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Fitch Upgrades Garrett Motion Credit Ratings on Deleveraging, Then Withdraws Coverage
Fitch Ratings has upgraded Garrett Motion, Inc.’s (NYSE:GTX) key credit ratings, reflecting the automotive technology company's improved financial leverage and strong profit outlook. Immediately following the upgrade, the ratings agency announced it was withdrawing all ratings on the company for commercial reasons.
Details of the Rating Action
Fitch lifted its Long-Term Issuer Default Rating for Garrett Motion to 'BB+' from 'BB' with a Stable Outlook. The agency also raised its ratings on the company's debt instruments:
- Senior unsecured notes were upgraded to 'BB+' from 'BB'.
- Senior secured notes were upgraded to 'BBB-' from 'BB+'.
This action places Garrett's senior secured debt at an investment-grade level, according to Fitch's scale.
Rationale for the Upgrade
AdThe upgrade was driven by Garrett's strengthening balance sheet. Fitch forecasts the company's EBITDA gross leverage will improve to 2.0x by the end of 2026, a deleveraging attributed to a voluntary repayment of a portion of its term loan in the first half of the year. The agency noted it expects leverage to remain at this level, supported by robust profitability and free cash flow generation.
Garrett’s financial performance has been strong, with its adjusted EBIT margin reaching 15.6% in the second quarter of 2026, an increase of 200 basis points year-over-year. Fitch cited strong volumes and a favorable product mix, with growth in commercial vehicles, industrial applications, and the aftermarket segment, as key drivers. The ratings firm projects Garrett's EBIT margin will remain in a healthy 15% to 16% range through 2029.
Business Strategy and Outlook
Garrett Motion is increasingly diversifying its revenue streams beyond the automotive sector. Approximately 30% of its revenue currently comes from non-automotive industrial applications and aftermarket services, a share that Fitch expects to grow. The company is actively expanding into new industrial markets, including power generation, HVAC, air compression, and solutions for data center backup power and cooling.
As part of this strategy, Garrett is targeting more than $1 billion in sales from these new applications by 2030. The company's liquidity position appears solid, with a reported $177 million in cash at the end of 2025 and an untapped $630 million revolving credit facility, according to the Fitch report.
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