UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

☑	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: ~~September~~June 30, ~~2022~~2023

☐	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:

Common stock $0.01 par value		DAN		New York Stock Exchange
(Title of each class)		(Trading Symbol)		(Name of exchange on which registered)

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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.

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

There were ~~143,353,465~~ 144,336,808 shares of the registrant’s common stock outstanding at ~~October~~July 14, ~~2022.~~2023.

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DANA INCORPORATED – FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023

TABLE OF CONTENTS

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dana Incorporated

Consolidated Statement of Operations (Unaudited)

(In millions, except per share amounts)

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Net sales	$	2,535		$	2,204		$	7,601		$	6,672		$	2,748		$	2,586		$	5,392		$	5,066
Costs and expenses
Cost of sales		2,332			1,998			7,018			5,963			2,477			2,403			4,892			4,686
Selling, general and administrative expenses		114			103			374			348			144			130			284			260
Amortization of intangibles		3			4			10			11			4			3			7			7
Restructuring charges, net		(1	)		1			(1	)		2			3			1			4
Impairment of goodwill		(191	)					(191	)
Other income (expense), net		3			(4	)		15			(33	)		4			10			9			12
Earnings (loss) before interest and income taxes		(101	)		94			24			315
Earnings before interest and income taxes														124			59			214			125
Loss on extinguishment of debt											(24	)		(1	)					(1	)
Interest income		2			2			6			6			5			2			9			4
Interest expense		32			31			95			99			39			32			73			63
Earnings (loss) before income taxes		(131	)		65			(65	)		198
Earnings before income taxes														89			29			149			66
Income tax expense		31			20			67			56			55			18			85			36
Equity in earnings (loss) of affiliates		(1	)		5			(1	)		29			2			(1	)		3
Net income (loss)		(163	)		50			(133	)		171
Net income														36			10			67			30
Less: Noncontrolling interests net income		4			4			11			9			5			3			9			7
Less: Redeemable noncontrolling interests net loss		(79	)		(2	)		(81	)		(10	)
Net income (loss) attributable to the parent company	$	(88	)	$	48		$	(63	)	$	172
Less: Redeemable noncontrolling interests net income (loss)														1			(1	)					(2	)
Net income attributable to the parent company													$	30		$	8		$	58		$	25

Net income (loss) per share available to common stockholders
Net income per share available to common stockholders
Basic	$	(0.61	)	$	0.33		$	(0.44	)	$	1.19		$	0.21		$	0.06		$	0.40		$	0.17
Diluted	$	(0.61	)	$	0.33		$	(0.44	)	$	1.17		$	0.21		$	0.06		$	0.40		$	0.17

Weighted-average common shares outstanding
Basic		143.4			144.8			143.6			145.0			144.3			143.4			144.1			143.8
Diluted		143.4			146.2			143.6			146.4			144.4			143.7			144.3			144.6

The accompanying notes are an integral part of the consolidated financial statements.

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Dana Incorporated

Consolidated Statement of Comprehensive Income (Unaudited)

(In millions)

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Net income (loss)	$	(163	)	$	50		$	(133	)	$	171
Net income													$	36		$	10		$	67		$	30
Other comprehensive income (loss), net of tax:
Currency translation adjustments		(82	)		(25	)		(134	)		(11	)		(7	)		(91	)		18			(52	)
Hedging gains and losses		1			(9	)		(2	)		(10	)		3			1			18			(3	)
Defined benefit plans		1			4			5			11						3			1			4
Other comprehensive loss		(80	)		(30	)		(131	)		(10	)
Other comprehensive income (loss)														(4	)		(87	)		37			(51	)
Total comprehensive income (loss)		(243	)		20			(264	)		161			32			(77	)		104			(21	)
Less: Comprehensive (income) loss attributable to noncontrolling interests		(1	)		(4	)		(6	)		2
Less: Comprehensive income attributable to noncontrolling interests														(5	)		(1	)		(9	)		(5	)
Less: Comprehensive loss attributable to redeemable noncontrolling interests		89			4			97									7						8
Comprehensive income (loss) attributable to the parent company	$	(155	)	$	20		$	(173	)	$	163		$	27		$	(71	)	$	95		$	(18	)

The accompanying notes are an integral part of the consolidated financial statements.

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Dana Incorporated

Consolidated Balance Sheet (Unaudited)

(In millions, except share and per share amounts)

	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
Assets
Current assets
Cash and cash equivalents	$	371		$	268		$	484		$	425
Marketable securities		13			17
Accounts receivable
Trade, less allowance for doubtful accounts of $11 in 2022 and $7 in 2021		1,507			1,321
Trade, less allowance for doubtful accounts of $12 in 2023 and $11 in 2022								1,581			1,374
Other		252			220			288			202
Inventories		1,603			1,564			1,731			1,609
Other current assets		208			196			247			219
Total current assets		3,954			3,586			4,331			3,829
Goodwill		246			482			262			259
Intangibles		200			233			192			201
Deferred tax assets		613			580			425			397
Other noncurrent assets		181			131			106			123
Investments in affiliates		128			174			135			136
Operating lease assets		262			247			326			311
Property, plant and equipment, net		2,078			2,199			2,269			2,193
Total assets	$	7,662		$	7,632		$	8,046		$	7,449

Liabilities and equity
Liabilities, redeemable noncontrolling interests and equity
Current liabilities
Short-term debt	$	230		$	23		$	35		$	52
Current portion of long-term debt		7			8			32			8
Accounts payable		1,839			1,571			1,966			1,838
Accrued payroll and employee benefits		209			184			256			214
Taxes on income		67			41			95			54
Current portion of operating lease liabilities		37			43			35			36
Other accrued liabilities		269			304			301			277
Total current liabilities		2,658			2,174			2,720			2,479
Long-term debt, less debt issuance costs of $22 in 2022 and $26 in 2021		2,314			2,386
Long-term debt, less debt issuance costs of $26 in 2023 and $22 in 2022								2,587			2,348
Noncurrent operating lease liabilities		229			209			287			277
Pension and postretirement obligations		350			398			306			298
Other noncurrent liabilities		244			292			252			249
Total liabilities		5,795			5,459			6,152			5,651
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests		196			198			213			195
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, 143,353,224 and 144,238,660 shares outstanding		2			2
Common stock, 450,000,000 shares authorized, $0.01 par value, 144,334,974 and 143,366,482 shares outstanding								2			2
Additional paid-in capital		2,440			2,427			2,244			2,229
Retained earnings		491			662			349			321
Treasury stock, at cost (13,469,842 and 11,661,591 shares)		(216	)		(184	)
Treasury stock, at cost (449,505 and zero shares)								(8	)
Accumulated other comprehensive loss		(1,095	)		(985	)		(964	)		(1,001	)
Total parent company stockholders' equity		1,622			1,922			1,623			1,551
Noncontrolling interests		49			53			58			52
Total equity		1,671			1,975			1,681			1,603
Total liabilities, redeemable noncontrolling interests and equity	$	7,662		$	7,632		$	8,046		$	7,449

The accompanying notes are an integral part of the consolidated financial statements.

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Dana Incorporated

Consolidated Statement of Cash Flows (Unaudited)

(In millions)

	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2022			2021			2023			2022
Operating activities
Net income (loss)	$	(133	)	$	171
Net income							$	67		$	30
Depreciation		270			272			186			182
Amortization		17			18			11			11
Amortization of deferred financing charges		4			5			3			3
Redemption premium on debt					21
Write-off of deferred financing costs					3			1
Earnings of affiliates, net of dividends received		29			(11	)		(3	)		29
Stock compensation expense		13			15			14			8
Deferred income taxes		(56	)		8			(30	)		(42	)
Impairment of goodwill		191
Pension expense, net								2
Change in working capital		(21	)		(501	)		(172	)		(84	)
Other, net		(7	)		18			7			(1	)
Net cash provided by operating activities		307			19			86			136
Investing activities
Purchases of property, plant and equipment		(300	)		(228	)		(242	)		(206	)
Acquisition of businesses, net of cash acquired		(1	)		(18	)
Investments in affiliates					(23	)
Proceeds from sale of subsidiary, net of cash disposed					(4	)
Proceeds from sale of property, plant and equipment								2
Acquisition of business, net of cash acquired											(1	)
Purchases of marketable securities		(15	)		(25	)					(13	)
Proceeds from sales of marketable securities					30						10
Proceeds from maturities of marketable securities		18			27
Settlement of terminated fixed-to-fixed cross currency swap					(22	)
Settlements of undesignated derivatives		(6	)		(2	)		(4	)		(7	)
Other, net		7			5			(1	)		2
Net cash used in investing activities		(297	)		(260	)		(245	)		(215	)
Financing activities
Net change in short-term debt		212			43			(17	)		214
Proceeds from long-term debt		2			802			458			2
Repayment of long-term debt		(19	)		(805	)		(204	)		(5	)
Redemption premium on debt					(21	)
Deferred financing payments					(13	)		(9	)
Dividends paid to common stockholders		(43	)		(44	)		(29	)		(29	)
Repurchases of common stock		(25	)		(23	)					(25	)
Distributions to noncontrolling interests		(8	)		(10	)		(3	)		(2	)
Contributions from redeemable noncontrolling interests		30			6			17			7
Deconsolidation of non-wholly owned subsidiary					(6	)
Payments to acquire noncontrolling interests		(4	)								(4	)
Other, net		(7	)					(4	)		(6	)
Net cash provided by (used in) financing activities		138			(71	)
Net increase (decrease) in cash, cash equivalents and restricted cash		148			(312	)
Net cash provided by financing activities								209			152
Net increase in cash, cash equivalents and restricted cash								50			73
Cash, cash equivalents and restricted cash – beginning of period		287			567			442			287
Effect of exchange rate changes on cash balances		(45	)		(16	)		11			(20	)
Cash, cash equivalents and restricted cash – end of period (Note 5)	$	390		$	239
Cash, cash equivalents and restricted cash – end of period (Note 4)							$	503		$	340

Non-cash investing activity
Purchases of property, plant and equipment held in accounts payable	$	65		$	75		$	75		$	69

The accompanying notes are an integral part of the consolidated financial statements.

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Dana Incorporated

Index to Notes to Consolidated Financial Statements

1.	Organization and Summary of Significant Accounting Policies

2.	~~Acquisitions~~

3.	Goodwill and Other Intangible Assets

4.3.	Restructuring of Operations

5.4.	Supplemental Balance Sheet and Cash Flow Information

6.5.	Stockholders' Equity

7.6.	Redeemable Noncontrolling Interests

8.7.	Earnings per Share

9.8.	Stock Compensation

~~10.~~9.	Pension and Postretirement Benefit Plans

~~11.~~	~~Marketable Securities~~

~~12.~~10.	Financing Agreements

~~13.~~11.	Fair Value Measurements and Derivatives

~~14.~~12.	Commitments and Contingencies

~~15.~~13.	Warranty Obligations

~~16.~~14.	Income Taxes

~~17.~~15.	Other Income (Expense), Net

~~18.~~16.	Revenue from Contracts with Customers

~~19.~~17.	Segments

~~20.~~18.	Equity Affiliates

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Notes to Consolidated Financial Statements (Unaudited)

(In millions, except share and per share amounts)

Note 1. Organization and Summary of Significant Accounting Policies

General

Dana Incorporated (Dana) is headquartered in Maumee, Ohio and was incorporated in Delaware in 2007. As a global provider of high technology driveline (axles, driveshafts and transmissions); sealing and thermal-management products; and motors, power inverters, and control systems for electric vehicles our customer base includes virtually every major vehicle manufacturer in the global light vehicle, medium/heavy vehicle and off-highway markets.

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 — Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information. These statements are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The results reported in these consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the ~~2021~~2022 Form 10-K). Certain prior year amounts have been reclassified to conform to the current presentation.

~~During the~~

On ~~first~~January 1, 2023 ~~quarter of~~ ~~2022,~~we ~~identified an error related to certain intercompany inventory transfers that were~~ ~~not~~ ~~appropriately eliminated and recorded an adjustment of $8 to cost of sales. A portion of this adjustment relates to prior periods. We concluded that the correction of this error was~~ ~~not~~ ~~material to the financial statements for the quarter ended~~ ~~March 31, 2022~~ ~~or any prior periods.~~

adopted ~~Recently issued accounting pronouncements~~

In ~~October 2021,~~ ~~the FASB issued~~ Accounting Standards Update (ASU) ~~2021~~2022-~~08,~~04, ~~Accounting~~ Supplier Finance Programs which requires annual and interim disclosures for ~~Contract Assets~~entities that use supplier finance programs in connection with the purchase of goods and ~~Contract Liabilities~~services. Adoption of this new standard did not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. Certain of our subsidiaries have entered into paying agency agreements with third-party administrators. These voluntary supply chain finance programs generally give participating suppliers the ability to sell, or otherwise pledge as collateral, their receivables from ~~Contracts with Customers. The guidance is intended~~Dana to ~~provide clarification on how to account for contract assets acquired via business combination, which will generally be~~the participating financial institutions, at the ~~same value as recognized~~sole discretion of both the suppliers and financial institutions. Dana is not a party to the arrangements between the suppliers and the financial institutions. Dana’s obligations to its suppliers, including amounts due and scheduled payment dates, are not impacted by the ~~acquiree assuming~~suppliers’ decisions to sell, or otherwise pledge as collateral, amounts under these arrangements. Dana's payment terms to the ~~acquiree followed US GAAP. The guidance becomes effective~~financial institutions, including the timing and amount of payments, are based on the original supplier invoices. As of ~~January 1, 2023.~~June 30, 2023 and December 31, 2022, we had $65 and $81, respectively, of confirmed obligations presented as accounts payable within total current liabilities on the consolidated balance sheet.

We doalso adopted the following standard during the firstsix months of 2023, which did not ~~expect adoption of this guidance to~~ have a material impact on our ~~consolidated~~ financial ~~statements.~~statements or financial statement disclosures:

In ~~November 2021,~~ ~~the FASB issued ASU~~ ~~2021~~-~~10,~~~~Disclosures by Business Entities about Government Assistance~~. This guidance requires annual disclosures about the nature of certain government assistance received, the accounting policy used to account for the transactions, the location in the financial statements where such transactions were recorded and significant terms and conditions associated with such transactions. The guidance is effective for annual periods beginning after ~~December 15, 2021,~~ ~~with early adoption permitted. We do~~ ~~not~~ ~~expect adoption of this guidance to have a material impact on our consolidated financial statements.~~
Standard
Effective Date
ASU 2021-08
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
January 1, 2023

In ~~September 2022,~~ ~~the FASB issued ASU~~ ~~2022~~-~~04,~~~~Supplier Finance Programs~~. This guidance enhances the transparency of supplier finance programs which includes disclosing information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. The guidance becomes effective ~~January 1, 2023.~~ ~~We are currently assessing the impact of the guidance on our consolidated financial statements.~~

~~Note~~ 2. ~~Acquisitions~~

~~Pi Innovo Holding Limited~~ ~~— On~~ ~~March 1, 2021,~~ we acquired the remaining 51% ownership interest in Pi Innovo Holding Limited (Pi Innovo). Pi Innovo designs, develops and manufactures electronic control units spanning a range of applications and industries. The acquisition of the remaining ownership interest provided us with a 100% ownership interest in Pi Innovo. The total purchase consideration of $35 is comprised of $18 of cash paid at closing and the $17 fair value of our previously held equity method investment in Pi Innovo. The results of operations of the business are reported within our Commercial Vehicle 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.~~

~~Note~~ 3. ~~Goodwill and Other Intangible Assets~~

~~Goodwill~~ ~~— Our goodwill is 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 estimate the fair value of the reporting units using discounted cash flow projections. In determining the fair value of the reporting units, we make significant assumptions and estimates about the extent and timing of future cash flows, including revenue growth rates, projected segment EBITDA, discount rates, and terminal growth rates. If the estimated fair value of the reporting unit exceeds its carrying value, the goodwill is considered ~~not~~ to be impaired. If the carrying value of the reporting unit exceeds its estimated fair value, a goodwill impairment charge is recorded for the difference, with the impairment loss limited to the total amount of goodwill allocated to that reporting unit.

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~~We evaluated macro-economic conditions during the~~Note ~~third~~2. ~~quarter of~~ ~~2022,~~ ~~including the impact of the Federal Reserve further increasing the risk-free interest rate, as well as the negative impact of sustained higher commodity costs, non-material cost increases~~Goodwill and operational inefficiencies attributable to continued global supply chain disruptions. We believe that these conditions were factors in our market capitalization falling below the book value of net assets as of ~~September 30, 2022.~~ ~~Accordingly, we concluded a triggering event had occurred and performed interim goodwill impairment analyses for our Commercial Vehicle and Off-Highway reporting units.~~

Based on the results of our interim impairment analyses, we concluded that the carrying value exceeded fair value of our Commercial Vehicle reporting unit and we recorded a goodwill impairment charge of $191, representing a full impairment of goodwill assigned to the Commercial Vehicle reporting unit. Our analysis for the Off-Highway reporting unit indicated that the fair value continues to exceed the carrying value by a substantial amount and, accordingly, no impairment charge was required. There was no impairment of indefinite-lived intangible assets in any of the periods presented.

~~The remaining change in the carrying amount of goodwill in~~ ~~2022~~ ~~was due to currency fluctuation.~~Other Intangible Assets

Changes in the carrying amount of goodwill by segment —

Light Vehicle

Commercial Vehicle

Off-Highway

Power Technologies

Total

Balance, December 31, 2021
$ — $ 201 $ 281 $ — $ 482
Impairment
(191 ) (191 )
Currency impact
(10 ) (35 ) (45 )
Balance, September 30, 2022
$ — $ — $ 246 $ — $ 246

	Off-Highway
Balance, December 31, 2022	$	259
Currency impact		3
Balance, June 30, 2023	$	262

Components of other intangible assets —

		September 30, 2022							December 31, 2021								June 30, 2023							December 31, 2022
	Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Weighted Average Useful Life (years)	Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment and Amortization			Net Carrying Amount
Amortizable intangible assets
Core technology	8	$	152	$	(111	)	$	41	$	161	$	(110	)	$	51	8	$	158	$	(121	)	$	37	$	156	$	(116	)	$	40
Trademarks and trade names	13		28		(12	)		16		31		(12	)		19	13		29		(15	)		14		29		(13	)		16
Customer relationships	8		489		(415	)		74		519		(431	)		88	8		501		(433	)		68		498		(425	)		73
Non-amortizable intangible assets
Trademarks and trade names			69					69		75					75			73					73		72					72
		$	738	$	(538	)	$	200	$	786	$	(553	)	$	233		$	761	$	(569	)	$	192	$	755	$	(554	)	$	201

The net carrying amounts of intangible assets, other than goodwill, attributable to each of our operating segments at ~~September~~June 30, ~~2022~~2023 were as follows: Light Vehicle — ~~$17,~~$15, Commercial Vehicle — ~~$67,~~$63, Off-Highway — ~~$111~~$110 and Power Technologies — ~~$5.~~$4.

Amortization expense related to amortizable intangible assets —

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Charged to cost of sales
$ 3 $ 2 $ 7 $ 7
Charged to amortization of intangibles
3 4 10 11
Total amortization
$ 6 $ 6 $ 17 $ 18

~~The following table provides the estimated aggregate pre-tax amortization expense related to intangible assets for each of the next~~ ~~five~~ ~~years based on~~ ~~September 30, 2022~~ ~~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.~~

Remainder of 2022

2023

2024

2025

2026

Amortization expense
$ 5 $ 22 $ 20 $ 19 $ 17

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Charged to cost of sales	$	2	$	2	$	4	$	4
Charged to amortization of intangibles		4		3		7		7
Total amortization	$	6	$	5	$	11	$	11

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Note 4.3. Restructuring of Operations

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 our focus has been primarily headcount reduction initiatives to reduce operating 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.

Accrued restructuring costs and activity —

Employee Termination Benefits

Exit Costs

Total

Balance, June 30, 2022
$ 7 $ — $ 7
Charges to restructuring
1 1
Adjustments of accruals
(2 ) (2 )
Cash payments
(1 ) (1 )
Currency impact
(1 ) (1 )
Balance, September 30, 2022
$ 4 $ — $ 4

Balance, December 31, 2021
$ 11 $ — $ 11
Charges to restructuring
2 1 3
Adjustments of accruals
(4 ) (4 )
Cash payments
(4 ) (1 ) (5 )
Currency impact
(1 ) (1 )
Balance, September 30, 2022
$ 4 $ — $ 4

	Employee Termination Benefits			Exit Costs			Total
Balance, March 31, 2023	$	2		$	—		$	2
Charges to restructuring		2			1			3
Cash payments		(2	)		(1	)		(3	)
Balance, June 30, 2023	$	2		$	—		$	2

Balance, December 31, 2022	$	2		$	—		$	2
Charges to restructuring		2			2			4
Cash payments		(2	)		(2	)		(4	)
Balance, June 30, 2023	$	2		$	—		$	2

At ~~September~~June 30, ~~2022~~2023, the accrued employee termination benefits include costs to reduce less than approximately 100 employees to be completed over the next year.

Note 5.4. Supplemental Balance Sheet and Cash Flow Information

Inventory components at —

	September 30, 2022			December 31, 2021			June 30, 2023		December 31, 2022
Raw materials	$	674		$	651		$	710	$	679
Work in process and finished goods		1,030			1,000			1,021		930
Inventory reserves		(101	)		(87	)
Total	$	1,603		$	1,564		$	1,731	$	1,609

Cash, cash equivalents and restricted cash at —

	September 30, 2022		December 31, 2021		September 30, 2021		December 31, 2020		June 30, 2023		December 31, 2022		June 30, 2022		December 31, 2021
Cash and cash equivalents	$	371	$	268	$	220	$	559	$	484	$	425	$	321	$	268
Restricted cash included in other current assets		9		9		8		5		8		7		8		9
Restricted cash included in other noncurrent assets		10		10		11		3		11		10		11		10
Total cash, cash equivalents and restricted cash	$	390	$	287	$	239	$	567	$	503	$	442	$	340	$	287

Note 6.5. Stockholders’ Equity

Common stock — Our Board of Directors declared a cash dividend of ten cents per share of common stock in the first~~second~~ and ~~third~~second quarters of ~~2022.~~2023. 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.

Share repurchase program — On February 16, 2021 our Board of Directors approved an extension of our existing common stock share repurchase program through December 31, 2023. Under the program, we spent $25 to repurchase 1,483,742 shares of our common stock during the first quarter of 2022 through open market transactions. Approximately $102 remained available for future share repurchases as of ~~September~~June 30, ~~2022~~2023.

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Changes in equity —

2022

Common Stock

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Non-controlling Interests

Total Equity

Balance, December 31, 2021
$ 2 $ 2,427 $ 662 $ (184 ) $ (985 ) $ 53 $ 1,975
2023

Common Stock

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Non-controlling Interests

Total Equity

Balance, December 31, 2022
$ 2 $ 2,229 $ 321 $ — $ (1,001 ) $ 52 $ 1,603
Net income
17 4 21 28 4 32
Other comprehensive income
36 36 40 40
Common stock dividends and dividend equivalents
(14 ) (14 ) (15 ) (15 )
Common stock share repurchases
(25 ) (25 )
Distributions to noncontrolling interests
(1 ) (1 ) (1 ) (1 )
Purchase of noncontrolling interests
(1 ) (1 )
Redeemable noncontrolling interests adjustment to redemption value
(1 ) (1 ) (1 ) (1 )
Stock compensation
4 4 8 8
Stock withheld for employees taxes
(7 ) (7 ) (8 ) (8 )
Balance, March 31, 2022
2 2,431 664 (216 ) (949 ) 55 1,987
Balance, March 31, 2023
2 2,237 333 (8 ) (961 ) 55 1,658
Net income
8 3 11 30 5 35
Other comprehensive loss
(79 ) (2 ) (81 ) (3 ) (3 )
Common stock dividends and dividend equivalents
(15 ) (15 ) (14 ) (14 )
Distributions to noncontrolling interests
(1 ) (1 ) (2 ) (2 )
Purchase of noncontrolling interests
(1 ) (1 ) —
Redeemable noncontrolling interests adjustment to redemption value
(1 ) (1 )
Stock compensation
4 4 7 7
Balance, June 30, 2022
2 2,435 656 (216 ) (1,028 ) 54 1,903
Net income (loss)
(88 ) 4 (84 )
Other comprehensive loss
(67 ) (3 ) (70 )
Common stock dividends and dividend equivalents
(14 ) (14 )
Distributions to noncontrolling interests
(6 ) (6 )
Redeemable noncontrolling interests adjustment to redemption value
(63 ) (63 )
Stock compensation
5 5
Balance, September 30, 2022
$ 2 $ 2,440 $ 491 $ (216 ) $ (1,095 ) $ 49 $ 1,671
Balance, June 30, 2023
2 2,244 349 (8 ) (964 ) 58 1,681

2021

Common Stock

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Non-controlling Interests

Total Equity

Balance, December 31, 2020
$ 2 $ 2,408 $ 530 $ (156 ) $ (1,026 ) $ 76 $ 1,834
2022

Common Stock

Additional Paid-In Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Non-controlling Interests

Total Equity

Balance, December 31, 2021
$ 2 $ 2,427 $ 662 $ (184 ) $ (985 ) $ 53 $ 1,975
Net income
17 4 21
Other comprehensive income
36 36
Common stock dividends and dividend equivalents
(14 ) (14 )
Common stock repurchases
(25 ) (25 )
Distributions to noncontrolling interests
(1 ) (1 )
Purchases of noncontrolling interests
(1 ) (1 )
Redeemable noncontrolling interests adjustment to redemption value
(1 ) (1 )
Stock compensation
4 4
Stock withheld for employees taxes
(7 ) (7 )
Balance, March 31, 2022
2 2,431 664 (216 ) (949 ) 55 1,987
Net income
71 1 72 8 3 11
Other comprehensive loss
(18 ) (2 ) (20 ) (79 ) (2 ) (81 )
Common stock dividends and dividend equivalents
(14 ) (14 ) (15 ) (15 )
Distributions to noncontrolling interests
(1 ) (1 )
Purchases of noncontrolling interests
(1 ) (1 )
Redeemable noncontrolling interests adjustment to redemption value
(4 ) (4 ) (1 ) (1 )
Stock compensation
7 7 4 4
Stock withheld for employees taxes
(5 ) (5 )
Balance, March 31, 2021
2 2,415 583 (161 ) (1,044 ) 75 1,870
Net income
53 4 57
Other comprehensive income (loss)
37 (9 ) 28
Common stock dividends and dividend equivalents
(15 ) (15 )
Distributions to noncontrolling interests
(2 ) (2 )
Sale of noncontrolling interests
(1 ) (1 )
Redeemable noncontrolling interests adjustment to redemption value
(4 ) (4 )
Other
1 1
Stock compensation
5 5
Balance, June 30, 2021
2 2,420 617 (161 ) (1,007 ) 68 1,939
Net income
48 4 52
Other comprehensive income (loss)
(28 ) (28 )
Common stock dividends and dividend equivalents
(15 ) (15 )
Common stock share repurchases
(23 ) (23 )
Distributions to noncontrolling interests
(8 ) (8 )
Redeemable noncontrolling interests adjustment to redemption value
(2 ) (2 )
Deconsolidation of non-wholly owned subsidiary
(8 ) (8 )
Stock compensation
5 5
Balance, September 30, 2021
$ 2 $ 2,425 $ 648 $ (184 ) $ (1,035 ) $ 56 $ 1,912
Balance, June 30, 2022
2 2,435 656 (216 ) (1,028 ) 54 1,903

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Changes in each component of accumulated other comprehensive income (loss) (AOCI) of the parent —

Parent Company Stockholders

Parent Company Stockholders

2022

Foreign Currency Translation

Hedging

Defined Benefit Plans

Accumulated Other Comprehensive Loss

Balance, December 31, 2021
$ (809 ) $ 4 $ (180 ) $ (985 )
2023

Foreign Currency Translation

Hedging

Defined Benefit Plans

Accumulated Other Comprehensive Loss

Balance, December 31, 2022
$ (895 ) $ 21 $ (127 ) $ (1,001 )
Currency translation adjustments
24 24
Holding gains and losses
16 16
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
1 1
Tax expense
(1 ) (1 )
Other comprehensive income
24 15 1 40
Balance, March 31, 2023
(871 ) 36 (126 ) (961 )
Currency translation adjustments
39 39 (6 ) (6 )
Holding gains and losses
19 19 10 10
Reclassification of amount to net income (a)
(22 ) (22 ) (7 ) (7 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
2 2 1 1
Tax expense
(1 ) (1 ) (2 ) (1 ) (1 )
Other comprehensive income (loss)
39 (4 ) 1 36 (6 ) 3 — (3 )
Balance, March 31, 2022
(770 ) — (179 ) (949 )
Currency translation adjustments
(83 ) (83 )
Holding gains and losses
42 42
Reclassification of amount to net income (a)
(39 ) (39 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
4 4
Tax expense
(2 ) (1 ) (3 )
Other comprehensive income (loss)
(83 ) 1 3 (79 )
Balance, June 30, 2022
(853 ) 1 (176 ) (1,028 )
Currency translation adjustments
(69 ) (69 )
Holding gains and losses
44 44
Reclassification of amount to net income (a)
(42 ) (42 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
2 2
Tax expense
(1 ) (1 ) (2 )
Other comprehensive income (loss)
(69 ) 1 1 (67 )
Balance, September 30, 2022
$ (922 ) $ 2 $ (175 ) $ (1,095 )
Balance, June 30, 2023
(877 ) 39 (126 ) (964 )

Parent Company Stockholders

Parent Company Stockholders

2021

Foreign Currency Translation

Hedging

Defined Benefit Plans

Accumulated Other Comprehensive Loss

Balance, December 31, 2020
$ (802 ) $ 9 $ (233 ) $ (1,026 )
2022

Foreign Currency Translation

Hedging

Defined Benefit Plans

Accumulated Other Comprehensive Loss

Balance, December 31, 2021
$ (809 ) $ 4 $ (180 ) $ (985 )
Currency translation adjustments
(4 ) (4 ) 39 39
Holding gains and losses
32 32 19 19
Reclassification of amount to net income (a)
(50 ) (50 ) (22 ) (22 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
4 4 2 2
Tax (expense) benefit
1 (1 ) —
Tax expense
(1 ) (1 ) (2 )
Other comprehensive income (loss)
(4 ) (17 ) 3 (18 ) 39 (4 ) 1 36
Balance, March 31, 2021
(806 ) (8 ) (230 ) (1,044 )
Balance, March 31, 2022
(770 ) — (179 ) (949 )
Currency translation adjustments
17 17 (83 ) (83 )
Holding gains and losses
(4 ) (4 ) 42 42
Reclassification of amount to net income (a)
23 23 (39 ) (39 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
5 5 4 4
Tax expense
(3 ) (1 ) (4 ) (2 ) (1 ) (3 )
Other comprehensive income
17 16 4 37 (83 ) 1 3 (79 )
Balance, June 30, 2021
(789 ) 8 (226 ) (1,007 )
Currency translation adjustments
(23 ) (23 )
Holding gains and losses
15 15
Reclassification of amount to net income (a)
(24 ) (24 )
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)
5 5
Tax expense
(1 ) (1 )
Other comprehensive income (loss)
(23 ) (9 ) 4 (28 )
Balance, September 30, 2021
$ (812 ) $ (1 ) $ (222 ) $ (1,035 )
Balance, June 30, 2022
(853 ) 1 (176 ) (1,028 )

(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 1311 for additional details.
(b) See Note 109 for additional details.

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Note 7.6. Redeemable Noncontrolling Interests

Hydro-Québec ~~holds~~owns a 45% redeemable noncontrolling interest in Dana TM4 Inc., Dana TM4 ~~USA, LLC, Dana (Beijing)~~ Electric ~~Motor Co., Ltd., Dana~~ ~~TM4~~ ~~Italia S.r.l., Ashwoods Innovations Ltd., Dana~~ ~~TM4~~ ~~India Private Limited~~Holdings BV and Dana TM4 ~~(Sweden) AB (together Dana~~ ~~TM4~~).USA, LLC. The terms of the joint venture agreement provide Hydro-Québec ~~may~~ with the right to put all, and not less than all, of its ownership interests in Dana TM4 Inc., Dana TM4 Electric Holdings BV and Dana TM4 USA, LLC to Dana at fair value.

Redeemable noncontrolling interests reflected as of the balance sheet date are the greater of the redeemable noncontrolling interest balances adjusted for comprehensive income (loss) items and distributions or the redemption value. Redeemable noncontrolling interest adjustments of redemption value are recorded in retained earnings. We estimate the fair value of the redemption value using 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 future cash flows, including revenue growth rates, projected EBITDA, discount rates and terminal growth rates.

Reconciliation of changes in redeemable noncontrolling interests —

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period
$ 199 $ 194 $ 198 $ 180 $ 206 $ 200 $ 195 $ 198
Capital contribution from redeemable noncontrolling interest
23 3 30 6 7 5 17 7
Adjustment to redemption value
63 2 65 10 1 1 2
Other
(1 )
Comprehensive income (loss) adjustments:

Net loss attributable to redeemable noncontrolling interests
(79 ) (2 ) (81 ) (10 )
Other comprehensive income (loss) attributable to redeemable noncontrolling interests
(10 ) (2 ) (16 ) 10
Net income (loss) attributable to redeemable noncontrolling interests
1 (1 ) (2 )
Other comprehensive loss attributable to redeemable noncontrolling interests
(1 ) (6 ) (6 )
Balance, end of period
$ 196 $ 195 $ 196 $ 195 $ 213 $ 199 $ 213 $ 199

Note 8.7. Earnings per Share

Reconciliation of the numerators and denominators of the earnings per share calculations —

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Net income (loss) available to common stockholders - Numerator basic and diluted
$ (88 ) $ 48 $ (63 ) $ 172
Net income available to common stockholders - Numerator basic and diluted
$ 30 $ 8 $ 58 $ 25

Denominator:

Weighted-average common shares outstanding - Basic
143.4 144.8 143.6 145.0 144.3 143.4 144.1 143.8
Employee compensation-related shares, including stock options
— 1.4 — 1.4 0.1 0.3 0.2 0.8
Weighted-average common shares outstanding - Diluted
143.4 146.2 143.6 146.4 144.4 143.7 144.3 144.6

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 ~~0.4~~2.0 million and 0.6 million CSEs from the calculation of diluted earnings per share for the ~~third~~second quarters of ~~2022~~2023 and ~~2021~~2022 and excluded ~~0.2~~0.3 million and ~~0.8~~0.4 million of CSEs for the respective year-to-date periods 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 0.5 million and 0.7 million for the~~ ~~third~~ ~~quarter and year-to-date periods of~~ ~~2022~~ ~~because the net loss position made these~~ anti-dilutive.

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Note 9.8. Stock Compensation

The Compensation Committee of our Board of Directors approved the grant of RSUs and performance share units (PSUs) shown in the table below during ~~2022~~2023.

Granted

Grant Date

Granted

Grant Date

(In millions)

Fair Value*

(In millions)

Fair Value*

RSUs
0.9 $ 22.23 1.2 $ 18.44
PSUs
0.3 $ 24.69 0.6 $ 19.56
* Weighted-average per share

We calculated the fair value of the RSUs at grant date based on the closing market price of our common stock at the date of grant. The number of PSUs that ultimately vest is contingent on achieving specified financial targets and specified total shareholder return targets relative to peer companies. For the portion of the award based on financial metrics, we estimated the fair value of the PSUs 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 awards are not dividend protected. For the portion of the award based on shareholder returns, we estimated the fair value of the PSUs 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 three-year performance period. The risk-free interest rate of ~~1.78%~~4.28% was based on U.S. Treasury constant maturity rates at the grant date. The dividend yield of ~~1.67%~~2.5% was calculated using our historical approach calculated by dividing the expected annual dividend by the average stock price over the prior year. The estimated volatility of ~~63.9%~~67.0% was based on observed historical volatility of daily stock returns for the 3-year period preceding the grant date.

During ~~2022,~~2023, we paid $4$5 of cash to settle RSUs and issued ~~0.8 million and 0.1~~1.2 million shares of common stock based on the vesting of ~~RSUs and PSUs, respectively.~~RSUs. We recognized stock compensation expense of $5$8 and $6$4 during the ~~third~~second quarters of ~~2022~~2023 and ~~2021~~2022 and expense of ~~$13~~$14 and ~~$15~~$8 during the respective year-to-date periods. At ~~September~~June 30, ~~2022~~2023, the total unrecognized compensation cost related to the nonvested awards granted and expected to vest was ~~$26.~~$39. This cost is expected to be recognized over a weighted-average period of ~~1.8~~2.0 years.

Note ~~10.~~9. Pension and Postretirement Benefit Plans

We have a number of defined contribution and 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.

Components of net periodic benefit cost (credit) —

Pension

OPEB

Pension

OPEB

2022

2021

2022

2021

2023

2022

2023

2022

Three Months Ended September 30,

U.S.

Non-U.S.

U.S.

Non-U.S.

Non-U.S.

Non-U.S.

Three Months Ended June 30,

U.S.

Non-U.S.

U.S.

Non-U.S.

Non-U.S.

Non-U.S.

Interest cost
$ 4 $ 2 $ 3 $ 1 $ — $ 1 $ 7 $ 3 $ 4 $ 1 $ — $ 1
Expected return on plan assets
(7 ) (1 ) (7 ) (1 ) (7 ) (1 ) (7 )
Service cost
2 3 2 2
Amortization of net actuarial loss
2 1 3 2 (1 ) 2 2 2 (1 )
Net periodic benefit cost (credit)
$ (1 ) $ 4 $ (1 ) $ 5 $ (1 ) $ 1 $ 2 $ 4 $ (1 ) $ 5 $ (1 ) $ 1

Nine Months Ended September 30,

Six Months Ended June 30,

Interest cost
$ 12 $ 5 $ 10 $ 3 $ 1 $ 2 $ 14 $ 6 $ 8 $ 3 $ 1 $ 1
Expected return on plan assets
(21 ) (2 ) (20 ) (2 ) (15 ) (2 ) (14 ) (1 )
Service cost
6 7 3 4
Amortization of net actuarial loss
6 4 7 7 (2 ) 4 4 3 (2 ) (1 )
Net periodic benefit cost (credit)
$ (3 ) $ 13 $ (3 ) $ 15 $ (1 ) $ 2 $ 3 $ 7 $ (2 ) $ 9 $ (1 ) $ -

The service cost components of net periodic pension and OPEB costs are included in cost of sales and selling, general and administrative expenses as part of compensation cost and are eligible for capitalization in inventory and other assets. The non-service components are reported in other income (expense), net and are not eligible for capitalization.

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Note~~11.~~~~Marketable Securities~~

September 30, 2022

December 31, 2021

Unrealized

Fair

Unrealized

Fair

Cost

Gains (Losses)

Value

Cost

Gains (Losses)

Value

Certificates of deposit - Current marketable securities
$ 13 $ — $ 13 $ 17 $ — $ 17
~~Certificates of deposit maturing in~~ ~~one~~ ~~year or less total $13 at~~ ~~September 30, 2022~~.
~~Note~~ ~~12.~~10. Financing Agreements

Long-term debt at —

Interest Rate

September 30, 2022

December 31, 2021

Interest Rate

June 30, 2023

December 31, 2022

Senior Notes due April 15, 2025
5.750%
* $ 400 $ 400
5.750%
* $ 200 $ 400
Senior Notes due November 15, 2027
5.375%
400 400
5.375%
400 400
Senior Notes due June 15, 2028
5.625%
400 400
5.625%
400 400
Senior Euro Notes due July 15, 2029
3.000%
319 370
3.000%
355 348
Senior Notes due September 1, 2030
4.250%
400 400
4.250%
400 400
Senior Euro Notes due July 15, 2031
8.500%
464
Senior Notes due February 15, 2032
4.500%
350 350
4.500%
350 350
Other indebtedness
74 100 76 80
Debt issuance costs
(22 ) (26 ) (26 ) (22 )
2,321 2,394 2,619 2,356
Less: Current portion of long-term debt
7 8 32 8
Long-term debt, less debt issuance costs
$ 2,314 $ 2,386 $ 2,587 $ 2,348

*
In conjunction with the issuance of the April 2025 Notes we entered into 8-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%. On ~~April 25, 2022,~~ ~~we settled existing fixed-to-fixed cross-currency swaps on $100 of the~~ ~~April 2025~~ ~~Notes.~~ See Note 1311 for additional information.

Interest on the senior notes is payable semi-annually. Other indebtedness includes ~~the~~a $25 note payable to the former ~~owners~~shareholders of SME S.p.A., borrowings from various financial institutions and finance lease obligations.

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Senior notes activity — On May ~~13, 2021,~~ ~~we redeemed $254 of our~~ ~~December 2024~~ ~~Notes pursuant to a tender offer at a weighted average price equal to 102.000% plus accrued and unpaid interest. On~~ ~~May 17, 2021,~~ ~~we called the remaining $171 of our~~ ~~December 2024~~ ~~Notes at a price equal to 101.833% plus accrued and unpaid interest. The $8 loss on extinguishment of debt recorded in~~ ~~May 2021~~ ~~includes the redemption premium of $8 and the write-off of $3 of previously deferred financing costs associated with the~~ ~~December 2024~~ ~~Notes. These charges were partially offset by the recognition of $3 related to an unamortized fair value adjustment associated with a fixed-to-floating interest rate swap that was terminated in~~ ~~2015.~~
On ~~May 13, 2021,~~ ~~we completed the sale of $400 in senior unsecured notes (the~~ ~~September 2030~~ ~~Notes) at 4.25%. The~~ ~~September 2030~~ ~~Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on~~ ~~March 1~~ ~~and~~ ~~September 1~~ ~~of each year, beginning on~~ ~~September 1, 2021.~~ ~~The~~ ~~September 2030~~ ~~Notes will mature on~~ ~~September 1, 2030.~~ Net proceeds of the offering totaled $395. Financing costs of $5 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. Proceeds from the offering will be used to finance or refinance, in whole or in part, recently completed or future eligible green projects related to clean transportation, renewable energy, sustainable water and wastewater management, and green buildings.
On ~~May 28, 2021,~~24, 2023, Dana Financing Luxembourg S.à ~~r.l.~~.r.l. (Dana Financing), a wholly-owned subsidiary of Dana, completed the sale of €~~325~~425 (~~$396~~($458 as of May ~~28, 2021)~~24, 2023) in senior unsecured notes ( July ~~2029~~2031 Notes) at ~~3.000%~~8.500%. The July ~~2029~~2031 Notes are fully and unconditionally guaranteed by Dana. The July ~~2029~~2031 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 July 2031 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 July 2031 Notes rank equally with Dana's other unsecured senior notes. Interest on the notes is payable on January 15 and July 15 of each year, beginning on January 15, ~~2022.~~2024. The July ~~2029~~2031 Notes will mature on July 15, ~~2029.~~2031. Net proceeds of the offering totaled €~~320~~419 (~~$391~~($451 as of May ~~28, 2021)~~24, 2023). Financing costs of €56 ($67 as of May ~~28, 2021)~~24, 2023) 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 ~~all~~$200 of our ~~June 2026~~April 2025 ~~Notes.~~Notes and to make payments against borrowings on our Revolving Facility. On June ~~10, 2021~~9, 2023 we redeemed ~~all~~$200 of our ~~June 2026~~April 2025 Notes at a price equal to ~~103.25%~~100.00% plus accrued and unpaid interest. The ~~$16~~$1 loss on extinguishment of debt ~~includes~~is comprised of the ~~$12 redemption premium and the $4~~ write-off of previously deferred financing costs associated with the ~~June 2026~~April 2025 Notes.

On ~~November 24, 2021,~~ ~~we completed the sale of $350 in senior unsecured notes (the~~ ~~February 2032~~ ~~Notes) at 4.5%. The~~ ~~February 2032~~ ~~Notes rank equally with Dana’s other unsecured senior notes. Interest on the notes is payable on~~ ~~February 15~~ ~~and~~ ~~August 15~~ ~~of each year, beginning on~~ ~~August 15, 2022.~~ ~~The~~ ~~February 2032~~ ~~Notes will mature on~~ ~~February 15, 2032.~~ Net proceeds of the offering totaled $345. Financing costs of $5 were recorded as deferred costs and are being amortized to interest expense over the life of the notes. Proceeds from the offering, along with cash on hand, were used to fully pay down the Term B Facility. See credit agreement discussion below.
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Senior notes redemption provisions — We may redeem some or all of the senior notes at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest to the redemption date, if redeemed during the 12-month period commencing on the anniversary date of the senior notes in the year set forth below:

Redemption Price

April

November

June

July

September

February

Year

2025 Notes

2027 Notes

2028 Notes

2029 Notes

2030 Notes

2032 Notes

2022
101.438 % 102.688 %
2023
100.000 % 101.344 % 102.813 %
2024
100.000 % 100.000 % 101.406 % 101.500 %
2025
100.000 % 100.000 % 100.750 %
2026
100.000 % 100.000 % 100.000 % 102.125 %
2027
100.000 % 100.000 % 101.417 % 102.250 %
2028
100.000 % 100.708 % 101.500 %
2029
100.000 % 100.750 %
2030
100.000 %
2031
100.000 %
~~At any time prior to~~ ~~November 15, 2022,~~ we ~~may~~ ~~redeem up to~~ ~~35%~~ ~~of the 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.
~~At any time prior to~~ ~~June 15, 2023,~~ we ~~may~~ ~~redeem up to~~ ~~35%~~ ~~of the aggregate principal amount of the~~ ~~June 2028~~ ~~Notes in an amount~~ ~~not~~ ~~to exceed the amount of proceeds of~~ ~~one~~ or more equity offerings, at a price equal to 105.625% 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 2028~~ ~~Notes remains outstanding after the redemption. Prior to~~ ~~June 15, 2023,~~ we ~~may~~ ~~redeem some or all of the~~ ~~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.

Redemption Price

April

November

June

July

September

July

February

Year

2025 Notes

2027 Notes

2028 Notes

2029 Notes

2030 Notes

2031 Notes

2032 Notes

2022
101.438 % 102.688 %
2023
100.000 % 101.344 % 102.813 %
2024
100.000 % 100.000 % 101.406 % 101.500 %
2025
100.000 % 100.000 % 100.750 %
2026
100.000 % 100.000 % 100.000 % 102.125 % 104.250 %
2027
100.000 % 100.000 % 101.417 % 102.125 % 102.250 %
2028
100.000 % 100.708 % 100.000 % 101.500 %
2029
100.000 % 100.000 % 100.750 %
2030
100.000 % 100.000 %
2031
100.000 %

At any time prior to July 15, 2024, we may redeem up to 40% of the aggregate principal amount of the July 2029 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 103.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the aggregate principal amount of the July 2029 Notes remain outstanding after the redemption. Prior to July 15, 2024, we may also redeem some or all of the July 2029 Notes at a redemption price equal to 100% 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 May 1, 2024, we may redeem up to 40% of the aggregate principal amount of the September 2030 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 104.250% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, provided that at least 50% of the aggregate principal amount of the September 2030 Notes remains outstanding after the redemption. Prior to May 1, 2026, we may redeem some or all of the September 2030 Notes at a redemption price equal to 100% 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 July 15, 2026, we may redeem up to 40% of the aggregate principal amount of the July 2031 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 108.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that at least 50% of the aggregate principal amount of the July 2031 Notes remain outstanding after the redemption. Prior to July 15, 2026, we may also redeem some or all of the July 2031 Notes at a redemption price equal to 100% 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 February 15, 2025, we may redeem up to 40% of the aggregate principal amount of the February 2032 Notes in an amount not to exceed the amount of proceeds of one or more equity offerings, at a price equal to 104.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, provided that at least 50% of the aggregate principal amount of the February 2032 Notes remains outstanding after the redemption. Prior to February 15, 2027, we may redeem some or all of the February 2032 Notes at a redemption price equal to 100% 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.

Credit agreement — On March ~~25, 2021,~~14, 2023, we amended our credit and guaranty agreement, ~~increasing the Revolving Facility to $1,150 and~~ extending ~~the~~its maturity to March ~~25, 2026.~~14, 2028. We recorded deferred fees of $2 related to the amendment. The deferred fees are being amortized over the life of the Revolving ~~Facility. On~~ ~~November 30, 2021,~~ ~~we fully paid down the Term B~~ Facility. Deferred financing costs on our Revolving Facility are included in other noncurrent assets.

The Revolving Facility is guaranteed by all of our wholly-owned domestic subsidiaries subject to certain exceptions (the guarantors) and are secured by a first-priority lien on substantially all of the assets of Dana and the guarantors, subject to certain exceptions.

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Advances under the Revolving Facility bear interest at a floating rate based on, at our option, the base rate or ~~Eurodollar rate~~the Term Secured Overnight Financing Rate ("SOFR") (each as described in the credit agreement) plus a margin as set forth below:

Margin

Margin

Total Net Leverage Ratio

Base Rate

Eurodollar Rate

Base Rate

SOFR Rate

Less than or equal to 1.00:1.00
0.25 % 1.25 % 0.25 % 1.25 %
Greater than 1.00:1.00 but less than or equal to 2.00:1.00
0.50 % 1.50 % 0.50 % 1.50 %
Greater than 2.00:1.00
0.75 % 1.75 % 0.75 % 1.75 %

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
0.250 %
Greater than 1.00:1.00 but less than or equal to 2.00:1.00
0.375 %
Greater than 2.00:1.00
0.500 %

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~~SOFR 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 ~~September~~June 30, ~~2022~~2023, we had ~~$195 of~~no outstanding borrowings under the Revolving Facility ~~and~~but we had utilized ~~$21~~$16 for letters of credit. We had availability at ~~September~~June 30, ~~2022~~2023 under the Revolving Facility of ~~$934~~$1,134 after deducting the outstanding ~~borrowings and the~~ letters of credit.

Debt covenants — At ~~September~~June 30, ~~2022~~2023, we were in compliance with the covenants of our financing agreements. Under the 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 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.

Note ~~13.~~11. Fair Value Measurements and Derivatives

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 — Assets and liabilities that are carried in our balance sheet at fair value are as follows:

Fair Value

Fair Value

Category

Balance Sheet Location

Fair Value Level
September 30, 2022 December 31, 2021
Balance Sheet Location

Fair Value Level
June 30, 2023 December 31, 2022
Certificates of deposit

Marketable securities
2 $ 13 $ 17
Currency forward contracts

Cash flow hedges

Accounts receivable - Other
2 5 7
Accounts receivable - Other
2 $ 47 $ 26
Cash flow hedges

Other accrued liabilities
2 2 1
Other accrued liabilities
2 7 4
Undesignated

Accounts receivable - Other
2 14 2
Accounts receivable - Other
2 3 2
Undesignated

Other accrued liabilities
2 4
Other accrued liabilities
2 8 7
Currency swaps

Cash flow hedges

Other noncurrent assets
2 60
Other noncurrent assets
2 8 17
Cash flow hedges

Other noncurrent liabilities
2 34
Undesignated

Other noncurrent liabilities
2 12 17
Other noncurrent liabilities
2 9 11

Fair Value Level 2 assets and liabilities reflect the use of significant other observable inputs.

Fair value of financial instruments — The financial instruments that are not carried in our balance sheet at fair value are as follows:

September 30, 2022

December 31, 2021

Fair Value Level

Carrying Value

Fair Value

Carrying Value

Fair Value

Long-term debt
2 $ 2,276 $ 1,835 $ 2,338 $ 2,412

June 30, 2023

December 31, 2022

Fair Value Level

Carrying Value

Fair Value

Carrying Value

Fair Value

Long-term debt
2 $ 2,571 $ 2,348 $ 2,304 $ 2,010

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Foreign currency derivatives — Our foreign currency derivatives include forward contracts associated with forecasted transactions, primarily involving the purchases and sales of inventory, 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.

We have executed fixed-to-fixed cross-currency swaps in conjunction with the issuance of certain notes to eliminate the variability in the functional-currency-equivalent cash flows due to changes in exchange rates associated with the forecasted principal and interest payments. All of the underlying designated financial instruments have been designated as the hedged items in each respective cash flow hedge relationship, as shown in the table below. Designated as cash flow hedges of the forecasted principal and interest payments of the underlying designated financial instruments, all of the swaps economically convert the underlying designated financial instruments into the functional currency of each respective holder. The impact of the interest rate differential between the inflow and outflow rates on ~~all~~ fixed-to-fixed cross-currency swaps is recognized during each period as a component of interest ~~expense.~~expense for hedges of external debt and as a component of other income (expense), net for hedges of intercompany debt.

The following fixed-to-fixed cross-currency swaps were outstanding at ~~September~~June 30, ~~2022~~2023:

Underlying Financial Instrument
Underlying Financial Instrument

Derivative Financial Instrument

Underlying Financial Instrument

Derivative Financial Instrument

Description

Type

Face Amount

Rate
Notional Amount
Traded Amount

Inflow Rate

Outflow Rate

Type

Face Amount

Rate
Notional Amount
Traded Amount

Inflow Rate

Outflow Rate

April 2025 Notes

Payable
$ 400 5.75 % $ 300 € 278 5.75 % 3.85 %
Payable
$ 200 5.75 % $ 200 € 185 5.75 % 3.85 %
Luxembourg Intercompany Notes

Receivable
€ 278 3.70 % € 278 $ 300 5.38 % 3.70 %
Receivable
€ 93 3.85 % $ 100 € 93 5.75 % 3.85 %
Luxembourg Intercompany Notes

Receivable
€ 278 3.70 % € 278 $ 300 5.38 % 3.70 %
Undesignated 2026 Swap
$ 188 € 169 6.50 % 5.14 % $ 188 € 169 6.50 % 5.14 %
Undesignated Offset 2026 Swap
€ 169 $ 188 3.13 % 6.50 % € 169 $ 188 3.13 % 6.50 %

The designated 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 the underlying designated financial instruments and 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 1210 for additional information about the April 2025 Notes. To the extent the swaps are no longer effective, changes in their fair values will be recorded in earnings.

~~We had previously entered into fixed-to-fixed cross currency swaps as a hedge against our~~ ~~June 2026~~ ~~Notes. In~~ ~~June 2021,~~ ~~we elected to redeem all of the~~ ~~June 2026~~ ~~Notes and de-designated the fixed-to-fixed cross currency swaps. See Note~~ 12 ~~for additional information about the extinguishment of the~~ ~~June 2026~~ ~~Notes. As the forecasted payments subject to the hedge will~~ no longer occur in the forecasted periods, we reclassified $9 of previously deferred losses from AOCI into other income (expense), net. We settled $187 of the $375 notional value resulting in a net cash outflow of $22. The remaining $188 continues to remain outstanding and we have entered into an offsetting swap to hedge against future fair value adjustments which will be included in earnings. The fair value of the remaining $188 will be settled with the counterparty over the life of the swap through the difference in the euro denominated inflow and outflow rates which are settled on ~~June 15~~ ~~and~~ ~~December 15~~ ~~each year through~~ ~~June 2026.~~
The total notional amount of outstanding foreign currency forward contracts, involving the exchange of various currencies, was ~~$505~~$662 at ~~September~~June 30, ~~2022~~2023 and ~~$449~~$608 at December 31, ~~2021~~2022. The total notional amount of outstanding foreign currency swaps, including the fixed-to-fixed cross-currency swaps, was ~~$926~~$975 at ~~September~~June 30, ~~2022~~2023 and ~~$1,096~~$967 at December 31, ~~2021~~2022.

The following currency derivatives were outstanding at ~~September~~June 30, ~~2022~~2023:

Notional Amount (U.S. Dollar Equivalent)

Notional Amount (U.S. Dollar Equivalent)

Functional Currency

Traded Currency

Designated

Undesignated

Total

Maturity

Traded Currency

Designated

Undesignated

Total

Maturity
U.S. dollar

Mexican peso
$ 136 $ — $ 136
Sep-2023

Mexican peso, Thai baht
$ 170 $ 32 $ 202
Jun-2024
Euro

U.S. dollar, Australian dollar, Brazilian real, Canadian dollar, Swiss franc, Chinese renminbi, British pound, Hungarian forint, Indian rupee, Japanese yen, Mexican peso, Norwegian krone, New Zealand dollar, Swedish krona, South African rand
67 108 175
Jan-2024

U.S. dollar, Australian dollar, Canadian dollar, Swiss franc, Chinese renminbi, British pound, Hungarian forint, Indian rupee, Japanese yen, Mexican peso, Norwegian krone, New Zealand dollar, Swedish krona, South African rand
191 59 250
Sep-2027
British pound

U.S. dollar, euro
1 1
Oct-2022

U.S. dollar, euro
1 6 7
Sep-2023
South African rand

U.S. dollar, euro, Thai baht
10 10
Nov-2022

U.S. dollar, euro, Thai baht
13 13
Aug-2023
Canadian dollar

U.S. dollar
12 12
Jul-2023
Brazilian real

U.S. dollar, euro
60 12 72
Jul-2023

U.S. dollar, euro
54 15 69
Mar-2024
Indian rupee

U.S. dollar, euro, British pound
102 102
Sep-2023

U.S. dollar, euro, British pound
95 95
Jun-2024
Chinese renminbi

U.S. dollar, Canadian dollar
8 8
Oct-2022

U.S. dollar, euro, Canadian dollar
10 10
Jul-2023
Australian dollar

U.S. dollar, euro
1 1
Oct-2022

U.S. dollar, euro
1 1
Jul-2023
Mexican peso

U.S. dollar
3 3
Jul-2023
Total forward contracts
263 242 505 416 246 662

U.S. dollar

euro
272 166 438
Nov-2027

euro
303 184 487
Nov-2027
Euro

U.S. dollar
300 188 488
Jun-2026

U.S. dollar
300 188 488
Jun-2026
Total currency swaps
572 354 926 603 372 975
Total currency derivatives
$ 835 $ 596 $ 1,431 $ 1,019 $ 618 $ 1,637

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Designated cash flow hedges — With respect to contracts designated as cash flow hedges, changes in fair value during the period in which the contracts remain outstanding are reported in OCI to the extent such contracts remain effective. 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. Changes in fair value of contracts not designated as cash flow hedges or as net investment hedges are recognized in other income (expense), net in the period in which the changes occur. Realized gains and losses from currency-related forward contracts associated with forecasted transactions or from other derivative instruments, including those that have been designated as cash flow hedges and those that have not been designated, are recognized in the same line item in the consolidated statement of operations in which the underlying forecasted transaction or other hedged item is recorded. Accordingly, amounts are potentially recorded in sales, cost of sales or, in certain circumstances, other income (expense), net.

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

Deferred Gain (Loss) in AOCI

September 30, 2022

December 31, 2021
Gain (loss) expected to be reclassified into income in one year or less
June 30, 2023

December 31, 2022
Gain (loss) expected to be reclassified into income in one year or less
Forward Contracts
$ 3 $ (1 ) $ 3 $ 28 $ 11 $ 28
Cross-Currency Swaps
1 2 13 11
Total
$ 4 $ 1 $ 3 $ 41 $ 22 $ 28

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:

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

Derivatives Designated as Cash Flow Hedges

2022

2021

2022

2021

2023

2022

2023

2022

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

Net sales
$ 2,535 $ 2,204 $ 7,601 $ 6,672 $ 2,748 $ 2,586 $ 5,392 $ 5,066
Cost of sales
2,332 1,998 7,018 5,963 2,477 2,403 4,892 4,686
Other income (expense), net
3 (4 ) 15 (33 ) 4 10 9 12
(Gain) or loss on cash flow hedging relationships

Foreign currency forwards

Amount of (gain) loss reclassified from AOCI into income

Cost of sales
(2 ) (3 ) (4 ) (8 ) (8 ) (1 ) (13 ) (2 )
Other income (expense), net
(2 ) (1 ) (6 ) (3 ) (3 ) (2 ) (5 ) (4 )
Cross-currency swaps

Amount of (gain) loss reclassified from AOCI into income

Other income (expense), net
(38 ) (21 ) (93 ) (40 ) 5 (36 ) 12 (55 )

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.

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

Derivatives Not Designated as Hedging Instruments

2022

2021

2022

2021

2023

2022

2023

2022

Gain or (loss) recognized in income

Foreign currency forward contracts

Cost of sales
$ — $ 1 $ 1 $ 1 $ 1 $ 1 $ — $ 1
Other income (expense), net
$ (1 ) $ 2 $ (10 ) $ (14 ) $ (10 ) $ (3 ) $ (7 ) $ (9 )

Net investment hedges — We periodically designate derivative contracts or underlying non-derivative financial instruments as net investment hedges. With respect to contracts designated as net investment hedges, we apply the forward method, but for non-derivative financial instruments designated as net investment hedges, we apply the spot method. Under both methods, we report changes in fair value in the cumulative translation adjustment (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.

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Note ~~14.~~12. Commitments and Contingencies

Product liabilities — Accrued product liability costs were $1de minimis at ~~September~~June 30, ~~2022~~2023 and $2de minimis at December 31, ~~2021~~2022. ~~We had also~~Amounts recognized ~~amounts~~as recoverable from third parties ~~of $17~~were de minimis at ~~September~~June 30, ~~2022~~2023 and ~~$13~~de minimis at December 31, ~~2021~~2022. Payments made to claimants precede recovery of amounts from third parties, and may result in recoverable amounts in excess of the total liability. We estimate these liabilities based on current information and assumptions about the value and likelihood of the claims against us.

Environmental liabilities — Accrued environmental liabilities were $8$6 at ~~September~~June 30, ~~2022~~2023 and ~~$10~~$8 at December 31, ~~2021~~2022. We consider the most probable method of remediation, current laws and regulations and existing technology in estimating our environmental liabilities.

Guarantee of lease obligations — 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 Metalsa. Under the terms of the sale agreement, we will 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.

Other legal matters — We are subject to various pending or threatened legal proceedings arising out of the normal course of business or operations. In view of the inherent difficulty of predicting the outcome of such matters, we cannot state what the eventual outcome of these matters will be. However, based on current knowledge and after consultation with legal counsel, we believe that any liabilities that may result from these proceedings will not have a material adverse effect on our liquidity, financial condition or results of operations.

Note ~~15.~~13. Warranty Obligations

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 —

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Balance, beginning of period
$ 100 $ 95 $ 107 $ 98 $ 108 $ 100 $ 108 $ 107
Amounts accrued for current period sales
11 9 31 28 13 10 23 20
Adjustments of prior estimates
(2 ) (4 ) 8 (4 )
Settlements of warranty claims
(13 ) (7 ) (33 ) (20 ) (15 ) (7 ) (32 ) (20 )
Divestitures
(10 )
Currency impact
(3 ) (6 ) (1 ) (3 ) (1 ) (3 )
Balance, end of period
$ 95 $ 95 $ 95 $ 95 $ 106 $ 100 $ 106 $ 100

Note ~~16.~~14. Income Taxes

We estimate the effective tax rate expected to be applicable for the full fiscal year and use that rate to provide for income taxes in interim reporting periods. We also recognize the tax impact of certain unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, in the interim period in which they occur.

We have generally not recognized tax benefits on losses generated 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. ~~We believe it is reasonably possible that valuation allowances of up to approximately $200 related to U.S. federal credits and attributes will be recorded in the next~~ ~~twelve~~ ~~months.~~

We record interest and penalties related to uncertain tax positions as a component of income tax expense. Net interest expense for the periods presented herein is not significant.

We reported income tax expense of ~~$31~~$55 and ~~$20~~$18 for the ~~third~~second quarters of ~~2022~~2023 and ~~2021~~2022 and income tax expense of ~~$67~~$85 and ~~$56~~$36 for the respective year-to-date periods. Our effective tax rates were ~~(103)%~~57% and ~~28%~~55% for the first ~~nine~~six months of ~~2022~~2023 and ~~2021.~~2022. During the ~~third~~second quarter of ~~2022,~~ ~~we recorded a pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2. In addition, we recorded a tax benefit of $32 for U.S. tax credits generated. Also, during the~~ ~~third~~ ~~quarter of~~ ~~2022,~~2023, we recorded tax expense of ~~$31~~$19 for ~~valuation allowances related to U.S. states driven by differences between our federal and state~~income tax ~~profile.~~reserves associated with prior tax years in foreign jurisdictions. Excluding this item, the effective tax rate would have been 44% for the 2023six-month period. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release, and adjustment of valuation allowances in several countries, nondeductible expenses and 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. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of non-deductible expenses.

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Note ~~17.~~15. Other Income (Expense), Net

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Non-service cost components of pension and OPEB costs
$ — $ (2 ) $ (3 ) $ (7 ) $ (3 ) $ (3 ) $ (6 ) $ (3 )
Foreign exchange gain
1 4 2
Government assistance
7 8
Foreign exchange gain (loss)
(3 ) 1 1 4
Strategic transaction expenses
(1 ) (3 ) (6 ) (11 ) (1 ) (1 ) (2 ) (5 )
Loss on investment in Hyliion
(6 ) (20 )
Loss on disposal group held for sale
(7 )
Loss on de-designation of fixed-to-fixed cross currency swaps
(9 )
Other, net
4 6 20 19 4 13 8 16
Other income (expense), net
$ 3 $ (4 ) $ 15 $ (33 ) $ 4 $ 10 $ 9 $ 12

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, and other strategic initiatives. Strategic transaction expenses in 2023 and 2022 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives. ~~Strategic transaction expenses in~~ ~~2021~~ ~~were primarily attributable to our pursuit of the acquisition of a portion of the thermal-management business of Modine Manufacturing Company and certain other strategic initiatives.~~
~~We held 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 was included in marketable securities and carried at fair value with changes in fair value included in net income. During the ~~third~~ ~~quarter of~~ ~~2021,~~ ~~we sold all of our Hyliion shares.~~
In conjunction with our acquisition of Oerlikon Drive Systems, we acquired a controlling financial interest in a joint venture in China. We were required to divest our interest in this joint venture as it violates competitive restrictions of another of our China joint venture shareholder agreements. During the ~~first~~ ~~quarter of~~ ~~2021,~~ ~~we recorded an impairment charge of~~ ~~$7,~~ ~~as we determined the carrying value of the disposal group exceeded its fair value less costs to sell. We completed the disposal of this business in~~ ~~April 2021.~~
~~We had previously entered into fixed-to-fixed cross currency swaps as a hedge against our~~ ~~June 2026~~ ~~Notes. In~~ ~~June 2021,~~ ~~we redeemed all of the~~ ~~June 2026~~ ~~Notes and de-designated the fixed-to-fixed cross currency swaps. See Note~~ 13 ~~for additional information.~~

Note ~~18.~~16. 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 payment, 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 $9$6 and $8$7 recorded in other current assets and ~~$30~~$36 and ~~$38~~$28 recorded in other noncurrent assets at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022.

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 consolidated 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 sale. See Note 1513 for additional information.

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Contract liabilities are primarily comprised of cash 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 ~~$37~~$48 and ~~$34~~$48 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022. Contract liabilities are included in other accrued liabilities on our consolidated balance sheet.

Disaggregation of revenue —

The following table disaggregates revenue for each of our operating segments by geographical market:

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Light Vehicle

North America
$ 756 $ 667 $ 2,245 $ 1,999 $ 728 $ 777 $ 1,368 $ 1,489
Europe
95 83 292 324 142 92 274 197
South America
64 47 158 122 59 49 112 94
Asia Pacific
132 121 365 354 137 110 274 233
Total
$ 1,047 $ 918 $ 3,060 $ 2,799 $ 1,066 $ 1,028 $ 2,028 $ 2,013

Commercial Vehicle

North America
$ 248 $ 181 $ 729 $ 564 $ 290 $ 252 $ 577 $ 481
Europe
62 59 203 192 83 71 164 141
South America
143 116 391 286 98 132 201 248
Asia Pacific
52 40 152 90 55 52 106 100
Total
$ 505 $ 396 $ 1,475 $ 1,132 $ 526 $ 507 $ 1,048 $ 970

Off-Highway

North America
$ 90 $ 80 $ 268 $ 218 $ 89 $ 95 $ 186 $ 178
Europe
435 391 1,452 1,248 593 513 1,166 1,017
South America
4 4 13 10 6 5 10 9
Asia Pacific
165 152 473 455 154 155 322 308
Total
$ 694 $ 627 $ 2,206 $ 1,931 $ 842 $ 768 $ 1,684 $ 1,512

Power Technologies

North America
$ 156 $ 122 $ 447 $ 376 $ 159 $ 150 $ 318 $ 291
Europe
106 118 339 372 129 111 263 233
South America
8 7 22 16 8 7 16 14
Asia Pacific
19 16 52 46 18 15 35 33
Total
$ 289 $ 263 $ 860 $ 810 $ 314 $ 283 $ 632 $ 571

Total

North America
$ 1,250 $ 1,050 $ 3,689 $ 3,157 $ 1,266 $ 1,274 $ 2,449 $ 2,439
Europe
698 651 2,286 2,136 947 787 1,867 1,588
South America
219 174 584 434 171 193 339 365
Asia Pacific
368 329 1,042 945 364 332 737 674
Total
$ 2,535 $ 2,204 $ 7,601 $ 6,672 $ 2,748 $ 2,586 $ 5,392 $ 5,066

Note ~~19.~~17. Segments

We are a global provider of high-technology products to virtually every major vehicle manufacturer in the world. We also serve the stationary industrial market. Our technologies include drive systems (axles, driveshafts, transmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives); electrodynamic technologies (motors, inverters, software and control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, cam covers, and oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and thermal-acoustical protective shielding); and digital solutions (active and 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 Drive Systems (Light Vehicle), Commercial Vehicle Drive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion Systems (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.

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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.

Segment information —

2022

2021

2023

2022

Three Months Ended September 30,

External Sales

Inter-Segment Sales

Segment EBITDA

External Sales

Inter-Segment Sales

Segment EBITDA

Three Months Ended June 30,

External Sales

Inter-Segment Sales

Segment EBITDA

External Sales

Inter-Segment Sales

Segment EBITDA

Light Vehicle
$ 1,047 $ 38 $ 60 $ 918 $ 39 $ 54 $ 1,066 $ 46 $ 66 $ 1,028 $ 40 $ 33
Commercial Vehicle
505 26 18 396 25 20 526 31 28 507 28 10
Off-Highway
694 12 91 627 16 100 842 16 131 768 17 100
Power Technologies
289 8 21 263 6 38 314 6 19 283 6 21
Eliminations and other
(84 ) (86 ) (99 ) (91 )
Total
$ 2,535 $ — $ 190 $ 2,204 $ — $ 212 $ 2,748 $ — $ 244 $ 2,586 $ — $ 164

Nine Months Ended September 30,

Six Months Ended June 30,

Light Vehicle
$ 3,060 $ 126 $ 124 $ 2,799 $ 126 $ 241 $ 2,028 $ 98 $ 115 $ 2,013 $ 88 $ 64
Commercial Vehicle
1,475 84 38 1,132 73 53 1,048 63 45 970 58 20
Off-Highway
2,206 49 291 1,931 52 276 1,684 33 249 1,512 37 200
Power Technologies
860 21 71 810 18 111 632 14 42 571 13 50
Eliminations and other
(280 ) (269 ) (208 ) (196 )
Total
$ 7,601 $ — $ 524 $ 6,672 $ — $ 681 $ 5,392 $ — $ 451 $ 5,066 $ — $ 334

Reconciliation of segment EBITDA to consolidated net income —

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Segment EBITDA
$ 190 $ 212 $ 524 $ 681 $ 244 $ 164 $ 451 $ 334
Corporate expense and other items, net
2 (2 ) (4 ) (1 ) (2 ) (4 ) (2 )
Depreciation
(88 ) (92 ) (270 ) (272 ) (94 ) (91 ) (186 ) (182 )
Amortization
(6 ) (6 ) (17 ) (18 ) (6 ) (5 ) (11 ) (11 )
Non-service cost components of pension and OPEB costs
(2 ) (3 ) (7 ) (3 ) (3 ) (6 ) (3 )
Restructuring charges, net
1 (1 ) 1 (2 ) (3 ) (1 ) (4 )
Stock compensation expense
(5 ) (6 ) (13 ) (15 ) (8 ) (4 ) (14 ) (8 )
Strategic transaction expenses
(1 ) (3 ) (6 ) (11 ) (1 ) (1 ) (2 ) (5 )
Loss on investment in Hyliion
(6 ) (20 )
Impairment of goodwill
(191 ) (191 )
Loss on disposal group held for sale
(7 )
Loss on de-designation of fixed-to-fixed cross currency swaps
(9 )
Distressed supplier costs
(4 ) (12 )
Other items
(3 ) (1 ) (1 ) 2 2 2
Earnings (loss) before interest and income taxes
(101 ) 94 24 315
Earnings before interest and income taxes
124 59 214 125
Loss on extinguishment of debt
(24 ) (1 ) (1 )
Interest income
2 2 6 6 5 2 9 4
Interest expense
32 31 95 99 39 32 73 63
Earnings (loss) before income taxes
(131 ) 65 (65 ) 198
Earnings before income taxes
89 29 149 66
Income tax expense
31 20 67 56 55 18 85 36
Equity in earnings (loss) of affiliates
(1 ) 5 (1 ) 29 2 (1 ) 3 —
Net income (loss)
$ (163 ) $ 50 $ (133 ) $ 171
Net income
$ 36 $ 10 $ 67 $ 30

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Note ~~20.~~18. Equity Affiliates

We have a number of investments in entities that engage in the manufacture and supply of vehicular parts (primarily axles, axle housings and driveshafts).

Equity method investments at ~~September~~June 30, ~~2022~~2023 —

Ownership Percentage

Investment

Ownership Percentage

Investment

Dongfeng Dana Axle Co., Ltd.
50% $ 65 50% $ 66
ROC-Spicer, Ltd.
50% 19 50% 22
Axles India Limited
48% 10 48% 13
Tai Ya Investment (HK) Co., Limited
50% 4 50% 4
All others as a group
6 6
Investments in equity affiliates
104 111
Investments in affiliates carried at cost
24 24
Investments in affiliates
$ 128 $ 135

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions)

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 this report.

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.

Management Overview

Dana, with history dating back to 1904, is headquartered in Maumee, ~~Ohio, and was incorporated in Delaware in 2007.~~Ohio. We are a world leader in providing power-conveyance and energy-management solutions for vehicles and machinery. The company's portfolio improves the efficiency, performance, and sustainability of light vehicles, commercial vehicles, and off-highway equipment. Our technologies include drive systems (axles, driveshafts, transmissions, and wheel and track drives); motion systems (winches, slew drives, and hub drives); electrodynamic technologies (motors, inverters, software and control systems, battery-management systems, and fuel cell plates); sealing solutions (gaskets, seals, cam covers, and oil pan modules); thermal-management technologies (transmission and engine oil cooling, battery and electronics cooling, charge air cooling, and thermal-acoustical protective shielding); and digital solutions (active and 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 Drive Systems (Light Vehicle), Commercial Vehicle Drive and Motion Systems (Commercial Vehicle), Off-Highway Drive and Motion Systems (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. At ~~September~~June 30, ~~2022,~~2023, we employed ~~approximately 42,300~~approximately 42,800 people and operated in ~~32 countries and had 140 major facilities housing manufacturing and distribution operations, service and assembly operations, technical and engineering centers and administrative offices.~~31 countries.

External sales by operating segment for the periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

2023

2022

2023

2022

% of

% of

% of

% of

% of

% of

% of

% of

Dollars

Total

Dollars

Total

Dollars

Total

Dollars

Total

Dollars

Total

Dollars

Total

Dollars

Total

Dollars

Total

Light Vehicle
$ 1,047 41.3 % $ 918 41.7 % $ 3,060 40.3 % $ 2,799 42.0 % $ 1,066 38.8 % $ 1,028 39.8 % $ 2,028 37.6 % $ 2,013 39.7 %
Commercial Vehicle
505 19.9 % 396 18.0 % 1,475 19.4 % 1,132 17.0 % 526 19.2 % 507 19.6 % 1,048 19.5 % 970 19.2 %
Off-Highway
694 27.4 % 627 28.4 % 2,206 29.0 % 1,931 28.9 % 842 30.6 % 768 29.7 % 1,684 31.2 % 1,512 29.8 %
Power Technologies
289 11.4 % 263 11.9 % 860 11.3 % 810 12.1 % 314 11.4 % 283 10.9 % 632 11.7 % 571 11.3 %
Total
$ 2,535 $ 2,204 $ 7,601 $ 6,672 $ 2,748 $ 2,586 $ 5,392 $ 5,066

See Note 1917 to our consolidated financial statements in Item 1 of Part I for further financial information about our operating segments.

Our internet address is www.dana.com. The inclusion of our website address in this report is an inactive textual reference only and is not intended to include or incorporate by reference the information on our website into this report.

Operational and Strategic Initiatives

Our enterprise strategy builds on our strong technology foundation and leverages our resources across the organization while driving a customer-centric focus, expanding our global markets, and delivering innovative solutions as we evolve into the era of vehicle electrification.

Central to our strategy is leveraging our core operations. 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 actively seeking synergies across our engineering, purchasing, and manufacturing 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. Leveraging these core elements can further expand the cost efficiencies of our common technologies and deliver a sustainable competitive advantage for Dana.

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Driving customer centricity continues to be at the heart of who we are. Putting our customers at the center of our value system is firmly embedded in our culture and is driving growth by focusing on customer relationships and providing value to our customers. These relationships are strengthened as we are physically located where we need to be in order to provide unparalleled service, and we are prioritizing our customers’ needs 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 customer outsourcing initiatives.

Expanding global markets means utilizing our global capabilities and presence 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 as well as 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 in 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 target the domestic Asia Pacific markets and utilize the capacity for export to other global markets. We continue to enhance and expand our global footprint, optimizing it to capture growth across all of our end markets.

Delivering innovative solutions enables us to capitalize on market growth trends as we evolve our core technology capabilities. We are also focused on enhancing 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 based on our core technology is leading to new business wins and increasing our content per vehicle. We have made significant investments - both organically and inorganically - allowing us to move to the next phase, which is to Lead electric propulsion.

Over the last several years we continue to deliver on our goal to accelerate vehicle electrification through both core Dana technologies and targeted strategic acquisitions and are positioned 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 the components that we offer due to our mechatronics capabilities. With recent electric vehicle program awards, we are well on our way to achieving our growth objectives in this emerging market.

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 electric vehicles.

Capital Structure Initiatives

In addition to investing in our business, we plan to prioritize a balanced allocation of capital while maintaining a strong financial position. We continue to drive toward investment grade metrics as part of our balanced allocation approach with a goal of further strengthening our balance sheet.

Shareholder return actions — When evaluating capital structure initiatives, we balance our growth opportunities and shareholder value initiatives with maintaining a strong balance sheet and access to capital. Our strong financial position has enabled us to simplify our capital structure while providing returns to our shareholders in the form of cash dividends and a reduction in the number of shares outstanding. Through the first quarter of 2020, we had declared and paid quarterly common stock dividends for thirty-three consecutive quarters. In response to the COVID pandemic, we temporarily suspended the declaration and payment of dividends to common shareholders and the repurchase of common stock under our $200 common stock share repurchase program. With the impacts of the COVID pandemic largely behind us we resumed the declaration and payment of quarterly common stock dividends during the first quarter of 2021. In addition, we resumed the repurchase of common shares using ~~$23~~$25 and ~~$25~~$23 of cash to repurchase common shares under the program in ~~2021~~2022 and ~~2022,~~2021, respectively. The share repurchase program expires on December 31, 2023, and $102 remains available for future share repurchases as of ~~September~~June 30, ~~2022.~~2023.

Financing actions — We have taken advantage of competitive debt markets, eliminating our secured debt and extending and restructuring our senior note maturity schedule. Our current portfolio of unsecured senior notes is structured such that no more than ~~$400~~$464 of senior notes comes due in any calendar year, with no maturities until the second quarter of 2025. ~~In addition, we increased our~~We have a $1,150 revolving credit facility ~~in 2021 to $1,150 and extended its maturity to~~that matures on March ~~25, 2026.~~14, 2028. See Note 1210 to our consolidated financial statements in Item 1 of Part I for additional information.

Other Initiatives

Aftermarket opportunities — We have a global group dedicated to identifying and developing aftermarket growth opportunities that leverage the capabilities within our existing businesses – targeting increased future aftermarket sales. 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.

Selective acquisitions — Although 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.

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Acquisitions

Over the past several years we have actively grown our electric vehicle capabilities through multiple acquisitions, positioning us to deliver complete e-Propulsion systems with in-house electrodynamics. Our acquisitions of ~~Dana~~ TM4 Inc. ~~(formerly TM4 Inc.)~~(TM4), ~~Dana TM4 Italia S.r.l. (formerly~~ S.M.E. S.p.A.) (SME), ~~Dana (Beijing) Electric Motor Co., Ltd. (formerly~~ Prestolite E-Propulsion Systems (Beijing) ~~Limited)~~Limited (PEPS), Ashwoods Innovations ~~Ltd.~~Limited (Ashwoods), Oerlikon Drive Systems, Nordresa Motors, Inc., Rational Motion GmbH and Pi Innovo Holding Limited have enhanced our portfolio of core technologies including e-motors, power inverters, software and controls, and advance mechatronics. Our strategic partner, Hydro-Québec, owns 45% redeemable noncontrolling interests in the Dana TM4 ~~Inc., Dana TM4 Italia S.r.l., Dana (Beijing) Electric Motor Co., Ltd., and Ashwoods Innovations Ltd.~~joint venture entities. See Note 76 to our consolidated financial statements in Item ~~1 of Part I~~8 for additional information.

Trends in Our Markets

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.

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; cost and availability of end customer financing; 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. In 2020, all of our end-markets were impacted to varying degrees by the COVID pandemic, which initially resulted in lower demand driven by production shutdowns related to virus mitigation efforts in the regions we serve. During 2021, we generally saw improvement across all of our end markets despite production levels being muted by continued global supply chain disruptions driven in part by transportation inefficiencies and labor, commodity and semiconductor chip shortages. During 2022, we continued to see incremental improvements across our end markets despite continuing, but lessening, global supply chain disruptions.

Light vehicle markets — Our driveline business is weighted more heavily to the truck and SUV segments of the light-vehicle market versus the passenger-car segment. Our vehicle content is greater on rear-wheel drive, four-wheel drive, and all-wheel drive vehicles, as well as hybrid and electric vehicles. ~~The impact of the COVID pandemic in 2020 saw the global light-truck market contract by 13% from 2019 levels.~~ During ~~2021,~~2022, light-truck markets improved across all regions and were up 5%6% on a global basis compared to ~~2020.~~2021. The outlook for the full year of ~~2022~~2023 reflects global light-truck production ~~to be up 8%, with growth~~being relatively stable across all regions, ~~exhibiting a moderate rebound~~ as production constraints continue to ease, ~~inventory begins to~~vehicle inventories return to more normal levels, and constrained customer demand is fulfilled.

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 peaked at 345,000 trucks produced in 2019. Production~~During 2022, production of Class-8 trucks in ~~2020~~North America increased 24% over 2021 reflecting increased demand driven by strong transport and construction activity resulting from higher freight volumes and rates and increased fleet utilization levels. The strong demand was 38% below the record production in 2019 due to normal cycle dynamics and the impact of COVID. During 2021, production of Class-8 trucks increased 20% over 2020 as the impacts of COVID lessened and the economy exhibited improvement.muted by continued global supply chain disruptions. The outlook for ~~2022~~2023 is for ~~stronger~~continued strong demand with production ~~up 21% over the prior year~~slightly above 2022 levels driven by ~~continued improving economic outlook and cyclical growth.~~
solid order backlogs. Medium-duty truck production in North America experienced a ~~20% year- over-year decline from 2019 to 2020, primarily due to COVID. During 2021, production increased a~~ modest 3% ~~over 2020.~~year-over-year increase from 2021 to 2022. The outlook for ~~2022~~2023 is for a slight increase in production ~~to be flat with~~over the prior year. Outside of North America, production of ~~medium-and~~medium- and heavy-duty trucks in South America declined ~~22%~~3% in ~~2020 due to COVID and deteriorating economic conditions. During~~2022 as demand moderated following a significant ramp up in production in 2021 ~~production increased 76% over 2020 as~~with the ~~region recovered from the impact~~dissipation of the COVID pandemic ~~and~~in the ~~age of existing vehicles drove a replacement cycle for new trucks.~~region. The 2023 outlook for South America is for a 25% decrease in production from 2022, reflecting the impact of lower year-over-year demand resulting from higher borrowing rates and 2022 pre-buy activity in advance of transition to the Euro 6 emission standard. Production of medium- and heavy-duty trucks in Asia Pacific, driven by China and India, decreased 27% in 2022 compared to 2021 due to China experiencing COVID outbreaks in certain regions and India’s continued struggles to recover from the pandemic. The 2023 outlook for Asia Pacific is for a modest 1% increase in production from the prior year ~~as local economic conditions remain relatively stable. In contrast to the rest of the world, Asia Pacific,~~ driven by ~~China, did not experience lower truck production in 2020, but output slowed by 8% in 2021 as production matched lower demand, primarily driven by India where~~ the ~~recovery from the pandemic has been slower than in China. The 2022 outlook for Asia Pacific is for a 26% reduction in production from the prior year as China experiences COVID lockdowns and the Indian~~ market recovery ~~continues to lag.~~ in India gaining traction.

Off-highway markets — Our off-highway business has a large presence outside of North America, with ~~65%~~66% of its ~~2021~~2022 sales coming from products manufactured in Europe; however, a large portion of these products are utilized in vehicle production outside the region. The construction equipment segment of the off-highway market is 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, with 2020 production ending down an additional 10%.~~ The global construction equipment market ~~began~~continued to rebound in ~~2021~~2022 with production up ~~12% over 2020. The 2022 outlook has production demand in the global construction market showing continued strength with production increasing by~~ 10% over the prior year. The outlook for 2023 is for continued modest growth. End-user investment in the mining equipment segment is driven by prices for commodity products produced by underground mining. The global mining equipment market has been mostly stable over the past several years as industry participants have maintained vehicle inventory levels to match commodity output, and this trend is expected to continue in ~~2022.~~2023. The agriculture equipment market is the third of our key off-highway segments. Like the underground mining segment, investment in agriculture equipment is primarily driven by prices for farm commodities. ~~Continued low farm~~Farm commodity ~~prices drove~~price increases in 2022 spurred a ~~7% reduction in production in 2020. Farm subsidies in response to the global pandemic drove a 10%~~6% increase in ~~production during 2021.~~agriculture equipment production. The outlook for ~~2022~~2023 is for global end-market demand to ~~improve by 6%~~decrease slightly compared towith the prior ~~year, as farm subsidies are expected to continue to bolster the commodity market and drive the replacement of aging equipment.~~year.

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Foreign currency — With ~~54%~~57% of our ~~year-to-date 2022~~first half 2023 sales coming from outside the U.S., international currency movements can have a significant effect on our sales and results of operations. The euro zone countries accounted for ~~49%~~52% of our ~~year-to-date 2022~~first half 2023 non-U.S. sales, while India, Brazil ~~India~~ and China accounted for ~~11%~~10%, ~~10%~~8% and 9%8%, respectively. Although sales in South Africa are less than 5% of our non-U.S. sales, the rand has been volatile and significantly impacted sales from time to time. International currencies including the euro, Indian rupee, Chinese renminbi and South African rand, weakened against the U.S. dollar in the first ~~nine months~~half of ~~2022,~~2023, decreasing sales by ~~$292. A weaker euro, Thai baht and Indian rupee were partially offset by a stronger Brazilian real.~~$96.

Argentina has experienced significant inflationary pressures the past few years, contributing to significant devaluation of its currency among other economic challenges. Our Argentine operation supports our Light Vehicle operating segment. Our sales in Argentina for the first ~~nine months~~half of ~~2022~~2023 of approximately ~~$109~~$83 are 1%2% of our consolidated sales and our net asset exposure related to Argentina was approximately ~~$42,~~$53, including ~~$18~~$20 of net fixed assets, at ~~September~~June 30, ~~2022~~.2023. During the second quarter of 2018, we determined that Argentina's economy met the GAAP definition of a highly inflationary economy. In assessing Argentina's economy as highly inflationary we considered its three-year cumulative inflation rate along with other factors. As a result, effective July 1, 2018, the U.S. dollar is the functional currency for our Argentine operations, rather than the Argentine peso. Beginning July 1, 2018, peso-denominated monetary assets and liabilities are remeasured into U.S. dollars using current Argentine peso exchange rates with resulting translation gains or losses included in results of operations. Nonmonetary assets and liabilities are remeasured into U.S. dollar using historic Argentine peso exchange rates.

Commodity costs — The cost of our products may be significantly impacted by changes in raw material commodity prices, the most important to us being those of various grades of steel, aluminum, copper, brass and rare earth materials. The effects of changes in commodity prices are reflected directly in our purchases of commodities and indirectly through our purchases of products such as castings, forgings, bearings, batteries and component parts that include commodities. Most of our major customer agreements provide for the sharing of significant commodity price changes with those customers based on the movement in various published commodity indexes. ~~Whe~~reWhere such formal agreements are not present, we have historically been successful implementing price adjustments that largely compensate for the inflationary impact of material costs. Material cost changes will customarily have some impact on our financial results as customer pricing adjustments typically lag commodity price changes. Higher commodity prices decreased year-over-year ~~third-quarter and first-nine-months~~ earnings by $447 in ~~2022 by $113 and $396.~~2022. Material recovery pricing actions increased year-over-year ~~third-quarter~~earnings by $446 in 2022. Lower commodity prices increased earnings during the second quarter and ~~first-nine-months~~first half of 2023 by $27 and $35, respectively. Material cost recovery pricing actions increased earnings in ~~2022~~the second quarter and first half of 2023 by ~~$134~~$10 and ~~$398.~~$15, respectively.

Sales, Earnings and Cash Flow Outlook

2022 Outlook

2021

2020

2023 Outlook

2022

2021

Sales

$10,000 - $10,200
$ 8,945 $ 7,106
$10,450 - $10,950
$ 10,156 $ 8,945
Adjusted EBITDA

$700 - $740
$ 795 $ 593
$800 - $900
$ 700 $ 795
Net cash provided by operating activities
~6% of sales $ 158 $ 386 $560 - $610 $ 649 $ 158
Purchases of property, plant and equipment
~4% of sales $ 369 $ 326 ~5% of sales $ 440 $ 369
Adjusted Free Cash Flow
~2% of sales $ (211 ) $ 60
Free cash flow
$50 - $100 $ 209 $ (211 )

Adjusted EBITDA and ~~adjusted~~ 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-GA~~APnon-GAAP guidance.

Our 2023 sales outlook is $10,450 to $10,950, reflecting a modest improvement in global market demand, continued material and inflationary cost recoveries and $300 of net new business backlog. At our current sales outlook for 2023, we expect full year ~~2022~~2023 adjusted EBITDA range of $700 - $740 remains unchanged from our July 2022 outlook and reflects our expectation for continued commodity and non-material cost inflation through the balance of the year. The midpoint of our sales range remains unchanged from our July 2022 outlook at $10,100.to approximate $800 to $900. Adjusted EBITDA Margin is expected to be ~~7.1%, 180 basis-points lower than 2021,~~7.9% at the midpoint of our guidance range, a 100 basis-point improvement over 2022, reflecting higher margin net new business and ~~a modest~~the benefit ~~from~~of material ~~recovery and other pricing actions~~cost recoveries as commodity costs begin to abate being ~~more than~~partially offset by continued ~~commodity cost increases~~operational inefficiencies, driven by continuing global supply chain disruptions and ~~non-material inflation, including higher labor, energy,~~customer order volatility, and ~~transportation rates.~~increased investment to support our electrification strategy. We expect to generate ~~adjusted~~ free cash flow of approximately ~~$200, or 2% of sales for 2022, reflecting lower year-over-year use of cash for working capital, partially offset by lower year-over-year adjusted EBITDA,~~$75 at the midpoint of our guidance range reflecting the ~~range. We expect~~benefit of higher year-over-year adjusted EBITDA being largely offset by higher capital spending ~~will be higher than 2021, as we make investments~~ to support ~~awarded programs~~new business and ~~continue to invest~~our continued investment in ~~electrification.~~our electrification strategy.

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Summary Consolidated Results of Operations ~~(Third~~(Second Quarter, ~~2022~~2023 versus ~~2021)~~2022)

Three Months Ended September 30,

Three Months Ended June 30,

2022

2021

2023

2022

Dollars

% of Net Sales

Dollars

% of Net Sales

Increase/ (Decrease)

Dollars

% of Net Sales

Dollars

% of Net Sales

Increase/ (Decrease)

Net sales
$ 2,535 $ 2,204 $ 331 $ 2,748 $ 2,586 $ 162
Cost of sales
2,332 92.0 % 1,998 90.7 % 334 2,477 90.1 % 2,403 92.9 % 74
Gross margin
203 8.0 % 206 9.3 % (3 ) 271 9.9 % 183 7.1 % 88
Selling, general and administrative expenses
114 4.5 % 103 4.7 % 11 144 5.2 % 130 5.0 % 14
Amortization of intangibles
3 4 (1 ) 4 3 1
Restructuring charges, net
(1 ) 1 (2 ) 3 1 2
Impairment of goodwill
(191 ) (191 )
Other income (expense), net
3 (4 ) 7 4 10 (6 )
Earnings (loss) before interest and income taxes
(101 ) 94 (195 )
Earnings before interest and income taxes
124 59 65
Loss on extinguishment of debt
(1 ) (1 )
Interest income
2 2 — 5 2 3
Interest expense
32 31 1 39 32 7
Earnings (loss) before income taxes
(131 ) 65 (196 )
Earnings before income taxes
89 29 60
Income tax expense
31 20 11 55 18 37
Equity in earnings (loss) of affiliates
(1 ) 5 (6 ) 2 (1 ) 3
Net income (loss)
(163 ) 50 (213 )
Net income
36 10 26
Less: Noncontrolling interests net income
4 4 — 5 3 2
Less: Redeemable noncontrolling interests net loss
(79 ) (2 ) (77 ) 1 (1 ) 2
Net income (loss) attributable to the parent company
$ (88 ) $ 48 $ (136 )
Net income attributable to the parent company
$ 30 $ 8 $ 22

Sales — The following table shows changes in our sales by geographic region.

Three Months Ended

Three Months Ended

September 30,

Amount of Change Due To

June 30,

Amount of Change Due To

2022

2021
Increase/ (Decrease)
Currency Effects
Acquisitions (Divestitures)
Organic Change

2023

2022
Increase/ (Decrease)
Currency Effects
Acquisitions (Divestitures)
Organic Change

North America
$ 1,250 $ 1,050 $ 200 $ (1 ) $ — $ 201 $ 1,266 $ 1,274 $ (8 ) $ (1 ) $ — $ (7 )
Europe
698 651 47 (107 ) 154 947 787 160 160
South America
219 174 45 (3 ) 48 171 193 (22 ) (3 ) (19 )
Asia Pacific
368 329 39 (28 ) 67 364 332 32 (17 ) 49
Total
$ 2,535 $ 2,204 $ 331 $ (139 ) $ — $ 470 $ 2,748 $ 2,586 $ 162 $ (21 ) $ — $ 183

Sales in ~~2022~~the second quarter of 2023 were ~~$331~~$162 higher than in ~~2021.~~2022. Weaker international currencies decreased sales by ~~$139,~~$21, principally due to a weaker ~~euro,~~South African rand, Indian rupee ~~Thai baht,~~and Chinese renminbi, ~~and South African rand.~~partially offset by a stronger euro. The organic sales increase of ~~$470,~~$183, or ~~21%~~7%, resulted from improved global construction/mining ~~and agricultural~~equipment markets, improved commercial vehicle demand primarily in North America ~~full-frame~~and Europe, higher global light-truck and ~~commercial-vehicle demand, improved South America commercial-vehicle demand~~light-vehicle engine production and the conversion of sales backlog. Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by ~~$229.~~$126.

The North America organic sales ~~increase~~decrease of ~~19%~~1% was driven principally by a full-frame light-truck customer program that ended in 2022, partially offset by stronger light-~~, medium-~~ and heavy-duty truck production volumes, higher light-vehicle engine production levels and the conversion of sales backlog. ~~Third~~Second quarter ~~2022~~2023 full-frame light-truck production was up ~~20%~~6% while light-vehicle engine production was up ~~30%~~18% compared ~~with~~to the ~~third~~second quarter of ~~2021.~~2022. Year-over-year Class 8 truck production was up ~~35%~~11% while Classes 5-7 truck production was ~~up 6%~~down 2%. Excluding currency effects, sales in Europe were up ~~24%~~20% compared with ~~2021.~~2022. With our significant Off-Highway presence in the region, a stronger construction/mining ~~and agricultural markets were~~equipment market was a major factor. Organic sales in this operating segment were up ~~23%~~10% compared with the ~~third~~second quarter of ~~2021.~~2022. Sales in Europe also benefited from higher year-over-year light-truck and medium/heavy-truck production of 17% and 14%, respectively. Excluding currency effects, ~~third~~second quarter ~~2022~~ sales in South America ~~increased 28% compared to 2021 due primarily to improved light- and~~were 10% lower than 2022 reflecting lower medium/~~heavy-duty truck~~heavy-truck production. ~~Third quarter light-duty truck~~Year-over-year South America medium/heavy-truck production was ~~up 36% and medium/heavy-duty truck production was up 5% compared with~~30% lower than the ~~third~~second quarter of ~~2021.~~2022. Excluding currency effects, sales in Asia Pacific increased ~~20%~~15% compared to ~~2021~~2022 due to ~~stronger~~a strong construction/mining ~~and agricultural markets~~equipment market and higher ~~medium/heavy-duty truck related sales despite overall medium/heavy-duty truck~~light-truck production ~~volumes declining 9% compared to 2021.~~volumes.

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Table of Contents

Cost of sales and gross margin — Cost of sales for the ~~third~~second quarter of ~~2022~~2023 increased ~~$334,~~$74, or ~~17%~~3%, when compared to ~~2021.~~2022. Cost of sales as a percent of sales was ~~130~~280 basis points ~~higher~~lower than in the previous year. Incremental margins provided by increased sales volumes, ~~were more than offset by higher year-over-year~~material cost savings of $32, lower commodity costs of ~~$113,~~$27, lower premium freight of $14 and lower spending on electrification initiatives of $1 were partially offset by non-material inflationary cost impacts of ~~$104~~$84, higher warranty expense of $2, higher program launch costs of $9 and operational inefficiencies primarily ~~attributable~~attributed to continued global supply chain disruptions and frequent customer order changes made with little to no advance notification. Commodity ~~cost increases~~costs are ~~being~~primarily driven by ~~higher prices for~~ certain grades of steel and aluminum. Non-material inflation includes higher labor, energy and transportation rates.~~Continued material cost savings and supplier recoveries provided a partial offset, reducing costs of sales by approximately $21.~~

Gross margin of ~~$203~~$271 for the ~~third~~second quarter of ~~2022 decreased $3~~2023 increased $88 from ~~2021.~~2022. Gross margin as a percent of sales was ~~8.0%~~9.9% in the ~~third~~second quarter of ~~2022, 130~~2023, 280 basis points ~~lower~~higher than in ~~2021.~~2022. The ~~degradation~~improvement in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above. Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days. With commodity costs abating slightly during the ~~third~~second quarter of ~~2022,~~2023, gross margin was positively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Selling, general and administrative expenses (SG&A) — SG&A expenses in ~~2022~~the second quarter of 2023 were ~~$114 (4.5%~~$144 (5.2% of sales) as compared to ~~$103 (4.7%~~$130 (5.0% of sales) in ~~2021.~~the second quarter of 2022. SG&A expenses were ~~$11~~$14 higher in ~~2022~~the second quarter of 2023 primarily due to higher salaried employee wages and incentive compensation ~~travel expenses~~ and ~~professional fees.~~increased software technology investments.

Amortization of intangibles — Amortization expense was $4 in the second quarter of 2023 and $3 in ~~2022 and $4 in 2021.~~the second quarter of 2022. See Note 2 for additional information.

Restructuring charges, net — Net restructuring charges were ~~($1)~~$3 in the ~~third~~second quarter of ~~2022~~2023 and $1 in the ~~third~~second quarter of ~~2021.~~2022. See Note ~~4 for additional information.~~
~~Impairment of goodwill~~ ~~— During the third quarter of 2022, we recorded a $191 goodwill impairment charge. See Note~~ 3 ~~of our consolidated financial statements in Item 1 of Part I~~ for additional information.

Other income (expense), net — The following table shows the major components of other income (expense), net.

Three Months Ended

Three Months Ended

September 30,

June 30,

2022

2021

2023

2022

Non-service cost components of pension and OPEB costs
$ — $ (2 ) $ (3 ) $ (3 )
Foreign exchange gain
1
Government assistance
7
Foreign exchange gain (loss)
(3 ) 1
Strategic transaction expenses
(1 ) (3 ) (1 ) (1 )
Loss on investment in Hyliion
(6 )
Other, net
4 6 4 13
Other income (expense), net
$ 3 $ (4 ) $ 4 $ 10

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, and other strategic initiatives. Strategic transaction expenses in the second quarter of 2023 and 2022 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives. Strategic transaction expenses in 2021 were primarily attributable to our pursuit of the acquisition of a portion of the thermal-management business of Modine Manufacturing Company and certain other strategic initiatives.
We held 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 was included in marketable securities and carried at fair value with changes in fair value included in net income. During the third quarter of 2021, we sold all of our Hyliion shares.

Loss on extinguishment of debt — On June 9, 2023 we redeemed $200 of our April 2025 Notes. The $1 loss on extinguishment of debt is comprised of the write-off of previously deferred financing costs associated with the April 2025 Notes. See Note 10 for additional information.
Interest income and interest expense — Interest income was $5 in the second quarter of 2023 and $2 in ~~both 2022 and 2021.~~the second quarter of 2022. Interest expense increased from ~~$31 in 2021 to~~ $32 in the second quarter of2022 ~~primarily~~to $39 in the second quarter of 2023, due to higher average debt levels ~~partially offset by lower~~and higher interest rates on outstanding borrowings. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated ~~4.8%~~5.5% in ~~2022~~the second quarter of 2023 and ~~4.9%~~4.6% in ~~2021.~~the second quarter of 2022.

Income tax expense — We reported income tax expense of ~~$31~~$55 and ~~$20 for~~$18 the second quarter of 2023 and 2022, ~~and 2021,~~ respectively. Our effective tax rates were ~~(24)%~~62% and ~~31%~~62% for the ~~third~~second quarter of ~~2022~~2023 and ~~2021.~~2022. During the ~~third~~second quarter of 2022, we recorded a pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2. In addition, we recorded a tax benefit of $32 for U.S. tax credits generated. Also, during the third quarter of 2022,2023, we recorded tax expense of ~~$31~~$19 for ~~valuation allowances related to U.S. states driven by differences between our federal and state~~income tax ~~profile.~~reserves associated with prior tax years in foreign jurisdictions. Excluding this item, the effective tax rate would have been 40% for the second quarter of 2023. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries ~~nondeductible expenses and 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. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of ~~non-deductible~~nondeductible expenses.

Equity in earnings ~~(loss)~~ of affiliates — Net earnings (loss) from equity investments was earnings of $2 in the second quarter of 2023 and a loss of $1 in ~~2022 and earnings~~the second quarter of ~~$5 in 2021.~~ 2022. Net earnings (loss) from DDAC ~~was~~were de minimis in the second quarter of 2023 and a loss of $3 in ~~2022 and earnings~~the second quarter of $3 in 2021. The decrease in DDAC's earnings is due to lower year-over-year sales driven by significant 2021 medium- and heavy-duty vehicle pre-buy activity in advance of new emission standards going into effect in China and Chinese government incentives driving new construction and infrastructure projects in 2021, increasing the demand for medium- and heavy-duty vehicles. 2022.

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Summary Consolidated Results of Operations (Year-to-Date, ~~2022~~2023 versus ~~2021)~~2022)

Nine Months Ended September 30,

Six Months Ended June 30,

2022

2021

2023

2022

Dollars

% of Net Sales

Dollars

% of Net Sales

Increase/ (Decrease)

Dollars

% of Net Sales

Dollars

% of Net Sales

Increase/ (Decrease)

Net sales
$ 7,601 $ 6,672 $ 929 $ 5,392 $ 5,066 $ 326
Cost of sales
7,018 92.3 % 5,963 89.4 % 1,055 4,892 90.7 % 4,686 92.5 % 206
Gross margin
583 7.7 % 709 10.6 % (126 ) 500 9.3 % 380 7.5 % 120
Selling, general and administrative expenses
374 4.9 % 348 5.2 % 26 284 5.3 % 260 5.1 % 24
Amortization of intangibles
10 11 (1 ) 7 7 —
Restructuring charges, net
(1 ) 2 (3 ) 4 4
Impairment of goodwill
(191 ) (191 )
Other income (expense), net
15 (33 ) 48 9 12 (3 )
Earnings before interest and income taxes
24 315 (291 ) 214 125 89
Loss on extinguishment of debt
(24 ) 24 (1 ) (1 )
Interest income
6 6 — 9 4 5
Interest expense
95 99 (4 ) 73 63 10
Earnings (loss) before income taxes
(65 ) 198 (263 )
Earnings before income taxes
149 66 83
Income tax expense
67 56 11 85 36 49
Equity in earnings (loss) of affiliates
(1 ) 29 (30 )
Net income (loss)
(133 ) 171 (304 )
Equity in earnings of affiliates
3 3
Net income
67 30 37
Less: Noncontrolling interests net income
11 9 2 9 7 2
Less: Redeemable noncontrolling interests net loss
(81 ) (10 ) (71 ) (2 ) 2
Net income (loss) attributable to the parent company
$ (63 ) $ 172 $ (235 )
Net income attributable to the parent company
$ 58 $ 25 $ 33

Sales — The following table shows changes in our sales by geographic region.

Nine Months Ended

Six Months Ended

September 30,

Amount of Change Due To

June 30,

Amount of Change Due To

2022

2021

Increase/ (Decrease)

Currency Effects

Acquisitions (Divestitures)

Organic Change

2023

2022

Increase/ (Decrease)

Currency Effects

Acquisitions (Divestitures)

Organic Change

North America
$ 3,689 $ 3,157 $ 532 $ (2 ) $ 1 $ 533 $ 2,449 $ 2,439 $ 10 $ (2 ) $ - $ 12
Europe
2,286 2,136 150 (250 ) 400 1,867 1,588 279 (47 ) 326
South America
584 434 150 12 138 339 365 (26 ) (4 ) (22 )
Asia Pacific
1,042 945 97 (52 ) (9 ) 158 737 674 63 (43 ) 106
Total
$ 7,601 $ 6,672 $ 929 $ (292 ) $ (8 ) $ 1,229 $ 5,392 $ 5,066 $ 326 $ (96 ) $ - $ 422

Sales in ~~2022~~2023 were ~~$929~~$326 higher than in ~~2021.~~2022. Weaker international currencies decreased sales by ~~$292,~~$96, principally due to a weaker euro, Indian rupee, South African rand and ~~Thai baht, partially offset by a stronger Brazilian real.~~Chinese renminbi. The organic sales increase of ~~$1,229,~~$422, or ~~18%~~8%, resulted from improved global construction/mining ~~and agricultural~~equipment markets, improved commercial vehicle demand primarily in North America ~~full-frame~~and Europe, higher global light-truck and ~~commercial-vehicle demand, improved South America commercial-vehicle demand~~light-vehicle engine production and the conversion of sales backlog. Pricing actions and recoveries, including material commodity price and inflationary cost adjustments, increased sales by ~~$569.~~$236.

The North America organic ~~sale~~sales increase of ~~17%~~1% was driven principally by stronger light-, medium- and heavy-duty truck production volumes, higher light-vehicle engine production levels and the conversion of sales ~~backlog.~~backlog, largely offset by a full-frame light-truck customer program that ended in 2022. First ~~nine months 2022~~half 2023 full-frame light-truck production was up 9%5% while light-vehicle engine production was up ~~13%~~16% compared ~~with~~to the first ~~nine months~~half of ~~2021.~~2022. Year-over-year Class 8 truck production was up ~~19%~~14% while Classes 5-7 truck production was up ~~1% compared with the first nine months of 2021.~~7%. Excluding currency effects, ~~sales~~sale in Europe were up ~~19%~~21% compared with ~~2021.~~2022. With our significant Off-Highway presence in the region, a stronger construction/mining ~~and agricultural markets were~~equipment market was a major factor. Organic sales in this operating segment were up ~~23%~~14% compared with the first ~~nine months~~half of ~~2021.~~2022. Sales in Europe also benefited from higher year-over-year light-truck and medium/heavy-truck production of 20% and 19%, respectively. Excluding currency effects, first ~~nine months 2022~~half sales in South America ~~increased 32% compared to 2021 due primarily to improved light-duty truck production and continued strengthening of~~were 6% lower than 2022 reflecting lower medium/~~heavy-duty truck related sales despite overall~~heavy-truck production. Year-over-year South America medium/~~heavy- duty truck production volumes moderating. First nine months light-duty truck~~heavy-truck production was ~~up 15% while medium/heavy-duty truck production was up 1% compared with~~25% lower than the first ~~nine months~~half of ~~2021.~~2022. Excluding currency effects, ~~and the impact of divestitures,~~ sales in Asia Pacific increased ~~17%~~16% compared to ~~2021~~2022 due to ~~stronger~~a strong construction/mining ~~and agricultural markets~~equipment market and higher ~~medium/heavy-duty truck related sales despite overall medium/heavy-duty~~light-truck production ~~volumes declining 34% compared to the first nine months~~volumes.
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Table of ~~2021.~~
Contents

Cost of sales and gross margin — Cost of sales for the first ~~nine~~six months of ~~2022~~2023 increased ~~$1,055,~~$206, or ~~18%~~4%, when compared to ~~2021.~~2022. Cost of sales as a percent of sales was ~~290~~180 basis points ~~higher~~lower than in the previous year. Incremental margins provided by increased sales volumes, ~~were more than offset by higher year-over-year~~material cost savings of $61, lower commodity costs of ~~$396,~~$35, lower premium freight of $21 and lower spending on electrification initiatives of $8 were partially offset by non-material inflationary cost impacts of ~~$250~~$180, higher warranty expense of $14, higher program launch costs of $18 and operational inefficiencies primarily ~~attributable~~attributed to continued global supply chain disruptions and frequent customer order changes made with little to no advance notification. Commodity cost ~~increases~~ are ~~being~~primarily driven by ~~higher prices for~~ certain grades of steel and aluminum. Non-material inflation includes higher labor, energy and transportation rates. ~~Continued material cost savings and supplier recoveries provided a partial offset, reducing costs of sales by approximately $37.~~

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~~Table of Contents~~
Gross margin of ~~$583~~$500 for the first ~~nine~~six months of ~~2022 decreased $126~~2023 increased $120 from ~~2021.~~2022. Gross margin as a percent of sales was ~~7.7%~~9.3% in the first ~~nine~~six months of ~~2022, 290~~2023, 180 basis points ~~lower~~higher than in ~~2021.~~2022. The ~~degradation~~improvement in gross margin as a percent of sales was driven principally by the cost of sales factors referenced above along with recovery of non-material inflation typically not being specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.above. Material cost recovery mechanisms with our customers lag material cost changes by our suppliers by approximately 90 days. With commodity costs abating slightly during the ~~third quarter~~first half of ~~2022,~~2023, gross margin ~~experienced a modest benefit from~~was positively impacted by net material cost recoveries on both a dollar and percentage basis. The recovery of non-material inflation is not specifically provided for in our current contracts with customers resulting in prolonged negotiations and indeterminate recoveries.

Selling, general and administrative expenses (SG&A) — SG&A expenses in ~~2022~~2023 were ~~$374 (4.9%~~$284 (5.3% of sales) as compared to ~~$348 (5.2%~~$260 (5.1% of sales) in ~~2021.~~2022. SG&A expenses were ~~$26~~$24 higher in ~~2022~~2023 primarily due to higher salaried employee wages and incentive compensation, increased software technology investments and travel ~~expenses and professional fees.~~expenses.

Amortization of intangibles — Amortization expense was $7 in both 2023 and 2022. See Note 2 for additional information.
Restructuring charges, net — ~~Amortization expense was $10 in 2022 and $11 in 2021.~~
~~Restructuring charges, net~~ ~~— N~~etNet restructuring charges were ~~($1)~~$4 in the first ~~nine~~six months of ~~2022 and $2 in the first nine months of 2021.~~2023. See Note 43 for additional information.
~~Impairment of goodwill~~ ~~— During the third quarter of 2022, we recorded a $191 goodwill impairment charge. See Note 3 of our consolidated financial statements in Item 1 of Part I for additional information.~~

Other income (expense), net — The following table shows the major components of other income (expense), net.

Nine Months Ended

Six Months Ended

September 30,

June 30,

2022

2021

2023

2022

Non-service cost components of pension and OPEB costs
$ (3 ) $ (7 ) $ (6 ) $ (3 )
Government assistance
8
Foreign exchange gain
4 2 1 4
Strategic transaction expenses
(6 ) (11 ) (2 ) (5 )
Loss on investment in Hyliion
(20 )
Loss on disposal group held for sale
(7 )
Loss on de-designation of fixed-to-fixed cross currency swaps
(9 )
Other, net
20 19 8 16
Other income (expense), net
$ 15 $ (33 ) $ 9 $ 12

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, and other strategic initiatives. Strategic transaction expenses in 2023 and 2022 were primarily attributable to investigating potential acquisitions and business ventures and other strategic initiatives. Strategic transaction expenses in 2021 were primarily attributable to our pursuit of the acquisition of a portion of the thermal-management business of Modine Manufacturing Company and certain other strategic initiatives.
We held 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 was included in marketable securities and carried at fair value with changes in fair value included in net income. During the third quarter of 2021, we sold all of our Hyliion shares.
In conjunction with our acquisition of Oerlikon Drive Systems, we acquired a controlling financial interest in a joint venture in China. We were required to divest our interest in this joint venture as it violates competitive restrictions of another of our China joint venture shareholder agreements. During the first quarter of 2021, we recorded an impairment charge of $7, as we determined the carrying value of the disposal group exceeded its fair value less costs to sell. We completed the disposal of this business in April 2021.
We had previously entered into fixed-to-fixed cross currency swaps as a hedge against our June 2026 Notes. In June 2021, we redeemed all of the June 2026 Notes and de-designated the fixed-to-fixed cross currency swaps. See Note 13 for additional information.

Loss on extinguishment of debt — On June 9, 2023 we redeemed $200 of our April 2025 Notes. The $1 loss on extinguishment of debt is comprised of the write-off of previously deferred financing costs associated with the April 2025 Notes. See Note 10 for additional information.
Interest income and interest expense — Interest income was $6$9 in ~~both 2022~~2023 and ~~2021.~~$4 in 2022. Interest expense ~~decreased~~increased from ~~$99 in 2021 to $95~~$63 in 2022 ~~primarily~~to $73 in 2023, due to ~~lower~~higher average debt levels and higher interest rates on outstanding ~~borrowings, partially offset by higher debt levels.~~borrowings. Average effective interest rates, inclusive of amortization of debt issuance costs, approximated ~~4.7% in 2022 and~~ 5.3% in ~~2021.~~2023 and 4.6% in 2022.

Income tax expense — We reported income tax expense of ~~$67~~$85 and ~~$56~~$36 for ~~the first nine months of~~2023 and 2022, ~~and 2021,~~ respectively. Our effective tax rates were ~~(103)%~~57% and ~~28%~~55% for the first ~~nine~~six months of ~~2022~~2023 and ~~2021.~~2022. During the ~~third~~second quarter of 2022, we recorded a pre-tax goodwill impairment charge of $191 with an associated income tax benefit of $2. In addition, we recorded a tax benefit of $32 for U.S. tax credits generated. Also, during the third quarter of 2022,2023, we recorded tax expense of ~~$31~~$19 for ~~valuation allowances related to U.S. states driven by differences between our federal and state~~income tax ~~profile.~~reserves associated with prior tax years in foreign jurisdictions. Excluding this item, the effective tax rate would have been 44% for the 2023 six-month period. Our effective income tax rates vary from the U.S. federal statutory rate of 21% due to establishment, release and adjustment of valuation allowances in several countries ~~nondeductible expenses and 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. The effective income tax rate may vary significantly due to fluctuations in the amounts and sources, both foreign and domestic, of pretax income and changes in the amounts of ~~non-deductible~~nondeductible expenses.

Equity in earnings ~~(loss)~~ of affiliates — Net earnings from equity investments was $3 in 2023 and de minimis in 2022. Net earnings (loss) from ~~equity investments~~DDAC was de minimis in 2023 and was a loss of $1$2 in 2022 and earnings of $29 in 2021. Equity in earnings from DDAC was a loss of $5 in 2022 and earnings of $24 in 2021. The decrease in DDAC's earnings is due to lower year-over-year sales driven by significant 2021 medium- and heavy-duty vehicle pre-buy activity in advance of new emission standards going into effect in China and Chinese government incentives driving new construction and infrastructure projects in 2021, increasing the demand for medium- and heavy-duty vehicles.2022.

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Table of Contents

Segment Results of Operations ~~(2022~~(2023 versus ~~2021)~~2022)

Light Vehicle

Three Months

Nine Months

Three Months

Six Months

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

2021
$ 918 $ 54 5.9 % $ 2,799 $ 241 8.6 %
2022
$ 1,028 $ 33 3.2 % $ 2,013 $ 64 3.2 %
Volume and mix
90 20 199 34 4 2 (26 ) (7 )
Divestitures
(8 )
Product line transfer
(20 ) (2 ) (59 ) (6 )
Performance
88 (9 ) 185 (141 ) 48 33 75 63
Currency effects
(29 ) (3 ) (56 ) (4 ) (14 ) (2 ) (34 ) (5 )
2022
$ 1,047 $ 60 5.7 % $ 3,060 $ 124 4.1 %
2023
$ 1,066 $ 66 6.2 % $ 2,028 $ 115 5.7 %

Light Vehicle sales in the ~~third~~second quarter ~~2022,~~of 2023, exclusive of currency effects, ~~and the product line transfer to Commercial Vehicle,~~ were ~~19%~~5% higher than ~~2021~~2022 reflecting ~~generally~~ stronger global markets, ~~cost recovery actions and~~ the conversion of sales ~~backlog.~~backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a customer program ending in 2022. Year-over-year North America full-frame light-truck production increased ~~20%~~6% in this year’s ~~third~~second quarter while light-truck production in Europe, South America and Asia Pacific increased ~~23%~~17%, ~~36%~~15% and ~~24%~~20%, respectively. Light Vehicle sales in the first ~~nine months~~half of ~~2022,~~2023, exclusive of currency effects, ~~the impact of divestitures and the product line transfer to Commercial Vehicle,~~ were ~~14%~~2% higher than ~~2021~~2022 reflecting stronger global markets, ~~in all regions,~~the benefit of net customer pricing and cost recovery actions and the conversion of sales ~~backlog.~~backlog, partially offset by a customer program ending in 2022. Year-over-year North America full-frame light-truck production increased 9%5% in this year’s first half while light-truck production in Europe, South America and Asia Pacific increased 2%20%, ~~15%~~17% and 7%13%, respectively. Net customer pricing and cost recovery actions increased year-over-year sales by ~~$88~~$48 and ~~$185~~$75 in this year’s ~~third~~second quarter and first ~~nine months,~~half, respectively.

Light Vehicle ~~third-quarter 2022~~second-quarter and first-half 2023 segment EBITDA increased ~~by $6~~$33 and $51, respectively, from ~~last year, with first-nine-months earnings lower by $117.~~the comparable periods of 2022. Higher sales volumes provided a year-over-year earnings benefit of ~~$20 (22% incremental margin) and $34 (17%~~$2 (50% incremental margin) in the ~~third~~second quarter ~~and~~of 2023. Lower sales volumes decreased year-over-year earnings by $7 (27% decremental margin) in the first ~~nine months~~half of ~~2022.~~2023. Year-over-year performance-related earnings ~~decreases~~increases in the ~~third~~second quarter were driven by inflationary cost increases of $41, operational inefficiencies of $27, commodity cost increases of $27, higher program launch costs of $5, higher incentive compensation of $3 and higher warranty costs of $2. Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of ~~$88, higher~~$48, commodity cost decreases of $21, material cost savings ~~and supplier recoveries~~ of $7$11 and lower premium freight costs of $5. Partially offsetting these performance-related earnings increases were inflationary cost increases of $38, operational inefficiencies of $5, higher program launch costs of $4, higher incentive compensation of $4 and higher spending on electrification initiatives of $1. The year-over-year performance-related earnings ~~decrease~~increases in the first ~~nine months was~~half were driven by commodity cost increases of $135, operational inefficiencies of $88, inflationary cost increases of $89, higher program launch costs of $9, higher incentive compensation of $3, lower material cost savings and supplier recoveries of $3 and higher premium freight costs of $1. Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of ~~$185~~$75, commodity cost decreases of $44, material cost savings of $20, operational efficiencies of $13 and lower ~~warranty~~premium freight costs of ~~$2.~~$6. Partially offsetting these performance-related earnings increases were inflationary cost increases of $74, higher program launch costs of $8, higher warranty expense of $7 and higher incentive compensation expense of $6.

Commercial Vehicle

Three Months

Nine Months

Three Months

Six Months

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

2021
$ 396 $ 20 5.1 % $ 1,132 $ 53 4.7 %
2022
$ 507 $ 10 2.0 % $ 970 $ 20 2.1 %
Volume and mix
57 8 163 28 (3 ) 3 40 10
Product line transfer
20 2 59 6
Performance
46 (11 ) 138 (48 ) 28 16 51 18
Currency effects
(14 ) (1 ) (17 ) (1 ) (6 ) (1 ) (13 ) (3 )
2022
$ 505 $ 18 3.6 % $ 1,475 $ 38 2.6 %
2023
$ 526 $ 28 5.3 % $ 1,048 $ 45 4.3 %

Commercial ~~Vehicles~~Vehicle sales in the ~~third~~second quarter ~~and first nine months~~ of ~~2022,~~2023, exclusive of currency effects, ~~and the production line transfer from Light Vehicle,~~ were ~~26%~~5% higher than ~~the same periods of 2021~~2022 reflecting ~~continued strengthening of medium/heavy-duty truck production volumes, cost recovery actions~~improved North America and Europe markets, the conversion of sales ~~backlog.~~backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market. Year-over-year North America Class 8 production was up ~~35%~~11% while Classes 5-7 ~~were up 6%~~was down 2% in this year’s ~~third~~second quarter. Year-over-year medium/heavy-truck production in Europe ~~and~~was up 14% while medium/heavy-truck production in South America ~~were up 30% and 5%, respectively, while production in Asia Pacific~~ was down 30%. Commercial Vehicle sales in the first half of 2023, exclusive of currency effects, were 9% ~~in this year’s third quarter.~~higher than 2022 reflecting improved North America and Europe markets, the conversion of sales backlog and the benefit of net customer pricing and cost recovery actions, partially offset by a weaker South America market. Year-over-year North America Class 8 production was up ~~19%~~14% while Classes 5-7 ~~were flat~~was up 7% in this year’s first ~~nine months.~~half. Year-over-year medium/heavy-truck production in Europe ~~and~~was up 19% while medium/heavy-truck production in South America ~~were up 4% and 1%, respectively, while production in Asia Pacific~~ was down ~~34% in this year's first nine months.~~25%. Net customer pricing and cost recovery actions increased year-over-year sales by ~~$46~~$28 and ~~$138~~$51 in this year’s ~~third~~second quarter and first ~~nine months,~~half, respectively.

Commercial Vehicle ~~third-quarter 2022~~second-quarter and first-half 2023 segment EBITDA ~~decreased by $2~~increased $18 and $25 from ~~last year, with first-nine-months~~the comparable periods of 2022. Year-over-year second-quarter earnings improved $3 on lower ~~by $15.~~sales volumes due to improved product mix. Higher sales volumes provided a year-over-year earnings benefit of ~~$8 (14% incremental margin) and $28 (17%~~$10 (25% incremental margin) in the ~~third quarter and~~ first ~~nine months~~half of ~~2022.~~2023. Year-over-year performance-related earnings ~~decreases~~increases in the ~~third~~second quarter were driven by commodity cost increases of $32, inflationary cost increases of $19, operational inefficiencies of $6, higher premium freight costs of $3, higher incentive compensation of $2 and higher program launch costs of $1. Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of ~~$46 and~~$28, material cost savings of ~~$6. The year-over-year~~$8, lower spending on electrification initiatives of $4 and lower premium freight costs of $3. Partially offsetting these performance-related earnings ~~decrease in the first nine months was driven by commodity cost~~ increases were operational inefficiencies of ~~$97,~~$9, inflationary cost increases of ~~$51, operational inefficiencies of $51, higher incentive compensation of $3 and~~$7, higher program launch costs of $4, commodity cost increases of $3, higher incentive compensation expense of $3 and higher warranty costs of $1. ~~Partially offsetting these~~Year-over-year performance-related ~~decreases~~earnings increases in the first half were driven by net customer pricing and cost recovery ~~actions~~ of ~~$138,~~$51, material cost savings of ~~$15~~$17, lower spending on electrification initiatives $13 and lower premium freight costs of $6. Partially offsetting these performance-related earnings increases were operational inefficiencies of $37, inflationary cost increases of $15, higher program launch costs of $6, commodity cost increases of $5, higher incentive compensation expense of $4 and higher warranty costs of $2.

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Table of Contents

Off-Highway

Three Months

Nine Months

Three Months

Six Months

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

2021
$ 627 $ 100 15.9 % $ 1,931 $ 276 14.3 %
2022
$ 768 $ 100 13.0 % $ 1,512 $ 200 13.2 %
Volume and mix
66 12 252 59 38 9 128 32
Performance
78 (11 ) 200 (21 ) 36 23 83 24
Currency effects
(77 ) (10 ) (177 ) (23 ) (1 ) (39 ) (7 )
2022
$ 694 $ 91 13.1 % $ 2,206 $ 291 13.2 %
2023
$ 842 $ 131 15.6 % $ 1,684 $ 249 14.8 %

Off-Highway sales in the ~~third~~second quarter and first ~~nine months~~half of ~~2022,~~2023, exclusive of currency effects, were ~~23%~~10% and 14%, respectively, higher than the same periods of ~~2021~~2022 reflecting ~~improved~~strong global markets, ~~cost recovery actions and~~ the conversion of sales ~~backlog.~~backlog and the benefit of net customer pricing and cost recovery actions. Year-over-year global construction/mining ~~and~~equipment markets increased 11% while global agricultural equipment markets ~~reflected marked improvement.~~were relatively stable with production decreasing 2% in this year’s second quarter. Year-over-year global construction/mining equipment markets increased 11% while global agricultural equipment markets were relatively stable with production decreasing 2% in this year’s first half. Net customer pricing and cost recovery actions ~~further~~ increased year-over-year sales by ~~$78~~$36 and ~~$200~~$83 in this year’s ~~third~~second quarter and first ~~nine months,~~half, respectively.

Off-Highway ~~third-quarter 2022~~second-quarter and first-half 2023 segment EBITDA ~~decreased by $9~~increased $31 and $49, respectively, from ~~last year, with first-nine-months earnings higher by $15.~~the comparable periods of 2022. Higher sales volumes provided a year-over-year earnings benefit of ~~$12 (18%~~$9 (24% incremental margin) and ~~$59 (23%~~$32 (25% incremental margin) in the ~~third~~second quarter and first ~~nine months~~half of ~~2022.~~2023, respectively. Year-over-year performance-related earnings ~~decreases~~increases in the ~~third~~second quarter were driven by commodity cost increases of $37, inflationary cost increases of $36, operational inefficiencies of $18, higher incentive compensation of $3 and higher warranty costs of $1. Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of ~~$78 and~~$36, material cost savings of ~~$6. The year-over-year~~$10, commodity cost decreases of $6 and lower premium freight costs of $4. Partially offsetting these performance-related earnings ~~decrease in the first nine months was driven by commodity cost~~ increases ~~of $109,~~were inflationary cost increases of ~~$90,~~$24, operational inefficiencies of ~~$33, higher premium freight costs of $6 and~~$4, higher incentive compensation expense of ~~$3. Partially offsetting these~~$3, higher warranty expenses of $1 and higher spending on electrification initiatives of $1. Year-over-year performance-related ~~decreases~~earnings increases in the first half were driven by net customer pricing and cost recovery actions of ~~$200 and~~$83, material cost savings of ~~$20.~~$18 and lower premium freight costs of $7. Partially offsetting these performance-related earnings increases were inflationary cost increases of $64, operational inefficiencies of $10, higher warranty expenses of $5, higher incentive compensation expense of $4 and higher spending on electrification initiatives of $1.

Power Technologies

Three Months

Nine Months

Three Months

Six Months

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

Sales

Segment EBITDA

Segment EBITDA Margin

2021
$ 263 $ 38 14.4 % $ 810 $ 111 13.7 %
2022
$ 283 $ 21 7.4 % $ 571 $ 50 8.8 %
Volume and mix
28 5 46 9 18 1 44 5
Performance
17 (20 ) 46 (45 ) 14 (3 ) 27 (12 )
Currency effects
(19 ) (2 ) (42 ) (4 ) (1 ) (10 ) (1 )
2022
$ 289 $ 21 7.3 % $ 860 $ 71 8.3 %
2023
$ 314 $ 19 6.1 % $ 632 $ 42 6.6 %

Power Technologies primarily serves the light-vehicle market but also sells product to the medium/heavy-truck and off-highway markets. Power Technologies sales in the ~~third~~second quarter and first ~~nine months~~half of ~~2022,~~2023, exclusive of currency effects, were ~~17%~~11% and ~~11%~~12%, respectively, higher than the same ~~period~~periods of ~~2021~~2022 reflecting an improved North ~~American market, cost recovery actions~~America and Europe markets, the conversion of sale ~~backlog.~~backlog and the benefit of net customer pricing and cost recovery actions. Year-over-year North ~~American~~America light-vehicle engine production was up ~~30%~~18% and ~~13%~~16% compared to the ~~third~~second quarter and first ~~nine months~~half of ~~2021,~~2022, respectively. Year-over-year Europe light-vehicle engine production was up ~~24%~~8% and ~~down 1%~~12% compared to the ~~third~~second quarter and first ~~nine months~~half of ~~2021,~~2022, respectively. Net customer pricing and cost recovery actions ~~further~~ increased year-over-year sales by ~~$17~~$14 and ~~$46~~$27 in this year’s ~~third~~second quarter and first ~~nine months,~~half, respectively.

Power Technologies ~~third-quarter 2022~~second-quarter and first-half 2023 segment EBITDA decreased ~~by $17~~$2 and $8, respectively, from ~~last year, with first-nine-months earnings lower by $40.~~the comparable periods of 2022. Higher sales volumes provided a year-over-year earnings benefit of ~~$5 (18%~~$1 (6% incremental margin) and ~~$9 (20%~~$5 (11% incremental margin) in the ~~third~~second quarter and first ~~nine months~~half of ~~2022.~~2023, respectively. Year-over-year performance-related ~~earnings~~ decreases in the ~~third~~second quarter were driven by ~~commodity~~inflationary cost increases of ~~$17,~~$11, operational inefficiencies of $9, ~~inflationary cost increases of $8,~~ higher ~~program launch costs~~incentive compensation expense of $2, higher ~~incentive compensation~~spending on electrification initiatives of $2 and higher ~~warranty~~program launch costs of $1. Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of ~~$17 and~~$14, commodity cost decreases of $3, material cost savings of $3 and lower premium freight costs of $2. ~~The year-over-year~~Year-over-year performance-related ~~earnings decrease~~decreases in the ~~first nine months was~~second half were driven by inflationary cost increases of $21, operational inefficiencies of $13, commodity cost increases of ~~$55, inflationary cost increases of $20, operational inefficiencies of $12,~~$4, higher program launch costs of $4, higher ~~warranty costs of $2, higher~~ incentive compensation expense of $2$3 and higher ~~premium freight costs~~spending on electrification initiatives of ~~$1.~~$2. Partially offsetting these performance-related decreases were net customer pricing and cost recovery actions of ~~$46 and~~$27, material cost savings of ~~$5.~~$6 and lower premium freight costs of $2.

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Table of Contents

Non-GAAP Financial Measures

Adjusted EBITDA

We have defined adjusted EBITDA as net income 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 to adjusted EBITDA.

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Net income (loss)
$ (163 ) $ 50 $ (133 ) $ 171
Net income
$ 36 $ 10 $ 67 $ 30
Equity in earnings (loss) of affiliates
(1 ) 5 (1 ) 29 2 (1 ) 3
Income tax expense
31 20 67 56 55 18 85 36
Earnings (loss) before income taxes
(131 ) 65 (65 ) 198
Earnings before income taxes
89 29 149 66
Depreciation and amortization
94 98 287 290 100 96 197 193
Restructuring charges, net
(1 ) 1 (1 ) 2 3 1 4
Interest expense, net
30 29 89 93 34 30 64 59
Loss on extinguishment of debt
24 1 1
Loss on investment in Hyliion
6 20
Loss on disposal group held for sale
7
Loss on de-designation of fixed-to-fixed cross currency swaps
9
Impairment of goodwill
191 191
Distress supplier costs
4 12
Other*
9 11 23 34 12 6 20 14
Adjusted EBITDA
$ 192 $ 210 $ 524 $ 677 $ 243 $ 162 $ 447 $ 332
*
Other includes stock compensation expense, non-service cost components of pension and OPEB costs, strategic transaction expenses and other items. See Note 1917 to our consolidated financial statements in Item 1 of Part I for additional details.

~~Free Cash Flow and Adjusted~~ Free Cash Flow

We have defined free cash flow as cash provided by (used in) operating activities less purchases of property, plant and equipment. We ~~have defined adjusted~~believe free cash flow ~~as cash provided by (used in) operating activities excluding discretionary pension contributions less purchases of property, plant and equipment. We believe these measures are~~is useful to investors in evaluating the operational cash flow of the company inclusive of the spending required to maintain the operations. Free cash flow ~~and adjusted free cash flow are~~is not intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities reported in 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 (used in) operating activities to ~~adjusted~~ free cash flow.

Three Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

September 30,

September 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Net cash provided by operating activities
$ 171 $ (75 ) $ 307 $ 19 $ 256 $ 257 $ 86 $ 136
Purchases of property, plant and equipment
(94 ) (95 ) (300 ) (228 ) (122 ) (90 ) (242 ) (206 )
Free cash flow
77 (170 ) 7 (209 ) 134 167 (156 ) (70 )
Discretionary pension contribution
— — — —
Adjusted free cash flow
$ 77 $ (170 ) $ 7 $ (209 )

35
Table of Contents

Liquidity

The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, at ~~September~~June 30, ~~2022:~~2023:

Cash and cash equivalents
$ 371 $ 484
Less: Deposits supporting obligations
(1 ) —
Available cash
370 484
Additional cash availability from Revolving Facility
934 1,134
Marketable securities
13
Total liquidity
$ 1,317 $ 1,618

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. Marketable securities are included as a component of liquidity as these investments can be readily liquidated at our discretion. We had availability of ~~$934~~$1,134 at ~~September~~June 30, ~~2022~~2023 under the Revolving Facility after deducting ~~$195~~$16 of ~~outstanding borrowings and $21 of outstanding~~outstanding letters of credit.

The components of our ~~September~~June 30, ~~2022~~2023 consolidated cash balance were as follows:

U.S.

Non-U.S.

Total

U.S.

Non-U.S.

Total

Cash and cash equivalents
$ — $ 297 $ 297 $ — $ 396 $ 396
Cash and cash equivalents held as deposits
1 1 -
Cash and cash equivalents held at less than wholly-owned subsidiaries
2 71 73 4 84 88
Consolidated cash balance
$ 2 $ 369 $ 371 $ 4 $ 480 $ 484

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 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.

On March 14, 2023, we amended our credit and guaranty agreement, extending its maturity to March 14, 2028.
At ~~September~~June 30, ~~2022,~~2023, we were in compliance with the covenants of our financing agreements. Under the Revolving Facility and our senior notes, we are required to comply with certain incurrence-based covenants customary for facilities of these types. The incurrence-based covenants in the Revolving Facility permit us to, among other things, (i) issue foreign subsidiary indebtedness, (ii) incur general secured indebtedness subject to a pro forma first lien net leverage ratio not to exceed 1.50:1.00 in the case of first lien debt and a pro forma secured net leverage ratio of 2.50:1.00 in the case of other secured debt and (iii) incur additional unsecured debt subject to a pro forma total net leverage ratio not to exceed 3.50:1.00, tested at the time of incurrence. We may also make dividend payments in respect of our common stock as well as certain investments and acquisitions subject to a pro forma total net leverage ratio of 2.75:1.00. In addition, the Revolving Facility is subject to a financial covenant requiring us to maintain a first lien net leverage ratio not to exceed 2.00:1.00. The indentures governing the senior notes include other incurrence-based covenants that may subject us to additional specified limitations.

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. In addition, we may enter into sale-leaseback transactions related to certain of our real estate holdings and factor receivables. 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 financing and governance documents.

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.

36
Table of Contents

Cash Flow

The following table summarizes our consolidated statement of cash flows:

Nine Months Ended

Six Months Ended

September 30,

June 30,

2022

2021

2023

2022

Cash used for changes in working capital
$ (21 ) $ (501 ) $ (172 ) $ (84 )
Other cash provided by operations
328 520 258 220
Net cash provided by operating activities
307 19 86 136
Net cash used in investing activities
(297 ) (260 ) (245 ) (215 )
Net cash provided by (used in) financing activities
138 (71 )
Net increase (decrease) in cash, cash equivalents and restricted cash
$ 148 $ (312 )
Net cash provided by financing activities
209 152
Net increase in cash, cash equivalents and restricted cash
$ 50 $ 73

Operating activities — Exclusive of working capital, other cash provided by operations was ~~$328~~$258 in ~~2022~~2023 and ~~$520~~$220 in ~~2021.~~2022. The year-over-year ~~decrease~~increase is primarily attributable to higher operating earnings in 2023, partially offset by lower ~~operating earnings.~~year-over-year dividends received from equity-method investments of $29.

Working capital used cash of ~~$21~~$172 and ~~$501~~$84 in ~~2022~~2023 and ~~2021.~~2022. Cash of ~~$345~~$246 and ~~$253~~$323 was used to finance receivables in ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~higher level~~use of cash ~~used~~ to finance receivables in ~~2022~~both periods is ~~due to higher year-over-year third~~primarily driven by second quarter sales driven by improved global construction/mining and agricultural markets, improved North America full-frame light-truck and commercial-vehicle demand and improved South America commercial-vehicle demand.exceeding first quarter sales in both years. Cash of ~~$152~~$107 and ~~$441~~$85 was used to fund higher inventory levels in 2023 and 2022, ~~and 2021,~~ respectively. ~~We are carrying higher levels of inventory to mitigate continued global-supply-chain disruptions, ensuring continuous supply for our customers.~~ Increases in accounts payable and other net liabilities provided cash of ~~$476~~$181 and ~~$193~~$324 in 2023 and 2022, ~~and 2021,~~ respectively.
Investing activities — Expenditures for property, plant and equipment were ~~$300~~$242 and ~~$228~~$206 during ~~2022~~2023 and ~~2021.~~2022. The increase in capital spending during ~~2022~~2023 is in support of awarded next generation programs and new business. During 2021, we paid $17, net of cash acquired, to acquire an additional 51% interest in Pi Innovo. The acquisition of the additional ownership interest provided us with a 100% ownership interest in Pi Innovo. During 2021, we acquired a 1% ownership interest in Switch Mobility Limited for $18. During 2022, purchases of marketable securities were largely funded by proceeds from sales and maturities of marketable securities. During 2021, we sold all of our Hyliion shares for $29. In 2021 we de-designated the fixed-to-fixed cross currency swaps associated with our June 2026 Notes and settled certain of the fixed-to-fixed cross currency swaps resulting in a net cash outflow of $22.
Financing activities — During ~~2022~~2023 and ~~2021,~~2022, we had net repayments of $25 and net borrowings of $195 ~~and $52~~ on our Revolving Facility. During ~~2021,~~2023, we completed the issuance of ~~€325~~€425 of our July ~~2029~~2031 Notes, ~~and $400~~paying financings costs of $7. Also during 2023, we redeemed $200 of our ~~September 2030 Notes, paying financing costs of $11. Also during 2021, we redeemed all $375 of our June 2026 Notes and all $425 of our December 2024 Notes, paying redemption premiums of $21.~~April 2025 Notes. During ~~2021,~~2023, we paid financing costs of $2 to amend our credit and guaranty agreement, ~~increasing~~extending the Revolving Facility ~~to $1,150 and extending its~~ maturity to March ~~25, 2026.~~14, 2028. We used cash of ~~$43 and $44~~$29 for dividend payments to common stockholders during ~~2022~~both 2023 and ~~2021.~~2022. We used cash of $25 ~~and $23~~ to repurchase common shares under our share repurchase program during ~~2022 and 2021.~~2022. Distributions to noncontrolling interests totaled $8$3 in 2023 and ~~2022 and $10~~$2 in ~~2021. Hydro-Qué~~2022. Hydro-Québec made cash contributions to Dana TM4 of ~~$30~~$17 in ~~2022~~2023 and $6$7 in 2021. During 2021, we sold a portion of our ownership interest in Tai Ya Investment (HK) Co., Limited (Tai Ya) to China Motor Corporation, reducing our ownership interest in Tai Ya to 50%. In conjunction with the decrease in our ownership interest, the Tai Ya shareholders agreement was amended, eliminating our controlling financial interest in Tai Ya. Upon our loss of control, we deconsolidated Tai Ya, including $6 of cash and cash equivalents.2022.

37
Table of Contents

Off-Balance Sheet Arrangements

There have been no material changes at ~~September~~June 30, ~~2022~~2023 in our off-balance sheet arrangements from those reported or estimated in the disclosures in Item 7 of our ~~2021~~2022 Form 10-K.

Contractual Obligations

~~During~~On May 24, 2023, Dana Financing Luxembourg S.à.r.l. (Dana Financing), a wholly-owned subsidiary of Dana, completed the ~~second quarter~~sale of ~~2022,~~€425 ($458 as of May 24, 2023) in senior unsecured notes (July 2031 Notes) at 8.500%. Interest on the notes is payable on January 15 and July 15 of each year, beginning on January 15, 2024. The July 2031 Notes will mature on July 15, 2031. On June 9, 2023 we ~~commenced two operating leases with minimum lease payments totaling $56 over their respective noncancelable lease terms which expire in September 2035~~redeemed $200 of our April 2025 Notes at a price equal to 100.00% plus accrued and ~~January 2037. There have been no other material changes in~~unpaid interest. See Note 10 to our ~~contractual obligations from those disclosed~~consolidated financial statements in Item 71 of ~~our 2021 Form 10-K.~~Part I for additional information.

Contingencies

For a summary of litigation and other contingencies, see Note 1412 to our consolidated financial statements in Item 1 of Part I. 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 and expenses and the related disclosures. See Item 7 in our ~~2021~~2022 Form 10-K for a description of our critical accounting estimates and Note 1 to our consolidated financial statements in Item 8 of our ~~2021~~2022 Form 10-K for our significant accounting policies. There were no changes to our critical accounting estimates in the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023. See Note 1 to our consolidated financial statements in this Form 10-Q for a discussion of new accounting guidance adopted during the first ~~nine~~six months of ~~2022.~~2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to market risk exposures related to changes in currency exchange rates, interest rates or commodity costs from those discussed in Item 7A of our ~~2021~~2022 Form 10-K.

Item 4. Controls and Procedures

Disclosure controls and procedures — We maintain disclosure controls and procedures that are designed to ensure that the information disclosed in the reports we file with the SEC under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Our CEO and CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes in internal control over financial reporting — There was no change in our internal control over financial reporting that occurred during our fiscal quarter ended ~~September~~June 30, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

CEO and CFO certifications — The certifications of our CEO and CFO that are attached to this report as Exhibits 31.1 and 31.2 include information about our disclosure controls and procedures and internal control over financial reporting. These certifications should be read in conjunction with the information contained in this Item 4 and in Item 9A of Part II of our ~~2021~~2022 Form 10-K for a more complete understanding of the matters covered by the certifications.

38
Table of Contents

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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 Note 1412 to our consolidated financial statements in Item 1 of Part I of this Form 10-Q.

Item 1A. Risk Factors

~~The~~There have been no material changes in our risk factors disclosed in Item 1A of our ~~2021~~2022 Form ~~10-K have been updated to include the following additional risk factor:~~
~~Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by Russia~~’~~s invasion of Ukraine.~~
In February 2022, Russia invaded Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts, and could materially adversely affect regional economies and the global economy. The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could increase our costs, disrupt our supply chain, reduce our sales and earnings, or otherwise adversely affect our business, financial condition, and results of operations. Our 2021 revenue from customers located in these countries was approximately $75. Our physical presence in Russia is limited to a leased sales office with two employees.
~~The risk factors disclosed in Item 1A of our 2021 Form 10-K have been updated to remove the following risk factor:~~
~~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") utilizes 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 March 5, 2021, the ICE Benchmark Administration Limited (IBA) confirmed that it will 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.10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer's purchases of equity securities — On February 16, 2021 our Board of Directors approved an extension of our existing common stock share repurchase program through December 31, 2023. Approximately $102 remained available under the program for future share repurchases as of ~~September~~June 30, ~~2022.~~2023. We repurchase shares utilizing available excess cash either in the open market or through privately negotiated transactions. Stock repurchases are subject to prevailing market conditions and other considerations. No shares of our common stock were repurchased under the program during the ~~third~~second quarter of ~~2022.~~2023.

Item 5.Other Information
During the three months ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.

Item 6. Exhibits

Exhibit No.
Description
4.1 Indenture, dated as of May 24, 2023, among Dana Luxembourg Financing S.à r.l., Dana Incorporated, Computershare Trust Company, N.A., as trustee, and Elavon Financial Services DAC, as paying agent, registrar and transfer agent. Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated May 24, 2023 and incorporated herein by reference.

31.1
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. Filed with this Report.

31.2
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. Filed with this Report.

32
Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). Filed with this Report.

101
The following materials from Dana Incorporated’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in iXBRL (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 and (v) Notes to the Consolidated Financial Statements. Filed with this Report.

104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

39
Table of Contents

SIGNATURES

Pursuant to the requirements 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:
~~October 27, 2022~~July 28, 2023
By:
/s/ Timothy R. Kraus

Timothy R. Kraus

Senior Vice President and

Chief Financial Officer

40

		10-Q Pages
PART I – FINANCIAL INFORMATION

Item 1	Financial Statements	3
	Consolidated Statement of Operations (Unaudited)	3
	Consolidated Statement of Comprehensive Income (Unaudited)	4
	Consolidated Balance Sheet (Unaudited)	5
	Consolidated Statement of Cash Flows (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4	Controls and Procedures	38

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	39

Item 1A	Risk Factors	39

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 5	Other Information	39

Item 6	Exhibits	39

Signatures		40

Standard				Effective Date
ASU 2021-08		Accounting for Contract Assets and Contract Liabilities from Contracts with Customers		January 1, 2023

	Light Vehicle		Commercial Vehicle			Off-Highway			Power Technologies		Total
Balance, December 31, 2021	$	—	$	201		$	281		$	—	$	482
Impairment				(191	)							(191	)
Currency impact				(10	)		(35	)				(45	)
Balance, September 30, 2022	$	—	$	—		$	246		$	—	$	246

		Remainder of 2022				2023				2024				2025				2026
Amortization expense		$	5			$	22			$	20			$	19			$	17

2022	Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total Equity
Balance, December 31, 2021	$	2	$	2,427	$	662		$	(184	)	$	(985	)	$	53		$	1,975
2023																				Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total Equity
Balance, December 31, 2022																				$	2	$	2,229	$	321		$	—		$	(1,001	)	$	52		$	1,603
Net income						17									4			21							28									4			32
Other comprehensive income												36						36													40						40
Common stock dividends and dividend equivalents						(14	)											(14	)						(15	)											(15	)
Common stock share repurchases									(25	)								(25	)
Distributions to noncontrolling interests															(1	)		(1	)															(1	)		(1	)
Purchase of noncontrolling interests															(1	)		(1	)
Redeemable noncontrolling interests adjustment to redemption value						(1	)											(1	)						(1	)											(1	)
Stock compensation				4														4					8														8
Stock withheld for employees taxes									(7	)								(7	)									(8	)								(8	)
Balance, March 31, 2022		2		2,431		664			(216	)		(949	)		55			1,987
Balance, March 31, 2023																					2		2,237		333			(8	)		(961	)		55			1,658
Net income						8									3			11							30									5			35
Other comprehensive loss												(79	)		(2	)		(81	)												(3	)					(3	)
Common stock dividends and dividend equivalents						(15	)											(15	)						(14	)											(14	)
Distributions to noncontrolling interests															(1	)		(1	)															(2	)		(2	)
Purchase of noncontrolling interests															(1	)		(1	)																		—
Redeemable noncontrolling interests adjustment to redemption value						(1	)											(1	)
Stock compensation				4														4					7														7
Balance, June 30, 2022		2		2,435		656			(216	)		(1,028	)		54			1,903
Net income (loss)						(88	)								4			(84	)
Other comprehensive loss												(67	)		(3	)		(70	)
Common stock dividends and dividend equivalents						(14	)											(14	)
Distributions to noncontrolling interests															(6	)		(6	)
Redeemable noncontrolling interests adjustment to redemption value						(63	)											(63	)
Stock compensation				5														5
Balance, September 30, 2022	$	2	$	2,440	$	491		$	(216	)	$	(1,095	)	$	49		$	1,671
Balance, June 30, 2023																					2		2,244		349			(8	)		(964	)		58			1,681

2021	Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total Equity
Balance, December 31, 2020	$	2	$	2,408	$	530		$	(156	)	$	(1,026	)	$	76		$	1,834
2022																				Common Stock		Additional Paid-In Capital		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total Equity
Balance, December 31, 2021																				$	2	$	2,427	$	662		$	(184	)	$	(985	)	$	53		$	1,975
Net income																									17									4			21
Other comprehensive income																															36						36
Common stock dividends and dividend equivalents																									(14	)											(14	)
Common stock repurchases																												(25	)								(25	)
Distributions to noncontrolling interests																																		(1	)		(1	)
Purchases of noncontrolling interests																																		(1	)		(1	)
Redeemable noncontrolling interests adjustment to redemption value																									(1	)											(1	)
Stock compensation																							4														4
Stock withheld for employees taxes																												(7	)								(7	)
Balance, March 31, 2022																					2		2,431		664			(216	)		(949	)		55			1,987
Net income						71									1			72							8									3			11
Other comprehensive loss												(18	)		(2	)		(20	)												(79	)		(2	)		(81	)
Common stock dividends and dividend equivalents						(14	)											(14	)						(15	)											(15	)
Distributions to noncontrolling interests																																		(1	)		(1	)
Purchases of noncontrolling interests																																		(1	)		(1	)
Redeemable noncontrolling interests adjustment to redemption value						(4	)											(4	)						(1	)											(1	)
Stock compensation				7														7					4														4
Stock withheld for employees taxes									(5	)								(5	)
Balance, March 31, 2021		2		2,415		583			(161	)		(1,044	)		75			1,870
Net income						53									4			57
Other comprehensive income (loss)												37			(9	)		28
Common stock dividends and dividend equivalents						(15	)											(15	)
Distributions to noncontrolling interests															(2	)		(2	)
Sale of noncontrolling interests															(1	)		(1	)
Redeemable noncontrolling interests adjustment to redemption value						(4	)											(4	)
Other															1			1
Stock compensation				5														5
Balance, June 30, 2021		2		2,420		617			(161	)		(1,007	)		68			1,939
Net income						48									4			52
Other comprehensive income (loss)												(28	)					(28	)
Common stock dividends and dividend equivalents						(15	)											(15	)
Common stock share repurchases									(23	)								(23	)
Distributions to noncontrolling interests															(8	)		(8	)
Redeemable noncontrolling interests adjustment to redemption value						(2	)											(2	)
Deconsolidation of non-wholly owned subsidiary															(8	)		(8	)
Stock compensation				5														5
Balance, September 30, 2021	$	2	$	2,425	$	648		$	(184	)	$	(1,035	)	$	56		$	1,912
Balance, June 30, 2022																					2		2,435		656			(216	)		(1,028	)		54			1,903

	Parent Company Stockholders												Parent Company Stockholders
2022	Foreign Currency Translation			Hedging			Defined Benefit Plans			Accumulated Other Comprehensive Loss
Balance, December 31, 2021	$	(809	)	$	4		$	(180	)	$	(985	)
2023													Foreign Currency Translation			Hedging			Defined Benefit Plans			Accumulated Other Comprehensive Loss
Balance, December 31, 2022													$	(895	)	$	21		$	(127	)	$	(1,001	)
Currency translation adjustments														24									24
Holding gains and losses																	16						16
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)																				1			1
Tax expense																	(1	)					(1	)
Other comprehensive income														24			15			1			40
Balance, March 31, 2023														(871	)		36			(126	)		(961	)
Currency translation adjustments		39									39			(6	)								(6	)
Holding gains and losses					19						19						10						10
Reclassification of amount to net income (a)					(22	)					(22	)					(7	)					(7	)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)								2			2									1			1
Tax expense					(1	)		(1	)		(2	)								(1	)		(1	)
Other comprehensive income (loss)		39			(4	)		1			36			(6	)		3			—			(3	)
Balance, March 31, 2022		(770	)		—			(179	)		(949	)
Currency translation adjustments		(83	)								(83	)
Holding gains and losses					42						42
Reclassification of amount to net income (a)					(39	)					(39	)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)								4			4
Tax expense					(2	)		(1	)		(3	)
Other comprehensive income (loss)		(83	)		1			3			(79	)
Balance, June 30, 2022		(853	)		1			(176	)		(1,028	)
Currency translation adjustments		(69	)								(69	)
Holding gains and losses					44						44
Reclassification of amount to net income (a)					(42	)					(42	)
Reclassification adjustment for net actuarial losses included in net periodic benefit cost (b)								2			2
Tax expense					(1	)		(1	)		(2	)
Other comprehensive income (loss)		(69	)		1			1			(67	)
Balance, September 30, 2022	$	(922	)	$	2		$	(175	)	$	(1,095	)
Balance, June 30, 2023														(877	)		39			(126	)		(964	)

	Granted		Grant Date		Granted		Grant Date
	(In millions)		Fair Value*		(In millions)		Fair Value*
RSUs		0.9	$	22.23		1.2	$	18.44
PSUs		0.3	$	24.69		0.6	$	19.56

	Pension												OPEB					Pension												OPEB
	2022						2021						2022			2021		2023						2022						2023			2022
Three Months Ended September 30,	U.S.			Non-U.S.			U.S.			Non-U.S.			Non-U.S.			Non-U.S.
Three Months Ended June 30,																		U.S.			Non-U.S.			U.S.			Non-U.S.			Non-U.S.			Non-U.S.
Interest cost	$	4		$	2		$	3		$	1		$	—		$	1	$	7		$	3		$	4		$	1		$	—		$	1
Expected return on plan assets		(7	)		(1	)		(7	)		(1	)							(7	)		(1	)		(7	)
Service cost					2						3											2						2
Amortization of net actuarial loss		2			1			3			2			(1	)				2						2			2			(1	)
Net periodic benefit cost (credit)	$	(1	)	$	4		$	(1	)	$	5		$	(1	)	$	1	$	2		$	4		$	(1	)	$	5		$	(1	)	$	1

Nine Months Ended September 30,
Six Months Ended June 30,
Interest cost	$	12		$	5		$	10		$	3		$	1		$	2	$	14		$	6		$	8		$	3		$	1		$	1
Expected return on plan assets		(21	)		(2	)		(20	)		(2	)							(15	)		(2	)		(14	)		(1	)
Service cost					6						7											3						4
Amortization of net actuarial loss		6			4			7			7			(2	)				4						4			3			(2	)		(1	)
Net periodic benefit cost (credit)	$	(3	)	$	13		$	(3	)	$	15		$	(1	)	$	2	$	3		$	7		$	(2	)	$	9		$	(1	)	$	-

	September 30, 2022						December 31, 2021
			Unrealized		Fair				Unrealized		Fair
	Cost		Gains (Losses)		Value		Cost		Gains (Losses)		Value
Certificates of deposit - Current marketable securities	$	13	$	—	$	13	$	17	$	—	$	17

	Interest Rate		September 30, 2022			December 31, 2021			Interest Rate		June 30, 2023			December 31, 2022
Senior Notes due April 15, 2025	5.750%	*	$	400		$	400		5.750%	*	$	200		$	400
Senior Notes due November 15, 2027	5.375%			400			400		5.375%			400			400
Senior Notes due June 15, 2028	5.625%			400			400		5.625%			400			400
Senior Euro Notes due July 15, 2029	3.000%			319			370		3.000%			355			348
Senior Notes due September 1, 2030	4.250%			400			400		4.250%			400			400
Senior Euro Notes due July 15, 2031									8.500%			464
Senior Notes due February 15, 2032	4.500%			350			350		4.500%			350			350
Other indebtedness				74			100					76			80
Debt issuance costs				(22	)		(26	)				(26	)		(22	)
				2,321			2,394					2,619			2,356
Less: Current portion of long-term debt				7			8					32			8
Long-term debt, less debt issuance costs			$	2,314		$	2,386				$	2,587		$	2,348

	Redemption Price
	April			November			June			July			September			February
Year	2025 Notes			2027 Notes			2028 Notes			2029 Notes			2030 Notes			2032 Notes
2022		101.438	%		102.688	%
2023		100.000	%		101.344	%		102.813	%
2024		100.000	%		100.000	%		101.406	%		101.500	%
2025					100.000	%		100.000	%		100.750	%
2026					100.000	%		100.000	%		100.000	%		102.125	%
2027								100.000	%		100.000	%		101.417	%		102.250	%
2028											100.000	%		100.708	%		101.500	%
2029														100.000	%		100.750	%
2030																	100.000	%
2031																	100.000	%

	Redemption Price
	April			November			June			July			September			July			February
Year	2025 Notes			2027 Notes			2028 Notes			2029 Notes			2030 Notes			2031 Notes			2032 Notes
2022		101.438	%		102.688	%
2023		100.000	%		101.344	%		102.813	%
2024		100.000	%		100.000	%		101.406	%		101.500	%
2025					100.000	%		100.000	%		100.750	%
2026					100.000	%		100.000	%		100.000	%		102.125	%		104.250	%
2027								100.000	%		100.000	%		101.417	%		102.125	%		102.250	%
2028											100.000	%		100.708	%		100.000	%		101.500	%
2029														100.000	%		100.000	%		100.750	%
2030																	100.000	%		100.000	%
2031																				100.000	%

	Margin						Margin
Total Net Leverage Ratio	Base Rate			Eurodollar Rate			Base Rate			SOFR Rate
Less than or equal to 1.00:1.00		0.25	%		1.25	%		0.25	%		1.25	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00		0.50	%		1.50	%		0.50	%		1.50	%
Greater than 2.00:1.00		0.75	%		1.75	%		0.75	%		1.75	%

Total Net Leverage Ratio	Commitment Fee
Less than or equal to 1.00:1.00		0.250	%
Greater than 1.00:1.00 but less than or equal to 2.00:1.00		0.375	%
Greater than 2.00:1.00		0.500	%

			Fair Value						Fair Value
Category	Balance Sheet Location	Fair Value Level	September 30, 2022		December 31, 2021		Balance Sheet Location	Fair Value Level	June 30, 2023		December 31, 2022
Certificates of deposit	Marketable securities	2	$	13	$	17
Currency forward contracts
Cash flow hedges	Accounts receivable - Other	2		5		7	Accounts receivable - Other	2	$	47	$	26
Cash flow hedges	Other accrued liabilities	2		2		1	Other accrued liabilities	2		7		4
Undesignated	Accounts receivable - Other	2		14		2	Accounts receivable - Other	2		3		2
Undesignated	Other accrued liabilities	2		4			Other accrued liabilities	2		8		7
Currency swaps
Cash flow hedges	Other noncurrent assets	2		60			Other noncurrent assets	2		8		17
Cash flow hedges	Other noncurrent liabilities	2				34
Undesignated	Other noncurrent liabilities	2		12		17	Other noncurrent liabilities	2		9		11

Underlying Financial Instrument	Underlying Financial Instrument							Derivative Financial Instrument										Underlying Financial Instrument							Derivative Financial Instrument
Description		Type	Face Amount		Rate			Notional Amount		Traded Amount		Inflow Rate			Outflow Rate				Type	Face Amount		Rate			Notional Amount		Traded Amount		Inflow Rate			Outflow Rate
April 2025 Notes		Payable	$	400		5.75	%	$	300	€	278		5.75	%		3.85	%		Payable	$	200		5.75	%	$	200	€	185		5.75	%		3.85	%
Luxembourg Intercompany Notes		Receivable	€	278		3.70	%	€	278	$	300		5.38	%		3.70	%		Receivable	€	93		3.85	%	$	100	€	93		5.75	%		3.85	%
Luxembourg Intercompany Notes																			Receivable	€	278		3.70	%	€	278	$	300		5.38	%		3.70	%
Undesignated 2026 Swap								$	188	€	169		6.50	%		5.14	%								$	188	€	169		6.50	%		5.14	%
Undesignated Offset 2026 Swap								€	169	$	188		3.13	%		6.50	%								€	169	$	188		3.13	%		6.50	%

		Notional Amount (U.S. Dollar Equivalent)								Notional Amount (U.S. Dollar Equivalent)
Functional Currency	Traded Currency	Designated		Undesignated		Total		Maturity	Traded Currency	Designated		Undesignated		Total		Maturity
U.S. dollar	Mexican peso	$	136	$	—	$	136	Sep-2023	Mexican peso, Thai baht	$	170	$	32	$	202	Jun-2024
Euro	U.S. dollar, Australian dollar, Brazilian real, Canadian dollar, Swiss franc, Chinese renminbi, British pound, Hungarian forint, Indian rupee, Japanese yen, Mexican peso, Norwegian krone, New Zealand dollar, Swedish krona, South African rand		67		108		175	Jan-2024	U.S. dollar, Australian dollar, Canadian dollar, Swiss franc, Chinese renminbi, British pound, Hungarian forint, Indian rupee, Japanese yen, Mexican peso, Norwegian krone, New Zealand dollar, Swedish krona, South African rand		191		59		250	Sep-2027
British pound	U.S. dollar, euro				1		1	Oct-2022	U.S. dollar, euro		1		6		7	Sep-2023
South African rand	U.S. dollar, euro, Thai baht				10		10	Nov-2022	U.S. dollar, euro, Thai baht				13		13	Aug-2023
Canadian dollar									U.S. dollar				12		12	Jul-2023
Brazilian real	U.S. dollar, euro		60		12		72	Jul-2023	U.S. dollar, euro		54		15		69	Mar-2024
Indian rupee	U.S. dollar, euro, British pound				102		102	Sep-2023	U.S. dollar, euro, British pound				95		95	Jun-2024
Chinese renminbi	U.S. dollar, Canadian dollar				8		8	Oct-2022	U.S. dollar, euro, Canadian dollar				10		10	Jul-2023
Australian dollar	U.S. dollar, euro				1		1	Oct-2022	U.S. dollar, euro				1		1	Jul-2023
Mexican peso									U.S. dollar				3		3	Jul-2023
Total forward contracts			263		242		505				416		246		662

U.S. dollar	euro		272		166		438	Nov-2027	euro		303		184		487	Nov-2027
Euro	U.S. dollar		300		188		488	Jun-2026	U.S. dollar		300		188		488	Jun-2026
Total currency swaps			572		354		926				603		372		975
Total currency derivatives		$	835	$	596	$	1,431			$	1,019	$	618	$	1,637

	Deferred Gain (Loss) in AOCI							Deferred Gain (Loss) in AOCI
	September 30, 2022		December 31, 2021			Gain (loss) expected to be reclassified into income in one year or less		June 30, 2023		December 31, 2022		Gain (loss) expected to be reclassified into income in one year or less
Forward Contracts	$	3	$	(1	)	$	3	$	28	$	11	$	28
Cross-Currency Swaps		1		2					13		11
Total	$	4	$	1		$	3	$	41	$	22	$	28

	Ownership Percentage	Investment		Ownership Percentage	Investment
Dongfeng Dana Axle Co., Ltd.	50%	$	65	50%	$	66
ROC-Spicer, Ltd.	50%		19	50%		22
Axles India Limited	48%		10	48%		13
Tai Ya Investment (HK) Co., Limited	50%		4	50%		4
All others as a group			6			6
Investments in equity affiliates			104			111
Investments in affiliates carried at cost			24			24
Investments in affiliates		$	128		$	135

	2022 Outlook	2021			2020		2023 Outlook	2022		2021
Sales	$10,000 - $10,200	$	8,945		$	7,106	$10,450 - $10,950	$	10,156	$	8,945
Adjusted EBITDA	$700 - $740	$	795		$	593	$800 - $900	$	700	$	795
Net cash provided by operating activities	~6% of sales	$	158		$	386	$560 - $610	$	649	$	158
Purchases of property, plant and equipment	~4% of sales	$	369		$	326	~5% of sales	$	440	$	369
Adjusted Free Cash Flow	~2% of sales	$	(211	)	$	60
Free cash flow							$50 - $100	$	209	$	(211	)

	Three Months Ended													Three Months Ended
	September 30,						Amount of Change Due To							June 30,							Amount of Change Due To
	2022		2021		Increase/ (Decrease)		Currency Effects			Acquisitions (Divestitures)		Organic Change		2023		2022		Increase/ (Decrease)			Currency Effects			Acquisitions (Divestitures)		Organic Change
North America	$	1,250	$	1,050	$	200	$	(1	)	$	—	$	201	$	1,266	$	1,274	$	(8	)	$	(1	)	$	—	$	(7	)
Europe		698		651		47		(107	)				154		947		787		160								160
South America		219		174		45		(3	)				48		171		193		(22	)		(3	)				(19	)
Asia Pacific		368		329		39		(28	)				67		364		332		32			(17	)				49
Total	$	2,535	$	2,204	$	331	$	(139	)	$	—	$	470	$	2,748	$	2,586	$	162		$	(21	)	$	—	$	183

	Nine Months Ended														Six Months Ended
	September 30,						Amount of Change Due To								June 30,							Amount of Change Due To
	2022		2021		Increase/ (Decrease)		Currency Effects			Acquisitions (Divestitures)			Organic Change		2023		2022		Increase/ (Decrease)			Currency Effects			Acquisitions (Divestitures)		Organic Change
North America	$	3,689	$	3,157	$	532	$	(2	)	$	1		$	533	$	2,449	$	2,439	$	10		$	(2	)	$	-	$	12
Europe		2,286		2,136		150		(250	)					400		1,867		1,588		279			(47	)				326
South America		584		434		150		12						138		339		365		(26	)		(4	)				(22	)
Asia Pacific		1,042		945		97		(52	)		(9	)		158		737		674		63			(43	)				106
Total	$	7,601	$	6,672	$	929	$	(292	)	$	(8	)	$	1,229	$	5,392	$	5,066	$	326		$	(96	)	$	-	$	422

	Three Months									Nine Months									Three Months									Six Months
	Sales			Segment EBITDA			Segment EBITDA Margin			Sales			Segment EBITDA			Segment EBITDA Margin			Sales			Segment EBITDA			Segment EBITDA Margin			Sales			Segment EBITDA			Segment EBITDA Margin
2021	$	918		$	54			5.9	%	$	2,799		$	241			8.6	%
2022																			$	1,028		$	33			3.2	%	$	2,013		$	64			3.2	%
Volume and mix		90			20						199			34						4			2						(26	)		(7	)
Divestitures											(8	)
Product line transfer		(20	)		(2	)					(59	)		(6	)
Performance		88			(9	)					185			(141	)					48			33						75			63
Currency effects		(29	)		(3	)					(56	)		(4	)					(14	)		(2	)					(34	)		(5	)
2022	$	1,047		$	60			5.7	%	$	3,060		$	124			4.1	%
2023																			$	1,066		$	66			6.2	%	$	2,028		$	115			5.7	%

Cash and cash equivalents	$	371		$	484
Less: Deposits supporting obligations		(1	)		—
Available cash		370			484
Additional cash availability from Revolving Facility		934			1,134
Marketable securities		13
Total liquidity	$	1,317		$	1,618

	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Cash and cash equivalents	$	—	$	297	$	297	$	—	$	396	$	396
Cash and cash equivalents held as deposits				1		1						-
Cash and cash equivalents held at less than wholly-owned subsidiaries		2		71		73		4		84		88
Consolidated cash balance	$	2	$	369	$	371	$	4	$	480	$	484

Exhibit No.	Description

4.1	Indenture, dated as of May 24, 2023, among Dana Luxembourg Financing S.à r.l., Dana Incorporated, Computershare Trust Company, N.A., as trustee, and Elavon Financial Services DAC, as paying agent, registrar and transfer agent. Filed as Exhibit 4.1 to Registrant's Current Report on Form 8-K dated May 24, 2023 and incorporated herein by reference.

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. Filed with this Report.

31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. Filed with this Report.

32	Section 1350 Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). Filed with this Report.

101	The following materials from Dana Incorporated’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in iXBRL (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 and (v) Notes to the Consolidated Financial Statements. Filed with this Report.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

		DANA INCORPORATED

Date:	~~October 27, 2022~~July 28, 2023	By:	/s/ Timothy R. Kraus
			Timothy R. Kraus
			Senior Vice President and
			Chief Financial Officer