GOODWILL AND OTHER INTANGIBLES

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

During the fourth quarter of 2023, the Company performed a quantitative analysis on each reporting unit to refresh its respective fair value. For 2023 and 2022, the estimated fair value was determined using a combined income and market approach. The market approach is based on market multiples (revenue and “EBITDA”, defined as earnings before interest, taxes, depreciation and amortization) and requires an estimate of appropriate multiples based on market data for comparable companies. 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 2023 goodwill quantitative impairment review are as follows:

•Discount rates: The Company used a range of 12.5% to 14.5% weighted average cost of capital (“WACC”) as the discount rates 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 rates: 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 could be adversely affected by industry downturns.

•The automotive industry is evolving, and if the Company does not respond appropriately, its results of operations could be adversely affected.

•The Company is dependent on market segments that use its key products and could 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 2023 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. Due to the Company’s recent acquisitions, there is less headroom (the difference between the carrying value and the fair value) associated with certain of the Company’s reporting units. Based on the impairment testing conducted in 2023, the amounts by which the estimated fair values of the Company’s goodwill reporting units exceeded their carrying values ranged from 22% to 139%. 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 the Company’s financial statements in any given year.

A summary of the changes in the carrying amount of goodwill is presented in the following tables. The prior period balances have been recast for inter-segment transitions of certain businesses that were completed during 2022. Refer to Note 24, “Reportable Segments and Related Information” for more information.


	2023
(in millions)	Air Management		Drivetrain & Battery Systems		ePropulsion		Total
Gross goodwill balance, January 1	$	1,566	$	1,434	$	480	$	3,480
Accumulated impairment losses, January 1	(502)		—		—		(502)
Net goodwill balance, January 1	$	1,064	$	1,434	$	480	$	2,978
Goodwill during the year:
Acquisitions1 (Note 2)	8		—		14		22
Measurement period adjustments (Note 2)	(6)		—		—		(6)
Other, primarily translation adjustment	11		21		(13)		19
Net goodwill balance, December 31	$	1,077	$	1,455	$	481	$	3,013


	2022
(in millions)	Air Management		Drivetrain & Battery Systems		ePropulsion		Total
Gross goodwill balance, January 1	$	1,466	$	1,364	$	526	$	3,356
Accumulated impairment losses, January 1	(502)		—		—		(502)
Net goodwill balance, January 1	$	964	$	1,364	$	526	$	2,854
Goodwill during the year:
Acquisitions1 (Note 2)	126		132		—		258
Measurement period adjustments2	—		(20)		—		(20)


Other, primarily translation adjustment	(26)		(42)		(46)		(114)
Net goodwill balance, December 31	$	1,064	$	1,434	$	480	$	2,978

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1 Acquisitions relate to the Company’s 2023 purchases of SSE, Eldor, and 2022 purchases of Drivetek, Rhombus and Santroll.

2 Measurement period adjustments primarily relate to the 2023 acquisition of SSE and 2022 acquisition of Santroll.

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


		December 31, 2023						December 31, 2022
(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	5 - 15	$	364	$	145	$	219	$	349	$	111	$	238
Customer relationships	6 - 15	641		305		336		639		267		372
Miscellaneous	2 - 5	9		6		3		9		6		3
Total amortized intangible assets		1,014		456		558		997		384		613
Unamortized trade names		6		—		6		6		—		6
Total other intangible assets		$	1,020	$	456	$	564	$	1,003	$	384	$	619

Amortization of other intangible assets was $67 million, $69 million and $59 million for the years ended December 31, 2023, 2022 and 2021, respectively. 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: $70 million in 2024, $69 million in 2025, $61 million in 2026, $54 million in 2027, $54 million in 2028 and $250 million 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)	2023		2022		2023		2022
Beginning balance, January 1	$	1,003	$	957	$	384	$	335
Acquisitions1 (Note 2)	14		132		—		—
Impairment2	—		(35)		—		(2)
Amortization	—		—		67		69
Translation adjustment	3		(51)		5		(18)
Ending balance, December 31	$	1,020	$	1,003	$	456	$	384

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1 Acquisitions relate to the Company’s 2023 purchases of SSE, Eldor, 2022 purchases of Drivetek, Rhombus and Santroll.

2 During the fourth quarter of 2022, the Company recorded an impairment charge of $30 million to remove the AKASOL indefinite-lived trade name as the Company no longer plans to utilize this trade name in the business.