Costs Associated with Rationalization Programs

9 Months Ended

Sep. 30, 2019

Restructuring and Related Activities [Abstract]

COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce high-cost and excess manufacturing capacity and associate headcount.

The following table shows the roll-forward of our liability between periods:



	Associate-
(In millions)	Related Costs			Other Exit Costs			Total
Balance at December 31, 2018	$	80		$	1		$	81
2019 Charges	117			14			131
Incurred, including net Foreign Currency Translation of $(6) million and $0 million, respectively	(38		)	(14		)	(52		)
Reversed to the Statement of Operations	(3		)	—			(3		)
Balance at September 30, 2019	$	156		$	1		$	157

On March 18, 2019, we approved a plan to modernize two of our tire manufacturing facilities in Germany. The plan is in furtherance of our strategy to strengthen the competitiveness of our manufacturing footprint and increase production of premium, large-rim diameter consumer tires. The plan will result in approximately 1,100 job reductions as a result of changes to the layout of the plants, efficiency gains from new equipment and a reduction in the production of tires for declining, less profitable market segments. We have $96 million accrued related to this plan at September 30, 2019, which is expected to be substantially paid through 2023.

On September 16, 2019, we approved a plan primarily to offer voluntary buy-outs to certain associates at our tire manufacturing facility in Gadsden, Alabama, in furtherance of our strategy to strengthen the competitiveness of our manufacturing footprint by curtailing production of tires for declining, less profitable segments of the tire market. Eligible associates must submit applications for buy-outs between October 1, 2019 and November 1, 2019 and can revoke any submitted applications up to the November 1, 2019 deadline. As of September 30, 2019, we have $6 million accrued related to this plan. The total amount expected to be incurred in connection with this plan is dependent upon the number of eligible associates who apply for buy-outs and our acceptance of those applications. As such, we cannot currently estimate the amount of the total cost, the amount for each major type of cost, or the amount of total future cash expenditures expected to be incurred in connection with this plan.

The remainder of the accrual balance at September 30, 2019 is expected to be substantially utilized in the next 12 months and includes $27 million related to plans to reduce manufacturing headcount and improve operating efficiency in Europe, Middle East and Africa ("EMEA"), $18 million related to global plans to reduce Selling, Administrative and General Expense ("SAG") headcount and $5 million related to a plan to reduce manufacturing headcount and improve operating efficiency in Americas.

The following table shows net rationalization charges included in Income before Income Taxes:



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In millions)	2019			2018		2019			2018
Current Year Plans
Associate Severance and Other Related Costs	$	17		$	—	$	115		$	32
Benefit Plan Termination Benefits	—			—		1			—
Other Exit Costs	3			1		7			1
Current Year Plans - Net Charges	$	20		$	1	$	123		$	33

Prior Year Plans
Associate Severance and Other Related Costs	$	(2	)	$	1	$	(2	)	$	(6	)
Benefit Plan Termination Benefits	1			—		—			—
Other Exit Costs	2			3		7			13
Prior Year Plans - Net Charges	1			4		5			7
Total Net Charges	$	21		$	5	$	128		$	40

Asset Write-off and Accelerated Depreciation Charges	$	1		$	—	$	2		$	2

Substantially all of the new charges for the three and nine months ended September 30, 2019 and 2018 related to future cash outflows. Net current year plan charges for the three and nine months ended September 30, 2019 include $11 million and $105 million, respectively, related to plans to reduce manufacturing headcount and improve operating efficiency in EMEA and $9 million and $18 million, respectively, related to plans to reduce manufacturing headcount and improve operating efficiency in Americas. Net current year plan charges for the three and nine months ended September 30, 2018 include $1 million and $27 million, respectively, related to a global plan to reduce SAG headcount. Net current year plan charges for the nine months ended September 30, 2018 also include charges of $6 million related to a plan to improve operating efficiency in EMEA.

Net prior year plan charges for the three and nine months ended September 30, 2019 were $1 million and $5 million, respectively, primarily related to EMEA manufacturing plans. Net prior year plan charges for the nine months ended September 30, 2019 also include reversals of $3 million for actions no longer needed for their originally intended purposes. Net prior year plan charges for the three and nine months ended September 30, 2018 include $2 million and $11 million, respectively, related to the closure of our tire manufacturing facility in Philippsburg, Germany and $2 million and $4 million, respectively, related to a plan to reduce manufacturing headcount in EMEA. Net prior year plan charges for the nine months ended September 30, 2018 also include $3 million related to a global plan to reduce SAG headcount. Net prior year plan charges for the three and nine months ended September 30, 2018 include reversals of $1 million and $13 million, respectively, for actions no longer needed for their originally intended purposes.

Ongoing rationalization plans had approximately $720 million in charges incurred prior to 2019 and approximately $110 million is expected to be incurred in future periods.

Approximately 1,200 associates will be released under new plans initiated in 2019, of which approximately 250 were released through September 30, 2019. In the first nine months of 2019, approximately 300 associates were released under plans initiated in prior years. Approximately 1,200 associates remain to be released under all ongoing rationalization plans.

Approximately 850 former associates of the closed Amiens, France manufacturing facility have asserted wrongful termination or other claims against us. Refer to Note to the Consolidated Financial Statements No. 13, Commitments and Contingent Liabilities, in this Form 10-Q.