Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

3. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill The following table provides a reconciliation of changes in goodwill for the year ended December 31, 2020 and the year ended December 31, 2019:


	Driveline		Metal Forming		Powertrain		Consolidated
	(in millions)
Balance as of January 1, 2019	$	212.1	$	552.4	$	377.3	$	1,141.8
Reorganization	187.2		190.1		(377.3)		—
Impairment charge	—		(440.0)		—		(440.0)
Foreign currency translation	(1.0)		(1.7)		—		(2.7)
Balance as of December 31, 2019	$	398.3	$	300.8	$	—	$	699.1
Impairment charge	(210.8)		(299.2)		—		(510.0)
Foreign currency translation	(1.8)		(1.6)		—		(3.4)
Balance as of December 31, 2020	$	185.7	$	—	$	—	$	185.7

We conduct our annual goodwill impairment test in the fourth quarter of each year, as well as whenever adverse events or changes in circumstances indicate a possible impairment. In performing this test, we utilize a third-party valuation specialist to assist management in determining the fair value of our reporting units. Fair value of each reporting unit is estimated based on a combination of discounted cash flows and the use of pricing multiples derived from an analysis of comparable public companies multiplied against historical and/or anticipated financial metrics of each reporting unit. These calculations contain uncertainties as they require management to make assumptions including, but not limited to, market comparables, future cash flows of the reporting units, and appropriate discount and long-term growth rates. This fair value determination is categorized as Level 3 within the fair value hierarchy. We completed our annual goodwill impairment test for our Driveline reporting unit in the fourth quarter of 2020 and no impairment was identified.

In the first quarter of 2020, the reduction in global automotive production volumes caused by the impact of COVID-19 represented an indicator to test our goodwill for impairment. This reduction in production volumes began in March of 2020 and resulted in lower forecasted sales volumes in the periods included in our long-range plan as revised in the first quarter of 2020. As a result of this goodwill impairment test in the first quarter of 2020, we determined that the carrying values of both our Driveline and Metal Forming reporting units were greater than their respective fair values. As such, we recorded a goodwill impairment charge of $210.8 million associated with our Driveline reporting unit and a goodwill impairment charge of $299.2 million associated with our Metal Forming reporting unit in the first quarter of 2020. The Metal Forming impairment charge represented a full impairment of the goodwill associated with that reporting unit.

These impairment charges were primarily the result of a decline in the projected cash flows of these reporting units under our revised long-range plan completed in the first quarter of 2020. The revision to our long-range plan was driven by lower forecasted sales volumes in the internal and external data sources used to form our projections primarily due to the reduction in global automotive production volumes caused by the impact of COVID-19. The impairment charges were also the result of changes in certain market-related inputs to the analysis to reflect macro-economic changes caused by the impact of COVID-19, including increased discount rates and lower pricing multiples for comparable public companies. At December 31, 2020, accumulated goodwill impairment losses were $1,435.5 million.

The reduction in production volumes and changes to macro-economic factors caused by the impact of COVID-19 also represented an indicator to test our long-lived assets, including other intangible assets and property, plant and equipment, for impairment. We completed this test in the first quarter of 2020 and there was no impairment of these assets.

As a result of our annual goodwill impairment test in the fourth quarter of 2019, we determined that the carrying value of our Metal Forming reporting unit was greater than its fair value. As such, we recorded a goodwill impairment charge of $440.0 million in 2019 associated with this reporting unit. This impairment was primarily the result of a decline in the projected cash flows of this reporting unit under our long-range plan completed in the fourth quarter of 2019, as compared to the long-range plan completed in the fourth quarter of 2018. This was driven, in part, by lower forecasted sales volumes in the internal and external data sources used to form our projections.

In the first quarter of 2019, we initiated a global restructuring program (the 2019 Program) to further streamline our business by consolidating our four existing segments into three segments. Prior to this reorganization, our former Powertrain segment was also a reporting unit for purposes of measuring and reporting goodwill. The goodwill that was previously attributable to the former Powertrain reporting unit was reallocated to the Driveline and Metal Forming reporting units based on the relative fair value of the respective portions that became attributable to those reporting units. The initiation of the 2019 Program and the reorganization of our business represented a triggering event in the first quarter of 2019 to test goodwill for impairment prior to reallocating the former Powertrain goodwill to Driveline and Metal Forming. No impairment was identified as a result of completing this goodwill impairment test.

As a result of our test in the fourth quarter of 2018, we determined that the carrying values of our former Casting and Powertrain reporting units were greater than their respective fair values. As such, we recorded goodwill impairment charges of $405.5 million associated with our Casting reporting unit and $80.0 million associated with our former Powertrain reporting unit in 2018. These impairments were primarily the result of a general contraction of pricing multiples associated with capital intensive businesses such as the business conducted by our former Casting and Powertrain reporting units, as well as a decline in the projected cash flows of these reporting units under our long-range plan completed in the fourth quarter of 2018, as compared to the long-range plan completed in the fourth quarter of 2017.

The decline in projected cash flows for our former Powertrain reporting unit was primarily the result of decreased contribution margin on lower production volumes for certain passenger car programs that we support. The decline in projected cash flows for our former Casting reporting unit was primarily the result of a projected increase in labor costs in an effort to address workforce shortages at certain locations, as well as an increase in other maintenance and capital requirements.

Other Intangible Assets The following table provides a reconciliation of the gross carrying amount and associated accumulated amortization for AAM's other intangible assets, which are all subject to amortization, as of December 31, 2020 and December 31, 2019:


	December 31,						December 31,
	2020						2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in millions)
Capitalized computer software	$	47.6	$	(33.9)	$	13.7	$	45.8	$	(27.6)	$	18.2
Customer platforms	856.2		(237.9)		618.3		856.2		(174.4)		681.8
Customer relationships	53.0		(12.8)		40.2		53.0		(9.4)		43.6
Technology and other	156.7		(48.2)		108.5		156.0		(35.1)		120.9
Total	$	1,113.5	$	(332.8)	$	780.7	$	1,111.0	$	(246.5)	$	864.5

Amortization expense for our intangible assets was $86.6 million for the year ended December 31, 2020, $95.4 million for the year ended December 31, 2019, and $99.4 million for the year ended December 31, 2018. The change in amortization expense in 2020, as compared to 2019, was primarily attributable to the sale of the U.S. operations of our Casting business in the fourth quarter of 2019. Amortization expense for the years 2021 through 2025 is expected to be in the range of approximately $80 million to $85 million per year.