Restructuring Charges, Net and Asset Impairments

6 Months Ended

Jun. 30, 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 and six months ended June 30, 2021 and 2020, restructuring charges, net and asset impairments by segment are as follows:

	Three Months Ended June 30, 2021
	Motorparts		Performance Solutions		Clean Air		Powertrain		Corporate		Total
Severance and other charges, net	$	5	$	8	$	2	$	8	$	1	$	24
Asset impairments related to restructuring actions	1		—		—		—		—		1
Other non-restructuring asset impairments	—		—		—		—		2		2
Total asset impairment charges	1		—		—		—		2		3
Total restructuring charges, net and asset impairments	$	6	$	8	$	2	$	8	$	3	$	27

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

	Six Months Ended June 30, 2021
	Motorparts		Performance Solutions		Clean Air		Powertrain		Corporate		Total
Severance and other charges, net	$	7	$	12	$	11	$	18	$	1	$	49
Asset impairments related to restructuring actions	1		—		—		—		—		1
Other non-restructuring asset impairments	—		—		—		—		2		2
Total asset impairment charges	1		—		—		—		2		3
Total restructuring charges, net and asset impairments	$	8	$	12	$	11	$	18	$	3	$	52

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

Severance and other charges, net

Three and six months ended June 30, 2021

The Company recognized $15 million and $32 million in severance and other charges expected to be paid for cost reduction initiatives aimed at optimizing the Company’s cost structure across all segments and regions during the three and six months ended June 30, 2021. The Company also recognized severance and other charges of $9 million and $20 million related to plant consolidations, relocations, and closures during the three and six months ended June 30, 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 for the cash severance costs expected to be paid in connection with these actions during the six months ended June 30, 2021.

Motorparts recognized severance and other charges, and revisions to estimates as follows:

•$1 million and $3 million for the three and six months ended June 30, 2021 in connection with its supply chain rationalization and distribution network initiative to achieve efficiencies and improve throughput to its customers in North America;

•$1 million, along with a reduction of $4 million in revisions to estimates, for the three and six months ended June 30, 2021 in connection with cost reduction initiatives primarily in Europe; and

•$7 million for the three and six months ended June 30, 2021 related to plant consolidations, relocations, and closures, primarily in Europe.

Performance Solutions recognized severance and other charges as follows:

•$7 million and $11 million for the three and six months ended June 30, 2021 in connection with cost reduction initiatives primarily in Europe; and

•$1 million for the three and six months ended June 30, 2021 related to plant consolidations, relocations, and closures, primarily in North America.

Clean Air recognized severance and other charges, and revisions to estimates as follows:

•$2 million and $17 million for the three and six months ended June 30, 2021, along with a reduction of $1 million and $6 million in revisions to estimates for the three and six months ended June 30, 2021, in connection with cost reduction initiatives primarily in Europe;

•$1 million and $3 million for the three and six months ended June 30, 2021 related to plant consolidations, relocations and closures primarily in North America and Asia Pacific; and

•$3 million reduction due to a revision in estimates for the six months ended June 30, 2021 in connection with Project Accelerate.

Powertrain recognized severance and other charges, and revisions to estimates as follows:

•$9 million for the three and six months ended June 30, 2021 in connection with cost reduction initiatives primarily in Asia Pacific;

•$3 million and $4 million reduction as a result of revisions to estimates for the three and six months ended June 30, 2021, in connection with cost reduction initiatives primarily in Europe;

•$9 million for the six months ended June 30, 2021 related to plant consolidations, relocations, and closures, primarily in Europe and North America; and

•$2 million and $4 million for the three and six months ended June 30, 2021 incurred related to an approved voluntary termination program at one of its European bearings plants aimed at reducing headcount. As of June 30, 2021, total severance related restructuring charges for this program aggregate to $12 million. Total severance related charges are expected to be approximately $31 million, comprised of approximately $10 million of 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.

The Company also incurred $1 million in cash severance costs within its corporate component for the three and six months ended June 30, 2021.

Three and six months ended June 30, 2020

The Company recognized $44 million and $51 million in severance and other charges of expected to be paid for cost reduction initiatives during the three and six months ended June 30, 2020. The Company also recognized severance and other charges of $23 million and $29 million related to plant consolidations, relocations, and closures during the three and six months ended June 30, 2020.

The Company recognized charges of $25 million for cash severance costs expected to be paid in connection with Project Accelerate during the three and six months ended June 30, 2020.

Motorparts recognized severance and other charges, and revisions to estimates as follows:

•$4 million for the three and six months ended June 30, 2020 in connection with its supply chain rationalization and distribution network initiative to achieve efficiencies and improve throughput to its customers in North America;

•$4 million and $6 million for the three and six months ended June 30, 2020, along with a reduction of $1 million in revisions to estimates for the three and six months ended June 30, 2020, in connection with cost reduction initiatives primarily in Europe;

•$3 million and $4 million for the three and six months ended June 30, 2020, along with a reduction of $1 million in revisions to estimates for the six months ended June 30, 2020, related to plant consolidations, relocations, and closures primarily in Europe and Asia Pacific; and

•$5 million for the three and six months ended June 30, 2020 in connection with Project Accelerate.

Performance Solutions recognized severance and other charges, and revisions to estimates as follows:

•$10 million for the three and six months ended June 30, 2020 in connection with cost reduction initiatives primarily in Europe;

•$5 million and $12 million for the three and six months ended June 30, 2020, along with a reduction of $1 million in revisions to estimates for the six months ended June 30, 2020 related to plant consolidations, relocations, and closures, primarily in North America; and

•$3 million for the three and six months ended June 30, 2020 in connection with Project Accelerate.

Clean Air recognized severance and other charges, and revisions to estimates for the three and six months ended June 30, 2020 as follows:

•$14 million, along with a reduction of $1 million in revisions to estimates, in connection with cost reduction initiatives primarily in Europe;

•$1 million, along with a reduction of $1 million in revisions to estimates, related to plant consolidations, relocations, and closures primarily in Europe; and

•$9 million in connection with Project Accelerate.

Powertrain recognized severance and other charges, and revisions to estimates as follows:

•$12 million and $14 million for the three and six months ended June 30, 2020 in connection with cost reduction initiatives primarily in Europe;

•$16 million for the three and six months ended June 30, 2020, along with a reduction of $1 million in revisions to estimates for the six months ended June 30, 2020, related to plant consolidations, relocations, and closures, primarily in North America and Europe;

•$7 million for the three and six months ended June 30, 2020 in connection with Project Accelerate; and

•$1 million for the three and six months ended June 30, 2020 incurred related to an approved voluntary termination program at one of its European bearings plants aimed at reducing headcount.

The Company also incurred $1 million in cash severance costs in connection with Project Accelerate for the three and six months ended June 30, 2020, as well as $4 million in cash severance costs for the elimination of certain redundant positions within its corporate component for the six months ended June 30, 2020.

Restructuring reserve rollforward

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, 2021						Six Months Ended June 30, 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 March 31	99		—		99		81		2		83
Provisions	30		2		32		90		6		96
Revisions to estimates	(8)		—		(8)		(4)		—		(4)
Payments	(22)		(2)		(24)		(31)		(4)		(35)
Balance at end of period	$	99	$	—	$	99	$	136	$	4	$	140

Asset impairments

Asset impairments related to restructuring actions

During the three and six months ended June 30, 2021, as a result of the actions in the Motorparts segment, asset impairment charges of $1 million were recognized related to the write-down of property, plant and equipment.

During the three and six months ended June 30, 2020, as a result of the actions in the Motorparts segment, 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 5, “Inventories”, 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.

Other non-restructuring asset impairments

As a result of changes in the business, during the second quarter of 2021, the Company assessed and concluded an impairment trigger had occurred for certain long-lived asset groups in its corporate component and recognized an impairment charge of $2 million during the three and six months ended June 30, 2021.

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 six months ended June 30, 2020. Refer to Note 8, “Financial Instruments and 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 $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 of property, plant, and equipment and $6 million of operating lease right-of-use assets, included in “Other assets” within the condensed consolidated balance sheets.