Lease Commitments

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

LEASE COMMITMENTS

We lease land, dealership facilities, offices, distribution centers, warehouses, and equipment under agreements with contractual periods ranging from less than one year to 40 years. Many of our leases contain one or more options to extend. In certain dealership lease agreements, we are the tenant and we sublease the site to a dealer. In the event the sublease is terminated, we have the option to terminate the head lease. We include options that we are reasonably certain to exercise in our evaluation of the lease term after considering all relevant economic and financial factors.

Leases that are economically similar to the purchase of an asset are classified as finance leases. The leased (“right-of-use”) assets in finance lease arrangements are reported in Net property on our consolidated balance sheet. Otherwise, the leases are classified as operating leases and reported in Other assets in the non-current assets section of our consolidated balance sheet.

For the majority of our leases commencing after January 1, 2019, we do not separate the non-lease components (e.g., maintenance and operating services) from the lease components to which they relate. Instead, non-lease components are included in the measurement of the lease liabilities. However, we do separate lease and non-lease components for contracts containing a significant service component (e.g., energy performance contracts). We calculate the initial lease liability as the present value of fixed payments not yet paid and variable payments that are based on a market rate or an index (e.g., CPI), measured at commencement. The majority of our leases are discounted using our incremental borrowing rate because the rate implicit in the lease is not readily determinable. All other variable payments are expensed as incurred.

Lease right-of-use assets and liabilities at June 30 were as follows (in millions):

	June 30, 2019
Operating leases
Other assets, non-current	$	1,299
Other liabilities and deferred revenue, current	$	327
Other liabilities and deferred revenue, non-current	1,013
Total operating lease liabilities	$	1,340
Finance leases
Property and equipment, gross	$	234
Accumulated depreciation	(39		)
Property and equipment, net	$	195
Automotive debt payable within one year	$	89
Automotive long-term debt	72
Total finance lease liabilities	$	161

Minimum non-cancellable operating lease commitments at December 31, 2018 were as follows (in millions):

	Operating Leases
2019	$	363
2020	271
2021	193
2022	141
2023	106
Thereafter	437
Total	$	1,511

NOTE 16. LEASE COMMITMENTS (Continued)

The amounts contractually due on our lease liabilities as of June 30, 2019 were as follows (in millions):

	Operating Leases		Finance Leases (a)
Within one year	$	367	$	94
After one year and within two years	275		27
After two years and within three years	196		20
After three years and within four years	146		15
After four years and within five years	115		9
After five years	421		6
Total	1,520		171
Less: Present value discount	180		10
Total lease liabilities	$	1,340	$	161

__________

(a) Excludes approximately $400 million in future lease payments for a 20-year finance lease commencing in a future period.

Supplemental cash flow information related to leases for the period ended June 30 was as follows (in millions):

	First Half 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	215
Operating cash flows from finance leases	3
Financing cash flows from finance leases	17
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	142
Finance leases	20

The components of lease expense for the period ended June 30 were as follows (in millions):

	Second Quarter 2019			First Half 2019
Operating lease expense	$	110		$	220
Variable lease expense	12			31
Sublease income	(4		)	(8		)
Finance lease expense
Amortization of right-of-use assets	4			7
Interest on lease liabilities	2			3
Total lease expense	$	124		$	253

The weighted average remaining lease term and weighted average discount rate at June 30 were as follows:

	June 30, 2019
Weighted average remaining lease term (years)
Operating leases	6.8
Finance leases	3.0
Weighted average discount rate
Operating leases	3.5	%
Finance leases	3.5	%