Note 5. Restructuring of Operations

Our restructuring activities primarily include rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead costs. Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including costs associated with lease continuation obligations and certain operating costs of facilities that we are in the process of closing. We classify the incremental depreciation associated with a planned closure as accelerated depreciation/impairment and also include this cost in restructuring expense.

During the third quarter of 2012, we implemented certain cost reduction programs, including a headcount reduction program at certain of our South American manufacturing operations and the realignment of certain of our North American regional operations. Total restructuring expense in the third quarter of 2012 to recognize these costs as well as costs associated with previously announced initiatives, including $1 of costs associated with discontinued operations, was $7 and included $4 of severance and related benefit costs, $2 of exit costs and $1 of accelerated depreciation/impairment cost.

During the first and second quarters of 2012, we implemented and recognized the costs of specific headcount reduction initiatives, primarily associated with certain of our South American operations. Additionally, as planned, we exited our Commercial Vehicle facility in Kalamazoo, Michigan in June 2012 and recognized the fair value of the associated lease continuation obligation. Total restructuring expense in the first nine months of 2012 to recognize the costs of these actions as well as costs associated with other previously announced initiatives, including $3 of costs associated with discontinued operations, was $33 and included $15 of severance and related benefits costs, $16 of exit costs and $2 of accelerated depreciation/impairment cost.

During the first quarter of 2011, we reached an agreement with the lessor to settle the lease associated with our LVD facility in Yennora, Australia. Under the terms of the agreement, we recognized $20 of lease termination costs. Additionally, we approved the realignment of several manufacturing operations, including the closure of our LVD manufacturing facility in Marion, Indiana. During the second quarter of 2011, we incurred pension settlement costs associated with the previously announced closure of certain of our Canadian operations (see Note 8). Including $2 of costs associated with discontinued operations, restructuring expense of $24 during the third quarter of 2011 was primarily attributable to costs associated with the planned closure of certain U.S. plants and work force reductions in certain corporate and functional areas in North America. Costs associated with these programs and with previously announced initiatives, including $5 of costs associated with discontinued operations, were $65 during the first nine months of 2011, including $23 of severance and related benefit costs, $40 of exit costs and $2 of accelerated depreciation/impairment cost.

Restructuring charges and related payments and adjustments —

	Employee			Accelerated
	Termination			Depreciation/			Exit
	Benefits			Impairment			Costs			Total
Balance at June 30, 2012	$	29		$	-		$	13		$	42
Activity during the period:
Charges to restructuring		4						2			6
Discontinued operations charges					1						1
Non-cash write-off					(1	)					(1	)
Cash payments		(6	)					(2	)		(8	)
Balance at September 30, 2012	$	27		$	-		$	13		$	40

Balance at December 31, 2011	$	30		$	-		$	3		$	33
Activity during the period:
Charges to restructuring		16						15			31
Adjustments of accruals		(1	)								(1	)
Discontinued operations charges					2			1			3
Non-cash write-off					(2	)					(2	)
Cash payments		(18	)					(6	)		(24	)
Balance at September 30, 2012	$	27		$	-		$	13		$	40

At September 30, 2012, the accrued employee termination benefits relate to the reduction of approximately 900 employees to be completed over the next two years. The exit costs relate primarily to lease continuation obligations. We estimate cash expenditures to approximate $14 in the fourth quarter of 2012 and $26 thereafter.

Cost to complete — The following table provides project-to-date and estimated future expenses for completion of our pending restructuring initiatives.

	Expense Recognized						Future
	Prior to				Total		Cost to
	2012		2012		to Date		Complete
LVD	$	23	$	5	$	28	$	11
Power Technologies		12		1		13		4
Commercial Vehicle		22		22		44		10
Off-Highway		8				8		2
Corporate		6		2		8
Discontinued operations		2		3		5		3
Total	$	73	$	33	$	106	$	30

The future cost to complete includes estimated separation costs, primarily those associated with one-time benefit programs, and exit costs, including lease continuation costs, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.