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Costs Associated with Rationalization Programs
 12 Months Ended
Dec. 31, 2022
Restructuring and Related Activities [Abstract]  
Costs Associated with Rationalization Programs

Note 4. 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 and excess manufacturing capacity and operating and administrative costs.

The following table presents the roll-forward of the liability balance between periods:

 

 

 

 

 

 

 

 

 

 

(In millions)

 

Associate-
Related Costs

 

 

Other Costs

 

 

Total

 

Balance at December 31, 2019

 

$

220

 

 

$

—

 

 

$

220

 

2020 charges(1)

 

 

129

 

 

 

27

 

 

 

156

 

Incurred, net of foreign currency translation of $12 million and $0 million, respectively

 

 

(147

)

 

 

(27

)

 

 

(174

)

Reversed to the Statement of Operations

 

 

(2

)

 

 

—

 

 

 

(2

)

Balance at December 31, 2020

 

$

200

 

 

$

—

 

 

$

200

 

2021 charges

 

 

52

 

 

 

43

 

 

 

95

 

Incurred, net of foreign currency translation of $(8) million and $0 million, respectively

 

 

(162

)

 

 

(43

)

 

 

(205

)

Reversed to the Statement of Operations

 

 

(2

)

 

 

—

 

 

 

(2

)

Balance at December 31, 2021

 

$

88

 

 

$

—

 

 

$

88

 

2022 charges

 

 

110

 

 

 

28

 

 

 

138

 

Incurred, net of foreign currency translation of ($5) million and $0 million, respectively

 

 

(74

)

 

 

(26

)

 

 

(100

)

Reversed to the Statement of Operations

 

 

(9

)

 

 

—

 

 

 

(9

)

Balance at December 31, 2022

 

$

115

 

 

$

2

 

 

$

117

 

 

(1)
Charges of $156 million in 2020 exclude $5 million of benefit plan curtailments and settlements recorded in Rationalizations in the Statements of Operations.

In January 2023, we approved a rationalization plan and workforce reorganization that will result in an approximately 5% reduction in salaried staff globally, or about 500 positions, in response to a challenging industry environment and cost pressure driven by inflation. In certain foreign countries, relevant portions of the rationalization plan remain subject to consultation with employee representative bodies. We expect to substantially complete the rationalization plan during the first and second quarters of 2023 and estimate total pre-tax charges associated with this action to be approximately $55 million, of which approximately $39 million are expected to be cash charges primarily for associate-related and other exit costs, with the remainder representing non-cash charges primarily for accelerated depreciation and other asset-related charges. We have $37 million accrued related to this plan at December 31, 2022 and expect to record a majority of the remaining charges in the first quarter of 2023. A majority of the cash outflows associated with this plan relate to cash severance payments that are expected to be paid during the first half of 2023.

In January 2023, we also approved a plan to discontinue our operations in Russia. Total expected net pre-tax charges related to this plan are $13 million, of which $5 million are expected to be cash charges for associate-related and other exit costs. The remainder of the charges represent non-cash charges primarily related to the write-off of accounts receivable and other asset-related charges. The plan will result in approximately 70 job reductions. We have $3 million accrued related to this plan at December 31, 2022 and expect that a majority of the remaining charges and related cash outflows will be recognized in the first quarter of 2023.

In October 2022, we approved a plan to close Cooper Tire's Melksham, United Kingdom tire manufacturing facility ("Melksham") to address long-standing competitiveness issues at this plant. Total expected charges related to this plan are to be between $80 million and $90 million, of which $60 million to $70 million are expected to be cash charges primarily for associate-related and other exit costs, with the remainder representing non-cash charges primarily for accelerated depreciation and other asset-related charges. The plan will result in approximately 340 job reductions. We have $33 million accrued related to this plan at December 31, 2022 and expect that a majority of the remaining charges and related cash outflows will be recognized through 2023.

During the third quarter of 2022, we approved a plan related to the exit of our retail operations in South Africa. Total expected charges related to this plan are $18 million, primarily representing cash charges for associate-related and other exit costs. The plan will result in approximately 900 job reductions. We have $5 million accrued related to this plan at December 31, 2022, which is expected to be substantially paid through 2023.

During the second quarter of 2022, we approved a plan related to the integration of Cooper Tire aimed at reducing duplicative global SAG headcount and closing redundant Cooper Tire warehouse locations in Americas in line with previously announced

planned synergies. The plan will result in approximately 490 job reductions. We have $11 million accrued related to this plan at December 31, 2022, which is expected to be substantially paid through 2023.

The remainder of the accrual balance at December 31, 2022 is expected to be substantially utilized in the next 12 months and includes $13 million related to plans to reduce SAG headcount, $5 million related to the closed Amiens, France tire manufacturing facility, $2 million related to the permanent closure of our Gadsden, Alabama tire manufacturing facility ("Gadsden"), and various other plans to reduce headcount and improve operating efficiency.

The following table shows net rationalization charges included in Income (Loss) before Income Taxes:

 

 

 

 

 

 

 

 

 

 

(In millions)

 

2022

 

 

2021

 

 

2020

 

Current Year Plans

 

 

 

 

 

 

 

 

 

Associate severance and other related costs

 

$

103

 

 

$

19

 

 

$

77

 

Benefit plan curtailment and special termination benefits

 

 

—

 

 

 

—

 

 

 

9

 

Other exit and non-cancelable lease costs

 

 

8

 

 

 

—

 

 

 

16

 

Current Year Plans - Net Charges

 

$

111

 

 

$

19

 

 

$

102

 

Prior Year Plans

 

 

 

 

 

 

 

 

 

Associate severance and other related costs

 

$

—

 

 

$

31

 

 

$

50

 

Benefit plan curtailment and special termination benefits

 

 

—

 

 

 

—

 

 

 

(4

)

Other exit and non-cancelable lease costs

 

 

18

 

 

 

43

 

 

 

11

 

Prior Year Plans - Net Charges

 

$

18

 

 

$

74

 

 

$

57

 

Total Net Charges

 

$

129

 

 

$

93

 

 

$

159

 

Asset write-off and accelerated depreciation charges

 

$

30

 

 

$

1

 

 

$

105

 

 

Substantially all of the new charges in 2022 related to future cash outflows. Current year plan charges for the year ended December 31, 2022 related to the new plans approved during 2022 described above.

Net prior year plan charges recognized in the year ended December 31, 2022 include $15 million related to Gadsden, $7 million related to the modernization of two of our tire manufacturing facilities in Germany and $3 million for various plans to reduce global SAG headcount. Net prior year plan charges also include reversals of $9 million for actions no longer needed for their originally intended purposes.

Ongoing rationalization plans had approximately $960 million in charges through 2022 and approximately $60 million is expected to be incurred in future periods.

Approximately 2,200 associates will be released under new plans initiated in 2022, of which approximately 1,200 were released through December 31, 2022. In 2022, approximately 200 associates were released under plans initiated in prior years. Approximately 1,000 associates remain to be released under all ongoing rationalization plans.

Rationalization activities initiated in 2021 include current year charges primarily related to a plan to reduce SAG headcount in EMEA. Net prior year plan charges recognized in 2021 include $37 million related to Gadsden, $26 million related to the modernization of two of our tire manufacturing facilities in Germany, and $10 million related to various plans to reduce manufacturing headcount and improve operating efficiency in EMEA. In addition, net prior year plan charges include reversals of $2 million for actions no longer needed for their originally intended purposes.

Rationalization activities initiated in 2020 include current year charges primarily related to the permanent closure of Gadsden. Net prior year plan charges recognized in 2020 include $30 million related to additional termination benefits for associates at the closed Amiens, France tire manufacturing facility. In addition, net prior year plan charges include $19 million related to the plan to modernize two of our tire manufacturing facilities in Germany, $5 million related to a plan primarily to offer voluntary buy-outs to certain associates at Gadsden, and $3 million related to the closure of our tire manufacturing facility in Philippsburg, Germany. Net prior year plan charges for the year ended December 31, 2020 also include reversals of $2 million for actions no longer needed for their originally intended purposes and a curtailment credit of $4 million for a postretirement benefit plan related to the exit of employees under an approved rationalization plan.

Asset write-off and accelerated depreciation charges in 2022 primarily related to the discontinuation of our operations in Russia and the plan related to the integration of Cooper Tire. Asset write-off and accelerated depreciation charges for 2022 were primarily recorded in SAG.

Asset write-off and accelerated depreciation charges in 2020 primarily related to Gadsden and were recorded in CGS.