Costs Associated with Rationalization Programs

6 Months Ended

Jun. 30, 2011

Costs Associated with Rationalization Programs [Abstract]

COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

NOTE 2. COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

In order to maintain our global competitiveness, we have implemented rationalization actions over the past several years to reduce high-cost manufacturing capacity and to reduce associate headcount. The net rationalization charges included in Income before Income Taxes are as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
(In millions)	2011		2010			2011			2010
New charges	$	46	$	17		$	57		$	27
Reversals		—		(11	)		(2	)		(19	)
	$	46	$	6		$	55		$	8

     The following table shows the roll-forward of our liability between periods:

	Associate-			Other
(In millions)	Related Costs			Costs			Total
Balance at December 31, 2010	$	212		$	18		$	230
2011 Charges		41			16			57
Incurred		(10	)		(18	)		(28	)
Reversed to the statement of operations		(1	)		(1	)		(2	)
Foreign currency translation		10			1			11
Balance at June 30, 2011	$	252		$	16		$	268

During the second quarter of 2011, net rationalization charges of $46 million were recorded. New charges of $46 million were comprised of $11 million for plans initiated in 2011, consisting of $10 million of associate severance costs and $1 million for other exit and non-cancelable lease costs, and $35 million for plans initiated primarily in 2010, consisting of $29 million of associate severance costs and $6 million of other exit and non-cancelable lease costs, mainly due to the July 2011 closure of our Union City, Tennessee manufacturing facility. Substantially all of the new charges relate to future cash outflows.

     During the first six months of 2011, net rationalization charges of $55 million were recorded. New charges of $57 million were comprised of $12 million for plans initiated in 2011, consisting of $11 million of associate severance costs and $1 million for other exit and non-cancelable lease costs, and $45 million for plans initiated primarily in 2010, consisting of $30 million of associate severance costs and $15 million of other exit and non-cancelable lease costs, mainly due to the July 2011 closure of our Union City, Tennessee manufacturing facility. Substantially all of the new charges relate to future cash outflows. The net charges in the first six months of 2011 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 500 associates will be released under 2011 plans.

     In the first six months of 2011, $10 million was incurred for associate severance payments and $18 million was incurred for non-cancellable lease and other exit costs.

     The accrual balance of $268 million at June 30, 2011 consists of $252 million for associate severance costs that are expected to be substantially utilized within the next 12 months and $16 million primarily for long term non-cancelable lease and other exit costs. At June 30, 2011, $112 million and $118 million, respectively, of the accrual balance relates to plans associated with the closure of our Union City, Tennessee manufacturing facility and the announced discontinuation of consumer tire production at one of our facilities in Amiens, France.

     Asset write-offs and accelerated depreciation charges of $25 million and $34 million were recorded in cost of goods sold (“CGS”) in the three and six months ended June 30, 2011, respectively, and were related primarily to property and equipment in our Union City, Tennessee manufacturing facility.

     In the second quarter of 2010, net rationalization charges of $6 million were recorded. New charges of $17 million were comprised of $6 million for plans initiated in 2010 for associate severance costs and $11 million for plans initiated primarily in 2009, consisting of $2 million for associate severance costs and $9 million for other exit and non-cancelable lease costs. Substantially all of these charges related to future cash outflows. The net charges in the second quarter of 2010 also included the reversal of $11 million of charges for actions no longer needed for their originally intended purposes.

     For the first six months of 2010, net rationalization charges of $8 million were recorded. New charges of $27 million were comprised of $10 million for plans initiated in 2010, consisting of $8 million for associate severance and pension costs and $2 million for other exit and non-cancelable lease costs, and $17 million for plans initiated primarily in 2009, consisting of $3 million for associate severance costs and $14 million for other exit and non-cancelable lease costs. Substantially all of these charges related to future cash outflows. The net charges in the first six months of 2010 also included the reversal of $19 million of charges for actions no longer needed for their originally intended purposes.

     Asset write-offs and accelerated depreciation charges of $6 million and $9 million were recorded in CGS in the three and six months ended June 30, 2010, respectively, and were related primarily to the closure of our Taiwan facility.

     Less than 100 associates were released under programs initiated in 2011 and 400 associates were released under programs initiated in 2010 as of June 30, 2011.