Aptiv (APTV) Risk Analysis

We are involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes, including warranty claims and other disputes with customers and suppliers; intellectual property matters; personal injury claims; environmental, health and safety issues; tax matters; and employment matters. While we believe our reserves are adequate, the final amounts required to resolve these matters could differ materially from our recorded estimates and our results of operations could be materially affected. For further information regarding our legal matters, see Item 3. Legal Proceedings. No assurance can be given that such proceedings and claims will not have a material adverse effect on our profitability and consolidated financial position.

As we sell, close and/or demolish facilities around the world, environmental investigations and assessments will need to be performed. We may identify previously unknown environmental conditions or further delineate known conditions that may require us to undertake remediation or incur additional costs related to demolition or decommissioning activities. Such costs may exceed our current reserves.

It is a condition to the distribution of the shares of Versigent to our shareholders as part of the Separation that we receive one or more tax opinions from our tax advisors, satisfactory to our Board of Directors in its sole discretion, regarding the qualification of the Separation as a distribution under Section 355(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"). We do not intend to seek a ruling from the Internal Revenue Service (the "IRS") with respect to the U.S. federal income tax treatment of the Separation. The opinions of our tax advisors will assume that the Separation will be completed according to the terms of a separation and distribution agreement that we intend to enter into with Versigent prior to the Separation (the "Separation and Distribution Agreement") and relies on the facts as stated in the Separation and Distribution Agreement, the Tax Matters Agreement (as defined below) and a number of other documents. In addition, the opinions of our tax advisors will rely on certain facts, assumptions, representations, and undertakings from Versigent and us regarding the past and future conduct of the companies' respective businesses and other matters and will be subject to certain caveats. If any of these facts, assumptions, representations, or undertakings are, or become, inaccurate or incomplete or are not otherwise satisfied, we and our shareholders may not be able to rely on the opinions of our tax advisors, and certain of our subsidiaries and our U.S. shareholders could be subject to significant tax liabilities. The opinions of our tax advisors will represent the judgment of each tax advisor, respectively, and will not be binding on the IRS or any courts, and there can be no assurance that the IRS will not take a contrary position or that a court will not uphold such position taken by the IRS. Notwithstanding the opinions of our tax advisors, the IRS could determine on audit that the Separation and/or certain related transactions are taxable if it determines that any of these facts, assumptions, representations, or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the share ownership of Versigent or us after the Separation. If the conclusions expressed in the opinions of our tax advisors are challenged by the IRS, and if the IRS prevails in such challenge, the tax consequences of the Separation (including the tax consequences to certain of our subsidiaries and our U.S. Holders) could be materially less favorable. If the Separation and/or certain related transactions were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, each U.S. Holder who received ordinary shares of Versigent in the Separation would be treated as having received a distribution in an amount equal to the fair market value of such ordinary shares received, which would generally result in: (i) a taxable dividend to the U.S. Holder to the extent of that U.S. Holder's pro rata share of our current or accumulated earnings and profits; (ii) a reduction in the U.S. Holder's basis (but not below zero) in our ordinary shares; and (iii) taxable gain from the exchange of our ordinary shares to the extent the amount received exceeds the sum of the U.S. Holder's share of our earnings and profits and the U.S. Holder's basis in our ordinary shares. In addition, certain of our subsidiaries could be subject to U.S. federal income tax if the Separation and/or certain related transactions were determined not to qualify for non-recognition under Section 355 and related provisions of the Code. These amounts could be material, and could adversely affect our business, financial conditions, cash flows and results of operations. We intend to enter into a tax matters agreement with Versigent, under which Versigent will make certain representations and covenants intended to protect the tax-free treatment of the Separation and certain related transactions (the "Tax Matters Agreement"). If, as a result of any of those representations being untrue or those covenants being breached, the Separation and/or certain related transactions were determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Code, Versigent could be required by the Tax Matters Agreement to indemnify us for the resulting taxes and related expenses. However, if Versigent fails to satisfy its indemnification obligations to us in respect of such taxes and expenses, our business, financial condition, cash flows and results of operations could be adversely affected.

We have taken, are taking, and may take future restructuring actions to realign and resize our production capacity and cost structure to meet current and projected operational and market requirements. Charges related to these actions or any further restructuring actions may have a material adverse effect on our results of operations and financial condition. We cannot ensure that any current or future restructuring actions will be completed as planned or achieve the desired results. Additionally, from time to time, we have recorded asset impairment losses relating to specific plants and operations. Generally, we record asset impairment losses when we determine that our estimates of the future undiscounted cash flows from an operation will not be sufficient to recover the carrying value of that facility's building, fixed assets and production tooling. For goodwill, we perform a qualitative assessment of whether it is more likely than not that a reporting unit's value is less than its carrying amount. If the qualitative assessment is not met, the Company then performs a quantitative assessment by comparing the estimated fair value of each reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is less than its carrying amount, the Company recognizes an impairment loss in an amount equal to the excess, not to exceed the amount of goodwill allocated to the reporting unit. For example, the Company assessed changes in circumstances that occurred during the third quarter of 2025 related to increased discount rates and a reduction in forecasted cash flows, which 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. 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. It is possible that we could incur additional charges in the future as changes in economic or operating conditions impacting the estimates and assumptions could result in additional impairment. See Item 7. Significant Accounting Policies and Critical Accounting Estimates for a detailed discussion of our annual goodwill and intangible assets impairment assessment.

Our sensitivity to economic cycles and any related fluctuation in the businesses of our customers or potential customers may have a material adverse effect on our financial condition, results of operations or cash flows. 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. A prolonged downturn in or uncertainty relating to global or regional economic conditions, including as a result of trade barriers, high inflation, component shortages, labor shortages or any significant reduction in automotive sales by our customers, may result in the delay or cancellation of plans to purchase our products, which could have a material adverse effect on our business, results of operations and financial condition. Additionally, uncertainty relating to global or regional economic conditions may have an adverse impact on our business. Any such adverse impacts could require us to shut down plants or result in impairment charges, restructuring actions or changes in our valuation allowances against deferred tax assets, which could be material to our financial condition and results of operations. Deteriorating global economic conditions and/or deteriorating performance of our business may also have a negative impact on our market capitalization, which could also result in impairment charges. A determination that an impairment has occurred could have a material adverse effect on our financial results. Any significant negative cash flow or instability in the global credit markets and global economic pressure could limit our ability to obtain external financing on favorable terms. There can be no assurance that we would be able to secure such financing on terms acceptable to us, or at all.

The majority of our manufacturing and distribution facilities are in Mexico, China and other countries in Asia Pacific, Eastern and Western Europe, South America and Northern Africa. We also purchase raw materials and other supplies from many different countries around the world. For the year ended December 31, 2025, approximately 64% of our net revenue came from sales outside the U.S. International operations are subject to certain risks inherent in doing business globally, including: - exposure to local economic, political and labor conditions;- unexpected changes in laws, regulations, economic and trade sanctions, trade or monetary or fiscal policy, including interest rates - foreign currency exchange rates and changes in the rate of inflation in the U.S. and other countries;- tariffs, quotas, customs and other import or export restrictions and other trade barriers;- expropriation and nationalization;- difficulty of enforcing agreements, collecting receivables and protecting assets through certain non-U.S. legal systems;- reduced technology, data or intellectual property protections;- limitations on repatriation of earnings;- withholding and other taxes on remittances and other payments by subsidiaries;- investment restrictions or requirements;- violence and civil unrest in local countries, including the conflict between Ukraine and Russia and the conflicts in the Middle East; and - compliance with the requirements of an increasing body of applicable anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws of various other countries. Additionally, our global operations may also be adversely affected by political events, terrorist events and hostilities, complications due to natural, nuclear or other disasters or the spread of an infectious disease, virus or other widespread illness. For instance, 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. Existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, 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 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 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 threatened duties, taxes or other business restrictions which could adversely affect our business and financial results. 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. Furthermore, 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. While the sanctions announced to date have not had a material adverse impact on us, any further sanctions imposed or actions taken by these countries, and any retaliatory measures by Russia in response, including restrictions on energy supplies from Russia to countries in the region and asset expropriations, could increase our costs, reduce our sales and earnings or otherwise have an adverse effect on our operations. 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. Increasing our manufacturing footprint in Asian markets, including China, and our business relationships with Asian automotive manufacturers are important elements of our long-term strategy. In addition, our strategy includes increasing revenue and expanding our manufacturing footprint in lower-cost regions. As a result, our exposure to the risks described above may be greater in the future. The likelihood of such occurrences and their potential impact on us vary from country to country and are unpredictable.

A significant public health crisis, such as the COVID-19 pandemic, could adversely impact our business as well as those of our suppliers and customers. Any future significant public health crisis could adversely impact the global economy, our industry and the overall demand for our products. In addition, preventative or reactionary measures taken by governmental authorities may disrupt the ability of our employees, suppliers and other business partners to perform their respective functions and obligations relative to the conduct of our business. Our ability to predict and respond to future changes resulting from potential health crises is uncertain as are the ultimate potential impacts on our business. In 2023, 2024 and 2025, our manufacturing facilities were not impacted by prolonged shutdowns directly resulting from any public health crises.

We have currency exposures related to buying, selling and financing in currencies other than the local currencies of the countries in which we operate. Approximately 64% of our net revenue for the year ended December 31, 2025 came from sales outside the U.S., which were primarily invoiced in currencies other than the U.S. dollar, and we expect net revenue from non-U.S. markets to continue to represent a significant portion of our net revenue. Accordingly, significant changes in currency exchange rates, particularly the Euro, Chinese Yuan (Renminbi) and Mexican Peso, could cause fluctuations in the reported results of our businesses' operations that could negatively affect our results of operations. Price increases caused by currency exchange rate fluctuations may make our products less competitive or have an adverse effect on our margins. Currency exchange rate fluctuations may also disrupt the business of our suppliers by making their purchases of raw materials more expensive and more difficult to finance. Historically, we have reduced our currency exposure by aligning our costs in the same currency as our revenues or, if that is impracticable, through financial instruments that provide offsets or limits to our exposures, which are opposite to the underlying transactions. However, any measures that we may implement to reduce the effect of volatile currencies and other risks of our global operations may not be effective.

In connection with the award of new business, we obligate ourselves to deliver new products and services that are subject to our customers' timing, performance and quality standards. The launch of production is a complex process, the success of which depends on a wide range of factors, including: the timing and frequency of design changes by our customers relative to the start of production; product maturity and complexity; production readiness of our own, as well as our customers' and suppliers' manufacturing facilities; robustness of manufacturing and validation processes; launch volumes; quality and production readiness of tooling and equipment; sufficiency of skilled employees; and initial product quality. Given the complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs. Failure by us to successfully launch a new product could result in commercial or litigation claims against us which could have a material adverse effect on our profitability. Additionally, a significant product or program launch failure could adversely affect our reputation, future business prospects with one or more customers, and/or ability to execute our strategy. In addition, new program launches require a significant ramp up of costs; however, our sales related to these new programs generally are dependent upon the timing and success of our customers' introduction of new vehicles. Customer decisions on program launch timing may be impacted by industry conditions, government regulations and consumer preferences, and therefore, the timing of such launches may also be subject to change.

We own significant intellectual property, including a large number of patents and trade names, and are involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets we serve. Developments or assertions by or against us relating to intellectual property rights could negatively impact our business. Significant technological developments by others also could materially and adversely affect our business and results of operations and financial condition.

Our ability to keep our business operating effectively depends on the functional and efficient operation of information technology capabilities, both internally and externally. Our capabilities, as well as those of our customers, suppliers, partners and service providers, are crucial to our operations and may contain confidential personal information, business-related information or intellectual property. These capabilities are also susceptible to interruptions (including those caused by systems failures, cyberattacks and other natural or man-made incidents or disasters), which may be prolonged or go undetected. Cyberattacks are continually increasing in their frequency, sophistication and intensity. Additionally, some actors are using artificial intelligence technology to launch more automated, targeted and coordinated attacks which further heightens these risks. Although we have and continue to employ capabilities, processes and other security and privacy measures designed to prevent, detect and mitigate the risk of such events, including but not limited to geographically diverse and resilient infrastructure, third-party risk management and the implementation of proactive security and privacy measures, a significant or large-scale interruption of our information technology capabilities could result in a confidentiality, integrity or availability data breach, and adversely affect our ability to manage and keep operations running efficiently and effectively, and could result in significant costs, regulatory investigations, fines or litigation. Incidents that result in a wider or sustained disruption to our business or products, or result in a personal data breach, could have a material adverse effect on our business, reputation, financial condition and results of operations. In addition, some of our employees work from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks. Some of our products, including but not limited to safety-critical products, contain complex digital technologies designed to support today's increasingly connected vehicles. Although we continue to employ capabilities, processes and other security and privacy measures designed to reduce risks of cyberattacks against our products, such measures may not provide absolute security (and, in turn, privacy) and may not sufficiently mitigate all potential risks under all scenarios. Failure of such products to effectively protect against attacks targeted at our products can negatively affect our brand and harm our business, prospects, customers, financial condition and operating results. Further, engineering and maintaining security for our systems and products may require significant costs. However, failing to properly respond to and invest in information technology and cybersecurity advancements may limit our ability to attract and retain customers, prevent us from offering similar products and services as those offered by our competitors or inhibit our ability to meet regulatory, industry or other compliance requirements. To date, we have not experienced a system failure, cyberattack or security breach that has resulted in a material interruption in our operations or material adverse effect on our financial condition. Our Board of Directors regularly reviews relevant information technology and cybersecurity matters and receives periodic updates from information technology and cybersecurity subject matter experts as part of its risk assessment procedures, including analysis of existing and emerging risks, as well as plans and strategies to address those risks. While we continuously seek to expand and improve our information technology systems and maintain adequate disclosure controls and procedures, there can be no assurance that we can adequately anticipate all trends of the market, technology landscapes and threat landscapes, and there can be no assurance that such measures will prevent interruptions or security breaches that could adversely affect our business. Refer to Item 1C. Cybersecurity of this Annual Report on Form 10-K for further information on the Company's risk management, strategy and governance over cybersecurity matters.