Restructuring costs

Our accounting for employee separations is dependent upon how the particular program is designed. For voluntary programs, eligible separation costs are recognized at the time of employee acceptance unless the acceptance requires explicit approval by the company. For involuntary programs, eligible costs are recognized when management has approved the program, the affected employees have been properly notified and the costs are estimable.

Restructuring costs for 2018, 2017 and 2016 were as follows:




(Millions of dollars)	2018			2017		2016
Employee separations ¹	$	112		$	525	$	297
Contract terminations ¹	7			183		62
Long-lived asset impairments ¹	93			346		391
Defined benefit plan curtailments and termination benefits ²	(8		)	29		7
Other ³	182			173		262
Total restructuring costs	$	386		$	1,256	$	1,019

¹ Recognized in Other operating (income) expenses.
² Recognized in Other income (expense).
³Represents costs related to our restructuring programs, primarily for accelerated depreciation, project management costs, equipment relocation and inventory write-downs, and also LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold.

The restructuring costs in 2018 were primarily related to ongoing facility closures across the company. In 2017, about half of the restructuring costs were related to the closure of the facility in Gosselies, Belgium, within Construction Industries, and the remainder was related to other restructuring actions across the company. The restructuring costs in 2016 were primarily related to actions in Resource Industries in response to continued weakness in the mining industry. In addition, costs in 2016 resulted from our decision to discontinue production of on-highway vocational trucks within Energy & Transportation and other restructuring actions across the company.

Restructuring costs are a reconciling item between Segment profit and Consolidated profit before taxes. See Note 23 for more information.

The following table summarizes the 2017 and 2018 employee separation activity:



(Millions of dollars)
Liability balance at December 31, 2016	$	147
Increase in liability (separation charges)	525
Reduction in liability (payments)	(423		)
Liability balance at December 31, 2017	$	249
Increase in liability (separation charges)	112
Reduction in liability (payments)	(276		)
Liability balance at December 31, 2018	$	85

Most of the remaining liability balance as of December 31, 2018 is expected to be paid in 2019.

In March 2017, Caterpillar informed Belgian authorities of the decision to proceed to a collective dismissal, which led to the closure of the Gosselies site, impacting about 2,000 employees. Production of Caterpillar products at the Gosselies site ended during the second quarter of 2017. The other operations and functions at the Gosselies site were phased out by the end of the second quarter of 2018. The program concluded in 2018, and we incurred a total of $647 million of restructuring costs (primarily in 2017) under the program. Those costs were primarily related to employee separation costs, long-lived asset impairments, and other costs which were partially offset by a LIFO inventory decrement benefit.

Restructuring costs for the year ended December 31, 2016 were $1,019 million. Throughout 2016, we initiated the following restructuring plans:


•	In February 2016, we made the decision to discontinue production of on-highway vocational trucks. Based on the business climate in the truck industry and a thorough evaluation of the business, the company decided it would withdraw from this market. We recognized $104 million of restructuring costs, primarily related to long-lived asset impairments and sales discounts.

•

In the second half of 2016, we took additional restructuring actions in Resource Industries, including ending the production of track drills; pursuing strategic alternatives related to room and pillar products; consolidation of two product development divisions; and additional actions in response to ongoing weakness in the mining industry. For the year ended December 31, 2016, we incurred $369 million of restructuring costs for these plans primarily related to long-lived asset impairments, employee separation costs and inventory write-downs.

In September 2015, we announced a large scale restructuring plan (the Plan) including a voluntary retirement enhancement program for qualifying U.S. employees, several voluntary separation programs outside of the U.S., additional involuntary programs throughout the company and manufacturing facility consolidations and closures that occurred through 2018. The largest action among those included in the Plan was related to our European manufacturing footprint which led to the Gosselies, Belgium, facility, closure as discussed above. We incurred $121 million, $817 million and $281 million of restructuring costs associated with these actions in 2018, 2017 and 2016, respectively. Total restructuring costs incurred since inception of the Plan were $1,788 million. The remaining costs of approximately $50 million related to the Plan are expected to be recognized in 2019.