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July 27, 2018
Suping Lu
Sole Director
Garrett Transportation Systems Inc.
La Piece 16
Rolle, Switzerland
1180
Re: Garrett Transportation Systems Inc.
Amendment No. 1 to
Draft Registration Statement on Form 10
Submitted June 8, 2018
CIK No: 0001735707
Response Letter
Submitted June 29, 2018
Dear Mr. Lu:
We have reviewed your amended draft registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Response Letter Submitted June 29, 2018
Notes to Combined Financial Statements
Note 18. Commitments and Contingencies
Asbestos Matters, page F-27
1. Please provide us a schedule of the aging of outstanding claims and
claims settled over the
Suping Lu
FirstName LastNameSuping LuInc.
Garrett Transportation Systems
Comapany NameGarrett Transportation Systems Inc.
July 27, 2018
July 27, 2018 Page 2
Page 2
FirstName LastName
last five years ended December 31, 2017.
2. We note from your representation during our conference call with you
on July 25, 2018
that your external actuary provided, as part of its report, its view
that Bendix liabilities
could not be reasonably estimated beyond five years in conjunction
with its work
supporting the December 31, 2017 accrual. Please advise, and provide
supporting
documentation as appropriate, with regards to the following:
1. What was the external actuary specifically asked to do with regards
to the period over
which claims were reasonably estimable? Did the Company ask the
actuary to
confirm its view that five years was the period over which Bendix
claims were
reasonably estimable, or was the actuary requested to provide its
independently
determined view on what time period would be reasonably estimable?
2. You asserted that you believe that the same actuary has performed
services relating to
the Bendix accrual since 2006. During that time period, have there
been any
significant changes in what the actuary has been requested to do by
the Company?
Were there any changes that have occurred during the last three
years (2015-2017)?
3. In your response to comment 3 in your letter dated June 29, 2018, we
understand that
$480 million of the total $616 million Bendix liability at December 31
2017 relates to
projected IBNR claims for the period 2018 through 2022. Please provide
the breakdown
of the estimated amount relating to each year during that period, as
well as the underlying
variables for the epidemiological projection of the future incidence
of asbestos-related
disease, projected claims rates against the Company, and average claim
resolution values
relating to each year.
4. Based on your disclosures it appears that over the last 10 years you
have had relatively
consistent amounts of Bendix liabilities accruals and payouts. You
have represented that
during these years you believed that your litigation strategy and
scientific information
related to your product caused you to believe that after a five year
period you could not
reasonably estimate the claims that would be filed and the resolution
rate for those
claims.
Please tell us if you believe that over the last 10 years your
litigation strategy, scientific
findings or other factors that you may have identified to support a
five year IBNR accrual
period have significantly reduced the claims filed against you or the
resolution rate for
those claims. If so, please provide data supporting this conclusion.
If not, tell us whether
you believe you should consider the fact that in the past these items
have not caused the
variability in future claims and resolutions you expected in your
determination at each
year-end from 2006-2017 and how those items prevented you from making
a reasonable
estimate beyond the next five years in light of that fact.
5. In your June 29, 2018 response to our prior comment 2 of our letter
dated June 21,
2018, you note that based on a mathematical extrapolation of projected
claims rates and
Suping Lu
Garrett Transportation Systems Inc.
July 27, 2018
Page 3
average resolution values, a reasonably possible exposure over the full
term of the
epidemiological projections for Bendix IBNR claims would be $1.3 billion.
We
understand that this would represent $820 million of reasonably possible
additional
exposure beyond what is recorded at December 31, 2017, extending over an
approximate
30 year period beginning in 2023.
Please tell us how much of the incremental $820 million would be included
if the IBNR
estimate were extended based on this mathematical extrapolation: 1) an
additional 5 years
(2023-27) and 2) an additional 10 years (2023-32).
6. Please provide us the accounting memoranda supporting the conclusion that
Bendix
related liabilities could not be reasonably estimated beyond a five year
time horizon for
each of the years ended December 31, 2013 through 2017.
You may contact Patrick Kuhn at (202) 551-3308 or Andrew Mew at (202)
551-3377 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Julia Griffith at (202) 551-3267 or Nolan McWilliams at (202) 551-3217
with any other
questions.
FirstName LastNameSuping Lu
Division of
Corporation Finance
Comapany NameGarrett Transportation Systems Inc.
Office of
Transportation and Leisure
July 27, 2018 Page 3
cc: John C. Kennedy
FirstName LastName