Restructuring costs

Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, eligible separation costs are recognized at the time of employee acceptance unless the acceptance requires explicit approval by the Company. For involuntary programs, eligible costs are recognized when management has approved the program, the affected employees have been properly notified and the costs are estimable.

Restructuring costs for 2016, 2015 and 2014 were as follows:




(Millions of dollars)	2016		2015		2014
Employee separations ¹	$	297	$	641	$	382
Contract terminations ¹	62		—		—
Long-lived asset impairments ¹	391		127		48
Defined benefit retirement plan curtailment losses ¹	7		82		2
Other ²	262		48		—
Total restructuring costs	$	1,019	$	898	$	432

¹ Recognized in Other operating (income) expenses.
² Represents costs related to our restructuring programs, primarily for inventory write-downs, accelerated depreciation, sales discounts, project management and equipment relocation and were recognized primarily in Cost of goods sold.

The restructuring costs in 2016 were primarily related to actions in Resource Industries in response to continued weakness in the mining industry. In addition, costs resulted from our decision to discontinue production of on-highway vocational trucks within Energy & Transportation and other restructuring actions across the company, most of which were related to our September 2015 announcement regarding significant restructuring and cost reduction actions to lower our operating costs in response to weak economic and business conditions in most of the industries we serve. The restructuring costs in 2015 were primarily related to several restructuring programs across the company. The restructuring costs in 2014 were primarily related to a reduction in workforce at our Gosselies, Belgium, facility.

Restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes. See Note 23 for more information.

The following table summarizes the 2015 and 2016 employee separation activity:



(Millions of dollars)
Liability balance at December 31, 2014	$	182
Increase in liability (separation charges)	641
Reduction in liability (payments)	(340		)
Liability balance at December 31, 2015	$	483
Increase in liability (separation charges)	297
Reduction in liability (payments)	(633		)
Liability balance at December 31, 2016	$	147

As part of our September 2015 announcement, we offered a voluntary retirement enhancement program to qualifying U.S. employees and various voluntary separation programs outside of the U.S. and implemented additional involuntary separation programs throughout the company. In 2016 and 2015, we incurred $100 million and $379 million of employee separation costs related to these programs, respectively. In addition, in 2015 we incurred $82 million of defined benefit retirement plan curtailment losses related to these programs. Substantially all of the employee separation costs related to this program were paid in 2016. We also incurred costs associated with the September 2015 announcement related to manufacturing facility consolidations and closures in 2016 and 2015 totaling $181 million and $108 million, respectively. The remaining liability balance as of December 31, 2016 represents costs for other employee separation programs, most of which are expected to be paid in 2017.

In February 2016, we made the decision to discontinue production of on-highway vocational trucks. Based on the business climate in the truck industry and a thorough evaluation of the business, the company decided it would withdraw from this market. We estimate restructuring costs incurred under the restructuring plan to be $110 million. In 2016, we recognized $104 million of restructuring costs primarily for long-lived asset impairments and sales discounts related to this restructuring plan. The remaining costs are expected to be recognized in 2017.

In the second half of 2016, we took additional restructuring actions in Resource Industries, including ending the production of track drills; pursuing strategic alternatives, including the possible divestiture of room and pillar products; consolidation of two product development divisions; and additional actions in response to ongoing weakness in the mining industry. We estimate restructuring costs incurred under these restructuring plans to be $385 million. For the year ended December 31, 2016, we incurred $369 million of restructuring costs related to these plans which included $164 million of long-lived asset impairments, $120 million of employee separation costs, $81 million of inventory write-downs and $4 million of other costs. The remaining costs are expected to be recognized in 2017.