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Fair Value Measurements and Financial Instruments | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements and Financial Instruments | Fair Value Measurements and Financial Instruments Fair Value Measurements The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. •Level 1 – Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access. •Level 2 – Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability. •Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Items Measured at Fair Value on a Recurring Basis The Company is exposed to various market risks including, but not limited to, changes in currency exchange rates arising from the sale of products in countries other than the manufacturing source, foreign currency denominated supplier payments, debt, dividends and investments in subsidiaries. The Company manages these risks, in part, through the use of derivative financial instruments. The maximum length of time over which the Company hedges the variability in the future cash flows related to transactions, excluding those transactions as related to the payment of variable interest on existing debt, is eighteen months. The maximum length of time over which the Company hedges forecasted transactions related to variable interest payments is the term of the underlying debt. Hedge instruments are measured at fair value on a recurring basis under an income approach using industry-standard models that consider various assumptions, including time value, volatility factors, current market and contractual prices for the underlying and non-performance risk. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument or may derived from observable data. Accordingly, the Company's currency instruments are classified as Level 2 in the fair value hierarchy. The Company presents its derivative positions and any related material collateral under master netting arrangements that provide for the net settlement of contracts, by counterparty, in the event of default or termination. Derivative financial instruments are included in the Company’s condensed consolidated balance sheets. There is no cash collateral on any of these derivatives. Currency Exchange Rate Instruments: The Company primarily uses forward contracts denominated in euro, Japanese yen, Thai baht, Brazilian real, and Mexican peso intended to mitigate the variability of cash flows denominated in currency other than the hedging entity's functional currency. As of September 30, 2021 and December 31, 2020, the Company had foreign currency economic derivative instruments with notional amounts of $21 million and $18 million, respectively. At September 30, 2021, these instruments are undesignated hedges of local currency value of recognized net monetary balances that are denominated in a currency other than the particular entity's functional currency. The aggregate fair value of these derivative instruments is an asset of less than $1 million and an asset of $1 million as of September 30, 2021 and December 31, 2020, respectively. Cross Currency Swaps: The Company has executed cross-currency swap transactions intended to mitigate the variability of the U.S. dollar value of its investment in certain of its non-U.S. entities. These transactions are designated as net investment hedges and the Company has elected to assess hedge effectiveness under the spot method. Accordingly, periodic changes in the fair value of the derivative instruments attributable to factors other than spot exchange rate variability are excluded from the measurement of hedge ineffectiveness and reported directly in earnings each reporting period. As of September 30, 2021 and December 31, 2020, the Company had cross currency swaps with an aggregate notional value of $250 million. The aggregate fair value of these derivatives is a non-current liability of $12 million and $27 million as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, a gain of $5 million is expected to be reclassified out of accumulated other comprehensive income into earnings within the next 12 months. Interest Rate Swaps: The Company utilizes interest rate swap instruments to manage its exposure and to mitigate the impact of interest rate variability. The instruments are designated as cash flow hedges, accordingly, the effective portion of the periodic changes in fair value is recognized in accumulated other comprehensive income, a component of shareholders' equity. Subsequently, the accumulated gains and losses recorded in equity are reclassified to income in the period during which the hedged cash flow impacts earnings. As of September 30, 2021 and December 31, 2020, the Company had interest rate swaps with an aggregate notional value of $300 million. The aggregate fair value of these derivative transactions is a non-current liability of $6 million and $11 million as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, a loss of $6 million is expected to be reclassified out of accumulated other comprehensive income into earnings within the next twelve months. Financial Statement Presentation Gains and losses on derivative financial instruments for the three and nine months ended September 30, 2021 and 2020 are as follows:
| Recorded Income (Loss) into AOCI, net of tax |  | Reclassified from AOCI into Income (Loss) |  | Recorded in (Income) Loss |  |
(In millions) | 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  |  |  |
Three months ended September 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency risk - Cost of sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges | $ | — |  |  | $ | 1 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |
Interest rate risk - Interest expense, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap | — |  |  | — |  |  | (2) |  |  | — |  |  | — |  |  | — |  |  |  |  |
Net investment hedges | 5 |  |  | (9) |  |  | 1 |  |  | 2 |  |  | — |  |  | — |  |  |  |  |
| $ | 5 |  |  | $ | (8) |  |  | $ | (1) |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  |  |  |
Nine months ended September 30, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency risk - Cost of sales: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  |  |  |
Interest rate risk - Interest expense, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap | (1) |  |  | (8) |  |  | (5) |  |  | (1) |  |  | — |  |  | — |  |  |  |  |
Net investment hedges | 18 |  |  | (1) |  |  | 4 |  |  | 5 |  |  | — |  |  | — |  |  |  |  |
| $ | 17 |  |  | $ | (9) |  |  | $ | (1) |  |  | $ | 4 |  |  | $ | 1 |  |  | $ | — |  |  |  |  |
Items Not Carried at Fair Value The Company's fair value of debt was $353 million and $347 million as of September 30, 2021 and December 31, 2020, respectively. Fair value estimates were based on the current rates offered to the Company for debt of the same remaining maturities. Accordingly, the Company's debt fair value disclosures are classified as Level 2 in the fair value hierarchy. Concentrations of Credit Risk Financial instruments including cash equivalents, derivative contracts, and accounts receivable, expose the Company to counter-party credit risk for non-performance. The Company’s counterparties for cash equivalents and derivative contracts are banks and financial institutions that meet the Company’s credit rating requirements. The Company’s counterparties for derivative contracts are substantial investment and commercial banks with significant experience using such derivatives. The Company manages its credit risk pursuant to written policies that specify minimum counterparty credit profile and by limiting the concentration of credit exposure amongst its multiple counterparties. The Company's credit risk with any single customer does not exceed ten percent of total accounts receivable except for Ford and its affiliates which represent 16% and 13% of the Company's balance as of September 30, 2021 and December 31, 2020, respectively.

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