Research, Development and Engineering

6 Months Ended

Jun. 30, 2025

Note 4. Research, Development and Engineering

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 June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
	(Dollars in millions)
Research and development costs	$	47	$	46	$	90	$	89
Engineering-related expenses, net of customer (reimbursements) (1)	(2)		(5)		(5)		(4)
	$	45	$	41	$	85	$	85

(1) Engineering-related expenses include customer reimbursements of $13 million and $16 million for the three months ended June 30, 2025 and 2024, respectively, and $25 million and $24 million for the six months ended June 30, 2025 and 2024, respectively.

Certain engineering expenses related to long-term supply arrangements are capitalized when defined criteria, such as the existence of a contractual guarantee for reimbursement, are met. As of June 30, 2025 and December 31, 2024, $40 million and $29 million, respectively, of such contractually reimbursable costs were capitalized. These amounts are recorded within Other current assets in the Consolidated Interim Balance Sheet.