Research, Development and Engineering

9 Months Ended

Sep. 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 September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(Dollars in millions)
Research and development costs	$	46	$	49	$	136	$	138
Engineering-related expenses, net (1)	(13)		(6)		(18)		(10)
	$	33	$	43	$	118	$	128

(1) Engineering-related expenses are net of customer reimbursements and costs capitalized from contractual guarantees of reimbursement of $23 million and $17 million for the three months ended September 30, 2025 and 2024, respectively, and $48 million and $41 million for the nine months ended September 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 September 30, 2025 and December 31, 2024, $49 million and $29 million, respectively, of such contractually reimbursable costs were capitalized. These amounts are recorded within Other current assets and Other assets in the Consolidated Interim Balance Sheet.