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 November 15, 2022

United States Securities and Exchange Commission

Division of Corporation Finance

Office of Manufacturing

100 F Street, N.E.

Washington, DC 20549

Attn:    Andrew Blume, Staff Accountant

Kevin Woody, Accounting Branch Chief

Re: Garrett Motion Inc.

       Form 10-K for the Fiscal Year Ended December 31, 2021

       Filed February 14, 2022

       File No. 001-38636

Dear Mr. Blume and Mr. Woody:

This letter is in response to your letter dated October 19, 2022 (the “Comment Letter”) regarding our Form 10-K for the fiscal year ended December 31, 2021. Each of the comments of the Staff of the Division of Corporation Finance (the “Staff”) is set forth below, followed by the corresponding response. For ease of reference, the headings and paragraphs below correspond to the headings and comments in the Comment Letter. Each response of the Company is set forth in ordinary type beneath the corresponding comment of the Staff of the Division of Corporation Finance (the “Staff”) from the Comment Letter appearing in italics.

Form 10-K for the Fiscal Year Ended December 31, 2021

Notes to Consolidated Financial Statements

Note 1. Background and Basis of Presentation, page 76

1.Please tell us, if true, how you determined you have a single operating and reportable segment. In particular, clarify why your geographic regions, channels, or product categories do not qualify as separate operating and reportable segments. Ensure you identify for us your chief operating decision maker ("CODM") and describe the information regularly provided to the CODM and board of directors, including how frequently it is prepared, and the level of information used for budgets and budget-to actual comparisons. Also tell us the titles and roles of individuals who report to the CODM, how often the CODM meets with his/her direct reports, the financial information the CODM reviews to prepare for these meetings, and the financial information discussed. Refer to ASC 280-10-50-1 through 50-9. As required by ASC 280-10-50-21, ensure you disclose in future filings the factors used to identify your reportable segments, including whether operating segments have been aggregated.

Response:

In response to the Staff’s comment, the Company respectfully advises the Staff that in determining that we have one operating and reportable segment, we considered the guidance in ASC 280 which employs a management approach in determining a company’s operating and reportable segments.

Following the guidance in ASC 280, we concluded that our CODM is the Company’s Chief Executive Officer (“CEO”). In making this determination, we considered the role performed by the CEO, which includes allocating resources to and assessing the performance of the Company. In particular, this includes but is not limited to operational matters such as setting the level of investment in information technology and new product development, approving significant customer program bids or agreements, entering into significant facility leases, approving all capital expenditures not within the annual budget, hiring and firing key personnel, and determining employee compensation. Although the CEO is supported by a senior leadership team comprising his direct reports, this group (i.e., the CEO and his direct reports) does not meet the criteria of the CODM as stated in ASC 280-10-50-5 since the direct reports, unlike the CEO, do not make the key operating decisions or assess the performance of the Company.

Each of the CODM’s direct reports and their respective primary roles are as follows:

•    Chief Financial Officer – company-wide financial management and oversight.

•    Chief Human Resources Officer – management of the Company’s global human resources.

•    General Counsel – oversight of company-wide legal matters.

•    Chief Technology Officer – management and oversight of global product research and development.

•    Senior Vice President, Global Customer Management, Japan & Korea – management of worldwide sales and commercial matters, as well as oversight of business administration and operations in Japan and Korea.

•    Senior Vice President, Marketing & Product Management – oversight of the marketing and product life-cycle management of the Company’s various product categories.

•    President, Global Aftermarket, India & Brazil – management of the worldwide aftermarket operations including growth of the distributor network, as well as oversight of business administration and operations in India and Brazil.

•    Senior Vice President, Chief Digital & Information Officer – oversight of the Company’s digital and technological resources.

•    Senior Vice President, Integrated Supply Chain – management of the Company’s global supply chain including procurement, manufacturing operations and logistics.

•    Vice President, M&A and Business Development – oversight of global business development.

•    Vice President and General Manager, North America – management of business administration and operations, as well as customer relations in North America.

•    Vice President and General Manager, China – management of business administration and operations, as well as customer relations in China.

None of the CODM’s direct reports have any product, channel (based on the Company’s main product categories described below) or regional profit responsibility. The direct reports with geographical responsibility are focused on developing customer relationships, overseeing the statutory business administration, and managing local operations cross-functionally with the global functional head of the respective areas (e.g., with the Senior Vice President, Integrated Supply Chain for plant operations, with the Senior Vice President, Global Customer Management for commercial matters, and with the Chief Human Resources Officer for employee relations). They do not manage or oversee the profitability of the products sold or manufactured in their respective geographical regions.

Each month, the CODM holds a three-day session with his direct reports and their respective teams whereby updates are provided by the direct reports and their teams on their respective areas and key projects. Areas covered include human resources, inventory and operations planning, finance, IT, quality, etc., and include topics for discussion, escalation to the CODM or where a decision is required by the CODM (e.g., status of product development projects, approval of capital expenditures, feedback on product quality discussions with suppliers and customers). The Company’s financial information is discussed only during the finance session and is presented by the Chief Financial Officer. The review of financial information including latest estimates versus budget and versus prior year is presented as part of these monthly sessions:

•    Revenue by the Company’s main product categories (Gasoline, Diesel, Commercial Vehicles and Aftermarket, each referred to as a Global Business Enterprise or “GBE”), and geographical region (Europe, North America, South Korea, Japan, China, India, and Brazil). Information also includes total volumes by GBE. New technology such as E-turbo is embedded within the various GBEs with no disaggregated information provided. Other new technologies such as fuel cell and connected vehicle are focused on product development with de minimis revenues.

•    Gross profit and operating income, which is prepared on a consolidated basis and not developed by product category or on a geographical basis. There is no gross profit, operating income or other profitability metrics presented by product category or geographical region.

•    Non-GAAP measures for adjusted EBITDA, adjusted EBITDA margin and adjusted free cash flow (collectively referred to as the “Non-GAAP Measures”), all of which are consistent with the Company’s external reporting and reflect the bonus metrics used for employee incentive compensation. The Non-GAAP Measures are developed and presented only on a consolidated basis with no additional disaggregation.

•    Financial “risks and opportunities” such as the effects of changes in the Euro-to-US Dollar foreign currency exchange rates, potential impacts from inflation, and the status of key actions to be undertaken for the quarter including but not limited to customer pricing negotiations, recovery of premium freight costs, supplier negotiations on material pricing, and actions on employee-related and other fixed costs (e.g., timing of new hires, utilization of outsourced services, marketing costs).

•    Status of customer collections and past-due receivables based on the amounts and aging of past dues.

•In the first month of the quarter, a review of the prior quarter’s results versus budget and versus prior year is also presented. The review covers the quarterly revenues by GBE and geographical region, total volumes by GBE, as well as gross profit, operating income and the Non-GAAP Measures, all of which aside from revenues and volumes are presented and reviewed only on a consolidated basis with no disaggregation by product category or geographical region. There is no additional information presented in the review of quarterly results that is not otherwise presented on a monthly basis during the finance sessions.

Although disaggregated revenue information is provided to the CODM, this is primarily to enable him to understand customer needs and speak knowledgeably to investors, customers and suppliers about the market trends in the industry. The CODM utilizes consolidated financial information, along with this knowledge of industry projections, market trends and customer needs, to make resource allocation decisions and assess the performance of the Company as there are many elements of gross profit and operating income that are incurred on a company-wide basis and not allocated to GBEs or geographical regions, such as third-party logistic costs, supplier negotiations, product engineering and development costs as well as the costs of global or corporate functions and IT infrastructure.

The annual budget that is presented to the CODM is based on a similar level of information presented in the monthly finance sessions with the inclusion of material margin by GBE (which is not included in the monthly finance sessions). Material margin reflects revenues less the direct cost of the associated inventory, and does not include other elements of gross profit such as freight costs, customs duties, supplier negotiations, variable costs and plant overheads. These elements, along with other elements of operating income and including the aforementioned costs, are presented on a consolidated basis as the budgeted amounts are prepared only on a consolidated basis without any allocation to products or geographical regions. The estimates of the Non-GAAP Measures are likewise prepared and presented only on a consolidated basis. The Company notes that the disaggregated material margin estimates are presented to the CODM as part of the annual budget review to supplement the CODM’s understanding of market trends, customer pricing, supplier costs and opportunities for value engineering. Such disaggregated material margin information is not presented, updated or reviewed versus budget during the monthly finance sessions.

The Board of Directors (the “Board”) meets in regular session on average five to six times a year. The financial information presented to the Board at each regular session includes the latest estimates versus budget and versus prior year, as well as a quarterly review of actual results (where applicable), and is at a similar level to what is reviewed by the CODM at the monthly finance sessions. The annual budget presented to the Board likewise contains revenues by GBE and geographical region, as well as material margin by GBE, without additional disaggregation of the budgeted financial information.

The criteria for determining operating segments under ASC 280-10-50-1 include the availability of discrete financial information and the regular review of the component’s operating results by the CODM. While ASC 280 does not define “discrete financial information”, it generally involves some measure of profitability that can be readily distinguished from other components of the organization. The Company notes that the financial information provided to the CODM contains revenues disaggregated by GBE and geographical region, with no disaggregated measure of any other financial metrics aside from material margin by GBE. The Company believes that revenue and material margin alone is not sufficient for the CODM to assess performance and allocate resources considering that the information is provided to the CODM for purposes of understanding industry and market trends, that material margins are not reflective of the Company’s supply chain and manufacturing operations, nor the actual relative profitability of different product categories, channels, or geographical regions, and that the primary measures of profitability that the CODM focuses on are the Non-GAAP Measures, which are presented and available only on a consolidated basis.

The Company also considered the performance metrics used in the compensation of its employees. As disclosed in the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 15, 2022, the metrics used in both the Short-Term Incentive Compensation Plan and Long-Term Incentive Plan for each of the Company’s executive officers are the Non-GAAP Measures which are based on the Company’s consolidated performance. The same metrics are applicable to other senior leaders reporting to the CODM as well as other employees to the extent that they are eligible to participate in these variable compensation plans.

In consideration of all of the information above, the Company has concluded that we have one operating and reportable segment based on the guidance in ASC 280. The Company has disclosed the factors used to identify our reportable segments within its Q3 2022 Quarterly Report on Form 10-Q filed with the SEC on October 26, 2022, and will include such disclosure in future filings of our Form 10-K as well:

We evaluate segment reporting in accordance with ASC 280, Segment Reporting. We concluded that Garrett operates in a single operating segment and a single reportable segment based on the operating results available and evaluated regularly by the chief operating decision maker (“CODM”), who is our Chief Executive Officer, to make decisions about resource allocation and performance assessment. The CODM makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the Company’s products across channels and geographies.

Note 2. Plan of Reorganization, page 77

1.We note your disclosure on pages 79 and 81 that you recognized a gain of $502 million during fiscal year 2021 related to the settlement of claims with Honeywell International Inc. ("Honeywell"). Considering Honeywell, your former parent, appears to be a related party, tell us why you recorded the gain within income and not as a capital transaction under the guidance in ASC 470-50-40-2. Citing authoritative accounting guidance, also tell us how you determined the $577 million value attributable to your Series B preferred stock upon issuance.

Response:

In response to the Staff’s comment, the Company respectfully advises the Staff that from October 1, 2018 (the “Spin Off”), the date the Company was spun-off from its former parent, Honeywell International Inc. (“Honeywell”), and until the Company’s emergence from Chapter 11 of the bankruptcy code (“Chapter 11”) on April 30, 2021 (“Emergence”), Honeywell was not considered to be a related party under Item 404 of Regulation S-K or under ASC 850-10-20. Honeywell ceased having an equity interest in the Company at the Spin Off when the Company