NOTE 3. OTHER EXPENSE


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions) (Income) Expense	2011			2010			2011			2010
Net foreign currency exchange losses	$	6		$	12		$	9		$	121
Financing fees and financial instruments		63			7			72			20
General and product liability — discontinued products (Note 11)		3			7			8			11
Net (gains) losses on asset sales		(11	)		(8	)		(13	)		(24	)
Royalty income		(11	)		(9	)		(20	)		(15	)
Interest income		(3	)		(2	)		(6	)		(5	)
Miscellaneous		1			—			2			3

	$	48		$	7		$	52		$	111

Net foreign currency exchange losses in the second quarter of 2011 were $6 million, compared to $12 million in the second quarter of 2010. Foreign currency exchange losses in the first six months of 2011 were $9 million, compared to $121 million in the first six months of 2010. Losses in 2010 included a loss of $110 million resulting from the January 8, 2010 devaluation of the Venezuelan bolivar fuerte against the U.S. dollar and the establishment of a two-tier exchange rate structure. Foreign currency exchange in all periods also reflected net gains and losses resulting from the effect of exchange rate changes on various foreign currency transactions worldwide.

Effective January 1, 2010, Venezuela’s economy was considered to be highly inflationary under U.S. generally accepted accounting principles since it experienced a rate of general inflation in excess of 100% over the latest three year period, based upon the blended Consumer Price Index and National Consumer Price Index. Accordingly, the U.S. dollar was determined to be the functional currency of our Venezuelan subsidiary. All gains and losses resulting from the remeasurement of its financial statements since January 1, 2010 were determined using official exchange rates.

On January 8, 2010, Venezuela established a two-tier exchange rate structure for essential and non-essential goods. For essential goods the official exchange rate was 2.6 bolivares fuertes to the U.S. dollar and for non-essential goods the official exchange rate was 4.3 bolivares fuertes to the U.S. dollar. On January 1, 2011, the two-tier exchange rate structure was eliminated. For our unsettled amounts at December 31, 2010 and going forward, the official exchange rate of 4.3 bolivares fuertes to the U.S. dollar will be used for substantially all goods.

The $110 million foreign currency exchange loss in the first quarter of 2010 primarily consisted of a $157 million remeasurement loss on bolivar-denominated net monetary assets and liabilities, including deferred taxes, at the time of the January 2010 devaluation. The loss was primarily related to cash deposits in Venezuela that were remeasured at the official exchange rate of 4.3 bolivares fuertes applicable to non-essential goods, and was partially offset by a $47 million subsidy receivable related to U.S. dollar-denominated payables that were expected to be settled at the official subsidy exchange rate of 2.6 bolivares fuertes applicable to essential goods. Since we expected these payables to be settled at the subsidy essential goods rate, we established a subsidy receivable to reflect the expected benefit to be received in the form of the difference between the essential and non-essential goods exchange rates. Throughout 2010, we periodically assessed our ability to realize the benefit of the subsidy receivable and a substantial portion of purchases by our Venezuelan subsidiary had qualified and settled at the official exchange rate for essential goods. As a result of the elimination of the official subsidy exchange rate for essential goods, we recorded a foreign exchange loss of $24 million in the fourth quarter of 2010 related to the reversal of the subsidy receivable at December 31, 2010.

Financing fees increased by $56 million due primarily to $53 million of charges in the second quarter of 2011 related to the redemption of $350 million in aggregate principal amount of our outstanding 10.5% senior notes due 2016, of which $37 million related to cash premiums paid on the redemption and $16 million related to the write-off of deferred financing fees and unamortized discount.

General and product liability — discontinued products includes charges for claims against us related primarily to asbestos personal injury claims, net of probable insurance recoveries. We recorded $6 million and $5 million of expense related to asbestos claims in the second quarter of 2011 and 2010, respectively. In addition, we recorded $3 million of income related to probable insurance recoveries and a $2 million decrease in probable insurance recoveries in the second quarter of 2011 and 2010, respectively. We recorded $11 million and $12 million of expense related to asbestos claims in the first six months of 2011 and 2010, respectively. In addition, we recorded $5 million and $1 million of income related to probable insurance recoveries in the first six months of 2011 and 2010, respectively.

Net gains on asset sales were $11 million in the second quarter of 2011, compared to net gains on asset sales of $8 million in the second quarter of 2010. Net gains on asset sales were $13 million in the first six months of 2011, compared to net gains on asset sales of $24 million in the first six months of 2010. Net gains on asset sales in 2011 included second quarter gains on the sale of the farm tire business in Latin American Tire and the recognition of a deferred gain from the sale of property in North American Tire. Net gains on asset sales in 2010 included a first quarter gain on the sale of land in Thailand and a second quarter gain on the recognition of a deferred gain from the sale of property in Latin American Tire.

Royalty income is derived primarily from licensing arrangements related to divested businesses. Interest income consisted primarily of amounts earned on cash deposits.