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 the three and nine months ended September 30, 2017 and 2016 were as follows:




(Millions of dollars)	Three Months Ended September 30
	2017		2016
Employee separations ¹	$	8	$	99
Contract terminations ¹	6		9
Long-lived asset impairments ¹	31		158
Other ²	45		58
Total restructuring costs	$	90	$	324


	Nine Months Ended September 30
	2017		2016
Employee separations ¹	$	514	$	175
Contract terminations ¹	32		55
Long-lived asset impairments ¹	306		254
Defined benefit plan curtailments and termination benefits ¹	29		—
Other²	130		140
Total restructuring costs	$	1,011	$	624

¹ Recognized in Other operating (income) expenses.
² Represents costs related to our restructuring programs, primarily for accelerated depreciation, inventory write-downs, equipment relocation and
project management costs and also LIFO inventory decrement benefits from inventory liquidations at closed facilities (all of which are
primarily included in Cost of goods sold).

In March 2017, Caterpillar informed Belgian authorities of the decision to proceed to a collective dismissal, which will lead to the closure of the Gosselies site, impacting about 2,000 employees. Production of Caterpillar products at the Gosselies site ended during the second quarter of 2017. The other operations and functions at the Gosselies site are expected to be gradually phased out by the end of the second quarter of 2018. We estimate restructuring costs incurred under this program to be about $700 million. For the first nine months of 2017, we recognized $649 million of restructuring costs which included $443 million of employee separation costs, $201 million for long-lived asset impairments and $67 million of other costs partially offset by a $62 million LIFO inventory decrement benefit. The majority of the remaining costs are expected to be recognized in 2017. The remaining restructuring costs for the first nine months of 2017 were primarily related to restructuring actions in Resource Industries.

The restructuring costs for the first nine months of 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, as discussed below, and other restructuring actions across the company.

Restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes. See Note 15 for more information.

The following table summarizes the 2016 and 2017 employee separation activity:




(Millions of dollars)
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
Increase in liability (separation charges)	514
Reduction in liability (payments)	(339		)
Liability balance at September 30, 2017	$	322

Most of the liability balance at September 30, 2017 is expected to be paid in 2017 and 2018 and primarily includes employee separation payments related to closure of the Gosselies facility.

Restructuring costs for the year ended December 31, 2016 were $1,019 million. Throughout 2016, we initiated the following restructuring plans:

•

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 recognized $104 million of restructuring costs, primarily related to long-lived asset impairments and sales discounts, which is substantially all the costs expected under this program.

•

In the second half of 2016, we took additional restructuring actions in Resource Industries, including ending the production of track drills; pursuing strategic alternatives related to room and pillar products; consolidation of two product development divisions; and additional actions in response to ongoing weakness in the mining industry. For the year ended December 31, 2016, we incurred $369 million of restructuring costs for these plans primarily related to long-lived asset impairments, employee separation costs and inventory write-downs.

In September 2015, we announced a large scale restructuring plan (the Plan) including a voluntary retirement enhancement program for qualifying U.S. employees, several voluntary separation programs outside of the U.S., additional involuntary programs throughout the company and manufacturing facility consolidations and closures expected to occur through 2018. The largest action among those included in the Plan was related to our European manufacturing footprint, which led to the Gosselies facility closure as discussed above. In the first nine months of 2017, we incurred $772 million of restructuring costs related to the Plan, and we incurred $281 million and $569 million in 2016 and 2015, respectively, for a total of $1,622 million through September 30, 2017. We expect to recognize approximately $70 million of additional restructuring costs related to the Plan in 2017.