Pension, Other Postretirement Benefits and Savings Plans

12 Months Ended

Dec. 31, 2022

Retirement Benefits [Abstract]

Pension, Other Postretirement Benefits and Savings Plans

Note 18. Pension, Other Postretirement Benefits and Savings Plans

We provide employees with defined benefit pension or defined contribution savings plans. Our hourly U.S. pension plans are frozen, except for certain grandfathered participants in the Cooper Tire hourly pension plans who continue to accrue benefits, and provide benefits based on length of service. The principal salaried U.S. pension plans are frozen and provide benefits based on compensation and length of service. Salaried employees who made voluntary contributions to these plans receive higher benefits. We also provide certain U.S. employees and employees at certain non-U.S. subsidiaries with health care benefits or life insurance benefits upon retirement. Substantial portions of retiree health care benefits are not insured and are funded from operations.

During 2022, we communicated the termination of the Cooper Tire U.S. salaried defined benefit pension plan, which was frozen in 2009, to applicable participants. The termination of the plan, which had $380 million in assets and $375 million in estimated obligations on a termination accounting basis as of December 31, 2022, is expected to be completed in the first half of 2023.

During 2022, we recognized settlement charges of $124 million in Other (Income) Expense, primarily related to our U.S. pension plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans.

During 2021, we recognized settlement charges of $43 million in Other (Income) Expense, primarily related to our salaried U.S pension plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans.

During 2020, we recognized settlement charges of $28 million, primarily related to certain of our salaried U.S. pension plans, of which $24 million was recognized in Other (Income) Expense and $4 million in Rationalizations, related to the exit of employees under approved rationalization plans. The settlement charges resulted from total lump sum payments exceeding annual service and interest cost of the applicable plans. In addition, we recognized a curtailment credit of $6 million in Other (Income) Expense during 2020, related to a freeze of one of our non-U.S. defined benefit pension plans.

During 2020, we also recognized a curtailment credit of $4 million related to one of our Other Postretirement Benefits plans and a termination benefits charge of $5 million related to our hourly U.S. pension plan in Rationalizations, related to the exit of employees under approved rationalization plans.

Our U.K. pension plan obligations include $21 million to recognize the estimated impact to our plans from court rulings in 2018 and later, involving a plan with similar features to ours that was sponsored by another company, that required equal guaranteed minimum pension benefits for males and females. The increases were primarily recognized in AOCL during 2018 as prior service cost from plan amendments. The actual impact to our U.K. pension plans is still subject to the finalization of plan amendments in response to the court rulings and potential future judicial decisions.

Total benefits cost and amounts recognized in other comprehensive (income) loss follows:

	Pension Plans
	U.S.									Non-U.S.									Other Postretirement Benefits
(In millions)	2022			2021			2020			2022			2021			2020			2022			2021			2020
Benefits cost (credit):
Service cost	$	13		$	9		$	4		$	24		$	30		$	30		$	3		$	3		$	2
Interest cost		133			94			126			60			47			56			12			9			8
Expected return on plan assets		(214	)		(196	)		(193	)		(67	)		(48	)		(54	)		—			—			—
Amortization of prior service cost (credit)		—			—			—			2			1			1			(1	)		(6	)		(9	)
Amortization of net losses		101			107			109			21			33			38			2			3			4
Net periodic cost	$	33		$	14		$	46		$	40		$	63		$	71		$	16		$	9		$	5
Net curtailments/settlements/ termination benefits		124			41			31			—			2			(4	)		—			—			(4	)
Total benefits cost	$	157		$	55		$	77		$	40		$	65		$	67		$	16		$	9		$	1
Recognized in other comprehensive (income) loss before tax and minority:
Prior service cost (credit) from plan amendments	$	6		$	—		$	—		$	(1	)	$	3		$	3		$	—		$	(4	)	$	—
(Decrease) increase in net actuarial losses		(99	)		(45	)		108			(10	)		(136	)		(100	)		(101	)		(20	)		5
Amortization of prior service (cost) credit in net periodic cost		—			—			—			(2	)		(2	)		(2	)		1			6			9
Amortization of net losses in net periodic cost		(101	)		(107	)		(109	)		(21	)		(33	)		(38	)		(2	)		(3	)		(4	)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements		(124	)		(41	)		(26	)		—			(2	)		(9	)		—			—			6
Total recognized in other comprehensive (income) loss before tax and minority	$	(318	)	$	(193	)	$	(27	)	$	(34	)	$	(170	)	$	(146	)	$	(102	)	$	(21	)	$	16
Total recognized in total benefits cost and other comprehensive (income) loss before tax and minority	$	(161	)	$	(138	)	$	50		$	6		$	(105	)	$	(79	)	$	(86	)	$	(12	)	$	17

Service cost is recorded in CGS or SAG. Other components of net periodic cost are recorded in Other (Income) Expense. Net curtailments, settlements and termination benefits are recorded in Other (Income) Expense or Rationalizations if related to a rationalization plan.

We use the fair value of pension assets in the calculation of pension expense for all plans.

Total benefits cost for our other postretirement benefits was $12 million, $5 million and $1 million for our U.S. plans in 2022, 2021 and 2020, respectively, and $4 million, $4 million and $0 million for our non-U.S. plans in 2022, 2021 and 2020, respectively.

The Medicare Prescription Drug Improvement and Modernization Act provides plan sponsors a federal subsidy for certain qualifying prescription drug benefits covered under the sponsor’s postretirement health care plans. Our other postretirement benefits cost is presented net of this subsidy, which is less than $1 million annually.

The change in benefit obligation and plan assets for 2022 and 2021 and the amounts recognized in our Consolidated Balance Sheets at December 31, 2022 and 2021 are as follows:

	Pension Plans
	U.S.						Non-U.S.						Other Postretirement Benefits
(In millions)	2022			2021			2022			2021			2022			2021
Change in benefit obligation:
Beginning balance	$	(5,798	)	$	(5,235	)	$	(3,464	)	$	(3,382	)	$	(406	)	$	(236	)
Service cost — benefits earned		(13	)		(9	)		(24	)		(30	)		(3	)		(3	)
Interest cost		(133	)		(94	)		(60	)		(47	)		(12	)		(9	)
Plan amendments		(6	)		—			1			(3	)		—			4
Actuarial gain		1,282			153			881			168			103			21
Participant contributions		—			—			(3	)		(1	)		(8	)		(8	)
Curtailments/settlements/ termination benefits		233			90			6			10			—			—
Acquisition of Cooper Tire (1)		—			(1,088	)		—			(450	)		—			(205	)
Foreign currency translation		—			—			287			118			5			2
Benefit payments		351			385			149			153			29			28
Ending balance	$	(4,084	)	$	(5,798	)	$	(2,227	)	$	(3,464	)	$	(292	)	$	(406	)
Change in plan assets:
Beginning balance	$	5,720		$	4,970		$	3,272		$	3,041		$	—		$	—
Actual return on plan assets		(969	)		86			(845	)		(9	)		—			—
Company contributions to plan assets		—			29			32			30			—			—
Cash funding of direct participant payments		7			10			21			22			21			20
Participant contributions		—			—			3			1			8			8
Settlements		(233	)		(90	)		(6	)		(10	)		—			—
Acquisition of Cooper Tire (1)		—			1,100			—			412			—			—
Foreign currency translation		—			—			(285	)		(62	)		—			—
Benefit payments		(351	)		(385	)		(149	)		(153	)		(29	)		(28	)
Ending balance	$	4,174		$	5,720		$	2,043		$	3,272		$	—		$	—
Funded status at end of year	$	90		$	(78	)	$	(184	)	$	(192	)	$	(292	)	$	(406	)

(1)Represents the fair value of Cooper Tire related benefit plan obligations and plan assets as of the Closing Date.

Significant actuarial gains related to changes in benefit obligations for 2022 and 2021 primarily resulted from increases in discount rates.

Other postretirement benefits unfunded status was $205 million and $292 million for our U.S. plans at December 31, 2022 and 2021, respectively, and $87 million and $114 million for our non-U.S. plans at December 31, 2022 and 2021, respectively.

The funded status at December 31 recognized in the Consolidated Balance Sheets consists of:

	Pension Plans												Other Postretirement
	U.S.						Non-U.S.						Benefits
(In millions)	2022			2021			2022			2021			2022			2021
Noncurrent assets	$	164		$	96		$	258		$	432		$	—		$	—
Current liabilities		(4	)		(7	)		(21	)		(22	)		(24	)		(25	)
Noncurrent liabilities		(70	)		(167	)		(421	)		(602	)		(268	)		(381	)
Net amount recognized	$	90		$	(78	)	$	(184	)	$	(192	)	$	(292	)	$	(406	)

The amounts recorded in AOCL at December 31, net of tax and minority interest, consist of:

	Pension Plans											Other Postretirement
	U.S.					Non-U.S.						Benefits
(In millions)	2022		2021			2022			2021			2022			2021
Prior service (credit) cost	$	3	$	(3	)	$	22		$	26		$	(4	)	$	(5	)
Net actuarial loss (gain)		1,836		2,160			435			465			(96	)		7
Gross amount recorded		1,839		2,157			457			491			(100	)		2
Deferred income taxes		81		3			(59	)		(64	)		1			(23	)
Minority shareholders’ equity		—		—			(4	)		(1	)		—			—
Net amount recorded	$	1,920	$	2,160		$	394		$	426		$	(99	)	$	(21	)

The following table presents significant weighted average assumptions used to determine benefit obligations at December 31:

	Pension Plans						Other Postretirement Benefits
	2022			2021			2022			2021
Discount rate:
—U.S.		5.45	%		2.82	%		5.51	%		2.87	%
—Non-U.S.		4.69			2.01			6.75			4.69
Rate of compensation increase:
—U.S.	N/A			N/A			N/A			N/A
—Non-U.S.		2.84			2.77		N/A			N/A

The following table presents significant weighted average assumptions used to determine benefits cost for the years ended December 31:

	Pension Plans									Other Postretirement Benefits
	2022			2021			2020			2022			2021			2020
Discount rate for determining interest cost:
—U.S.		2.74	%		1.72	%		2.66	%		2.33	%		1.97	%		2.68	%
—Non-U.S.		2.32			1.82			2.26			6.65			6.54			5.68
Expected long term return on plan assets:
—U.S.		4.23			3.74			4.22		N/A			N/A			N/A
—Non-U.S.		2.64			2.27			2.52		N/A			N/A			N/A
Rate of compensation increase:
—U.S.	N/A			N/A			N/A			N/A			N/A			N/A
—Non-U.S.		2.77			2.89			2.92		N/A			N/A			N/A

For 2022, a weighted average discount rate of 2.74% was used to determine interest cost for the U.S. pension plans. This rate was derived from spot rates along a yield curve developed from a portfolio of corporate bonds from issuers rated AA or higher by established rating agencies as of December 31, 2021, applied to our expected benefit payment cash flows. For our non-U.S. locations, a weighted average discount rate of 2.32% was used. This rate was developed based on the nature of the liabilities and local environments, using available bond indices, yield curves, projected cash flows, and long term inflation.

For 2022, an assumed weighted average long term rate of return of 4.23% was used for the U.S. pension plans. In developing the long term rate of return, we evaluated input from our pension fund consultant on asset class return expectations, including determining the appropriate rate of return for our plans, which are substantially invested in fixed income securities. For our non-U.S. locations, an assumed weighted average long term rate of return of 2.64% was used. Input from local pension fund consultants concerning asset class return expectations and long term inflation form the basis of this assumption.

The U.S. pension plan mortality assumption is based on our actual historical experience or published actuarial tables, and expected future mortality improvements based on published actuarial tables. For our non-U.S. locations, mortality assumptions are based on published actuarial tables which include projections of future mortality improvements.

The following table presents estimated future benefit payments from the plans as of December 31, 2022. Benefit payments for U.S. pension plans in 2023 reflect the termination of the Cooper Tire U.S. salaried defined benefit pension plan. Benefit payments for other postretirement benefits are presented net of retiree contributions and Medicare Part D Subsidy Receipts:

	Pension Plans				Other Postretirement
(In millions)	U.S.		Non-U.S.		Benefits
2023	$	755	$	147	$	24
2024		358		141		24
2025		348		143		24
2026		346		145		24
2027		354		148		23
2028-2032		1,489		779		115

The following table presents selected information on our pension plans at December 31:

	U.S.				Non-U.S.
(In millions)	2022		2021		2022		2021
All plans:
Accumulated benefit obligation	$	4,077	$	5,780	$	2,167	$	3,385
Plans not fully-funded:
Projected benefit obligation	$	275	$	1,847	$	799	$	1,273
Accumulated benefit obligation		267		1,829		752		1,216
Fair value of plan assets		202		1,674		360		650

Certain non-U.S. subsidiaries maintain unfunded pension plans consistent with local practices and requirements. At December 31, 2022, these plans accounted for $176 million of our accumulated pension benefit obligation, $211 million of our projected pension benefit obligation, and $28 million of our AOCL adjustment. At December 31, 2021, these plans accounted for $226 million of our accumulated pension benefit obligation, $253 million of our projected pension benefit obligation, and $57 million of our AOCL adjustment.

We expect to contribute $25 million to $50 million to our funded pension plans in 2023.

Assumed health care cost trend rates at December 31 follow:

	2022			2021
Health care cost trend rate assumed for the next year		7.0	%		6.5	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.0			5.0
Year that the rate reaches the ultimate trend rate		2031			2028

Our pension plan weighted average investment allocation at December 31, by asset category, follows:

	U.S.						Non-U.S.
	2022			2021			2022			2021
Cash and short term securities		—	%		1	%		3	%		2	%
Equity securities		6			6			5			6
Debt securities		93			92			88			90
Alternatives		1			1			4			2
Total		100	%		100	%		100	%		100	%

Our pension investment policies recognize the long-term nature of pension liabilities, and are primarily designed to offset the future impact of discount rate movements on the funded status for our plans, with target return-seeking allocations based upon given funded ratio levels. All assets are managed externally according to target asset allocation guidelines we have established. Manager guidelines prohibit the use of any type of investment derivative without our prior approval. Portfolio risk is controlled by having managers comply with guidelines, establishing the maximum size of any single holding in their portfolios, and using managers with different investment styles. We periodically undertake asset and liability modeling studies to determine the appropriateness of the investments.

The portfolio of our U.S. pension plan assets includes holdings of global high quality and high yield fixed income securities, fixed income, equity and real estate collective trust funds, short term interest bearing deposits, and private equity and credit securities. The target asset allocation of our U.S. pension plans is 92% in duration-matched fixed income securities, 5% in private equity and credit securities, 2% in equity securities and 1% in real estate funds. Actual U.S. pension fund asset allocations are reviewed on a periodic basis and the pension funds are rebalanced to target ranges on an as needed basis.

The portfolios of our non-U.S. pension plans include holdings of global high quality and high yield fixed income securities, U.S. and non-U.S. equities, real estate funds, insurance contracts, repurchase agreements, and short term interest bearing deposits. The weighted average target asset allocation of the non-U.S. pension funds is approximately 90% fixed income, 5% equities and 5% in real estate funds.

The fair values of our pension plan assets at December 31, 2022 by asset category are as follows:

	U.S.									Non-U.S
(In millions)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)
Cash and Short Term Securities	$	7		$	5	$	2	$	—	$	47		$	43	$	4		$	—
Equity Securities
Common and Preferred Stock		—			—		—		—		22			22		—			—
Commingled Funds		—			—		—		—		14			14		—			—
Mutual Funds		—			—		—		—		15			6		9			—
Debt Securities
Corporate Bonds		1,873			—		1,873		—		222			4		218			—
Government Bonds		646			—		646		—		1,369			51		1,318			—
Repurchase Agreements		—			—		—		—		(348	)		—		(348	)		—
Asset Backed Securities		157			—		157		—		21			5		16			—
Commingled Funds		—			—		—		—		25			19		6			—
Mutual Funds		—			—		—		—		10			10		—			—
Alternatives
Commingled Funds		—			—		—		—		3			3		—			—
Insurance Contracts		1			—		—		1		20			—		—			20
Derivatives		1			—		1		—		1			—		1			—
Total Investments in the Fair Value Hierarchy		2,685		$	5	$	2,679	$	1		1,421		$	177	$	1,224		$	20
Investments Measured at Net Asset Value, as Practical Expedient:
Equity Securities
Commingled Funds		—									38
Mutual Funds		111									3
Partnership Interests		119									—
Debt Securities
Commingled Funds		283									453
Mutual Funds		558									43
Partnership Interests		153									29
Short Term Securities
Commingled Funds		222									14
Pooled Separate Accounts		10									—
Alternatives
Commingled Funds		44									43
Partnership Interests		—									20
Total Investments		4,185									2,064
Other		(11	)								(21	)
Total Plan Assets	$	4,174								$	2,043

The fair values of our pension plan assets at December 31, 2021 by asset category are as follows:

	U.S.									Non-U.S
(In millions)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Other Unobservable Inputs (Level 3)
Cash and Short Term Securities	$	71		$	71	$	—	$	—	$	56		$	51	$	5		$	—
Equity Securities
Common and Preferred Stock		—			—		—		—		28			28		—			—
Commingled Funds		—			—		—		—		20			20		—			—
Mutual Funds		—			—		—		—		37			8		29			—
Debt Securities
Corporate Bonds		2,673			—		2,673		—		286			5		281			—
Government Bonds		958			—		958		—		2,391			71		2,320			—
Repurchase Agreements		—			—		—		—		(570	)		—		(570	)		—
Asset Backed Securities		172			—		172		—		26			7		19			—
Commingled Funds		—			—		—		—		29			20		9			—
Mutual Funds		—			—		—		—		9			9		—			—
Alternatives
Insurance Contracts		1			—		—		1		25			—		—			25
Derivatives		4			—		4		—		2			—		2			—
Total Investments in the Fair Value Hierarchy		3,879		$	71	$	3,807	$	1		2,339		$	219	$	2,095		$	25
Investments Measured at Net Asset Value, as Practical Expedient:
Equity Securities
Commingled Funds		8									102
Mutual Funds		167									2
Partnership Interests		161									13
Debt Securities
Commingled Funds		388									708
Mutual Funds		877									76
Partnership Interests		143									39
Short Term Securities
Commingled Funds		78									19
Pooled Separate Accounts		10									—
Alternatives
Commingled Funds		60									39
Total Investments		5,771									3,337
Other		(51	)								(65	)
Total Plan Assets	$	5,720								$	3,272

At December 31, 2022 and 2021, the Plans did not directly hold any of our common stock.

The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. Investments that are measured at Net Asset Value ("NAV") as a practical expedient to estimate fair value are not classified in the fair value hierarchy. Under the practical expedient approach, the NAV is based on the fair value of the underlying investments held by each fund less its liabilities. This practical expedient would not be used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total plan assets. Valuation methodologies used for assets and liabilities measured at fair value are as follows:

•Cash and Short Term Securities: Cash and cash equivalents consist of U.S. and foreign currencies. Foreign currencies are reported in U.S. dollars based on currency exchange rates readily available in active markets. Short term securities held in commingled funds or pooled separate accounts are valued at the NAV of units held at year end, as determined by the investment manager.

•Equity Securities: Common and preferred stock, which are held in non-U.S. companies, are valued at the closing price reported on the active market on which the individual securities are traded. Commingled funds are primarily valued at the NAV of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the NAV of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available. Partnership interests in private equity securities are priced based on valuations using the partnership’s latest available financial statements and the plan's percent ownership, adjusted for any cash transactions which occurred between the date of those financial statements and our year end.

•Debt Securities: Corporate and government bonds, including asset backed securities, are valued at the closing price reported on the active market on which the individual securities are traded, or based on institutional bid evaluations using proprietary models if an active market is not available. Repurchase agreements are valued at the contract price plus accrued interest. These secured borrowings are collateralized by government bonds held by the non-U.S. plans and have maturities less than one year. Commingled funds are primarily valued at the NAV of units held at year end, as determined by a pricing vendor or the fund family. Mutual funds are valued at the NAV of shares held at year end, as determined by the closing price reported on the active market on which the individual securities are traded, or a pricing vendor or the fund family if an active market is not available. Partnership interests in private credit securities are priced based on valuations using the partnership’s latest available financial statements and the plan's percent ownership, adjusted for any cash transactions which occurred between the date of those financial statements and our year end.

•Alternatives: Commingled funds, which primarily consist of real estate funds, are valued based on the NAV as determined by the fund manager using the most recent financial information available. Partnership interests are invested in real estate and priced based on valuations using the partnership's latest available financial statements and the plan's percent ownership, adjusted for any cash transactions which occurred between the date of those financial statements and our year end. Other investments primarily include derivative financial instruments, which are valued using independent pricing sources which utilize industry standard derivative valuation models. Directed insurance contracts are valued as reported by the issuer, based on discounted cash flows using weighted average discount rates of 3.0% and 2.1% at December 31, 2022 and 2021, respectively.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following table sets forth a summary of changes in fair value of the non-U.S. pension plan insurance contracts classified as Level 3:

(In millions)	2022			2021
Balance, beginning of year	$	25		$	28
Unrealized gains relating to instruments still held at the reporting date		(3	)		(1	)
Foreign currency translation		(2	)		(2	)
Balance, end of year	$	20		$	25

Savings Plans

Substantially all employees in the U.S. and employees of certain non-U.S. locations are eligible to participate in a defined contribution savings plan. Expenses recognized for contributions to these plans were $127 million, $116 million and $100 million for 2022, 2021 and 2020, respectively.