LEASES AND COMMITMENTS

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

LEASES AND COMMITMENTS

LEASES AND COMMITMENTS

The Company’s lease agreements primarily consist of real estate property, such as manufacturing facilities, warehouses, and office buildings, in addition to personal property, such as vehicles, manufacturing and information technology equipment. The Company determines whether a contract is or contains a lease at contract inception. The majority of the Company's lease arrangements are comprised of fixed payments and a limited number of these arrangements include a variable payment component based on certain index fluctuations. As of December 31, 2020, a significant portion of the Company’s leases are classified as operating leases.

Generally, the Company’s operating leases have renewal options that extend the lease terms and some include options to terminate the agreement or purchase the leased asset. The amortizable life of these assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of being exercised at lease inception.

All leases with an initial term of 12 months or less without an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the Consolidated Balance Sheet and lease expense is recognized on a straight-line basis over the lease term.

The following table presents the lease assets and lease liabilities as of December 31, 2020 and 2019:

		December 31,
(in millions)		2020		2019
Assets	Balance Sheet Location
Operating leases	Other non-current assets	$	211	$	85
Finance leases	Property, plant and equipment, net	12		1
Total lease assets		$	223	$	86
Liabilities
Current
Operating leases	Other current liabilities	$	47	$	18
Finance leases	Notes payable and other short-term debt	2		—
Non-current
Operating leases	Other non-current liabilities	172		67
Finance leases	Long-term debt	12		—
Total lease liabilities		$	233	$	85

The following table presents lease obligations arising from obtaining leased assets for the years ended December 31, 2020 and 2019. Approximately $159 million of these lease obligations for the year ended December 31, 2020 related to leases assumed in the acquisition of Delphi Technologies on October 1, 2020.

	December 31,
(in millions)	2020		2019
Operating leases	$	152	$	4
Finance leases	14		—
Total lease obligations	$	166	$	4

The following table presents the maturity of lease liabilities as of December 31, 2020:

(in millions)	Operating leases		Finance leases
2021	$	51	$	2
2022	42		2
2023	27		2
2024	23		2
2025	22		2
After 2025	73		6
Total (undiscounted) lease payments	$	238	$	16
Less: Imputed interest	19		2
Present value of lease liabilities	$	219	$	14

In the years ended December 31, 2020 and 2019, the Company recorded operating lease costs of $29 million and $24 million, respectively, primarily in Cost of sales in the Consolidated Statement of Operations. The operating cash flows for operating leases were $29 million and $24 million for the years ended December 31, 2020 and 2019, respectively.

In the years ended December 31, 2020 and 2019, the Company recorded short-term lease costs of $21 million and $18 million, respectively, primarily in Cost of sales in the Consolidated Statement of Operations.

Under the previous lease accounting standard, total rent expense was $42 million in the year ended December 31, 2018.

Finance lease costs and related cash flows were immaterial for the periods presented.

ASC Topic 842 requires that the rate implicit in the lease be used if readily determinable. Generally, implicit rates are not readily determinable in the Company’s agreements, and the incremental borrowing rate is used for each lease arrangement. The incremental borrowing rates are determined using rates specific to the term of the lease, economic environments where lease activity is concentrated, value of lease portfolio, and assuming full collateralization of the loans. The following table presents the terms and discount rates:

	December 31,
	2020		2019
Weighted-average remaining lease term (years)
Operating leases	8		8
Finance leases	8		1
Weighted-average discount rate
Operating leases	2.0	%	2.8	%
Finance leases	3.1	%	0.8	%

LEASES AND COMMITMENTS

LEASES AND COMMITMENTS

The Company’s lease agreements primarily consist of real estate property, such as manufacturing facilities, warehouses, and office buildings, in addition to personal property, such as vehicles, manufacturing and information technology equipment. The Company determines whether a contract is or contains a lease at contract inception. The majority of the Company's lease arrangements are comprised of fixed payments and a limited number of these arrangements include a variable payment component based on certain index fluctuations. As of December 31, 2020, a significant portion of the Company’s leases are classified as operating leases.

Generally, the Company’s operating leases have renewal options that extend the lease terms and some include options to terminate the agreement or purchase the leased asset. The amortizable life of these assets is the lesser of its useful life or the lease term, including renewal periods reasonably assured of being exercised at lease inception.

All leases with an initial term of 12 months or less without an option to extend or purchase the underlying asset that the Company is reasonably certain to exercise (“short-term leases”) are not recorded on the Consolidated Balance Sheet and lease expense is recognized on a straight-line basis over the lease term.

The following table presents the lease assets and lease liabilities as of December 31, 2020 and 2019:

		December 31,
(in millions)		2020		2019
Assets	Balance Sheet Location
Operating leases	Other non-current assets	$	211	$	85
Finance leases	Property, plant and equipment, net	12		1
Total lease assets		$	223	$	86
Liabilities
Current
Operating leases	Other current liabilities	$	47	$	18
Finance leases	Notes payable and other short-term debt	2		—
Non-current
Operating leases	Other non-current liabilities	172		67
Finance leases	Long-term debt	12		—
Total lease liabilities		$	233	$	85

The following table presents lease obligations arising from obtaining leased assets for the years ended December 31, 2020 and 2019. Approximately $159 million of these lease obligations for the year ended December 31, 2020 related to leases assumed in the acquisition of Delphi Technologies on October 1, 2020.

	December 31,
(in millions)	2020		2019
Operating leases	$	152	$	4
Finance leases	14		—
Total lease obligations	$	166	$	4

The following table presents the maturity of lease liabilities as of December 31, 2020:

(in millions)	Operating leases		Finance leases
2021	$	51	$	2
2022	42		2
2023	27		2
2024	23		2
2025	22		2
After 2025	73		6
Total (undiscounted) lease payments	$	238	$	16
Less: Imputed interest	19		2
Present value of lease liabilities	$	219	$	14

In the years ended December 31, 2020 and 2019, the Company recorded operating lease costs of $29 million and $24 million, respectively, primarily in Cost of sales in the Consolidated Statement of Operations. The operating cash flows for operating leases were $29 million and $24 million for the years ended December 31, 2020 and 2019, respectively.

In the years ended December 31, 2020 and 2019, the Company recorded short-term lease costs of $21 million and $18 million, respectively, primarily in Cost of sales in the Consolidated Statement of Operations.

Under the previous lease accounting standard, total rent expense was $42 million in the year ended December 31, 2018.

Finance lease costs and related cash flows were immaterial for the periods presented.

ASC Topic 842 requires that the rate implicit in the lease be used if readily determinable. Generally, implicit rates are not readily determinable in the Company’s agreements, and the incremental borrowing rate is used for each lease arrangement. The incremental borrowing rates are determined using rates specific to the term of the lease, economic environments where lease activity is concentrated, value of lease portfolio, and assuming full collateralization of the loans. The following table presents the terms and discount rates:

	December 31,
	2020		2019
Weighted-average remaining lease term (years)
Operating leases	8		8
Finance leases	8		1
Weighted-average discount rate
Operating leases	2.0	%	2.8	%
Finance leases	3.1	%	0.8	%