Derivative Financial Instruments

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Cash Flow Hedges

Our cash flow hedges include foreign currency forward contracts, commodity swaps and commodity purchase contracts. We use foreign currency forward contracts to manage currency risk associated with certain transactions, specifically forecasted sales and purchases made in foreign currencies. Our foreign currency contracts hedge forecasted transactions through 2025. We use commodity derivatives, such as fixed-price purchase commitments and swaps to hedge against potentially unfavorable price changes for items used in production. Our commodity contracts hedge forecasted transactions through 2029.

We continue to monitor the effects of the COVID-19 pandemic on our cash flow hedges, including reductions in our forecasted purchases of certain commodities. As of September 30, 2020, the impact of the COVID-19 pandemic on our cash flow hedges was not significant.

Derivative Instruments Not Receiving Hedge Accounting Treatment

We have entered into agreements to purchase and sell aluminum to address long-term strategic sourcing objectives and non-U.S. business requirements. These agreements are derivative instruments for accounting purposes. The quantities of aluminum in these agreements offset and are priced at prevailing market prices. We also hold certain foreign currency forward contracts and commodity swaps which do not qualify for hedge accounting treatment.

Notional Amounts and Fair Values

The notional amounts and fair values of derivative instruments in the Condensed Consolidated Statements of Financial Position were as follows:


	Notional amounts (1)		Other assets		Accrued liabilities
	September 30 2020	December 31 2019	September 30 2020	December 31 2019	September 30 2020	December 31 2019
Derivatives designated as hedging instruments:
Foreign exchange contracts	$3,022	$2,590	$15	$29	($94)	($60)

Commodity contracts	354	645	3	4	(81)	(72)
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts	641	285	16	1	(9)	(6)
Commodity contracts	927	1,644			(16)
Total derivatives	$4,944	$5,164	$34	$34	($200)	($138)
Netting arrangements			(17)	(20)	17	20
Net recorded balance			$17	$14	($183)	($118)

(1)Notional amounts represent the gross contract/notional amount of the derivatives outstanding.

Gains/(losses) associated with our hedging transactions and forward points recognized in Other comprehensive income are presented in the following table:


	Nine months ended September 30		Three months ended September 30
	2020	2019	2020	2019
Recognized in Other comprehensive income, net of taxes:
Foreign exchange contracts	($58)	($6)	$54	($34)
Commodity contracts	(49)	(78)	25	(30)

Gains/(losses) associated with our hedging transactions and forward points reclassified from AOCI to earnings are presented in the following table:


	Nine months ended September 30		Three months ended September 30
	2020	2019	2020	2019
Foreign exchange contracts
Revenues	($2)		($1)	($6)
Costs and expenses	(12)	(21)	(6)	(9)
General and administrative	(5)	(9)		(18)
Commodity contracts

Costs and expenses	(6)	1	(3)
General and administrative expense	(1)	1		1

Gains/(losses) related to undesignated derivatives on foreign exchange and commodity cash flow hedging transactions recognized in Other income, net were gains of $11 and $5 for the nine and three months ended September 30, 2020 and gains of $1 and losses of $1 for the nine and three months ended September 30, 2019.

Based on our portfolio of cash flow hedges, we expect to reclassify losses of $21 (pre-tax) out of Accumulated other comprehensive loss into earnings during the next 12 months.

We have derivative instruments with credit-risk-related contingent features. For foreign exchange and commodity contracts with original maturities of at least five years, our derivative counterparties could require settlement if we default on our five-year credit facility. For certain commodity contracts, our counterparties could require collateral posted in an amount determined by our credit ratings. The fair value of foreign exchange and commodity contracts that have credit-risk-related contingent features that are in a net liability position at September 30, 2020 was $26. At September 30, 2020, there was no collateral posted related to our derivatives.