Fair Value Measurements.

U.S. GAAP requires enhanced disclosures about investments and non-recurring non-financial assets and non-financial liabilities that are measured and reported at fair value and has established a hierarchal disclosure framework that prioritizes and ranks the level of market price observability used in measuring investments or non-financial assets and liabilities at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments and non-financial assets and/or liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments included in Level 1 include listed equities and listed derivatives. We do not adjust the quoted price for these investments, even in situations where we hold a large position.

Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. The inputs and assumptions of our Level 2 investments are derived from market observable sources including reported trades, broker/dealer quotes and other pertinent data.

Level 3 - Pricing inputs are unobservable for the investment and non-financial asset and/or liability and include situations where there is little, if any, market activity for the investment or non-financial asset and/or liability. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the investment. Significant transfers, if any, between the levels within the fair value hierarchy are recognized at the beginning of the reporting period when changes in circumstances require such transfers.

Investment

The following table summarizes the valuation of the Investment Funds' investments and derivative contracts by the above fair value hierarchy levels as of September 30, 2014 and December 31, 2013:



	September 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Investments:
Equity securities:
Communications	$	2,940	$	—	$	—	$	2,940	$	820	$	—	$	—	$	820
Consumer, non-cyclical	2,077		—		—		2,077		3,344		178		—		3,522
Consumer, cyclical	385		—		—		385		414		—		—		414
Diversified	24		—		—		24		29		—		—		29
Energy	2,409		—		—		2,409		3,050		—		—		3,050
Financial	435		—		—		435		300		—		—		300
Funds	—		8		—		8		—		6		—		6
Industrial	53		17		—		70		—		—		—		—
Technology	5,267		—		—		5,267		3,173		—		—		3,173
	13,590		25		—		13,615		11,130		184		—		11,314
Corporate debt:
Consumer, cyclical	—		—		75		75		—		—		287		287
Financial	—		10		—		10		—		11		—		11
Sovereign debt	—		—		—		—		—		5		—		5
Utilities	—		34		—		34		—		29		—		29
	—		44		75		119		—		45		287		332
Mortgage-backed securities:
Financial	—		176		—		176		—		180		—		180
	13,590		245		75		13,910		11,130		409		287		11,826
Derivative contracts, at fair value⁽¹⁾	—		183		—		183		—		—		—		—
	$	13,590	$	428	$	75	$	14,093	$	11,130	$	409	$	287	$	11,826
Liabilities
Securities sold, not yet purchased, at fair value:
Equity securities:
Communications	$	9	$	—	$	—	$	9	$	—	$	—	$	—	$	—
Consumer, non-cyclical	—		—		—		—		44		—		—		44
Consumer, cyclical	1,064		—		—		1,064		787		—		—		787
Financial	—		—		—		—		45		—		—		45
Funds⁽²⁾	—		38		—		38		—		8		—		8
	1,073		38		—		1,111		876		8		—		884
Derivative contracts, at fair value⁽³⁾	—		103		—		103		—		639		—		639
	$	1,073	$	141	$	—	$	1,214	$	876	$	647	$	—	$	1,523


⁽¹⁾	Included in other assets in our consolidated balance sheets.


⁽²⁾	Includes $1 million of debt related securities as of September 30, 2014.


⁽³⁾	Included in accrued expenses and other liabilities in our consolidated balance sheets.

The changes in investments measured at fair value for which our Investment segment has used Level 3 input to determine fair value are as follows:



	Nine Months Ended September 30,
	2014			2013
	(in millions)
Balance at January 1	$	287		$	288
Gross realized and unrealized losses	(100		)	4
Gross proceeds	(2		)	(4		)
Distribution-in-kind	(110		)	—
Balance at September 30	$	75		$	288

Unrealized losses of $100 million are included in earnings related to Level 3 investments still held at September 30, 2014 by our Investment segment. Total realized and unrealized gains and losses recorded for Level 3 investments are reported in net (loss) gain from investment activities in our consolidated statements of operations.

The Investment Funds held one Level 3 corporate debt investment at September 30, 2014. In prior periods, in determining the fair value of this investment, we performed a yield analysis of comparable loans to which we applied a risk premium. As a result of the underlying company’s performance in the second quarter of 2014, however, we determined that it was more appropriate to measure the fair value of our debt investment through an enterprise value analysis. This resulted in a lower valuation at the end of the second and third quarter of 2014. In addition, on June 30, 2014, the Investment Funds made a distribution-in-kind of this corporate debt investment in the amount of $110 million to the Holding Company.

Other Segments and Holding Company

The following table summarizes the valuation of our Automotive and Energy segments and our Holding Company investments, derivative contracts and other liabilities by the above fair value hierarchy levels as of September 30, 2014 and December 31, 2013:



	September 30, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets	(in millions)
Marketable equity and debt securities	$	91	$	4	$	75	$	170	$	1	$	—	$	—	$	1
Trading securities	—		—		55		55		—		—		116		116
Derivative contracts, at fair value⁽¹⁾	—		64		—		64		—		1		—		1
	$	91	$	68	$	130	$	289	$	1	$	1	$	116	$	118
Liabilities
Other liabilities	$	—	$	10	$	—	$	10	$	—	$	16	$	—	$	16
Derivative contracts, at fair value⁽²⁾	—		2		—		2		—		35		—		35
	$	—	$	12	$	—	$	12	$	—	$	51	$	—	$	51


⁽¹⁾	Amounts are classified within other assets in our consolidated balance sheets.


⁽²⁾	Amounts are classified within accrued expenses and other liabilities in our consolidated balance sheets.

The changes in marketable equity and debt securities and trading securities measured at fair value for which our Holding Company have used Level 3 inputs to determine fair value are as follows:



	Nine Months Ended September 30,
	2014			2013
	(in millions)
Balance at January 1	$	116		$	81
Distribution-in-kind	110			46
Gross unrealized losses	(96		)	(13		)
Balance at September 30	$	130		$	114

Unrealized losses of $96 million are included in earnings related to Level 3 investments still held at September 30, 2014 by our Holding Company. Total realized and unrealized gains and losses recorded for Level 3 investments, if any, are reported in net (loss) gain from investment activities in our consolidated statements of operations.

As discussed above, on June 30, 2014, the Investment Funds made a distribution-in-kind of a certain Level 3 corporate debt investment in the amount of $110 million to the Holding Company. The fair value of this investment was determined through an enterprise value analysis. In addition, as of September 30, 2014, the Holding Company held a certain security which lacked observable market data due to limited market activity for that security, and accordingly, was valued based on trading EBITDA multiples and enterprise value to resource ratios of market comparables.

Assets measured at fair value on a nonrecurring basis during the nine months ended September 30, 2014 and 2013 are set forth in the table below:



	September 30,
	2014				2013
Category	Fair Value of Level 3 Asset		Recognized Impairment		Fair Value of Level 3 Asset		Recognized Impairment
	(in millions)
Property, plant and equipment, net	$	11	$	6	$	25	$	7

We determined the fair value of property, plant and equipment by applying probability weighted, expected present value techniques to the estimated future cash flows using assumptions a market participant would utilize.