Restructurings and Impairments

Restructuring charges are recorded based on restructuring plans that have been committed to by management and are, in part, based upon management's best estimates of future events. Changes to the estimates may require future adjustments to the restructuring liabilities.

Restructuring Liability

The following tables summarize the activity in the restructuring liability, which includes amounts related to discontinued operations and excludes pension and other postretirement contractual termination benefits:



(in millions)	Balance at October 31, 2015		Additions		Payments			Adjustments		Balance at October 31, 2016
Employee termination charges	$	62	$	4	$	(63	)	$	2	$	5
Lease vacancy	5		—		(4		)	—		1
Other	1		—		—			—		1
Restructuring liability	$	68	$	4	$	(67	)	$	2	$	7



(in millions)	Balance at October 31, 2014		Additions		Payments			Adjustments			Balance at October 31, 2015
Employee termination charges	$	8	$	68	$	(11	)	$	(3	)	$	62
Lease vacancy	11		3		(8		)	(1		)	5
Other	1		—		(1		)	1			1
Restructuring liability	$	20	$	71	$	(20	)	$	(3	)	$	68



(in millions)	Balance at October 31, 2013		Additions		Payments			Adjustments			Balance at October 31, 2014
Employee termination charges	$	15	$	15	$	(19	)	$	(3	)	$	8
Employee relocation costs	—		1		(1		)	—			—
Lease vacancy	18		—		(8		)	1			11
Other	1		2		(2		)	—			1
Restructuring liability	$	34	$	18	$	(30	)	$	(2	)	$	20

Cost-Reductions and Other Strategic Initiatives

From time to time, we have announced, and we may continue to announce, actions to control spending across the Company with targeted reductions of certain costs. We are focused on continued reductions in discretionary spending, including reductions resulting from efficiencies, and prioritizing or eliminating certain programs or projects.

Voluntary separation program and reduction-in-force actions

During 2014, we initiated new cost-reduction actions, including an enterprise-wide reduction-in-force. As a result of these actions, we recognized restructuring charges of $8 million in personnel costs for employee termination and related benefits, the majority of which was paid during 2014 and 2015.

During 2015, we initiated new cost-reduction actions, including a reduction-in-force in the U.S. and Brazil. As a result of these actions, we recognized restructuring charges of $13 million in personnel costs for employee termination and related benefits, which were primarily paid throughout 2016. We also offered the majority of our U.S.-based non-represented salaried employees the opportunity to apply for a voluntary separation program ("VSP"). As a result of these actions, we recognized restructuring charges of $37 million. The restructuring charges primarily consist of personnel costs for employee termination and related benefits. In addition, we initiated new cost-reduction actions, including a reduction-in-force in Brazil. As a result of these actions, we recognized restructuring charges of $10 million in personnel costs for employee termination and related benefits, which were paid throughout 2016.

North American Manufacturing Restructuring Activities

We continue to focus on our core Truck and Parts businesses and evaluate our portfolio of assets to validate their strategic and financial fit. This allows us to close or divest non-strategic businesses, and identify opportunities to restructure our business and rationalize our Manufacturing operations in an effort to optimize our cost structure. For those areas that fall outside our strategic businesses, we are evaluating alternatives which could result in additional restructuring and other related charges in the future, including but not limited to: (i) impairments, (ii) costs for employee and contractor termination and other related benefits, and (iii) charges for pension and other postretirement contractual benefits and curtailments. These charges could be significant.

Chatham restructuring activities

In the third quarter of 2011, we committed to close our Chatham, Ontario heavy truck plant, which had been idled since June 2009. At that time, we recognized curtailment and contractual termination charges related to postretirement plans. Based on a ruling regarding pension benefits received from the Financial Services Tribunal in Ontario, Canada, in the third quarter of 2014, we recognized additional charges of $14 million related to the 2011 closure of the Chatham, Ontario plant. We appealed this ruling, but it was upheld in a July 3, 2015 decision issued by the Divisional Court of Ontario. On July 23, 2015, we filed a notice of motion for leave to appeal to the Court of Appeal for Ontario, which was perfected on August 25, 2015 through an additional filing. On December 21, 2015, the Ontario Court of Appeal denied the motion for leave to appeal. On April 25, 2016, we filed a qualified partial wind-up report for approval by the Financial Services Commission of Ontario. Potential charges in future periods could range from $0 million to $60 million, primarily related to pension, postretirement costs and termination benefits, which are subject to governmental approval, employee negotiation, acceptance rates and the resolution of disputes related thereto. In addition, we are continuing to evaluate the impact of the ruling on prior plan administration practices, and, as a result, we recognized $2 million of charges in the second quarter and $5 million of charges in the third quarter of 2016. We do not expect material future charges. See Note 10, Postretirement benefits for further discussion.

Huntsville Facility

In February 2014, we announced plans to consolidate our mid-range engine manufacturing footprint and relocate mid-range engine production from our Huntsville, Alabama, facility ("Huntsville Facility") to our Melrose Park, Illinois facility ("Melrose Park Facility"). As a result, in the first quarter of 2014, the Truck segment recognized restructuring charges of $1 million for personnel costs related to employee terminations and $2 million for inventory reserves related to the idled production equipment at the Huntsville Facility that impacted Costs of products sold in our Consolidated Statements of Operations.

Foundry Facilities

In December 2014, we announced the closure of our Indianapolis, Indiana foundry facility; on June 30, 2015, we closed this facility; and on August 19, 2016, we sold this facility. In addition, on April 30, 2015, we sold our Waukesha, Wisconsin foundry operations. As a result, in 2014, the Truck segment recognized restructuring charges of $13 million, which are included in Restructuring charges in our Consolidated Statements of Operations. The restructuring charges consist of $2 million in personnel costs for employee termination and related benefits and $11 million of charges for pension and other postretirement contractual termination benefits. The restructuring charges relating to employee terminations were paid throughout 2015. Also in the fourth quarter of 2014, the Truck segment recognized $7 million for inventory reserves related to the foundry facilities that impacted Costs of products sold in our Consolidated Statements of Operations.

In addition, in the fourth quarter of 2014, the Truck segment recognized $7 million of charges for impairments of property and equipment. The Waukesha asset group was reviewed for recoverability by comparing the carrying value to estimated future undiscounted cash flows and those carrying values were determined not to be fully recoverable. We utilized the market approach to determine the fair value of the asset group. These charges were recorded in Asset impairment charges our Consolidated Statements of Operations.

During the years ended October 31, 2016 and 2015, the Truck segment recognized charges of $2 million and $28 million, respectively, for the acceleration of depreciation of certain assets related to the foundry and engine facilities. These charges are reported within Costs of products sold in our Consolidated Statements of Operations.

Asset Impairments

The following table reconciles our Asset impairment charges in our Consolidated Statements of Operations:



	For the Years Ended October 31,
(in millions)	2016		2015		2014
Goodwill impairment charge^(A)	$	—	$	—	$	142
Intangible asset impairment charge	1		7		7
Other asset impairment charges related to continuing operations	26		23		34
Total asset impairment charges	$	27	$	30	$	183

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(A)	For more information, see Note 7, Goodwill and Other Intangible Assets, Net.

As a result of the economic downturn in Brazil causing declines in actual and forecasted results, we tested the indefinite-lived intangible asset of our Brazilian engine reporting unit for potential impairment. As a result, we determined that the trademark asset carrying value was impaired, resulting in charges of $1 million and $3 million, for the years ended October 31, 2016 and 2015, respectively. For more information, see Note 1, Summary of Significant Accounting Policies.

During 2016, we concluded that we had triggering events related to certain long-lived assets in the Truck segment. As a result, certain long-lived assets were determined to be impaired, resulting in charges of $17 million. Included in the charges was a $3 million asset impairment related to the sale of Pure Power Technologies, LLC, a components business focused on air and fuel systems. During 2016, we also concluded that we had triggering events related to certain operating leases. As a result, the Truck segment recorded $8 million of asset impairment charges.

During 2015, we recognized a total non-cash charge of $7 million for the impairment of certain intangible and long-lived assets in the Global Operations segment. As a result of the continued operating losses and idled production in the asset group, we tested the indefinite-lived intangible and long-lived assets for potential impairment. As a result, we determined that $4 million of intangible assets and $3 million of certain long-lived assets were impaired.

During 2015, we concluded that we had triggering events related to certain long-lived assets in the Truck segment. As a result, certain long-lived assets were determined to be impaired, resulting in charges of $11 million. During 2015, we also concluded that we had triggering events related to certain operating leases. As a result, the Truck segment recorded $9 million of asset impairment charges.

During 2014, we concluded that we had a triggering event related to potential sales of assets requiring assessment of impairment for certain intangible and long-lived assets in the Truck segment. As a result, certain amortizing intangible assets and long-lived assets were determined to be fully impaired, resulting in an impairment charge of $32 million.

All of these charges are recognized in Asset impairment charges in our Consolidated Statements of Operations.