Restructuring and Other Charges

Over the past several years, we have adopted plans to restructure portions of our operations. These plans were approved by our Board of Directors and were designed to reduce operational and administrative overhead costs throughout the business.

In the third quarter of 2018, we incurred $12 million in restructuring and related costs, primarily related to the accelerated move of our Beijing Ride Performance plant, and other cost improvement initiatives. In the first nine months of 2018, we incurred $55 million in restructuring and related costs, primarily related to the accelerated move of our Beijing Ride Performance plant, headcount reduction at a Clean Air manufacturing plant in Germany and other cost improvement initiatives. We expect all assembly to be relocated to the new China facility by the end of the year and the component manufacturing relocation to be complete during the first quarter of 2019.

In the third quarter of 2017, we incurred $20 million in restructuring and related costs, including asset write-downs of $1 million, primarily related to closing a Clean Air manufacturing plant and downsizing Ride Performance operations in Australia and other cost improvement initiatives. In the first nine months of 2017, we incurred $52 million in restructuring and related costs, including asset write-downs of $3 million, primarily related to closing a Clean Air Belgian JIT plant in response to the end of production on a customer platform, closing a Clean Air manufacturing plant and downsizing Ride Performance operations in Australia and other cost improvement initiatives.

The Company's restructuring and other charges are classified in the condensed consolidated statements of income as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(Millions)
Cost of sales	$	12	$	8	$	44	$	31
Engineering, research, and development	—		—		1		—
Selling, general, and administrative	—		11		10		18
Depreciation and amortization of other intangibles	—		1		—		3
	$	12	$	20	$	55	$	52

Other Structural Cost Reductions

The Company has also been tracking other costs, unrelated to manufacturing operations, which are intended to support the achievement of Acquisition synergies. In the third quarter of 2018, these other costs were $4 million, of which $3 million was recorded in selling, general, and administrative and $1 million in other expense, net. In the first nine months of 2018, these other costs were $13 million, of which $8 million was recorded in selling, general, and administrative expenses, $4 million was recorded in engineering, research, and development and $1 million was recorded in other expense, net.

Amounts related to activities that were charged to our restructuring reserves, including costs incurred to support future structural cost reductions, are as follows:



	December 31, 2017 Restructuring Reserve		2018 Expenses		2018 Cash Payments			Impact of Exchange Rates			September 30, 2018 Restructuring Reserve
	(Millions)
Employee severance, termination benefits and other related costs	$	25	$	55	$	(47	)	$	(1	)	$	32

Under the terms of our amended and restated senior credit agreement that took effect on May 12, 2017, we were allowed to exclude, at our discretion, (i) up to $35 million in 2017 and $25 million each year thereafter of cash restructuring charges and related expenses, with the ability to carry forward any amount not used in one year to the following year, and (ii) up to $150 million in the aggregate of all costs, expenses, fees, fines, penalties, judgments, legal settlements and other amounts associated with any restructuring, litigation, claim, proceeding or investigation related to or undertaken by us or any of our subsidiaries, together with any related provision for taxes, incurred for any quarterly period ending after May 12, 2017 in the calculation of the financial covenant ratios required under our senior credit facility. As of September 30, 2018, we elected not to exclude any of the $106 million of allowable cash charges and related expenses recognized in the fourth quarter of 2017 and in the first nine months of 2018 for restructuring related costs and antitrust settlements against the $35 million annual limit for 2017, the $25 million limit for 2018 and the $150 million aggregate limit that was available under the terms of the senior credit facility.