UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
☑Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended:
December 31,OR
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period From to
Commission File Number: 1-1063
Dana Incorporated
(Exact name of registrant as specified in its charter)
Delaware | 26-1531856 | |
(State of incorporation) | (IRS Employer Identification Number) | |
3939 Technology Drive, Maumee, OH | 43537 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (419) 887-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of |
Common | DAN | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None.Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405)232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☑ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the common stock held by non-affiliates of the registrant computed by reference to the closing price of the common stock on June 30, 20172020 was $3,218,263,263.
There were 145,056,206144,670,587 shares of the registrant's common stock outstanding at January 31, 2018.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Shareholders to be held on April 26, 201821, 2021 are incorporated by reference into Part III.
Pages | ||||
PART I | ||||
Item 1 | ||||
Item 1A | ||||
Item 1B | ||||
Item 2 | ||||
Item 3 | ||||
PART II | ||||
Item 5 | ||||
Item 6 | ||||
Item 7 | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||
Item 7A | ||||
Item 8 | ||||
Item 9 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | |||
Item 9A | ||||
Item 9B | ||||
PART III | ||||
Item 10 | ||||
Item 11 | ||||
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |||
Item 13 | Certain Relationships and Related Transactions, and Director Independence | |||
Item 14 | ||||
PART IV | ||||
Item 15 | ||||
Forward-Looking Information
Statements in this report (or otherwise made by us or on our behalf) that are not entirely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can often be identified by words such as “anticipates,” “expects,” “believes,” “intends,” “plans,” “predicts,” “seeks,” “estimates,” “projects,” “outlook,” “may,"” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing” and similar expressions, variations or negatives of these words. These statements represent the present expectations of Dana Incorporated and its consolidated subsidiaries (Dana) based on our current information and assumptions. Forward-looking statements are inherently subject to risks and uncertainties. Our plans, actions and actual results could differ materially from our present expectations due to a number of factors, including those discussed below and elsewhere in this report and in our other filings with the Securities and Exchange Commission (SEC). All forward-looking statements speak only as of the date made and we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances that may arise after the date of this report.
PART I
(Dollars in millions, except per share amounts)
General
Dana Incorporated (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. We are a global providerworld leader in providing power-conveyance and energy-management solutions for vehicles and machinery. The company's portfolio improves the efficiency, performance, and sustainability of high technology drivelight vehicles, commercial vehicles, and motion products,off-highway equipment. From axles, driveshafts, and transmissions to electrodynamic, thermal, sealing and digital solutions, thermal-management technologiesthe company enables the propulsion of conventional, hybrid, and fluid-power products and our customer base includes virtuallyelectric-powered vehicles by supplying nearly every major vehicle and engine manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets.world. We also serve the stationary industrial market. As of December 31, 20172020 we employed approximately 30,10038,200 people, operated in 33 countries and had 139141 major facilities around the world.
The terms “Dana,” “we,” “our” and “us” are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise.
Overview of our Business
We have aligned our organization around four operating segments: Light Vehicle Driveline TechnologiesDrive Systems (Light Vehicle), Commercial Vehicle Driveline TechnologiesDrive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion TechnologiesSystems (Off-Highway) and Power Technologies. These operating segments have global responsibility and accountability for business commercial activities and financial performance.
External sales by operating segment for the years ended December 31, 2017, 20162020, 2019 and 20152018 are as follows:
2017 | 2016 | 2015 | |||||||||||||||||||
Dollars | % of Total | Dollars | % of Total | Dollars | % of Total | ||||||||||||||||
Light Vehicle | $ | 3,172 | 44.0 | % | $ | 2,607 | 44.8 | % | $ | 2,482 | 40.9 | % | |||||||||
Commercial Vehicle | 1,412 | 19.6 | % | 1,254 | 21.5 | % | 1,533 | 25.3 | % | ||||||||||||
Off-Highway | 1,521 | 21.1 | % | 909 | 15.6 | % | 1,040 | 17.2 | % | ||||||||||||
Power Technologies | 1,104 | 15.3 | % | 1,056 | 18.1 | % | 1,005 | 16.6 | % | ||||||||||||
Total | $ | 7,209 | $ | 5,826 | $ | 6,060 |
2020 | 2019 | 2018 | ||||||||||||||||||||||
Dollars | % of Total | Dollars | % of Total | Dollars | % of Total | |||||||||||||||||||
Light Vehicle | $ | 3,038 | 42.8 | % | $ | 3,609 | 41.9 | % | $ | 3,575 | 43.9 | % | ||||||||||||
Commercial Vehicle | 1,181 | 16.6 | % | 1,611 | 18.7 | % | 1,612 | 19.8 | % | |||||||||||||||
Off-Highway | 1,970 | 27.7 | % | 2,360 | 27.4 | % | 1,844 | 22.6 | % | |||||||||||||||
Power Technologies | 917 | 12.9 | % | 1,040 | 12.0 | % | 1,112 | 13.7 | % | |||||||||||||||
Total | $ | 7,106 | $ | 8,620 | $ | 8,143 |
Refer to Segment Results of Operations in Item 7 and Note 2021 to our consolidated financial statements in Item 8 for further financial information about our operating segments.
Our business is diversified across end-markets, products and customers. The following table summarizes the markets, products and largest customers of each of our operating segments as of December 31, 2017.
Segment | Markets | Products | Largest |
Light Vehicle | Light vehicle market: | Axles | Ford Motor Company |
Light trucks (full frame) | Driveshafts | Fiat Chrysler Automobiles* | |
Sport utility vehicles | Transmissions | Toyota Motor Company | |
Crossover utility vehicles | e-Axles | Renault-Nissan-Mitsubishi | |
Vans | Electrodynamic and | Alliance | |
Passenger cars | drivetrain components | General Motors Company | |
Tata Motors / Jaguar Land | |||
Rover | |||
Commercial Vehicle | Medium/heavy vehicle market: | Axles | PACCAR Inc |
Medium duty trucks | Driveshafts | Traton Group | |
Heavy duty trucks | e-Axles | AB Volvo | |
Buses | e-Transmissions | Navistar International Corp. | |
Specialty vehicles | Electrodynamic and | Daimler AG | |
drivetrain components | Ford Motor Company | ||
| |||
Software as a service | |||
Off-Highway | Off-Highway market: | Axles | Deere & Company |
Construction | Driveshafts | CNH Industrial N.V. | |
Earth moving | Transmissions | AGCO Corporation | |
Agricultural | Planetary hub drives | Oshkosh Corporation | |
Mining | e-Axles | Manitou Group | |
Forestry | e-Drives | Sany Group | |
Material handling | Electrodynamic, hydraulic | ||
Industrial stationary | and drivetrain components | ||
Power Technologies | Light vehicle market | Gaskets | Ford Motor Company |
Medium/heavy vehicle market | Cover modules | General Motors Company | |
Off-Highway market | Heat shields | Volkswagen AG | |
Engine sealing systems | (including Traton Group) | ||
Cooling | Cummins Inc. | ||
Heat transfer products | Fiat Chrysler Automobiles | ||
Caterpillar Inc. | |||
* Via a directed supply relationship with Hyundai Mobis.
Geographic Operations
We maintain administrative and operational organizations in North America, Europe, South America and Asia Pacific to support our operating segments, assist with the management of affiliate relations and facilitate financial and statutory reporting and tax compliance on a worldwide basis. Our operations are located in the following countries:
North America | Europe | South America | Asia Pacific | |
Canada | Belgium | Netherlands | Argentina | Australia |
Mexico | Denmark | Norway | Brazil | China |
United States | Finland | Russia | Colombia | India |
France | South Africa | Ecuador | Japan | |
Germany | Spain | New Zealand | ||
Hungary | Sweden | Singapore | ||
Ireland | Switzerland | South Korea | ||
Italy | Turkey | Thailand | ||
Lithuania | ||||
United Kingdom | ||||
Our non-U.S. subsidiaries and affiliates manufacture and sell products similar to those we produce in the United States. Operations outside the U.S. may be subject to a greater risk of changing political, economic and social environments, changing governmental laws and regulations, currency revaluations and market fluctuations than our domestic operations. See the discussion of risk factors in Item 1A.
Sales reported by our non-U.S. subsidiaries comprised $4,000$3,702, or 52%, of our 20172020 consolidated sales of $7,209.$7,106. A summary of sales and long-lived assets by geographic region can be found in Note 2021 to our consolidated financial statements in Item 8.
Customer Dependence
We are largely dependent on light vehicle, medium- and heavy-duty vehicle and off-highway original equipment manufacturer (OEM) customers. Ford Motor Company (Ford) wasand Fiat Chrysler Automobiles (FCA) were the only individual customercustomers accounting for 10% or more of our consolidated sales in 2017.2020. As a percentage of total sales from operations, our sales to Ford were approximately 22%20% in 2017, 22%2020, 20% in 20162019 and 20% in 20152018, and our sales to Fiat Chrysler AutomobilesFCA (via a directed supply relationship with Hyundai Mobis)relationship), our second largest customer, were approximately 8%12% in 2017, 9%2020, 11% in 20162019 and 9%11% in 2015.2018. PACCAR Inc, Renault-Nissan AllianceDeere & Company and General Motors CompanyVolkswagen AG (including Traton Group) were our third, fourth and fifth largest customers in 2017.2020. Our 10 largest customers collectively accounted for approximately 58%54% of our sales in 2017.
Loss of all or a substantial portion of our sales to Ford, FCA or other large volume customers would have a significant adverse effect on our financial results until such lost sales volume could be replaced and there is no assurance that any such lost volume would be replaced.
Sources and Availability of Raw Materials
We use a variety of raw materials in the production of our products, including steel and products containing steel, stainless steel, forgings, castings, bearings, and bearings.batteries and related rare earth materials. Other commodity purchases include aluminum, brass, copper and plastics. These materials are typically available from multiple qualified sources in quantities sufficient for our needs. However, some of our operations remain dependent on single sources for certain raw materials.
While our suppliers have generally been able to support our needs, our operations may experience shortages and delays in the supply of raw material from time to time due to strong demand, capacity limitations, short lead times, production schedule increases from our customers and other problems experienced by the suppliers. A significant or prolonged shortage of critical components from any of our suppliers could adversely impact our ability to meet our production schedules and to deliver our products to our customers in a timely manner.
Seasonality
Our businesses are generally not seasonal. However, in the light vehicle market, our sales are closely related to the production schedules of our OEM customers and those schedules have historically been weakest in the third quarter of the year due to a large number of model year change-overs that occur during this period. Additionally, third-quarter production
A substantial amount of the new business we are awarded by OEMs is granted well in advance of a program launch. These awards typically extend through the life of the given program. This backlog of new business does not represent firm orders. We estimate future sales from new business using the projected volume under these programs.
Competition
Within each of our markets, we compete with a variety of independent suppliers and distributors, as well as with the in-house operations of certain OEMs. With a renewed focus on product innovation, we differentiate ourselves through efficiency and performance, reliability, materials and processes, sustainability and product extension.
The following table summarizes our principal competitors by operating segment as of December 31, 2017.
Segment | Principal Competitors | |
Light Vehicle | American Axle & Manufacturing Holdings, Inc. | Schaeffler Group |
BorgWarner Inc. | Wanxiang Group Corporation | |
Hofer Powertrain GmbH | ZF Friedrichshafen AG | |
IFA ROTARION Holding GmbH | Vertically integration OEM operations | |
Commercial Vehicle | Allison Transmission | Meritor, Inc. |
American Axle & Manufacturing Holdings, Inc. | Tirsan Kardan | |
Borg Warner Inc. | ZF Friedrichshafen AG | |
Klein Products Inc. | ||
Vertically integrated OEM operations | ||
Off-Highway | Bonfiglioli | Danfoss |
Bosch Rexroth AG | Kessler & Co. | |
Carraro Group | ||
ZF Friedrichshafen AG | ||
Comer Industries | ||
Vertically integrated OEM operations | ||
Power Technologies | Denso Corporation | MAHLE GmbH |
ElringKlinger AG | Tenneco Inc. | |
Freudenberg NOK Group | Valeo Group | |
Hanon Systems | ||
YinLun Co., LTD | ||
Intellectual Property
Our proprietary driveline and power technologies product lines have strong identities in the markets we serve. Throughout these product lines, we manufacture and sell our products under a number of patents that have been obtained over a period of years and expire at various times. We consider each of these patents to be of value and aggressively protect our rights throughout the world against infringement. We are involved with many product lines and the loss or expiration of any particular patent would not materially affect our sales and profits.
We own or have licensed numerous trademarks that are registered in many countries, enabling us to market our products worldwide. For example, our Spicer®, Victor Reinz® , Long® and Long®TM4® trademarks are widely recognized in their market segments.
Engineering and Research and Development
Since our introduction of the automotive universal joint in 1904, we have been focused on technological innovation. Our objective is to be an essential partner to our customers and we remain highly focused on offering superior product quality, technologically advanced products, world-class service and competitive prices. To enhance quality and reduce costs, we use statistical process control, cellular manufacturing, flexible regional production and assembly, global sourcing and extensive employee training.
We engage in ongoing engineering and research and development activities to improve the reliability, performance and cost-effectiveness of our existing products and to design and develop innovative products that meet customer requirements for new applications. We are integrating related operations to create a more innovative environment, speed product development, maximize efficiency and improve communication and information sharing among our research and development operations. At December 31, 2017,2020, we had eightseven stand-alone technical and engineering centers and eightnineteen additional sites at which we conduct research and development activities. Our research and development costs were $102$146 in 2017, $812020, $112 in 20162019 and $75$103 in 2015.2018. Total engineering expenses including research and development were $220$246 in 2017, $1962020, $271 in 20162019 and $183$252 in 2015.
Our research and development activities continueis targeted to create unique value for our customers. Our technologies are enabling the electrification of vehicles and accessories to improve customer value. For allefficiency and reduce the impact of our markets, this meanscarbon emissions. Our advanced drivelines with higher torque capacity, reduced weightare more efficient than ever before and improved efficiency. End-use customers benefit by having vehicles with better fuel economy and reduced cost of ownership. We are also developing a number ofinclude mechatronic systems to enhance performance. The power technologies products for vehiculargroup is developing new ways to keep batteries and other applications that will assistpower electronics at optimum temperatures to improve their efficiency and operation. We have developed innovative fuel cell batteryproducts to help keep vehicles running in near continuous operation.
Human Capital
Our talented people power a customer-centric organization that is continuously improving the performance and hybrid vehicle manufacturers in making their technologies commercially viable in mass production.
Segment | Employees | Region | Employees | ||||||
Light Vehicle | 13,800 | North America | 14,800 | ||||||
Commercial Vehicle | 6,200 | Europe | 10,000 | ||||||
Off-Highway | 11,100 | South America | 3,800 | ||||||
Power Technologies | 5,400 | Asia Pacific | 9,600 | ||||||
Technical and administrative | 1,700 | Total | 38,200 | ||||||
Total | 38,200 |
Safety – The health and safety of employees remain our highest priority and we believe our company has an essential responsibility to safeguard life, health, property, and the environment for the well-being of all involved. Through effective feedback and positive recognition, we actively promote and pursue safety in all that we do. This is achieved through a consistent commitment to excellence in, health, safety, security management, and risk elimination. Dana’s health, safety and security programs ensure that all employees receive training, guidance, and assistance in safety awareness and risk prevention. An implemented, verified, audited, and communicated occupational health and safety management system reflects Dana’s internal and external commitment to all our stakeholders in identifying and reducing the health and safety risk of our employees around the world. Dana has developed robust safety systems, including detailed work instructions and processes for standard and non-standard work, as well as regular layer process audits to ensure that we carefully consider safety in each of our work functions.
COVID-19 Response – The company’s response to the global COVID-19 pandemic was comprehensive, swift, and decisive with an emphasis on health and safety. Our top priorities were to protect our employees, communities, customers, and our future. For our employees, we implemented protocols throughout our global footprint to ensure their health and safety including, but not limited to: temporarily closing a significant number of our facilities; restricting access to all facilities; increasing cleaning and disinfecting protocols of those facilities that continued to operate; use of personal protection equipment; adhering to social distancing guidelines; instituting remote work; and restricting travel. In our communities, we provided support to initiatives across the globe, including light manufacturing and assembly for personal protection equipment and ventilator-related components. As our customers focused on managing through the challenges of the pandemic, we carefully managed our supply chain and inventory, while preparing our facilities for a safe restart.
Inclusion and Diversity – Our vision is to maintain an inclusive and diverse, global organization that develops, fosters, and attracts great people whose perspectives are heard, valued, and supported. We embrace our team members, suppliers, and customers. Their unique backgrounds, experiences, thoughts, views, and talents shape the ever-changing world. We are continuously building upon our diverse strengths to further grow a strong, inclusive work environment. Dana remains focused on embracing inclusion and diversity while enhancing the cultural competence of the global workforce. To achieve this, we have emphasized three core areas: retention and employee development, resources for employees, and recruiting of new team members.
Retention and Employee Development– Dana believes the development of its people is critical to the company’s success. The company empowers individuals to lead their development by articulating their professional, personal, and career growth aspirations to their manager. Development of all Dana people is strongly encouraged and should be considered each year as a part of their goals. Dana as an organization has the responsibility to set the tone, culture, and organizational expectations. The company also provides regular training opportunities for our associates across the globe to ensure they have the skills and information to keep pace with technological change. This development is supported and measured with robust performance management and development plans that encourages employees to continuously improve upon their past performance and build on critical skills the company requires to remain competitive. The company has a mentorship program for diverse employees to help guide and coach employees to positions of leadership and ensure the company is developing a diverse talent pool.
Resources – Dana has established an expanding network of Business Resource Groups (BRGs) to enhance Dana’s ability to develop, retain, and attract employees of varied backgrounds. By embracing inclusion and diversity, we create an environment that inspires the best from everyone and maximizes the value of our most important asset – Dana people. These BRGs are executive leadership-supported, employee-led initiatives with the mission to inspire growth and innovation and foster diversity for all employees. Our BRGs currently include:
● | Dana Women’s Network (DAWN) – The company’s DAWN group is focused on providing professional networking and career development for women at Dana. They also promote activities that engage Dana’s senior leaders to better understand how the company can support women at work. |
● | African American Resource Group (AARG) – Dana’s AARG group is committed to supporting the career development of African American talent through thought-leadership workshops and community events. The group provides insight to Dana into the best practices for sourcing and retaining top talent. |
● | LGBT+A – The LGBT+A group focuses on maintaining an inclusive working environment that enables the company to leverage a diverse leadership pipeline. It has assisted in providing educational resources and community activities to engage the Dana team on best ways to support our LGBT+A colleagues. |
● | Live Green – Dana’s Live Green resource group helps to advance Dana’s mission to be sustainably responsible in our business practices. The group helps to inform and drive grassroots employee initiatives on reducing our impact on the environment. |
● | New to Dana (NTD) – The NTD group is open to all new Dana employees to help acclimate them to the Dana business culture and understand the company’s rich history. It provides resources, support, and professional development opportunities to new employees as they transition into their job responsibilities at Dana. |
● | Dana Alumni – With more than a century of rich history, Dana leverages its vast network of Alumni, including retires and former long-time employees to help them remain informed about the company’s latest initiatives and to gather ideas on how to best continue to engage our workforce. |
● | Military and Veterans – The military and veterans group supports active-duty and veteran military personnel by understanding their unique needs and finding the best ways to support them. This group’s understanding of the needs of those who have served also allows the company to consider the best way to engage candidates and recruit them to Dana. |
Recruiting – As a company, we are always collaborating with internationally recognized organizations to reach out to diverse talent and implement best practices for recruiting individuals who work within our core business functions.
Health and Wellness – Dana understands the importance of advocating for the health and well-being of our employees. Health initiatives can have a long-lasting, sustainable impact on employee well-being, but healthy habits do not develop overnight. The company is continuously evaluating new opportunities for programs that help address factors that influence health-related behaviors, which can have a long-lasting impact on an employee’s well-being. Dana understands the needs of individuals are unique and continues to offer initiatives spanning the spectrum of health and wellness to help provide a supportive work environment where employees strive for balance in their lives.
We encourage you to review the “Empowering People” section of our annual Sustainability and Social Responsibility Report (located on our website) for more detailed information regarding our Human Capital programs and initiatives. Nothing on our website, including our annual Sustainability and Social Responsibility Report or sections thereof, shall be deemed incorporated by reference into this Annual Report.
Environmental Compliance
We make capital expenditures in the normal course of business as necessary to ensure that our facilities are in compliance with applicable environmental laws and regulations. The cost of environmental compliance has not been a material part of capital expenditures and did not have a material adverse effect on our earnings or competitive position in 2017.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended (Exchange Act) are available, free of charge, on or through our Internet website at http://www.dana.com/investors as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. Copies of any materials we file with the SEC can also be
We are impacted by events and conditions that affect the light vehicle, medium/heavy vehicle and off-highway markets that we serve, as well as by factors specific to Dana. Among the risks that could materially adversely affect our business, financial condition or results of operations are the following, many of which are interrelated.
Risk Factors Related to the Markets We Serve
A downturn in the United States and elsewhereglobal economy could have a substantial adverse effect on our business.
Our business is tied to general economic and industry conditions as demand for vehicles depends largely on the strength of the economy, employment levels, consumer confidence levels, the availability and cost of credit and the cost of fuel. These factors have had and could continue to have a substantial impact on our business.
Certain political developments occurring the past twoseveral years have provided increased economic uncertainty. The United Kingdom'sKingdom’s (UK) 2016 decision in 2016 to exit the European Union (EU) has not had significant economic ramifications on our operations to date; however, transition details continue to developdate. The UK and couldthe EU have potential economic implicationsannounced the UK-EU Trade and Cooperation Agreement (TCA) which covers the future UK – EU relationship. The TCA is being provisionally applied beginning January 1, 2021 pending approval in the United Kingdom and elsewhere. EffectsCouncil of the 2016 presidential electionEU and European Parliament. The longer term economic, legal, political, and social implications of the TCA are unclear at this stage. Political climate changes in the U.S., including recent tax reform legislation, easing of regulatory requirements and potential trade policy actions, are likely to impact economic conditions in the U.S. and various countries, the cost of importing into the U.S. and the competitive landscape of our customers, suppliers and competitors.
Adverse global economic conditions could also cause our customers and suppliers to experience severe economic constraints in the future, including bankruptcy, which could have a material adverse impact on our financial position and results of operations.
Our results of operations could be adversely affected by climate change, natural catastrophes or public health crises, in the locations in which we, our customers or our suppliers operate.
A natural disaster could disrupt our operations, or our customers’ or suppliers’ operations and could adversely affect our results of operations and financial condition. Although we have continuity plans designed to mitigate the impact of natural disasters on our operations, those plans may be insufficient, and any catastrophe may disrupt our ability to manufacture and deliver products to our customers, resulting in an adverse impact on our business and results of operations. Also, climate change poses both regulatory and physical risks that could harm our results of operations or affect the way we conduct our businesses. For example, new or modified regulations could require us to spend substantial funds to enhance our environmental compliance efforts. In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer.
The novel coronavirus disease (COVID-19) pandemic has had an adverse effect on our business, results of operations, cash flows and financial condition. The COVID-19 pandemic has negatively impacted the global economy, disrupted our operations as well as those of our customers, suppliers and the global supply chains in which we participate, and created significant volatility and disruption of financial markets. The extent of the impact of the COVID-19 pandemic on our business and financial performance, including our ability to execute our near-term and long-term operational, strategic and capital structure initiatives, will depend on future developments, including the duration and severity of the pandemic, which are uncertain and cannot be predicted.
As a result of the COVID-19 pandemic, and in response to government mandates or recommendations, rapid dissipation of customer demand, as well as decisions we have made to protect the health and safety of our employees and communities, we temporarily closed a significant number of our facilities globally during 2020. We may face facility closure requirements and other operational restrictions with respect to some or all of our locations for prolonged periods of time due to, among other factors, evolving and increasingly stringent governmental restrictions including public health directives, quarantine policies or social distancing measures. We operate as part of the complex integrated global supply chains of our largest customers. As the COVID-19 pandemic dissipates at varying times and rates in different regions around the world, there could be a prolonged negative impact on these global supply chains. Our ability to continue operations at specific facilities will be impacted by the interdependencies of the various participants of these global supply chains, which are largely beyond our direct control. A prolonged shut down of these global supply chains will have a material adverse effect on our business, results of operations, cash flows and financial condition.
Consumer spending may also be negatively impacted by general macroeconomic conditions and consumer confidence, including the impacts of any recession, resulting from the COVID-19 pandemic. This may negatively impact the markets we serve and may cause our customers to purchase fewer products from us. Any significant reduction in demand caused by decreased consumer confidence and spending following the pandemic, would result in a loss of sales and profits and other material adverse effects.
Rising interest rates could have a substantial adverse effect on our business
Rising interest rates could have a dampening effect on overall economic activity, the financial condition of our customers and the financial condition of the end customers who ultimately create demand for the products we supply, all of which could negatively affect demand for our products. An increase in interest rates could make it difficult for us to obtain financing at attractive rates, impacting our ability to execute on our growth strategies or future acquisitions.
We could be adversely impacted by the loss of any of our significant customers, changes in their requirements for our products or changes in their financial condition.
We are reliant upon sales to several significant customers. Sales to our ten largest customers accounted for 58%54% of our overall sales in 2017.2020. Changes in our business relationships with any of our large customers or in the timing, size and continuation of their various programs could have a material adverse impact on us.
The loss of any of these customers, the loss of business with respect to one or more of their vehicle models on which we have high component content, or a significant decline in the production levels of such vehicles would negatively impact our business, results of operations and financial condition. Pricing pressure from our customers also poses certain risks. Inability on our part to offset pricing concessions with cost reductions would adversely affect our profitability. We are continually bidding on new business with these customers, as well as seeking to diversify our customer base, but there is no assurance that our
We may be adversely impacted by changes in international legislative and political conditions.
We operate in 33 countries around the world and we depend on significant foreign suppliers and customers. Further, we have several growth initiatives that are targeting emerging markets like China and India. Legislative and political activities within the countries where we conduct business, particularly in emerging markets and less developed countries, could adversely impact our ability to operate in those countries. The political situation in a number of countries in which we operate could create instability in our contractual relationships with no effective legal safeguards for resolution of these issues, or potentially result in the seizure of our assets. We operate in Argentina, where trade-related initiatives and other government restrictions limit our ability to optimize operating effectiveness. At December 31, 2017,2020, our net asset exposure related to Argentina was approximately $19,$21, including $9$5 of net fixed assets.
We may be adversely impacted by changes in trade policies and proposed or imposed tariffs, including but not limited to, the imposition of new tariffs by the U.S. government on imports to the U.S. and/or the imposition of retaliatory tariffs by foreign countries.
Section 232 of the Trade Expansion Act of 1962, as amended (the Trade Act), gives the executive branch of the U.S. government broad authority to restrict imports in the interest of national security by imposing tariffs. Tariffs imposed on imported steel and aluminum could raise the costs associated with manufacturing our products. We work with our customers to recover a portion of any increased costs, and with our suppliers to defray costs, associated with tariffs. While we have been successful in the past recovering a significant portion of costs increases, there is no assurance that cost increases resulting from trade policies and tariffs will not adversely impact our profitability. Our sales may also be adversely impacted if tariffs are assessed directly on the products we produce or on our customers’ products containing content sourced from us.
We may be adversely impacted by the strength of the U.S. dollar relative to the currencies in the other countries in which we do business.
Approximately 55%52% of our sales in 20172020 were from operations located in countries other than the U.S. Currency variations can have an impact on our results (expressed in U.S. dollars). Currency variations can also adversely affect margins on sales of our products in countries outside of the U.S. and margins on sales of products that include components obtained from affiliates or other suppliers located outside of the U.S. Strengthening of the U.S. dollar against the euro and currencies of other countries in which we have operations has had and could continue to have an adverse effect on our results reported in U.S. dollars. We use a combination of natural hedging techniques and financial derivatives to mitigate foreign currency exchange rate risks. Such hedging activities may be ineffective or may not offset more than a portion of the adverse financial impact resulting from currency variations.
We may be adversely impacted by new laws, regulations or policies of governmental organizations related to increased fuel economy standards and reduced greenhouse gas emissions, or changes in existing ones.
The markets and customers we serve are subject to substantial government regulation, which often differs by state, region and country. These regulations, and proposals for additional regulation, are advanced primarily out of concern for the environment (including concerns about global climate change and its impact) and energy independence. We anticipate that the number and extent of these regulations, and the costs to comply with them, will increase significantly in the future.
In the U.S., vehicle fuel economy and greenhouse gas emissions are regulated under a harmonized national program administered by the National Highway Traffic Safety Administration and the Environmental Protection Agency (EPA). Other governments in the markets we serve are also creating new policies to address these same issues, including the European Union, Brazil, China and India. These government regulatory requirements could significantly affect our customers by altering their global product development plans and substantially increasing their costs, which could result in limitations on the types of vehicles they sell and the geographical markets they serve. Any of these outcomes could adversely affect our financial position and results of operations.
The proposed phase out of the London Interbank Offer Rate (LIBOR) could have an adverse effect on our business
Our revolving credit facility (the "Revolving Facility") and term loan B facility (the "Term B Facility") utilize Libor to set the interest rate on any outstanding borrowings. In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of Libor by the end of 2021. On November 30, 2020 the ICE Benchmark Administration Limited (IBA) announced that it will consult on its intention to cease publication of the one week and two-month USD Libor settings at the end of 2021 and the remaining USD Libor settings at the end of June 2023. The potential effect on our cost of borrowing utilizing a replacement rate cannot yet be determined. In addition, any further changes or reforms to the determination of Libor or its successor rate may result in a sudden or prolonged increase or decrease on our borrowing rate, which could have an adverse impact on extension of credit held by us and could have a material adverse effect on our business, financial condition and results of operations.
Company-Specific Risk Factors
We have taken, and continue to take, cost-reduction actions. Although our process includes planning for potential negative consequences, the cost-reduction actions may expose us to additional production risk and could adversely affect our sales, profitability and ability to retain and attract and retain employees.
We have been reducing costs in all of our businesses and have discontinued product lines, exited businesses, consolidated manufacturing operations and positioned operations in lower cost locations. The impact of these cost-reduction actions on our sales and profitability may be influenced by many factors including our ability to successfully complete these ongoing efforts, our ability to generate the level of cost savings we expect or that are necessary to enable us to effectively compete, delays in implementation of anticipated workforce reductions, decline in employee morale and the potential inability to meet operational targets due to our inability to retain or recruit key employees.
We depend on our subsidiaries for cash to satisfy the obligations of the company.
Our subsidiaries conduct all of our operations and own substantially all of our assets. Our cash flow and our ability to meet our obligations depend on the cash flow of our subsidiaries. In addition, the payment of funds in the form of dividends, intercompany payments, tax sharing payments and otherwise may be subject to restrictions under the laws of the countries of incorporation of our subsidiaries or the by-laws of the subsidiary.
Labor stoppages or work slowdowns at Dana, key suppliers or our customers could result in a disruption in our operations and have a material adverse effect on our businesses.
We and our customers rely on our respective suppliers to provide parts needed to maintain production levels. We all rely on workforces represented by labor unions. Workforce disputes that result in work stoppages or slowdowns could disrupt operations of all of these businesses, which in turn could have a material adverse effect on the supply of, or demand for, the products we supply our customers.
We could be adversely affected if we are unable to recover portions of commodity costs (including costs of steel, other raw materials and energy) from our customers.
We continue to work with our customers to recover a portion of our material cost increases. While we have been successful in the past recovering a significant portion of such cost increases, there is no assurance that increases in commodity costs, which can be impacted by a variety of factors, including changes in trade laws and tariffs, will not adversely impact our profitability in the future.
We could be adversely affected if we experience shortages of components from our suppliers or if disruptions in the supply chain lead to parts shortages for our customers.
A substantial portion of our annual cost of sales is driven by the purchase of goods and services. To manage and minimize these costs, we have been consolidating our supplier base. As a result, we are dependent on single sources of supply for some components of our products. We select our suppliers based on total value (including price, delivery and quality), taking into consideration their production capacities and financial condition, and we expect that they will be able to support our needs. However, there is no assurance that adverse financial conditions, including bankruptcies of our suppliers, reduced levels of production, natural disasters or other problems experienced by our suppliers will not result in shortages or delays in their supply of components to us or even in the financial collapse of one or more such suppliers. If we were to experience a significant or prolonged shortage of critical components from any of our suppliers, particularly those who are sole sources, and were unable to procure the components from other sources, we would be unable to meet our production schedules for some of our key products and to ship such products to our customers in a timely fashion, which would adversely affect our sales, profitability and customer relations.
Adverse economic conditions, natural disasters and other factors can similarly lead to financial distress or production problems for other suppliers to our customers which can create disruptions to our production levels. Any such supply-chain induced disruptions to our production are likely to create operating inefficiencies that will adversely affect our sales, profitability and customer relations.
Our profitability and results of operations may be adversely affected by program launch difficulties.
The launch of new business is a complex process, the success of which depends on a wide range of factors, including the production readiness of our manufacturing facilities and manufacturing processes and those of our suppliers, as well as factors related to tooling, equipment, employees, initial product quality and other factors. Our failure to successfully launch material new or takeover business could have an adverse effect on our profitability and results of operations.
We use important intellectual property in our business. If we are unable to protect our intellectual property or if a third party makes assertions against us or our customers relating to intellectual property rights, our business could be adversely affected.
We own important intellectual property, including patents, trademarks, copyrights and trade secrets, and are involved in numerous licensing arrangements. Our intellectual property plays an important role in maintaining our competitive position in a number of the markets that we serve. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design around the patents we own or license. Further, as we expand our operations in jurisdictions where the protection of intellectual property rights is less robust, the risk of others duplicating our proprietary technologies increases,
We could encounter unexpected difficulties integrating acquisitions and joint ventures.
We acquired businesses in 2017,recent years, and we expect to complete additional acquisitions and investments in the future that complement or expand our businesses. The success of this strategy will depend on our ability to successfully complete these transactions or arrangements, to integrate the businesses acquired in these transactions and to develop satisfactory working arrangements with our strategic partners in the joint ventures. We could encounter unexpected difficulties in completing these transactions and integrating the acquisitions with our existing operations. We also may not realize the degree or timing of benefits anticipated when we entered into a transaction.
Several of our joint ventures operate pursuant to established agreements and, as such, we do not unilaterally control the joint venture. There is a risk that the partners’ objectives for the joint venture may not be aligned with ours, leading to potential differences over management of the joint venture that could adversely impact its financial performance and consequent contribution to our earnings. Additionally, inability on the part of our partners to satisfy their contractual obligations under the agreements could adversely impact our results of operations and financial position.
We could be adversely impacted by the costs of environmental, health, safety and product liability compliance.
Our operations are subject to environmental laws and regulations in the U.S. and other countries that govern emissions to the air; discharges to water; the generation, handling, storage, transportation, treatment and disposal of waste materials; and the cleanup of contaminated properties. Historically, other than an EPA settlement as part of our bankruptcy proceedings, environmental costs related to our former and existing operations have not been material. However, there is no assurance that the costs of complying with current environmental laws and regulations, or those that may be adopted in the future, will not increase and adversely impact us.
There is also no assurance that the costs of complying with current laws and regulations, or those that may be adopted in the future, that relate to health, safety and product liability matters will not adversely impact us. There is also a risk of warranty and product liability claims, as well as product recalls, if our products fail to perform to specifications or cause property damage, injury or death. (See Notes 16 and 17 to our consolidated financial statements in Item 8 for additional information on product liabilities and warranties.)
A failure of our information technology infrastructure could adversely impact our business and operations.
We recognize the increasing volume of cyber attacks and employ commercially practical efforts to provide reasonable assurance that the risks of such attacks are appropriately mitigated. Each year, we evaluate the threat profile of our industry to stay abreast of trends and to provide reasonable assurance our existing countermeasures will address any new threats identified. Despite our implementation of security measures, our IT systems and those of our service providers are vulnerable to circumstances beyond our reasonable control including acts of terror, acts of government, natural disasters, civil unrest and denial of service attacks which may lead to the theft of our intellectual property, trade secrets or business disruption. To the extent that any disruption or security breach results in a loss or damage to our data or an inappropriate disclosure of confidential information, it could cause significant damage to our reputation, affect our relationships with our customers, suppliers and employees, lead to claims against the company and ultimately harm our business. Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
We participate in certain multi-employer pension plans which are not fully funded.
We contribute to certain multi-employer defined benefit pension plans for certain of our union-represented employees in the U.S. in accordance with our collective bargaining agreements. Contributions are based on hours worked except in cases of layoff or leave where we generally contribute based on 40 hours per week for a maximum of one year. The plans are not fully funded as of December 31, 2017.2020. We could be held liable to the plans for our obligation, as well as those of other employers, due to our participation in the plans. Contribution rates could increase if the plans are required to adopt a funding improvement plan, if the performance of plan assets does not meet expectations or as a result of future collectively bargained wage and benefit agreements. (See Note 12 to our consolidated financial statements in Item 8 for additional information on multi-employer pension plans.)
Changes in interest rates and asset returns could increase our pension funding obligations and reduce our profitability.
We have unfunded obligations under certain of our defined benefit pension and other postretirement benefit plans. The valuation of our future payment obligations under the plans and the related plan assets are subject to significant adverse changes if the credit and capital markets cause interest rates and projected rates of return to decline. Such declines could also require us to make significant additional contributions to our pension plans in the future. A material increase in the unfunded obligations of these plans could also result in a significant increase in our pension expense in the future.
We may incur additional tax expense or become subject to additional tax exposure.
Our provision for income taxes and the cash outlays required to satisfy our income tax obligations in the future could be adversely affected by numerous factors. These factors include changes in the level of earnings in the tax jurisdictions in which we operate, changes in the valuation of deferred tax assets and liabilities, changes in our plans to repatriate the earnings of our non-U.S. operations to the U.S. and changes in tax laws and regulations. Enactment
Our income tax returns are subject to examination by federal, state and local tax authorities in the U.S. and tax authorities outside the U.S. The results of these examinations and the ongoing assessments of our tax exposures could also have an adverse effect on our provision for income taxes and the cash outlays required to satisfy our income tax obligations.
Our ability to utilize our net operating loss carryforwards may be limited.
Net operating loss carryforwards (NOLs) approximating $643$190 were available at December 31, 20172020 to reduce future U.S. income tax liabilities. Our ability to utilize these NOLs may be limited as a result of certain change of control provisions of the U.S. Internal Revenue Code of 1986, as amended (Code). Of this amount,The NOLs of approximately $458 are treated as losses incurred before the change of control upon emergence from Chapter 11in January 2008 and are limited to annual utilization of $84. The balance of our NOLs, treated as incurred subsequent to the change in control, is not subject to limitation as of December 31, 2017. However, thereThere can be no assurance that trading in our shares will not effect another change in control under the Code, which wouldcould further limit our ability to utilize our available NOLs. Such limitations may cause us to pay income taxes earlier and in greater amounts than would be the case if the NOLs were not subject to limitation.
An inability to provide products with the technology required to satisfy customer requirements would adversely impact our ability to successfully compete in our markets.
The vehicular markets in which we operate are undergoing significant technological change, with increasing focus on electrified and autonomous vehicles. These and other technological advances could render certain of our products obsolete. Maintaining our competitive position is dependent on our ability to develop commercially-viable products and services that support the future technologies embraced by our customers.
Failure to appropriately anticipate and react to the cyclical and volatile nature of production rates and customer demands in our business can adversely impact our results of operations.
Our financial performance is directly related to production levels of our customers. In several of our markets, customer production levels are prone to significant cyclicality, influenced by general economic conditions, changing consumer preferences, regulatory changes, and other factors. Oftentimes the rapidity of the downcycles and upcycles can be severe. Successfully executing operationally during periods of extreme downward and upward demand pressures can be challenging. Our inability to recognize and react appropriately to the production cycles inherent in our markets can adversely impact our operating results.
Our continued success is dependent on being able to attractretain and retainattract requisite talent.
Sustaining and growing our business requires that we continue to attract,retain, develop and retainattract people with the requisite skills. With the vehicles of the future expected to undergo significant technological change, having qualified people savvy in the right technologies will be a key factor in our ability to develop the products necessary to successfully compete in the future.
Failure to maintain effective internal controls could adversely impact our business, financial condition and results of operations.
Regulatory provisions governing the financial reporting of U.S. public companies require that we maintain effective disclosure controls and internal controls over financial reporting across our operations in 33 countries. Effective internal controls are designed to provide reasonable assurance of compliance, and, as such, they can be susceptible to human error, circumvention or override, and fraud. Failure to maintain adequate, effective internal controls could result in potential financial misstatements or other forms of noncompliance that have an adverse impact on our results of operations, financial condition or organizational reputation. Our 2017 acquisitions were exempt from certain regulatory internal control compliance requirements this past year, but are required to be compliant in 2018.
Developments in the financial markets or downgrades to Dana's credit rating could restrict our access to capital and increase financing costs.
At December 31, 2017,2020, Dana had consolidated debt obligations of $1,821,$2,481, with cash and marketable securities of $643$580 and unused revolving credit capacity of $578.$979. Our ability to grow the business and satisfy debt service obligations is dependent, in part, on our ability to gain access to capital at competitive costs. External factors beyond our control can adversely affect capital markets – either tightening availability of capital or increasing the cost of available capital. Failure on our part to maintain adequate financial performance and appropriate credit metrics can also affect our ability to access capital at competitive prices.
Provisions in our Restated Certificate of Incorporation and Bylaws may discourage a takeover attempt.
Certain provisions of our Restated Certificate of Incorporation and Bylaws, as well as the General Corporation Law of the State of Delaware, may have the effect of delaying, deferring or preventing a change in control of Dana. Such provisions, including those governing the nomination of directors, limiting who may call special stockholders’ meetings and eliminating stockholder action by written consent, may make it more difficult for other persons, without the approval of our board of directors, to make a tender offer or otherwise acquire substantial amounts of common stock or to launch other takeover attempts that a stockholder might consider to be in such stockholder’s best interest.
None.
Type of Facility | North America | Europe | South America | Asia Pacific | Total | |||||
Light Vehicle | ||||||||||
Manufacturing/Distribution | 12 | 4 | 4 | 10 | 30 | |||||
Service/Assembly | 2 | 1 | 1 | 4 | ||||||
Technical and Engineering Centers | 1 | 1 | ||||||||
Commercial Vehicle | ||||||||||
Manufacturing/Distribution | 7 | 5 | 4 | 7 | 23 | |||||
Service/Assembly | 1 | 1 | ||||||||
Off-Highway | ||||||||||
Manufacturing/Distribution | 5 | 32 | 1 | 9 | 47 | |||||
Service/Assembly | 1 | 1 | ||||||||
Administrative Offices | 2 | 2 | ||||||||
Technical and Engineering Centers | 1 | 1 | ||||||||
Power Technologies | ||||||||||
Manufacturing/Distribution | 10 | 4 | 2 | 16 | ||||||
Technical and Engineering Centers | 2 | 2 | ||||||||
Corporate and other | ||||||||||
Administrative Offices | 2 | 1 | 1 | 3 | 7 | |||||
Technical and Engineering Centers - Multiple Segments | 1 | 3 | 4 | |||||||
43 | 48 | 11 | 37 | 139 |
Type of Facility | North | Europe | South | Asia | Total | |||||||||||||||
Light Vehicle | ||||||||||||||||||||
Manufacturing/Distribution | 14 | 4 | 4 | 9 | 31 | |||||||||||||||
Service/Assembly | 1 | 1 | 2 | |||||||||||||||||
Technical and Engineering Centers | 1 | 1 | ||||||||||||||||||
Commercial Vehicle | ||||||||||||||||||||
Manufacturing/Distribution | 6 | 5 | 3 | 7 | 21 | |||||||||||||||
Service/Assembly | 1 | 1 | ||||||||||||||||||
Administrative Offices | 1 | 1 | ||||||||||||||||||
Technical and Engineering Centers | 1 | 1 | 2 | |||||||||||||||||
Off-Highway | ||||||||||||||||||||
Manufacturing/Distribution | 3 | 20 | 7 | 30 | ||||||||||||||||
Service/Assembly | 3 | 13 | 1 | 4 | 21 | |||||||||||||||
Administrative Offices | 3 | 1 | 4 | |||||||||||||||||
Technical and Engineering Centers | 1 | 1 | ||||||||||||||||||
Power Technologies | ||||||||||||||||||||
Manufacturing/Distribution | 9 | 4 | 2 | 15 | ||||||||||||||||
Administrative Offices | 1 | 1 | ||||||||||||||||||
Technical and Engineering Centers | 1 | 1 | ||||||||||||||||||
Corporate and other | ||||||||||||||||||||
Administrative Offices | 3 | 1 | 1 | 2 | 7 | |||||||||||||||
Technical and Engineering Centers - Multiple Segments | 2 | 2 | ||||||||||||||||||
43 | 52 | 9 | 37 | 141 |
As of December 31, 2017,2020, we operated in 33 countries and had 139141 major facilities housing manufacturing and distribution operations, service and assembly operations, technical and engineering centers and administrative offices. In addition to the eightseven stand-alone technical and engineering centers in the table above, we have fourteennineteen technical and engineering centers housed within manufacturing sites. We lease 6768 of these facilities and own the remainder. We believe that all of our property and equipment is properly maintained.
Our world headquarters is located in Maumee, Ohio. This facility and other facilities in the greater Detroit, Michigan and Maumee, Ohio areas house functions that have global or North American regional responsibility for finance and accounting, tax, treasury, risk management, legal, human resources, procurement and supply chain management, communications and information technology.
We are a party to various pending judicial and administrative proceedings that arose in the ordinary course of business. After reviewing the currently pending lawsuits and proceedings (including the probable outcomes, reasonably anticipated costs and expenses and our established reserves for uninsured liabilities), we do not believe that any liabilities that may result from these proceedings are reasonably likely to have a material adverse effect on our liquidity, financial condition or results of operations. Legal proceedings are also discussed in Notes 3 andNote 16 to our consolidated financial statements in Item 8.
PART II
Market information
— Our common stock trades on the New York Stock Exchange (NYSE) under the symbol "DAN."2017 | 2016 | ||||||||||||||
High | Low | High | Low | ||||||||||||
Fourth quarter | $ | 33.45 | $ | 28.01 | $ | 19.81 | $ | 13.93 | |||||||
Third quarter | 28.25 | 22.27 | 15.70 | 9.80 | |||||||||||
Second quarter | 22.51 | 17.53 | 14.55 | 10.21 | |||||||||||
First quarter | 20.62 | 17.67 | 14.32 | 10.62 |
Holders of common stock
— Based on reports by our transfer agent, there were approximatelyReference is made to the Equity Compensation Plan Information section of Item 12 for certain information regarding our equity compensation plans.
Stockholder return
— The following graph shows the cumulative total shareholder return for our common stock since December 31,Performance chart
Index
12/31/2012 | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | ||||||||||||||||||
Dana Incorporated | $ | 100.00 | $ | 125.26 | $ | 139.18 | $ | 92.92 | $ | 134.07 | $ | 226.96 | |||||||||||
S&P 500 | 100.00 | 132.39 | 150.51 | 152.59 | 170.84 | 208.14 | |||||||||||||||||
Dow Jones US Auto Parts Index | 100.00 | 156.05 | 172.65 | 166.24 | 175.24 | 227.44 |
12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/20 | |||||||||||||||||||
Dana Incorporated | $ | 100.00 | $ | 137.94 | $ | 230.83 | $ | 104.97 | $ | 139.76 | $ | 156.84 | ||||||||||||
S&P 500 | 100.00 | 111.96 | 136.40 | 130.42 | 171.49 | 203.04 | ||||||||||||||||||
Dow Jones US Auto Parts Index | 100.00 | 105.41 | 136.81 | 94.91 | 120.95 | 142.12 |
Issuer's purchases of equity securities
—Annual meeting
— We will hold an annual meeting of shareholders on AprilYear Ended December 31, Operating Results Net sales Earnings (loss) before income taxes Net income (loss) Net income (loss) attributable to the parent company Redeemable noncontrolling interests adjustment to redemption value Net income (loss) available to common stockholders Net income (loss) per share available to common stockholders Basic Diluted Depreciation and amortization Net cash provided by operating activities Purchases of property, plant and equipment Financial Position Cash and cash equivalents and marketable securities Total assets Long-term debt, less debt issuance costs Total debt, less debt issuance costs Common stock and additional paid-in capital Treasury stock Total parent company stockholders' equity Book value per share Common Share Information Dividends declared per common share Weighted-average common shares outstanding Basic Diluted (1) Operating results in 2020 were significantly impacted by the global COVID-19 pandemic. Net income in 2020 included a $51 pre-tax goodwill impairment charge, a $33 pre-tax gain on notes receivable conversion and subsequent adjustment of shares to fair value and a $8 charge attributable to net discrete tax items. (2) Net income in 2019 included pension settlement charges of $259 attributable to the termination of certain U.S. and Canadian defined benefit pension plans and a $135 benefit attributable to net discrete tax items. The increase in total assets in 2019 is primarily attributable to the acquisition of the Oerlikon Drive Systems (ODS) segment of the Oerlikon Group. The increase in total debt, less debt issuance costs is primarily attributable to taking out additional debt to finance the acquisition of ODS. (3) Net income in 2018 included a $20 charge attributable to the impairment of intangible assets used in research and development activities and a $67 benefit attributable to net discrete tax items. (4) Net income in 2017 included a $27 charge attributable to the divestiture of our Brazil suspension components business and a $159 charge attributable to net discrete tax items, including a charge of $186 associated with a reduction of net deferred tax assets to reflect expected realization at the lower U.S corporate tax rate of 21% rather than the previous rate of 35%. (5) Net income in 2016 includes a $77 loss attributable to the divestiture of Dana Companies, LLC and a $476 benefit attributable to net discrete tax items, including a benefit of $501 associated with the release of valuation allowances against U.S. deferred taxes. Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes in Item 8. Management Overview We are a global provider of high-technology products to virtually every major vehicle Operational and Strategic Initiatives Our enterprise strategy builds on our strong technology foundation and leverages our resources across the organization while Central to our strategy is Driving customer centricity We continue to enhance and expand our global footprint, optimizing it to capture growth across all of our end markets. Expanding global markets means utilizing our Delivering innovative solutions enables us to capitalize on market growth trends as Over the The development and implementation of our enterprise strategy is positioning Dana to grow profitably due to increased customer focus as we leverage our core capabilities, expand into new markets, develop and commercialize new technologies including for hybrid and electric vehicles. Capital Structure Initiatives In addition to investing in our business, we plan to continue prioritizing the allocation of capital to reduce debt and maintain a strong financial position. Shareholder return actions Financing actions — Over the past Other Initiatives Aftermarket opportunities Selective acquisitions Acquisitions Ashwoods Innovations Limited— On Nordresa —On August 26, 2019, we acquired a 100% ownership interest in Nordresa Motors, Inc. (Nordresa) for consideration of $12, using cash on hand. Prestolite E-Propulsion Systems (Beijing) Limited — On June 6, 2019, we acquired Prestolite Electric Beijing Limited's (PEBL) 50% ownership interest in Prestolite E-Propulsion Systems (Beijing) Limited (PEPS). PEPS manufactures and distributes electric mobility solutions, including electric motors, inverters, and generators for commercial vehicles and heavy machinery. PEPS has a state-of-the-art facility in China, enabling us to expand motor and inverter manufacturing capabilities in the world's largest electric-mobility market. The acquisition of PEBL's interest in PEPS, along with our existing ownership interest in PEPS through our TM4 subsidiary, provides us with a 100% ownership interest and a controlling financial interest in PEPS. We recognized a $2 gain to other Oerlikon Drive Systems — On February 28, 2019, we acquired a 100% ownership interest in the Oerlikon Drive Systems (ODS) segment of the SME — TM4 — On June 22, 2018, we acquired a 55% ownership interest in TM4 Inc. (TM4) from Hydro-Québec. TM4 designs and manufactures motors, power inverters and control systems for electric vehicles, offering a complementary portfolio to Dana's electric gearboxes and thermal-management technologies for batteries, motors and inverters. The transaction establishes Dana as the only supplier with full e-Drive design, engineering and manufacturing capabilities – offering electro mechanical propulsion solutions to each of Hydro-Québec Relationship On June 22, 2018, we acquired a 55% ownership interest in TM4 from Hydro-Québec. On July 29, 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45% redeemable noncontrolling interest in SME and increasing its existing indirect 22.5% noncontrolling interest in PEPS to 45%. We received $65 at closing, consisting of $53 of cash and a note receivable of $12. The note is payable in five years and bears annual interest of 5%. Dana Segments We manage our operations globally through four operating segments. Our Light Vehicle and Power Technologies segments primarily support light vehicle original equipment manufacturers (OEMs) with products for light trucks, SUVs, CUVs, vans and passenger cars. The Commercial Vehicle segment supports the OEMs of on-highway commercial vehicles (primarily trucks and buses), while our Off-Highway segment supports OEMs of off-highway vehicles (primarily wheeled vehicles used in construction, mining and agricultural applications). 2020(1) 2019(2) 2018(3) 2017(4) 2016(5) $ 7,106 $ 8,620 $ 8,143 $ 7,209 $ 5,826 (13 ) 171 494 380 215 (51 ) 233 440 116 653 $ (31 ) $ 226 $ 427 $ 111 $ 640 — — — 6 — $ (31 ) $ 226 $ 427 $ 105 $ 640 $ (0.21 ) $ 1.57 $ 2.94 $ 0.72 $ 4.38 $ (0.21 ) $ 1.56 $ 2.91 $ 0.71 $ 4.36 $ 365 $ 339 $ 270 $ 233 $ 182 386 637 �� 568 554 384 326 426 325 393 322 $ 580 $ 527 $ 531 $ 643 $ 737 7,376 7,220 5,918 5,644 4,860 2,420 2,336 1,755 1,759 1,595 2,454 2,370 1,783 1,799 1,664 2,410 2,388 2,370 2,356 2,329 (156 ) (150 ) (119 ) (87 ) (83 ) 1,758 1,873 1,345 1,013 1,157 $ 12.17 $ 13.01 $ 9.27 $ 6.98 $ 7.92 $ 0.10 $ 0.40 $ 0.40 $ 0.24 $ 0.24 144.5 144.0 145.0 145.1 146.0 144.5 145.1 146.5 146.9 146.8 Year Ended December 31, 2017 2016 2015 2014 2013 Operating Results Net sales $ 7,209 $ 5,826 $ 6,060 $ 6,617 $ 6,769 Earnings from continuing operations before income taxes 380 215 292 260 368 Income from continuing operations 116 653 176 343 261 Income (loss) from discontinued operations 4 (15 ) (1 ) Net income 116 653 180 328 260 Net income attributable to the parent company $ 111 $ 640 $ 159 $ 319 $ 244 Redeemable noncontrolling interests adjustment to redemption value 6 Preferred stock dividend requirements — — — 7 25 Preferred stock redemption premium — — — — 232 Net income (loss) available to common stockholders $ 105 $ 640 $ 159 $ 312 $ (13 ) Net income (loss) per share available to common stockholders Basic Income (loss) from continuing operations $ 0.72 $ 4.38 $ 0.98 $ 2.07 $ (0.08 ) Income (loss) from discontinued operations — — 0.02 (0.10 ) (0.01 ) Net income (loss) 0.72 4.38 1.00 1.97 (0.09 ) Diluted Income (loss) from continuing operations $ 0.71 $ 4.36 $ 0.97 $ 1.93 $ (0.08 ) Income (loss) from discontinued operations — — 0.02 (0.09 ) (0.01 ) Net income (loss) 0.71 4.36 0.99 1.84 (0.09 ) Depreciation and amortization of intangibles $ 233 $ 182 $ 174 $ 213 $ 262 Net cash provided by operating activities 554 384 406 510 577 Purchases of property, plant and equipment 393 322 260 234 209 Financial Position Cash and cash equivalents and marketable securities $ 643 $ 737 $ 953 $ 1,290 $ 1,366 Total assets 5,644 4,860 4,301 4,893 5,068 Long-term debt, less debt issuance costs 1,759 1,595 1,553 1,588 1,541 Total debt 1,799 1,664 1,575 1,653 1,598 Preferred stock — — — — 372 Common stock and additional paid-in capital 2,356 2,329 2,313 2,642 2,842 Treasury stock (87 ) (83 ) (1 ) (33 ) (366 ) Total parent company stockholders' equity 1,013 1,157 728 1,080 1,309 Book value per share $ 6.98 $ 7.92 $ 4.58 $ 6.83 $ 8.94 Common Share Information Dividends declared per common share $ 0.24 $ 0.24 $ 0.23 $ 0.20 $ 0.20 Weighted-average common shares outstanding Basic 145.1 146.0 159.0 158.0 146.4 Diluted 146.9 146.8 160.0 173.5 146.4 Market prices High $ 33.45 $ 19.81 $ 23.48 $ 24.82 $ 23.46 Low 17.53 9.80 13.01 16.81 15.17 and engine manufacturer in the world. We also serve the stationary industrial market. Our technologies include drive and motion productssystems (axles, driveshafts, planetarytransmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives, power-transmission products, tire-management productsdrives); electrodynamic technologies (motors, inverters, software and transmissions)control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, heat shieldscam covers, and fuel-cell plates)oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and exhaust-gas heat recovery)thermal-acoustical protective shielding); and fluid-power products (pumps, valves, motorsdigital solutions (active and controls)passive system controls and descriptive and predictive analytics). We serve our global light vehicle, medium/heavy vehicle and off-highway markets through four business units – Light Vehicle Driveline TechnologiesDrive Systems (Light Vehicle), Commercial Vehicle Driveline TechnologiesDrive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion TechnologiesSystems (Off-Highway) and Power Technologies, which is the center of excellence for sealing and thermal-management technologies that span all customers in our on-highway and off-highway markets. We have a diverse customer base and geographic footprint which minimizes our exposure to individual market and segment declines. In 2017,2020, 51% of our sales came from North American operations and 49% from operations throughout the rest of the world. Our sales by operating segment were Light Vehicle – 44%43%, Commercial Vehicle – 20%16%, Off-Highway – 21%28% and Power Technologies – 15%13%.maintainingdriving a customer centric focus, expanding our global markets, and accelerating the commercialization of new technologydelivering innovative solutions as we evolve into the era of vehicle electrification.operationsoperations. This foundational element enables us to infuse strong operational disciplines throughout the strategy, making it practical, actionable, and effective. It enables us to capitalize on being a major drive systems supplier across all three end-mobility markets. We are achieving improved profitability by sharingactively seeking synergies across our capabilities, technology, assetsengineering, purchasing, and knowledgemanufacturing base. We have strengthened the portfolio by acquiring critical assets; and we are utilizing our physical and intellectual capital to amplify innovation across the enterprise, leading to improved executionenterprise. Leveraging these core elements can further expand the cost efficiencies of our common technologies and increased customer satisfaction. Through streamlining and rationalizing our manufacturing activities we have significantly improved our profitability and margins, and we believe additional opportunities remain to further optimize our manufacturing footprint and improve our cost performance. Leveraging investments across multiple end markets and making disciplined, value enhancing acquisitions will allow us to bring product to market faster, grow our top-line sales and enhance financial returns.Strengtheningdeliver a sustainable competitive advantage for Dana.and expanding global markets are key elementscontinues to be at the heart of who we are. Putting our strategy that focus on market penetration. Foundational to growing the business is directing the entire organization to putting the customercustomers at the center of our value system is firmly embedded in our culture and shifting from transactionalis driving growth by focusing customer relationships and providing value to relationship-based interactions.our customers. These relationships are built on a foundation of providingstrengthened as we are physically where we need to be in order to provide unparalleled technology with exceptional quality, deliveryservice and value. With even stronger relationships we will be better positioned to supportare prioritizing our customers’ most important global and flagship programsneeds as we engineer solutions that differentiate their products, while making it easier to do business with Dana by digitizing their experience. Our customer centric focus has uniquely positioned us to win more than our fair share of new business and capitalize on future growth opportunities. Specifically,manufacturingglobal capabilities and technology centerpresence to further penetrate growth markets, focusing on Asia due to its position as the largest mobility market in the world with the highest market growth rate and its lead in the adoption of new energy vehicles. We are investing across various avenues to increase our presence in Asia Pacific by forging new partnerships, expanding inorganically, and growing organically. We continue to operate in this region through wholly owned and joint ventures with local market partners. We have recently made acquisitions that have augmented our footprint positionsin the region, specifically in India and China. All the while, we have been making meaningful organic investments to grow with existing and new customers, primarily in Thailand, India, and China. These added capabilities have enabled us to support customers globally – an important factortarget the domestic Asia Pacific markets and utilize the capacity for export to other global markets.many ofwe evolve our customerscore technology capabilities. We are increasinglyalso focused on commonenhancing our physical products with digital content to provide smart systems and we see an opportunity to become a digital systems provider by delivering software as a service to our traditional end customers. This focus on delivering solutions for global platforms. Our acquisition of the Brevini operations in 2017 (see Acquisitions section below) provided us with operational presence in eight additional countries, while also providing us with additional opportunitiesbased on our core technology is leading to leveragenew business wins and increasing our global footprint to support the needs across all our businesses. Shortly following the acquisition, we were able to consolidate certain Brevini activities in China,content per vehicle. We have made significant investments - both organically and inorganically - allowing us to utilize an acquired facilitymove to support our Power Technologies business in China.the next phase, which is to Lead electric propulsion.world,past year we have a primary focus on buildingachieved our presence and local capability in the Asia Pacific region. Over the last few years, we have opened two new engineering facilities in the region, gear manufacturing facilities in India and Thailand, and are currently developing a new light vehicle assembly facility in China that is scheduledgoal to commence operations in 2018.In addition to Asia, we see further growth opportunity in Eastern Europe. A new gear manufacturing facility in Hungary is under construction and scheduled to commence operations in the first half of 2018. This will be our third facility in the country and will give us the capability to cost effectively manufacture gears, one of our core technologies, and efficiently service our customers within the region.The final two elements of our enterprise strategy, commercializing new technology and accelerating hybridization and electrification, focus on opportunities for product expansion. Bringing new innovations to market as industry leading products will drive growth as our new products and technology provide our customers with cutting-edge solutions, address end user needs and capitalize on key market trends. An example is our industry leading electronically disconnecting all-wheel drive technology, which we believe is the most fuel efficient rapidly disconnecting system in the market, will be utilized on a Ford Motor Company global vehicle platform – opening up new commercial channels for us in the passenger car, crossover and sport utility vehicle markets. The above-referenced new assembly facility under construction in China will support this new program.Initiatives to capitalize on evolvingaccelerate hybridization and electrification vehicle trendsthrough both core Dana technologies and targeted strategic acquisitions and are a core ingredientpositioned today to lead the market. The nine recent investments in electrodynamic expertise and technologies combined with Dana’s longstanding mechatronics capabilities has allowed us to develop and deliver fully integrated e-Propulsion systems that are power-dense and achieve optimal efficiency through the integration of our current strategy. In additionthe components that we offer due to our current technologiesmechatronics capabilities. With recent electric vehicle program awards, we are well on our way to achieving our growth objectives in battery cooling and fuel cells, this element of our strategy is leveraging our electronics controls expertise across all our business units and applications such as advanced vehicle hybridization and electrification initiatives. We are working with customers to develop new solutions for those markets where electrification will be adopted first such as hybrids, buses and urban delivery vehicles. These new solutions, which include advanced electric propulsion systems with fully integrated motors and controls, are included in our recently launched Spicer Electrified portfolio of products. Working with our joint venture partner, our latest integrated e-axle is scheduled to launch in the first quarter of 2018 in a bus application in China.In January 2018, we announced our intentionWe continue to drive toward investment grade metrics as part of a balanced approach to our capital allocation priorities and our goal of further strengthening our balance sheet.Over the past five years, we returned $1,481 of cash to shareholders by redeeming all of our preferred stock and repurchasing common shares. From program inception in 2012 through December 31, 2017, we repurchased approximately 74 million shares, inclusive of the common share equivalent reduction resulting from redemption of preferred shares. With the availability under the previous authorization having expired, ourOur Board of Directors authorized a new $100$200 share repurchase program which was effective Januaryin 2018 andwhich expires at the end of 2019. We2023. Through December 31, 2020, we have used $50 of cash to repurchase common shares under the program. Through the first quarter of 2020, we had declared and paid quarterly common stock dividends overfor thirty-three consecutive quarters. In response to the global COVID-19 pandemic, we temporarily suspended the declaration and payment of dividends to common shareholders and the repurchase of common stock under our existing common stock share repurchase program.fivefew years raising the dividend from five cents to six cents per share in the second quarter of 2015. In recognition of our strong financial performance and confidence in our financial outlook, our Board approved an additional four cents per share increase in the quarterly dividend to ten cents per share in 2018.Financing actions — Wewe have taken advantage of the lower interest rate environment to complete refinancing transactions in each of the past four years that resulted in lower effective interest rates while extending maturities. In 2017,During 2019 we completed a $400 2025 note offeringexpanded our credit and enteredguaranty agreement, entering into a $275$675 of additional floating rate term loan. The proceeds of these issuances were usedloans to repay higher cost international debtfund the ODS acquisition (see Acquisitions section below) and to repay $450 of 2021 notes. In connection with amending our credit agreement to effectuate the term loan, we also increased our revolving credit facility by $100, providing us with $600to $1,000 and extended its maturity to August 2024. We completed a $300 2027 note offering and used the proceeds to repay $300 of back-up liquidity through 2022. Additionally, in 2017higher cost 2023 notes. During 2019, we commenced the process of terminatingterminated one of our U.S. defined benefit pension plans. This action allows us to effectively eliminateplans, settling approximately $165 of previously unfunded pension obligations and the associatedeliminating future funding risk associated with interest rate and other market developments. We expectIn response to the termination actionglobal COVID-19 pandemic, during June 2020, we completed a $400 2028 note offering and a $100 add on to be completedour 2027 notes. With the impact of the global COVID-19 pandemic on our operations dissipating, we paid down $474 of our floating rate term loans (the "Term A Facility") in 2019.In January 2016, we completed the acquisition of Magnum® Gaskets' (Magnum) aftermarket distribution business, providing us access to new customers for sealing products and an additional aftermarket channel for other products. Powered by recognized brands such as Dana®, Spicer®, Spicer Electrified™, Victor Reinz®, Glaser®, GWB®, Thompson®, Tru-Cool®, SVL®, and Transejes™, Dana delivers a broad range of aftermarket solutions – including genuine, all makes, and value lines – servicing passenger, commercial and off-highway vehicles across the globe.OurAlthough transformational opportunities like the GKN plc driveline business transaction that we pursued in 2018 will be considered when strategically and economically attractive, our acquisition focus is principally directed at “bolt-on” or adjacent acquisition opportunities that have a strategic fit with our existing core businesses, particularly opportunities that support our enterprise strategy and enhance the value proposition of our product offerings. Any potential acquisition will be evaluated in the same manner we currently consider customer program opportunities and other uses of capital – with a disciplined financial approach designed to ensure profitable growth and increased shareholder value.USM – Warren March 1, 2017, we completed the purchase of Warren Manufacturing LLC (USM – Warren), which holds certain assets and liabilities of the former Warren, Michigan production unit of U.S. Manufacturing Corporation (USM). With this transaction,February 5, 2020, we acquired proprietary tube-manufacturing processesCurtis Instruments, Inc.'s (Curtis) 35.4% ownership interest in Ashwoods Innovations Limited (Ashwoods). Ashwoods designs and light-weighting intellectual propertymanufactures permanent magnet electric motors for axle tubesthe automotive, material handling and shafts. Significant content was previously purchased from USM. Vertically integrating this content strengthensoff-highway vehicle markets. The acquisition of Curtis' interest in Ashwoods, along with our existing ownership interest in Ashwoods, provided us with a 97.8% ownership interest and a controlling financial interest in Ashwoods. We recognized a $3 gain to other income (expense), net on the supply chain for severalrequired remeasurement of our most strategic customers.previously held equity method investment in Ashwoods to fair value. The new producttotal purchase consideration of $22 is comprised of $8 of cash paid to Curtis at closing, the $10 fair value of our previously held equity method investment in Ashwoods and process technologies for light-weighting will assist our customers$4 related to the effective settlement of a pre-existing loan payable due from Ashwoods. During March 2020, we acquired the remaining noncontrolling interests in achieving their sustainability and fuel efficiency goals. The USM – Warren acquisition added $96 of sales and $12 of adjusted EBITDA in 2017.Ashwoods held by employee shareholders. The results of operations of the USM – Warren businessAshwoods are reported within our Light VehicleOff-Highway operating segment.We paid $104 The Ashwoods acquisition had an insignificant impact on our consolidated results of operations during 2020. See Hydro-Québec relationship discussion below for this business at closing, including $25 to effectively settle trade payable obligations originating from product purchases Dana made from USM prior todetails of the acquisition. No debt was assumed with this transaction which was fundedsubsequent change in our ownership interest in Ashwoods.Post-closing purchase price adjustmentsNordresa is a prominent integration and application engineering expert for working capitalthe development and commercialization of electric powertrains for commercial vehicles. The investment further enhances Dana's electrification capabilities by combining its complete portfolio of motors, inverters, chargers, gearboxes, and thermal-management products with Nordresa's proprietary battery-management system, electric powertrain controls and integration expertise to deliver complete electric powertrain systems. The results of operations of Nordresa are reported within our Commercial Vehicle operating segment. Nordresa had an insignificant impact on our consolidated results of operations during 2019.items, which totaled less than $1, were receivedincome (expense), net on the required remeasurement of our previously held equity method investment in this year's third quarter.PEPS to fair value. We paid $50 at closing using cash on hand. Reference is made to Note 2 of the consolidated financial statements in Item 8 for the allocation of purchase consideration to assets acquired and liabilities assumed.BFP and BPT — On February 1, 2017, we acquired 80% ownership interests in Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini). The acquisition expands our Off-Highway operating segment product portfolio to include technologies for tracked vehicles, doubling our addressable market for off-highway driveline systems and establishing Dana as the only off-highway solutions provider that can manage the power to both move the equipment and perform its critical work functions. This acquisition also brings a platform of technologies that can be leveraged in our light and commercial vehicle end markets, helping to accelerate our hybridization and electrification initiatives. The BFP and BPT acquisitions added $401 of sales and $40 of adjusted EBITDA in 2017. The results of operations of these businesses are reported within our Off-Highway operating segment.We paid $181 at closing using cash on hand and assumed debt of $181 as part of the transaction. In December 2017, a purchase price reduction of $9 was agreed under the sale and purchase agreement provisions for determination of the net indebtedness and net working capital levels of BFP and BPT as of the closing date. In connection with the acquisition of BFP and BPT, Dana agreed to purchase certain real estate currently being leased by BPT from a Brevini affiliate for €25 by November 1, 2017. Purchase at this date did not occur due to document transfer requirements not having been fully satisfied. Receipt of the purchase price adjustment will occur concurrent with the completion of the real estate purchase during the first quarter of 2018. Reference is made to Note 2 of the consolidated financial statements in Item 8 for the allocation of purchase consideration to assets acquired and liabilities assumed. The terms of the agreement provide Dana the right to call Brevini's noncontrolling interests in BFP and BPT, and Brevini the right to put its noncontrolling interests in BFP and BPT to Dana, assuming Dana does not exercise its call rights, at dates and prices defined in the agreement.SIFCO —On December 23, 2016, we acquired strategic assets of the commercial vehicle steer axle systems and related forged components businesses of SIFCO. The acquisition enables us to enhance our vertically integrated supply chain, which will further improve our cost structure and customer satisfaction by leveraging SIFCO's extensive experience and knowledge of sophisticated forged components. In addition to strengthening our position as a central source for products that use forged and machined parts throughout the region, this acquisition enables us to better accommodate the local content requirements of our customers, which reduces their import and other region-specific costs.As part of the acquisition, we added two manufacturing facilities and approximately 1,400 employees. The strategic assets were acquired by Dana free and clear of any liens, claims or encumbrances and without assumption of any legacy liabilities of SIFCO. We had sales of $86 in 2016 resulting from business conducted under the previous supply agreement with SIFCO. The additional business relationships obtained as a result of the acquisition generated incremental sales of $44 in 2017. The results of operations of the SIFCO related businessPEPS are reported within our Commercial Vehicle operating segment.SIFCO purchase price was $70, with the paymentPEPS acquisition contributed $8 of $10sales and de minimis adjusted EBITDA in 2019. See Hydro-Québec relationship discussion below for details of the purchase price deferred until December 2017 pending any claims under indemnification provisionssubsequent change in our ownership interest in PEPS.purchase agreement. In December 2017,Oerlikon Group. ODS is a global manufacturer of high-precision gears, planetary hub drives for wheeled and tracked vehicles, and products, controls, and software that support vehicle electrification across the parties to the SIFCO transaction entered into a settlement agreement. Under this agreement, $3mobility industry. We paid $626 at closing, which was paid to the seller with the remaining deferredpurchase price of $7 being retained by Dana to settle indemnification claims. After the settlement of all indemnification claims, any remaining deferred purchase price will be paid to the seller.primarily funded through debt proceeds. Reference is made to Note 2 of theour consolidated financial statements in Item 8 for the allocation of purchase consideration to assets acquired and liabilities assumed.Magnum — On January 29, 2016, we acquired the aftermarket distribution business of Magnum, a U.S.-based supplier of gaskets and sealing products for automotive and commercial vehicle applications, for a cash payment of $18. Assets acquired included trademarks and trade names, customer relationships and goodwill. The results of operations of MagnumODS are reported primarily within our Power TechnologiesOff-Highway and Commercial Vehicle operating segment.DivestituresBrazil Suspension Components Operations segments. The ODS acquisition added $630 of sales and $87 of adjusted EBITDA during 2019.In December 2017,On January 11, 2019, we entered into an agreementacquired a 100% ownership interest in S.M.E. S.p.A. (SME). SME designs, engineers, and manufactures low-voltage AC induction and synchronous reluctance motors, inverters, and controls for a wide range of off-highway electric vehicle applications, including material handling, agriculture, construction, and automated-guided vehicles. The addition of SME's low-voltage motors and inverters, which are primarily designed to divest our Brazil suspension components business (the disposal group). This business is non-core to our enterprise strategymeet the evolution of electrification in off-highway equipment, significantly expands Dana's electrified product portfolio. We paid $88 at closing, consisting of $62 in cash on hand and under-performing financially. As such, we agreed to divest the businessa note payable of $26 which allows for no consideration and contribute $10net settlement of additional cash to the business prior to closing. Completion of the sale is expectedpotential contingencies as defined in the first quarterpurchase agreement. The note is payable in five years and bears annual interest of 2018 upon receipt of Brazilian antitrust approval. The disposal group was classified as held for sale at December 31, 2017. We recognized a pre-tax loss of $27 in the fourth quarter of 2017 to adjust the carrying value of the net assets to fair value and to recognize the liability for the additional cash required to be contributed to the business prior to closing.5%. Reference is made to Note 32 of our consolidated financial statements in Item 8 for additional information, including the carrying amountsallocation of purchase consideration to assets acquired and liabilities assumed. The SME acquisition added $21 of sales and de minimis adjusted EBITDA during 2019. See Hydro-Québec relationship discussion below for details of the major classessubsequent change in our ownership interest in SME.assetsour end markets. TM4's technology and liabilities advanced manufacturing facility in Boucherville, Quebec will add to our global technical centers, and their 50% interest in PEPS provides an opportunity to enhance our position in the fastest growing market for electric vehicles. See PEPS acquisition discussion above for details of the disposal group held for sale at December 31, 2017. Sales of the business being divested approximated $23subsequent change in 2017. In connection with the divestiture of this business, we entered into a supply agreement whereby Dana will purchase specified components to satisfy customer requirements from the purchaser of the divested business at market prices.Nippon Reinz — On November 30, 2016, we sold our 53.7%ownership interest in Nippon Reinz Co. Ltd. (Nippon Reinz) to Nichias Corporation.PEPS. Dana received net cash proceeds of $5 and recognizedis consolidating TM4 as the governing documents provide Dana with a pre-tax loss of $3 on the divestiture of Nippon Reinz, inclusive of the derecognition of the related noncontrollingcontrolling financial interest. Nippon Reinz had sales of $42 in 2016 through the transaction date.Dana Companies —On December 30, 2016, we completed the divestiture of Dana Companies, LLC (DCLLC), a consolidated wholly-owned limited liability company that was established as part of our reorganization in 2008 to hold and manage personal injury asbestos claims retained by the reorganized Dana Corporation, which was merged into DCLLC. The assets of DCLLC at time of sale included cash and marketable securities along with the rights to insurance coverage in place to satisfy a significant portion of its liabilities. We received net cash proceeds of $29paid $125 at closing, using cash on December 30, 2016, with $3 retained by the purchaser subjecthand. Reference is made to the satisfactionNote 2 of certain future conditions. We recognized a pre-tax loss of $77 in 2016 upon completion of the transaction. We received payment of the retained $3 in the second quarter of 2017 and recognized such amount as income. Following completion of the sale, Dana has no obligation with respect to current or future asbestos claims. The sale of this business also enhanced our available liquidity since the net proceeds from the sale are available for use in our core businesses.VenezuelaOperations — In December 2014, we entered into an agreement to divest our operations in Venezuela (the disposal group) to an unaffiliated company for no consideration. We completed the divestiture in January 2015. In connection with the divestiture, we entered into a supply and technology agreement whereby Dana will supply product and technology to the operations at competitive market prices. Dana has no obligations to otherwise provide support to the operations. The disposal group was classified as held for sale at December 31, 2014, and we recognized a net charge of $77 – an $80 loss to adjust the carrying value of the net assets to fair value less cost to sell, with a reduction of $3 for the noncontrolling interest share of the loss. These assets and liabilities were presented as held for sale on our December 31, 2014 balance sheet. Upon completion of the divestiture of the disposal group in January 2015, we recognized a gain of $5 on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary in other income (expense), net. We also credited other comprehensive income (loss) (OCI) attributable to the parent for $10 and OCI attributable to noncontrolling interests for $1 to eliminate the unrecognized pension expense recorded in accumulated other comprehensive income (loss) (AOCI). See Note 3 to our consolidated financial statements in Item 8 for additional information. With the completionallocation of purchase consideration to assets acquired and liabilities assumed. The results of operations of the saleTM4 business are reported in January 2015,our Commercial Vehicle operating segment. The TM4 acquisition contributed $11 of sales and de minimis adjusted EBITDA in 2018.has no remaining investmentwill continue to consolidate SME and PEPS as the governing documents continue to provide Dana with a controlling financial interest in Venezuela.Structural Products Business — In 2010, we completedthese subsidiaries. See Acquisitions section above for a discussion of Dana's acquisitions of PEPS and SME. On April 14, 2020, Hydro-Québec acquired an indirect 45% redeemable noncontrolling interest in Ashwoods. We received $9 in cash at closing, inclusive of $2 in proceeds on a loan from Hydro-Québec. Dana will continue to consolidate Ashwoods as the salegoverning documents continue to provide Dana with a controlling financial interest in this subsidiary. See the Acquisitions section above for a discussion of substantially allDana's acquisition of the assets of our Structural Products business to Metalsa S.A. de C.V. (Metalsa) and reached a final agreement with the buyer on disputed issues in May 2014. Prior to the third quarter of 2012, Structural Products was reported as an operating segment of continuing operations. With the cessation of the retained operations in the third quarter of 2012, we began reporting the activities relating to the Structural Products business as discontinued operations. Legal and other costs incurred in 2014 to settle a customer complaint and theremaining disputes with Metalsa and insurance recoveries in 2015 related to previously outstanding claims have extended the reporting of discontinued operations.
Trends in Our Markets
Actual | |||||||||||||
(Units in thousands) | Dana 2018 Outlook | 2017 | 2016 | 2015 | |||||||||
North America | |||||||||||||
Light Truck (Full Frame) | 4,000 | to | 4,300 | 4,331 | 4,220 | 3,937 | |||||||
Light Vehicle Engines | 14,800 | to | 15,100 | 14,828 | 15,913 | 15,474 | |||||||
Medium Truck (Classes 5-7) | 245 | to | 255 | 246 | 233 | 237 | |||||||
Heavy Truck (Class 8) | 290 | to | 310 | 255 | 228 | 323 | |||||||
Agricultural Equipment | 50 | to | 60 | 54 | 53 | 58 | |||||||
Construction/Mining Equipment | 160 | to | 170 | 157 | 150 | 158 | |||||||
Europe (including Eastern Europe) | |||||||||||||
Light Truck | 10,600 | to | 10,900 | 10,276 | 9,306 | 8,546 | |||||||
Light Vehicle Engines | 24,700 | to | 25,200 | 24,096 | 23,287 | 22,570 | |||||||
Medium/Heavy Truck | 480 | to | 495 | 486 | 463 | 434 | |||||||
Agricultural Equipment | 200 | to | 215 | 202 | 193 | 202 | |||||||
Construction/Mining Equipment | 310 | to | 330 | 309 | 290 | 299 | |||||||
South America | |||||||||||||
Light Truck | 1,300 | to | 1,500 | 1,235 | 980 | 940 | |||||||
Light Vehicle Engines | 2,650 | to | 2,750 | 2,412 | 2,112 | 2,439 | |||||||
Medium/Heavy Truck | 90 | to | 100 | 89 | 70 | 88 | |||||||
Agricultural Equipment | 30 | to | 35 | 33 | 29 | 32 | |||||||
Construction/Mining Equipment | 8 | to | 12 | 9 | 10 | 13 | |||||||
Asia-Pacific | |||||||||||||
Light Truck | 29,800 | to | 31,000 | 29,495 | 27,465 | 24,160 | |||||||
Light Vehicle Engines | 52,500 | to | 53,500 | 52,543 | 50,533 | 47,209 | |||||||
Medium/Heavy Truck | 1,850 | to | 2,050 | 2,039 | 1,661 | 1,383 | |||||||
Agricultural Equipment | 650 | to | 680 | 653 | 648 | 676 | |||||||
Construction/Mining Equipment | 445 | to | 465 | 441 | 396 | 405 |
We serve our customers in three core global end markets: light vehicle, primarily full frame trucks and SUVs; commercial vehicle, including medium-and heavy-duty trucks and busses; and off-highway, including construction, mining, and agriculture equipment.
In 2020, all of our end-markets were impacted to varying degrees by the global COVID-19 pandemic, which initially resulted in lower demand driven by production shutdowns related to virus mitigation efforts in the regions we serve. Each of our end-markets has unique cyclical dynamics and market drivers. These cycles are impacted by periods of investment where end-user vehicle fleets are refreshed or expanded in reaction to demand usage patterns, regulatory changes, or when the age of vehicles in service reach their useful life. Key market drivers include regional economic growth rates; industrial output; commodity production and pricing; and residential and nonresidential construction rates. Our multi-market coverage and broad customer base help provide stability across the cycles while mitigating secular variability.
Light vehicle markets
—Commercial vehicle markets — Our primary business is driveline systems for medium and heavy-duty trucks and busses, including the emerging market for hybrid and electric vehicles. Key regional markets are North America, South America (primarily Brazil) and Asia Pacific. The Class-8 truck market in North America continue to be relatively favorable with improving employment levels and upward trending consumer confidence. After increasing by about 1%has experienced steady growth from 2017 through 2019, peaking at 345,000 trucks produced in 2016 from 2015,2019. Production of Class-8 trucks in 2020 was 38% below the North America light vehicle market begun to show signs of weakening demand levels this past year as strong sales levels the past few years have significantly reduced the built-up demand to replace older vehicles. As such, 2017 light vehicle sales declined about 2% from 2016. Within the light vehicle segment, passenger car sales declined around 5%record production in 2016, and another 9% in 2017. In part2019 due to comparatively low fuel prices when compared with recent years,normal cycle dynamics and the impact of COVID-19. The outlook for 2021 is for stronger demand for light trucks and SUVs continued to be strong, increasing about 7% in 2016 and 4% in 2017. Many of our customer programs are focused in the full frame light truck segment. Sales in this segment increased 6% in 2016 and another 3% in 2017. Production levels were generally reflective of light vehicle sales. Production of 17.8 million light vehicles in 2016 was 2% higher than 2015, with 2017 light vehicle production coming in at approximately 17.1 million units – down 4% from 2016. Light vehicle engine production was impacted more by the developments in the passenger car segment, with production in 2017 declining about 7% versus
Medium-duty truck segment, production levels in 2017 increased about 3% compared to 2016 following an increase of 7% in 2016 from the preceding year. Days’ supply of total light vehicles in the U.S. at the end of December the past three years has been around 61 to 62 days. In the full frame light truck segment, days supply in inventory at December 31, 2017 approximated 64 days, down slightly from 65 days at December 31, 2016 and up from 62 days at the end of December 2015.
Off-highway markets — Our off-highway business has a large presence outside of North America, with approximately 75%64% of its 2020 sales coming from Europe and 15% from South America and Asia Pacific combined. We serve several segmentsproducts manufactured in Europe; however, a large portion of these products are utilized in vehicle production outside the region. The construction equipment segment of the diverse off-highway market includingis closely related to global economic growth and infrastructure investment. This segment has experienced a 5% market contraction, which began in late 2018 and further accelerated due to COVID-19, with 2020 production ending down an additional 10%. The 2021 outlook has production demand in the global construction agriculture,market rebounding by 5% over the prior year. End-user investment in the mining and material handling. Our largest markets are the construction/equipment segment is driven by prices for commodity products produced by underground mining. The global mining and agricultural equipment segments which havemarket has been relatively weakmostly stable over the past few years. Global demandseveral years as industry participants have maintained vehicle inventory levels to match commodity output, and this trend is expected to continue in 2021. The agriculture equipment market is the agriculture market was down about 11% in 2014, 7% in 2015 and 5% in 2016. The construction/third of our key off-highway segments. Like the underground mining segment, weakened about 4%investment in 2014, 11%agriculture equipment is primarily driven by prices for farm commodities. From 2018 to 2019, global demand for agriculture equipment fell by 3% due to a slump in 2015 and 3% in 2016. These markets began to rebound in 2017 along with general economic recovery in several global markets, and in particular the European markets where this segment has a significant presence. During 2017, global production levels in the construction/mining and agriculture segments increased by about 8% and 2%. Consistent with expectations for improving global economic conditions, we expect that off-highway market demand will increase in 2018. Our 2018 outlook hascommodity prices. As prices have remained low, production in 2020 fell an additional 7%. The outlook for 2021 is for end-market demand to improve by 5% compared to the construction/mining segment increasing about 1prior year, as farm subsidies in response to 7%the global pandemic have bolstered the commodity market and is expected to drive the agriculture segment being down 1% to up 5% from 2017.
Foreign Currency
Argentina has experienced significant inflationary pressures the past few years, contributing to significant devaluation of its currency among other economic challenges. Our Argentine peso. Based onoperation supports our currentLight Vehicle operating segment. Our sales in Argentina for 2020 of approximately $78 are 1% of our consolidated sales and exchange rate outlook forour net asset exposure related to Argentina was approximately $21, including $5 of net fixed assets, at December 31, 2020. During the second quarter of 2018, we expect overall stability in international currencies withdetermined that Argentina's economy met the GAAP definition of a modest reduction to sales. At sales levels in our current outlook for 2018, a 5% movement on the euro would impact our annual sales by approximately $100. A 5% change on the Brazilian real, Thai baht, Mexican peso and Chinese yuan rates would impact our annual sales in each of those countries by approximately $10 to $20.
Commodity Costs
Sales, Earnings and Cash Flow Outlook
2018 Outlook | 2017 | 2016 | 2015 | ||||||||||
Sales | $7,500 - $7,700 | $ | 7,209 | $ | 5,826 | $ | 6,060 | ||||||
Adjusted EBITDA | $910 - $960 | $ | 835 | $ | 660 | $ | 652 | ||||||
Net cash provided by operating activities | ~7.5% of Sales | $ | 554 | $ | 384 | $ | 406 | ||||||
Purchases of property, plant and equipment | ~4.0% of Sales | $ | 393 | $ | 322 | $ | 260 | ||||||
Free Cash Flow | ~3.5% of Sales | $ | 161 | $ | 62 | $ | 146 |
2021 | ||||||||||||||||
Outlook* | 2020 | 2019 | 2018 | |||||||||||||
Sales | $8,050 - $8,550 | $ | 7,106 | $ | 8,620 | $ | 8,143 | |||||||||
Adjusted EBITDA | $860 - $960 | $ | 593 | $ | 1,019 | $ | 957 | |||||||||
Net cash provided by operating activities | ~7.5% of sales | $ | 386 | $ | 637 | $ | 568 | |||||||||
Discretionary pension contributions | $— | $ | — | $ | 61 | $ | — | |||||||||
Purchases of property, plant and equipment | ~4.5% of sales | $ | 326 | $ | 426 | $ | 325 | |||||||||
Adjusted Free Cash Flow | ~3.0% of sales | $ | 60 | $ | 272 | $ | 243 |
* Our 2021 outlook does not include our pending acquisition of a portion of the thermal-management business of Modine Manufacturing Company, as the timing of closing the transaction is uncertain.
Adjusted EBITDA and Free Cash Flowadjusted free cash flow are non-GAAP financial measures. See the Non-GAAP Financial Measures discussion below for definitions of our non-GAAP financial measures and reconciliations to the most directly comparable U.S. generally accepted accounting principles (GAAP) measures. We have not provided a reconciliation of our adjusted EBITDA outlook to the most comparable GAAP measure of net income. Providing net income guidance is potentially misleading and not practical given the difficulty of projecting event driven transactional and other non-core operating items that are included in net income, including restructuring actions, asset impairments and certain income tax adjustments. The accompanying reconciliations of these non-GAAP measures with the most comparable GAAP measures for the historical periods presented are indicative of the reconciliations that will be prepared upon completion of the periods covered by the non-GAAP guidance.
Our 2021 sales outlook is $8,050 to $8,550, reflecting improving post-pandemic global market demand and $500 of net new business backlog. Based on our current sales and exchange rate outlook for 2021, we expect overall stability in total sales in 2015 and 2016 due to weaker international currencies relative to the U.S. dollar. For these two years combined, currency translation effects reduced sales by $689. Adjusted for currency and divestiture effects, sales in these years were relatively comparable, with new customer programs largely offsetting the impacts of overall weaker end user demand across our global businesses. We experienced uneven end user markets, with some being relatively strong and
Among our Operationaloperational and Strategic Initiativesstrategic initiatives are increased focus on and investment in product technology – delivering products and technology that are key to bringing solutions to issues of paramount importance to our customers. Our success on this front is measured, in part, by our sales backlog – net new business received that will be launching in the future and adding to our base annual sales. This backlog excludes replacement business and represents incremental sales associated with new programs for which we have received formal customer awards. At December 31, 2017,2020, our sales backlog of net new business for the 20182021 through 20202022 period was $800, a 7% increase from the $750 three-year$700. We expect to realize $500 of our sales backlog that existed at the end of 2016. The increased three-yearin 2021, with incremental sales backlog at December 31, 2017 reflects continued new business wins, as the expected impact of revised market volumes$200 being realized in 2022. Our sales backlog is evenly balanced between electric-vehicle and currency effects were minimal.traditional ICE-vehicle content.
Consolidated Results of Operations
Summary Consolidated Results of Operations (2017(2020 versus 2016)
2017 | 2016 | ||||||||||||||||
Dollars | % of Net Sales | Dollars | % of Net Sales | Increase/ (Decrease) | |||||||||||||
Net sales | $ | 7,209 | $ | 5,826 | $ | 1,383 | |||||||||||
Cost of sales | 6,147 | 85.3 | % | 4,982 | 85.5 | % | 1,165 | ||||||||||
Gross margin | 1,062 | 14.7 | % | 844 | 14.5 | % | 218 | ||||||||||
Selling, general and administrative expenses | 511 | 7.1 | % | 406 | 7.0 | % | 105 | ||||||||||
Amortization of intangibles | 11 | 8 | 3 | ||||||||||||||
Restructuring charges, net | 14 | 36 | (22 | ) | |||||||||||||
Loss on disposal group held for sale | (27 | ) | (27 | ) | |||||||||||||
Loss on sale of subsidiaries | (80 | ) | 80 | ||||||||||||||
Other income (expense), net | (9 | ) | 18 | (27 | ) | ||||||||||||
Earnings before interest and income taxes | 490 | 332 | 158 | ||||||||||||||
Loss on extinguishment of debt | (19 | ) | (17 | ) | (2 | ) | |||||||||||
Interest income | 11 | 13 | (2 | ) | |||||||||||||
Interest expense | 102 | 113 | (11 | ) | |||||||||||||
Earnings before income taxes | 380 | 215 | 165 | ||||||||||||||
Income tax expense (benefit) | 283 | (424 | ) | 707 | |||||||||||||
Equity in earnings of affiliates | 19 | 14 | 5 | ||||||||||||||
Net income | 116 | 653 | (537 | ) | |||||||||||||
Less: Noncontrolling interests net income | 10 | 13 | (3 | ) | |||||||||||||
Less: Redeemable noncontrolling interests net loss | (5 | ) | (5 | ) | |||||||||||||
Net income attributable to the parent company | $ | 111 | $ | 640 | $ | (529 | ) |
2020 | 2019 | |||||||||||||||||||
% of | % of | Increase/ | ||||||||||||||||||
Dollars | Net Sales | Dollars | Net Sales | (Decrease) | ||||||||||||||||
Net sales | $ | 7,106 | $ | 8,620 | $ | (1,514 | ) | |||||||||||||
Cost of sales | 6,485 | 91.3 | % | 7,489 | 86.9 | % | (1,004 | ) | ||||||||||||
Gross margin | 621 | 8.7 | % | 1,131 | 13.1 | % | (510 | ) | ||||||||||||
Selling, general and administrative expenses | 421 | 5.9 | % | 508 | 5.9 | % | (87 | ) | ||||||||||||
Amortization of intangibles | 13 | 12 | 1 | |||||||||||||||||
Restructuring charges, net | 34 | 29 | 5 | |||||||||||||||||
Impairment of goodwill | (51 | ) | (6 | ) | (45 | ) | ||||||||||||||
Pension settlement charges | (259 | ) | 259 | |||||||||||||||||
Other income (expense), net | 22 | (25 | ) | 47 | ||||||||||||||||
Earnings before interest and income taxes | 124 | 292 | (168 | ) | ||||||||||||||||
Loss on extinguishment of debt | (8 | ) | (9 | ) | 1 | |||||||||||||||
Interest income | 9 | 10 | (1 | ) | ||||||||||||||||
Interest expense | 138 | 122 | 16 | |||||||||||||||||
Earnings (loss) before income taxes | (13 | ) | 171 | (184 | ) | |||||||||||||||
Income tax expense (benefit) | 58 | (32 | ) | 90 | ||||||||||||||||
Equity in earnings of affiliates | 20 | 30 | (10 | ) | ||||||||||||||||
Net income (loss) | (51 | ) | 233 | (284 | ) | |||||||||||||||
Less: Noncontrolling interests net income | 10 | 13 | (3 | ) | ||||||||||||||||
Less: Redeemable noncontrolling interests net loss | (30 | ) | (6 | ) | (24 | ) | ||||||||||||||
Net income (loss) attributable to the parent company | $ | (31 | ) | $ | 226 | $ | (257 | ) |
Sales
— The following table shows changes in our sales by geographic region.Amount of Change Due To | |||||||||||||||||||||||
2017 | 2016 | Increase/ (Decrease) | Currency Effects | Acquisitions (Divestitures) | Organic Change | ||||||||||||||||||
North America | $ | 3,688 | $ | 3,128 | $ | 560 | $ | (1 | ) | $ | 127 | $ | 434 | ||||||||||
Europe | 2,154 | 1,616 | 538 | 35 | 294 | 209 | |||||||||||||||||
South America | 500 | 338 | 162 | 3 | 54 | 105 | |||||||||||||||||
Asia Pacific | 867 | 744 | 123 | 17 | 25 | 81 | |||||||||||||||||
Total | $ | 7,209 | $ | 5,826 | $ | 1,383 | $ | 54 | $ | 500 | $ | 829 |
Amount of Change Due To | ||||||||||||||||||||||||
Increase/ | Currency | Acquisitions | Organic | |||||||||||||||||||||
2020 | 2019 | (Decrease) | Effects | (Divestitures) | Change | |||||||||||||||||||
North America | $ | 3,602 | $ | 4,473 | $ | (871 | ) | $ | (1 | ) | $ | 30 | $ | (900 | ) | |||||||||
Europe | 2,209 | 2,606 | (397 | ) | 32 | 66 | (495 | ) | ||||||||||||||||
South America | 358 | 509 | (151 | ) | (73 | ) | (78 | ) | ||||||||||||||||
Asia Pacific | 937 | 1,032 | (95 | ) | (11 | ) | 29 | (113 | ) | |||||||||||||||
Total | $ | 7,106 | $ | 8,620 | $ | (1,514 | ) | $ | (53 | ) | $ | 125 | $ | (1,586 | ) |
Sales in 20172020 were $1,383 higher$1,514 lower than in 2016. Stronger2019. Weaker international currencies increaseddecreased sales by $54.$53, principally due to a weaker Brazilian real, South African rand and Indian rupee, partially offset by a stronger euro. The acquisitions of BFP, BPT, SIFCO, USM – WarrenODS in last year's first quarter, PEPS in last year's second quarter and MagnumAshwoods in 2016 and 2017this year's first quarter, generated a year-over-year increase in sales of $542, with the divestiture of Nippon Reinz resulting in a reduction of $42.$125. The organic sales increasedecrease of $829$1,586, or 18%, resulted primarily from strongerweaker light and medium/heavy truck markets strengtheningand lower global off-highway demand stronger medium/heavy truckin January and February 2020 and the rapid dissipation in production volumes across all of our end markets beginning in EuropeMarch 2020 as a result of the global COVID-19 pandemic. The impact of the global COVID-19 pandemic on our operations as well as those of our customers, suppliers and South America,the global supply chains in which we participate, was most notable during April 2020, with a measured ramp up in production beginning in May followed by a rapid increase in customer demand through the third quarter. Sales in the fourth quarter of 2020 were $121 higher than the same period of 2019, primarily due to strong customer demand in, and contributions from new business.the conversion of sales backlog by, our Light Vehicle operating segment. The conversion of sales backlog contributed $348 on a full-year basis, while pricing actions, including material commodity price and inflationary cost adjustments, reduced sales by $80.
The North America sales increase from acquisitions in 2017 relates primarily to the USM – Warren purchase, with a lesser amount being added by the BFP, BPT and Magnum transactions. The organic sales increasedecrease of 14%20% was driven principally by strongerweaker light and medium/heavy duty truck production levels on certainvolumes resulting from the global COVID-19 pandemic, partially offset by the conversion of our keysales backlog. Full frame light truck programs,production was down 20% during 2020 while production of Class 8 and Classes 5-7 trucks were down 38% and 20%, respectively.
Excluding currency and acquisition effects, sales in Europe were down 19% compared with stronger2019. With our significant Off-Highway presence in the region, weakening construction/mining and agricultural markets due to the global COVID-19 pandemic were a major factor. Organic sales in this operating segment were down 22% compared with 2019.
Excluding currency effects, sales in South America decreased 15% compared to 2019 primarily due to the global COVID-19 pandemic. Medium/heavy truck production was down 22% and light truck production was down 17% compared to 2019.
Excluding currency and acquisition effects, sales in Asia Pacific decreased about 11% as China's economy showed signs of weakening even before the onset of the COVID-19 pandemic. Light truck and light vehicle engine production were down 9% and 13%, respectively, while medium/heavy truck production and off-highway demand levels also providing some contribution.
Cost of sales and gross margin
— Cost of sales forGross margin of $1,062$621 for 2017 increased $2182020 decreased $510 from 2016.2019. Gross margin as a percent of sales was 14.7%8.7% in 2017, 202020, 440 basis points higherlower than in 2016. Acquisitions net of divestitures added $76 of gross margin.2019. The decline in margin improvement as a percent of sales was driven principally by the cost of sales factors referenced above.
Selling, general and administrative expenses (SG&A)
— SG&A expenses inAmortization of intangibles
— Amortization expense was $13 in 2020 and $12 in 2019. The increaseRestructuring charges, net
—Impairment of goodwill — During the first quarter of 2020, we recorded a discussion$51 goodwill impairment charge. During the fourth quarter of 2019, we wrote off the pending divestituregoodwill recognized as part of our Brazil suspension components business.
Pension settlement charges — During 2019, we recorded a discussion$256 settlement charge related to the termination of one of our U.S. defined benefit pension plans and a $3 settlement charge related to the 2016 divestiturestermination of DCLLC and Nippon Reinz.
Other income (expense), net
— The following table shows the major components of other income (expense), net.2017 | 2016 | ||||||
Government grants and incentives | $ | 7 | $ | 8 | |||
Foreign exchange loss | (3 | ) | (3 | ) | |||
Strategic transaction expenses | (25 | ) | (13 | ) | |||
Insurance and other recoveries | 10 | ||||||
Gain on sale of marketable securities | 7 | ||||||
Amounts attributable to previously divested/closed operations | 3 | ||||||
Other, net | 9 | 9 | |||||
Other income (expense), net | $ | (9 | ) | $ | 18 |
2020 | 2019 | |||||||
Non-service cost components of pension and OPEB costs | $ | (10 | ) | $ | (23 | ) | ||
Government grants and incentives | 14 | 15 | ||||||
Foreign exchange loss | 8 | (11 | ) | |||||
Strategic transaction expenses | (20 | ) | (41 | ) | ||||
Gain on investment in Hyliion | 33 | |||||||
Non-income tax legal judgment | 6 | |||||||
Gain on liquidation of foreign subsidiary | 12 | |||||||
Other, net | (3 | ) | 17 | |||||
Other income (expense), net | $ | 22 | $ | (25 | ) |
Strategic transaction expenses in 2017 is2020 were primarily attributable to costs incurredthe acquisition of ODS and Nordresa and certain other strategic initiatives. Strategic transaction expenses in connection2019 were primarily attributable to the acquisition of ODS. We held $16 of convertible notes receivable from our investment in Hyliion Inc. On October 1, 2020, Hyliion Inc. completed its merger with acquiringTortoise Acquisition Corp. The business combination resulted in the combined company being renamed Hyliion Holdings Corp. (Hyliion), with its common stock being listed on the New York Stock Exchange under the ticker symbol HYLN. Effective with the completed merger, our notes receivable were converted into 2,988,229 common shares of HYLN. Our investment in Hyliion will be included in noncurrent marketable securities and integrating the BFP, BPT and USM businesses beginningcarried at fair value with changes in fair value included in net income in future periods. During the first quarter of 2017. Amounts2019, we won a legal judgment regarding the methodology used to calculate PIS/COFINS tax on imports into Brazil. During the fourth quarter of 2019, we liquidated a foreign subsidiary. The resulting non-cash gain is attributable to previously divested/closed operations in 2017 includes the receiptrecognition of the remaining proceeds on our December 2016 divestiture of DCLLC.accumulated currency translation adjustments. See Note 19 toof our consolidated financial statements in Item 8 for additional information. In 2016, DCLLC received a recovery of $8 of costs previously incurred on behalf of other participants in a consortium that existed to administer certain legacy personal injury claims and realized gains of $7 from the sale of portfolio investments.
Loss on extinguishment of debt
—Interest income and interest expense — Interest income was $9 in combination with cross-currency swaps effectively resulted2020 and $10 in euro-denominated obligations at lower interest rates.2019. Interest expense increased from $122 in 2019 to $138 in 2020 due to higher average debt levels in 2020. The increase in average debt levels is primarily attributable to outstanding borrowings under the Revolving Facility during the first half of 2020 and the issuances of $400 of our June 2028 Notes and an additional $100 of our November 2027 Notes in June 2020. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.5%5.0% in both 2020 and 6.5% in 2017 and 2016.
Income tax expense (benefit)
— Income taxes were an expense ofIn countries where our history of operating losses does not allow us to satisfy the “more likely than not” criterion for
Sales | Segment EBITDA | Segment EBITDA Margin | |||||||||
2016 | $ | 2,607 | $ | 279 | 10.7 | % | |||||
Volume and mix | 452 | 92 | |||||||||
Acquisition | 96 | 12 | |||||||||
Performance | 14 | (22 | ) | ||||||||
Currency effects | 3 | (2 | ) | ||||||||
2017 | $ | 3,172 | $ | 359 | 11.3 | % |
Sales | Segment EBITDA | Segment EBITDA Margin | |||||||||
2016 | $ | 1,254 | $ | 96 | 7.7 | % | |||||
Volume and mix | 81 | 20 | |||||||||
Acquisition | 44 | 1 | |||||||||
Performance | 12 | 6 | |||||||||
Currency effects | 21 | (7 | ) | ||||||||
2017 | $ | 1,412 | $ | 116 | 8.2 | % |
Sales | Segment EBITDA | Segment EBITDA Margin | |||||||||
2016 | $ | 909 | $ | 129 | 14.2 | % | |||||
Volume and mix | 202 | 41 | |||||||||
Acquisition | 401 | 40 | |||||||||
Performance | (10 | ) | (1 | ) | |||||||
Currency effects | 19 | 3 | |||||||||
2017 | $ | 1,521 | $ | 212 | 13.9 | % |
Sales | Segment EBITDA | Segment EBITDA Margin | |||||||||
2016 | $ | 1,056 | $ | 158 | 15.0 | % | |||||
Volume and mix | 83 | 26 | |||||||||
Divestiture | (41 | ) | (5 | ) | |||||||
Performance | (5 | ) | (12 | ) | |||||||
Currency effects | 11 | 1 | |||||||||
2017 | $ | 1,104 | $ | 168 | 15.2 | % |
2016 | 2015 | ||||||||||||||||
Dollars | % of Net Sales | Dollars | % of Net Sales | Increase/ (Decrease) | |||||||||||||
Net sales | $ | 5,826 | $ | 6,060 | $ | (234 | ) | ||||||||||
Cost of sales | 4,982 | 85.5 | % | 5,211 | 86.0 | % | (229 | ) | |||||||||
Gross margin | 844 | 14.5 | % | 849 | 14.0 | % | (5 | ) | |||||||||
Selling, general and administrative expenses | 406 | 7.0 | % | 391 | 6.5 | % | 15 | ||||||||||
Amortization of intangibles | 8 | 14 | (6 | ) | |||||||||||||
Restructuring charges, net | 36 | 15 | 21 | ||||||||||||||
Loss on sale of subsidiaries | (80 | ) | (80 | ) | |||||||||||||
Impairment of long-lived assets | (36 | ) | 36 | ||||||||||||||
Other income, net | 18 | 1 | 17 | ||||||||||||||
Earnings before interest and income taxes | 332 | 394 | (62 | ) | |||||||||||||
Loss on extinguishment of debt | (17 | ) | (2 | ) | (15 | ) | |||||||||||
Interest income | 13 | 13 | — | ||||||||||||||
Interest expense | 113 | 113 | — | ||||||||||||||
Earnings from continuing operations before income taxes | 215 | 292 | (77 | ) | |||||||||||||
Income tax expense (benefit) | (424 | ) | 82 | (506 | ) | ||||||||||||
Equity in earnings (losses) of affiliates | 14 | (34 | ) | 48 | |||||||||||||
Income from continuing operations | 653 | 176 | 477 | ||||||||||||||
Income from discontinued operations | 4 | (4 | ) | ||||||||||||||
Net income | 653 | 180 | 473 | ||||||||||||||
Less: Noncontrolling interests net income | 13 | 21 | (8 | ) | |||||||||||||
Net income attributable to the parent company | $ | 640 | $ | 159 | $ | 481 |
Amount of Change Due To | |||||||||||||||||||||||
2016 | 2015 | Increase/ (Decrease) | Currency Effects | Acquisitions (Divestitures) | Organic Change | ||||||||||||||||||
North America | $ | 3,128 | $ | 3,210 | $ | (82 | ) | $ | (24 | ) | $ | 7 | $ | (65 | ) | ||||||||
Europe | 1,616 | 1,723 | (107 | ) | (44 | ) | (63 | ) | |||||||||||||||
South America | 338 | 377 | (39 | ) | (82 | ) | 43 | ||||||||||||||||
Asia Pacific | 744 | 750 | (6 | ) | (23 | ) | (3 | ) | 20 | ||||||||||||||
Total | $ | 5,826 | $ | 6,060 | $ | (234 | ) | $ | (173 | ) | $ | 4 | $ | (65 | ) |
2016 | 2015 | ||||||
Government grants and incentives | $ | 8 | $ | 3 | |||
Foreign exchange loss | (3 | ) | (20 | ) | |||
Gain on derecognition of noncontrolling interest | 5 | ||||||
Strategic transaction expenses | (13 | ) | (4 | ) | |||
Insurance and other recoveries | 10 | 4 | |||||
Gain on sale of marketable securities | 7 | 1 | |||||
Amounts attributable to previously divested/closed operations | 1 | ||||||
Other, net | 9 | 11 | |||||
Other income (expense), net | $ | 18 | $ | 1 |
Equity in earnings (losses) of affiliates
Segment Results of Operations (2016(2020 versus 2015)
Light Vehicle
Sales | Segment EBITDA | Segment EBITDA Margin | ||||||||
2015 | $ | 2,482 | $ | 262 | 10.6 | % | ||||
Volume and mix | 235 | 37 | ||||||||
Performance | 31 | (4 | ) | |||||||
Currency effects | (141 | ) | (16 | ) | ||||||
2016 | $ | 2,607 | $ | 279 | 10.7 | % |
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2019 | $ | 3,609 | $ | 438 | 12.1 | % | ||||||
Volume and mix | (495 | ) | (140 | ) | ||||||||
Performance | (61 | ) | (59 | ) | ||||||||
Currency effects | (15 | ) | ||||||||||
2020 | $ | 3,038 | $ | 239 | 7.9 | % |
Light Vehicle sales in 2016 were reduced by currency translation effects, primarily as a result of a weaker Mexico peso, Argentina peso, Thailand baht, South Africa rand and British pound sterling. Sales,2020, exclusive of currency effects, were 11% higher15% lower than in 2015. The volume-related increases were driven primarily by stronger production levels. North America2019. Full year 2020 full frame light truck production declined in 2016North America, Europe, South America, and Asia Pacific by 20%, 20%, 17%, and 9%, respectively, compared to 2019. Full frame light truck production rapidly dissipated across all regions beginning in March 2020 as a result of the global COVID-19 pandemic. The impact of the global COVID-19 pandemic on our Light Vehicle operations was most notable during April 2020, with a measured ramp up 7%, while lightin production beginning in May followed by a rapid increase in customer demand through the third quarter. Light Vehicle sales in the fourth quarter of 2020, exclusive of currency effects, were $135 higher than the fourth quarter of 2019 primary due to the conversion of sales backlog and continued strengthening of customer demand. Net customer pricing and cost recovery actions further decreased year-over-year sales by $49.
Light Vehicle segment EBITDA decreased by $199 in 2020. Lower sales volumes provided a year-over-year headwind of $140 (28.3% decremental margin) as actions to flex down our cost structure during the second quarter of 2020 lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. Performance during the third and fourth quarters was negatively impacted by taking a number of our Light Vehicle plants from being idled just a few months prior to running at full capacity. The year-over-year performance-related earnings decline was driven by operational inefficiencies of $86, lower net pricing and material cost recovery of $49 and incremental safety costs of $2 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment. Partially offsetting these performance-related earnings decreases were material cost savings of $32, commodity cost decreases of $26, lower salaried employee wages of $10, certain benefits of the CARES Act of $5, lower incentive compensation of $3 and lower warranty expense of $2.
Commercial Vehicle
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2019 | $ | 1,611 | $ | 138 | 8.6 | % | ||||||
Volume and mix | (378 | ) | (98 | ) | ||||||||
Acquisition / Divestiture | 8 | (7 | ) | |||||||||
Performance | (11 | ) | 6 | |||||||||
Currency effects | (49 | ) | (3 | ) | ||||||||
2020 | $ | 1,181 | $ | 36 | 3.0 | % |
Commercial Vehicle sales in 2020, exclusive of currency effects and the impact of acquisitions, were 24% lower than 2019. Declining market conditions coming out of 2019 deteriorated further with the rapid dissipation in customer demand resulting from the global COVID-19 pandemic. Full year North America Class 8 production was down 38% and Classes 5-7 production was down 20% from 2019. Year-over-year medium/heavy truck production in Europe and South America were down 30% and 22%, respectively. Asia Pacific was strongerimpacted by 9% andthe global COVID-19 pandemic earlier than the other regions, with its most significant year-over-year production decline occurring during the first quarter of 2020. Asia Pacific medium/heavy truck production was up 12% compared to 2015. Sales in this segment also benefited from new2019. Net customer programs, including $45 relating to a program previously supportedpricing and cost recovery actions further decreased year-over-year sales by our $12.
Commercial Vehicle segment that moved to Light VehicleEBITDA decreased by $102 in 2016 when the axle used to support the program was replaced with an axle produced by the Light Vehicle segment. Cost recovery actions, including inflationary cost recovery in Argentina, were the primary drivers of the sales increase categorized as performance.
Sales | Segment EBITDA | Segment EBITDA Margin | ||||||||
2015 | $ | 1,533 | $ | 100 | 6.5 | % | ||||
Volume and mix | (265 | ) | (52 | ) | ||||||
Performance | 3 | 52 | ||||||||
Currency effects | (17 | ) | (4 | ) | ||||||
2016 | $ | 1,254 | $ | 96 | 7.7 | % |
Off-Highway
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2019 | $ | 2,360 | $ | 330 | 14.0 | % | ||||||
Volume and mix | (498 | ) | (115 | ) | ||||||||
Acquisition | 117 | 22 | ||||||||||
Performance | (15 | ) | (3 | ) | ||||||||
Currency effects | 6 | |||||||||||
2020 | $ | 1,970 | $ | 234 | 11.9 | % |
Off-Highway sales in 2020, exclusive of currency effects and the impact of the ODS and Ashwoods acquisitions, were 22% lower than 2019. Already declining global construction/mining and agricultural equipment markets coming out of 2019 deteriorated further with the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. Net customer pricing and cost reductions of $12.
Sales | Segment EBITDA | Segment EBITDA Margin | ||||||||
2015 | $ | 1,040 | $ | 147 | 14.1 | % | ||||
Volume and mix | (110 | ) | (31 | ) | ||||||
Performance | (11 | ) | 11 | |||||||
Currency effects | (10 | ) | 2 | |||||||
2016 | $ | 909 | $ | 129 | 14.2 | % |
Off-Highway segment EBITDA of $129decreased by $96 in 2016 was down $18 from 2015. The impact of lower2020. Lower sales volumes on segment EBITDA was partially offset byprovided a year-over-year headwind of $115 (23.1% decremental margin) as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. The year-over-year performance-related earnings improvement, principally from year-over-yeardecline was driven by operating inefficiencies of $23, lower net pricing and material recovery of $15, incremental safety costs of $4 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment and higher incentive compensation of $1. Partially offsetting these performance-related earnings decreases were material cost savings of $17$22, commodity cost decreases of $8, lower salaried employee wages of $8, certain benefits of the CARES Act of $1 and other net cost reductionslower warranty expense of $5 which were partially offset by pricing actions of $11.
Power Technologies
Sales | Segment EBITDA | Segment EBITDA Margin | ||||||||
2015 | $ | 1,005 | $ | 149 | 14.8 | % | ||||
Volume and mix | 69 | 17 | ||||||||
Performance | (13 | ) | (6 | ) | ||||||
Currency effects | (5 | ) | (2 | ) | ||||||
2016 | $ | 1,056 | $ | 158 | 15.0 | % |
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2019 | $ | 1,040 | $ | 117 | 11.3 | % | ||||||
Volume and mix | (124 | ) | (39 | ) | ||||||||
Performance | (4 | ) | 16 | |||||||||
Currency effects | 5 | |||||||||||
2020 | $ | 917 | $ | 94 | 10.3 | % |
Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-highway markets. Net of currency effects, sales in 2016 increased about 5%for 2020 were 12% lower than 2020, primarily due to strongerlower market demand. Lightdemand resulting from the global COVID-19 pandemic. Full year 2020 light vehicle engine buildproduction declined in North America, Europe and Asia Pacific by 18%, 22% and 13%, respectively, compared to 2019. Net customer pricing and cost reduction actions further decreased year-over-year sales by $4.
Power Technologies segment EBITDA decreased by $23 in 2020. Lower sales volumes provided a year-over-year headwind of $39 (31.5% decremental margin) as actions to flex down our cost structure lagged the rapid dissipation of customer demand resulting from the global COVID-19 pandemic. The year-over-year performance-related earnings increase was driven by operational efficiencies of $9, lower salaried employee wages of $9, material cost savings of $7 and certain benefits of the CARES Act of $1. Partially offsetting these performance-related earnings increases were lower net pricing and material recovery of $4, higher warranty expense of $3, incremental safety costs of $2 directly related to the global COVID-19 pandemic, including facility sanitization and personal protective equipment and higher incentive compensation of $1.
Summary Consolidated Results of Operations (2019 versus 2018)
2019 | 2018 | |||||||||||||||||||
% of | % of | Increase/ | ||||||||||||||||||
Dollars | Net Sales | Dollars | Net Sales | (Decrease) | ||||||||||||||||
Net sales | $ | 8,620 | $ | 8,143 | $ | 477 | ||||||||||||||
Cost of sales | 7,489 | 86.9 | % | 6,986 | 85.8 | % | 503 | |||||||||||||
Gross margin | 1,131 | 13.1 | % | 1,157 | 14.2 | % | (26 | ) | ||||||||||||
Selling, general and administrative expenses | 508 | 5.9 | % | 499 | 6.1 | % | 9 | |||||||||||||
Amortization of intangibles | 12 | 8 | 4 | |||||||||||||||||
Restructuring charges, net | 29 | 25 | 4 | |||||||||||||||||
Impairment of goodwill and indefinite-lived intangible asset | (6 | ) | (20 | ) | 14 | |||||||||||||||
Gain on disposal group held for sale | 3 | (3 | ) | |||||||||||||||||
Pension settlement charges | (259 | ) | (259 | ) | ||||||||||||||||
Other income (expense), net | (25 | ) | (29 | ) | 4 | |||||||||||||||
Earnings before interest and income taxes | 292 | 579 | (287 | ) | ||||||||||||||||
Loss on extinguishment of debt | (9 | ) | (9 | ) | ||||||||||||||||
Interest income | 10 | 11 | (1 | ) | ||||||||||||||||
Interest expense | 122 | 96 | 26 | |||||||||||||||||
Earnings before income taxes | 171 | 494 | (323 | ) | ||||||||||||||||
Income tax expense (benefit) | (32 | ) | 78 | (110 | ) | |||||||||||||||
Equity in earnings of affiliates | 30 | 24 | 6 | |||||||||||||||||
Net income | 233 | 440 | (207 | ) | ||||||||||||||||
Less: Noncontrolling interests net income | 13 | 13 | — | |||||||||||||||||
Less: Redeemable noncontrolling interests net loss | (6 | ) | (6 | ) | ||||||||||||||||
Net income attributable to the parent company | $ | 226 | $ | 427 | $ | (201 | ) |
Sales — The following table shows changes in our sales by geographic region.
Amount of Change Due To | ||||||||||||||||||||||||
Increase/ | Currency | Acquisitions | Organic | |||||||||||||||||||||
2019 | 2018 | (Decrease) | Effects | (Divestitures) | Change | |||||||||||||||||||
North America | $ | 4,473 | $ | 4,106 | $ | 367 | $ | (3 | ) | $ | 196 | $ | 174 | |||||||||||
Europe | 2,606 | 2,484 | 122 | (129 | ) | 322 | (71 | ) | ||||||||||||||||
South America | 509 | 546 | (37 | ) | (31 | ) | (13 | ) | 7 | |||||||||||||||
Asia Pacific | 1,032 | 1,007 | 25 | (14 | ) | 149 | (110 | ) | ||||||||||||||||
Total | $ | 8,620 | $ | 8,143 | $ | 477 | $ | (177 | ) | $ | 654 | $ | — |
Sales in 2019 were $477 higher than in 2018. Weaker international currencies decreased sales by $177, principally due to a weaker euro, Brazilian real, South African rand, Chinese renminbi and Indian rupee. The acquisitions of ODS and SME in the first quarter of 2019, PEPS in the second quarter of 2019, Nordresa in the third quarter of 2019 and TM4 in the second quarter of 2018, net of the divestiture of the Brazil suspension components business in the third quarter of 2018, generated a year- over-year increase in sales of $654. The organic sales increase in North America driven by stronger medium/heavy truck production and the conversion of sale backlog was offset by weaker global construction/mining and agricultural equipment markets and a softening in the Chinese economy. Pricing actions, including material commodity price and inflationary cost recovery, reduced sales by $10.
The North America organic sales increase of 4% was driven principally by stronger medium/heavy truck production volumes and the conversion of sales backlog. Production of Class 8 trucks was up 6% and production of Classes 5-7 was up 2% while full frame light truck production was flat compared to 2018. In addition, realization of light truck sales backlog helped to offset the year-over-year sales volume-related decline attributable to one of our largest light vehicle customer programs for which production continued on the outgoing model, concurrent with production of the new model vehicle, during the first quarter of 2018.
A weaker euro and South African rand were the primary driver of the decreased sales in Europe due to currency effects. Excluding currency and acquisition effects, sales in Europe decreased 3% compared to 2018. Strong market demand in the first half of 2019 in our Off-Highway segment was more than offset by weak demand in the second half of 2019.
A weaker Brazilian real reduced South America sales in 2019. The region overall experienced relatively stable markets, with medium/heavy truck production being flat and light truck production down 3% compared to 2018.
A weaker Chinese renminbi and Indian rupee were the primary drivers of the decreased sales in Asia Pacific due to currency effects. Excluding currency and acquisition effects, sales decreased about 11% as China's economy showed signs of weakening. Light truck, light vehicle engine and medium/heavy truck production were down 4%, 7% and 4% respectively, from 2018.
Cost of sales and gross margin — Cost of sales for 2019 increased $503, or 7% when compared to 2018. Similar to the factors affecting sales, the increase was primarily due to the inclusion of acquired businesses. Cost of sales as a percent of sales in 2019 was 110 basis points higher than in the previous year. Cost of sales attributed to net acquisitions, which included $13 of incremental cost assigned to inventory as part of business combination accounting, was approximately $620. Excluding the effects of acquisitions and divestitures, cost of sales as a percent of sales was 86.2%, 40 basis points higher than in 2018. The increased cost of sales as a percent of sales was largely attributable to higher commodity prices which increased material costs by about $30, an increase in engineering and development cost of $4, higher depreciation expense of $15 and operational inefficiencies and other cost increases. Partially offsetting these higher costs were continued material cost savings of $86, a net benefit of $17 from the monetization of a non-income tax claim, lower start-up and launch costs and lower premium freight.
Gross margin of $1,131 for 2019 decreased $26 from 2018. Gross margin as a percent of sales was 13.1% in 2019, 110 basis points lower than in 2018. The decline in margin as a percent of sales was driven principally by the cost of sales factors referenced above.
Selling, general and administrative expenses (SG&A) — SG&A expenses in 2019 were $508 (5.9% of sales) as compared to $499 (6.1% of sales) in 2018. SG&A attributed to net acquisitions was $33. Excluding the increase associated with net acquisitions, SG&A expenses were 10 basis points lower than the same period of 2018. The year-over-year decrease of $24 exclusive of net acquisitions was primarily due to lower salaries and benefits expenses resulting from the voluntary retirement program and other headcount reduction actions taken in the fourth quarter of 2018.
Amortization of intangibles — The $4 increase in amortization expense in 2019 was attributable to intangible assets obtained through the TM4, ODS, SME, and PEPS acquisitions, partially offset by certain intangible assets becoming fully amortized. See Note 2 and Note 3 of our consolidated financial statements in Item 8 for additional information.
Restructuring charges, net — Restructuring charges of $29 in 2019 were comprised of severance and benefit costs related to integration of recent acquisitions, headcount reductions across our operations and exit costs related to previously announced actions. Restructuring charges of $25 in 2018 were primarily comprised of severance and benefit costs related to a voluntary retirement program in North America, headcount reduction actions in our operations and corporate functions in Brazil and administrative cost reduction initiatives primarily in Europe and North America. In response to continued market recovery in our Off-Highway business in Europe, management re-evaluated the economic conditions of our global Off-Highway business and determined that $7 of the previously approved restructuring actions are no longer economically prudent. See Note 4 of our consolidated financial statements in Item 8 for additional information.
Impairment of goodwill and indefinite-lived intangible asset — During the fourth quarter of 2019, we wrote off the goodwill recognized as part of a 2016 acquisition. During the second quarter of 2018, we wrote off the in-process research and development intangible asset recognized as part of a 2012 acquisition. See Note 3 of our consolidated financial statements in Item 8 for additional information.
Gain on disposal group held for sale — Upon completion of the divestiture of our Brazil suspension components business in the second quarter of 2018, we reversed $3 of the previously recognized $27 pre-tax loss.
Pension settlement charges — During 2019, we recorded a $256 settlement charge related to the termination of one of our U.S. defined benefit pension plans and a $3 settlement charge related to the termination of one of our Canadian defined benefit pension plans. See Note 12 of our consolidated financial statements in Item 8 for additional information.
Other income (expense), net — The following table shows the major components of other income (expense), net.
2019 | 2018 | |||||||
Non-service cost components of pension and OPEB costs | $ | (23 | ) | $ | (15 | ) | ||
Government grants and incentives | 15 | 12 | ||||||
Foreign exchange loss | (11 | ) | (12 | ) | ||||
Strategic transaction expenses, net of transaction breakup fee income | (41 | ) | (18 | ) | ||||
Non-income tax legal judgment | 6 | |||||||
Gain on liquidation of foreign subsidiary | 12 | |||||||
Other, net | 17 | 4 | ||||||
Other income (expense), net | $ | (25 | ) | $ | (29 | ) |
Strategic transaction expenses in 2019 were primarily attributable to our acquisition of ODS. Strategic transaction expenses in 2018 were primarily attributable to our bid to acquire the driveline business of GKN plc., our acquisition of an ownership interest in TM4, our pending acquisition of ODS and integration costs associated with our acquisitions of BFP and BPT, and were partially offset by a $40 transaction breakup fee associated with the GKN plc. transaction. During the first quarter of 2019, we won a legal judgment regarding the methodology used to calculate PIS/COFINS tax on imports into Brazil. During the fourth quarter of 2019, we liquidated a foreign subsidiary. The resulting non-cash gain is attributable to the recognition of accumulated currency translation adjustments. See Note 19 of our consolidated financial statements in Item 8 for additional information.
Loss on extinguishment of debt — We redeemed $300 of our September 2023 Notes during the fourth quarter of 2019. We incurred redemption premiums of $7 in connection with these repayments and wrote off $2 of previously deferred financing costs associated with the extinguished debt. See Note 14 of our consolidated financial statements in Item 8 for additional information.
Interest income and interest expense — Interest income was $10 in 2019 and $11 in 2018. Interest expense increased from $96 in 2018 to $122 in 2019 primarily due to increased debt levels used to fund recent acquisition activities. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated 5.0% and 5.2% in 2019 and 2018.
Income tax expense — Income taxes were a benefit of $32 in 2019 and an expense of $78 in 2018. During 2019, we recognized a benefit of $22 for the release of valuation allowance in a subsidiary in Brazil based on recent history of profitability and increased income projections. A pre-tax pension settlement charge of $259 was recorded, resulting in income tax expense of $11 and a valuation allowance release of $18. For the year, we also recognized benefits for the release of valuation allowance in the US of $34 based on increased income projections and $30 based on the development of a tax planning strategy related to federal tax credits. Partially offsetting this benefit in the US was $6 of expense related to a US state law change. During the second quarter of 2019, we also recorded tax benefits of $48 related to tax actions that adjusted federal tax credits. During 2018, we recognized a benefit of $44 related to U.S. state law changes and the development and implementation of a tax planning strategy which adjusted federal tax credits, along with federal and state net operating losses and the associated valuation allowances. We also recognized benefits of $11 relating to the reversal of a provision for an uncertain tax position, $5 relating to the release of valuation allowances in the US based on improved income projections and $7 due to permanent reinvestment assertions. Partially offsetting these benefits was $5 of expense to settle outstanding tax matters in a foreign jurisdiction. See Note 18 of our consolidated financial statements in Item 8 for additional information.
Excluding the effects of the items referenced in the preceding paragraph, our effective tax rates were 24% in 2019 and 28% in 2018. These rates vary from the applicable U.S. federal statutory rate of 21% primarily due to establishment, release and adjustment of valuation allowances in several countries, nondeductible expenses, deemed income, local tax incentives in several countries outside the U.S., different statutory tax rates outside the U.S. and withholding taxes related to repatriations of international earnings.
In countries where our history of operating losses does not allow us to satisfy the "more likely than not" criterion for recognition of deferred tax assets, we have generally recognized no income tax on the pre-tax income or losses as valuation allowance adjustments offset the associated tax effects. During the third quarter of 2019, we recognized a benefit of $22 for the release of a valuation allowance in a subsidiary in Brazil.
Equity in earnings of affiliates — Net earnings from equity investments was $30 in 2019 compared with $24 in 2018. Equity in earnings from BSFB was $12 in 2019 and $7 in 2018. Equity in earnings from DDAC was $18 in 2019 and $15 in 2018. See Note 22 of our consolidated financial statements in Item 8 for additional information.
Segment Results of Operations (2019 versus 2018)
Light Vehicle
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2018 | $ | 3,575 | $ | 398 | 11.1 | % | ||||||
Volume and mix | 64 | 18 | ||||||||||
Acquisition | 1 | (1 | ) | |||||||||
Performance | (10 | ) | 26 | |||||||||
Currency effects | (21 | ) | (3 | ) | ||||||||
2019 | $ | 3,609 | $ | 438 | 12.1 | % |
Light Vehicle sales in 2019, exclusive of acquisition and currency effects, were 2% higher than 2018. Conversion of sales backlog was partially offset by lower full frame truck production in Asia Pacific and the year-over-year sales volume-related decline attributable to one of our largest customer programs for which production continued on the outgoing model, concurrent with production of the new model vehicle, during last year's first quarter. Full frame truck production in North America and Europe was flat compared to 2018. Net customer pricing and cost recovery actions resulted in a year-over-year decrease of $13.
Light Vehicle segment EBITDA increased by $40 in 2019. Higher sales volumes provided a year-over-year benefit of $18. The year-over-year performance related earnings improvement was driven by material cost savings of $37 and lower new program start-up and launch-related costs of $16. Lower net pricing and material cost recovery actions of $13, increased engineering spend of $9, higher warranty costs of $2 and operational inefficiencies and other cost increases of $3 reduced performance in 2019.
Commercial Vehicle
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2018 | $ | 1,612 | $ | 146 | 9.1 | % | ||||||
Volume and mix | 10 | 3 | ||||||||||
Acquisition / Divestiture | 17 | (2 | ) | |||||||||
Performance | 16 | (3 | ) | |||||||||
Currency effects | (44 | ) | (6 | ) | ||||||||
2019 | $ | 1,611 | $ | 138 | 8.6 | % |
Excluding currency effects and the net impact of acquisitions and divestitures, Commercial Vehicle sales increased 2% compared to last year. The volume-related increase was primarily attributable to higher production levels in North America during the first half of 2019 where Class 8 production was up about 4%22% and Classes 5-7 production was up 7% compared to the first half of 2018. During the second half of 2019, North American production volumes declined, with Class 8 production down 9% and Classes 5-7 down 3% compared to 2015. Pricingthe second half of 2018. Similarly the impact of higher 2019 first-half production volumes in Europe and Asia Pacific have been largely offset by declining production volumes in both regions during the second half of 2019. With the improving economy in Brazil, our sales volume in 2019 benefited from year-over-year higher production levels in that country of around 7%. Net customer pricing and cost recovery actions during 2016 reducedincreased year-over-year sales by $13.
Commercial Vehicle segment EBITDA of $158 in 2016 was $9 higher$8 lower than in 2015,2018. Higher sales volumes increased year-over-year earnings by $3. The year-over-year performance related earnings decline was driven primarily by higher commodity costs of $21, increased engineering spend of $2 and operational inefficiencies and other cost increases of $8. Material cost savings of $19, higher net pricing and material cost recovery actions of $7 and net foreign currency transaction gains of $2 provided a partial offset.
Off-Highway
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2018 | $ | 1,844 | $ | 285 | 15.5 | % | ||||||
Volume and mix | (42 | ) | (19 | ) | ||||||||
Acquisition | 636 | 88 | ||||||||||
Performance | 3 | (15 | ) | |||||||||
Currency effects | (81 | ) | (9 | ) | ||||||||
2019 | $ | 2,360 | $ | 330 | 14.0 | % |
Excluding currency effects, primarily due to a weaker euro, and the impact of the ODS and SME acquisitions, Off-Highway segment sales volumes. Although performance-relateddecreased 2% compared to last year. The construction/mining and agricultural equipment markets were relatively stable during the first half of 2019 but deteriorated rapidly during the second half of 2019. Customer pricing and material cost recovery actions increased year-over-year sales by $5.
Off-Highway segment EBITDA increased by $45 in 2016 benefited by $17 from lower material commodity costs and other material cost savings, those benefits were2019. Marginally higher market demand through the first half of 2019 was more than offset by $13rapid market deterioration in the second half of 2019. The $15 performance-related deterioration in 2019 earnings was impacted by higher commodity costs of $6 and operational inefficiencies and other cost increases of $36, partially offset by material cost savings of $22 and customer pricing and material cost recovery actions of $5.
Power Technologies
Segment | ||||||||||||
Segment | EBITDA | |||||||||||
Sales | EBITDA | Margin | ||||||||||
2018 | $ | 1,112 | $ | 149 | 13.4 | % | ||||||
Volume and mix | (36 | ) | (13 | ) | ||||||||
Performance | (5 | ) | (15 | ) | ||||||||
Currency effects | (31 | ) | (4 | ) | ||||||||
2019 | $ | 1,040 | $ | 117 | 11.3 | % |
Power Technologies primarily serves the light vehicle market but also sells product to the medium/heavy truck and off-highway markets. Net of currency effects, sales for 2019 were 4% lower than 2018, primarily due to program roll offs and lower market demand. Light vehicle engine production declined across all regions during 2019. Net customer pricing and material cost recovery actions decreased year-over-year sales by $9.
Power Technologies segment EBITDA decreased $32 compared to 2019. The $15 performance deterioration resulted from higher engineeringcommodity costs of $2, operational inefficiencies and development expenseother cost increases of $4 and otherlower net pricing and material cost increasesrecovery actions of $6.$9.
Non-GAAP Financial Measures
Adjusted EBITDA
We have defined adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, amortization, equity grant expense, restructuring expense, non-service cost components of pension and other postretirement benefits (OPEB) costs and other adjustments not related to our core operations (gain/loss on debt extinguishment, pension settlements, divestitures, impairment, etc.). Adjusted EBITDA is a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. We use adjusted EBITDA in assessing the effectiveness of our business strategies, evaluating and pricing potential acquisitions and as a factor in making incentive compensation decisions. In addition to its use by management, we also believe adjusted EBITDA is a measure widely used by securities analysts, investors and others to evaluate financial performance of our company relative to other Tier 1 automotive suppliers. Adjusted EBITDA should not be considered a substitute for earnings before income taxes, net income or other results reported in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table provides a reconciliation of net income (loss) to adjusted EBITDA.
2017 | 2016 | 2015 | |||||||||
Net income | $ | 116 | $ | 653 | $ | 180 | |||||
Income from discontinued operations | 4 | ||||||||||
Income from continuing operations | 116 | 653 | 176 | ||||||||
Equity in earnings (losses) of affiliates | 19 | 14 | (34 | ) | |||||||
Income tax expense (benefit) | 283 | (424 | ) | 82 | |||||||
Earnings from continuing operations before income taxes | 380 | 215 | 292 | ||||||||
Depreciation and amortization | 233 | 182 | 174 | ||||||||
Restructuring charges, net | 14 | 36 | 15 | ||||||||
Interest expense, net | 91 | 100 | 100 | ||||||||
Other* | 117 | 127 | 71 | ||||||||
Adjusted EBITDA | $ | 835 | $ | 660 | $ | 652 |
2020 | 2019 | 2018 | ||||||||||
Net income (loss) | $ | (51 | ) | $ | 233 | $ | 440 | |||||
Equity in earnings of affiliates | 20 | 30 | 24 | |||||||||
Income tax expense (benefit) | 58 | (32 | ) | 78 | ||||||||
Earnings (loss) before income taxes | (13 | ) | 171 | 494 | ||||||||
Depreciation and amortization | 365 | 339 | 270 | |||||||||
Restructuring charges, net | 34 | 29 | 25 | |||||||||
Interest expense, net | 129 | 112 | 85 | |||||||||
Impairment of goodwill and indefinite-lived intangible assets | 51 | 6 | 20 | |||||||||
Gain on investment in Hyliion | (33 | ) | ||||||||||
Loss on extinguishment of debt | 8 | 9 | ||||||||||
Pension settlement charge | 259 | |||||||||||
Acquisition related inventory adjustments | 13 | |||||||||||
(Gain) on disposal group held for sale | (3 | ) | ||||||||||
Other* | 52 | 81 | 66 | |||||||||
Adjusted EBITDA | $ | 593 | $ | 1,019 | $ | 957 |
* | |
Other includes stock compensation expense, non-service cost components of pension and OPEB costs, strategic transaction expenses, |
Free Cash Flow
We have defined free cash flow as cash provided by operating activities less purchases of property, plant and equipment. We have defined adjusted free cash flow as cash provided by operating activities excluding discretionary pension contributions less purchases of property, plant and equipment. We believe this measure isthese measures are useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Free cash flow is neitherand adjusted free cash flow are not intended to represent nor be an alternative to the measure of net cash provided by operating activities reported underin accordance with GAAP. Free cash flow and adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.
The following table reconciles net cash flows provided by operating activities to adjusted free cash flow.
2020 | 2019 | 2018 | ||||||||||
Net cash provided by operating activities | $ | 386 | $ | 637 | $ | 568 | ||||||
Purchases of property, plant and equipment | (326 | ) | (426 | ) | (325 | ) | ||||||
Free cash flow | 60 | 211 | 243 | |||||||||
Discretionary pension contribution | — | 61 | — | |||||||||
Adjusted free cash flow | $ | 60 | $ | 272 | $ | 243 |
2017 | 2016 | 2015 | |||||||||
Net cash provided by operating activities | $ | 554 | $ | 384 | $ | 406 | |||||
Purchases of property, plant and equipment | (393 | ) | (322 | ) | (260 | ) | |||||
Free cash flow | $ | 161 | $ | 62 | $ | 146 |
Liquidity
The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at December 31, 2017:
Cash and cash equivalents | $ | 603 | |
Less: Deposits supporting obligations | (7 | ) | |
Available cash | 596 | ||
Additional cash availability from Revolving Facility | 578 | ||
Marketable securities | 40 | ||
Total liquidity | $ | 1,214 |
Cash and cash equivalents | $ | 559 | ||
Less: Deposits supporting obligations | (3 | ) | ||
Available cash | 556 | |||
Additional cash availability from Revolving Facility | 979 | |||
Marketable securities | 21 | |||
Total liquidity | $ | 1,556 |
Cash deposits are maintained to provide credit enhancement for certain agreements and are reported as part of cash and cash equivalents. For most of these deposits, the cash may be withdrawn if a comparable security is provided in the form of letters of credit. Accordingly, these deposits are not considered to be restricted.
The components of our December 31, 20172020 consolidated cash balance were as follows:
U.S. | Non-U.S. | Total | |||||||||
Cash and cash equivalents | $ | 85 | $ | 323 | $ | 408 | |||||
Cash and cash equivalents held as deposits | 7 | 7 | |||||||||
Cash and cash equivalents held at less than wholly-owned subsidiaries | 6 | 182 | 188 | ||||||||
Consolidated cash balance | $ | 91 | $ | 512 | $ | 603 |
U.S. | Non-U.S. | Total | ||||||||||
Cash and cash equivalents | $ | 35 | $ | 425 | $ | 460 | ||||||
Cash and cash equivalents held as deposits | 3 | 3 | ||||||||||
Cash and cash equivalents held at less than wholly-owned subsidiaries | 3 | 93 | 96 | |||||||||
Consolidated cash balance | $ | 38 | $ | 521 | $ | 559 |
A portion of the non-U.S. cash and cash equivalents is utilized for working capital and other operating purposes. Several countries have local regulatory requirements that significantly restrict the ability of our operations to repatriate this cash. Beyond these restrictions, there are practical limitations on repatriation of cash from certain subsidiaries because of the resulting tax withholdings and subsidiary by-law restrictions which could limit our ability to access cash and other assets.
In response to the COVID-19 pandemic we have taken controlled and measured actions to preserve liquidity including but not limited to flexing our cost structure, reducing capital spending and investments in research and development activities where and when appropriate, taking advantage of liquidity available for our future cash requirements are expectedvarious government programs and subsidies including certain provisions of the CARES Act, temporarily suspending the declaration and payment of dividends to be (i) cash flows from operations, (ii) cashcommon shareholders and cash equivalents on hand and (iii) borrowings from our Revolving Facility. We believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital, debt obligations,temporarily suspending the repurchase of common stock repurchases and other commitments during the next twelve months. While uncertainty surrounding the current economic environment could adversely impactunder our business, based on our current financial position,existing common stock share repurchase program. During June 2020, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.
On April 2025 Notes. Net proceeds of the offering totaled $394. The proceeds from the offering were used to repay indebtedness16, 2020, we amended certain provisions of our BPT and BFP subsidiaries, repay indebtedness of a wholly-owned subsidiary in Brazil, redeem $100 of our September 2021 Notes and for general corporate purposes. The September 2021 Notes were redeemed on April 4, 2017 at a price equal to 104.031% plus accrued and unpaid interest.
While varied, the markets in which participate generally saw marked improvement during the third and fourth quarters of 2020, returning to near pre-pandemic levels. Based on our strengthening operating results and improved adjusted free cash flow generation, we fully paid down our Term Facility)A Facility in the third and a $600 revolving credit facility (the Revolving Facility) bothfourth quarters of which mature on August 17, 2022. On September 14, 2017, we drew2020 and elected to return the entire amount available under the Term Facility. Net proceeds from the Term Facility draw totaled $274. The proceeds from the Term Facility, together with cash on hand, were usedmaximum first lien net leverage ratio to redeem the remaining $350its prior level of our September 2021 Notes at a price equal2.00 to 102.688% plus accrued and unpaid interest.
At December 31, 2017, we had no outstanding borrowings under the Revolving Facility but we had utilized $22 for letters of credit. We had availability at December 31, 2017 under the Revolving Facility of $578 after deducting the outstanding letters of credit.
From time to time, depending upon market, pricing and other conditions, as well as our cash balances and liquidity, we may seek to acquire our senior notes or other indebtedness or our common stock through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may determine (or as may be provided for in the indentures governing the notes), for cash, securities or other consideration. There can be no assurance that we will pursue any such transactions in the future, as the pursuit of any alternative will depend upon numerous factors such as market conditions, our financial performance and the limitations applicable to such transactions under our
The principal sources of liquidity available for our future cash requirements are expected to be (i) cash flows from operations, (ii) cash and cash equivalents on hand and (iii) borrowings from our Revolving Facility. We believe that our overall liquidity and operating cash flow will be sufficient to meet our anticipated cash requirements for capital expenditures, working capital, debt obligations and other commitments during the next twelve months. While uncertainty surrounding the current economic environment could adversely impact our business, based on our current financial position, we believe it is unlikely that any such effects would preclude us from maintaining sufficient liquidity.
Cash Flow
2017 | 2016 | 2015 | |||||||||
Cash used for changes in working capital | $ | (8 | ) | $ | (51 | ) | $ | (41 | ) | ||
Other cash provided by operations | 562 | 435 | 447 | ||||||||
Net cash provided by operating activities | 554 | 384 | 406 | ||||||||
Net cash used in investing activities | (581 | ) | (365 | ) | (258 | ) | |||||
Net cash used in financing activities | (120 | ) | (88 | ) | (403 | ) | |||||
Net decrease in cash and cash equivalents | $ | (147 | ) | $ | (69 | ) | $ | (255 | ) |
2020 | 2019 | 2018 | ||||||||||
Cash used for changes in working capital | $ | 47 | $ | (17 | ) | $ | (113 | ) | ||||
Other cash provided by operations | 339 | 654 | 681 | |||||||||
Net cash provided by operating activities | 386 | 637 | 568 | |||||||||
Net cash used in investing activities | (327 | ) | (1,123 | ) | (462 | ) | ||||||
Net cash provided by (used in) financing activities | (12 | ) | 479 | (180 | ) | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 47 | $ | (7 | ) | $ | (74 | ) |
The table above summarizes our consolidated statement of cash flows.
Operating activities
— Exclusive of working capital, other cash provided by operations wasWorking capital provided cash of $47 in 2020 and used cash of $8$17 in 2017, $512019 and $113 in 2016 and $412018. Higher levels of receivables used cash of $66 in 2015. Cash2020 while lower levels of $141 wasreceivables generated cash of $135 in 2019. The cash used to finance increasedfor receivables in 2017, with2020 is reflective of higher year-over-year fourth quarter sales resulting from stronger market demand. The cash generated from receivables in 2019 is reflective of lower year-over-year fourth quarter sales resulting from lower market demand. Lower inventories generated cash of $86 having been required$69 in 20162020 and receivables remaining unchanged$35 in 2015. Higher inventories2019 while higher inventory levels consumed cash of $146$110 in 2017, $132018. During the fourth quarter of 2020 we continued to closely monitor inventory levels across our facilities, as the recovery from the global COVID-19 pandemic has varied by end market. Inventory levels began to decline at the end of 2019 in 2016 and $28 in 2015.response to lower market demand. Increases in accounts payable and other net liabilities provided cash of $279$44 in 2017 and $48 in 20162020 while decreases in accounts payable and other net liabilities used cash of $13$187 in 2015. The higher level of cash used to finance increased receivables and inventory, and the partial offset resulting from higher levels of2019. Increases in accounts payable and other liabilities provided cash of $110 in 2017 is due primarily to the stronger volume levels experienced this past year. Exclusive of acquisitions, sales increased 15% in 2017, predominantly on the strength of stronger market demand and new customer programs. In addition to higher volume levels, the cash2018. Cash generated in 2017 from increased levels ofby accounts payable and other net liabilities was also reflective of changes in payment practices and lengthening2020 is primarily attributable to negotiating temporary extensions of payment terms with suppliers. The continued focus on receivable collectionscertain suppliers and inventory management combined with extending supplier termsservice providers in response to the global COVID-19 pandemic. Cash used by accounts payable and modifyingother net liabilities in 2019 is primarily attributable to lower levels of purchasing during the fourth quarter of 2019 resulting from lower market demand, lower year-over-year accruals for professional service fees and strategic transaction expenses and the payment practices, enabled us to use less cash overall for working capitalof higher incentive compensation accrued in 2017 than 2016 despite the higher sales levels. The use of cash in 2016 for receivables reflected increased sales levels in November and December compared to 2015. Except for this increase in receivables in 2016, there were no significant uses or sources of cash from working capital components in 2016 and 2015 as organic sales levels were relatively comparable with the preceding years.
Investing activities
— Expenditures for property plant and equipment wereFinancing activities — During 2017, our European subsidiary, Dana Financing Luxembourg S.à r.l.,2020, we completed the issuance of $400 of its April 2025our June 2028 Notes and paidthe issuance of an additional $100 of our November 2027 Notes, paying financing costs of $6$8. During 2020, we entered into a $500 bridge facility, paying financing costs of $5. We subsequently terminated the bridge facility. During 2020 we fully paid down the Term A Facility, making principle payments of $474. During 2019, we entered into an amended credit and guaranty agreement comprised of a $500 Term A Facility, a $450 Term B Facility and a $1,000 Revolving Facility. The Term A Facility was an expansion of our existing $275 term facility. We drew the $225 available under the Term A Facility and the $450 available under the Term B Facility. The proceeds from the Term Facilities were used to acquire ODS and pay for related to the notes.integration activities. We paid financing costs of $3 related$16 to our Term Facilityamend the credit and Revolving Facility and drew the entire $275 available underguaranty agreement. During 2019, we made combined principle payments of $117 on the Term Facility.Facilities. Also during 2019, we completed the issuances of $300 of our November 2027 Notes, paying financing cost of $4. We redeemedused the proceeds of the November 2027 Notes issuance to redeem all $450$300 of our September 20212023 Notes, paying a redemption premium of $7. During 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45% redeemable noncontrolling interest in SME and increasing its existing indirect 22.5% noncontrolling interest in PEPS to an indirect 45% redeemable noncontrolling interest. We received $53 of cash at closing. During 2020, Hydro-Québec paid us $7 to acquire an indirect 45% redeemable noncontrolling interest in Ashwoods. During 2018, we paid $43 to acquire Intrafind S.p.A.'s (formerly Brevini Group S.p.A.) remaining 20% ownership interests in BFP and BPT. Also during 2018, Yulon Motor Co., Ltd. (Yulon) paid $22 to acquire a $14 premium, repaid indebtednessdirect ownership interest in two of our consolidated operating subsidiaries. Yulon's ownership interest in the two consolidated operating subsidiaries did not change as a result of the transactions, as it previously owned the same percentages indirectly through a series of consolidated holding companies. The $22, less withholding taxes, was returned to Yulon in the form of a wholly-owned subsidiarydividend in Brazil at2018. During 2020 we sold a premium of $1 and repaid indebtednessportion of our BPTownership interest in ROC-Spicer, Ltd. (ROC-Spicer) to China Motor Corporation, reducing our ownership interest in ROC-Spicer to 50%. In conjunction with the decrease in our ownership interest, the ROC-Spicer shareholders agreement was amended, eliminating our controlling financial interest in ROC-Spicer. Upon our loss of control, we deconsolidated ROC-Spicer, including $14 of cash and BFP subsidiaries. In 2016, Dana Financing Luxembourg S.à r.l. completed the issuance of $375 of its June 2026 Notes and paid financing costs of $7 related to the notes. We paid financing costs of $3 to enter our Revolving Facility and a premium of $12 to redeem all of our February 2021 Notes. Also during 2016, we made scheduled repayments of $32 and took out $66 of additional long-term debt at international locations. During 2015, we redeemed $55 of our February 2019 Notes at a $2 premium.cash equivalents. We used cash of $81 and $311$25 to repurchase common shares under our share repurchase program in 2016both 2019 and 2015.2018. We used $35, $35$15, $58 and $37$58 for dividend payments to common stockholders in 2017, 20162020, 2019 and 2015.2018. During the second quarter of 2020, we temporarily suspended the declaration and payment of dividends to common stockholders and temporarily suspended the repurchase of common stock under our existing common stock repurchase program in response to the global COVID-19 pandemic. Distributions to noncontrolling interests totaled $12, $17$11, $19 and $9$42 in 2017, 20162020, 2019 and 2015.2018. Distributions to noncontrolling interest in 2018 includes the dividend to Yulon discussed above.
Off-Balance Sheet Arrangements
In connection with the divestiture of our Structural Products business in 2010, leases covering three U.S. facilities were assigned to a U.S. affiliate of the new owner, Metalsa S.A. de C.V. (Metalsa). Under the terms of the sale agreement, we guarantee the affiliate’s performance under the leases, which run through June 2025, including approximately $6 of annual payments. In the event of a required payment by Dana as guarantor, we are entitled to pursue full recovery from Metalsa of the amounts paid under the guarantee and to take possession of the leased property.
Contractual Obligations
We are obligated to make future cash payments in fixed amounts under various agreements. The following table summarizes our significant contractual obligations as of December 31, 2017.
Payments Due by Period | ||||||||||||||||||||
Contractual Cash Obligations | Total | 2018 | 2019 - 2020 | 2021 - 2022 | After 2022 | |||||||||||||||
Long-term debt(1) | $ | 1,785 | $ | 12 | $ | 38 | $ | 234 | $ | 1,501 | ||||||||||
Interest payments(2) | 689 | 98 | 194 | 190 | 207 | |||||||||||||||
Leases(3) | 306 | 53 | 93 | 70 | 90 | |||||||||||||||
Unconditional purchase obligations(4) | 176 | 174 | 1 | 1 | — | |||||||||||||||
Pension contribution(5) | 16 | 16 | ||||||||||||||||||
Retiree health care benefits(6) | 99 | 5 | 10 | 10 | 74 | |||||||||||||||
Uncertain income tax positions(7) | ||||||||||||||||||||
Total contractual cash obligations | $ | 3,071 | $ | 358 | $ | 336 | $ | 505 | $ | 1,872 |
Payments Due by Period | ||||||||||||||||||||
Contractual Cash Obligations | Total | 2021 | 2022 - 2023 | 2024 - 2025 | After 2025 | |||||||||||||||
Long-term debt(1) | $ | 2,390 | $ | — | $ | 9 | $ | 857 | $ | 1,524 | ||||||||||
Interest payments(2) | 686 | 125 | 249 | 205 | 107 | |||||||||||||||
Operating leases(3) | 226 | 50 | 70 | 45 | 61 | |||||||||||||||
Financing leases(4) | 86 | 9 | 17 | 11 | 49 | |||||||||||||||
Unconditional purchase obligations(5) | 164 | 153 | 8 | 2 | 1 | |||||||||||||||
Pension contribution(6) | 16 | 16 | ||||||||||||||||||
Retiree health care benefits(7) | 50 | 5 | 10 | 10 | 25 | |||||||||||||||
Uncertain income tax positions(8) | — | |||||||||||||||||||
Total contractual cash obligations | $ | 3,618 | $ | 358 | $ | 363 | $ | 1,130 | $ | 1,767 |
Notes:
(1) | |
Principal payments on long-term |
debt. | |
(2) | Interest payments are based on long-term debt |
(3) | Operating |
(4) | Finance lease obligations, including interest, related to real estate and manufacturing and material handling equipment. |
(5) | Unconditional purchase obligations are comprised of commitments for the procurement of fixed assets, the purchase of raw materials and the fulfillment of other contractual obligations. |
(6) | This amount represents estimated |
(7) | This amount represents estimated payments under our |
(8) | We are not able to reasonably estimate the timing of payments related to uncertain tax positions because the timing of settlement is uncertain. The above table does not reflect unrecognized tax benefits at December 31, |
At December 31, 2017,2020, we maintained cash balances of $7$3 on deposit with financial institutions primarily to support property insurance policy deductibles, certain employee retirement obligations and specific government approved environmental remediation efforts.
Contingencies
For a summary of litigation and other contingencies, see Note 16 toof our consolidated financial statements in Item 8. Based on information available to us at the present time, we do not believe that any liabilities beyond the amounts already accrued that may result from these contingencies will have a material adverse effect on our liquidity, financial condition or results of operations.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with GAAP requires us to use estimates and make judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. Considerable judgment is often involved in making these determinations. Critical estimates are those that
Income taxes
— Accounting for income taxes is complex, in part because we conduct business globally and therefore file income tax returns in numerous tax jurisdictions. Significant judgment is required in determining the income tax provision, uncertain tax positions, deferred tax assets and liabilities and the valuation allowances recorded against our net deferred tax assets. A valuation allowance is provided when, in our judgment based upon available information, it is more likely than not that a portion of such deferred tax assets will not be realized. To make this assessment, we consider the historical and projected future taxable income or loss by tax jurisdiction. We consider all components of comprehensive income andIn the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is less than certain. We are regularly under audit by the various applicable tax authorities. Although the outcome of tax audits is always uncertain, we believe that we have appropriate support for the positions taken on our tax returns and that our annual tax provisions include amounts sufficient to pay assessments, if any, which may be proposedupon final determination by the taxing authorities. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. See additional discussion of our deferred tax assets and liabilities in Note 18 toof our consolidated financial statements in Item 8.
Retiree benefits — Accounting for pension benefits and other postretirement benefits (OPEB) involves estimating the cost of benefits to be provided well into the future and attributing that cost to the time period each employee works. These plan expenses and obligations are dependent on assumptions developed by us in consultation with our outside advisers such as actuaries and other consultants and are generally calculated independently of funding requirements. The assumptions used, including inflation, discount rates, investment returns, life expectancies, turnover rates, retirement rates, future compensation levels and health care cost trend rates, have a significant impact on plan expenses and obligations. These assumptions are
Mortality rates are based in part on the company's plan experience and actuarial estimates. The inflation assumption is based on an evaluation of external market indicators, while retirement and turnover rates are based primarily on actual plan experience. Health care cost trend rates are developed based on our actual historical claims experience, the near-term outlook and an assessment of likely long-term trends. For our largest plans, discount rates are based upon the construction of a yield curve which is developed based on a subset of high-quality fixed-income investments (those with yields between the 40th and 90th percentiles). The projected cash flows are matched to this yield curve and a present value developed which is then calibrated to develop a single equivalent discount rate. Pension benefits are funded through deposits with trustees that satisfy, at a minimum, the applicable funding regulations. For our largest defined benefit pension plans, expected investment rates of return are based on input from the plans’ investment advisers and actuary regarding our expected investment portfolio mix, historical rates of return on those assets, projected future asset class returns, the impact of active management and long-term market conditions and inflation expectations. We believe that the long-term asset allocation on average will approximate the targeted allocation and we regularly review the actual asset allocation to periodically re-balance the investments to the targeted allocation when appropriate. OPEB and the majority of our non-U.S. pension benefits are funded as they become due.
Actuarial gains or losses may result from changes in assumptions or when actual experience is different from that which was expected. Under the applicable standards, those gains and losses are not required to be immediately recognized in our results of operations as income or expense, but instead are deferred as part of AOCI and amortized into our results of operations over future periods.
U.S. retirement plans
Rising discount rates decrease the present value of future pension obligations – a 25 basis point increase in the discount rate would decrease our U.S. pension liability by about $41.$20. As indicated above, when establishing the expected long-term rate of return on our U.S. pension plan assets, we consider historical performance and forward looking return estimates reflective of our portfolio mix and investment strategy. Based on the most recent analysis of projected portfolio returns, we concluded that the use of a 6.0%3.5% expected return in 20182021 is appropriate for our U.S. pension plans where termination is not anticipated. With the asset portfolio of the plan being terminated having a larger proportion of cash and fixed income investments, a rate of return of 4.1% through the expected settlement date in the first half of 2019 was considered appropriate.plans. See Note 12 to theour consolidated financial statements in Item 8 for information about the investing and allocation objectives related to our U.S. pension plan assets.
We elected to use the Society of Actuaries (SOA) issued new mortality improvement scales in the fourth quarter of 2017, marking the fourth consecutive year for revised guidance. In developing MP-2017, the SOA considered actual experience through 2014 and preliminary data for 2015. When it issued MP-2014, the SOA had projected improvementMP-2020 Mortality Improvement Scale. This update from the beginning of 2008 after analyzing historical data through 2007. In connection with selecting our assumptionsplan-specific mortality tables used in 2014, we had compared actual experience forprior years after 2007 to the improvement projected in MP-2014, along with other information, before concluding that a 0.75% long-term improvement rate (LTIR) for periods beginning with 2014 was appropriate and assuming that the LTIR would be attained by 2020, sooner than the period assumed in MP-2014. We reviewed the data in MP-2017 and concluded that the adjustments made in the past are also appropriate with respect to the latest guidance, resulting in the adoption of MP-2017 modified to reflect an LTIR of 0.75% being achieved by 2026. Adopting the modified MP-2017 scale did not have a material effect on our pension obligations.
We use a full yield curve approach to estimate the service (where applicable) and interest components of the annual cost of our pension and other postretirement benefit plans. The newThis method estimates interest and service expense using the specific spot rates, from the yield curve, that relate to projected cash flows. Prior to 2016, we had estimatedWe believe this method is a more precise measurement of interest and service expense usingcosts by improving the discount rate underlyingcorrelation between the calculation of the related projected benefit obligation at the end of the preceding year. That rate was a weighted-average rate derived fromcash flows and the corresponding yield curve. The full yield curve approach, which we believe is more precise, reduced interest expense for our pension plans in the U.S. by approximately $14 in 2016 and $11 in 2017.rates. The determination of the projected benefit obligation at year end is unchanged, however, so the actuarial gain or loss is affected by the amount of the change in interest and service expense.
At December 31, 2017,2020, we have $559$142 of unrecognized losses relating to our U.S. pension plans. Actuarial gains and losses, which are primarily the result of changes in the discount rate and other assumptions and differences between actual and expected asset returns, are deferred in AOCI and amortized to expense following the corridor approach. We use the average remaining service period of active participants unless almost all of the plan’s participants are inactive, in which case we use the average remaining life expectancy of inactive participants. The plan being terminated has deferred actuarial losses of $369 at December 31, 2017. The unrecognized actuarial losses of this plan that remain when the obligations are settled in 2019 will be recognized as expense at that time.
Based on the current funded status of our U.S. plans, there are no minimum contribution requirements for 2018. For the U.S. plan being terminated,we do not expect to effectuate the expected settlement in 2019, Dana will be required to fundmake any plan obligations in excess of assets. Based on the plan obligation settlement assumptions and asset values at December 31, 2017, the unfunded plan obligations are $164. The actual cash requirement at settlement will vary from this amount based on the actual cost of annuities and participant settlement elections relative to those assumed for year-end 2017 valuation and the actual return on assets compared to the 4.1% expected annual rate of return.
See Note 12 toof our consolidated financial statements in Item 8 for additional discussion of our pension and OPEB obligations.
Acquisitions —From time to time, we make strategic acquisitions that have a material impact on our consolidated results of operations or financial position. We allocate the purchase price of acquired businesses to the identifiable tangible and intangible assets acquired, liabilities assumed and any redeemable noncontrolling interests or noncontrolling interests based upon their estimated fair values as of the acquisition date. We determine the estimated fair values using information available to us and engage independent third-party valuation specialists when necessary. Estimating fair values can be complex and subject to significant business judgment. We believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash flows from product sales, customer contracts and acquired technologies, and discount rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results. Generally, we have, if necessary, up to one year from the acquisition date to finalize our estimates of acquisition date fair values.
Goodwill and other indefinite-lived intangible assets
— Our goodwill and other indefinite-lived intangible assets are tested for impairment annually as of October 31 for all of our reporting units, and more frequently if events or circumstances warrant such a review. We make significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected gross margins, discount rates, terminal growth rates, andThe most likely factors that would significantly impact our forecasts are changes in customer production levels and loss of significant portions of our business. We believe that the assumptions and estimates used in the assessment of the goodwill and other indefinite-lived intangible assets as of October 31, 20172020 were reasonable. Aside from the goodwill recorded in connection with the Magnum and SJT Forjaria Ltda. acquisitions, we believe there is a significant excess of fair value over the carrying value of the related assets at December 31, 2017.
Long-lived assets with definite lives
— We perform impairment assessments on our property, plant and equipment and our definite-lived intangible assets whenever events and circumstances indicate that the carrying amounts of the assets may not be recoverable. When indications are present, we compare the estimated future undiscounted net cash flows of the operations to which the assets relate to the carrying amounts of such assets. We utilize the cash flow projections discussed above for property, plant and equipment and amortizable intangibles. We group the assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the undiscounted future cash flows using the life of the primary assets. If the carrying amounts of the long-lived assets are not recoverable from future cash flows and exceed their fair value, an impairment loss is recognized to reduce the carrying amounts of the long-lived assets to their fair value. Fair value is determined based on discounted cash flows,Investments in affiliates — We had aggregate investments in affiliates of $163$152 at December 31, 20172020 and $150$182 at December 31, 2016.2019. We monitor our investments in affiliates for indicators of other-than-temporary declines in value on an ongoing basis
Warranty
— Costs related to product warranty obligations are estimated and accrued at the time of sale with a charge against cost of sales. Warranty accruals are evaluated and adjusted as appropriate based on occurrences giving rise to potential warranty exposure and associated experience. Warranty accruals and adjustments require significant judgment, including a determination of our involvement in the matter giving rise to the potential warranty issue or claim, our contractual requirements, estimates of units requiring repair and estimates of repair costs. If actual experience differs from expectations, our financial position and results of operations in future periods could be affected.Contingency reserves
— We have numerous other loss exposures, such as product liability and warranty claims and matters involving litigation. Establishing loss reserves for these matters requires the use of estimates and judgment regarding risk of exposure and ultimate liability. Product liability and warranty claims are generally estimated based on historical experience and the estimated costs associated with specific events giving rise to potential field campaigns or recalls. In the case of legal contingencies, estimates are made of the likely outcome of legal proceedings and potential exposure where reasonably determinable based on the information presently known to us. New information and other developments in these matters could materially affect our recorded liabilities.We are exposed to fluctuations in foreign currency exchange rates, commodity prices for products we use in our manufacturing and interest rates. To reduce our exposure to these risks, we maintain risk management controls to monitor these risks and take appropriate actions to attempt to mitigate such forms of market risks.
Foreign currency exchange rate risk
— Our foreign currency exposures are primarily associated with intercompany and third party sales and purchase transactions, cross-currency intercompany loans and external debt. We use forward contracts to manage our foreign currency exchange rate risk associated with a portion of our forecasted foreign currency-denominated sales and purchase transactions and with certain foreign currency-denominated assets and liabilities. We also use currency swaps, including fixed-to-fixed cross-currency interest rate swaps, to manage foreign currency exchange rate risk associated with our intercompany loans and external debt. Foreign currency exposures are reviewed quarterly, at a minimum, and natural offsets are considered prior to entering into derivative instruments.Changes in the fair value of derivative instruments treated as cash flow hedges are reported in other comprehensive income (loss) (OCI). Deferred gains and losses are reclassified to earnings in the same period in which the underlying transactions affect earnings. Specifically, with respect to the cross-currency interest rate swap, to the extent we recognize an exchange gain or loss on the underlying external debt, we reclassify an offsetting portion from OCI to earnings in the same period.
Changes in the fair value of derivative instruments not treated as cash flow hedges are recognized in earnings in the period in which those changes occur. Changes in the fair value of derivative instruments associated with product-related transactions are recorded in cost of sales, while those associated with non-product transactions are recorded in other income (expense), net. See Note 15 toof our consolidated financial statements in Item 8.
The following table summarizes the sensitivity of the fair value of our derivative instruments, including forward contracts and currency swaps, at December 31, 20172020 to a 10% change in foreign exchange rates.
10% Increase | 10% Decrease | |||||||
in Rates | in Rates | |||||||
Gain (Loss) | Gain (Loss) | |||||||
Foreign currency rate sensitivity: | ||||||||
Currency swaps | $ | (142 | ) | $ | 142 | |||
Forward contracts | $ | (22 | ) | $ | 27 |
10% Increase in Rates Gain (Loss) | 10% Decrease in Rates Gain (Loss) | ||||||
Foreign currency rate sensitivity: | |||||||
Currency swaps | $ | 140 | $ | (140 | ) | ||
Forward contracts | $ | (11 | ) | $ | 13 |
At December 31, 2017,2020, of the $1,418$1,504 total notional amount of foreign currency derivatives, approximately 80%74% represents the aggregate of three fixed-to-fixed cross-currency interest rate swaps associated with recorded foreign currency-denominated external debt and certain foreign currency-denominated intercompany loans while the remaining 20%26% primarily represents forward contracts associated with our forecasted foreign currency-denominated sales and purchase transactions.
To manage our global liquidity objectives, we periodically execute intercompany loans, some of which are foreign currency-denominated. With respect to such intercompany loans, the total notional amount outstanding at December 31, 20172020 is approximately $500.$800. Depending on the specific objective of each intercompany loan arrangement, certain intercompany loans may be hedged while others remain unhedged for strategic reasons. The decision to hedge the loan, to designate the loan itself as a hedge or not to hedge the loan is dependent on management's underlying strategy. Of the approximately $500$800 of foreign currency-denominated intercompany loans outstanding at December 31, 2017, approximately two-thirds,2020, $340, or $337,43%, has been hedged by one of our fixed-to-fixed cross-currency swaps whereby we have protected the income statement from exchange rate risk. Of the remaining one-third57% of such outstanding intercompany loans, none$35 million has been hedged by foreign currency forwards and the remaining balances have not been hedged. A significant portion of thisthe remaining one-third57% is deemed to be permanent in nature while the remainder of this one-third portion has been designated as a net investment hedge to protect the USD-equivalent value of the corresponding amount of the underlying investment in our Mexican operations.nature. The remeasurement of foreign currency-denominated intercompany loans that have been designated as net investment hedges or characterized as permanent in nature is recognized as an adjustment to the cumulative translation adjustment component of OCI.
To align our cash requirements with availability by currency, we also periodically issue external debt that is denominated in a currency other than the functional currency of the issuing entity. As of December 31, 2017,2020, we had $775 of external U.S. dollar debt, issued by a euro-functional entity, all of which has been hedged by our fixed-to-fixed cross-currency interest rate swaps. Such swaps are treated as cash flow hedges whereby the changes in fair value are recorded in OCI to the extent the hedges remain effective.
At December 31, 2016,2019, the total notional amount of our currency derivative portfolio was $714$1,598 and included a fixed-to-fixed cross-currency interest rate swapswaps associated with $375$775 of external debt. The remaining $339$823 represents currency swaps and forward contracts associated with certain foreign currency-denominated intercompany loans and forecasted sales and purchase transactions.
Commodity price risk
— We do not utilize derivative contracts to manage commodity price risk. Our overall strategy is to pass through commodity risk to our customers in our pricing agreements. A substantial portion of our customer agreements include contractual provisions for the pass-through of commodity price movements. In instances where the risk is not covered contractually, we have generally been able to adjust customer pricing to recover commodity cost increases.Interest rate risk
— Our long-term debt portfolio consists mostly of fixed-rate instruments. On occasion we enter into interest rate swaps to convert fixed-rate debt to floating-rate debt. As described in Note 15The table below indicates interest rate sensitivity on interest expense of our floating rate debt, inclusive of the interest rate collar, based on amounts outstanding as of December 31, 2020.
Change in rate: | Impact on Annual Interest Expense | |||
25 bps decrease | $ | (1 | ) | |
25 bps increase | $ | 1 |
To the Board of Directors and Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Interim and Annual Goodwill Impairment Assessments – Off-Highway and Commercial Vehicle Reporting Units As described in Notes 1 and 3 to the consolidated financial statements, the Company’s consolidated goodwill balance was $479 million as of December 31, 2020, and the goodwill associated with the Off-Highway and Commercial Vehicle reporting units was $302 million and $177 million, respectively. Management tests goodwill for impairment annually as of October 31 and more frequently if events occur or circumstances change that would warrant an interim review. Management estimates the fair value of these reporting units using discounted cash flow projections. In determining fair value using discounted cash flow projections, management makes significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected segment EBITDA, discount rates, terminal growth rates, and exit earnings multiples. Management determined certain impairment triggers had occurred in the first quarter of 2020. Accordingly, management performed interim impairment analyses at each of the reporting units as of March 31, 2020. Based on the results of the interim impairment tests, management concluded that carrying value exceeded fair value in the Commercial Vehicle reporting unit and recorded a goodwill impairment charge of $48 million in the first quarter of 2020. Management’s testing for the Off-Highway reporting unit indicated that fair value exceeded carrying value and, accordingly, no impairment charge was required. The principal considerations for our determination that performing procedures relating to the interim and annual goodwill impairment assessments of the Off-Highway and Commercial Vehicle reporting units is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates of the reporting units; (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the significant assumptions used in management’s fair value estimates related to revenue growth rates, projected segment EBITDA, and discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s interim and annual goodwill impairment assessments, including controls over the valuation of the Off-Highway and Commercial Vehicle reporting units. These procedures also included, among others (i) testing management’s process for determining the fair value estimates of the reporting units; (ii) evaluating the appropriateness of management’s discounted cash flow projections models; (iii) testing the completeness and accuracy of the underlying data used in the discounted cash flow projections models; and (iv) evaluating the reasonableness of significant assumptions used by management related to revenue growth rates, projected segment EBITDA, and discount rates. Evaluating management’s assumptions related to revenue growth rates and projected segment EBITDA involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the reporting units; (ii) consistency with external industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow projections models and (ii) reasonableness of significant assumptions related to the discount rates. /s/ PricewaterhouseCoopers LLP Toledo, Ohio February We have served as the Company’s auditor since 1916. Consolidated Statement of Operations (In millions, except per share amounts) 2020 2019 2018 Net sales Costs and expenses Cost of sales Selling, general and administrative expenses Amortization of intangibles Restructuring charges, net Gain on disposal group held for sale Other income (expense), net Earnings before interest and income taxes Interest income Interest expense Earnings (loss) before income taxes Income tax expense (benefit) Equity in earnings of affiliates Net income (loss) Less: Noncontrolling interests net income Less: Redeemable noncontrolling interests net loss Net income (loss) attributable to the parent company Net income (loss) per share available to common stockholders Weighted-average common shares outstanding The accompanying notes are an integral part of the consolidated financial statements. Consolidated Statement of Comprehensive Income (In millions) 2020 2019 2018 Net income (loss) Other comprehensive income (loss), net of tax: Currency translation adjustments Hedging gains and losses Defined benefit plans Other comprehensive income (loss) Total comprehensive income (loss) Comprehensive income (loss) attributable to the parent company The accompanying notes are an integral part of the consolidated financial statements. Consolidated Balance Sheet (In millions, except share and per share amounts) 2020 2019 Assets Current assets Cash and cash equivalents Marketable securities Accounts receivable Trade, less allowance for doubtful accounts of $7 in 2020 and $9 in 2019 Other Inventories Other current assets Total current assets Goodwill Intangibles Deferred tax assets Other noncurrent assets Investments in affiliates Property, plant and equipment, net Total assets Liabilities and equity Current liabilities Short-term debt Current portion of long-term debt Accounts payable Accrued payroll and employee benefits Taxes on income Other accrued liabilities Total current liabilities Long-term debt, less debt issuance costs of $27 in 2020 and $28 in 2019 Pension and postretirement obligations Other noncurrent liabilities Total liabilities Commitments and contingencies (Note 16) Redeemable noncontrolling interests Parent company stockholders' equity Preferred stock, 50,000,000 shares authorized, $0.01 par value, no shares outstanding Common stock, 450,000,000 shares authorized, $0.01 par value, 144,515,658 and 143,942,539 shares outstanding Additional paid-in capital Retained earnings Treasury stock, at cost (10,442,582 and 10,111,191 shares) Accumulated other comprehensive loss Total parent company stockholders' equity Noncontrolling interests Total equity Total liabilities and equity The accompanying notes are an integral part of the consolidated financial statements. Consolidated Statement of Cash Flows (In millions) 2020 2019 2018 Operating activities Net income (loss) Net cash provided by operating activities Investing activities Proceeds from sale of subsidiaries, net of cash disposed Net cash used in investing activities Financing activities Net cash provided by (used in) financing activities Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash - beginning of period Cash, cash equivalents and restricted cash - end of period The accompanying notes are an integral part of the consolidated financial statements. Consolidated Statement of Stockholders’ Equity (In millions) Parent Company Stockholders' Accumulated Parent Additional Other Company Non- Preferred Common Paid-In Retained Treasury Comprehensive Stockholders' controlling Total Stock Stock Capital Earnings Stock Loss Equity Interests Equity Balance, December 31, 2017 Adoption of ASU 2016-01 financial instruments adjustment, January 1, 2018 Net income Other comprehensive loss Common stock dividends ($0.40 per share) Distributions to noncontrolling interests Purchase of noncontrolling interests Purchase of redeemable noncontrolling interests Contribution from noncontrolling interest Common stock share repurchases Stock compensation Stock withheld for employees taxes Balance, December 31, 2018 Adoption of ASU 2016-02 leases, January 1, 2019 Net income Other comprehensive income (loss) Common stock dividends ($0.40 per share) Distributions to noncontrolling interests Increase from business combination Common stock share repurchases Stock compensation Stock withheld for employees taxes Balance, December 31, 2019 Adoption of ASU 2016-13 credit losses, January 1, 2020 Balance, December 31, 2020 The accompanying notes are an integral part of the consolidated financial statements. Index to Notes to the Consolidated Financial Statements Page 1. Organization and Summary of Significant Accounting Policies 2. Acquisitions 3. Goodwill and Other Intangible Assets 4. Restructuring of Operations 5. Inventories 6. Supplemental Balance Sheet and Cash Flow Information 7. Leases 8. Stockholders' Equity 9. Redeemable Noncontrolling Interests 10. Earnings per Share 11. Stock Compensation 12. Pension and Postretirement Benefit Plans 13. Marketable Securities 14. Financing Agreements 15. Fair Value Measurements and Derivatives 16. Commitments and Contingencies 17. Warranty Obligations 18. Income Taxes 19. Other Income (Expense), Net 20. Revenue from Contracts with Customers 21. Segments, Geographical Area and Major Customer Information 22. Equity Affiliates Notes to the Consolidated Financial Statements (In millions, except share and per share amounts) General Dana Incorporated (Dana) is headquartered in Maumee, Ohio, and was incorporated in Delaware in 2007. The terms "Dana," "we," "our" and "us," when used in this report are references to Dana. These references include the subsidiaries of Dana unless otherwise indicated or the context requires otherwise. Summary of significant accounting policies Basis of presentation During the We concluded that the error 2020 As Previously Reported Adjustment As Revised (unaudited) Consolidated Statement of Operations Net income Less: Noncontrolling interests net income Less: Redeemable noncontrolling interests net loss Net income attributable to the parent company Net income per share available to common stockholders Basic Diluted Consolidated Statement of Comprehensive Income Total comprehensive loss Less: Comprehensive loss attributable to noncontrolling interests Less: Comprehensive (income) loss attributable to redeemable noncontrolling interests Comprehensive income (loss) attributable to the parent company Period Ended March 31, Held for sale — We classify long-lived assets or disposal groups as held for sale in the period: management commits to a plan to sell; the long-lived asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such long-lived assets or disposal groups; an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; the sale is probable within one year; the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long-lived assets and disposal groups classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. Discontinued operations Estimates Fair value measurements The inputs we use in our valuation techniques include market data or assumptions that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs. When available, we use quoted market prices to determine the fair value (market approach). In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, we consider the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of credit risk that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date (income approach). Fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future. Cash and cash equivalents Marketable securities Inventories Property, plant and equipment Leases — Our global lease portfolio represents leases of real estate, including manufacturing, assembly and office facilities, while the remainder represents leases of personal property, including manufacturing, material handling and IT equipment. We have lease agreements with lease and non-lease components, which are accounted for separately. Leases with an initial term of twelve months or less are not recorded on the balance sheet, and we recognize lease expense for these leases on a straight-line basis over the lease term. Generally, we use our incremental borrowing rate in determining the present value of lease payments, unless there is a rate stated in the lease agreement. Pre-production costs related to long-term supply arrangements Goodwill — We test goodwill for impairment annually as of October 31 and more frequently if events occur or circumstances change that would warrant an interim review. Goodwill impairment testing is performed at the reporting unit level, which is the operating segment in the case of our Off-Highway and Commercial Vehicle goodwill. We estimate the fair value of the reporting Intangible assets Investments in affiliates Tangible asset impairments Other long-lived assets and liabilities Financial instruments Derivative For derivative instruments designated as cash flow hedges, at the cash flow hedge’s inception and on an ongoing basis, the company formally assesses whether the cash flow hedging instruments have been highly effective in offsetting changes in the cash flows of the hedged transactions and whether those cash flow hedging instruments may be expected to remain highly effective in future periods. Changes in the fair value of currency-related contracts treated as cash flow hedges are deferred and included as a component of other comprehensive income (loss) (OCI) Changes in the fair value of contracts not treated as cash flow hedges or as net investment hedges are recognized in other income (expense), net in the period in which those changes occur. Changes in the fair value of contracts treated as net investment hedges are recorded in the cumulative translation adjustment (CTA) component of OCI. Amounts recorded in CTA are deferred until such time as the investment in the associated subsidiary is substantially liquidated. We may also use fixed-to-floating or floating-to-fixed interest rate swaps or other similar derivatives to manage exposure to fluctuations in interest rates and to adjust the mix of our fixed-rate and Cash flows associated with designated derivatives are classified within the same category as the item being hedged on the consolidated statement of cash flows. Cash flows Warranty — Costs related to product warranty obligations are estimated and accrued at the time of sale with a charge against cost of sales. Warranty accruals are evaluated and adjusted as appropriate based on occurrences giving rise to potential warranty exposure and associated experience. Warranty accruals and adjustments require significant judgment, including a determination of our involvement in the matter giving rise to the potential warranty issue or claim, our contractual requirements, estimates of units requiring repair and estimates of repair costs. Environmental compliance and remediation Pension and other postretirement defined benefits Postemployment benefits Equity-based compensation Revenue recognition Foreign currency translation Effective July 1, 2018, we accounted for Argentina as a highly inflationary economy, as the three-year cumulative inflation rate exceeded 100%. As such, beginning July 1, 2018 we began to remeasure the financial statements of our Argentine subsidiaries as if their functional currency was the U.S. dollar. Income taxes Research and development — Research and development costs include expenditures for research activities relating to product development and improvement. Salaries, fringes and occupancy costs, including building, utility and overhead costs, comprise the vast majority of these expenses and are expensed as incurred. Research and development expenses were Recently adopted accounting pronouncements On January 1, 2019, We On January 1, 2020, We also adopted the following standards during 2020, which did not have a material impact on our financial statements or financial statement disclosures: Standard Effective Date 2018-15 Intangibles – Goodwill and Other – Internal-Use Software, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract January 1, 2020 2018-14 Recently issued accounting pronouncements In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This guidance In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. This guidance is intended to simplify various aspects of income tax accounting including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This guidance becomes effective January 1, Ashwoods Innovations Limited —On February Nordresa —On August 26, 2019, we acquired a 100% ownership interest in Nordresa Motors, Inc. (Nordresa) for consideration of $12, using cash on hand. Nordresa is a prominent integration and application engineering expert for the development and commercialization of electric powertrains for commercial vehicles. The investment further enhances Dana's electrification capabilities by combining its complete portfolio of motors, inverters, chargers, gearboxes, and thermal-management products with Nordresa's proprietary battery-management system, electric powertrain controls and integration expertise to Hydro-Québec Relationship —On July 29, 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45% redeemable noncontrolling interest in S.M.E. S.p.A. (SME) and increasing its existing indirect 22.5% noncontrolling interest in Prestolite E-Propulsion Systems (Beijing) Limited (PEPS) to 45%. We received $65 at closing, consisting of Prestolite E-Propulsion Systems (Beijing) Limited — On June 6, 2019, we acquired Prestolite Electric Beijing Limited's (PEBL) 50% ownership interest in PEPS. PEPS manufactures and distributes electric mobility solutions, including electric motors, inverters, and generators for commercial vehicles and heavy machinery. PEPS has a state-of-the-art facility in China, enabling us to expand motor and inverter manufacturing capabilities in the world's largest electric-mobility market. The acquisition of PEBL's interest in PEPS, along with our existing ownership interest in PEPS through our TM4 subsidiary, provides us with a 100% ownership interest and a controlling financial interest in PEPS. We recognized a $2 gain to other income (expense), net on the required remeasurement of our We paid $50 at closing using cash on hand. The purchase consideration and Purchase consideration paid at closing Fair value of previously held equity method investment Total purchase consideration Cash and cash equivalents Accounts receivable - Trade Inventories Goodwill Intangibles Property, plant and equipment Accounts payable Other accrued liabilities Other noncurrent liabilities Total purchase consideration allocation Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for tax purposes. We used a combination of the discounted cash flow method, an The results of operations of the business are reported in Oerlikon Drive Systems — On February 28, 2019, we acquired a We paid Purchase consideration paid at closing Less purchase consideration to be recovered for indemnified matters Total purchase consideration Cash and cash equivalents Accounts receivable - Trade Accounts receivable - Other Inventories Other current assets Goodwill Intangibles Deferred tax assets Other noncurrent assets Investments in affiliates Operating lease assets Property, plant and equipment Current portion of long-term debt Accounts payable Accrued payroll and employee benefits Current portion of operating lease liabilities Taxes on income Other accrued liabilities Long-term debt Pension and postretirement obligations Noncurrent operating lease liabilities Other noncurrent liabilities Noncontrolling interests Total purchase consideration allocation Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is not deductible for The results of operations of the business are primarily reported in our Off-Highway and Commercial Vehicle operating segments. Transaction related expenses associated with completion of the acquisition totaling $13 in 2019 were charged to other income (expense), net. During 2019, the business contributed sales of $630. The following unaudited pro forma information has been 2019 2018 Net sales Net income The unaudited pro forma results include adjustments primarily related to purchase accounting, interest expense related to the debt proceeds used in connection with the acquisition of ODS, and non-recurring strategic transaction expenses. The unaudited pro forma financial information is not indicative of the operational results that would have been obtained had the transactions actually occurred as of that date, nor is it necessarily indicative of Dana’s future operational results. SME — On January 11, 2019, we acquired a 100% ownership interest in SME. SME designs, engineers, and manufactures low-voltage AC induction and synchronous reluctance motors, inverters, and controls for a wide range of off-highway electric vehicle applications, including material handling, agriculture, construction, and automated-guided vehicles. The addition of SME's low-voltage motors and inverters, which are primarily designed to meet the evolution of electrification in off-highway equipment, significantly expands Dana's electrified product portfolio. See Hydro-Québec relationship discussion above for details of the subsequent change in our ownership interest in SME. We paid $88 at closing, consisting of $62 in cash on hand and a note payable of $26 which allows for net settlement of potential contingencies as Total purchase consideration Accounts receivable - Trade Accounts receivable - Other Inventories Goodwill Intangibles Property, plant and equipment Short-term debt Accounts payable Accrued payroll and employee benefits Other accrued liabilities Other noncurrent liabilities Total purchase consideration allocation Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is notdeductible for tax purposes. The results of operations of the business are reported in our TM4— We paid $125 at closing, using cash on hand. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table: Total purchase consideration Cash and cash equivalents Accounts receivable - Trade Accounts receivable - Other Inventories Goodwill Intangibles Investment in affiliates Property, plant and equipment Accounts payable Accrued payroll and employee benefits Other accrued liabilities Redeemable noncontrolling interest Total purchase consideration allocation Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce and is notdeductible for tax purposes. Dana is consolidating TM4 as the governing documents provide Dana with a controlling financial interest. The results of operations of the business are reported in our Commercial Vehicle operating segment from the date of acquisition. Note 3. Goodwill and Other Intangible Assets Goodwill — Based on the results of The remaining change in the carrying amount of goodwill in Changes in the carrying amount of goodwill by segment Light Vehicle Commercial Vehicle Off-Highway Power Technologies Total Balance, December 31, 2018 Impairment Currency impact Balance, December 31, 2019 Acquisition Currency impact Balance, December 31, 2020 Non-amortizable intangible assets During the third quarter of 2012, we entered a strategic alliance with Fallbrook Technologies Inc. (Fallbrook). The transaction with Fallbrook was accounted for as a business combination and the original purchase price allocation included $20 of intangible assets used in research and development activities, Amortizable intangible assets These assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We group the assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the undiscounted future cash flows. We use our internal forecasts, which we update quarterly, to develop our cash flow projections. These forecasts are based on our knowledge of our customers’ production forecasts, our assessment of market growth rates, net new business, material and labor cost estimates, cost recovery agreements with customers and our estimate of savings expected from our restructuring activities. The most likely factors that would significantly impact our forecasts are changes in customer production levels and loss of significant portions of our business. Our valuation is applied over the life of the primary assets within the asset groups. If the undiscounted cash flows do not indicate that the carrying amount of the asset group is recoverable, an impairment charge is recorded if the carrying amount of the asset group exceeds its fair value based on discounted cash flow analyses or appraisals. Components of other intangible assets — December 31, 2020 December 31, 2019 Weighted Average Gross Accumulated Net Gross Accumulated Net Useful Life Carrying Impairment and Carrying Carrying Impairment and Carrying (years) Amount Amortization Amount Amount Amortization Amount Amortizable intangible assets Core technology Trademarks and trade names Customer relationships Non-amortizable intangible assets Trademarks and trade names The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at Amortization expense related to amortizable intangible assets 2020 2019 2018 Charged to cost of sales Charged to amortization of intangibles Total amortization The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next five years based on 2021 2022 2023 2024 2025 Amortization expense Our restructuring activities have historically included rationalizing our operating footprint by consolidating facilities, positioning operations in lower cost locations and reducing overhead costs. In recent years, Net restructuring charges of $34 and $29 in Net restructuring charges of Accrued restructuring costs and activity, including noncurrent portion Employee Termination Exit Benefits Costs Total Balance, December 31, 2017 Charges to restructuring Adjustments of accruals Cash payments Currency impact Balance, December 31, 2018 Charges to restructuring Adjustments of accruals Cash payments Lease cease-use reclassification Balance, December 31, 2019 Charges to restructuring Adjustments of accruals Cash payments Balance, December 31, 2020 At Cost to complete Expense Recognized Future Prior to Total Cost to 2020 2020 to Date Complete Commercial Vehicle The future cost to complete includes estimated separation costs, primarily those associated with Inventory components at December 31 2020 2019 Raw materials Work in process and finished goods Inventory reserves Total Supplemental balance sheet information at December 31 2020 2019 Other current assets: Prepaid expenses Other Total Other noncurrent assets: Customer incentive payments Prepaid expenses Deferred financing costs Pension assets, net of related obligations Other Total Property, plant and equipment, net: Land and improvements to land Buildings and building fixtures Machinery and equipment Total cost Less: accumulated depreciation Net Other accrued liabilities (current): Non-income taxes payable Accrued interest Warranty reserves Deferred income Work place injury costs Restructuring costs Payable under forward contracts Environmental Other expense accruals Total Other noncurrent liabilities: Income tax liability Interest rate swap market valuation Deferred income tax liability Work place injury costs Warranty reserves Other noncurrent liabilities Total Cash, cash equivalents and restricted cash at — December 31, 2020 December 31, 2019 December 31, 2018 December 31, 2017 Cash and cash equivalents Restricted cash included in other current assets Restricted cash included in other noncurrent assets Total cash, cash equivalents and restricted cash Supplemental cash flow information 2020 2019 2018 Change in working capital: Change in accounts receivable Change in inventories Change in accounts payable Change in accrued payroll and employee benefits Change in accrued income taxes Change in other current assets and liabilities Net Cash paid during the period for: Interest Income taxes Noncash investing and financing activities: Purchases of property, plant and equipment held in accounts payable Stock compensation plans Our leases generally have remaining lease terms of one year to eleven years, some of which include options to extend the leases for up to ten years. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The following table provides a summary of the location and amounts related to finance leases recognized in the consolidated balance sheet. Short-term lease costs were insignificant as of December 31, 2020 and 2019. Classification 2020 2019 Finance lease right-of-use assets Property, plant and equipment, net Finance lease liabilities Current portion of long-term debt Finance lease liabilities Long-term debt Components of lease expense — 2020 2019 Operating lease cost Finance lease cost: Amortization of right-of-use assets Interest on lease liabilities Total finance lease cost Supplemental cash flow information related to leases — 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases Operating cash flows from finance leases Financing cash flows from finance leases Right-of-use assets obtained in exchange for lease obligations: Operating leases Finance leases Supplemental balance sheet information related to leases — 2020 2019 Weighted-average remaining lease term (years): Operating leases Finance leases Weighted-average discount rate: Operating leases Finance leases Maturities — Operating Leases Finance Leases 2021 2022 2023 2024 2025 Thereafter Total lease payments Less: interest Present value of lease liabilities Operating lease payments presented in the table above exclude approximately $18 of minimum lease payments for real estate leases signed but not yet commenced. These leases are expected to commence in 2021. Preferred Stock We are authorized to issue 50,000,000 shares of Dana preferred stock, par value $0.01 per share. There were no preferred shares outstanding at December 31, Common Stock We are authorized to issue Our Board of Directors declared a Share repurchase program Changes in equity — During the first quarter of 2018, a wholly-owned subsidiary of Dana purchased the ownership interest in Dana Spicer (Thailand) Limited (a non wholly-owned consolidated subsidiary of Dana) held by ROC-Spicer, Ltd. (a non wholly-owned consolidated subsidiary of Dana). Dana maintained its controlling financial interest in Dana Spicer (Thailand) Limited and accordingly accounted for the purchase as an equity transaction. The Changes in each component of AOCI of the parent Parent Company Stockholders Accumulated Foreign Defined Other Currency Benefit Comprehensive Translation Hedging Investments Plans Loss Balance, December 31, 2017 Other comprehensive income (loss): Currency translation adjustments Holding loss on net investment hedge Reclassification of amount to net income (a) Net actuarial losses Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b) Other Tax expense Other comprehensive income (loss) Adoption of ASU 2016-01 financial instruments adjustment, January 1, 2018 Balance, December 31, 2018 Other comprehensive income (loss): Currency translation adjustments Holding gains and losses Reclassification of amount to net income (a) Net actuarial gains Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b) Tax expense Other comprehensive income Balance, December 31, 2019 Other comprehensive income (loss): Other comprehensive income (loss) Balance, December 31, 2020 Notes: (a) Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments treated as cash flow hedges are reclassified from AOCI into the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. See Note 15 for additional details. (b) See Note 12 for additional details. In connection with the acquisition of a controlling interest in Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income items and distributions or the redemption Reconciliation of changes in redeemable noncontrolling interests 2020 2019 Balance, beginning of period Capital contribution from redeemable noncontrolling interest Comprehensive income (loss) adjustments: Balance, end of period Reconciliation of the numerators and denominators of the earnings per share calculations 2020 2019 2018 Net income (loss) available to common stockholders - Numerator basic and diluted Denominator: Weighted-average common shares outstanding - Basic Employee compensation-related shares, including stock options Weighted-average common shares outstanding - Diluted The share count for diluted earnings per share is computed on the basis of the weighted-average number of common shares outstanding plus the effects of dilutive common stock equivalents (CSEs) outstanding during the period. We excluded 1.4 million, 0.1 million 2017 Omnibus Incentive Plan The 2017 Award activity Options SARs RSUs PSUs Grant-Date Grant-Date Shares Exercise Price* Shares Exercise Price* Shares Fair Value* Shares Fair Value* Granted Forfeited or expired December 31, 2020 * Weighted-average 2020 2019 2018 Total stock compensation expense Total grant-date fair value of awards vested Cash paid to settle SARs and RSUs Intrinsic value of stock options and SARs exercised Intrinsic value of RSUs and PSUs vested Compensation expense is generally measured based on the fair value at the date of grant and is recognized on a straight-line basis over the vesting period. For options and SARs, we use an option-pricing model to estimate fair value. For RSUs and PSUs, the fair value is based on the closing market price of our common stock at the date of grant. Awards that are settled in cash are subject to liability accounting. Accordingly, the fair value of such awards is remeasured at the end of each reporting period until settled or expired. We had accrued Stock options and stock appreciation rights Restricted stock units and performance shares units Under the 2020 stock compensation award program, the number of PSUs that ultimately vest is contingent on achieving a specified free cash flow target and a specified margin target, with an even distribution between the two targets. Our 2019 and 2018 programs had specified return on invested capital targets Cash incentive awards Under the We sponsor various defined benefit, qualified and nonqualified, pension plans covering eligible employees. Other postretirement benefits (OPEB), including medical and life insurance, are provided for certain employees upon retirement. We also sponsor various defined contribution plans that cover the majority of our employees. Under the terms of the qualified defined contribution retirement plans, employee and employer contributions may be directed into a number of diverse investments. None of these qualified defined contribution plans allow direct investment in our stock. Components of net periodic benefit cost (credit) and other amounts recognized in OCI Pension Benefits 2020 2019 2018 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Interest cost Expected return on plan assets Service cost Amortization of net actuarial loss Other Net periodic benefit cost (credit) Recognized in OCI: Reclassification adjustment for net actuarial losses in net periodic benefit cost Other Total recognized in OCI Net recognized in benefit cost (credit) and OCI OPEB 2020 2019 2018 U.S. Non-U.S. U.S. Non-U.S. Non-U.S. Interest cost Amortization of net actuarial gain Net periodic benefit cost Recognized in OCI: Amount due to net actuarial (gains) losses Reclassification adjustment for net actuarial gain in net periodic benefit cost Total recognized in OCI Net recognized in benefit cost (credit) and OCI Our U.S. defined benefit pension plans are frozen and no additional service cost is being accrued. The estimated net actuarial loss for the defined benefit pension plans that will be amortized from AOCI into benefit cost in In October 2017, upon authorization by the Dana Board of Directors, we commenced the process of terminating one of our U.S. defined benefit pension plans. Funded status Pension Benefits OPEB 2020 2019 2020 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Reconciliation of benefit obligation: Obligation at beginning of period Interest cost Actuarial loss Benefit payments Curtailment Deconsolidation of subsidiary Translation adjustments Obligation at end of period Pension Benefits OPEB 2020 2019 2020 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Reconciliation of fair value of plan assets: Fair value at beginning of period Actual return on plan assets Benefit payments Acquisitions Translation adjustments Fair value at end of period Funded status at end of period Amounts recognized in the balance sheet Pension Benefits OPEB 2020 2019 2020 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Amounts recognized in the consolidated balance sheet: Noncurrent assets Current liabilities Noncurrent liabilities Net amount recognized Amounts recognized in AOCI Pension Benefits OPEB 2020 2019 2020 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Amounts recognized in AOCI: Net actuarial loss (gain) AOCI before tax Deferred taxes Net The 2020 actuarial gain of The 2019 actuarial gain of Aggregate funding levels 2020 2019 U.S. Non-U.S. U.S. Non-U.S. Plans with fair value of plan assets in excess of obligations: Accumulated benefit obligation Projected benefit obligation Fair value of plan assets Plans with obligations in excess of fair value of plan assets: Accumulated benefit obligation Projected benefit obligation Fair value of plan assets Fair value of pension plan assets Fair Value Measurements at December 31, 2020 U.S. Non-U.S. Asset Category Total Level 1 Level 2 Level 3 NAV (a) Level 1 Level 2 Level 3 Equity securities: U.S. all cap (b) U.S. large cap EAFE composite Emerging markets Fixed income securities: Corporate bonds U.S. Treasury strips Emerging market debt Alternative investments: Insurance contracts (c) Real estate Other Cash and cash equivalents Total Fair Value Measurements at December 31, 2019 U.S. Non-U.S. Asset Category Total Level 1 Level 2 Level 3 NAV (a) Level 1 Level 2 Level 3 Equity securities: U.S. all cap (b) U.S. large cap EAFE composite Emerging markets Fixed income securities: Corporate bonds U.S. Treasury strips Non-U.S. government securities Emerging market debt Alternative investments: Insurance contracts (c) Real estate Other Cash and cash equivalents Total Notes: (a) Certain assets are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy. (b) This category comprises a combination of small-, mid- and large-cap equity stocks that are allocated at the investment manager's discretion. Investments include common and preferred securities as well as equity funds that invest in these instruments. (c) This category comprises contracts placed with insurance companies where the underlying assets are invested in fixed interest securities. 2020 2020 2019 2019 U.S. Non-U.S. U.S. Non-U.S. Insurance Insurance Insurance Insurance Reconciliation of Level 3 Assets Contracts Contracts Contracts Contracts Fair value at beginning of period Purchases, sales and settlements Currency impact Fair value at end of period Valuation Methods Equity securities Fixed income securities Insurance contracts Real estate Cash and cash equivalents — The fair value of cash and cash equivalents is set equal to its amortized cost. The methods described above may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe the 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. Investment policy Our policy recognizes that properly managing the relationship between pension assets and pension liabilities serves to mitigate the impact of market volatility on our funding levels. The investment policy permits plan assets to be invested in a number of diverse categories, including a Growth Portfolio, an Immunizing Portfolio and a Liquidity Portfolio. These sub-portfolios are intended to balance the generation of incremental returns with the management of overall risk. The Growth Portfolio is invested in a diversified pool of assets in order to generate an incremental return with an acceptable level of risk. The Immunizing Portfolio is a hedging portfolio that may be comprised of fixed income securities and overlay positions. This portfolio is designed to offset changes in the value of the pension liability due to changes in interest rates. The Liquidity Portfolio is a cash portfolio designed to meet short-term liquidity needs and reduce the plans’ overall risk. As a result of our diversification strategies, there are no significant concentrations of risk within the portfolio of investments. The allocations among portfolios are adjusted as needed to meet changing objectives and constraints and to manage the risk of adverse changes in the unfunded positions of our plans. Significant assumptions 2020 2019 2018 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Pension benefit obligations: Discount rate Net periodic benefit cost: Discount rate Rate of compensation increase Expected return on plan assets The pension plan discount rate assumptions are evaluated annually in consultation with our outside actuarial advisers. Long-term interest rates on high quality corporate debt instruments are used to determine the discount rate. For our largest plans, discount rates are developed using a discounted bond portfolio analysis, with appropriate consideration given to defined benefit payment terms and duration of the liabilities. For pension and other postretirement benefit plans that utilize The expected rate of return on plan assets was selected on the basis of our long-term view of return and risk assumptions for major asset classes. We define long-term as forecasts that span at least the next ten years. Our long-term outlook is influenced by a combination of return expectations by individual asset class, actual historical experience and our diversified investment strategy. We consult with and consider the opinions of financial professionals in developing appropriate capital market assumptions. Return projections are also validated using a simulation model that incorporates yield curves, credit spreads and risk premiums to project long-term prospective returns. The appropriateness of the expected rate of return is assessed on an annual basis and revised if necessary. We have a high percentage of total assets in fixed income securities since the benefit accruals are frozen for all of our U.S. pension plans. Based on this assessment, we have selected a The significant weighted-average assumptions used in the measurement of OPEB obligations at December 31 of each year and the net periodic benefit cost for each year are as follows: 2020 2019 2018 U.S. Non-U.S. U.S. Non-U.S. Non-U.S. OPEB benefit obligations: Discount rate Net periodic benefit cost: Discount rate Initial health care cost trend rate Ultimate health care cost trend rate Year ultimate reached The discount rate selection process was similar to the process used for the pension plans. Assumed health care cost trend rates have a significant effect on the health care obligation. To determine the trend rates, consideration is given to the plan design, recent experience and health care economics. Estimated future benefit payments and contributions Pension Benefits OPEB Year U.S. Non-U.S. U.S. Non-U.S. 2021 2022 2023 2024 2025 Total Pension benefits are funded through deposits with trustees that satisfy, at a minimum, the applicable funding regulations. OPEB benefits are funded as they become due. Multi-employer pension plans Contribution rates could increase if the plan is required to adopt a funding improvement plan or a rehabilitation plan, if the performance of plan assets does not meet expectations or as a result of future collectively bargained wage and benefit agreements. If we choose to stop participating in the plan, we may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The Pension Protection Act (PPA) defines a zone status for each plan. Plans in the green zone are at least 80% funded, plans in the yellow zone are at least 65% funded and plans in the red zone are generally less than 65% funded. The SPT plan has utilized extended amortization provisions to amortize its losses from 2008. The plan recertified its zone status after using the extended amortization provisions as allowed by law. The SPT plan has not implemented a funding improvement or rehabilitation plan, nor are such plans pending. Our contributions to the SPT Employer PPA Pension Number/ Pending/ Surcharge Fund Plan Number 2020 2019 Implemented 2020 2019 2018 Imposed SPT 23-6648508 / 499 Green Green No No 2020 2019 Unrealized Fair Unrealized Fair Cost Gains (Losses) Value Cost Gains (Losses) Value Certificates of deposit - Current marketable securities Corporate securities - Noncurrent marketable securities Certificates of deposit maturing in one year or less We held $16 of convertible notes receivable from our investment in Hyliion Inc. On October 1,2020, Hyliion completed its merger with Tortoise Acquisition Corp. The business combination resulted in the combined company being renamed Hyliion Holdings Corp., with its common stock being listed on the New York Stock Exchange under the ticker symbol HYLN. Effective with the completed merger, our notes receivable were converted into 2,988,229 common shares of HYLN. Our investment in Hyliion is included in noncurrent marketable securities and carried at fair value with changes in fair value included in net income in future periods. The strategic partnership with Hyliion establishes Dana as the preferred supplier for e-propulsion systems to Hyliion as long as Dana maintains a minimum equity investment in Hyliion. Long-term debt at December 31 Interest Rate 2020 2019 Senior Notes due December 15, 2024 Senior Notes due April 15, 2025 * Senior Notes due June 1, 2026 * Senior Notes due November 15, 2027 Senior Notes due June 15, 2028 Term A Facility Term B Facility Other indebtedness Debt issuance costs Less: Current portion of long-term debt Long-term debt, less debt issuance costs * In conjunction with the issuance of the April 2025 Notes we entered into Interest on the senior notes is payable semi-annually and interest on the Term B Facility is payable quarterly. Other indebtedness includes the note payable to SME, borrowings from various financial institutions, Scheduled principal payments on long-term debt, excluding finance leases at December 31, 2021 2022 2023 2024 2025 Maturities Senior notes activity In November 2019, we Senior notes redemption provisions Redemption Price December April June November June Year 2024 Notes 2025 Notes 2026 Notes 2027 Notes 2028 Notes 2021 2022 2023 2024 2025 2026 2027 Prior to At any time prior to At any time prior to Credit agreement The Term B Facility and the Revolving Facility are guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and Advances under the Margin Total Net Leverage Ratio Base Rate Eurodollar Rate Less than or equal to 1.00:1.00 Greater than 1.00:1.00 but less than or equal to 2.00:1.00 Greater than 2.00:1.00 The Term B Facility bears interest based on, at our option, the Base Rate plus 1.25% or the Eurodollar rate plus 2.25%. We have elected to pay interest on our Commitment fees are applied based on the average daily unused portion of the available amounts under the Revolving Facility as set forth below: Total Net Leverage Ratio Commitment Fee Less than or equal to 1.00:1.00 Greater than 1.00:1.00 but less than or equal to 2.00:1.00 Greater than 2.00:1.00 Up to $275 of the Revolving Facility may be applied to letters of credit, which reduces availability. We pay a fee for issued and undrawn letters of credit in an amount per annum equal to the applicable margin for Eurodollar rate advances based on a quarterly average availability under issued and undrawn letters of credit under the Revolving Facility and a per annum fronting fee of 0.125%, payable quarterly. At December 31, Bridge facility — On April 16, 2020, we entered into a $500 bridge facility (the Bridge Facility). We recorded deferred fees of $5 related to the Bridge Facility. The deferred fees were being amortized over the life of the Bridge Facility. The Bridge Facility was to mature on April 15, 2021. On June 19, 2020, in connection with the issuance of our June 2028 Notes, we terminated the Bridge Facility and wrote off the $5 of deferred fees associated with the Bridge Facility. Debt covenants In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe market participants would use in pricing an asset or liability including assumptions about risk when appropriate. Our valuation techniques include a combination of observable and unobservable inputs. Fair value measurements on a recurring basis Fair Value Category Balance Sheet Location Fair Value Level December 31, 2020 December 31, 2019 Certificates of deposit Marketable securities Available-for-sale securities Other noncurrent assets Currency forward contracts Cash flow hedges Accounts receivable - Other Cash flow hedges Other accrued liabilities Undesignated Accounts receivable - Other Undesignated Other accrued liabilities Interest rate collars Other accrued liabilities Currency swaps Cash flow hedges Other noncurrent liabilities Fair Value Level 1 assets and liabilities reflect quoted prices in active markets. Fair Value Level 2 assets and liabilities reflect the use of significant other observable inputs. Fair value of financial instruments 2020 2019 Carrying Fair Carrying Fair Fair Value Level Value Value Value Value Long term debt Interest rate derivatives Foreign currency derivatives We have executed fixed-to-fixed cross-currency swaps in conjunction with the issuance of The following fixed-to-fixed cross-currency swaps were outstanding at December 31, Underlying Financial Instrument Derivative Financial Instrument Description Type Face Amount Rate Designated Notional Amount Traded Amount Inflow Rate Outflow Rate April 2025 Notes Payable June 2026 Notes Payable Luxembourg Intercompany Notes Receivable All of the swaps are expected to be highly effective in offsetting the corresponding currency-based changes in cash outflows related to the underlying designated financial instruments. Based on our qualitative assessment that the critical terms of all of the underlying designated financial instruments and all of the associated swaps match and that all other required criteria have been met, we do not expect to incur any ineffectiveness. As effective cash flow hedges, changes in the fair value of the swaps will be recorded in OCI during each period. Additionally, to the extent the swaps remain effective, the appropriate portion of AOCI will be reclassified to earnings each period as an offset to the foreign exchange gain or loss resulting from the remeasurement of the underlying designated financial instruments. See Note 14 for additional information about the The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was Notional Amount (U.S. Dollar Equivalent) Functional Currency Traded Currency Designated Undesignated Total Maturity U.S. dollar Canadian dollar, Mexican peso Aug-2021 Euro U.S. dollar, Australian dollar, Swiss franc, Chinese renminbi, Hungarian forint, Indian rupee, Japanese yen, Mexican peso, Singapore dollar Jan-2024 British pound U.S. dollar, euro Apr-2021 South African rand U.S. dollar, euro Jan-2021 Canadian dollar U.S. dollar Aug-2021 Brazilian real U.S. dollar, euro Sep-2021 Indian rupee U.S. dollar, euro, British pound Jan-2022 Chinese renminbi Canadian dollar, euro Jan-2021 Total forward contracts U.S. dollar euro Nov-2027 Euro U.S. dollar Jun-2026 Total currency swaps Total currency derivatives Designated cash flow hedges The following table provides a summary of deferred gains (losses) reported in AOCI as well as the amount expected to be reclassified to income in one year or less: Deferred Gain (Loss) in AOCI December 31, 2020 December 31, 2019 Forward Contracts Collar Cross-Currency Swaps Total The following table provides a summary of the location and amount of gains or losses recognized in the consolidated statement of operations associated with cash flow hedging relationships: 2020 Derivatives Designated as Cash Flow Hedges Net sales Cost of sales Other income (expense), net Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded (Gain) or loss on cash flow hedging relationships Foreign currency forwards Cross-currency swaps Amount of (gain) loss reclassified from AOCI into income 2019 Derivatives Designated as Cash Flow Hedges Net sales Cost of sales Other income (expense), net Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded (Gain) or loss on cash flow hedging relationships Foreign currency forwards Amount of (gain) loss reclassified from AOCI into income Cross-currency swaps Amount of (gain) loss reclassified from AOCI into income 2018 Derivatives Designated as Cash Flow Hedges Net sales Cost of sales Other income (expense), net Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded (Gain) or loss on cash flow hedging relationships Foreign currency forwards Amount of (gain) loss reclassified from AOCI into income Cross-currency swaps Amount of (gain) loss reclassified from AOCI into income The amounts reclassified from AOCI into income for the cross-currency swaps represent an offset to a foreign exchange loss on our foreign currency-denominated intercompany and external debt instruments. Certain of our hedges of forecasted transactions have not formally been designated as cash flow hedges. As undesignated forward contracts, the changes in the fair value of such contracts are included in earnings for the duration of the outstanding forward contract. Any realized gain or loss on the settlement of such contracts is recognized in the same period and in the same line item in the consolidated statement of operations as the underlying transaction. The following table provides a summary of the location and amount of gains or losses recognized in the consolidated statement of operations associated with undesignated hedging relationships. Amount of Gain (Loss) Recognized in Income Foreign currency forward contracts Cost of sales Foreign currency forward contracts Other income (expense), net During the first quarter of 2019 we settled the outstanding undesignated Swiss franc notional deal contingent forward related to the ODS acquisition for $21, resulting in a realized loss of $13 included in other income (expense), net in the first quarter of 2019. Net investment hedges Product liabilities — Accrued product Environmental liabilities Guarantee of lease obligations Other legal matters We record a liability for estimated warranty obligations at the dates our products are sold. We record the liability based on our estimate of costs to settle future claims. Adjustments to our estimated costs at time of sale are made as claim experience and other new information becomes available. Obligations for service campaigns and other occurrences are recognized as adjustments to prior estimates when the obligation is probable and can be reasonably estimated. Changes in warranty liabilities — 2020 2019 2018 Balance, beginning of period Amounts accrued for current period sales Adjustments of prior estimates Settlements of warranty claims Balance, end of period Income tax expense (benefit) 2020 2019 2018 Current U.S. federal and state Non-U.S. Total current Deferred U.S. federal and state Non-U.S. Total deferred Total expense (benefit) We record interest and penalties related to uncertain tax positions as a component of income tax expense or benefit. Net interest expense for the periods presented herein is not significant. Income 2020 2019 2018 U.S. operations Non-U.S. operations Earnings before income taxes Income tax audits We are currently under audit by U.S. and foreign authorities for certain taxation years. When the issues related to these periods are settled, the total amounts of unrecognized tax benefits for all open tax years may be modified. Audit outcomes and the timing of the audit settlements are subject to uncertainty and we cannot make an estimate of the impact on our financial position at this time. U.S. tax reform legislation Effective tax rate reconciliation 2020 2019 2018 $ % $ $ U.S. federal income tax rate Adjustments resulting from: State & local income taxes, net of federal benefit Non-US income / expense Credits & tax incentives US foreign derived intangible income US tax & withholding tax on non-US earnings Intercompany sale of certain operating assets Settlement and return adjustments Enacted change in tax rates Pension settlement Mexican non-deductible cost of goods sold Goodwill impairment Miscellaneous items Valuation allowance adjustments Effective income tax rate During 2020, we recognized tax expense of During 2019, we recognized a During 2018, we recognized Foreign income repatriation The earnings of our certain non-U.S. subsidiaries may be repatriated to the U.S. in the form of repayments of intercompany borrowings. Certain of our international operations had intercompany loan obligations to the U.S. totaling Valuation allowance adjustments — We have recorded valuation allowances in several entities where the recent history of operating losses does not allow us to satisfy the “more likely than not” criterion for the recognition of deferred tax assets. Consequently, there is no income tax expense or benefit recognized on the pre-tax income or losses in these jurisdictions as valuation allowances are adjusted to offset the associated tax expense or benefit. When evaluating the need for a valuation allowance we consider all components of comprehensive income, and we weigh the positive and negative evidence, putting greater reliance on objectively verifiable evidence than on projections of future profitability that are dependent on actions that have not occurred as of the assessment date. We also consider changes to the historical financial results due to activities that were either new to the business or not expected to recur in the future, in order to identify the core earnings of the business. A sustained period of profitability, after considering changes to the historical results due to implemented actions and nonrecurring events, along with positive expectations for future profitability are necessary to reach a determination that a valuation allowance should be released. Deferred tax assets and liabilities — 2020 2019 Net operating loss carryforwards Postretirement benefits, including pensions Research and development costs Expense accruals Other tax credits recoverable Capital loss carryforwards Inventory reserves Postemployment and other benefits Total Valuation allowances Deferred tax assets Unremitted earnings Intangibles Depreciation Other Deferred tax liabilities Net deferred tax assets Carryforwards Deferred Earliest Tax Valuation Carryforward Year of Asset Allowance Period Expiration Net operating losses U.S. federal U.S. state Various Brazil Unlimited Italy Unlimited Germany Unlimited U.K. Unlimited Canada India China Total In addition to the NOL carryforwards listed in the table above, we have deferred tax assets related to capital loss carryforwards of The use of Unrecognized tax benefits Reconciliation of gross unrecognized tax benefits 2020 2019 2018 Balance, beginning of period Decrease related to expiration of statute of limitations Increase related to prior years tax positions Increase related to current year tax positions Balance, end of period We anticipate that the change in our gross unrecognized tax benefits will 2020 2019 2018 Non-service cost components of pension and OPEB costs Government grants and incentives Foreign exchange gain (loss) Strategic transaction expenses, net of transaction breakup fee income Other income (expense), net Foreign exchange gains and losses on cross-currency intercompany loan balances that are not of a long-term investment nature are included above. Foreign exchange gains and losses on intercompany loans that are permanently invested are reported in OCI. Strategic transaction expenses relate primarily to costs incurred in connection with acquisition and divestiture related activities, including costs to complete the transaction and post-closing integration costs. Strategic transaction expenses in We held $16 of convertible notes receivable from our investment in Hyliion Inc. On October 1,2020, Hyliion Inc. completed its merger with Tortoise Acquisition Corp. The business combination resulted in the combined company being renamed Hyliion Holdings Corp. (Hyliion), with its common stock being listed on the New York Stock Exchange under the ticker symbol HYLN. Effective with the completed merger, our notes receivable were converted into 2,988,229 common shares of HYLN. Our investment in Hyliion will be included in noncurrent marketable securities and carried at fair value with changes in fair value included in net income in future periods. The strategic partnership with Hyliion establishes Dana as the preferred supplier for e-propulsion systems to Hyliion as long as Dana maintains a minimum equity investment in Hyliion. During the first quarter of 2019, we won a legal judgment regarding the methodology used to calculate PIS/COFINS tax on imports into Brazil. During the fourth quarter of 2019, we liquidated a foreign subsidiary. The resulting non-cash gain is attributable to Note 20. Revenue from Contracts with Customers We generate revenue from selling production parts to original equipment manufacturers (OEMs) and service parts to OEMs and aftermarket customers. While we provide production and service parts to certain OEMs under awarded multi-year programs, these multi-year programs do not contain any commitment to volume by the customer. As such, individual customer releases or purchase orders represent the contract with the customer. Our customer contracts do not provide us with an enforceable right to payment for performance completed to date throughout the contract term. As such, we recognize part sales revenue at the point in time when the parts are shipped, and risk of loss has transferred to the customer. We have elected to continue to include shipping and handling fees billed to customers in revenue, while including costs of shipping and handling in costs of sales. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate government agencies. Payment terms with our customers are established based on industry and regional practices and generally do not exceed 180 days. We continually seek new business opportunities and at times provide incentives to our customers for new program awards. We evaluate the underlying economics of each payment made to our customers to determine the proper accounting by understanding the nature of the Certain of our customer contracts include rebate incentives. We estimate expected rebates and accrue the corresponding refund liability, as a reduction of revenue, at the time covered product is sold to the customer based on anticipated customer purchases during the rebate period and contractual rebate percentages. Refund liabilities are included in other accrued liabilities on our Contract liabilities are primarily comprised of Disaggregation of The following table disaggregates revenue for 2020 Light Vehicle Commercial Vehicle Off-Highway Power Technologies Total North America Europe South America Asia Pacific Total 2019 North America Europe South America Asia Pacific Total 2018 North America Europe South America Asia Pacific Total We are a global provider of high-technology products to virtually every major vehicle Dana evaluates the performance of its operating segments based on external sales and segment EBITDA. Segment EBITDA is a primary driver of cash flows from operations and a measure of our ability to maintain and continue to invest in our operations and provide shareholder returns. Our segments are charged for corporate and other shared administrative costs. Segment EBITDA may not be comparable to similarly titled measures reported by other companies. Inter- External Segment Segment Capital Net 2020 Sales Sales EBITDA Spend Depreciation Assets Light Vehicle Commercial Vehicle Off-Highway Power Technologies Eliminations and other Total 2019 Light Vehicle Commercial Vehicle Off-Highway Power Technologies Eliminations and other Total 2018 Light Vehicle Commercial Vehicle Off-Highway Power Technologies Eliminations and other Total Net assets include 2020 2019 2018 Segment EBITDA Corporate expense and other items, net Depreciation Amortization Restructuring charges, net Stock compensation expense Strategic transaction expenses, net of transaction breakup fee income Acquisition related inventory adjustments Gain on disposal group held for sale Other items Earnings before interest and income taxes Interest income Interest expense Earnings (loss) before income taxes Income tax expense (benefit) Equity in earnings of affiliates Net income (loss) Reconciliation of segment net assets to consolidated total assets 2020 2019 Segment net assets Accounts payable and other current liabilities Other current and long-term assets Consolidated total assets Geographic information Net Sales Long-Lived Assets 2020 2019 2018 2020 2019 2018 North America United States Other North America Total Europe Italy Germany Other Europe Total South America Total Total Sales to major customers — Ford We have a number of investments in entities that engage in the manufacture and supply of vehicular parts Dividends received from equity affiliates were Equity method investments exceeding Ownership Percentage Investment Dongfeng Dana Axle Co., Ltd. (DDAC) Pi Innovo Holdings Limited Axles India Limited All others as a group Investments in equity affiliates Investments in affiliates carried at cost Investments in affiliates On February 5, 2020, we acquired an additional ownership interest in Ashwoods. The additional interest, along with our existing ownership interest, provided us with a controlling financial interest in Ashwoods. As such, we ceased accounting for our investment in Ashwoods under the equity method. See Note 2 for additional information. On October 1, 2020, we received a $4 cash dividend from Bendix Spicer Foundation Brake, LLC (BSFB). Immediately following the receipt of the cash dividend, we sold our 20% ownership interest in BSFB to Bendix Commercial Vehicle Systems LLC. We received $50, consisting of $21 in cash, a note receivable of $25 and deferred proceeds of $4. The proceeds received approximated the carrying value of our investment in BSFB. The note receivable and deferred proceeds are due in one year and bear interest at 1.65%. On October 20, 2020, we acquired a 49% ownership interest in Pi Innovo Holdings Limited (Pi Innovo) for consideration of $17, using cash on hand. The consideration paid is subject to adjustment based on cash and working capital balances as of the closing date. Pi Innovo designs, develops and manufactures electronic control units spanning a range of applications and industries. We are accounting for our investment in Pi Innovo by applying the equity method. On December 16, 2020, we sold a portion of our ownership interest in ROC-Spicer, Ltd. (ROC-Spicer) to China Motor Corporation (CMC), reducing our ownership interest in ROC-Spicer to 50%. In conjunction with the decrease in our ownership interest, the ROC-Spicer shareholders agreement was amended, eliminating our controlling financial interest in ROC-Spicer. Upon our loss of control, we recognized a $2 loss to other income (expense), net on the deconsolidation of ROC-Spicer. Of the $2 loss, $1 is related to the remeasurement of our retained investment in ROC-Spicer. The $21 fair value of our retained interest in ROC-Spicer was determined based on the share sale to CMC. Our retained investment in ROC-Spicer is being accounted for by applying the equity method. Our equity method investment in ROC-Spicer is included in the net assets of our Light Vehicle operating segment. Our equity method investments in DDAC, The carrying value of our equity method investments at December 31, Quarterly Results (Unaudited) (In millions, except per share amounts) First Second Third Fourth 2020 Quarter Quarter Quarter Quarter Net sales Gross margin Net income (loss) Net income (loss) attributable to the parent company Net income (loss) per share available to parent company common stockholders First Second Third Fourth 2019 Quarter Quarter Quarter Quarter Net sales Gross margin Net income Net income (loss) attributable to the parent company Net income (loss) per share available to parent company common stockholders Basic Diluted Note: Gross margin is net sales less cost of sales. During 2020, our quarterly results were significantly impacted by the Net income for the first quarter of 2019 includes $16 of net income tax benefits related to discrete items. Net loss for the second quarter of 2019 includes a $258 pre-tax pension settlement charge related to the termination of one of our U.S. defined benefit pension plans and $87 of net income tax benefits related to discrete items. Net income for the third quarter of 2019 includes $22 of income tax benefit related to a discrete item. Net income for the fourth quarter of 2019 includes a $6 pre-tax goodwill impairment charge and a $9 pre-tax loss on extinguishment of debt. Schedule II Valuation and Qualifying Accounts and Reserves (In millions) Amounts deducted from assets in the balance sheets Accounts Receivable - Allowance for Doubtful Accounts 2020 2019 2018 Inventory Reserves 2020 2019 2018 Deferred Tax Assets - Valuation Allowance 2020 2019 2018 None. Disclosure controls and procedures — Management's report on internal control over financial reporting — Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, Changes in internal control over financial reporting — None. PART III Dana has adopted Standards of Business Conduct that apply to all of its officers and employees worldwide. Dana also has adopted Standards of Business Conduct for the Board of Directors. Both documents are available on Dana’s Internet website at The remainder of the response to this item will be included under the sections captioned “Corporate Governance,” “Board Leadership Structure," "Succession Planning,” “Information About the Nominees,” “Risk Oversight,” “Committees and Meetings of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” of Dana’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April The response to this item will be included under the sections captioned “Compensation Committee Interlocks and Insider Participation,” “Compensation of Executive Officers,” “Compensation Discussion and Analysis,” “Compensation of Directors,” “Officer Stock Ownership Guidelines,” “Compensation Committee Report,” “Summary Compensation Table,” “Grants of Plan-Based Awards at Fiscal Year-End,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock Vested During Fiscal Year,” “Pension Benefits,” “Nonqualified Deferred Compensation at Fiscal Year-End,” “Executive Agreements” and “Potential Payments and Benefits Upon Termination or Change in Control” of Dana’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April The response to this item will be included under the section captioned “Security Ownership of Certain Beneficial Owners and Management” of Dana’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April Equity Compensation Plan Information The following table contains information at December 31, Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Notes: (1) In addition to stock options, restricted stock units and performance shares have been awarded under Dana's equity compensation plans and were outstanding at December 31, (2) Calculated without taking into account the The response to this item will be included under the sections captioned “Director Independence and Transactions of Directors with Dana,” “Transactions of Executive Officers with Dana” and “Information about the Nominees” of Dana’s definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April The response to this item will be included under the section captioned "Independent Registered Public Accounting Firm" of Dana's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on April PART IV 10-K Pages (a) List of documents filed as a part of this report: 1. Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statement of Operations Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Stockholders' Equity Notes to the Consolidated Financial Statements 2. Quarterly Results (Unaudited) 3. Financial Statement Schedule: Valuation and Qualifying Accounts and Reserves (Schedule II) All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 4. Exhibits No. Description 2.1 3.1 3.2 4.1 4.2 4.3 4.4 4.5 4.6 10.1* 10.2* 10.3* 10.4* 10.5* 10.6* 10.7* 10.8* 10.9* 10.10* 10.11* 10.12 10.13 10.14 10.15 10.16 10.17 21 23 24 31.1 31.2 32 101 The following materials from Dana Incorporated’s Annual Report on Form 10-K for the year ended December 31, 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * Management contract or compensatory plan or arrangement. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. DANA INCORPORATED Date: February 18, 2021 By: /s/ James K. Kamsickas James K. Kamsickas Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this Signature Title /s/ James K. Kamsickas Chairman, President and Chief Executive Officer James K. Kamsickas (Principal Executive Officer) /s/ Jonathan M. Collins Executive Vice President and Chief Financial Officer Jonathan M. Collins (Principal Financial Officer) /s/ Vice President and Chief Accounting Officer James D. Kellett (Principal Accounting Officer) /s/ Rachel A. Gonzalez* Director Rachel A. Gonzalez /s/ Virginia A. Kamsky* Director Virginia A. Kamsky /s/ Director Bridget E. Karlin /s/ Michael J. Mack, Jr.* Director Michael J. Mack, Jr. /s/ Raymond E. Mabus, Jr.* Director Raymond E. Mabus, Jr. /s/ R. Bruce McDonald* Director R. Bruce McDonald /s/ Director Diarmuid B. O'Connell /s/ Keith E. Wandell* Director Keith E. Wandell *By: /s/ Douglas H. Liedberg Douglas H. Liedberg, Attorney-in-FactShareholdersStockholders of Dana Incorporatedsheetssheet of Dana Incorporated and its subsidiaries (the “Company”) as of December 31, 20172020 and December 31, 2016,2019, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2017,2020, including the related notes and schedule of valuation and qualifying accounts and reserves for each of the three years in the period ended December 31, 20172020 appearing under Item 15(a)(3)8 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017,2020, based on criteria established in 20172020 and December 31, 2016, 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20172020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.Reportreport on Internal Controlinternal control over Financial Reportingfinancial reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Brevini Fluid Power S.pA. (BFP), Brevini Power Transmission S.p.A. (BPT), and Warren Manufacturing LLC (USM) from its assessment/s/ PricewaterhouseCoopers LLP Toledo, Ohio14, 201818, 2021 $ 7,106 $ 8,620 $ 8,143 6,485 7,489 6,986 421 508 499 13 12 8 34 29 25 Impairment of goodwill and indefinite-lived intangible asset (51 ) (6 ) (20 ) 0 0 3 Pension settlement charges 0 (259 ) 0 22 (25 ) (29 ) 124 292 579 Loss on extinguishment of debt (8 ) (9 ) 0 9 10 11 138 122 96 (13 ) 171 494 58 (32 ) 78 20 30 24 (51 ) 233 440 10 13 13 (30 ) (6 ) 0 $ (31 ) $ 226 $ 427 Basic $ (0.21 ) $ 1.57 $ 2.94 Diluted $ (0.21 ) $ 1.56 $ 2.91 Basic 144.5 144.0 145.0 Diluted 144.5 145.1 146.5 2017 2016 2015 Net sales $ 7,209 $ 5,826 $ 6,060 Costs and expenses Cost of sales 6,147 4,982 5,211 Selling, general and administrative expenses 511 406 391 Amortization of intangibles 11 8 14 Restructuring charges, net 14 36 15 Loss on disposal group held for sale (27 ) Loss on sale of subsidiaries (80 ) Impairment of long-lived assets (36 ) Other income (expense), net (9 ) 18 1 Earnings before interest and income taxes 490 332 394 Loss on extinguishment of debt (19 ) (17 ) (2 ) Interest income 11 13 13 Interest expense 102 113 113 Earnings from continuing operations before income taxes 380 215 292 Income tax expense (benefit) 283 (424 ) 82 Equity in earnings (losses) of affiliates 19 14 (34 ) Income from continuing operations 116 653 176 Income from discontinued operations 4 Net income 116 653 180 Less: Noncontrolling interests net income 10 13 21 Less: Redeemable noncontrolling interests net loss (5 ) Net income attributable to the parent company $ 111 $ 640 $ 159 Net income per share available to common stockholders: Basic: Income from continuing operations $ 0.72 $ 4.38 $ 0.98 Income from discontinued operations $ — $ — $ 0.02 Net income $ 0.72 $ 4.38 $ 1.00 Diluted: Income from continuing operations $ 0.71 $ 4.36 $ 0.97 Income from discontinued operations $ — $ — $ 0.02 Net income $ 0.71 $ 4.36 $ 0.99 Weighted-average common shares outstanding Basic 145.1 146.0 159.0 Diluted 146.9 146.8 160.0 Dividends declared per common share $ 0.24 $ 0.24 $ 0.23 $ (51 ) $ 233 $ 440 (77 ) 8 (63 ) 39 24 10 9 344 23 (29 ) 376 (30 ) (80 ) 609 410 Less: Comprehensive income attributable to noncontrolling interests (27 ) (9 ) (7 ) Less: Comprehensive loss attributable to redeemable noncontrolling interests 36 1 6 $ (71 ) $ 601 $ 409 2017 2016 2015 Net income $ 116 $ 653 $ 180 Other comprehensive income (loss), net of tax: Currency translation adjustments (14 ) (41 ) (186 ) Hedging gains and losses (30 ) (30 ) 5 Investment and other gains and losses 2 (2 ) (3 ) Defined benefit plans (6 ) (39 ) 3 Other comprehensive loss (48 ) (112 ) (181 ) Total comprehensive income (loss) 68 541 (1 ) Less: Comprehensive income attributable to noncontrolling interests (17 ) (11 ) (17 ) Less: Comprehensive loss attributable to redeemable noncontrolling interests 2 Comprehensive income (loss) attributable to the parent company $ 53 $ 530 $ (18 ) $ 559 $ 508 21 19 1,201 1,103 231 202 1,149 1,193 127 137 3,288 3,162 479 493 236 240 611 580 169 120 152 182 Operating lease assets 190 178 2,251 2,265 $ 7,376 $ 7,220 $ 26 $ 14 8 20 1,331 1,255 190 206 35 46 Current portion of operating lease liabilities 43 42 308 262 1,941 1,845 2,420 2,336 Noncurrent operating lease liabilities 154 140 479 459 368 305 5,362 5,085 180 167 0 0 2 2 2,408 2,386 530 622 (156 ) (150 ) (1,026 ) (987 ) 1,758 1,873 76 95 1,834 1,968 $ 7,376 $ 7,220 2017 2016 Assets Current assets Cash and cash equivalents $ 603 $ 707 Marketable securities 40 30 Accounts receivable Trade, less allowance for doubtful accounts of $8 in 2017 and $6 in 2016 994 721 Other 172 110 Inventories 969 638 Other current assets 97 78 Current assets of disposal group held for sale 7 Total current assets 2,882 2,284 Goodwill 127 90 Intangibles 174 109 Deferred tax assets 420 588 Other noncurrent assets 71 226 Investments in affiliates 163 150 Property, plant and equipment, net 1,807 1,413 Total assets $ 5,644 $ 4,860 Liabilities and equity Current liabilities Notes payable, including current portion of long-term debt $ 40 $ 69 Accounts payable 1,165 819 Accrued payroll and employee benefits 219 149 Taxes on income 53 15 Other accrued liabilities 220 201 Current liabilities of disposal group held for sale 5 Total current liabilities 1,702 1,253 Long-term debt, less debt issuance costs of $22 in 2017 and $21 in 2016 1,759 1,595 Pension and postretirement obligations 607 565 Other noncurrent liabilities 413 205 Noncurrent liabilities of disposal group held for sale 2 Total liabilities 4,483 3,618 Commitments and contingencies (Note 16) Redeemable noncontrolling interests 47 Parent company stockholders' equity Preferred stock, 50,000,000 shares authorized, $0.01 par value, no shares outstanding — — Common stock, 450,000,000 shares authorized, $0.01 par value, 144,984,050 and 143,938,280 shares outstanding 2 2 Additional paid-in capital 2,354 2,327 Retained earnings 86 195 Treasury stock, at cost (7,001,017 and 6,812,784 shares) (87 ) (83 ) Accumulated other comprehensive loss (1,342 ) (1,284 ) Total parent company stockholders' equity 1,013 1,157 Noncontrolling interests 101 85 Total equity 1,114 1,242 Total liabilities and equity $ 5,644 $ 4,860 $ (51 ) $ 233 $ 440 Depreciation 345 322 260 Amortization 20 17 10 Amortization of deferred financing charges 8 6 4 Call premium on debt 0 7 0 Write-off of deferred financing costs 8 2 0 Earnings of affiliates, net of dividends received 7 (9 ) (4 ) Stock compensation expense 14 19 16 Deferred income taxes (35 ) (137 ) (64 ) Pension expense, net 3 211 3 Impairment of goodwill and indefinite-lived intangible asset 51 6 20 Change in working capital 47 (17 ) (113 ) Change in other noncurrent assets and liabilities (20 ) (18 ) (12 ) Other, net (11 ) (5 ) 8 386 637 568 Purchases of property, plant and equipment (326 ) (426 ) (325 ) Acquisition of businesses, net of cash acquired (6 ) (668 ) (153 ) Proceeds from previous acquisition 0 0 9 Purchases of marketable securities (44 ) (33 ) (37 ) Proceeds from sales of marketable securities 5 6 15 Proceeds from maturities of marketable securities 36 29 37 Proceeds from sale of equity affiliate 21 0 0 0 1 (6 ) Settlements of undesignated derivatives (5 ) (20 ) 0 Other, net (8 ) (12 ) (2 ) (327 ) (1,123 ) (462 ) Net change in short-term debt 9 (3 ) (21 ) Proceeds from long-term debt 508 975 0 Repayment of long-term debt (480 ) (423 ) (13 ) Call premium on debt 0 (7 ) 0 Deferred financing payments (13 ) (20 ) (1 ) Dividends paid to common stockholders (15 ) (58 ) (58 ) Distributions to noncontrolling interests (11 ) (19 ) (42 ) Sale of interest to noncontrolling shareholder 9 53 0 Contributions from noncontrolling interests 4 4 25 Payments to acquire noncontrolling interests (7 ) 0 0 Deconsolidation of non-wholly owned subsidiary (14 ) 0 0 Payments to acquire redeemable noncontrolling interests 0 0 (43 ) Repurchases of common stock 0 (25 ) (25 ) Other, net (2 ) 2 (2 ) (12 ) 479 (180 ) 47 (7 ) (74 ) 518 520 610 Effect of exchange rate changes on cash balances 2 5 (16 ) $ 567 $ 518 $ 520 2017 2016 2015 Operating activities Net income $ 116 $ 653 $ 180 Depreciation 220 173 158 Amortization of intangibles 13 9 16 Amortization of deferred financing charges 5 5 5 Call premium on debt 15 12 2 Write-off of deferred financing costs 4 5 1 Earnings of affiliates, net of dividends received (3 ) (3 ) 12 Stock compensation expense 23 17 14 Deferred income taxes 179 (480 ) (10 ) Pension contributions, net (6 ) (16 ) (18 ) (Gain) loss on sale of subsidiaries (3 ) 80 Loss on disposal group held for sale 27 Impairment of long-lived assets 36 Impairment of equity affiliate 39 Change in working capital (8 ) (51 ) (41 ) Change in other noncurrent assets and liabilities (9 ) (1 ) (7 ) Other, net (19 ) (19 ) 19 Net cash provided by operating activities 554 384 406 Investing activities Purchases of property, plant and equipment (393 ) (322 ) (260 ) Acquisition of businesses, net of cash acquired (187 ) (78 ) Purchases of marketable securities (35 ) (93 ) (43 ) Proceeds from sales of marketable securities 1 47 17 Proceeds from maturities of marketable securities 27 47 30 Proceeds from sale of subsidiaries 3 34 Other 3 (2 ) Net cash used in investing activities (581 ) (365 ) (258 ) Financing activities Net change in short-term debt (90 ) 9 (5 ) Repayment of letters of credit (4 ) Proceeds from long-term debt 676 441 18 Repayment of long-term debt (640 ) (382 ) (60 ) Call premium on debt (15 ) (12 ) (2 ) Deferred financing payments (9 ) (11 ) Dividends paid to common stockholders (35 ) (35 ) (37 ) Distributions to noncontrolling interests (12 ) (17 ) (9 ) Repurchases of common stock (81 ) (311 ) Other 5 7 Net cash used in financing activities (120 ) (88 ) (403 ) Net decrease in cash and cash equivalents (147 ) (69 ) (255 ) Cash and cash equivalents - beginning of period 707 791 1,121 Effect of exchange rate changes on cash balances 43 (15 ) (75 ) Cash and cash equivalents - end of period $ 603 $ 707 $ 791 $ — $ 2 $ 2,354 $ 86 $ (87 ) $ (1,342 ) $ 1,013 $ 101 $ 1,114 2 (2 ) — — 427 427 13 440 (18 ) (18 ) (6 ) (24 ) 1 (59 ) (58 ) (58 ) — (42 ) (42 ) (9 ) (9 ) 9 — 2 2 2 — 22 22 (25 ) (25 ) (25 ) 20 20 20 (7 ) (7 ) (7 ) — 2 2,368 456 (119 ) (1,362 ) 1,345 97 1,442 (1 ) (1 ) (1 ) 226 226 13 239 375 375 (4 ) 371 1 (59 ) (58 ) (58 ) — (19 ) (19 ) — 8 8 (25 ) (25 ) (25 ) 17 17 17 (6 ) (6 ) (6 ) — 2 2,386 622 (150 ) (987 ) 1,873 95 1,968 (1 ) (1 ) (1 ) Net income (loss) (31 ) (31 ) 10 (21 ) Other comprehensive income (40 ) (40 ) 17 (23 ) Common stock dividends ($0.10 per share) (15 ) (15 ) (15 ) Distributions to noncontrolling interests — (11 ) (11 ) Purchase of noncontrolling interests 10 10 (23 ) (13 ) Sale of noncontrolling interests 0 0 0 0 0 0 0 2 2 Redeemable noncontrolling interests adjustment to redemption value 0 0 0 (38 ) 0 0 (38 ) 0 (38 ) Deconsolidation of non-wholly owned subsidiary 0 0 0 (7 ) 0 1 (6 ) (14 ) (20 ) Stock compensation 12 12 12 Stock withheld for employees taxes (6 ) (6 ) (6 ) $ — $ 2 $ 2,408 $ 530 $ (156 ) $ (1,026 ) $ 1,758 $ 76 $ 1,834 Parent Company Stockholders' Balance, December 31, 2014 $ — $ 2 $ 2,640 $ (532 ) $ (33 ) $ (997 ) $ 1,080 $ 100 $ 1,180 Net income 159 159 21 180 Other comprehensive loss (177 ) (177 ) (4 ) (181 ) Common stock dividends ($0.23 per share) (37 ) (37 ) (37 ) Distributions to noncontrolling interests — (9 ) (9 ) Derecognition of noncontrolling interest — (5 ) (5 ) Common stock share repurchases (311 ) (311 ) (311 ) Retire treasury shares (346 ) 346 — — Stock compensation 17 17 17 Stock withheld for employees taxes (3 ) (3 ) (3 ) Balance, December 31, 2015 — 2 2,311 (410 ) (1 ) (1,174 ) 728 103 831 Net income 640 640 13 653 Other comprehensive loss (110 ) (110 ) (2 ) (112 ) Common stock dividends ($0.24 per share) (35 ) (35 ) (35 ) Distributions to noncontrolling interests — (17 ) (17 ) Derecognition of noncontrolling interest — (12 ) (12 ) Common stock share repurchases (81 ) (81 ) (81 ) Stock compensation 16 16 16 Stock withheld for employees taxes (1 ) (1 ) (1 ) Balance, December 31, 2016 — 2 2,327 195 (83 ) (1,284 ) 1,157 85 1,242 Adoption of ASU 2016-16 tax adjustment, January 1, 2017 (179 ) (179 ) (179 ) Net income 111 111 10 121 Other comprehensive income (loss) (58 ) (58 ) 7 (51 ) Common stock dividends ($0.24 per share) (35 ) (35 ) (35 ) Distributions to noncontrolling interests — (12 ) (12 ) Increase from business combination — 12 12 Redeemable noncontrolling interests adjustment to redemption value (6 ) (6 ) (6 ) Purchase of noncontrolling interests — (1 ) (1 ) Stock compensation 27 27 27 Stock withheld for employees taxes (4 ) (4 ) (4 ) Balance, December 31, 2017 $ — $ 2 $ 2,354 $ 86 $ (87 ) $ (1,342 ) $ 1,013 $ 101 $ 1,114 Page 1. Organization and Summary of Significant Accounting Policies 2. Acquisitions 3. Disposal Groups, Divestitures and Impairment of Long-Lived Assets 4. Goodwill and Other Intangible Assets 5. Restructuring of Operations 6. Inventories 7. Supplemental Balance Sheet and Cash Flow Information 8. Stockholders' Equity 9. Redeemable Noncontrolling Interests 10. Earnings per Share 11. Stock Compensation 12. Pension and Postretirement Benefit Plans 13. Marketable Securities 14. Financing Agreements 15. Fair Value Measurements and Derivatives 16. Commitments and Contingencies 17. Warranty Obligations 18. Income Taxes 19. Other Income (Expense), Net 20. Segments, Geographical Area and Major Customer Information 21. Equity Affiliates We are As a global provider of high technology drivedriveline (axles, driveshafts and motion products,transmissions); sealing solutions,and thermal-management technologiesproducts; and fluid-power productsmotors, power inverters, and control systems for electric vehicles, our customer base includes virtually every major vehicle and engine manufacturer in the global light vehicle, medium/heavy vehicle, and off-highway markets.The ownership interests in subsidiaries held by third parties are presented in the consolidated balance sheet within equity, but separate from the parent’s equity, as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in 20 to 50%-owned affiliates, which are not required to be consolidated, are generally accounted for under the equity method. Equity in earnings of these investments is presented separately in the consolidated statement of operations, net of tax. Investments in less-than-20%less-than-20%-owned companies are generally included in the financial statements at the cost of our investment. Dividends, royalties and fees from these cost basis affiliates are recorded in income when received.Infourthsecond quarter of 2017,2020, we identified an error in the classificationloss attributable to redeemable noncontrolling interests due to incorrectly excluding the share of a third-party ownership interest in a subsidiary of Brevini Power Transmission S.p.A. Based on put and call provisions providedthe goodwill impairment charge related to the redeemable noncontrolling interests. Of the $48 million impairment charge recorded for in the agreement betweenCommercial Vehicle reporting unit during the parties, the third-party ownership interestquarter ended March 31, 2020, $20 million should have been classified as a redeemable noncontrolling interest. This balance sheet error was corrected in December 2017 by increasing redeemable noncontrolling interests and reducing noncontrolling interests by $3. The purchase consideration allocation presented in Note 2 and the initial fair value of redeemable noncontrolling interests of acquired businesses presented in Note 9 include this correction.In the first quarter of 2015, we identified an error attributable to the calculation ofredeemable noncontrolling interests net income of a subsidiary. The error resulted in an understatement of noncontrolling equity and noncontrolling interests net income and a corresponding overstatement of parent company stockholders' equity and net income attributable to the parent company in prior periods. Based on our assessments of qualitative and quantitative factors,interests.and related impacts were was not considered material to the financial statements for the quarter ended March 31, 2020 and therefore, amendment of the previously filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 is not required. In accordance with ASC Topic 250, "Accounting Changes and Error Corrections," we have corrected the error in the prior period by revising the year-to-date consolidated financial statements appearing herein. The first quarter of 2020not presented herein will be revised, as applicable, in future filings. The following historical consolidated financial information includes both the consolidated financial information “as previously reported” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as well as the consolidated financial information “as revised” to reflect the correction of the error. Reference is made to the Quarterly Results disclosure in Item 8 below. The impact on our consolidated financial statements for the prior periods to which they relate. The errorpresented was corrected in March 2015 by increasing noncontrolling interests net income by $9. The correction was not considered material to our 2015 net income attributable to the parent company.insignificant. Three Months Ended March 31, $ 38 $ 0 $ 38 2 0 2 (2 ) (20 ) (22 ) $ 38 $ 20 $ 58 $ 0.26 $ 0.14 $ 0.40 $ 0.26 $ 0.14 $ 0.40 $ (84 ) $ 0 $ (84 ) 17 0 17 (6 ) 20 14 $ (73 ) $ 20 $ (53 ) 2020 As Previously Reported Adjustment As Revised (unaudited) Consolidated Balance Sheet Redeemable noncontrolling interests $ 175 $ (20 ) $ 155 Retained earnings $ 644 $ 20 $ 664 Prior to January 1, 2015, we would classifyThe results of operations of a business component or a group of components that hadeither has been disposed of or is classified as held for sale asis reported in discontinued operations if the cash flows of the component were eliminated from our ongoingdisposal represents a strategic shift that has (or will have) a major effect on operations and we no longer had any significant continuing involvement in or with the component. The results of operations of our discontinued operations, including any gains or losses on disposition, were aggregated and presented on one line in the income statement. See Recently adopted accounting pronouncements in this note for a description of the current practice and Note 3 for additional information regarding our discontinued operations.theour consolidated financial statements and accompanying disclosures. We believe our assumptions and estimates are reasonablethree-tierthree-tier fair value hierarchy is used to prioritize the inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows: Level 1 inputs (highest priority) include unadjusted quoted prices in active markets for identical instruments. Level 2 inputs include quoted prices for similar instruments that are observable either directly or indirectly. Level 3 inputs (lowest priority) include unobservable inputs in which there is little or no market data, which require management to develop its own assumptions. Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.will recordrecorded them in net income beginning in 2018 to comply with new accounting guidance. Realized gains and losses are recorded using the specific identification method.first-in, first-outfirst-in, first-out (FIFO) cost method.As a result of our adoption of fresh start accounting on February 1, 2008, property,Property, plant and equipment was statedare recorded at fair value with useful lives ranging from two to thirty years. Useful lives of newly acquired assets are generally twenty to thirty years for buildings and building improvements, five to ten years for machinery and equipment, three to five years for tooling and office equipment and three to ten years for furniture and fixtures.cost. Depreciation is recognized over the estimated useful lives using primarily the straight-line method for financial reporting purposes and accelerated depreciation methods for federal income tax purposes. Useful lives of newly acquired assets are generally twenty to thirty years for buildings and building improvements, five to ten years for machinery and equipment, three to five years for tooling and office equipment and three to ten years for furniture and fixtures. If assets are impaired, their value is reduced via an increase in accumulated depreciation.20172020, the machinery and equipment component of property, plant and equipment includes $28$23 of our tooling related to long-term supply arrangements. The significant increase during 2017 reflects the start of production for our recently awarded customer contracts, including the new JL program at our Toledo, Ohio plant. Also at December 31, 2017,2020, trade and other accounts receivable includes $40$31 of costs related to tooling that we have a contractual right to collect from our customers.unit in the first stepunits using various valuation methodologies, including projected futurediscounted cash flowsflow projections and multiples of current earnings. In determining fair value using discounted cash flow projections, we make significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected segment EBITDA, discount rates, terminal growth rates, and exit earnings multiples. If the estimated fair value of the reporting unit exceeds its carrying value, the goodwill is considered not impaired. If the carrying value of the reporting unit exceeds its estimated fair value, thena goodwill impairment charge is recorded for the second step of the test would be required to determine the implied fair value of the goodwill and any resulting impairment. The vast majority of our goodwill is assigned to our Off-Highwaysegment. The estimated fair value of our Off-Highway reporting unit was significantly greater than its carrying value at October 31, 2017. No impairment of goodwill occurred during the three years ended December 31, 2017.relationships and intangible assets used in research and development activities.relationships. Core technology and customer relationships have definite lives while intangible assets used in research and development activities and substantially all of our trademarks and trade names have indefinite lives. Definite-lived intangible assets are amortized over their useful life using the straight-line method of amortization and are periodically reviewed for impairment indicators. Amortization of core technology is charged to cost of sales. Amortization of trademarks and trade names and customer relationships is charged to amortization of intangibles. Intangible assets used in research and development activities have an indefinite life until completion of the associated research and development efforts. Upon completion of development, the assets are amortized over their useful life; if the project is abandoned, the assets are written off immediately. Indefinite-lived intangible assets are tested for impairment annually and more frequently if impairment indicators exist. See Notes Note 3 and 4 for more information about intangible assets.2122 for further information about our investment in affiliates. to the extent the contracts remain effective and the associated forecasted cash flows from our purchase and sale transactions and from our hedged external and intercompany debt instruments remain probable. For our forward contracts associated with forecasted purchase and sale transactions, effectiveness is measured by using regression analysis to determine the degree of correlation between the change in the fair value of the derivative instrument and the change in the associated foreign currency exchange rates.. For our fixed-to-fixed cross-currency swaps, a review of critical terms is performed each period to establish that an assumption of effectiveness remains appropriate. Deferred gains and losses are reclassified to other income (expense), netearnings in the same periods in which the underlying transactions affect earnings. variable-rate debt. With our current portfolio of fixed-rate debt, the execution of a fixed-to-floating interest rate swap serves to convert our fixed-rate debt to variable-rate debt. As a fair value hedge of the underlying debt, changes in the fair values of the swap and the underlying debt are recorded in interest expense. No such fixed-to-floating or floating-to-fixed swaps remainwere outstanding at December 31, 2017.2020. See Note 15 for additional information.Inthe impact of hedging activities is recordedassociated with undesignated derivatives are included in the investing category that is consistent withon the natureconsolidated statement of the derivative instrument. This category is typically the same category as thatcash flows.$102, $81$146, $112 and $75$103 in 20172020, 20162019 and 20152018.In October 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-16, Income Taxes – Intra-Entity Transfers of Assets Other Than Inventory, guidance that simplifies the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. GAAP had prohibited the recognition in earnings of current and deferred income taxes for an intra-entity transfer until the asset was sold to an outside party or recovered through use. This amendment simplifies the accounting by requiring entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance, which requires modified retrospective application, becomes effective January 1, 2018 with early adoption permitted in 2017 prior to the issuance of interim financial statements. We adopted this guidance effective January 1, 2017. The adoption of the new guidance resulted in a decrease in other current assets of $10, a decrease in other noncurrent assets of $169 and a decrease in retained earnings at January 1, 2017 of $179.We also adopted the following standards during 2017, none of which had a material impact on our financial statements or financial statement disclosures:StandardEffective Date2016-07Investments – Equity Method and Joint Ventures – Simplifying the Transition to the Equity Method of AccountingJanuary 1, 20172016-06Derivatives and Hedging – Contingent Put and Call Options in Debt InstrumentsJanuary 1, 20172016-05Derivatives and Hedging – Effect of Derivative Contract Novations on Existing Hedge Accounting RelationshipsJanuary 1, 20172015-11Inventory – Simplifying the Measurement of InventoryJanuary 1, 2017Recently issued accounting pronouncementsIn September 2017, the FASB issued ASU 2017-13, Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, guidance that delays the mandatory adoption of ASC 606 and 842 for certain entities, revises the guidance related to performance-based incentive fees in ASC 605 and revises the guidance related to leases in ASC 840 and 842. The revisions to the lease guidance eliminate language specific to certain sale-leaseback arrangements, guarantees of lease residual assets and loans made by lessees to owner-lessors. Also included is an amendment to ASC 842 to retain the guidance in ASC 840 covering the impact of changes in tax rates on investments in leveraged leases. This guidance, which is effective immediately, generally relates to the adoption of ASC 606 and 842 and is not expected to impact our consolidated financial statements.In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging – Targeted Improvements to Accounting for Hedging Activities, guidance that is intended to improve and simplify various aspects of accounting for hedging activities. The guidance addresses effectiveness testing requirements, income statement presentation and disclosure and hedge accounting qualification criteria. Adoption of this standard is expected to result in a prospective change to the presentation of certain hedging-related gains and losses in our consolidated statement of operations. We also expect adoption to simplify our ongoingeffectiveness testing and to reduce the complexity of hedge accounting requirements for new hedging contracts executed after adoption. The new standard is effective but early adoption is permitted. We intend to adopt this standard effective January 1, 2018,we adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), using the impactmodified retrospective approach and an application date of which is prospective, as described above. The impact of adoption, including the change in presentation within the consolidated statement of operations, is not expected to be material.In July 2017, the FASB issued ASU 2017-11, Earnings Per Share, Distinguishing Liabilities from Equity, Derivatives and Hedging – (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This guidance is intended to reduce the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, a down round feature would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be considered "not indexed to an entity's own stock" and therefore accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. Down round features are most often found in warrants and conversion options embedded in debt or preferred equity instruments. In addition, the guidance re-characterized the indefinite deferral of certain provisions on distinguishing liabilities from equity to a scope exception with no accounting effect. This guidance becomes effective January 1, 2019. Early adoption is permitted. Prior period amounts have not been adjusted and continue to be reflected in accordance with our historical accounting. This transition method resulted in the recognition of a right-of-use asset and a lease liability for virtually all leases at the application date with a cumulative-effect adjustment to retained earnings.do elected the package of practical expedients, which among other things, allowed us to carry forward the historical lease classification. We did not presently issue any equity-linked financial instruments elect the practical expedient that allowed for hindsight to determine the lease term of existing leases. We separated the lease components from the non-lease components of each lease arrangement and, therefore, this guidance has no impact on our consolidated financial statements.In May 2017,did not elect the FASB issued ASU 2017-09, Stock Compensation – Scope of Modification Accounting, guidancepractical expedient that clarifies that all changeswould enable us to share-based payment awards are not necessarily accounted for as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective prospectively beginning January 1, 2018. Early adoption is permitted. This guidance will apply to any future modifications. We do not expect this guidance to have a material impact on our consolidated financial statements.In March 2017, the FASB issued ASU 2017-07, Retirement Benefits – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, guidance that requires entities to present the service cost component of net periodic pension cost and net periodic postretirement benefit cost in the income statement line items where they report compensation cost. Entities will present all other components of net benefit cost outside operating income, if this subtotal is presented. The rules related to the timing of when costs are recognized or how they are measured have not changed. This amendment only impacts where those costs are reflected within the income statement. In addition, only the service cost component will be eligible for capitalization in inventory and other assets. This guidance becomes effective January 1, 2018. Early adoption is permitted. Upon adoption, we expect to classify the non-service cost components of net periodic pension expense in other income (expense), net.In January 2017, the FASB issued ASU 2017-04, Goodwill – Simplifying the Test for Goodwill Impairment, guidance that simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 of the goodwill impairment test. The new guidance quantifies goodwill impairment as the amount by which the carrying amount of a reporting unit, including goodwill, exceeds its fair value, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit. This guidance becomes effective for us separate them.and will be applied on a prospective basis. Early adoption is permitted for impairment tests performed after January 1, 2017. We do not expect the adoption of this guidance to impact our consolidated financial statements.In January 2017, the FASB issued ASU 2017-01, Business Combinations – Clarifying the Definition of a Business, guidance that revises the definition of a business. The definition of a business affects many areas of accounting, including acquisitions, disposals, goodwill impairment and consolidation. When substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the asset acquired would not represent a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. The new guidance provides a framework to evaluate when an input and a substantive process are present. This guidance becomes effective January 1, 2018. Early adoption is permitted.In November we adopted Accounting Standards Update (ASU) 2016 the FASB released ASU 2016-18, Statement of Cash Flows – Restricted Cash, guidance that addresses the diversity in practice in the classification and presentation of changes in restricted cash on the statement of cash flows. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance becomes effective January 1, 2018 and must be applied on a retrospective basis. This guidance will result in a change in presentation of our consolidated statement of cash flows.In August 2016, the FASB released ASU 2016-15, Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments, guidance that is intended to reduce diversity in practice in how certain cash receipts and cash payments are classified in the statement of cash flows. This guidance becomes effective January 1, 2018 and must be applied on a retrospective basis. This guidance is not expected to have a material impact on our consolidated statement of cash flows.In June 2016, the FASB issued ASU 2016-13, Credit Losses –-03, Financial Instruments (Topic 326): Measurement of Credit Losses on Financial Instrumentsnew guidance for, using the accounting for credit losses on certain financial instruments. modified retrospective approach and an application date of January 1, 2020. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. The adoption resulted in a noncash cumulative effect adjustment to retained earnings on our opening consolidated balance sheet as of January 1, 2020.Compensation – Retirement Benefits – Defined Benefit Plans – General, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans January 1, 2020 2018-13 Fair Value Measurement, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement January 1, 2020 whichis intended to provide temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments in this ASU are elective and are effective upon issuance for all entities through December 31, 2022. We are currently assessing the impact of this guidance on our consolidated financial statements.2020,2021 and early adoption is permitted. Adoption of this guidance requires certain changes to primarily be made prospectively, with some changes to be made retrospectively. We do not expected expect adoption of this guidance to have a material impact on our consolidated financial statements.In 2016,5, 2020, we acquired Curtis Instruments, Inc.'s (Curtis) 35.4% ownership interest in Ashwoods Innovations Limited (Ashwoods). Ashwoods designs and manufactures permanent magnet electric motors for the FASB issued ASU 2016-02, Leases, its new lease accounting standard. The primary focus of the standard is on the accounting by lessees. This standard requires lessees to recognize a right-of-use asset and a lease liability for virtually all leases (other than leases that meet the definition of a short-term lease) on the balance sheet. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern in the income statement. Quantitative and qualitative disclosures are required to provide insight into the extent of revenue and expense recognized and expected to be recognized from leasing arrangements. Approximately three-fourths of our global lease portfolio represents leases of real estate, including manufacturing, assembly and office facilities, while the remainder represents leases of personal property, including manufacturing,automotive, material handling and IT equipment. Many factors will impactoff-highway vehicle markets. The acquisition of Curtis' interest in Ashwoods, along with our existing ownership interest in Ashwoods, provided us with a 97.8% ownership interest and a controlling financial interest in Ashwoods. We recognized a $3 gain to other income (expense), net on the ultimate measurementrequired remeasurement of our previously held equity method investment in Ashwoods to fair value. The total purchase consideration of $22 is comprised of $8 of cash paid to Curtis at closing, the $10 fair value of our previously held equity method investment in Ashwoods and $4 related to the effective settlement of a pre-existing loan payable due from Ashwoods. During March 2020, we acquired the remaining noncontrolling interests in Ashwoods held by employee shareholders. See Hydro-Québec relationship discussion below for details of subsequent changes in our ownership interest in Ashwoods. The results of operations of the lease obligationbusiness are reported within our Off-Highway operating segment. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented.be recognized upon adoption, including our assessmentdeliver complete electric powertrain systems. The results of operations of the likelihoodbusiness are reported within our Commercial Vehicle operating segment. The pro forma effects of renewalthis acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented.leases that provide such an option. We$53 of cash and a note receivable of $12. The note is payable in five years and bears annual interest of 5%. Dana will continue to evaluateconsolidate SME and PEPS as the impactgoverning documents continue to provide Dana with a controlling financial interest in these subsidiaries. See Note 9 for additional information. See below for a discussion of Dana's acquisitions of PEPS, SME and TM4. On April 14, 2020, Hydro-Québec acquired an indirect 45% redeemable noncontrolling interest in Ashwoods. We received $9 in cash at closing, inclusive of $2 in proceeds on a loan from Hydro-Québec. Dana will continue to consolidate Ashwoods as the governing documents continue to provide Dana with a controlling financial interest in this guidance will havesubsidiary.consolidated financial statements. This guidance becomes effective January 1, 2019 with early adoption permitted.In January 2016,previously held equity method investment in PEPS to fair value. See Hydro-Québec relationship discussion above for details of the FASB issued ASU 2016-01, Financial Instruments – Recognitionsubsequent change in our ownership interest in PEPS.Measurementrelated provisional allocation to the acquisition date fair values of Financial Assetsthe assets acquired and Financial Liabilities, $ 50 45 $ 95 $ 2 17 9 63 10 2 (4 ) (3 ) (1 ) $ 95 amendment that addressesincome approach, and the recognition, measurement, presentation and disclosure of certain financial instruments. Investmentsguideline public company method, a market approach, to value our previously held equity method investment in equity securities currently classified as available-for-sale and carried atPEPS. The fair value with changes in fairassigned to intangibles includes $10 allocated to customer relationships. We used the multi-period excess earnings method, an income approach, to value customer relationships. The customer relationships intangible asset is being amortized on a straight-line basis over seven years.OCI, will be carried at fair value determined onour Commercial Vehicle operating segment from the date of acquisition. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial information is presented. PEPS had an exit price notion and changes in fair value will be reported in net income. The new guidance also affects the assessment of deferred tax assets related to available-for-sale securities, the accounting for liabilities for which the fair value option is elected and the disclosures of financial assets and financial liabilities in the notes to the financial statements. This guidance, which becomes effective January 1, 2018, is not expected to have a materialinsignificant impact on our consolidated financial statements.In May 2014, the FASB issued ASU 2014-09, Revenue - Revenue from Contracts with Customers, guidance that requires companies to recognize revenue inresults of operations during 2019.manner that depicts the transfer of promised goods or services to customers in amounts that reflect the consideration a company expects to be entitled to in exchange for those goods or services. The new guidance will also require new disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This guidance will be effective January 1, 2018 for Dana. We intend to adopt this standard using the modified retrospective method, recognizing the cumulative effect of initially applying the standard as an adjustment to opening retained earnings. We have assessed our products in combination with the provisions of our current customer contracts to evaluate whether any contractual provisions provide us with an enforceable right to payment that may require us to recognize revenue prior to the product being shipped to the customer. We have also assessed whether the pricing provisions contained in certain of our customer contracts may provide the customer with a material right. Based on our assessment, we do not expect the new guidance to have a material impact and believe the adoption date financial statement impact will be limited to balance sheet reclassifications required to establish the contract asset, contract liability and refund liability concepts provided for100% ownership interest in the new guidance. While we are still assessing the enhanced disclosure requirementsOerlikon Drive Systems (ODS) segment of the new guidance, we have determinedOerlikon Group. ODS is a global manufacturer of high-precision gears, planetary hub drives for wheeled and tracked vehicles, and products, controls, and software that we will further disaggregatesupport vehicle electrification across the mobility industry. The acquisition of ODS is expected to deliver significant long-term value by accelerating our revenue, presenting revenue by geographic regioncommitment to vehicle electrification and strengthening the technology portfolio for each of our operating segments.Note 2. AcquisitionsUSM – Warren — On March 1, 2017, we acquired certain assets and liabilities relating to the Warren, Michigan production unit of U.S. Manufacturing Corporation (USM). The production unit acquired is in the business of manufacturing axle housings, extruded tubular products and machined components for the automotive industry. The acquisition will increase Dana's revenue from light and commercial vehicle manufacturers and will vertically integrate a significant element of Dana's supply chain. It also provides Dana with new lightweight product and process technologies.USM contributed certain assets and liabilities relating to its Warren, Michigan production unit to Warren Manufacturing LLC (USM – Warren), a newly created legal entity, and Dana acquired all of the company units of USM – Warren. The company units were acquired by Dana free and clear of any liens. $104$626 at closing including $25 to effectively settletrade payable obligations originating from product purchases Dana made from USM priorwhich was funded primarily through debt proceeds. See Note 14 for additional information. The purchase consideration and related allocation to the acquisition date fair values of the assets acquired and received$1liabilities assumed are presented in the third quarterfollowing table: $ 626 (11 ) $ 615 $ 76 150 15 190 16 94 58 24 2 7 4 333 (2 ) (151 ) (37 ) (1 ) (5 ) (61 ) (8 ) (49 ) (2 ) (30 ) (8 ) $ 615 purchase price adjustments determined undertax purposes. The fair values assigned to intangibles includes $11 allocated to developed technology, $13 allocated to trademarks and trade names and $34 allocated to customer relationships. Various valuation techniques were used to determine the termsfair value of the agreement. accountedprepared as if the ODS acquisition and the related debt financing had occurred on January 1, 2018. $ 8,765 $ 9,013 $ 273 $ 425 a business combination.defined in the purchase agreement. The note is payable in five years and bears annual interest of 5%. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired and liabilities assumed are presented in the following table:Total purchase consideration $ 78 Accounts receivable - Trade 17 Accounts receivable - Other 3 Inventories 9 Goodwill 3 Intangibles 33 Property, plant and equipment 50 Accounts payable (34 ) Accrued payroll and employee benefits (2 ) Other accrued liabilities (1 ) Total purchase consideration allocation $ 78 $ 88 $ 4 1 8 68 24 5 (8 ) (6 ) (1 ) (1 ) (6 ) $ 88 Intangibles includes $30The fair values assigned to intangibles include $15 allocated to developed technology and $9 allocated to customer relationships and $3 allocated to developed technology.relationships. We used the relief from royalty method, an income approach, to value developed technology. We used the multi-period excess earnings method, an income approach, to value customer relationships. We used a replacement cost method to value fixed assets. The developed technology and customer relationship intangible assets are being amortized on a straight-line basis over eighteentwelve and eleventen years, respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from one to seventeentwenty years.Light VehicleOff-Highway operating segment from the date of acquisition. We incurred transaction related expenses to complete the acquisition in 2017 totaling $5, which were charged to other income (expense), net. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements areinformation is presented. During 2017,2019, the business contributed sales of $96.BFP and BPT $21.February 1, 2017, June 22, 2018, we acquired 80%a 55% ownership interestsinterest in Brevini Fluid Power S.p.A. (BFP)TM4 Inc. (TM4) from Hydro-Québec. TM4 designs and Brevini Power Transmission S.p.A. (BPT) from Brevini Group S.p.A. (Brevini). The acquisition expands our Off-Highway operating segment productmanufactures motors, power inverters, and control systems for electric vehicles, offering a complementary portfolio to includeDana's electric gearboxes and thermal-management technologies for tracked vehicles, doubling our addressable market for off-highway driveline systemsbatteries, motors, and establishinginverters. The transaction establishes Dana as the only off-highwaysupplier with full e-Drive design, engineering, and manufacturing capabilities – offering electro-mechanical propulsion solutions provider that can manageto each of its end markets. The transaction further strengthens Dana's position in China, the power to both move the equipment and perform its critical work functions. This acquisition also brings a platform of technologies that can be leveraged in our light and commercial-vehicle end markets, helping to accelerate our hybridization and electrification initiatives.We paid $181 at closing, using cash on hand, and refinanced a significant portion of the debt assumed in the transaction during the first half of 2017. In December 2017, a purchase price reduction of $9 was agreed under the sale and purchase agreement provisionsworld's fastest-growing market for determination of the net indebtedness and net working capital levels of BFP and BPT as of the closing date.electric vehicles. The terms of the agreement provide Dana the right to call half of Brevini’s noncontrolling interests in BFP and BPT, and BreviniHydro-Québec with the right to put halfall, and not less than all, of its noncontrolling interestsshares in BFP and BPTTM4 to Dana assuming Dana does not exercise its call right,at fair value any time after the 2017 BFP and BPT financial statements have been approved by the board of directors. Further, Dana has the right to call Brevini’s remaining noncontrolling interests in BFP and BPT, and Brevini the right to put its remaining noncontrolling interests in BFP and BPT to Dana, assuming Dana does not exercise its call right, after the 2019 BFP and BPT financial statements have been approved by the board of directors. The call and put prices are based on the amount Dana paid to acquire its initial 80%June 22, 2021, see Note 9 for additional information. TM4 owns a 50% interest in BFPPEPS, a joint venture in China with PEBL, which offers electric mobility solutions throughout China and BPT subject to adjustment based on the actual EBITDA and free cash flows, as defined in the agreement,Asia. See discussion of BFP and BPT. In connection with theDana's subsequent acquisition of BFP and BPT, Dana agreed to purchase certain real estate currently being leased by BPT from a Brevini affiliate for €25 by November 1, 2017. The real estate purchase did not occur by November 1, 2017 due to document transfer requirements not having been fully satisfied. ReceiptPEBL's 50% interest in PEPS above.Total purchase consideration $ 172 Cash and cash equivalents $ 75 Accounts receivable - Trade 78 Accounts receivable - Other 18 Inventories 134 Other current assets 9 Goodwill 20 Intangibles 41 Deferred tax assets 3 Other noncurrent assets 4 Property, plant and equipment 145 Notes payable, including current portion of long-term debt (130 ) Accounts payable (51 ) Accrued payroll and employee benefits (14 ) Taxes on income (1 ) Other accrued liabilities (19 ) Long-term debt (51 ) Pension and postretirement obligations (11 ) Other noncurrent liabilities (22 ) Redeemable noncontrolling interests (44 ) Noncontrolling interests (12 ) Total purchase consideration allocation $ 172 The purchase consideration and fair value of the assets acquired and liabilities assumed are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding liabilities assumed and revisions of provisional estimates of fair values, including but not limited to, the completion of independent appraisals and valuations related to property, plant and equipment and intangibles.Goodwill recognized in this transaction is primarily attributable to synergies expected to arise after the acquisition and the assembled workforce, is not deductible for tax purposes and will be assigned to and evaluated for impairment at the operating segment level. Intangibles includes $29 allocated to customer relationships and $12 allocated to trademarks and trade names. We used the multi-period excess earnings method, an income approach, to value the customer relationships. We used the relief from royalty method, an income approach, to value trademarks and trade names. We used a replacement cost method to value fixed assets. We used a discounted cash flow approach to value the redeemable noncontrolling interests, inclusive of the put and call provisions. We used both discounted cash flow and cost approaches to value the noncontrolling interests. The customer relationships and trademarks and trade names intangible assets are being amortized on a straight-line basis over seventeen years, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from three to thirty years.The results of operations of the businesses are reported in our Off-Highway operating segment from the date of acquisition. Transaction related expenses in 2017 associated with completion of the acquisition totaling $7 were charged to other income (expense), net. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements are presented. During 2017, the businesses contributed sales of $401. See Note 5 for more information.SIFCO —On December 23, 2016, we acquired strategic assets of SIFCO S.A.'s (SIFCO) commercial vehicle steer axle systems and related forged components businesses. The acquisition enables us to enhance our vertically integrated supply chain, which will further improve our cost structure and customer satisfaction by leveraging SIFCO's extensive experience and knowledge of sophisticated forged components. In addition to strengthening our position as a central source for products that use forged and machined parts throughout the region, this acquisition enables us to better accommodate the local content requirements of our customers, which reduces their import and other region-specific costs. See Note 3 for additional information on Dana's prior relationship with SIFCO.SIFCO contributed the strategic assets to SJT Forjaria Ltda., a newly created legal entity, and Dana acquired all of the issued and outstanding quotas of SJT Forjaria Ltda. The strategic assets were acquired by Dana free and clear of any liens,claims or encumbrances. The acquisition was funded using cash on hand and has been accounted for as a business combination. Dana paid $60 at closing and paid $3 of previously deferred consideration during the fourth quarter of 2017. On December 19, 2017, Dana and SIFCO reached an agreement providing for Dana to retain the remaining $7 of deferred consideration to satisfy indemnification claims as they arise. Once all indemnification claims have been satisfied, any remaining deferred consideration will be paid to SIFCO. The purchase consideration and the related allocation to the acquisition date fair values of the assets acquired are presented in the following table:Total purchase consideration $ 70 Accounts receivable - Trade $ 1 Accounts receivable - Other 1 Inventories 10 Goodwill 7 Intangibles 3 Property, plant and equipment 59 Accounts payable (2 ) Accrued payroll and employee benefits (9 ) Total purchase consideration allocation $ 70 $ 125 $ 3 3 1 4 148 24 49 5 (2 ) (1 ) (7 ) (102 ) $ 125 Intangibles includes $2The fair values assigned to intangibles include $14 allocated to developed technology and $1$10 allocated to trademarks and trade names. We used the relief from royalty method, an income approach, to value developed technology and the trademarks and trade names. We used a replacement cost method to value fixed assets. We used a combination of the discounted cash flow, an income approach, and the guideline public company method, a market approach, to value the equity method investment in PEPS. The developed technology and trade name intangible assets are being amortized on a straight-line basis over seven and fiveten years, respectively, and property, plant and equipment is being depreciated on a straight-line basis over useful lives ranging from threefive to tensix years.As a resultTransaction related expenses associated with completion of the acquisition we incurred transaction related expenses totaling $5 which were charged to other income (expense), net.net in 2018. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements wereare presented. During 2018, the business contributed sales of $11.MagnumOn January 29, 2016, we acquired the aftermarket distribution businessOur goodwill is tested for impairment annually as of Magnum® Gaskets (Magnum),October 31 for all of our reporting units, and more frequent if events or circumstances warrant such a U.S.-based supplier of gasketsreview. We completed numerous acquisitions in 2018 and sealing products for automotive and commercial-vehicle applications, for a cash payment of $18. Assets acquired2019 that are included trademarks and trade names, customer relationships and goodwill. The results of operations of Magnum are reported within our Power Technologies operating segment. We acquired Magnum using cash on hand. The pro forma effects of this acquisition would not materially impact our reported results for any period presented, and as a result no pro forma financial statements were presented.Note 3. Disposal Groups, Divestitures and Impairment of Long-Lived AssetsDisposal group held for sale — In December 2017, we entered into an agreement to divest our Brazil suspension components business (the disposal group) for no consideration to an unaffiliated company. The results of operations of the Brazil suspension components business are reported withinin our Commercial Vehicle operating segment. To effectuateand Off-Highway reporting units. These acquisitions were recorded on the sale, Dana is obligated to contribute $10balance sheet at their estimated acquisition date fair values and therefore had no cushion of additional cash to the business prior to closing. Completion of the sale is expected in the first quarter of 2018 upon receipt of Brazilian antitrust approval. The disposal group was classified as held for sale at December 31, 2017. We recognized a $27 loss to adjust the carrying value of the net assets to fair value and to recognize the liability for the additional cash required to be contributed to the business prior to closing. The assets and liabilities of our Brazil suspension components business are presented as held for sale on our balance sheet as of December 31, 2017. Theover their carrying amounts of the major classes of assets and liabilities of our Brazil suspension components business are as follows: Accounts receivable - Trade $ 3 Inventories 4 Current assets classified as held for sale $ 7 Accounts payable $ 3 Accrued payroll and employee benefits 1 Other accrued liabilities 1 Current liabilities classified as held for sale $ 5 Other noncurrent liabilities $ 2 Noncurrent liabilities classified as held for sale $ 2 Divestiture of Dana Companies —On December 30, 2016, we completed the divestiture of Dana Companies, LLC (DCLLC), a consolidated wholly-owned limited liability company that was established as part of our reorganization in 2008 to hold and manage personal injury asbestos claims retained by the reorganized Dana Corporation which was merged into DCLLC. DCLLC had net assets of $165 at the time of sale including cash and cash equivalents, marketable securities and rights to insurance coverage in place to satisfy a significant portion of its liabilities. We received cash proceeds of $88 – $29 net of cash divested – with $3 retained by the purchaser subject to the satisfaction of certain future conditions. We recognized a pre-tax loss of $77 in 2016 upon completion of the transaction. During the second quarter of 2017 the conditions associated with the retained purchase price were satisfied. Dana received the remaining proceeds and recognized $3 of income in other income (expense), net. Following completion of the sale, Dana has no obligation with respect to current or future asbestos claims.Divestiture of Nippon Reinz — On November 30, 2016, we sold our 53.7% interest in Nippon Reinz Co. Ltd. (Nippon Reinz) to Nichias Corporation. Dana received net cash proceeds of $5 and recognized a pre-tax loss of $3 on the divestiture of Nippon Reinz, inclusive of the $12 gain on derecognition of the noncontrolling interest. Nippon Reinz had sales of $42 in 2016 through the transaction date.Disposal of operations in Venezuela — In December 2014, we entered into an agreement to divest our Light Vehicle operations in Venezuela (the disposal group) to an unaffiliated company for no consideration. Upon classification of the disposal group as held for sale in December 2014, we recognized an $80 loss to adjust the carrying value of the net assets of our operations in Venezuela to fair value less cost to sell. The assets and liabilities of our operations in Venezuela were presented as held for sale on our balance sheet as of December 31, 2014. Upon completion of the divestiture of the disposal group in January 2015, we recognized a gain of $5 on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary in other income (expense), net. We also credited OCI attributable to the parent for $10 and OCI attributable to noncontrolling interests for $1 to eliminate the unrecognized pension expense recorded in AOCI.Discontinued operations of Structural Products business — The sale of substantially all of the assets of our Structural Products business to Metalsa S.A. de C.V. (Metalsa) in 2010 excluded the facility in Longview, Texas and its employees and manufacturing assets related to a significant customer contract. The customer contract was satisfied and operations concluded in August 2012.value. As a result of the cessationeffect of all operations, activities related to the former Structural Products business have been presentedglobal COVID-19 pandemic on our expected future operating cash flows, a decrease in our share price which reduced our market capitalization below the book value of net assets and lower cushion in our expected reporting unit fair values as discontinued operationsa result of the recent acquisitions, we determined certain impairment triggers had occurred in the accompanying financial statements. The income reported for 2015 includes insurance recoveries related to previously outstanding claims.Thefirst quarter of 2020. Accordingly, we performed interim impairment analyses at each of our reporting units as of March 31, 2020.the discontinued operations were as follows: 2015 Sales $ — Other income, net 5 Pre-tax income 5 Income tax expense 1 Income from discontinued operations $ 4 Impairment of long-lived assets — On February 1, 2011,our interim impairment tests, we entered into an agreement with SIFCO, a leading producer of steer axles and forged componentsconcluded that carrying value exceeded fair value in South America. In return for payment of $150 to SIFCO, we acquired the distribution rights to SIFCO's commercial vehicle steer axle systems as well as an exclusive long-term supply agreement for key drivelinecomponents. During 2014, our Commercial Vehicle operating segment had $225and Light Vehicle reporting units and we recorded a goodwill impairment charge of sales attributable to SIFCO supplied axles$51 in the first quarter of 2020. Our testing for the Off-Highway reporting unit indicated that fair value slightly exceeded carrying value and, parts.This agreementaccordingly, no impairment charge was accounted for as a business combination for financialrequired. The reduction in fair values, and the corresponding impairment charges, were primarily driven by the negative effect of the global COVID-19 pandemic on each reporting purposes.unit’s near-term cash flows. The aggregateestimated fair value of the net assets acquired was allocated primarily to the exclusivity provisions of the supply agreement as a contract-based intangible assetour Off-Highway and recorded within our Commercial Vehicle operating segment. Fair value was also allocated to fixed assetsreporting units were greater than their carrying values at October 31, 2020 by 14% and an embedded lease obligation. The intangible asset was being amortized4%, respectively. Discount rates of 12% and 14% were used in the fixed assetsvaluation of our Off-Highway and Commercial Vehicle reporting units. These discount rates were being depreciatedbased on a straight-line basis over ten years. The embedded lease obligations were being amortized usingmarket participant developed weighted average cost of capital adjusted to reflect the effective interest method over the ten-year useful lives of the related fixed assets.On April 22, 2014, SIFCOrisk inherent in future cash flows, perpetual growth rates and affiliated companies filed for judicial reorganization before Bankruptcy Court in São Paulo, Brazil and an ancillary Chapter 15 proceeding before the Bankruptcy Court of the Southern District of New York. The Brazilian bankruptcy case was subsequently moved to the 5th Lower Civil Court in the Judicial District of Jundiai, the location of SIFCO's principal operations. Until the third quarter of 2015, SIFCO complied with the terms of the supply agreement. In August 2015, SIFCO discontinued production of our orders and failed to comply with provisions of the supply agreement. We obtained a judicial injunction requiring that SIFCO release any finished product in their possession that was produced pursuant to the supply agreement, resume production and parts supply pursuant to the terms of the supply agreement and cease communications with our customers regarding direct sale of parts. SIFCO contested the injunction we obtained, without success, and refused to comply with the injunction. Through a judicial seizure order we were successful in obtaining the release of the finished product.Based on SIFCO's refusal to comply with the terms of the supply agreement and the court injunctions as noted above, we believed that the carrying amount of the contract-based intangible asset was not recoverable and therefore tested the associated asset group for impairment as of September 30, 2015 under ASC 360-10. Based upon management's conclusion that there were noprojected future economic benefits and related cash flows associated withmarket conditions. An increase of the discount rate to 13.6% and 14.7% would be required to result in fair value being equal to carrying value for the long-lived assets of this asset group, which is comprised predominantly of the intangible asset, management concludedOff-Highway and Commercial Vehicle reporting units. We expect that the fair value of the asset group was de minimis and accordingly recorded a full impairment charge of $36our reporting units will continue to exceed their carrying values in the third quarter of 2015.On October 27, 2015, we entered into an interim agreement with SIFCO under which they continued to supply product while pursuing various mutually satisfactory longer-term alternatives. During 2015, in addition to the above mentioned impairment charge, we incurred approximately $8 of increased costs in connection with maintaining product supply from SIFCO. On December 23, 2016, we acquired strategic assets of SIFCO's commercial vehicle steer axle systems and related forged components businesses. See Note 2 for additional information.Note 4. Goodwill and Other Intangible AssetsGoodwill —Thefuture periods.20172020 is primarily due to the acquisitionsacquisition of USM – Warren and 80% interests in BFP and BPTAshwoods, measurement period adjustments for the Nordresa acquisition and currency fluctuation. The change in the carrying amount of goodwill in 2016 is2019 was due to the acquisitions of SJT Forjaria Ltda.Nordresa, PEPS, ODS and the aftermarket distribution business of MagnumSME and currency fluctuation. As a result of our annual goodwill impairment test performed in the fourth quarter of 2019, we concluded that the goodwill resulting from the acquisition of Magnum Gaskets in 2016 was unrecoverable. Accordingly, a full impairment charge of $6 was recorded for the year ended December 31, 2019. See Note 2 for additional information. Basedinformation on our October 31, 2017 impairment assessment, the fair value of our Off-Highway segment is significantly higher than its carrying value, including goodwill. We do not believe that any significant component of our goodwill is at risk of being impaired. Light Vehicle Commercial Vehicle Off-Highway Power Technologies Total Balance, December 31, 2015 $ — $ — $ 80 $ — $ 80 Acquisitions 6 6 12 Currency impact (2 ) (2 ) Balance, December 31, 2016 — 6 78 6 90 Acquisitions 3 20 23 Purchase accounting adjustments 1 1 Currency impact 1 12 13 Balance, December 31, 2017 $ 3 $ 8 $ 110 $ 6 $ 127 $ 3 $ 150 $ 105 $ 6 $ 264 Acquisitions 74 160 234 (6 ) (6 ) 4 (3 ) 1 3 228 262 — 493 (5 ) 26 21 Impairment (3 ) (48 ) (51 ) 2 14 16 $ — $ 177 $ 302 $ — $ 479 names and intangible assets used in research and development activities. Trademarksnames. Non-amortizable trademarks and trade names consist of the Dana®, Spicer® and Spicer®TM4® trademarksthreetwo years ended December 31, 20172020 in connection with the required annual assessment. Intangibleassessment for trademarks and trade names.relatewhich had been classified as indefinite-lived. Since the third quarter of 2012, we had been working with several customers to our strategic alliance formed with Fallbrook Technologies Inc.commercialize the continuously variable planetary (CVP) technology primarily in September 2012.combustion engine applications. During the second quarter of 2018 key customers notified us of their intention to redirect their development efforts to electrification and cease further development efforts of the CVP technology in combustion engine applications. We usedetermined that it was more likely than not that the fair value of the related intangible assets was less than their carrying amount. We used the multi-period excess earnings method, an income approach, to fair value the assets used in research and development activities. Given the lack of adequate identifiable future revenue streams, it was determined that the $20 of intangible assets used in research and development activities. No impairment has been recordedactivities was fully impaired during the three years ended December 31, 2017 in connection with the required annual assessment. Trademarks and trade names includes the Brevini® trademark and trade name utilized in our Off-Highway segment. Core technology includes the proprietary know-how and expertise that is inherent in our products and manufacturing processes. Customer relationships include the established relationships with our customers and the related ability of these customers to continue to generate future recurring revenue and income.forrecorded during thetwo years ended December 31, 2017 and December 31, 2016. During the third quarter2020. December 31, 2017 December 31, 2016 Amortizable intangible assets Core technology 7 $ 95 $ (88 ) $ 7 $ 88 $ (83 ) $ 5 Trademarks and trade names 16 17 (2 ) 15 6 (2 ) 4 Customer relationships 8 470 (403 ) 67 389 (374 ) 15 Non-amortizable intangible assets Trademarks and trade names 65 65 65 65 Used in research and development activities 20 20 20 20 $ 667 $ (493 ) $ 174 $ 568 $ (459 ) $ 109 8 $ 146 $ (103 ) $ 43 $ 133 $ (94 ) $ 39 13 31 (9 ) 22 30 (6 ) 24 8 525 (431 ) 94 509 (407 ) 102 77 77 75 75 $ 779 $ (543 ) $ 236 $ 747 $ (507 ) $ 240 20172020 were as follows: Light Vehicle Driveline (Light Vehicle) – $52,$22, Commercial Vehicle – $34,$68, Off-Highway – $78$139 and Power Technologies – $10. 2017 2016 2015 Charged to cost of sales $ 2 $ 1 $ 2 Charged to amortization of intangibles 11 8 14 Total amortization $ 13 $ 9 $ 16 $ 7 $ 5 $ 2 13 12 8 $ 20 $ 17 $ 10 20172020 exchange rates. Actual amounts may differ from these estimates due to such factors as currency translation, customer turnover, impairments, additional intangible asset acquisitions and other events. $ 19 $ 19 $ 19 $ 19 $ 19 2018 2019 2020 2021 2022 Amortization expense $ 9 $ 8 $ 7 $ 7 $ 7 5.4. Restructuring of Operationshowever, in response to lower demand and other market conditions in certain businesses, our focus has been primarily been headcount reduction initiatives to reduce operating costs.costs, including actions taken at acquired businesses to rationalize cost structures and achieve operating synergies. Restructuring expense includes costs associated with current and previously announced actions and is comprised of contractual and noncontractual separation costs and exit costs, including costs associated with lease continuation obligations and certain operating costs of facilities that we are in the process of closing.During 2017, we approved additional plans to implement certain headcount reduction initiativesour Off-Highway business as part of the BFP2020 and BPT acquisition integration, resulting in the recognition of $14, primarily for severance and benefits costs, during 2017. Including costs associated with the newly approved actions during 2017 and costs associated with previously announced initiatives, net of the reversal described below, restructuring expense during 2017 was $14, including $82019 were comprised of severance and benefitsbenefit costs related to integration of recent acquisitions, headcount reductions across our operations and $6exit costs related to previously announced actions.exit costs. During the fourth quarter$25 in 2018 were primarily comprised of 2017,severance and benefit costs related to a voluntary retirement program in North America, headcount reduction actions in our operations and corporate functions in Brazil and administrative cost reduction initiatives primarily in Europe and North America. In response to better-than-expectedcontinued market recovery in our Off-Highway business in Europe, management re-evaluated the economic conditions of our global Off-Highway business and determined that a portion$7 of the previously approved 2016 restructuring program is actions were no longer economically prudent. This change in facts and circumstances led to the decision to reverse $8During 2016, we implemented various headcount reduction initiatives across our businesses, including the first-quarter 2016 announcement of the planned closure of our Commercial Vehicle manufacturing facility in Glasgow, Kentucky. During the second half of 2016, we also approved and began to implement other headcount reduction initiatives, the most significant of which were associated with our Off-Highway business in Europe and our Commercial Vehicle and Light Vehicle businesses in Brazil, in response to continued market weakness in those businesses at that time. Additionally, in conjunction with the SJT Forjaria Ltda. acquisition in December 2016, we approved plans to eliminate certain redundant positions as one of our initial steps toward the integration of the SJT Forjaria Ltda. operations into our Commercial Vehicle business in that region. Including costs associated with these actions and with other previously announced initiatives, total restructuring expense during 2016 was $36, including $33 of severance and benefits costs and $3 of exit costs.During 2015, we implemented certain headcount reduction programs, primarily in our Commercial Vehicle business in Brazil in response to lower demand in that region. Including costs associated with these actions and with other previously announced initiatives, total restructuring expense in 2015 was $15 and included $12 of severance and benefits costs and $3 of exit costs. Total Balance at December 31, 2014 $ 12 $ 9 $ 21 Charges to restructuring 12 3 15 Cash payments (12 ) (4 ) (16 ) Currency impact (3 ) (3 ) Balance at December 31, 2015 9 8 17 Charges to restructuring 35 3 38 Adjustments of accruals (2 ) (2 ) Cash payments (10 ) (5 ) (15 ) Balance at December 31, 2016 32 6 38 Charges to restructuring 16 6 22 Adjustments of accruals (8 ) (8 ) Cash payments (21 ) (7 ) (28 ) Currency impact 2 2 Balance at December 31, 2017 $ 21 $ 5 $ 26 $ 21 $ 5 $ 26 28 4 32 (7 ) (7 ) (16 ) (5 ) (21 ) (1 ) (1 ) 25 4 29 21 10 31 (2 ) (2 ) (31 ) (9 ) (40 ) Currency impact 0 (4 ) (4 ) 13 1 14 30 6 36 (2 ) (2 ) (12 ) (7 ) (19 ) Currency impact 1 1 $ 30 $ 0 $ 30 20172020, accrued employee termination benefits include costs to reduce approximately 300500 employees to be completed over the next two years. The exit costs relate primarily to lease continuation obligations.2017. Expense Recognized 2017 Light Vehicle $ 10 $ 2 $ 12 $ — Commercial Vehicle 41 4 45 12 Off-Highway 6 7 13 Corporate 1 1 Total $ 57 $ 14 $ 71 $ 12 $ 39 $ 2 $ 41 $ 2 Light Vehicle $ 0 $ 1 $ 1 $ 1 one-timeone-time benefit programs, and exit costs through 2021, including lease continuation costs, equipment transfers and other costs which are required to be recognized as closures are finalized or as incurred during the closure.6.5. Inventories $ 473 $ 470 752 787 (76 ) (64 ) $ 1,149 $ 1,193 2017 2016 Raw materials $ 442 $ 321 Work in process and finished goods 580 368 Inventory reserves (53 ) (51 ) Total $ 969 $ 638 7.6. Supplemental Balance Sheet and Cash Flow Information $ 95 $ 109 32 28 $ 127 $ 137 Marketable securities $ 49 $ 0 45 37 2 3 5 6 3 4 65 70 $ 169 $ 120 $ 210 $ 223 646 621 3,613 3,355 Finance lease right-of-use assets 72 41 4,541 4,240 (2,290 ) (1,975 ) $ 2,251 $ 2,265 $ 56 $ 65 13 11 43 36 7 6 6 5 30 14 9 5 5 5 139 115 $ 308 $ 262 $ 51 $ 47 128 71 38 40 15 17 55 65 81 65 $ 368 $ 305 2017 2016 Other current assets: Prepaid expenses $ 83 $ 67 Other 14 11 Total $ 97 $ 78 Other noncurrent assets: Prepaid income taxes $ — $ 168 Prepaid expenses 17 11 Deferred financing costs 5 5 Pension assets, net of related obligations 3 2 Other 46 40 Total $ 71 $ 226 Property, plant and equipment, net: Land and improvements to land $ 210 $ 172 Buildings and building fixtures 518 435 Machinery and equipment 2,635 2,108 Total cost 3,363 2,715 Less: accumulated depreciation (1,556 ) (1,302 ) Net $ 1,807 $ 1,413 Other accrued liabilities (current): Non-income taxes payable $ 43 $ 30 Accrued interest 14 17 Warranty reserves 29 35 Deferred income 12 6 Work place injury costs 6 5 Restructuring costs 22 29 Payable under forward contracts 9 8 Environmental 3 3 Other expense accruals 82 68 Total $ 220 $ 201 Other noncurrent liabilities: Income tax liability $ 48 $ 57 Interest rate swap market valuation 177 12 Deferred income tax liability 59 37 Work place injury costs 22 26 Warranty reserves 47 31 Restructuring costs 4 9 Other noncurrent liabilities 56 33 Total $ 413 $ 205 $ 559 $ 508 $ 510 $ 603 5 6 7 3 3 4 3 4 $ 567 $ 518 $ 520 $ 610 $ (66 ) $ 134 $ (113 ) 69 35 (110 ) 82 (96 ) 97 (22 ) (21 ) (28 ) (9 ) (19 ) (3 ) (7 ) (50 ) 44 $ 47 $ (17 ) $ (113 ) $ 129 $ 117 $ 90 98 125 145 $ 50 $ 71 $ 91 12 17 18 Noncash dividends declared 0 1 1 $ 72 $ 41 7 5 53 24 $ 52 $ 50 $ 5 $ 3 2 1 $ 7 $ 4 2017 2016 2015 Change in working capital: Change in accounts receivable $ (141 ) $ (86 ) $ — Change in inventories (146 ) (13 ) (28 ) Change in accounts payable 234 70 (22 ) Change in accrued payroll and employee benefits 53 5 3 Change in accrued income taxes 26 (13 ) (1 ) Change in other current assets and liabilities (34 ) (14 ) 7 Net $ (8 ) $ (51 ) $ (41 ) $ 52 $ 50 2 1 4 3 $ 57 $ 24 32 13 6 6 14 9 4.3 % 5.5 % 4.4 % 3.2 % $ 50 $ 9 41 9 29 8 24 6 21 5 61 49 226 86 30 26 $ 196 $ 60 Cash paid during the period for: Interest $ 104 $ 111 $ 96 Income taxes 87 89 90 Non-cash investing and financing activities: Purchases of property, plant and equipment held in accounts payable $ 86 $ 113 $ 55 Stock compensation plans 17 14 15 20172020 or 2016.$0.01$0.01 per share. At December 31, 20172020, there were 151,985,067154,958,240 shares of our common stock issued and 144,984,050144,515,658 shares outstanding, net of 7,001,01710,442,582 in treasury shares. Treasury shares include those shares withheld at cost to satisfy tax obligations from stock awards issued under our stock compensation plan in addition to shares repurchased through share repurchases noted below.quarterly cash dividend of sixten cents per share of common stock in eachthe first quarter of 2017.2020. Aggregate 20172020 declared dividends totaled $15 and cash dividends paid dividends total $35.totaled $15. Dividends accrue on restricted stock units (RSUs) granted under our stock compensation program and will be paid in cash or additional units when the underlying units vest.Treasury stock — In December 2015, we retired 18,100,000 shares of treasury stock. The $346 excess of the cost of the treasury stock over the common stock par value, based on the weighted-average pool price of our treasury shares at the date of retirement, was charged to additional paid-in capital.OurOn February 16, 2021 our Board of Directors approved aan extension of our existing common stock share repurchase program up to $1,700 on January 11, 2016. The program expired on through December 31, 2017. In December 2017, our Board2023. Approximately $150 remained available under the program for future share repurchases as of Directors approved a new common stock share repurchase program up to $100, expiring on December 31, 2019.2020.stock repurchases are subjectexcess of the fair value of the consideration paid over the carrying value of the investment attributable to prevailing market conditions and other management considerations. $ (670 ) $ (64 ) $ 2 $ (610 ) $ (1,342 ) (48 ) (48 ) (3 ) (3 ) Holding gains and losses 66 66 (56 ) (56 ) (8 ) (8 ) 34 34 2 2 (5 ) (5 ) (51 ) 10 — 23 (18 ) (2 ) (2 ) (721 ) (54 ) — (587 ) (1,362 ) 8 8 58 58 (33 ) (33 ) 71 71 286 286 (1 ) (1 ) (13 ) (15 ) 7 24 — 344 375 (714 ) (30 ) — (243 ) (987 ) Currency translation adjustments (88 ) (88 ) Holding gains and losses (78 ) (78 ) Reclassification of amount to net income (a) 117 117 Net actuarial losses (11 ) (11 ) Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b) 20 20 (88 ) 39 — 9 (40 ) Deconsolidation of non-wholly owned subsidiary 0 0 1 1 $ (802 ) $ 9 $ — $ (233 ) $ (1,026 ) Parent Company Stockholders Hedging Investments Balance, December 31, 2014 $ (427 ) $ (9 ) $ 5 $ (566 ) $ (997 ) Other comprehensive income (loss): Currency translation adjustments (179 ) (179 ) Holding loss on net investment hedge (2 ) (2 ) Holding gains and losses (14 ) (3 ) (17 ) 20 20 Net actuarial losses (28 ) (28 ) 25 25 Elimination of net prior service cost and actuarial losses of disposal group 10 10 Tax expense (1 ) (5 ) (6 ) Other comprehensive income (loss) (181 ) 5 (3 ) 2 (177 ) Balance, December 31, 2015 (608 ) (4 ) 2 (564 ) (1,174 ) Other comprehensive income (loss): Currency translation adjustments (43 ) (43 ) Holding gains and losses (16 ) 3 (13 ) (14 ) (7 ) (21 ) Net actuarial losses (88 ) (88 ) 26 26 Elimination due to sale of subsidiary 2 2 1 5 Tax benefit 3 21 24 Other comprehensive loss (38 ) (30 ) (2 ) (40 ) (110 ) Balance, December 31, 2016 (646 ) (34 ) — (604 ) (1,284 ) Other comprehensive income (loss): Currency translation adjustments (22 ) (22 ) Holding loss on net investment hedge (2 ) (2 ) Holding gains and losses (162 ) 1 (161 ) 128 128 Net actuarial losses (28 ) (28 ) Curtailment gain 1 1 30 30 Tax (expense) benefit 4 1 (9 ) (4 ) Other comprehensive income (loss) (24 ) (30 ) 2 (6 ) (58 ) Balance, December 31, 2017 $ (670 ) $ (64 ) $ 2 $ (610 ) $ (1,342 ) Notes:(a) Foreign currency contract and investment reclassifications are included in other income (expense), net.Note 9. Redeemable Noncontrolling InterestsBFP and BPTTM4 from BreviniHydro-Québec on February 1, 2017, June 22, 2018, we recognized $44$102 for Brevini's 20%Hydro-Québec's 45% redeemable noncontrolling interests.interest in TM4. On July 29, 2019, we broadened our relationship with Hydro-Québec, with Hydro-Québec acquiring an indirect 45% redeemable noncontrolling interest in SME and an additional indirect 22.5% redeemable noncontrolling interest in PEPS which resulted in recognition of additional redeemable noncontrolling interest of $64. On April 14, 2020, Hydro-Québec acquired an indirect 45% redeemable noncontrolling interest in Ashwoods which resulted in recognition of additional redeemable noncontrolling interest of $7. The terms of the agreement provide Dana the right to call Brevini's noncontrolling interests in BFP and BPT, and BreviniHydro-Québec with the right to put all, and not less than all, of its noncontrollingownership interests in BFPTM4, SME, PEPS and BPTAshwoods to Dana assuming Dana does not exercise its call rights, at dates and prices defined in the agreement. The call and put prices are based on the amount Dana paid to acquire its initial ownership interest in BFP and BPT subject to adjustment based on the actual EBITDA and free cash flows, as defined in the agreement, of BFP and BPT. fair value any time after June 22, 2021. See Note 2 for additional information.values (i.e., the "floor").values. Redeemable noncontrolling interest adjustments of redemption value to the floor are recorded in retained earnings and included as an adjustment to net income available to parent company stockholders inearnings. We estimate the calculationfair value of earnings per share. During 2017 there was a $6 adjustment to reflect athe redemption value in excessusing an income based approach based on discounted cash flow projections. In determining fair value using discounted cash flow projections, we make significant assumptions and estimates about the extent and timing of carrying value. See Note 10. $ 167 $ 100 4 4 Sale of redeemable noncontrolling interest 7 64 Adjustment to redemption value 38 0 Net loss attributable to redeemable noncontrolling interests (30 ) (6 ) Other comprehensive income (loss) attributable to redeemable noncontrolling interests (6 ) 5 $ 180 $ 167 December 31, 2017 Twelve Months Ended Balance, beginning of period $ — Initial fair value of redeemable noncontrolling interests of acquired businesses 44 Purchase of redeemable noncontrolling interest (1 ) Comprehensive income (loss) adjustments: Net income (loss) attributable to redeemable noncontrolling interests (5 ) Other comprehensive income (loss) attributable to redeemable noncontrolling interests 3 Retained earnings adjustments: Adjustment to redemption value 6 Balance, end of period $ 47 2017 2016 2015 Income from continuing operations $ 116 $ 653 $ 176 Less: Noncontrolling interests net income 10 13 21 Less: Redeemable noncontrolling interests net loss (5 ) Less: Redeemable noncontrolling interests adjustment to redemption value (6 ) Income from continuing operations available to common stockholders - Numerator basic and diluted $ 105 $ 640 $ 155 Net income available to common stockholders - Numerator basic and diluted $ 105 $ 640 $ 159 Denominator: Weighted-average shares outstanding - Basic 145.1 146.0 159.0 Employee compensation-related shares, including stock options 1.8 0.8 1.0 Weighted-average shares outstanding - Diluted 146.9 146.8 160.0 $ (31 ) $ 226 $ 427 144.5 144.0 145.0 0 1.1 1.5 144.5 145.1 146.5 1.7 million and 0.40.2 million CSEs from the calculations of diluted earnings per share for the years 2017, 20162020, 2019 and 20152018 as the effect of including them would have been anti-dilutive. In addition, we excluded CSEs that satisfied the definition of potentially dilutive shares of 0.7 million for 2020 since there was no net income available to common stockholders for this period.On April 27, our stockholders approved the 2017 Omnibus Incentive Plan (the Plan), replacing the 2012 Omnibus Incentive Plan (the Prior Plan). The Plan authorizes the grant of stock options, stock appreciation rights (SARs), RSUs and performance share units (PSUs) through April 2027. The maximum aggregate number of shares of common stock that may be issued under the Plan is 3.7 million shares of common stock plus the number of shares that remained available for new grants under the Prior Plan. Cash-settled awards do not count against the maximum aggregate number. At 20172020, there were 6.33.1 million shares available for future grants. Shares of common stock to be issued under the Plan are made available from authorized and unissued Dana common stock. Options SARs RSUs PSUs Shares Shares Shares Shares December 31, 2016 1.5 $ 14.56 0.3 $ 15.42 1.8 $ 16.54 0.6 $ 16.31 Granted 0.8 19.92 0.3 18.63 Exercised or vested (0.7 ) 14.54 (0.2 ) 15.62 (0.6 ) 18.48 (0.2 ) 21.68 Forfeited or expired (0.2 ) 17.09 (0.1 ) 20.36 December 31, 2017 0.8 14.58 0.1 14.83 1.8 17.38 0.6 15.70 December 31, 2019 0.6 $ 16.13 0.1 $ 16.27 2.0 $ 20.56 0.7 $ 19.99 1.3 15.53 0.5 14.42 Exercised or vested (0.6 ) 19.58 (0.2 ) 19.15 (0.2 ) 18.86 (0.2 ) 18.14 0.6 16.27 0.1 16.50 2.5 18.27 0.8 15.18 2017 2016 2015 Total stock compensation expense $ 23 $ 17 $ 14 Total grant-date fair value of awards vested 17 11 21 Cash received from exercise of stock options 10 2 2 Cash paid to settle SARs and RSUs 4 1 2 Intrinsic value of stock options and SARs exercised 8 1 1 Intrinsic value of RSUs and PSUs vested 20 7 16 $ 14 $ 19 $ 16 16 16 16 Cash received from exercise of stock options 2 2 2 2 1 3 14 17 18 $7$4 and $5$3 for cash-settled awards at December 31, 2017 2020 and 2016. We2019. During 2020 we issued 0.6 million and 0.3 million shares of common stock in 2017 to settle vested RSUs.based on vesting of RSUs and PSUs. At December 31, 2017,2020, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was $22.$19. This cost is expected to be recognized over a weighted-average period of 1.71.8 years.2017,2020, the outstanding awards have an aggregate intrinsic value of $15$2 and a weighted-average remaining contractual life of 3.81.3 years.Thespecified total shareholder return targets relative to peer companies orand specified margin targets, with an even distribution between the twotargets. For the portion of the PSU award based on the return on invested capital performance or margin metric, weWe estimated the fair value at grant date based on the closing market price of our common stock at the date of grant adjusted for the value of assumed dividends over the period because the award is awards are not dividend protected. The estimated grant date value is accrued over the performance period and adjusted as appropriate based on performance relative to the target. For the portion of the PSU award based on shareholder returns, we estimated the fair value at grant date using various assumptions as part of a Monte Carlo simulation. The expected term represents the period from the grant date to the end of the performance period. The risk-free interest rate was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield was calculated by dividing the expected annual dividend by the average stock price over the prior year. The expected volatility was based on historical volatility using daily stock price observations. PSUs 2016 2015 Expected term (in years) 3.0 3.0 Risk-free interest rate 1.00 % 0.89 % Dividend yield 1.40 % 0.98 % Expected volatility 33.4 % 33.9 % 2017, 20162020 annual incentive program, participants were eligible to receive cash awards based on achieving a cash flow performance goal. Under the 2019 and 20152018 annual incentive programs, participants were eligible to receive cash awards based on achieving earnings and cash flow and working capital performance goals. Our 2017, 2016 and 2015 long-term incentive programs each have a three-year contractual period and include a performance-based cash component. For the 2017 and 2016 long-term incentive programs the vesting of the performance-based cash component is based on achieving the required return-on-invested-capital target, established at the grant date of the award, measured on an average basis over the three-year contractual period of the program. The 2017 award also has a component that is based on achieving a margin target that was established at the grant date. For the 2015 long-term incentive program the vesting of the performance-based cash component is based on achieving the required return-on-invested-capital target, established at the grant date of the award, in the third year of the three-year contractual period of the respective program. We accrued $77, $41$23, $27 and $35$33 of expense in 2017, 20162020, 2019 and 20152018 for the expected cash payments under these programs. $ 21 $ 5 $ 40 $ 8 $ 43 $ 7 (35 ) (3 ) (51 ) (3 ) (71 ) (3 ) 9 8 7 11 9 22 6 28 6 Settlement charge 256 3 Curtailment (1 ) 2 (3 ) 20 267 21 — 19 Amount due to net actuarial (gains) losses (4 ) 10 (107 ) 33 11 4 (11 ) (9 ) (278 ) (9 ) (28 ) (6 ) Curtailment 0 (2 ) (15 ) 1 (385 ) 24 (17 ) (4 ) $ (18 ) $ 21 $ (118 ) $ 45 $ (17 ) $ 15 $ — $ 2 $ — $ 3 $ 3 Service cost 1 1 (1 ) — 3 — 2 4 1 4 1 2 (7 ) 1 1 4 1 3 (7 ) $ 1 $ 7 $ 1 $ 5 $ (3 ) Pension Benefits 2017 2016 2015 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Interest cost $ 51 $ 7 $ 53 $ 7 $ 66 $ 8 Expected return on plan assets (82 ) (3 ) (92 ) (2 ) (108 ) (2 ) Service cost 7 5 5 Amortization of net actuarial loss 23 7 21 6 18 7 Termination benefit 1 Other 1 Net periodic benefit cost (credit) (8 ) 19 (18 ) 17 (24 ) 18 Recognized in OCI: Amount due to net actuarial (gains) losses 22 4 68 16 40 (6 ) Reclassification adjustment for net actuarial losses in net periodic benefit cost (23 ) (7 ) (21 ) (6 ) (18 ) (7 ) Curtailment (1 ) Other (1 ) (11 ) Total recognized in OCI (1 ) (4 ) 47 9 22 (24 ) Net recognized in benefit cost (credit) and OCI $ (9 ) $ 15 $ 29 $ 26 $ (2 ) $ (6 ) OPEB - Non-U.S. 2017 2016 2015 Interest cost $ 3 $ 3 $ 3 Service cost 1 1 1 Amortization of net actuarial gain (1 ) Net periodic benefit cost 4 3 4 Recognized in OCI: Amount due to net actuarial (gains) losses 2 4 (6 ) Reclassification adjustment for net actuarial gain in net periodic benefit cost 1 Total recognized in OCI 2 5 (6 ) Net recognized in benefit cost and OCI $ 6 $ 8 $ (2 ) 20182021 is $28$9 for our U.S. plans and $6$9 for our non-U.S. plans. We use the corridor approach for purposes of systematically amortizing deferred gains or losses as a component of net periodic benefit cost into the income statement in future reporting periods. The amortization period used is generally the average remaining service period of active participants in the plan unless almost all of the plan’s participants are inactive, in which case we use the average remaining life expectancy of the inactive participants. No portion of the estimated net actuarial gain related to OPEB plans will be amortized from AOCI into benefit cost in 2018.UltimateDuring the second quarter of 2019, payments were made from plan termination is subjectassets to regulatory approvalthose plan participants that elected to take the lump-sum payout option. In June 2019, we entered into (a) a definitive commitment agreement by and among Dana, Athene Annuity and Life Company (Athene) and State Street Global Advisors, as independent fiduciary to prevailing market conditionsthe plan, and other considerations, including interest rates(b) a definitive commitment agreement by and among Dana, Companion Life Insurance Company (Companion) and State Street Global Advisors, as independent fiduciary to the plan. Pursuant to the definitive commitment agreements, the plan purchased group annuity pricing. Incontracts that irrevocably transferred to the event that approvalsinsurance companies the remaining future pension benefit obligations of the plan. Plan participant’s benefits are received and we proceed with effecting termination, settlementunchanged as a result of the termination. We contributed $59 to the plan prior to the purchase of the group annuity contracts. The purchase of group annuity contracts was then funded directly by the assets of the plan obligations is expected to occur in the first half ofJune 2019. At December 31, 2017, this plan had benefit obligations of $1,064 and assets of $900. The benefit obligations have been valued at the amount expected to be required to settleBy irrevocably transferring the obligations using assumptions regarding the portionto Athene and Companion, we reduced our unfunded pension obligation by approximately $165 and recognized a pre-tax pension settlement charge of obligations expected to be settled through participant acceptance of lump sum payments or annuities and the cost to purchase those annuities. Increasing this plan's obligations to reflect the expected settlement value resulted$256 in an actuarial loss of $69 that was charged to OCI in 2017, bringing the unrecognized actuarial losses of the plan to $369 at the end of 2017. If the settlement is effected as expected in 2019, the plan's deferred actuarial losses remaining in AOCI at that time will be recognized as expense.As discussed in Note 3, upon the divestiture of our operations in Venezuela, we eliminated unrecognized pension expense of $11, of which $1 was attributable to noncontrolling interests. $ 772 $ 412 $ 1,501 $ 364 $ 3 $ 88 $ — $ 83 21 5 40 8 2 3 Service cost 9 8 1 68 10 13 41 1 4 1 2 (51 ) (13 ) (90 ) (14 ) 0 (4 ) (1 ) (4 ) Acquisitions 161 25 3 Settlements (4 ) (853 ) (13 ) (1 ) (8 ) 27 (6 ) 2 4 $ 810 $ 438 $ 772 $ 412 $ 4 $ 93 $ 3 $ 88 Pension Benefits 2017 2016 OPEB - Non-U.S. U.S. Non-U.S. U.S. Non-U.S. 2017 2016 Reconciliation of benefit obligation: Obligation at beginning of period $ 1,682 $ 309 $ 1,692 $ 288 $ 91 $ 86 Interest cost 51 7 53 7 3 3 Service cost 7 5 1 1 Actuarial (gain) loss 115 7 59 18 2 4 Benefit payments (118 ) (14 ) (122 ) (12 ) (5 ) (5 ) Acquisitions 22 New plans 14 Settlements (1 ) (2 ) Termination benefit 1 Curtailment (1 ) Other (5 ) Translation adjustments 40 (4 ) 7 2 Obligation at end of period $ 1,730 $ 377 $ 1,682 $ 309 $ 99 $ 91 The amount included on the New plans line in the preceding table includes obligations under a pension plan in Switzerland, gratuity plans in India and a termination benefit plan covering certain employees in Italy. We determined in 2016 that these obligations should be included within our defined benefit pension plan obligation and the related disclosures. The adjustments were primarily reclassifications from other noncurrent liabilities to pension and postretirement obligations and did not have a material impact on pension expense. Pension Benefits 2017 2016 OPEB - Non-U.S. U.S. Non-U.S. U.S. Non-U.S. 2017 2016 Reconciliation of fair value of plan assets: Fair value at beginning of period $ 1,454 $ 51 $ 1,493 $ 40 $ — $ — Actual return on plan assets 175 6 83 4 Employer contributions 2 15 15 5 5 Benefit payments (118 ) (14 ) (122 ) (12 ) (5 ) (5 ) Settlements (1 ) (2 ) New plans 4 Acquisition 12 Translation adjustments 2 2 Fair value at end of period $ 1,513 $ 71 $ 1,454 $ 51 $ — $ — Funded status at end of period $ (217 ) $ (306 ) $ (228 ) $ (258 ) $ (99 ) $ (91 ) $ 724 $ 78 $ 1,301 $ 71 $ 0 $ 0 $ 0 $ 0 107 3 171 11 Employer contributions 1 14 59 17 4 1 4 (51 ) (13 ) (90 ) (14 ) (4 ) (1 ) (4 ) Settlements (4 ) (853 ) (13 ) 136 7 Deconsolidation of subsidiary (8 ) (1 ) (1 ) $ 781 $ 69 $ 724 $ 78 $ 0 $ 0 $ 0 $ 0 $ (29 ) $ (369 ) $ (48 ) $ (334 ) $ (4 ) $ (93 ) $ (3 ) $ (88 ) Pension Benefits 2017 2016 OPEB - Non-U.S. U.S. Non-U.S. U.S. Non-U.S. 2017 2016 Amounts recognized in the consolidated balance sheet: Noncurrent assets $ — $ 3 $ — $ 2 $ — $ — Current liabilities (13 ) (9 ) (5 ) (5 ) Noncurrent liabilities (217 ) (296 ) (228 ) (251 ) (94 ) (86 ) Net amount recognized $ (217 ) $ (306 ) $ (228 ) $ (258 ) $ (99 ) $ (91 ) $ 2 $ 1 $ 0 $ 4 $ 0 $ 0 $ 0 $ 0 (14 ) (13 ) (5 ) (5 ) (31 ) (356 ) (48 ) (325 ) (4 ) (88 ) (3 ) (83 ) $ (29 ) $ (369 ) $ (48 ) $ (334 ) $ (4 ) $ (93 ) $ (3 ) $ (88 ) Pension Benefits 2017 2016 OPEB - Non-U.S. U.S. Non-U.S. U.S. Non-U.S. 2017 2016 Amounts recognized in AOCI: Net actuarial loss (gain) $ 559 $ 88 $ 560 $ 92 $ (8 ) $ (10 ) AOCI before tax 559 88 560 92 (8 ) (10 ) Deferred taxes (10 ) (22 ) (17 ) (24 ) 3 3 Net $ 549 $ 66 $ 543 $ 68 $ (5 ) $ (7 ) Excluding the actuarial loss of $69 for remeasurement of the benefit obligations of the plan being terminated at expected settlement value, we recognized an $ 142 $ 108 $ 157 $ 108 $ 2 $ (8 ) $ 1 $ (12 ) 142 108 157 108 2 (8 ) 1 (12 ) 16 (30 ) 13 (28 ) 3 4 $ 158 $ 78 $ 170 $ 80 $ 2 $ (5 ) $ 1 $ (8 ) $47$4 on the U.S. plans in 2017 aswas largely the result of the actual return on assets exceeding the expected asset return partially offset by the decrease in discount rate more than offset the effectand result of the lower discount rates used to value our December 31, 2017 pension obligations and the impactreflecting updated mortality tables.using spot rates to determine pension service and interest expense, as discussed previously. In the fourth quarter of 2017, the Society of Actuaries continued its trend of frequent updates, issuing new U.S. mortality scales (MP-2017) based on historical data through 2014 and preliminary data for 2015. After studying the new data and consulting with our actuarial advisers, we concluded that adopting MP-2017, modified to reflect a long-term improvement rate of 0.75% being attained in 2026, was appropriate. This change in assumption did not have a significant impact$107 on the 2017 valuation.The 2016 actuarial lossU.S plans was largely the result of decreases in the discount rates used to value our December 31, 2016 pension obligations. Other elementsactual return on assets exceeding the expected asset return. 2017 2016 U.S. Non-U.S. U.S. Non-U.S. Plans with fair value of plan assets in excess of obligations: Accumulated benefit obligation $ 16 $ 15 $ — $ 15 Projected benefit obligation 16 15 15 Fair value of plan assets 16 18 17 Plans with obligations in excess of fair value of plan assets: Accumulated benefit obligation 1,714 334 1,682 272 Projected benefit obligation 1,714 362 1,682 294 Fair value of plan assets 1,497 53 1,454 34 $ 16 $ 14 $ 15 $ 17 16 14 15 17 17 15 16 21 $ 794 $ 391 $ 757 $ 363 794 424 757 395 764 54 708 57 $ 40 $ 40 $ — $ — $ — $ — $ — $ — 36 36 23 23 16 16 572 189 383 22 22 Non-U.S. government securities 16 1 15 12 12 58 6 52 18 18 2 2 35 35 $ 850 $ 40 $ 247 $ 6 $ 488 $ 0 $ 17 $ 52 Fair Value Measurements at December 31, 2017 U.S. Non-U.S. Asset Category Total Level 1 Level 2 NAV (a) Level 1 Level 2 Level 3 Equity securities: U.S. all cap (b) $ 62 $ 62 $ — $ — $ — $ — $ — U.S. large cap 61 61 U.S. small cap 7 7 EAFE composite 65 65 Emerging markets 52 52 Fixed income securities: U.S. bonds (c) 61 61 Corporate bonds 464 226 238 U.S. Treasury strips 281 281 Non-U.S. government securities 26 26 Emerging market debt 82 82 Alternative investments: Insurance contracts (e) 33 33 Real estate 35 35 Other (f) 1 (10 ) 11 Cash and cash equivalents 354 353 1 Total $ 1,584 $ 69 $ 911 $ 533 $ — $ 38 $ 33 Fair Value Measurements at December 31, 2016 U.S. Non-U.S. Asset Category Total Level 1 Level 2 NAV (a) Level 1 Level 2 Level 3 Equity securities: U.S. all cap (b) $ 76 $ 76 $ — $ — $ — $ — $ — U.S. large cap 102 102 U.S. small cap 26 26 EAFE composite 119 119 Emerging markets 66 66 Fixed income securities: U.S. bonds (c) 137 67 70 Corporate bonds 419 198 221 U.S. Treasury strips 269 269 Non-U.S. government securities 25 25 Emerging market debt 65 65 Alternative investments: Hedge fund of funds (d) 66 66 Insurance contracts (e) 16 16 Real estate 36 36 Other (f) 10 1 9 Cash and cash equivalents 73 72 1 Total $ 1,505 $ 102 $ 607 $ 745 $ — $ 35 $ 16 $ 39 $ 39 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 28 28 19 19 9 9 492 186 306 37 37 21 21 11 11 50 4 46 20 20 11 11 65 65 $ 802 $ 39 $ 288 $ 4 $ 393 $ 0 $ 32 $ 46 (a)(b)(c)This category represents a combination of high-yield and investment grade corporate bonds, sovereign bonds, Yankee bonds, asset-backed securities and U.S. government bonds. Investments include fixed income funds that invest in these instruments.(d)This category includes fund managers that invest in a well-diversified group of hedge funds where strategies include, but are not limited to, event driven, relative value, long/short market neutral, multistrategy and global macro. Investments may be made directly or through pooled funds.(e)(f)Other assets in the U.S. represent interest rate derivatives which had a market value of $(10) at December 31, 2017 and $1 at December 31, 2016. 2017 2016 Non-U.S. Non-U.S. Reconciliation of Level 3 Assets Fair value at beginning of period $ 16 $ 12 Actual gains relating to assets still held at the reporting date 3 Purchases, sales and settlements 1 Currency impact 3 Transfers into (out of) Level 3 10 4 Fair value at end of period $ 33 $ 16 $ 4 $ 46 $ 0 $ 35 Actual gains relating to assets still held at the reporting date 2 4 7 (2 ) 4 5 4 (1 ) $ 6 $ 52 $ 4 $ 46 Hedge funds — The fair value of hedge funds is provided by the managers of the underlying investments. Those managers develop a NAV based on market quotes for the most liquid assets and alternative methods for assets that do not have sufficient trading activity to derive prices.officers and directors.officers. The investment policy allows for a flexible asset allocation mix which is intended to provide appropriate diversification to lessen market volatility while assuming a reasonable level of economic risk.Following approval of the plan of termination by our Board of Directors in October 2017, the Investment Committee established new targets for the assets of the subject plan. At December 31, 2017,2020, the plan that we expect to terminateU.S. plans had targets of 10% in20% for the Growth Portfolio (U.S. and non-U.S. equities, high-yield fixed income, real estate, emerging market debt and cash), 88% in78% for the Immunizing Portfolio (long duration U.S. Treasury strips, corporate bonds and cash) and 2% infor the Liquidity Portfolio (cash and short-term securities) while the remaining U.S. plans had targets of 45% for the Growth Portfolio, 53% for the Immunizing Portfolio and 2% for the Liquidity Portfolio.. The assets held at December 31, 20172020 by the plan we expect to terminateU.S. plans were invested 26%21% in the Growth Portfolio, 73%76% in the Immunizing Portfolio and 1%3% in the Liquidity Portfolio while the assets held by the remaining U.S. plans were invested 39% in the Growth Portfolio, 60% in the Immunizing Portfolio and 1% in the Liquidity Portfolio. The Investment Committee is in the process of implementing the adjustments to the asset allocation. 2017 2016 2015 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Pension benefit obligations: Discount rate 3.55 % 2.25 % 3.92 % 2.48 % 4.13 % 2.83 % Net periodic benefit cost: Discount rate 3.24 % 2.34 % 3.29 % 2.56 % 3.81 % 3.75 % Rate of compensation increase N/A 3.33 % N/A 3.12 % N/A 4.83 % Expected return on plan assets 6.00 % 5.92 % 6.50 % 5.42 % 7.00 % 5.87 % 2.43 % 1.40 % 3.21 % 1.72 % 4.22 % 2.42 % 2.79 % 2.10 % 3.41 % 2.50 % 2.56 % 2.54 % N/A 3.36 % N/A 3.28 % N/A 3.21 % 5.00 % 4.45 % 6.00 % 4.61 % 6.00 % 4.66 % As disclosed previously, the obligations of the U.S. plan being terminated have been remeasured at expected settlement value. Based on the timing and settlement payments, the U.S. plan being terminated has an implied discount rate of 2.79%. In the above table, the discount rate used to determine U.S. pension obligations at the end of 20172018 does not consider the terminated plan we expect to terminate.Wewhich had historically estimated the interest and service cost components of net periodic benefit cost for pension and other postretirement benefits using a single weighted-averagean implied discount rate derived from the yield curve used to measure the benefit obligation of the plan at the most recent remeasurement date. At December 31, 2015, we changed the method used to estimate those interest and service components for3.46%. a yield curve approach. The new method uses a full yield curve approach to estimate the interest and service components by applyingof net periodic benefit cost, we apply the specific spot rates along the yield curve used in the most recent remeasurement of the benefit obligation to the relevant projected cash flows. We believe this method improves the correlation between the projected cash flows and the corresponding interest rates and provides a more precise measurement of interest and service costs. Since the remeasurement of total benefit obligations is not affected, the resulting reduction in periodic benefit cost is offset by an increase in the actuarial loss.6.00%3.50% expected return on asset assumption for 20182021 for our U.S. plans not being terminated. The asset portfolio of the U.S. plan expected to be terminated has a higher proportion of assets invested in fixed income investments. As such, we selected an expected rate of 4.10% for this plan. 2017 2016 2015 Non-U.S. Non-U.S. Non-U.S. OPEB benefit obligations: Discount rate 3.41 % 3.69 % 3.96 % Net periodic benefit cost: Discount rate 3.70 % 3.45 % 3.84 % Initial health care cost trend rate 5.07 % 5.32 % 5.62 % Ultimate health care cost trend rate 5.07 % 5.02 % 5.03 % Year ultimate reached 2018 2018 2018 2.67 % 2.55 % 3.37 % 3.10 % 3.71 % 3.19 % 3.15 % 4.08 % 3.76 % 3.42 % N/A 4.64 % N/A 4.22 % 4.12 % N/A 5.13 % N/A 4.93 % 5.10 % N/A 2023 N/A 2023 2023 A one-percentage-point change in assumed health care cost trend rates would have the following effects for 2017: Effect on total of service and interest cost components $ 1 $ (1 ) Effect on OPEB obligations 10 (9 ) five-yearfive-year period are as follows: Pension Benefits OPEB Year U.S. Non-U.S. Non-U.S. 2018 $ 135 $ 17 $ 5 2019 1,072 26 5 2020 44 17 5 2021 43 17 5 2022 43 19 5 2023 to 2027 204 105 27 Total $ 1,541 $ 201 $ 52 $ 51 $ 17 $ 0 $ 5 51 16 5 50 16 5 50 20 5 49 17 5 2026 to 2030 229 109 1 24 $ 480 $ 195 $ 1 $ 49 ProjectedThere are no projected contributions to be made during 2018 to the defined benefit pension2021 for our U.S. plans areand projected contributions of $16 for our non-U.S.non-U.S plans. Based on the current funded status of our U.S. plans, there are no minimum contributions required for 2018.allcertain of our U.S. employees represented by the United Steelworkers and United Automobile Workers unions. Contributions are made in accordance with our collective bargaining agreements and rates are generally based on hours worked. The collective bargaining agreements expire August 18, 2021. The trustees of the SPT have provided us with the latest data available for the plan year ended December 31, 2017.2020. As of that date, the plan is not fully funded. We could be held liable to the plan for our obligations as well as those of other employers as a result of our participation in the plan.have not exceeded 5% of the total contributions to the plan. Identification Zone Status Funding Plan Contributions by Dana $ 14 $ 13 $ 12 Contributions by Dana 2017 2016 2017 2016 2015 SPT 23-6648508 / 499 Green Green No $ 11 $ 10 $ 10 No 2017 2016 Cost Cost U.S. government securities $ 3 $ — $ 3 $ 2 $ — $ 2 Corporate securities 5 5 2 2 Certificates of deposit 27 27 22 22 Other 4 1 5 4 4 Total marketable securities $ 39 $ 1 $ 40 $ 30 $ — $ 30 U.S. government securities include bonds issued by government-sponsored agencies and Treasury notes. Corporate securities include primarily debt securities. Other consists of investments in mutual and index funds. U.S. government securities, corporate debt and certificates $ 21 $ 0 $ 21 $ 19 $ 0 $ 19 $ 16 $ 33 $ 49 $ 0 $ 0 $ 0 after one year through five years and after five years through ten years total $27, $5 and $3$21 at December 31, 2017.2020. 2017 2016 Interest
Rate Principal Unamortized Debt Issue Costs Principal Unamortized Debt Issue Costs Senior Notes due September 15, 2021 5.375% $ — $ — $ 450 $ (5 ) Senior Notes due September 15, 2023 6.000% 300 (4 ) 300 (4 ) Senior Notes due December 15, 2024 5.500% 425 (5 ) 425 (6 ) Senior Notes due April 15, 2025 5.750% * 400 (6 ) Senior Notes due June 1, 2026 6.500% * 375 (6 ) 375 (6 ) Term Facility 275 (1 ) Other indebtedness 29 120 Total $ 1,804 $ (22 ) $ 1,670 $ (21 ) 5.500% $ 425 $ 425 5.750% 400 400 6.500% 375 375 5.375% 400 300 5.625% 400 0 0 474 349 349 106 61 (27 ) (28 ) 2,428 2,356 8 20 $ 2,420 $ 2,336 *8-year8-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. See Note 15 for additional information. In conjunction with the issuance of the June 2026 Notes we entered into 10-year10-year fixed-to-fixed cross-currency swaps which have the effect of economically converting the June 2026 Notes to euro denominatedeuro-denominated debt at a fixed rate of 5.140%. See Note 15 for additional information.capitalfinance lease obligations and the unamortized fair value adjustment related to a terminated interest rate swap and the financial liability related to build-to-suit leases.swap. See Note 2 for additional information on the note payable to SME and Note 15 for additional information on the terminated interest rate swap.20172020— 2018 2019 2020 2021 2022 Thereafter Total Debt maturities $ 12 $ 19 $ 19 $ 18 $ 216 $ 1,501 $ 1,785 $ 0 $ 4 $ 5 $ 453 $ 404 On September 18, 2017, In June 2020, we redeemedcompleted the remaining $350sale of our September 2021 Notes at a price equal to 102.688% plus accrued and unpaid interest. The $13 loss on extinguishment of debt includes the $10 redemption premium and the $3 write-off of previously deferred financing costs associated with the September 2021 Notes.On April 4, 2017, Dana Financing Luxembourg S.à r.l., a wholly-owned subsidiary of Dana, issued $400 in senior unsecured notes (April 2025 ( June 2028 Notes) at 5.750%, which are guaranteed by Dana. The April 2025 Notes were issued through a private placement and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act)5.625%. The April 2025 Notes were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and, outside the United States, only to non-U.S. investors in reliance on Regulation S under the Securities Act. The April 2025 June 2028 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on AprilDecember 15 and OctoberJune 15 of each year, beginning on OctoberDecember 15, 2017. 2020. The April 2025 June 2028 Notes will mature on AprilJune 15, 2025. 2028. Net proceeds of the offering totaled $394.$395. Financing costs of $6April 2025 Notes.notes. The proceeds from the offering were used to repay indebtedness ofpay down outstanding borrowings under our BPT and BFP subsidiaries, repay indebtedness of a wholly-owned subsidiary in Brazil, redeem $100 of our September 2021 NotesRevolving Facility and for general corporate purposes. Also, we completed the sale of an additional $100 of November 2027 Notes at 5.375%. The September 2021 November 2027 Notes were redeemedrank equally with Dana’s other unsecured senior notes. Interest on April 4, 2017 at a price equal to 104.031% plus accrued the notes is payable on May 15 and unpaid interest. November 15 of each year, beginning on November 15, 2020. The $6 lossNovember 2027 Notes will mature on extinguishment of debt includes the $4 redemption premium and the $1 write-off of previously deferred financing costs associated with the September 2021 Notes and the $1 redemption premium associated with the repayment of indebtedness of a wholly-owned subsidiary in Brazil. In conjunction with the issuanceNovember 15, 2027. Net proceeds of the April 2025 Notes, offering totaled $99. Financing costs of $1 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. The proceeds from the offering were used for general corporate purposes.entered into eight-year fixed-to-fixed cross-currency swaps which havecompleted the effectsale of economically converting the April 2025 Notes to euro-denominated debt at a fixed rate of 3.850%. See Note 15 for additional information.On June 23, 2016, we redeemed all of our February 2021 Notes at a price equal to 103.375% plus accrued and unpaid interest. The $16 loss on extinguishment of debt includes the $12 redemption premium and the $4 write-off of previously deferred financing costs associated with the February 2021 Notes.On May 27, 2016, Dana Financing Luxembourg S.à r.l., a wholly-owned subsidiary of Dana, issued $375$300 in senior unsecured notes (June 2026 ( November 2027 Notes) at 5.375%. The June 2026 Notes were issued through a private placement and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act). The June 2026 Notes were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act and, outside the United States, only to non-U.S. investors in reliance on Regulation S under the Securities Act. The June 2026 November 2027 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on JuneMay 15 and DecemberNovember 15 of each year, beginning on DecemberMay 15, 2016. 2020. The June 2026 November 2027 Notes will mature on June 1, 2026. November 15, 2027. Net proceeds of the offering totaled $368.$296. Financing costs of $7$4 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. The proceeds from the offering were used to redeem our February 2021 Notes, to pay related fees and expenses and for general corporate purposes.March 16, 2015, November 22, 2019, we redeemed $162 of our September 2023 Notes pursuant to a tender offer at a weighted average price equal to 102.250% plus accrued and unpaid interest. On November 26, 2019, we called the remaining $15$138 of our February 2019 September 2023 Notes at a price equal to 103.250%102.000% plus accrued and unpaid interest. The $2$9 loss on extinguishment of debt recorded in November 2019 includes the redemption premiumpremiums and transaction costs associated with the tender offer and the call and the write-off of $2 of previously deferred financing costs associated with the February 2019 September 2023 Notes.12-month12-month period commencing on the anniversary date of the senior notes in the yearsyear set forth below: Redemption Price September December April June Year 2023 Notes 2024 Notes 2025 Notes 2026 Notes 2018 103.000 % 2019 102.000 % 102.750 % 2020 101.000 % 101.833 % 104.313 % 2021 100.000 % 100.917 % 102.875 % 103.250 % 2022 100.000 % 100.000 % 101.438 % 102.167 % 2023 100.000 % 100.000 % 101.083 % 2024 100.000 % 100.000 % 2025 100.000 % 2020 101.833 % 104.313 % 100.917 % 102.875 % 103.250 % 100.000 % 101.438 % 102.167 % 102.688 % 100.000 % 100.000 % 101.083 % 101.344 % 102.813 % 100.000 % 100.000 % 100.000 % 101.406 % 100.000 % 100.000 % 100.000 % 100.000 % 100.000 % 100.000 % September 15, 2018 for the September 2023 Notes, June 1, 2021, we may redeem some or all of such notesthe June 2026 Notes at a redemption price equal toof 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.PriorDecemberNovember 15, 2019, 2022, we may redeem some or allup to 35% of the December 2024 aggregate principal amount of the November 2027 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.375% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the November 2027 Notes remains outstanding after the redemption. Prior to November 15, 2022, we may redeem some or all of the November 2027 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.AprilJune 15, 2020, 2023, we may redeem up to 35% of the aggregate principal amount of the April 2025 June 2028 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 105.750%105.625% of theApril 2025 June 2028 Notes remains outstanding after the redemption.AprilJune 15, 2020, 2023, we may redeem some or all of the April 2025 June 2028 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.At any time prior to June 1, 2019, we may redeem up to 35% of the aggregate principal amount of the June 2026 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 106.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the original aggregate principal amount of the June 2026 Notes remains outstanding after the redemption.Prior to June 1, 2021, we may redeem some or all of the June 2026 Notes at a redemption price of 100.000% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date plus a “make-whole” premium. We have not separated the make-whole premium from the underlying debt instrument to account for it as a derivative instrument as the economic characteristics and the risks of this embedded derivative are clearly and closely related to the economic characteristics and risks of the underlying debt.August 17, 2017, February 28, 2019, we entered into an amended credit and guaranty agreement comprised of a $275$500 term facility (the Term A Facility), a $450 term facility (the Term B Facility and, together with the Term A Facility, the Term Facilities) and a $600$750 revolving credit facility (the Revolving Facility) both. The Term A Facility and the Revolving Facility were expansions of which mature on August 17, 2022.our existing facilities. On September 14, 2017, February 28, 2019, we drew the entire amount$225 available under the Term A Facility and the $450 available under the Term B Facility. NetThe proceeds from the Term Facility draw totaled $274. Financing costs of $1Facilities were recorded as deferred cost and are being amortizedused to interest expense overacquire the lifeOerlikon Drive Systems segment of the Term Facility.Oerlikon Group and pay for related integration activities. We arewere required to make equal quarterly installments on the Term A Facility on the last day of each fiscal quarter of 1.5625%$8 beginning March 31, 2019 and 0.25% of the initial aggregate principal advances of the Term B Facility quarterly commencing on June 30, 2019. On August 30, 2019, we amended our credit and guaranty agreement, increasing the Revolving Facility to $1,000 and extending the maturities and reducing the interest rates of both the Revolving Facility and the Term A Facility. We recorded deferred fees of $13 and $4 related to the amendments to the Term Facilities and the Revolving Facility, respectively. The deferred fees are being amortized over the life of the applicable facilities. On August 30, 2019, we borrowed $100 on the Revolving Facility and paid down a similar amount of the Term Facility commencingB Facility. We are no longer required to make quarterly installments on September 30, 2018.the Term B Facility. On December 31, 2020, we fully paid down the Term A Facility. We wrote off $3 of previously deferred financing costs associated with the Term A Facility. We may prepay some or all of the amounts under the Term B Facility without penalty. Any prepayments made on the Term Facility would be applied against the required quarterly installments. The proceeds from the Term Facility were used to repay our September 2021 Notes and for general corporate purposes. The Revolving Facility amended our previous revolving credit facility. In connection with the Revolving Facility, we paid $2 in deferred financing costs to be amortized to interest expense over the life of the facility. Deferred financing costs on our Revolving Facility are included in other noncurrent assets.grantsare secured by a first-priorityfirst-priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions. Term Facility and Revolving Facility bear interest at a floating rate based on, at our option, the base rate or Eurodollar rate (each as described in the revolving credit and guaranty agreement) plus a margin as set forth below: Margin Total Net Leverage Ratio Base Rate Eurodollar Rate Less than or equal to 1.00:1.00 0.50 % 1.50 % Greater than 1.00:1.00 but less than or equal to 2.00:1.00 0.75 % 1.75 % Greater than 2.00:1.00 1.00 % 2.00 % 0.25 % 1.25 % 0.50 % 1.50 % 0.75 % 1.75 % advanceadvances under the Term B Facility at the Eurodollar Rate. The interest rate on the Term B Facility was 2.397%, inclusive of the applicable margin, was 3.28488%margins, as of December 31, 2017.2020. 0.250 % 0.375 % 0.500%0.500% 2017, 2020, we had no0 outstanding borrowings under the Revolving Facility but weand had utilized $22$21 for letters of credit. We had availability at December 31, 2017 2020 under the Revolving Facility of $578$979 after deducting the outstanding letters of credit.2017, 2020, we were in compliance with the covenants of our financing agreements. Under the Term B Facility, Revolving Facility and the senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types and, in the case of the Term Facility and Revolving Facility, a maintenance covenant tested on the last day of each fiscal quarter requiring us to maintain a first lien net leverage ratio not to exceed 2.00 to 1.00. Fair Value Category Balance Sheet Location Fair Value Level December 31, 2017 December 31, 2016 Available-for-sale securities Marketable securities 1 $ 5 $ 4 Available-for-sale securities Marketable securities 2 35 26 Currency forward contracts Cash flow hedges Accounts receivable - Other 2 1 2 Cash flow hedges Other accrued liabilities 2 5 4 Undesignated Accounts receivable - Other 2 1 1 Undesignated Other accrued liabilities 2 3 1 Currency swaps Cash flow hedges Other noncurrent liabilities 2 177 12 Undesignated Other accrued liabilities 2 — 3 2 $ 21 $ 19 1 49 0 2 15 14 2 1 2 2 2 1 2 1 1 2 7 3 2 128 71 2 $ 2,376 $ 2,475 $ 2,384 $ 2,450 2017 2016 Senior notes $ 1,500 $ 1,592 $ 1,550 $ 1,612 Term Facility 275 275 — — Other indebtedness* 29 22 120 101 Total $ 1,804 $ 1,889 $ 1,670 $ 1,713 *The carrying value includes the unamortized portion of a fair value adjustment related to a terminated interest rate swap at both dates. The carrying value and fair value also include a financial liability associated with certain build-to-suit lease arrangements at both dates.Fair value measurements on a nonrecurring basis — Certain assets are measured at fair value on a nonrecurring basis. These are long-lived assets that are subject to fair value adjustments only in certain circumstances. These assets include intangible assets and property, plant and equipment which may be written down to fair value when they are held for sale or as a result of impairment.2017, 2020, no fixed-to-floating interest rate swaps remain outstanding. However, a $6$4 fair value adjustment to the carrying amount of our December 2024 Notes, associated with a fixed-to-floating interest rate swap that had been executed but was subsequently terminated during 2015, remains deferred at December 31, 2017. 2020. This amount is being amortized as a reduction of interest expense through the period ending December 2024, the scheduled maturity date of the December 2024 Notes. Approximately $1 wasThe amount amortized as a reduction of interest expense was not material during 2017.eighteenfifteen months, as well as currency swaps associated with certain recorded external notes payable and intercompany loans receivable and payable. Periodically, our foreign currency derivatives also include net investment hedges of certain of our investments in foreign operations.During the first quarter of 2017,€281 of euro-denominated intercompanycertain notes payable, issued by certain of our Luxembourg subsidiaries (the "Luxembourg Intercompany Notes") and payable to USD-functional Dana, Inc., we executed fixed-to-fixed cross-currency swaps with the same critical terms as the Luxembourg Intercompany Notes. The risk management objective of these swaps is to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the euro / U.S. dollar exchange rates associated with the forecasted principal and interest payments.Additionally, during the first quarter of 2017, in conjunction with the issuance of an aggregate $15 of U.S. dollar-denominated short-term notes payable by one of our Brazilian subsidiaries (the "Brazilian Notes"), we executed fixed-to-fixed cross-currency swaps with the same critical terms as the Brazilian Notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the U.S. dollar / Brazilian real exchange rates. During September 2017, the Brazilian Notes and the associated swaps were settled.During March 2017, in conjunction with the planned April 2017 issuance of the $400 of U.S. dollar-denominated April 2025 Notes by euro-functional Dana Financing Luxembourg S.à r.l., we executed fixed-to-fixed cross-currency swaps with the same critical terms as the April 2025 Notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the U.S. dollar / euro exchange rates associated with the forecasted principal and interest payments.During May 2016, in conjunction with the issuance of the $375 of U.S. dollar-denominated June 2026 Notes by euro-functional Dana Financing Luxembourg S.à r.l., we executed fixed-to-fixed cross-currency swaps with the same critical terms as the June 2026 Notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in the U.S. dollar / euro exchange rates associated with the forecasted principal and interest payments.2017:Underlying Financial Instrument Derivative Financial Instrument Description Type Face Amount Rate Designated Notional Amount Traded Amount Inflow Rate Outflow Rate June 2026 Notes Payable $ 375 6.50 % $ 375 € 338 6.50 % 5.14 % April 2025 Notes Payable $ 400 5.75 % $ 400 € 371 5.75 % 3.85 % Luxembourg Intercompany Notes Receivable € 281 3.91 % € 281 $ 300 6.00 % 3.91 % $ 400 5.75% $ 400 € 371 5.75% 3.85% $ 375 6.50% $ 375 € 338 6.50% 5.14% € 278 3.70% € 278 $ 300 5.38% 3.70% June 2026 April 2025 Notes and the April 2025 June 2026 Notes.In the event our ongoing assessment demonstrates that the critical terms of either the swaps or the underlying designated financial instruments have changed, or that there have been adverse developments regarding counterparty risk, we will use the long haul method to assess ineffectiveness of the hedging relationship. To the extent the swaps are no longer effective, changes in their fair values will be recorded in earnings. During 2017, deferred losses of $32 associated with all of the fixed-to-fixed cross-currency swaps were recorded in OCI and reflect the net impact of a $165 unfavorable change in the fair value of the swaps and a $133 reclassification from AOCI to earnings. The reclassification from AOCI to earnings represents an offset to a foreign exchange remeasurement gain on all of the designated debt instruments outstanding during the year ended December 31, 2017.$306$386 at December 31, 2017 2020 and $143$508 at December 31, 2016. 2019. The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was $1,112$1,118 at December 31,2020 and $1,090 at December 31, 2017 and $571 at December 31, 2016.2019. Notional Amount (U.S. Dollar Equivalent) Functional Currency Traded Currency Undesignated Total Maturity U.S. dollar Mexican peso $ 109 $ 109 Dec-18 Euro U.S. dollar, Canadian dollar, Hungarian forint, British pound, Swiss franc, Indian rupee, Russian ruble, Chinese renminbi 45 6 51 Mar-19 British pound U.S. dollar, Euro 1 1 Nov-18 Swedish krona Euro, U.S. dollar 29 29 Feb-19 South African rand U.S. dollar, Euro, Thai baht 9 9 Sep-18 Canadian dollar U.S. dollar 11 11 Mar-19 Thai baht U.S. dollar, Australian dollar 31 31 Dec-18 Brazilian real U.S. dollar, Euro 33 33 Dec-18 Indian rupee U.S. dollar, British pound, Euro 32 32 Jun-19 Total forward contracts 184 122 306 U.S. dollar Euro 337 337 Sep-23 Euro U.S. dollar 775 775 Jun-26 Total currency swaps 1,112 — 1,112 Total currency derivatives $ 1,296 $ 122 $ 1,418 Cash $ 84 $ 45 $ 129 72 4 76 1 5 6 7 7 Thai baht U.S. dollar, euro 6 31 37 Dec-2021 5 5 29 10 39 81 81 6 6 197 189 386 343 343 775 775 1,118 — 1,118 $ 1,315 $ 189 $ 1,504 Gain (loss) expected to be reclassified into income in one year or less $ 9 $ 6 $ 9 (6 ) (3 ) 3 (36 ) $ 6 $ (33 ) $ 9 $ 7,106 $ 6,485 $ 22 Amount of (gain) loss reclassified from AOCI into income 1 18 99 $ 8,620 $ 7,489 $ (25 ) (9 ) (24 ) $ 8,143 $ 6,986 $ (29 ) (1 ) (55 ) Derivatives Not Designated as Hedging Instruments 2020 2019 2018 Location of Gain or (Loss) Recognized in Income $ 0 $ 0 $ (5 ) (6 ) (14 ) (5 ) cumulative translation adjustment (CTA)CTA component of OCI during the period in which the contracts remain outstanding to the extent such contracts and non-derivative financial instruments remain effective.During 2017, we recorded a deferred loss of $2 in the CTA component of OCI associated with the MXN-denominated intercompany note. Amounts recorded in CTA remain deferred in AOCI until such time as the investments in the associated subsidiaries are substantially liquidated.Amounts to be reclassified to earnings — Deferred gains or losses associated with effective cash flow hedges of forecasted transactions are reported in AOCI and are reclassified to earnings in the same periods in which the underlying transactions affect earnings. Amounts expected to be reclassified to earnings assume no change in the current hedge relationships or to December 31, 2017 exchange rates. Deferred losses of $4 at December 31, 2017 are expected to be reclassified to earnings during the next twelve months, compared to deferred losses of $2 at December 31, 2016. Amounts reclassified from AOCI to earnings arising from the discontinuation of cash flow hedge accounting treatment were not material during 2017.Otherliabilities — We had accrued $7liability costs were $1 and $5$10 for non-asbestos product liability costs at December 31, 20172020 and 20162019. We had also recognized $9 and $4 as expected amounts recoverable from third parties of $11 and $13 at the respective dates. The increases in the liability and recoverable amounts at December 31, 2017 largely reflect the recognition of the estimated cost, net of payments made, and the expected recovery of an insured matter. Payments made to claimants have preceded theprecede recovery of amounts from third parties, resultingand may result in a recoverable amountamounts in excess of the total liability at December 31, 2017.liability. We estimate these liabilities based on current information and assumptions about the value and likelihood of the claims against us.$8$10 and $13 at December 31, 20172020 and 2016.2019. We consider the most probable method of remediation, current laws and regulations and existing technology in estimating our environmental liabilities.On September 25, 2015, the Brazilian antitrust authority (“CADE”) announced an investigation of an alleged cartel involving a former Dana business in Brazil and various competitors related to sales of shock absorbers between 2000 and 2014. We divested this business as a part of the sale of our aftermarket business in 2004. The investigation of Dana's involvement in this matter concluded in the second quarter of 2016 without a material impact on Dana.Lease commitments — Cash obligations under future minimum rental commitments under operating leases and net rental expense at December 31, 2017 are shown in the table below. Operating lease commitments are primarily related to facilities. The significant increase in lease commitments at December 31, 2017 reflects the impact of the acquisitions made during 2017. See also 2018 2019 2020 2021 2022 Thereafter Total Lease commitments $ 53 $ 48 $ 45 $ 39 $ 31 $ 90 $ 306 2017 2016 2015 Rent expense $61 $50 $49 Note 17. Warranty Obligations $ 101 $ 75 $ 76 35 35 37 1 2 (1 ) (42 ) (35 ) (35 ) Acquisitions 24 Currency impact 3 (2 ) $ 98 $ 101 $ 75 2017 2016 2015 Balance, beginning of period $ 66 $ 56 $ 47 Acquisitions 6 Amounts accrued for current period sales 32 25 26 Adjustments of prior estimates 11 26 22 Settlements of warranty claims (42 ) (41 ) (36 ) Currency impact 3 (3 ) Balance, end of period $ 76 $ 66 $ 56 The Acquisitions line includes approximately $4 related to the acquisitionTable of BFP and BPT that is subject to recovery from the seller.Contents attributable to continuing operations 2017 2016 2015 Current U.S. federal and state $ 6 $ (18 ) $ 12 Non-U.S. 98 74 80 Total current 104 56 92 Deferred U.S. federal and state 164 (497 ) (9 ) Non-U.S. 15 17 (1 ) Total deferred 179 (480 ) (10 ) Total expense (benefit) $ 283 $ (424 ) $ 82 $ 14 $ 13 $ 14 79 92 128 93 105 142 (23 ) (104 ) (47 ) (12 ) (33 ) (17 ) (35 ) (137 ) (64 ) $ 58 $ (32 ) $ 78 from continuing operations before income taxes 2017 2016 2015 U.S. operations $ 60 $ (56 ) $ 72 Non-U.S. operations 320 271 220 Earnings from continuing operations before income taxes $ 380 $ 215 $ 292 $ (128 ) $ (166 ) $ 26 115 337 468 $ (13 ) $ 171 $ 494 2009. The U.S. federal income tax audits for 2011 and 2012 were settled during the first quarter of 2015, resulting in no incremental cash taxes.U.S.tax — On December 22, 2017, —Beginning in 2018, the Tax Cuts and Jobs Act ("Act") was signed into law in the U.S. The Act includes a broad range of tax reforms, certain of which were required by GAAP to be recognized upon enactment. The U.S. Securities and Exchange Commission has issued Staff Accounting Bulletin 118 (SAB 118), which provides guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that should not extend beyond one year from the enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Act.Based on our historical financial performance in the U.S., at December 31, 2017, we have a significant net deferred tax asset position. As such, with the Act's reduction of the corporate tax rate from 35% to 21%, we remeasured our net deferred tax assets at the lower corporate rate of 21% and recognized a tax expense to adjust net deferred tax assets to the reduced value. The Act introduced provisions that fundamentally change the U.S. approach to taxation of foreign earnings. Under the Act, qualified dividends of foreign subsidiaries are no longer subject to U.S. tax. Under the previously-existing tax rules, dividends from foreign operations were subjected to U.S. tax, and if not considered permanently reinvested, we had recognized expense and recorded a liability for the tax expected to be incurred upon receipt of the dividend of these foreign earnings. Although the Act excludes dividends of foreign subsidiaries from taxation, it includes provisions for a mandatory deemed dividend of undistributed foreign earnings at tax rates of 15.5% or 8% ("transition tax") depending on the nature of the foreign operations' assets. Companies may utilize tax attributes (including net operating losses and tax credits) to offset the transition tax. The estimated net effect of applying the provisions of the Act on our 2017 results of operations was a non-cash charge to tax expense of $186. This provisional amount could be revised as additional guidance and interpretations are issued and as we continue to examine the details of the Act and the related tax attributes.Beginning in 2018, the Act may also trigger a taxable deemed dividend to the extent that the annual earnings of our foreign subsidiaries exceed a specified threshold, based on the value of tangible foreign operating assets. The deemed dividend, if any, from this global intangible low-taxed income (GILTI) may be offset by the use of other tax attributes in that year. We intend to account foryear, and specifically, the GILTI rules may impact the amount of cash tax effect of GILTI as a period cost and will include a provisional estimate for GILTI in our effective tax rate beginning in the first quarter of 2018.savings that net operating losses provide. The SEC staff has indicated that a company should make and disclose acertain policy election aselections related to accounting for GILTI. As to whether itwe will recognize deferred taxes for basis differences expected to reverse as GILTI or account for the effect of GILTI as a period cost when incurred. We are currently applyingincurred, we intend to account for the SAB 118 guidancetax effect of GILTI as a period cost. As to the selectionrealizability of a GILTI accounting policy election and, therefore, asthe tax benefit provided by net operating losses, we are electing to utilize the tax law ordering approach.for continuing operations — 2017 2016 2015 U.S. federal income tax rate 35 % 35 % 35 % Adjustments resulting from: State and local income taxes, net of federal benefit 1 5 (1 ) Non-U.S. income (expense) (11 ) (15 ) (11 ) Credits and tax incentives (16 ) (5 ) (4 ) U.S. tax on non-U.S. earnings 12 (19 ) 9 Intercompany sale of certain operating assets (6 ) 5 9 Settlement and return adjustments (2 ) 14 1 Enacted change in tax laws 49 4 Miscellaneous items 1 2 5 Valuation allowance adjustments 11 (222 ) (15 ) Effective income tax rate for continuing operations 74 % (196 )% 28 % The net effect in 2017 of applying the U.S. tax reform provisions of the Act was tax expense of $186. This impact, which increased the effective rate for 2017 by 49%, was principally attributable to the reduction of net deferred tax assets to reflect the reduced corporate tax rate. Foreign tax credits of $49 which were generated in 2017 but not utilized to offset the transition tax are included as a benefit in the credits and incentives component of the effective rate reconciliation, with an offsetting expense of $49 in the valuation allowance component to recognize that such credits are not likely to be realized.In the fourth quarter of 2016, we determined that valuation allowances against certain U.S. deferred taxes were no longer required. Release of these valuation allowances resulted in $501 of tax benefit. Valuation allowances against U.S. deferred tax assets primarily related to state operating loss carryforwards and other credits were retained. In the fourth quarter of 2017, based on our improved financial performance and outlook, we determined that release of an additional $27 was appropriate and recognized a tax benefit of this amount. Developments in Brazil in 2016 led to our determination that an allowance against certain deferred taxes in that country was appropriate, and % % (3 ) 21 36 21 103 21 6 (46 ) (1 ) (1 ) 6 1 (5 ) 39 25 15 23 5 (55 ) 423 (62 ) (37 ) (87 ) (18 ) (24 ) 185 (4 ) (2 ) 0 0 20 (154 ) 21 12 14 3 27 (207 ) 0 0 5 1 3 (23 ) (19 ) (11 ) 29 6 (2 ) 15 3 2 6 1 0 0 73 43 0 0 17 (130 ) 0 0 0 0 8 (61 ) 0 0 0 0 6 (46 ) (2 ) (1 ) 1 0 60 (462 ) (102 ) (60 ) (22 ) (4 ) 58 (446 ) (32 ) (19 ) 78 16 $25$60 for additional valuation allowances in 2016foreign jurisdictions due to establish this valuation allowance.In 2014,reduced income tax expense inprojections. We also recognized a benefit of $26 for the U.S. was reduced by $179 for release of valuation allowances forallowance in Australia, based on recent history of profitability and increased income forecastedprojections. For the year, we also recognized tax benefits of $37 related to be realized in 2015 in connectiontax actions that adjusted federal tax credits. A pre-tax goodwill impairment charge of $51 with aan associated income tax planning action that involved a salebenefit of an affiliate’s stock and certain operating assets by a U.S. subsidiary of the company to a non-U.S. affiliate expected to be completed in 2015. During the fourth quarter of 2015, the tax planning action$1 was completed. The final income generated by the transaction was higher than anticipated as a consequence of proposed Internal Revenue Service regulations issued in 2015 providing guidance on the tax treatment afforded a component of the tax planning action we undertook, as well as revised income estimates, which resulted in an additional $66 release of valuation allowance.recorded. In conjunction with the completion of the intercompany sale of certain operating assets to a non-U.S. affiliate, tax expense of $12 was recorded, including the corresponding foreign derived intangible income benefit.prepaid tax assetbenefit of $190 was recorded. The prepaid tax asset represents the usage of tax attributes recognized in 2014 and 2015, through$22 for the release of valuation allowance in a subsidiary in Brazil based on our deferred tax assets,recent history of profitability and increased income projections. A pre-tax pension settlement charge of $259 was being amortized into tax expense over the life of the assets transferredrecorded, resulting in the transaction until 2017. We recognizedincome tax expense of $11 and $2a valuation allowance release of $18. For the year, we also recognized benefits for the release of valuation allowance in 2016the US of $34 based on increased income projections and 2015 as$30 based on the development of a resulttax planning strategy related to federal tax credits. Partially offsetting this benefit in the US was $6 of this amortization. In addition,expense related to a US state law change. During the second quarter of 2019, we also recorded tax benefits of $48 related to tax actions that adjusted federal tax credits.tax expensea benefit of $23 in 2015$44 related to U.S. state law changes and the saledevelopment and implementation of a tax planning strategy which adjusted federal tax credits, along with federal and state net operating losses and the affiliate’s stock. As described in Note 1associated valuation allowances. We also recognized benefits of $11 relating to the consolidated financial statements, in 2017 we adopted new accounting guidance applicablereversal of a provision for an uncertain tax position, $5 relating to intra-entity transfers. Adoptionthe release of this guidance effective January 1, 2017 resultedvaluation allowances in the unamortized valueUS based on improved income projections and $7 due to permanent reinvestment assertions. Partially offsetting these benefits was $5 of the prepaidexpense to settle outstanding tax asset being written off to retained earnings. Prior to the U.S. tax reform provisions enacted with passage of the Act, we provided for U.S. federal income and non-U.S. withholding taxes on the earnings of our non-U.S. operations that are not considered to be permanently reinvested. As indicated above, with passage of the Act, dividends of earnings from non-U.S. operations are generally no longer subjected to U.S. income tax. Accordingly, in the fourth quarter of 2017, we reduced the previously recorded liability for U.S. income tax on expected repatriations of non-U.S. earnings. We continue to analyze and adjust the estimated impact of the non-U.S. income and withholding tax liabilities based on the amount and source of these earnings, as well as the expected means through which those earnings may be taxed. We recognized net expense of $2 for 2017,$6 in 2020, $3 in 2019 and a net benefit of $58 for 2016 and expense of $1 for 2015$7 in 2018, related to future income taxes and non-U.S. withholding taxes on repatriations from operations that are not permanently reinvested. We also paid withholding taxes of $7, $6$9, $10 and $7$11 during 2017, 20162020,2019 and 20152018 related to the actual transfer of funds to the U.S. The unrecognized tax liability associated with the operations in which we are permanently reinvested is $5 at December 31, 2017.$1,119$1,338 at the end of 2017.2020. Included in this amount are intercompany loans and related interest accruals with an equivalent value of $23$21 which are denominated in a foreign currency and considered to be permanently invested.We believe it is reasonably possible thatIn 2020, we recognized a benefit of $26 for the release of valuation allowance in a subsidiary in Australia based on recent history of profitability and increased income projections. During the third quarter of 2019, we recognized a benefit of $22 for the release of a valuation allowance of up to $8 related to a subsidiary in Argentina will be released in the next twelve months.Prior to 2016, we carried a valuation allowance against deferred tax assets in the U.S. While our U.S. operations have experienced improved profitability in recent years, our analysis of the income of the U.S. operations, as adjusted for changes in historical results due to developments through 2015, demonstrated historical losses as of December 31, 2015. Additionally, there were considerable uncertainties in the U.S. in certain of our end markets. Therefore, we had not achieved a level of sustained profitability that would, in our judgment, support a release of the valuation allowance prior to 2016.During the fourth quarter of 2016, following the completion of an enterprise wide strategy assessment and our annual one- and five-year financial plans, the Company assessed the weight of all available positive and negative evidence and determined it was more likely than not that future earnings would be sufficient to realize most of our deferred tax assets in the U.S. Accordingly, we released the U.S. valuation allowance at December 31, 2016, resulting in an income tax benefit of $501. In arriving at the conclusion that we had achieved sustained profitability in the U.S., we considered the following positive evidence: we were in a cumulative three-year historical income position in the U.S., we had income in seven of the eight previous quarters; we successfully launched a replacement business for one of our largest customer programs for Light Vehicle in the U.S. with actual volumes and margins which were consistent with our forecast in the fourth quarter; we stabilized our U.S. Commercial Vehicle business despite lower than expected volumes and we secured certain new programs with customers that increased our sales backlog in the U.S.At December 31, 2016, we retained a valuation allowance of $137 against deferred tax assets in the U.S. primarily related to state operating loss carryforwards and other credits which do not meet the more likely than not criterion for releasing the valuation allowance. During 2017, based on our financial performance and outlook, we determined that $27 of this allowance met the more-likely-than not standard for release.At December 31, 2016, our analysis of the operations of a subsidiary in Brazil adjusted for changes in the historical results due to the effectsbased on recent history of developments through the date of the analysisprofitability and planned future actions, reflected three years of historical cumulative losses and our annual one- and five-year financial plans forecasted continued near-term losses. Therefore, we determined it was not more likely than not that future earnings will be sufficient to realize the deferred tax assets. Accordingly, we recorded a valuation allowance as of December 31, 2016, resulting inincreased income tax expense of $25. 2017 2016 Net operating loss carryforwards $ 319 $ 472 Postretirement benefits, including pensions 119 152 Research and development costs 85 113 Expense accruals 78 54 Other tax credits recoverable 122 67 Capital loss carryforwards 43 40 Inventory reserves 16 18 Postemployment and other benefits 5 8 Other 20 Total 787 944 Valuation allowance (301 ) (285 ) Deferred tax assets 486 659 Unremitted earnings (30 ) (27 ) Intangibles (22 ) (29 ) Depreciation (60 ) (52 ) Other (13 ) Deferred tax liabilities (125 ) (108 ) Net deferred tax assets $ 361 $ 551 $ 240 $ 258 92 87 149 124 76 81 234 244 47 42 25 19 5 6 Intangibles 17 Leasing activities 43 46 928 907 (259 ) (190 ) 669 717 (10 ) (4 ) (34 ) (87 ) (104 ) (33 ) (97 ) (175 ) $ 572 $ 542 2017.2020. Due to time limitations on the ability to realize the benefit of the carryforwards, additional portions of these deferred tax assets may become unrealizable in the future. Net operating losses U.S. federal $ 135 $ — 20 2029 U.S. state 101 (81 ) Various 2018 Brazil 20 (20 ) Unlimited France 9 Unlimited Australia 35 (35 ) Unlimited Italy 7 (7 ) Unlimited Germany 5 (5 ) Unlimited U.K. 3 (3 ) Unlimited Argentina 3 (3 ) 5 2018 China 1 (1 ) 5 2019 Total $ 319 $ (155 ) $ 40 $ — 20 2030 61 (33 ) 2021 14 (5 ) France 8 Unlimited Australia 26 Unlimited 31 (27 ) 6 (6 ) Lithuania 1 Unlimited South Africa 2 Unlimited Spain 1 Unlimited 7 (7 ) 28 (25 ) 20 2022 1 8 2028 14 (14 ) 5 2021 $ 240 $ (117 ) $43$47 which are fully offset with valuation allowances at December 31, 2017.2020. We also have deferred tax assets of $122$234 related to other credit carryforwards which are partially offset with $76$19 of valuation allowances at December 31, 2017.2020. The capital losses can be carried forward indefinitely while the other credits are generally available for 10 to 20 years. We elected to adopt the new guidance for share based payments in the third quarter of 2016, requiring us to reflect any adjustments as of January 1, 2016 in retained earnings. The primary impact of adopting the new guidance was an increase in deferred tax assets of $32 related to the cumulative excess tax benefits resulting from share-based payments. Because we continued to carry a valuation allowance against certain of our deferred tax assets in the U.S., the increase in deferred tax assets was offset by an increase in our valuation allowance of $32, resulting in no impact to retained earnings as of January 1, 2016.a portion of our $643$190 U.S. federal NOL as of December 31, 20172020 is subject to limitation due to the change in ownership of our stock upon emergence from bankruptcy. in January 2008. Generally, the application of the relevant Internal Revenue Code (IRC) provisions will release the limitation on $84 of pre-change NOLs each year, allowing pre-change losses to offset post-change taxable income. Through further evaluation and audit adjustment, and after considering U.S. taxable income in 2017, we estimate that $458 of our U.S. federal NOLs remains subject to limitation as of December 31, 2017. The remainder of our U.S. federal NOLs represents a combination of post-change NOLs and pre-change NOLs on which the limitation has been released. However, there can be no assurance that trading in our shares will not effect affect another change in ownership under the IRC which wouldcould further limit our ability to utilize our available NOLs.$11$6 and $7$12 was accrued on the uncertain tax positions at December 31, 2017 2020 and 2016. 2017 2016 2015 Balance, beginning of period $ 117 $ 87 $ 109 Decrease related to expiration of statute of limitations (3 ) (5 ) (6 ) Decrease related to prior years tax positions (25 ) (1 ) (9 ) Increase related to prior years tax positions 15 28 1 Increase related to current year tax positions 15 8 8 Decrease related to settlements (16 ) Balance, end of period $ 119 $ 117 $ 87 The 2017 decrease related to prior years tax positions includes $23 that resulted from the reduction of the U.S. income tax rate from 35% to 21% since these positions represent a reduction of U.S. net operating losses. $ 119 $ 107 $ 119 (5 ) (10 ) (4 ) Decrease related to prior years tax positions (1 ) (15 ) 3 13 8 9 9 10 Decrease related to settlements (21 ) (11 ) $ 104 $ 119 $ 107 decrease by $17not be significant in the next twelve months upon the expected completionas a result of examinations in various jurisdictions. The settlement of these matters will not impact the effective tax rate. Gross unrecognized tax benefits of $83$68 would impact the effective tax rate if recognized. If other open matters are settled with the IRS or other taxing jurisdictions, the total amounts of unrecognized tax benefits for open tax years may be modified. 2017 2016 2015 Government grants and incentives $ 7 $ 8 $ 3 Foreign exchange loss (3 ) (3 ) (20 ) Gain on derecognition of noncontrolling interest 5 Strategic transaction expenses (25 ) (13 ) (4 ) Insurance and other recoveries 10 4 Gain on sale of marketable securities 7 1 Amounts attributable to previously divested/closed operations 3 1 Other, net 9 9 11 Other income (expense), net $ (9 ) $ 18 $ 1 $ (10 ) $ (23 ) $ (15 ) 14 15 12 8 (11 ) (12 ) (20 ) (41 ) (18 ) Gain on investment in Hyliion 33 Non-income tax legal judgment 6 Gain on liquidation of foreign subsidiary 12 Other, net (3 ) 17 4 $ 22 $ (25 ) $ (29 ) During 2015, foreign exchange losses were primarily driven by the impact the strengthening U.S. dollar had on our Mexican peso and euro forward contracts.Upon completion of the divestiture of our operations in Venezuela in January 2015, we recognized a gain on the derecognition of the noncontrolling interest in a former Venezuelan subsidiary.2017 are2020 were primarily attributable to the acquisition of ODS and Nordresa and certain other strategic initiatives. Strategic transaction expenses in 2019 were primarily attributable to the acquisition of ODS. Strategic transaction expenses in 2018 were primarily attributable to our acquisitionsbid to acquire the driveline business of USM - Warren, BFP and BPT. Strategic transaction expenses in 2016 areprimarily attributable toGKN plc., our acquisition of SJT Forjaria Ltda.an ownership interest in TM4, our pending acquisition of the ODS and integration costs associated with our divestituresacquisitions of DCLLCBFP and Nippon Reinz.BPT, and were partially offset by a $40 transaction breakup fee associated with the GKN plc. transaction. See Notes Note 2 and 3 for additional information.Amountspreviously divested/closed operations includes the receiptrecognition of accumulated currency translation adjustments.remaining proceedspayment, the rights and obligations in the contract, and other relevant facts and circumstances. Upfront payments to our customers are capitalized if we determine that the payments are incremental and incurred only if the new business is obtained and we expect to recover these amounts from the customer over the term of the new business program. We recognize a reduction to revenue as products that the upfront payments are related to are transferred to the customer, based on the total amount of products expected to be sold over the term of the program. We evaluate the amounts capitalized each period for recoverability and expense any amounts that are no longer expected to be recovered. We had $8 and $5 recorded in other current assets and $45 and $37 recorded in other noncurrent assets at December 31, 2020 and December 31, 2019. December 2016 divestitureconsolidated balance sheet. We provide standard fitness for use warranties on the products we sell, accruing for estimated costs related to product warranty obligations at time of DCLLC during the second quarter of 2017.sale. See Note 317 for additional information. During 2016, DCLLC received $8 as recoverycosts previously incurredcash deposits made by customers with cash in advance payment terms. Generally, our contract liabilities turn over frequently given our relatively short production cycles. Contract liabilities were $27 and $23 at December 31, 2020 and December 31, 2019. Contract liabilities are included in other accrued liabilities on behalfour consolidated balance sheet.gain.During 2015, we reached a settlement with an insurance carrierrevenue —the recoveryeach of previously incurred legal costs.our operating segments by geographical market: $ 2,228 $ 693 $ 252 $ 429 $ 3,602 346 192 1,260 411 2,209 108 200 32 18 358 356 96 426 59 937 $ 3,038 $ 1,181 $ 1,970 $ 917 $ 7,106 $ 2,679 $ 948 $ 317 $ 529 $ 4,473 325 233 1,617 431 2,606 137 312 40 20 509 468 118 386 60 1,032 $ 3,609 $ 1,611 $ 2,360 $ 1,040 $ 8,620 $ 2,477 $ 908 $ 141 $ 580 $ 4,106 347 271 1,423 443 2,484 186 308 34 18 546 565 125 246 71 1,007 $ 3,575 $ 1,612 $ 1,844 $ 1,112 $ 8,143 20.21. Segments, Geographical Area and Major Customer Information and engine manufacturer in the world. We also serve the stationary industrial market. Our technologies include drive and motion productssystems (axles, driveshafts, planetarytransmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives, power-transmission products, tire-management products,drives); electrodynamic technologies (motors, inverters, software and transmissions)control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, heat shields,cam covers, and fuel-cell plates)oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and exhaust-gas heat recovery)thermal-acoustical protective shielding); and fluid-power products (pumps, valves, motors,digital solutions (active and controls)passive system controls and descriptive and predictive analytics). We serve our global light vehicle, medium/heavy vehicle and off-highway markets through four operating segments – Light Vehicle Driveline TechnologiesDrive Systems (Light Vehicle), Commercial Vehicle Driveline TechnologiesDrive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion TechnologiesSystems (Off-Highway) and Power Technologies, which is the center of excellence for sealing and thermal-management technologies that span all customers in our on-highway and off-highway markets. These operating segments have global responsibility and accountability for business commercial activities and financial performance.2017 Depreciation Light Vehicle $ 3,172 $ 130 $ 359 $ 279 $ 88 $ 1,538 Commercial Vehicle 1,412 97 116 31 41 714 Off-Highway 1,521 4 212 32 40 724 Power Technologies 1,104 17 168 32 29 488 Eliminations and other (248 ) 19 22 423 Total $ 7,209 $ — $ 855 $ 393 $ 220 $ 3,887 2016 Light Vehicle $ 2,607 $ 113 $ 279 $ 208 $ 71 $ 1,194 Commercial Vehicle 1,254 83 96 34 33 699 Off-Highway 909 3 129 21 20 262 Power Technologies 1,056 14 158 32 29 440 Eliminations and other (213 ) 27 20 760 Total $ 5,826 $ — $ 662 $ 322 $ 173 $ 3,355 2015 Light Vehicle $ 2,482 $ 126 $ 262 $ 140 $ 63 $ 1,002 Commercial Vehicle 1,533 95 100 33 32 692 Off-Highway 1,040 3 147 18 20 310 Power Technologies 1,005 15 149 34 28 423 Eliminations and other (239 ) 35 15 467 Total $ 6,060 $ — $ 658 $ 260 $ 158 $ 2,894 Prior to the third quarter of 2017, our Crossville, Tennessee distribution center rolled up within our Commercial Vehicle operating segment for purposes of inter-segment sales reporting. Beginning in the third quarter of 2017, the distribution center has been split between our Commercial Vehicle and Off-Highway operating segments. This change in management reporting has resulted in a decrease in the inter-segment sales reported by our Off-Highway operating segment. Prior period amounts have been recast to conform with the current presentation. This change in management reporting had no impact on segment reporting of external sales or segment EBITDA. $ 3,038 $ 104 $ 239 $ 131 $ 167 $ 1,432 1,181 71 36 41 34 808 1,970 44 234 67 91 1,348 917 19 94 38 32 360 (238 ) 49 21 146 $ 7,106 $ — $ 603 $ 326 $ 345 $ 4,094 $ 3,609 $ 124 $ 438 $ 179 $ 149 $ 1,369 1,611 100 138 52 37 897 2,360 17 330 85 87 1,364 1,040 23 117 46 30 367 (264 ) 64 19 124 $ 8,620 $ — $ 1,023 $ 426 $ 322 $ 4,121 $ 3,575 $ 133 $ 398 $ 195 $ 124 $ 1,288 1,612 107 146 27 38 811 1,844 12 285 36 43 707 1,112 23 149 36 30 363 (275 ) 31 25 29 $ 8,143 $ — $ 978 $ 325 $ 260 $ 3,198 certain cash balances, accounts receivable, inventories, other current assets, certaingoodwill, intangibles, investments in affiliates, other noncurrent assets, net property, plant and equipment, notes payable and short term debt, accounts payable and current accrued liabilities. 2017 2016 2015 Segment EBITDA $ 855 $ 662 $ 658 Corporate expense and other items, net (20 ) (2 ) (6 ) Depreciation (220 ) (173 ) (158 ) Amortization of intangibles (13 ) (9 ) (16 ) Restructuring charges, net (14 ) (36 ) (15 ) Stock compensation expense (23 ) (17 ) (14 ) Strategic transaction expenses (25 ) (13 ) (4 ) Acquisition related inventory adjustments (14 ) Other items (11 ) (2 ) (6 ) Loss on disposal group held for sale (27 ) Loss on sale of subsidiaries (80 ) Impairment of long-lived assets (36 ) Distressed supplier costs (1 ) (8 ) Amounts attributable to previously divested/closed operations 2 3 (6 ) Gain on derecognition of noncontrolling interest 5 Earnings before interest and income taxes 490 332 394 Loss on extinguishment of debt (19 ) (17 ) (2 ) Interest expense 102 113 113 Interest income 11 13 13 Earnings from continuing operations before income taxes 380 215 292 Income tax expense (benefit) 283 (424 ) 82 Equity in earnings (losses) of affiliates 19 14 (34 ) Income from continuing operations 116 653 176 Income from discontinued operations 4 Net income $ 116 $ 653 $ 180 $ 603 $ 1,023 $ 978 (10 ) (4 ) (21 ) (345 ) (322 ) (260 ) (20 ) (17 ) (10 ) Non-service cost components of pension and OPEB costs (10 ) (23 ) (15 ) (34 ) (29 ) (25 ) (14 ) (19 ) (16 ) (20 ) (41 ) (18 ) Amounts attributable to previously divested/closed operations (1 ) (5 ) Impairment of goodwill and indefinite-lived intangible asset (51 ) (6 ) (20 ) Gain on investment in Hyliion 33 (13 ) Non-income tax legal judgment 6 Pension settlement charges (259 ) 3 Gain on liquidation of foreign subsidiary 12 (7 ) (11 ) (17 ) 124 292 579 Loss on extinguishment of debt (8 ) (9 ) 9 10 11 138 122 96 (13 ) 171 494 58 (32 ) 78 20 30 24 $ (51 ) $ 233 $ 440 2017 2016 Segment net assets $ 3,887 $ 3,355 Accounts payable and other current liabilities 1,704 1,254 Other current and long-term assets 53 251 Consolidated total assets $ 5,644 $ 4,860 $ 4,094 $ 4,121 1,863 1,769 1,419 1,330 $ 7,376 $ 7,220 20172020 consolidated net sales, the U.S., Italy, Germany and GermanyChina account for 45%48%, 11%14%, 6% and 7%5%, respectively. No other country accounted for more than 5% of our consolidated net sales during 2017.2020. Sales are attributed to the location of the product entity recording the sale. Long-lived assets represent property, plant and equipment. $ 3,404 $ 4,069 $ 3,613 $ 957 $ 972 $ 860 198 404 493 106 105 87 3,602 4,473 4,106 1,063 1,077 947 993 1,186 971 252 248 138 429 478 513 132 131 133 787 942 1,000 310 265 241 2,209 2,606 2,484 694 644 512 358 509 546 97 126 129 Asia Pacific China 379 321 311 111 106 91 Other Asia Pacific 558 711 696 286 312 171 937 1,032 1,007 397 418 262 $ 7,106 $ 8,620 $ 8,143 $ 2,251 $ 2,265 $ 1,850 Net Sales Long-Lived Assets 2017 2016 2015 2017 2016 2015 North America United States $ 3,209 $ 2,695 $ 2,805 $ 828 $ 634 $ 441 Other North America 479 433 405 82 80 90 Total 3,688 3,128 3,210 910 714 531 Europe Italy 762 499 570 122 58 58 Germany 473 377 368 149 98 100 Other Europe 919 740 785 211 157 153 Total 2,154 1,616 1,723 482 313 311 South America 500 338 377 153 172 99 Asia Pacific 867 744 750 262 214 226 Total $ 7,209 $ 5,826 $ 6,060 $ 1,807 $ 1,413 $ 1,167 isand FCA are the only individual customercustomers to whom sales have exceeded 10% of our consolidated sales in each of the past three years. Sales to Ford for the three most recent years were $1,553 (22%) in 2017, $1,300 (22%) in 2016 and $1,187$1,436 (20%) in 20152020, $1,753 (20%) in 2019 and $1,646 (20%) in 2018. Sales to FCA (via a directed supply relationship) exceeded the threshold in 2020 at $839 (12%), 2019 at $988 (11%) and 2018 at $911 (11%).21.22. Equity Affiliates– primarily(primarily axles, driveshaftsaxle housing and wheel-end braking systems – supplied to OEMs.$16, $11$27, $21 and $16$20 in 20172020, 20162019 and 20152018.20172020— Ownership
Percentage Investment Dongfeng Dana Axle Co., Ltd. (DDAC) 50% $ 97 Bendix Spicer Foundation Brake, LLC 20% 44 Axles India Limited 48% 9 Taiway Ltd. 14% 5 All others as a group 5 Investments in equity affiliates 160 Investment in affiliates carried at cost 3 Investment in affiliates $ 163 50% $ 99 ROC-Spicer, Ltd. 50% 21 49% 17 48% 8 5 150 2 $ 152 Bendix Spicer Foundation Brake, LLCPi Innovo and Axles India Limited are included in the net assets of our Commercial Vehicle operating segment. Our equity method investment in Taiway Ltd. is included in the net assets of our Light Vehicle segment.The significant decline in China's commercial vehicle market during 2015 resulted in a series of monthly operating losses by DDAC. These factors when combined with updated long-range plan information received from DDAC in the fourth quarter of 2015, which incorporated China's projected "new normal" future growth rate, indicated that we may not be able to recover the carrying value of our investment in DDAC. During the fourth quarter of 2015, we calculated the fair value of our investment in DDAC to determine if we had an other-than-temporary decline in the carrying value of our investment. We used both the discounted cash flow (an income approach) and guideline public company (a market approach) methods, weighting each equally, to fair value our investment in DDAC. The discounted cash flow method used DDAC's updated long-range plan and focuses on estimating the expected after-tax cash flows attributable to the subject company over its life and converting these after-tax cash flows to present value through discounting. The discount rate of 16.0% which was used in our assessmentaccounts for both the time value of money and subject company risk factors. The guideline public company method focuses on comparing a subject company to reasonably similar (or "guideline") publicly-traded companies. Under this method, valuation multiples are: (i) derived from the operating data of selected guideline public companies; (ii) evaluated and adjusted based on the strengths and weaknesses of the subject company relative to the selected guideline companies; and (iii) applied to the operating data of the subject company to arrive at an indication of fair value. The carrying value of our investment in DDAC exceeded the calculated fair value by $39. The $39 impairment charge has been included in equity in earnings of affiliates.20172020 was $26$17 more than our share of the affiliates’ book value, including $19 attributablewith our recent investment in Pi Innovo accounting for $16 of the basis difference. We are still in the process of completing the valuation of Pi Innovo’s assets and liabilities, but expect the $16 basis difference to goodwill. The difference between the investment carrying valuebe attributed to a combination of identified intangible assets and the amountgoodwill.Summarized financial information for DDAC and other equity affiliates on a combined basis — DDAC Other Equity Affiliates Combined 2017 2016 2015 2017 2016 2015 Sales $ 877 $ 646 $ 554 $ 588 $ 498 $ 582 Gross profit $ 104 $ 83 $ 45 $ 122 $ 98 $ 113 Income (loss) before income taxes $ 28 $ 15 $ (14 ) $ 41 $ 26 $ 42 Net income (loss) $ 22 $ 18 $ (6 ) $ 38 $ 24 $ 40 Dana's equity in earnings (loss) of affiliate $ 9 $ 7 $ (45 ) $ 10 $ 7 $ 11 DDAC 2017 2016 2017 2016 Current assets $ 786 $ 547 $ 186 $ 169 Noncurrent assets 185 191 76 74 Total assets $ 971 $ 738 $ 262 $ 243 Current liabilities $ 711 $ 512 $ 117 $ 96 Noncurrent liabilities 86 87 11 13 Total liabilities $ 797 $ 599 $ 128 $ 109 2017 Net sales $ 1,701 $ 1,840 $ 1,831 $ 1,837 Gross margin $ 263 $ 276 $ 269 $ 254 Net income (loss) $ 80 $ 73 $ 73 $ (110 ) Net income (loss) attributable to the parent company $ 75 $ 71 $ 69 $ (104 ) Net income (loss) per share available to parent company common stockholders Basic $ 0.52 $ 0.48 $ 0.47 $ (0.74 ) Diluted $ 0.51 $ 0.47 $ 0.46 $ (0.74 ) 2016 Net sales $ 1,449 $ 1,546 $ 1,384 $ 1,447 Gross margin $ 199 $ 233 $ 208 $ 204 Net income $ 48 $ 55 $ 61 $ 489 Net income attributable to the parent company $ 45 $ 53 $ 57 $ 485 Net income per share available to parent company common stockholders Basic $ 0.30 $ 0.36 $ 0.40 $ 3.37 Diluted $ 0.30 $ 0.36 $ 0.39 $ 3.34 $ 1,926 $ 1,078 $ 1,994 $ 2,108 $ 206 $ (10 ) $ 214 $ 211 $ 38 $ (173 ) $ 45 $ 39 $ 58 $ (174 ) $ 45 $ 40 Basic $ 0.40 $ (1.20 ) $ 0.31 $ 0.28 Diluted $ 0.40 $ (1.20 ) $ 0.31 $ 0.27 $ 2,163 $ 2,306 $ 2,164 $ 1,987 $ 300 $ 326 $ 282 $ 223 $ 101 $ (66 ) $ 112 $ 86 $ 98 $ (68 ) $ 111 $ 85 $ 0.68 $ (0.47 ) $ 0.77 $ 0.59 $ 0.68 $ (0.47 ) $ 0.77 $ 0.58 The net loss forfourth quarter of 2017 includes a $27 pre-tax charge to adjust carrying value of our Brazil suspension components business to fair value and to recognizeglobal COVID-19 pandemic, with the liability forimpact being most severe during the additional cash required to be contributed to the business prior to closing and a tax charge of $186 to recognize the estimated effects of U.S. tax reform legislation enacted on December 22, 2017.second quarter. Net income for the third and second quartersfirst quarter of 20172020 includes a $13$51 pre-tax goodwill impairment charge and $34 of net income tax benefits related to discrete items. Net loss for the second quarter includes a $5 pre-tax charge for the write-off of deferred financing costs and $56 of net income tax expense related to discrete items. Net income for the fourth quarter includes a $33 pre-tax gain on notes receivable conversion and subsequent adjustment of shares to fair value, a $3 pre-tax charge for the write-off of deferred financing costs and $14 of net income tax benefits related to discrete items. Net income for the fourth quarter Balance at beginning of period Amounts charged (credited) to income Allowance utilized Adjustments arising from change in currency exchange rates and other items Balance at end of period $ 9 $ 0 $ (1 ) $ (1 ) $ 7 $ 9 $ 2 $ 0 $ (2 ) $ 9 $ 8 $ 3 $ 0 $ (2 ) $ 9 $ 64 $ 23 $ (14 ) $ 3 $ 76 $ 51 $ 25 $ (16 ) $ 4 $ 64 $ 53 $ 15 $ (11 ) $ (6 ) $ 51 $ 190 $ 60 $ 0 $ 9 $ 259 $ 281 $ (102 ) $ 0 $ 11 $ 190 $ 301 $ (31 ) $ 0 $ 11 $ 281 Accounts Receivable - Allowance for Doubtful Accounts 2017 $ 6 $ 2 $ — $ — $ 8 2016 $ 5 $ 2 $ — $ (1 ) $ 6 2015 $ 6 $ 1 $ (1 ) $ (1 ) $ 5 Inventory Reserves 2017 $ 51 $ 10 $ (11 ) $ 3 $ 53 2016 $ 46 $ 19 $ (13 ) $ (1 ) $ 51 2015 $ 48 $ 18 $ (16 ) $ (4 ) $ 46 Deferred Tax Assets - Valuation Allowance 2017 $ 285 $ 29 $ — $ (13 ) $ 301 2016 $ 662 $ (483 ) $ — $ 106 $ 285 2015 $ 728 $ (49 ) $ (1 ) $ (16 ) $ 662 Considering Securities and Exchange Commission guidance, management excluded from its assessment of internal control over financial reporting Warren Manufacturing LLC (USM – Warren) acquired on March 1, 2017 and Brevini Fluid Power S.p.A. (BFP) and Brevini Power Transmission S.p.A. (BPT) acquired on February 1, 2017. BFP, BPT and USM - Warren's total assets and total revenues excluded from management’s assessment represent approximately 2.5%, 6.0% and 1.6% of total assets, respectively and approximately 1.5%, 4.1%, and 1.3% of total revenues, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017. Based on this evaluation, management has concluded that, as of December 31, 2017,2020, our internal control over financial reporting was effective.2017,2020, as stated in its report which is included herein.20172020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.26, 2018,21, 2021, which sections are hereby incorporated herein by reference.26, 2018,21, 2021, which sections are hereby incorporated herein by reference.26, 2018,21, 2021, which section is hereby incorporated herein by reference.20172020 about shares of stock which may be issued under our equity compensation plans, all of which have been approved by our shareholders.
Exercise Price of
Number of Securities to be Issued Upon Exercise of Outstanding Options,
Remaining Available for Future Issuance 3.5 $ 14.58 6.3 Total 3.5 $ 14.58 6.3 (Shares in millions) Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) Weighted Average Exercise Price of Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(2) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) 3.8 $ 16.27 3.1 3.8 $ 16.27 3.1 (1)2017. 2020. (2)2.63.2 shares of common stock subject to outstanding restricted stock and performance share units that become issuable as those units vest since they have no exercise price and no cash consideration or other payment is required for such shares.26, 2018,21, 2021, which sections are hereby incorporated herein by reference.26, 2018,21, 2021, which section is hereby incorporated herein by reference. (a) List of documents filed as a part of this report: 1. Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm Consolidated Statement of Operations Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Stockholders' Equity Notes to the Consolidated Financial Statements 2. Quarterly Results (Unaudited) 3. Financial Statement Schedule: Valuation and Qualifying Accounts and Reserves (Schedule II) All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 4. Exhibits No.Description3.13.23.34.14.44.54.6 10.1**4.7 4.8 Description of Dana Incorporated Common Stock. Filed as Exhibit 4.9 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2019, and incorporated herein by reference. 10.2***********10.1310.14 1210.18 2017,2020, formatted in XBRL (ExtensibleiXBRL (Inline Extensible Business Reporting Language): (i) the Consolidated Statement of Operations, (ii) the Consolidated Statement of Comprehensive Income, (iii) the Consolidated Balance Sheet, (iv) the Consolidated Statement of Cash Flows, (v) the Consolidated Statement of Shareholders’ Equity and (vi) Notes to the Consolidated Financial Statements. Filed with this Report.**DANA INCORPORATEDDate:February 14, 2018By:14th18th day of February 20182021 by the following persons on behalf of the registrant and in the capacities indicated, including a majority of the directors.SignatureTitleRodney R. FilcekJames D. KellettSenior Rodney R. FilcekTerrence J. Keating*Bridget E. Karlin*Terrence J. KeatingMark A. Schulz*Diarmuid B. O'Connell*Mark A. SchulzNon-Executive Chairman and *By:103