Garrett Motion's Dual-Engine Strategy: Shareholder Payouts & EV Pivot

PLYMOUTH, MI – December 03, 2025

In a move that telegraphs profound confidence in its financial trajectory, automotive technology leader Garrett Motion Inc. (Nasdaq: GTX) has announced a new $250 million share repurchase program for 2026. While buybacks are common tools in a company’s financial arsenal, this particular announcement is more than a simple capital return; it's a key chapter in a larger narrative of strategic transformation. For a company whose stock has already doubled over the past year, this move serves as a powerful affirmation of its dual-engine strategy: leveraging the robust cash flow from its legacy turbocharging business to both generously reward shareholders and aggressively fund its pivot into the zero-emission vehicle (ZEV) landscape.

A Foundation of Financial Fortitude

The decision to authorize a quarter-billion-dollar buyback is not made in a vacuum. It is rooted in a foundation of formidable financial performance. Garrett Motion has consistently demonstrated an impressive ability to generate cash and deliver on profitability. The company's third-quarter 2025 results, for example, saw earnings per share of $0.38, handily beating analyst forecasts by nearly 19%. This financial vigor is most evident in its free cash flow (FCF). The company reported an adjusted free cash flow of $121 million in the second quarter of 2025 alone and has raised its full-year outlook to a range of $330 million to $410 million.

This isn't a recent trend but the result of disciplined operations. In 2023, Garrett generated a remarkable $422 million in adjusted free cash flow, which it promptly put to work by returning a combined $793 million to stakeholders through common and preferred stock buybacks. The new program is a continuation of this disciplined approach, guided by a clear and ambitious target. As President and CEO Oliver Rabiller stated, “Returning capital to shareholders remains a cornerstone of Garrett’s financial framework… Our strong cash flow generation enables us to invest in advanced turbocharging and zero-emission technologies while aiming to return 75% of our Adjusted Free Cash Flow to shareholders over time.”

This explicit 75% target is a crucial piece of the puzzle. It provides investors with a clear framework for the company's capital allocation priorities, signaling that shareholder returns are not an afterthought but a core component of its financial identity. Underlying this confidence are financials that analysts consider exceptionally healthy, reflected in metrics like a Piotroski F-Score of 8—a signal typically associated with strong operational performance and a low probability of earnings manipulation.

The Strategic Balancing Act

What makes Garrett’s story compelling is the delicate and deliberate balance it strikes. While dedicating a significant portion of its cash flow to shareholders, the company is simultaneously executing one of the most critical pivots in its 70-year history. The capital being returned is generated primarily by its world-class expertise in turbocharging—a technology that has defined the internal combustion engine era. Yet, the company is astutely using that strength to fund its own evolution.

More than 50% of Garrett’s research and development budget is now allocated to zero-emission technologies, a clear indicator of where its strategic focus lies. The company has set an ambitious goal of generating $1 billion in revenue from its ZEV portfolio by 2030. This isn't just aspirational; it's backed by tangible innovation across key growth areas:

• Hydrogen Power: Garrett is a leader in developing high-speed, high-efficiency fuel cell compressors, a critical component for maximizing the range and durability of hydrogen-powered vehicles. It has even launched the first turbocharger for hydrogen-powered internal combustion engines, showcasing its ability to bridge technological pathways.
• Electric Propulsion: The company is advancing sophisticated 3-in-1 E-Powertrain systems that integrate the motor, inverter, and reducer into a compact unit. This not only saves space and weight but also aims to reduce reliance on rare-earth minerals, addressing a key supply chain vulnerability in the EV industry.
• Thermal Management: Recognizing that battery performance is paramount, Garrett is developing advanced E-Cooling compressors to provide superior thermal management for EV batteries and cabins, a crucial element for safety, range, and longevity.

This commitment is global, with new innovation centers in China and strategic partnerships, such as the one with SinoTruk to co-develop a next-generation E-powertrain for heavy-duty trucks. The company is not just waiting for the future; it is actively building the components that will power it.

Setting the Pace in a Shifting Sector

In the fiercely competitive automotive supplier landscape, every company is grappling with the EV transition, but their capital allocation strategies vary. Garrett's explicit 75% FCF return target sets it apart from many peers, including its chief rival, BorgWarner. While BorgWarner also engages in significant buybacks and dividends, Garrett’s stated percentage offers a level of transparency and commitment that resonates strongly with the market. It sends an unambiguous message: we are confident enough in our cash-generating ability to make a firm commitment to our shareholders, even as we invest heavily in R&D.

This strategy appears to be a key factor in the market's enthusiastic reception. Institutional ownership stands at a remarkably high 94.19%, with major players like Geode Capital Management and Vanguard Group increasing their holdings. Analyst sentiment is overwhelmingly positive, with a consensus “Buy” rating and price targets that suggest further upside. The stock's 100% return over the past year is the ultimate market verdict on this dual strategy.

At the same time, the repurchase program is structured with prudent flexibility. The board retains the discretion to modify, suspend, or terminate the plan at any time. This isn't a sign of wavering commitment but rather of sophisticated corporate governance. It provides management with the agility to navigate market volatility or pivot capital towards a compelling, unforeseen strategic opportunity—ensuring that the long-term health of the company remains the paramount objective. This balance of firm commitment and operational flexibility is the hallmark of a management team that understands the complexities of navigating a profound industry shift.