Costs Associated with Rationalization Programs

3 Months Ended

Mar. 31, 2013

Restructuring and Related Activities [Abstract]

COSTS ASSOCIATED WITH RATIONALIZATION PROGRAMS

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
	March 31,
(In millions)	2013			2012
New charges	$	10		$	16
Reversals	(3		)	(1		)
	$	7		$	15

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

	Associate-			Other
(In millions)	Related Costs			Costs			Total
Balance at December 31, 2012	$	229		$	23		$	252
2013 Charges	3			7			10
Incurred	(24		)	(7		)	(31		)
Reversed to the statements of operations	(3		)	—			(3		)
Balance at March 31, 2013	$	205		$	23		$	228

During the first quarter of 2013, net rationalization charges of $7 million were recorded. New charges of $10 million related to plans initiated in prior years and consisted of $3 million of associate severance and other related costs and $7 million of other exit and non-cancelable lease costs. Substantially all of the new charges relate to future cash outflows. The net charges in 2013 also included the reversal of $3 million of charges for actions no longer needed for their originally intended purposes. Approximately 100 associates have been released during the quarter ended March 31, 2013. In total, approximately 1,700 associates remain to be released under prior year rationalization plans, including approximately 1,200 associates related to the announced plan to exit the farm tire business and close one of our facilities in Amiens, France.

In the first quarter of 2013, $24 million was incurred for associate severance and other related payments and $7 million was incurred for other exit and non-cancelable lease costs. Foreign currency translation of $6 million, also reducing the reserve balance, was included in incurred associate-related costs.

The accrual balance of $228 million at March 31, 2013 consists of $205 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 March 31, 2013, $166 million of the accrual balance relates to plans associated with the announced closure of one of our facilities in Amiens, France.

Accelerated depreciation charges of $5 million were recorded in cost of goods sold (“CGS”) in the first quarter of 2013 related primarily to property and equipment in one of our facilities in Amiens, France.

During the first quarter of 2012, net rationalization charges of $15 million were recorded. New charges of $16 million were comprised of $7 million for plans initiated in 2012, consisting of associate severance costs, and $9 million for plans initiated in prior years, consisting of $1 million of associate severance costs and $8 million of other exit and non-cancelable lease costs, primarily related 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 2012 also included the reversal of $1 million of charges for actions no longer needed for their originally intended purposes.

Accelerated depreciation charges of $2 million were recorded in CGS in the first quarter of 2012, and were primarily related to property and equipment in our Dalian, China manufacturing facility.