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				Nine Months Ended
	September 30,				September 30,
(In millions)	2012		2011		2012			2011
New charges	$	26	$	25	$	69		$	82
Reversals	—		—		(2		)	(2		)
	$	26	$	25	$	67		$	80

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	41			28			69
Incurred	(48		)	(22		)	(70		)
Reversed to the income statement	(1		)	(1		)	(2		)
Balance at September 30, 2012	$	158		$	23		$	181

During the third quarter of 2012, net rationalization charges of $26 million were recorded. New charges of $26 million were comprised of $21 million for plans initiated in 2012, consisting of associate severance and other related costs, and $5 million for plans initiated in prior years, consisting of $1 million of associate severance and other related costs and $4 million of other exit and non-cancelable lease costs. Substantially all of the new charges relate to future cash outflows.

During the first nine months of 2012, net rationalization charges of $67 million were recorded. New charges of $69 million were comprised of $39 million for plans initiated in 2012, consisting of $29 million of associate severance and other related costs primarily related to plans to reduce selling, administrative, and general expenses ("SAG") in Europe, Australia, New Zealand, and North America, and $10 million of other exit and non-cancelable lease costs, and $30 million for plans initiated in prior years, consisting of $12 million of associate severance and other related costs and $18 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 nine months of 2012 also included the reversal of $2 million of charges for actions no longer needed for their originally intended purposes. Approximately 900 associates will be released under 2012 plans, of which approximately 600 associates have been released as of September 30, 2012.

In the first nine months of 2012, $48 million was incurred for associate severance and other related payments, including a favorable impact of $1 million of foreign currency translation, and $22 million was incurred for other exit and non-cancelable lease costs.

The accrual balance of $181 million at September 30, 2012 consists of $158 million for associate severance costs that are expected to be substantially utilized within the next 12 months and $23 million primarily for other exit and non-cancelable lease costs. At September 30, 2012, the accrual balance included $95 million for the announced discontinuation of consumer tire production at one of our facilities in Amiens, France, $26 million for the closure of our Union City, Tennessee manufacturing facility and $9 million related to the relocation of our Dalian, China manufacturing facility.

Accelerated depreciation charges of $13 million and $19 million were recorded in cost of goods sold (“CGS”) in the three and nine months ended September 30, 2012, respectively, and were related primarily to property and equipment in our Dalian, China manufacturing facility, which ceased production in the third quarter of 2012.

In the third quarter of 2011, net rationalization charges of $25 million were recorded. New charges of $25 million were comprised of $6 million for plans initiated in 2011, consisting of $4 million of associate severance costs and $2 million of other exit and non-cancelable lease costs, and $19 million for plans initiated in prior years, consisting of $4 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 these charges related to future cash outflows.

For the first nine months of 2011, net rationalization charges of $80 million were recorded. New charges of $82 million were comprised of $18 million for plans initiated in 2011, consisting of $15 million of associate severance costs and $3 million of other exit and non-cancelable lease costs, and $64 million for plans initiated in prior years, consisting of $34 million of associate severance costs and $30 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 nine 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 were to be released under plans initiated in 2011, all of which were released as of September 30, 2012. In addition, there are approximately 600 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 $12 million and $46 million were recorded in CGS in the three and nine months ended September 30, 2011, respectively, and were primarily related to property and equipment in our Union City, Tennessee manufacturing facility.