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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

for the fiscal year ended December 31, 20172021

or

for the transition period from to .

Commission file number 0-21810

GENTHERM INCORPORATED

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (248) 504-0500

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K    ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant, computed by reference to the average bid and asked pricesclosing price of such Common Stock on The Nasdaq Global Select Market as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2017,2021, was $1,047,947,000.$2,342,097,813. For purposes of this computation, the registrant has excluded the market value of all shares of its Common Stock reported as being beneficially owned by executive officers and directors and holders of more than 10% of the Common Stock on a fully diluted basis of the registrant;directors; such exclusion shall not, however, be deemed to constitute an admission that any such person is an “affiliate” of the registrant.

As of February 22, 2018,14, 2022, there were 36,762,71033,021,536 issued and outstanding shares of Common Stock of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the 20182022 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report to the extent described herein.

TABLE OF CONTENTS

GENTHERM INCORPORATED

PART I

Unless otherwise indicated, references to “Gentherm”, “the Company”, “we”, “our” and “us” in thisForward-Looking Statements

This Annual Report on Form 10-K refer to Gentherm Incorporated and its consolidated subsidiaries.

Except tofor the extent expressly noted herein, the content of our website or the websites of other third parties noted herein are not incorporated by reference in this Report.

Forward-Looking Statements

This Reportyear ended December 31, 2021 (this “Annual Report”) contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our goals, beliefs, plans and expectations about our prospects for the future and other future events, such as the impact of the COVID-19 pandemic and other current macroeconomic conditions, including supply chain disruptions, labor shortages and inflationary pressures, on our financial statements, liquidity, and business as well as the global economy, our ability to finance sufficient working capital, the amount of availability under our credit facility, our ability to continue to maintain or increase sales and profits of our operations, andgrow current production levels, the sufficiency of our cash balances and cash generated from operating, investing and financing activities for our future liquidity and capital resource needs.needs, our ability to finance sufficient working capital, and our ability to execute our strategic plan.  Reference is made in particular to forward-looking statements included in “Item 1. Business,”, “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Such statements may be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “believe”, “estimate”, “anticipate”, “intend”, “continue”, or similar terms, variations of such terms or the negative of such terms.

The forward-looking statements included in this Annual Report are made as of the date hereof or as of the date specified and are based on management’s currentreasonable expectations and beliefs.  Such forward-looking statements are subject to a number of important assumptions, significant risks and uncertainties (some of which are beyond our control) and other factors which are set forththat may cause the Company’s actual results or performance to differ materially from that described in “Item 1A. Risk Factors” and elsewhere in this Report, and subsequent reports filed with or furnished toindicated by the Securities and Exchange Commission, and whichforward-looking statements. Important factors that could cause actual results to differ materially from that describedthose in the forward looking statements.forward-looking statements include, but are not limited to those summarized below:

In addition, with reasonable frequency, we have entered into business combinations, acquisitions, divestitures, strategic investments and other significant transactions. Such forward-looking statements do not include the potential impact of any such transactions that may be completed after the date hereof, each of which may present material risks to the Company’s business and financial results.  Except as required by law, we expressly disclaim any obligation or undertaking to update any forward-looking statements to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

General

Unless otherwise indicated, references to “Gentherm”, “the Company”, “we”, “our” and “us” in this Annual Report refer to Gentherm Incorporated and its consolidated subsidiaries.

Except to the extent expressly noted herein, the content of our website or the websites of other third parties noted herein are not incorporated by reference in this Annual Report.

Overview

Gentherm Incorporated is a global technologydeveloper, manufacturer and industry leader in the design, development, and manufacturingmarketer of innovative thermal management technologies.  Ourtechnologies for a broad range of heating and cooling and temperature control applications in the automotive and medical industries. Within the automotive industry, our products provide solutions for automotive passenger climate comfort and convenience, battery thermal management remote power generation,and cell connecting systems. Within the medical industry our products provide patient temperature management environmental product testing  and other consumer and industrial temperature control needs.solutions. Our automotive products can be found on the vehicles ofmanufactured by nearly all the major automotive manufacturersOEMs operating in North America and Europe, and several major OEMs in Asia. We operate in locations aligned with our major customers’ product strategies in order to provide locally enhanced design, integration and production capabilities and to identify future thermal technology product opportunities in both automotive and other markets.   We concentrate our research on the developmentcapabilities. The Company is also developing a number of new technologies and new applications fromproducts that are expected to enable improvements to existing technologiesproducts and to create product and market opportunities for a wide array of thermal management solutions.  

The Company has two reportable segments for financial reporting purposes: Automotive and Industrial.

Automotive

The Automotive reporting segment is comprised of the results from our global automotive businesses and individual convenience products. Operating results from our automotive seat comfort systems, specialized automotive cable systems and other automotive and non-automotive thermal convenience products are all reported in the Automotive segment because of their complementary focus on automotive content and/or individual comfort and convenience.  All of our activities with respect to electronics are also included in our Automotive segment because a majority of these activities relate to the manufacture of electronic components for our automotive products or the automotive products of third parties. Etratech’s operating results are included within Gentherm’s Automotive segment due to the concentration ofnew product applications within the automotive, RVfor existing and marine industries.new markets.

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Automotive seat comfort systems include seat heaters, variable temperature Climate Control Seats  (“CCS”) designed to provide individualized thermal comfort to automobile passengers, and integrated electronic components, such as blowers and electronic control units, that utilize our proprietary electronics technology.  Specialized automotive cable system products include ready-made wire harnesses and related wiring products. Other automotive products include the automotive steering wheel heater, heated door and armrests, heated and cooled cup holders and thermal storage bins.

Industrial

The Industrial reporting segment represents the combined results from our remote power generation systems business, our patient temperature management systems business, our environmental testing equipment business and our advanced research and product development division.  Our remote power generation systems business is managed by our subsidiary Gentherm Global Power Technologies (“GPT”) and our patient temperature management and environment test equipment businesses are managed by our subsidiary Cincinnati Sub-Zero (“CSZ”). The advanced research and product development division is engaged in projects to improve the efficiency of thermal management technologies and to develop, market, and distribute products based on these new technologies.  The operating results from these businesses and division are presented together as one reporting segment because of their joint concentration on identifying new, non-automotive markets and product applications based on thermal management technologies. See “Research and Development” below for a description of our internal and external research and development initiatives.

See Note 11 of the consolidated financial statements for information regarding the Company’s segment revenues from external customers, including geographic composition, operating income, depreciation and amortization, and goodwill. With the exception of goodwill, asset information by segment is not reported since the Company does not manage assets at the segment level.

Corporate Information

We are incorporated under the laws of the State of Michigan. We were originally incorporated in California in 1991 and we reincorporated in Michigan in 2005. Our internet website is www.gentherm.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge through our website, www.gentherm.com, as soon as reasonably practicable after we electronically file them with or furnish them to the Securities and Exchange Commission.Commission (“SEC”). These reports are also available on the SecuritiesSEC’s website, www.sec.gov.

Impact of COVID-19, Supply Chain Disruptions and Exchange Commission’s website, www.sec.gov.Other Matters

The macroeconomic effects of the COVID-19 pandemic continue to cause significant volatility in the global economy, including within the automotive market and our business. Our sales are driven by the number of vehicles produced by the automotive manufacturers, which is ultimately dependent on consumer demand for automotive vehicles, and our content per vehicle, and other factors that may limit or otherwise impact production by us, our supply chain and our customers. According to the forecasting firm IHS Markit (February 2022 release), global light vehicle production in 2021 in the Company’s key markets of North America, Europe, China, Japan and Korea, was up 0.3%, as compared to 2020. The lack of significant growth in 2021 was primarily due to the impacts of global supply chain disruptions, including the worldwide semiconductor supply shortage, and follows the significant decrease in vehicle production in 2020 which was driven by the adverse impacts of the COVID-19 pandemic. Light vehicle production remains well below recent historic levels and consumer demand.

In 2021, the Company's semiconductor suppliers, along with most automotive component supply companies that use semiconductors, including Gentherm, were unable to fully meet the vehicle production demands of the OEMs largely due to events outside the control of the Company and its suppliers and customers, as well as the automotive industry generally. Supply shortages of semiconductor chips and other components not only resulted in decreased global automotive vehicle production but also caused significant volatility in customer vehicle production schedules. Sudden changes in the production schedules of OEMs and Tier 1s resulted in operating inefficiencies which adversely affect our profitability and results of operations. In addition, we experienced inflationary cost increases in certain component parts, raw materials, labor and transportation as a result of the supply-constrained environment and general economic conditions. These broad-based operational and inflationary impacts negatively impacted the Company’s financial condition, results of operations and cash flows for the fiscal year ended December 31, 2021.

In response to the global supply chain instability and inflationary cost increases the Company has taken several actions to minimize any potential and actual adverse impacts by working closely with its suppliers and customers to closely monitor the availability of semiconductor microchips and other component parts and raw materials, customer vehicle production schedules and any other supply chain inefficiencies that may arise. We expect global supply chain instability will continue to have an adverse impact on our business and financial performance for the foreseeable future, and such adverse impact may be material. The consequences of the pandemic, global supply chain instability and inflationary cost increases and their adverse impact to the global economy continue to evolve. Accordingly, the significance of the future adverse impact on our business and financial statements remains subject to significant uncertainty.

See further discussion of the COVID-19 pandemic and related risks in Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report.

Segments

The Company has two reportable segments for financial reporting purposes: Automotive and Medical.

Automotive

The Automotive reporting segment is comprised of the results from our global automotive businesses, including the design, development, manufacturing and sales of automotive climate comfort systems, automotive cable systems, battery performance solutions, and automotive electronic and software systems.

Climate comfort systems include seat heaters, blowers and thermoelectric devices for variable temperature Climate Control Seats® (“CCS”) and steering wheel heaters designed to provide individualized thermal comfort to automobile passengers, and integrated electronic components, such as electronic control units that utilize our proprietary electronics technology and software. Other climate comfort systems include neck and shoulder conditioners and climate control system products for door panels, armrests, cupholders and storage bins.

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Battery performance solutions consist of cell connecting devices and battery cable technologies used for various types of automotive batteries and thermal management products for heating and cooling 12 volts, 48 volts and high voltage batteries and battery modules.

Automotive electronic and software systems include electronic control units for climate comfort systems, electronic control units for memory seat modules and other devices.

Medical

The Medical reporting segment is comprised of the results from the patient temperature management business in the medical industry.

Patient temperature management includes temperature management systems across multiple product categories addressing the needs of hyper-hypothermia therapy in intensive care, normothermia in surgical procedures and additional warming/cooling therapies utilized in acute care, ambulatory, clinics and home health.

Business Strategy

We are striving to be the world leader inGlobally, we develop, manufacture, and deliver extraordinary thermal solutions for automotive and patient thermal management technologies for applicationmarkets that make meaningful differences in everyday life by improving health, wellness, comfort and energy efficiency.

To achieve our goals and capitalize on opportunities within the automotive and certain other markets. We believe achieving this goal depends on our abilitypatient thermal management markets, in mid-2018, we launched and continue to anticipate the needs of our customers and integrate those needs into our advanced products.  Ourimplement four primary strategies:

Focus Growth

The focused growth strategy includes four key goals:

These areas of the followingfocused growth strategy are underpinned and enabled by our electronic and software systems business.

Extend Technology Leadership

We continue to expand our technology leadership with focused investments in key elements:

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Recent Acquisitions

As part of our plan to acquire other companies to further our strategic goals, we have completed the following significant acquisitions in the recent past:

On April 1, 2014, we acquired Global Thermoelectric Inc., now known as Gentherm Global Power Technologies Inc., to enhance our expertise in the areas of thermoelectricsResearch, Development and enter new, non-automotive markets that use thermoelectric devices (“TEDs”).

On April 1, 2016,  we acquired Cincinnati Sub-Zero Products, LLC to expand our temperature management activities into the medical, industrial and testing fields.

On November 1, 2017, we acquired Etratech Enterprises Inc. to expand our electronics capabilities, including in the automotive, consumer and commercial markets.

Research and DevelopmentPartnerships

Our research, development and developmentpartnerships activities are an essential part of our efforts to develop new or improved innovative products and introduce them to the market.products.  Through both internal and external research and development programs, we are working to develop a comprehensive knowledge of thermal management systems that can demonstratedemonstrates functionality and performance.  These activities are critical to optimizingoptimize energy utilization and production efficiencies, and to improvingimprove effectiveness in our products making them less complex, easierand minimize the cost to package and less expensive to manufacture and install while improving the customer experience.integrate our products with those of our customers.

We perform advanced research and development on thermal management systems, including the development and testing ofthose that utilize new materials,proprietary comfort software algorithms, to achieve increasedenhance the efficiency and reliability. We engineer new applicationsfunctionality of our existing products in order to meet design criteria compatible with each of our customers’ unique requirements.automotive heating and cooling products. We believe there are substantial prospects for the design and development ofopportunities to integrate innovative thermal management systems into current and future product applications.

To offer our customers cutting-edge products and technologies, our strategy includes partnering with key technology leaders in applications both insideour industry.  Our advanced partnership with global automakers and outsidemanufactures address and work to solve industry preferences of the industries servedtoday and tomorrow by leveraging our current product lines.  

Research and development activities are expensed as incurred. These expenses include direct expenses for wages, materials and services associated with particular engineering activities, net of reimbursements from customers and research sponsors.  Any related reimbursements for costs, whether for advanced research or a specific product application, are accounted for as a reduction of research and development expense.  expertise in human thermophysiology.

Research and development is conducted around the globe, includingglobally and predominantly at our world headquarters in Northville, Michigan, our test laboratoryTechnology Center in Farmington Hills, Michigan, our advanced batteryEuropean research facility in Irvine, California, our advanced materials research facilities in Azusa, California, our European research facilities in Odelzhausen, Germany and Budapest, Hungary, our industrial applicationAsian research facility in Calgary, Canada, our medical application research facility in Cincinnati, Ohio and our electronicsShanghai, China.

Product design and advanced testing facilities in Shanghai, China and Burlington, Canada.  Additional product development is also performed at all of our manufacturing facilities to support our geographically diverse customers.  We believe the localized development model employed at our global design and manufacturing facilities improves our ability to effectively serve our customers and increases our innovative capacity in the future.capacity.

Net research and development expense in 2017, 2016 and 2015 was $82,478,000, $72,923,000, and $59,604,000, respectively. Because of changing levels of research and development activity, our research and development expenses fluctuate from period to period.

Core Technologies

Gentherm’s expertise in thermal management is focused on two general areas: managing the thermal conditions of people and objectsobjects.  

ClimateSense^TM

ClimateSense^TM is an integrated comfort system we are designing to create a personalized microclimate for passengers using localized convective, conductive and managingradiative heating and cooling products.  Using automatic regulation technology in combination with our unique occupant-centric control algorithm, ClimateSense^TM offers the ability to personalize and improve overall occupant thermal comfort, improve time to comfort with (all-electric) pre-conditioning, provide comfort with less energy conversionconsumption thereby lowering carbon dioxide emissions by conventional internal combustion and hybrid powertrains, and extend range for electrified powertrains through a reduction in central heating, ventilation and air conditioning (“HVAC”) system usage.  In July 2021, we received first production vehicle award for our ClimateSense^TM technology on an all-new 2024 model year electric vehicle with a global automaker.

Electronics

The electronics in our core climate comfort solution products is manufactured by us.  We also supply value-added electronic products to electrical energy.  third parties for adjacent areas within the automotive interior.  In addition, Gentherm manufacturers and supplies electronic control units for memory seat modules that include electric motor position sensing technology. This technology further applies to other automotive products requiring fine motor controls.

Air Moving Devices

Our highly durable and quiet air moving devices, some of which include our proprietary blower and fan designs, are essential to all of our products that require air movement. We have a strong portfolio of these products, tailored to various automotive application, including seat ventilation and electric vehicle battery cooling.

Thermoelectric Technologies

Many of our thermal products manage the thermal conditions of people and objects using our internally developed advanced TED technology.thermoelectric device technology (“TED”). A TED is a solid statesolid-state circuit that has the capability to produce both hot and cold thermal conditions by use of the

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Peltier effect. The advantages of advanced TEDsTED over conventional compressed gas systems are that they are environmentally friendly and less complex as they have no moving parts and are compact and light weight.  For the last 17 years, ourOur work on this technology has yielded great improvements in areas of functionality, efficiency, durability and performance.

Thermoelectric generator (“TEG”) technologies have the reciprocal capability to the Peltier effect, known as the Seebeck effect, whereby thermal energy is converted into electrical power.  Our current research and development activities are concentrated on improving the efficiency of this process, by improving design and adapting new materials that are better suited for TEG commercialization.  These efforts, together with previously sponsored research which focused on the recovery of waste heat from vehicle exhaust and other sources, has led us to introduce this technology to certain specialty markets.    

Resistive Heaters

Resistive heater technologies are comprised of wire, carbon fiber or positive thermal coefficient (“PTC”) heating elements whichthat quickly and effectively deliver heat to people and objects.  Wire heating elements are designed from stainless steel, copper, our proprietary carbon fiber woven lattice technology called Carbotex® or printed circuit PTC heaters based on the specifications for a particular product application.  Resistive heaters have multiple automotive applications, including seat heating, steering wheel heating, interior panel heating, and battery heating.

ElectronicsProducts

Climate Comfort Solutions – Seat Comfort

CCS

Gentherm manufactures and supplies electronics to our core thermal seat comfort, interior comfort and thermal convenience products.  We also supply electronics for products outside this core set and haveoffers a contract to supply value-added electronic products to third parties for adjacent areas within the automotive interior, which is scheduled to launch in 2019.  In November 2017, we acquired Canadian-based Etratech Enterprises to expand our electronics capabilities in automotive, consumer and commercial products.

Automotive Cable Systems

Gentherm produces automotive cable systems used to connect automotive components to sourcesrange of power. The automotive cable systems are an important element in the production of virtually all of our products and form a significant component in how we generate value to our customers by being an efficient, low-cost and high quality manufacturer. We offer cable systems as integrated parts of our products and also as stand-alone components for other automotive applications, such as oxygen sensors.  Our cable systems business includes both ready-made individual cables and ready-to-install cable networks. Sales of products that utilize our automotive cable systems technology represent 9%, 9% and 10% of our total product revenues for the twelve-month periods ending December 31, 2017, 2016 and 2015, respectively.

Air Moving Devices

Our highly durable and quiet air moving devices, including our proprietary blower and fan designs, are essential to all of our products that require air movement.  Production of integrated air moving devices is an example of our expanding manufacturing capabilities and is an important step toward our goal of becoming a full service provider of sub-systems.

Refrigeration Systems

Refrigeration systems are used in environmental test chambers to cool various products. In most cases the products are heated to a higher temperature (85°C and up) and then cooled down. The heat up and cool down rates are important to thoroughly test the product. Generally products are cooled to -40°C or below. To accomplish this, specialized refrigeration systems are required. Single stage refrigeration systems can cool chambers to -34°C. Two-stage refrigeration systems can achieve -50°C . Cascade refrigeration systems can cool down to -85°C. The customers’ applications determine the temperature range needed.  

Other Technologies

We are developing new technologies that will help enable improvements to existing products and create new product applications.

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Products

Seat Comfort

Climate Control Seat®

Our CCS products utilize exclusive patented technology to regulateutilizing proprietary technologies for regulating temperature and enhanceenhancing the comfort of vehicle passengers. The most advancedOur ventilated CCS models use one or moreproducts move air through the seat to provide conditioning. Our active CCS products utilize TEDs to generate heating or cooling depending uponheat and cool air used to condition the direction of the current applied to the device.

A TED is the heart of a compact heat pump used in our active CCS products. Air is forced through the heat pump and thermally conditioned in response to electronic switch input from the seat occupant.seat. The conditionedconditioning air circulates by one of our specially designed air moving devices through a proprietaryan air distribution system installed in the seat cushion and seat back, so that the seat surface can be heated, ventilated or cooled. Each seat has individual electronic controls to adjust the level of heating, ventilating or cooling. ActiveOur CCS products substantially improve comfort compared with conventional vehicle cabin air conditioners by focusing heating and cooling directly on the passenger through the seat rather than waiting until ambient air cools the seat surface beneath the passenger.  A heated and ventilated variant of theseat. Our CCS utilizes ambient cabin air to provide cooling comfort instead of a TED to actively cool the seat. In the heating mode, the vent-only system is supplementedproducts can be combined with our resistive heating elements.  elements to increase heating capacity and reduce time to comfort.

Heated and ventilated CCS products, which are targeted for lower cost vehicle models, provide a lower level of cooling capability than our active CCS solution, but at a lower price. By offering different models of the CCS product, our customers have the opportunity to purchase a wider range of climate control products at different price points. Sales of CCS products, primarily ventilated CCS products, contributed 39%38%, 45%38% and 47%37% to our total product revenues for the twelve-month periods endingyears ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.

Heated Seat

Heated seats, based on our resistive heater core technology, are seamlessly integrated into automotive seat designs, and are constructed using materials that offer the best capacity, installation characteristics and durability.  Our design and manufacturing capabilities allow customers to choose among a variety of resistive heater materials based on their individual vehicle specifications. Sales of heated seat products contributed 31%26%, 32%27% and 32%29% to our total product revenues for the twelve-month period endingyears ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.  

Thermal ConvenienceNeck Climate Control Systems

TrueTherm^TM Cup Holder

The TrueTherm cup holder applies Gentherm’s patented TED technologies to keep beverages of automobile drivers and passengers eitherNeck climate control systems ventilate warm or cool.  We have developedtemperature-controlled air directly onto the passenger’s neck and shoulder area. The system combines electronics, air moving device technologies and a range of cup holder models with varying degrees of functionality, designed to be packaged in multiple configurations to accommodate different console environments.  Our dual independentheating element into a compact, integrated headrest design provides separate temperature settings in each holder allowing the driver and passenger to individually maintain a heated or cooled beverage.  

TrueTherm^TM Storage Unit

Gentherm’s TrueTherm storage units provide for food or beverage cooling for the global automotive market.  Using patented TED or refrigeration technologies, the TrueTherm cool storage unit provides temperature control independently from a vehicle’s heating and air conditioning system.  Itthat can be custom designedadjusted to accommodate tight interior spaces, such assuit the front floor consolebody size of a sport utility vehicle (SUV), and provide additional cooling capacity to those who have long work commutes or transport multiple passengers.the passenger.  

InteriorClimate Comfort Solutions – Surface Climate Control Systems

Heated Steering Wheel

Heated steering wheels deliver heating comfort to automobile drivers through resistive wire elements, similar to those used in our seat heater products.elements. This product can be applied to both leather and wood steering wheels.  A solution for drivers in cold and mild weather climates, the heated steering wheel is designed for the global automotive market.  

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Heated Door and ArmrestSurfaces

Gentherm’s thermally conductive or radiative surfaces, such as door panel armrest and center console armrest products, are powered by technologies used in our advanced seat heating products.core technologies. The system is thermally managed by a heating control system which can be discretely located in the door panel or seat of the vehicle.  Heated door panels and armrests complement our climate controlledclimate-controlled seat and steering wheel products and provide a superior level of thermal comfort to the driving experience.  

Electronics Solutions

Memory Seat Modules

Gentherm has developed a unique way to control certain electrical motors in a vehicle.  Our Intelligent Positioning System, IPS^® product suite utilizes proprietary software to determine the position of a power seat and control the memory seat module.

Hands-On Detection

All vehicles manufactured with autonomous driving level 2 or higher capabilities are required to ensure that the driver stays in control of the vehicle during operation.  In order to accomplish this task, Gentherm developed PilotSense^TM – a sensor integrated into the steering wheel that monitors whether the driver’s hands are maintaining contact with the steering wheel.  This product is available for both heated and non-heated steering wheels.

Battery Performance Solutions

Cell Connecting Systems

Cell connecting systems provide secure connections between advanced automotive batteries to transmit a continuous flow of information about battery temperature and cell voltage during the charging and discharging process to monitor battery system performance. Gentherm has developed a range of cell connecting system products, including flexible foil cell connecting boards that offer improved packaging, weight and functionality. We offer these products in a variety of materials to cover customers’ requirements.

Thermoelectric Battery Thermal Management (“BTM”)

Thermal management is critically important for the long-term operation of advanced automotive batteries.  The expansion of electrified vehicle applications, such as 48-volt electrical networks, start-stop systems, regenerative braking systemselectric vehicles, plug-in hybrids and other micro-hybrid battery implementations,mild hybrids, have drastically increased the demand for BTMbattery thermal management(“BTM”) systems solutions whichthat enable wider operating temperature ranges, enhanced driving range and prolonged life of the battery.  Gentherm’s BTM system can provide precision battery cooling of 48-volt mild hybrid systems on pack or cell-level using patented TED technology.  The BTM system maintains the temperature of the lithium-ion battery or other advanced chemistry battery within an acceptable temperature range without the use of chilled liquids or refrigerant loops, making it a light weight, highly scalable, compact solution ideal for automotive applications. Gentherm’s proprietary BTM system is compact and energy efficient, resulting in a minimal energy budget,usage, which is important for an electrified vehicle.

Aside from battery cooling, Gentherm’s BTM portfolio includes battery heating applications.  Based on our proprietary technology, we offer solutions to our customers that enable efficient heating of lithium-ion batteries for most electrified vehicles.

Climate Comfort Solutions – Thermal Convenience

TrueTherm^TM Cup Holder

The performance improvements realizedTrueTherm^TM Cup Holder applies Gentherm’s patented TED technologies to keep beverages of automobile drivers and passengers either warm or cool.  We have developed a range of cup holder models with this productvarying degrees of functionality, designed to be manufactured in multiple configurations to accommodate different console environments.  Our dual independent design provides separate temperature settings in each holder allowing the driver and passenger to individually maintain a heated or cooled beverage.  

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TrueTherm^TM Storage Unit

Gentherm’s TrueTherm^TM Storage Unit provide for food or beverage cooling for the global automotive market.  Using patented TED or refrigeration technologies, the TrueTherm^TM Storage Unit provides temperature control independently from a vehicle’s heating and air conditioning system.  It can be custom designed to accommodate tight interior spaces, such as the front floor console of a sport utility vehicle and provide additional cooling capacity to those who have been validated through the award of production BTM systems by two flagship original equipment manufacturers (“OEMs”). We are currently working with other OEMs in an effort to secure more production contracts.long work commutes or transport multiple passengers.  

Remote Power GenerationAutomotive Cable Systems

Gentherm ismanufactures automotive cable systems used to connect automotive components to power sources. The automotive cable systems are an important element in the production of many of our products and form a leading provider of remote electric power generation systems, primarily serving large upstream and midstream oil and gas markets.  Using our unique industrial TEG technologies, our generation systems deliver ultra-reliable power for long-term unattended operationsignificant component in geographically remote applications that are criticalhow we generate value to our customers’ operations,customers by being an efficient, low-cost and high-quality manufacturer. We offer cable systems as integrated parts of our products and also as stand-alone components for other automotive applications, such as wellhead automation, valve automationoxygen sensors.  Our cable systems business includes both ready-made individual cables and cathodic protection of pipelines.  We design and produce turnkey systems that are highly customized for application, load, power and fuel source, and location requirements.  Other applications for our remote power generation systems include mobile telecommunications, security and surveillance and scientific monitoring.  Our revenues from this product include large custom systems projects ranging from $200,000 to over $2,000,000.  Quarterly results from our remote power generation business can vary significantly due to delivery timing of these custom systems to customers, among other factors.ready-to-install cable networks.

Patient Temperature Management Systems

Gentherm provides a full line of patient temperature management systems including ouracross multiple product categories addressing the needs of hyper-hypothermia therapy in intensive care, normothermia in surgical procedures and additional warming/cooling therapies utilized in acute care, ambulatory, clinics and home health.  Our broad array of products for patient warming provides an improved patient experience and satisfaction. Our core brands include Blanketrol® hyper-hypothermia system, designedWarmAir®/FilteredFlo® convective warming system, Electri-Cool®/Micro-Temp® localized cooling/warming systems, the ASTOPAD® patient warming system that utilizes resistive warming technology which is also used in our automotive products, ASTOTHERM®/ASTOFLO® IV fluid and blood warming systems, ASTODIA® diaphanoscope for transillumination, Hemotherm® cardiovascular cooling/warming system and our recent launch of our next generation cardiovascular cooling/warming system utilized to manage patient body temperatures in operating rooms, recovery rooms, intensive care units and other areas of hospitals, as well as for use in the home healthcare market.  Our systems offer simple programmable body temperature regulations to establish and maintain stable patient temperature. We also offer the industry-leading Hemotherm®deliver precise blood temperature management solutions that delivers reliable, effective blood temperature management control during cardiopulmonary by-pass and other related cardiovascular procedures. Revenues from the sale ofWe aspire to have innovative patient temperature management systems began in April 2016 in connectionproduct offerings coupled with the acquisitionclinical education enabling our customers to have enhanced patient outcomes and improved efficiencies of CSZ.care.

Environmental Testing Equipment and Testing Services

Gentherm provides standard and custom designed environmental test chambers that execute reliability tests by subjecting products to environmental extremes like temperature, humidity, altitude, and vibration.  Our chambers are available in a variety of sizes with capabilities ranging from basic temperature cycling to accelerated stress testing.  Gentherm designs and sells environmental test chambers for a variety of industries, which include the pharmaceutical, automotive, electronics, medical, telecommunications, aerospace and defense industries.  Revenues from the sale of environment testing equipment and testing services began in April 2016 in connection with the acquisition of CSZ.

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Heated and Cooled Sleep Systems

Our heated and cooled sleep system solution incorporates our proprietary Climate Control Sleep System^TM (“CCSS”) technology. The CCSS represents an adaptation of the TED technology used in our active CCS system. The CCSS directs warmed or cooled air to the surface of a mattress through our proprietary air distribution system. Two independently controlled temperature zones have their own heat or cool settings for a personalized microclimate sleep environment. There are five available settings in each of the heat and cool modes as well as an ambient setting. The sleep system is controlled by the user through a Master Control Unit or hand-held remote controls. In addition, our Heat Vent Sleep System (HVSS) provides similar comfort features at a lower price point. Integration solutions for both CCSS and HVSS exist for foam, innerspring and air bed mattresses and we are working with mattress manufacturers and retailers to bring CCSS technology to markets around the world. Beds featuring CCSS technology is available from Symbol Mattress and their brand SleepFresh^TM  (www.sleepfreshbeds.com).

Heated and Cooled Office Chair

Gentherm has adapted our innovative automotive-grade thermal technology to office chairs. Our design and integration solutions provide personalized temperature control whether at home or in the office. With the ability to provide heat or cool to one or both of the back and seat surfaces, we are able to provide manufactures and retailers a range of product and pricing options that best meets their customers’ needs. Combined with our occupant sensor switch, the rechargeable lithium-ion battery is capable of providing over 8 hours of thermally controlled comfort, granting users the freedom of movement without being tethered by an electrical cord. Office chairs featuring our technology are currently marketed and sold by National Business Furniture and Klӧber, and are also available at www.amazon.com.

Heated Lift Assist Chair

Gentherm’s heated seat technology has recently been added to a lift assist chair. The chair, produced by Windermere Motion and marketed as the Ultimate Power Recliner^TM (www.ultimatepowerrecliner.com), uses dual zones allowing for the back and seat/legs to be set at different temperatures. The chair is available through Windermere Motion’s network of dealers.

Sponsored Research  

In April 2016, the Company was selected as a subcontractor in a U.S. Air Force sponsored program award for the engineering and development of a non-invasive warming and cooling device. The device will be incorporated as medical equipment in the Air Force Expeditionary Medicine Support and Air Force Theater Hospital units supporting overseas contingency operations. Once operational testing is complete and the manufacturing processes for initial production are fully matured, the device will be submitted to the U.S. Food and Drug Administration for certification. The 30-month, $5.7 million project will be fully funded by the U.S. Air Force. As a subcontractor, Gentherm’s share of the award is approximately $2.6 million. Gentherm received $1.2 million and $300,000 in program funding during 2017 and 2016, respectively.

During 2015, Gentherm was selected by the U.S. Navy to lead the development of an energy efficient, portable patient warming system based on proprietary thermal management technologies. The objectives for the program include improving the current standard of care for patient warming in support of expeditionary health services and advanced medical development.  The patient warming system is intended to be compatible with existing medical care systems and will be used for treating patients in field hospitals or in transport by ground, ship or air to traditional, better-equipped treatment centers.  Our approach, which is based on new research, leverages the body’s natural methods for thermal exchange and temperature management.  The $2.75 million project was granted a one-year extension and is fully funded by the U.S. Navy.  Total funding received from this program during 2017, 2016 and 2015 was $836,000, $1.1 million and $140,000, respectively. The portion of funding pertaining to Gentherm’s project contributions  during 2017, 2016 and 2015 was $648,000, $403,000 and $140,000, respectively.

Marketing, Customers and Sales

Our Automotive segment customers include primarily light vehicle OEMs commercial vehicle OEMs, and first tier (“Tier 1”) suppliers to the automotive OEMs,1s, including automotive seat manufacturers.  We also directly supply CCS and seat heatersproducts to aftermarket seat distributors and installers.

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The Company’s automotive marketing is directed primarily at automotive manufacturersthe OEMs and their Tier 1 suppliers1s and focuses on the enhanced value consumers attribute to vehicles with seat comfort, thermal convenience and interiorclimate comfort products. If interested,In many cases, the manufacturersOEMs direct us to work with their suppliers, primarily their Tier 1s, to integrate our products into the vehicle’s seat or interior design. These customers will sell our product, as a component of an entire seat or seating system, to automotive OEMs.

Once the integration work is complete, prototypes are sent to the manufacturerOEMs for evaluation and testing. If a manufacturean OEM accepts our product, a program can then be launched for a particular model on a production basis, but it normally takes twoone to three years from the time a manufactureran OEM decides to include any of our products in a vehicle model to actual volume production for that vehicle. During this process, we derive funding from prototype sales but obtain no significant revenue until mass production begins. Upon commencement of mass production, our products are sold by Tier 1s to the OEMs as a component of an entire seat or seating system. Inherent to the automotive supplier market are costs and commitments that are incurred well in advance of the receipt of orders and resulting revenues from customers.

As automobile products comprise a majority of our current revenue, theThe volume of products we sell is significantly affected by theglobal and regional automotive production levels of new vehicle sales and the general business conditions in the automotive industry. Our product revenues are generally based upon purchase orders issued by our customers, with updated production schedules for volume adjustments. As such, we typically do not have a backlog of firm orders at any point in time. Once we are selected to supply products for a particular platform, we typically supply those products for the platform life, which is normally five to seven years, although there is no guarantee that this will occur. In addition, when we are the incumbent supplier to a given platform, we believe we have a competitive advantage in winning the redesign or replacement platform, although there is no guarantee that this will occur.

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For 2017,2021, our revenues from sales to our threetwo largest customers, Adient plc (“Adient”) and Lear AdientCorporation (“Lear”) were $156 million and Bosch Automotive were $192,756,000, $173,964,000, and $75,370,000,$153 million, respectively, each representing 20%, 18%, and 8%15% of our totalproduct revenues respectively.that is consistent with prior years. Revenues from AdientLear and LearAdient represent sales of our seat comfort, thermal convenience and interiorclimate comfort products.  Revenues from Bosch represent product sales based on our automobile cable system technologyOn October 28, 2021, Lear announced that it entered into an agreement to acquire the Interior Comfort Systems business unit of Kongsberg Automotive ASA, which is a key competitor of the Company’s climate comfort products, including CCS and are used primarily in the production of automotive oxygen sensors. seat heaters.

The loss of any one of these customers iswould likely to have a material adverse impact on our business; however,business, results of operations and cash flows. However, as noted above, our strategy is to market our seat comfort and thermal convenience products to thein many cases automotive OEMs who then direct their suppliers such as AdientLear and Lear,Adient to work with us.  Therefore itus for our climate comfort solutions, battery performance solutions and cable technology products. It is, therefore, relevant to understand how our revenues are divided among the OEMs, as shown below.

Our total product revenues including those from sales of our automotive cable systems products, for each of the past three years were divided among automotivethe OEMs as follows:

Non-automotive revenues of 11% in 2017, 8% in 2016 and 6% for 2015 are included within the Other category.  

Our power generation systems are used by oil and gas customers for cathodic pipeline protection and other remote applications around the world.  

Patient temperature management systems customers include hospitals and other health care service providers.  Customers purchase our products at prices negotiated by exclusive medical equipment distributors or, if they are a named participant, a group purchasing organization.

Our environmental testing equipment and testing services are sold to a wide variety of customer in many different industries.Market Trends

We supply heatedbelieve increased consumer demand for personalized thermal comfort in a vehicle is driving increased adoption of our comfort products.  In recent years, we are seeing a trend of equipping second, and cooled sleep systems to mattress manufacturesin some cases, third row seats with thermal management solutions. This trend is accelerating in all major markets where Gentherm is present, including North America, Europe, Japan, Korea and their distribution channels and heated and cooled office chairs to catalog and on-line retailers.  China.

10The Gentherm product portfolio aligns well with long-term technological trends:

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Our non-automotive electronics products are sold to a variety of industrial customers, including an elevator door manufacturer and an irrigation systems company.

Outsourcing, Production and Suppliers

Our global manufacturing and distribution facilities are located close to our key customers. Our EuropeanIn Automotive, we operate two manufacturing operations aresites in Europe located at our Hungarian, Macedonianwithin North Macedonia and Ukrainian sites.Ukraine and one distribution center located in Hungary. In North America, we operate two manufacturing production sites in Acuña, Mexico, one in Celaya, Mexico, one in Cincinnati, Ohio, one in Alberta, Canada and one in Ontario, Canada.Mexico. In Asia, we operate production facilitiestwo manufacturing sites in Langfang, China and Ha Nam,one in Vietnam, and two electronics productionone distribution center in South Korea.  

For Medical, we operate one manufacturing site within Germany and one manufacturing site and distribution center within the United States.

In September 2019, we committed to a restructuring plan (the “Plan”) to improve our manufacturing productivity and rationalize our footprint. Under this Plan, we planned to relocate and consolidate certain existing automotive manufacturing facilities in Shenzhen, China. We continue to grow our in-house manufacturing capabilities, reducingand, as a result, reduce the number of components outsourcedour manufacturing facilities by two. In March 2020, we announced the initial phase of this Plan, which included the consolidation of all North American electronics manufacturing to contract manufacturers.  

We rely on various domestic and foreign vendors and suppliers to supply components for our products through purchase orders, with no guaranteed supply arrangements. Components for certain products, including TEDs, are only available from a limited number of suppliersCelaya, Mexico. This resulted in the world. The lossclosure of any significant supplier,the Burlington, Canada facility, and the transfer of electronics manufacturing to Celaya, Mexico during 2021.  In December 2020, we announced the consolidation of our electronics manufacturing in Asia to Bantian, Shenzhen, China, which resulted in the absenceclosure of our Longgang, Shenzhen, China facility during 2021. See Note 5, "Restructuring," to the consolidated financial statements included in this Annual Report for additional information.

The automotive industry is highly reliant on semiconductors and, beginning in the fourth quarter 2020, throughout 2021 and continuing into 2022, is facing a timelysignificant supply shortage of semiconductors. See further discussion of the risks relating to the supply shortage of semiconductors and satisfactory alternative arrangement, or an inability to obtain essential components on reasonable terms or at all, could materially adversely affect our business, operationsrelated risks above in “—Impact of COVID-19, Supply Chain Disruptions and cash flows. Our businessOther Matters”, in Item 1A, “Risk Factors” and operations could also be materially adversely affected by delaysItem 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in deliveries from our suppliers.this Annual Report.

Proprietary Rights and Patents

The development of new or improved technologies is critical to the execution of our business strategy. PatentsCurrently owned patents and patents obtained for new or improved technologies form an important basis for the success of the Company and underpin the success of our research and development efforts. We have adopted a policy of obtaining, where practical, the exclusive rights to use technology related to our products through patents or licenses for proprietary technologies or processes. We adapt and commercialize such technologies in products for mass production. We also have developed technologies or furthered the development of acquired technologies through internal research and development efforts.

As of December 31, 2017,2021, Gentherm held 565439 issued patents, of which 233238 were U.S. patents and 332201 were non-U.S. patents.  A total of 27 patents were held jointly with other companies.  Gentherm held 399309 patents directed to climate control products (including 2 patents directed to ClimateSense^TM) and thermoelectric technologies, 12641 patents directed atto heating elements and technologies, 33 patents directed to battery cell connecting and cable technologies, 26 patents directed to medical technologies, 15 patents directed to air moving devices, 13and 15 patents directed at patient temperature management systemsto occupant sensing technologies.  The Company continued to evaluate its patents during 2021 and 1 patent directed at refrigeration systems technologies.made strategic decisions to reduce low-value patents and patents unrelated to current or planned business strategies.

Competition

TheSee further discussion of the risks relating to competition in Item 1A, “Risk Factors” in this Annual Report.

Gentherm faces competition from other automotive componentssuppliers and, systems business is highly competitive. We have several important competitors in the heated seat business andwith respect to certain vehicle manufacturers have, for some time, offered options on certain models that combine heated seats with circulation of ambient air or cooled airproducts, from the car’s air conditioning system which works similar to our heatedOEMs and ventilated seat system products.  It is possible that our competitors will be able to expandTier 1s who manufacture or modify their current products to more directly compete with our CCS products. We believe that there are other potential competitors that are working to develop systems for heating and cooling of automotive car seats.

We may experience additional competition directly from automobile manufacturers or other major suppliers, most of which have the capability to manufacture competing products. We believecertain products that our products will compete successfullyGentherm manufactures and supplies. The automotive supply industry competes on the basis of performance,technology, quality, reliability of supply and price. Design, engineering capability and competitive pricing are increasingly important factors.

Additionally, we may experience competition from non-traditional participantsThe competitive landscape for Gentherm’s climate comfort solutions and battery sub-systems includes component specialists, thermal management system suppliers, the Tier 1s and the OEMs with their own integrated solutions.  Independent suppliers that introduce newrepresent the principal competitors of Gentherm include I.G. Bauerhin GmbH and Kongsberg Automotive ASA. In October 2021,

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Lear announced that it entered into an agreement to acquire the Interior Comfort Systems business unit of Kongsberg Automotive ASA.  The competitive landscape for patient temperature management systems includes patient thermal management medical device manufactures.  The principal manufacturers of products similar to those of Gentherm’s products include 3M Company, Stryker Corporation and Becton, Dickinson and Company.

We believe our expertise in core thermal management technologies such as advanced driver assistance technologies,and vehicle occupant thermal comfort, as well as new products or services, such as autonomous vehicles, car-our capability in applying specific component design, global footprint and ride-sharing and transportation as a service.

See “Risk Factors” for further information regardingbroad product offerings make us well positioned to compete against the significant competition in the automotive industry.

Our power generation systems compete with other technologies, such as photovoltaic solar panels and fuel cells, to deliver power to different types of oil and gas market applications.  Our products have earned a reputation for delivering highly reliable power under extreme climatic and weather conditions to locations that do not offer access to an electrical grid.  In addition to quality and

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performance, our ability to design and support custom solutions that integrate directly with an application’s existing infrastructure gives our products a competitive advantage over products based on other technologies.

The patient temperature management market has seven segments: convective warming, blood warming, fluid warming, surface warming, invasive warming, non-invasive cooling and invasive cooling.  Gentherm specializes in the convective warming, blood warming, surface warming and non-invasive cooling.  We compete based on the quality of our products and service to our customers and are working to develop and market the next generation of advanced temperaturetraditional thermal management systems that complies with the rulessuppliers, global Tier 1s and regulations of the U.S. Food and Drug Administration and other government regulatory bodies.

Gentherm’s environment test chamber business competes globally on the basis of performance, customization, quality and service. Our ability to modify our standard product lines to meet customer specifications helps differentiate Gentherm’s chambers from other competitive offerings.

Risk Attendant to Foreign Operations

We internally manufacture the majority of our products at our production facilities in foreign countries.  Other products we sell are manufactured by third parties in foreign countries.  See “Risk Factors” for a description of risks attendant to our foreign operations.

See Note 11 of the consolidated financial statements for information regarding the Company’s segment revenues by geographic composition.component specialists.

Seasonality

Our principal operations are directly related to the automotive industry. Consequently, we have historically experienced seasonal fluctuations to the extent automotive vehicle production slows, such as in the summer months when many customer plants close for model year changeovers and in December when many customer plants close for the holidays. See Item 8 “Financial Statements and Supplementary Data” for selected quarterly financial data.  

Human Capital Management

Employees

At Gentherm, our mission is to “create and deliver extraordinary thermal solutions that make meaningful differences in everyday life, by improving health, wellness, comfort and energy efficiency.” Our people are the foundation for making our mission come to life every day.

Our winning culture behaviors helps shape our core Human Resource programs and our culture, the behaviors are Customer Focus, Global Mindset, Performance & Accountability and Engagement & Inclusion.

Our human capital strategy is to attract, develop and retain results-driven, high-performance talent while providing each employee with a compelling and personal employee experience. We also strive to promote a safe work environment and a culture the values fairness, diversity, equity, inclusion and belonging.  

Our global workforce creates a competitive advantage and operates in over 12 countries in 23 locations.  As of December 31, 20172021, and 2016,2020, Gentherm’s employment levels worldwide were as follows:

Gentherm retains the servicesNotable statistics as of outside contractors from time to time. None of our employees is subject to collective bargaining agreements. We consider our employee relations to be satisfactory.

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Executive Officers of the Registrant

Our current executive officers are as follows:

Phillip Eyler, 46, was appointed President and Chief Executive Officer, and to the Company’s Board of Directors, in December 2017. Prior to joining Gentherm, Mr. Eyler served as President of the Connected Car division at Harman, a subsidiary of Samsung since 2015. The Connected Car division included infotainment, telematics, connected safety and cyber security solutions, among others. Mr. Eyler joined Harmon in 1997 and held various senior management positions, including Senior Vice-President and General Manager of Harman’s Global Automotive Audio business from 2011 to 2015. Mr. Eyler received a Bachelor of Science degree in mechanical engineering from Purdue University and an MBA from the Fuqua School of Business at Duke University.31, 2021:

Frithjof Oldorff, 51, was appointed President of the Automotive business unit in July, 2013.  Prior to this appointment, Mr. Oldorff served as the Chief Operating Officer of Gentherm GmbH since 2008. He previously was a Director of Operations for Freudenberg from 2005 to 2007 and held various positions at Faurecia from 1995 to 2005. Mr. Oldorff received a master’s degree from Darmstadt Technical University (Germany) in Industrial and Mechanical Engineering.

Barry G. Steele, 47, was appointed Vice President Finance and Chief Financial Officer in 2004 and Treasurer in 2005. Prior to joining Gentherm, Mr. Steele worked since 1997 in a number of senior financial management positions, including Chief Financial Officer for Advanced Accessory Systems, LLC, a global supplier of specialty accessories to the automotive industry. Prior to 1997, Mr. Steele worked for PriceWaterhouse LLP. Mr. Steele received a bachelor’s degree from Hillsdale College and is a Certified Public Accountant.

Kenneth J. Phillips, 44, was appointed Vice-President, General Counsel and Secretary in June, 2012. Prior to joining Gentherm, Mr. Phillips was a Partner in the Detroit, Michigan office of the law firm Honigman Miller Schwartz and Cohn LLP. Mr. Phillips graduated with a J.D. from Wayne State University and a bachelor’s degree in Accounting and Finance from Oakland University. Mr. Phillips is also a Certified Public Accountant.

Darren Schumacher, 50, was appointed President of Gentherm Technologies in July, 2016 after serving as the Company’s Vice-President of Product Development since 2013.  Prior to joining Gentherm, Dr. Schumacher worked since 2009 at Bosch as Business Segment Vice President of Engineering.  Prior to 2009, Dr. Schumacher worked at Eaton Corporation where he had a series of executive management roles including Director of Product Engineering.  Dr. Schumacher graduated with a Ph.D., MSE and BSE in Aerospace Engineering from the University of Michigan and an MBA from Regis University.

Erin E. Ascher, 54, was appointed Vice-President Talent Development and Chief Human Resources Officer in February, 2015.  Prior to joining Gentherm, Ms. Ascher worked since 2012 as Chief Human Resources Officer at the University of Cincinnati. From 2010 to 2012, Ms. Ascher was Senior Vice President of Human Resources for Omnicare Inc., a Fortune 500 company that provides pharmaceutical services to patients and providers across the U.S.   Prior to Omnicare, from 1998 to 2007, Ms. Ascher was Vice President Human Resources, Latin America and Asia Pacific for Ecolab, a publicly-owned developer and provider of water, hygiene and energy technologies and services. Ms. Ascher received a bachelor’s degree from Miami University in Ohio and a master’s degree in Personnel and Employee Relations from Georgia State University.

Ryan Gaul, 42, was appointed Vice President of Business Development in November, 2014. Mr. Gaul has spent most of his professional career with Gentherm, serving in diverse roles in Gentherm’s locations in North America, Europe and Asia. He started his career in IT, and moved into roles of increasing responsibility within the IT organization, finally serving as CIO from 2005 to 2009. From 2009 to 2014, he served as Managing Director of Operations for Gentherm’s Asian business. Mr. Gaul received his bachelor’s degree from the University of Missouri.

Officers of the Company serve at the pleasure of the Board of Directors and, to the extent applicable, in accordance with the terms of their individual Service Agreements.

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Key Highlights of our Human Capital Strategy

Gentherm’s Human Capital goals have evolved to a more flexible, personal, employee value proposition since the onset of the pandemic to ensure we are aiding our employees in navigating through the blurred demands of work and life. We introduced a new flexible working guideline called “Locate for Your Day”.

In November 2021, we completed our first global engagement survey with a best-in-class response rate of 97%. The results of the survey in addition to several new listening tools help our managers continue to adapt and meet the needs of our workforce.

Health and Safety

At Gentherm, health and safety are an essential part of our culture and values. The “Safety Culture” of a workplace is a key issue for implementing and proceeding with the Vision Zero strategy.  This initiative outlines a global approach and mindset that strives to eliminate all work accidents and injuries by aligning the Company culture with the Seven Golden Rules:

The global operating health and safety team is not only committed to the Seven Golden Rules to eliminate work accidents and injuries. These rules also are focused on identifying hazards and unsafe behaviors before they happen by “near miss reporting”.

Our teams have continued to benchmark across Gentherm sites which has fostered significant optimization and continuous improvement. By implementing consistent routine components in the daily work across all sites, the overall safety culture improves for all Gentherm operations.

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Diversity, Equity and Inclusion

Our DE+I mission “Embracing Diversity Inspires Innovation” cascades from our corporate mission. We are building a culture of belonging where we value our differences to positively impact the lives of our employees, customers and communities.  Our Diversity, Equity and Inclusion Council, has built strong momentum in 2021. The DE+I council conducted engagement activities and enrichment programming each month to promote awareness and celebrate various ethnic and underrepresented employees within Gentherm. We took another step forward on our DE+I journey with launching inclusion trainings to all global people leaders with the purpose of building local and global awareness of DE+I at Gentherm, ensuring all team members are educated on consistent standards, identifying feedback mechanisms to solve for conflict, and creating a culture that unites us all.

Total Rewards

Gentherm’s compensation and benefits programs are designed to attract and retain our employees in the locations where we compete for talent using a mix of elements that allow us to achieve our Company’s short and long-term goals.

Total Talent Development

At Gentherm, we provide foundational leadership development programs to ensure our current and future people leaders are well equipped to engage and lead in today’s complex business environment. Additionally, Gentherm’s performance management process is based on a contemporary coaching model where employees align yearly objectives with their leaders, supported with timely quarterly “check-ins” for progress updates and feedback. We have offered additional training programs to provide on-demand, flexible learning solutions for our global workforce. We introduced the Accelerator program for high potential employee development in 2021.

Environmental, Social, and Governance

In 2021, we issued our second Sustainability report and incorporated ESG into our everyday business operations and future strategies. Our sustainability efforts are based on three pillars: People, Planet, and Places.

These actions indicate the strength of our commitment to sustainability across Gentherm.

Environmental and Regulatory Compliance

Applicable laws and regulations, and significant changes to such laws and regulations, will potentially lead to increases in costs and complexity, and failure to comply with global and specific country regulations could subject us to civil penalties, production

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disruptions, or limitations on the sale of affected products. We believe we are materially in compliance with substantially all these requirements or expect to be materially in compliance by the required dates.

Chemical Regulation

There are numerous global laws and regulations that prohibit or restrict the selection and use of certain chemicals for product development and manufacturing and potentially impact an automobile manufacturer’s responsibility for vehicle components at the end of a vehicle’s life. New chemical regulations continue to be introduced and passed, such as the new European requirements that require suppliers of parts and vehicles to the European market to disclose certain substances of concern in parts. Further, increases in the use of circuit boards and other electronics may require additional assessment under the directives related to certain hazardous substances and waste from electrical and electronic equipment.

Vehicle Safety

In the U.S., the National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates motor vehicle equipment that we manufacture and sell as well as vehicles. The Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable federal motor vehicle safety standards established by the National Highway Traffic Safety Administration (“NHTSA”). The Safety Act further requires that if a vehicle manufacturer or NHTSA determine a vehicle or an item of vehicle equipment does not comply with a safety standard, or that vehicle or equipment contains a defect that poses an unreasonable safety risk, the vehicle manufacturer must conduct a safety recall to remedy that condition in the affected vehicles. Should a vehicle manufacturer or NHTSA determine a safety defect or noncompliance issue exists with respect to any of our products, the cost of such recall campaigns could be substantial.  Further, many other countries have established vehicle and vehicle equipment safety standards and regulations.  Meeting or exceeding the many safety standards is costly as global compliance and non-governmental assessment requirements continue to evolve and grow more complex, and lack harmonization globally.

You should carefully consider each of the risks, assumptions, uncertainties and other factors described below and elsewhere in this Annual Report, as well as any amendments or updates reflected in subsequent filings or furnishings with the SEC.  We believe these risks, assumptions, uncertainties and other factors, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations, financial condition and liquidity.  

Industry and Operational Risks Relating

The COVID-19 pandemic and measures taken to Our Businesscontain it have significantly adversely affected, and are likely to continue to significantly adversely affect, our business, results of operations, financial condition, cash flows, liquidity and result in stock price volatility.

Numerous general economicThe COVID-19 pandemic has caused, and industry factors which we do not control havecontinues to cause, a significant impactsadverse effect on the level of economic activity around the world. In response to the COVID-19 pandemic, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions. The actions taken by governments, businesses and individuals in response to the pandemic have resulted in, and are expected to continue to result in, a curtailment of business activities (including changes in demand for a broad variety of goods and services), labor shortages, disruptions in supply, manufacturing and logistics, economic uncertainty and weakness, and volatility in the financial markets, both in the United States and abroad.

The COVID-19 pandemic poses the risk that Gentherm or its suppliers, customers and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be requested or mandated by governmental authorities. At various times in the first half of 2020, substantially all of the Company’s major OEM and Tier 1 customers temporarily ceased or significantly reduced production as a result of restrictions that were requested or mandated by governmental authorities. As a result, substantially all of our manufacturing facilities either temporarily suspended production or experienced significant reductions in volumes during this period. During 2021, the Company continued to see periodic, temporary mandates by governmental authorities that impacted our employees’ ability to travel to and from our manufacturing facilities, following the resurgence of COVID-19 in certain geographic areas. Restrictions on the Company’s access to its facilities and similar limitations for the Company’s customers, OEMs, suppliers and distributors, have had a material adverse impact on the business, financial condition and results of operations and could continue to have an impact in the future.

Gentherm has implemented numerous measures attempting to manage and mitigate the effects of the virus, however, there can be no assurance that these measures will be successful now or in the future. Gentherm has modified its business practices and it may take further actions as may be required by government authorities, for the continued health and safety of the employees, or that the Company otherwise determines are in the best interests of the employees, customers, partners, and suppliers. The Company's management of the impact of COVID-19 has and will continue to require significant investment of time from its management and employees. The focus on managing and mitigating the impacts of COVID-19 on the business may cause the Company to divert or delay the application of its resources toward other or new initiatives or investments, which may cause a material adverse impact on the results of operations.

If the COVID-19 pandemic becomes more pronounced in the markets in which the Company or its customers operate, or there is a continued resurgence in the virus in markets currently recovering from the spread of COVID-19, as we experienced with the emergence of the Delta and Omicron variants during 2021 and continuing into 2022, then the Company's operations in areas impacted by such events could experience further materially adverse financial impacts.  The extent to which the COVID-19 pandemic continues to impact the Company's operations and financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity of COVID-19, the longevity of COVID-19 and its variants and the impact of COVID-19 on economic activity. The COVID-19 pandemic has impacted the global economy creating certain macroeconomic conditions that make this a particularly challenging business environment for us and the automotive industry, including global supply chain instability, inflationary cost increases and labor shortages, as described in other risk factors in this Annual Report. To the extent the COVID-19 pandemic materially adversely affects the Company's business and financial results, it may also have the effect of significantly heightening many of the other risks associated with the Company's business, results of operations, financial condition, cash flows, liquidity and stock price, including in ways that we cannot predict.

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The inability of our supply chain, and the supply chain of the OEMs and Tier 1s that we supply, to deliver key components, such as semiconductors, has adversely affected, and could continue to adversely affect our business, profitability and results of operations.

Our products contain a significant number of components that we source globally from suppliers who, in turn, source components from their global suppliers. If our supply chain fails to deliver products to us in sufficient quality and quantity on a timely basis, we will be challenged to meet our production schedules, fulfilling our orders, sales and profits could decline, and our commercial reputation and customer relationships could be damaged. Similarly, OEMs and Tier 1s to whom we supply our products are dependent on an ever-greater number of global suppliers to manufacture and sell their products to consumers, which drives sales of our products. We and our customers are currently operating in a supply-constrained environment and are facing, and we expect to continue to face for at least the first half of 2022 and potentially longer, component shortages, manufacturing disruptions, logistics challenges and inflationary pressures, each of which is described below.  

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Our supply chain has been and may in the future be adversely impacted by other events outside of our and their control, including other macroeconomic events, trade restrictions, economic recessions, political crises, labor relations issues, liquidity constraints, natural disasters and extreme weather events, which may become more frequent due to climate change.

The automotive industry, our primary market, is cyclical and resulting difficultiesa decline in the automotive industry orproduction levels of our major customers, particularly with respect to models for our key customers and suppliers would have a material and adverse effect onwhich we supply significant amounts of product, could adversely affect our business, results of operations and financial conditioncondition.

Our Automotive segment represents 89%96%, 92%95% and 95% of our product revenues for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.  Demand for our automotive products is directly related to automotive vehicle production, which is impactedultimately dependent on consumer demand for automotive vehicles, our content per vehicle, and other factors that may limit or otherwise impact production by numerousus, our supply chain and our customers. Automotive sales and production are cyclical and have been, and we expect will continue to be, materially affected by general economic and industry factors which we do not control and is highly cyclical.  In particular, the automotive industry has been susceptible historically in the U.S. and globally to economic recessions,conditions, labor disputes, volatilerelations issues, fuel prices, complex and evolving regulatory requirements, government initiatives, trade agreements, and government initiatives and uncertainthe availability and cost of credit. In additioncredit for us, customers and consumers and other factors.  

We operate in a highly competitive industry and efforts by our competitors, as well as new non-traditional entrants to the continuation of these trends, future automotive vehicle production may be materially impacted by additional industry or consumer behaviors, including the development and use of autonomous vehicles and increasing use of car- and ride-sharing and transportation as a service. Further, disruptions in the global economy and volatility in the financial markets may cause, among other things, lower levels of liquidity, increased borrowing rates, increased rates of default and bankruptcy, lower consumer and business spending, and lower consumer net worth, all of which may reduce demand for our products and have a material adverse effect oncould adversely affect our business, results of operations and financial condition.  We are also limited in our ability to reduce costs to offset the results of a prolonged or severe economic downturn given certain fixed costs associated with our operations, difficulties if we overstrain our resources, and our long-term business approach that necessitates we remain in position to respond when market conditions improve.

Unfavorable economic or industry conditions could result in the financial distress of our customers and suppliers.  If our customers experience an actual decline or project a future decline in vehicle sales generally, or in sales of models for which we supply products, we may experience reductions in orders from these customers, experience difficulties in obtaining new business, incur write-offs of accounts receivable, incur impairment charges or require restructuring actions.  In addition, if any of our significant customers experiences a material work stoppage, the customer may halt or limit the purchase of our products.  This could require us to shut down or significantly reduce production at facilities relating to such products, which could have a material adverse effect on our business and harm our profitability.  

The automotive component supply industry as well as the automotive industry generally, is subject to intense competition and our current automotive products may be rendered obsolete by future technological developments

The automotive component industry, from which we derive a substantial majority of our revenues, is subject to intense competition. Business is typically awarded to the supplier offering the most favorable combination of cost, quality, timely delivery, technological innovation and service. In addition, customers often demand periodic price reductions during a vehicle’s lifeThere can be no assurance that require uswe will be able to continually assess, redefinecompete successfully with the products of our competitors. Further, our competitors’ efforts to grow market share could exert downward pressure on our product pricing and improve our operations, products and manufacturing capabilities to maintain and improve profitability.margins. Many of our competitors are substantially larger in size and have substantially greater financial, marketing and other resources than we do, and therefore may be more effective in adapting to customer requirements while being more profitable.

We must also be responsive to the entrance In addition, our customers may increase levels of non-traditional participants in the automotive industry. These non-traditional participants may seek to disrupt the historic business modelproduction insourcing for a variety of the industry through the introduction of new technologies,reasons, such as advanced driver assistance technologies,shifts in customers’ business strategies or the emergence of low-cost production opportunities in other countries, which may adversely affect our sales as well as new products or services, such asthe profit margins on our products.

If we do not respond appropriately, the evolution of the automotive industry towards electric vehicles, autonomous vehicles car- and ride-sharingmobility on demand services could adversely affect our business.

The global automotive industry is experiencing a period of significant technological change. Future automotive vehicle production may be affected by additional industry or consumer behaviors, including the development and use of autonomous and electric vehicles and increasing use of car and ridesharing and on-demand transportation as a service. Asservice, as well as related regulations. The rapidly evolving nature of the markets in which we compete has attracted, and may continue to attract, new entrants, including new entrants from outside the traditional automotive supply industry. Further, in comparison to us, our business evolves,competitors may foresee the pressurecourse of market developments more accurately, develop superior products, produce similar products at a lower cost, or adapt quicker to innovate will encompass a wider range of products and services, including products and services that may be outside of our historically core business. new technologies. If we do not accurately predict, prepare for and respond to new kinds of technological innovations, market developments and changing customer needs, our sales, profitability and long-term competitiveness may be harmed.

We manage our business based on projected future sales volume, which is highly dependent on information received from customers and general market data, and any inaccuracies or changes in such information could adversely affect our business, results of operations and financial condition.

We manage our business based upon projected future sales volumes, which are based upon many factors, including awarded business and assumptions of conversion rates thereof, customers’ forecasts and general market data. Our product revenues are generally based upon purchase orders issued by our customers, with updated production schedules for volume adjustments, and our customers generally do not guarantee sales volumes. As such, we typically do not have a backlog of firm orders at any point in time. In addition, there canawarded business may include business under arrangements that our customers have the right to terminate without penalty at any time. Further, our customers’ forecasts are subject to numerous assumptions, and such forecasts often are/may be no assurancechanged

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The receipt of orders and resulting revenues from those of our competitors, thatcustomers is significantly affected by global automotive production levels and the marketplace will consider our current or proposed products to be superior or even comparable

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to those of our competitors, or that we can succeed in establishing new or maintaining existing relationships with automobile manufacturers.

Due to the rapid pace of technological change, as with any technology-based product, our ability to compete successfully will depend on our ability to develop and license improved technologies on a rapid and cost-efficient basis. Ourgeneral business will therefore require extensive capital expenditures and investment in product development, manufacturing and management information systems.  Further, certain of our products may be rendered obsolete by future technologies, including from competitors in our products or widespread use of autonomous vehicles, or consumer preferences.  Our operations, financial results and competitive position would be materially and adversely affected if we were unable to anticipate such future developments and develop, or obtain access to, critical new technologies at a reasonable cost, or adapt to changesconditions in the automotive industry generally.  An inability to compete successfully may also hinder our ability to complete acquisitions or financings on reasonable terms or at all.

We are investing significant capital and employee resources to research, develop, commercialize, market and sell additional products in non-automotive industries, and we are increasingly reliant on market acceptanceindustry. Impacts of new products and innovations for continued revenue and earnings growth

Although non-automotive applications represented only 11% of our total revenues in 2017, we are currently investing significant capital and utilizing key employees to improve existing products and to develop products and research technologies to be used in a wide range of non-automotive industries. For example, we are working to generate and increase sales of our products in the sleep system, office chair, cup holder, environmental test chamber, patient temperature management systems and electronic control units and systems. Developing products beyond our historical core business is speculative and complex, and commercial success will depend on a number of risks, opportunities and uncertainties specific to each industry. As we continue to expand into new markets, we will also face new sources of competition,COVID-19 pandemic, including in certain of these markets, from existing manufacturers with established customer bases and greater brand recognition. To be successful, we need to cultivate new relationships with customers, suppliers and other partners in each of these markets. In addition, there can be no assurance that technological advances from our research and development effort will occur in a timely or feasible way, that the funds that we have budgeted for these purposes will be adequate, or that we will be able to establish our proprietary right to the technologies. Further, there is no certainty that new product applications leveraging the technology will be commercially viable or that we will be successful in generating significant revenues, operating margins and profitability from sales of non-automotive products in the near term or at all and the operating margins and profitability may be lower than our automotive products.

If our expansion efforts are not successfully implemented, they may adversely impact our business and results of operations

As a result of a significant increasechanges in demand for a broad variety of goods and services, labor shortages, inflationary pressures and a challenging and dynamic supply chain environment, has caused additional variability in customer purchase orders and caused customers to cancel their purchase orders, which has made it particularly challenging for us to project future sales volumes and manage our products overbusiness in the past few yearscurrent economic climate.

The loss or insolvency of any of our principal customers would adversely affect our future results.

For the year ended December 31, 2021, our top two customers were Adient and Lear which each comprised 15% of our product revenues. Combined, approximately 71% of product revenues to supportthese customers was sourced directly by the Company’s OEM customers. The continued growth, viability and financial stability of our customers’ global platform initiatives, we have opened or acquired new manufacturing facilities in Vietnam, Macedonia, Mexico and China, and thereby significantly increased our capacity to manufacture our products.

Opening new or acquiring existing manufacturing facilities entail a number of risks, including our ability to successfully manage the demands placed on our management resources and engineering and quality teams, our ability to begin production at levels, quality and within the cost and timeframe estimated, the implementation of internal controls and compliance, and our ability to attract and maintain a sufficient number of skilled workers at the requisite locations to meet the needs of the new facilities.  Our results of operations could also be adversely impacted by start-up costs until production levels at the new facilities reach planned levels,principal customers, as well as any legacy issues with acquired facilities.  

These newly developed or acquired facilities, as well as our other production facilities around the world, could have significant unused capacity if our revenues do not continueOEMS to increase as they have in recent years.  Significant unused capacity would result in overhead costs that would need to be absorbed by a smaller than expected revenue base, which could materially and adversely impact our financial results.

While there are currently no active projects to construct new manufacturing facilities, or agreements to acquire other manufacturing facilities, we regularly consider such development or acquisition opportunities and any future construction or acquisition activities, particularly in foreign countries, could entail a number of other risks.  If we experience construction or regulatory delays or increased costs, our estimates and assumptions are incorrect, or other unforeseen events occur, our business, financial conditions and results of operations could be adversely impacted.  

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Our ability to market our automotive products is subject to a lengthy sales and acceptance cycle, which requires significant investment prior to significant sales revenue, and non-automotive products may be subject to similar time lags

The sales cycle for our automotive products is lengthy because an automobile manufacturer must develop a high degree of assurance that the products it buys will meet consumer needs, interface as easily as possible with the other parts of a vehicle and with the automobile manufacturer’s production and assembly process, and have minimal warranty, safety and service problems. As a result, from the time that a manufacturer develops a strong interest in our products for a specified vehicle, it normally will take several years before our products are availablesupplied, are critical to consumers in that vehicle.

In the automotive components industry, products typically proceed through five stagesour success. The loss of research and development. Initial research on the product concept comes first,any significant portion of our sales to assess its technical feasibility and economic costs and benefits. This stage often includes developmentany of an internal prototype for the component supplier’s own evaluation. If the product appears feasible, the component supplier manufactures a functioning prototype to demonstrate and test the product’s features. These prototypes are then marketed and sold to automotive companies for testing and evaluation. If an automobile manufacturer shows interest in the product, it typically works with the component supplier to refine the product, then purchases second and subsequent generation engineering prototypes for further evaluation. Finally, the automobile manufacturer either decides to purchase the component for a production vehicle or terminates the program.  

The time required to progress through these five stages to commercialization varies widely. Generally, the more a component must be integrated with other vehicle systems, the longer the process takes. Further, products that are installed by the factory usually require extra time for evaluation because other vehicle systems are affected, and a decision to introduce the product into the vehicle is not easily reversed. Because our automotive products affect other vehicle systems and are factory-installed items, the process usually takes several years from conception to commercialization.

While we currently have active development programs with various seat manufacturers and automotive OEMs for our thermal management products, no assurance can be given that our products will be implemented in any particular vehicles.  During this development process, we derive minimal funding from prototype sales but generally obtain no significant revenue until mass production begins, which couldcustomers would have a material adverse effect on our liquidity.  If our products are not selected after a lengthy development process, our results of operations and financial condition. We sometimes experience, and we expect to continue to experience, a delay in our collection of accounts receivable balances from our customers, which may be significant and would be at risk in the event of their bankruptcy or other restructuring.

On October 28, 2021, Lear announced that it entered into an agreement to acquire the Interior Comfort Systems business unit of Kongsberg Automotive ASA, which is a key competitor of our climate comfort products, including CCS and seat heaters. The effects of this acquisition are not yet known; however, a decrease in product revenues to Lear could adversely impact our financial condition, results of operations and cash flows, and the impact of any reduced relationship with Lear on the rest of our business is uncertain.

Our inability to achieve product cost reductions which offset customer-imposed price reductions could adversely affect our financial performance.

Downward pricing pressure is customarily applied by automotive manufacturers to the automotive supply chain. Our customer contracts generally provide for annual price reductions over the production life of the vehicle, while requiring us to assume significant responsibility for the design, development and engineering of our products, as well as the costs incurred through our supply chain. Prices may also be adjusted on an ongoing basis to reflect changes in product content/costs and other commercial factors. Our inability to achieve product cost reductions that offset customer-imposed price reductions could adversely affect our financial condition, results of operations and cash flows.

Our inability to effectively manage the development, timing, quality and costs of new product launches could adversely affect our financial performance.

Gentherm is developing and launching new products and related technologies for its battery performance solutions and electronics systems businesses and intends to launch other new products in the future. The launch of products employing new technologies is a complex process, the success of which depends on a wide range of factors, including the robustness of our product and manufacturing process development, success in sourcing new components and commodities with suitable suppliers, readiness of our and our suppliers' manufacturing facilities and manufacturing processes, as well as factors related to tooling, equipment, employees, initial product quality and other factors. Given the complexity of new product launches, we may experience difficulties managing product quality, timeliness and associated costs.

In addition, new program launches require a significant ramp up of costs up to a few years prior to sales of such products. However, our sales related to these new programs generally are dependent upon the timing and success of our customers’ introduction of new vehicles. Our inability to effectively manage the timing, quality and costs of these new program launches could have a materially adverse effect on our business, results of operations and financial condition.

To the extent we are not able to successfully launch new business, vehicle production at our customers could be materiallysignificantly delayed or shut down. Such operating failures could result in significant financial penalties to us or a diversion of personnel and financial resources to improving launches rather than investment in continuous process improvement or other growth initiatives, and

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could result in our customers shifting work away from us to a competitor. Any of the foregoing matters could result in a significant loss of revenue and market shares and could have an adverse effect on our profitability and cash flows.

We use important intellectual property in our business. If we are unable to protect our intellectual property or if a third party makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected.  affected.

Non-automotive productsWe own important intellectual property, including patents, trademarks, copyrights and trade secrets. Our intellectual property plays an important role in maintaining our competitive position in many of the markets that we develop or significantly update are also likelyserve.

We cannot guarantee, however, that we will be able to secure all desired protection, nor that the steps we have a lengthy sales cycle. Because the usetaken to protect our intellectual property will be adequate, to prevent infringement of our rights or misappropriation or theft of our technology, trade secrets or know-how. For example, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in some of the countries in which we operate. In addition, while we generally enter into confidentiality agreements with our employees and third parties to protect our trade secrets, know-how, business strategy and other proprietary technologyinformation, such confidentiality agreements could be breached or otherwise may not provide meaningful protection for our trade secrets and know-how related to the design, manufacture or operation of our products. If it became necessary for us to resort to litigation to protect our intellectual property rights, any proceedings could be burdensome and costly, and we may not prevail. Further, adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets and manufacturing expertise. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired, the product is generally open to competition. Products under patent protection usually generate higher revenues and profitability than those not protected by patents. If we fail to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our business, financial condition, results of operations and cash flows.

In addition, our competitors may develop technologies that are similar or superior to our proprietary technologies or design around the patents we own or license. Further, as we expand our operations in jurisdictions where the protection of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases, despite efforts we undertake to protect them. Foreign governments may adopt regulations, and foreign governments or courts may render decisions, requiring compulsory licensing of intellectual property rights, or foreign governments may require products to meet standards that serve to favor local companies or provide reduced protection relative to other markets is new and evolving, and because customers will likely require any new product or significantly changed product that we develop to pass certain feasibility, safety and economic viability tests before committing to purchase, it is expected that any new or significantly changed products we develop in non-automotive markets also will take several years before they are sold to customers, if at all.countries.

Our ability to market our products successfully depends on acceptance of our products by existing and potential customers and consumers, as well as the success of our customerscustomers.

We have been, and will continue to be, required to educate potential customers and demonstrate that the merits of our existing products justify the costs associated with them. Similar efforts will be required with existing and potential customers for additional products we develop using technologies we develop or license. ManufacturersCustomers will only include our products if there appears to be demand for our products from the consumers.consumer demand. For our automotive products, we rely on OEMs and applicable dealer networks to market our products to consumers, and we do not have any control over the marketing budget or messaging nor the training of employees and agents regarding our products. Further, OEMs and dealer networks may market products offered by our competitors, including products manufactured by such OEMs. If customers or consumers conclude that temperature control seats or our other automotive products are unnecessary or too expensive or that our competitors offer more favorable sales terms or better products, OEMs and other manufacturers may reduce availability or decline to include our products in their vehicles.

In addition,Security breaches and other disruptions to our information technology networks and systems, including a disruption related to cybersecurity, could interfere with our operations and could compromise the vehicle market is highly competitive among OEMs, which drives continual cost-cutting initiatives by our customers.  It is possible that pricing pressures beyond our expectations could intensify as OEMs pursue restructuring and cost cutting initiatives.  If we are unable to generate sufficient production cost savings in the future to offset such price reductions, our gross margin, rate of profitability and cash flows could be materially and adversely affected.  

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We must also satisfy the timing, performance and quality standardsconfidentiality of our proprietary information or personal information.

We rely on our information technology systems and networks in connection with many of our business activities. Some of these networks and systems are managed by third-party service providers and are not under our direct control. Our operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to our business, customers, suppliers, employees and consumers during mass production.  Further, we are dependentother sensitive matters. We rely upon the timingcapacity, reliability and successsecurity of our customers’ continuation of existing vehiclesIT and introduction of new vehicles which include our products.  If such vehicles are not successful in the marketplace, our results of operations and financial condition could be materially and adversely affected.

Significant increases in the market prices and restrictions on the availability of certain raw materials may materially and adversely affect our business

Many of our products include TEDs which contain certain raw materials that generally cannot be substituted. The prices for these raw materials fluctuate depending on market conditions.  We generally have no contractual price protections with our suppliers and customers regarding raw material costs.  Substantial increases in the prices for our raw materials increase our operating costs and could reduce our profitability if we cannot recover these increases from our customers.  As an example, Tellurium is a raw material used in TEDs. If the market price for this raw material significantly increases,data security infrastructure, as it has in the past, our gross profit may be adversely impactedwell as our suppliers pass those price increases on to us. Other key raw materials include copper, silver and petroleum based engineered plastics. In addition, the availability of raw materials fluctuates from time to time due to factors outside our control, including as a result of catastrophic events, which may adversely impact our ability to meet customer commitmentsexpand and continually update this infrastructure in response to the changing needs of our business. If we experience a problem with the functioning of an important IT system or needs. Our business, resultsa security breach of operationsour IT systems, due to failure to timely upgrade systems or during system upgrades and/or new system implementations, or resulting from failures of our third-party service providers, the resulting disruptions could have an adverse effect on our business.

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As with most companies, we have experienced cyber-attacks, attempts to breach our systems and financial conditionother similar incidents, none of which were material in 2021. Any future cyber incidents could, however, materially disrupt operational systems; result in loss of trade secrets or other proprietary or competitively sensitive information; compromise personally identifiable information regarding customers or employees; delay our ability to deliver products to customers; and jeopardize the security of our facilities. A cyber incident could be materiallycaused by malicious outsiders (including state-sponsored espionage or cyberwarfare) or insiders using sophisticated methods to circumvent firewalls, encryption and adversely affected by shortagesother security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Information technology security threats, including security breaches, computer malware, “ransomware” and other cyber-attacks, are increasing in both frequency and sophistication and could create financial liability, subject us to legal or regulatory sanctions or damage our reputation with customers, dealers, suppliers and other stakeholders. Many victims of ransomware are forced to pay significant price increases of key raw materials.  

The disruption or loss of relationships with vendorsransoms to regain access to their critical business data, and suppliers for the components for our products could materiallywe may not be permitted under various regulations and adversely affect our business

Our abilitylaws to manufacture and market our products successfully is dependent on relationships with both third party vendors and suppliers. We rely on various vendors and suppliers for the componentsmake such payments.  With some of our productsemployees working from home during the COVID-19 pandemic, there may be increased opportunities for unauthorized access and procure these components through purchase orders, with no guaranteed supply arrangements. Certain components are only available fromcyber-attacks. Security breaches could also result in a limited numberviolation of suppliers. The lossU.S. and international privacy and other laws and subject the Company to various litigations, investigations and proceedings. We continuously seek to maintain a robust program of any significant supplier, ininformation security and controls, but the absenceimpact of a timely and satisfactory alternative arrangement, or an inability to obtain essential components on reasonable terms or at all, could materially and adversely affect our business, results of operations and financial condition.

Our business also could be materially and adversely affected by delays in deliveries from suppliers because we carry minimal inventory of product components.  Automobile manufacturers, in particular, demand on-time delivery of quality products, and some have required the payment of substantial financial penalties for failure to deliver components to their plants on a timely basis.  Such penalties, as well as costs to avoid them, such as overtime costs and overnight air freighting of parts that normally are shipped by other less expensive means of transportation due to our global production operations,material information technology event could have a material adverse effect on our business, results of operations and financial condition. Moreover, the inability to meet demand for our products on a timely basis would materially and adversely affect ourcompetitive position, reputation, and future commercial prospects.

In addition, financial difficulties or solvency problems with our suppliers, which may be exacerbated by the cost of remediating quality issues with these items, could lead to uncertainty in our supply chain or cause supply disruptions for us which could, in turn, disrupt our operations, including production.

Further, we engage outside contractors to perform product assembly and other production functions for certain of our products. Our reliance upon third party contractors for certain production functions reduces our control over the manufacture of our products and makes us dependent in part upon such third parties to deliver our products in a timely manner, with satisfactory quality controls and on a competitive basis.  If we are unable to meet commitments to our customers due to third party services in production, our business, results of operations, financial condition and cash flows.

Despite our implementation of security measures, our IT systems, like those of other companies, are vulnerable to damages from computer viruses, natural disasters (which may become more frequent due to climate change), unauthorized access, cyber-attack and other similar disruptions. No IT system can be fully secure and impervious to all threats or failures. Any system failure, accident or security breach could result in disruptions to our operations. A material network breach in the security of our IT systems could include the theft of our intellectual property, trade secrets, customer information, human resources information or other confidential information. To the extent that any disruptions or security breach results in a loss or damage to our data, or an inappropriate disclosure of confidential, proprietary or customer information, it could cause significant damage to our reputation, couldaffect our relationships with its customers, lead to claims against us, fines and other penalties assessed upon us by governmental authorities, and ultimately harm our business. In addition, we may be materiallyrequired to incur significant costs to remediate and adversely affected.protect against damage caused by these disruptions or security breaches in the future.

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Our business is subject to risks associated with manufacturing processesprocesses.

If certain of our existing production facilities become incapable of manufacturing products or production capacity is limited for any reason, such as terror attacks, war, or other civil disturbances, natural disasters (which may be more frequent due to climate change), other catastrophic events, public health crises, labor shortages, work stoppages, or other events that cause facility closures or production disruptions, we may be unable to meet production requirements, sales and profits could decline, and our commercial reputation could be damaged. For example, we experienced extended work stoppages in the first half of 2020 as the pandemic spread and governmental authorities initiated “lock-down” orders for all non-essential activities. Without operation of certain existing production facilities, we may be limited in our ability to deliver products until we restore the manufacturing capability at the particular facility, find an alternative manufacturing facility or arrange an alternative source of supply.

We internally manufacturemaintain property damage insurance that we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss. However, any recovery under our insurance policies may not offset the lost sales, harm to our business reputation or increased costs that may be experienced during the disruption of operations. Further, any such proceeds may be received and accounted for in a largedifferent reporting period, which could materially and growing portion ofadversely affect our products at our fourteen production facilities.  See Item 2. below for information regarding our significant properties.  Other products we sell are manufactured by third parties.  A catastrophic loss of the use of all or a portion of our facilities due to accident, fire, explosion, labor issues, civil unrest, weather conditions, other natural disaster or otherwise, whether short or long-term, could have a material adverse effect on our business, financial condition, results of operations and cash flow generally or for a specific reporting period.

If we fail to manage our growth effectively or to integrate successfully any new or future business ventures, acquisitions, investments or strategic alliance into our business, our business could be materially adversely harmed.

We regularly consider opportunities to pursue business ventures, acquisitions, investments and strategic alliances that could leverage our products and capabilities, as well as, enhance our customer base, geographic penetration and scale, to complement our current businesses, some of which could be material. Finding and assessing a potential growth opportunity and completing a transaction involves extensive due diligence, management time and expense; however, the amount of information we can obtain about a potential growth opportunity may be limited. Further, we can give no assurance that new business ventures, acquisitions,

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investments and strategic alliances will positively affect our financial condition.  This riskperformance or will perform as planned, including regarding anticipated synergies or other financial or operational benefits. We may not be able to successfully assimilate or integrate companies that we acquire, including personnel, financial systems, distribution, operations, internal controls and general operating procedures. Further, for significant transactions, we would expect to incur additional debt, issue equity and/or increase capital expenditures, which may increase leverage risks, result in dilution or reduce capital available for other investments in ongoing operations. If we fail to assimilate or integrate acquired companies successfully, our business, reputation and results of operations could be materially impacted. Likewise, our failure to integrate and manage acquired companies successfully may lead to future impairment of any associated goodwill and intangible asset balances. Given our limited history in the patient temperature management business, the foregoing risks may be heightened due to our lack of experience in integrating similar businesses.

Our global operations subject us to risks that may harm our operations and financial results.

In 2021, 61% of our product revenue was generated from sales to customers outside the United States. We have significant personnel, property, equipment and operations in a number of countries outside of the United States, including China, Germany, Hungary, North Macedonia, Mexico, South Korea, Ukraine and Vietnam. Our exposure to the risks described below is exacerbated bysubstantial. We also derive a significant portion of revenues from Europe and Asia and conduct certain investing and financing activities in local currencies.

In addition to the factgeneral risks relating to our operations, our international operations are subject to unique risks inherent in doing business abroad, including:

Additionally, our primary manufacturing locations are in Mexico, China, Vietnam, North Macedonia and Ukraine, all countries that have historically experienced a heightened degree of political, civil and labor uncertainty.

Political conflict and related demonstrations and violence in Ukraine in recent years, for example, highlights the risks to our foreign manufacturing facilities. Although our manufacturing facility in Ukraineis located approximately 700 miles by road from Kiev, and approximately the same distance from the activities along the border of Ukraine and Russia where fighting has occurred, we cannot be certain that similar demonstrations, unrest and international tensions will not affect our facility in the future, including due to electrical outages and periodic battles with separatists closer to our facility. In addition, certain of our employees in Ukraine are routinely conscripted into the military and/or sent to the Russian border to fight in the ongoing conflict. Furthermore, most of our products manufactured in Ukraine are shipped across the border from Ukraine to Hungary for further delivery to our customers. If that border crossing were to be closed or restricted for any reason, we would essentially experience a loss of the use of our Ukrainian facility, which would have a material adverse effect on our business.

Unexpected failuresDefects or quality issues associated with our automotive and medical products could adversely affect the results of our equipmentoperations.

Our design, manufacture and machinerymarketing of automotive products may subject us to warranty claims and product liability in the event that our products fail to perform as expected and, in the case of product liability, such failure of our products results or is alleged to result in bodily injury or property damage. Any large product liability claims, if made, could exceed our insurance coverage limits and insurance may not continue to be available on commercially acceptable terms, if at all, and we may incur significant costs to defend these claims. If any of our products are or are alleged to be defective, we also may resultbe required to participate in production delays, revenue lossa recall or other corrective action involving such products. Automotive manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and significant repair costs, injuries to our employees, and customer claims. Any interruption in production capability may require us to delay fulfilling orders, utilize less efficient internal facilities on a temporary basis and make large capital expenditures to remedy the situation, which could have a negative impact on our profitability and cash flows.

We maintain property damage insurance that we believe to be adequate to provide for reconstruction of facilities and equipment,product liability claims, as well as business interruptionrequiring their suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties.  OEMs historically have recalled vehicles for perceived defects in seat heaters, and we have incurred liabilities in connection with the recalls and other field actions.  In addition, governmental regulatory agencies throughout the world, such as NHTSA in the U.S., have safety standards that require manufacturers to remedy defects related to vehicle safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if it determines that the vehicles do not comply with a safety standard. A recall claim brought against us that is not insured, or a product liability claim brought against us in excess of our available insurance, to mitigate losses resulting from any production interruption or shutdown caused bycould have an insured loss.  However, any recovery underadverse impact on our insurance policies may not be offset the lost sales or increased costs that may be experienced during the disruption of operations, and such proceeds may be received and accounted for in  a different reporting period, which could materially and adversely affect our business, financial condition, results of operations and cash flow generallyreputation or for a specific reporting period.

Our global operations subject us to risks that may harm our operations and financial results

In 2017, 54%market acceptance of our products.  In certain instances, allegedly defective products may be the result of components supplied by our supply chain, and we may be limited in our ability to obtain recovery from our suppliers of materials or services included within our products that are associated with product revenue was generated from salesliability and warranty claims, particularly if the affected items relate to customers outside the United States. We have significant personnel, property, equipmentglobal platforms or involve defects that are identified years after production.

The design, manufacture and operations in a numbermarketing of countries outsidemedical products involve certain inherent risks. Manufacturing or design defects, component failures, unapproved or improper use of the United States, including Canada, China, Germany, Hungary, Macedonia, Mexico, Ukraine and Vietnam.  We have also engaged third parties to produceour products, for us in China and Japan. We and these third parties maintain production facilities in lower-cost countries for cost containment reasons.  Our exposureor inadequate disclosure of risks or other information relating to the risks described below is substantial and increasing.  We also derive a significant portionuse of revenues from Europe and Asia and conduct certain investing and financing activities in local currencies.

In additionour products can lead to the general risksregulatory action, injury or other serious adverse events. These events could lead to recalls or safety alerts relating to our operations,products (either voluntary or as required by the FDA or similar governmental authorities in other countries), and could result, in certain cases, in the removal of a product from the market. A recall, inadequate disclosure or defect could result in significant costs and lost sales and customers, enforcement actions and/or investigations by state and federal governments or other enforcement bodies, as well as negative publicity and damage to our international operations are subject to unique risks inherent in doing business abroad, including:

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See “Our business is subject to risks associated with manufacturing processes” above for a description of certain specific risks associated with our facility in Ukraine.

Modification of the North American Free Trade Agreement (“NAFTA”) or other international trade agreements,new products or the imposition of significantpost-market approval requirements, such as further clinical testing.  Such clinical testing is costly and time-consuming and could delay market approval or the meeting of additional post-market requirements.

Legal, Regulatory and Compliance Risks

Changes to trade policy, including tariffs on imports into the United States,and customs regulations, could have a material and adverse effect on our businessbusiness.

A significant portion of our business activities are conducted in foreign countries, including Mexico.  President TrumpExisting free trade laws and his administration previously announced that the U.S. intended to renegotiate or withdraw from NAFTA, althoughregulations, such matters remain uncertain. Ifas the United States wereStates-Mexico-Canada Agreement, provide certain duties and tariffs for qualifying imports and exports, subject to renegotiatecompliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such trade agreements or impose such tariffs, it is likely to make it more costly for us to manufacture goods at our Mexican facilities for the North American market.  As a result, our business, financial conditionas China and results of operations could be materially and adversely affected. Further, a complete withdrawal from NAFTAMexico, could have significanta material adverse consequences toeffect on our business and resultsfinancial results. For instance, beginning in 2018, the U.S. and Chinese governments have imposed a series of operations,significant incremental retaliatory tariffs to certain imported products. Most notably with respect to the automotive industry, the U.S. imposed tariffs on imports of certain steel,

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aluminum and create uncertainty for our future business activities in Mexico.

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The United Kingdom's departure from the European Union could materiallyautomotive components, and adversely affect our business.

In June, 2016, the United Kingdom (U.K.) voted to exit the European Union (“Brexit”) in a referendum vote. In March, 2017, the U.K. formally notified the European UnionChina imposed retaliatory tariffs on imports of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty, which provides a two-year time period through March 2019 for the U.K.U.S. vehicles and the European Union countries to negotiate a withdrawal. The announcement of Brexitcertain automotive components. Depending upon their duration and the ongoing negotiations for the withdrawal of the U.K. from the European Union has created and may continue to create global economic uncertainty, which may continue to impact global light vehicle production, and affect the business of and/or our relationships with our customers and suppliers,implementation, as well as alter the relationship amongour ability to mitigate their impact, these tariffs and currencies. The long-term effects of Brexit remains uncertain, and Brexit has and may continue to contribute to volatility in stock prices of companies that have significant operations in Europe. Brexit’s impact on currency exchange rates may also impact operations; we generate certain revenues in Euro, but do not generate revenues denominatedother regulatory actions could materially affect our business, including in the British Pound. In addition, Brexit could result in legal uncertaintyform of increased cost of goods sold, decreased margins, increased pricing for customers, and potentially divergent national laws and regulations as new legal relationships between the United Kingdom and the European Union are established.  The ultimate effects of Brexit on us also will depend on the terms of any agreements the U.K. and the European Union make to retain access to each other's respective markets either during a transitional period or more permanently.

Significant price volatility, or uncertainty in future pricing, or oil and natural gas may materially and adversely impact our Gentherm Global Power Technologies (GPT) business

A large portion of our GPT products is sold to companies in the oil and gas industry, in particular, pertaining to new oil and gas pipelines and wells.  Prices for oil and natural gas historically have been volatile and are expected to continue to be volatile. Significant changes in the price of oil and natural gas or uncertainty as to future pricing can adversely impact the number of new oil explorations and installations, and cause the postponement or cancellation of existing projects, any of which would adversely affect our GPT business.reduced sales.

Tax matters, including the changes in the corporate tax rates, disagreement with taxing authorities and imposition of new taxes could impact our results of operations and financial condition.

We are subject to income and other taxes in the U.S. and our operations, plans and results are affected by tax and other initiatives. On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”) was signed into law by President Trump. The Tax Act contains significant changes to corporate taxation, including reduction of the corporate tax rate from 35% to 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small business), limitation of the deduction for net operation losses (“NOLs”) to 80% of current year taxable income and elimination of NOL carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), new taxes on certain foreign earnings, a new minimum tax related to payment to foreign subsidiaries and affiliates, immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. The decrease in the corporate tax rate will result in changes in the valuation of our deferred tax assets and liabilities which will have a material impact on our income tax expense and deferred tax balances.  Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain.  In addition, it is uncertain if, and to what extent, various states will conform to the new tax law and foreign countries will react by adopting tax legislation or taking other actions.  It is not currently anticipated that this change in law will have a material impact on our financial performance.

internationally. We are also subject to regular reviews, examinations, and audits by the Internal Revenue Service and other taxing authorities with respect to our taxes. Although we believe our tax estimates are reasonable, if a taxing authority disagrees with the positions we have taken, we could face additional tax liability, including interest and penalties. There can be no assurance that payment of such additional amounts upon final adjudication of any disputes will not have a material impact on our result of operations and financial position.

We also need to comply with new, evolving or revised tax laws and regulations. The enactment of or increases in tariffs, or other changes in the application or interpretation of the Tax Act,tax legislation and other initiatives, or on specific products that we sell or with which our products compete, may have an adverse effect on our business or on our results of operations.

The value of our deferred tax assets may not be realized, which could materially and adversely affect our operating results.

20As of December 31, 2021, we had approximately $68 million in net deferred tax assets, inclusive of a $16 million valuation allowance. These deferred tax assets include net operating loss carryovers and tax credits that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods. Each quarter, we determine the probability of the realization of deferred tax assets, using significant judgments and estimates with respect to, among other things, historical operating results and expectations of future earnings and tax planning strategies. If we determine in the future that there is not sufficient positive evidence to support the valuation of these assets, due to the risk factors described herein or other factors, we may be required to further adjust the valuation allowance to reduce our deferred tax assets. Such a reduction could result in material non-cash expenses in the period in which the valuation allowance is adjusted and could have a material adverse effect on our financial statements.

Our patient temperature management systems business is subject to extensive industry regulation and failure to comply with all applicable rules and regulation may adversely impact usus.

Our patient temperature management products are subject to extensive, complex, costly and evolving government regulation. In the United States, this is principally administered by the Food and Drug Administration (“FDA”). Various regulatory agencies in foreign countries where our medical products are sold also regulate that business. Under theseboth United States and foreign country regulations, we are subject to periodic inspection of our facilities (including third-party facilities that are performing services for us), procedures and operations and testing of our products. Following such FDA inspections, should any noncompliance with regulations or other quality issues be noted, we may receive observations, notices, citations and/or warning letters that could require us to get FDA approval of a corrective action plan and modify certain activities identified during the inspection, possibly at a significant cost. We are also required to report adverse events associated with our medical products to the FDA and other foreign regulatory authorities.authorities where our products have been approved or received market clearance. Unexpected or serious health or safety concerns could result in liability claims, recalls, market withdrawals or other regulatory actions. Changes in laws or regulations could require us to change the way we operate or to utilize resources to maintain compliance, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any applicable laws or regulations could result in fines or revocation of our operating permits and licenses or, in rare circumstances, market withdrawal of the product.

The process for obtaining governmental approval to manufacture and market new medical devices is time-consuming and costly. We are dependent on receiving FDA and other governmental or third-party approvals prior to manufacturing, marketing and shipping any new medical products. We cannot be certain that any new medical products we develop will receive FDA or other necessary approvals. Also receipt of approval in one country does not guarantee approval by the FDA or any other foreign regulatory agency.

Any failure to comply with anti-corruption laws and regulations could have a material and adverse effect on our reputation, business and financial resultsresults.

Our operations outside of the United States require us to comply with various anti-bribery and anti-corruption regulations, including but not limited to the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act and the China Anti-Unfair

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Competition Law. Recent years have seen a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both U.S. and non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. We operate in many partsViolations of the world that are recognized as having governmental and commercial corruption and local customs and practices that can be inconsistent with anti-bribery laws. We have internal control policies and procedures, and we have implemented training and compliance programs for our employees and agents, with respect to these regulations.  However, our policies, procedures and programs may not always protect us from negligent, reckless or criminal acts committed by our employees or agents.  We could incur significant expenses in investigating any potential violation and could incur severe criminal or civil sanctions and/or fines as a result of violations or settlements regarding such laws.  In addition, any allegations, settlements or violations could materially and adversely impact our reputation and our relationships with current and future customers, suppliers, employees and agents.  Also, some of our competitors may not be subject to, or similarly comply with, the same anti-corruption laws, which could provide them a competitive advantage.  

We are subject to significant currency risk related to our global operations

A significant portion of our global transactions is conducted in currencies other than the U.S. Dollar. While we sometimes employ financial instruments to hedge some of our transactional foreign exchange exposure, developing an effective and economical foreign currency risk strategy is complex and expensiveoften difficult to interpret and no strategy can completely insulate us from those exposures.  Hedging arrangements also may expose us to additional risks, includingapply, could result in significant criminal penalties or sanctions that a counterparty may fail to honor its obligations, and additional costs, including transaction fees and breakage costs.  Changes in the exchange rates of foreign currencies could significantlyadversely affect our reportedbusiness, financial condition, results of operations and financial condition. For example, a significant portion of our business activities is conducted in Euros, and the weakening of the U.S. dollar against the Euro had a positive effect on our reported revenues in 2017.

In addition, concerns persist regarding the debt burden of certain European countries that have adopted the Euro currency (the "Euro Zone") and their ability to meet future financial obligations, as well as concerns regarding the overall stability of the Euro to function as a single currency among the diverse economic, social and political circumstances within the Euro Zone. For example, the announcement of the United Kingdom’s decision to exit the European Union caused significant volatility in currency exchange rates, especially between the U.S. dollar and British pound sterling.  If one of the Euro Zone countries were to default on its debt or other Euro Zone countries withdraw from the Euro currency, the impact on global markets, and on our business, results of operations and financial condition, could be significant, and that impact would intensify substantially if the Euro currency were dissolved entirely. Such a development could also cause financial and capital markets across the globe to constrict, reducing liquidity and increasing borrowing costs, and could have a significant negative impact on consumer confidence and spending.

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Any failure to protect our intellectual property developed or licensed could harm our business and competitive position

We believe that patents and proprietary rights have been and will continue to be very important in enabling us to compete.  If our patents are circumvented, rendered invalid or unenforceable, or narrowed in scope, the patent coverage afforded to our products would be impaired, which could significantly impede our ability to market our products, negatively affect our competitive position and materially and adversely affect our business and results of operations.

There can be no assurance that any new or pending patents will be issued, that our or our licensors’ proprietary rights will not be challenged, invalidated, circumvented or rendered unenforceable, or that our patents will provide us with meaningful competitive advantages. Furthermore, there can be no assurance that others will not independently develop similar products or will not design around any patents that have been or may be issued to our licensors or us. Also, failure to seek or obtain patents in certain foreign countries may materially and adversely affect our ability to compete effectively in those international markets.  Further, as we expand our operations in jurisdictions where the protection of intellectual property rights is less robust, such as China, the risk of others duplicating our proprietary technologies increases, despite efforts we undertake to protect them.  Foreign governments may adopt regulations—and foreign governments or courts may render decisions—requiring compulsory licensing of intellectual property rights, or foreign governments may require products to meet standards that serve to favor local companies.

Because of rapid technological developments in the automotive industry and the competitive nature of the market, the patent position of any component manufacturer is subject to uncertainties and may involve complex legal and factual issues. Consequently, although we either own or have licenses to certain patents, and are currently processing a significant number of additional patent applications, it is possible that no patents will issue from any pending applications or that claims allowed in any existing or future patents issued or licensed to us will be challenged, invalidated, circumvented, or that any rights granted under such patents will not provide us adequate protection. There is an additional risk that we may be required to participate in interference proceedings to determine the priority of inventions or may be required to commence litigation to protect our rights, which could result in substantial costs and divert the attention of management and technical and engineering personnel.  

In addition to patents, we rely on a combination of trademarks, copyrights, know-how, confidentiality provisions and licensing agreements to establish and protect our proprietary rights. We cannot guarantee, however, that the steps we have taken to protect our intellectual property will be adequate to prevent infringement of our rights or misappropriate thereof.

To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to our proposed projects, disputes may arise as to the proprietary rights to such information that may not be resolved in our favor. Additionally, with respect to licensed technology, there can be no assurance that the licensor of the technology will have the resources, financial or otherwise, or desire to defend against any challenges to the rights of such licensor to its patents.

Our products may conflict with patents that have been or may be granted to competitors or other

Other persons could bring legal actions against us claiming damages and seeking to enjoin manufacturing and marketing of our products for allegedly conflicting with patents held by them. Any such litigation could result in substantial cost to us, divert the attention of management and engineering and technical personnel, and harm our reputation. If any such actions are successful, in addition to any potential liability for damages, we could be required to cease selling or using infringing products, obtain a license in order to continue to manufacture or market the affected products, or redesign the infringing products. There can be no assurance that we would prevail in any such action, that any license required under any such patent would be made available on acceptable terms, if at all, or that we could redesign such products on a timely basis and at a reasonable cost, if at all. Failure to obtain needed patents, licenses or proprietary information held by others may have a material adverse effect on our business, results of operations and financial condition. From time to time, we receive notices from third parties suggesting that our products infringe on the proprietary rights of others and historically we have had litigation regarding such matters. While we do not believe that any current claim of patent is valid and material, we must spend time and resources reviewing, defending and resolving such claims.

We rely on trade secret protection through confidentiality agreements and the agreements could be breached or information may be otherwise stolen

We rely on trade secrets that we seek to protect, in part, through confidentiality and non-disclosure agreements with employees, customers and other parties. There can be no assurance that these agreements will not be breached, that we would have adequate

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remedies for any such breach or that our trade secrets will not otherwise become known to or independently developed by competitors.

The theft or unauthorized use or publication of our trade secrets and other confidential business information could harm our competitive position and reduce acceptance of our products, as well as the value of our investment in research and development, product development and marketing.  In addition, third parties might make claims against us related to losses of confidential or proprietary information, end-user data or system reliability. These incidents and claims could severely disrupt our business, and we could suffer losses, including the cost of product recalls and returns and reputational harm.  In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Our most significant customers typically reserve the right unilaterally to cancel contracts or reduce prices, and the exercise of such right could reduce or eliminate any financial benefit to us anticipated from such contract

Due to their purchasing size, automotive customers typically reserve the right unilaterally to cancel contracts completely or to require price reductions during the term of the contract. Although these customers generally agree as a commercial practice to reimburse companies for actual out-of-pocket costs incurred with respect to the particular contract up to the point of cancellation, these reimbursements typically do not cover costs associated with acquiring general purpose assets, such as facilities and capital equipment, or for increases in employee count and related costs, and may be subject to negotiation and substantial delays in receiving payment on such actual out-of-pocket costs. Any unilateral cancellation of, or price reduction with respect to, any contract could reduce or eliminate any financial benefits anticipated from such contract.  If we are not able to offset pricing reductions through improved operating efficiencies and reduced expenditures, such price reduction could have a material adverse effect on our financial condition and results of operations.

The third parties that have agreed to reimburse portions of our research and development expenses generally also reserve the right to unilaterally terminate those contracts. There can be no assurance that we will continue to receive the third party reimbursements for any of our research and development efforts.cash flows.

A significant product liability lawsuit, warranty claim or product recall involving us or one of our major customers, or an investigation regarding vehicle safety generally, could materially and adversely affect our financial performanceperformance.

In the event that our products fail to perform as expected, whether allegedly due to our fault or that of one of our suppliers, and such failure results in, or is alleged to result in, bodily injury and/or property damage or other losses, we may be subject to product liability lawsuits and other claims, orand we have been in the past and may again be required or requested by our customers or regulators to participate in a recall or other corrective action involving such products. We also are a party to agreements with certain of our customers, whereby these customers may pursue claims against us for contribution of all or a portion of the amounts sought in connection with product liability and warranty claims. We carry insurance for certain product liability claims, , butand have utilized such insurance periodically.  However, such coverage may be limited.limited for future claims. In addition, we may not be successful in recovering amounts from third parties, including suppliers, in connection with these claims. These types of claims could materially and adversely affect our financial condition, operating results and cash flows.

Over the past couple of years, there has been a significant increaseWe are involved from time to time in various legal and regulatory proceedings and claims, which could adversely affect our financial performance.

We are involved in various legal and regulatory proceedings and claims that, from time to time, are significant. These are typically claims that arise in the levelnormal course of scrutiny given to vehicle safety issues. Inquiries are being conducted not only by traditional regulators but also by state Attorneys General. Furthermore,business including, without limitation, commercial or contractual disputes, including disputes with our customers, suppliers or competitors, intellectual property matters, personal injury claims, environmental matters, tax matters and employment matters. Such legal and regulatory proceedings could result in an adverse outcome for the U.S. Department of Justice has commenced investigations and U.S. Congressional hearings have also been conducted in which vehicle manufacturers and in some cases suppliers are being called to testify as to particular safety risks. This increased scrutiny could materially andCompany that would adversely affect our financial condition, results of operations and cash flows.

Our results of operations and financial condition may be adversely impacted from a decrease in or cessation or clawback of government incentives related to investments, workforce or production.

We have received, and may receive economic benefits from national, state and local governments in various regions of the businessworld in the form of incentives designed to encourage manufacturers to establish, maintain or increase investment, workforce or production. These incentives may take various forms, including grants, loan subsidies and tax abatements or credits.  The impact of these incentives can be significant in a particular market during a reporting period.  A decrease in, expiration without renewal of, or other cessation or clawback of government incentives for any of our customers and suppliers and subject us to fines, penalties, sanctions and/business units, as a result of administrative decision or investigations.

Our success will depend in large part on retaining key personnel and effective succession planning

Our success will depend to a large extent upon the continued contributions of key personnel. The loss of the services of one or more of our executive officersotherwise, could have a materialan adverse effectimpact on the successour results of our business. Effective succession planning is also important to our long-term success.  Failure to ensure effective transfer of knowledgeoperations and smooth transitions involving key employees could hinder our strategic planning and execution. Further, our success will depend, in part, uponfinancial condition, as well as our ability to retain qualified engineering and other technical and marketing personnel. There is significant competition for technologically qualified personnel in our business and we may not be successful in recruiting or retaining sufficient qualified personnel.fund new investments.

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We are required to comply with environmental laws and regulations that could cause us to incur significant costscosts.

Our manufacturing facilities are subject to numerous laws and regulations designed to protect the environment, inside and outside the United States, and we expect that additional requirements with respect to environmental matters will be imposed on us in the future. We may also assume, or be deemed to assume, significant environmental liabilities in acquisitions. Environmental liability may be imposed without regard to fault, and under certain circumstances, can be joint and several, resulting in one party being held responsible for the entire obligation. Material future expenditures may be necessary if compliance standards change or material unknown conditions that require remediation are discovered. No assurance can be given that all environmental liabilities have been identified or that no prior owner or operator of our properties or former properties has created an environmental condition not known to us.  Environmental laws could also restrict our ability to expand our facilities or could require us to acquire costly equipment or to incur other significant expenses in connection with our business. Violations of these requirements could result in fines or sanctions, obligations to investigate or remediate contamination, third party property damage or personal injury claims due to the migration of contaminants off-site, or modification or revocation of our operating permits, which could materially and adversely affect our financial condition, operating results of operations and cash flows.

We may not realize significant benefits from acquisitions Additionally, proposed and existing efforts to address climate change by reducing greenhouse gas emissions could directly or joint ventures becauseindirectly affect our costs of integration difficultiesenergy, materials, manufacturing, distribution, packaging and other challengesoperating costs, which could impact our business and financial results.

We

Our business may be negatively impacted by regulatory and customer-imposed requirements to address climate change and other sustainability issues.

As evidenced by shifting industry and consumer behaviors, including the development and use of electric vehicles, the automotive industry and consumers have recently completed a few acquisitions, and we are actively pursuing additional acquisitions to expand the breadth of products derived from core thermal technologies as well as the markets in which they are applied.  Identifying suitable potential acquisitions, conducting due diligence, successfully negotiating and closing an acquisitionheightened focus on climate change and the acquisition integration process are complex, costlyenvironmental impact of product

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manufacturing and time-consuming. The difficultiesend use. This increased focus on sustainability and the environmental impact of completingthe automotive industry and integrating an acquisition include, among others:

comply with customer requirements. To the extent we complete an acquisitionare unable to meet or exceed customer sustainability requirements, demand for our products and our revenues would be adversely impacted. We also expect that the increased focus on sustainability and climate change will result in a new industry,legislation or regulations at the above risks will be heightened duefederal, state or local level. Such legislative developments could adversely impact our business by increasing costs and could require us to make changes to our lack of familiarity with such business.

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In the future, we may not be able to successfully identify suitable acquisition or joint venture opportunities or complete any particular acquisition, combination, joint venture or other transaction on acceptable terms. Our identification of suitable acquisition candidates and joint venture opportunities and the integration of acquired business operations involve risks inherent in assessing the values, strengths, weaknesses, risks and profitability of these opportunities, as well as significant competition for such acquisition opportunities. Our focus on acquisition opportunities may require significant financial, management and related resources that would otherwise be used for the ongoing development of our existing operations and internal expansion.result in substantial additional capital expenditures and operating costs. These additional costs, changes in operations, or loss of revenues could have a material adverse effect on our business, financial condition, and results of operations.

We may not generate enough liquid assets to fund our ongoing operationsface particular privacy, data security and investments and service our debtdata protection risks.

Based on our current business plan, we believe our cash on hand along with cash flows from operating activities will be sufficient to meet operating and capital expenditure needs and to service our debt for the foreseeable future.  However, if cash flows from operations decline, we may need to obtain alternative sources of capital and reduce Legislators and/or delay capital expenditures, acquisitions and investments, all of which could impede the implementation of our business strategy and materially and adversely affect our results of operations and financial condition.  In addition, we may need to complete one or more equity or debt financings if we consummate any significant acquisitions.  There can be no assurance that such capital will be available at all or on reasonable terms, which could materially and adversely affect our future operations and business strategy.

We may not be able to generate sufficient cash flows to meet our substantial debt service obligations, and such substantial debt service obligations could materially and adversely affect our business, results of operations and financial condition

Our ability to make payments on and to refinance our debt obligations depends on our ability to generate cash flows from operationsregulators in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not be able to refinance any of our indebtedness on commercially reasonable terms, or at all.

If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, on commercially reasonable terms, or at all.

Our debt obligations could have important consequences to our business, results of operations and financial condition. For example: