Derivative Financial Instruments

6 Months Ended

Jun. 30, 2023

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 2031. We use commodity derivatives, such as fixed-price purchase commitments and swaps to hedge against potentially unfavorable price changes for commodities used in production. Our commodity contracts hedge forecasted transactions through 2028.

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
	June 30 2023	December 31 2022	June 30 2023	December 31 2022	June 30 2023	December 31 2022
Derivatives designated as hedging instruments:
Foreign exchange contracts	$2,399	$2,815	$34	$23	($85)	($122)

Commodity contracts	568	602	89	115	(35)	(9)
Derivatives not receiving hedge accounting treatment:
Foreign exchange contracts	458	462	6	5	(36)	(42)
Commodity contracts	163	412		2	(1)	(1)
Total derivatives	$3,588	$4,291	$129	$145	($157)	($174)
Netting arrangements			(33)	(33)	33	33
Net recorded balance			$96	$112	($124)	($141)

(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 (loss)/income are presented in the following table:


	Six months ended June 30		Three months ended June 30
	2023	2022	2023	2022
Recognized in Other comprehensive (loss)/income, net of taxes:
Foreign exchange contracts	$11	($104)	$1	($96)
Commodity contracts	(36)	30	(44)	(72)

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


	Six months ended June 30		Three months ended June 30
	2023	2022	2023	2022
Foreign exchange contracts

Costs and expenses	($6)	$10	($4)	$5
General and administrative expense	(23)	(7)	(12)	(6)
Commodity contracts

Costs and expenses	27	7	10	6
General and administrative expense	5	2	3	1

During the six months ended June 30, 2022, we reclassified losses associated with certain cash flow hedges of $50 from AOCI to Other income, net because it was probable the forecasted transactions would not occur. Losses related to undesignated derivatives on foreign exchange and commodity cash flow hedging transactions recognized in Other income, net were insignificant for the six months ended June 30, 2023 and 2022.

Based on our portfolio of cash flow hedges, we expect to reclassify losses of $22 (pre-tax) out of AOCI into earnings during the next 12 months.

We have derivative instruments with credit-risk-related contingent features. If we default on our five-year credit facility, our derivative counterparties could require settlement for foreign exchange and certain commodity contracts with original maturities of at least five years. The fair value of those contracts in a net liability position at June 30, 2023 was $24. For other particular commodity contracts, our counterparties could require collateral posted in an amount determined by our credit ratings. At June 30, 2023, there was no collateral posted related to our derivatives.