Costs Associated with Rationalization Programs

3 Months Ended

Mar. 31, 2012

Restructuring and Related Activities [Abstract]

COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce high-cost manufacturing capacity and to reduce associate headcount. The net rationalization charges included in Income before Income Taxes are as follows:

	Three Months Ended
	March 31,
(In millions)	2012			2011
New charges	$	16		$	11
Reversals	(1		)	(2		)
	$	15		$	9

The following table shows the roll-forward of our liability between periods:

	Associate-			Other
(In millions)	Related Costs			Costs			Total
Balance at December 31, 2011	$	166		$	18		$	184
2012 Charges	8			8			16
Incurred	(19		)	(9		)	(28		)
Reversed to the statement of operations	—			(1		)	(1		)
Balance at March 31, 2012	$	155		$	16		$	171

During the first quarter of 2012, net rationalization charges of $15 million were recorded. New charges of $16 million were comprised of $7 million for plans initiated in 2012, consisting of associate severance costs, and $9 million for plans initiated in 2011, consisting of $1 million of associate severance costs and $8 million of other exit and non-cancelable lease costs, mainly due to the July 2011 closure of our Union City, Tennessee manufacturing facility. Substantially all of the new charges relate to future cash outflows. The net charges in 2012 also included the reversal of $1 million of charges for actions no longer needed for their originally intended purposes. Approximately 60 associates will be released under 2012 plans.

In the first quarter of 2012, $19 million was incurred for associate severance payments, net of a favorable impact of $3 million of foreign currency translation, and $9 million was incurred for other exit and non-cancelable lease costs.

The accrual balance of $171 million at March 31, 2012 consists of $155 million for associate severance costs that are expected to be substantially utilized within the next 12 months and $16 million primarily for other exit and non-cancelable lease costs. At March 31, 2012, $101 million and $29 million, respectively, of the accrual balance relates to plans associated with the announced discontinuation of consumer tire production at one of our facilities in Amiens, France and the closure of our Union City, Tennessee manufacturing facility.

Accelerated depreciation charges of $2 million were recorded in cost of goods sold (“CGS”) in the first quarter of 2012, and were related primarily to property and equipment in our Dalian, China manufacturing facility.

During the first quarter of 2011, net rationalization charges of $9 million were recorded. New charges of $11 million were comprised of $1 million for plans initiated in 2011, consisting of associate severance costs, and $10 million for plans initiated primarily in 2010, consisting of $1 million for associate severance costs and $9 million for other exit and non-cancelable lease costs. The net charges in 2011 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 500 associates will be released under plans initiated in 2011, of which approximately 200 associates have been released as of March 31, 2012. There are approximately 600 associates to be released under prior year plans, primarily related to the discontinuation of consumer tire production at our Amiens, France manufacturing facility.

In the first quarter of 2011, $2 million was incurred for associate severance payments, net of a favorable impact of $7 million of foreign currency translation, and $10 million was incurred for other exit and non-cancelable lease costs. Additionally, asset write-offs and accelerated depreciation charges of $9 million, primarily related to property and equipment in our Union City, Tennessee manufacturing facility were recorded in CGS.