Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November 4, 2019,~~July 27, 2020, the registrant had ~~74,826,329~~75,635,938 shares of common stock, $0.001 par value per share, outstanding.

On October 1, 2018, Garrett Motion Inc. became an independent publicly-traded company through a pro rata distribution (the “Distribution”) by Honeywell International Inc. (“Former Parent” or “Honeywell”) of 100% of the then-outstanding shares of Garrett to Honeywell’s stockholders (the “Spin-Off”). Each Honeywell stockholder of record received one share of Garrett common stock for every 10 shares of Honeywell common stock held on the record date. ~~Approximately 74 million shares of Garrett common stock were distributed on October 1, 2018 to Honeywell stockholders.~~

In connection with the Spin-Off, ~~Garrett´s common stock began trading “regular-way” under the ticker symbol “GTX” on the New York Stock Exchange on October 1, 2018.~~Garrett entered into a number of agreements with Honeywell, including but not limited to an indemnification and reimbursement agreement (the “Subordinated Indemnity Agreement”) and a tax matters agreement (the “Tax Matters Agreement”).

Unless the context otherwise requires, references to “Garrett,” “we,” “us,” “our,” and “the Company” in this Quarterly Report on Form 10-Q refer to ~~(i) Honeywell’s Transportation Systems Business (the “Transportation Systems Business” or the “Business”) prior to the Spin-Off and (ii)~~ Garrett Motion Inc. and its subsidiaries following the ~~Spin-Off, as applicable.~~

~~This Quarterly Report on Form 10-Q contains financial information that was derived partially from the consolidated financial statements and accounting records of Honeywell. The~~ accompanying consolidated and combined interim financial statements of Garrett (“Consolidated and Combined Interim Financial Statements”) reflect the consolidated and combined historical results of operations, financial position and cash flows of Garrett, for the period following the Spin-Off, and the Transportation Systems Business, for all periods prior to the Spin-Off, as it was historically managed in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Therefore, the historical consolidated and combined financial information may not be indicative of our future performance and does not necessarily reflect what our consolidated and combined results of operations, financial condition and cash flows would have been had the Business operated as a separate, publicly traded company during the entirety of the periods presented, particularly because of changes that we have experienced, and expect to continue to experience in the future, as a result of our separation from Honeywell, including changes in the financing, cash management, operations, cost structure and personnel needs of our business.Spin-Off.

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding our future results of operations and financial position, the anticipated impact of the novel coronavirus (“COVID-19”) pandemic on our business, results of operations and financial position, expectations regarding the growth of the turbocharger and electric vehicle markets and other industry trends, the sufficiency of our cash and cash equivalents, anticipated sources and uses of cash, anticipated investments in our business, our business strategy, anticipated payments under our agreements with Honeywell, and the expected timing of those payments, anticipated interest expense, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including:

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,					For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018			2019		2018			2020			2019		2020			2019
	(Dollars in millions, except per share amounts)											(Dollars in millions, except per share amounts)
Net sales (Note 4)		781			784			2,418		2,576
Net sales (Note 3)													477			802		1,222			1,637
Cost of goods sold		609			606			1,868		1,972			393			620		996			1,259
Gross profit	$	172		$	178		$	550	$	604		$	84		$	182	$	226		$	378
Selling, general and administrative expenses		68			60			186		186			51			58		112			118
Other expense, net (Note 6)		18			51			54		132
Other expense, net (Note 5)													15			17		31			36
Interest expense		18			1			52		3			20			18		36			34
Non-operating expense (income)		(4	)		(7	)		2		(10	)
Non-operating (income) expense													(4	)		2		(8	)		6
Income before taxes	$	72		$	73		$	256	$	293		$	2		$	87	$	55		$	184
Tax expense (benefit) (Note 7)		34			(856	)		79		(844	)
Net income	$	38		$	929		$	177	$	1,137
Tax expense (Note 6)													11			21		12			45
Net (loss) income												$	(9	)	$	66	$	43		$	139

Earnings per common share (Note 16)
Earnings (loss) per common share
Basic	$	0.51		$	12.54		$	2.37	$	15.35		$	(0.12	)	$	0.88	$	0.57		$	1.87
Diluted	$	0.50		$	12.54		$	2.34	$	15.35		$	(0.12	)	$	0.86	$	0.57		$	1.83

Weighted average common shares outstanding (Note 16)
Weighted average common shares outstanding
Basic		74,753,593			74,070,852			74,528,740		74,070,852			75,595,991			74,591,478		75,316,827			74,414,450
Diluted		75,704,457			74,070,852			75,700,652		74,070,852			75,845,511			76,900,544		75,837,459			76,129,821

The Notes to the Consolidated ~~and Combined~~ Interim Financial Statements are an integral part of ~~these statements.~~this statement.

CONSOLIDATED ~~AND COMBINED~~ INTERIM STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

The Notes to the Consolidated ~~and Combined~~ Interim Financial Statements are an integral part of ~~these statements.~~this statement.

	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
	(Dollars in millions)						(Dollars in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	190		$	196		$	139		$	187
Accounts, notes and other receivables – net (Note 8)		751			750
Accounts, notes and other receivables – net (Note 7)								554			707
Inventories – net (Note 9)		193			172			234			220
Other current assets		59			71			77			85
Total current assets		1,193			1,189			1,004			1,199
Investments and long-term receivables		41			39			34			36
Property, plant and equipment – net		430			438			457			471
Goodwill		193			193			193			193
Deferred income taxes		181			165			272			268
Other assets (Note 10)		108			80			106			108
Total assets	$	2,146		$	2,104		$	2,066		$	2,275
LIABILITIES
Current liabilities:
Accounts payable	$	897		$	916		$	705		$	1,009
Borrowings under revolving credit facility		—			—			135			—
Current maturities of long-term debt		4			23			4			4
Obligations payable to Honeywell, current (Note 17)		121			127			37			69
Accrued liabilities (Note 11)		366			426			284			310
Total current liabilities		1,388			1,492			1,165			1,392
Long-term debt		1,477			1,569			1,403			1,409
Deferred income taxes		53			27			35			51
Obligations payable to Honeywell (Note 17)		1,254			1,399			1,304			1,282
Other liabilities (Note 12)		238			210			262			274
Total liabilities	$	4,410		$	4,697		$	4,169		$	4,408
COMMITMENTS AND CONTINGENCIES (Note 17)
EQUITY (DEFICIT)
Common stock, par value $0.001; 400,000,000 shares authorized, 74,892,306 and 74,070,852 issued and 74,809,930 and 74,019,825 outstanding as of September 30, 2019 and December 31, 2018, respectively		—			—
Common stock, par value $0.001; 400,000,000 shares authorized, 76,008,388 and 74,911,139 issued and 75,630,561 and 74,826,329 outstanding as of June 30, 2020 and December 31, 2019, respectively								—			—
Additional paid-in capital		19			5			24			19
Retained earnings		(2,494	)		(2,671	)		(2,244	)		(2,282	)
Accumulated other comprehensive income (Note 15)		211			73			117			130
Total stockholders' deficit	$	(2,264	)	$	(2,593	)		(2,103	)		(2,133	)
Total liabilities and stockholders' deficit	$	2,146		$	2,104		$	2,066		$	2,275

The Notes to the Consolidated ~~and Combined~~ Interim Financial Statements are an integral part of ~~these statements.~~this statement.

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2019			2018			2020			2019
	(Dollars in millions)						(Dollars in millions)
Cash flows from operating activities:
Net income	$	177		$	1,137		$	43		$	139
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		4			(908	)		(5	)		—
Depreciation		55			53			37			35
Amortization of deferred issuance costs		5			—			3			3
Foreign exchange loss		32			10			3			11
Stock compensation expense		14			16			6			9
Pension expense		4			7			—			3
Other		7			6			4			6
Changes in assets and liabilities:
Accounts, notes and other receivables		(29	)		(42	)		114			(42	)
Receivables from related parties		—			57
Inventories		(33	)		(7	)		(23	)		(26	)
Other assets		7			(2	)		(11	)		14
Accounts payable		18			(6	)		(231	)		(14	)
Payables to related parties		—			(50	)
Accrued liabilities		(48	)		(57	)		(16	)		(48	)
Obligations payable to Honeywell		(84	)		—			(8	)		(61	)
Asbestos related liabilities		—			1
Other liabilities		(4	)		25			(11	)		8
Net cash provided by operating activities	$	125		$	240
Net cash (used for) provided by operating activities							$	(95	)	$	37
Cash flows from investing activities:
Expenditures for property, plant and equipment		(74	)		(66	)		(63	)		(51	)
Increase in marketable securities		—			(21	)
Decrease in marketable securities		—			312
Other		12			—			(1	)		18
Net cash (used for) provided by investing activities	$	(62	)	$	225
Net cash used for investing activities							$	(64	)	$	(33	)
Cash flows from financing activities:
Net increase (decrease) in Invested deficit		—			(1,493	)
Proceeds from revolving credit facility		550			1,631			1,023			300
Payments of revolving credit facility		(550	)		—			(904	)		(300	)
Payments of long-term debt		(62	)		—			(2	)		(21	)
Payments related to related party notes payable		—			(493	)
Net change related to cash pooling and short-term notes		—			(201	)
Net cash used for financing activities	$	(62	)	$	(556	)
Other								(3	)		4
Net cash provided by (used for) financing activities								114			(17	)
Effect of foreign exchange rate changes on cash and cash equivalents	$	(7	)	$	(12	)		(3	)		(1	)
Net decrease in cash and cash equivalents		(6	)		(103	)		(48	)		(14	)
Cash and cash equivalents at beginning of period		196			300			187			196
Cash and cash equivalents at end of period	$	190		$	197		$	139		$	182

The Notes to the Consolidated ~~and Combined~~ Interim Financial Statements are an integral part of ~~these statements.~~this statement.

													Accumulated																		Accumulated
					Additional								Other										Additional								Other
	Common Stock				Paid-in		Retained			Invested			Comprehensive			Total			Common Stock				Paid-in			Retained			Invested		Comprehensive			Total
	Shares		Amount		Capital		Earnings			Deficit			Income/(Loss)			Deficit			Shares		Amount		Capital			Earnings			Deficit		Income/(Loss)			Deficit
	(Dollars in millions)																		(in millions)
Balance at December 31, 2017		—		—		—		—		$	(2,433	)	$	238		$	(2,195	)
Net income		—		—		—		—			58			—			58
Other comprehensive income, net of tax		—		—		—		—			—			(184	)		(184	)
Change in Invested deficit		—		—		—		—			1,080			—			1,080
Balance at March 31, 2018		—		—		—		—		$	(1,295	)	$	54		$	(1,241	)
Net income		—		—		—		—			150			—			150
Other comprehensive income, net of tax		—		—		—		—			—			(45	)		(45	)
Change in Invested deficit		—		—		—		—			(672	)		—			(672	)
Balance at June 30, 2018		—		—		—		—		$	(1,817	)	$	9		$	(1,808	)
Net income		—		—		—		—			929			—			929
Other comprehensive income, net of tax		—		—		—		—			—			(1	)		(1	)
Change in Invested deficit		—		—		—		—			(1,576	)		—			(1,576	)
Balance at September 30, 2018		—		—		—		—		$	(2,464	)	$	8		$	(2,456	)

Balance at December 31, 2018		74		—	$	5	$	(2,671	)		—		$	73		$	(2,593	)		74		—		5			(2,595	)		—		73			(2,517	)
Net income		—		—		—		73			—			—			73			—		—		—			73			0		—			73
Other comprehensive income, net of tax		—		—		—		—			—			63			63			—		—		—			—			—		63			63
Stock compensation expense		1		—		5		—			—			—			5
Stock-based compensation																				1		—		5			—			—		—			5
Balance at March 31, 2019		75		—	$	10	$	(2,598	)		—		$	136		$	(2,452	)		75		—		10			(2,522	)		—		136			(2,376	)
Net income		—		—		—		66			—			—			66			—		—		—			66			—		—			66
Other comprehensive income, net of tax		—		—		—		—			—			(35	)		(35	)		—		—		—			—			—		(35	)		(35	)
Stock compensation expense		—		—		4		—			—			—			4
Stock-based compensation																				—		—		4			—			—		—			4
Balance at June 30, 2019		75		—	$	14	$	(2,532	)		—		$	101		$	(2,417	)		75		—		14			(2,456	)		—		101			(2,341	)

Balance at December 31, 2019																				75		—		19			(2,282	)		—		130			(2,133	)
Net income		—		—		—		38			—			—			38			—		—		—			52			—		—			52
Other comprehensive income, net of tax		—		—		—		—			—			110			110			—		—		—			—			—		39			39
Stock compensation expense		—		—		5		—			—			—			5
Balance at September 30, 2019		75		—	$	19	$	(2,494	)		—		$	211		$	(2,264	)
Stock-based compensation																				—		—		2			—			—		—			2
Tax withholding related to vesting of restricted stock units and other																				—		—		(1	)		—			—		—			(1	)
Adoption impact of ASU 2016-13, Financial Instruments - Credit Losses																				—		—		—			(5	)		—		—			(5	)
Balance at March 31, 2020																				75		—		20			(2,235	)		—		169			(2,046	)
Net loss																				—		—		—			(9	)		—		—			(9	)
Other comprehensive loss, net of tax																				—		—		—			—			—		(52	)		(52	)
Stock-based compensation																				—		—		4			—			—		—			4
Balance at June 30, 2020																				75		—		24			(2,244	)		—		117			(2,103	)

The Notes to the Consolidated ~~and Combined~~ Interim Financial Statements are an integral part of ~~these statements.~~

Garrett Motion Inc. (the “Company” or “Garrett”) designs, manufactures and sells highly engineered turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers (“OEMs”) and the global vehicle independent aftermarket, as well as automotive software solutions. These OEMs in turn ship to consumers globally. We are a global technology leader with significant expertise in delivering products across gasoline, diesel, natural gas and ~~diesel propulsion systems and hybrid~~electric (hybrid and fuel ~~cell~~cell) powertrains. These products are key enablers for fuel economy and emission standards compliance.

In December 2019, a strain of novel coronavirus disease, COVID-19, was identified in Wuhan, China. This virus has been declared a pandemic and has spread across the world, including throughout Asia, the United States and Europe. Our business operations have been materially disrupted and our revenues have decreased significantly as a result of the COVID-19 pandemic and related response measures, and we expect our financial performance in the quarter ending September 30, 2020, and in future fiscal quarters, to be materially negatively affected by the pandemic and its impact on the global automotive industry.

On June 12, 2020, the Company ~~became~~entered into an ~~independent publicly-traded company through~~ amendment (the “2020 Amendment”) to its Credit Agreement, dated as of September 27, 2018 (as amended, the “Credit Agreement”) by and among the Company, Garrett LX I S.à r.l., Garrett LX II S.à r.l., Garrett LX III S.à r.l., Garrett Borrowing LLC, and Garrett Motion Sàrl (f/k/a ~~pro rata distribution by~~ Honeywell ~~International Inc. (“Former Parent” or “Honeywell”) of 100%~~Technologies Sàrl), the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent, consisting of:

The primary purpose for entering into the 2020 Amendment was to obtain covenant relief with respect to the total leverage ratio and interest coverage ratios under the Credit Agreement as a result of the ~~then-outstanding shares~~impact of ~~Garrett to Honeywell’s stockholders (the “Spin-Off”). Each Honeywell stockholder~~the COVID-19 pandemic and the Company’s leveraged capital structure. The 2020 Amendment provides that the financial maintenance covenants set forth in the Credit Agreement will not apply until the earlier of ~~record received one share~~the occurrence of ~~Garrett common stock for every 10 shares~~a Covenant Relief Termination Event (as defined below) and the conclusion of ~~Honeywell common stock held~~the Relief Period (as defined below) and puts the following financial ratios and tests in place during the Relief Period:

Upon the occurrence of a Covenant Relief Termination Event or the conclusion of the Relief Period, the total leverage ratio and interest coverage ratio covenants included in the Credit Agreement will again apply. The minimum liquidity, net secured leverage ratio and maximum cash covenants will no longer apply following the conclusion of the Relief Period.

The “Relief Period” will conclude on the ~~record date. Approximately 74 million shares~~earlier of ~~Garrett common stock were distributed~~(a) June 30, 2022 and (b) the date on ~~October 1, 2018 to Honeywell stockholders. In connection~~which the administrative agent receives a certificate from a financial officer of the Company certifying as of such date that (i) the Company is in compliance with the ~~Spin-Off, Garrett´s common stock began trading “regular-way” under~~total leverage ratio and interest coverage ratio covenants included in the ~~ticker symbol “GTX” on the New York Stock Exchange on October 1, 2018.~~

~~The Spin-Off was completed pursuant to a Separation and Distribution~~Credit Agreement ~~and other agreements with Honeywell related~~as they would apply without giving effect to the ~~Spin-Off, including but not limited~~Relief Period for the most recently ended period of four consecutive fiscal quarters ended on or prior to ~~an indemnification~~such date and reimbursement agreement (the “Indemnification and Reimbursement Agreement”) and a tax matters agreement (the “Tax Matters Agreement”). Refer to Note 17, Commitments and Contingencies for additional details related to the Indemnification and Reimbursement Agreement and Tax Matters Agreement.

Unless the context otherwise requires, references to “Garrett,” “we,” “us,” “our,” and “the Company” refer to (i) Honeywell’s Transportation Systems Business (the “Transportation Systems Business”(ii) if such date is on or ~~the “Business”)~~ prior to the ~~Spin-Off~~date of delivery of the Company’s financial statements with respect to the period of four consecutive quarters ending June 30, 2022, based on a financial model provided to the administrative agent, the Company expects in good faith that it will be in compliance with such total leverage ratio and interest coverage ratio covenants as they would apply without giving effect to the Relief Period from the end of the quarter in which such certificate is given until and including the period of four consecutive quarters ending June 30, 2022.

A “Covenant Relief Termination Event” will occur if any member of the restricted group under the Credit Agreement (including Garrett ASASCO Inc. (“Garrett ASASCO”), a wholly owned indirect subsidiary of the Company) makes any payment under the Subordinated Indemnity Agreement but excluding the payment in respect of the second fiscal quarter of 2020. As of the date of this Quarterly Report on Form 10-Q, based on the Company’s current forecasts, we do not anticipate that a Covenant Relief Termination Event will occur prior to 2022.

Each of the Revolving Facility and Term A Facility continues to mature on September 27, 2023, and the Term B Facility continues to mature on September 27, 2025. Pursuant to the 2020 Amendment, (i) the margin applicable to loans under the Term B Facility will increase by 75 basis points through the maturity date and (ii) ~~Garrett Motion Inc.~~the margin applicable to loans under the Revolving Facility and Term A Facility will increase by 25 basis points until the Company delivers consolidated financial statements as of and for its ~~subsidiaries~~first fiscal quarter ending on or after the last day of the Relief Period. In addition, pursuant to the 2020 Amendment, if (a) our corporate family rating by Moody’s is B2 or lower or there is no corporate family rating of the Company by Moody’s and, at the same time, (b) our corporate rating from S&P is B+ or lower or there is no corporate rating of the Company by S&P, then upon the first occurrence of this ratings event the margin applicable to loans under our Senior Credit Facilities will increase by 25 basis points through the maturity date.

The 2020 Amendment also tightened certain of the baskets applicable to our ability to incur additional indebtedness, create liens, and make investments and restricted payments. These increased restrictions will no longer apply following the ~~Spin-Off,~~conclusion of the Relief Period. The 2020 Amendment also modifies the conditions to drawdown under the Revolving Facility and makes certain other changes to the Senior Credit Facilities.

The 2020 Amendment qualified as ~~applicable.~~a debt modification that did not result in an extinguishment or have a material impact on our Consolidated Interim Financial Statements.

Prior to the Spin-Off on October 1, 2018, our historical financial statements were prepared on a stand-alone combined basis and were derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 1, 2018, our financial statements are presented on a combined basis and for the periods subsequent to October 1, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Interim Financial Statements”). The Consolidated ~~and Combined~~ Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All amounts presented are in millions, except per share amounts.

Asbestos-related expenses, net of probable insurance recoveries, are presented within Other expense, net in the Consolidated ~~and Combined~~ Interim Statement of Operations. Honeywell is subject to certain asbestos-related and environmental-related liabilities, primarily related to its legacy Bendix business. In conjunction with the Spin-Off, certain operations that were part of the Bendix business, along with the ownership of the Bendix trademark, as well as certain operations that were part of other legacy elements of the Business, were transferred to us. For the periods prior to the Spin-Off, these Consolidated and Combined Interim Financial Statements reflect an estimated liability for resolution of pending and future asbestos-related and environmental liabilities primarily related to the legacy Bendix business, calculated as if we were responsible for 100% of the Bendix asbestos-liability payments. However, this recognition model differs from the recognition model applied subsequent to the Spin-Off, with the difference recognized through equity as of the Spin-Off date. In periods subsequent to the Spin-Off, theThe accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement with Honeywell entered into on September 12, 2018, under which ~~we are~~Garrett ASASCO is required to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the 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 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 ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. We are currently engaged in litigation against Honeywell in connection with the Subordinated Indemnity Agreement. For additional information, see Note 17, Commitments and Contingencies.

The Consolidated ~~and Combined~~ Interim Financial Statements are unaudited; however, in the opinion of management, they contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods. The Consolidated ~~and Combined~~ Interim Financial Statements should be read in conjunction with the audited annual Consolidated and Combined Financial Statements for the year ended December 31, ~~2018~~2019 included in our Annual Report on Form 10-K, as filed with the SEC on ~~March 1, 2019~~February 27, 2020 (our ~~“2018~~“2019 Form 10-K”). The results of operationsfor the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 should not necessarily be taken as indicative of the entire year.

We report our quarterly financial information using a calendar convention: the first, second and third quarters are consistently reported as ending on March 31, June 30 and September 30. It has been our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes. The effects of this practice are generally not significant to reported results for any quarter and only exist within a reporting year. For differences in actual closing dates that are material to year-over-year comparisons of quarterly or year-to-date results, such differences have been adjusted for the three months ended ~~September~~June 30, ~~2019.~~2020. Our actual closing dates for the three months ended ~~September~~June 30, 2020 and 2019 were June 27, 2020 and ~~2018 were September 28,~~June 29, 2019, ~~and September 29, 2018,~~ respectively.

The accounting policies of the Company are set forth in Note 2 to the audited annual Consolidated and Combined Financial Statements for the year ended December 31, ~~2018~~2019 included in our ~~2018~~2019 Form 10-K. We include herein certain updates to those policies.

~~For~~Trade Receivables and Allowance for Doubtful Accounts—Trade accounts receivable are recorded at the ~~periods beginning~~invoiced amount as a result of transactions with customers. Garrett maintains allowances for doubtful accounts for estimated losses as a result of a customer’s inability to make required payments. As of January 1, ~~2019, right-of-use (“ROU”)~~2020, Garrett adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance requires an entity to recognize as an allowance its estimate of lifetime expected credit losses rather than incurred losses. The guidance is also applicable to contract assets ~~represent our right to use an underlying asset for~~such as unbilled receivables. Consistent with the ~~lease term and lease liabilities represent our obligation to make lease payments arising~~new guidance, Garrett estimates losses from doubtful accounts expected over the contractual life of the receivables based on days past due as measured from the ~~lease. Operating lease ROU assets~~contractual due date and ~~liabilities~~collection history. Garrett also takes into consideration changes in economic conditions that may not be reflected in historical trends (for example, customers in bankruptcy, liquidation or reorganization). Receivables are ~~recognized at~~written-off against the ~~commencement date~~allowance for doubtful accounts when they are determined uncollectible. Such determination includes analysis and consideration of ~~a lease (the “commencement date”) based on~~ the ~~present value~~particular conditions of ~~lease payments over~~ the ~~lease term. We determine if an arrangement is a lease at inception. Operating leases are included in Other assets, Accrued liabilities,~~account, including time intervals since last collection, customer performance against agreed upon payment plans, solvency of customer and ~~Other liabilities in our Consolidated and Combined Balance Sheets. No finance leases have been recognized.~~

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are expensed in the period in which they occur.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment, we account for the lease and non-lease components as a single lease component.

We account for short-term leases by recognizing lease payments in net income on a straight-line basis over the lease term and will not recognize any ROU assets and lease liabilities on the Consolidated and Combined Balance Sheet.

~~For the periods prior to January 1, 2019, we accounted for leases in accordance with ASC 840.~~bankruptcy proceedings.

Effective January 1, 2019, the Company adopted the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date while electing not to recast comparative periods in the transition. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. In adopting the new leases standard, the Company has applied the practical expedients as per ASC 842-10-65-1(f) and (g). Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of $34 million as of January 1, 2019. The adoption of this standard did not have a material impact related to existing leases and as a result, a cumulative-effect adjustment was not recorded.

~~In February~~August 2018, the FASB issued ~~guidance that allows~~ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for ~~an entity~~Fair Value Measurement, which amends certain disclosure requirements related to ~~elect to reclassify the income tax effects on items within Accumulated other comprehensive income resulting from The Tax Cuts and Jobs Act (“Tax Act”) to retained earnings.~~fair value measures. The guidance is effective for fiscal years beginning after December 15, ~~2018. Upon adoption,~~2019, including interim periods within that fiscal year. Effective January 1, 2020, the Company adopted the new guidance. The adoption did not ~~elect~~have an impact on our Consolidated Interim Balance Sheets, Consolidated Interim Statements of Operations and related Notes to ~~reclassify~~ the ~~stranded income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings.~~

~~Recently Issued Accounting Pronouncements~~Consolidated Interim Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial ~~Instruments-Credit~~Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, ~~(ASU 2016-13),~~ which requires measurement and recognition of expected credit losses for financial assets ~~held and enhances disclosures regarding significant estimates used in estimating credit losses. ASU 2016-13 will be~~held. The guidance is effective for ~~us in our first quarter of~~ fiscal ~~2020, and earlier~~years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is ~~permitted beginning~~permitted. Adoption of the new standard resulted in an increase in the ~~first quarter~~allowance for doubtful accounts of $5 million which was recognized as a cumulative-effect adjustment to opening retained earnings as of January 1, 2020.

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits Defined Benefit Plans – General (Subtopic 715-20), which amends certain disclosure requirements related to the defined benefit pension and other postretirement plans. The guidance is effective for fiscal ~~2019. We are~~years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently ~~developing the model to estimate our expected credit losses to evaluate~~evaluating the impact on its disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~guidance~~Effects of Reference Rate Reform on Financial Reporting, provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact on our ~~Consolidated~~hedging relationships, other transactions, and ~~Combined Financial Statements.~~disclosures.

Prior to the Spin-Off, the Consolidated and Combined Interim Financial Statements were prepared on a stand-alone basis and are derived from the Consolidated Interim Financial Statements and accounting records of Honeywell.

Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Business. The cost of these services has been allocated to the Business on the basis of the proportion of revenues. The Business and Honeywell consider the allocations to be a reasonable reflection of the benefits received by the Business. During the three and nine months ended September 30, 2018, the Business was allocated $26 million and $87 million, respectively, of general corporate expenses incurred by Honeywell, and such amounts are included within Selling, general and administrative expenses in the Consolidated and Combined Interim Statements of Operations. As certain expenses reflected in the Consolidated and Combined Interim Financial Statements for the three and nine months ended September 30, 2018 include allocations of corporate expenses from Honeywell, these statements could differ from those that would have been prepared had the Business operated on a stand-alone basis.

The Company received interest income for related party notes receivables of $0 million and $1 million for the three and nine months ended September 30, 2018. Additionally, the Company incurred interest expense for related party notes payable of $0 million and $1 million for the three and nine months ended September 30, 2018, respectively.

Net transfers to and from Honeywell are included within Invested deficit on the Consolidated and Combined Interim Statements of Equity. The components of the net transfers to and from Honeywell for the three and nine months ended September 30, 2018 are as follows:

~~Sales~~Net sales by region (determined based on country of shipment) and channel are as follows:

	Three months Ended September 30, 2019								Three months ended June 30, 2020
	OEM		Aftermarket		Other		Total		OEM		Aftermarket		Other		Total
United States	$	72	$	45	$	2	$	119	$	33	$	32	$	1	$	66
Europe		388		34		9		431		160		22		6		188
Asia		202		13		7		222		202		11		5		218
Other International		4		5		—		9		—		5		—		5
	$	666	$	97	$	18	$	781	$	395	$	70	$	12	$	477

									Six months ended June 30, 2020
									OEM		Aftermarket		Other		Total
United States									$	125	$	72	$	1	$	198
Europe										554		52		15		621
Asia										361		19		11		391
Other International										3		9		—		12
									$	1,043	$	152	$	27	$	1,222

									Three months ended June 30, 2019
									OEM		Aftermarket		Other		Total
United States									$	77	$	49	$	2	$	128
Europe										416		31		8		455
Asia										190		13		7		210
Other International										4		5		—		9
									$	687	$	98	$	17	$	802

									Six months ended June 30, 2019
									OEM		Aftermarket		Other		Total
United States									$	160	$	94	$	3	$	257
Europe										845		68		20		933
Asia										389		26		14		429
Other International										8		10		—		18
									$	1,402	$	198	$	37	$	1,637

	2019			2020
Contract assets—January 1	$	5		$	6
Contract assets—September 30		9
Contract assets—June 30					32
Change in contract assets—Increase/(Decrease)	$	4			26
Contract liabilities—January 1	$	(2	)	$	(3	)
Contract liabilities—September 30		(1	)
Contract liabilities—June 30					(3	)
Change in contract liabilities—(Increase)/Decrease	$	1		$	—

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

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Research and development costs	$	31	$	28	$	92	$	96	$	25	$	29	$	52	$	61
Engineering-related expenses		4		—		8		7		3		1		7		4
	$	35	$	28	$	100	$	103	$	28	$	30	$	59	$	65

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in millions)												(Dollars in millions)
Tax expense (benefit)	$	34		$	(856	)	$	79		$	(844	)
Tax expense													$	11		$	21		$	12		$	45
Effective tax rate		47	%		(1,173	)%		31	%		(288	)%		550	%		24.1	%		21.8	%	��	24.5	%

For the period ended June 30, 2020 the Company computed its effective tax rate using actual year to date information rather than a full year forecast to compute an annual effective tax rate. Based on current forecasts which take into account a range of potential impacts from COVID-19, the Company’s effective tax rate is expected to be highly sensitive to changes in earnings because of non-deductible asbestos related expenses which have no correlation to earnings. Accordingly, the Company concluded that computing its effective tax rate using year to date actual results is its best estimate of tax expense for the period ended June 30, 2020.

The effective tax rate ~~increased~~ for the three months ended ~~September~~June 30, ~~2019, as compared to~~2020 is significantly higher than the effective tax rate for the three months ended ~~September~~June 30, ~~2018,~~2019 primarily because of substantially lower earnings due to the adverse economic impacts of COVID-19 and, to a lesser extent, an increase in tax benefits from an internal restructuring of Garrett’s business in advance of the Spin-Off that resulted in an $870 million reduction to withholding taxes on undistributed foreign earnings recorded during the three months ended September 30, 2018.reserves.

The effective tax rate ~~increased~~ for the ~~nine~~six months ended ~~September~~June 30, 2020 is lower than the effective tax rate for the six months ended June 30, 2019 ~~as compared to the nine months ended September 30, 2018, primarily due to tax benefits from an internal restructuring~~because of ~~Garrett’s business~~a decrease in ~~advance of the Spin-Off that resulted in an $880 million reduction to~~ withholding taxes onrelated to undistributed ~~foreign~~ earnings, ~~recorded during~~partially offset by the ~~nine months ended September 30, 2018.~~impacts of lower earnings.

The effective tax ~~rates~~rate for the three months ~~and nine months~~ ended ~~September~~June 30, ~~2019 were~~2020 was higher than the U.S. federal statutory rate of 21% primarily from non-deductible indemnity expenses, the impacts of U.S. international tax provisions and accruals of withholding taxes on current year earnings, partially offset by non-U.S. earnings taxed at lower rates and tax adjustments from completed statutory filings.

~~The effective tax rates for the three months and nine months ended September 30, 2018 were lower~~ than the U.S. federal statutory rate of 21% primarily due to lower earnings, the impacts of non-deductible asbestos related expenses which have no correlation to earnings and tax ~~benefits from an internal restructuring~~reserves.

The effective tax rate for the three months ended June 30, 2019 was higher than the U.S. federal statutory rate of ~~Garrett’s business in advance of the Spin-Off that resulted in reduced~~21% primarily due to non-deductible asbestos related expenses, withholding taxes on ~~undistributed foreign~~current year earnings and tax reserves, partially offset by non-U.S. earnings taxed at lower rates.

The effective tax rate can vary from quarter to quarter due to changes in the Company’s global mix of earnings, impacts of Covid-19, the resolution of income tax audits, changes in tax laws (including updated guidance on U.S. tax reform), deductions related to employee share-based payments, internal restructurings and pension mark-to-market adjustments.

AsIn connection with the global outbreak of ~~September 30, 2019, there is pending tax~~COVID-19, many countries have enacted legislation to provide various forms of emergency economic relief, including the CARES Act in the United States, that ~~is expected~~may provide financial benefits to ~~be enacted before~~ the ~~end of 2019 that will increase the Company’s income tax rate in Switzerland effective January 1, 2020. Upon enactment, the Company will be required~~Company. At this time, we do not expect such benefits to ~~remeasure its deferred tax assets and liabilities to reflect the new tax rate. Such remeasurement will likely result in~~have a material ~~tax benefit that will be recorded through~~impact to the ~~income statement in the quarter in which enactment occurs.~~Company.

	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Trade receivables	$	606		$	593		$	438		$	574
Notes receivables		82			93			55			68
Other receivables		68			67			70			69
	$	756		$	753		$	563		$	711
Less—Allowance for doubtful accounts		(5	)		(3	)		(9	)		(4	)
	$	751		$	750		$	554		$	707

Trade ~~receivables~~Receivables include ~~$18~~$32 million and $5$4 million of unbilled balances as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. These amounts are billed in accordance with the terms of customer contracts to which they relate. Unbilled receivables include $9$32 million and $5$6 million of contract assets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. See Note 4,3, Revenue Recognition and Contracts with Customers.

The Company entered into arrangements with financial institutions to sell eligible trade receivable. During the periods ended June 30, 2020 and December 31, 2019, the Company sold $66 and $27 million of eligible receivables, respectively, without recourse, and accounted for these arrangements as true sales.

The Company also received guaranteed bank notes without recourse, in settlement of accounts receivables, primarily in the Asia Pacific region. The Company can hold the bank notes until maturity, exchange them with suppliers to settle liabilities, or sell them to third party financial institutions in exchange for cash. During the periods ended June 30, 2020 and December 31, 2019, the Company sold $47 and $105 million of bank notes, respectively, without recourse, and accounted for these as true sales.

	September 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
Raw materials	$	125		$	112		$	158		$	142
Work in process		21			19			22			18
Finished products		69			64			83			85
	$	215		$	195		$	263		$	245
Less—Reserves		(22	)		(23	)		(29	)		(25	)
	$	193		$	172		$	234		$	220

	September 30,		December 31,		June 30,		December 31,
	2019		2018		2020		2019
Advanced discounts to customers, non-current	$	55	$	56	$	61	$	62
Operating right-of-use assets (Note 13)		36		—		34		35
Undesignated cross-currency swap at fair value		9		16		1		—
Other		8		8		10		11
	$	108	$	80	$	106	$	108

	September 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Customer pricing reserve	$	112	$	107	$	88	$	90
Compensation, benefit and other employee related		58		71		62		64
Repositioning		4		15		6		4
Product warranties and performance guarantees		32		32		25		29
Taxes		61		113		23		33
Advanced discounts from suppliers, current		19		17		19		19
Customer advances and deferred income^(a)		13		14		18		12
Accrued interest		9		6		5		5
Short-term lease liability (Note 13)		8		—		8		8
Other (primarily operating expenses)		50		51		30		46
	$	366	$	426	$	284	$	310

The Company accrued repositioning costs related to projects to optimize ~~our~~its product costs and to right-size ~~our~~its organizational structure. Expenses related to the repositioning accruals are included in Cost of goods sold in our Consolidated ~~and Combined~~ Interim Statements of Operations.

	Severance Costs			Exit Costs			Total			Severance Costs			Exit Costs			Total
Balance at December 31, 2017	$	53		$	7		$	60
Balance at December 31, 2018										$	13		$	2		$	15
Charges		2			—			2			3			—			3
Usage—cash		(39	)		(4	)		(43	)		(6	)		(2	)		(8	)
Adjustments and reclassifications											(6	)		1			(5	)
Foreign currency translation		—			—			—			—			—			—
Balance at September 30, 2018	$	16		$	3		$	19
Balance at June 30, 2019										$	4		$	1		$	5

	Severance Costs			Exit Costs			Total			Severance Costs			Exit Costs		Total
Balance at December 31, 2018	$	13		$	2		$	15
Balance at December 31, 2019										$	3		$	1	$	4
Charges		3			—			3			6			—		6
Usage—cash		(7	)		(2	)		(9	)		(4	)		—		(4	)
Adjustments and reclassifications		(6	)		1			(5	)		—			—		—
Foreign currency translation		—			—			—			—			—		—
Balance at September 30, 2019	$	3		$	1		$	4
Balance at June 30, 2020										$	5		$	1	$	6

	September 30,		December 31,		June 30,		December 31,
	2019		2018		2020		2019
Pension and other employee related	$	68	$	71	$	93	$	94
Advanced discounts from suppliers		50		63		37		46
Uncertain tax positions		67		59		80		79
Long-term lease liability (Note 13)		28		—		27		28
Other		25		17		25		27
	$	238	$	210	$	262	$	274

We have operating leases ~~that primarily consist of~~for real estate and machinery and equipment. Our leases have remaining lease terms of up to 11 years, some of which include options to extend the leases for up to two years, and some of which include options to terminate the leases within the year.

					Three Months Ended June 30,				Six Months Ended June 30,
	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		2020		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	3	$	9	$	3	$	3	$	5	$	6
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	2	$	10	$	5	$	3	$	5	$	8

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

	September 30, 2019		June 30, 2020		December 31, 2019
Other assets	$	36	$	34	$	35
Accrued liabilities		8		8		8
Other liabilities		28		27		28

	September 30, 2019			June 30, 2020
2019	$	3
2020		9		$	5
2021		7			8
2022		6			7
2023		5			6
2024					5
Thereafter		14			11
Total lease payments		44			42
Less imputed interest		(8	)		(7	)
	$	36		$	35

~~As of December 31, 2018, in accordance with the previous lease standard, ASC 840, future minimumleasepaymentsunder operatingleaseshaving initialnon-cancellablelease termsin excessof one year were as follows:~~

Our credit, market and foreign currency risk management policies are described in Note ~~16,~~18, Financial Instruments and Fair Value Measures, of the notes to the audited annual Consolidated ~~and Combined~~ Financial Statements for the year ended December 31, ~~2018~~2019 included in our ~~2018~~2019 Form 10-K. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had contracts with aggregate gross notional amounts of ~~$1,964~~$1,399 million and ~~$838~~$1,820 million, respectively, to limit interest rate risk and to exchange foreign currencies, principally the U.S. Dollar, Swiss Franc, ~~British Pound,~~ Euro, Chinese Yuan, Japanese Yen, Mexican Peso, New Romanian Leu, Czech ~~Crown,~~Koruna, Australian Dollar and Korean ~~Won, and to limit interest rate risk.~~Won.

Financial and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

					Fair Value														Fair Value
	Notional Amounts				Assets					Liabilities					Notional Amounts				Assets					Liabilities
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018			September 30, 2019		December 31, 2018			June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019			June 30, 2020		December 31, 2019
Designated forward currency exchange contracts	$	358	$	—	$	11	$	—	^(a)	$	1	$	—	^(b)	$	286	$	392	$	4	$	5	^(a)	$	1	$	1	^(b)
Undesignated instruments:
Undesignated cross-currency swap		421		425		9		16	^(c)		—		—			418		420		1		—	^(c)		—		1	^(d)
Undesignated interest rate swap		547		—		—		—			2		—	^(d)		471		561		—		—			2		1	^(d)
Undesignated forward currency exchange contracts		638		413		10		4	^(a)		3		1	^(b)		224		447		2		2	^(a)		—		3	^(b)
	$	1,964	$	838	$	30	$	20		$	6	$	1		$	1,399	$	1,820	$	7	$	7		$	3	$	6

On June 7, 2019, the Company entered into an interest rate swap contract to limit its exposure to interest rate risk by converting the interest payments on variable rate debt to fixed rate payments. These interest rate swaps have not been designated as hedging instruments for accounting purposes.

The Company initiated a cash flow hedging program in the first quarter of 2019 and has since then entered into forward currency exchange contracts to mitigate exposure to foreign currency exchange rate volatility and the associated impact on earnings related to forecasted foreign currency commitments. These forward currency exchange contracts are assessed as highly effective and are designated as cash flow hedges. Gains and losses on derivatives qualifying as cash flow hedges are recorded in Accumulated other comprehensive income (loss) until the underlying transactions are recognized in earnings.

On September 27, 2018, the Company entered into a floating-floating cross-currency swap contract to hedge the foreign currency exposure from foreign currency-denominated debt which will mature on September 27, 2025. The gain or loss on this derivative instrument is recognized in earnings and included in Non-operating expense (income). For the three and nine months ended September 30, 2019, gains recorded in Non-operating expense (income) under the cross-currency swap contract were $17 million and $12~~million, respectively. In May 2019, Garrett re-couponed the cross currency swap contract with its counterparties and received a cash settlement of $19 million.~~

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

The carrying value of Cash and cash equivalents, Account receivables, ~~notes~~Notes and ~~other~~Other receivables, and Account payables contained in the Consolidated ~~and Combined~~ Balance Sheets approximates fair value.

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

The Company determined the fair value of certain of its long-term debt and related current maturities utilizing transactions in the listed markets for similar liabilities. As such, the fair value of the long-term debt and related current maturities is considered ~~level~~Level 2.

On May 23, 2019, the Company made a prepayment of the Euro-equivalent of $9 million related to the mandatory amortizations of its Term Loan A Facility due in the third and fourth quarters of 2019. On September 27, 2019, the Company made a prepayment of the Euro-equivalent of $41 million related to the mandatory amortizations of its Term Loan A Facility due through the first half of 2021.

	Foreign Exchange Translation Adjustment			Changes in Fair Value of Effective Cash Flow Hedges			Changes in Currency Basis Reserve			Pension Adjustments			Total Accumulated Other Comprehensive Income (Loss)			Foreign Exchange Translation Adjustment		Changes in Fair Value of Effective Cash Flow Hedges		Pension Adjustments			Total Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2017	$	284		$	(35	)		—		$	(11	)	$	238
Balance at December 31, 2018																$	86	$	—	$	(13	)	$	73
Other comprehensive income (loss) before reclassifications		(251	)		3			(3	)		—			(251	)		25		2		—			27
Amounts reclassified from accumulated other comprehensive income (loss)		—			21			—			—			21			—		—		1			1
Net current period other comprehensive income (loss)		(251	)		24			(3	)		—			(230	)		25		2		1			28
Balance at September 30, 2018	$	33		$	(11	)		(3	)	$	(11	)	$	8
Balance at June 30, 2019																$	111	$	2	$	(12	)	$	101

	Foreign Exchange Translation Adjustment		Changes in Fair Value of Effective Cash Flow Hedges		Pension Adjustments			Total Accumulated Other Comprehensive Income (Loss)		Foreign Exchange Translation Adjustment			Changes in Fair Value of Effective Cash Flow Hedges			Pension Adjustments			Total Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018	$	86	$	—	$	(13	)	$	73
Balance at December 31, 2019										$	153		$	4		$	(27	)	$	130
Other comprehensive income (loss) before reclassifications		127		9		—			136		(11	)		(2	)		—			(13	)
Amounts reclassified from accumulated other comprehensive income (loss)		—		1		1			2		—			—			—			—
Net current period other comprehensive income (loss)		127		10		1			138		(11	)		(2	)					(13	)
Balance at September 30, 2019	$	213	$	10	$	(12	)	$	211
Balance at June 30, 2020										$	142		$	2		$	(27	)	$	117

On October 1, 2018, the date of consummation of the Spin-Off, 74,070,852 shares of the Company’s common stock were distributed to Honeywell stockholders of record as of September 18, 2018 who held their shares through the Distribution Date. Basic and Diluted EPS for all historical periods prior to the Spin-Off reflect the number of distributed shares, or 74,070,852 shares.

The details of the earnings per share (“EPS”) calculations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018		2019		2018		2020			2019		2020		2019
Basic
Net Income	$	38	$	929	$	177	$	1,137
Net (loss) Income									$	(9	)	$	66	$	43	$	139
Weighted average common shares outstanding		74,753,593		74,070,852		74,528,740		74,070,852		75,595,991			74,591,478		75,316,827		74,414,450
EPS – Basic	$	0.51	$	12.54	$	2.37	$	15.35	$	(0.12	)	$	0.88	$	0.57	$	1.87

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018		2019		2018		2020			2019		2020		2019
Diluted
Net Income	$	38	$	929	$	177	$	1,137
Net (loss) Income									$	(9	)	$	66	$	43	$	139
Weighted average common shares outstanding – Basic		74,753,593		74,070,852		74,528,740		74,070,852		75,595,991			74,591,478		75,316,827		74,414,450
Dilutive effect of unvested RSUs and other contingently issuable shares		950,864		—		1,171,912		—		249,520			2,309,066		520,632		1,715,371
Weighted average common shares outstanding – Diluted		75,704,457		74,070,852		75,700,652		74,070,852		75,845,511			76,900,544		75,837,459		76,129,821
EPS – Diluted	$	0.50	$	12.54	$	2.34	$	15.35	$	(0.12	)	$	0.86	$	0.57	$	1.83

Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the period.

The diluted earnings per share calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the weighted number of stock options excluded from the computations was ~~483,408~~437,333 and ~~371,852~~439,649, respectively. These stock options were outstanding ~~at September~~for the three and six months ended June 30, ~~2019.~~2020, respectively.

Honeywell is a defendant in asbestos-related personal injury actions mainly related to its legacy Bendix friction materials (“Bendix”) business. The Bendix business manufactured automotive brake linings that contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals who performed brake replacements. C~~ertain~~Certain operations that were part of the Bendix business were transferred to Garrett.

In connection with the Spin-Off, weGarrett ASASCO, a wholly owned indirect subsidiary of the Company, entered into ~~an Indemnification and Reimbursement~~the Subordinated Indemnity Agreement with Honeywell on September 12, 2018. As of the Spin-Off date of October 1, 2018, ~~we are~~Garrett ASASCO is obligated to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the 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 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. Pursuant to the terms of this ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement, ~~we are~~Garrett ASASCO is responsible for paying to Honeywell such amounts, up to a cap of an amount equal to the Euro-to-U.S. dollar exchange rate determined by Honeywell as of a date within two business days prior to the date of the Distribution (1.16977 USD = 1 EUR) equivalent of $175 million in respect of such liabilities arising in any given calendar year. The payments that ~~we are~~Garrett ASASCO is required to make to Honeywell pursuant to the terms of ~~this agreement~~the Subordinated Indemnity Agreement will not be deductible for U.S. federal income tax purposes. The ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third

consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement.During the ~~three and nine months ended September 30, 2019, we~~first quarter of 2020, Garrett ASASCO paid Honeywell the Euro-equivalent of ~~$37~~$35 million ~~and $113 million, respectively,~~ in connection with the ~~Indemnification~~Subordinated Indemnity Agreement. Honeywell and ~~Reimbursement~~Garrett agreed to defer the payment under the Subordinated Indemnity Agreement due May 1, 2020 to December 31, 2020 (the “Q2 Payment”). As of the date of this Quarterly Report on Form 10-Q, we do not anticipate that Garrett ASASCO will make any additional payments under the Subordinated Indemnity Agreement, other than the Q2 Payment, prior to 2022, in accordance with the payment deferral mechanism contained in the Subordinated Indemnity Agreement, which is described in additional detail in our 2019 Form 10-K. In accordance with the Subordinated Indemnity Agreement, we anticipate that the deferred payments will be partially settled on April 30, 2023, up to the available capacity to make such payments under the Credit Agreement , assuming we remain in compliance with the financial maintenance covenants in the Credit Agreement at that time. We expect to pay the remaining balance of deferred amounts from 2023 onwards. These amounts do not reflect any increases to the aggregate amount owed to Honeywell.

In conjunction with the 2020 Amendment, on June 12, 2020, Garrett ASASCO entered into an amendment (the “Subordinated Indemnity Amendment”) to the Subordinated Indemnity Agreement. The Subordinated Indemnity Amendment:

On December 2, 2019, the Company and its subsidiary Garrett ASASCO, filed a Summons with Notice in the Commercial Division of the Supreme Court of the State of New York, County of New York (the “NY Supreme Court”) commencing an action (the “Action”) against Honeywell, certain of Honeywell’s subsidiaries and certain of Honeywell’s employees for declaratory judgment, breach of contract, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, corporate waste, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On January 15, 2020, the Company and Garrett ASASCO, filed a Complaint in the NY Supreme Court in connection with the Action. The lawsuit arises from the Subordinated Indemnity Agreement. The Company is seeking declaratory relief; compensatory damages in an amount to be determined at trial; rescission of the Subordinated Indemnity Agreement; attorneys’ fees and costs and such other and further relief as the Court may deem just and proper. There can be no assurance as to the time and resources that will be required to pursue these claims or the ultimate outcome of the lawsuit. Among other claims, Garrett asserts that Honeywell is not entitled to indemnification because it improperly seeks indemnification for amounts attributable to punitive damages and intentional misconduct, and because it has failed to establish other prerequisites for indemnification under New York law. Specifically, the claim asserts that Honeywell has failed to establish its right to indemnity for each and every asbestos settlement of the thousands for which it seeks indemnification. The Action seeks to establish that the Subordinated Indemnity Agreement is not enforceable, in whole or in part. On March 5, 2020, Honeywell filed a “Notice of Motion to Dismiss Garrett’s Complaint.” On June 18, 2020, by agreement of the parties, Honeywell withdrew its motion to dismiss and Garrett agreed to file an amended complaint on September 15, 2020.

On September 12, 2018, we also entered into a Tax Matters Agreement with Honeywell (the “Tax Matters Agreement”), which governs the respective rights, responsibilities and obligations of Honeywell and us after the Spin-Off with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests). The Tax Matters Agreement generally provides that, following the Spin-Off date of October 1, 2018, we are responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes, ~~VAT~~value-added and payroll taxes, relating to Garrett for all periods, including periods prior to the completion date of the Spin-Off. Among other items, as a result of the mandatory transition tax imposed by the Tax Cuts and Jobs Act, ~~one of our subsidiaries~~Garrett ASASCO is required to make payments to a subsidiary of Honeywell in the amount representing the net tax liability of Honeywell under the mandatory transition tax attributable to us, as determined by Honeywell. We ~~currently~~ estimate that ~~our~~Garrett ASASCO’s total aggregate payments to Honeywell with respect to the mandatory transition tax will be $240 ~~million.~~million with $193 million in payments remaining as of June 30, 2020. Under the terms of the Tax Matters Agreement, ~~we are~~Garrett ASASCO is required to pay this amount in Euros, without interest, in ~~five~~5 annual installments, each equal to 8% of the aggregate amount, followed by three additional annual installments equal to 15%, 20% and 25% of the aggregate amount, respectively. Following the Spin-Off in October of 2018, weGarrett ASASCO paid ~~our~~the first annual installment in ~~that month. Subsequently, our~~October 2018, with subsequent annual installments ~~will~~to be paid in April of each year. OnThe annual installment due on April 1, ~~2019, we paid our second annual installment of the Euro-equivalent of $18 million.~~2020 has been deferred to December 31, 2020 in agreement with Honeywell.

In addition, the Tax Matters Agreement addresses the allocation of liability for taxes incurred as a result of restructuring activities undertaken to effectuate the Spin-Off. The Tax Matters Agreement also provides that we are required to indemnify Honeywell for certain taxes (and reasonable expenses) resulting from the failure of the Spin-Off and related internal transactions to qualify for their intended tax treatment under U.S. federal, state and local income tax law, as well as foreign tax law. Further, the Tax Matters Agreement also imposes certain restrictions on us and our subsidiaries (including restrictions on share issuances, redemptions or repurchases, business combinations, sales of assets and similar transactions) that are designed to address compliance with Section 355 of the Internal Revenue Code of 1986, as amended, and are intended to preserve the tax-free nature of the Spin-Off.

On July 17, 2020, we provided notice to Honeywell asserting that Honeywell has caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement is unenforceable.

The following table summarizes our Obligation payable to Honeywell related to these agreements:

	Nine Months Ended September 30, 2019									Six Months Ended June 30, 2020
	Asbestos and environmental			Tax Matters			Total			Asbestos and environmental			Tax Matters		Total
Beginning of year	$	1,244		$	282		$	1,526		$	1,090		$	261	$	1,351
Accrual for update to estimated liability		—			3			3			—			—		—
Legal fees expensed		46			—			46			27			—		27
Payments to Honeywell		(113	)		(18	)		(131	)		(35	)		—		(35	)
Currency translation adjustment		(57	)		(12	)		(69	)		(2	)		—		(2	)
End of period	$	1,120		$	255		$	1,375		$	1,080		$	261	$	1,341

Current		103			18			121			—			37		37
Non-current		1,017			237			1,254			1,080			224		1,304
Total	$	1,120		$	255		$	1,375		$	1,080		$	261	$	1,341

For the periods prior to the Spin-Off, these Consolidated and Combined Interim Financial Statements reflect an estimated liability for resolution of pending and future asbestos-related and environmental liabilities primarily related to the Bendix legacy Honeywell business, calculated as if we were responsible for 100% of the Bendix asbestos-liability payments. However, this recognition model differs from the recognition model applied subsequent to the Spin-Off as outlined above. In periods subsequent to the Spin-Off, theThe accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement with Honeywell entered into by Garrett ASASCO on September 12, 2018, under which ~~we are~~Garrett ASASCO is required to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the 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 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 ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement.

The following tables present information regarding Bendix related asbestos claims activity:

	Nine Months Ended September 30,			Year Ended December 31,			Six Months Ended June 30,			Year Ended December 31,
Claims Activity	2019			2018			2020			2019
Claims Unresolved at the beginning of the period		6,209			6,280			6,480			6,209
Claims Filed		1,996			2,430			1,013			2,659
Claims Resolved		(1,744	)		(2,501	)		(1,195	)		(2,388	)
Claims Unresolved at the end of the period		6,461			6,209			6,298			6,480

	Nine Months Ended September 30,		Years Ended December 31,		Six Months Ended June 30,		Years Ended December 31,
Disease Distribution of Unresolved Claims	2019		2018		2020		2019
Mesothelioma and Other Cancer Claims		3,323		2,949		3,278		3,399
Nonmalignant Claims		3,138		3,260		3,020		3,081
Total Claims		6,461		6,209		6,298		6,480

Honeywell has experienced average resolutions per claim excluding legal costs as follows:

	Years Ended December 31,										Years Ended December 31,
	2018		2017		2016		2015		2014		2019		2018		2017		2016
			(in whole dollars)												(in whole dollars)
Malignant claims	$	55,300	$	56,000	$	44,000	$	44,000	$	53,500	$	50,200	$	55,300	$	56,000	$	44,000
Nonmalignant claims	$	4,700	$	2,800	$	4,485	$	100	$	120	$	3,900	$	4,700	$	2,800	$	4,485

It is not possible to predict whether resolution values for Bendix-related asbestos claims will increase, decrease or stabilize in the future.

We are subject to other lawsuits, investigations and disputes arising out of the conduct of our business, including matters relating to commercial transactions, government contracts, product liability, prior acquisitions and divestitures, employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. To date, no such matters are material to the Consolidated ~~and~~ ~~Combined~~ Interim Statements of Operations.

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

Our general funding policy for qualified defined benefit pension plans is to contribute amounts at least sufficient to satisfy regulatory funding standards. We are not required to make any contributions to our U.S. pension plan in ~~2019.~~2020. We expect to make contributions of cash and/or marketable securities of approximately $6$7 million to our non-U.S. pension plans to satisfy regulatory funding standards in ~~2019,~~2020, of which $5$3 million has been contributed through the first ~~nine~~six months of the year.

For periods prior to the Spin-Off, we only accounted for our pension plan in Ireland as a defined benefit pension plan. Our other pension plans were accounted for as multiemployer plans as further described below.

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

	Three Months Ended September 30,									Nine Months Ended September 30,									Three Months Ended June 30,										Six Months Ended June 30,
	U.S. Plans			Non-U.S. Plan,						U.S. Plans			Non-U.S. Plan,						U.S. Plans					Non-U.S. Plan,					U.S. Plans						Non-U.S. Plan,
	2019			2019			2018 ⁽¹⁾			2019			2019			2018 ⁽¹⁾			2020			2019		2020			2019		2020			2019			2020			2019
Service cost	$	—		$	1		$	1			—		$	3		$	2		$	—		$	—	$	2		$	1	$	1		$	—		$	5		$	2
Interest cost		—			—			—			1			1			1			1			—		—			—		3			1			1			1
Expected return on plan assets		(1	)		(1	)		(1	)		(2	)		(2	)		(2	)		(3	)		—		(1	)		—		(5	)		(1	)		(3	)		(1	)
Amortization of prior service (credit)		—			—			—			—			—			—			—			—		—			—		—			—			—			—
	$	(1	)		—			—		$	(1	)	$	2		$	1		$	(2	)	$	—	$	1		$	1	$	(1	)	$	—		$	3		$	2

For both our U.S. and non-U.S. defined benefit pension ~~plan from the date of the Spin-Off,~~plans, we estimate the service and interest cost components of net period benefit (income) cost by utilizing a full yield curve approach in the estimation of these cost components by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows. This approach provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. For our Switzerland and Ireland defined benefit pension plans until 2019, we estimated such cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the pension benefit obligation. In 2019, we updated the approach for estimating the service and interest cost components of net period benefit (income) cost for the Switzerland and Ireland plans to the full yield curve approach.

Prior to the completion of the Spin-Off, certain Garrett employees participated in defined benefit pension plans (the “Shared Plans”) sponsored by Honeywell which includes participants of other Honeywell subsidiaries and operations. We accounted for our participation in the Shared Plans as multiemployer benefit plans. Accordingly, we did not record an asset or liability to recognize the funded status of the Shared Plans. The related pension expense was based on annual service cost of active Garrett participants and reported within Cost of goods sold in the Combined Statements of Operations. The pension expense specifically identified for the active Garrett participants in the Shared Plans for the three and nine months ended September 30, 2018 was $1 million and $5 million, respectively.

On September 20, 2018 in preparation of the Spin-Off, we entered into an agreement by and between Honeywell ~~International Inc.~~ and Garrett ~~Motion Inc.~~ (the “China Purchase Agreement”) in which Honeywell agreed to sell to Garrett 100% of the equity interests of Honeywell Transportation Investment (China) Co., Ltd. (“Garrett China”) consisting of our primary operations in China, in exchange for upfront consideration of 8,444,077 shares of our common stock. No further consideration from Garrett iswas due. The China Purchase Agreement ~~has been~~was amended to extend the date of the transfer of the equity interests in Garrett China from September 20, 2019 to June 30, 2020.

Prior to the transfer of the equity interests, Garrett China iswas considered a variable interest entity for which Garrett is the primary beneficiary because the China Purchase Agreement ~~provides~~provided Garrett ~~prior to the transfer of the equity interests,~~ control to direct the management and operation of Garrett China as well as all economic benefits and losses. The intent of the agreement iswas to place Garrett in the same position as if it already owned 100% of the equity interests of Garrett China. As the agreement was effective prior to the Spin-Off date while the Company and Garrett China were under common control of Honeywell, the assets and liabilities of Garrett China ~~are~~were recognized at their carrying amounts. ~~Additionally,~~

On June 3, 2020 Honeywell transferred 100% of the ~~related operations~~equity interests of Garrett China ~~were included~~ in ~~our Consolidated and Combined Statements~~accordance with the China Purchase Agreement. Following the transfer, Garret continues to consolidate Garrett China. However, Garrett China is no longer considered to be a variable interest entity as Garrett now owns 100% of ~~Operations for~~ the ~~nine months ended September 30, 2018 which were prepared on~~equity interests. There was no change in the basis of the net assets of Garrett China as the transaction did not result in a ~~carve-out basis.~~change of control under U.S. GAAP.

~~The following table summarizes the consolidated assets and liabilities of Garrett China:~~

Net sales from Garrett China were $123 million and $105 million, and $352 million and $361 million for the three and nine months ended September 30, 2019 and 2018, respectively. Related expenses primarily consisted of Costs of Goods Sold of $88 ~~million~~ ~~and $82~~ ~~million, and $240~~ ~~million~~ ~~and $264~~ ~~million~~ ~~for the three and nine months ended September 30, 2019 and 2018, respectively. Selling, general and administrative expenses were $2~~ ~~million~~ ~~and $5~~ ~~million, and $8~~ ~~million~~ ~~and $15~~ ~~million,~~ ~~for the three and nine months ended September 30, 2019 and 2018, respectively. Income tax expense was $6~~ ~~million~~ ~~and $6~~ ~~million, and $20~~ ~~million~~ ~~and $20~~ ~~million,~~ ~~for the three and nine months ended September 30, 2019 and 2018, respectively.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with our Consolidated ~~and Combined~~ Interim Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the audited annual Consolidated and Combined Financial Statements for the year ended December 31, ~~2018,~~2019, included in our Form 10-K, as filed with the Securities and Exchange Commission on ~~March 1, 2019~~February 27, 2020 (our ~~“2018~~“2019 Form 10-K”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the “Risk Factors” section of our ~~2018~~2019 Form 10-K and this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.

The following, Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help you understand the results of operations and financial condition of Garrett Motion Inc. for the three and ~~nine~~six months ended ~~September~~June 30, 2019. Unless the context otherwise requires, references to “Garrett,” “we,” “us,” “our,” and “the Company” refer to (i) Honeywell’s Transportation Systems Business (the “Transportation Systems Business” or the “Business”) prior to our spin-off from Honeywell International Inc. (the “Spin-Off”) and (ii) Garrett Motion Inc. and its subsidiaries following the Spin-Off, as applicable.2020.

Garrett designs, manufactures and sells highly engineered turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers (“OEMs”) and the global vehicle independent aftermarket as well as automotive software solutions. These OEMs in turn ship to consumers globally. We are a global technology leader with significant expertise in delivering products across gasoline, diesel, natural gas and electric (hybrid and fuel cell) powertrains. These products are key enablers for fuel economy and emission standards compliance.

Market penetration of vehicles with a turbocharger is expected to increase from approximately ~~48%~~49% in ~~2018~~2019 to approximately ~~56%~~55% by ~~2022,~~2023, according to IHS Markit (“IHS”) ~~and other industry sources,~~, which we believe will allow ~~our business~~the turbocharger market to grow at a faster rate than overall automobile production. We expect that the powertrain mix evolution trends will remain mostly unchanged, which should support the turbocharger industry in the short to medium term. In particular, the phasing out of battery electric vehicles (“BEV”) incentive in China from June 2019 and the change in new energy vehicles (“NEV”) credit policy in November 2019, have significantly reduced BEV sales in China, which are now below 2018 levels. In Europe, the COVID-19 stimulus packages are mostly directed to electric vehicles, but we do not expect a material adverse impact on the turbocharger market in the short term, as selling price, charging time, charging infrastructure availability and profitability issues for OEMs remain challenges. However, in the long term, a revision of CO2 reduction targets by 2030 proposed by the E.U. could drive an increase of BEV penetration in Europe beyond currently forecasted levels. The turbocharger market volume growth is expected to be particularly strong in China and other high-growth regions in the ~~long term.~~same period.

~~The growth trajectory for turbochargers is expected~~In the short to ~~continue,~~medium term, we believe that turbo penetration will grow as ~~the technology is~~turbos remain one of the most ~~cost-effective solutions for OEMs~~cost-efficient levers to ~~address strict constraints for vehicle~~improve the fuel efficiency of conventional Gasoline and ~~emissions standards. As a result, OEMs are increasing their adoption of turbocharger technologies across gasoline and diesel engines~~Diesel vehicles as well as ~~hybrid-electric~~hybrid and ~~fuel cell~~fuel-cell vehicles. ~~In recent years, we have also seen a shift~~Growth in ~~demand from diesel engines to gasoline engines.~~

~~In particular,~~ the ~~commercial vehicle OEM~~turbo market ~~and light vehicle gasoline markets~~is expected in ~~China and other~~all regions, with special mention for high-growth regions ~~have increased due to favorable economic conditions and~~in Asia, where rising income levels ~~which have led~~continue to ~~an increase in~~drive long-term automotive and vehicle content demand. While these positive factors do not isolate the turbo industry from fluctuations in global vehicle production volumes, such factors may mitigate the negative impact of macroeconomic cycles, or the negative impact of a shift from light vehicle Diesel to light vehicle Gasoline engines.

In addition, specific to Garrett’s financial situation and high debt leverage, we have ~~recently observed~~seen a ~~slowdown~~potential risk developing with some OEMs questioning whether to award (or award less) new business to Garrett in the next few years, which has impacted our long term revenue expectations. In the shorter term, financial stability concerns could also drive some OEMs to consider dual sourcing some of the high volume engine platforms, already awarded to Garrett, in order to balance perceived supply risk and possibly shift volumes to the second source supplier.

The ongoing global COVID-19 pandemic has created unparalleled challenges for the auto industry in the short-term. In the three months ended March 31, 2020, our manufacturing facility in Wuhan, China was shut down for six weeks in February and March and we saw diminished production in our Shanghai, China facility for that same time period, which adversely impacted our net sales for the period. During the second quarter, while our facilities in China wehave re-opened, certain of our manufacturing facilities in other geographies have been shut down or operated at reduced capacity during the majority of the period. This situation is expected to continue ~~to expect an increase~~and may be exacerbated if COVID-19 drives new lockdown measures at our manufacturing facilities. Additional or continued facilities closures or reductions in ~~future vehicle~~operation could significantly reduce our production ~~utilizing turbocharger technologies as vehicle ownership remains well below ownership levels in developed markets.~~volumes and have a material adverse impact on our business, results of operations and financial condition.

The 2020 auto industry outlook remains highly uncertain, but we believe it is clear that the automotive industry is facing a downturn that will exceed the financial crisis in 2008 and 2009. The vehicle production drop is expected to impact all verticals. Europe and the U.S. are expected to be the most impacted, while China already appears on a recovery path. As a result, we expect a contraction of turbocharger industry revenue in 2020. The health and safety of our employees, customers, and suppliers is our top priority. In parallel, we are continuously updating various scenarios for vehicle demand and OEM production volumes through 2020 and 2021. Each scenario is backed with contingency plans that we believe will allow us to react swiftly to changes in customer demand while protecting Garrett’s long-term growth potential. In addition, we have implemented cost control measures and cash management actions, including:

The following charts show our percentage of revenues by geographic region and product line for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and the percentage change from the prior year comparable period.

On October 1, 2018, the Company became an independent publicly-traded company through a pro rata distribution by Honeywell of 100% of the then-outstanding shares of Garrett to Honeywell’s stockholders. Each Honeywell stockholder of record received one share of Garrett common stock for every 10 shares of Honeywell common stock held on the record date. Approximately 74 million shares of Garrett common stock were distributed on October 1, 2018 to Honeywell stockholders. In connection with the separation, Garrett´s common stock began trading “regular-way” under the ticker symbol “GTX” on the New York Stock Exchange on October 1, 2018.

In connection with the Spin-Off, we entered into several agreements with Honeywell that govern the future relationship between us and Honeywell and impose certain obligations on us following the Spin-Off and which may cause us to incur new costs, including the following:

~~A description of each of these agreements is included in a Current Report on Form 8-K filed with the SEC on October 1, 2018.~~

In addition, we entered into an Indemnification and Reimbursement Agreement (the “Indemnification and Reimbursement Agreement”) and a Tax Matters Agreement (the “Tax Matters Agreement”) with Honeywell on September 12, 2018, each of which is described in this MD&A.

Prior to the Spin-Off on October 1, 2018, our historical financial statements were prepared on a stand–alone basis and derived from the consolidated financial statements and accounting records of Honeywell. Accordingly, for periods prior to October 1, 2018, our financial statements are presented on a combined basis and for the periods subsequent to October 1, 2018 are presented on a consolidated basis (collectively, the historical financial statements for all periods presented are referred to as “Consolidated and Combined Interim Financial Statements”). The Consolidated ~~and Combined~~ Interim Financial Statements have been prepared in accordance with accounting principles generally accepted in the United Statesof America (“U.S. GAAP”). The historical consolidated and combined interim financial information may not be indicative of our future performance and does not necessarily reflect what our consolidated and combined results of operations, financial condition and cash flows would have been hadAll amounts presented are in millions, except per share amounts.

Liabilities under the Business operated as a separate, publicly traded company during the periods presented, particularly because of changes that we have experienced and expect to continue to experience in the future as a result of our separation from Honeywell, including changes in the financing, cash management, operations, cost structure and personnel needs of our business.Subordinated Indemnity Agreement

~~For periods prior to the Spin-Off, Honeywell provided certain services, such as legal, accounting, information technology, human resources and other infrastructure support, on behalf of the Business.~~ The cost of these services has been allocated to the Business on the basis of the proportion of revenues. We consider these allocations to be a reasonable reflection of the benefits received by the Business. Actual costs that would have been incurred if the Business had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. We consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefits received by the Business during the periods presented.

Subsequent to the completion of the Spin-Off, we have incurred, and expect to continue to incur, expenditures consisting of employee-related costs, costs to start up certain stand-alone functions and information technology systems, and other one-time transaction related costs. Recurring stand-alone costs include costs related to the internal audit, treasury, investor relations, tax and corporate secretary functions as well as the annual expenses associated with running an independent publicly traded company including listing fees, compensation of non-employee directors, related board of director fees and other fees and expenses related to insurance, legal and external audit. Recurring stand-alone costs that differ from historical allocations may have an impact on profitability and operating cash flows but we believe the impact will not be significant. As a stand-alone public company, our recurring stand-alone corporate costs have not been, and we do not expect will be in the future, materially higher than the expenses historically allocated to us from Honeywell.

For the periods prior to the Spin-Off, our Consolidated and Combined Interim Financial Statements reflect an estimated liability for resolution of pending and future asbestos-related and environmental liabilities primarily related to Honeywell´s legacy Bendix business, calculated as if we were responsible for 100% of the Bendix asbestos-liability payments. However, this recognition model differs from the recognition model applied subsequent to the Spin-Off. In periods subsequent to the Spin-Off, the accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement, ~~(the “Indemnification and Reimbursement Agreement”) with Honeywell entered into on September 12, 2018,~~ under which ~~we are~~Garrett ASASCO is required to make payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the 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 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 ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement. During the ~~three and nine months ended September 30, 2019, we~~first quarter of 2020, Garrett ASASCO paid Honeywell the Euro-equivalent of ~~$37~~$35 million ~~and $113 million, respectively,~~ in connection with the ~~Indemnification~~Subordinated Indemnity Agreement. Honeywell and ~~Reimbursement~~Garrett agreed to defer the payment from Garrett ASASCO under the Subordinated Indemnity Agreement due May 1, 2020 to December 31, 2020 (the “Q2 Payment”). As of the date of this Quarterly Report on Form 10-Q, we do not anticipate that Garrett ASASCO will make any additional payments under the Subordinated Indemnity Agreement, other than the Q2 Payment, prior to 2022, in accordance with the payment deferral mechanism contained in the Subordinated Indemnity Agreement. Garrett ASASCO has made all payments under the Subordinated Indemnity Agreement under protest, as described below.

On December 2, 2019, the Company and Garrett ASASCO, filed a Summons with Notice in the Commercial Division of the Supreme Court of the State of New York, County of New York (the “NY Supreme Court”) commencing an action (the “Action”) against Honeywell, certain of Honeywell’s subsidiaries and certain of Honeywell’s employees for declaratory judgment, breach of contract, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, corporate waste, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On January 15, 2020, the Company and Garrett ASASCO, filed a Complaint in the NY Supreme Court in connection with the Action. The lawsuit arises from the Subordinated Indemnity Agreement. The Company is seeking declaratory relief; compensatory damages in an amount to be determined at trial; rescission of the Subordinated Indemnity

Agreement; attorneys’ fees and costs and such other and further relief as the Court may deem just and proper. There can be no assurance as to the time and resources that will be required to pursue these claims or the ultimate outcome of the lawsuit. Among other claims, Garrett asserts that Honeywell is not entitled to indemnification because it improperly seeks indemnification for amounts attributable to punitive damages and intentional misconduct, and because it has failed to establish other prerequisites for indemnification under New York law. Specifically, the claim asserts that Honeywell has failed to establish its right to indemnity for each and every asbestos settlement of the thousands for which it seeks indemnification. The Action seeks to establish that the Subordinated Indemnity Agreement is not enforceable, in whole or in part. On March 5, 2020, Honeywell filed a “Notice of Motion to Dismiss Garrett’s Complaint.” On June 18, 2020, by agreement of the parties, Honeywell withdrew its motion to dismiss and Garrett agreed to file an amended complaint on September 15, 2020.

Results of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared with the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019		2020			2019
	(Dollars in millions)												(Dollars in millions)
Net sales	$	781		$	784		$	2,418		$	2,576		$	477		$	802	$	1,222		$	1,637
% change compared with prior period		(0.4	)%		5.2	%		(6.1	)%		12.4	%		(40.5	)%				(25.4	)%

The change in net sales compared to prior year period is attributable to the following:

	For the Three Months Ended September 30, 2019			For the Nine Months Ended September 30, 2019			For the Three Months Ended June 30, 2020			For the Six Months Ended June 30, 2020
Volume		4.2	%		(0.5	%)		(39.4	%)		(23.5	%)
Price		(1.4	%)		(1.1	%)		0.2	%		(0.1	%)
Foreign Currency Translation		(3.2	%)		(4.5	%)		(1.3	%)		(1.8	%)
		(0.4	%)		(6.1	%)		(40.5	%)		(25.4	%)

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended ~~September~~June 30, ~~2018~~2019

Our net sales decreased for the three months ended ~~September~~June 30, ~~2019~~2020 compared to the prior year period by $3$325 million or ~~0.4%~~40.5% (including a negative impact of ~~3.2%~~1.3% due to foreign currency translation). The decrease ~~was primarily driven by a decrease~~ in net sales of commercial vehicles OEM products of $16 million, a decrease in net sales of aftermarket products of $1 million and a decrease in other net sales of $2 million. These decreases were partially offset by an increase in net sales of light vehicles OEM products of $16 million (despite an unfavorable impact of $21 million due to foreign currency translation).

~~Our commercial vehicles OEM product decline was mainly driven by lower volumes in Europe and Asia. The decrease in aftermarket product~~ sales was primarily driven by a volume decrease in Europe, partially offset by higher volumes in North America and Asia. The decrease in other net sales was primarily driven by a decrease in prototype volumes. The increase in net sales for light vehicles OEM products ~~was primarily driven by higher gasoline volumes as a result~~decline of ~~increased turbocharger penetration in gasoline engines and new product launches mainly in Europe and Asia, partially offset by lower diesel volumes in Europe and Asia.~~

~~Nine Months Ended September 30, 2019 compared with Nine Months Ended September 30, 2018~~

~~Our net sales decreased for the nine months ended September 30, 2019 compared to the prior year period by $158~~$231 million, or 6.1% (including a negative impact of 4.5% due to foreign currency translation). The decrease was primarily driven by a decrease in net sales for light vehicles OEM products of $105 million ($90 million of which was due to foreign currency translation). Net sales for commercial vehicles OEM products ~~decreased by $33~~decline of $62 million, aftermarket products decline of $28 million and ~~net sales for aftermarket~~other products ~~decreased by $9~~decline of $5 million.

Our light vehicles OEM product decline was primarily driven by lower diesel volumes in Europe and Asia and lower gasoline volumes in Europe and North America, partially offset by ~~higher~~increased gasoline volumes in China as a result of increased turbocharger penetration in gasoline engines and new product launches. The decrease in net sales for commercial vehicles iswas mainly driven by lower volumes in Europe and ~~Asia.~~North America. The decrease in aftermarket product sales was primarily driven by a volume decreases in Europe and North America. The decrease in other net sales was primarily driven by a decrease in prototype volumes.

Due to the Covid-19 pandemic, our manufacturing facilities in Mexicali, Mexico and Pune, India were shut down for five weeks in April and May 2020 and we saw diminished production in our European manufacturing facilities for that same time period, which were the primary drivers of the decrease in sales in the Europe and North America regions during the three months ended June 30, 2020. Since our facilities in China re-opened in the middle of March, the production of those facilities in China has recovered significantly with an increase in net sales of 57% compared to the three months ended June 30, 2019.

Our net sales decreased for the six months ended June 30, 2020 compared to the prior year period by $415 million or 25.4% (including a negative impact of 1.8% due to foreign currency translation). The decrease in sales was primarily driven by light vehicles OEM products decline of $266 million, commercial vehicles OEM products decline of $93 million, aftermarket products decline of $46 million and other products decline of $10 million.

Our light vehicles OEM product decline was primarily driven by lower diesel volumes in Europe and Asia and lower gasoline volumes in Europe and North America, partially offset by ~~higher~~increased gasoline volumes in China as a result of increased turbocharger penetration in gasoline engines and new product launches. The decrease in net sales for commercial vehicles was mainly driven by lower volumes in Europe and North America. The decrease in aftermarket product sales was primarily driven by volume decreases in Europe and North America. The decrease in other net sales was primarily driven by a decrease in prototype volumes.

Due to the Covid-19 pandemic, our manufacturing facility in Wuhan, China, was shut down for six weeks in February and March 2020 and we saw diminished production in our Shanghai, China facility for the same time period, which were the primary drivers of the decrease in sales in the Asia region during the three months ended March 31, 2020. Since our facilities in China re-opened in the middle of March, the production of those facilities in China has recovered significantly with an increase in net sales of 20% compared to the six months ended June 30, 2019.

Our manufacturing facilities in Mexicali, Mexico and Pune, India were shut down for five weeks in April and May 2020 and we saw diminished production in our European manufacturing facilities for that same time period, which were the primary drivers of the decrease in sales in the Europe and North America regions during the three months ended June 30, 2020.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in millions)												(Dollars in millions)
Cost of goods sold	$	609		$	606		$	1,868		$	1,972		$	393		$	620		$	996		$	1,259
% change compared with prior period		0.5	%		6.7	%		(5.3	)%		14.0	%		(36.6	)%					(20.9	)%
Gross profit percentage		22.0	%		22.7	%		22.7	%		23.4	%		17.6	%		22.7	%		18.5	%		23.1	%

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended ~~September~~June 30, ~~2018~~2019

Costs of goods sold ~~increased~~decreased in the three months ended ~~September~~June 30, ~~2019~~2020 compared to the prior year period by $3$227 million or ~~0.5~~36.6% primarily due to a decrease in direct material costs of $200 million, driven by decreased volumes.

Gross profit percentage decreased by 5.1 percentage points primarily due to ~~an increase~~unfavorable impact of productivity including lower volume leverage (4.8 percentage points), unfavorable impacts from mix and price (0.8 percentage points), unfavorable impacts from inflation (1.2 percentage points) and higher premium costs (0.4 percentage points), partially offset by the favorable impact of foreign exchange rates (0.3 percentage points), favorable impact from repositioning costs (0.3 percentage points) and lower warranty costs (1.5 percentage points).

Costs of goods sold decreased in the six months ended June 30, 2020 compared to the prior year period by $263 million or 20.9% primarily due to a decrease in direct material costs and labor costs of ~~$12~~$235 million, ~~partially offset~~driven by ~~a $9 million decrease in other fixed costs (primarily related to government incentives and tax recoveries).~~decreased volumes.

Gross profit percentage decreased by 4.6 percentage points primarily due to unfavorable impacts from mix and price ~~(3.9~~(2.2 percentage points), ~~the~~ unfavorable impacts from inflation ~~(0.7~~(0.9 percentage points), unfavorable impact of productivity including lower volume leverage (1.0 percentage points), higher costs from ~~research~~premium freight and ~~development (0.3 percentage points), the unfavorable impact of foreign exchange rates (0.2~~other plant related costs (0.4 percentage points), and ~~the~~ unfavorable impact from ~~repositioning costs (0.1~~foreign and exchange rates (0.3 percentage points), partially offset by the favorable ~~impact of productivity (4.4 percentage points).~~

~~Nine Months Ended September 30, 2019 compared with Nine Months Ended September 30, 2018~~

Costs of goods sold decreased in the nine months ended September 30, 2019 compared to the prior year period by $104 million or 5.3 percentage points primarily driven by a decrease in direct material costs, freight and labor of $66 million (primarily due to a decrease in volume), a decrease in research and development costs of $4 million (primarily due to increased customer and government funding) and a $13 million decrease in other fixed costs (primarily due to government incentives and tax recoveries).

~~Gross profit percentage decreased primarily due to unfavorable~~ impacts from mix and price (3.0 percentage points), the unfavorable impacts from inflation (0.6 percentage points) and the unfavorable impact from repositioning costs (0.1 percentage points), partially offset by the favorable impact of productivity (3.0foreign exchange rates (0.2 percentage points).

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in millions)												(Dollars in millions)
Selling, general and administrative expense	$	68		$	60		$	186		$	186		$	51		$	58		$	112		$	118
% of sales		8.7	%		7.7	%		7.7	%		7.2	%		10.7	%		7.2	%		9.2	%		7.2	%

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended ~~September~~June 30, ~~2018~~2019

Selling, general and administrative expenses ~~increased by $8 million~~decreased in the three months ended ~~September~~June 30, ~~2019~~2020 compared to the prior year ~~period. The increase was primarily~~periodby $7 million, mainly due to ~~lower corporate allocations while part~~$16 million of cost saving actions implemented to ease the impact of Covid-19 on our ~~Former Parent~~financial performance, including merit freezes, state funded lay-offs, unpaid leaves and ~~an increase~~reductions in ~~severance-related expense during~~travel expenses and professional services, as well as one-time Spin-Off costs incurred in the ~~three months ended September 30, 2018.~~prior year period, partially offset by $9 million in higher professional service fees mainly related to strategic planning costs in the current year period.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

Selling, general and administrative expenses ~~remained flat for~~decreased in the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the prior year periodby $6 million, mainly due to $15 million of cost saving actions implemented to ease the impact of Covid-19 on our financial performance, including merit freezes, state funded lay-offs, unpaid leaves and reductions in travel expenses and professional services, as well as one-time Spin-Off costs incurred in the prior year period, partially offset by $9 million higher professional service fees mainly related to strategic planning costs in the current year period.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in millions)												(Dollars in millions)
Other expense, net	$	18		$	51		$	54		$	132		$	15		$	17		$	31		$	36
% of sales		2.3	%		6.5	%		2.2	%		5.1	%		3.1	%		2.1	%		2.5	%		2.2	%

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended ~~September~~June 30, ~~2018~~2019

Other expense, net decreased in the three months ended ~~September~~June 30, ~~2019 by $33 million~~2020 compared to the prior year ~~period.~~

~~Following~~period by $2 million. The decrease was attributable to the ~~Spin-Off~~decrease in 2018, the accounting for the majority of our asbestos-related liability payments and accounts payable reflect the terms of the Indemnification and Reimbursement Agreement as described above in the Asbestos-Related and Environmental Liabilities section. For the three months ended September 30, 2019, Other expense, net of $18 million primarily reflects the expense related to legal fees incurred in connection with the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

Other expense, net decreased in the ~~nine~~six months ended ~~September~~June 30, ~~2019 by $78 million~~2020 compared to the prior year ~~period.~~

~~For~~period by $5 million. The decrease was attributable to the ~~nine months ended September 30, 2019, Other expense, net of $54 million primarily reflects the expense related to~~decrease in legal fees incurred in connection with the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement. ~~For the nine months ended September 30, 2018, Other expense, net of $132 million was primarily driven by asbestos-related charges, net of probable insurance recoveries of $130 million.~~

~~Three Months Ended September 30, 2019 compared with Three Months Ended September 30, 2018~~

Following the Spin-Off, interest expense primarily relates to interest on our long-term debt. Prior to the Spin-Off, interest expense was primarily related to related party notes cash pool arrangements with our Former Parent which were settled in cash prior to the Spin-Off. Interest expense for the three months ended September 30, 2019, was $18 million in comparison to $1 million in the prior year period. This increase was primarily driven by interest expense related to our long-term debt.

~~Nine Months Ended September 30, 2019 compared with Nine Months Ended September 30, 2018~~

Interest expense for the nine months ended September 30, 2019, was $52 million, an increase of $49 million from $3 million in the prior year period. This increase was primarily driven by interest expense related to our long-term debt.

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended June 30, 2019

Interest expense increased in the three months ended June 30, 2020 compared to the prior year period by $2 million, mainly due to higher interest expense due to the full drawn down of our Revolving Credit Facility and fees related to the amendment, dated June 12, 2020 (the “2020 Amendment”), to our Credit Agreement, dated as of September 27, 2018 (as amended, the “Credit Agreement”), partially offset by lower interest expense on our Term Loans due to partial prepayments in 2019.

Six Months Ended June 30, ~~2018~~2020 compared with Six Months Ended June 30, 2019

Interest expense increased in the six months ended June 30, 2020 compared to the prior year period by $2 million, mainly due to higher interest expense due to the full drawn down of our Revolving Credit Facility and Credit Agreement amendment related fees, partially offset by lower interest expense on our Term Loans due to partial prepayments in 2019.

Non-operating (income) expense for the three months ended ~~September~~June 30, ~~2019 decreased~~2020 increased to an income of ~~$(4)~~$4 million from ~~income~~an expense of ~~$(7)~~$2 million in the prior year period, primarily due to impacts from changes in foreign exchange rates, net of hedging.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

Non-operating (income) expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019 decreased~~2020 increased to an income of $8 million from an expense of ~~$2 million from income of $(10)~~$6 million in the prior year period, primarily due to impacts from changes in foreign exchange rates, net of hedging.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
	(Dollars in millions)												(Dollars in millions)
Tax expense (benefit)	$	34		$	(856	)	$	79		$	(844	)
Tax expense													$	11		$	21		$	12		$	45
Effective tax rate		47	%		(1173	)%		31	%		(288	)%		550	%		24.1	%		21.8	%		24.5	%

See Note 7,6, Income Taxes of the Notes to the Consolidated ~~and Combined~~ Interim Financial Statements for a discussion of the change in effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30,~~, 2019~~ 2020 versus the prior year periods.

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended ~~September~~June 30, ~~2018~~2019

As a result of the factors described above, there was a net loss of $9 million for the three months ended June 30, 2020 as compared to net income of $66 million for the three months ended June 30, 2019.

As a result of the factors described above, net income was ~~$38~~$43 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to net income of ~~$929~~$139 million for the ~~three~~six months ended ~~September~~June 30, 2018. Net income for the three months ended September 30, 2018 included a tax benefit from an internal restructuring of Garrett’s business in advance of the Spin-Off that resulted in an $870 million reduction to withholding taxes on undistributed foreign earnings recorded during the three months ended September 30, 2018, and excluded any interest expense related to our long-term debt raised at the time of the Spin-Off.

~~Nine Months Ended September 30, 2019 compared with Nine Months Ended September 30, 2018~~

As a result of the factors described above, net income was $177 million for the nine months ended September 30, 2019 as compared to net income of $1,137 million for the nine months ended September 30, 2018. Net income for the nine months ended September 30, 2018 included a tax benefit from an internal restructuring of Garrett’s business in advance of the Spin-Off that resulted in an $880 million reduction to withholding taxes on undistributed foreign earnings and excluded any interest expense related to our long-term debt raised at the time of the Spin-Off.2019.

It is management’s intent to provide non-GAAP financial information to supplement the understanding of our business operations and performance, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the most directly comparable GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to other similarly titled measures used by other companies. Additionally, the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s operating results as reported under GAAP.

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,					For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019		2018			2019		2018			2020			2019			2020			2019
	(Dollars in millions)										(Dollars in millions)
Net income — GAAP	$	38	$	929		$	177	$	1,137
Net interest (income) expense		16		—			46		(3	)
Tax expense (benefit)		34		(856	)		79		(844	)
Net (loss) income — GAAP											$	(9	)	$	66		$	43		$	139
Net interest expense (income)												19			15			34			30
Tax expense												11			21			12			45
Depreciation		20		17			55		53			18			16			37			35
EBITDA (Non-GAAP)	$	108	$	90		$	357	$	343		$	39		$	118		$	126		$	249
Other operating expenses, net (which primarily consists of indemnification, asbestos and environmental expenses)⁽²⁾		18		51			54		132
Other expense, net (which consists of indemnification, asbestos and environmental expenses)⁽³⁾												14			17			30			36
Non-operating (income) expense⁽³⁾⁽⁴⁾		—		—			—		(4	)		(3	)		(3	)		(5	)		(2	)
Stock compensation expense⁽⁴⁾⁽⁵⁾		5		4			14		16			4			4			6			9
Repositioning charges⁽⁵⁾⁽⁶⁾		—		—			3		2			1			2			6			3
Foreign exchange (gain) loss on debt, net of related hedging (gain) loss		—		(8	)		8		(8	)		(1	)		8			(1	)		8
Spin-Off costs⁽⁶⁾		2		—			10		—
Spin-off costs⁽⁷⁾⁽⁸⁾												—			8			—			10
Professional service costs⁽⁹⁾												9			—			9			—
Adjusted EBITDA (Non-GAAP)	$	133	$	137		$	446	$	481		$	63		$	154		$	171		$	313

In addition, our management may use Adjusted EBITDA in setting performance incentive targets in order to align performance measurement with operational performance.

Three Months Ended ~~September~~June 30, ~~2019~~2020 compared with Three Months Ended ~~September~~June 30, ~~2018~~2019

Adjusted EBITDA ~~(Non-GAAP)~~(non-GAAP) decreased by $4$91 million for the three months ended ~~September~~June 30, ~~2019~~2020 compared to the prior year period. The decrease was primarily due to ~~the~~ unfavorable ~~impact~~impacts of ~~higher research and development expenses~~sales volume ($3104 million), ~~higher Selling, general and administrative expenses ($8 million), the unfavorable impact from~~ inflation ($76 million) and ~~unfavorable~~ foreign exchange ~~rates~~including prior year´s hedge gains ($13 million), partially offset by the favorable ~~impacts~~impact of ~~volume~~productivity net of mix ($159 million), selling, general and administrative expenses ($7 million), lower research and development expenses ($4 million) and ~~mix and~~ price ~~net of productivity~~ ($12 million).

~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

Adjusted EBITDA ~~(Non-GAAP)~~(non-GAAP) decreased by ~~$35~~$142 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the prior year period. The decrease was primarily due to ~~the~~ unfavorable impacts of sales volume ($22133 million), ~~the unfavorable impact of foreign exchange rates including prior year’s hedge losses~~inflation ($11 million), productivity net of mix ($14 million) and ~~the~~ unfavorable impact from ~~inflation~~price ($171 million), partially offset by the favorable impact of ~~mix and price net of productivity and~~lower research and development expenses ($159 million), selling, general and administrative expenses ($6 million) and foreign exchange including prior year´s hedge losses ($2 million).

Cash flow from operations less Expenditures for property, plant and equipment⁽¹⁾

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2019			2018			2020			2019
	(Dollars in millions)						(Dollars in millions)
Net cash provided by operating activities — GAAP		125			240
Net cash (used for) provided by operating activities — GAAP								(95	)		37
Expenditures for property, plant and equipment		(74	)		(66	)		(63	)		(51	)
Cash flow from operations less Expenditures for property, plant and equipment (Non-GAAP)	$	51		$	174		$	(158	)	$	(14	)

Cash flow from operations less Expenditures for property, plant and equipment (non-GAAP) decreased by ~~$123~~$144 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 versus the prior year period, primarily due to ~~the decrease in cash provided by operating activities~~unfavorable impact from working capital of ~~$115~~$58 million, ~~which was driven by~~ a decrease in net income, net of deferred taxes of ~~$48~~$101 million, and an unfavorable impact of ~~$85~~$26 million ~~related~~from the issuance of employee continuity awards and customer settlements primarily relating to ~~changes in~~warranty, pricing, quick saving, partially offset by delayed Obligations payable to Honeywell ~~and Asbestos-related liabilities.~~of $53 million. Additionally, Expenditures for property, plant and equipment expenses increased by ~~$8 million for the nine months ended September 30, 2019 versus the prior year period.~~$12 million.

~~Liquidity prior~~We expect that our cash requirements in 2020 will primarily be to fund operating activities, working capital, and capital expenditures, and to meet our obligations under our debt instruments and the ~~Spin-Off~~

~~Prior~~Subordinated Indemnity Agreement described below, as well as the Tax Matters Agreement. In addition, we may engage in repurchases of our debt and equity securities from time to time. In light of the ~~Spin-Off, we generated positive~~ongoing COVID-19 pandemic, on April 6, 2020, the Company fully drew the remaining funds available under its revolving credit facility of approximately $470 million to increase its financial flexibility in the current environment. The unutilized revolving credit facility proceeds were repaid at the end of the second quarter of 2020. We have historically funded our cash requirements through the combination of cash flows from ~~operations.~~

~~As part~~operating activities, available cash balances and available borrowings through our debt agreements. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances, particularly in light of the ~~Former Parent, we were dependent upon Honeywell for all of its working capital and financing requirements. Honeywell uses~~volatility in global financial markets as a ~~centralized approach to cash management and financing of its operations. The majority~~result of the Business’s cash was transferred to Honeywell daily and Honeywell funded its operating and investing activities as needed. This arrangement is not reflective of the manner in which the Business would have beenCOVID-19 pandemic, that we will be able to ~~finance its operations had it been a stand-alone business separate from Honeywell during~~obtain additional debt or equity financing on acceptable terms in the ~~periods presented. Cash transfers to and from Honeywell’s cash management accounts are reflected within Invested deficit.~~

~~All intracompany transactions have been eliminated. In the Consolidated and Combined Statements of Cash Flows, the~~future or at all. We believe that our operating cash flows, ~~related~~available cash balances and available borrowings through our debt agreements we enable us to related party notes receivables are reflected as investing activities since these balances represent amounts loaned to Former Parent. The cash flows related to related party notes payables are reflected as financing activities since these balances represent amounts financed by Former Parent. Followingmeet our short-term liquidity needs for the ~~Spin-Off, Honeywell is no longer considered a related party.~~

For both the three and nine months ended September 30, 2018, we received interest income for related party notes receivables of $0 million and $1 million and incurred interest expense for related party notes payable of $0 million and $1 million, respectively.next twelve months.

On September 27, 2018, we entered into a Credit Agreement by and among us, Garrett LX I S.à r.l., Garrett LX II S.à r.l. (“Lux Guarantor”), Garrett LX III S.à r.l. (“Lux Borrower”), Garrett Borrowing LLC (in such capacity, the “US Co-Borrower”), and Honeywell Technologies Sàrl (“Swiss Borrower” and, together with Lux Borrower and US Co-Borrower, the “Borrowers”),certain of our subsidiaries, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative ~~agent (the “Credit Agreement”).~~

agent. The Credit Agreement was amended on June 12, 2020. The Credit Agreement provides for senior secured financing of approximately the Euro equivalent of $1,254 million, consisting of (i) a seven-year senior secured first-lien term B loan facility, which consists of a tranche denominated in Euro of €375 million and a tranche denominated in U.S. Dollars of $425 million (the “Term B Facility”), (ii) a five-year senior secured first-lien term A loan facility in an aggregate principal amount of €330 million (the “Term A Facility” and, together with the Term B Facility, the “Term Loan Facilities”) and (iii) a five-year senior secured first-lien revolving credit facility in an aggregate principal amount of €430 million with revolving loans to the Swiss Borrower (as defined in the Credit Agreement), to be made available in a number of currencies including Australian Dollars, Euros, Pounds Sterling, Swiss Francs, U.S. Dollars and Yen (the “Revolving Facility” and, together with the Term Loan Facilities, the “Senior Credit Facilities”). Each of the Revolving Facility and the Term A Facility matures five years after the effective date of the Credit Agreement, in each case with certain extension rights in the discretion of each lender. The Term B Facility matures seven years after the effective date of the Credit Agreement, with certain extension rights in the discretion of each lender.

The Senior Credit Facilities are subject to an interest rate, at our option, of either (a) base rate determined by reference to the highest of (1) the rate of interest last quoted by The Wall Street Journal as the “prime rate” in the United States, (2) the greater of the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one month adjusted LIBOR rate, plus 1% per annum (“ABR”), (b) an adjusted LIBOR rate (“LIBOR”) (which shall not be less than zero), or (c) an adjusted EURIBOR rate (“EURIBOR”) (which shall not be less than zero), in each case, plus an applicable margin. Pursuant to the 2020 Amendment, (i) the margin applicable to loans under the Term B Facility will increase by 75 basis points through the maturity date and (ii) the margin applicable to loans under the Revolving Facility and Term A Facility will increase by 25 basis points until the Company delivers consolidated financial statements as of and for its first fiscal quarter ending on or after the last day of the Relief Period. In addition, pursuant to the 2020 Amendment, if (a) our corporate family rating by Moody’s is B2 or lower or there is no corporate family rating of the Company by Moody’s and, at the same time, (b) our corporate rating from S&P is B+ or lower or there is no corporate rating of the Company by S&P, then upon the first occurrence of this ratings event the margin applicable to loans under our Senior Credit Facilities will increase by 25 basis points through the maturity date.

The applicable margin for the U.S. Dollar tranche of the Term B Facility is currently ~~2.50%~~3.25% per annum (for LIBOR loans) and ~~1.50%~~2.25% per annum (for ABR loans) while that for the euro tranche of the Term B Facility is currently ~~2.75%~~3.50% per annum (for EURIBOR loans). The applicable margin for each of the Term A Facility and the Revolving Credit Facility varies based on our leverage ~~ratio.~~ratio which is increased by 25 basis points until the Company delivers consolidated financial statements as of and for its first fiscal quarter ending on or after the last day of the Relief Period. Accordingly, the interest rates for the Senior Credit Facilities will fluctuate during the term of the Credit Agreement based on changes in the ABR, LIBOR, EURIBOR or future changes in our corporate rating or leverage ratio. Interest payments with respect to the Term Loan Facilities are required either on a quarterly basis (for ABR loans) or at the end of each interest period (for LIBOR and EURIBOR loans) or, if the duration of the applicable interest period exceeds three months, then every three months.

We are obligated to make quarterly principal payments throughout the term of the Term Loan Facilities according to the amortization provisions in the Credit Agreement. Borrowings under the Credit Agreement are prepayable at our option without premium or penalty, subject to a 1.00% prepayment premium in connection with any repricing transaction with respect to the Term B Facility in the first six months after the effective date of the Credit Agreement.penalty. We may request to extend the maturity date of all or a portion of the Senior Credit Facilities subject to certain conditions customary for financings of this type. The Credit Agreement also contains certain mandatory prepayment provisions in the event that we incur certain types of indebtedness or receive net cash proceeds from certain non-ordinary course asset sales or other dispositions of property, in each case subject to terms and conditions customary for financings of this type. On May 23, 2019, the Company made a prepayment of the Euro-equivalent of $9 million related to the mandatory amortizations of our Term Loan A Facility due in the third and fourth quarters of 2019 using a portion of the $19 million cash receipt from the re-couponing of our cross-currency swap contract. On September 27, 2019, the Company made a prepayment of the Euro-equivalent of $41 million related to the mandatory amortizations of its Term Loan A Facility due through the first half of 2021.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends, to make other distributions or redemptions/ repurchases, in respect of the our and our subsidiaries’ equity interests, to engage in transactions with affiliates, amend certain material documents or to permit the International Financial Reporting Standards equity amount of Lux Borrower (as defined in the Credit Agreement) to decrease below a certain amount. The 2020 Amendment tightened certain of the baskets applicable to our ability to incur additional indebtedness, create liens, and make investments and restricted payments. These increased restrictions will no longer apply following the conclusion of the Relief Period. The 2020 Amendment also modifies the conditions to drawdown under the Revolving Facility and makes certain other changes to the Senior Credit Facilities.

The Credit Agreement also contains financial covenants, ~~requiring the maintenance of~~including a consolidated total leverage ratio ~~of not greater than 4.25 to 1.00 (with step-downs to (i) 4.00 to 1.00 in approximately 2019, (ii) 3.75 to 1.00 in approximately 2020 and (iii) 3.50 to 1.00 in approximately 2021),~~covenant and a consolidated interest coverage ratio covenant. The 2020 Amendment provides that the consolidated total leverage ratio covenant and consolidated interest coverage ratio covenant will not apply until the earlier of the occurrence of a Covenant Relief Termination Event (as defined below) and the conclusion of the Relief Period and puts the following financial ratios and tests in place during the Relief Period:

The “Relief Period” will conclude on the earlier of (a) June 30, 2022 and (b) the date on which the administrative agent receives a certificate from a financial officer of the Company certifying as of such date that (i) the Company is in compliance with the total leverage ratio and interest coverage ratio covenants included in the Credit Agreement as they would apply without giving effect to the Relief Period for the most recently ended period of four consecutive fiscal quarters ended on or prior to such date and (ii) if such date is on or prior to the date of delivery of the Company’s financial statements with respect to the period of four consecutive quarters ending June 30, 2022, based on a financial model provided to the administrative agent, the Company expects in good faith that it will be in compliance with such total leverage ratio and interest coverage ratio covenants as they would apply without giving effect to the Relief Period from the end of the quarter in which such certificate is given until and including the period of four consecutive quarters ending June 30, 2022.

A “Covenant Relief Termination Event” will occur if any member of the restricted group under the Credit Agreement (including Garrett ASASCO) makes any payment under the Subordinated Indemnity Agreement but excluding the payment in respect of the second fiscal quarter of 2020. As of the date of this Quarterly Report on Form 10-Q, we do not ~~less than 2.75~~anticipate that a Covenant Relief Termination Event will occur prior to ~~1.00.~~ 2022.

We were in compliance with our financial covenants as of ~~September~~June 30, ~~2019.~~2020.

On September 27, 2018, we completed the offering of €350 million (approximately ~~$400 million)~~$410 million based on exchange rates as of September 27, 2018) in aggregate principal amount of 5.125% senior notes due 2026 (the “Senior Notes”). The Senior Notes bear interest at a fixed annual interest rate of 5.125% and mature on October 15, 2026.

The Senior Notes were issued pursuant to an Indenture, dated September 27, 2018 (the “Indenture”), which, among other things and subject to certain limitations and exceptions, limits our ability and the ability of our restricted subsidiaries to: (i) incur, assume or guarantee additional indebtedness or issue certain disqualified equity interests and preferred shares, (ii) pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments, (iii) make investments, (iv) consummate certain asset sales or transfers, (v) engage in certain transactions with affiliates, (vi) grant or assume certain liens on assets to secure debt unless the notes are secured equally and ratably (vii) restrict dividends and other payments by certain of their subsidiaries and (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of our or our restricted subsidiaries’ assets.

~~Following the Spin-Off, a treasury team was appointed and cash management structures were implemented, in order to manage the Company’s liquidity centrally and concentrate excess cash.~~

Our capital structure and sources of liquidity have changed from our historical capital structure because we no longer participate in our Former Parent’s centralized cash management program. We expect that our primary cash requirements in the remainder of 2019 will primarily be to fund operating activities, working capital, and capital expenditures, and to meet our obligations under the debt instruments and the Indemnification and Reimbursement Agreement described below, as well as the Tax Matters Agreement. In addition, we engage in repurchases of our debt and equity securities from time to time. We believe we will meet our known or reasonably likely future cash requirements through the combination of cash flows from operating activities, available cash balances and available borrowings through our debt agreements. If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities; however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms in the future. Based upon our history of generating strong cash flows, we believe we will be able to meet our short-term liquidity needs for at least the next twelve months.

On September 12, 2018, weGarrett ASASCO entered into the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement, under which ~~we are~~Garrett ASASCO is required to make certain payments to Honeywell in amounts equal to 90% of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the 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 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. Pursuant to the terms of the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement, ~~we are~~Garrett ASASCO is responsible for paying to Honeywell such amounts, up to a cap of an amount equal to the Distribution Date Currency Exchange Rate (1.16977 USD = 1 EUR) equivalent of $175 million (exclusive of any late payment fees) in respect of such liabilities arising in any given calendar year. This ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement may have material adverse effects on our liquidity and cash flows and on our results of operations, regardless of whether we experience a decline in net sales. See “We are subject to risks associated with the Indemnification and Reimbursement Agreement, pursuant to which we are required to make substantial cash payments to Honeywell, measured in substantial part by reference to estimates by Honeywell of certain of its liabilities” ~~in the~~under “Risk Factors” ~~section of~~in our ~~Annual Report on~~2019 Form ~~10-K for the year ended December 31, 2018.~~10-K. In addition, the payments that ~~we are~~Garrett ASASCO is required to make to Honeywell pursuant to the terms of the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement will not be deductible for U.S. federal income tax purposes. The ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement provides that the agreement will terminate upon the earlier of (x) December 31, 2048 or (y) December 31st of the third consecutive year during which certain amounts owed to Honeywell during each such year were less than $25 million as converted into Euros in accordance with the terms of the agreement.

During the ~~three and nine months ended September 30, 2019, we~~first quarter of 2020, Garrett ASASCO paid Honeywell the Euro-equivalent of ~~$37~~$35 million in connection with the Subordinated Indemnity Agreement. In January 2020 we received from Honeywell the 2019 Prior Year Aggregate Loss Statement (as defined in the Subordinated Indemnity Agreement) which confirmed that the payments made to Honeywell as required by the Subordinated Indemnity Agreement in 2019 included an overpayment of $33 million. This payment will be deducted from the Q2 Payment and ~~$113 million, respectively,~~will reduce the cash payments payable to Honeywell in 2020. Honeywell and Garrett have agreed to defer the Q2 Payment due May 1, 2020 to December 31, 2020. As of the date of this Quarterly Report on Form 10-Q, based on the Company’s current forecasts, we do not anticipate that Garrett ASASCO will make any additional payments under the Subordinated Indemnity Agreement, other than the Q2 Payment, prior to 2022, in accordance with the payment deferral mechanism contained in the Subordinated Indemnity Agreement.

We are currently engaged in litigation against Honeywell in connection with the ~~Indemnification and Reimbursement~~Subordinated Indemnity Agreement. For additional information, see Part II, Item 1. Legal Proceedings.

On September 12, 2018, we entered into a Tax Matters Agreement with Honeywell (the “Tax Matters Agreement”), which governs the respective rights, responsibilities and obligations of Honeywell and us after the Spin-Off with respect to all tax matters (including tax liabilities, tax attributes, tax returns and tax contests).

The Tax Matters Agreement generally provides that ~~following the Spin-Off date of October 1, 2018,~~ we are responsible and will indemnify Honeywell for all taxes, including income taxes, sales taxes, VAT and payroll taxes, relating to Garrett for all periods, including periods prior to the completion date of the Spin-Off. Among other items, as a result of the mandatory transition tax imposed by the Tax Cuts and Jobs Act, ~~one of our subsidiaries~~Garrett ASASCO is required to make payments to a subsidiary of Honeywell in the amount representing the net tax liability of Honeywell under the mandatory transition tax attributable to us, as determined by Honeywell. We ~~currently~~ estimate that ~~our~~Garrett ASASCO’s total aggregate payments to Honeywell with respect to the mandatory transition tax will be $240 ~~million.~~million with $193 million in payments remaining as of December 31, 2019. Under the terms of the Tax Matters Agreement, ~~we are~~Garrett ASASCO is required to pay this amount in Euros, without interest, in five annual installments, each equal to 8% of the aggregate amount, followed by three additional annual installments equal to 15%, 20% and 25% of the aggregate amount, respectively. ~~Following~~Garrett ASASCO paid the ~~Spin-Off in October of 2018, we paid our~~ first annual installment in ~~that month. Subsequently, our~~October 2018 and subsequent annual installments ~~will be paid~~are due in April of each year. OnThe annual installment due on April 1, ~~2019, we paid our second annual installment of the Euro-equivalent of $18 million.~~2020 has been deferred to December 31, 2020 in agreement with Honeywell.

On July 17, 2020, we provided notice to Honeywell asserting that Honeywell has caused material breaches of the Tax Matters Agreement and that the Tax Matters Agreement is unenforceable.

Cash Flow Summary for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2019			2018			2020			2019
	(Dollars in millions)						(Dollars in millions)
Cash provided by (used for):
Cash (used for) provided by:
Operating activities		125			240			(95	)		37
Investing activities		(62	)		225			(64	)		(33	)
Financing activities		(62	)		(556	)		114			(17	)
Effect of exchange rate changes on cash		(7	)		(12	)		(3	)		(1	)
Net decrease in cash and cash equivalents	$	(6	)	$	(103	)	$	(48	)	$	(14	)

Cash ~~provided by~~used for operating activities ~~decreased~~increased by ~~$115~~$132 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 versus the prior year period, primarily due to an unfavorable impact from working capital of $58 million, a decrease in net income, net of deferred taxes of ~~$48~~$101 million, ~~and~~ an unfavorable impact of ~~$85~~$26 million ~~related~~in employee continuity awards and customer settlements primarily relating to ~~changes in~~warranty, pricing and quick saving, partially offset by a delayed Obligations payable to Honeywell ~~and Asbestos-related liabilities.~~of $53 million.

Cash ~~provided by~~used for investing activities ~~decreased~~increased by ~~$287~~$31 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 versus the prior year period, primarily due to an unfavorable ~~net cash impacts~~impact from ~~marketable securities investment activities period over period~~Expenditures for property, plant and equipment of ~~$291~~$12 million and an unfavorable impact from a prior year settlement received on the re-couponing of our cross currency swap contract of $19 million.

Cash ~~used for~~provided by financing activities ~~decreased~~increased by ~~$494~~$131 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 versus the prior year ~~period primarily related to significant financing activities prior to the Spin-Off.~~period. The ~~change~~increase was driven by ~~payments for related party notes payable~~a draw down on our Revolving Credit Facility of ~~$493 million, net changes to cash pooling and short-term notes of $201~~$119 million and the net decrease in invested deficit of $1,493 million during the nine months ended September 30, 2018 that did not recur during the nine months ended September 30, 2019. This was partially offset by the $1,631 million of proceeds from issuancepayments of long-term debt during the ~~nine~~six months ended ~~September~~June 30, ~~2018 that did not recur~~2020 totaling $2 million, as compared to $21 million of such payments during the ~~nine months ended September 30, 2019.~~prior year period.

Our business is typically moderately seasonal. Our primary North American customers historically reduce production during the month of July and halt operations for approximately one week in December; our European customers generally reduce production during the months of July and August and for one week in December; and our Chinese customers often reduce production during the period surrounding the Chinese New Year. Shut-down periods in the rest of the world generally vary by country. In addition, automotive production is traditionally reduced in the months of July, August and September due to the launch of parts production for new vehicle models. Accordingly, our results ~~reflect~~have historically reflected this seasonality. Our sales predictability in the short term might also be impacted by sudden changes in customer demand, driven by our OEM customers’ supply chain management.

We also typically experience seasonality in cash flow, as a relatively small portion of our full year cash flow is typically generated in the first quarter of the year and a relatively large portion in the last quarter. 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 the impact of incentive payments to management. Additionally, tax payments are due based on jurisdictional requirements which vary in timing throughout the year.

There have been no material changes to our contractual obligations from those described in our ~~2018~~2019 Form ~~10-K.~~10-K, other than with regards to the anticipated timing of our payments under the Subordinated Indemnity Agreement as described elsewhere in this Quarterly Report on Form 10-Q.

We believe our capital spending in recent years has been sufficient to maintain efficient production capacity, to implement important product and process redesigns and to expand capacity to meet increased demand. Productivity projects have freed up capacity in our manufacturing facilities and are expected to continue to do so. We expect to continue investing to expand and modernize our existing facilities and invest in our facilities to create capacity for new product development.

In light of the near-term impact of the COVID-19 pandemic, we have reviewed current capital expenditure programs and re-phased some programs related to future capacity expansion, and long-term development programs. We expect this to materially reduce new capital expenditures in 2020 without having an adverse effect on our ability to deliver long-term projects on time.

We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

The preparation of our Consolidated ~~and Combined~~ Interim Financial Statements in accordance with generally accepted accounting principles is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. Actual results could differ from our estimates and assumptions, and any such differences could be material to our financial statements.Our critical accounting policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our ~~2018~~2019 Form 10-K. As of ~~September~~June 30, ~~2019,~~2020, there were no significant changes to any of our critical accounting policies.

See Note 2, Summary of Significant Accounting Policies of the Notes to Consolidated ~~and Combined~~ Interim Financial Statements for further discussion of recent accounting pronouncements.

See Note 17, Commitments and Contingencies of the Notes to the Consolidated ~~and Combined~~ Interim Financial Statements for a discussion of environmental, asbestos and other litigation matters.

For a discussion of the Company’s quantitative and qualitative disclosures about market risks, see Item ~~7A.~~7A Quantitative and Qualitative Disclosures About Market Risks, in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. As of ~~September~~June 30, ~~2019,~~2020, there have been no material changes in this information.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

As previously disclosed, in the course of preparing our 2018 Form 10-K and our Consolidated and Combined Financial Statements for the year ended December 31, 2018, our management determined that there was a material weakness in our internal control over financial reporting relating to the supporting evidence for our liability to Honeywell under the Indemnification and Reimbursement Agreement. Specifically, we were unable to independently verify the accuracy of certain information Honeywell provided to us that we used to calculate the amount of our Indemnification Liability, including information provided in Honeywell's actuary report and the amounts of settlement values and insurance receivables. For example, Honeywell did not provide us with sufficient information to make an independent assessment of the probable outcome of the underlying asbestos proceedings and whether certain insurance receivables are recoverable. This material weakness has not yet been remediated.

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, ~~evaluated, as of September 30, 2019, the effectiveness~~conducted an evaluation of our disclosure controls and procedures, ~~(as~~as such term is defined ~~in Rules~~under Rule 13a-15(e) ~~and 15d-15(e)~~promulgated under the Securities Exchange ~~Act)~~Act of 1934, as amended (the “Exchange Act”). ~~Our~~Based on management's evaluation, our Chief Executive Officer and ~~Interim~~ Chief Financial Officer concluded that ~~as of September 30, 2019,~~ our disclosure controls and procedures were ~~not~~ effective at the reasonable assurance level as ~~a result~~ of ~~the material weakness in our internal control over financial reporting relating to the supporting evidence for our liability under the Indemnification and Reimbursement Agreement described above.~~

Our management is committed to maintaining a strong internal control environment. In response to the identified material weakness, our management, with the oversight of the Audit Committee of the Board of Directors and in consultation with our outside advisors, has taken steps to remediate the material weakness by working to obtain additional information about the Indemnification Liability through a dialogue and iterative process with Honeywell. That process has continued, and we and our advisors remain in communication with Honeywell on these issues.June 30, 2020.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

On December 2, 2019, the Company and its subsidiary, Garrett ASASCO Inc., filed a Summons with Notice in the Commercial Division of the Supreme Court of the State of New York, County of New York (the “NY Supreme Court”) commencing an action (the “Action”) against Honeywell, certain of Honeywell’s subsidiaries and certain of Honeywell’s employees for declaratory judgment, breach of contract, breach of fiduciary duties, aiding and abetting breach of fiduciary duties, corporate waste, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. On January 15, 2020, the Company and Garrett ASASCO Inc. filed a Complaint in the NY Supreme Court in connection with the Action. The lawsuit arises from the Subordinated Indemnity Agreement. The Company is seeking declaratory relief, compensatory damages in an amount to be determined at trial rescission of the Subordinated Indemnity Agreement, attorneys’ fees and costs, and such other and further relief as the Court may deem just and proper. Among other claims, Garrett asserts that Honeywell is not entitled to indemnification because it improperly seeks indemnification for amounts attributable to punitive damages and intentional misconduct, and because it has failed to establish other prerequisites for indemnification under New York law. Specifically, the claim asserts that Honeywell has failed to establish its right to indemnity for each and every asbestos settlement of the thousands for which it seeks indemnification. The Action seeks to establish that the Subordinated Indemnity Agreement is not enforceable, in whole or in part. On March 5, 2020, Honeywell filed a “Notice of Motion to Dismiss Garrett’s Complaint.” On June 18, 2020, by agreement of the parties, Honeywell withdrew its motion to dismiss and Garrett agreed to file an amended complaint on September 15, 2020.

We are involved in various other lawsuits, claims and proceedings incident to the operation of our businesses, including those pertaining to product liability, product safety, environmental, safety and health, intellectual property, employment, commercial and contractual matters and various other matters. Although the outcome of any such lawsuit, claim or proceeding cannot be predicted with certainty and some may be disposed of unfavorably to us, we do not currently believe that such lawsuits, claims or proceedings will have a material adverse effect on our financial position, results of operations or cash flows. We accrue for potential liabilities in a manner consistent with accounting principles generally accepted in the United States. Accordingly, we accrue for a liability when it is probable that a liability has been incurred and the amount of the liability is reasonably estimable.

Additionally, in connection with our entry into the Indemnification and Reimbursement Agreement, we will be required to make payments to Honeywell for a certain amount of Honeywell’s asbestos-related liability payments and accounts payable, primarily related to the 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 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.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under “Risk Factors” in our ~~2018~~2019 Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by any forward-looking statements contained in this report. ~~There~~

Other than the below, there have been no material changes in the risks affecting the Company since the filing of our ~~2018~~2019 Form 10-K. We are updating the risk factors included in our 2019 Form 10-K to include the following:

The COVID-19 pandemic has adversely impacted and is expected to further adversely impact our business and results of operations.

During 2020, the novel coronavirus disease, COVID-19, has spread across the world, including throughout Asia, the United States and Europe. The outbreak and government measures taken in response have also had a significant adverse impact, both direct and indirect, on our businesses and the economy. Our manufacturing facility in Wuhan, China was shut down for six weeks in February and March 2020 and we saw diminished production in our Shanghai, China facility for that same time period, which were the primary drivers of the decrease in sales in the Asia region during the three months ended March 31, 2020. While our facilities in China have re-opened, our manufacturing facilities in Mexicali, Mexico and Pune, India were shut down for five weeks in April and May 2020 and our manufacturing facilities in Europe operated at reduced capacity for the three months ending June 30, 2020. This significantly reduced our production volumes and had a material adverse impact on our business, results of operations and financial condition. We expect these disruptions will continue to negatively impact our revenues in 2020. We have also faced limitations on our employee resources, including because of stay-at-home orders from local governments, new Paid Time Off policies, employee furloughs, state-funded layoffs, sickness of employees or their families or the desire of employees to avoid contact with large groups of people. The pandemic has also diverted management resources and the prolonged work-from-home arrangements have created business continuity and cybersecurity risks.

Certain of our customers have been similarly affected and are experiencing closures and labor shortages. As a result of such closures, we have experienced weakened demand from our customers, who have not been able to accept orders or have delayed or canceled orders, which has negatively affected our revenues. If this trend continues, our revenues will continue to be negatively impacted.

The COVID-19 pandemic continues to rapidly evolve. The extent to which the outbreak impacts our business, liquidity and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the continued geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the European Union, China and other countries, the duration and extent of business closures or business disruptions and the effectiveness of actions taken to contain and treat the disease. If we or our customers experience prolonged shutdowns or other business disruptions beyond current expectations, our ability to conduct our business in the manner and within planned timelines could be materially and adversely impacted, and our business and financial results may continue to be adversely affected.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets, which has adversely impacted and may continue to adversely impact our stock price and our ability to access capital markets.

Our leveraged capital structure and liabilities to Honeywell may pose significant challenges to our overall strategic and financial flexibility and have a material adverse effect on our business, liquidity position and financial position.

As previously disclosed, on June 12, 2020, we entered into an amendment to the Credit Agreement to obtain relief from certain of our financial covenants, including our consolidated leverage ratio, in light of current and anticipated operating conditions. Notwithstanding the relief negotiated with our lenders, our leverage ratio remains high and we expect that it will remain so for at least the next several quarters. This high leverage is exacerbated by Garrett ASASCO’s significant liabilities and obligations to Honeywell under the Subordinated Indemnity Agreement and the Tax Matters Agreement. Our leveraged capital structure poses significant challenges to our overall strategic and financial flexibility and may impair our ability to gain or hold market share in the highly competitive automotive supply market. This leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage. In addition, our business has been and may continue to be significantly impacted by the COVID-19 pandemic and related response measures,which has had adverse consequences for our leverage. See “-The COVID-19 pandemic has adversely impacted and is expected to further adversely impact our business and results of operations.” above for more information. If we are unable to manage through these challenges, or if our liquidity position is otherwise impaired, including as a result of the COVID-19 pandemic and related response measures, we may be required to take further actions to manage our liabilities. Any actions in relation to liability management may materially reduce the value or trading price of our common stock, dilute existing holders of our common stock by the issuance of equity (whether through conversion of existing liabilities into equity or otherwise) or result in the cancellation of existing common stock.

Incorporated by Reference

Exhibit

Number

Description

Form

File No.

Exhibit

Filing
Date

Filed/ Furnished

Herewith

Description

Form

File No.

Exhibit

Filing
Date

Filed/ Furnished

Herewith

2.1+

Indemnification and Reimbursement Agreement, dated September 12, 2018, by and among Honeywell ASASCO Inc., Honeywell ASASCO 2 Inc., and Honeywell International Inc.

8-K

001-38636

2.1

9/14/2018

Indemnification and Reimbursement Agreement, dated September 12, 2018, by and among Honeywell ASASCO Inc., Honeywell ASASCO 2 Inc., and Honeywell International Inc.

8-K

001-38636

2.1

2/27/2020

2.2+

Tax Matters Agreement, dated September 12, 2018, by and between Honeywell International Inc., Garrett Motion Inc., and, solely for purposes of Section 3.02(g), 5.05 and 6.13(b), Honeywell ASASCO Inc. and Honeywell ASASCO 2 Inc.

8-K

001-38636

2.2

9/14/2018

8-K

001-38636

2.2

9/14/2018

2.3+

Separation and Distribution Agreement, dated September 27, 2018, between Honeywell and Garrett Motion Inc.

8-K

001-38636

2.1

10/1/2018

2.4+

Transition Services Agreement, dated September 27, 2018, between Honeywell and Garrett Transportation I Inc.

8-K

001-28636

2.2

10/1/2018

2.5+

Employee Matters Agreement, dated September 27, 2018, between Honeywell and Garrett Motion Inc.

8-K

001-28636

2.3

10/1/2018

2.6+

Intellectual Property Agreement, dated September 27, 2018, between Honeywell and Garrett Motion Inc.

8-K

001-28636

2.4

10/1/2018

2.7+

Trademark License Agreement, dated September 27, 2018, between Honeywell and Garrett Motion Inc.

8-K

001-28636

2.5

10/1/2018

3.1

Amended and Restated Certificate of Incorporation of Garrett Motion Inc.

S-8

333-227619

4.1

10/1/2018

Amended and Restated Certificate of Incorporation of Garrett Motion Inc.

S-8

333-227619

4.1

10/1/2018

3.2

Amended and Restated By-laws of Garrett Motion Inc.

8-K

333-227619

4.2

10/1/2018

Amended and Restated By-laws of Garrett Motion Inc.

S-8

333-227619

4.2

10/1/2018

4.1

Indenture, dated as of September 27, 2018, between Garrett LX I S.à r.l, Garrett Borrowing LLC, Garrett Motion Inc., the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, London Branch, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent

8-K

001-38636

4.1

10/1/2018

Indenture, dated as of September 27, 2018, between Garrett LX I S.à r.l, Garrett Borrowing LLC, the Company, the guarantors named therein, Deutsche Trustee Company Limited, as Trustee, Deutsche Bank AG, London Branch, as Security Agent and Paying Agent, and Deutsche Bank Luxembourg S.A., as Registrar and Transfer Agent

8-K

001-38636

4.1

10/1/2018

10.1

Agreement, dated as of September 2, 2019, between Garrett Motion Inc. and Alessandro Gili

Employment Contract, dated May 29, 2020, between Garrett Motion Sàrl, Garrett Motion Inc. and Sean Deason.

10.2

Letter Agreement, dated May 31, 2018, between Honeywell Transportation Systems and Peter Bracke

Addendum to Employment Agreement, dated June 8, 2020, between Garrett Motion Sàrl and Peter Bracke.

10.3

Addendum to Employment Contract, dated as of September 3, 2019, between Garrett Motion Sàrl and Peter Bracke

First Amendment, dated as of June 12, 2020, to the Credit Agreement dated as of September 27, 2018, among the Company, Garrett LX I S.à r.l., Garrett LX II S.à r.l., Garrett LX III S.à r.l., Garrett Borrowing LLC, Garrett Motion Sàrl (f/k/a Honeywell Technologies Sàrl), the other Loan Parties party thereto, the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

8-K

001-38636

10.1

6/12/2020

10.4

First Amendment, dated as of June 12, 2020, to the Indemnification and Reimbursement Agreement, dated as of September 12, 2018, among HHI, Honeywell International Inc., and Garrett ASASCO.

8-K

001-38636

10.2

6/12/2020

10.5

Form of Continuity Award Agreement.

8-K

001-38636

10.1

6/19/2020

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	82-4873189
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

La Pièce 16, Rolle, Switzerland	1180
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	Consolidated ~~and Combined~~ Interim Statements of Operations (Unaudited)	5
	Consolidated ~~and Combined~~ Interim Statements of Comprehensive Income (Loss) (Unaudited)	6
	Consolidated ~~and Combined~~ Interim Balance Sheets (Unaudited)	7
	Consolidated ~~and Combined~~ Interim Statements of Cash Flows (Unaudited)	8
	Consolidated ~~and Combined~~ Interim Statements of Equity (Deficit) (Unaudited)	9
	Notes to Unaudited Consolidated ~~and Combined Interim~~ Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2524
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	4039
Item 1.	Legal Proceedings	4039
Item 1A.	Risk Factors	4039
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		43


Fiscal Quarter Ending		Consolidated Net Secured Leverage Ratio
June 30, 2020		5.75 to 1.00
September 30, 2020		9.25 to 1.00
December 31, 2020		10.75 to 1.00
March 31, 2021		11.75 to 1.00
June 30, 2021		6.50 to 1.00
September 30, 2021		4.50 to 1.00
December 31, 2021		4.25 to 1.00
March 31, 2022		3.75 to 1.00
June 30, 2022		3.50 to 1.00

		~~September 30, 2019~~
~~Weighted-average lease term (in years)~~		~~6.31~~
~~Weighted-average discount rate~~		~~6.37~~


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


1.	changes in the automotive industry and economic or competitive conditions;


~~18.~~19.	risks related to international operations and our investment in foreign markets, including risks related to the withdrawal of the United Kingdom from the European Union ~~or Brexit, and changes to tariff regimes;~~(“Brexit”);

	Three months Ended September 30, 2018 ⁽¹⁾
	OEM		Aftermarket		Other		Total
United States	$	83	$	44	$	2	$	129
Europe		381		37		12		430
Asia		196		12		6		214
Other International		6		5		—		11
	$	666	$	98	$	20	$	784

	Nine months Ended September 30, 2018 ⁽¹⁾
	OEM		Aftermarket		Other		Total
United States	$	257	$	132	$	4	$	393
Europe		1,277		118		42		1,437
Asia		655		38		20		713
Other International		17		16		—		33
	$	2,206	$	304	$	66	$	2,576

	June 30, 2020	December 31, 2019
Weighted-average lease term	5.83	6.30
Weighted-average discount rate	6.23	6.36

	September 30, 2019
	Carrying Value		Fair Value
Long-term debt and related current maturities	$	1,481	$	1,492

	Garrett Motion Inc.

Date: ~~November 8, 2019~~July 30, 2020	By:	/s/ Olivier Rabiller
		Olivier Rabiller
		President and Chief Executive Officer

Date: ~~November 8, 2019~~July 30, 2020	By:	/s/ ~~Peter Bracke~~Sean Deason
		~~Peter Bracke~~Sean Deason
		~~Interim~~Senior Vice President and Chief Financial Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company