BUSINESS OPTIMIZATION CHARGES

12 Months Ended

Dec. 31, 2019

Restructuring and Related Activities [Abstract]


BUSINESS OPTIMIZATION CHARGES

In recent years, we have undertaken actions to transform our cost structure and enhance operational efficiency. These efforts include restructuring the organization, optimizing the manufacturing footprint, R&D operations and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions. From the commencement of our business optimization activities through December 31, 2019, we have incurred cumulative pre-tax costs of approximately $980 million related to these actions. The costs consisted primarily of employee termination, implementation costs, asset impairments and accelerated depreciation. We currently expect to incur additional pre-tax cash costs of approximately $50 million through the completion of these initiatives under our current program. These costs will primarily include employee termination costs, implementation costs, and accelerated depreciation. To the extent further cost savings opportunities are identified, we may incur additional business optimization expenses.

We recorded the following charges related to business optimization programs in 2019, 2018, and 2017:


years ended December 31 (in millions)	2019		2018		2017
Restructuring charges	$	134	$	117	$	70
Costs to implement business optimization programs	45		94		89
Accelerated depreciation	5		9		10
Total business optimization charges	$	184	$	220	$	169

For segment reporting, business optimization charges are unallocated expenses.

Costs to implement business optimization programs for the years ended December 31, 2019, 2018 and 2017, consisted primarily of external consulting and transition costs, including employee compensation and related costs. The costs were generally included within cost of sales, SG&A expense and R&D expense.

For the years ended December 31, 2019, 2018 and 2017, we recognized accelerated depreciation, primarily associated with facilities to be closed. The costs were recorded within cost of sales and SG&A expense.

During the years ended December 31, 2019, 2018 and 2017, we recorded the following restructuring charges:


	2019
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	13	$	37	$	25	$	75
Contract termination and other costs	10		1		—		11
Asset impairments	37		2		9		48
Total restructuring charges	$	60	$	40	$	34	$	134
	2018
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	30	$	51	$	19	$	100
Contract termination and other costs	4		6		—		10
Asset impairments	1		6		—		7
Total restructuring charges	$	35	$	63	$	19	$	117
	2017
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	22	$	39	$	(2)	$	59
Contract termination and other costs	—		5		—		5
Asset impairments	5		1		—		6
Total restructuring charges	$	27	$	45	$	(2)	$	70

The following table summarizes activity in the liability related to our restructuring initiatives.


(in millions)
Liability balance as of December 31, 2016 (As Restated)	$	164
Charges	83
Payments	(140)
Reserve adjustments	(19)
Currency translation	24
Liability balance as of December 31, 2017 (As Restated)	112
Charges	126
Payments	(96)
Reserve adjustments	(16)
Currency translation	(25)
Liability balance as of December 31, 2018 (As Restated)	101
Charges	113
Payments	(93)
Reserve adjustments	(27)
Currency translation	(2)
Liability balance as of December 31, 2019	$	92

Reserve adjustments primarily relate to employee termination cost reserves established in prior periods.

Substantially all of our restructuring liabilities as of December 31, 2019 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs. Substantially all of the cash payments for those liabilities are expected to be disbursed by the end of 2020.