Restructuring Charges, Net and Asset Impairments

3 Months Ended

Mar. 31, 2021

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. For the three months ended March 31, 2021 and 2020, restructuring charges, net and asset impairments by segment are as follows:

	Three Months Ended March 31, 2021
	Motorparts		Performance Solutions		Clean Air		Powertrain		Corporate		Total
Severance and other charges, net	$	2	$	4	$	9	$	10	$	—	$	25
Total restructuring charges, asset impairments, and other	$	2	$	4	$	9	$	10	$	—	$	25

	Three Months Ended March 31, 2020
	Motorparts		Performance Solutions		Clean Air		Powertrain		Corporate		Total
Severance and other charges, net	$	2	$	6	$	—	$	1	$	4	$	13
Other non-restructuring asset impairments	—		455		—		—		16		471
Total restructuring charges, asset impairments, and other	$	2	$	461	$	—	$	1	$	20	$	484

Severance and other charges, net

Three-months ended March 31, 2021

The Company initiated several cost reduction initiatives across all segments and regions aimed at optimizing the Company’s cost structure. The Company recognized cash severance and other charges of $17 million expected to be paid under these programs during the three months ended March 31, 2021. The Company also recognized severance and other charges of $11 million related to plant consolidations, relocations, and closures during the three months ended March 31, 2021.

In response to the COVID-19 global pandemic, the Company announced Project Accelerate and executed global headcount reductions. The Company began implementing these actions during the second quarter of 2020 and expects to complete them during 2021. The Company recognized a reduction of $3 million in revisions to estimates in connection with the cash severance costs expected to be paid in connection with these actions during the three months ended March 31, 2021.

Motorparts recognized severance and other charges related to restructuring actions for the three months ended March 31, 2021 of $2 million in connection with its supply chain rationalization and distribution network initiative to achieve efficiencies and improve throughput to its customers in North America.

Performance Solutions recognized severance and other charges for the three months ended March 31, 2021 of $4 million in connection with the other cost reduction initiatives primarily in Europe.

Clean Air recognized severance and other charges, and revisions to estimates for the three months ended March 31, 2021 as follows:

•$15 million in severance and other charges, along with a reduction of $5 million in revisions to estimates, in connection with the other cost reduction initiatives primarily in Europe;

•$2 million in severance and other charges related to plant consolidations and closures primarily in North America and Asia Pacific; and

•$3 million reduction in severance and other charges due to a revision in estimates in connection with Project Accelerate.

Powertrain recognized severance and other charges, and revisions to estimates for the three months ended March 31, 2021 as follows:

•$1 million reduction in severance and other charges due to a revision in estimates in connection with the other cost reduction initiatives primarily in Europe;

•$9 million in severance and other charges related to plant consolidations, relocations, and closures, primarily in Europe and North America; and

•$2 million restructuring costs incurred related to an approved voluntary termination program at one of its European bearings plants aimed at reducing headcount. Restructuring and related charges expected to be incurred in 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.

Three-months ended March 31, 2020

The Company recognized cash severance and other charges of $7 million expected to be paid for cost reduction initiatives during the three months ended March 31, 2020. The Company also recognized severance and other charges of $6 million related to plant consolidations, relocations, and closures during the three months ended March 31, 2020.

Motorparts recognized severance and other charges related to restructuring actions for the three months ended March 31, 2020 as follows:

•$1 million in severance and other charges in connection with the other cost reduction initiatives primarily in Asia Pacific; and

•$1 million in severance and other charges related to plant consolidations, relocations, and closures primarily in Europe.

Performance Solutions recognized severance and other charges, and revisions to estimates for the three months ended March 31, 2020 of $7 million in severance and other charges, along with a reduction of $1 million in revisions to estimates, in connection with previously announced plant consolidations, relocations, and closures, primarily in North America.

Powertrain recognized severance and other charges and revisions to estimates related to restructuring actions for the three months ended March 31, 2020 as follows:

•$2 million in severance and other charges in connection with the other cost reduction initiatives primarily in Europe; and

•$1 million reduction in severance and other charges due to a revision in estimates related to plant consolidations, relocations, and closures, primarily North America.

The Company also incurred $4 million in cash severance costs for the elimination of certain redundant positions within its corporate component for the three months ended March 31, 2020.

Restructuring reserve rollforward

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

	Reportable Segments
	Motorparts		Performance Solutions		Clean Air		Powertrain		Total Reportable Segments		Corporate		Total
Balance at December 31, 2020	$	14	$	18	$	25	$	42	$	99	$	1	$	100
Provisions	2		4		17		11		34		—		34
Revisions to estimates	—		—		(8)		(1)		(9)		—		(9)
Payments	(4)		(5)		(6)		(9)		(24)		(1)		(25)
Foreign currency	—		(1)		—		—		(1)		—		(1)
Balance at March 31, 2021	$	12	$	16	$	28	$	43	$	99	$	—	$	99

	Reportable Segments
	Motorparts		Performance Solutions		Clean Air		Powertrain		Total Reportable Segments		Corporate		Total
Balance at December 31, 2019	$	16	$	23	$	23	$	30	$	92	$	9	$	101
Provisions	2		7		—		2		11		4		15
Revisions to estimates	—		(1)		—		(1)		(2)		—		(2)
Payments	(4)		(9)		(4)		(4)		(21)		(9)		(30)
Foreign currency	—		(1)		—		—		(1)		—		(1)
Balance at March 31, 2020	$	14	$	19	$	19	$	27	$	79	$	4	$	83

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

	Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	Employee Costs		Facility Closure and Other Costs		Total		Employee Costs		Facility Closure and Other Costs		Total
Balance at beginning of period	$	99	$	1	$	100	$	97	$	4	$	101
Provisions	31		3		34		10		5		15
Revisions to estimates	(9)		—		(9)		(2)		—		(2)
Payments	(21)		(4)		(25)		(23)		(7)		(30)
Foreign currency	(1)		—		(1)		(1)		—		(1)
Balance at end of period	$	99	$	—	$	99	$	81	$	2	$	83

Asset impairments

Other non-restructuring asset impairments

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 Performance Solutions 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 three months ended March 31, 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, during the first quarter of 2020, 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 $16 million during the three months ended March 31, 2020, consisting of $11 million of property, plant, and equipment and $5 million of operating lease right-of-use assets, included in “Other assets” within the condensed consolidated balance sheets.