Restructuring Costs

At December 31, 2012 and September 30, 2012, $16 million and $15 million, respectively, of restructuring reserves primarily related to unpaid employee termination benefits remained in the consolidated balance sheet. The changes in restructuring reserves for the three months ended December 31, 2012 and 2011 are as follows (in millions):



	Employee Termination Benefits			Asset Impairment			Plant Shutdown & Other			Total
Balance at September 30, 2012	$	15		$	—		$	—		$	15
Activity during the period:
Charges to continuing operations	6			—			—			6
Cash payments – continuing operations	(5		)	—			—			(5		)
Total restructuring reserves at December 31, 2012	16			—			—			16
Less: non-current restructuring reserves	(4		)	—			—			(4		)
Restructuring reserves – current, at December 31, 2012	$	12		$	—		$	—		$	12

Balance at September 30, 2011	$	19		$	—		$	—		$	19
Activity during the period:
Charges to continuing operations	4			19			1			24
Charges to discontinued operations⁽¹⁾	—			—			1			1
Asset write-offs	—			(19		)	—			(19		)
Cash payments – continuing operations	(6		)	—			(1		)	(7		)
Cash payments – discontinued operations	(1		)	—			(1		)	(2		)
Total restructuring reserves at December 31, 2011	16			—			—			16
Less: non-current restructuring reserves	(2		)	—			—			(2		)
Restructuring reserves – current, at December 31, 2011	$	14		$	—		$	—		$	14


⁽¹⁾	Charges to discontinued operations are included in loss from discontinued operations in the consolidated statement of operations.

Variable Labor Reductions: The company is executing a global variable labor headcount reduction plan intended to reduce labor and other costs in response to market conditions. As part of this action, the company expects to eliminate 375 hourly and 50 salaried positions and incur approximately $9 million of restructuring costs in the Commercial Truck & Industrial segment. The company has recognized cumulative costs of approximately $7 million, primarily severance benefits, as of December 31, 2012, of which approximately $5 million was recognized in fiscal year 2012 and $2 million was recognized in the first quarter of fiscal year 2013. The remaining restructuring costs for this program are expected to be incurred in fiscal year 2013.

Remanufacturing Consolidation: During the first quarter of fiscal year 2013, the company also announced the planned consolidation of its remanufacturing operations in the Aftermarket & Trailer segment resulting in the upcoming closure of one remanufacturing plant in Canada. The closure will result in the elimination of 85 hourly positions which include approximately 65 positions which will be transferred to the company's facility in Indiana. The company expects to incur approximately $7 million of restructuring costs in relation to this program related to employee severance and lease terminations. During the quarter ended December 31, 2012, the company recorded employee severance charges of approximately $3 million.

Segment Reorganization: On November 12, 2012, the company announced a revised management reporting structure resulting in two business segments to drive efficiencies. In the first quarter of fiscal year 2013, the company recognized approximately $1 million of restructuring costs in its Aftermarket & Trailer segment associated with this action. On January 8, 2013, the company announced restructuring actions related to its business segment rationalization (see Note 23). The company currently estimates charges in the range of $15 million to $25 million associated with these restructuring actions, which are expected to be completed over the next 12 to 18 months. Of these charges, $15 million are expected to be for employee severance costs associated with the elimination of 200 salaried positions (including contract employees), with the remainder associated with a lease termination and other costs.

Performance Plus: During fiscal year 2007, the company launched a long-term profit improvement and cost reduction initiative called “Performance Plus.” As part of this program, the company identified significant restructuring actions which would eliminate up to 2,800 positions in North America and Europe and consolidate and combine certain global facilities. The company’s continuing operations recognized restructuring costs in its Commercial Truck & Industrial business segment of $23 million in the first three months of fiscal year 2012 related to Performance Plus. These costs include $19 million of non-cash charges, including an impairment charge of $17 million for assets held for sale at December 31, 2011. In connection with the then planned sale of St. Priest, France manufacturing facility to Renault Trucks SAS, the company classified certain assets and associated liabilities as held for sale (collectively the “Disposal Group”) at December 31, 2011. Upon comparing the carrying value of the Disposal Group to its fair value less cost to sell, an impairment was identified. The sale of Disposal Group was completed on January 2, 2012. In addition, other restructuring charges of approximately $4 million associated with employee headcount reduction and plant rationalization costs were recognized in connection with the sale of St. Priest facility.

Cumulative restructuring costs recorded for this program as of December 31, 2012 are $186 million, including $93 million reported in discontinued operations in the consolidated statement of operations. These costs primarily relate to employee severance and related costs of $117 million, asset impairment charges of $41 million and $28 million primarily associated with pension termination benefits. The company’s Commercial Truck & Industrial segment has recognized cumulative restructuring costs associated with Performance Plus of $82 million. Cumulative restructuring costs of $11 million were recognized by corporate locations and the company’s Aftermarket & Trailer segment. All restructuring actions associated with Performance Plus were complete as of September 30, 2012.