Fair Value of Financial Investments and Liabilities

6 Months Ended

Jun. 30, 2011

Fair Value of Financial Investments and Liabilities [Abstract]

Fair Value of Financial Investments and Liabilities

D. The Company has maintained investments in available-for-sale securities and a number of private equity funds, principally as part of its tax planning strategies, as any gains enhance the utilization of any current and future tax capital losses. Financial investments included in other assets were as follows, in millions:

	June 30,		December 31,
	2011		2010
Auction rate securities	$	22	$	22
TriMas Corporation common stock		—		40
Total recurring investments		22		62
Private equity funds		101		106
Other investments		9		13
Total non-recurring investments		110		119
Total	$	132	$	181

The Company’s investments in available-for-sale securities at June 30, 2011 and December 31, 2010 were as follows, in millions:

			Pre-tax
			Unrealized		Unrealized		Recorded
	Cost Basis		Gains		Losses		Basis
June 30, 2011	$	19	$	3	$	—	$	22
December 31, 2010	$	22	$	40	$	—	$	62

Recurring Fair Value Measurements. Financial assets and (liabilities) measured at fair value on a recurring basis at each reporting period and the amounts for each level within the fair value hierarchy were as follows, in millions:

			Fair Value Measurements Using
			Quoted		Significant		Significant
			Market		Other		Observable
	June 30,		Prices		Inputs		Inputs
Unobservable	2011		(Level 1)		(Level 2)		(Level 3)
Auction rate securities	$	22	$	—	$	—	$	22
Total	$	22	$	—	$	—	$	22

			Fair Value Measurements Using
			Quoted		Significant		Significant
			Market		Other		Observable
	Dec. 31,		Prices		Inputs		Inputs
Unobservable	2010		(Level 1)		(Level 2)		(Level 3)
Auction rate securities	$	22	$	—	$	—	$	22
TriMas Corporation		40		40		—		—
Total	$	62	$	40	$	—	$	22

The fair value of the auction rate securities held by the Company have been estimated, on a recurring basis, using a discounted cash flow model (Level 3 input). The significant inputs in the discounted cash flow model used to value the auction rate securities include: expected maturity of auction rate securities, discount rate used to determine the present value of expected cash flows and the assumptions for credit defaults, since the auction rate securities are backed by credit default swap agreements.

The following tables summarize the changes in Level 3 financial assets measured at fair value on a recurring basis for the six months ended June 30, 2011 and the year ended December 31, 2010, in millions:

	Auction Rate
	Securities
Fair value January 1, 2011	$	22
Total losses included in earnings		—
Unrealized (losses)		—
Purchases		—
Settlements		—
Transfer from Level 3 to Level 2		—
Fair value at June 30, 2011	$	22

During 2010, the Company converted all of its holdings in Asahi Tec preferred stock into common stock, which was sold in its entirety in 2010 in open market transactions.

	Asahi Tec			Auction Rate
	Preferred Stock			Securities		Total
Fair value January 1, 2010	$	71		$	22	$	93
Total losses included in earnings		(28	)		—		(28	)
Unrealized losses		(23	)		—		(23	)
Purchases, issuances, settlements		—			—		—
Transfers from Level 3 to Level 2		(20	)		—		(20	)
Fair value at December 31, 2010	$	—		$	22	$	22

Non-Recurring Fair Value Measurements. For the six months ended June 30, 2011 and 2010, the Company did not measure any financial investments on a non-recurring basis, as there was no other-than-temporary decline in the estimated value of private equity funds. Financial investments measured at fair value on a non-recurring basis during 2010 and the amounts for each level within the fair value hierarchy were as follows, in millions:

			Fair Value Measurements Using
					Significant
			Quoted		Other		Significant
			Market		Observable		Unobservable		Total
	Dec. 31,		Prices		Inputs		Inputs		Gains
	2010		(Level 1)		(Level 2)		(Level 3)		(Losses)
Private equity funds	$	2	$	—	$	—	$	2	$	(4	)
Other private investments		—		—		—		—		(2	)
	$	2	$	—	$	—	$	2	$	(6	)

The Company did not have any transfers between Level 1 and Level 2 financial assets in the first six months of 2011 or in the full-year 2010.

Income and impairment charges for financial investments were as follows, in millions:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011		2010			2011		2010
Realized gains from:
TriMas Corporation common stock	$	27	$	—		$	41	$	—
Private equity funds		6		1			9		1
Total realized gains	$	33	$	1		$	50	$	1
Impairment charges:
Asahi Tec Preferred Stock	$	—	$	(28	)	$	—	$	(28	)
Private equity funds		—		(3	)		—		(3	)
Other private investments		—		(2	)		—		(2	)
Total impairment charges	$	—	$	(33	)	$	—	$	(33	)

The fair value of the Company’s short-term and long-term fixed-rate debt instruments is based principally upon quoted market prices for the same or similar issues or the current rates available to the Company for debt with similar terms and remaining maturities. The aggregate estimated market value of short-term and long-term debt at June 30, 2011 was approximately $4.1 billion, compared with the aggregate carrying value of $4.1 billion. The aggregate estimated market value of short-term and long-term debt at December 31, 2010 was approximately $4.2 billion, compared with the aggregate carrying value of $4.1 billion.