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Business Segments

12 Months Ended

Dec. 31, 2019

Segment information reflects our strategic business units (“SBUs”), which are organized to meet customer requirements and global competition. For the year ended December 31, 2019, we operated our business through three operating segments representing our regional tire businesses: Americas; Europe, Middle East and Africa; and Asia Pacific. Segment information is reported on the basis used for reporting to our Chief Executive Officer. Each of the three regional business segments is involved in the development, manufacture, distribution and sale of tires. Certain of the business segments also provide related products and services, which include retreads and automotive and commercial truck maintenance and repair services. Each segment also exports tires to other segments.

Americas manufactures and sells tires for automobiles, trucks, buses, earthmoving, mining and industrial equipment, aircraft, and for various other applications throughout North, Central and South America. Americas also provides related products and services including retreaded tires, tread rubber, and automotive and commercial truck maintenance and repair services, as well as sells chemical and natural rubber products to our other business segments and to unaffiliated customers.

EMEA manufactures and sells tires for automobiles, trucks, buses, aircraft, motorcycles, and earthmoving, mining and industrial equipment throughout Europe, the Middle East and Africa. EMEA also sells retreaded aviation tires, retreading and related services for commercial truck and earthmoving, mining and industrial equipment, and automotive maintenance and repair services.

Asia Pacific manufactures and sells tires for automobiles, trucks, aircraft, farm, and earthmoving, mining and industrial equipment throughout the Asia Pacific region. Asia Pacific also provides related products and services including retreaded truck and aviation tires, tread rubber, and automotive maintenance and repair services.

The following table presents segment sales and operating income, and the reconciliation of segment operating income to Income before Income Taxes:



(In millions)	2019		2018			2017
Sales
Americas	$	7,922	$	8,168		$	8,212
Europe, Middle East and Africa	4,708		5,090			4,928
Asia Pacific	2,115		2,217			2,237
Net Sales	$	14,745	$	15,475		$	15,377
Segment Operating Income
Americas	$	550	$	654		$	847
Europe, Middle East and Africa	202		363			367
Asia Pacific	193		257			342
Total Segment Operating Income	945		1,274			1,556
Less:
Rationalizations	205		44			135
Interest expense	340		321			335
Other (income) expense ⁽¹⁾	98		(174		)	70
Asset write-offs and accelerated depreciation	15		4			40
Corporate incentive compensation plans	50		13			33
Retained expenses of divested operations	10		9			13
Other ⁽²⁾	50		46			52
Income before Income Taxes	$	177	$	1,011		$	878


(1)	Refer to Note to the Consolidated Financial Statements No. 5, Other (Income) Expense, in this Form 10-K.


(2)	Primarily represents unallocated corporate costs and the elimination of $17 million, $18 million and $30 million for the years ended December 31, 2019, 2018 and 2017, respectively, of royalty income attributable to the strategic business units.

The following table presents segment assets at December 31:



(In millions)	2019		2018
Assets
Americas	$	7,606	$	7,160
Europe, Middle East and Africa	4,724		4,809
Asia Pacific	2,711		2,602
Total Segment Assets	15,041		14,571
Corporate⁽¹⁾	2,144		2,301
	$	17,185	$	16,872


(1)	Corporate includes substantially all of our U.S. net deferred tax assets.

Results of operations are measured based on net sales to unaffiliated customers and segment operating income. Each segment exports tires to other segments. The financial results of each segment exclude sales of tires exported to other segments, but include operating income derived from such transactions. Segment operating income is computed as follows: Net sales less CGS (excluding asset write-offs and accelerated depreciation charges) and SAG (including certain allocated corporate administrative expenses). Segment operating income also includes certain royalties and equity in earnings of most affiliates. Segment operating income does not include net rationalization charges, asset sales, and certain other items.

The following table presents geographic information. Net sales by country were determined based on the location of the selling subsidiary. Long-lived assets consisted of property, plant and equipment. Besides Germany, management did not consider the net sales of any other individual countries outside the United States to be significant to the consolidated financial statements. For long-lived assets, only China was considered to be significant.



(In millions)	2019		2018		2017
Net Sales
United States	$	6,489	$	6,692	$	6,678
Germany ⁽¹⁾	979		1,691		1,874
Other international	7,277		7,092		6,825
	$	14,745	$	15,475	$	15,377
Long-Lived Assets
United States	$	2,681	$	2,734
China	722		762
Other international	3,805		3,763
	$	7,208	$	7,259


(1)	The 2018 and 2019 decrease in net sales primarily related to a business reorganization that centralized our OE sales for EMEA in Luxembourg.

At December 31, 2019, significant concentrations of cash and cash equivalents held by our international subsidiaries included the following amounts:


•	$337 million or 37% in Asia Pacific, primarily China, India and Japan ($278 million or 35% at December 31, 2018),


•	$214 million or 24% in EMEA, primarily Belgium ($261 million or 33% at December 31, 2018), and


•	$190 million or 21% in Americas, primarily Brazil, Canada and Chile ($134 million or 17% at December 31, 2018).

Rationalizations, as described in Note to the Consolidated Financial Statements No. 3, Costs Associated with Rationalization Programs, in this Form 10-K, net (gains) losses on asset sales, as described in Note to the Consolidated Financial Statements No. 5, Other (Income) Expense, in this Form 10-K, and asset write-offs and accelerated depreciation were not charged (credited) to the SBUs for performance evaluation purposes but were attributable to the SBUs as follows:



(In millions)	2019		2018		2017
Rationalizations
Americas	$	90	$	3	$	6
Europe, Middle East and Africa	115		36		111
Asia Pacific	—		3		2
Total Segment Rationalizations	$	205	$	42	$	119
Corporate	—		2		16
	$	205	$	44	$	135



(In millions)	2019			2018			2017
Net (Gains) Losses on Asset Sales
Americas⁽¹⁾	$	—		$	(275	)	$	(4	)
Europe, Middle East and Africa	(16		)	2			(10		)
Total Segment Asset Sales	$	(16	)	$	(273	)	$	(14	)


(1)	Americas Net (Gains) Losses on Asset Sales for the year ended December 31, 2018 includes the gain of $272 million related to the TireHub transaction, net of transaction costs.



(In millions)	2019		2018		2017
Asset Write-offs and Accelerated Depreciation
Americas	$	13	$	—	$	—
Europe, Middle East and Africa	2		4		40
Total Segment Asset Write-offs and Accelerated Depreciation	$	15	$	4	$	40

The following tables present segment capital expenditures and depreciation and amortization:



(In millions)	2019		2018		2017
Capital Expenditures
Americas	$	369	$	406	$	525
Europe, Middle East and Africa	227		180		159
Asia Pacific	141		188		164
Total Segment Capital Expenditures	$	737	$	774	$	848
Corporate	33		37		33
	$	770	$	811	$	881



(In millions)	2019		2018		2017
Depreciation and Amortization
Americas	$	430	$	414	$	398
Europe, Middle East and Africa	197		201		191
Asia Pacific	133		131		124
Total Segment Depreciation and Amortization	$	760	$	746	$	713
Corporate	35		32		68
	$	795	$	778	$	781

The following table presents segment equity in the net income of investees accounted for by the equity method:



(In millions)	2019		2018			2017
Equity in (Income) Loss
Americas	$	32	$	11		$	(5	)
Europe, Middle East and Africa	—		(1		)	—
Total Segment Equity in (Income) Loss	$	32	$	10		$	(5	)