Disposal Groups and Impairment of Long-Lived Assets

9 Months Ended

Sep. 30, 2016

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Discontinued Operations and Impairment of Long-Lived Assets [Text Block]

Disposal Groups and Impairment of Long-Lived Assets

Disposal of operations in Venezuela — In December 2014, we entered into an agreement to divest our Light Vehicle operations in Venezuela (the disposal group) to an unaffiliated company for no consideration. Upon classification of the disposal group as held for sale in December 2014, we recognized an $80 loss to adjust the carrying value of the net assets of our operations in Venezuela to fair value less cost to sell.

Upon completion of the divestiture of the disposal group in January 2015, we recognized a gain of $5 on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary in other income, net. We also credited other comprehensive loss attributable to the parent for $10 and other comprehensive loss attributable to noncontrolling interests for $1 to eliminate the unrecognized pension expense recorded in accumulated other comprehensive loss.

Impairment of long-lived assets — On February 1, 2011, we entered into an agreement with SIFCO S.A. (SIFCO), a leading producer of steer axles and forged components in South America. In return for payment of $150 to SIFCO, we acquired the distribution rights to SIFCO's commercial vehicle steer axle systems as well as an exclusive long-term supply agreement for key driveline components. Our Commercial Vehicle operating segment had sales attributable to SIFCO supplied axles and parts of $98 and $225 in 2015 and 2014.

This agreement was accounted for as a business combination for financial reporting purposes. The aggregate fair value of the net assets acquired were allocated primarily to the exclusivity provisions of the supply agreement as a contract-based intangible asset and recorded within our Commercial Vehicle operating segment. Fair value was also allocated to fixed assets and an embedded lease obligation. The intangible asset was being amortized and the fixed assets were being depreciated on a straight-line basis over ten years. The embedded lease obligation was being amortized using the effective interest method over the ten-year useful lives of the related fixed assets.

On April 22, 2014, SIFCO and affiliated companies filed for judicial reorganization before Bankruptcy Court in São Paulo, Brazil and an ancillary Chapter 15 proceeding before the Bankruptcy Court of the Southern District of New York. The Brazilian bankruptcy case has subsequently been moved to the 5th Lower Civil Court in the Judicial District of Jundiai, the location of SIFCO's principal operations. Until the third quarter of 2015, SIFCO complied with the terms of the supply agreement. In August 2015, SIFCO discontinued production of our orders and failed to comply with provisions of the supply agreement. We obtained a judicial injunction requiring that SIFCO release any finished product in their possession that was produced pursuant to the supply agreement, resume production and parts supply pursuant to the terms of the supply agreement and cease communications with our customers regarding direct sale of parts. SIFCO contested the injunction we obtained, without success, and refused to comply with the injunction. Through a judicial seizure order issued on September 9, 2015, we were successful in obtaining the release of the finished product.

Based on SIFCO's refusal to comply with the terms of the supply agreement and the court injunctions as noted above, we believed that the carrying amount of the contract-based intangible asset was not recoverable and therefore tested the associated asset group for impairment as of September 30, 2015 under ASC 360-10. Based upon management's conclusion that there were no future economic benefit and related cash flows associated with the long-lived assets of this asset group, which is comprised predominantly of the intangible asset, management concluded that the fair value of the asset group was de minimis and accordingly recorded a full impairment charge of $36 in the third quarter of 2015.

On October 27, 2015, we entered into an interim agreement with SIFCO under which they have continued to supply us product while pursuing various mutually satisfactory longer-term alternatives. On October 10, 2016, we submitted a bid to the Brazilian bankruptcy court overseeing SIFCO’s reorganization in the competitive process to sell SIFCO's commercial vehicle steer axle systems business and its related forged components business. The bid and the proposed transaction are governed by a purchase agreement entered into between certain of Dana’s affiliates and SIFCO and certain of its affiliates. The transaction is subject to certain closing conditions, including that Dana is the winning bidder pursuant to the bankruptcy court supervised competitive auction process and certain Brazilian regulatory approvals. If Dana’s bid is approved in the bankruptcy court supervised competitive auction process and the applicable Brazilian regulatory approvals are received, closing is expected to occur in the fourth quarter of 2016. The purchase price for the business being acquired is 275 Brazilian reals, which approximates $85 at current exchange rates.

Our ability to maintain continued uninterrupted product supply to satisfy our customer commitments is somewhat uncertain, dependent on SIFCO's compliance with the terms of the supply agreement until the closing of the transaction. We continue to preserve the ability to pursue the legal rights and remedies available to us to enforce compliance with the original supply agreement.