Pension and Postretirement Benefit Plans

We sponsor various defined benefit, qualified and nonqualified, pension plans covering eligible employees. Other postretirement benefits (OPEB), including medical and life insurance, are provided for certain employees upon retirement.

We also sponsor various defined contribution plans that cover the majority of our employees. Under the terms of the qualified defined contribution retirement plans, employee and employer contributions may be directed into a number of diverse investments. None of these qualified defined contribution plans allow direct investment in our stock.

Components of net periodic benefit costs and other amounts recognized in OCI —



	Pension Benefits
	2014						2013						2012
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Interest cost	$	80		$	11		$	74		$	11		$	85		$	12
Expected return on plan assets	(111		)	(1		)	(117		)	(1		)	(111		)	(1		)
Service cost				6						6						5
Amortization of net actuarial loss	16			3			20			4			14
Settlement loss	36			6
Other	(5		)	(1		)
Net periodic benefit cost (credit)	16			24			(23		)	20			(12		)	16

Recognized in OCI:
Amount due to net actuarial (gains) losses	93			53			(88		)	(1		)	131			51
Prior service cost from plan amendments																6
Reclassification adjustment for net actuarial losses in net periodic benefit cost	(52		)	(9		)	(20		)	(4		)	(14		)
Venezuelan bolivar devaluation				(4		)				(2		)
Other	(2		)	(1		)
Total recognized in OCI	39			39			(108		)	(7		)	117			57
Net recognized in benefit cost and OCI	$	55		$	63		$	(131	)	$	13		$	105		$	73



	OPEB - Non-U.S.
	2014			2013			2012
Interest cost	$	5		$	5		$	5
Service cost	1			1			1
Amortization of net actuarial gain	(1		)
Net periodic benefit cost	$	5		$	6		$	6

Recognized in OCI:
Amount due to net actuarial (gains) losses	10			(12		)	(8		)
Reclassification adjustment for amortization of net actuarial gain	1
Total recognized in OCI	11			(12		)	(8		)
Net recognized in benefit cost and OCI	$	16		$	(6	)	$	(2	)

Our U.S. defined benefit pension plans are frozen and no additional service cost is being accrued. The estimated net actuarial loss for the defined benefit pension plans that will be amortized from AOCI into benefit cost in 2015 is $20 for our U.S. plans and $7 for our non-U.S. plans. We use the corridor approach for purposes of systematically amortizing deferred gains or losses as a component of net periodic benefit cost into the income statement in future reporting periods. The amortization period used is generally the average remaining service period of active participants in the plan unless almost all of the plan’s participants are inactive, in which case we use the average remaining life expectancy of the inactive participants. No portion of the estimated net actuarial gain related to OPEB plans will be amortized from AOCI into benefit cost in 2015.

During the third quarter of 2012, we recorded a $6 charge to OCI for the prior service cost of a plan amendment resulting from a change in the Venezuelan labor code. This prior service cost was being amortized as a component of net periodic pension cost over the average future service period of active participants. The divestiture of our operations in Venezuela will result in the elimination of the related unrecognized pension expense of $11, which includes the unamortized prior service cost.

Funded status — The following tables provide reconciliations of the changes in benefit obligations, plan assets and funded status.



	Pension Benefits
	2014						2013						OPEB - Non-U.S.
	U.S.			Non-U.S.			U.S.			Non-U.S.			2014			2013
Reconciliation of benefit obligation:
Obligation at beginning of period	$	1,805		$	313		$	2,061		$	309		$	112		$	132
Interest cost	80			11			74			11			5			5
Service cost				6						6			1			1
Actuarial (gain) loss	212			54			(200		)	(1		)	10			(12		)
Benefit payments	(124		)	(16		)	(130		)	(15		)	(6		)	(6		)
New plans				16
Settlements	(133		)	(7		)				(2		)
Other	(17		)	(11		)
Translation adjustments				(41		)				5			(12		)	(8		)
Obligation at end of period	$	1,823		$	325		$	1,805		$	313		$	110		$	112

The amounts included on the Other line of the preceding table represent the error correction discussed in Note 1 to these consolidated financial statements and the reclassification of the amount related to our operations in Venezuela to noncurrent liabilities of disposal group held for sale as discussed in Note 2.



	Pension Benefits
	2014						2013						OPEB - Non-U.S.
	U.S.			Non-U.S.			U.S.			Non-U.S.			2014			2013
Reconciliation of fair value of plan assets:
Fair value at beginning of period	$	1,649		$	42		$	1,734		$	42		$	—		$	—
Actual return on plan assets	230			2			5			1
Employer contributions				16			40			17			6			6
Benefit payments	(124		)	(16		)	(130		)	(15		)	(6		)	(6		)
Settlements	(133		)	(7		)				(2		)
New plans				18
Asset reversion				(6		)
Translation adjustments				(5		)				(1		)
Fair value at end of period	$	1,622		$	44		$	1,649		$	42		$	—		$	—

Funded status at end of period	$	(201	)	$	(281	)	$	(156	)	$	(271	)	$	(110	)	$	(112	)

Amounts recognized in the balance sheet —



	Pension Benefits
	2014						2013						OPEB - Non-U.S.
	U.S.			Non-U.S.			U.S.			Non-U.S.			2014			2013
Amounts recognized in the consolidated balance sheet:
Noncurrent assets	$	—		$	3		$	1		$	7		$	—		$	—
Current liabilities				(10		)				(11		)	(5		)	(6		)
Noncurrent liabilities	(201		)	(274		)	(157		)	(267		)	(105		)	(106		)
Net amount recognized	$	(201	)	$	(281	)	$	(156	)	$	(271	)	$	(110	)	$	(112	)

Amounts recognized in AOCI —



	Pension Benefits
	2014					2013					OPEB - Non-U.S.
	U.S.		Non-U.S.			U.S.		Non-U.S.			2014			2013
Amounts recognized in AOCI:
Net actuarial loss (gain)	$	491	$	103		$	452	$	58		$	(9	)	$	(20	)
Prior service cost			3					10
Gross amount recognized	491		106			452		68			(9		)	(20		)
Deferred tax benefits			(25		)			(16		)	3			5
Noncontrolling and equity interests								(1		)
Net amount recognized	$	491	$	81		$	452	$	51		$	(6	)	$	(15	)

We initiated a program in September 2014 under which certain former U.S. employees with vested pension benefits were offered lump sum payments to settle their pension obligations. The same participants were also offered the option to begin receiving monthly benefits soon after the program ended – earlier than previously allowed under the related plans. This voluntary program ended in early November with 71% of the participants in the program accepting accelerated payments. The lump sum payments were made in December. Together with routine settlements occurring in the U.S. throughout 2014, these actions resulted in the distribution of plan assets of $133 to effect settlement of the related obligations. We charged earnings for $36 to write off a pro rata portion of the cumulative actuarial loss related to the settled obligations. Because of differences in valuation methods, the reduction in pension obligations exceeded the assets distributed by $38, which was credited to other comprehensive income as a component of the actuarial loss for 2014.

During the fourth quarter of 2014, a defined benefit pension plan in Canada distributed the remainder of its assets in accordance with the related agreement. We incurred a charge of $6 to write off the remaining unrecognized pension expense related to this plan.

The other elements of the 2014 actuarial loss resulted from changes in assumptions and investment returns. Reducing our discount rate at the end of 2014 caused an increase in the U.S. pension benefit obligation and an actuarial loss of $165. During the fourth quarter of 2014, the Society of Actuaries (SOA) issued new mortality tables (RP-2014) and mortality improvement scales (MP-2014). After studying our recent experience and evaluating the new tables, we adopted the RP-2014 Blue Collar table for hourly participants and the No Collar table for salaried participants in our U.S. plans. With respect to the improvement scales, the SOA had projected improvement from the beginning of 2008 after analyzing historical data through 2007. We compared actual experience for years after 2007 to the improvement projected in MP-2014 and, in concert with our actuarial advisers, considered other relevant data before concluding that a 0.75% long-term improvement rate (LTIR) for periods beginning with 2014 was appropriate and that the LTIR would be attained by 2020, sooner than the period assumed in MP-2014. Adopting the new mortality assumptions in 2014 caused an increase in our pension obligations and an actuarial loss of $83. The actual return on U.S. plan assets provided a partial offset to these losses as it exceeded the assumed return by $119.

Aggregate funding levels — The following table presents information regarding the aggregate funding levels of our defined benefit pension plans at December 31:



	2014				2013
	U.S.		Non-U.S.		U.S.		Non-U.S.
Plans with fair value of plan assets in excess of obligations:
Accumulated benefit obligation	$	—	$	14	$	15	$	14
Projected benefit obligation			14		15		15
Fair value of plan assets			16		16		22
Plans with obligations in excess of fair value of plan assets:
Accumulated benefit obligation	1,823		283		1,790		266
Projected benefit obligation	1,823		311		1,790		298
Fair value of plan assets	1,622		28		1,633		20

At December 31, 2014, benefit obligations of $268 for certain non-U.S. pension plans and $110 for OPEB benefits are in plans that are not required to be funded.

Fair value of pension plan assets —



				Fair Value Measurements at December 31, 2014
				U.S.									Non-U.S.
				Quoted Prices in Active Markets		Significant Other Observable Inputs			Significant Unobserv-able Inputs		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobserv-able Inputs
Asset Category	Total			(Level 1)		(Level 2)			(Level 3)		(Level 1)		(Level 2)		(Level 3)
Equity securities:
U.S. all cap (a)	$	76		$	76	$	—		$	—	$	—	$	—	$	—
U.S. large cap	76			76
U.S. small cap	22			22
EAFE composite	139			139
Emerging markets	78			75							3
Fixed income securities:
U.S. core bonds (b)	132					132
Corporate bonds	500					500
U.S. Treasury strips	263					263
Non-U.S. government securities	25												25
Emerging market debt	69					69
Alternative investments:
Hedge fund of funds (c)	87								87
Insurance contracts (d)	10														10
Real estate	50								50
Other (e)	(3		)			(3		)
Cash and cash equivalents	142					136							6
Total	$	1,666		$	388	$	1,097		$	137	$	3	$	31	$	10



				Fair Value Measurements at December 31, 2013
				U.S.							Non-U.S.
				Quoted Prices in Active Markets		Significant Other Observable Inputs			Significant Unobservable Inputs		Significant Other Observable Inputs		Significant Unobservable Inputs
Asset Category	Total			(Level 1)		(Level 2)			(Level 3)		(Level 2)		(Level 3)
Equity securities:
U.S. all cap (a)	$	90		$	90	$	—		$	—	$	—	$	—
U.S. large cap	72			72
EAFE composite	155			155
Emerging markets	76			76
Fixed income securities:
U.S. core bonds (b)	203					203
Corporate bonds	494					494
U.S. Treasury strips	207					207
Non-U.S. government securities	11										11
Emerging market debt	81					81
Alternative investments:
Hedge fund of funds (c)	83								83
Insurance contracts (d)	11												11
Real estate	48								48
Other (e)	(28		)			(34		)			6
Cash and cash equivalents	188					174					14
Total	$	1,691		$	393	$	1,125		$	131	$	31	$	11

________________________________

Notes:


(a)	This category comprises a combination of small-, mid- and large-cap equity stocks that are allocated at the investment manager's discretion. Investments include common and preferred securities as well as equity funds that invest in these instruments.


(b)	This category represents a combination of investment grade corporate bonds, sovereign bonds, Yankee bonds, asset backed securities and U.S. government bonds. Investments include fixed income funds that invest in these instruments.


(c)	This category includes fund managers that invest in a well-diversified group of hedge funds where strategies include, but are not limited to, event driven, relative value, long/short market neutral, multistrategy and global macro. Investments may be made directly or through pooled funds.


(d)	This category comprises contracts placed with insurance companies where the underlying assets are invested in fixed interest securities.


(e)	Other assets in the U.S. represent interest rate derivatives which had a market value of $(3) at December 31, 2014 and $(34) at December 31, 2013.



	2014								2013
	U.S.					Non-U.S.			U.S.						Non-U.S.
Reconciliation of Level 3 Assets	Hedge fund of funds		Real Estate and Other			Insurance contract			Hedge fund of funds			Real Estate and Other			Insurance contract
Fair value at beginning of period	$	83	$	48		$	11		$	78		$	46		$	9
Unrealized gains (losses) relating to:
Assets sold during the period
Assets still held at the reporting date	4		5						8			4			2
Purchases, sales and settlements			(3		)	(1		)	(3		)	(2		)
Fair value at end of period	$	87	$	50		$	10		$	83		$	48		$	11

Valuation Methods

Equity securities — The fair value of equity securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the value of the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.

Fixed income securities — The fair value of fixed income securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the value of the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.

Hedge funds — The fair value of hedge funds is accounted for by a custodian. The custodian obtains valuations from underlying managers based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices. We review with the custodian the methods used by the underlying managers to value the assets. We believe this is an appropriate methodology to obtain the fair value of these assets.

Insurance contracts — The fair value of insurance contracts is determined by reference to the contract provided by the insurance company. The fair values of the insurance contracts are based on the underlying investments included in the contract.

Real estate — The fair value of investments in real estate is provided by fund managers. The fund managers value the real estate investments via independent third party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter. We believe this is an appropriate methodology to obtain the fair value of these assets. For the component of the real estate portfolio under development, the investments are carried at cost until they are completed and valued by a third party appraiser.

Cash and cash equivalents — The fair value of cash and cash equivalents is set equal to its cost.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Investment policy — Target asset allocations of U.S. pension plans are established through an investment policy, which is updated periodically and reviewed by an Investment Committee, comprised of certain company officers and directors. The investment policy allows for a flexible asset allocation mix which is intended to provide appropriate diversification to lessen market volatility while assuming a reasonable level of economic risk.

Our policy recognizes that properly managing the relationship between pension assets and pension liabilities serves to mitigate the impact of market volatility on our funding levels. The investment policy permits plan assets to be invested in a number of diverse categories, including a Growth Portfolio, an Immunizing Portfolio and a Liquidity Portfolio. These sub-portfolios are intended to balance the generation of incremental returns with the management of overall risk.

The Growth Portfolio is invested in a diversified pool of assets in order to generate an incremental return with an acceptable level of risk. The Immunizing Portfolio is a hedging portfolio that may be comprised of fixed income securities and overlay positions. This portfolio is designed to offset changes in the value of the pension liability due to changes in interest rates. The Liquidity Portfolio is a cash portfolio designed to meet short-term liquidity needs and reduce the plans’ overall risk. As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments.

The allocations among portfolios may be adjusted to meet changing objectives and constraints. We expect that as the funded status of the plans changes, we will increase or decrease the size of the Growth Portfolio in order to manage the risk of losses in the plan. As of December 31, 2014, the Growth Portfolio (U.S. and non-U.S. equities, core and high-yield fixed income, hedge fund of funds, real estate, emerging market debt and cash) comprises 46% of total assets, the Immunizing Portfolio (long duration U.S. Treasury strips, corporate bonds and cash) comprises 53% and the Liquidity Portfolio (cash and short-term securities) comprises 1%. During 2014, the mid-points of the target ranges were 45.5% for the Growth Portfolio, 53.5% for the Immunizing Portfolio and 5% for the Liquidity Portfolio.

Significant assumptions — The significant weighted-average assumptions used in the measurement of pension benefit obligations at December 31 of each year and the net periodic benefit cost for each year are as follows:



	2014				2013				2012
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
Pension benefit obligations:
Discount rate	3.81	%	3.75	%	4.63	%	4.15	%	3.77	%	3.93	%
Net periodic benefit cost:
Discount rate	4.63	%	4.15	%	3.77	%	3.93	%	4.57	%	4.98	%
Rate of compensation increase	N/A		3.77	%	N/A		3.73	%	N/A		3.14	%
Expected return on plan assets	7.00	%	3.41	%	7.00	%	3.35	%	7.00	%	3.74	%

The pension plan discount rate assumptions are evaluated annually in consultation with our outside actuarial advisers. Long-term interest rates on high quality corporate debt instruments are used to determine the discount rate. For our largest plans, discount rates are developed using a discounted bond portfolio analysis, with appropriate consideration given to defined benefit payment terms and duration of the liabilities.

The expected rate of return on plan assets was selected on the basis of our long-term view of return and risk assumptions for major asset classes. We define long-term as forecasts that span at least the next ten years. Our long-term outlook is influenced by a combination of return expectations by individual asset class, actual historical experience and our diversified investment strategy. We consult with and consider the opinions of financial professionals in developing appropriate capital market assumptions. Return projections are also validated using a simulation model that incorporates yield curves, credit spreads and risk premiums to project long-term prospective returns. The appropriateness of the expected rate of return is assessed on an annual basis and revised if necessary. We have a high percentage of total assets in fixed income securities since the benefit accruals are frozen for all of our U.S. pension plans. Based on this assessment, we have selected a 7.00% expected return on asset assumption for 2015 for our U.S. plans, the same rate we used for 2014.

The significant weighted-average assumptions used in the measurement of OPEB obligations at December 31 of each year and the net periodic benefit cost for each year are as follows:



	2014		2013		2012
	Non-U.S.		Non-U.S.		Non-U.S.
OPEB benefit obligations:
Discount rate	3.84	%	4.65	%	3.90	%
Net periodic benefit cost:
Discount rate	4.65	%	3.90	%	4.18	%
Initial health care costs trend rate	5.91	%	6.11	%	6.40	%
Ultimate health care costs trend rate	5.02	%	5.03	%	5.02	%
Year ultimate reached	2018		2018		2018

The discount rate selection process was similar to the process used for the pension plans. Assumed health care cost trend rates have a significant effect on the health care obligation. To determine the trend rates, consideration is given to the plan design, recent experience and health care economics.

A one-percentage-point change in assumed health care cost trend rates would have the following effects for 2014:



	1% Point Increase		1% Point Decrease
Effect on total of service and interest cost components	$	1	$	(1	)
Effect on OPEB obligations	14		(12		)

Estimated future benefit payments and contributions — Expected benefit payments by our pension and OPEB plans for each of the next five years and for the period 2020 through 2024 are as follows:



	Pension Benefits				OPEB
Year	U.S.		Non-U.S.		Non-U.S.
2015	$	132	$	14	$	5
2016	127		15		6
2017	123		16		6
2018	120		16		6
2019	116		16		6
2020 to 2024	555		113		30
Total	$	1,173	$	190	$	59

Pension benefits are funded through deposits with trustees that satisfy, at a minimum, the applicable funding regulations. OPEB benefits are funded as they become due. Projected contributions to be made during 2015 to the defined benefit pension plans are $13 for our non-U.S. plans. Based on the current funded status of our U.S. plans, there are no minimum contributions required for 2015.

Multiemployer pension plans — We participate in the Steelworkers Pension Trust (SPT) multiemployer pension plan which provides pension benefits to substantially all of our U.S. union-represented employees. We also have a small participation in the IAM National Pension Fund. Benefit levels are set by trustees who manage the plans. Contributions are made in accordance with our collective bargaining agreements and rates are generally based on hours worked. The collective bargaining agreement expires May 31, 2017. The trustees of the SPT have provided us with the latest data available for the plan year ended December 31, 2014. As of that date, the plan is not fully funded. We could be held liable to the plan for our obligations as well as those of other employers as a result of our participation in the plan. Contribution rates could increase if the plan is required to adopt a funding improvement plan or a rehabilitation plan, if the performance of plan assets does not meet expectations or as a result of future collectively bargained wage and benefit agreements. If we choose to stop participating in the plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Pension Protection Act (PPA) defines a zone status for each plan. Plans in the green zone are at least 80% funded, plans in the yellow zone are at least 65% funded and plans in the red zone are generally less than 65% funded. The SPT plan has utilized extended amortization provisions to amortize its losses from 2008. The plan recertified its zone status after using the extended amortization provisions as allowed by law. The SPT plan has not implemented a funding improvement or rehabilitation plan, nor are such plans pending. Our contributions to the SPT have not exceeded 5% of the total contributions to the plan. Contributions in 2014 increased by approximately 5% after decreasing in 2013 as a result of plant closings and decreased employment levels.



	Employer Identification Number/ Plan Number	PPA Zone Status		Funding Plan Pending/ Implemented	Contributions by Dana						Surcharge Imposed
Pension Fund	Employer Identification Number/ Plan Number	2014	2013	Funding Plan Pending/ Implemented	2014		2013		2012		Surcharge Imposed
SPT	23-6648508 / 499	Green	Green	No	$	9	$	9	$	10	No