Pension, Other Postretirement Benefits and Savings Plans

12 Months Ended

Dec. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Pension, Other Postretirement Benefits and Savings Plans

Note 17. Pension, Other Postretirement Benefits and Savings Plans

We provide employees with defined benefit pension or defined contribution savings plans. Our hourly U.S. pension plans are frozen and provide benefits based on length of service. The principal salaried U.S. pension plans are frozen and provide benefits based on final five-year average earnings formulas. Salaried employees who made voluntary contributions to these plans receive higher benefits. We also provide certain U.S. employees and employees at certain non-U.S. subsidiaries with health care benefits or life insurance benefits upon retirement. Substantial portions of the health care benefits for U.S. salaried retirees are not insured and are funded from operations.

During 2020, we recognized settlement charges of $28 million, primarily related to certain of our salaried U.S. pension plans, of which $24 million was recognized in Other (Income) Expense and $4 million in Rationalizations, related to the exit of employees under approved rationalization plans.  The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans.  In addition, we recognized a curtailment credit of $6 million in Other (Income) Expense during 2020, related to a freeze of one of our non-U.S. defined benefit pension plans.  

During 2020, we also recognized a curtailment credit of $4 million related to one of our Other Postretirement Benefits plans and a termination benefits charge of $5 million related to our hourly U.S. pension plan in Rationalizations, related to the exit of employees under approved rationalization plans.

During 2019, we recognized settlement charges of $6 million in Other (Income) Expense primarily related to certain of our U.S. pension plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans. During 2019, we also recognized curtailment and special termination benefit charges of $5 million in Rationalizations, primarily related to the acceptance of voluntary buy-outs at our tire manufacturing facility in Gadsden, Alabama.

During 2018, we recognized settlement charges of $13 million in Other (Income) Expense for our frozen U.K. pension plan. These settlement charges related primarily to an offer of lump sum payments over a limited time during 2018 to non-retiree participants of the plan. Lump sum payments of $103 million, primarily related to this offer, were made from existing plan assets in 2018. As a result, total lump sum payments related to this plan exceeded annual interest cost for 2018.

During 2018, we recognized settlement charges of $8 million in Other (Income) Expense related to certain of our U.S. pension plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans.

We have increased the obligation for our U.K. pension plan by $16 million to recognize the estimated impact to our plan from court rulings in 2018 and later, involving a plan with similar features to ours that was sponsored by another company, that required equal guaranteed minimum pension benefits for males and females. The increases were recognized in AOCL as prior service cost from plan amendments. The actual impact to our U.K. pension plan is still subject to the finalization of plan amendments in response to the court rulings and potential future judicial decisions.

During 2018, the Brazil pension regulator approved our plan to replace certain benefits in our Brazil retiree medical plan with an increase in benefits in our Brazil pension plan. The changes were effective in the fourth quarter of 2019 and resulted in an increase to our pension obligation of $16 million and a decrease in our other postretirement benefits obligation of $14 million at December 31, 2018. The increase to the pension obligation and decrease to the other postretirement benefits obligation were recognized in AOCL as prior service cost and prior service credit, respectively.

Total benefits cost and amounts recognized in other comprehensive (income) loss follows:

	Pension Plans
	U.S.									Non-U.S.									Other Postretirement Benefits
(In millions)	2020			2019			2018			2020			2019			2018			2020			2019			2018
Benefits cost (credit):
Service cost	$	4		$	3		$	4		$	30		$	26		$	28		$	2		$	2		$	3
Interest cost		126			173			157			56			69			69			8			11			12
Expected return on plan assets		(193	)		(223	)		(219	)		(54	)		(59	)		(70	)		—			—			—
Amortization of prior service cost (credit)		—			—			—			1			2			—			(9	)		(9	)		(8	)
Amortization of net losses		109			112			112			38			29			29			4			3			4
Net periodic cost	$	46		$	65		$	54		$	71		$	67		$	56		$	5		$	7		$	11
Net curtailments/settlements /termination benefits		31			8			8			(4	)		3			13			(4	)		—			—
Total benefits cost	$	77		$	73		$	62		$	67		$	70		$	69		$	1		$	7		$	11
Recognized in other comprehensive (income) loss before tax and minority:
Prior service cost (credit) from plan amendments	$	—		$	—		$	—		$	3		$	(2	)	$	31		$	—		$	—		$	(16	)
Increase (decrease) in net actuarial losses		108			4			14			(100	)		201			(18	)		5			6			(14	)
Amortization of prior service (cost) credit in net periodic cost		—			—			—			(2	)		(2	)		—			9			9			8
Amortization of net losses in net periodic cost		(109	)		(112	)		(112	)		(38	)		(29	)		(30	)		(4	)		(3	)		(5	)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments, settlements, and divestitures		(26	)		(5	)		(11	)		(9	)		(3	)		(14	)		6			2			—
Total recognized in other comprehensive (income) loss before tax and minority		(27	)		(113	)		(109	)		(146	)		165			(31	)		16			14			(27	)
Total recognized in total benefits cost and other comprehensive (income) loss before tax and minority	$	50		$	(40	)	$	(47	)	$	(79	)	$	235		$	38		$	17		$	21		$	(16	)

Service cost is recorded in CGS or SAG. Other components of net periodic cost are recorded in Other (Income) Expense. Net curtailments, settlements and termination benefits are recorded in Other (Income) Expense or Rationalizations if related to a rationalization plan.

We use the fair value of pension assets in the calculation of pension expense for all plans.

Total benefits cost for our other postretirement benefits was $1 million, $3 million and $4 million for our U.S. plans in 2020, 2019 and 2018, respectively, and $0 million, $4 million and $7 million for our non-U.S. plans in 2020, 2019 and 2018, respectively.

The Medicare Prescription Drug Improvement and Modernization Act provides plan sponsors a federal subsidy for certain qualifying prescription drug benefits covered under the sponsor’s postretirement health care plans. Our other postretirement benefits cost is presented net of this subsidy, which is less than $1 million annually.

The change in benefit obligation and plan assets for 2020 and 2019 and the amounts recognized in our Consolidated Balance Sheets at December 31, 2020 and 2019 are as follows:

	Pension Plans
	U.S.						Non-U.S.						Other Postretirement Benefits
(In millions)	2020			2019			2020			2019			2020			2019
Change in benefit obligation:
Beginning balance	$	(5,009	)	$	(4,734	)	$	(3,195	)	$	(2,774	)	$	(241	)	$	(234	)
Newly adopted plans		—			—			—			(19	)		—			—
Service cost — benefits earned		(4	)		(3	)		(30	)		(26	)		(2	)		(2	)
Interest cost		(126	)		(173	)		(56	)		(69	)		(8	)		(11	)
Plan amendments		—			—			(3	)		2			—			—
Actuarial loss		(520	)		(477	)		(123	)		(381	)		(4	)		(6	)
Participant contributions		—			—			(3	)		(2	)		(8	)		(12	)
Curtailments/settlements/termination benefits		51			12			21			5			—			(2	)
Foreign currency translation		—			—			(133	)		(62	)		4			(5	)
Benefit payments		373			366			140			131			23			31
Ending balance	$	(5,235	)	$	(5,009	)	$	(3,382	)	$	(3,195	)	$	(236	)	$	(241	)
Change in plan assets:
Beginning balance	$	4,780		$	4,445		$	2,740		$	2,464		$	—		$	3
Newly adopted plans		—			—			—			19			—			—
Actual return on plan assets		605			696			305			252			—			—
Company contributions to plan assets		—			—			20			39			—			—
Cash funding of direct participant payments		14			20			22			20			15			16
Participant contributions		—			—			3			2			8			12
Settlements		(56	)		(15	)		(8	)		(5	)		—			—
Foreign currency translation		—			—			99			80			—			—
Benefit payments		(373	)		(366	)		(140	)		(131	)		(23	)		(31	)
Ending balance	$	4,970		$	4,780		$	3,041		$	2,740		$	—		$	—
Funded status at end of year	$	(265	)	$	(229	)	$	(341	)	$	(455	)	$	(236	)	$	(241	)

Significant actuarial losses related to changes in benefit obligations for 2020 and 2019 primarily resulted from decreases in discount rates.

Other postretirement benefits unfunded status was $106 million for our U.S. plans at December 31, 2020 and 2019, and $130 million and $135 million for our non-U.S. plans at December 31, 2020 and 2019, respectively.

The funded status recognized in the Consolidated Balance Sheets consists of:

	Pension Plans												Other Postretirement
	U.S.						Non-U.S.						Benefits
(In millions)	2020			2019			2020			2019			2020			2019
Noncurrent assets	$	—		$	—		$	408		$	237		$	—		$	—
Current liabilities		(11	)		(16	)		(22	)		(20	)		(16	)		(16	)
Noncurrent liabilities		(254	)		(213	)		(727	)		(672	)		(220	)		(225	)
Net amount recognized	$	(265	)	$	(229	)	$	(341	)	$	(455	)	$	(236	)	$	(241	)

The amounts recognized in AOCL, net of tax, consist of:

	Pension Plans												Other Postretirement
	U.S.						Non-U.S.						Benefits
(In millions)	2020			2019			2020			2019			2020			2019
Prior service (credit) cost	$	(3	)	$	(3	)	$	25		$	25		$	(7	)	$	(23	)
Net actuarial loss		2,353			2,380			636			782			30			30
Gross amount recognized		2,350			2,377			661			807			23			7
Deferred income taxes		(43	)		(50	)		(104	)		(135	)		(29	)		(22	)
Minority shareholders’ equity		—			—			(2	)		(1	)		—			—
Net amount recognized	$	2,307		$	2,327		$	555		$	671		$	(6	)	$	(15	)

The following table presents significant weighted average assumptions used to determine benefit obligations at December 31:

	Pension Plans						Other Postretirement Benefits
	2020			2019			2020			2019
Discount rate:
—U.S.		2.42	%		3.22	%		2.34	%		3.14	%
—Non-U.S.		1.49			1.98			4.09			4.39
Rate of compensation increase:
—U.S.	N/A			N/A			N/A			N/A
—Non-U.S.		2.89			2.92		N/A			N/A

The following table presents significant weighted average assumptions used to determine benefits cost for the years ended December 31:

	Pension Plans									Other Postretirement Benefits
	2020			2019			2018			2020			2019			2018
Discount rate for determining interest cost:
—U.S.		2.66	%		3.85	%		3.09	%		2.68	%		3.79	%		2.99	%
—Non-U.S.		2.26			2.84			2.56			5.68			6.25			6.13
Expected long term return on plan assets:
—U.S.		4.22			5.25			4.58		N/A			N/A			N/A
—Non-U.S.		2.52			2.95			3.02		N/A			N/A			N/A
Rate of compensation increase:
—U.S.	N/A			N/A			N/A			N/A			N/A			N/A
—Non-U.S.		2.92			2.91			2.91		N/A			N/A			N/A

For 2020, a weighted average discount rate of 2.66% was used to determine interest cost for the U.S. pension plans. This rate was derived from spot rates along a yield curve developed from a portfolio of corporate bonds from issuers rated AA or higher by established rating agencies as of December 31, 2019, applied to our expected benefit payment cash flows. For our non-U.S. locations, a weighted average discount rate of 2.26% was used. This rate was developed based on the nature of the liabilities and local environments, using available bond indices, yield curves, projected cash flows, and long term inflation.

For 2020, an assumed weighted average long term rate of return of 4.22% was used for the U.S. pension plans. In developing the long term rate of return, we evaluated input from our pension fund consultant on asset class return expectations, including determining the appropriate rate of return for our plans, which are primarily invested in fixed income securities. For our non-U.S. locations, an assumed weighted average long term rate of return of 2.52% was used. Input from local pension fund consultants concerning asset class return expectations and long term inflation form the basis of this assumption.

The U.S. pension plan mortality assumption is based on our actual historical experience and expected future mortality improvements based on published actuarial tables. For our non-U.S. locations, mortality assumptions are based on published actuarial tables which include projections of future mortality improvements.

The following table presents estimated future benefit payments from the plans as of December 31, 2020. Benefit payments for other postretirement benefits are presented net of retiree contributions and Medicare Part D Subsidy Receipts:

	Pension Plans				Other Postretirement
(In millions)	U.S.		Non-U.S.		Benefits
2021	$	417	$	136	$	16
2022		390		129		16
2023		366		130		15
2024		352		137		15
2025		339		138		14
2026-2030		1,578		743		68

The following table presents selected information on our pension plans:

	U.S.				Non-U.S.
(In millions)	2020		2019		2020		2019
All plans:
Accumulated benefit obligation	$	5,220	$	4,994	$	3,284	$	3,097
Plans not fully-funded:
Projected benefit obligation	$	5,235	$	5,009	$	933	$	1,059
Accumulated benefit obligation		5,220		4,994		856		991
Fair value of plan assets		4,970		4,780		185		370

Certain non-U.S. subsidiaries maintain unfunded pension plans consistent with local practices and requirements. At December 31, 2020, these plans accounted for $264 million of our accumulated pension benefit obligation, $299 million of our projected pension benefit obligation, and $90 million of our AOCL adjustment. At December 31, 2019, these plans accounted for $247 million of our accumulated pension benefit obligation, $277 million of our projected pension benefit obligation, and $82 million of our AOCL adjustment.

We expect to contribute $25 million to $50 million to our funded non-U.S. pension plans in 2021.

Assumed health care cost trend rates at December 31 follow:

	2020			2019
Health care cost trend rate assumed for the next year		6.0	%		6.3	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.0			5.0
Year that the rate reaches the ultimate trend rate		2025			2025

Our pension plan weighted average investment allocation at December 31, by asset category, follows:

	U.S.						Non-U.S.
	2020			2019			2020			2019
Cash and short term securities		3	%		2	%		2	%		1	%
Equity securities		4			6			4			3
Debt securities		93			92			93			96
Alternatives		—			—			1			—
Total		100	%		100	%		100	%		100	%

Our pension investment policy recognizes the long term nature of pension liabilities, and is primarily designed to offset the future impact of discount rate movements on the funded status for our plans. All assets are managed externally according to target asset allocation guidelines we have established. Manager guidelines prohibit the use of any type of investment derivative without our prior approval. Portfolio risk is controlled by having managers comply with guidelines, establishing the maximum size of any single holding in their portfolios, and using managers with different investment styles. We periodically undertake asset and liability modeling studies to determine the appropriateness of the investments.

The portfolio of our U.S. pension plan assets includes holdings of global high quality and high yield fixed income securities, short term interest bearing deposits, and private equities. The target asset allocation of our U.S. pension plans is 94% in duration-matched fixed income securities and 6% in private equity and private credit securities. Actual U.S. pension fund asset allocations are reviewed on a periodic basis and the pension funds are rebalanced to target ranges on an as needed basis.

The portfolios of our non-U.S. pension plans include holdings of U.S. and non-U.S. equities, global high quality and high yield fixed income securities, insurance contracts, repurchase agreements, and short term interest bearing deposits. The weighted average target asset allocation of the non-U.S. pension funds is approximately 95% fixed income and 5% equities.

The fair values of our pension plan assets at December 31, 2020 by asset category are as follows:

	U.S.									Non-U.S
(In millions)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)
Cash and Short Term Securities	$	122		$	122	$	—	$	—	$	46		$	42	$	4		$	—
Equity Securities
Common and Preferred Stock		—			—		—		—		24			24		—			—
Commingled Funds		—			—		—		—		19			19		—			—
Mutual Funds		—			—		—		—		6			6		—			—
Debt Securities
Corporate Bonds		2,843			—		2,842		1		230			24		206			—
Government Bonds		1,038			—		1,038		—		2,503			42		2,461			—
Repurchase Agreements		—			—		—		—		(650	)		—		(650	)		—
Asset Backed Securities		280			—		280		—		76			8		68			—
Commingled Funds		—			—		—		—		20			20		—			—
Mutual Funds		—			—		—		—		19			9		10			—
Alternatives
Insurance Contracts		2			—		—		2		28			—		—			28
Other Investments		7			—		7		—		6			—		5			1
Total Investments in the Fair Value Hierarchy		4,292		$	122	$	4,167	$	3		2,327		$	194	$	2,104		$	29
Investments Measured at Net Asset Value, as Practical Expedient:
Equity Securities
Commingled Funds		23									62
Mutual Funds		—									4
Partnership Interests		166									—
Debt Securities
Mutual Funds		148									81
Commingled Funds		295									665
Partnership Interests		102									—
Short Term Securities
Commingled Funds		22									3
Alternatives
Commingled Funds		—									6
Total Investments		5,048									3,148
Other		(78	)								(107	)
Total Plan Assets	$	4,970								$	3,041

The fair values of our pension plan assets at December 31, 2019 by asset category are as follows:

	U.S.									Non-U.S.
(In millions)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)
Cash and Short Term Securities	$	47		$	47	$	—	$	—	$	33		$	29	$	4		$	—
Equity Securities
Common and Preferred Stock		—			—		—		—		24			24		—			—
Commingled Funds		—			—		—		—		36			36		—			—
Mutual Funds		—			—		—		—		5			5		—			—
Debt Securities
Corporate Bonds		2,577			—		2,576		1		190			10		180			—
Government Bonds		1,120			—		1,120		—		2,271			60		2,211			—
Repurchase Agreements		—			—		—		—		(511	)		—		(511	)		—
Asset Backed Securities		283			—		282		1		74			5		69			—
Mutual Funds		—			—		—		—		19			9		10			—
Alternatives
Insurance Contracts		2			—		—		2		22			—		—			22
Other Investments		2			—		2		—		(4	)		—		(5	)		1
Total Investments in the Fair Value Hierarchy		4,031		$	47	$	3,980	$	4		2,159		$	178	$	1,958		$	23
Investments Measured at Net Asset Value, as Practical Expedient:
Equity Securities
Commingled Funds		9									69
Mutual Funds		—									11
Partnership Interests		267									—
Debt Securities
Mutual Funds		141									7
Commingled Funds		310									604
Short Term Securities
Commingled Funds		67									4
Alternatives
Commingled Funds		—									6
Total Investments		4,825									2,860
Other		(45	)								(120	)
Total Plan Assets	$	4,780								$	2,740

At December 31, 2020 and 2019, the Plans did not directly hold any of our common stock.

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Investments that are measured at Net Asset Value ("NAV") as a practical expedient to estimate fair value are not classified in the fair value hierarchy. Under the practical expedient approach, the NAV is based on the fair value of the underlying investments held by each fund less its liabilities. This practical expedient would not be used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total plan assets. Valuation methodologies used for assets and liabilities measured at fair value are as follows:

• Cash and Short Term Securities:  Cash and cash equivalents consist of U.S. and foreign currencies. Foreign currencies are reported in U.S. dollars based on currency exchange rates readily available in active markets. Short term securities held in commingled funds are valued at the NAV of units held at year end, as determined by the investment manager.

• Equity Securities:  Common and preferred stock, which are held in non-U.S. companies, are valued at the closing price reported on the active market on which the individual securities are traded. Commingled funds are valued at the NAV of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the NAV of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available. Partnership interests in private equity securities are priced based on valuations using the partnership’s latest available financial statements and the plan's percent ownership, adjusted for any cash transactions which occurred between the date of those financial statements and our year end.

• Debt Securities:  Corporate and government bonds, including asset backed securities, are valued at the closing price reported on the active market on which the individual securities are traded, or based on institutional bid evaluations using proprietary models if an active market is not available. Repurchase agreements are valued at the contract price plus accrued interest. These secured borrowings are collateralized by government bonds held by the non-U.S. plans and have maturities less than one year. Commingled funds are valued at the NAV of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the NAV of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available. Partnership interests in private credit securities are priced based on valuations using the partnership’s latest available financial statements and the plan's percent ownership, adjusted for any cash transactions which occurred between the date of those financial statements and our year end.

• Alternatives:  Commingled funds are valued based on the NAV as determined by the fund manager using the most recent financial information available. Other investments primarily include derivative financial instruments, which are valued using independent pricing sources which utilize industry standard derivative valuation models. Directed insurance contracts are valued as reported by the issuer, based on discounted cash flows using weighted average discount rates of 1.7% and 2.3% at December 31, 2020 and 2019, respectively.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table sets forth a summary of changes in fair value of the non-U.S. pension plan insurance contracts classified as Level 3:

(In millions)	2020		2019
Balance, beginning of year	$	22	$	19
Unrealized gains relating to instruments still held at the reporting date		3		1
Purchases, sales, issuances and settlements (net)		1		2
Foreign currency translation		2		—
Balance, end of year	$	28	$	22

Savings Plans

Substantially all employees in the U.S. and employees of certain non-U.S. locations are eligible to participate in a defined contribution savings plan. Expenses recognized for contributions to these plans were $100 million, $110 million and $111 million for 2020, 2019 and 2018, respectively.