GOODWILL AND OTHER INTANGIBLES

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

During the fourth quarter of 2021, the Company performed an analysis on each reporting unit. Given the macroeconomic environment, the Company performed quantitative goodwill impairment analyses for the majority of reporting units to refresh their respective fair values. This requires the Company to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The basis of this goodwill impairment analysis is the Company’s annual budget and long-range plan (“LRP”). The annual budget and LRP includes a five-year projection of future cash flows based on actual new products and customer commitments. Because the projections are estimated over a significant future period of time, those estimates and assumptions are subject to uncertainty. Further, the market valuation models and other financial ratios used by the Company require certain assumptions and estimates regarding the applicability of those models to the Company’s facts and circumstances.

The Company believes the assumptions and estimates used to determine the estimated fair value are reasonable. Different assumptions could materially affect the estimated fair value. The primary assumptions affecting the Company’s 2021 goodwill quantitative impairment review are as follows:

•Discount rates: the Company used a range of 12.4% to 13.6% weighted average cost of capital (“WACC”) as the discount rates for future cash flows. The WACC is intended to represent a rate of return that would be expected by a market participant.

•Operating income margin: the Company used historical and expected operating income margins, which may vary based on the projections of the reporting unit being evaluated.

•Revenue growth rate: the Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.

In addition to the above primary assumptions, the Company notes the following risks to volume and operating income assumptions that could have an impact on the discounted cash flow models:

•The automotive industry is cyclical, and the Company’s results of operations would be adversely affected by industry downturns.

•The automotive industry is evolving, and if the Company does not respond appropriately, its results of operations would be adversely affected.

•The Company is dependent on market segments that use its key products and would be affected by decreasing demand in those segments.

•The Company is subject to risks related to international operations.

Based on the assumptions outlined above, the impairment testing conducted in the fourth quarter of 2021 indicated the Company’s goodwill assigned to the respective reporting units was not impaired. Future changes in the judgments, assumptions and estimates from those used in acquisition-related valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. Due to the Company’s recent acquisitions, there is less headroom (the difference between the carrying value and the fair value) associated with several of the Company’s reporting units. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect the Company’s financial statements in any given year.

A summary of the changes in the carrying amount of goodwill is as follows:


	2021
(in millions)	Air Management		e-Propulsion & Drivetrain		Aftermarket		Total
Gross goodwill balance, January 1	$	1,517	$	1,313	$	299	$	3,129
Accumulated impairment losses, January 1	(502)		—		—		(502)
Net goodwill balance, January 1	$	1,015	$	1,313	$	299	$	2,627
Goodwill during the year:
Acquisitions1 (Note 2)	707		—		—		707
Measurement period adjustments (Note 2)	(4)		29		16		41

Disposition2 (Note 2)	—		(12)		—		(12)

Other, primarily translation adjustment	(51)		(29)		(4)		(84)
Net goodwill balance, December 31	$	1,667	$	1,301	$	311	$	3,279


	2020
(in millions)	Air Management		e-Propulsion & Drivetrain		Aftermarket		Total
Gross goodwill balance, January 1	$	1,337	$	1,007	$	—	$	2,344
Accumulated impairment losses, January 1	(502)		—		—		(502)
Net goodwill balance, January 1	$	835	$	1,007	$	—	$	1,842
Goodwill during the year:
Acquisitions1 (Note 2)	151		272		287		710




Other, primarily translation adjustment	29		34		12		75
Net goodwill balance, December 31	$	1,015	$	1,313	$	299	$	2,627

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1 Acquisitions relate to the Company’s 2021 purchase of AKASOL and 2020 purchase of Delphi Technologies.

2 Disposition relates to the Company’s 2021 sale of Water Valley.

The Company’s other intangible assets, primarily from acquisitions, consist of the following:


		December 31, 2021						December 31, 2020
(in millions)	Estimated useful lives (years)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Amortized intangible assets:
Patented and unpatented technology	5 - 15	$	443	$	105	$	338	$	383	$	77	$	306
Customer relationships	7 - 15	877		310		567		893		272		621
Miscellaneous	2 - 13	14		7		7		10		7		3
Total amortized intangible assets		1,334		422		912		1,286		356		930
Unamortized trade names		179		—		179		166		—		166
Total other intangible assets		$	1,513	$	422	$	1,091	$	1,452	$	356	$	1,096

Amortization of other intangible assets was $88 million, $89 million and $39 million for the years ended December 31, 2021, 2020 and 2019, respectively. Amortization for the year ended December 31, 2020 includes $38 million related to accelerated amortization for certain intangibles, discussed further below. The Company utilizes the straight-line method of amortization recognized over the estimated useful lives of the assets. The estimated future annual amortization expense, primarily for acquired intangible assets, is as follows: $94 million in 2022, $87 million in 2023, $86 million in 2024, $85 million in 2025, $77 million in 2026 and $483 million thereafter.

A roll forward of the gross carrying amounts and related accumulated amortization of the Company’s other intangible assets is presented below:


	Gross carrying amounts				Accumulated amortization
(in millions)	2021		2020		2021		2020
Beginning balance, January 1	$	1,452	$	700	$	356	$	298
Acquisitions1 (Note 2)	130		760		—		—
Impairment/Abandonment2	(14)		(56)		—		(56)
Amortization2	—		—		88		89
Translation adjustment	(55)		48		(22)		25
Ending balance, December 31	$	1,513	$	1,452	$	422	$	356

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1 Acquisitions relate to the Company’s 2021 purchase of AKASOL and 2020 purchase of Delphi Technologies

2 In 2021, the Company performed a quantitative impairment test over its indefinite-lived trade names, which indicated that for one trade name the fair value was less than the carrying value. Therefore, the Company recorded an impairment charge to reduce the carrying value to the fair value. In 2020, as a result of an evaluation of the underlying technologies and management of the business subsequent to the acquisition of Delphi Technologies, the Company reduced the useful life of certain intangible assets during the fourth quarter of 2020 as they no longer provided future economic benefit. This resulted in accelerated amortization expense of $38 million and the removal of the related gross carrying amount and accumulated amortization of these assets.