Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

6. Goodwill and Other Intangible Assets

During the three months ended September 30, 2020, the Company performed a review of potential triggering events, and concluded no events indicated it was more likely than not that the fair values of its reporting units had declined to below their carrying values. There are many uncertainties regarding the COVID-19 global pandemic that could negatively affect the Company's results of operations, financial position, and cash flows. As a result, if there is an adverse change to the Company’s projected financial information, due to business performance or market conditions, this may be indicative that the fair value of its reporting units have declined below their carrying values, which may result in non-cash goodwill or intangible asset impairment charges in a future period.

During the first quarter of 2020, the Company concluded it was more likely than not that the fair values of certain of its reporting units and its indefinite-lived intangible assets had declined to below their carrying values as a result of the effects of the COVID-19 global pandemic on the Company's projected financial information. The Company completed a goodwill impairment analysis for four of its reporting units with goodwill in the Powertrain, Motorparts, and Ride Performance segments. The difference between the reporting units' carrying values and fair values were recognized as impairment charges. The Company recognized $267 million in non-cash impairment charges related to its goodwill during the nine months ended September 30, 2020, which represented full impairments of the goodwill in one reporting unit in the Powertrain segment and one reporting unit in the Ride Performance segment, and partial impairments of goodwill in one reporting unit in the Powertrain segment and one reporting unit in the Motorparts segment.

During the first quarter of 2020, the Company also completed an analysis to determine the fair value of its trade names and trademarks for its reporting units in the Ride Performance and Motorparts segments. It was determined their carrying values exceeded their fair values and the Company recognized $51 million in non-cash impairment charges related to these indefinite-lived intangible assets during the nine months ended September 30, 2020, which represented a full impairment of the trade names and trademarks in one of the reporting units in the Motorparts segment, and a partial impairment of the trade names and trademarks in one of the reporting units in the Ride Performance segment and one of the reporting units in the Motorparts segment.

As discussed in more details in Note 4, Restructuring Charges, Net and Asset Impairments, the Company concluded impairment triggers had occurred during the first quarter of 2020 for certain long-lived asset groups within the Ride Performance segment. As a result, the Company recorded non-cash impairment charges of $65 million related to its definite-lived intangible assets during the nine months ended September 30, 2020, which represented full impairments of the definite-lived intangible assets in these two reporting units.

Impairment charges for goodwill and intangible assets recognized by segment during the nine months ended September 30, 2020 consist of the following:


	Nine Months Ended September 30, 2020
	Powertrain		Ride Performance		Motorparts		Total
Goodwill impairment charges	$	160	$	37	$	70	$	267
Trade names and trademarks intangible asset impairment charges	—		11		40		51
Definite-lived intangible asset impairment charges	—		65		—		65
	$	160	$	113	$	110	$	383

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% based on each respective reporting units most recent goodwill impairment analysis:


	Segments
	Clean Air		Powertrain		Ride Performance		Motorparts
Number of reporting units with goodwill	3		1		1		1

Number of reporting units where fair value exceeds carrying value:
Greater than 10%	3		—		1		—
Less than 10%	—		1		—		1

Goodwill for reporting units where fair value exceeds carrying value:
Greater than 10%	$	22	$	—	$	7	$	—
Less than 10%	—		165		—		313
	$	22	$	165	$	7	$	313

At September 30, 2020 and December 31, 2019, goodwill consists of the following:



	Clean Air		Powertrain		Ride Performance		Motorparts		Total
Gross carrying amount at December 31, 2019	$	22	$	343	$	259	$	620	$	1,244

Foreign exchange	—		—		(3)		—		(3)
Gross carrying amount at March 31, 2020	22		343		256		620		1,241

Foreign exchange	—		—		3		—		3
Gross carrying amount at June 30, 2020	22		343		259		620		1,244
Reclassified from held for sale	—		—		—		2		2

Foreign exchange	—		—		1		1		2
Gross carrying amount at September 30, 2020	22		343		260		623		1,248

Accumulated impairment loss at December 31, 2019	—		(18)		(212)		(239)		(469)
Impairment	—		(160)		(37)		(70)		(267)
Accumulated impairment loss at March 31, 2020	—		(178)		(249)		(309)		(736)

Foreign exchange	—		—		(3)		—		(3)
Accumulated impairment loss at June 30, 2020	—		(178)		(252)		(309)		(739)

Foreign exchange	—		—		(1)		(1)		(2)
Accumulated impairment loss at September 30, 2020	—		(178)		(253)		(310)		(741)

Net carrying value at September 30, 2020	$	22	$	165	$	7	$	313	$	507

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 nine months ended September 30, 2019. Goodwill allocated to other reporting units was supported by the valuation performed at that time.

During the third quarter of 2019, the Company completed 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. This non-cash charge was recorded in the three months ended September 30, 2019 and the total impairment charges recognized in the nine months ended September 30, 2019 for the reorganization of the reporting units that occurred in the first quarter of 2019 was $69 million.

At September 30, 2020 and December 31, 2019, the Company's intangible assets consist of the following:


		September 30, 2020						December 31, 2019
	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	$	990	$	(257)	$	733	$	988	$	(123)	$	865
Customer contract	10 years	8		(6)		2		8		(6)		2
Patents	10 to 17 years	1		(1)		—		1		(1)		—
Technology rights	10 to 30 years	135		(47)		88		133		(37)		96
Packaged kits know-how	10 years	54		(11)		43		54		(7)		47
Catalogs	10 years	47		(9)		38		47		(6)		41
Licensing agreements	3 to 5 years	64		(31)		33		63		(18)		45
Land use rights	28 to 46 years	48		(4)		44		47		(3)		44
		1,347		(366)		981		1,341		(201)		1,140
Indefinite-lived intangible assets:
Trade names and trademarks						233						282
Total						$	1,214					$	1,422

The amortization expense associated with definite-lived intangible assets is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Amortization expense	$	32	$	33	$	98	$	101

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	$	32	$	129	$	124	$	121	$	114	$	461	$	981