Note 10. 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
	2011						2010						2009
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Interest cost	$	92		$	13		$	100		$	17		$	109		$	19
Expected return on plan assets		(104	)		(2	)		(99	)		(5	)		(116	)		(9	)
Service cost					5						5						6
Amortization of net actuarial loss		20						19
Curtailment (gain) loss														1			(1	)
Settlement loss					5						2						1
Termination cost														2
Net periodic benefit cost (credit)		8			21			20			19			(4	)		16

Recognized in OCI:
Amount due to net actuarial (gains) losses		66			(1	)		29			3			285			27
Prior service cost from
plan amendments																	(1	)
Amortization of net actuarial
losses in net periodic cost		(20	)		(5	)		(19	)		(2	)
Total recognized in OCI		46			(6	)		10			1			285			26
Net recognized in benefit cost and OCI	$	54		$	15		$	30		$	20		$	281		$	42

	OPEB - Non-U.S
	2011		2010			2009
Interest cost	$	7	$	7		$	6
Service cost							1
Curtailment gain							(2	)
Net periodic benefit cost		7		7			5

Recognized in OCI:
Amount due to net actuarial (gains) losses		7		(1	)		9
Total recognized in OCI		7		(1	)		9
Net recognized in benefit cost and OCI	$	14	$	6		$	14

Our U.S. 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 2012 is $14 for our U.S. plans and a nominal amount for our non-U.S. plans. The year-over-year decrease in amortization of net actuarial losses is primarily due to a change in amortization methods in accordance with our policy from the average remaining service period of active participants to the average remaining life expectancy of inactive participants for one of our U.S. plans as a result of almost all of the plan’s participants being inactive. There is no net actuarial gain or loss related to OPEB plans that will be amortized from AOCI into benefit cost in 2012 for our non-U.S. plans.

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

	Pension Benefits
	2011						2010						OPEB - Non-U.S.
	U.S.			Non-U.S.			U.S.			Non-U.S.			2011			2010
Reconciliation of benefit obligation:
Obligation at beginning	$	1,866		$	325		$	1,831		$	351		$	132		$	124
of period
Interest cost		92			13			100			17			7			7
Service cost					5						5
Actuarial (gain) loss		114			(2	)		94			7			7			(1	)
Benefit payments		(141	)		(17	)		(159	)		(17	)		(6	)		(6	)
Settlements, curtailments
and terminations					(77	)					(33	)
Translation adjustments					(4	)					(5	)		(3	)		8
Obligation at end of period	$	1,931		$	243		$	1,866		$	325		$	137		$	132

	Pension Benefits
	2011						2010						OPEB - Non-U.S.
	U.S.			Non-U.S.			U.S.			Non-U.S.			2011			2010
Reconciliation of fair value of plan assets:
Fair value at beginning of period	$	1,456		$	120		$	1,401		$	136		$	—		$	—
Actual return on plan assets		152			1			164			9
Employer contributions		30			14			50			18			6			6
Benefit payments		(141	)		(17	)		(159	)		(17	)		(6	)		(6	)
Settlements					(77	)					(33	)
Translation adjustments					2						7
Fair value at end of period	$	1,497		$	43		$	1,456		$	120		$	—		$	—

Funded status at end of period	$	(434	)	$	(200	)	$	(410	)	$	(205	)	$	(137	)	$	(132	)

Amounts recognized in the balance sheet —

	Pension Benefits
	2011						2010						OPEB - Non-U.S.
	U.S.			Non-U.S.			U.S.			Non-U.S.			2011			2010
Amounts recognized in the consolidated balance sheet:
Noncurrent assets	$	—		$	8		$	—		$	10		$	—		$	—
Current liabilities					(10	)					(10	)		(7	)		(7	)
Noncurrent liabilities		(434	)		(198	)		(410	)		(205	)		(130	)		(125	)
Net amount recognized	$	(434	)	$	(200	)	$	(410	)	$	(205	)	$	(137	)	$	(132	)

	Pension Benefits
	2011					2010					OPEB - Non-U.S.
	U.S.		Non-U.S.			U.S.		Non-U.S.			2011		2010
Amounts recognized in AOCI:
Net actuarial loss (gain)	$	443	$	12		$	397	$	18		$	—	$	(7	)
Prior service cost				6					6
Gross amount recognized		443		18			397		24					(7	)
Deferred tax benefits				(2	)				(3	)
Minority and equity interests				(1	)				(1	)
Net amount recognized	$	443	$	15		$	397	$	20		$	—	$	(7	)

During 2011, we made $30 in minimum required contributions to our U.S. pension plans. In January 2012, we made a voluntary contribution to the U.S. pension plans of $150. The $50 contributed to our U.S. pension plans in 2010 was also voluntary.

As a result of the closure of several facilities in Canada, we are required to settle the related pension benefit obligations. During the first half of 2011, we settled portions of our Canadian pension benefit obligations by making lump-sum payments or by purchasing non-participating annuity contracts to cover vested benefits. As a result of these actions, we reduced the benefit obligations by $77 and also reduced the fair value of plan assets by $77. The related settlement loss of $5 representing the recognition of a portion of the actuarial loss deferred in AOCI was included in restructuring charges. During principally the fourth quarter of 2010, similar settlement actions resulted in concurrent reductions in benefit obligations and fair value of plan assets by $32 and a related settlement loss of $2 which was included in restructuring charges. Settlement actions completed during the first quarter of 2009 reduced obligations and plan assets by $43 and we recorded the related settlement loss of $1 in cost of sales.

In 2009, we recorded a net charge of less than $1 in pension curtailment costs and $2 in postretirement health care curtailment gains related to our workforce reduction actions. These costs were included in restructuring charges. We also announced the anticipated sale of substantially all of the assets of our Structural Products business, which resulted in a termination of pension service. The associated cost of $2 was recorded in other income, net along with other costs associated with the sale.

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

	2011				2010
	U.S		Non-U.S		U.S		Non-U.S
Plans with fair value of plan assets in excess of obligations:
Accumulated benefit obligation	$	16	$	16	$	15	$	90
Projected benefit obligation		16		16		15		91
Fair value of plan assets		16		24		15		101
Plans with obligations in excess of fair value of plan assets:
Accumulated benefit obligation		1,915		209		1,851		215
Projected benefit obligation		1,915		227		1,851		234
Fair value of plan assets		1,481		19		1,441		19

At December 31, 2011, benefit obligations of $189 for certain non-U.S. pension plans and $137 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, 2011
			U.S.						Non-U.S.
			Quoted		Significant				Significant
			Prices in		Other		Significant		Other		Significant
			Active		Observable		Unobservable		Observable		Unobservable
			Markets		Inputs		Inputs		Inputs		Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)		(Level 2)		(Level 3)
Equity securities:
U.S. all cap (a)	$	56	$	56	$	—	$	—	$	—	$	—
U.S. large cap		114		114
U.S. small cap		35		35
EAFE composite		127		127
Emerging markets		52		52
Fixed income securities:
U.S. core bonds (b)		163				163
Corporate bonds		501				501
U.S. Treasury strips		265				265
Non-U.S. government
securities		24								24
Emerging market debt		44				44
Alternative Investments:
Hedge fund of funds (c)		73						73
Insurance contracts (d)		10										10
Real estate		42						42
Other		6						1		5
Cash and cash equivalents		28				24				4
Total	$	1,540	$	384	$	997	$	116	$	33	$	10

			Fair Value Measurements at December 31, 2010
			U.S.						Non-U.S.
			Quoted		Significant				Significant
			Prices in		Other		Significant		Other		Significant
			Active		Observable		Unobservable		Observable		Unobservable
			Markets		Inputs		Inputs		Inputs		Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)		(Level 2)		(Level 3)
Equity securities:
U.S. all cap (a)	$	66	$	66	$	—	$	—	$	—	$	—
U.S. large cap		115		115
U.S. small cap		35		35
EAFE composite		160		160
Emerging markets		65		65
Fixed income securities:
U.S. core bonds (b)		112				112
Corporate bonds		467				463				4
U.S. Treasury strips		219				219
Non-U.S. government
securities		91								91
Emerging market debt		41				41
Alternative Investments:
Hedge fund of funds (c)		78						78
Insurance contracts (d)		10										10
Real estate		19						19
Other		5						1		4
Cash and cash equivalents		93				82				11
Total	$	1,576	$	441	$	917	$	98	$	110	$	10

Notes:

(a)	This category comprises a combination of small-, mid- and large-cap equity stocks that are allocated at the investment manager’s discretion.
(b)	This category represents a combination of investment grade corporate bonds, sovereign bonds, Yankee bonds, asset backed securities and U.S. government bonds.
(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.
(d)	This category comprises contracts placed with insurance companies where the underlying assets are invested in fixed interest securities.

	2011							2010
	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	$	78		$	20	$	10	$	109		$	2	$	9
Unrealized gains (losses) relating to
Assets sold during the period									(36	)
Assets still held at the reporting date		(5	)		4				5					1
Purchases					19							18
Fair value at end of period	$	73		$	43	$	10	$	78		$	20	$	10

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 three 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.

The allocations among portfolios may be adjusted to meet changing objectives and constraints. We expect that as the funded status of the plan 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, 2011, the Growth Portfolio (U.S. and non-U.S. equities, core and high-yield fixed income, as well as hedge fund of funds, real estate and emerging market debt) comprises 47% of total assets, the Immunizing Portfolio (long duration U.S. Treasury strips and corporate bonds) comprises 52% and the Liquidity Portfolio (cash and short-term securities) comprises 1%. The Growth Portfolio is currently limited to not less than 40.5% nor more than 55.5% of total assets, the Immunizing Portfolio is currently limited to not less than 44.5% nor more than 59.5% and the Liquidity Portfolio is currently limited to no more than 11.5%.

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:

	2011						2010						2009
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
Pension benefit obligations:
Discount rate		4.57	%		4.98	%		5.23	%		4.87	%		5.79	%		5.36	%
Net periodic benefit cost:
Discount rate		5.23	%		4.87	%		5.79	%		5.36	%		6.44	%		5.80	%
Rate of compensation increase		N/A			3.21	%		N/A			3.19	%		N/A			3.21	%
Expected return on plan assets		7.50	%		4.09	%		7.50	%		4.12	%		7.50	%		6.03	%

The pension plan discount rate assumptions are evaluated annually in consultation with our outside actuarial advisors. 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 reduced the expected return on assets for 2012 to 7.00% for our U.S. plans.

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:

	2011			2010			2009
	Non-U.S.			Non-U.S.			Non-U.S.
OPEB benefit obligations:
Discount rate		4.18	%		5.11	%		5.79	%
Net periodic benefit cost:
Discount rate		5.11	%		5.79	%		6.33	%
Initial health care costs trend rate		6.70	%		7.00	%		7.98	%
Ultimate health care costs trend rate		5.02	%		5.02	%		5.03	%
Year ultimate reached		2018			2015			2015

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 2011:

	1% Point		1% Point
	Increase		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 2017 through 2021 are as follows:

	Pension Benefits				OPEB
Year	U.S.		Non-U.S.		Non-U.S.
2012	$	140	$	13	$	7
2013		135		13		7
2014		132		13		7
2015		130		13		8
2016		126		14		8
2017 to 2021		597		82		39
Total	$	1,260	$	148	$	76

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 2012 to the defined benefit pension plans are $13 for our non-U.S. plans and $212 for our U.S. plans, inclusive of a voluntary contribution of $150 in January 2012.

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 SPT agreement expires May 31, 2014. The trustees of the SPT have provided us with the latest data available for the plan year ending December 31, 2011. As of that date, the plan is not fully funded. We could be held liable to the plan for our, as well as other employers’ obligations due to 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 do 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 more than 5% of the total contributions to the plan. The sale of substantially all of our Structural Products business to Metalsa in March 2010 impacted our contributions in 2010. The increased levels of overtime impacted our contributions in 2011.

Employer
Identification

PPA

Funding Plan

Pension

Number /

Zone Status

Pending /

Contributions by Dana

Surcharge

Fund

Plan Number

2011

2010

Implemented

2011

2010

2009

Imposed

SPT

23-6648508 / 499

Green