Restructuring, Impairments and Divestitures

6 Months Ended

Apr. 30, 2021

Restructuring and Related Activities [Abstract]

Restructuring, Impairments and Divestitures

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.

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 to optimize our cost structure.

For those areas that fall outside our strategic businesses, we evaluate alternatives which could result in additional restructuring and other related charges in the future, including, but not limited to: (i) impairments, (ii) accelerated depreciation, (iii) costs for employee and contractor termination and other related benefits, (iv) relocation costs, and (v) charges for pension and other postretirement contractual benefits and curtailments. These charges could be significant.

Melrose Park Facility Disposition

On January 13, 2021, we approved a plan to sell our facility in Melrose Park, IL (the “Melrose Park Facility”) and cease all operations at the Melrose Park Facility by November 2021. In connection with the cessation of operations at the Melrose Park Facility, we expect that half of the current workforce of approximately 500 employees at the Melrose Park Facility will be transferred to our other facilities.

We estimate that we will incur total costs related to the exit from and disposition of the Melrose Park Facility of approximately $90 million, of which $80 million is expected to be incurred in fiscal year 2021, with the remainder being incurred in fiscal year 2022. The estimated total charges primarily include $21 million of restructuring costs, $21 million of relocation costs, and $38 million for accelerated depreciation and impairment charges.

As a result of the restructuring activities, the Truck segment recognized $2 million and $23 million of restructuring charges for the three and six months ended April 30, 2021, respectively. For the six month period, the charges primarily include $12 million related to pension and OPEB liabilities and $10 million for employee termination charges recorded in Restructuring charges in our Consolidated Statements of Operations. In addition, the Truck segment recorded $3 million and $28 million of impairment charges for the three and six months ended April 30, 2021, respectively, recorded in Asset impairment charges in our Consolidated Statements of Operations.

The following table summarizes the changes to our Melrose Park restructuring liability:


(in millions)	Balance at October 31, 2020		Additions		Payments		Adjustments		Balance at April 30, 2021
Employee termination charges	$	—	$	10	$	—	$	—	$	10
Restructuring liability	$	—	$	10	$	—	$	—	$	10

See Note 9, Postretirement Benefits, for further discussion.

Asset Impairments

In the three and six months ended April 30, 2021 and 2020, we concluded that we had triggering events primarily related to certain trucks under operating leases, due to declines in expected residual values. As a result, for the three and six months ended April 30, 2021 we recorded charges of $1 million and $7 million, respectively, and for the three and six months ended April 30, 2020 we recorded charges of $1 million, for both periods, in our Truck segment.

In the three months ended April 30, 2020, we identified a triggering event related to our operations in Brazil due to the impacts of the COVID-19 pandemic, which resulted in declines in actual and forecasted results. We performed an impairment test as of April 30, 2020 on the long-lived assets of the Brazilian asset group. As a result, we recorded charges of $12 million in our Global Operations segment.

These charges were recorded in Asset impairment charges in our Consolidated Statements of Operations.

See Note 11, Fair Value Measurements, for information on the valuation of impaired operating leases and other long-lived assets.