ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to help you understand the business operations and financial condition of the Company for the year ended December 31, 2025. This discussion should be read in conjunction with Item 8. Financial Statements and Supplementary Data. Our MD&A is presented in seven sections:
• Executive Overview
• Consolidated Results of Operations
• Results of Operations by Segment
• Liquidity and Capital Resources
• Off-Balance Sheet Arrangements
• Significant Accounting Policies and Critical Accounting Estimates
• Recently Issued Accounting Pronouncements
Executive Overview
Our Business
Aptiv is a global industrial technology company focused on enabling a more automated, electrified and digitalized future. We deliver flexible and scalable solutions that support our customers’ transition to an increasingly software-defined future. Our technologies reach from sensor to cloud, including the hardware and software necessary to support automotive and other industries on a global basis. Our Advanced Safety and User Experience segment provides advanced software and services, intelligent sensors and high-performance compute platforms; our Engineered Components Group segment provides connection systems, high-performance interconnects, and cable management and protection solutions; and our Electrical Distribution Systems segment provides low voltage and high voltage power, signal and data distribution.
We are one of the largest vehicle technology suppliers and our customers include the 25 largest automotive original equipment manufacturers (“OEMs”) in the world, as well as many of the leading aerospace and defense companies and global telecom operators.
In December 2024, Old Aptiv (as defined below) completed its previously announced reorganization transaction (the “Transaction,” or the “reorganization transaction”), in which Old Aptiv established a new publicly-listed Jersey parent company, Aptiv Holdings Limited (“New Aptiv”), which is resident for tax purposes in Switzerland. As a result of the Transaction, all issued and outstanding ordinary shares of Old Aptiv were exchanged on a one-for-one basis for newly issued ordinary shares of New Aptiv. Following consummation of the Transaction, holders of Old Aptiv shares became ordinary shareholders of New Aptiv, Old Aptiv became a wholly-owned subsidiary of New Aptiv and New Aptiv was renamed “Aptiv PLC.” The previous publicly-listed Jersey parent company, which was an Irish tax resident, is referred to as “Old Aptiv” throughout this Annual Report on Form 10-K. New Aptiv’s ordinary shares are publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “APTV,” the same symbol under which the Old Aptiv shares were previously listed. Aptiv PLC remains a public limited company incorporated under the laws of Jersey, and continues to be subject to U.S. Securities and Exchange Commission reporting requirements.
In December 2024, following the completion of the Transaction, Old Aptiv merged with and into Aptiv Swiss Holdings Limited (“Aptiv Swiss Holdings”), a newly formed Jersey incorporated private limited company, and a direct, wholly-owned subsidiary of New Aptiv, with Aptiv Swiss Holdings surviving as a direct, wholly owned subsidiary of New Aptiv, and Old Aptiv ceasing to exist. Except as otherwise noted, all property, rights, privileges, powers and franchises of Old Aptiv vested in Aptiv Swiss Holdings, and all debts, liabilities and duties of Old Aptiv became debts, liabilities and duties of Aptiv Swiss Holdings. As a result of the Transaction described above, there were no material changes in Aptiv PLC’s operations or governance.
In connection with the Transaction, New Aptiv assumed Old Aptiv’s long-term incentive plans and its existing obligations in connection with awards granted thereunder, and Aptiv Swiss Holdings (i) entered into a supplemental indenture to each indenture in which Aptiv Swiss Holdings assumed all of Old Aptiv’s obligations under each series of Old Aptiv’s outstanding Notes and (ii) entered into an assumption and/or supplement agreement relating to the Credit Agreement in which New Aptiv assumed all of Old Aptiv’s obligations under the Credit Agreement as the “parent entity” thereunder. In addition, New Aptiv (i) entered into a supplemental indenture to each indenture in which New Aptiv guaranteed the outstanding Notes and (ii) entered into a guarantee joinder relating to the Credit Agreement in which New Aptiv guaranteed the obligations under the Credit Agreement. Following the reorganization transaction, Aptiv Swiss Holdings (i) replaced Old Aptiv as a guarantor of the borrowers’ obligations under the Credit Agreement, and (ii) succeeded to Old Aptiv as an obligor under the senior notes and the
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junior notes, and New Aptiv became a guarantor under the Credit Agreement (and will act as the “parent entity” thereunder) and the indentures.
Planned Spin-off of Electrical Distribution Systems Business
On January 22, 2025, we announced our intention to pursue a separation of our Electrical Distribution Systems business into a new, independent publicly traded company, through a transaction expected to be treated as a tax-free spin-off to its shareholders (the “Separation”). The Company plans to complete the Separation by April 1, 2026, subject to customary closing conditions. The new publicly traded Electrical Distributions Systems spin-off company will be named Versigent, and will trade on the NYSE under the symbol “VGNT” following the distribution date.
During the year ended December 31, 2025, the Company incurred costs of approximately $178 million related to the Separation. These costs, which are included in selling, general and administrative expense within the consolidated statements of operations, are primarily related to third-party professional fees associated with planning the Separation. The Company expects to continue to incur additional expenses related to the Separation through the completion of the transaction.
In connection with the Separation, in the first quarter of 2025, Aptiv realigned its business into three reportable operating segments: Advanced Safety and User Experience, Engineered Components Group and Electrical Distribution Systems. Prior period amounts have been adjusted retrospectively to reflect the change in reportable operating segments, consistent with the current year presentation, throughout the audited consolidated financial statements contained herein.
Commencing with the first Quarterly Report on Form 10-Q of 2026, Aptiv will rename its Advanced Safety and User Experience segment to Intelligent Systems, and will rename its Engineered Components Group segment to Engineered Components. There is no impact to the composition of either segment.
Business Strategy
We believe the Company is well-positioned to benefit from key secular trends, including automation, electrification and digitalization, that are driving transformation in the automotive industry and expanding in scope to impact a broader range of end markets, including aerospace and defense, telecom and datacom, and diversified industrials. In particular, we believe automotive industry growth will increasingly be driven by the accelerating transition to software-defined vehicles, the continued commercialization of active safety and adoption of autonomous driving technologies, and enhanced in-cabin experiences and connected services, all of which require advanced software, computing platforms and optimized hardware and architectures to support them. Through our robust operating model, we have successfully created a competitive cost structure, while investing in research and development to further innovate and grow our product offerings across multiple industries, and have re-aligned our manufacturing footprint into an efficient, low-cost regional service model, focused on increasing our profit margins.
Our 2025 performance reflects our solid execution and cost reduction initiatives, despite the global inflationary environment and evolving geopolitical issues, including global trade impacts from tariffs. Our recent financial and business achievements include the following:
• Generating new business awards of approximately $27 billion, based on expected volumes and prices, validating our industry-leading portfolio of advanced technologies tied to the secular growth drivers across industries;
◦ Driving more than 75% of new business awards in China with local OEM customers;
• Delivering record revenue, with strong revenue growth over the prior year despite the dynamic vehicle production environment, helped by strong growth in other industrial end markets;
• Successfully mitigating substantially all significant tariff-related exposures during the year;
• Generating cash flow from operations of $2.2 billion and delivering $1.2 billion of operating income (record adjusted operating income of $2.5 billion), demonstrating strong operating execution in the face of continuing material and labor cost inflation;
◦ Delivering operating income margin of 5.8% (adjusted operating income margin of 12.1%), driven by strong operating performance and cost reduction initiatives;
• Repurchasing 22.8 million shares with a value of $1.5 billion, including incremental share deliveries under the terms of the Company’s accelerated share repurchase program;
• Leveraging our investment grade credit metrics to further enhance our capital structure and increase our financial flexibility;
◦ Opportunistically deploying capital to repurchase $300 million aggregate principal amount of certain senior notes and repaying the outstanding principal balance of $250 million on the Term Loan A;
◦ Extending the maturity of our existing Credit Agreement to March 2030;
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• Commencing partnerships with leading technology companies to commercialize our intelligent edge portfolio, including ServiceNow, Capgemini, Robust.AI, Vecna Robotics, Nota AI, SiMa.ai, DEEPX and others;
• Continuing our relentless focus on cost structure and operational optimization;
◦ Maximizing our operational flexibility and profitability at all points in the normal automotive business cycle, by having approximately 97% of our hourly workforce based in best cost countries, and approximately 31% of our hourly workforce composed of contingent employees; and
• Fully preparing our Electrical Distribution Systems business for separation into an independent, publicly traded company, including post-separation strategies and growth opportunities for both Aptiv and Versigent, and remaining on-track to complete the Separation by April 1, 2026.
Our strategy is to build on these accomplishments and continue to develop and manufacture innovative, market-relevant products for a diverse base of customers around the globe, and leverage our lean and flexible cost structure to achieve strong and disciplined earnings growth and returns on invested capital. Through our culture of innovation and world class engineering capabilities, we intend to employ our rigorous, forward-looking product development process to deliver new technologies that provide solutions to our customers. We are committed to creating value for our shareholders, including through the continued return of capital through share repurchases. Our key strategic priorities include:
Commercializing the evolution towards software-defined components and systems across multiple industries, including automotive . We expect the trends of automation, electrification and digitalization to create growth opportunities, as they drive similar product requirements for mission-critical applications across multiple industries, namely increased demand for advanced software and optimized hardware. Intelligent, software-defined solutions, such as increasingly capable automated driving technologies, offer significant societal benefits and create long-term growth opportunities for our product offerings, including new customers such as mobility providers, telecommunications network operators and smart cities. Growth opportunities across the automotive and other industries will be driven by increased hardware and software content, greater computing power and software requirements, enhanced solutions for lifecycle management and connectivity, and continued electrification. We believe the complexity of these systems will also require ongoing software support services, as they will be continuously upgraded with new features and performance enhancements.
As part of our strategy to harness the full potential of connected intelligent systems across industries, strengthen our capabilities in software-defined mobility and enable advanced smart vehicle architecture changes, we acquired Wind River Systems, Inc. (“Wind River”) in December 2022. Wind River is a global leader in delivering software for the intelligent edge for multiple industries, including automotive, by leveraging mixed-criticality software products and solutions enabling customers to develop in the cloud, deploy over-the-air and run and manage software at the vehicle edge. As described in Note 7. Intangible Assets and Goodwill to the audited consolidated financial statements contained herein, although the timeline has been extended for the broader transition to more fully software-defined vehicles, as evidenced by certain delays in our OEM customers’ software-defined vehicle investment strategies, we continue to believe we are well-aligned with long-term key industry technology trends and continue to make investments to further develop and grow our product offerings in this space.
We are also continuing to develop market-leading automated driving solutions, such as automated driving software, sensing and perception technologies enhanced through artificial intelligence and machine learning, as well as the underlying architecture technologies capable of supporting safety-critical applications. We believe we are well-aligned with industry technology trends that will help to support sustainable future growth in this space and have partnered with leaders in their respective fields to advance the pace of development and commercialization of these emerging technologies.
In March 2020, we completed a transaction with Hyundai Motor Group (“Hyundai”) to form Motional AD LLC (“Motional”), a joint venture focused on the design, development and commercialization of autonomous driving technologies. Although we believe our strategic partnerships have us well-aligned with industry technology trends in these evolving areas, the timeline necessary to produce commercially viable autonomous vehicles has been extended and is still subject to significant uncertainty, which resulted in additional funding requirements for Motional. In April 2024, Aptiv and Hyundai entered into an agreement to restructure Aptiv’s ownership interest in Motional and for Hyundai to provide additional funding to Motional, which also eliminated any requirements for additional future funding from Aptiv. These transactions, which were completed in May 2024, resulted in the reduction of our common equity interest in Motional from 50% as of December 31, 2023 to approximately 15%. In May 2025, Hyundai provided additional funding to Motional, further reducing Aptiv’s common equity interest in Motional from 15% as of March 31, 2025 to approximately 13% as of December 31, 2025. The total gains recorded as a result of these transactions were approximately $33 million ($0.15 per diluted share) and approximately $641 million ($2.50 per diluted share) during the years ended December 31, 2025 and 2024, respectively, within net gain on equity method transactions in the consolidated statements of operations. Refer to Note 5. Investments in Affiliates to the audited consolidated financial statements contained herein for further information on these transactions.
Evolving technology areas related to the trends of automation, electrification, and digitalization present numerous risks, including high development costs, uncertainty regarding the timing of customer and consumer adoption, increased competition
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from entrants outside our traditional industries, and evolving regulations, such as the guidance for automated driving systems published by the U.S. Department of Transportation. While we believe we are well-positioned across our markets, the high development cost of various technologies may result in a higher risk of exposure to the success of new or disruptive technologies different than those being developed by us or our partners, and ultimately there can be no assurance that we will be successful in our efforts to develop these technologies.
Leveraging our engineering and technological capabilities . We seek to leverage our strong product portfolio tied to the broader trends of automation, electrification and digitalization that are transforming multiple industries with our global footprint to increase our revenues, as well as committing to substantial annual investment in research and development to maintain and enhance our leadership in new solutions across each of our product lines.
Targeting the right business with the right customers . We intend to be strategic in our pursuit of new business and customers in order to achieve disciplined, above-market growth. We conduct in-depth analysis of market share and product trends by region in order to prioritize research, development and engineering spend for the customers that we believe will be successful. Collaboration with customers in our 11 major technical centers around the world helps us develop innovative product solutions designed to meet their needs. As more OEMs design vehicles for global platforms, where the same vehicle architecture is shared among different regions, we are well suited to provide global design and engineering support while manufacturing these products for a specific regional market.
Capitalizing on our scale, global footprint and established position in key growth markets . We intend to generate sustained growth by capitalizing on the breadth and scale of our operating capabilities. Our global footprint provides us important proximity to our customers’ manufacturing facilities and allows us to serve them in every region in which they operate. We anticipate that we will continue to build upon our extensive geographic reach to capitalize on growing automotive markets, particularly in China. In addition, our presence in best cost countries positions us to realize incremental margin improvements as the global balance of automotive production shifts towards key growth markets.
Leveraging our lean and flexible cost structure to deliver profitability and cash flow . We recognize the importance of maintaining a lean and flexible cost structure in order to deliver stable earnings and cash flow in a cyclical industry. Our focus is on maximizing and optimizing manufacturing output to meet increasing production requirements with minimal additions to our fixed-cost base. Additionally, we are continuing to use a meaningful amount of temporary workers to ensure we have the appropriate operational flexibility to scale our operations so that we can maintain our profitability as industry production levels increase or contract.
Advancing and maintaining an efficient capital structure. We actively manage our capital structure in order to maintain an investment grade credit rating and healthy capital ratios to support our business and maximize shareholder value. We will continue to make adjustments to our capital structure in light of changes in economic conditions or as opportunities arise to provide us with additional financial flexibility to invest in our business and execute our strategic objectives going forward.
Pursuing selected acquisitions and strategic investments . In recent years, we continued to complete selected acquisitions and strategic investments in order to continue to leverage our technology capabilities and enhance and expand our commercialization of new solutions, product offerings, customer base, geographic penetration and scale to complement our current businesses, while continuing to enhance our product offerings and competitive position in growing market segments.
Accelerating an electrified, sustainable future. We are committed to becoming carbon-neutral in our global operations by 2030 and to achieving net carbon neutrality by 2040 as we transition away from carbon-intensive energy and processes in our global operations. We also continue to focus on minimizing the overall environmental impact of vehicles as a key part of our overall business strategy. We believe that this strong, foundational focus on sustainability makes Aptiv a partner of choice for our customers, a desirable place to work for our employees and a valued contributor to the communities in which we operate.
Trends, Uncertainties and Opportunities
Economic conditions . Our business is directly related to automotive sales and automotive vehicle production by our customers. Automotive sales depend on a number of factors, including global and regional economic conditions. Global automotive vehicle production increased 4% from 2024 to 2025 (1% on an Aptiv weighted market basis, which represents global vehicle production weighted to the geographic regions in which the Company generates its revenue), reflecting increased vehicle production of 10% in China and 1% in South America, our smallest region, partially offset by declines of 2% in North America and 1% in Europe. Refer to Note 22. Segment Reporting of the notes to the audited consolidated financial statements, included in Item 8. Financial Statements and Supplementary Data of this Annual Report for financial information concerning principal geographic areas.
On September 15, 2023, several of our largest customers’ collective bargaining agreements with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (the “UAW”), expired and the UAW subsequently went on strike against General Motors (“GM”), Ford Motor Company (“Ford”) and Stellantis N.V. (“Stellantis”) in the United States (the “U.S.”), causing work stoppages at certain of these customers’ vehicle production and parts
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distribution facilities, which lasted approximately six weeks. Aptiv’s estimated total indirect and direct adverse impacts of these labor strikes to revenue during 2023 were approximately $180 million. Refer to Part I, Item 1A. Risk Factors for further discussion of the risks related to significant disruptions at our or our customers’ manufacturing facilities.
Economic volatility or weakness in North America, Europe, China or, to a lesser extent, South America, could result in a significant reduction in automotive sales and production by our customers, which would have an adverse effect on our business, results of operations and financial condition. Global inflationary pressures have, at times, both reduced consumer demand for automotive vehicles and increased the price of inputs to our products, which has adversely impacted our sales and profitability, which may continue in 2026. There is also potential that geopolitical factors could adversely impact the U.S. and other economies, and specifically the automotive sector. In particular, changes to international trade agreements, such as the United States-Mexico-Canada Agreement (the “USMCA”), increases in trade tariffs, import quotas and other trade restrictions or actions, including retaliatory responses to such actions, or other political pressures have affected and could continue to affect our operations and the operations of our OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions. Increases in interest rates could also negatively impact automotive production as a result of increased consumer borrowing costs or reduced credit availability. Additionally, economic may result in shifts in the mix of future automotive sales (from vehicles with more content such as luxury vehicles, trucks and sport utility vehicles toward smaller passenger cars). While our diversified customer and geographic revenue base, along with our flexible cost structure, have well positioned us to withstand the impact of industry and from industry , shifts in the mix of global automotive production to higher cost regions or to vehicles with less content could impact our .
Ukraine/Russia conflict. The conflict between Ukraine and Russia, which began in February 2022, has had, and is expected to continue to have, negative economic impacts to both countries and to the European and global economies. In response to the conflict, the European Union (the “E.U.”), the U.S. and other governments implemented broad economic sanctions against Russia. These countries may impose further sanctions and take other actions as the situation continues.
Given the sanctions put in place by the E.U., U.S. and other governments, which restrict our ability to conduct business in Russia, we initiated a plan in the second quarter of 2022 to exit our 51% owned subsidiary in Russia. On May 30, 2023, the Company completed the sale of its entire interest in the Russian subsidiary to JSC Samara Cables Company, the sole minority shareholder in the Russian subsidiary, for a nominal amount in exchange for all of the Company’s shares in the subsidiary. The Company did not record any incremental gain or loss resulting from this disposition. Refer to Note 20. Acquisitions and Divestitures to the audited consolidated financial statements contained herein for further detail on this transaction.
Ukraine and Russia are significant global producers of raw materials used in our supply chain, including copper, aluminum, palladium and neon gases. Disruptions in the supply and volatility in the price of these materials and other inputs produced by Ukraine or Russia, including increased logistics costs and longer transit times, could adversely impact our business and results of operations. The conflict has also increased the possibility of cyberattacks occurring, which could either directly or indirectly impact our operations. Furthermore, the conflict has caused our customers to analyze their and their suppliers’ continued presence in the region and future customer production plans in the region remain uncertain.
We do not have a material physical presence in either Russia or Ukraine, with less than 1% of our workforce located in the countries as of December 31, 2025. For the year ended December 31, 2025, less than 1% of our net sales were generated from manufacturing facilities in Ukraine, and we did not generate any sales in Russia. However, the impacts of the conflict have adversely impacted, and may continue to adversely impact, global economies, and in particular, the European economy, a region which accounted for approximately 32% of our net sales for the year ended December 31, 2025. As a result of the conflict, the Company ceased using certain long-lived assets in Ukraine and consequently recorded non-cash impairment charges of $11 million during the year ended December 31, 2023. These charges were recorded within cost of sales in the consolidated statements of operations.
We continue to monitor the situation and will seek to minimize its impact to our business, while prioritizing the safety and well-being of our employees located in both countries and our compliance with applicable laws and regulations in the locations where we operate. Any of the impacts mentioned above, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.
Global supply chain disruptions. Global supply chain disruptions have in the past and could in the future lead to interruptions in our production, which could impact our ability to fully meet the vehicle production demands of OEMs at times due to events which are outside our control. For example, as a result of the rapidly evolving trade policies and tariff actions, the uncertainty in the automotive industry has increased, which could adversely affect our business and financial results. We will continue to actively monitor our global supply chain and will seek to aggressively mitigate and minimize the impact of any future disruptions on our business.
In addition, we are carrying critical inventory items and key components, and we continue to procure productive, raw material and non-critical inventory components in order to satisfy our customers’ vehicle production schedules. However, as a
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result of our customers’ recent production volatility and cancellations, among other things, our balance of productive, raw and component material inventories has increased substantially from customary levels as of both December 31, 2025 and 2024. These changes to the production environment were primarily driven by the global supply chain disruptions that impacted the automotive industry at times during previous years. We continue to actively monitor and manage inventory levels across all inventory types in order to maximize both supply continuity and the efficient use of working capital. Normally we do not carry inventories of such raw materials in excess of those reasonably required to meet our production and shipping schedules.
Key growth regions . We believe our strong global presence has positioned us to generate strong growth rates over the long-term. We continue to expand our established presence in key growth regions, positioning us to benefit from the expected long-term growth opportunities in these regions. We are capitalizing on our long-standing relationships with the global OEMs and further enhancing our positions with OEMs in key growth regions to continue expanding our worldwide leadership. We believe that our presence in best cost countries positions us to realize incremental margin improvements as the global balance of automotive production shifts towards these key growth regions. In addition, we continue to build upon our extensive geographic reach, enabled by our leadership in the automotive market, to capitalize on opportunities in key growth markets, including aerospace and defense, telecom and datacom, and diversified industries.
We have a strong local presence in China, including a major manufacturing base and well-established customer relationships. Each of our business segments have operations and sales in China. There have been periods of increased market volatility and moderations in the level of economic growth in China, which resulted in periods of lower automotive production growth rates in China than those previously experienced. Automotive production in China experienced growth of 10% in 2025, which follows growth of 4% in 2024. Despite the market volatility and moderation in the level of economic growth in China, rising income levels in China and other key growth markets are expected to result in stronger growth rates in these markets over the long-term.
Our business in China remains sensitive to economic and market conditions that impact automotive sales volumes in China and may be affected if the pace of growth slows as the Chinese market matures or if there are reductions in vehicle demand in China. Our business in China may also be impacted by the expanding market share of domestic Chinese OEMs in the China market, which has led to declines in revenue and market share of non-Chinese OEMs, resulting in certain traditional OEMs taking steps to reduce or restructure their operations in China. However, we continue to believe this market will benefit from long-term demand for new vehicles and stringent governmental regulation driving increased vehicle content, including accelerated demand for electrified vehicles.
Market driven products . Our product offerings satisfy our customers’ needs to meet increasingly stringent government regulations and meet consumer preferences for products that address the trends of automation, electrification and digitalization. With our offerings, we believe we are well-positioned to benefit from the growing demand for vehicle content and technology related to safety, electrification, high speed data, connectivity to the global information network and automated driving technologies. We are benefiting from the substantial increase in vehicle content, including advanced software and optimized hardware required to enable systems such as automated advanced driver assistance technologies, electrical vehicle monitoring, active safety systems, lane departure warning systems, integrated vehicle cockpit displays, navigation systems and technologies that enable connected infotainment in vehicles. While we have identified electrification programs as a key market for our products, certain of our OEM customers have recently announced delays in or changes to their software-defined vehicle investment strategies amidst reduced expectations for future consumer demand for these products.
Global capabilities and risks . Many OEMs are continuing to develop vehicle platforms intended to increase standardization, reduce per-unit cost and increase capital efficiency and profitability. In addition, geopolitical tensions are also causing them to regionalize their supply chains. As a result, OEMs prefer suppliers that have the capability to manufacture products on a global basis with manufacturing and design flexibility to adapt to regional variations. Suppliers with global scale and strong design, engineering and manufacturing capabilities are best positioned to benefit from this trend. Our global manufacturing footprint enables us to efficiently manufacture in and supply from best cost countries at scale. Our regional teams allow us to stay connected to local market requirements and more closely partner with our customers during all phases of the development process, from design through production, while maintaining focus on increasing efficiency and lowering costs. Increasing manufacturing automation, footprint rotation to best cost countries, and other operational initiatives have supported our commitment to continuous , leveraging scale and to our margins.
Our operations are subject to certain risks inherent in doing business globally, including military conflicts in regions in which we operate, changes in laws or regulations governing labor, trade, or other monetary or tax fiscal policy changes, including the Organisation for Economic Co-operation and Development (the “OECD”) Pillar Two Framework (the “Framework”), tariffs, quotas, customs and other import or export restrictions or trade barriers.
Existing free trade laws and regulations, such as the USMCA, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs, taxes or non-tariff barriers on imports
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from countries where we manufacture products, such as China and Mexico, could have a material adverse effect on our business and financial results. For example, beginning on April 2, 2025, the U.S. government announced tariffs of at least 10% across imported goods from all countries, with rates even higher for goods from certain countries with a high trade deficit with the U.S. Subsequent to this announcement, a number of other countries announced tariffs on U.S. goods and have negotiated or continue to negotiate trade agreements with the U.S.
While the impacts to the Company resulting from these incremental tariffs were not significant during 2025, the future impact of any announced tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available, and may be material to the Company. In addition, we are continuing to work with our customers and suppliers to mitigate the impact of these incremental tariffs on our results of operations. Despite recent trade negotiations and the potential for trade agreements between the U.S. and the Mexican, Canadian and Chinese governments, given the uncertainty regarding the scope and duration of any new tariffs and any associated retaliatory measures, as well as the potential for additional tariffs or trade barriers by the U.S., Mexico, Canada, China or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. Management continues to monitor the volatile geopolitical environment to identify, quantify and assess proposed or duties, taxes or other business restrictions which could affect our business and financial results.
In addition, the government of Mexico implemented country-wide statutory minimum wage increases of approximately 13% (5% in Northern Border Zone), 12% and 20%, effective January 1, 2026, 2025 and 2024, respectively. The government of Mexico has indicated it may implement other labor reforms, such as an initiative to shorten the work week from 48 to 40 hours, as early as January 1, 2027, through a gradual reduction of two hours per year. Labor costs have increased significantly in Mexico as a result of this and other labor reform initiatives, necessitating a strategic review of more cost-competitive jurisdictions and a greater acceleration in manufacturing automation. While management has implemented measures to mitigate the impact of these labor reforms on our cost structure, we cannot predict the ultimate future impact on our business.
The outbreak of armed conflicts in the Middle East beginning in October 2023 has also created numerous uncertainties, including the risk that the conflicts spread throughout the broader region, and their impact on the global economy and supply chains. In addition, as described above, the conflict between Ukraine and Russia has also created numerous economic uncertainties, including the potential for further sanctions against Russia, the impact on the global supply chain for raw materials produced in each country, as well as increased logistics costs and transit times, and the actions of automotive OEMs and suppliers as they relate to production plans in each country and within the region. We are also subject to risks associated with actions taken by governmental authorities to impose changes in laws or regulations that restrict certain business operations, trade or travel in response to a pandemic or widespread outbreak of an illness. The impacts of any of these factors mentioned above, among others, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.
Product development . The automotive technology and components industry is highly competitive and is characterized by rapidly changing technology, evolving industry standards and changes in customer needs. Our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely and cost competitive basis will be a significant factor in our ability to remain competitive and to maintain or increase our revenues. To compete effectively in the automotive technology and components industry, we must be able to develop and launch new products to meet our customers’ demands in a timely manner. With our innovative technologies and robust global engineering and development capabilities, we are well positioned to meet the increasingly stringent vehicle manufacturer demands and consumer preferences for high-technology content in automobiles.
OEMs are increasingly looking to their suppliers to simplify vehicle design and assembly processes to reduce costs. As a result, OEMs prefer suppliers that have the capability to manufacture products on a global basis with manufacturing and design flexibility to adapt to regional variations. Suppliers that can provide fully engineered solutions, systems and pre-assembled combinations of component parts are positioned to leverage the trend toward system sourcing from global suppliers.
Engineering, design and development . Our history and culture of innovation have enabled us to develop significant intellectual property and design and development expertise to provide advanced technology solutions that meet the demands of our customers. We have a team of approximately 20,700 scientists, engineers and technicians focused on developing leading product solutions for our key markets, located at 11 major technical centers in China, Germany, India, Mexico, Poland, Singapore and the United States. Our total investment in research and development, including engineering, was approximately $1.7 billion, $1.6 billion and $1.8 billion for the years ended December 31, 2025, 2024 and 2023, respectively, which includes approximately $573 million, $535 million and $492 million of co-investment by customers and government agencies. Each year we share some engineering expenses with OEMs and government agencies which generally ranges from 25% to 35% of engineering expenses. This level of co-investment supports product development, accelerates the pace of innovation and
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reduces the risk associated with successful commercialization of technological breakthroughs. We also encourage “open innovation” and collaborate extensively with peers in the industry, government agencies and academic institutions.
In the past, suppliers often incurred the initial cost of engineering, designing and developing automotive component parts, and recovered their investments over time by including a cost recovery component in the price of each part based on expected volumes. Recently, we and many other suppliers have negotiated for cost recovery payments independent of volumes. This trend reduces our economic risk.
We utilize a Technology Advisory Council, a panel of prominent global technology thought leaders, which helps us anticipate cutting-edge technology trends and guides our product strategies and investments in technology with a focus on developing advanced technologies to drive growth and foster innovation. This independent perspective assists Aptiv in pursuing investments in the right technologies that create the most value for all of its stakeholders. We believe that our engineering and technical expertise, together with our emphasis on continuing research and development, allow us to use the latest technologies, materials and processes to solve problems for our customers and to bring new, innovative products to market. We believe that continued engineering activities are critical to maintaining our pipeline of technologically advanced products. Given our strong financial discipline, we seek to effectively manage fixed costs and efficiently rationalize capital spending by critically evaluating the profit potential of new and existing customer programs, including investment in innovation and technology. We maintain our engineering activities around our focused product portfolio and allocate our capital and resources to those products with technologies. We expect expenditures for research and development activities, including engineering, net of co-investment, to be approximately $1.2 billion for the year ended December 31, 2026.
We maintain a large portfolio of approximately 11,000 patents and protective rights in the operation of our business as of December 31, 2025. While no individual patent or group of patents, taken alone, is considered material to our business, taken in the aggregate, these patents provide meaningful protection for our products and technical innovations. Similarly, while our trademarks are important to identify our position in the industry, we do not believe that any of these are individually material to our business. We are actively pursuing marketing opportunities to commercialize and license our technology to both automotive and non-automotive industries and we have selectively taken licenses from others to support our business interests. These activities foster optimization of intellectual property rights.
Pricing . Cost-cutting initiatives adopted by our customers result in increased downward pressure on pricing. Our customer supply agreements generally require step-downs in component pricing over the periods of production and OEMs have historically possessed significant leverage over their outside suppliers because the automotive component supply industry is fragmented and serves a limited number of automotive OEMs. Our profitability depends in part on our ability to generate sufficient production cost savings in the future to offset price reductions. In addition, during recent years, global economies and our industry were subjected to significant inflationary cost pressures, and these pressures may continue in 2026. We also continue to face additional potential impacts from the rapidly evolving trade policies and tariff actions. We continue to work with our customers, both through price recoveries and adjustments as well as future pricing adjustments as contracts renew, to mitigate the impact of these inflationary pressures on our results of operations.
We are focused on maintaining a low fixed cost structure that provides us flexibility to remain profitable at all points of the traditional vehicle industry production cycle. As a result, approximately 97% of our hourly workforce is located in best cost countries. Furthermore, we have substantial operational flexibility by leveraging a large workforce of contingent workers, which represented approximately 31% of the hourly workforce as of December 31, 2025. However, we will continue to adjust our cost structure and optimize our manufacturing footprint in response to changes in the global and regional automotive markets and in order to increase investment in advanced technologies and engineering, as evidenced by our ongoing restructuring programs focused on reducing our global overhead costs, the continued rotation of our manufacturing footprint to best cost locations in Europe and aligning our manufacturing capacity with the current levels of automotive production in each region. As we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further refine our cost structure. Assuming constant product mix and pricing, based on our 2025 results, we estimate that our EBITDA breakeven level would be reached if we experienced a 45% downturn to current product volumes.
We have a strong balance sheet with gross debt of approximately $7.7 billion and substantial available liquidity of approximately $4.4 billion consisting of cash and cash equivalents and available financing under our Revolving Credit Facility and committed European accounts receivable factoring facility (as defined below in Liquidity and Capital Resources) as of December 31, 2025, and no significant U.S. defined benefit or workforce postretirement health care benefits and employer-paid postretirement basic life insurance benefits liabilities. We intend to maintain strong financial discipline by targeting industry-leading earnings growth, cash flow generation and return on invested capital and to maintain sufficient liquidity to sustain our financial flexibility throughout the industry cycle.
OEM product recalls . The number of vehicles recalled globally by OEMs has increased above historical levels. These recalls can either be initiated by the OEMs or influenced or required by regulatory agencies. Although there are differing rules
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and regulations across countries governing recalls for safety issues, as automotive components are increasingly standardized across regions, the level of recalls outside of the U.S. may also increase. Given the sensitivity to safety issues in the automotive industry, including increased focus from regulators and consumers, we anticipate the number of automotive recalls may remain above historical levels in the near future. Although we engage in extensive product quality programs and processes, it is possible that we may be adversely affected in the future if the pace of these recalls continues.
Efficient use of capital . The global vehicle components industry is generally capital intensive and a portion of a supplier’s capital equipment is frequently utilized for specific customer programs. Lead times for procurement of capital equipment are long and typically exceed start of production by one to two years. Substantial advantages exist for suppliers that can leverage their prior investments in capital equipment or amortize the investment over higher volume global customer programs.
Industry consolidation and disruptive new entrants . Consolidation among worldwide OEMs and suppliers is expected to continue as these companies seek to achieve operating synergies and value stream efficiencies, acquire complementary technologies and build stronger customer relationships. Additionally, the rise of advanced software and technologies in vehicles has attracted new and disruptive entrants from outside the traditional automotive supply industry. These entrants may seek to gain access to certain vehicle technology and component markets. Any of these new competitors may develop and introduce technologies that gain greater customer or consumer acceptance, which could adversely affect the future growth of the Company. We believe companies with strong balance sheets and financial discipline are in the best position to take advantage of these trends.
Consolidated Results of Operations
Our total net sales during the year ended December 31, 2025 were $20.4 billion, an increase of approximately 3% compared to 2024. Our overall volumes increased 3%, with increased global automotive production of 4% (1% on an AWM basis) for the year ended December 31, 2025, compared to 2024 production rates. Despite the global inflationary environment, our overall lean cost structure has enabled us to achieve strong levels of operating income, while continuing to strategically invest in the future.
Aptiv typically experiences fluctuations in revenue due to changes in OEM production schedules, vehicle sales mix and the net of new and lost business (which we refer to collectively as volume), increased prices attributable to escalation clauses in our supply contracts for recovery of increased commodity costs (which we refer to as commodity pass-through), fluctuations in foreign currency exchange rates (which we refer to as “FX”), contractual reductions of the sales price to the OEM (which we refer to as contractual price reductions) and engineering changes. Changes in sales mix can have either favorable or unfavorable impacts on revenue. Such changes can be the result of shifts in regional growth, shifts in OEM sales demand, as well as shifts in consumer demand related to vehicle segment purchases and content penetration. For instance, a shift in sales demand favoring a particular OEM’s vehicle model for which we do not have a supply contract may negatively impact our revenue. A shift in regional sales demand toward certain markets could favorably impact the sales of those of our customers that have a large market share in those regions, which in turn would be expected to have a favorable impact on our revenue.
We typically experience (as described below) fluctuations in operating income due to:
• Volume, net of contractual price reductions—changes in volume offset by contractual price reductions (which typically range from 1% to 3% of net sales) and changes in mix;
• Operational performance—changes to costs for materials and commodities or manufacturing and engineering variances; and
• Other—including restructuring costs and any remaining variances not included in Volume, net of contractual price reductions or Operational performance.
The automotive technology and component supply industry is traditionally subject to inflationary pressures with respect to raw materials and labor which may place operational and profitability burdens on the entire supply chain. For instance, the industry has recently been subjected to increased pricing pressures, specifically in relation to copper and petroleum-based resin products, which have experienced significant volatility in price. We have also been impacted globally by increased overall inflation as a result of a variety of global trends. For example, the rapidly evolving trade policies and tariff actions could result in increased pricing pressures on our global supply chain, which could adversely affect our business and financial results. In addition, we expect semiconductor supply cost and commodity cost volatility to have a continual impact on future earnings and/or operating cash flows. Management continues to seek to mitigate both inflationary pressures and our material-related cost exposures using a number of approaches, including combining purchase requirements with customers and/or other suppliers, using alternate suppliers or product designs, negotiating cost reductions and/or commodity cost contract escalation clauses into our vehicle manufacturer supply contracts and hedging. We have also negotiated, and will continue to negotiate, price increases with our customers in response to the aforementioned increased overall inflation and global supply chain .
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This section discusses our consolidated results of operations and results of operations by segment for the years ended December 31, 2025 versus 2024. A detailed discussion of our consolidated results of operations and results of operations by segment for the years ended December 31, 2024 versus 2023 can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 7, 2025.
2025 versus 2024
The results of operations for the years ended December 31, 2025 and 2024 were as follows:
Year Ended December 31,
Favorable/
(unfavorable)
(dollars in millions)
Net sales
Cost of sales
Gross margin
Selling, general and administrative
Amortization
Restructuring
Goodwill impairment
Operating income
Interest expense
Other income, net
Net gain on equity method transactions
Income before income taxes and equity loss
Income tax expense
Income before equity loss
Equity loss, net of tax
Net income
Net income attributable to noncontrolling interest
Net loss attributable to redeemable noncontrolling interest
Net income attributable to Aptiv
Total Net Sales
Below is a summary of our total net sales for the years ended December 31, 2025 versus 2024.
Year Ended December 31,
Variance Due To:
Favorable/
(unfavorable)
Volume, net of
contractual
price
reductions
Commodity
pass-
through
Other
Total
(in millions)
(in millions)
Total net sales
Total net sales for the year ended December 31, 2025 increased 3% compared to the year ended December 31, 2024. Our volumes increased 3% for the period, which primarily reflects volume growth in North America and Asia Pacific, partially offset by volume declines in Europe, compared to increased global automotive production of 4% (1% on an AWM basis). Our net sales also reflect the impact of contractual price reductions, net of price recoveries, of $47 million, and favorable foreign currency impacts, primarily related to the Euro.
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Cost of Sales
Cost of sales is primarily comprised of material, labor, manufacturing overhead, freight, fluctuations in foreign currency exchange rates, product engineering, design and development expenses, depreciation, warranty costs and other operating expenses. Gross margin is revenue less cost of sales and gross margin percentage is gross margin as a percentage of net sales.
Cost of sales increased $498 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, as summarized below. The Company’s material cost of sales was approximately 50% of net sales for both the years ended December 31, 2025 and 2024.
Year Ended December 31,
Variance Due To:
Favorable/
(unfavorable)
Volume (a)
Operational
performance
Other
Total
(dollars in millions)
(in millions)
Cost of sales
Gross margin
Percentage of net sales
(a) Presented net of contractual price reductions for gross margin variance.
The increase in cost of sales reflects the impacts of improved operational performance, offset by increased volumes and currency exchange. Cost of sales was also impacted by the following items in Other above:
• $90 million of increased commodity pass-through costs;
• Approximately $15 million of increased depreciation; and
• Approximately $20 million of increased warranty costs.
Selling, General and Administrative Expense
Year Ended December 31,
Favorable/
(unfavorable)
(dollars in millions)
Selling, general and administrative expense
Percentage of net sales
Selling, general and administrative expense (“SG&A”) primarily includes administrative expenses, information technology costs, incentive compensation related costs, Separation, acquisition and project portfolio costs and selling and marketing expenses. SG&A increased as a percentage of net sales for the year ended December 31, 2025 compared to 2024, primarily due to $178 million of Separation costs, long-lived asset impairment charges of approximately $7 million and increased incentive compensation costs recorded during the year ended December 31, 2025.
Amortization
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Amortization
Amortization expense reflects the non-cash charge related to definite-lived intangible assets. Amortization during the years ended December 31, 2025 and 2024 reflects the continued amortization of our definite-lived intangible assets, which resulted primarily from our acquisitions, over their estimated useful lives. Refer to Note 20. Acquisitions and Divestitures to the audited consolidated financial statements included herein for further detail of our business acquisitions, including details of the intangible assets recorded in each transaction.
In 2026, we expect to incur non-cash amortization charges of approximately $215 million.
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Restructuring
Year Ended December 31,
Favorable/
(unfavorable)
(dollars in millions)
Restructuring
Percentage of net sales
The Company recorded employee-related and other restructuring charges totaling approximately $185 million during the year ended December 31, 2025, which included the recognition of approximately $37 million within the Electrical Distribution Systems segment for programs to downsize and close European manufacturing sites, approximately $25 million related to workforce optimization within the Advanced Safety and User Experience segment and approximately $15 million for a program initiated in the fourth quarter of 2024 focused on global salaried workforce optimization, primarily in the European region. We expect to make cash payments of approximately $110 million in 2026 pursuant to currently implemented restructuring programs.
The Company recorded employee-related and other restructuring charges totaling approximately $193 million during the year ended December 31, 2024, which reflected programs to align manufacturing capacity with the current levels of automotive production in each region, and included the recognition of approximately $25 million and $57 million for programs initiated in the fourth quarter of 2024 and 2023, respectively, focused on global salaried workforce optimization, primarily in the North American and European regions.
We expect to continue to incur additional restructuring expense in 2026 and beyond, primarily related to programs focused on reducing global overhead costs, the continued rotation of our manufacturing footprint to best cost locations in Europe and aligning manufacturing capacity with the levels of automotive production, which includes approximately $75 million (of which approximately $40 million relates to the Electrical Distribution Systems segment, approximately $25 million relates to the Advanced Safety and User Experience segment and approximately $10 million relates to the Engineered Components Group segment) for approved programs within the next twelve months. Additionally, as we continue to operate in a cyclical industry that is impacted by movements in the global and regional economies, we continually evaluate opportunities to further adjust our cost structure and optimize our manufacturing footprint. The Company plans to implement additional restructuring activities in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing regional automotive production levels and locations, to improve the efficiency and utilization of other locations and in order to increase investment in advanced technologies and engineering. Such future restructuring actions are dependent on market conditions, customer actions and other factors.
Refer to Note 10. Restructuring to the audited consolidated financial statements included herein for additional information.
Goodwill Impairment
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Goodwill impairment
Goodwill impairment for the year ended December 31, 2025 reflects a non-cash, pre-tax goodwill impairment charge of approximately $648 million related to the Wind River reporting unit. Refer to Note 7. Intangible Assets and Goodwill to the audited consolidated financial statements included herein for additional information.
Interest Expense
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Interest expense
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The increase in interest expense during the year ended December 31, 2025 compared to 2024 primarily reflects the issuance of $1,650 million in aggregate principal amount of 2024 Senior Notes and $500 million in aggregate principal amount of 2024 Junior Notes in September 2024, partially offset by the redemption of the $700 million in aggregate principal amount of 2.396% senior unsecured notes (the “2.396% Senior Notes”) due 2025 in September 2024, the redemption of the 2015 Euro-denominated Senior Notes in December 2024, the full repayment of the $600 million Term Loan A in the fourth quarter of 2024 and first quarter of 2025 and the full repayment of our €450 million European accounts receivable factoring facility in the first half of 2025.
Refer to Note 11. Debt to the audited consolidated financial statements included herein for additional information.
Other Income, Net
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Other income, net
Other income, net for the year ended December 31, 2025 includes interest income of $60 million. The Company also recorded $26 million during the year ended December 31, 2025 related to the components of net periodic pension and postretirement benefit cost other than service costs, as further described in Note 12. Pension Benefits to the audited consolidated financial statements included herein.
Other income, net for the year ended December 31, 2024 includes interest income of $87 million. During the year ended December 31, 2024, the Company also recorded a loss on extinguishment of debt of $15 million in conjunction with the repayment and termination of the Bridge Credit Agreement, the redemption of the 2.396% Senior Notes and the partial repayment on the Term Loan A, as further discussed in Note 11. Debt to the audited consolidated financial statements included herein. The Company also recorded $26 million during the year ended December 31, 2024 related to the components of net periodic pension and postretirement benefit cost other than service costs, as further described in Note 12. Pension Benefits to the audited consolidated financial statements included herein.
Refer to Note 19. Other Income, Net to the audited consolidated financial statements included herein for additional information.
Net Gain on Equity Method Transactions
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Net gain on equity method transactions
Net gain on equity method transactions for the year ended December 31, 2025 includes a gain of approximately $33 million recorded as a result of the Motional funding transaction completed in May 2025 and a gain of approximately $13 million from the closing of the sale of TTTech Auto AG (“TTTech Auto”) in June 2025.
Net gain on equity method transactions for the year ended December 31, 2024 includes a gain of approximately $641 million recorded as a result of the Motional funding and ownership restructuring transactions completed in May 2024, partially offset by a non-cash, pre-tax impairment charge of approximately $36 million related to its equity method investment in TTTech Auto.
Refer to Note 5. Investments in Affiliates to the audited consolidated financial statements included herein for additional information.
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Income Taxes
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Income tax expense
The Company’s tax rate is affected by the fact that its parent entity is a Swiss resident taxpayer, and was an Irish resident taxpayer prior to the December 2024 reorganization transaction, the tax rates in Switzerland, Ireland and other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance. The Company’s effective tax rate is also impacted by the receipt of certain tax incentives and holidays that reduce the effective tax rate for certain subsidiaries below the statutory rate.
The Company’s effective tax rate was 76% and 10% for the years ended December 31, 2025 and 2024, respectively. The effective tax rate for the year ended December 31, 2025 includes net discrete tax expense of approximately $380 million primarily related to a change in valuation allowance on the Swiss tax incentive, as described below, tax accruals associated with the Separation of the Electrical Distribution Systems business and the tax impact of intercompany reorganizations, partially offset by changes in other valuation allowances. Also included as a discrete item in the effective tax rate for the year ended December 31, 2025 is the unfavorable impact of approximately 32 points resulting from the Wind River non-cash goodwill impairment charge, as described further in Note 7. Intangible Assets and Goodwill to the audited consolidated financial statements included herein, which is non-deductible for tax purposes.
The effective tax rate for the year ended December 31, 2024 includes discrete tax benefits primarily associated with intercompany reorganizations. Also included as a discrete item in the effective tax rate for the year ended December 31, 2024 is the beneficial impact of approximately 4 points resulting from the Motional funding and ownership restructuring transactions, as described further in Note 5. Investments in Affiliates to the audited consolidated financial statements included herein. There was no tax expense associated with these gains as Aptiv’s interest in Motional is exempt from capital gains tax in the jurisdiction in which it is owned.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law. The OBBBA includes changes to U.S. tax law that were applicable to Aptiv beginning in 2025, with additional provisions applying in subsequent years. Included in these changes are favorable adjustments to deductions for interest, qualified property, and research and development expenditures, as well as reforms to the international tax framework. The OBBBA will not have a material impact on the Company’s consolidated financial statements.
On January 15, 2025, the OECD released Administrative Guidance (the “Guidance) on Article 9.1 of the Global Anti-Base Erosion Model Rules (the “Model Rules”) which amends the Pillar Two Framework (the “Framework”) previously adopted by the European Union (the “E.U.”) Member States on December 15, 2022. Jurisdictions that have adopted the Framework, which generally provides for a minimum effective tax rate of 15%, as established by the OECD, may implement and administer their domestic laws consistent with the Model Rules and Guidance. The Guidance eliminates the tax basis in certain deferred tax assets including tax credit carryforwards for purposes of the global minimum tax established under the Framework. As a result, the Company no longer expects to obtain significant benefits from the tax incentive granted to its Swiss subsidiary in 2023, as described below. Accordingly, the Company recognized an increase to valuation allowances of $294 million to reduce the related deferred tax asset during the year ended December 31, 2025. No other deferred tax assets are impacted by the Guidance.
On December 18, 2025, the Swiss Council of States passed a motion preventing the retroactive application of the OECD’s 2025 Guidance on the Model Rules. While this development has no immediate impact on Aptiv’s tax position, we will continue to monitor potential implications for the recoverability of our Swiss deferred tax assets associated with our Swiss tax incentive.
In response to the Framework, during the second half of 2023, the Company initiated changes to its corporate entity structure, including intercompany transfers of certain intellectual property to one of its subsidiaries in Switzerland. Furthermore, during the third quarter of 2023, the Company’s Swiss subsidiary was granted a ten-year tax incentive, beginning in 2024. The measurement of certain deferred tax assets and associated income tax benefits resulting from these transactions was impacted by tax legislation in Switzerland enacted in the fourth quarter of 2023, which increased the statutory income tax rate, resulting in additional deferred tax benefit impacts, net of valuation allowances. During the year ended December 31, 2023, the total income tax benefit recorded as a result of the intercompany transfers of intellectual property and tax incentive, all as described above, combined with other related additional current year tax expense as a result of the transactions, was approximately $2,080 million.
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The Company has proactively responded to these tax policy changes, as described above, and will continue to closely monitor developments. Our effective tax rate for the year ended December 31, 2025 includes an unfavorable impact from the enacted Framework.
Refer to Note 14. Income Taxes to the audited consolidated financial statements included herein for additional information.
Equity Loss
Year Ended December 31,
Favorable/
(unfavorable)
(in millions)
Equity loss, net of tax
Equity loss, net of tax reflects the Company’s interest in the results of ongoing operations of entities accounted for as equity method investments. The decrease in equity losses recognized by Aptiv during the year ended December 31, 2025 compared to 2024 is primarily attributable to the decrease in Aptiv’s common equity interest in Motional from 50% to approximately 13% as a result of the Motional funding and ownership restructuring transactions that were completed in May 2024 and May 2025. Refer to Note 5. Investments in Affiliates to the audited consolidated financial statements included herein for additional information.
Results of Operations by Segment
In connection with the Separation, as further described in Note 26. Separation of Electrical Distribution Systems to the audited consolidated financial statements included herein, in the first quarter of 2025, Aptiv realigned its business into three reportable operating segments:
• Advanced Safety and User Experience, which includes platforms and modular offerings, such as intelligent sensors, high-performance compute, and advance software tools and services.
• Engineered Components Group, which includes connection systems, high-performance interconnects, and cable management and protection solutions that optimize the distribution of power, signal and data for next-generation applications across multiple end markets.
• Electrical Distribution Systems, which includes a full range of low voltage and high voltage power, signal and data distribution solutions needed to deliver fully integrated, cost-optimized architectures. As described in Note 26. Separation of Electrical Distribution Systems, the Company is pursuing a separation of the Electrical Distribution Systems business into a new, independent publicly traded company, through a transaction expected to be treated as a tax-free spin-off to its shareholders.
• Eliminations and Other, which includes i) the elimination of inter-segment transactions, and ii) certain other expenses and income of a non-operating or strategic nature.
Prior period amounts were adjusted retrospectively to reflect the change in reportable operating segments, consistent with the current year presentation, throughout the audited consolidated financial statements contained herein.
Generally, Aptiv evaluates segment performance based on stand-alone segment net income before interest expense, other income (expense), net, income tax (expense) benefit, equity income (loss), net of tax, amortization, restructuring, Separation costs related to the planned spin-off of the Electrical Distribution Systems business, other acquisition and portfolio project costs (which includes costs incurred to integrate acquired businesses and to plan and execute product portfolio transformation actions, including business and product acquisitions and divestitures), goodwill and other asset impairments, compensation expense related to acquisitions and gains (losses) on business divestitures and other transactions (“Adjusted Operating Income”).
Our management utilizes Adjusted Operating Income as the key performance measure of segment income or loss to evaluate segment performance, and for planning and forecasting purposes to allocate resources to the segments, as management believes this measure is most reflective of the operational profitability or loss of our operating segments. Segment Adjusted Operating Income should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income attributable to Aptiv, which is the most directly comparable financial measure to Adjusted Operating Income that is prepared in accordance with U.S. GAAP. Segment Adjusted Operating Income, as determined and measured by Aptiv, should also not be compared to similarly titled measures reported by other companies.
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Refer to Note 22. Segment Reporting to the audited consolidated financial statements included herein for additional information.
Net sales, gross margin as a percentage of net sales and Adjusted Operating Income by segment for the years ended December 31, 2025 and 2024 are as follows:
Net Sales by Segment
Year Ended December 31,
Variance Due To:
Favorable/
(unfavorable)
Volume, net of contractual price reductions
Commodity Pass-through
Other
Total
(in millions)
(in millions)
Advanced Safety and User Experience
Engineered Components Group
Electrical Distribution Systems
Eliminations and Other
Total
Gross Margin Percentage by Segment
Year Ended December 31,
Advanced Safety and User Experience
Engineered Components Group
Electrical Distribution Systems
Total
Adjusted Operating Income by Segment
Year Ended December 31,
Variance Due To:
Favorable/
(unfavorable)
Volume, net of contractual price reductions
Operational performance
Other
Total
(in millions)
(in millions)
Advanced Safety and User Experience
Engineered Components Group
Electrical Distribution Systems
As noted in the table above, Adjusted Operating Income for the year ended December 31, 2025 as compared to the year ended December 31, 2024 was impacted by operational performance, volume, including product mix, as well as the impacts of contractual price reductions, net of price recoveries, of $47 million. Adjusted Operating Income was also impacted by the following items included within Other in the table above:
• $143 million of unfavorable foreign currency impacts, primarily related to the Mexican Peso;
• Approximately $75 million of increased SG&A expense, including increased incentive compensation costs, excluding the impact of Separation costs and other acquisition and portfolio project costs;
• Approximately $30 million of increased depreciation, primarily as a result of a higher fixed asset base; and
• $20 million of increased warranty costs.
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Liquidity and Capital Resources
Overview of Capital Structure
Our liquidity requirements are primarily to fund our business operations, including capital expenditures and working capital requirements, as well as to fund debt service requirements, operational restructuring and Separation activities. Our primary sources of liquidity are cash flows from operations, our existing cash balance, and as necessary and available, borrowings under credit facilities and issuance of long-term debt and equity. To the extent we generate discretionary cash flow we may consider using this additional cash flow for optional prepayments of existing indebtedness, strategic acquisitions or investments, additional share repurchases and/or general corporate purposes. We also continually explore ways to enhance our capital structure.
As of December 31, 2025, we had cash and cash equivalents of $1.9 billion and net debt (defined as outstanding debt less cash and cash equivalents) of $5.7 billion. We also have access to additional liquidity pursuant to the terms of the $2.0 billion Revolving Credit Facility and the committed European accounts receivable factoring facility, as described below. The following table summarizes our available liquidity, which includes cash, cash equivalents and funds available under our significant committed credit facilities, as of December 31, 2025.
December 31, 2025
(in millions)
Cash and cash equivalents
Revolving Credit Facility, unutilized portion (1)
Committed European accounts receivable factoring facility, unutilized portion (2)
Total available liquidity
(1) Availability reduced by $2 million in letters of credit issued under the Credit Agreement as of December 31, 2025.
(2) Based on December 31, 2025 foreign currency rates, subject to the availability of eligible accounts receivable.
We expect existing cash, available liquidity and cash flows from operations to continue to be sufficient to fund our global operating activities, including restructuring payments, capital expenditures, debt obligations and Separation activities. In addition, we expect to continue to repurchase outstanding ordinary shares pursuant to our authorized ordinary share repurchase program, as further described below.
We also continue to expect to be able to move funds between different countries to manage our global liquidity needs without material adverse tax implications, subject to current monetary policies. We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan repayments and other distributions and advances to provide the funds necessary to meet our global liquidity needs. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Aptiv. As of December 31, 2025, the Company’s cash and cash equivalents held by our non-U.S. subsidiaries totaled approximately $1.8 billion. If additional non-U.S. cash was needed for our U.S. operations, we may be required to accrue and pay withholding if we were to distribute such funds from non-U.S. subsidiaries to the U.S.; however, based on our current liquidity needs and strategies, we do not anticipate a need to accrue and pay such additional amounts.
Based on these factors, we believe we possess sufficient liquidity to fund our global operations and capital investments in 2026 and beyond.
Share Repurchase Programs
In July 2024, the Board of Directors authorized a share repurchase program of up to $5.0 billion of ordinary shares, which commenced in August 2024 following completion of the Company’s $2.0 billion January 2019 share repurchase program. This share repurchase program provides for share purchases in the open market or in privately negotiated transactions (which may include derivative transactions, including an accelerated share repurchase program (“ASR”)), depending on share price, market conditions and other factors, as determined by the Company.
As part of the Company’s share repurchase program, on August 1, 2024, the Company entered into ASR agreements with each of Goldman Sachs International and JPMorgan Chase Bank, N.A. to repurchase an aggregate of $3.0 billion of Aptiv’s ordinary shares (the “ASR Agreements”).
Under the terms of the ASR Agreements, on August 2, 2024, the Company made an aggregate payment of $3.0 billion (the “Repurchase Price”) and received initial deliveries of approximately 30.8 million ordinary shares with a value of $2.25 billion, which were retired immediately and recorded as a reduction to shareholders’ equity. Aptiv incurred approximately $4
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million of direct costs in connection with the ASR Agreements. Given the Company’s ability to settle in shares, the remaining $750 million prepaid forward contract was classified as a reduction to additional paid-in capital as of December 31, 2024.
The Company initially funded the accelerated share repurchase program with cash on hand and borrowings under the Bridge Credit Agreement. The Bridge Credit Agreement was subsequently repaid and terminated during the third quarter of 2024 using proceeds from the Term Loan A and issuance of the 2024 Senior Notes and 2024 Junior Notes, as further described in Note 11. Debt to the audited consolidated financial statements included herein.
During the year ended December 31, 2025, upon final settlements under the ASR Agreements, Aptiv received incremental deliveries of approximately 17.7 million ordinary shares. All shares delivered to Aptiv under the ASR Agreements were retired immediately. Under the ASR Agreements, the Company received total deliveries of approximately 48.5 million ordinary shares at an average price of $61.84 per share, based on the daily volume-weighted average price of our ordinary shares on specified dates during the terms of the ASR Agreements, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements. During the year ended December 31, 2025, the Company also repurchased approximately 5.1 million of our outstanding ordinary shares for $400 million in the open market.
During the year ended December 31, 2024, in addition to the initial shares received under the ASR program, we repurchased approximately 13.6 million of our outstanding ordinary shares for $1,100 million in the open market.
During the year ended December 31, 2023, we repurchased approximately 4.7 million of our outstanding ordinary shares for $398 million in the open market.
As of December 31, 2025, approximately $2,115 million of share repurchases remained available under the July 2024 share repurchase program. All previously repurchased shares were retired and are reflected as a reduction of ordinary share capital for the par value of the shares, with the excess applied as reductions to additional paid-in-capital and retained earnings.
Dividends from Equity Investments
During the years ended December 31, 2025, 2024 and 2023, Aptiv received dividends of $20 million, $12 million and $5 million, respectively, from its equity method investments. The dividends were recognized as a reduction to the investment and represented a return on investment included in cash flows from operating activities.
Acquisitions, Divestitures and Other Transactions
In April 2025, one of Aptiv’s wholly-owned subsidiaries completed the sale of certain assets (net of certain liabilities) that were previously reported within the Advanced Safety and User Experience segment for net cash proceeds of approximately $4 million. As a result of the sale, the Company recognized a pre-tax gain of approximately $5 million during the year ended December 31, 2025, within cost of sales in the consolidated statements of operations.
The Company had no other business acquisitions or divestitures during the years ended December 31, 2025 and 2024.
Höhle Ltd. —On April 3, 2023, Aptiv acquired 100% of the equity interests of Höhle Ltd. (“Höhle”), a manufacturer of microducts, for total consideration of $42 million. The results of operations of Höhle are reported within the Engineered Components Group segment from the date of acquisition. The Company acquired Höhle utilizing cash on hand.
Sale of Interest in Majority Owned Russian Subsidiary —Given the sanctions put in place by the E.U., U.S. and other governments, which restrict our ability to conduct business in Russia, we initiated a plan in the second quarter of 2022 to exit our 51% owned subsidiary in Russia. As a result, the Company determined that this subsidiary, which was reported within the Electrical Distribution Systems segment, initially met the held for sale criteria as of June 30, 2022. Consequently, during the year ended December 31, 2022, the Company recorded a pre-tax charge of $51 million to impair the carrying value of the Russian subsidiary’s net assets to fair value.
On May 30, 2023, the Company completed the sale of its entire interest in the Russian subsidiary to JSC Samara Cables Company, the sole minority shareholder in the Russian subsidiary, for a nominal amount in exchange for all of the Company’s shares in the subsidiary. As a result of this transaction, the net assets held for sale of the Russian subsidiary were deconsolidated from the Company’s consolidated financial statements and the Company did not record any incremental gain or loss resulting from this disposition. Furthermore, losses relating to the Russian subsidiary during the held for sale period were de minimis. The former Russian subsidiary is not considered to be a related party of the Company after deconsolidation.
Investment in StradVision, Inc. —On October 20, 2025, Aptiv entered into an agreement with StradVision, Inc. (“StradVision”), a provider of deep learning-based camera perception software for automotive applications, to convert the Company’s existing preferred shares in StradVision into common shares (the “Conversion”), resulting in a common equity interest of approximately 41% in StradVision. Aptiv previously made KRW-denominated investments in StradVision totaling approximately $40 million in the first half of 2025 and approximately $108 million in prior years (using foreign currency rates on the date of the respective investments).
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Prior to the Conversion, due to the Company’s redemption rights, the Company’s investment in StradVision was classified as an available-for-sale debt security within other long-term assets in the consolidated balance sheets, with changes in fair value recorded in other comprehensive income. The fair value of the available-for-sale debt security on the Conversion date was approximately $149 million. Following the Conversion, Aptiv began accounting for its investment in StradVision under the equity method. The investment was reclassified to investments in affiliates in the consolidated balance sheets and is included in the Advanced Safety and User Experience segment.
Motional Joint Venture Funding and Ownership Restructuring Transactions —On April 19, 2024, Aptiv and Hyundai Motor Group (“Hyundai”) entered into an agreement to restructure Aptiv’s ownership interest in Motional and for Hyundai to provide additional funding to Motional, each as described below. Prior to these transactions, Motional was 50% owned by each of Aptiv and Hyundai.
As part of the agreement, on May 2, 2024, Hyundai invested $475 million in Motional in exchange for additional common equity interests. Aptiv did not participate in this funding round. This transaction resulted in the dilution of Aptiv’s common equity interest in Motional from 50% to approximately 44%, prior to the completion of any further transactions as described below. As these units were issued at a valuation greater than the carrying value of our investment in Motional, the Company recognized a gain of approximately $91 million during the year ended December 31, 2024, within net gain on equity method transactions in the consolidated statements of operations.
Also as part of the agreement, on May 16, 2024, Aptiv sold 11% of its common equity interest in Motional to Hyundai for approximately $448 million of cash consideration. Aptiv also exchanged approximately 21% of its common equity in Motional for a like number of Motional preferred shares. These transactions resulted in the reduction of Aptiv’s common equity interest in Motional from approximately 44% to approximately 15%. As a result of these transactions, the Company recognized a gain of approximately $550 million during the year ended December 31, 2024, within net gain on equity method transactions in the consolidated statements of operations.
The total gain recorded as a result of the Motional funding and ownership restructuring transactions completed in May 2024, all as described above, was approximately $641 million (approximately $2.50 per diluted share) for the year ended December 31, 2024.
On May 30, 2025, Hyundai invested approximately $440 million in Motional in exchange for additional common equity interests. Aptiv did not participate in this funding round. This transaction resulted in the dilution of Aptiv’s common equity interest in Motional from approximately 15% as of March 31, 2025 to approximately 13% as of December 31, 2025. As a result of this transaction, the Company recognized a gain of approximately $33 million (approximately $0.15 per diluted share) during the year ended December 31, 2025, within net gain on equity method transactions in the consolidated statements of operations.
Investment in TTTech Auto AG —On March 15, 2022, Aptiv acquired approximately 20% of the equity interests of TTTech Auto, a leading provider of safety-critical middleware solutions for advanced driver-assistance systems and autonomous driving applications, for €200 million (approximately $220 million, using foreign currency rates on the investment date).
In 2024, the shareholders of TTTech Auto entered into an agreement for the sale of 100% of TTTech Auto to an unrelated third party, and as a result, the Company determined there was an other-than-temporary impairment to its equity method investment in TTTech Auto in the fourth quarter of 2024 based on the anticipated acquisition value of TTTech Auto. During the year ended December 31, 2024, the Company’s equity investment in TTTech Auto was written down to its estimated fair value of $147 million, resulting in a non-cash, pre-tax impairment charge of approximately $36 million within net gain on equity method transactions in the consolidated statements of operations.
The impairment was based on the fair value of the investment at the balance sheet date. The fair value was determined based on the contractual sales price of TTTech Auto pursuant to the executed purchase and sale agreement. Contractual sales prices are considered observable inputs other than quoted prices, and are therefore classified as a Level 2 measurement.
The sale of TTTech Auto closed in June 2025, resulting in net cash proceeds to Aptiv of $164 million. As a result of the sale, the Company recognized a gain of approximately $13 million during the year ended December 31, 2025, within net gain on equity method transactions in the consolidated statements of operations, which includes accumulated currency translation adjustment impacts of $6 million. Following completion of the sale, Aptiv no longer holds an equity interest in TTTech Auto and accordingly reduced the carrying value of the investment to zero in the consolidated balance sheet.
Technology Investments —During the year ended December 31, 2025, the Company sold its Valens Semiconductor Ltd. ordinary shares for net proceeds of approximately $6 million and its Smart Eye AB ordinary shares for net proceeds of approximately $6 million.
In September 2024, the Company’s Advanced Safety and User Experience segment made an investment totaling approximately 399 million Chinese Yuan Renminbi (“RMB”) (approximately $57 million, using foreign currency rates on the
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investment date) in preferred equity of MAXIEYE Automotive Technology (Ningbo) Co., Ltd. (“Maxieye”), a provider of advanced driver-assistance systems and autonomous driving applications. Due to the Company’s redemption rights, the Company’s investment in Maxieye is classified as an available-for-sale debt security within other long-term assets in the consolidated balance sheets, with changes in fair value recorded in other comprehensive income. The Company also agreed to invest an additional 171 million RMB (approximately $24 million, using December 31, 2025 foreign currency rates) in preferred equity of Maxieye, contingent on the achievement of certain technical milestones, which have not yet been met as of December 31, 2025, and the satisfaction of customary closing conditions.
Refer to Note 5. Investments in Affiliates to the audited consolidated financial statements included herein for further detail of the Company’s investments.
Credit Agreement
Aptiv PLC and its wholly-owned subsidiaries Aptiv LLC (formerly known as Aptiv Corporation) and Aptiv Global Financing Designated Activity Company (“AGF DAC”) entered into a credit agreement (the “Credit Agreement”) with, among others, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), under which it maintains a senior unsecured credit facility currently consisting of a revolving credit facility of $2 billion (the “Revolving Credit Facility”). AGF DAC and Aptiv LLC are each borrowers under the Credit Agreement, under which such borrowings would be guaranteed by each of the other borrowers, Aptiv PLC and Aptiv Swiss Holdings.
The Credit Agreement was entered into in March 2011 and has been subsequently amended and restated on several occasions, most recently on March 31, 2025 (the “March 2025 amendment”). The March 2025 amendment, among other things, (1) refinanced and replaced the revolver with a new five-year revolving credit facility with aggregate commitments of $2 billion, and (2) removed provisions from the June 2021 amendment for sustainability-linked rate adjustments. The Revolving Credit Facility matures on March 31, 2030. The Credit Agreement also contains an uncommitted accordion feature that permits Aptiv to increase, from time to time, on customary terms and conditions, the aggregate borrowing capacity under the Credit Agreement by up to an additional $1 billion upon Aptiv’s request, the agreement of the lenders participating in the increase, and the approval of the Administrative Agent. Borrowings under the Credit Agreement are revolving in nature and may be made and prepaid from time to time at Aptiv’s option without premium or penalty, in accordance with the terms and conditions of the Credit Agreement. The March 2025 amendment also required that Aptiv pay amendment fees of $5 million during the year ended December 31, 2025, which are reflected as a financing activity in the consolidated statements of cash flows.
As of December 31, 2025, Aptiv had no amounts outstanding under the Revolving Credit Facility and approximately $2 million in letters of credit were issued under the Credit Agreement. Letters of credit issued under the Credit Agreement reduce availability under the Revolving Credit Facility.
Loans under the Credit Agreement bear interest, at Aptiv’s option, at either (a) the Administrative Agent’s Alternate Base Rate (“ABR” as defined in the Credit Agreement) or (b) SOFR plus in either case a percentage per annum as set forth in the table below (the “Applicable Rate”). The rates under the Credit Agreement on the specified dates are set forth below:
December 31, 2025
December 31, 2024
SOFR plus
ABR plus
SOFR plus
ABR plus
Revolving Credit Facility
The Applicable Rate under the Credit Agreement, as well as the facility fee, may increase or decrease from time to time based on changes in the Company’s credit ratings. Accordingly, the interest rate is subject to fluctuation during the term of the Credit Agreement based on changes in the ABR, SOFR and changes in the Company’s corporate credit ratings. The Credit Agreement also requires that Aptiv pay certain facility fees on the Revolving Credit Facility, which are also subject to adjustment based on certain letter of credit issuance and fronting fees.
The Credit Agreement contains certain covenants that limit, among other things, the Company’s (and the Company’s subsidiaries’) ability to incur certain additional indebtedness or liens or to dispose of substantially all of its assets. In addition, the Credit Agreement requires that the Company maintain a consolidated leverage ratio (the ratio of Consolidated Total Indebtedness to Consolidated EBITDA, each as defined in the Credit Agreement) of not more than 3.5 to 1.0 (or 4.0 to 1.0 for four full fiscal quarters following completion of material acquisitions, as defined in the Credit Agreement).
The Credit Agreement also contains events of default customary for financings of this type. The Company was in compliance with the Credit Agreement covenants as of December 31, 2025.
Term Loan A Credit Agreement
On August 19, 2024, Aptiv PLC and its wholly-owned subsidiaries AGF DAC and Aptiv LLC entered into a senior unsecured term loan A credit agreement (the “Term Loan A Credit Agreement”) with, among others, JPMorgan Chase Bank,
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N.A., as Administrative Agent, under which it maintained a senior unsecured credit facility consisting of a term loan (the “Term Loan A”) in aggregate principal amount of $600 million. Aptiv incurred approximately $2 million of issuance costs in connection with the Term Loan A.
As described above, proceeds from the Term Loan A were used to repay a portion of the loans incurred under the Bridge Credit Agreement during the three months ended September 30, 2024. This transaction was accounted for as a modification of debt in accordance with ASC Topic 470-50, Debt Modifications and Extinguishments . Accordingly, a pro-rata portion of the unamortized fees from the Bridge Credit Agreement in the amount of $4 million was transferred to the Term Loan A and, together with the $2 million of direct issuance costs referenced above, were amortized to interest expense over the term of the Term Loan A.
During the fourth quarter of 2024, the Company repaid $350 million of the outstanding principal balance on the Term Loan A, utilizing cash on hand. During the first quarter of 2025, the Company fully repaid the remaining outstanding principal balance of $250 million on the Term Loan A utilizing cash on hand, and recognized a loss on debt extinguishment of approximately $2 million during the year ended December 31, 2025 within other income, net in the consolidated statements of operations.
The Term Loan A had a maturity date of August 19, 2027. Prior to its repayment, borrowings under the Term Loan A Credit Agreement were prepayable at Aptiv’s option without premium or penalty. No principal payment was required until the maturity date.
Loans under the Term Loan A Credit Agreement bore interest, at Aptiv’s option, at either (a) ABR or (b) SOFR plus in either case a percentage per annum as set forth in the table below (the “Term Loan Applicable Rate”). The rates under the Term Loan A Credit Agreement on the specified dates are set forth below:
December 31, 2025
December 31, 2024
SOFR plus
ABR plus
SOFR plus
ABR plus
Term Loan A
Spin-off Financing
Versigent Limited (“Versigent”), a wholly owned subsidiary of Aptiv, was formed in connection with the Separation as a holding company to directly or indirectly own substantially all of the operating subsidiaries of the Electrical Distribution Systems business and to issue debt. Cyprium Corporation (“Cyprium U.S.”), a wholly owned U.S. subsidiary of the Company, and Cyprium Holdings Luxembourg S.a.r.l. (“Cyprium Luxembourg”), a wholly owned Luxembourg subsidiary of the Company, both of which will become wholly owned subsidiaries of Versigent upon completion of the Separation, were also formed for the same purposes.
Spin-off Credit Agreement —In November 2025, Versigent, Cyprium U.S. and Cyprium Luxembourg entered into a credit agreement (the “Spin-Off Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, with respect to $1.35 billion in senior secured credit facilities. The Credit Agreement consists of a senior secured five-year $500 million term loan facility (the “Spin-Off Term Loan A Facility”) and an $850 million five-year senior secured revolving credit facility (the “ Spin-Off Revolving Credit Facility”) (collectively, the “Spin-Off Credit Facilities”) with the lenders party thereto and JPMorgan Chase Bank, N.A.
The Spin-Off Credit Facilities are expected to become available to Versigent no later than the date of the Separation, subject to the satisfaction of certain conditions customary for financings of this type. Accordingly, no amounts were drawn or available to be drawn under the Spin-Off Credit Facilities as of December 31, 2025.
Cyprium U.S. and Cyprium Luxembourg are each borrowers under the Spin-Off Credit Agreement, under which such borrowings would be guaranteed by Versigent and certain of its subsidiaries. Additional subsidiaries of Versigent may be added as co-borrowers or guarantors under the Spin-Off Credit Agreement from time to time on the terms and conditions set forth in the Spin-Off Credit Agreement. The obligations of each borrower under the Spin-Off Credit Agreement will be jointly and severally guaranteed by each other borrower and by certain of Versigent’s existing and future direct and indirect subsidiaries, subject to certain exceptions customary for financings of this type. All obligations of the borrowers and the guarantors will be secured by certain assets of such borrowers and guarantors, including a perfected first-priority pledge of all of the capital stock in Cyprium U.S. and Cyprium Luxembourg.
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Senior and Junior Unsecured Notes
As of December 31, 2025, the Company had the following senior and junior unsecured notes issued and outstanding:
Aggregate Principal Amount
(in millions)
Stated Coupon Rate
Issuance Date
Maturity Date
Interest Payment Date
September 2016
September 2028
September 15
March 2019
March 2029
March 15 and September 15
September 2024
September 2029
March 13 and September 13
February 2022
March 2032
March 1 and September 1
September 2024
September 2034
March 13 and September 13
June 2024
June 2036
June 11
September 2016
October 2046
April 1 and October 1
March 2019
March 2049
March 15 and September 15
November 2021
December 2051
June 1 and December 1
February 2022
May 2052
May 1 and November 1
September 2024
September 2054
March 13 and September 13
September 2024
December 2054
June 15 and December 15
(1) Represents fixed-to-fixed reset rate junior subordinated unsecured notes.
In 2025, Aptiv redeemed $300 million aggregate principal amount of certain senior notes for cash consideration of $298 million, and recognized a net gain on debt extinguishment of approximately $1 million during the year ended December 31, 2025 within other income, net in the consolidated statements of operations.
Although the specific terms of each indenture governing each series of senior and junior notes vary, the senior indentures contain certain restrictive covenants, including with respect to Aptiv’s (and Aptiv’s subsidiaries’) ability to incur liens, enter into sale and leaseback transactions and merge with or into other entities. As of December 31, 2025, the Company was in compliance with the provisions of all series of the outstanding senior and junior notes. Refer to Note 11. Debt to the audited consolidated financial statements included herein for additional information.
Guarantor Summarized Financial Information
As further described in Note 11. Debt to the audited consolidated financial statements included herein, Aptiv LLC and AGF DAC are each borrowers under the Credit Agreement, under which such borrowings would be guaranteed by each of the other borrowers, Aptiv PLC and Aptiv Swiss Holdings. Old Aptiv issued the 2016 Euro-denominated Senior Notes, 2016 Senior Notes, 2019 Senior Notes and 2021 Senior Notes. In February 2022, Aptiv LLC and AGF DAC were added as guarantors on each series of outstanding senior notes previously issued by Old Aptiv. AGF DAC was added as a joint and several co-issuer of the 2021 Senior Notes in December 2021, effective as of the date of issuance. Old Aptiv and Aptiv LLC jointly issued the 2022 Senior Notes, which are guaranteed by AGF DAC. In 2024, Old Aptiv and AGF DAC co-issued the 2024 Euro-denominated Senior Notes, the 2024 Senior Notes, and the 2024 Junior Notes, which are all guaranteed by Aptiv LLC. In December 2024, in connection with the merger of Old Aptiv with and into Aptiv Swiss Holdings, with respect to each series of outstanding senior and junior notes previously issued by Old Aptiv, Aptiv Swiss Holdings succeeded to Old Aptiv as obligor, and Aptiv PLC was added as a guarantor. Together, Aptiv PLC, Aptiv LLC, AGF DAC and Aptiv Swiss Holdings comprise the “Obligor Group.” All other consolidated direct and indirect subsidiaries of Aptiv PLC are not subject to any guarantee under any series of notes outstanding (the “Non-Guarantors”). The guarantees rank equally in right of payment with all of the guarantors’ existing and future senior indebtedness, are effectively subordinated to any of their existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the indebtedness of each of their existing and future subsidiaries that is not a guarantor.
The below summarized financial information is presented on a combined basis after the elimination of intercompany balances and transactions among the Obligor Group and equity in earnings from and investments in the Non-Guarantors. The below summarized financial information should be read in conjunction with the Company’s audited consolidated financial statements included herein, as the financial information may not necessarily be indicative of results of operations or financial position had the subsidiaries operated as independent entities.
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Obligor Group
Year Ended December 31, 2025
(in millions)
Net sales
Gross margin
Operating loss
Net loss
Net loss attributable to Aptiv
As of December 31, 2025
Current assets (1)
Long-term assets (1)
Current liabilities (2)
Long-term liabilities (2)
Noncontrolling interest
As of December 31, 2024
Current assets (1)
Long-term assets (1)
Current liabilities (2)
Long-term liabilities (2)
Noncontrolling interest
(1) Includes current assets of $4,858 million and $6,212 million, and long-term assets of $770 million and $687 million, due from Non-Guarantors as of December 31, 2025 and December 31, 2024, respectively.
(2) Includes current liabilities of $5,577 million and $5,481 million, and long-term liabilities of $226 million and $226 million, due to Non-Guarantors as of December 31, 2025 and December 31, 2024, respectively.
Other Financing
Receivable factoring —Aptiv maintains a €450 million European accounts receivable factoring facility that is available on a committed basis and allows for factoring of receivables denominated in both Euros and U.S. dollars (“USD”). This facility is accounted for as short-term debt and borrowings are subject to the availability of eligible accounts receivable. Collateral is not required related to these trade accounts receivable. This facility became effective on January 1, 2021 and had an initial term of three years, and was renewed for an additional three-year term, effective November 2023, subject to Aptiv’s right to terminate at any time with three months’ notice. After expiration of the new three-year term, either party can terminate with three months’ notice. Borrowings denominated in Euros under the facility bear interest at the three-month Euro Interbank Offered Rate (“EURIBOR”) plus 0.50% and USD borrowings bear interest at two-month SOFR plus 0.68%, with borrowings under either denomination carrying a minimum interest rate of 0.20%. As of December 31, 2025, Aptiv had no amounts outstanding under the European accounts receivable factoring facility. As of December 31, 2024, Aptiv had approximately $450 million outstanding under the European accounts receivable factoring facility. The maximum amount drawn under the European accounts receivable factoring facility during the year ended December 31, 2025 was $450 million, primarily to manage intra-month working capital requirements.
Finance leases and other —As of December 31, 2025 and 2024, approximately $86 million and $64 million, respectively, of other debt primarily issued by certain non-U.S. subsidiaries and finance lease obligations were outstanding.
Letter of credit facilities —In addition to the letters of credit issued under the Credit Agreement, Aptiv had approximately $3 million and $4 million outstanding through other letter of credit facilities as of December 31, 2025 and 2024, respectively, primarily to support arrangements and other obligations at certain of its subsidiaries.
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Contractual Commitments
The following table summarizes our expected cash outflows resulting from financial contracts and commitments as of December 31, 2025, with amounts denominated in foreign currencies translated using foreign currency rates as of December 31, 2025. We have not included information on our recurring purchases of materials for use in our manufacturing operations. These amounts are generally consistent from year to year, closely reflect our levels of production, and are not long-term in nature. The amounts below exclude the gross liability for uncertain tax positions of $246 million as of December 31, 2025. We do not expect a significant payment related to these obligations to be made within the next twelve months. We are not able to provide a reasonably reliable estimate of the timing of future payments relating to the non-current portion of obligations associated with uncertain tax positions. For more information, refer to Note 14. Income Taxes to the audited consolidated financial statements included herein.
Payments due by Period
Total
Thereafter
(in millions)
Debt and finance lease obligations (excluding interest)
Estimated interest costs related to debt and finance lease obligations
Operating lease obligations
Contractual commitments for capital expenditures
Other contractual purchase commitments, including information technology
Total
In addition to the obligations discussed above, certain of our non-U.S. subsidiaries sponsor defined benefit pension plans, some of which are funded. We have minimum funding requirements with respect to certain of our pension obligations and may periodically elect to make discretionary contributions to the plans in support of risk management initiatives. We will also have payments due with respect to our other postretirement benefit obligations. We do not fund our other postretirement benefit obligations and payments are made as costs are incurred by covered retirees. Refer to Note 12. Pension Benefits to the audited consolidated financial statements included herein for additional detail regarding our expected contributions to our pension plans and expected distributions to participants in future periods.
Capital Expenditures
Supplier selection in the automotive industry is generally finalized several years prior to the start of production of the vehicle. Therefore, current capital expenditures are based on customer commitments entered into previously, generally several years ago when the customer contract was awarded. As of December 31, 2025, we had approximately $183 million in outstanding cancellable and non-cancellable capital commitments. Capital expenditures by operating segment and geographic region for the periods presented were:
Year Ended December 31,
(in millions)
Advanced Safety and User Experience
Engineered Components Group
Electrical Distribution Systems
Other (1)
Total capital expenditures
North America
Europe, Middle East & Africa
Asia Pacific
South America
Total capital expenditures
(1) Other includes capital expenditures attributable to corporate administrative and support functions, including corporate headquarters and certain technical centers.
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Cash Flows
Intra-month cash flow cycles vary by region, but in general we are users of cash through the first half of a typical month and we generate cash during the latter half of a typical month. Due to this cycle of cash flows, we may utilize short-term financing, including our Revolving Credit Facility and European accounts receivable factoring facility, to manage our intra-month working capital needs. Our cash balance typically peaks at month end.
We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan structures and other distributions and advances to provide the funds necessary to meet our global liquidity needs. We utilize a global cash pooling arrangement to consolidate and manage our global cash balances, which enables us to efficiently move cash into and out of a number of the countries in which we operate.
Operating activities —Net cash provided by operating activities totaled $2,185 million and $2,446 million for the years ended December 31, 2025 and 2024, respectively. Cash flows provided by operating activities for the year ended December 31, 2025 consisted primarily of net earnings of $181 million, increased by $1,037 million for non-cash charges for depreciation, amortization, pension costs and extinguishment of debt, $648 million for non-cash goodwill impairment charges and $394 million for non-cash changes in deferred income taxes, partially offset by $233 million related to changes in operating assets and liabilities, net of restructuring and pension contributions and $46 million for non-cash net gains on equity method transactions. Cash flows provided by operating activities for the year ended December 31, 2024 consisted primarily of net earnings of $1,810 million, increased by $1,023 million for non-cash charges for depreciation, amortization, pension costs and extinguishment of debt, partially offset by $605 million for non-cash net gains on equity method transactions and $16 million related to changes in operating assets and liabilities, net of restructuring and pension contributions.
Investing activities —Net cash used in investing activities totaled $498 million and $507 million for the years ended December 31, 2025 and 2024, respectively. Cash flows used in investing activities for the year ended December 31, 2025 primarily consisted of capital expenditures of $656 million and technology investments of $42 million, partially offset by proceeds from the sale of equity method investments of $164 million. Cash flows used in investing activities for the year ended December 31, 2024 primarily consisted of capital expenditures of $830 million and technology investments of $121 million, partially offset by proceeds from the sale of equity method investments of $448 million.
Financing activities —Net cash used in financing activities totaled $1,442 million and $1,965 million for the years ended December 31, 2025 and 2024. Cash flows used in financing activities for the year ended December 31, 2025 primarily included $462 million in repayments under short-term debt agreements, $397 million paid to repurchase ordinary shares, $296 million for the repayment of senior notes and $250 million for the repayment of the Term Loan A. Cash flows used in financing activities for the year ended December 31, 2024 primarily included $4,104 million paid to repurchase ordinary shares, $1,440 million for the repayment of senior notes and $350 million for the partial repayment of the Term Loan A, partially offset by net proceeds of $2,920 million received from the issuance of senior and junior notes, net proceeds of $598 million received from the issuance of the Term Loan A and $454 million for borrowings under other short-term debt agreements.
Off-Balance Sheet Arrangements
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.
Significant Accounting Policies and Critical Accounting Estimates
Our significant accounting policies are described in Note 2. Significant Accounting Policies to the audited consolidated financial statements included herein. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.
We consider an accounting estimate to be critical if:
• It requires us to make assumptions about matters that were uncertain at the time we were making the estimate, and
• Changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or results of operations.
Acquisitions and Other Transactions
In accordance with the accounting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations , we allocate the purchase price of an acquired business to its
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identifiable assets and liabilities based on estimated fair values. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. The process to estimate fair value described herein is generally applicable to other transactions, including the fair value estimates used in establishing the identifiable assets, liabilities and goodwill recorded upon formation of Motional AD LLC (“Motional”), Aptiv’s autonomous driving joint venture, and the resulting equity method investment recorded on Aptiv’s balance sheet.
An acquisition may include a contingent consideration component. The fair value of the contingent consideration is estimated as of the date of the acquisition and is recorded as part of the purchase price. This estimate is updated in future periods and any changes in the estimate, which are not considered an adjustment to the purchase price, are recorded in our consolidated statements of operations.
An acquisition may also include a redeemable noncontrolling interest component. The fair value of the noncontrolling interest is recorded to temporary equity in the consolidated balance sheet and is estimated as of the date of acquisition using a Monte Carlo simulation approach, which includes several assumptions including estimated future profitability, expected volatility rate and risk-free rate. The redeemable noncontrolling interest is then adjusted each reporting period for the income (loss) attributable to the noncontrolling interest, and for any measurement period adjustments necessary to record the redeemable noncontrolling interest at the higher of its redemption value, assuming it was redeemable at the reporting date, or its carrying value. Any measurement period adjustments are recorded to retained earnings, with a corresponding increase or reduction to net income attributable to Aptiv.
We use all available information to estimate fair values. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets and any other significant assets or liabilities. We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain more information regarding asset valuations and liabilities assumed.
Our purchase price allocation methodology contains uncertainties because it requires management to make assumptions and to apply judgment to estimate the fair value of acquired assets and liabilities. Management estimates the fair value of assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows and market multiple analyses. Unanticipated events or circumstances may occur which could affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.
Other estimates used in determining fair value include, but are not limited to, future cash flows or income related to intangibles, market rate assumptions, actuarial assumptions for benefit plans and appropriate discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but that are inherently uncertain, and therefore, may not be realized. Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.
Warranty Obligations and Product Recall Costs
Estimating warranty obligations requires us to forecast the resolution of existing claims and expected future claims on products sold. We base our estimate on historical trends of units sold and payment amounts, combined with our current understanding of the status of existing claims and discussions with our customers. The key factors which impact our estimates are (1) the stated or implied warranty period; (2) OEM source; (3) OEM policy decisions regarding warranty claims; and (4) OEMs seeking to hold suppliers responsible for product warranties. These estimates are re-evaluated on an ongoing basis. Actual warranty obligations could differ from the amounts estimated requiring adjustments to existing reserves in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing these estimates, changes in our assumptions could materially affect our results of operations.
In addition to our ordinary warranty provisions with customers, we are also at risk for product recall costs, which are costs incurred when a customer or the Company recalls a product through a formal campaign soliciting return of that product. In addition, the National Highway Traffic Safety Administration (“NHTSA”) has the authority, under certain circumstances, to require recalls to remedy safety concerns. Product recall costs typically include the cost of the product being replaced as well as the customer’s cost of the recall, including labor to remove and replace the recalled part. The Company accrues for costs related to product recalls as part of our warranty accrual at the time an obligation becomes probable and can be reasonably estimated. Actual costs incurred could differ from the amounts estimated, requiring adjustments to these reserves in future periods. It is possible that changes in our assumptions or future product recall issues could materially affect our financial position, results of operations or cash flows.
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Legal and Other Contingencies
We are involved from time to time in various legal proceedings and claims, including commercial or contractual disputes, product liability claims, government investigations, product warranties and environmental and other matters, that arise in the normal course of business. We routinely assess the likelihood of any adverse judgments or outcomes related to these matters, as well as ranges of probable losses, by consulting with internal personnel involved with such matters as well as with outside legal counsel handling such matters. We have accrued for estimated losses for those matters where we believe that the likelihood of a loss has occurred, is probable and the amount of the loss is reasonably estimable. The determination of the amount of such reserves is based on knowledge and experience with regard to past and current matters and consultation with internal personnel involved with such matters and with outside legal counsel handling such matters. The amount of such reserves may change in the future due to new developments or changes in circumstances. The inherent uncertainty related to the outcome of these matters can result in amounts materially different from any provisions made with respect to their resolution. Refer to Note 13. Commitments and Contingencies to the audited consolidated financial statements included herein for additional information.
Restructuring
Accruals have been recorded in conjunction with our restructuring actions. These accruals include estimates primarily related to employee termination costs, contract termination costs and other related exit costs in conjunction with workforce reduction and programs related to the rationalization of manufacturing and engineering processes. Actual costs may vary from these estimates. These accruals are reviewed on a quarterly basis and changes to restructuring actions are appropriately recognized when identified.
Pensions
We use actuarial estimates and related actuarial methods to calculate our obligation and expense. We are required to select certain actuarial assumptions, which are determined based on current market conditions, historical information and consultation with and input from our actuaries and asset managers. Refer to Note 12. Pension Benefits to the audited consolidated financial statements included herein for additional details. The key factors which impact our estimates are (1) discount rates; (2) asset return assumptions; and (3) actuarial assumptions such as retirement age and mortality which are determined as of the current year measurement date. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Experience gains and losses, as well as the effects of changes in actuarial assumptions and plan provisions are recognized in other comprehensive income. Cumulative actuarial gains and losses in excess of 10% of the projected benefit obligation (“PBO”) for a particular plan are amortized over the average future service period of the employees in that plan.
The principal assumptions used to determine the pension expense and the actuarial value of the projected benefit obligation for the U.S. and non-U.S. pension plans were:
Assumptions used to determine benefit obligations at December 31:
Pension Benefits
U.S. Plans
Non-U.S. Plans
Weighted-average discount rate
Weighted-average rate of increase in compensation levels
Assumptions used to determine net expense for years ended December 31:
Pension Benefits
U.S. Plans
Non-U.S. Plans
Weighted-average discount rate
Weighted-average rate of increase in compensation levels
Weighted-average expected long-term rate of return on plan assets
We select discount rates by analyzing the results of matching each plan’s projected benefit obligations with a portfolio of high-quality fixed income investments rated AA or higher by Standard and Poor’s or Moody’s.
Aptiv does not have any U.S. pension assets; therefore no U.S. asset rate of return calculation was necessary. The primary funded non-U.S. plans are in the U.K. and Mexico. For the determination of 2025 expense, we assumed a long-term expected
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asset rate of return of approximately 4.50% and 8.50% for the U.K. and Mexico, respectively. We evaluated input from local actuaries and asset managers, including consideration of recent fund performance and historical returns, in developing the long-term rate of return assumptions. The assumptions for the U.K. and Mexico are primarily conservative long-term, prospective rates. To determine the expected return on plan assets, the market-related value of our plan assets is actual fair value.
Our pension expense for 2026 is determined at the December 31, 2025 measurement date. For purposes of analysis, the following table highlights the sensitivity of our pension obligations and expense attributable to changes in key assumptions:
Change in Assumption
Impact on Pension Expense
Impact on PBO
25 basis point (“bp”) decrease in discount rate
Less than + $1 million
‘ + $16 million
25 bp increase in discount rate
- $1 million
‘ - $16 million
25 bp decrease in long-term expected return on assets
‘ + $1 million
25 bp increase in long-term expected return on assets
‘ - $1 million
The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear. The above sensitivities also assume no changes to the design of the pension plans and no major restructuring programs.
Based on information provided by our actuaries and asset managers, we believe that the assumptions used are reasonable; however, changes in these assumptions could impact our financial position, results of operations or cash flows. Refer to Note 12. Pension Benefits to the audited consolidated financial statements included herein for additional information.
Valuation of Long-Lived Assets, Intangible Assets and Investments in Affiliates and Expected Useful Lives
We monitor our long-lived and definite-lived assets, including our investments in affiliates, the most significant of which is our investment in Motional, for impairment indicators on an ongoing basis based on projections of anticipated future cash flows, including future profitability assessments of various manufacturing sites when events and circumstances warrant such a review. If impairment indicators exist, we perform the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the estimated fair value of the long-lived assets. Even if an impairment charge is not required, a reassessment of the useful lives over which depreciation or amortization is being recognized may be appropriate based on our assessment of the recoverability of these assets. We estimate cash flows and fair value through review of appraisals and using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments. The key factors which impact our estimates are (1) future production estimates; (2) customer preferences and decisions; (3) product pricing; (4) manufacturing and material cost estimates; and (5) product life / business retention. Any differences in actual results from the estimates could result in fair values different from the estimated fair values, which could materially impact our future results of operations and financial condition. We believe that the projections of anticipated future cash flows and fair value assumptions are reasonable; however, changes in assumptions underlying these estimates could affect our valuations.
Goodwill and Intangible Assets
We review goodwill for impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company performs the goodwill impairment review at the reporting unit level. We perform a qualitative assessment (step 0) of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. If not, no further goodwill impairment testing is performed. If so, we perform the step 1 test discussed hereafter. Our qualitative assessment involves significant estimates, assumptions, and judgments, including, but not limited to, macroeconomic conditions, industry and market conditions, financial performance of the Company, reporting unit specific events and changes in the Company’s share price.
If the fair value of the reporting unit is greater than its carrying amount (step 1), goodwill is not considered to be impaired. We estimate the fair value of our reporting units using a combination of a future discounted cash flow valuation model and, if possible, a comparable market transaction model. Estimating fair value requires the Company to make judgments about appropriate discount rates, growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows. If the fair value of the reporting unit is less than its carrying amount, the Company must record an impairment charge based on the amount by which a reporting unit’s carrying value exceeds its estimated fair value, limited to the amount of goodwill allocated to that reporting unit.
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As described in Note 1. General, in the first quarter of 2025 Aptiv realigned its business into three reportable operating segments: Advanced Safety and User Experience, Engineered Components Group and Electrical Distribution Systems. Concurrent with the change in reportable operating segments, the Company reassigned goodwill to the updated reporting units using a relative fair value approach. Aptiv tested goodwill related to the impacted reporting units immediately before and after the reassignment and concluded no goodwill impairments existed.
As described in Note 7. Intangible Assets and Goodwill to the audited consolidated financial statements included herein, during the third quarter of 2025, increased discount rates and a reduction in forecasted cash flows led the Company to conclude that, when considering the events and factors in totality, it was more likely than not that the estimated fair value of its Wind River reporting unit within the Advanced Safety and User Experience segment would be below its carrying value at September 30, 2025. Accordingly, we performed an interim quantitative assessment for goodwill impairment. As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, the fair value of this reporting unit was previously determined to be in excess of its carrying value by less than 1% as of the impairment assessment date in the fourth quarter of 2024. The modifications to forecasted reporting unit cash flows were attributable to the impacts resulting from market and industry delays in the broader adoption of software-defined vehicles. For example, certain of our OEM customers have recently announced delays in their software-defined vehicle investment strategies amidst reduced expectations for consumer demand for these products. Additionally, the Company is making incremental investments to further develop and grow the aerospace & defense and telecommunications businesses and product offerings for the reporting unit.
The estimated fair value of this reporting unit was primarily determined using discounted cash flow projections. Significant assumptions included management’s forecasted cash flows, including estimated future revenue growth, EBITDA margins and the discount rate. Forecasts of future cash flows are based on management’s best estimates. The discount rate was determined using a weighted average cost of capital adjusted for risk factors specific to the reporting unit. The estimated fair value of the reporting unit was developed based on current and future market conditions and the best information available at the impairment assessment date.
The assessment indicated that the carrying value of this reporting unit exceeded its estimated fair value, and as a result, during the third quarter of 2025, the Company recorded a non-cash, pre-tax goodwill impairment charge of approximately $648 million related to the Wind River reporting unit. Following the impairment, goodwill related to this reporting unit was approximately $1,631 million.
Although we believe our estimate of fair value is reasonable based on current and future market conditions and the best information available at the impairment assessment date, the reporting unit’s future financial performance is dependent on our ability to execute our business plan. The estimated fair value of the reporting unit is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue and the discount rate used to evaluate the fair value of the reporting unit. Future changes in the judgments, assumptions and estimates used in our impairment testing for goodwill, including discount rates and cash flow projections, could result in significantly different estimates of the fair value. A reduction in the estimated fair value could result in additional non-cash impairment charges in a future period. For example, an increase in the discount rate assumption by 50 basis points would result in the fair value of the reporting unit being approximately 6%, or $160 million, below its carrying value. A decrease in the estimated annual EBITDA margins used in the analysis by 100 basis points would result in the fair value of the reporting unit being approximately 4%, or $100 million, below its carrying value. A 5% decrease in the estimated annual revenues used in the analysis would result in the fair value of the reporting unit being approximately 5%, or $140 million, below its carrying value. These sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear.
Management performed its annual goodwill impairment test in the fourth quarter of 2025. The Company completed a qualitative goodwill impairment assessment (step 0) and, after evaluating the results, events and circumstances of the Company, we concluded that sufficient evidence existed to assert qualitatively that it was more likely than not that the estimated fair value of all our other reporting units remained substantially in excess of their carrying values.
We review indefinite-lived intangible assets for impairment annually or more frequently if events or changes in circumstances indicate the assets might be impaired. Similar to the goodwill assessment described above, the Company first performs a qualitative assessment of whether it is more likely than not that an indefinite-lived intangible asset is impaired. If necessary, the Company then performs a quantitative impairment test by comparing the estimated fair value of the asset, based upon its forecasted cash flows, to its carrying value. Other intangible assets with definite lives are amortized over their useful lives and are subject to impairment testing only if events or circumstances indicate that the asset might be impaired, as described above.
Income Taxes
Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce our deferred tax assets to the amount that
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is more likely than not to be realized. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.
When establishing a valuation allowance, we consider future sources of taxable income such as “future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards” and “tax planning strategies.” A tax planning strategy is defined as “an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets.” In the event we determine it is more likely than not that the deferred tax assets will not be realized in the future, the valuation adjustment to the deferred tax assets will be charged to earnings in the period in which we make such a determination. The valuation of deferred tax assets requires judgment and accounting for the deferred tax effect of events that have been recorded in the financial statements or in tax returns and our future projected profitability. Changes in our estimates, due to unforeseen events or otherwise, could have a material impact on our financial condition and results of operations.
We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified. The amount of income taxes we pay is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We report tax-related interest and penalties as a component of income tax expense. We do not believe there is a reasonable likelihood that there will be a material change in the tax related balances. However, due to the complexity of some of these uncertainties, the ultimate resolution may be materially different from the current estimate. Refer to Note 14. Income Taxes to the audited consolidated financial statements included herein for additional information.
Recently Issued Accounting Pronouncements
Refer to Note 2. Significant Accounting Policies to the audited consolidated financial statements included herein for a complete description of recent accounting standards which we have not yet been required to implement which may be applicable to our operations. Additionally, the significant accounting standards that have been adopted during the year ended December 31, 2025 are described.
