Restructuring Charges, Net and Asset Impairments | 4. Restructuring Charges, Net and Asset Impairments The Company’s restructuring activities are undertaken as necessary to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company’s businesses and to relocate operations to best cost locations. The Company’s restructuring charges consist primarily of employee costs (principally severance and/or termination benefits), and facility closure and exit costs. Restructuring charges, net and asset impairments by segment are as follows: Three and Nine Months Ended September 30, 2021 Three Months Ended September 30, 2021 Motorparts Performance Solutions Clean Air Powertrain Corporate Total Severance and other charges, net $ (1) $ (5) $ (2) $ 2 $ 1 $ (5) Other non-restructuring asset impairments 1 — — — — 1 Total restructuring charges, net and asset impairments $ — $ (5) $ (2) $ 2 $ 1 $ (4) Nine Months Ended September 30, 2021 Motorparts Performance Solutions Clean Air Powertrain Corporate Total Severance and other charges, net $ 6 $ 7 $ 9 $ 20 $ 2 $ 44 Asset impairments related to restructuring actions 1 — — — — 1 Other non-restructuring asset impairments 1 — — — 2 3 Total asset impairment charges 2 — — — 2 4 Total restructuring charges, net and asset impairments $ 8 $ 7 $ 9 $ 20 $ 4 $ 48 Severance and other charges, net The Company recognized a net reduction of $5 million and a net charge of $27 million in severance and other charges expected to be paid for cost reduction initiatives aimed at optimizing the Company’s cost structure across all segments and regions during the three and nine months ended September 30, 2021. The Company also recognized severance and other charges of $1 million and $21 million related to plant consolidations, relocations, and closures during the three and nine months ended September 30, 2021. In response to the COVID-19 global pandemic, the Company announced Project Accelerate and executed global headcount reductions. The Company began implementing these actions during the second quarter of 2020 and expects to complete them during 2021. The Company recognized a reduction of $1 million and $4 million in revisions to estimates for the cash severance costs expected to be paid in connection with these actions during the three and nine months ended September 30, 2021. Motorparts recognized severance and other charges, and revisions to estimates as follows: • $3 million for the nine months ended September 30, 2021 in connection with its supply chain rationalization and distribution network initiative to achieve efficiencies and improve throughput to its customers in North America; • $1 million for the nine months ended September 30, 2021, along with a reduction of $1 million and $5 million in revisions to estimates for the three and nine months ended September 30, 2021 in connection with cost reduction initiatives primarily in Europe; and • $7 million for the nine months ended September 30, 2021 related to plant consolidations, relocations, and closures, primarily in Europe. Performance Solutions recognized severance and other charges, and revisions to estimates as follows: • $12 million for the nine months ended September 30, 2021, along with a reduction of $4 million in revisions to estimates for the three and nine months ended September 30, 2021, in connection with cost reduction initiatives primarily in Europe; • $1 million for the nine months ended September 30, 2021 related to plant consolidations, relocations, and closures, primarily in North America; and • $1 million reduction as a result of revisions to estimates for the three and nine months ended September 30, 2021 in connection with Project Accelerate. Clean Air recognized severance and other charges, and revisions to estimates as follows: • $17 million for the nine months ended September 30, 2021, along with a reduction of $3 million and $9 million in revisions to estimates for the three and nine months ended September 30, 2021, in connection with cost reduction initiatives primarily in Europe; • $1 million and $4 million for the three and nine months ended September 30, 2021 related to plant consolidations, relocations and closures primarily in North America and Asia Pacific; and • $3 million reduction as a result of revisions to estimates for the nine months ended September 30, 2021 in connection with Project Accelerate. Powertrain recognized severance and other charges, and revisions to estimates as follows: • $9 million for the nine months ended September 30, 2021 in connection with cost reduction initiatives primarily in Asia Pacific; • $2 million for the three and nine months ended September 30, 2021, along with a reduction of $1 million and $5 million in revisions to estimates for the three and nine months ended September 30, 2021,in connection with cost reduction initiatives primarily in Europe; • $9 million for the nine months ended September 30, 2021 related to plant consolidations, relocations, and closures, primarily in Europe and North America; and • $1 million and $5 million for the three and nine months ended September 30, 2021 incurred related to an approved voluntary termination program at one of its European bearings plants aimed at reducing headcount. As of September 30, 2021, total severance related restructuring charges for this program aggregate to $13 million. During the three months ended September 30, 2021, an additional $5 million of special termination benefits were approved under this program. Total severance related charges are expected to be approximately $36 million, comprised of approximately $10 million of postemployment benefits, including an early retirement program, and $26 million of special termination benefits. In addition, the Company expects to incur additional costs of approximately $2 million for customer validation, equipment transfer, and related expenditures. The Company also incurred $1 million and $2 million in cash severance costs within its corporate component for the three and nine months ended September 30, 2021. Asset impairments Asset impairments related to restructuring actions During the nine months ended September 30, 2021, as a result of actions in the Motorparts segment, asset impairment charges of $1 million were recognized related to the write-down of property, plant and equipment. Other non-restructuring asset impairments During the three and nine months ended September 30, 2021, the Motorparts segment recognized asset impairment charges of $1 million related to the write-down of property, plant and equipment. As a result of changes in the business, during the second quarter of 2021, the Company assessed and concluded an impairment trigger had occurred for certain long-lived asset groups in its corporate component and recognized an impairment charge of $2 million during the nine months ended September 30, 2021. Three and Nine Months Ended September 30, 2020 Three Months Ended September 30, 2020 Motorparts Performance Solutions Clean Air Powertrain Corporate Total Severance and other charges, net $ — $ — $ 1 $ 13 $ — $ 14 Asset impairments related to restructuring actions 1 — — — — 1 Impairment of assets held for sale 2 — — — — 2 Total asset impairment charges 3 — — — — 3 Total restructuring charges, net and asset impairments $ 3 $ — $ 1 $ 13 $ — $ 17 Nine Months Ended September 30, 2020 Motorparts Performance Solutions Clean Air Powertrain Corporate Total Severance and other charges, net $ 17 $ 24 $ 23 $ 50 $ 5 $ 119 Asset impairments related to restructuring actions 26 — — 3 — 29 Other non-restructuring asset impairments — 455 — — 17 472 Impairment of assets held for sale 1 — — 1 — 2 Total asset impairment charges 27 455 — 4 17 503 Total restructuring charges, net and asset impairments $ 44 $ 479 $ 23 $ 54 $ 22 $ 622 Severance and other charges, net The Company recognized $9 million and $60 million in severance and other charges of expected to be paid for cost reduction initiatives during the three and nine months ended September 30, 2020. The Company also recognized severance and other charges of $4 million and $33 million related to plant consolidations, relocations, and closures during the three and nine months ended September 30, 2020. The Company recognized charges of $1 million and $26 million for cash severance costs expected to be paid in connection with Project Accelerate during the three and nine months ended September 30, 2020. Motorparts recognized severance and other charges, and revisions to estimates as follows: • $4 million for the nine months ended September 30, 2020 in connection with its supply chain rationalization and distribution network initiative to achieve efficiencies and improve throughput to its customers in North America; • $1 million and $7 million for the three and nine months ended September 30, 2020, along with a reduction of $1 million and $2 million in revisions to estimates for the three and nine months ended September 30, 2020, in connection with cost reduction initiatives primarily in Europe; • $3 million for the nine months ended September 30, 2020, related to plant consolidations, relocations, and closures primarily in Europe and Asia Pacific; and • $5 million for the nine months ended September 30, 2020 in connection with Project Accelerate. Performance Solutions recognized severance and other charges, and revisions to estimates as follows: • $10 million for the nine months ended September 30, 2020, along with a reduction of $3 million in revisions to estimates for the three and nine months ended September 30, 2020 in connection with cost reduction initiatives primarily in Europe; • $3 million and $15 million for the three and nine months ended September 30, 2020, along with a reduction of $1 million in revisions to estimates for the nine months ended September 30, 2020 related to plant consolidations, relocations, and closures, primarily in North America; and • $3 million for the nine months ended September 30, 2020 in connection with Project Accelerate. Clean Air recognized severance and other charges, and revisions to estimates as follows: • $14 million, along with a reduction of $1 million in revisions to estimates for the nine months ended September 30, 2020, in connection with cost reduction initiatives primarily in Europe; • $1 million and $2 million for the three and nine months ended September 30, 2020, along with a reduction of $1 million in revisions to estimates for the nine months ended September 30, 2020, related to plant consolidations, relocations, and closures primarily in Europe; and • $9 million for the nine months ended September 30, 2020 in connection with Project Accelerate. Powertrain recognized severance and other charges, and revisions to estimates as follows: • $6 million and $20 million for the three and nine months ended September 30, 2020 in connection with cost reduction initiatives primarily in Europe; • $1 million and $16 million, along with a reduction of $1 million in revisions to estimates for the three and nine months ended September 30, 2020 related to plant consolidations, relocations, and closures, primarily in North America and Europe; • $1 million and $8 million for the three and nine months ended September 30, 2020 in connection with Project Accelerate; and • $6 million and $7 million for the three and nine months ended September 30, 2020 incurred related to an approved voluntary termination program at one of its European bearings plants aimed at reducing headcount. The Company also incurred $1 million in cash sev erance costs in connection with Project Accelerate for the nine months ended September 30, 2020, as well as $4 million in cash sev erance costs for the elimination of certain redundant positions within its corporate component for the nine months ended September 30, 2020. Asset impairments Asset impairments related to restructuring actions During the nine months ended September 30, 2020, as a result of the actions in connection with its supply chain rationalization effort in the Motorparts segment, asset impairment charges of $25 million were recognized which included $16 million related to the write-down of property, plant, and equipment to its fair value, and $9 million of impairment charge to its operating lease right-of-use assets. Refer to Note 5, “Inventories”, for additional information. During the three and nine months ended September 30, 2020, the Motorparts segment recognized an additional $1 million impairment charge related to the write-down of property, plant and equipment. During the nine months ended September 30, 2020, the Powertrain segment recognized $3 million in asset impairment charges in connection with its plant relocation and closure actions . Other non-restructuring asset impairments The Company evaluates its long-lived assets for impairment whenever events or circumstances indicate the value of these long-lived asset groups are not recoverable. During the first quarter of 2020, the Company concluded impairment triggers had occurred for certain long-lived asset groups in the Performance Solutions segment as a result of the effects of the COVID-19 global pandemic on the Company’s projected financial information. Accordingly, the Company tested these long-lived asset groups for recoverability by performing undiscounted cash flow analyses. Based on these analyses, the net carrying values of these asset groups exceeded their undiscounted future cash flows. As such, the Company estimated the fair values of these asset groups at March 31, 2020 and compared them to their carrying values. As the net carrying values of these long-lived asset groups exceeded their fair values, the Company recorded long-lived asset impairment charges for property, plant, and equipment of $455 million during the nine months ended September 30, 2020. Refer to Note 8, “Financial Instruments and Fair Value” for additional information on the fair value estimates used in these analyses. As a result of changes in the business, during the first quarter of 2020, the Company assessed and concluded an impairment trigger had occurred for certain long-lived asset groups in its corporate component. Accordingly, the Company tested these long-lived asset groups for recoverability. The Company estimated the fair value of these asset groups and compared it to the carrying value. As the net carrying value exceeded fair value, the Company recorded long-lived asset impairment charges of $17 million during the nine months ended September 30, 2020. Included in the asset impairment charges for the nine months ended September 30, 2020 are $11 million of property, plant, and equipment and $6 million of operating lease right-of-use assets, included in “Other assets” within the condensed consolidated balance sheets. Restructuring Reserve Rollforward The following table provides a summary of the Company’s restructuring liabilities and related activity for each type of exit costs: Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020 Employee Costs Facility Closure and Other Costs Total Employee Costs Facility Closure and Other Costs Total Balance at beginning of period $ 99 $ 1 $ 100 $ 97 $ 4 $ 101 Provisions 31 3 34 10 5 15 Revisions to estimates (9) — (9) (2) — (2) Payments (21) (4) (25) (23) (7) (30) Foreign currency (1) — (1) (1) — (1) Balance at March 31 99 — 99 81 2 83 Provisions 30 2 32 90 6 96 Revisions to estimates (8) — (8) (4) — (4) Payments (22) (2) (24) (31) (4) (35) Balance at June 30 99 — 99 136 4 140 Provisions 2 3 5 16 3 19 Revisions to estimates (10) — (10) (4) (1) (5) Payments (13) (3) (16) (24) (4) (28) Foreign currency (1) — (1) 1 — 1 Balance at end of period $ 77 $ — $ 77 $ 125 $ 2 $ 127 |