Restructuring Charges, Net and Asset Impairments (Notes)

6 Months Ended

Jun. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring Charges, Net and Asset Impairments

4. Restructuring Charges, Net and Asset Impairments

The Company's restructuring activities are undertaken as necessary to execute management's strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company's businesses and to relocate operations to best cost locations.

The Company's restructuring charges consist primarily of employee costs (principally severance and/or termination benefits) and facility closure and exit costs. The 2019 amounts below reflect the reclassifications to the prior period as discussed in Note 2, Summary of Significant Accounting Policies.

For the three and six months ended June 30, 2020 and 2019, restructuring charges, net and asset impairments by segment are as follows:

	Three Months Ended June 30, 2020
	Clean Air		Powertrain		Ride Performance		Motorparts			Corporate		Total
Severance and other charges, net	$	22	$	36	$	18	$	15		$	1	$	92
Asset impairments related to restructuring actions	—		3		—		25			—		28
Other non-restructuring asset impairments	—		—		—		—			1		1
Impairment of assets held for sale	—		1		—		(1		)	—		—
Total asset impairment charges	—		4		—		24			1		29
Total restructuring charges, net and asset impairments	$	22	$	40	$	18	$	39		$	2	$	121

	Three Months Ended June 30, 2019
	Clean Air		Powertrain		Ride Performance		Motorparts		Corporate		Total
Severance and other charges, net	$	14	$	17	$	10	$	6	$	—	$	47
Other non-restructuring asset impairments	1		—		—		1		—		2
Total restructuring charges, net and asset impairments	$	15	$	17	$	10	$	7	$	—	$	49

	Six Months Ended June 30, 2020
	Clean Air		Powertrain		Ride Performance		Motorparts			Corporate		Total
Severance and other charges, net	$	22	$	37	$	24	$	17		$	5	$	105
Asset impairments related to restructuring actions	—		3		—		25			—		28
Other non-restructuring asset impairments	—		—		455		—			17		472
Impairment of assets held for sale	—		1		—		(1		)	—		—
Total asset impairment charges	—		4		455		24			17		500
Total restructuring charges, net and asset impairments	$	22	$	41	$	479	$	41		$	22	$	605

	Six Months Ended June 30, 2019
	Clean Air		Powertrain		Ride Performance		Motorparts		Corporate		Total
Severance and other charges, net	$	19	$	18	$	15	$	10	$	1	$	63
Other non-restructuring asset impairments	1		—		—		1		—		2
Total restructuring charges, net and asset impairments	$	20	$	18	$	15	$	11	$	1	$	65

Severance and other charges, net

Severance and other charges, net for the three and six months ended June 30, 2020 include the following actions:

• In conjunction with the Company's previously announced Project Accelerate, and in response to the COVID-19 global pandemic, the Company is executing global headcount reductions, subject to negotiation with works councils in certain jurisdictions. The Company began implementing these actions during the second quarter of 2020 and expects to complete them during 2021. During the three and six months ended June 30, 2020, the Company recognized a charge of $25 million in connection with the cash severance costs expected to be paid in connections with these actions.

• In addition to the actions above, the Company initiated several other cost reduction initiatives across all segments and regions aimed at optimizing the Company's cost structure. During the three and six months ended June 30, 2020, the Company recognized cash severance charges of $32 million expected to be paid under these programs.

• During the three and six months ended June 30, 2020, the Powertrain segment incurred $20 million in restructuring and other costs, of which $16 million is related to plant relocations and closures, and $4 million is related to a cost reduction program in one of its product lines.

• During the three and six months ended June 30, 2020, the Company incurred $4 million and $10 million in restructuring and other costs related to previously announced plant relocation and closures within its Ride Performance segment.

• Beginning in the third quarter of 2020, the Motorparts segment will initiate a rationalization of its supply chain and distribution network to achieve supply chain efficiencies and improve throughput to its customers; as discussed in Note 1, Description of Business. During the three and six months ended June 30, 2020, the Motorparts segment recognized $4 million in restructuring charges related to cash severance expected to be paid in connection with these actions. In addition, the Motorparts segment also recognized charges during the three and six months ended June 30, 2020 of $3 million in connection with an infrastructure cost reduction program in one of its regions.

• The Company also incurred $4 million in cash severance costs for the elimination of certain redundant positions within its corporate component in the six months ended June 30, 2020.

On June 30, 2020, the Company approved a voluntary termination program within the Powertrain segment at one of its European bearings plants aimed at reducing headcount, as negotiated with the works council and union. The Company anticipates implementing headcount reductions during 2020 and continuing into 2021 through a voluntary early retirement program and a voluntary special termination program. Restructuring and related charges are expected to be incurred in the second half of 2020 and 2021 aggregate to approximately $31 million. The charges are expected to be comprised of approximately $10 million for postemployment benefits, including an early retirement program and $21 million of special termination benefits. In addition, the Company expects to incur additional costs of approximately $2 million for customer validation, equipment transfer, and related expenditures.

During the three and six months ended June 30, 2019, the Company incurred $3 million and $9 million in restructuring and related costs and reduced previously recorded estimates by $2 million related to a restructuring plan designed to achieve a portion of the synergies the Company anticipated achieving in connection with the Federal-Mogul Acquisition. Pursuant to the plan, the Company reduced its headcount globally across all segments. During the three and six months ended June 30, 2019, the Ride Performance segment incurred $5 million and $8 million in restructuring and other costs related to plant relocations and closures.

Restructuring reserve rollforward

Amounts related to activities that were charged to restructuring reserves by reportable segments are as follows:

	Reportable Segments
	Clean Air			Powertrain			Ride Performance			Motorparts			Total Reportable Segments			Corporate			Total
Balance at December 31, 2019	$	23		$	30		$	23		$	16		$	92		$	9		$	101
Provisions	—			2			7			2			11			4			15
Revisions to estimates	—			(1		)	(1		)	—			(2		)	—			(2		)
Payments	(4		)	(4		)	(9		)	(4		)	(21		)	(9		)	(30		)
Foreign currency	—			—			(1		)	—			(1		)	—			(1		)
Balance at March 31, 2020	19			27			19			14			79			4			83
Provisions	24			36			18			17			95			1			96
Revisions to estimates	(2		)	—			—			(2		)	(4		)	—			(4		)
Payments	(6		)	(6		)	(17		)	(5		)	(34		)	(1		)	(35		)
Balance at June 30, 2020	$	35		$	57		$	20		$	24		$	136		$	4		$	140

	Reportable Segments
	Clean Air			Powertrain			Ride Performance			Motorparts			Total Reportable Segments			Corporate			Total
Balance at December 31, 2018	$	17		$	15		$	25		$	43		$	100		$	3		$	103
Provisions	5			1			5			4			15			1			16
Payments	(6		)	(3		)	(5		)	(14		)	(28		)	(2		)	(30		)
Balance at March 31, 2019	16			13			25			33			87			2			89
Provisions	14			17			10			8			49			—			49
Revisions to estimates	—			—			—			(2		)	(2		)	—			(2		)
Payments	(2		)	(4		)	(7		)	(7		)	(20		)	(1		)	(21		)
Balance at June 30, 2019	$	28		$	26		$	28		$	32		$	114		$	1		$	115

The following table provides a summary of the Company's restructuring liabilities and related activity for each type of exit costs:

	Six Months Ended June 30, 2020									Six Months Ended June 30, 2019
	Employee Costs			Facility Closure and Other Costs			Total			Employee Costs			Facility Closure and Other Costs			Total
Balance at beginning of period	$	97		$	4		$	101		$	98		$	5		$	103
Provisions	10			5			15			11			5			16
Revisions to estimates	(2		)	—			(2		)	—			—			—
Payments	(23		)	(7		)	(30		)	(25		)	(5		)	(30		)
Foreign currency	(1		)	—			(1		)	—			—			—
Balance at March 31	81			2			83			84			5			89
Provisions	90			6			96			44			5			49
Revisions to estimates	(4		)	—			(4		)	(2		)	—			(2		)
Payments	(31		)	(4		)	(35		)	(16		)	(5		)	(21		)
Balance at end of period	$	136		$	4		$	140		$	110		$	5		$	115

Asset impairments

During the three and six months ended June 30, 2020, as a result of the actions in the Motorparts segment discussed above, asset impairment charges of $25 million were recognized which included $16 million related to the write-down of property, plant, and equipment to its fair value, and $9 million of impairment charge to its operating lease right-of-use assets. Refer to Note 1, Description of Business, for additional information.

During the three and six months ended June 30, 2020, the Powertrain segment incurred $3 million in asset impairment charges in connection with its plant relocation and closure actions.

Refer to Note 3, Acquisitions and Divestitures, for additional information on impairments of assets held for sale.

The Company evaluates its long-lived assets for impairment whenever events or circumstances indicate the value of these long-lived asset groups are not recoverable. During the first quarter of 2020, the Company concluded impairment triggers had occurred for certain long-lived asset groups in the Ride Performance segment as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. Accordingly, the Company tested these long-lived asset groups for recoverability by performing undiscounted cash flow analyses. Based on these analyses, the net carrying values of these asset groups exceeded their undiscounted future cash flows. As such, the Company estimated the fair values of these asset groups at March 31, 2020 and compared them to their carrying values. As the net carrying values of these long-lived asset groups exceeded their fair values, the Company recorded long-lived asset impairment charges for property, plant, and equipment of $455 million during the six months ended June 30, 2020. Refer to Note 9, Fair Value for additional information on the fair value estimates used in these analyses.

As a result of changes in the business, the Company assessed and concluded an impairment trigger had occurred for certain long-lived asset groups in its corporate component. Accordingly, the Company tested these long-lived asset groups for recoverability. The Company estimated the fair value of these asset groups and compared it to the carrying value. As the net carrying value exceeded fair value, the Company recorded long-lived asset impairment charges of $1 million and $17 million during the three and six months ended June 30, 2020. Included in the asset impairment charges for the six months ended June 30, 2020 are $11 million related to property, plant, and equipment and $6 million related to operating lease right-of-use assets.

There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s projected financial information, due to business performance or market conditions, this may be indicative the value of its long-lived assets are not recoverable, which may result in additional non-cash long-lived asset impairment charges in a future period.