NOTE 9.

PRODUCT WARRANTY LIABILITIES

Product warranty liability activities consist of the following (dollars in millions):


	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Beginning balance	$	90.5		$	109.7		$	115.4
Payments		(35.0	)		(38.7	)		(47.3	)
Increase in liability (warranty issued during period)		26.8			28.4			25.5
Net adjustments to liability		0.7			(9.6	)		15.3
Accretion (for Predecessor liabilities)		0.6			0.7			0.8

Ending balance	$	83.6		$	90.5		$	109.7

As of December 31, 2014, the current and non-current product warranty liabilities were $24.0 million and $59.6 million, respectively. As of December 31, 2013, the current and non-current product warranty liabilities were $37.4 million and $53.1 million, respectively.

During June 2007, Old GM recognized the estimated cost of replacing the Dual Power Inverter Module (“DPIM”) used on H 40/50 EP hybrid systems. Certain units were falling short of their expected service life and Allison Transmission (the “Predecessor”), an operating unit of General Motors Corporation, decided to cover repair or replacement for an extended period. The Company is responsible for the first $12.0 million of qualified cost while General Motors Company (“GM”) is responsible for the next $34.0 million of costs, with any amount over $46.0 million being shared one-third by the Company and two-thirds by GM for shipments through June 30, 2009.

During 2014, the Company completed an analysis of its DPIM extended coverage program and determined, based on current claims, that the product warranty liability should be increased by $3.9 million. This resulted in a $2.9 million increase in the GM DPIM receivable and a $1.0 million unfavorable adjustment to the Consolidated Statements of Comprehensive Income. As of December 31, 2014, the DPIM liability was $48.5 million with an associated receivable from GM of $28.7 million. Through December 31, 2014, the Company had paid approximately $32.8 million in DPIM claims and received approximately $14.9 million in reimbursement from GM. The Company will continue to review the total DPIM liability and GM receivable for any changes in estimates as additional data becomes available.

During 2013, the Company completed an analysis of its DPIM extended coverage program and determined, based on current claims, that the product warranty liability should be reduced by $8.2 million. This resulted in a $5.8 million reduction in the GM DPIM receivable and a $2.4 million favorable adjustment to the Consolidated Statements of Comprehensive Income. As of December 31, 2013, the DPIM liability was $44.6 million with an associated receivable from GM of $25.8 million. Through December 31, 2013, the Company had paid approximately $25.5 million in DPIM claims and received approximately $9.1 million in reimbursement from GM.

During 2012, the Company completed an analysis of its DPIM extended coverage program and determined, based on current claims, that the product liability should be reduced by $7.9 million. This resulted in a $7.3 million reduction in the GM DPIM receivable and a $0.6 million favorable adjustment to the Consolidated Statements of Comprehensive Income. As part of the analysis, it was also determined that design issues related to the early introduction of the replacement DPIM unit resulted in a $10.0 million increase to the product warranty liability. As the replacement DPIM unit is the responsibility of the Company and not covered by the asset purchase agreement dated June 28, 2007 (“Asset Purchase Agreement”), the Company recorded a $10.0 million charge to the Consolidated Statements of Comprehensive Income.

The remaining adjustments to the total liability in 2014, 2013 and 2012 were the result of general changes in estimates for various products as additional claims data and field information became available.