GOODWILL AND OTHER INTANGIBLES

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

During the fourth quarter of 2020, the Company performed an analysis on each reporting unit. Following the acquisition of Delphi Technologies and the resulting reorganization of the business, the Company elected to perform quantitative, “step one,” goodwill impairment analyses for certain reporting units to refresh their respective fair values. This requires the Company to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The basis of this goodwill impairment analysis is the Company’s annual budget and long-range plan (“LRP”). The annual budget and LRP includes a five-year projection of future cash flows based on actual new products and customer commitments. Because the projections are estimated over a significant future period of time, those estimates and assumptions are subject to uncertainty. Further, the market valuation models and other financial ratios used by the Company require certain assumptions and estimates regarding the applicability of those models to the Company’s facts and circumstances.

The Company believes the assumptions and estimates used to determine the estimated fair value are reasonable. Different assumptions could materially affect the estimated fair value. The primary assumptions affecting the Company’s 2020 goodwill quantitative, “step one,” impairment review are as follows:

•Discount rate: the Company used a 11.7% weighted average cost of capital (“WACC”) as the discount rate for future cash flows. The WACC is intended to represent a rate of return that would be expected by a market participant.

•Operating income margin: the Company used historical and expected operating income margins, which may vary based on the projections of the reporting unit being evaluated.

•Revenue growth rate: the Company used a global automotive market industry growth rate forecast adjusted to estimate its own market participation for product lines.

In addition to the above primary assumptions, the Company notes the following risks to volume and operating income assumptions that could have an impact on the discounted cash flow models:

•The automotive industry is cyclical, and the Company's results of operations would be adversely affected by industry downturns.

•The Company is dependent on market segments that use our key products and would be affected by decreasing demand in those segments.

•The Company is subject to risks related to international operations.

Based on the assumptions outlined above, the impairment testing conducted in the fourth quarter of 2020 indicated the Company’s goodwill assigned to the respective reporting units was not impaired. Future changes in the judgments, assumptions and estimates from those used in acquisition-related valuations and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

The changes in the carrying amount of goodwill are as follows:


	2020								2019
(in millions)	Air Management		e-Propulsion & Drivetrain		Fuel Injection		Aftermarket		Air Management		e-Propulsion & Drivetrain
Gross goodwill balance, January 1	$	1,337	$	1,007	$	—	$	—	$	1,343	$	1,012
Accumulated impairment losses, January 1	(502)		—		—		—		(502)		—
Net goodwill balance, January 1	$	835	$	1,007	$	—	$	—	$	841	$	1,012
Goodwill during the year:
Acquisitions*	151		272		—		287		—		7


Translation adjustment and other	29		34		—		12		(6)		(12)
Ending balance, December 31	$	1,015	$	1,313	$	—	$	299	$	835	$	1,007

________________

* Acquisitions relate to the Company's 2020 purchase of Delphi Technologies PLC and the 2019 purchase of Rinehart Motion Systems LLC and AM Racing LLC.

The Company’s other intangible assets, primarily from acquisitions, consist of the following:


		December 31, 2020						December 31, 2019
(in millions)	Estimated useful lives (years)	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Amortized intangible assets:
Patented and unpatented technology	7 - 15	$	383	$	77	$	306	$	154	$	70	$	84
Customer relationships	7 - 15	893		272		621		481		224		257
Miscellaneous	1 - 13	10		7		3		10		4		6
Total amortized intangible assets		1,286		356		930		645		298		347
Unamortized trade names	—	166		—		166		55		—		55
Total other intangible assets		$	1,452	$	356	$	1,096	$	700	$	298	$	402

Amortization of other intangible assets was $89 million, $39 million and $40 million for the years ended December 31, 2020, 2019 and 2018, respectively. Amortization for the year ended December 31, 2020, includes $38 million related to accelerated amortization for certain intangibles, discussed further below, and $11 million related to intangibles acquired in the Delphi Technologies acquisition. The Company utilizes the straight line method of amortization recognized over the estimated useful lives of the assets. The estimated future annual amortization expense, primarily for acquired intangible assets, is as follows: $81 million in 2021, $80 million in 2022, $74 million in 2023, $73 million in 2024, and $622 million in 2025 and thereafter.

A roll forward of the gross carrying amounts and related accumulated amortization of the Company's other intangible assets is presented below:


	Gross carrying amounts				Accumulated amortization
(in millions)	2020		2019		2020		2019
Beginning balance, January 1	$	700	$	705	$	298	$	266
Acquisitions1	760		5		—		—
Abandonment2	(56)		—		(56)		—
Amortization2	—		—		89		39
Translation adjustment	48		(10)		25		(7)
Ending balance, December 31	$	1,452	$	700	$	356	$	298

________________

1 Acquisitions relate to the Company's 2020 purchase of Delphi Technologies PLC and the 2019 purchase of Rinehart Motion Systems LLC and AM Racing LLC.

2 As a result of an evaluation of the underlying technologies and management of the business subsequent to the acquisition of Delphi Technologies, the Company reduced the useful life of certain intangible assets during the fourth quarter of 2020 as they no longer provided future economic benefit. This resulted in accelerated amortization expense of $38 million and the removal of the related gross carrying amount and accumulated amortization of these assets.