotive industry is experiencing a period of significant technological change, including a focus on environmentally sustainable vehicles and subcomponents.

As a result, the success of portions of our business requires us to develop, acquire and/or incorporate new technologies and depends not only on our customers' ability to execute their strategies to exploit these technologies but also on the adoption of such technologies by end consumers.

Such technologies are subject to rapid obsolescence.

Our inability to maintain access to these technologies (through development, acquisition or licensing) may adversely affect our ability to compete.

If we are unable to differentiate our products, maintain a low-cost footprint or compete effectively with technology-focused new market entrants, we may lose market share or be forced to reduce prices, thereby lowering our margins.

Any such occurrences could adversely affect our financial condition, operating results and cash flows.

• A significant labor dispute involving us or one or more of our customers or suppliers or that could otherwise affect our operations could adversely affect our financial performance.

A substantial number of our employees and the employees of our largest customers and suppliers are members of industrial trade unions and are employed under the terms of various labor agreements.

We have labor agreements covering approximately 82,500 employees globally.

Labor agreements covering approximately 85% of our global unionized work force, including labor agreements in the United States and Canada covering approximately 1% of our global unionized workforce, are scheduled to expire in 2021.

This could require us to shut down or significantly reduce production at facilities relating to such products, which could adversely affect our business and harm our profitability.

• Certain of our operations are conducted through joint ventures which have unique risks.

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Accordingly, any such occurrences could adversely affect our financial condition, operating results and cash flows.

• Our failure to execute our strategic objectives could adversely affect our financial performance.

Our financial performance depends, in part, on our ability to successfully execute our strategic objectives.

Our objectives are to deliver superior long-term stockholder value by investing in innovation to drive business growth and profitability, while maintaining a strong balance sheet and returning excess cash to our stockholders.

Various factors, including the industry environment and the other matters described herein and in Part II — Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," including "— Forward-Looking Statements," could adversely affect our ability to execute our strategic objectives.

These risk factors include our failure to identify suitable opportunities

for organic investment and/or acquisitions, our inability to successfully develop such opportunities or complete such acquisitions or our inability to successfully utilize or integrate the investments in our operations.

Our failure to execute our strategic objectives could adversely affect our financial condition, operating results and cash flows.

Moreover, there can be no assurances that, even if implemented, our strategic objectives will be successful.

• Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.

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Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our financial condition, operating results and cash flows.

• Significant changes in discount rates, the actual return on pension assets and other factors could adversely affect our financial performance.

Our earnings may be positively or negatively impacted by the amount of income or expense recorded related to our global defined benefit plans.

Accounting principles generally accepted in the United States require that income or expense related to the defined benefit plans be calculated at the annual measurement date using actuarial calculations, which reflect certain assumptions.

The most significant of these assumptions relate to interest rates, the capital markets and other economic conditions.

These assumptions, as well as the actual value of pension assets at the measurement date, will impact the calculation of pension and other postretirement benefit expense for the year.

Although pension expense and pension contributions are not directly related, the key economic indicators that affect pension expense also affect the amount of cash that we will contribute to our pension plans.

Because interest rates and the values of these pension assets have fluctuated and will continue to fluctuate in response to changing market conditions, pension and other postretirement benefit expense in subsequent periods, the funded status of our pension plans and the future minimum required pension contributions, if any, could adversely affect our financial condition, operating results and cash flows.

We operate in a highly competitive industry.

We and most of our competitors are seeking to expand market share with new and existing customers, including in Asia and other potential high growth regions.

Our customers award business based on, among other things, price, quality, service and technology.

Our competitors' efforts to grow market share could exert downward pressure on our product pricing and margins.

Further, the global automotive industry is experiencing a period of significant technological change, including a focus on environmentally sustainable vehicles and subcomponents.

Such technologies are subject to rapid obsolescence.

Our inability to maintain access to these technologies (through development, acquisition or licensing) may adversely affect our ability to compete.

Any such occurrences could adversely affect our financial condition, operating results and cash flows.

• If we do not respond appropriately, the evolution of the global transportation industry towards electrification, connectivity, autonomy and shared mobility could adversely affect our business.

The global transportation industry is increasingly focused on the development of more fuel-efficient solutions to meet demands from consumers and governments worldwide to address climate change and an increased desire for environmentally sustainable solutions.

The impacts of these changes on us are uncertain and could ultimately prove dramatic.

If we do not respond appropriately, the evolution towards electrification and other energy sources could adversely affect our business.

The increased adoption of electrified and other non-internal combustion-based powertrains, such as fuel cells, may result in lower demand for some of our products.

For example, there has been an increase in consumer preferences for car and ride sharing, as opposed to automobile ownership, which may result in a long-term reduction in the number of vehicles per capita.

The evolution of the industry towards electrification, connectivity, autonomy and shared mobility has also attracted increased competition from entrants outside of the traditional light vehicle industry, some of whom may seek to provide products which compete with ours.

Failure to innovate and to develop or acquire new and compelling products that capitalize upon new technologies in response to these evolving consumer preferences and demands could adversely affect our financial condition, operating results and cash flows.

• An emphasis on global climate change and other ESG matters by various stakeholders could negatively affect our business.

Customer, investor and employee expectations in areas such as the environment, social matters and corporate governance have been rapidly evolving and increasing.

The enhanced stakeholder focus on ESG issues requires the continuous monitoring of various and evolving standards and the associated reporting requirements.

A failure to adequately meet stakeholder expectations may result in the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent.

• Global climate change could negatively affect our business.

The effects of climate change, such as extreme weather conditions, could impact our business.

Such effects could disrupt our operations by impacting the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs.

These factors may impact our decisions to construct new facilities or maintain existing facilities in areas most prone to physical climate risks.

We could also experience indirect financial risks passed through the supply chain and disruptions that could result in increased prices for our products and the resources needed to produce them.

• Impairment charges relating to our goodwill and long-lived assets could adversely affect our financial performance.

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In the event that we determine that our goodwill or long-lived assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and operating results.

• Our failure to execute our strategic objectives could adversely affect our financial performance.

Our financial performance depends, in part, on our ability to successfully execute our strategic objectives.

Various factors, including the industry environment and the other matters described herein and in Part II — Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," including "— Forward-Looking Statements," could adversely affect our ability to execute our strategic objectives.

These risk factors include our failure to identify suitable opportunities for organic investment and/or acquisitions, our inability to successfully develop such opportunities or complete such acquisitions or our inability to successfully utilize or integrate the investments in our operations.

Our failure to execute our strategic objectives could adversely affect our financial condition, operating results and cash flows.

Moreover, there can be no assurances that, even if implemented, our strategic objectives will be successful.

• Significant changes in discount rates, the actual return on pension assets and other factors could adversely affect our financial performance.

Our earnings may be positively or negatively impacted by the amount of income or expense recorded related to our global defined benefit plans.

The most significant of these assumptions relate to interest rates, the capital markets and other economic conditions.

These assumptions, as well as the actual value of pension assets at the measurement date, will impact the calculation of pension and other postretirement benefit expense for the year.

Risks Related to Our Indebtedness

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Our inability to generate sufficient cash flow to satisfy our debt and lease obligations, to refinance our debt obligations or to access capital markets on commercially reasonable terms could adversely affect our financial condition, operating results and cash flows.

• Changes affecting the availability of the London Inter-bank Offered Rate ( " LIBOR " ) may have consequences for us that cannot yet be reasonably predicted.

We have outstanding debt with variable interest rates based on LIBOR.

Advances under our revolving credit facility and our term loan facility generally bear interest based on (i) the Eurocurrency Rate (as defined in our credit agreement and calculated using LIBOR) or (ii) the ABR (as defined in our credit agreement).

The LIBOR benchmark has been the subject of national, international and other regulatory guidance and proposals to reform.

In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021.

These reforms may cause LIBOR to perform differently than it has in the past, and LIBOR may ultimately cease to exist after 2021.

Alternative benchmark rates may replace LIBOR and could affect our debt securities, debt payments and receipts.

At this time, it is not possible to predict the effect of any changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates.

Any new benchmark rate will likely not replicate LIBOR exactly, which could impact our contracts that terminate after 2021.

There is uncertainty about how applicable law and the courts will address the replacement of LIBOR with alternative rates on variable rate retail loan contracts and other contracts that do not include alternative rate fallback provisions.

If LIBOR ceases to exist after 2021, the interest rates on our revolving credit facility and our term loan facility will be based on the ABR, which may result in higher interest rates.

In addition, any changes to benchmark rates may have an uncertain impact on our cost of funds and our access to the capital markets, which could impact our results of operations and cash flows.

Uncertainty as to the nature of such potential changes may also adversely affect the trading market for our securities.

Legal and Regulatory Risks

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We rely on the accuracy, capacity and security of our information technology networks.

Despite the security measures that we have implemented, including those measures related to cybersecurity, our operational systems (including business, financial, accounting, human resources, product development and manufacturing processes), as well as those of our customers, suppliers and other service providers, and certain of our connected vehicle systems and components that may collect and store sensitive end-user data (which could include personally identifiable information) could be breached or damaged by computer viruses, malware, phishing attacks, denial-of-service attacks, human error, natural or man-made incidents or disasters or unauthorized physical or electronic access.

collect and store sensitive end-user data (which could include personally identifiable information) could be breached or damaged by computer viruses, malware, phishing attacks, denial-of-service attacks, human error, natural or man-made incidents or disasters or unauthorized physical or electronic access.

These types of incidents have become more prevalent and pervasive across industries, including our industry, and are expected to continue in the future.

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We are also dependent on security measures that some of our customers, suppliers and other third-party service providers take to protect their own systems and infrastructures.

Any security breach of any of these third-parties' systems could result in unauthorized access to our or our customers’ or suppliers' sensitive data or our own information technology systems, cause us to be non-compliant with applicable laws or regulations, subject us to legal claims or proceedings, disrupt our

operations, damage our reputation or cause a loss of confidence in our products or services, any of which could adversely affect our financial performance.

Any security breach of any of these third-parties' systems could result in unauthorized access to our or our customers' or suppliers' sensitive data or our own information technology systems, cause us to be non-compliant with applicable laws or regulations, subject us to legal claims or proceedings, disrupt our operations, damage our reputation or cause a loss of confidence in our products or services, any of which could adversely affect our financial performance.

• A significant product liability lawsuit, warranty claim or product recall involving us or one of our major customers could adversely affect our financial performance.

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No assurances can be given that such proceedings and claims will not adversely affect our financial condition, operating results and cash flows.

• Increasing focus on environmental laws and regulations globally could cause us to incur significant costs.

Concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts globally, and we believe that this will continue both in scope and in the number of countries participating.

In addition, as climate change issues become more prevalent, foreign, federal, state and local governments and our customers have been responding to these issues.

The increased focus on environmental sustainability may result in new regulations and customer

requirements, or changes in current regulations and customer requirements, which could adversely affect our business, financial condition and operating results.

If we are unable to effectively manage real or perceived issues, including concerns about environmental impacts or similar matters, sentiments toward us or our products could be negatively impacted, and our business, financial condition and operating results could be adversely affected.

Changing government regulations related to greenhouse gas emissions and energy efficiency and growing recognition among consumers of the dangers of climate change may also require changes at the product/production process level.

These trends may also prompt automotive manufacturers to make or accelerate commitments to carbon neutrality, which could in turn prompt us to make changes at the product/production process level.

This could require additional cost and/or investment to make products/production processes compliant and/or carbon neutral.

• New laws or regulations or changes in existing laws or regulations could adversely affect our financial performance.

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and (iv) significant increases in customs duties and tariffs on goods imported into the United States.

The United States, Mexico and Canada signed a new trade agreement, the United States-Mexico-Canada Agreement ("USMCA"), which serves as the successor agreement to the North American Free Trade Agreement ("NAFTA").

The USMCA became effective on July 1, 2020.

There can be no assurance that the ongoing transition from NAFTA to USMCA will not adversely affect our business.

The United States-Mexico-Canada Agreement ("USMCA"), which serves as the successor agreement to the North American Free Trade Agreement ("NAFTA"), became effective on July 1, 2020.

There can be no assurance that the ongoing transition to the higher North American automotive content requirements in the USMCA will not adversely affect our business.

The United States still maintains significant tariffs on most imports from China.

It remains unclear what specific actions the new U.S.

It remains unclear what specific actions the current U.S.

administration may take to resolve trade-related issues with China and other countries.

A trade war, other governmental action related to tariffs or international trade agreements, changes in U.S.

social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where we currently manufacture and sell products or any resulting negative sentiments towards the United States could adversely affect our business, financial condition, operating results and cash flows.

• Changes in the United Kingdom's economic and other relationships with the European Union could adversely affect us.

In December 2020, the United Kingdom finalized a free trade agreement with the European Union, the EU-UK Trade and Cooperation Agreement ("TCA"), to manage future bilateral trade and formally completed its withdrawal from the European Union.

Thus, effective January 1, 2021, trade between the European Union and the United Kingdom is now subject to border controls and imported goods must meet bilateral content rules as set out in the TCA to qualify for duty-free trade.

We have significant operations in both the European Union and the United Kingdom.

In 2020, our European Union (excluding the United Kingdom) and United Kingdom sales totaled $4.5 billion and $0.6 billion, respectively.

Our supply chain and that of our customers are highly integrated across the European Union and the United Kingdom, and we are highly dependent on the free flow of goods in those regions.

We have implemented procedures to manage our supply chains with the new border controls and to comply with the TCA’s bilateral content rules.

However, there can be no assurance that the new border controls and content rules will not adversely impact our competitive position, supplier and customer relationships and financial performance.

social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the

territories and countries where we currently manufacture and sell products or any resulting negative sentiments towards the United States could adversely affect our business, financial condition, operating results and cash flows.

ITEM 1B – UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors