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Derivative Instruments and Hedging Activities | 3 Months Ended
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Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities |
9. Derivative Instruments and Hedging Activities
Adient selectively uses derivative instruments to reduce Adient's market risk associated with changes in foreign currency. Under Adient's policy, the use of derivatives is restricted to those intended for hedging purposes; the use of any derivative instrument for speculative purposes is strictly prohibited. A description of each type of derivative utilized to manage Adient's risk is included in the following paragraphs. In addition, refer to Note 10, "Fair Value Measurements," of the notes to the consolidated financial statements for information related to the fair value measurements and valuation methods utilized by Adient for each derivative type. Adient has global operations and participates in the foreign exchange markets to minimize its risk of loss from fluctuations in foreign currency exchange rates. Adient primarily uses foreign currency exchange contracts to hedge certain foreign exchange rate exposures. Adient hedges 70% to 90% of the nominal amount of each of its known foreign exchange transactional exposures. Gains and losses on derivative contracts offset gains and losses on underlying foreign currency exposures. These contracts have been designated as cash flow hedges under ASC 815, “Derivatives and Hedging,” and the hedge gains or losses due to changes in fair value are initially recorded as a component of AOCI and are subsequently reclassified into earnings when the hedged transactions occur and affect earnings. All contracts were highly effective in hedging the variability in future cash flows attributable to changes in currency exchange rates at December 31, 2025 and September 30, 2025, respectively. Adient also utilizes foreign currency exchange contracts and cross currency interest rate swap contracts to selectively hedge portions of its investments in foreign subsidiaries. Such contracts are designated as net investment hedges, with the objective of managing the impact of foreign currency exchange rate fluctuations on Adient’s net investments. The currency effects of such contracts are reflected in the AOCI account within shareholders’ equity attributable to Adient, where gains and losses recorded on Adient’s net investment are offset. During the first quarter of fiscal 2026, Adient entered into a cross-currency interest rate swap agreement with an aggregate notional amount of $60 million in order to hedge the foreign currency risk associated with its net investment in Japanese subsidiaries. The agreement will expire during the first quarter of fiscal 2027 and has been designated as a net investment hedge of Adient's Japanese yen denominated subsidiaries. The currency remeasurement impacts of the instruments are reflected in the AOCI account within shareholders' equity attributable to Adient where they offset gains and losses recorded on Adient's net investment. Under the terms of the agreement, Adient receives fixed-rate interest payments in U.S. dollar at a rate of 2.85% and pays 0.00% on the fixed-rate yen leg. The interest rate differentials are recorded within net financing charges on the consolidated statement of income (loss). During the fourth quarter of fiscal 2025, Adient entered into cross-currency interest rate swap agreements with an aggregate notional amount of $325 million in order to hedge the foreign currency risk associated with its net investment in European subsidiaries. These agreements expire over a three-year period and have been designated as net investment hedges of Adient's Euro denominated subsidiaries. Under the terms of the agreements, Adient receives fixed-rate interest payments in U.S. dollar at a weighted average rate of 1.85% and pays 0.00% on the fixed-rate Euro leg. The interest rate differentials are recorded within net financing charges on the consolidated statement of income (loss). During the third quarter of fiscal 2025, Adient entered into a ¥559 million ($78 million) foreign currency exchange contract to selectively hedge portions of its net investment in China. The contract is set to mature in October 2026. During the third quarter of fiscal 2024, Adient entered into a ¥570 million ($78 million) foreign currency exchange contract to selectively hedge portions of its net investment in China. During the first quarter of fiscal 2026, ¥413 million ($58 million) of the notional amount have matured, the impact of which was not material. The remainder of the contract is set to mature in June 2026. During the second quarter of fiscal 2024, Adient entered into a ¥685 million ($96 million) foreign exchange forward contract to selectively hedge portions of its net investment in China. The contract matured during the first quarter of fiscal 2025, the impact of which was not material. The following table presents the location and fair values of derivative instruments and other amounts used in hedging activities included in Adient's consolidated statements of financial position:
|  | Derivatives and Hedging Activities Designated as Hedging Instruments under ASC 815 |  | Derivatives and Hedging Activities Not Designated as Hedging Instruments under ASC 815
(in millions) |  | December 31, 2025 |  | September 30, 2025 |  | December 31, 2025 |  | September 30, 2025
Other current assets |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | $ | 34 |  |  | $ | 32 |  |  | $ | 7 |  |  | $ | 4 |
Cross-currency interest rate swaps |  | 1 |  |  | — |  |  | — |  |  | — |
Other noncurrent assets |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | 2 |  |  | 1 |  |  | — |  |  | — |
Cross-currency interest rate swaps |  | — |  |  | — |  |  | — |  |  | — |
Total assets |  | $ | 37 |  |  | $ | 33 |  |  | $ | 7 |  |  | $ | 4 |
Other current liabilities |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | $ | 6 |  |  | $ | 7 |  |  | $ | — |  |  | $ | — |
Cross-currency interest rate swaps |  | — |  |  | 1 |  |  |  |  | — |
Other noncurrent liabilities |  |  |  |  |  |  |  |
Foreign currency exchange derivatives |  | — |  |  | 2 |  |  | — |  |  | 1 |
Cross-currency interest rate swaps |  | 3 |  |  | 3 |  |  | — |  |  | — |
Total liabilities |  | $ | 9 |  |  | $ | 13 |  |  | $ | — |  |  | $ | 1 |
Adient enters into International Swaps and Derivatives Associations ("ISDA") master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. Adient has not elected to offset the fair value positions of the derivative contracts recorded in the consolidated statements of financial position. Collateral is generally not required of Adient or the counterparties under the master netting agreements. As of December 31, 2025 and September 30, 2025, no cash collateral was received or pledged under the master netting agreements. The gross and net amounts of derivative instruments and other amounts used in hedging activities are as follows:
|  | Assets |  | Liabilities
(in millions) |  | December 31, 2025 |  | September 30, 2025 |  | December 31, 2025 |  | September 30, 2025
Gross amount recognized |  | $ | 44 |  |  | $ | 37 |  |  | $ | 9 |  |  | $ | 14 |
Gross amount eligible for offsetting |  | (9) |  |  | (10) |  |  | (9) |  |  | (10) |
Net amount |  | $ | 35 |  |  | $ | 27 |  |  | $ | — |  |  | $ | 4 |
The following table presents the effective portion of pretax gains (losses) recorded in other comprehensive income related to cash flow hedges:
|  | Three Months Ended December 31, |  |
(in millions) |  | 2025 |  | 2024 |  |  |  |
Foreign currency exchange derivatives |  | $ | 20 |  |  | $ | (14) |  |  |  |  |
The following table presents the location and amount of the effective portion of pretax gains (losses) on cash flow hedges reclassified from AOCI into Adient's consolidated statements of income (loss):
(in millions) |  |  |  | Three Months Ended December 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Foreign currency exchange derivatives |  | Cost of sales |  | $ | 12 |  |  | $ | (8) |  |  |  |  |
During the next twelve months, $30 million of pretax gain on cash flow hedges are expected to be reclassified from AOCI into Adient's consolidated statements of income (loss). The following table presents the location and amount of pretax gains (losses) on derivatives not designated as hedging instruments recognized in Adient's consolidated statements of income (loss):
(in millions) |  |  |  | Three Months Ended December 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Foreign currency exchange derivatives |  | Cost of sales |  | $ | — |  |  | $ | (3) |  |  |  |  |
Foreign currency exchange derivatives |  | Net financing charges |  | 4 |  |  | (13) |  |  |  |  |
Total |  |  |  | $ | 4 |  |  | $ | (16) |  |  |  |  |
The effective portion of pretax gains (losses) recorded in currency translation adjustment ("CTA") within other comprehensive income (loss) related to net investment hedges was $0 million and $4 million for the three months ended December 31, 2025 and 2024, respectively. For the three months ended December 31, 2025 and 2024, respectively, no significant gains or losses were reclassified from CTA into income for Adient's outstanding net investment hedges. For the three months ended December 31, 2025 and 2024, no ineffectiveness was recognized in the consolidated statements of income (loss) resulting from cash flow hedges.

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