Pension, Other Postretirement Benefits and Savings Plans

12 Months Ended

Dec. 31, 2023

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 2023, we recognized settlement charges of $40 million in Other (Income) Expense, primarily related to the settlement of all plan benefits of the Cooper Tire U.S. salaried defined benefit pension plan with lump sum payments to electing participants and the purchase of a group annuity contract. After settlement, excess plan assets of $18 million were used to fund

obligations associated with our U.S. salaried defined contribution savings plan. During 2023, we recognized termination benefits charges of $1 million in Rationalizations related to the closure of the Fulda tire manufacturing facility.

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.

Our U.K. pension plan obligations include $37 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. These amounts have been recognized in AOCL, including a $16 million actuarial loss in 2023 from an agreement with the plan trustees on implementation of changes for certain participants in one of our U.K. pension plans. The actual impact to our U.K. pension plans is still subject to the finalization of plan amendments for all impacted participants in response to the court rulings.

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

	Pension Plans
	U.S.									Non-U.S.									Other Postretirement Benefits
(In millions)	2023			2022			2021			2023			2022			2021			2023			2022			2021
Benefits cost (credit):
Service cost	$	8		$	13		$	9		$	18		$	24		$	30		$	2		$	3		$	3
Interest cost		195			133			94			108			60			47			16			12			9
Expected return on plan assets		(231	)		(214	)		(196	)		(92	)		(67	)		(48	)		—			—			—
Amortization of prior service cost (credit)		—			—			—			2			2			1			(1	)		(1	)		(6	)
Amortization of net losses (gains)		98			101			107			16			21			33			(9	)		2			3
Net periodic cost	$	70		$	33		$	14		$	52		$	40		$	63		$	8		$	16		$	9
Net curtailments/settlements/ termination benefits		34			124			41			7			—			2			—			—			—
Total benefits cost	$	104		$	157		$	55		$	59		$	40		$	65		$	8		$	16		$	9
Recognized in other comprehensive (income) loss before tax and minority:
Prior service cost (credit) from plan amendments	$	—		$	6		$	—		$	—		$	(1	)	$	3		$	—		$	—		$	(4	)
Increase (decrease) in net actuarial losses		40			(99	)		(45	)		120			(10	)		(136	)		1			(101	)		(20	)
Amortization of prior service (cost) credit in net periodic cost		—			—			—			(2	)		(2	)		(2	)		1			1			6
Amortization of net (losses) gains in net periodic cost		(98	)		(101	)		(107	)		(16	)		(21	)		(33	)		9			(2	)		(3	)
Immediate recognition of prior service cost and unrecognized gains and losses due to curtailments and settlements		(34	)		(124	)		(41	)		(13	)		—			(2	)		—			—			—
Total recognized in other comprehensive (income) loss before tax and minority	$	(92	)	$	(318	)	$	(193	)	$	89		$	(34	)	$	(170	)	$	11		$	(102	)	$	(21	)
Total recognized in total benefits cost and other comprehensive (income) loss before tax and minority	$	12		$	(161	)	$	(138	)	$	148		$	6		$	(105	)	$	19		$	(86	)	$	(12	)

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 $5 million, $12 million and $5 million for our U.S. plans in 2023, 2022 and 2021, respectively, and $3 million, $4 million and $4 million for our non-U.S. plans in 2023, 2022 and 2021, 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 2023 and 2022 and the amounts recognized in our Consolidated Balance Sheets at December 31, 2023 and 2022 are as follows:

	Pension Plans
	U.S.						Non-U.S.						Other Postretirement Benefits
(In millions)	2023			2022			2023			2022			2023			2022
Change in benefit obligation:
Beginning balance	$	(4,084	)	$	(5,798	)	$	(2,227	)	$	(3,464	)	$	(292	)	$	(406	)
Service cost — benefits earned		(8	)		(13	)		(18	)		(24	)		(2	)		(3	)
Interest cost		(195	)		(133	)		(108	)		(60	)		(16	)		(12	)
Plan amendments		—			(6	)		—			1			—			—
Actuarial gain (loss)		(98	)		1,282			(116	)		881			(1	)		103
Participant contributions		—			—			(3	)		(3	)		(7	)		(8	)
Curtailments/settlements/ termination benefits		355			233			21			6			—			—
Foreign currency translation		—			—			(83	)		287			(1	)		5
Benefit payments		371			351			142			149			32			29
Ending balance	$	(3,659	)	$	(4,084	)	$	(2,392	)	$	(2,227	)	$	(287	)	$	(292	)
Change in plan assets:
Beginning balance	$	4,174		$	5,720		$	2,043		$	3,272		$	—		$	—
Actual return on plan assets		290			(969	)		102			(845	)		—			—
Company contributions to plan assets		(18	)		—			42			32			—			—
Cash funding of direct participant payments		4			7			26			21			25			21
Participant contributions		—			—			3			3			7			8
Settlements		(355	)		(233	)		(16	)		(6	)		—			—
Foreign currency translation		—			—			88			(285	)		—			—
Benefit payments		(371	)		(351	)		(142	)		(149	)		(32	)		(29	)
Ending balance	$	3,724		$	4,174		$	2,146		$	2,043		$	—		$	—
Funded status at end of year	$	65		$	90		$	(246	)	$	(184	)	$	(287	)	$	(292	)

Significant actuarial gains or losses related to changes in benefit obligations for 2023 and 2022 primarily resulted from changes in discount rates.

Other postretirement benefits unfunded status was $195 million and $205 million for our U.S. plans at December 31, 2023 and 2022, respectively, and $92 million and $87 million for our non-U.S. plans at December 31, 2023 and 2022, 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)	2023			2022			2023			2022			2023			2022
Noncurrent assets	$	155		$	164		$	215		$	258		$	—		$	—
Current liabilities		(14	)		(4	)		(28	)		(21	)		(24	)		(24	)
Noncurrent liabilities		(76	)		(70	)		(433	)		(421	)		(263	)		(268	)
Net amount recognized	$	65		$	90		$	(246	)	$	(184	)	$	(287	)	$	(292	)

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)	2023		2022		2023			2022			2023			2022
Prior service (credit) cost	$	3	$	3	$	22		$	22		$	(4	)	$	(4	)
Net actuarial loss (gain)		1,744		1,836		524			435			(85	)		(96	)
Gross amount recorded		1,747		1,839		546			457			(89	)		(100	)
Deferred income taxes		103		81		(77	)		(59	)		(2	)		1
Minority shareholders’ equity		—		—		(4	)		(4	)		—			—
Net amount recorded	$	1,850	$	1,920	$	465		$	394		$	(91	)	$	(99	)

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

	Pension Plans						Other Postretirement Benefits
	2023			2022			2023			2022
Discount rate:
—U.S.		5.12	%		5.45	%		5.16	%		5.51	%
—Non-U.S.		4.29			4.69			6.38			6.75
Rate of compensation increase:
—U.S.	N/A			N/A			N/A			N/A
—Non-U.S.		2.82			2.84		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
	2023			2022			2021			2023			2022			2021
Discount rate for determining interest cost:
—U.S.		5.34	%		2.74	%		1.72	%		5.37	%		2.33	%		1.97	%
—Non-U.S.		4.72			2.32			1.82			7.64			6.65			6.54
Expected long term return on plan assets:
—U.S.		6.27			4.23			3.74		N/A			N/A			N/A
—Non-U.S.		4.79			2.64			2.27		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.		2.84			2.77			2.89		N/A			N/A			N/A

For 2023, a weighted average discount rate of 5.34% 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, 2022, applied to our expected benefit payment cash flows. For our non-U.S. locations, a weighted average discount rate of 4.72% 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 2023, an assumed weighted average long term rate of return of 6.27% 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 4.79% 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, 2023. 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
2024	$	381	$	165	$	24
2025		379		146		23
2026		350		148		23
2027		328		150		23
2028		318		154		23
2029-2033		1,408		813		109

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

	U.S.				Non-U.S.
(In millions)	2023		2022		2023		2022
All plans:
Accumulated benefit obligation	$	3,650	$	4,077	$	2,330	$	2,167
Plans not fully-funded:
Projected benefit obligation	$	292	$	275	$	905	$	799
Accumulated benefit obligation		283		267		858		752
Fair value of plan assets		203		202		445		360

Certain non-U.S. subsidiaries maintain unfunded pension plans consistent with local practices and requirements. At December 31, 2023, these plans accounted for $182 million of our accumulated pension benefit obligation, $222 million of our projected pension benefit obligation, and $32 million of our AOCL adjustment. 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.

We expect to contribute $25 million to $50 million to our funded pension plans in 2024.

Assumed health care cost trend rates at December 31 follow:

	2023			2022
Health care cost trend rate assumed for the next year		6.75	%		7.0	%
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			2031

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

	U.S.						Non-U.S.
	2023			2022			2023			2022
Cash and short term securities		—	%		—	%		2	%		3	%
Equity securities		3			6			4			5
Debt securities		97			93			91			88
Alternatives		—			1			3			4
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, short term interest bearing deposits, and private equity and credit securities. The target asset allocation of our U.S. pension plans is 95% in duration-matched fixed income securities and 5% in private equity and credit securities. 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, 2023 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	$	11	$	6	$	5	$	—	$	50		$	46	$	4		$	—
Equity Securities
Common and Preferred Stock		—		—		—		—		1			1		—			—
Commingled Funds		—		—		—		—		5			5		—			—
Mutual Funds		—		—		—		—		43			22		21			—
Debt Securities
Corporate Bonds		1,832		—		1,831		1		223			—		223			—
Government Bonds		729		—		729		—		1,676			67		1,609			—
Repurchase Agreements		—		—		—		—		(453	)		—		(453	)		—
Asset Backed Securities		163		—		163		—		18			—		18			—
Commingled Funds		—		—		—		—		18			18		—			—
Mutual Funds		—		—		—		—		38			38		—			—
Alternatives
Commingled Funds		—		—		—		—		2			2		—			—
Insurance Contracts		1		—		—		1		21			—		—			21
Derivatives		5		—		5		—		1			—		1			—
Mutual Funds		—		—		—		—		1			1		—			—
Total Investments in the Fair Value Hierarchy		2,741	$	6	$	2,733	$	2		1,644		$	200	$	1,423		$	21
Investments Measured at Net Asset Value, as Practical Expedient:
Equity Securities
Commingled Funds		—								29
Mutual Funds		—								4
Partnership Interests		95								—
Debt Securities
Commingled Funds		216								385
Mutual Funds		289								44
Partnership Interests		150								23
Short Term Securities
Commingled Funds		227								7
Alternatives
Commingled Funds		—								27
Partnership Interests		—								9
Total Investments		3,718								2,172
Other		6								(26	)
Total Plan Assets	$	3,724							$	2,146

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

At December 31, 2023 and 2022, 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 and mutual 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, or the closing price on the active market on which the individual securities are traded, if an active market is 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 a weighted average discount rate of 3.0% at December 31, 2023 and 2022.

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)	2023		2022
Balance, beginning of year	$	20	$	25
Unrealized gains relating to instruments still held at the reporting date		1		(3	)
Foreign currency translation		—		(2	)
Balance, end of year	$	21	$	20

Savings Plans

Substantially all employees in the U.S. and employees of certain non-U.S. locations are eligible to participate in defined contribution savings plans. Expenses recognized for contributions to these plans were $131 million, $127 million and $116 million for 2023, 2022 and 2021, respectively.