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How ADNT rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

The global automotive industry has continued to experience uncertainties due to changing macroeconomic conditions.
The Asia region is also experiencing higher competitive pressures from local OEMs in China who are penetrating the industry with new product offerings.
These Chinese OEMs are producing vehicles at lower costs, resulting in pricing pressures on the supply chain base.
Further, new relationships need to be developed in order to become the supplier of choice for these new OEMs in China along with careful assessment of which local OEMs are expected to exist and thrive over the long-term due to the competitive pressures.
Adient strives to offset the impact of lower production volumes and price reductions through improved operational performance, including commercial negotiations with Adient’s customers and vendors and through other operational improvements that Adient can influence, however there is no guarantee that Adient will be able to sufficiently offset the impact of lower production volumes, price reductions, or avoid more significant restructuring actions.
The global automotive industry has also experienced significant volatility in the past, and to some extent volatility persists in the current environment, related to supply chain disruptions, inflationary pressures, labor shortages, geopolitical uncertainties, high interest rates and foreign currency fluctuations.
These disruptions have moderated in fiscal 2025, but supply chains remain fragile and, in the past have led to unplanned downtime at Adient's production facilities, often with very little warning, which created operating inefficiencies and limited Adient's ability to adequately mitigate such inefficiencies.
While some of these input cost increases have moderated in fiscal 2025, other exposures will likely continue into fiscal 2026 and perhaps further into the future.
Automakers may experience a decline in the number of new vehicle sales, whether as a result of economic decline, vehicle affordability, disruptions as a result of changes to trade policies, supply chain disruptions and labor shortages, increasing consumer borrowing rates or for various other reasons.
The Asia region in particular has experienced higher competitive pressures within the automotive industry from local OEMs in China who are penetrating the industry with new product offerings.
These Chinese OEMs are producing vehicles at lower costs, resulting in pricing pressures on the supply chain base and among automaker competitors.
As a result, Adient expects modest margin declines as Adient continues to win new business with local OEMs in China.
Adient may also experience reductions in orders from these customers, incur write-offs of accounts receivable, incur impairment charges or require additional restructuring actions beyond its current restructuring plans, particularly if any of the automakers cannot adequately fund their operations or experience financial distress.
As a result of macroeconomic factors impacting Adient and the automotive industry, Adient recorded a $333 million non-cash goodwill impairment due to a decline in the fair value of the EMEA reporting unit as of March 31, 2025.
The decrease in EMEA’s fair value is driven by lower forecasted vehicle volumes from weakening consumer demand due in part to vehicle affordability, slower consumer adoption of electric vehicles, overcapacity in the industry resulting in pricing pressure, intensifying competition from Chinese imports and lower exports to China from EMEA as domestic brands expand in China.
The Americas and Asia reporting units also showed significant declines in fair value, however, the differences between their fair values and carrying values both modestly exceeded 10% at March 31, 2025.
The decrease in Americas' fair value is primarily attributable to the direct and indirect impacts stemming from the imposition of U.S. and foreign tariffs, and the decrease in Asia's fair value is primarily attributable to market share loss for foreign/luxury OEMs in the region combined with modest expected margin declines as Adient continues to win new business with local OEMs in China.
The fair values in both America and Asia reporting units show higher levels as of September 30, 2025 resulting in greater levels of fair value in excess of carrying values.
Adient will continuously assess the changing macroeconomic conditions in all regions including the outlook for consumer demand for vehicles and other factors impacting the region, along with the need for further restructuring actions, all of which impact Adient’s ability to achieve its projected long-term operating performance.
This ongoing conflict, along with other geopolitical uncertainties such as the ongoing conflict in the Middle East, could have broader adverse impacts on macroeconomic factors that impact Adient's business, cash flows, financial condition and results of operations.
Further, new relationships need to be developed in order to become the supplier of choice for the new Chinese OEMs, along with careful assessment of which local OEMs will exist and thrive over the long-term due to the competitive pressures within the industry.
Recent changes in U.S. administrative policy, including increases in tariffs and any changes in international trade relations or trade agreements, may have an adverse effect on Adient.
There is continued uncertainty about the future relationship between the U.S. and various other countries with respect to tariffs, trade policies, government regulations, treaties and trade agreements.
Recent changes in U.S. administrative policy have led to significant increases in tariffs on goods imported into the U.S., particularly tariffs on products manufactured in Europe, Mexico and China.
These tariffs, and additional proposed tariffs or other restrictive changes, have resulted, and may further result, in retaliatory trade measures in response to such actions and ongoing uncertainty regarding existing trade agreements, greater restrictions on free trade generally, and prohibitions or restrictions on the import of certain automobiles and components into the U.S., among other possible changes.
Further governmental action related to tariffs or international trade agreements, a trade war, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where Adient currently manufactures and sells products, and any resulting negative sentiments towards the U.S. as a result of such changes, would likely have an adverse effect on Adient's business, financial condition or results of operations.
To the extent that Adient incurs incremental tariffs, Adient will need to recover such tariffs from its customers, and there is no guarantee such recoveries will occur.
As of September 30, 2025, Adient’s results were negatively impacted by $17 million, net of recoveries, related to the recent enactment of U.S. tariffs.
Due to a variety of global factors, the automotive industry has experienced, and may continue to experience, supply chain disruptions, mainly from other automotive suppliers, due to production downtime and insufficient availability of raw materials, components and labor.
Adient operates in the highly competitive automotive supply industry which requires capital expenditures to support customer launch plans and growth.
Furthermore, the evolving nature of the markets in which Adient competes, including the evolution towards electric vehicles along with the autonomous vehicle market and consumer preferences for mobility on demand services, such as car- and ride-sharing, may attract new entrants.
In addition, Adient is required to spend capital resources to facilitate growth as automotive markets evolve; however, there is no guarantee that profitable growth will occur as a result of such expenditures due to customer platform sales and performance.
These factors may also lead to selective resourcing of business to competitors.
As a result, Adient's products may not be able to compete successfully with its competitors' products and Adient may not be able to meet the growing demands of customers or achieve its sales and profitability growth targets.
Similarly, if one or more of Adient's customers were to experience a work stoppage resulting in ongoing supply chain disruptions, or otherwise, that customer would likely halt or limit purchases of Adient's products, which could result in the shutdown of the related Adient manufacturing facilities and/or other cost-reduction initiatives.
In each of the last seven fiscal years, Adient announced restructurings related to cost reduction initiatives, which included workforce reductions, plant closures and asset impairments.
Additionally, changes in tax laws in Ireland, the U.S. or in other countries where Adient has significant operations could materially affect deferred tax assets and liabilities on Adient's statements of financial position and income tax provision on Adient's statements of income (loss).
Adient has been experiencing increased levels of discussions with taxing authorities and more aggressive negotiations by the tax authorities as part of tax audits and related inquiries, requiring increased levels of management's focus and attention and resulting in higher levels of uncertainty on tax assessment outcomes.
Subsequent to September 30, 2025, Adient initiated a foreign tax audit settlement proposal which, although still under negotiation with the foreign tax authorities, is expected to require a non-recurring recognition and payment of approximately $20 million in fiscal 2026.
Any further negative unexpected results from one or more such tax audits and related inquiries could have a material adverse affect on Adient's results of operations and cash flows.

and 22 more.

Gone since FY2024

The global automotive industry has recently experienced uncertainties due to changing macroeconomic conditions.
Adient strives to offset the impact of lower production volumes through improved operational performance, including commercial negotiations with Adient’s customers and vendors and through other operational improvements that Adient can influence, however there is no guarantee that Adient will be able to sufficiently offset the impact of lower production volumes or to avoid more significant restructuring actions.
The global automotive industry has also experienced significant volatility in the past due to supply chain disruptions, inflationary pressures, labor shortages, geopolitical uncertainties, high interest rates and foreign currency fluctuations.
These disruptions have moderated in fiscal 2024, but supply chains remain fragile and, in the past have led to unplanned downtime at Adient's production facilities, often with very little warning, which created operating inefficiencies and limited Adient's ability to adequately mitigate such inefficiencies.
While some of these input cost increases have moderated in fiscal 2024, other exposures will likely continue into fiscal 2025 and perhaps further into the future.
Automakers may experience a decline in the number of new vehicle sales, whether as a result of economic decline, supply chain disruptions and labor shortages, increasing consumer borrowing rates or for various other reasons.
As a result, Adient may experience reductions in orders from these customers, incur write-offs of accounts receivable, incur impairment charges or require additional restructuring actions beyond its current restructuring plans, particularly if any of the automakers cannot adequately fund their operations or experience financial distress.
As a result of macroeconomic factors impacting Adient and the automotive industry, a heightened risk of impairment exists for the EMEA reporting unit as the difference between its fair value and carrying value is less than 10% as of September 30, 2024.
The decrease in EMEA’s fair value is driven by lower forecasted vehicle volumes from weakening consumer demand, slower consumer adoption of electric vehicles, overcapacity in the industry resulting in pricing pressure, intensifying competition from Chinese imports and lower exports to China from EMEA as domestic brands expand in China.
As a result of the heightened risk of impairment, Adient will continuously assess the changing macroeconomic conditions in EMEA including the outlook for consumer demand for vehicles and other factors impacting the region, along with the need for further restructuring actions, all of which impact Adient’s ability to achieve its projected long-term operating performance.
This ongoing conflict, along with other geopolitical uncertainties such as the current conflict in the Middle East, could have broader adverse impacts on macroeconomic factors that impact Adient's business, cash flows, financial condition and results of operations.
Changes in U.S. administrative policy, including changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on Adient.
There is continued uncertainty about the future relationship between the U.S. and various other countries, most significantly China, with respect to trade policies, treaties, government regulations and tariffs.
Changes in U.S. administrative policy could lead to changes to existing trade agreements, greater restrictions on free trade generally, prohibitions or restrictions on the import of certain automobiles and components into the U.S. and significant increases in tariffs on goods imported into the U.S., particularly tariffs on products manufactured in Mexico and China, among other possible changes.
A trade war, other governmental action related to tariffs or international trade agreements, changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment in the territories and countries where Adient currently manufactures and sells products, and any resulting negative sentiments towards the U.S. as a result of such changes, likely would have an adverse effect on Adient's business, financial condition or results of operations.
Due to a variety of global factors, the automotive industry has experienced, and may continue to experience, supply chain disruptions from an insufficient availability of raw materials, components and labor.
Adient operates in the highly competitive automotive supply industry.
Furthermore, the rapidly evolving nature of the markets in which Adient competes, including as a result of the autonomous vehicle market and consumer preferences for mobility on demand services, such as car- and ride-sharing, may attract new entrants.
These factors may lead to selective resourcing of business to competitors.
As a result, Adient's products may not be able to compete successfully with its competitors' products and Adient may not be able to meet the growing demands of customers.
Similarly, if one or more of Adient's customers were to experience a work stoppage, such as what occurred during the UAW strike in the U.S. in late 2023, resulting in ongoing supply chain disruptions, or otherwise, that customer would likely halt or limit purchases of Adient's products, which could result in the shutdown of the related Adient manufacturing facilities and or other cost-reduction initiatives.
In each of the last six fiscal years, Adient announced restructurings related to cost reduction initiatives, which included workforce reductions, plant closures and asset impairments.
Additionally, changes in tax laws in Ireland, the U.S. or in other countries where Adient has significant operations could materially affect deferred tax assets and liabilities on Adient's statements of financial position and income tax provision on Adient's statements of income.
Negative unexpected results from one or more such tax audits could adversely affect Adient's results of operations.
The automotive industry is increasingly focused on the development of advanced driver assistance technologies, with the goal of developing and introducing a commercially-viable, fully automated driving experience.
There has also been an increase in consumer preferences for mobility on demand services, such as car- and ride-sharing, as opposed to automobile ownership, which may result in a long term reduction in the number of vehicles per capita.
Adient may incur material losses and costs as a result of warranty claims and product liability actions that may be brought against Adient.
Adient faces an inherent business risk of exposure to warranty claims and product liability in the event that its products fail to perform as expected and, in the case of product liability, such failure of its products results, or is alleged to result, in bodily injury and/or property damage.
Although Adient cannot assure that the future costs of warranty claims by its customers and product liability claims will not be material, Adient believes its established reserves are adequate to cover potential settlements.
For example, Adient has recorded mark-to-market adjustments on the revaluation of its pension obligations that have significantly impacted its overall results the past two years.
As of September 30, 2024, Adient's total consolidated indebtedness approximated $2.4 billion.
Further, certain of the recent austerity measures related to employee compensation, along with the on-going unpredictability of production schedules, could result in employees pursuing other employment opportunities outside of Adient.
Any of the following could adversely impact Adient's results of operations: the inability of Adient to execute continued turnaround actions to improve profitability; the loss of, or changes in, automobile supply contracts, sourcing strategies or customer claims with Adient's major customers or suppliers; increased freight or shipping costs resulting from extreme weather conditions or supply chain disruptions, lack of commodity availability and unfavorable commodity pricing; start-up expenses associated with new vehicle programs or delays or cancellations of such programs; underutilization of Adient's manufacturing facilities, which are generally located near, and devoted to, a particular customer's facility; inability to recover engineering and tooling costs; market and financial consequences of any recalls that may be required on products that Adient has supplied or sold into the automotive aftermarket; delays or difficulties in new product development and integration; quantity and complexity of new program launches, which are subject to Adient's customers' timing, performance, design and quality standards; interruption of supply of certain single-source components; the potential introduction of similar or superior technologies; changing nature and prevalence of Adient's joint ventures and relationships with its strategic business partners; global overcapacity and vehicle platform proliferation; and the implementation of new internal control systems and procedures that fail to achieve accurate financial reporting or that fail to prevent fraudulent activity (such as vendor payments to fraudulent bank accounts).
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.
The corporate tax provisions include (a) the creation of a 15% corporate minimum tax, effective for Adient’s fiscal year 2024, and (b) a nondeductible 1% excise tax on share buy-backs of covered corporations, effective for stock repurchases that occur after December 31, 2022.
Based upon current IRS guidance and Adient income levels, Adient is not subject to either provision.
However, Adient will continue to monitor and reassess the impact, if any, as the IRS and U.S.
Treasury issue additional guidance on the IRA provisions.
Given the current political environment, it is uncertain whether additional U.S. corporate tax reform could be expected.
There are a number of corporate income tax topics that were not addressed in the IRA that could be raised in the future, for example: increasing the U.S. corporate tax rate, increasing the rate of tax on certain earnings of foreign subsidiaries (the corporate minimum tax), modifying the base erosion and anti-abuse tax rules to target outbound payments to low-taxed jurisdictions, and further limiting interest expense deductibility.

and 3 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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