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Note 2. Acquisitions (Notes)
 12 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
2. Acquisitions and Divestitures

On September 22, 2017, Adient completed the acquisition of Futuris Global Holdings LLC (“Futuris”), a manufacturer of full seating systems, seat frames, seat trim, headrests, armrests and seat bolsters. The acquisition is expected to provide substantial synergies through vertical integration, purchasing and logistics improvements. The acquisition also provides for an immediate manufacturing presence on the west coast of the U.S. to service customers such as Tesla as well as strategic locations in China and Southeast Asia.

The net purchase consideration of $353 million consisted of net cash consideration of $349 million (net of $34 million acquired) and the assumption of $4 million of debt (consisting of $2 million of short-term debt and $2 million of current portion of long-term debt). The acquisition was accounted for using the acquisition method and the operating results and cash flows of Futuris are included in Adient's consolidated financial statements from September 22, 2017.

Adient has recorded a preliminary allocation of the purchase price for assets acquired and liabilities assumed based on their estimated fair values as of the September 22, 2017 acquisition date. The preliminary purchase price allocation is as follows:
(in millions)
 
Preliminary Purchase Price Allocation
Cash
 
$
34

Accounts receivable
 
93

Inventory
 
42

Property, plant and equipment
 
49

Other assets
 
17

Goodwill
 
202

Intangible assets
 
165

Accounts payable
 
(85
)
Other liabilities
 
(134
)
Total purchase consideration
 
383

Less: cash acquired
 
34

Net cash paid
 
349

Plus: acquired debt
 
4

Net purchase consideration
 
$
353



The preliminary values allocated to intangible assets of $165 million primarily consist of customer relationships which are being amortized on a straight line basis over an estimated useful life of approximately 10 years. The assets were valued using an income approach, specifically the “multi-period excess earnings” method, which identifies an estimated stream of revenue and expenses for a particular group of assets from which deductions of portions of the projected economic benefits, attributable to assets other than the subject asset (contributory assets), are deducted in order to isolate the prospective earnings of the subject asset. This value is considered a level 3 measurement under the U.S. GAAP fair value hierarchy. Key assumptions used in the valuation of customer relationships include: (1) a rate of return of 16.5% and (2) the life of the relationship of approximately 10 years.

The preliminary allocation of the purchase price is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets along with fair value adjustments on property, plant and equipment and inventory are based on preliminary valuations and are subject to final adjustments to reflect the final valuations.

Adient expensed $3 million of acquisition-related costs in the year ended September 30, 2017. Pro forma historical results of operations related to the acquisition of Futuris have not been presented as they are not material to Adient’s consolidated statements of operations.
During July 2017, Guangzhou Adient Automotive Seating Co., Ltd. ("GAAS"), one of Adient's non-consolidated partially-owned affiliates in China became a consolidated entity as a result of an amendment to the rights agreement. This transaction was accounted for as a step acquisition and fair value accounting was applied. A fair value of $354 million was determined through a valuation using the income approach. A gain of $151 million was recorded on Adient's previously held interest and is included in equity income in the consolidated statements of operations. Adient has recorded a preliminary fair value allocation for the assets and liabilities of the entity based on their estimated fair values, as follows:

(in millions)
 
Preliminary Fair Value Allocation
Cash and cash equivalents
 
$
102

Accounts receivable
 
46

Inventory - net
 
2

Other assets
 
3

Property, plant and equipment
 
17

Goodwill
 
82

Identifiable intangibles
 
276

Accounts payable
 
(83
)
Other liabilities
 
(91
)
Fair value of the entity
 
$
354

Noncontrolling interest
 
(170
)
Adient's interest
 
$
184



The preliminary values allocated to other intangible assets of $276 million primarily consist of customer relationships, which are being amortized on a straight-line basis over the estimated useful life of 20 years. The assets were valued using an income approach, specifically the “multi-period excess earnings” method, which identifies an estimated stream of revenue and expenses for a particular group of assets from which deductions of portions of the projected economic benefits, attributable to assets other than the subject asset (contributory assets), are deducted in order to isolate the prospective earnings of the subject asset. This value is considered a level 3 measurement under the U.S. GAAP fair value hierarchy. Key assumptions used in the valuation of customer relationships include: (1) a rate of return of 14.7% and (2) the life of the relationship of approximately 20 years.

The purchase price is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The amounts allocated to goodwill and intangible assets are based on preliminary valuations and are subject to final adjustments to reflect the final valuations. Pro forma historical results of operations related to this transaction have not been presented as they are not material to Adient’s consolidated statements of operations.

During fiscal 2015, Adient completed three acquisitions, of which $18 million of the purchase price was paid as of September 30, 2015. The acquisitions in the aggregate were not material to Adient's consolidated financial statements. In connection with the acquisitions, Adient recorded goodwill of $9 million in the Interiors segment.

In the fourth quarter of fiscal 2015, Adient completed its global automotive interiors joint venture with Yanfeng Global Automotive Interior Systems Co., Ltd., or YFAI. In connection with the divestiture of the Interiors business, Adient recorded a $127 million gain, $20 million net of tax, and reduced goodwill in assets held for sale by $43 million.

Also during fiscal 2015, Adient completed a divestiture for a sales price of $18 million, which was received in the first quarter of fiscal 2016. The divestiture was not material to Adient's consolidated financial statements. In connection with the divestiture, Adient recorded a gain of $10 million and reduced goodwill by $4 million in the Seating segment.