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Manufacturing Facility Fire and Insurance Recovery
12 Months Ended
Dec. 31, 2020
Insurance Recoveries [Abstract]  
Manufacturing Facility Fire and Insurance Recovery
15. MANUFACTURING FACILITY FIRE AND INSURANCE RECOVERY

On September 22, 2020, a significant industrial fire occurred at our Malvern Manufacturing Facility in Ohio (Malvern Fire). All associates were evacuated safely and without injury. We continue to focus on managing this disruption and protecting continuity of supply to our customers, including utilizing production capacity and resources at other AAM facilities.

Our insurance policies are expected to cover the repair, replacement or actual cash value of the assets that incurred loss or damage, less our applicable deductible of $1.0 million. In addition, our insurance policies are expected to provide coverage for interruption to our business, including lost or reduced profits and reimbursement for certain expenses and costs that are incurred relating to the fire. In 2020, we recorded $36.5 million of charges primarily related to site services and clean-up, expediting, asset repairs and other costs incurred to resume or relocate operations and ensure continuity of supply to our customers. In addition, we recorded $27.0 million of costs primarily associated with the write-down of PP&E as a result of damage from the fire. We also recorded an estimated insurance recovery of $54.2 million in the twelve months ended December 31, 2020, of which $43.1 million is included in Prepaid expenses and other in our Consolidated Balance Sheet as of December 31, 2020. This receivable is net of cash received in the fourth quarter of 2020 as an advance under our insurance policies of $11.1 million. This resulted in a net pre-tax impact to our Consolidated Statement of Operations of approximately $9.3 million in Cost of goods sold for the twelve months ended December 31, 2020, which includes our applicable deductible.

In the fourth quarter of 2020, we determined that we will cease production at the Malvern Manufacturing Facility and relocate production capacity to other AAM manufacturing facilities during 2021. As such, we cannot estimate the total claim eligible costs that we will incur as a result of the Malvern Fire and the associated relocation of production capacity to other AAM manufacturing facilities. At December 31, 2020, we have estimated the amount of expected insurance proceeds recoverable in consideration of the policy provisions, carrying amount of the PP&E that was written-down, and claim eligible expenses incurred from the date of the fire. We expect the claim settlement process to continue through 2021, however, based on the provisions of the policy the process could continue into 2022. We will update our estimates as additional information becomes available, however, the actual impact on our results of operations, financial position or cash flows, or the timing of such impact, could differ from our estimates.