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 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)	2012			2011		2012			2011
New charges	$	27		$	46	$	43		$	57
Reversals	(1		)	—		(2		)	(2		)
	$	26		$	46	$	41		$	55

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



	Associate-			Other
(In millions)	Related Costs			Costs			Total
Balance at December 31, 2011	$	166		$	18		$	184
2012 Charges	23			20			43
Incurred	(34		)	(16		)	(50		)
Reversed to the statement of operations	(1		)	(1		)	(2		)
Balance at June 30, 2012	$	154		$	21		$	175

During the second quarter of 2012, net rationalization charges of $26 million were recorded. New charges of $27 million were comprised of $11 million for plans initiated in 2012, consisting of $6 million of associate severance costs and $5 million for other exit and non-cancelable lease costs, and $16 million for plans initiated in prior years, consisting of $10 million of associate severance and other related 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. The net charges in 2012 also included the reversal of $1 million of charges for actions no longer needed for their originally intended purposes.

During the first six months of 2012, net rationalization charges of $41 million were recorded. New charges of $43 million were comprised of $18 million for plans initiated in 2012, consisting of $11 million of associate severance costs and $7 million for other exit and non-cancelable lease costs, and $25 million for plans initiated in prior years, consisting of $11 million of associate severance and other related costs and $14 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 2012 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 700 associates will be released under 2012 plans, of which approximately 300 associates have been released as of June 30, 2012.

In the first six months of 2012, $34 million was incurred for associate severance payments, including a favorable impact of $3 million of foreign currency translation, and $16 million was incurred for other exit and non-cancelable lease costs.

The accrual balance of $175 million at June 30, 2012 consists of $154 million for associate severance costs that are expected to be substantially utilized within the next 12 months and $21 million primarily for other exit and non-cancelable lease costs. At June 30, 2012, $94 million and $32 million, respectively, of the accrual balance relates to plans associated with the announced discontinuation of consumer tire production at one of our facilities in Amiens, France and the closure of our Union City, Tennessee manufacturing facility.

Accelerated depreciation charges of $4 million and $6 million were recorded in cost of goods sold (“CGS”) in the three and six months ended June 30, 2012, respectively, and were related primarily to property and equipment in our Dalian, China manufacturing facility.

In 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 in prior years, consisting of $29 million for associate severance costs and $6 million for other exit and non-cancelable lease costs. Substantially all of these charges related to future cash outflows.

For 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 in prior years, consisting of $30 million for 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 these charges related 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 plans initiated in 2011, of which approximately 200 associates have been released as of June 30, 2012. In addition, there are approximately 900 associates to be released under prior year plans, primarily related to the 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 CGS in the three and six months ended June 30, 2011, respectively, and were primarily related to property and equipment in our Union City, Tennessee manufacturing facility.