Equity Method Investment

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investment

Equity Method Investment

On April 2, 2020, the Company entered into a non-binding agreement with VCC to separate Zenuity, a 50% ownership joint venture with VCC in order for each company to more effectively drive their respective strategies. The parties entered into definitive agreements and effected the separation on July 1, 2020.

On July 1, 2020, the Company finalized the split of Zenuity. As part of the transaction the Company paid approximately $37 million to Zenuity for 200 software engineers and two business units located in Germany and the US. Veoneer acquired the right to use Zenuity's intellectual property for a total consideration of SEK 1,067 million (approximately $114 million) payable in ten annual installment payments, with the first payment due on July 1, 2021.

As the transaction resulted in all of the business of Zenuity being transferred to one of its two owners, the Company determined that the remaining value of that equity investment was equal only to the expected future dividends to be received. This resulted in an impairment charge of approximately $24 million that was recorded in the unaudited Condensed Consolidated Statements of Operations for the period ended September 30, 2020.

As the transaction was between the investor and investee, the Company did not recognize any gain from the transaction.

Following completion of the transaction, Veoneer and VCC continue to own 50% each of Zenuity AB. The joint venture was not dissolved as part of the transaction but continues as a holding company that owns the IP of Zenuity.

During the third quarter of 2020, the Company received dividend of SEK 327 million (approximately $35 million) in cash (representing 50% of the total dividend, with the remainder received by VCC) from Zenuity.

During the second quarter of 2020, Veoneer contributed SEK 90 million (approximately $9 million) in cash (representing 50% of the total contribution, with the remainder made by VCC) into Zenuity to support its current operating cash flow needs.

During the first quarter of 2020, Veoneer contributed SEK 150 million (approximately $16 million) in cash (representing 50% of the total contribution, with the remainder made by VCC) into Zenuity to support its future operating cash flow needs.

The profit and loss attributed to the investment is shown in the line item Loss from equity method investment in the unaudited Condensed Consolidated Statements of Operations. Veoneer’s share of Zenuity’s loss for the three and nine month periods ended September 30, 2020 was $1 million and $39 million, respectively. Veoneer's share of Zenuity's loss for the three and nine month periods ended September 30, 2019, was $16 million and $50 million, respectively. As of September 30, 2020 and December 31, 2019, the Company’s equity investment in Zenuity was $129 million and $87 million, respectively