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Goodwill and Other Intangible Assets—Net
 12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets—Net Goodwill and Other Intangible Assets

The Company performed a quantitative goodwill and indefinite-lived asset impairment analysis during the fourth quarter. The basis of the goodwill impairment and indefinite-lived intangible asset analyses is the Company's annual budget and three-year strategic plan. This includes a projection of future cash flows, which requires the Company to make significant assumptions and estimates about the extent and timing of future cash flows and revenue growth rates. These represent Company-specific inputs and assumptions about the use of the assets, as observable inputs are not available. These estimates and assumptions are subject to a high degree of uncertainty. Due to the many variables inherent in estimating fair value and the relative size of the goodwill and indefinite-lived intangible assets, differences in assumptions could have a material effect on the results of the analyses.

In the goodwill impairment analysis, for reporting units with goodwill, fair values are estimated using a combination of the income approach and market approach. The Company applies a 75% weighting to the income approach and a 25% weighting to the market approach. The most significant inputs in estimating the fair value of the Company's reporting units under the income approach are (i) projected operating margins, (ii) the revenue growth rate, and (iii) the discount rate, which is risk-adjusted based on the aforementioned inputs.

For the indefinite-lived asset impairment analysis, the fair value is based upon the prospective stream of hypothetical after-tax royalty cost savings discounted at rates that reflect the rates of return appropriate for these intangible assets. The primary, and most sensitive, inputs utilized in determining fair values of trade names and trademarks are (i) projected branded product sales, (ii) the revenue growth rate, (iii) the royalty rate, and (iv) the discount rate, which is risk-adjusted based on the projected branded sales.

At December 31, 2019 and 2018, goodwill consisted of the following:
 
December 31, 2019
 
Clean Air
 
Powertrain
 
Ride Performance
 
Motorparts
 
Total
Gross carrying amount at beginning of period
$
22

 
$
388

 
$
210

 
$
611

 
$
1,231

Measurement period adjustments
—

 
(45
)
 
24

 
13

 
(8
)
Acquisitions
—

 
—

 
28

 
—

 
28

Reclassification to assets held for sale
—

 
—

 
—

 
(4
)
 
(4
)
Foreign exchange
—

 
—

 
(3
)
 
—

 
(3
)
Gross carrying amount at end of period
22

 
343

 
259

 
620

 
1,244

 
 
 
 
 
 
 
 
 
 
Accumulated impairment loss at beginning of period
—

 
—

 
(143
)
 
(219
)
 
(362
)
Impairment
—

 
(18
)
 
(69
)
 
(21
)
 
(108
)
Foreign exchange
—

 
—

 
—

 
1

 
1

Accumulated impairment loss at end of period
—

 
(18
)
 
(212
)
 
(239
)
 
(469
)
 
 
 
 
 
 
 
 
 
 
Net carrying value at end of period
$
22

 
$
325

 
$
47

 
$
381

 
$
775

 
December 31, 2018
 
Clean Air
 
Powertrain
 
Ride Performance
 
Motorparts
 
Total
Gross carrying amount at beginning of period
$
23

 
$
—

 
$
156

 
$
229

 
$
408

Acquisitions
—

 
388

 
55

 
382

 
825

Foreign exchange
(1
)
 
—

 
(1
)
 
—

 
(2
)
Gross carrying amount at end of period
22

 
388

 
210

 
611

 
1,231

 
 
 
 
 
 
 
 
 
 
Accumulated impairment loss at beginning of period
—

 
—

 
(140
)
 
(219
)
 
(359
)
Impairment
—

 
—

 
(3
)
 
—

 
(3
)
Foreign exchange
—

 
—

 
—

 
—

 
—

Accumulated impairment loss at end of period
—

 
—

 
(143
)
 
(219
)
 
(362
)
 
 
 
 
 
 
 
 
 
 
Net carrying value at end of period
$
22

 
$
388

 
$
67

 
$
392

 
$
869


The Öhlins Acquisition resulted in $42 million of goodwill which was included in the Ride Performance segment and the Federal-Mogul Acquisition resulted in goodwill of $803 million. During the year ended December 31, 2019, the Company made the following adjustments to goodwill in the measurement period to the preliminary purchase price allocation for the Acquisitions:
•
an increase of $14 million for the Öhlins Acquisition; and
•
a net decrease of $22 million for the Federal-Mogul Acquisition.

The Company recognized goodwill impairment charges of $108 million for the year ended December 31, 2019, which consisted of the following:
•
During the first quarter of 2019, the Company reorganized the reporting structure of its Aftermarket, Ride Performance, and Motorparts segments and the underlying reporting units within those segments. The Company reassigned assets and liabilities (excluding goodwill) to the reporting units affected. Goodwill was then reassigned to the reporting units using a relative fair value approach based on the fair value of the elements transferred and the fair value of the elements remaining within the original reporting units. The Company tested goodwill for impairment on a pre-reorganization basis and determined there was no impairment for the affected reporting units. The Company also performed an impairment analysis on a post-reorganization basis and determined $60 million of goodwill was
impaired for two reporting units within its Ride Performance segment, one of which was a full impairment of the goodwill. As a result, this non-cash charge was recorded in the first quarter of 2019. Goodwill allocated to other reporting units was supported by the valuation performed at that time;

•
During the third quarter of 2019, the Company finalized purchase accounting for the Federal-Mogul Acquisition. As a result, the final goodwill allocation was reassigned to the reorganized segments and reporting unit structure that occurred in the first quarter of 2019 using a relative fair value approach and the Company determined an incremental $9 million of goodwill was impaired for one reporting unit in its Ride Performance segment, which continued to represent a full impairment of goodwill in that reporting unit. This non-cash charge was recorded in the third quarter of 2019; and

•
As a result of the annual goodwill impairment analysis performed in the fourth quarter of 2019, the estimated fair value of one of the reporting units in the Motorparts segment was lower than its carrying value and an impairment charge of $21 million was recognized, which was a full impairment of the goodwill in that reporting unit. Additionally, the estimated fair value of one of the reporting units in the Powertrain segment was determined to be lower than the carrying value, and a partial goodwill impairment charge of $18 million was recognized. At December 31, 2019, this reporting unit has $40 million of goodwill after recognizing the impairment. This non-cash charge was recorded in the fourth quarter of 2019.

The following table shows a summary of the number of reporting units with goodwill in each segment and whether or not the reporting unit's fair value exceeds its carrying value by more or less than 10%:
 
Segments
 
Clean Air
 
Powertrain
 
Ride Performance
 
Motorparts
Number of reporting units with goodwill
3

 
2

 
2

 
1

 
 
 
 
 
 
 
 
Number of reporting units where fair value exceeds carrying value:
 
 
 
 
 
 
 
Greater than 10%
3

 
—

 
1

 
1

Less than 10%
—

 
2

 
1

 
—

 
 
 
 
 
 
 
 
Goodwill for reporting units where fair value exceeds carrying value:
 
 
 
 
 
 
 
Greater than 10%
$
22

 
$
—

 
$
7

 
$
381

Less than 10%
—

 
325

 
40

 
—

 
$
22

 
$
325

 
$
47

 
$
381



The three reporting units above where fair value is not in excess of carrying value by 10% or more are reporting units acquired as part of the Acquisitions.

As a result of the goodwill impairment analysis in the fourth quarter of 2018, the estimated fair value for one reporting unit in the Ride Performance segment was lower than its carrying value and an impairment charge of $3 million was recognized for the year ended December 31, 2018.

As a result of the goodwill impairment analysis in the fourth quarter of 2017, the Company recognized goodwill impairment charges of $11 million for the year ended December 31, 2017. The estimated fair value for one reporting unit in the Ride Performance segment was lower than its carrying value and an impairment charge of $7 million was recognized. Additionally, the estimated fair value for one reporting unit in the Motorparts segment was lower than its carrying value and an impairment charge of $4 million was recognized.

At December 31, 2019 and 2018, intangible assets consisted of the following:
 
 
December 31, 2019
 
December 31, 2018
 
Useful Lives
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
 
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Definite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Customer relationships and platforms
10 years
$
988

 
$
(123
)
 
$
865

 
$
964

 
$
(24
)
 
$
940

Customer contract
10 years
8

 
(6
)
 
2

 
8

 
(5
)
 
3

Patents
10 to 17 years
1

 
(1
)
 
—

 
1

 
(1
)
 
—

Technology rights
10 to 30 years
133

 
(37
)
 
96

 
98

 
(27
)
 
71

Packaged kits know-how
10 years
54

 
(7
)
 
47

 
36

 
(1
)
 
35

Catalogs
10 years
47

 
(6
)
 
41

 
—

 
—

 
—

Licensing agreements
3 to 5 years
63

 
(18
)
 
45

 
66

 
(3
)
 
63

Land use rights
28 to 46 years
47

 
(3
)
 
44

 
44

 
(2
)
 
42

 
 
$
1,341

 
$
(201
)
 
$
1,140

 
$
1,217

 
$
(63
)
 
$
1,154

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Trade names and trademarks
 
 
 
 
 
282

 
 
 
 
 
365

Total
 
 
 
 
 
$
1,422

 
 
 
 
 
$
1,519



The Company recorded definite-lived and indefinite-lived intangible assets of $133 million as a result of the Öhlins Acquisition and the Federal-Mogul Acquisition resulted in $1.6 billion of definite-lived and indefinite-lived intangible assets. During the year ended December 31, 2019, the Company made the following adjustments to these intangible assets in the measurement period to the preliminary purchase price allocation for the Acquisitions:
•
a decrease of $2 million was recognized for the Öhlins Acquisition; and
•
a net increase of $47 million was recognized for the Federal-Mogul Acquisition.

Amortization expense of definite-lived intangible assets for the year ended December 31, 2019, 2018, and 2017 was $138 million, $32 million, and $3 million and is included in depreciation and amortization within the consolidated statements of income (loss).

As a result of the annual indefinite-lived intangible asset analysis performed in the fourth quarter of 2019, the estimated fair value of the trademarks and trade names for two reporting units in the Motorparts segment were less than their carrying values. Accordingly, non-cash impairment charges of $133 million were recognized, both of which were partial impairments. As a result, the carrying value equals fair value at December 31, 2019.

The expected future amortization expense for the Company's definite-lived intangible assets is as follows:
 
 
2020
 
2021
 
2022
 
2023
 
2024
 
2025 and thereafter
 
Total
Expected Amortization Expense
 
$
138

 
$
135

 
$
131

 
$
129

 
$
122

 
$
485

 
$
1,140