Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Components of income tax expense (benefit)

	Year Ended December 31, 2011									Year Ended December 31, 2010									Year Ended December 31, 2009
(millions of dollars)	U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total			U.S.			Non-U.S.			Total
Earnings (loss) before income taxes	$	119.2		$	646.7		$	765.9		$	(26.7	)	$	504.6		$	477.9		$	(138.5	)	$	156.4		$	17.9
Provision for income taxes:
Current:
Federal/foreign	31.8			162.9			194.7			14.0			117.7			131.7			(2.7		)	42.7			40.0
State	1.7			—			1.7			2.2			—			2.2			1.5			—			1.5
Total current	33.5			162.9			196.4			16.2			117.7			133.9			(1.2		)	42.7			41.5
Deferred	17.4			(18.5		)	(1.1		)	(48.9		)	(3.3		)	(52.2		)	(51.6		)	(8.4		)	(60.0		)
Total provision for income taxes	$	50.9		$	144.4		$	195.3		$	(32.7	)	$	114.4		$	81.7		$	(52.8	)	$	34.3		$	(18.5	)
Effective tax rate	42.7		%	22.3		%	25.5		%	(122.5		)%	22.7		%	17.1		%	(38.1		)%	21.9		%	(103.4		)%

Effective Income Tax Rate Reconciliation

An analysis of the differences between the effective tax rate and the U.S. statutory rate for the years ended December 31, 2011, 2010 and 2009 is presented below.

	Year Ended December 31,
(millions of dollars)	2011			2010			2009
Income taxes at U.S. statutory rate of 35%	$	268.1		$	167.3		$	6.2
Increases (decreases) resulting from:
Income from non-U.S. sources, including withholding taxes	(74.8		)	(55.8		)	(17.1		)
Affiliates' earnings	(13.4		)	(13.8		)	(7.5		)
State taxes, net of federal benefit	1.1			1.4			4.7
Business tax credits	11.5			0.2			(1.9		)
Accrual adjustment and settlement of prior year tax matters	(1.0		)	0.4			(6.3		)
Medicare Part D	0.1			2.9			1.7
Foreign tax credit valuation allowance	—			(21.2		)	7.7
Non-temporary differences and other	3.7			0.3			(6.0		)
Provision for income taxes, as reported	$	195.3		$	81.7		$	(18.5	)

Reconciliation of the total gross unrecognized tax benefits

(millions of dollars)	2011			2010
Balance, January 1	$	27.6		$	34.8
Additions based on tax positions related to current year	0.5			1.1
Additions for tax positions of prior years	3.9			0.3
Reductions for closure of tax audits and settlements	(4.3		)	(6.6		)
Reductions for lapse in statute of limitations	(0.8		)	(1.3		)
Translation adjustment	(0.7		)	(0.7		)
Balance, December 31	$	26.2		$	27.6

Tax jurisdiction

The Company is no longer subject to income tax examinations by tax authorities in its major tax jurisdictions as follows:

Tax jurisdiction	Years no longer subject to audit	Tax jurisdiction	Years no longer subject to audit
U.S. Federal	2008 and prior	Italy	2006 and prior
Brazil	2004 and prior	Japan	2009 and prior
France	2007 and prior	Spain	2005 and prior
Germany*	2004 and prior	South Korea	2006 and prior
Hungary	2008 and prior	United Kingdom	2009 and prior

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*In Germany, the open tax years for the Company's BERU subsidiary are from 2003 and forward

Deferred Tax Assets (Liabilities)

The gross components of deferred tax assets and liabilities as of December 31, 2011 and 2010 consist of the following:

	December 31,
(millions of dollars)	2011			2010
Current deferred tax assets:
Employee related	$	28.0		$	26.2
Net operating loss carryforwards	4.3			9.8
Inventory	14.5			8.6
Warranties	4.5			6.3
Litigation & environmental	0.9			5.8
Customer claims	2.2			2.0
Derivatives	0.6			1.2
Other	5.7			6.8
Total current deferred tax assets	$	60.7		$	66.7
Current deferred tax liabilities:
Other	$	(3.7	)	$	(7.6	)
Total current deferred tax liabilities	$	(3.7	)	$	(7.6	)
Non-current deferred tax assets:
Foreign tax credits	$	158.2		$	183.4
Other comprehensive income	116.7			98.0
Research and development capitalization	76.7			49.3
Pension and other post employment benefits	33.9			44.6
Employee related	22.9			20.0
Net operating loss carryforwards*	35.1			15.0
Research and development credits	3.0			6.3
Warranties	4.7			4.4
Litigation and environmental	2.0			2.6
Other	5.1			8.1
Total non-current deferred tax assets	$	458.3		$	431.7
Non-current deferred tax liabilities:
Goodwill & intangibles	$	(155.5	)	$	(130.3	)
Fixed assets	(79.7		)	(84.8		)
Dividends accrued	(1.3		)	(2.8		)
Other comprehensive income	(2.9		)	(3.0		)
Other	(6.6		)	(7.7		)
Total non-current deferred tax liabilities	$	(246.0	)	$	(228.6	)
Total deferred tax items	$	269.3		$	262.2
Valuation allowances*	(23.6		)	(13.0		)
Net deferred tax asset	$	245.7		$	249.2

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*Net operating loss carryforwards are shown gross with the corresponding valuation allowances located at the end of the table.

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets are as follows:

	December 31,
(millions of dollars)	2011			2010
Deferred income taxes — current assets	$	58.5		$	75.8
Deferred income taxes — current liabilities	(6.5		)	(18.4		)
Other non-current assets*	313.9			305.5
Other non-current liabilities*	(120.2		)	(113.7		)
Net deferred tax asset (current and non-current)	$	245.7		$	249.2

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*Other non-current assets and liabilities have been netted within their respective taxing jurisdictions due to consolidation (primarily U.S. and Germany).