UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2015~~2016

Commission File Number: 001-34029

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

(Exact name of Registrant as specified in its charter)



Delaware		46-5182047
(State or other jurisdiction of incorporation or organization)		(IRS Employer I.D. No.)

27300 West 11 Mile Road, Southfield, Michigan		48034
(Address of principal executive offices)		(Zip code)
Registrant’s telephone number including area code: (248) 354-7700



Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class		Name of Each Exchange on Which Registered
Common Stock par value $0.01 per share		The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: Title of Class Warrants to purchase Common Stock, par value $0.01 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):



Large accelerated filer	¨	Accelerated filer	x	Non-accelerated filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $~~346~~253 million as of June 30, ~~2015~~2016 based on the reported last sale price as reported on the NASDAQ Global Select Market on that date.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨

~~The~~There ~~Registrant~~were ~~had~~no ~~169~~stockholders of record of Common Stock as of February 22,~~040~~ 2017 since the Company converted to a single member limited liability company on February 14,~~651~~ 2017, as such the Registrant had no shares of common stock outstanding as of February 2522, ~~2016~~2017.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s 2017 Proxy Statement ~~for its 2016 Annual Meeting of Stockholders~~ are incorporated by reference into Part III of this Annual Report.

INDEX

	Page No.
Forward-Looking Statements	1
Part I
Item 1 – Business	23
Item 1A – Risk Factors	1517
Item 1B – Unresolved Staff Comments	23
Item 2 – Properties	2324
Item 3 – Legal Proceedings	2324
Item 4 – Mine Safety Disclosures	2426
Part II
Item 5 – Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2527
Item 6 – Selected Financial Data	2628
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	2730
Item 7A – Quantitative and Qualitative Disclosures About Market Risk	4750
Item 8 – Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting	4851
Report of Independent Registered Public Accounting Firm	4952
Consolidated Financial Statements	5053
Notes to Consolidated Financial Statements	5558
Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	98101
Item 9A – Controls and Procedures	99101
Item 9B – Other Information	~~100~~101
Part III
Item 10 – Directors, Executive Officers and Corporate Governance	~~101~~102
Item 11 – Executive Compensation	102
Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	102
Item 13 – Certain Relationships and Related Transactions, and Director Independence	102
Item 14 – Principal Accountant Fees and Services	~~103~~104
Part IV
Item 15 – Exhibits and Financial Statement Schedules	~~104~~105
Signatures	109
Exhibits

FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated in this Annual Report on Form 10-K which are not statements of historical fact constitute “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”).

Forward-looking statements give current expectations or forecasts of future events. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may”, “plan,” “seek” and other words and terms of similar meaning in connection with discussions of future operating or financial performance signify forward-looking statements. We also, from time to time, may provide oral or written forward-looking statements in other materials released to the public. Such statements are made in good faith pursuant to the “Safe Harbor” provisions of the Reform Act.

Any or all forward-looking statements included in this report or in any other public statements may ultimately be incorrect. Forward-looking statements may involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance, experience or achievements to differ materially from any future results, performance, experience or achievements expressed or implied by such forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Listed below are some of the factors that could potentially cause actual results to differ materially from historical and expected future results. Other factors besides these listed here could also materially affect our business.


•	Our substantial indebtedness, which could restrict our business activities and could subject us to significant interest rate risks;


•	Our restructuring activities and strategic initiatives may affect our short-term liquidity and may not result in the anticipated synergies and cost savings.


•	Various worldwide economic, political and social factors, changes in economic conditions, currency fluctuations and devaluations, credit risks in emerging markets, or political instability in foreign countries where we have significant manufacturing operations, customers or suppliers.


•	Changes in tax law or trade agreements and new or changed tariffs.


•	Risks related to our joint ventures.


•	Risks relating to acquisitions.


•	Impairment changes relating to our goodwill and long lived assets.


•	Variations in current and anticipated future production volumes, financial condition, or operational circumstances of our significant customers, particularly the world’s original equipment manufacturers of commercial and passenger vehicles.


•	Our ability to generate cost savings or manufacturing efficiencies to offset or exceed contractually or competitively required price reductions or price reductions to obtain new business.


•	Our ability to obtain cash adequate to fund our needs, including availability of borrowings under our various credit facilities.


•	Fluctuations in the price and availability of raw materials and other supplies used in the manufacturing and distribution of our products.


•	Strategic decisions of our parent, Icahn Enterprises, L.P..


•	Material shortages, transportation system delays, or other difficulties in markets where we purchase supplies for the manufacturing of our products.


•	Significant work stoppages, disputes, or any other difficulties in labor markets where we obtain materials necessary for the manufacturing of our products or where our products are manufactured, distributed or sold.


•	Our ability to expand our development of fuel cell, hybrid-electric or other alternative energy technologies.

• Changes in actuarial assumptions, interest costs and discount rates, and fluctuations in the global securities markets which directly affect the valuation of assets and liabilities associated with our pension and other ~~postemployment~~postretirement benefit plans.

• Various worldwide economic, political and social factors, changes in economic conditions, currency fluctuations and devaluations, credit risks in emerging markets, or political instability in foreign countries where we have significant manufacturing operations, customers or suppliers.


•	Legal actions and claims of undetermined merit and amount involving, among other things, product liability, patent infringement, warranty, recalls of products manufactured or sold by us, and environmental and safety issues involving our products or facilities.

• Legislative activities of governments, agencies, and similar organizations, both in the United States and in other countries that may affect our operations.

• Physical damage to, or loss of, significant manufacturing or distribution property, plant and equipment due to fire, weather or other factors beyond our control.

• Possible terrorist attacks or acts of aggression or war, that could exacerbate other risks such as slowed vehicle production or the availability of supplies for the manufacturing of our products.

• Our ability to effectively transition our information system infrastructure and functions to newer generation systems.


•	Legislative activities of governments, agencies, and similar organizations, both in the U.S. and in other countries that may affect our operations.


•	Physical damage to, or loss of, significant manufacturing or distribution property, plant, and equipment due to fire, weather or other factors beyond our control.


•	Our ability to effectively transition our information system infrastructure and functions to newer generation systems.


•	Other risks set forth under “Item 1A-Risk Factors” in this Form 10-K.

PART I

ITEM 1. BUSINESS

The Company

~~On April 15, 2014,~~ Federal-Mogul ~~Corporation~~Holdings ~~completed~~LLC is a ~~holding~~limited liability company ~~reorganization~~formed (under the ~~“Reorganization”).~~laws Asof aDelaware. ~~result~~On ofFebruary ~~the~~14, ~~Reorganization~~2017, ~~the outstanding shares of~~ Federal-Mogul Holdings Corporation ~~common~~was ~~stock were automatically~~ converted onto a ~~one-for-one~~single ~~basis~~member ~~into~~limited ~~shares~~liability ofcorporation ~~Federal-Mogul~~in ~~Holdings~~the ~~Corporation~~U.S. ~~common stock,~~ and ~~all~~changed ofits ~~the~~name ~~stockholders of Federal-Mogul Corporation immediately prior~~ to ~~the Reorganization automatically became stockholders of~~ Federal-Mogul Holdings ~~Corporation~~LLC. ~~The~~References ~~rights~~herein ofto ~~stockholders~~the of“Company,” “Federal-Mogul,” ~~Holdings~~“we,” ~~Corporation~~“us,” ~~are~~or ~~generally~~“our” ~~governed~~refer byto ~~Delaware law and~~ Federal-Mogul Holdings ~~Corporation’s~~LLC ~~certificate~~for ofthe ~~incorporation~~period ~~and~~after ~~bylaws, which are~~ the ~~same~~effective indate ~~all material respects as those~~ of ~~Federal-Mogul~~the ~~Corporation~~conversion ~~immediately~~on ~~prior~~February to14, ~~the Reorganization. In addition~~2017, ~~the board of directors of~~ Federal-Mogul Holdings Corporation ~~and~~for ~~its~~the ~~Audit~~period ~~Committee~~after ~~and~~the ~~Compensation~~effective ~~Committee~~date ~~are composed~~ of the ~~same~~Reorganization ~~members~~(subsequently asdefined ~~the~~below) ~~board~~on ofApril ~~directors~~15, ~~Audit~~2014, ~~Committee~~ and ~~Compensation Committee of~~ Federal-Mogul Corporation for the period prior to the effective date of the Reorganization on April 15, 2014.

~~References~~Holding ~~herein~~Company toReorganization: ~~the~~On ~~“Company~~April 15,” “2014, Federal-Mogul,” Corporation completed a holding company reorganization (the “~~we,~~Reorganization”). ~~“us~~As a result of the Reorganization,” orthe ~~“our”~~outstanding ~~refer~~shares toof Federal-Mogul Corporation common stock were automatically converted on a one-for-one basis into shares of Federal-Mogul Holdings Corporation common stock, and all of the ~~period~~stockholders of Federal-Mogul Corporation immediately prior to the ~~effective~~Reorganization ~~time~~automatically became stockholders of ~~the~~Federal-Mogul ~~Reorganization~~Holdings onCorporation. ~~April~~The ~~15,~~rights ~~2014~~of stockholders of Federal-Mogul Holdings Corporation are generally governed by Delaware law and Federal-Mogul Holdings Corporation’s certificate of incorporation and bylaws, which are the same in all material respects as those of Federal-Mogul Corporation immediately prior to the Reorganization. In addition, the board of directors of Federal-Mogul Holdings Corporation ~~for~~and its Audit Committee and Compensation Committee were composed of the ~~period~~same ~~after~~members as the ~~effective~~board ~~time~~of directors, Audit Committee and Compensation Committee of Federal-Mogul Corporation prior to the Reorganization.

Merger Transaction: On September 36, ~~2014~~2016, wethe ~~announced~~Company, American Entertainment Properties Corp., a ~~plan~~Delaware tocorporation ~~separate~~(“AEP”), our ~~Powertrain~~parent and ~~Motorparts~~a ~~divisions~~subsidiary of Icahn Enterprises L.P. ("IEP"), and IEH FM Holdings LLC, a Delaware limited liability company (“Merger Sub”) entered into ~~two~~an ~~independent~~Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, ~~publicly-traded~~and ~~companies~~upon ~~serving~~the terms and subject to the ~~global~~conditions ~~original~~thereof, ~~equipment~~Merger Sub commenced a cash tender offer (the "Offer) to acquire, subject to the terms and ~~aftermarket~~conditions ~~industries~~of the Merger Agreement, all of the issued and outstanding shares of the Company’s common stock, par value $0.01 per share, not already owned by IEP affiliates, for a purchase price of $9.25 per share, net to the seller in cash, without interest, less any applicable tax withholding.

On January 3, 2017, the Company announced it had received a revised proposal to purchase shares of the Company’s common stock for $10.00 per share, an increase from the previous offer of $9.25 in cash per share. On January 23, 2017, AEP, and Merger Sub completed the acquisition of the Company as all terms and conditions set forth in the Merger Agreement were satisfied. Shares of the Company's stock are no longer publicly traded as of the close of business January 23, 2017.

Spinoff: On September 3, 2014, we announced a plan to separate our Powertrain and Motorparts divisions into two independent, publicly-traded companies serving the global original equipment and aftermarket industries.

On January 15, 2016, we announced a termination of the previously announced spin-off of our Motorparts division. We will continue to operate with two separate, independent businesses with separate CEOs who will each report directly to our board of directors. The separate businesses more effectively serve their unique markets and allow each operating business to pursue its business strategy and more quickly react to our respective market conditions.

Interests Held by an Entity Controlled by Mr. Carl C. Icahn

AnAs ~~entity~~of ~~indirectly~~December 31, ~~owned~~2016, ~~and~~Mr. Carl C. Icahn indirectly controlled byapproximately Mr81. ~~Icahn~~99% ~~filed~~of athe ~~Schedule 13D~~voting power of the Company’s capital stock and, ~~amendments~~by ~~therein~~virtue ~~with~~of such stock ownership, is able to control or exert substantial influence over the ~~Securities~~Company, ~~and~~including ~~Exchange~~the ~~Commission~~election ~~indicating~~of ~~that~~directors, ~~such~~business ~~entity~~strategy ~~has~~and apolicies, ~~beneficial~~mergers ~~interest~~or inother ~~approximately~~business ~~81.99%~~combinations, acquisition or disposition of ~~our~~assets, ~~outstanding~~future ~~shares~~issuances of common stock. Asor aother ~~result~~securities, ~~Mr. Icahn~~incurrence ~~has~~of ~~the~~debt ~~indirect~~or ~~ability~~obtaining toother ~~nominate~~sources of financing, and ~~elect~~the ~~all~~payment of ~~the~~dividends ~~directors~~ on ~~our~~the ~~board~~Company’s ofcommon ~~directors~~stock. Under applicable law and our certificate of incorporation and ~~by-laws~~bylaws, certain actions cannot be taken without the approval of holders of a majority of our voting stock including, without limitation, mergers, the sale of substantially all of our assets, and amendments to our certificate of incorporation and ~~by-laws~~bylaws. So long as Mr. Icahn continues to control a majority of our outstanding capital stock, he will continue to have these governance rights and the ability to control Federal-Mogul Holdings ~~Corporation~~LLC. As a result of the Merger Transaction and subsequent conversion, the entity indirectly owned and controlled by Mr. Icahn became the sole member of the Company.

Business Overview

We are a leading global supplier of technology and innovation in vehicle and industrial products for fuel economy, emissions reduction, and safety systems. We serve the world’s foremost original equipment manufacturers (“OEM”) and servicers (“OES”) (collectively “OE”) of automotive, light, medium and heavy-duty commercial vehicles, off-road, agricultural, marine, rail, aerospace, power generation and industrial equipment, as well as the ~~worldwide~~independent aftermarket. We seek to participate in both of these markets by leveraging our original equipment product engineering and development capability, manufacturing know-how, and expertise in managing a broad and deep range of replacement parts to service the aftermarket. We believe that we are uniquely positioned to effectively manage the life cycle of a broad range of products to a diverse customer base. We are a leading technology supplier and a market share leader in several product categories. As of December 31, ~~2015~~2016, we had current OEM products included on more than ~~300~~400 global vehicle platforms and more than ~~700~~800 global powertrains used in light, medium, and heavy-duty vehicles. We offer premium brands, OE replacement, and entry/mid -level products for all aftermarket customers. This broad range of vehicle and powertrain applications reinforces our belief in our unique market position.

We operate with two end-customer focused business segments. The Powertrain segment focuses on original equipment powertrain products for automotive, heavy duty, and industrial applications. The Motorparts segment sells and distributes a broad portfolio of products in the global aftermarket ~~including~~and ~~more than 20 globally-recognized brands. We~~ also ~~serve~~serves original equipment manufacturers with products including braking, wipers, and a limited range of chassis components. This organizational model allows for a strong product line focus benefitting both original equipment and aftermarket customers and enables us to be responsive to customers’ needs for superior products and to promote greater identification with our premium brands. Additionally, this organizational model enhances management focus to capitalize on opportunities for organic or acquisition growth, profit improvement, capital allocation, and business model optimization in line with the unique requirements of the two different customer bases and business models.

2Powertrain offers its customers a diverse array of market-leading products for OE applications, including pistons, piston rings, piston pins, cylinder liners, engine valves, valve seats and guides, ignition products, dynamic seals, bonded piston seals, combustion and exhaust gaskets, static gaskets and seals, rigid heat shields, engine bearings, industrial bearings, bushings and washers, element resistant systems protection sleeving products, acoustic shielding, and flexible heat shields. Motorparts offers powertrain products, typically manufactured by Powertrain, and is also a leading global manufacturer and distributor of brake disc pads, brake linings, brake blocks, brake system components, chassis and driveline products, engine gaskets and seals, filters, wipers, lighting, and other product lines to OE and aftermarket customers.

~~growth~~We have manufacturing facilities, ~~profit~~technical ~~improvement~~centers, ~~capital~~distribution ~~allocation~~centers, and ~~business~~warehouses ~~model~~in ~~optimization~~24 countries. Accordingly, our reporting segments derive sales from both domestic and international markets. The attendant risks of our international operations are primarily related to foreign currency fluctuations, changes in ~~line~~local ~~with~~economic ~~the~~and ~~unique~~political ~~requirements~~conditions, extraterritorial effects of U.S. laws such as the ~~two~~Foreign ~~different~~Corrupt ~~customer~~Practices ~~bases~~Act, and ~~business~~changes ~~models~~in laws and regulations.

Powertrain offers its customers a diverse array of market-leading products for OE applications, including pistons, piston rings, piston pins, cylinder liners, engine valves, valve seats and guides, ignition products, dynamic seals, bonded piston seals, combustion and exhaust gaskets, static gaskets and seals, rigid heat shields, engine bearings, industrial bearings, bushings and washers, element resistant systems protection sleeving products, acoustic shielding, and flexible heat shields. Motorparts offers powertrain products, typically manufactured by Powertrain, and is also a leading global manufacturer and distributor of brake disc pads, brake linings, brake blocks, brake system components, chassis and driveline products, engine gaskets and seals, wipers, lighting, and other product lines to OE and aftermarket customers. Motorparts markets its products under more than 20 globally recognized brands through a global distribution network. 4

We have manufacturing facilities, technical centers, distribution centers, and warehouses in 25 countries. Accordingly, our reporting segments derive sales from both domestic and international markets. The attendant risks of our international operations are primarily related to currency fluctuations, changes in local economic and political conditions, extraterritorial effects of United States laws such as the Foreign Corrupt Practices Act, and changes in laws and regulations.

The following tables set forth net sales and net property, plant and equipment (“PP&E”) by geographic region as a percentage of total net sales and net PP&E:

	Net Sales						Net PP&E
	Year Ended December 31						December 31
	2015		2014		2013		2015		2014
	2016		2015		2014		2016		2015
United States	38	%	36	%	37	%	29	%	28	%
U.S.	37	%	38	%	36	%	30	%	29	%
Mexico	56	%	5	%	5	%	7	%	7	%
Canada	2	%	2	%	12	%	—		—
Total North America	45	%	4345	%	43	%	3637	%	3536	%
Germany	2019	%	20	%	20	%	2019	%	20	%
France	5	%	5	%	65	%	3	%	3	%
Belgium	3	%	4	%	5	%	1	%	1	%
Italy	4	%	4	%	4	%	2	%	2	%
Italy	4	%	4	%	4	%	2	%	3	%
United Kingdom	3	%	3	%	3	%	3	%	3	%
United Kingdom	3	%	3	%	3	%	3	%	4	%
Belgium	3	%	3	%	4	%	1	%	1	%
Other EMEA	7	%	87	%	68	%	12	%	1312	%
Total EMEA	4241	%	4442	%	44	%	4140	%	4441	%
China	67	%	6	%	56	%	1211	%	1112	%
India	3	%	3	%	3	%	6	%	6	%
South America	1	%	21	%	2	%	23	%	2	%
Other	3	%	23	%	32	%	3	%	23	%
Total Rest of World	1314	%	13	%	13	%	23	%	2123	%
	100	%	100	%	100	%	100	%	100	%

The following table sets forth net sales by reporting segment as a percentage of total net sales:

	Year Ended December 31
	2015		2014		2013
	2016		2015		2014
Net sales by reporting segment:
Powertrain	57	%	57	%	57	%
Motorparts	43	%	43	%	43	%
	100	%	100	%	100	%

3See Note 21, Operations by Reporting Segment and Geographic Area, to the Consolidated Financial Statements, included in Item 8 of this report.

See Note 21, Operations by Reporting Segment and Geographic Area, to the consolidated financial statements, included in Item 8 of this report.

Strategy

Our strategy is designed to create sustainable global profitable growth by leveraging existing and developing new competitive advantages. This strategy consists of the following primary elements:


•	Provide value-added products to customers in all markets served through leading technology and innovation;


•	Develop products to enable increased fuel economy and reduce vehicle emissions, plus enable the use of alternative energies;


•	Utilize our leading technology resources to develop advanced and innovative products, processes and manufacturing capabilities;


•	Extend our global reach to support our OE and aftermarket customers, furthering relationships with leading Asian OEs and strengthening market share with U.S. and European OEs;

• Assess acquisition and investment opportunities that provide product line expansion, technological advancements, geographic positioning, penetration of emerging markets (including India and China), and market share growth;

• Invest in world-class distribution and online capabilities to meet delivery expectations of our customers by enhancing our distribution footprint to improve our distribution capabilities, strengthen delivery performance and engage end customers;5


•	Invest in world-class distribution and online capabilities to meet delivery expectations of our customers by enhancing our distribution footprint to improve our distribution capabilities, strengthen delivery performance, and engage end customers;


•	Leverage the strength of our global aftermarket leading brand positions, product portfolio and range, marketing and selling expertise, and distribution and logistics capabilities;

• Expand our coverage in existing product lines and add new product lines which are critical to maintaining our leadership position, and leveraging our distribution and sales network;


•	Continue to invest in product innovation to support our premium brands and to enhance our marketing initiatives to more effectively communicate the value proposition of our branded products to end customers; and


•	Aggressively pursue cost competitiveness in all business segments by continuing to drive productivity in existing operations, consolidating and relocating manufacturing operations to best cost countries, utilizing our strategic alliances, and rationalizing business resources and infrastructure.

Our strategy is to develop and deliver leading technology, innovation, and service capabilities which results in market share expansion in the OE market and aftermarket. We assess individual opportunities to execute our strategy based upon estimated sales and margin growth, cost reduction potential, internal investment returns, ~~and~~among other criteria, and make investment decisions on a case-by-case basis. Opportunities meeting or exceeding benchmark return criteria may be undertaken through research and development activities, acquisitions, organic growth, ~~and~~ strategic alliances, or restructuring activities as further discussed below.

Research and Development. We maintain technical centers throughout the world designed to:

• ~~provide~~Provide solutions for customers and bring new, innovative products to market;

• ~~integrate~~Integrate our leading technologies into advanced products and processes;

• ~~provide~~Provide engineering support for all of our manufacturing sites; and

• ~~provide~~Provide technological expertise in engineering and design development.

Our research and development activities are conducted at our ~~research~~technical ~~and development locations~~centers. Within the ~~United States~~U.S., these ~~centers~~ are located in Skokie, Illinois; Ann Arbor, Michigan; Plymouth, Michigan; St. Louis, Missouri;, Exton, Pennsylvania; and ~~Waupun~~Smithville, ~~Wisconsin~~Tennessee. Internationally, our ~~research~~technical ~~and development~~ centers are located in Araras, Brazil; Aubange, Belgium; Chapel-en-le-Frith, United Kingdom; Coventry, United Kingdom; Burscheid, Germany; Nuremberg, Germany; Wiesbaden, Germany; Bad Camberg, Germany; Glinde, Germany; Kostelec, Czech Republic, Gorzyce, Poland; and Shanghai, China.

Each of our business units isengage ~~engaged~~ in engineering, and research and development efforts and ~~works~~work closely with customers to develop custom solutions to meet their needs. Total expenditures for research and development activities, including product engineering and validation costs, were $~~189~~192 million, $~~192~~189 million, and $~~173~~192 million for the years ended December 31, 2016, 2015, ~~2014~~ and ~~2013~~2014.

Consolidated and Nonconsolidated Affiliates. We form certain affiliations, including joint ventures, to gain share in emerging markets, facilitate the exchange of technical information and development of new products, extend current product offerings, provide best cost manufacturing operations, broaden our customer base, and pursue strategic alternatives. We believe ~~that~~ certain of these affiliations have provided, and will continue to provide, opportunities to expand business relationships with Asian and other customers and partners operating in the India and China growth markets. We are currently involved in 3738 such affiliations located in 13 different countries throughout the world, including China, India, Korea, Russia, Turkey, Thailand, and the ~~United States~~U.S. Of these affiliations, we maintain a controlling interest in 2118 entities and, accordingly, the financial results of these entities are included in our Consolidated Financial Statements. We have a noncontrolling interest in 20 of our affiliates, of which 13 are accounted for under the equity method and 7 are accounted for under the cost method. We do not consolidate any entity for which we have a variable interest based solely on power to direct the activities and significant participation in the entity’s expected results that would not otherwise be consolidated based on control through voting interests. Further, our affiliations are businesses established and maintained in connection with our operating strategy.

4Net sales for our 18 consolidated affiliates were approximately 5% of consolidated net sales for each of the years ended December 31, 2016, 2015, and 2014. Our investments in nonconsolidated affiliates totaled $270 million and $296 million as of December 31, 2016 and 2015, and the equity in earnings of such affiliates amounted to $59 million, $56 million, and $48 million for the years ended December 31, 2016, 2015, and 2014.

~~these entities are included in our consolidated financial statements~~Acquisitions. We have a non-controlling interest in 16 of our affiliates, of which 12 are accounted for under the equity method and 4 are accounted for under the cost method. We do not consolidate any entity for which we have a variable interest based solely on power to direct the activities and significant participation in the entity’s expected results that would not otherwise be consolidated based on control through voting interests. Further, our affiliations are businesses established and maintained in connection with our operating strategy.

~~Net~~On ~~sales~~December ~~for~~1, ~~our~~2016, 21we ~~consolidated~~acquired ~~affiliates~~the ~~were~~assets ~~approximately 5%, 5%~~ and 8%liabilities of ~~consolidated~~IEH ~~net~~BA ~~sales~~LLC ~~for~~("Beck ~~the~~Arnley"), ~~years~~an ~~ended~~entity ~~December 31,~~owned ~~2015,~~by ~~2014~~a ~~and~~subsidiary ~~2013~~of IEP. ~~Our~~Beck ~~investments~~Arnley inis ~~nonconsolidated~~a ~~affiliates~~provider ~~totaled~~of ~~$296~~premium ~~million~~OE quality parts and ~~$269~~fluids ~~million~~for asforeign ofnameplate ~~December 31,~~vehicles ~~2015~~in ~~and~~North ~~2014,~~America and ~~the~~was ~~equity~~acquired infor ~~earnings~~a ofpurchase ~~such~~price ~~affiliates~~of ~~amounted to~~ $5614 million, which included $487 million ~~and~~paid ~~$34~~in ~~million~~cash ~~for~~on the ~~years~~date ~~ended~~of ~~December 31,~~acquisition ~~2015,~~and ~~2014~~a ~~and~~$7 ~~2013.~~

~~Acquisitions. Pursuant to the Amended and Restated Share and Asset Purchase Agreement dated January 23, 2015, we completed the acquisition of TRW’s valvetrain business. On February~~ 6, 2015, we completed the acquisition of certain assets of the TRW valvetrain business. The business was acquired through a combination of asset and stock purchases for a purchase price of approximately $309 million. On July 7, 2015, we completed the purchase of certain additional business assets of the TRW valvetrain business. The business was acquired through stock purchases for a base purchase price of approximately $56 million. The purchase included a $25 million noncontrolling interest related to a 66% stake in a majority owned entity that we consolidate in our financial statements. The acquisition was funded primarily from our available revolving line of credit and is subject to certain customary closing and post-closing adjustments. The acquisition of TRW’s valvetrain business adds a completely new product line to our portfolio, strengthens our position as a leading developer and supplier of core components for engines, and enhances our ability to support our customers to improve fuel economy and reduce emissions.

million non-interest bearing note maturing on May 1, 2018. Beck Arnley’s products complement the foreign nameplate coverage of our current aftermarket offerings, while adding several new product lines, including fluids, engine management, cooling, electrical parts, and electronic components. See Note 5, Acquisitions, and Note 23, Related Party Transactions, to the Consolidated Financial Statements, included in Item 8 of this report.

On May 26, 2016, we completed the acquisition of the assets of a filter manufacturing business in Mexico, which primarily serves the Mexican market, for a purchase price of $25 million, net of cash acquired.

On February 6, 2015, we completed the acquisition of certain assets of the TRW valvetrain business through a combination of asset and stock purchases for a purchase price of approximately $309 million. On July 7, 2015, we completed the purchase of certain additional business assets of the TRW valvetrain business through stock purchases for a base purchase price of approximately $56 million. The purchase included a $25 million noncontrolling interest related to a 66% stake in a majority owned entity that we consolidate in our financial statements. The acquisition of TRW’s valvetrain business adds a completely new product line to our portfolio, strengthens our position as a leading developer and supplier of core components for engines, and enhances our ability to support our customers to improve fuel economy and reduce emissions.

In July 2014, we completed the purchase of certain assets of the Honeywell brake component business, including two recently established manufacturing facilities in China and Romania that substantially strengthened the manufacturing and engineering capabilities of our global braking portfolio. The business was acquired through a combination of asset and stock purchases for a base purchase price of $168 million and other incurred liabilities of $15 million.

In May 2014, we completed the purchase of the Affinia chassis business. This business serves leading U.S. aftermarket customers with chassis products and broadened Motorparts product offering and customer base while also providing operational synergies. The purchase price was $149 million, net of acquired cash.

See Note 5, Acquisitions, to the Consolidated Financial Statements, included in Item 8 of this report.

Divestitures. In connection with our strategic planning process, we assess our operations for market position, product technology and capability, and profitability. Those businesses determined by management not to have a sustainable competitive advantage are considered non-core and may be considered for divestiture or other exit activities. ~~During the year ended December 31, 2015, we entered into an agreement to sell one of our subsidiaries located in France, which has been presented in the consolidated balance sheet as held for sale.~~

~~During~~In ~~the year ended~~ December ~~31,~~ ~~2013~~2016, we ~~divested~~entered ~~our~~into ~~sintered~~an ~~components~~agreement ~~operations~~to ~~located~~sell in80.1% ~~France,~~of ~~our~~the ~~connecting~~shares ~~rod~~of ~~manufacturing~~one ~~facility~~of ~~located in Canada,~~ our ~~camshaft~~subsidiaries ~~foundry~~in ~~located~~Brazil in the ~~United~~Motorparts ~~Kingdom,~~segment ~~and~~for ~~our fuel pump business, which included an aftermarket business component and~~ a ~~manufacturing~~sale ~~and~~price ~~research~~of ~~and~~one ~~development~~Brazilian ~~facility located in the United States~~Real. ~~These~~The ~~divestitures~~sale ~~have~~is ~~been~~expected ~~presented~~to asclose ~~discontinued operations~~ in the ~~consolidated~~second ~~statements~~half of ~~operations~~2017.

In December 2016, we entered into stock and asset purchase agreement to sell certain assets and liabilities related to our wipers business in the Motorparts segment for a sale price of $8 million. The sale is expected to close in the first half of 2017.

During 2015, we entered into a share agreement to sell 100% of the shares of one of our subsidiaries in the Powertrain segment for a sale price of one euro. Prior to December 31, 2015, we contributed $12 million in cash to the subsidiary. The sale closed on January 1, 2016.

See Note 6, Held for Sale and Discontinued Operations, to the Consolidated Financial Statements, included in Item 8 of this report.

Restructuring Activities. Our restructuring activities are undertaken as necessary to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources, ~~and~~to ultimately achieve net cost reductions and productivity improvements. Restructuring activities include efforts to integrate and rationalize our businesses, and to relocate ~~manufacturing~~ operations to best cost markets.

During the years ended December 31, 2016, 2015, ~~2014~~ and ~~2013~~2014, we recorded $8927 million, $8692 million and $4089 million in net restructuring expenses. Our restructuring activities are further discussed in Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 3, Restructuring ~~Charges~~charges and ~~Asset~~asset ~~Impairments~~impairments, to the ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements, included in Item 8 of this report.

Products

The following provides an overview of products manufactured and distributed by our reporting segments.

Powertrain. The Powertrain segment primarily represents our OE business in powertrain-related components and systems. In 2016, about 95% of Powertrain’s revenue was derived from OE customers, with the remaining 5% of revenue coming directly from the Motorparts segment for eventual distribution, by Motorparts, to customers in the independent aftermarket.

Powertrain. The Powertrain segment primarily represents our OE business in powertrain-related components and systems. In 2015, about 94% of Powertrain’s revenue was derived from OE customers, with the remaining 6% of revenue coming directly from the Motorparts segment for eventual distribution, by Motorparts, to customers in the independent aftermarket.

Powertrain operates 84 manufacturing sites in 19 countries, serving a large number of major automotive, heavy-duty, marine and industrial customers worldwide. Powertrain derived 35% of 2015 OE sales in North America, 46% in Europe, the Middle-East and Africa ("EMEA") and 19% in the rest of the world (“Rest of World” or “ROW”).

We are one of the world’s leading powertrain component and assembly providers. Comprehensive design capability and an extensive product portfolio enable effective delivery of a broad range of engine and driveline components as well as engineered solutions to improve fuel economy, reduce emissions or enhance vehicle performance and durability. Powertrain products are used in automotive, motorcycle, light truck, heavy-duty, industrial, commercial equipment (construction, agricultural, power generation, marine and railway), aerospace, and small air-cooled engine applications. The following provides a description of the various products manufactured by Powertrain:

Product	Description
Pistons	The main task of the piston is to compress the air and fuel mixture in advance of ignition. Following combustion, the piston relays the combustion energy into mechanical energy. In this process, substantial pressures are exerted on the piston, imposing high demands on it in terms of rigidity and temperature resistance.
Piston Rings	The three main tasks of piston rings in internal combustion engines include: (1) sealing the combustion chamber, (2) supporting heat transfer from the piston to the cylinder wall, and (3) regulating lubrication and oil consumption.
Piston Pins	Piston pins attach the piston to the end of the connecting rod, allowing the piston to pivot in each cycle of the engine and following the revolution of the crankshaft.
Cylinder Liners	Cylinder liners, or sleeves are specially engineered where surfaces formed within the engine block, working in tandem with the piston and ring, as the chamber in which the thermal energy of the combustion process is converted into mechanical energy.
Valve Seats and Guides	Valve seats and guides are a wide variety of powdered metal inserts used in engines and general industrial applications, which are specially designed to meet customer requirements for extreme hardness.
Engine Valves	Engine valves are used to control the air and fuel flow into and out of the cylinders, facilitating the combustion process. Valve designs consist of mono, bimetallic and hollow valves depending on application, which includes automotive and various industrial requirements including marine and power generation. The product line also provides other related valve train components including cotters, rotators and retainers.
Engine Bearings	Engine bearings provide an intermediate surface between the connecting rod and crankshaft and between the crankshaft and engine block. Their purpose is to facilitate the conversion of combustion energy into mechanical energy by allowing low-friction movement of the connecting rods and crankshaft when absorbing the power created in the combustion chamber. They operate principally under hydrodynamic lubrication conditions. The bearing product line includes lead-free aluminum engine bearings commonly used in gasoline engines and bronze bearings used in highly-loaded compression engines such as diesel or gasoline turbocharged models.

Industrial Bearings Sold under the Deva®and Glycodur® brands, industrial bearings are primarily dedicated to applications operating in mixed or low lubrication conditions. Applications are mainly diverse industrial motors or converters and include wind turbines and hydroelectric power generation equipment. Bushings and Washers Bushings and washers are used in engines and transmissions to ensure low friction rotation or oscillation of shafts. They are made of bronze, aluminum or polymer material. Ignition Ignition products include spark plugs, glow plugs, ignition coils and accessories for automotive commercial and industrial applications. Dynamic Seals Dynamic seals are used between a housing or body structure and rotating or moving shafts to contain lubricants, fluids and pressure inside the housing, while keeping out dust and other contaminates. There are numerous areas of application including engine crankshaft, transmission driveshaft, pinion and axle, and wheel seals. Bonded Piston Seals Bonded piston seals use hydraulic pressure in transmissions to facilitate gearshift. These products are used in automatic, dual clutch transmissions and continuously variable transmissions. Combustion and Exhaust Gaskets Combustion and exhaust gaskets are used between two surfaces to contain gas and pressure produced from combustion. These gaskets are primarily used on internal combustion engine applications including cylinder head, exhaust manifold, exhaust takedown, exhaust gas recirculation and turbocharger gaskets. Static Gaskets and Seals Static gaskets and seals create a barrier between two surfaces to contain fluids, pressure and gases while keeping out dust and other contaminants. There are numerous areas of application including engine covers, oil pans, intake manifolds, transmission covers and differential covers. Rigid Heat Shields Rigid heat shields are designed to provide a heat and sound barrier to emitting components. These products cover a full range of application on a vehicle from engine to tailpipe. Flexible Heat Shields Flexible heat shields are designed to provide a heat barrier and for thermal management usually in the engine compartment. Element Resistant Sleeving Element resistant sleeving products provide protection of wires, hoses, sensors, and mechanical components and assemblies from heat, electro-magnetic interference, dirt, vibration and moisture. Element resistant sleeving products include: • automotive wire harnesses and hoses; • abrasion protection and wire management of cable assemblies; • dielectric protection of electrical leads; • thermal and mechanical protection of hose assemblies; and • acoustic insulating and sound-dampening materials. Lighting Automotive lighting products include power and lighting systems, and interior and exterior lighting components.

Motorparts. Motorparts sells and distributes a broad portfolio of products in the global vehicle aftermarket while also serving the OE market with products including braking, wipers, and chassis. In 2015, approximately 73% of Motorparts’ sales were derived from sales to customers in the aftermarket and approximately 27% were attributable to sales to the OE market. Motorparts operates 32 manufacturing sites in 15 countries and 35 distribution centers and warehouses in 13 countries. In 2015, Motorparts derived 56% of sales in North America, 37% in EMEA and 7% in Rest of World.

Motorparts’ products are designed to solve a problem, facilitate installation and improve safety, durability, and vehicle performance. Motorparts’ products are utilized widely in vehicle braking systems and chassis, as well as in engine and sealing applications and general service. Through global market insight, supply chain expertise, and brand and product line management, aftermarket and OE customers worldwide benefit from our innovative technology, manufacturing, supply chain and distribution capabilities.

~~The~~Powertrain ~~following~~operates ~~table~~87 ~~sets~~manufacturing ~~forth~~sites in 19 countries, serving a ~~description~~large number of major automotive, heavy-duty, marine, and industrial customers worldwide. Powertrain derived 35% of 2016 OE sales in North America, 45% in Europe, the ~~principal~~Middle-East ~~products~~and ~~manufactured~~Africa ("EMEA") and/ 20% in the rest of the world (“Rest of World” or ~~sold~~“ROW”). byThe ~~Motorparts:~~ Company has also invested globally in nonconsolidated affiliates which have multiple manufacturing sites in Turkey and China.

~~Product~~We ~~Description~~are ~~Brands~~one ~~Light Vehicle DiscPads A light vehicle disc pad assembly consists~~ of: ~~friction material, which dissipates forward momentum by converting energy into heat; underlayer, which is a layer of different friction material placed between~~ the ~~backplate~~world’s ~~and~~leading ~~friction~~powertrain ~~material~~component ~~to improve strength, provide a thermal barrier, corrosion resistance, noise performance or a combination of these characteristics; backplate, to support~~ and ~~locate~~assembly ~~the friction material in the caliper; and shim, which is a rubber/metal laminate developed to suppress noise~~providers. ~~Wagner®,~~Comprehensive ~~Abex®,~~design ~~Ferodo®,~~capability ~~Jurid®, Stop®, QuickStop®, ThermoQuiet®,~~ and ~~OEx®~~an ~~Commercial~~extensive ~~VehicleDisc~~product ~~Pads~~portfolio ~~Commercial~~enable ~~vehicle~~effective ~~disc~~delivery ~~brake~~of ~~pads are~~ a ~~growing~~broad ~~segment~~range of ~~the~~engine ~~friction market, superseding drum brakes on trucks, buses, tractor units~~ and ~~trailers.~~driveline ~~The~~components ~~basic~~as ~~construction~~well ~~of a commercial vehicle disc pad is the same~~ as aengineered ~~light~~solutions ~~vehicle disc pad. Ferodo®, Beral®, Abex® and Stop® Light Vehicle DrumBrake Linings Drum brake linings are friction material affixed~~ to aimprove ~~brake~~fuel ~~shoe and fitted on the rear service brake~~economy, ~~rear~~reduce ~~parking~~emissions ~~brake and/~~or ~~transmission~~enhance ~~brake application. Ferodo® and Wagner® Commercial VehicleFull Length Linings Full length linings are the commercial~~ vehicle ~~equivalent of light vehicle drum brake linings. Ferodo®~~performance, ~~Beral®, Abex®~~ and ~~Jurid® Commercial VehicleHalf Blocks Half blocks are segments of friction material made to be riveted onto drum brake shoes~~durability. ~~They~~Powertrain ~~are~~products ~~used on heavier vehicle applications where discs~~ are ~~not~~ used. ~~Ferodo®, Beral®, Abex® and Jurid® Railway BrakeBlocks Railway brake blocks work by acting on the circumference of the wheel. They are lighter and quieter~~ in ~~operation than cast iron blocks. However~~automotive, ~~friction performance is designed to replicate that of cast iron blocks. Ferodo® and Jurid® Chassis Chassis parts include ball joints~~motorcycle, ~~tie~~light ~~rod ends~~truck, sway bar links, idler arms, pitman arms, and control arms. These components affect vehicle steering and vehicle ride quality. MOOG® and QuickSteer® Driveline UniversalJoints Driveline universal joints which provide a linkage between a power unit and output device such as a wheel end or service device. MOOG® Combustion andExhaust Gaskets Combustion and exhaust gaskets are used between two surfaces to contain gas and pressure produced from combustion. These gaskets are primarily used on internal combustion engine applications including cylinder head, exhaust manifold, exhaust takedown, exhaust gas recirculation and turbocharger gaskets. Felheavy-~~Pro®~~duty, ~~Payen® and Goetze® Static Gaskets andSeals Static gaskets and seals create a barrier between two surfaces to contain fluids~~industrial, ~~pressure~~commercial ~~and~~equipment ~~gases while keeping out dust and other contaminants. There are numerous areas of application including engine covers~~(construction, ~~oil pans~~agricultural, ~~intake~~power ~~manifolds~~generation, ~~shaft~~marine ~~seals, transmission covers~~ and ~~differential covers. Fel-Pro®~~railway), ~~Payen®~~aerospace, ~~Goetze®~~ and ~~National®~~small ~~Wipers Windshield wiper parts include conventional and profile style wiper blades, blade refills, and wiper arms. ANCO® Filters Filtration parts include oil,~~ air,-cooled ~~cabin,~~engine ~~fuel and other filters for both light and commercial vehicles~~applications. ~~These~~The ~~components~~following ~~prevent~~provides ~~harmful~~a ~~contaminants~~description ~~contained~~of inthe ~~liquids~~various ~~and~~products ~~gases~~manufactured ~~from~~by ~~passing through vehicle components and potentially leading to premature wear or failure. Champion®~~Powertrain:



Product	Description

Pistons	The main task of the piston is to compress the air and fuel mixture in advance of ignition. Following combustion, the piston relays the combustion energy into mechanical energy. In this process, substantial pressures are exerted on the piston, imposing high demands on it in terms of rigidity and temperature resistance.

Piston Rings	The three main tasks of piston rings in internal combustion engines include: (1) sealing the combustion chamber, (2) supporting heat transfer from the piston to the cylinder wall, and (3) regulating lubrication and oil consumption.

Piston Pins	Piston pins attach the piston to the end of the connecting rod, allowing the piston to pivot in each cycle of the engine and following the revolution of the crankshaft.

Cylinder Liners	Cylinder liners, or sleeves, are specially engineered where surfaces formed within the engine block, working in tandem with the piston and ring, as the chamber in which the thermal energy of the combustion process is converted into mechanical energy.

Valve Seats and Guides	Valve seats and guides are a wide variety of powdered metal inserts used in engines and general industrial applications, which are specially designed to meet customer requirements for extreme hardness.

Engine Valves	Engine valves are used to control the air and fuel flow into and out of the cylinders, facilitating the combustion process. Valve designs consist of mono, bimetallic, and hollow valves depending on application, which includes automotive and various industrial requirements including marine and power generation. The product line also provides other related valve train components including cotters, rotators, and retainers.

Engine Bearings	Engine bearings provide an intermediate surface between the connecting rod and crankshaft and between the crankshaft and engine block. Their purpose is to facilitate the conversion of combustion energy into mechanical energy by allowing low-friction movement of the connecting rods and crankshaft when absorbing the power created in the combustion chamber. They operate principally under hydrodynamic lubrication conditions. The bearing product line includes lead-free aluminum engine bearings commonly used in gasoline engines and bronze bearings used in highly-loaded compression engines such as diesel or gasoline turbocharged models.

Pistons	The main task of the piston is to compress the air and fuel mixture in advance of ignition. Following combustion, the piston relays the combustion energy into mechanical energy. In this process, substantial pressures are exerted on the piston, imposing high demands on it in terms of rigidity and temperature resistance.	Sealed Power®, Speed Pro®, FP Diesel® and Nüral®
Piston Rings	The three main tasks of piston rings in internal combustion engines are (1) sealing the combustion chamber, (2) supporting heat transfer from the piston to the cylinder wall and (3) regulating lubrication and oil consumption.	Sealed Power®, Speed Pro®, FP Diesel® and Goetze®
Cylinder liners	Cylinder liners, or sleeves, are specially engineered where surfaces form within the engine block, working in tandem with the piston and ring, as the chamber in which the thermal energy of the combustion process is converted into mechanical energy.	FP Diesel® and Goetze®
Ignition	Ignition products include spark plugs, glow plugs, ignition coils and accessories for automotive, commercial and industrial applications.	Champion® and Beru®
Lighting	Replacement vehicle lighting products for automotive and commercial applications	Wagner®




Industrial Bearings	Industrial bearings are primarily dedicated to applications operating in mixed or low lubrication conditions. Applications are mainly diverse industrial motors or converters and include wind turbines and hydroelectric power generation equipment.

Bushings and Washers	Bushings and washers are used in engines and transmissions to ensure low friction rotation or oscillation of shafts. They are made of bronze, aluminum or polymer material.

Ignition	Ignition products include spark plugs, glow plugs, ignition coils, and accessories for automotive, commercial, and industrial applications.

Dynamic Seals	Dynamic seals are used between a housing or body structure and rotating or moving shafts to contain lubricants, fluids, and pressure inside the housing, while keeping out dust and other contaminates. There are numerous areas of application including engine crankshaft, transmission driveshaft, pinion and axle, and wheel seals.

Bonded Piston Seals	Bonded piston seals use hydraulic pressure in transmissions to facilitate gearshift. These products are used in automatic, dual clutch transmissions, and continuously variable transmissions.

Combustion and Exhaust Gaskets	Combustion and exhaust gaskets are used between two surfaces to contain gas and pressure produced from combustion. These gaskets are primarily used on internal combustion engine applications including cylinder head, exhaust manifold, exhaust takedown, exhaust gas recirculation, and turbocharger gaskets.

Static Gaskets and Seals	Static gaskets and seals create a barrier between two surfaces to contain fluids, pressure, and gases while keeping out dust and other contaminants. There are numerous areas of application including engine covers, oil pans, intake manifolds, transmission covers, and differential covers.

Rigid Heat Shields	Rigid heat shields are designed to provide a heat and sound barrier to emitting components. These products cover a full range of application on a vehicle from engine to tailpipe.

Flexible Heat Shields	Flexible heat shields are designed to provide a heat barrier and for thermal management usually in the engine compartment.

Element Resistant Sleeving	Element resistant sleeving products provide protection for wires, hoses, sensors, and mechanical components and assemblies from heat, electro-magnetic interference, dirt, vibration, and moisture. Element resistant sleeving products include: • Automotive wire harnesses and hoses; • Abrasion protection and wire management of cable assemblies; • Dielectric protection of electrical leads; • Thermal and mechanical protection of hose assemblies; and • Acoustic insulating and sound-dampening materials.

Lighting	Automotive lighting products include power and lighting systems, and interior and exterior lighting components.

Motorparts. Motorparts sells and distributes a broad portfolio of products in the global vehicle aftermarket while also serving the OE market with products including braking, wipers, and a limited range of chassis components. In 2016, approximately 72% of Motorparts’ sales were derived from sales to customers in the aftermarket and approximately 28% were attributable to sales to the OE market. Motorparts operates 33 manufacturing sites in 15 countries, 33 distribution centers and warehouses in 12 countries, 13 Technical Service Centers in 2 countries, and 9 third party operated distribution centers in 4 countries. In 2016, Motorparts derived 56% of sales in North America, 36% in EMEA and 8% in Rest of World.

Motorparts’ products are designed to solve a problem, facilitate installation, and improve safety, durability, and vehicle performance. Motorparts’ products are utilized in vehicle braking systems and chassis, as well as in engine and sealing applications, and general service. Through global market insight, supply chain expertise, and brand and product line management, aftermarket and OE customers worldwide benefit from our innovative technology, manufacturing, supply chain, and distribution capabilities.

The following table sets forth a description of the principal products manufactured and/or sold by Motorparts:



Product	Description	Brands
Light Vehicle Disc Pads	A light vehicle disc pad assembly consists of: • friction material, which dissipates forward momentum by converting energy into heat; • underlayer, which is a layer of different friction material placed between the backplate and friction material to improve strength, provide a thermal barrier, corrosion resistance, noise performance or a combination of these characteristics; • backplate, to support and locate the friction material in the caliper; and • shim, which is a rubber/metal laminate developed to suppress noise.	Wagner^®, Abex^®, Ferodo^®, Jurid^®, Stop^®, QuickStop^®, ThermoQuiet^®, and OE^x^®

Commercial Vehicle Disc Pads	Commercial vehicle disc brake pads are a growing segment of the friction market, superseding drum brakes on trucks, buses, tractor units, and trailers. The basic construction of a commercial vehicle disc pad is the same as a light vehicle disc pad.	Ferodo^®, Beral^®, Abex^® and Stop^®

Light Vehicle Drum Brake Linings	Drum brake linings are friction material affixed to a brake shoe and fitted on the rear service brake, rear parking brake, and/or transmission brake application.	Ferodo^® and Wagner^®

Commercial Vehicle Full Length Linings	Full length linings are the commercial vehicle equivalent of light vehicle drum brake linings.	Ferodo^®, Beral^®, Abex^® and Jurid^®

Commercial Vehicle Half Blocks	Half blocks are segments of friction material made to be riveted onto drum brake shoes. They are used on heavier vehicle applications where discs are not used.	Ferodo^®, Beral^®, Abex^® and Jurid^®

Railway Brake Blocks	Railway brake blocks work by acting on the circumference of the wheel. They are lighter and quieter in operation than cast iron blocks. However, friction performance is designed to replicate that of cast iron blocks.	Ferodo^® and Jurid^®

Chassis	Chassis parts include ball joints, tie rod ends, sway bar links, idler arms, pitman arms, and control arms. These components affect vehicle steering and vehicle ride quality.	MOOG^® and QuickSteer^®

Driveline Universal Joints	Driveline universal joints which provide a linkage between a power unit and output device such as a wheel end or service device.	MOOG^®

Combustion and Exhaust Gaskets	Combustion and exhaust gaskets are used between two surfaces to contain gas and pressure produced from combustion. These gaskets are primarily used on internal combustion engine applications including cylinder head, exhaust manifold, exhaust takedown, exhaust gas recirculation, and turbocharger gaskets.	Fel-Pro^®, Payen^® and Goetze^®

Static Gaskets and Seals	Static gaskets and seals create a barrier between two surfaces to contain fluids, pressure, and gases while keeping out dust and other contaminants. There are numerous areas of application including engine covers, oil pans, intake manifolds, shaft seals, transmission covers, and differential covers.	Fel-Pro^®, Payen^®, Goetze^® and National^®

Wipers	Windshield wiper parts include conventional and profile style wiper blades, blade refills, and wiper arms.	ANCO^®

Filters	Filtration parts include oil, air, cabin, fuel, and other filters for both light and commercial vehicles. These components prevent harmful contaminants contained in liquids and gases from passing through vehicle components and potentially leading to premature wear or failure.	Champion^® Interfil^®



Pistons	The main task of the piston is to compress the air and fuel mixture in advance of ignition. Following combustion, the piston relays the combustion energy into mechanical energy. In this process, substantial pressures are exerted on the piston, imposing high demands on it in terms of rigidity and temperature resistance.	Sealed Power^®, Speed Pro^®, FP Diesel^® and Nüral^®

Piston Rings	The three main tasks of piston rings in internal combustion engines include (1) sealing the combustion chamber, (2) supporting heat transfer from the piston to the cylinder wall, and (3) regulating lubrication and oil consumption.	Sealed Power^®, Speed Pro^®, FP Diesel^® and Goetze^®

Cylinder liners	Cylinder liners, or sleeves, are specially engineered where surfaces formed within the engine block, working in tandem with the piston and ring, as the chamber in which the thermal energy of the combustion process is converted into mechanical energy.	FP Diesel^® and Goetze^®

Ignition	Ignition products include spark plugs, glow plugs, ignition coils, and accessories for automotive, commercial, and industrial applications.	Champion^® and Beru^®
	,
Lighting	Replacement vehicle lighting products for automotive and commercial applications	Wagner^®

Industry

The automotive light vehicle market, as well as the medium ~~duty/heavy~~and heavy-duty commercial market, is comprised of two primary segments: the OE market in which our products are used in the manufacture of new vehicles and OE dealer service parts ("OES"), and the global aftermarket, in which our products are used as replacement parts for all vehicles in operation on the road, including all previous models.

The OE Market. Demand for component parts in the OE market is generally a function of the number of new vehicles produced, which is driven by macro-economic conditions and other factors such as ~~interest rates,~~ fuel prices, consumer confidence, employment trends, regulatory requirements, and trade agreements. Although OE demand is tied to planned vehicle production, parts suppliers also have the opportunity to grow through increasing their product content per vehicle, by increasing market share and by expanding into new or emerging markets. Companies with a global presence, leading technology and innovation, and advanced product engineering, manufacturing, and customer support capabilities are best positioned to take advantage of these opportunities.

There are currently several significant trends that are ~~effecting~~affecting the OE market, including the following:

• Global Production – The global light and commercial vehicle production in developed markets during ~~2015~~2016 and ~~2014~~2015 was as follows:

	Global Light and Commercial Vehicle Production
	2015		2014
	2016	2015
	(Millions of Vehicles)
	(millions of vehicles)
Americas	21.31	21.3	~~21.4~~
EMEA	2324.3	23.3	~~22.3~~
Asia	4650.52	46.5	~~45.7~~

While global OE production increased at a moderate pace, the demand for parts, including products produced by us also increased moderately during ~~2015~~2016 due to solid demand in the Americas and Asia.

•

Automotive Supply Consolidation – Consolidation within the automotive supply base is expected to continue as the entire industry evolves and as the industry responds to the need to achieve economies of scale and global capabilities to serve vehicle manufacturers who are increasingly global in their production. Suppliers will seek opportunities to achieve synergies in their operations through consolidation, while striving to acquire complementary businesses to improve global competitiveness or to strategically enhance a product offering to global customers.

•

Globalization of Automotive Industry – OEs are increasingly designing global platforms where the basic design of the vehicle is performed in one location, but the vehicle is produced and sold in numerous geographic markets to realize significant economies of scale by limiting variations across product designs and geographic regions. While developed markets in North America and Europe continue to remain important to OEs, increased focus is being placed upon expanded design, development, and production within emerging markets for growth opportunities, especially in India

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and China. As a result, suppliers must be prepared to provide product and technical resources in support of their customers within these emerging markets. Furthermore, OEs are moving their operations to best cost geographies outside the U.S. and Western European markets and, accordingly, OEs are increasingly requiring suppliers to provide parts on a global basis. Finally, the Asian OEs continue to expand their reach and market share in relation to traditional North American and European manufacturers. As this trend is expected to continue into the foreseeable future, suppliers must be geographically and technically positioned to meet the needs of the Asian OEs.

•

Focus on Fuel Economy, Reduced Emissions and Alternative Energy Sources – Increased fuel economy and decreased vehicle emissions are of great importance to OEs as legislators and customers continue to demand more efficient and cleaner operating vehicles. Increasingly stringent fuel economy standards and environmental regulations are driving OEs to focus on new technologies including downsized, higher output and turbocharged gasoline engines, diesel and turbocharged diesel, bio-mass and hybrid diesel applications, and hybrid electric and alternative energy engines. As a result, the number of powertrain configurations will increase in response to the proliferation of commercially available energy sources. Suppliers offering solutions to OEs related to numerous vehicle fuel and powertrain configurations possess a distinct competitive advantage, which is driving accelerated new product development cycles.

•

Focus on Vehicle Safety – Vehicle safety continues to receive industry attention by OEs as customers view safety as a fundamental driver in consumer purchasing decisions and legislation looks on improved vehicle safety as a public health issue. Accordingly, OEs are seeking suppliers with new technologies, capabilities, and products that have the ability to advance vehicle safety. Suppliers that are able to enhance vehicle safety through innovative products and technologies have a distinct competitive advantage.

•

Pricing Pressures – OEs provide extensive pricing incentives and financing alternatives to consumers in order to generate sales of new vehicles and retain or gain market share. These actions, coupled with the increasing content required to meet regulations, have placed pressures on the OEs’ profits and, in turn, the OEs expect certain recovery from their supply base. Suppliers must continually identify and implement product innovation and cost reduction activities to fund customer annual price concession expectations in order to retain current business as well as to be competitively positioned for future new business opportunities.

• Raw Material Cost Fluctuations – There have been significant fluctuations in recent periods in global prices of aluminum, copper, lead, nickel, platinum, resins, steel, other base raw materials, and energy. Suppliers must continue to identify leading design and innovative technological solutions and material substitution options in order to retain a competitive advantage to the extent ~~that~~ cost increases are not passed on to customers.

• Energy, Industrial and Transport Markets – Customers continue to develop alternatives to historic infrastructure in the energy, industrial, and transport markets. This includes power generators and other power conversion devices as well as growth in the aerospace and high speed railway markets, and ocean transport. Suppliers with the capability to utilize automotive expertise to service these and other related markets have a competitive advantage.

The Aftermarket Business. Products for the global vehicle aftermarket are sold directly to a wide range of distributors, retail parts stores, and mass merchants that distribute these products to professional service providers, “do-it-yourself” consumers, and in some cases, directly to service chains. Demand for aftermarket products historically has been driven by three primary factors: (i) the number of vehicles in operation; (ii) the average age of vehicles in operation; and (iii) vehicle usage trends. These factors, while applicable in all regions, vary depending on the composition of the car parc and other factors, which are discussed in greater detail below:

• Number of Vehicles in Operation -– The global vehicle population is expected to grow to 1.4 billion by 2021 and 2.0 billion by 2040. Growth in certain emerging markets, such as China, is increasing at the highest rate, while more mature markets are expected to continue to remain stable or to grow modestly in size, indicating ~~that~~ new car sales are well beyond the replacement rate for scrapped vehicles.

• Increase in Average Age of Vehicles -– The average age of vehicles on the road in the ~~United~~U.S. ~~States~~ has increased since 2002 from 9.6 years to an estimated 11.56 years in ~~2015~~2016. It is expected to ~~remain~~increase ~~level~~to ~~at approximately~~ 11.58 years orby ~~increase slightly through 2018~~2019. The average age of vehicles on the road in Europe has also steadily increased over the past decade to 9.7 years with a slight increase projected through 2020. These trends will drive the need for maintenance and repair work, ~~and~~ thereby increasing the overall demand for aftermarket replacement parts in both markets. The average age of vehicles on the road in China is just under ~~four~~five years and is expected to increase to over ~~the~~six ~~next several~~ years asby ~~the vehicle population matures~~2020. We believe this will lead to continuing significant growth in the China aftermarket.

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• Channel Consolidation -– In the more mature markets of the ~~United~~U.S. ~~States~~ and Western Europe, there has been increasing consolidation in aftermarket distribution networks with larger, more sophisticated aftermarket distributors and retailers gaining market share. These distributors generally require larger, more sophisticated suppliers with product expertise, category management capabilities, ~~and~~ supply chain services and capabilities, as well as a global manufacturing and sourcing footprint.

• Growth of Online Capabilities -– Reaching consumers directly through online capabilities, including e-commerce, is expected to have an increasing effect on the global aftermarket industry and how aftermarket products are sold. Establishment of a robust online presence will be critical for suppliers regardless of whether they intend to participate directly in e-commerce. In 2015, Motorparts devoted significant resources to improving its online capabilities, in both customer-facing and internal applications, including a new online order management system, vendor management system, customer relationship management ("CRM"), global brand websites, and data and analytics. Initiatives to improve Motorparts online capabilities ~~will~~continued ~~continue~~ in 2016.

• Increase in Private Label Brands and Low-Cost Country Imports -– In the ~~United States~~U.S., there has been an increase in private label or store brands sold by retailers and distributors at a lower price point than premium brands of the same products. However, in many cases, retailers or wholesale distributors creating private label brands will still rely on established suppliers, like Motorparts, to manufacture their private label products and, in some cases, utilize co-branding to support their private label offerings. Motorparts will continue to invest in product innovation and marketing to support the differentiation of its branded product lines.

• Changes in Consumer Behavior -– The aftermarket is affected by changes in economic conditions, volatility in fuel prices, and expanding focus on environmental and energy conservation. For example, the number of consumers with the ability to purchase new vehicles during the 2008-2010 economic downturns led to increased demand for repairs in order to keep older vehicles road-worthy. Increased environmental regulation will lead to additional replacement parts being required on a more frequent basis to meet more exacting standards. Recent falling fuel prices in the United States are likely to lead consumers to drive more and to increase disposable income available for consumers to purchase aftermarket automotive parts and complete necessary repairs.

Customers

We supply OEs with a wide variety of technologically innovative parts, substantially all of which are manufactured by us. Our OE customers consist of automotive, light, medium and heavy-duty commercial vehicle manufacturers as well as agricultural, off-highway, marine, railroad, aerospace, high performance, and power generation and industrial application manufacturers. We have well-established relationships with substantially all major American, European, and Asian automotive OEs.

Our aftermarket customers include independent warehouse distributors who redistribute products to local parts suppliers, distributors of heavy-duty vehicular parts, engine rebuilders, retail parts stores, and mass merchants. The breadth of our product lines, the strength of our leading brand names, marketing expertise, ~~its~~ sizable sales force, and ~~our~~ distribution and logistics capability are central to the success of our Motorparts operations.

No individual customer accounted for more than 10% of our net sales during ~~2015~~2016.

Competition

The global vehicular parts business is highly competitive. We compete with many independent manufacturers and distributors of component parts globally. In general, competition for sales is based on price, product quality, technology, delivery, customer service, and the breadth of products offered by a given supplier. We are meeting these competitive challenges by developing leading technologies, efficiently integrating and expanding our manufacturing and distribution operations, widening our product coverage within our core businesses, restructuring our operations and transferring production to best cost countries, and utilizing our worldwide technical centers to develop and provide value-added solutions to our customers. A summary of our primary independent competitors by reporting segment is set forth below.


•	Powertrain – Primary competitors include AGM Automotive, Art Metal, Bergmann, BinZou, Bleistahl, Bosch, Daido, Dana, Dana-Reinz, Delfingen, Denso, DongYang, ElringKlinger, FNOK, Freudenberg, Kaco/Sabo, Kolbenschmidt, Mahle, Miba, NGK, NOK, NPR, Relats, Sinteron, SKF, Taiho, and Vitrica.

• Motorparts – Primary competitors include Akebono Brake Corporation, Autolite, Brake Parts Inc., Bosch Group, Centric Parts, Crowne Group LLC, Delphi Automotive LLP, Denso Corporation, Dorman Products, Inc., GRI Engineering and Development LLC (MAT Holdings, Inc.), Mahle GmbH, Mevotech Inc., NGK Spark Plug Co., Ltd., NTN Bearing Corporation, Neapco Inc., Old World Industries, LLC, Phillips Industries, Pylon Manufacturing Corporation, Rain-X (ITW Global Brands), SKF Group, Osram Sylvania Ltd., The Timken Company, Valeo Group, Dana Corporation (Victor Reinz brand), and ZF TRW Automotive Holdings Corp.

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NTN Bearing Corporation, Neapco Inc., Old World Industries, LLC, Phillips Industries, Pylon Manufacturing Corporation, Rain-X (ITW Global Brands), SKF Group, Osram Sylvania Ltd., The Timken Company, Trico Products Corporation, Valeo Group, Dana Corporation (Victor Reinz brand), and ZF TRW Automotive Holdings Corp.

Backlog

For OE customers, we generally receive purchase orders for specific products supplied for particular vehicles. These supply relationships typically extend over the life of the related vehicle, subject to interim design and technical specification revisions, and do not require the customer to purchase a minimum quantity. In addition to customary commercial terms and conditions, purchase orders generally provide for annual price reductions based upon expected productivity improvements and other factors. Customers typically retain the right to terminate purchase orders, but we generally cannot terminate purchase orders. OE order fulfillment is typically manufactured in response to customer purchase order releases, and we ship directly from a manufacturing location to the customer for use in vehicle production and assembly. Accordingly, our manufacturing locations turn finished goods inventory relatively quickly, producing from on-hand raw materials and work-in-process inventory within relatively short manufacturing cycles. Significant risks to us include a change in engine production, driven by mix changes, for powertrain components (e.g. a change from diesel to gasoline engines), lower than expected vehicle or engine production by one or more of our OE customers, or termination of the business based upon perceived or actual shortfalls in delivery, quality or value.

For our global aftermarket customers, Motorparts generally establishes product line arrangements that encompass substantially all parts offered within a particular product line. In some cases, Motorparts will enter into agreements with terms ranging from one to three years that cover one or more product lines with fixed prices. Pricing is market responsive and subject to adjustment based upon competitive pressures, material costs, and other commercial factors. Global ~~Aftermarket~~aftermarket order fulfillment is largely performed from finished goods inventory stocked in our worldwide distribution network. Inventory stocking levels in our distribution centers are established based upon historical and anticipated future customer demand.

Although customer programs typically extend to future periods, and although there is an expectation ~~that~~ we will supply certain levels of OE production over such periods, we believe ~~that~~ outstanding purchase orders and product line arrangements do not constitute firm orders. Firm orders are limited to specific and authorized customer purchase order releases placed with our manufacturing and distribution centers for actual production and order fulfillment. Firm orders are typically fulfilled as promptly as possible after receipt from the conversion of available raw materials and work-in-process inventory for OE orders, and from current on-hand finished goods inventory for aftermarket orders. The dollar amount of such purchase order releases on hand and not processed at any point in time is not believed to be significant based upon the time frame involved.

Raw Materials and Suppliers

We purchase various raw materials and component parts for use in our manufacturing processes, including ferrous and non-ferrous metals, non-metallic raw materials, stampings, castings, and forgings. We also purchase parts manufactured by other manufacturers for sale in the aftermarket. We have not experienced any significant shortages of raw materials, components or finished parts and normally do not carry inventories of raw materials or finished parts in excess of those reasonably required to meet our production and shipping schedules. In ~~2015~~2016, no outside supplier provided products that accounted for more than 35% of our annual purchases.

Insight Portfolio Group LLC ~~(formally known as Icahn Sourcing, LLC)~~ - Related Party

Insight Portfolio Group, LLC (“Insight”) is an entity formed and controlled by ~~Icahn Enterprises, L~~Mr.P ~~("IEP")~~Icahn in order to maximize the potential buying power of a group of entities with which ~~IEP~~Mr. Icahn has a relationship in negotiating with a wide range of suppliers of goods, services, and tangible and intangible property at negotiated rates. WeThe Company acquired a minority equity interest in Insight and agreed to pay a portion of Insight’s operating expenses beginning in 2013. In addition to the minority equity interest held by usthe Company, certain subsidiaries ~~and affiliates~~ of IEP, and other entities with which ~~IEP~~Mr. Icahn has a relationship, also acquired ~~minority~~ equity interests in Insight and also agreed to pay acertain ~~portion~~operating ofexpenses. Our payments to Insight’s ~~operating~~were ~~expenses~~less than $0.5 million in 2016 and 2015.

Our payments to Insight were less than $0.5 million in each of the three years 2015, 2014, and 2013. We anticipate our 2016 payments to Insight to be similar to the amounts paid in 2015.

Related Parties

On June 1, 2015, a subsidiary of IEP completed an acquisition of substantially all of the assets of Uni-Select USA, Inc. and Beck/ Arnley Worldparts, Inc., comprising the U.S. automotive parts distribution of Uni-Select Inc. ("Uni-Select"). Subsequent to the ~~IEP~~ acquisition ~~of Uni-Select~~, Uni-Select changed its name to Auto Plus. Auto Plus is operated independently from us and all transactions are approved by independent directors of our company. In connection with the acquisition, Mr. Icahn has resigned from our board of directors and our Co-Chief Executive Officer, Daniel A. Ninivaggi, has resigned from the board of directors of IEP.

12We had $54 million of sales for the year ended December 31, 2016 to Auto Plus and $11 million of accounts receivable, net outstanding from Auto Plus as of December 31, 2016.

Auto Plus is operated independently from us and all transactions are approved by the independent directors of our company. In connection with IEP's acquisition of Auto Plus, Mr. Icahn has resigned from our board of directors and our Co-Chief Executive Officer, Daniel A. Ninivaggi, has resigned from the board of directors of IEP.14

WeOn ~~had~~February ~~$27~~3, ~~million~~2016, a subsidiary of ~~net~~IEP ~~sales~~acquired ~~from~~a majority of the ~~date~~outstanding shares of ~~acquisition~~Pep ~~through~~Boys ~~December 31~~- Manny, ~~2015~~Moe to& ~~Auto~~Jack ~~Plus~~("Pep ~~and~~Boys"), ~~$12~~a ~~million~~leading aftermarket provider of ~~accounts~~automotive ~~receivable~~service, ~~outstanding~~tires, ~~from~~parts, ~~Auto~~and ~~Plus~~accessories asacross ofthe ~~December 31~~U.S. and Puerto Rico. On February 4, ~~2015~~2016, the acquisition of the remaining outstanding shares of Pep Boys was completed.

OnWe ~~February~~had 3,$39 ~~2016,~~million ~~IEP~~of ~~acquired~~sales afrom ~~majority of~~ the ~~outstanding~~date ~~shares~~ of ~~Pep~~acquisition ~~Boys~~through -December ~~Manny~~31, ~~Moe~~2016 &to ~~Jack ("~~Pep Boys~~"),~~ aand ~~leading~~$25 ~~aftermarket~~million ~~provider~~ of ~~automotive~~accounts ~~service~~receivable, ~~tires,~~net ~~parts and accessories across the United States and Puerto Rico. On February 4, 2016, IEP completed the acquisition of the remaining~~ outstanding ~~shares~~from of Pep Boys. ~~Motorparts~~as ~~sales~~of toDecember 31, ~~Pep Boys in 2015 were approximately $5 million~~2016.

PSC Metals, Inc. (“PSC Metals”) is a wholly-owned subsidiary of IEP. We had scrap sales to PSC Metals of $2 million for the year ended December 31, 2016.

On December 1, 2016, we acquired the assets and liabilities of IEH BA LLC ("Beck Arnley"), an entity owned by a subsidiary of IEP. The purchase price was $14 million and included a $7 million note maturing on May 1, 2018.

Seasonality of Our Business

Our business is moderately seasonal because many North American OE customers typically close assembly plants for two weeks in July for model year changeovers, and for an additional week during the December holiday season. OE customers in Europe historically shut down vehicle production during portions of July and August and one week in December. Shut-down periods in the Rest of World generally vary by country. The aftermarket experiences seasonal fluctuations in sales due to demands caused by weather and driving patterns. Historically, our sales and operating profits have been the strongest in the second quarter. For additional information, refer to our quarterly financial results contained in Note 22, Supplementary Quarterly Financial Information (Unaudited), to the ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements, included in Item 8 of this report.

Employee Relations

We have approximately 53,~~700~~000 employees as of December 31, ~~2015~~2016. Various unions represent approximately 2831% of our U.S. hourly employees and approximately 8783% of our non-U.S. hourly employees. With the exception of two facilities in the U.S., most of our unionized manufacturing facilities have their own contracts with their own expiration dates and, as a result, no contract expiration date affects more than one facility.

Effect of Environmental Regulations

Our operations, consistent with those of the manufacturing sector in general, are subject to numerous existing and proposed laws, and governmental regulations designed to protect the environment, particularly regarding plant wastes and emissions, and solid waste disposal. Capital expenditures for property, plant, and equipment for environmental control activities did not have a material effect on our financial position or cash flows in ~~2015~~2016 and are not expected to have a material effect on our financial position or cash flows in ~~2016~~2017.

Intellectual Property

We hold in excess of 6,300 patents and patent applications on a worldwide basis, of which more than 1,200 have been filed in the ~~United States~~U.S. Of the approximately 6,300 patents and patent applications, approximately 30% are in production use and/or are licensed to third parties, and the remaining 70% are being considered for future production use or provide a strategic technological benefit to us.

We do not materially rely on any single patent, nor will the expiration of any single patent materially affect our business. Our current patents expire over various periods into the year 2036. We are actively introducing and patenting new technology to replace formerly patented technology before the expiration of the existing patents. In the aggregate, our worldwide patent portfolio is materially important to our business because it enables us to achieve technological differentiation from our competitors.

We also maintain more than 6,~~600~~700 active trademark registrations and applications worldwide. InMore ~~excess~~than of 90% of these trademark registrations and applications are in commercial use by us or are licensed to third parties.

Segment Reporting Data

Operating segment data and principal geographic area data for the years ended December 31, 2016, 2015, ~~2014~~ and ~~2013~~2014 are summarized in Note 21, Operations by reporting segment and geographic area, to our ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

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Web Site and Access to Filed Reports

We maintain an internet Web site at www.federalmogul.com. The contents of our Web site are not incorporated by reference in this report. We provide access to our annual and periodic reports filed with the SEC free of charge through this Web site. Our ~~Integrity~~Code ~~Policy~~of Conduct is also available on our Web site. The SEC maintains a Web site at www.SEC.gov where reports, proxy and information statements, and other information about us may be obtained. Paper copies of annual and periodic reports filed with the SEC may be obtained free of charge by contacting our headquarters at the address located within the SEC Filings or under Investor Relations on our Web site.

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ITEM 1.A. RISK FACTORS

An investment in Federal-Mogul involves various risks. The risks discussed below are not the only ones faced by the Company. Please also read the cautionary note regarding “Forward-Looking Statements” beginning on page 2.

The Company has substantial indebtedness, which could restrict the Company’s business activities and could subject the Company to significant interest rate risk: As of December 31, ~~2015~~2016, the Company had approximately $3.10 billion of outstanding indebtedness. The Company is permitted by the terms of its debt instruments to incur additional indebtedness, subject to the restrictions therein. The Company’s inability to generate sufficient cash flow to satisfy its debt obligations, or to refinance its debt obligations on commercially reasonable terms, including approximately $700 million of term loan indebtedness that matures in 2018, would have a material adverse effect on the Company’s business, financial condition, and results of operations. In addition, covenants in the Company’s debt agreements could limit its ability to engage in certain transactions and pursue its business strategies, which could adversely affect liquidity.

The Company’s indebtedness could:


•	limit the Company’s ability to borrow money for working capital, capital expenditures, debt service requirements or other corporate purposes, guarantee additional debt or issue redeemable, convertible of preferred equity;


•	limit the Company’s ability to make distributions or prepay its debt, incur liens, enter into agreements that restrict distributions from restricted subsidiaries, sell or otherwise dispose of assets (including capital stock of subsidiaries), enter into transactions with affiliates and merger consolidate or sell substantially all of its assets;


•	require the Company to dedicate a substantial portion of its cash flow to payments on indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures, product development, and other corporate requirements;


•	increase the Company’s vulnerability to general adverse economic and industry conditions; and


•	limit the Company’s ability to respond to business opportunities.

A significant portion of the Company’s indebtedness accrues interest at variable rates. To the extent market interest rates rise, the cost of the Company’s debt would increase, adversely affecting the Company’s financial condition, results of operations, and cash flows.

The Company’s restructuring activities and strategic initiatives may affect the Company’s short-term liquidity and may not result in the anticipated synergies and cost savings: The Company is pursuing a number of organic and inorganic growth activities, restructuring plans, and strategic initiatives to increase and improve the Company’s business and profitability. Management believes these activities will enhance the Company’s long term shareholder value; however, the investment to effectuate these activities may have an effect on the Company’s short term liquidity and may create the need for additional borrowing which may be at higher interest rates given the Company’s current level of indebtedness. In addition, it is possible the achievement of expected synergies and cost savings associated with the Company’s restructuring activities will require additional costs or charges to earnings in future periods. It is also possible the expected synergies or returns from strategic initiatives may not be achieved. Any costs or charges could adversely ~~effect~~affect the business, results of operations, liquidity, and financial condition.

The Company’s operations in foreign countries expose the Company to risks related to economic and political conditions, currency fluctuations, import/export restrictions, regulatory and other risks: ~~The~~As ~~Company~~a ~~has~~global ~~manufacturing~~business operating in a time of increasing global economic and ~~distribution~~political ~~facilities~~instability, we are exposed to global market risks, the consequences of which cannot always be anticipated or quantified. One example is the recent decision of voters in ~~many~~the ~~countries~~United Kingdom to withdraw from the European Union (referred to as “Brexit”). ~~International~~While ~~operations~~any ultimate effects of Brexit on the Company are ~~subject~~difficult to ~~certain~~predict ~~risks~~(particularly given the potentially lengthy negotiation period to accomplish a formal withdrawal), because we currently conduct business in the United Kingdom and in Europe, the results of the referendum and any eventual withdrawal could cause disruptions and create uncertainty for our businesses, including: affecting our relationships with our customers and suppliers, and could also alter the relationship among currencies, including the value of the British Pound relative to the US Dollar. Such disruptions and uncertainties could adversely affect our financial condition, operating results and cash flows. Any ultimate effects of Brexit on the Company will also depend on whether the UK negotiates to retain access to European Union markets either during a transitional period or more permanently. The failed coup attempt in Turkey, a country in which the Company has various ownership and economic interests, is another example of a recent global political development for which any potential consequences for the Company are uncertain. These and other developments may increase volatility in the results our operations and may adversely affect our financial condition.

The Company has manufacturing and distribution facilities in many countries. International operations are subject to certain risks including:


•	exposure to local economic conditions;


•	exposure to local political conditions (including the risk of seizure of assets by foreign governments);


•	currency exchange rate fluctuations (including, but not limited to, material exchange rate fluctuations, such as devaluations) and currency controls


•	export and import restrictions;


•	restrictions on ability to repatriate foreign earnings;


•	labor unrest; and


•	compliance with U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting inappropriate payments.

The likelihood of such occurrences and their potential effect on the Company are unpredictable and vary from country-to-country.

Certain of the Company’s operating entities report their financial condition and results of operations in currencies other than the U.S. dollar (including, but not limited to, Brazilian real, British pound, Chinese yuan renminbi, Czech crown, euro, Indian rupee, Mexican peso, Polish zloty, Russian ruble, South Korean won, and Swedish krona). In reporting its consolidated statements of operations, the Company translates the reported results of these entities into U.S. dollars at the applicable exchange rates. As a result, fluctuations in the dollar against foreign currencies will affect the value at which the results of these entities are included within Federal-Mogul’s consolidated results.

statements of operations, the Company translates the reported results of these entities into U.S. dollars at the applicable exchange rates. As a result, fluctuations in the dollar against foreign currencies will affect the value at which the results of these entities are included within Federal-Mogul’s consolidated results.

The Company is exposed to a risk of gain or loss from changes in foreign exchange rates whenever the Company, or one of its foreign subsidiaries, enters into a purchase or sales agreement in a currency other than its functional currency. While the Company reduces such exposure by matching most revenues and costs within the same currency, changes in exchange rates could affect the Company’s financial condition or results of operations.

Changes in tax law or trade agreements and new or changed tariffs could have a material adverse effect on us: Changes in U.S. political, regulatory and economic conditions and/or changes in laws and policies governing U.S. tax laws, foreign trade (including trade agreements and tariffs), manufacturing, and development and investment in the territories and countries where the Company or our customers operate could adversely affect our operating results and our business.

The Company conducts operations through joint ventures which may contain various contractual restrictions and require approval for certain actions by our joint venture partners: Certain of the Company’s operations, including emerging markets, are conducted through joint ventures and strategic alliances. With respect to these joint ventures, the Company may share ownership and management responsibilities with one or more partners that may not share the same goals and objectives. Operating a joint venture requires the Company to operate the business pursuant to the terms of the agreement that was entered into with the joint venture partners, as well as to share information and decision making. Additional risks associated with joint ventures include one or more partners failing to satisfy contractual obligations, conflicts arising between the joint venture partners, a change in the ownership of any of the joint venture partners and our limited ability to control compliance with applicable rules and regulations, including the Foreign Corrupt Practices Act and related rules and regulations. Additionally, the Company’s ability to sell its interest in a joint venture may be subject to contractual and other limitations. Accordingly, any such occurrences could adversely affect the Company’s financial condition, operating results and cash flows.

The Company may pursue acquisitions or other affiliations that involve inherent risks, any of which may cause the Company not to realize anticipated benefits, and the Company may have difficulty integrating the operations of any companies that may be acquired, which may adversely affect the Company’s results of operations: In the past, the Company has grown through acquisitions, and may engage in acquisitions in the future as part of the Company’s business strategy. The full benefits of these acquisitions, however, require integration of manufacturing, administrative, financial, sales, and marketing approaches and personnel. If the Company is unable to successfully integrate its acquisitions, it may not realize the benefits of the acquisitions, the financial results may be negatively affected, or additional cash may be required to integrate such operations.

In the future, the Company may not be able to successfully identify suitable acquisition or affiliation opportunities or complete any particular acquisition, combination, affiliation or other transaction on acceptable terms. The Company’s identification of suitable acquisition candidates and affiliation opportunities and the integration of acquired business operations involve risks inherent in assessing the values, strengths, weaknesses, risks, and profitability of these opportunities. This includes the effects on the Company’s business, diversion of management’s attention, and risks associated with unanticipated problems or unforeseen liabilities, and may require significant financial resources that would otherwise be used for the ongoing development of the Company’s business.

The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. These difficulties could be further increased to the extent the Company pursues acquisition or affiliation opportunities internationally. The Company may not be effective in retaining key employees or customers of the combined businesses. The Company may face integration issues pertaining to the internal controls and operations functions of the acquired companies and also may not realize cost efficiencies or synergies that were anticipated when selecting the acquisition candidates. The Company may experience managerial or other conflicts with its affiliation partners. Any of these items could adversely affect the Company’s results of operations.

The Company’s failure to identify suitable acquisition or joint venture opportunities may restrict the Company’s ability to grow its business. If the Company is successful in pursuing future acquisitions or other affiliations, the Company may be required to expend significant funds, incur additional debt and/or issue additional securities, which may materially adversely affect its results of operations. If the Company spends significant funds or incurs additional debt, the Company’s ability to obtain financing for working capital or other purposes could decline and the Company may be more vulnerable to economic downturns and competitive pressures.

Impairment charges relating to the Company’s goodwill and long lived assets could adversely affect its financial performance: The Company has been required to recognize impairment charges for its goodwill and other long lived assets. In accordance with generally accepted accounting principles, the Company periodically assesses these assets to determine if they are impaired. Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of these assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets. Any charges relating to such impairments may adversely affect our results of operations in the periods recognized.

business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets. Any charges relating to such impairments may adversely affect our results of operations in the periods recognized.

Adverse conditions in the automotive market adversely affect demand for the Company’s products and exposes the Company to credit risks of its customers: The revenues of the Company’s operations are closely tied to global OE automobile sales, production levels, and independent aftermarket parts replacement activity. The OE market is characterized by short-term volatility, with overall expected long-term growth in global vehicle sales and production. Automotive production in the local markets served by the Company can be affected by macro-economic factors such as interest rates, fuel prices, consumer confidence, employment trends, regulatory and legislative oversight requirements and trade agreements. A variation in the level of automobile production would affect not only sales to OE customers but, depending on the reasons for the change, could affect demand from aftermarket customers. In addition, aftermarket demand is affected by various factors, including the size and composition of the vehicle population and vehicle usage. The Company’s results of operations and financial condition could be adversely affected if the Company fails to respond in a timely and appropriate manner to changes in the demand for its products or if the Company is not able to timely identify or address financial distress of its aftermarket customers.

Accounts receivable potentially subject the Company to concentrations of credit risk. The Company’s customer base includes virtually every significant global automotive manufacturer, numerous Tier 1 automotive suppliers, and a large number of distributors and installers of automotive aftermarket parts. Consolidation in the automotive aftermarket may lead to financial distress for financially weaker customers of the Company which, coupled with payment terms that are typically longer than in the OE market, could have a negative effect on the Company’s financial results.

Consolidation, increased market power, and potential conflicts with the Company’s independent aftermarket customers could negatively affect the Company’s financial performance: The Company’s independent aftermarket customers are continuing to consolidate and gain purchasing power and the ability to demand extended payment terms and other pricing concessions. If these trends continue, the financial results of the Company’s Motorparts business segment could be negatively affected. In addition, ~~aftermarket~~certain ~~customers~~of ~~may reduce their business with~~ the Company’s ~~based~~strategic oninitiatives, ~~perceived~~including ~~conflicts with~~ the Company'’s strategy of supporting its branded products, ~~and~~strategy of supporting new distribution channels orand enhancing its distribution and category management capabilities, or the Company’s strategic affiliation with certain competitors, may not align with the interest of customers. As a result, aftermarket customers may reduce their business with the Company based on perceived channel conflict.

Cybersecurity risks and other cyber incidents could result in disruption: Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow. The Company depends on information technology systems. In addition, the Company collects, processes and retains certain sensitive and confidential customer information in the normal course of business. Despite the security measures in place and any additional measures that may be ~~implement~~implemented in the future, the Company’s facilities and systems, and those of its third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, human errors, acts of vandalism or other events. Any disruption of our systems or security breach or event resulting in the misappropriation, loss or other unauthorized disclosure of confidential information, whether by the Company directly or its third-party service providers, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise affect the Company’s results of operations.

unauthorized disclosure of confidential information, whether by the Company directly or its third-party service providers, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise affect the Company’s results of operations.

The Company is subject to possible insolvency of financial counterparties: The Company engages in numerous financial transactions and contracts including insurance policies, letters of credit, credit line agreements, financial derivatives, and investment management agreements involving various counterparties. The Company is subject to the risk that one or more of these counterparties may become insolvent and therefore be unable to discharge its obligations under such contracts.

The automotive industry is highly competitive and the Company’s success depends upon its ability to compete effectively in the market: The Company operates in an extremely competitive industry, driven by global vehicle production volumes and part replacement trends. Business is typically awarded to the supplier offering the most favorable combination of cost, quality, technology, and service. In addition, customers continue to require periodic price reductions that require the Company to continually assess, redefine and improve its operations, products, and manufacturing capabilities to maintain and improve profitability. In addition, the Company’s competitors’ efforts to increase their market share could exert additional downward pressure on product pricing and margins. There can be no assurance the Company will be able to compete effectively in the automotive market.

The Company’s pension obligations and other ~~postemployment~~postretirement benefits could adversely affect the Company’s operating margins and cash flows: The automotive industry, like other industries, continues to be affected by the rising cost of providing pension and other ~~postemployment~~postretirement benefits. In addition, the Company sponsors certain defined benefit plans worldwide that are underfunded and will require cash payments. If the performance of the assets in the pension plans does not meet the Company’s expectations, or other actuarial assumptions are modified, the Company’s required contributions may be higher than it expects. See Note 15. Pensions and Other Postretirement Benefits, to the Consolidated Financial Statements, included in Item 8 of this report.

17We are a wholly owned subsidiary and therefore could be subject to strategic decisions of Icahn Enterprises, L.P. (“IEP”): We are fundamentally affected by our relationship with IEP. As a wholly owned subsidiary of IEP we could be subject to a wide range of possible decisions which IEP may make from time to time, and circumstances affecting IEP could affect us. Significant changes in IEP’s overall strategy or its relationship with us or material adverse changes in IEP’s performance could have a material adverse effect on us.

Company’s expectations, or other actuarial assumptions are modified, the Company’s required contributions may be higher than it expects. See Note 15, Pensions and Other Post-Retirement Benefits, to the Consolidated Financial Statements, included in Item 8 of this report.

The price of the Company’s common stock is subject to volatility: Various factors could cause the market price of the Company’s common stock to fluctuate substantially including general financial market changes, changes in governmental regulation, significant automotive industry announcements or developments, the introduction of new products or technologies by the Company or its competitors, and changes in other conditions or trends in the automotive industry. Other factors that could cause the Company’s stock price to fluctuate could be actual or anticipated variations in the Company’s or its competitors’ quarterly or annual financial results, financial results failing to meet expectations of analysts or investors, changes in securities analysts’ estimates of the Company’s future performance or of that of the Company’s competitors and the general health of the automotive industry.

Mr. Carl C. Icahn exerts significant influence over the Company and his interests may conflict with the interest of the Company’s other stockholders: Mr. Carl C. Icahn indirectly controls approximately 81.99% of the voting power of the Company’s capital stock and, by virtue of such stock ownership, is able to control or exert substantial influence over the Company, including:

• the election of directors;

• business strategy and policies;

• mergers or other business combinations;

• acquisition or disposition of assets;

• future issuances of common stock or other securities;

• incurrence of debt or obtaining other sources of financing; and

• the payment of dividends on the Company’s common stock.

The existence of a controlling stockholder may have the effect of making it difficult for, or may discourage or delay, a third party from seeking to acquire a majority of the Company’s outstanding common stock, which may adversely affect the market price of the stock.

Mr. Icahn’s interests may not always be consistent with the Company’s interests or with the interests of the Company’s other stockholders. Mr. Icahn and entities controlled by him may also pursue acquisitions or business opportunities that may or may not be complementary to the Company’s business. To the extent that conflicts of interest may arise between the Company and Mr. Icahn and his affiliates, those conflicts may be resolved in a manner adverse to the Company or its other shareholders.

If the Company loses any of its executive officers or key employees, the Company’s operations and ability to manage the day-to-day aspects of its business may be materially adversely affected: The Company’s future performance substantially depends on its ability to retain and motivate executive officers and key employees, both individually and as a group. If the Company loses any of its executive officers or key employees, which have many years of experience with the Company and within the automotive industry and other manufacturing industries, or is unable to recruit qualified personnel, the Company’s ability to manage the day-to-day aspects of its business may be materially adversely affected. The loss of the services of one or more executive officers or key employees, who also have strong personal ties with customers and suppliers, could have a material adverse effect on the Company’s business, financial condition, and results of operations.

The Company does not currently maintain “key person” life insurance.

The Company’s stock price may decline due to sales of shares by Mr. Carl C. Icahn: Sales of substantial amounts of the Company’s common stock by Mr. Icahn and his affiliates, or the perception that these sales may occur, may adversely affect the price of the Company’s common stock and impede its ability to raise capital through the issuance of equity securities in the future. Mr. Icahn is contractually entitled, subject to certain exceptions, to exercise rights under a registration rights agreement to cause the Company to register his shares under the Securities Act. By exercising his registration rights and selling a large number of shares, Mr. Icahn could cause the price of the Company’s common stock to decline. No other shareholder has registration rights.

The Company is subject to the pension liabilities of all entities in which Mr. Icahn has a direct or indirect ownership interest of at least 80%: As a result of the more than 80% ownership interest in the Company by Mr. Icahn’s affiliates, the Company is subject to the pension liabilities of all entities in which Mr. Icahn has a direct or indirect ownership interest of at least 80%. One such entity, ACF Industries LLC ("ACF"), is the sponsor of several pension plans. All the minimum funding requirements of the Code and the Employee Retirement Income Security Act of 1974 for these plans have been met as of December 31, 2015. If the ACF plans were voluntarily terminated, they would be underfunded by approximately $101 million as of December 31, 2015. These results are based on the most recent information provided by the plans’ actuaries. These liabilities could increase or

decrease, depending on a number of factors, including future changes in benefits, investment returns, and the assumptions used to calculate the liability. As members of the controlled group, the Company would be liable for any failure of ACF to make ongoing pension contributions or to pay the unfunded liabilities upon a termination of the pension plans of ACF. In addition, other entities now or in the future within the controlled group in which the Company is included may have pension plan obligations that are, or may become, underfunded and the Company would be liable for any failure of such entities to make ongoing pension contributions or to pay the unfunded liabilities upon termination of such plans. Further, the failure to pay these pension obligations when due may result in the creation of liens in favor of the pension plan or the Pension Benefit Guaranty Corporation (“PBGC”) against the assets of each member of the controlled group.

The current underfunded status of the pension plans of ACF requires it to notify the PBGC of certain “reportable events,” such as if the Company ceases to be a member of the ACF controlled group, or the Company makes certain extraordinary dividends or stock redemptions. The obligation to report could cause the Company to seek to delay or reconsider the occurrence of such reportable events.

Icahn Enterprises Holdings L.P. and IEH FM Holdings LLC have undertaken to indemnify Federal-Mogul for any and all liability imposed upon the Company pursuant to the Employee Retirement Income Security Act of 1974, as amended, or any regulation there under (“ERISA”) resulting from the Company being considered a member of a controlled group within the meaning of ERISA § 4001(a)(14) of which American Entertainment Properties Corporation is a member, except with respect to liability in respect to any employee benefit plan, as defined by ERISA § 3(3), maintained by the Company. Icahn Enterprises Holdings L.P. and IEH FM Holdings LLC are not required to maintain any specific net worth and there can be no guarantee Icahn Enterprises Holdings L.P. and IEH FM Holdings LLC will be able to fund its indemnification obligations to the Company.

Certain disruptions in supply of and changes in the competitive environment for raw materials could adversely affect the Company’s operating margins and cash flows: The Company purchases a broad range of materials, components, and finished parts. The Company also uses a significant amount of energy, both electricity and natural gas, in the production of its products. A significant disruption in the supply of these materials, supplies, and energy or the failure of a supplier with whom the Company has established a single source supply relationship could decrease production and shipping levels, materially increase operating costs and materially adversely affect profit margins. Shortages of materials or interruptions in transportation systems, labor strikes, work stoppages, or other interruptions to or difficulties in the employment of labor or transportation in the markets where the Company purchases material, components, and supplies for the production of products or where the products are produced, distributed or sold, whether as a result of labor strife, war, further acts of terrorism or otherwise, in each case may adversely affect profitability.

In recent periods there have been significant fluctuations in the prices of aluminum, copper, lead, nickel, platinum, resins, steel, other base metals and energy which have had and may continue to have an unfavorable effect on the Company’s business. Any continued fluctuations in the price or availability of energy and materials may have an adverse effect on the Company’s results of operations or financial condition. To address increased costs associated with these market forces, a number of the Company’s suppliers have implemented surcharges on existing fixed price contracts. Without the surcharge, some suppliers claim they will be unable to provide adequate supply. Competitive and marketing pressures may limit the Company’s ability to pass some of the supply and material cost increases on to the Company’s customers and may prevent the Company from doing so in the future. Furthermore, the Company’s customers are generally not obligated to accept price increases the Company may desire to pass along to them. This inability to pass on price increases to customers when material prices increase rapidly or to significantly higher than historic levels could adversely affect the Company’s operating margins and cash flow, possibly resulting in lower operating income and profitability.

The Company’s hedging activities to address commodity price fluctuations may not be successful in offsetting future increases in those costs or may reduce or eliminate the benefits of any decreases in those costs: In order to mitigate short-term variation in operating results due to the aforementioned commodity price fluctuations, the Company hedges a portion of near-term exposure to certain raw materials used in production processes, primarily natural gas, copper, nickel, tin, zinc, high-grade aluminum and aluminum alloy. The results of the Company’s hedging practice could be positive, neutral or negative in any period depending on price changes in the hedged exposures.20

~~The~~the supply and material cost increases on to the Company’s ~~hedging~~customers ~~activities~~and ~~are~~may ~~not~~prevent ~~designed~~the toCompany ~~mitigate~~from ~~long-term~~doing ~~commodity~~so ~~price~~in ~~fluctuations~~the ~~and,~~future. ~~therefore~~Furthermore, ~~will~~the ~~not~~Company’s ~~protect~~customers ~~from~~are ~~long-term~~generally ~~commodity~~not obligated to accept price increases. ~~The~~the Company’s ~~future~~may ~~hedging~~desire ~~positions~~to ~~may~~pass ~~not~~along ~~correlate~~to them. This inability to ~~actual~~pass ~~energy~~on price increases to customers when material prices increase rapidly or ~~raw~~to ~~materials~~significantly ~~costs,~~higher ~~which~~than ~~would~~historic ~~cause~~levels ~~acceleration~~could inadversely affect the ~~recognition~~Company’s ofoperating ~~unrealized~~margins ~~gains~~ and ~~losses~~cash onflow, ~~hedging~~possibly ~~positions~~resulting in lower operating ~~results~~income and profitability.

19The Company’s hedging activities to address commodity price fluctuations may not be successful in offsetting future increases in those costs or may reduce or eliminate the benefits of any decreases in those costs: In order to mitigate short-term variation in operating results due to the aforementioned commodity price fluctuations, the Company hedges a portion of near-term exposure to certain raw materials used in production processes, primarily copper, nickel, tin, zinc, high-grade aluminum and aluminum alloy. The results of the Company’s hedging practice could be positive, neutral or negative in any period depending on price changes in the hedged exposures.

The Company’s hedging activities are not designed to mitigate long-term commodity price fluctuations and, therefore, will not protect from long-term commodity price increases. The Company’s future hedging positions may not correlate to actual raw materials costs, which would cause acceleration in the recognition of unrealized gains and losses on hedging positions in operating results.

The Company is subject to a variety of environmental, health and safety laws, and regulations, and the cost of complying or the Company’s failure to comply with such requirements may have a material adverse effect on its business, financial condition and results of operations: The Company is subject to a variety of federal, state, and local environmental laws and regulations relating to the release or discharge of materials into the environment, the management, use, processing, handling, storage, transport or disposal of hazardous waste materials, or otherwise relating to the protection of public and employee health, safety, and the environment. These laws and regulations expose the Company to liability for the environmental condition of its current facilities, and also may expose the Company to liability for the conduct of others or for the Company’s actions that were in compliance with all applicable laws at the time these actions were taken. These laws and regulations also may expose the Company to liability for claims of personal injury or property damage related to alleged exposure to hazardous or toxic materials in foreign countries. Despite the Company’s intention to be in compliance with all such laws and regulations, the Company cannot guarantee that it will at all times be in compliance with all such requirements. The cost of complying with these requirements may also increase substantially in future years. If the Company violates or fails to comply with these requirements, the Company could be fined or otherwise sanctioned by regulators. These requirements are complex, change frequently, and may become more stringent over time, which could have a material adverse effect on the Company’s business.

The Company’s failure to maintain and comply with environmental permits the Company is required to maintain could result in fines or penalties or other sanctions and have a material adverse effect on the Company’s operations or results. Future events, such as new environmental regulations or changes in or modified interpretations of existing laws and regulations or enforcement policies, newly discovered information or further investigation or evaluation of the potential health hazards of products or business activities, may give rise to additional compliance and other costs that could have a material adverse effect on the Company’s business, financial conditions, and operations.

New regulations related to “conflict minerals” may force us to incur additional expenses and may make the Company’s supply chain more complex. In August 2012, the SEC adopted annual disclosure and reporting requirements for those companies who use certain minerals known as “conflict minerals” mined from the Democratic Republic of Congo and adjoining countries in their products. These new requirements required due diligence efforts in 2013, with initial disclosure requirements beginning in 2014. There will be significant costs associated with complying with these disclosure requirements, including for diligence to determine the sources of conflict minerals used in the Company’s products and other potential changes to products, processes or sources of supply as a consequence of such verification activities.

A significant labor dispute involving the Company or one or more of its customers or suppliers or that could otherwise affect our operations could adversely affect the Company’s financial performance: A substantial number of the Company’s employees and the employees of the Company’s largest customers and suppliers are members of industrial trade unions and are employed under the terms of various labor agreements. Most of the Company’s unionized manufacturing facilities have their own contracts with their own expiration dates. There can be no assurances that future negotiations with the unions will be resolved favorably or that the Company will not experience a work stoppage or disruption that could adversely affect its financial condition, operating results and cash flows. A labor dispute involving the Company, any of its customers or suppliers or any other suppliers to the Company’s customers or that otherwise affects the Company’s operations, or the inability by the Company, any of its customers or suppliers or any other suppliers to the Company’s customers to negotiate, upon the expiration of a labor agreement, an extension of such agreement or a new agreement on satisfactory terms could adversely affect the Company’s financial condition, operating results and cash flows. In addition, if any of the Company’s significant customers experience a material work stoppage, the customer may halt or limit the purchase of the Company’s products. This could require the Company to shut down or significantly reduce production at facilities relating to such products, which could adversely affect the Company’s business and harm its profitability.

experience a material work stoppage, the customer may halt or limit the purchase of the Company’s products. This could require the Company to shut down or significantly reduce production at facilities relating to such products, which could adversely affect the Company’s business and harm its profitability.

The Company is involved from time to time in legal proceedings and commercial or contractual disputes, which could have an adverse effect on the Company’s profitability and consolidated financial position: The Company is involved in legal proceedings and commercial or contractual disputes that, from time to time, are significant. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes, including disputes with suppliers, intellectual property matters, personal injury claims, environmental issues, tax matters and employment matters. No assurances can be given that such proceedings and claims will not have a material adverse effect on the Company’s profitability and consolidated financial position.

If the Company is unable to protect its intellectual property and prevent its improper use by third parties, the Company’s ability to compete in the market may be harmed: Various patent, copyright, trade secret, and trademark laws afford only limited protection and may not prevent the Company’s competitors from duplicating the Company’s products or gaining access to its proprietary information and technology. These means also may not permit the Company to gain or maintain a competitive advantage.

Any of the Company’s patents may be challenged, invalidated, circumvented or rendered unenforceable. The Company cannot guarantee it will be successful should one or more of its patents be challenged for any reason and countries outside the U.S. may diminish the protection of the Company’s patents. If the Company’s patent claims are rendered invalid or unenforceable, or narrowed in scope, the patent coverage afforded to the Company’s products could be impaired, which could significantly impede the Company’s ability to market its products, negatively affect its competitive position and materially adversely affect its business and results of operations.

The Company’s pending or future patent applications may not result in an issued patent. Additionally, newly issued patents may not provide meaningful protection against competitors or against competitive technologies. Courts in the ~~United~~U.S. ~~States~~ and in other countries may invalidate the Company’s patents or find them unenforceable. Competitors may also be able to design around the Company’s patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. If these developments were to occur, it could have an adverse effect on the Company’s sales. If the Company’s intellectual property rights are not adequately protected, the Company may not be able to commercialize its technologies, products or services and the Company’s competitors could commercialize the Company’s technologies, which could result in a decrease in the Company’s sales and market share and could materially adversely affect the Company’s business, financial condition and results of operations.

The Company’s products could infringe the intellectual property rights of others, which may lead to litigation that could itself be costly, could result in the payment of substantial damages or royalties, and could prevent the Company from using technology that is essential to its products: The Company cannot guarantee its products, manufacturing processes or other methods do not infringe the patents or other intellectual property rights of third parties. Infringement and other intellectual property claims and proceedings brought against the Company, whether successful or not, could result in substantial costs and harm the Company’s reputation. Such claims and proceedings can also distract and divert management and key personnel from other tasks important to the success of its business. In addition, intellectual property litigation or claims could force the Company to do one or more of the following:


•	cease selling or using of any products that incorporate the asserted intellectual property, which would adversely affect the Company’s revenue;


•	pay substantial damages for past use of the asserted intellectual property;


•	obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and


•	redesign or rename, in the case of trademark claims, products to avoid infringing the intellectual property rights of third parties, which may not be possible and could be costly and time-consuming if it is possible to do.

In the event of an adverse determination in an intellectual property suit or proceeding, or the Company’s failure to license essential technology, the Company’s sales could be harmed and its costs could increase, which could materially adversely affect the Company’s business, financial condition, and results of operations.

The Company may be exposed to certain regulatory and financial risks related to climate change: Climate change is continuing to receive ever increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which could lead to additional legislative and regulatory efforts to limit greenhouse gas emissions. The focus on emissions could increase costs associated with the Company’s operations, including costs for raw materials and transportation. Because the scope of future laws in this area is uncertain, the Company cannot predict the potential effect of such laws on its future consolidated financial condition, results of operations, or cash flows.

A material weakness in internal control over financial reporting could affect our ability to timely file reliable financial statements and could have a material adverse effect on our business, results of operations, financial condition and liquidity. If the Company discovers significant deficiencies or material weaknesses in its internal controls over financial reporting or at any recently acquired entity, it may adversely affect its ability to provide timely and reliable financial information and satisfy its reporting obligations under federal securities laws, which also could affect the market price of its common stock or its ability to remain listed on the NASDAQ Global Select Market, or NASDAQ.

As discussed in Part II, Item 9A - Controls and Procedures, we have identified a material weakness in the operating effectiveness of information technology (IT) general controls. More specifically, the Company was not consistently following its processes and procedures during 2015 to execute and monitor change management controls or to restrict or monitor access to certain of its IT systems. These processes and procedures are intended to ensure that access to financial applications and data is adequately restricted to appropriate personnel and that all changes affecting the financial applications and underlying account records are identified, authorized, tested and implemented appropriately. Additionally, as a result of the deficiencies identified, there is a possibility that the effectiveness of business process controls that are dependent on the affected IT systems or data and

financial reports generated from the affected IT systems may be adversely affected. A material weakness could result in a material misstatement of our annual or interim Consolidated Financial Statements. A material misstatement could result in significant adverse consequences.

If in the future we have additional material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to attest that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease. We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies.

including costs for raw materials and transportation. Because the scope of future laws in this area is uncertain, the Company cannot predict the potential effect of such laws on its future consolidated financial condition, results of operations, or cash flows.

ITEM 1.B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our world headquarters is located in Southfield, Michigan, which is a leased facility. Our operations include ~~227~~252 manufacturing facilities, technical centers, distribution and warehouse centers, and sales and administration office facilities worldwide at December 31, ~~2015~~2016 supporting our operations. Approximately 4957% of the facilities are leased; the majority of which are distribution centers, and sales and administration offices. We own the remainder of the facilities.

AWe ~~summary~~have ofentered into agreements with certain Third Party Logistic providers ("TPL"s) to provide distribution services on our ~~facilities,~~behalf. byOf ~~segment~~the 9 locations listed below, ~~type~~the ofCompany ~~facility~~is ~~and~~the ~~geographic~~lessee ~~region,~~for astwo of ~~December~~the 31properties. The Company has also invested globally in nonconsolidated affiliates which we have multiple manufacturing sites in Turkey and China, ~~2015~~which are ~~set~~not ~~forth~~included in the ~~following~~ tables: below.

A summary of our facilities, by segment, type of facility and geographic region, as of December 31, 2016 are set forth in the following tables:

Powertrain

Type of Facility	NorthAmerica	EMEA	Rest ofWorld	Total
Manufacturing facilities	2524	3233	2730	8487
Technical centers (a)	6	3	1	10
Technical centers(a)	5	5	2	12
Distribution and warehouses centers	65	1	36	1012
Sales and administration offices	56	5	47	1418
	42	41	35	118
	40	44	45	129
(a) Consists mainly of research and development activity.

Motorparts

Type of Facility	NorthAmerica	EMEA		~~Rest ofWorld~~	Rest ofWorld	~~Total~~	Total
Manufacturing facilities	1112	13		8	8	32	33
Technical centers (a)	3	3		—		6
Technical centers(a)	5	5			—		10
Distribution and warehouses centers	158	10		10	15	35	33
Sales and administration offices	176	913		10	6	36	25
	46	35		28		109
Technical support centers	12	—			1		13
(a) Consists mainly of research and development activity.
Third party distribution centers	2	—			7		9
	45	41	—		37		123
(a) Consists mainly of research and development activity.

The facilities range in size ~~from~~up ~~approximately 100 square feet~~ to 700 thousand square feet. Management believes substantially all of our facilities are in good condition and ithave ~~has~~ sufficient capacity to meet our current and expected manufacturing and distribution needs.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in various litigation matters regarding environmental matters and other matters as described below.

Environmental Matters

The Company is a defendant in lawsuits filed, or the recipient of administrative orders issued or demand letters received, in various jurisdictions pursuant to the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”) or other similar national, provincial or state environmental remedial laws. These laws provide that responsible parties may be liable to pay for remediating contamination resulting from hazardous substances that were discharged into the environment by them, by prior owners or occupants of property ~~they~~it currently ~~own~~owns or ~~operate~~operates, or by others to whom ~~they~~it sent such substances for treatment or other disposition at third party locations. The Company has been notified by the ~~United~~U.S. ~~States~~ Environmental Protection Agency, other national environmental agencies, and various provincial and state agencies that it may be a potentially responsible party (“PRP”) under such laws for the cost of remediating hazardous substances pursuant to ~~CERCLA and other national and state or provincial environmental laws. PRP designation typically requires the funding of site investigations and subsequent remedial activities.~~

2324

CERCLA and other national and state or provincial environmental laws. PRP designation typically requires the funding of site investigations and subsequent remedial activities.

Many of the sites that are likely to be the costliest to remediate are often current or former commercial waste disposal facilities to which numerous companies sent wastes. Despite the potential joint and several liability which might be imposed on the Company under CERCLA and some of the other laws pertaining to these sites, the Company’s share of the total waste sent to these sites has generally been small. Therefore, the Company believes its exposure for liability at these sites is limited.

The Company has also identified certain other present and former properties at which it may be responsible for cleaning up or addressing environmental contamination, in some cases as a result of contractual commitments and/or federal or state environmental laws. The Company is actively seeking to resolve these actual and potential statutory, regulatory, and contractual obligations. Although difficult to quantify based on the complexity of the issues, the Company has accrued amounts corresponding to its best estimate of the costs associated with such regulatory and contractual obligations on the basis of available information from site investigations and ~~best~~the professional judgment of consultants.

Total environmental liabilities were $1416 million and $1514 million at December 31, ~~2015~~2016 and ~~2014~~2015. Management believes ~~that~~ such accruals will be adequate to cover the Company’s estimated liability for its exposure in respect to such matters. In the event ~~that~~ such liabilities were to significantly exceed the amounts recorded by the Company, the Company’s results of operations and financial condition could be materially affected. At December 31, ~~2015~~2016, management estimates ~~that~~ reasonably possible material additional losses above and beyond management’s best estimate of required remediation costs, as recorded, approximate $4541 million.

Other Matters

~~The~~On ~~Company~~September is29, ~~involved~~2016, inSeptember ~~other~~30, ~~legal~~2016, October 12, 2016 and October 19, 2016, respectively, four putative class actions, captioned Skybo v. Ninivaggi et al., C.A. No. 12790, Lemanchek v. Ninivaggi et al., C.A. No. 12791, Raul v. Ninivaggi et al., C.A. No. 12821 and ~~claims~~Mercado v. Ninivaggi et al., ~~directly~~C.A. No. 12837, were filed in the Court of Chancery of the State of Delaware against the Board, Icahn Enterprises L.P. and ~~through~~certain of its ~~subsidiaries~~affiliates, ~~that~~including ~~arise~~Parent inand the ~~normal~~Offeror ~~course~~(the “Icahn Defendants”), and, in the case of ~~business~~Raul, the Company. ~~Management~~The ~~does~~complaints ~~not~~allege ~~believe~~that, among other things, the Board breached its fiduciary duties by approving the proposed Merger Agreement, that the ~~outcomes~~Icahn Defendants breached their fiduciary duties to the minority stockholders and/or aided and abetted the Board’s breaches of ~~these~~its fiduciary duties, as well as alleging certain material misstatements and omissions in the Schedule 14D-9. The complaints allege that, among other ~~actions~~things, orthe ~~claims~~then-Offer ~~are~~Price ~~likely~~was toinadequate ~~have~~and, together with that the Merger Agreement, was the result of a ~~material~~flawed ~~adverse~~and ~~effect~~unfair onsales process and conflicts of interest of the Board and the Special Committee, alleging that the Special Committee and the Company’s ~~financial~~management ~~position~~lacked independence from the Icahn Defendants. In addition, ~~operating~~the ~~results~~complaints allege that the Merger Agreement contains certain allegedly preclusive deal protection provisions, orincluding ~~cash~~a ~~flows~~no-solicitation provision, an information rights provision and a matching rights provision. ~~See~~Among ~~Note~~other 17things, ~~Commitments~~the complaints sought to enjoin the transactions contemplated by the Merger Agreement, as well as award costs and ~~Contingencies~~disbursements, including reasonable attorneys’ and experts’ fees. The Raul and Mercado complaints further seek to rescind the ~~Consolidated~~transaction ~~Financial~~or ~~Statements~~award rescissory damages, ~~included~~or (in ~~Item 8~~the case of ~~this~~Raul) ~~report~~award a quasi-appraisal remedy in the event that the transaction was consummated, as well as award money damages. On October 28, 2016, all four actions were consolidated under the caption In re Federal-Mogul Holdings, Inc. Stockholder Litigation, C.A. No. 12790-CB (the “Delaware Action”). On February 3, 2017, an order was entered requiring plaintiffs to file their amended complaint by March 6, 2017.

On October 5, 2016, a putative class action captioned Sanders v. Federal-Mogul Holdings Corporation et al., C.A. No. 16-155387 was filed in the Circuit Court for Oakland County of the State of Michigan against the Company, the Board and the Icahn Defendants (the “Michigan Action”). The complaint alleges, among other things, that the Board breached its fiduciary duties and that the Company and the Icahn Defendants aided and abetted the Board’s breaches of its fiduciary duties, as well as alleging certain material misstatements and omissions in the Schedule 14D-9. The complaint alleges that, among other things, the then-Offer Price was unfair and the result of an unfair sales process that included conflicts of interest. In addition, the complaint alleges that the Merger Agreement contains certain allegedly preclusive deal protection provisions, including a no-solicitation provision, an information rights provision and a matching rights provision. Among other things, the complaint sought to enjoin the transactions contemplated by the Merger Agreement, or, in the event that the transactions were consummated, rescind the transactions or award rescissory damages, as well as award money damages and costs, including reasonable attorneys’ and experts’ fees. On February 10, 2017, an order was entered providing that plaintiff shall have through March 6, 2016, to file his First Amended Complaint.

We believe that the claims in the Delaware and Michigan Actions are without merit and intend to defend against them vigorously.

In addition, the Company is involved in other legal actions and claims, directly and through its subsidiaries, that arise in the normal course of business. Management does not believe the outcomes of these other actions or claims are likely to have a material adverse effect on the Company’s financial position, operating results, or cash flows. See Note 17, Commitments and Contingencies, to the Consolidated Financial Statements, included in Item 8 of this report.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

2426

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our stock iswas listed on the NASDAQ Global Stock Market as of December 31, 2016.

There were ~~approximately~~no 53 stockholders of record of Common Stock as of February 2522, ~~2016 including multiple beneficial holders at depositories~~2017, ~~banks~~since ~~and~~the ~~brokers~~Company ~~listed~~converted asto a single ~~holder~~member oflimited ~~record~~liability incompany ~~the~~on ~~street name of each respective depository~~February 14, ~~bank or broker~~2017. High and low sales prices for our common stock for each quarter in ~~2015~~2016 and ~~2014~~2015 are as follows:

	2015				2014
	2016				2015
Quarter	High		Low		High		Low
First	$	1510.6400	$	123.6181	$	2215.9764	$	1512.8261
Second	$	139.9197	$	117.3571	$	2013.5191	$	1611.1935
Third	$	119.2490	$	68.7811	$	2011.8224	$	146.8778
Fourth	$	810.68	$	69.5312	$	168.3968	$	146.1453

We did not pay any dividends in ~~2015~~2016 or ~~2014~~2015. We have certain restrictions under our ~~debt~~credit facilities from paying dividends in the future.

The following graph compares the cumulative total stockholder return during the five year period from December 31, ~~2010~~2011 to December 31, ~~2015~~2016. The graph assumes that $100 was invested on December 31, ~~2010~~2011, in each of the Company’s common stock, the stocks comprising the S&P 500 Index, and the stocks comprising the peer group. The peer group is comprised on the following companies: BorgWarner Inc., Dana, Magna International, Meritor, Tenneco, and Timken. This performance graph shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed soliciting material or filed under such Acts.

2527

ITEM 6. SELECTED FINANCIAL DATA

The following table presents information from the ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements as of or for the five years ended December 31, ~~2015~~2016. This information should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and ‘‘Financial Statements and Supplemental Data.’’

	Year Ended December 31
	2015			2014			2013			2012			2011
	2016			2015			2014			2013			2012
	(Millions of Dollars, Except Per Share Amounts)
	(in millions, except per share amounts)
Consolidated Statement of Operations Data
Net sales (a)	$	7,~~419~~434		$	7,~~317~~419		$	67,~~786~~317		$	6,~~444~~786		$	6,~~719~~444
Net income (loss) from continuing operations	~~(111~~90		)	(~~161~~111		)	~~101~~(161		)	~~(91~~101		)	(5691		)
Amounts attributable to Federal-Mogul:
Net income (loss) from continuing operations	~~(117~~82		)	(~~168~~117		)	93(168		)	~~(98~~93		)	(6398		)
Income (loss) from discontinued operations, net of tax	7—			—7			~~(52~~—		)	(1952		)	(2719		)
Net income (loss)	$	~~(110~~82	)	$	(~~168~~110	)	$	41(168	)	$	~~(117~~41	)	$	(90117	)
Common Share Summary Attributable to Federal-Mogul
Net (loss) income per common share - basic:
Net (loss) income from continuing operations	$	(0.7149	)	$	(10.1271	)	$	0(1.7512	)	$	(0.9975	)	$	(0.6499	)
(Loss) income from discontinued operations, net of tax	~~0.04~~—			—0.04			~~(0.42~~—		)	(0.1942		)	(0.2719		)
Net (loss) income	$	(0.6749	)	$	(10.1267	)	$	0(1.3312	)	$	(10.1833	)	$	(01.9118	)
Weighted average shares outstanding – basic (in millions)	169.0			164.7			150.0			123.4			98.9
Net (loss) income per common share - diluted:
Net (loss) income from continuing operations	$	(0.7149	)	$	(10.1271	)	$	0(1.7512	)	$	(0.9975	)	$	(0.6499	)
(Loss) income from discontinued operations, net of tax	~~0.04~~—			—0.04			~~(0.42~~—		)	(0.1942		)	(0.2719		)
Net (loss) income	$	(0.6749	)	$	(10.1267	)	$	0(1.3312	)	$	(10.1833	)	$	(01.9118	)
Weighted average shares outstanding – basic (in millions)	164.7			150.0			123.4			98.9			98.9
Weighted average shares outstanding – diluted (in millions)	169.0			164.7			150.0			123.4			99.4
Weighted average shares outstanding – diluted (in millions)	164.7			150.0			123.4			99.4			99.4
Dividends declared per common share	$	—		$	—		$	—		$	—		$	—
	As of December 31
	2015			2014			2013			2012			2011
	2016			2015			2014			2013			2012
	(Millions of Dollars)
	(in millions)
Consolidated Balance Sheet Data
Total assets	$	7,~~238~~076		$	7,~~067~~228		$	7,~~182~~067		$	67,~~927~~182		$	76,~~029~~927
Total liabilities	~~6,336~~$	6,196		~~6,158~~$	6,326		~~5,581~~$	6,158		~~6,095~~$	5,581		~~6,046~~$	6,095
Total debt (including short-term debt and current portion of long-term debt	3,062			2,690			2,599			2,827			2,829
Total debt (including short-term debt and current portion of long-term debt)	$	3,025		$	3,052		$	2,690		$	2,599		$	2,827
Federal-Mogul shareholders’ equity	~~770~~$	738		~~806~~$	770		~~1,490~~$	806		~~725~~$	1,490		~~953~~$	725
(a) Refer to Note 5, Acquisitions, for the effect of acquisitions on net sales and net income (loss).

2628

The following table represents items that affect the comparability of the amounts shown above for the years ended December 31, 2016:

The following table represents items that affect the comparability of the amounts shown above for the years ended December 31, 2015, 2014, and 2013:



	Year ended December 31
	2016			2015			2014			2013			2012
	(in millions)
Gain on sale of real estate	$	7		$	4		$	1		$	(2	)	$	1
Loss on sale of equity method investment	$	—		$	(11	)	$	—		$	—		$	—
Goodwill and intangible impairment expense, net	$	(6	)	$	(94	)	$	(120	)	$	—		$	(142	)
OPEB curtailment gain	$	—		$	—		$	—		$	19		$	51
Loss on debt extinguishment	$	—		$	—		$	(24	)	$	—		$	—
Restructuring charges and asset impairments, net	$	(44	)	$	(121	)	$	(110	)	$	(29	)	$	(78	)

	Year ended December 31
	2015			2014			2013			2012			2011
	(Millions of Dollars)
Goodwill and intangible impairment expense, net	$	(94	)	$	(120	)	$	—		$	(142	)	$	(296	)
OPEB curtailment gain	$	—		$	—		$	19		$	51		$	—
Loss on debt extinguishment	$	—		$	(24	)	$	—		$	—		$	—
Restructuring charges and asset impairments, net	$	(121	)	$	(110	)	$	(29	)	$	(78	)	$	(16	)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

Our Business: We are a leading global supplier of a broad range of components, accessories, and systems to the automotive, small engine, heavy-duty, marine, railroad, agricultural, off-road, aerospace and energy, industrial, and transport markets, including customers in both the original equipment manufacturers (“OEM”) and servicers (“OES”) (collectively “OE”) market and the replacement market (“aftermarket”). Our customers include the world’s largest automotive OEs, and major distributors and retailers in the independent aftermarket.

WeMerger ~~operate~~Transaction: ~~with~~On ~~two~~September ~~end-customer~~6, ~~focused~~2016, ~~business~~we, ~~segments.~~American ~~The~~Entertainment ~~Powertrain~~Properties ~~segment~~Corp., ~~focuses~~a onDelaware ~~original~~corporation ~~equipment~~(“AEP”), ~~powertrain~~our ~~products~~parent ~~for~~and ~~automotive,~~a ~~heavy~~subsidiary ~~duty~~of ~~and~~Icahn ~~industrial~~Enterprises ~~applications~~L.P. ~~Powertrain~~("IEP"), ~~operates~~and ~~manufacturing~~IEH ~~facilities~~FM inHoldings 19LLC, ~~countries~~a ~~and~~Delaware ~~derived~~limited ~~35%~~liability ofcompany ~~its~~(“Merger ~~2015~~Sub”) OEentered ~~sales~~into inan ~~North~~Agreement ~~America,~~and ~~46%~~Plan inof ~~Europe,~~Merger (the ~~Middle-East~~"Merger ~~and Africa (~~Agreement"~~EMEA"~~),. ~~and~~Pursuant ~~19%~~to in the ~~rest~~Merger ofAgreement, ~~the~~and ~~world~~upon ~~("Rest~~the ofterms ~~World"~~and orsubject ~~"ROW").~~to ~~The~~the ~~Motorparts~~conditions ~~segment~~thereof, ~~sells~~Merger ~~and~~Sub ~~distributes~~commenced a ~~broad~~cash ~~portfolio~~tender ofoffer ~~products in~~ (the ~~global~~"Offer) ~~aftermarket~~to ~~including~~acquire, ~~more~~subject ~~than~~to 20the ~~globally-recognized~~terms ~~brands.~~and Weconditions ~~also~~of ~~serve~~the ~~OEMs~~Merger ~~with~~Agreement, ~~products~~all ~~including~~of ~~braking,~~the ~~wipers,~~issued and aoutstanding ~~limited~~shares ~~range~~ of ~~chassis~~our ~~components.~~common ~~Motorparts~~stock, ~~operates~~par ~~manufacturing~~value ~~sites~~$0.01 inper 15share, ~~countries~~not ~~and~~already ~~distribution~~owned ~~centers~~by ~~and~~IEP ~~warehouses in 13 countries. In 2015~~affiliates, ~~Motorparts~~for ~~derived~~a ~~56%~~purchase price of ~~its~~$9.25 ~~sales~~per inshare, ~~North~~net ~~America,~~to ~~37%~~the seller in ~~EMEA~~cash, ~~and~~without 7%interest, inless ~~Rest~~any ofapplicable ~~World.~~tax withholding.

~~Termination of Spin-off:~~ On January 153, ~~2016~~2017, we announced ~~the~~we ~~termination~~had ofreceived ~~the~~a ~~previously~~revised ~~announced~~proposal ~~spin-off~~to purchase our shares of ~~the~~common ~~Motorparts~~stock ~~division~~for $10.00 Weper ~~will~~share, ~~continue~~an toincrease ~~operate~~from ~~with~~the ~~two~~previous ~~separate,~~offer ~~independent~~of ~~businesses~~$9.25 ~~with~~in ~~separate~~cash ~~CEOs~~per ~~who~~share. ~~will~~On ~~each~~January ~~report~~23, ~~directly~~2017, toAEP ~~our~~and ~~board~~Merger Sub completed the acquisition of ~~directors.~~the ~~The~~Company ~~separate~~as ~~businesses~~all ~~more~~terms ~~effectively~~and ~~serve~~conditions ~~their~~as ~~unique~~set ~~markets~~forth ~~and~~in ~~allow~~the ~~each~~Merger ~~operating~~Agreement ~~business~~were tosatisfied. ~~pursue~~Shares ~~its~~of ~~business~~our ~~strategy~~stock ~~and~~are ~~more~~no ~~quickly~~longer ~~react~~publicly totraded ~~its~~as ~~unique~~of ~~market~~the ~~conditions.~~close of business January 23, 2017.

~~Financial~~On ~~Results~~February ~~for the Year Ended December 31~~14, ~~2015: Consolidated net sales were $7~~2017,~~419~~ ~~million,~~we anconverted ~~increase~~to ofa ~~$102~~single ~~million,~~member orlimited ~~1.4%. The~~liability ~~increase~~corporation ~~was primarily driven by a 10% increase~~ in ~~sales volumes of $734 million (which included a $657 million benefit from acquisitions), which was substantially offset by~~ the ~~$642~~U.S. ~~million~~and ~~unfavorable~~changed ~~effect~~our ofname ~~foreign~~to ~~currency~~Federal-Mogul ~~exchange~~Holdings LLC.

~~Cost~~Financial ofResults ~~products~~for ~~sold~~the ~~was~~Year $6Ended December 31,~~345~~ ~~million~~2016: ~~for~~Consolidated ~~the~~net ~~year~~sales ~~ended~~were ~~December 31~~$7,434 ~~2015~~million, an increase of $8515 million, or 10.2%. The increase was primarily driven by ~~$645~~a ~~million~~1.9% increase in ~~incremental costs related to higher~~ sales volumes ~~attributable~~of to$143 ~~acquisitions,~~million ~~and~~(which ~~partly~~included toa ~~volumes~~$91 ~~related~~million tobenefit ~~organic~~from ~~growth.~~acquisitions) ~~This~~and was substantially offset by ~~the~~a $~~529~~107 million ~~favorable~~unfavorable effect of foreign currency exchange ~~and $31 million of savings from net performance~~. Net performance gains were burdened by incremental costs associated with the realignment of our North American distribution centers within our Motorparts division and strategic initiatives within both divisions.

~~Gross~~Cost ~~profit~~of ~~increased~~products bysold ~~$17~~was ~~million to~~ $16,~~074~~301 million, ~~or 14.5% of sales,~~ for the year ended December 31, ~~2015~~2016, ~~compared~~a todecrease of $~~1,057~~44 million, or 140.47% ~~of sales, for the year ended December 31, 2014~~. ~~This~~The decrease was primarily driven by ~~higher sales volumes of~~ $9899 million, ~~which~~of ~~included~~savings ~~the~~from ~~effect~~net ofperformance ~~acquisitions,~~ and ~~the~~a $3292 million favorable effect of ~~performance,~~foreign ~~which~~currency exchange. This was partially offset by the ~~negative~~$147 ~~effects~~million ofin ~~foreign~~incremental ~~currency~~costs ~~exchange~~related to higher sales volumes attributable to organic growth and acquisitions.

~~For~~Gross profit increased by $59 million to $1,133 million or 15.2% of sales, for the year- ended December 31, 2016 compared to $1,074 million, or 14.5% of sales, for the year ended December 31, 2015:. The increase was primarily driven by the favorable effect of performance of $78 million which was offset by the negative effects of foreign currency exchange of $15 million.

•For ~~Net loss attributable to Federal-Mogul for~~ the year-ended December 31, ~~2015 was $110 million, which included goodwill and intangible impairment charges of $94 million, and restructuring charges and asset impairments of $121 million.~~2016:

27• Net income attributable to Federal-Mogul was $82 million which included restructuring charges and asset impairments, net of $44 million, goodwill and intangible impairment charges of $6 million, and other income of $9 million (net of tax) related to the recognition of a gain on the sale of real estate made in the prior year.

• WeRestructuring ~~impaired~~charges and asset impairments, net were comprised of $5021 million related to the Powertrain segment and $4423 million related to the Motorparts segment. This charge includes $27 million of ~~goodwill~~costs related to severance and other charges, net primarily focused on optimizing our ~~Motorparts~~cost structure. The charges include severance related costs and ~~Powertrain~~other ~~segments~~charges of $18 million in EMEA, ~~respectively~~$8 million in North America, and $1 million in ROW. In addition, there was $12 million in asset impairments in ROW, $4 million in EMEA, and $1 million in North America for the Motorparts segment.

• ~~Restructuring~~Total ~~charges~~debt, ~~and~~including ~~asset~~short-term ~~impairments~~debt ~~were~~and ~~comprised~~current portion of ~~$62~~long-term ~~million~~debt, ~~related~~decreased toby ~~the~~$27 ~~Powertrain~~million. ~~segment~~The ~~and~~decrease ~~$59~~was ~~million~~primarily ~~related~~attributable to the ~~Motorparts~~payments ~~segment.~~in ~~This~~excess ~~charge~~of ~~includes~~borrowings. We had $89300 million of ~~costs~~cash, ~~related~~$213 tomillion ~~severance~~of ~~and~~availability ~~other~~under ~~charges~~our ~~primarily~~U.S. ~~focused~~credit onfacilities, ~~reducing~~and ~~inefficiencies~~additional inavailability ~~the~~of ~~cost~~$60 ~~structure~~million ofunder ~~recent~~foreign ~~acquisitions~~lines ~~and~~of ~~the~~credit ~~EMEA~~at ~~aftermarket~~December 31, 2016.

• Total debt, including short-term debt and current portion of long-term debt, increased by $372 million. This was attributable to the additional strategic investments made during 2015 including the acquisition of TRW’s valvetrain business, which was funded primarily by our revolving line of credit. We had $194 million of cash and $170 million of availability under our credit facilities at December 31, 2015.30

Recent Trends and Market Conditions:

There is inherent uncertainty in the continuation of the trends discussed below. In addition, there may be other factors or trends that can have an effect on our business. Our business and operating results are affected by the relative strength of:

General economic conditions: Our OE business is directly related to automotive sales and automotive vehicle production by our customers. Automotive sales depend on a number of factors, including global and regional economic conditions. Demand for aftermarket products is driven by three primary factors including: the number of vehicles in operation; the average age of vehicles; and vehicle usage trends (primarily distance traveled).

~~Early~~Global ~~estimates~~vehicle ofproduction ~~global~~levels: ~~GDP~~Global ~~indicate~~light avehicle ~~2.4~~production ~~percent~~increased ~~increase~~by ~~in 2015~~4. ~~Major~~8 ~~factors~~percent ~~contributing to this rate of growth include generally stable conditions~~ in ~~developed~~2016. ~~regions~~European ~~and~~light ~~slowing~~vehicle ~~growth in emerging markets.~~production ~~While~~rose ~~the Chinese economic growth rate slowed from previous years, GDP estimates indicate 6~~3.9 percent ~~growth in 2015. Full-year GDP estimates for the European Union, Japan,~~ and ~~the~~North ~~United~~American ~~States~~light ~~are~~vehicle ~~1.5,~~production ~~0.8~~increased ~~and~~ 2.53 percent, ~~respectively.~~with ~~Economic~~positive ~~conditions~~growth in ~~key~~Canada ~~regions~~and ~~remain~~the ~~mixed~~U.S. ~~However,~~Light ~~the~~vehicle ~~combination~~production ofin ~~low~~the ~~interest~~Asia-Pacific ~~rates~~region ~~and~~increased ~~declining~~by ~~fuel~~7.4 ~~prices~~percent, ~~continues~~with tostrong ~~support~~positive ~~vehicle~~growth ~~sales~~in China and ~~production globally~~India. ~~Declining~~Among ~~commodity prices have also strengthened~~ the ~~position~~major ~~of automotive manufacturers. However~~regions, ~~visibility~~only onSouth ~~global~~America ~~GDP~~posted ~~remains~~a ~~limited~~decline, ~~and~~down ~~uncertain~~11.9 percent.

Global ~~vehicle~~commercial ~~production levels: Global~~ vehicle production increased by 12.35 percent in ~~2015~~2016. European commercial vehicle production rose 42.19 percent ~~from~~and ~~2014~~the ~~levels. North~~Asia-Pacific ~~American~~region ~~vehicle~~rose ~~production increased 3~~11.61 percent, with strong positive growth in ~~Mexico~~China and ~~the United States~~India. ~~Vehicle~~ ~~production~~South inAmerica ~~the~~posted ~~Asia-Pacific~~a ~~region~~decline, ~~increased~~down ~~just~~20.5 ~~under 1~~ percent. inThere ~~2015,~~was ~~reaching~~a ~~another record high~~15. ~~Among~~9 ~~the~~percent ~~major~~decrease ~~regions,~~in ~~only~~commercial ~~South~~vehicle ~~America~~production ~~posted~~in aour ~~decline~~primary inmarket ~~2015,~~of ~~down~~North 19America.~~3 percent.~~

Global vehicle sales levels: Global light vehicle sales increased by 14.85 percent in ~~2015~~2016. European light vehicle sales rose 3.5 percent ~~from~~and ~~2014 levels.~~ North American vehicles sales increased 61.39 percent, with positive growth in Canada, Mexico, and the ~~United States~~U.S. ~~Vehicle~~Light vehicle sales in the Asia-Pacific region increased 18.52 percent, inwith ~~2015,~~strong ~~reaching~~positive ~~another~~growth ~~record~~in ~~high~~China and India. Among the major regions, only South America posted a decline, ~~in 2015~~ which was down 2112.15 percent.

~~Part~~Global ~~replacement~~commercial ~~trends:~~vehicle ~~The~~sales ~~strength~~were ofup ~~our~~4.7 ~~aftermarket~~percent ~~business~~in isall ~~influenced~~of ~~by several key drivers~~2016. ~~These~~ ~~include~~European ~~the~~commercial ~~vehicle~~vehicles ~~population~~sales ~~(or~~rose ~~"parc"),~~2.6 ~~average~~percent ~~vehicle~~and ~~age,~~the ~~fuel~~Asia-Pacific ~~prices~~region ~~and~~was ~~vehicle~~up ~~distance traveled~~12. ~~The~~9 ~~vehicle~~percent, ~~parc~~with isstrong ~~estimated~~positive togrowth ~~have expanded~~ in ~~most~~China ~~major~~and ~~markets,~~India. ~~including~~South ~~the~~America ~~United~~posted ~~States,~~a ~~Japan~~decline, ~~China,~~down ~~and~~24.0 ~~Germany~~percent. ~~Average~~ ~~vehicle~~There ~~ages~~was ~~also~~an ~~increased,~~8.2 ~~despite~~percent ~~growth~~decrease in ~~new~~our ~~vehicle~~primary ~~sales,~~market inof ~~most~~North ~~regions~~America.

~~Recent~~Part ~~decline~~replacement ~~in oil prices~~trends: The ~~recent~~strength ~~decline~~of inour ~~oil~~aftermarket ~~prices~~business ~~results~~is ininfluenced ~~lower~~by ~~fuel~~several ~~prices~~key ~~for consumers~~drivers. These ~~Lower~~include ~~fuel~~the ~~prices~~vehicle ~~provide~~population ~~consumers~~(or ~~with~~"parc"), ~~more~~average ~~discretionary~~vehicle ~~income~~age, ~~for~~fuel prices, and vehicle ~~repairs~~distance ~~and~~traveled. The ~~tends~~vehicle parc is estimated to ~~encourage~~have ~~more~~expanded ~~driving~~in ~~miles~~most major markets, ~~which~~including ~~in turn~~the ~~accelerates~~U.S., ~~wear~~China, onand Germany. Average vehicle ~~components~~ages also increased, ~~accelerating~~despite ~~the~~growth ~~need~~in ~~for~~new ~~replacements~~vehicle sales, in most regions. Vehicle ~~Low~~distance traveled varies by region and is sensitive to several factors, including fuel prices ~~also~~and ~~encourage~~transportation ~~more~~alternatives. Average vehicle ~~sales~~distance traveled has declined in China in the recent past, ~~which~~partially ~~increases~~offsetting ~~demand~~generally ~~for~~favorable ~~parts~~trends ~~from~~in ~~OEMs~~the country.

~~Foreign~~Geopolitical ~~currencies~~risk: ~~Given~~We ~~the~~conduct ~~global~~business ~~nature~~globally, ofwhich ~~our~~subjects ~~operations~~us to numerous risks and uncertainties. For example, we ~~are~~have ~~subject~~operations in the UK which may be materially affected by the UK's referendum to ~~fluctuations~~leave the European Union, which has created uncertainty in ~~foreign~~both ~~exchanges~~the ~~rates~~UK and Europe. ~~During~~We ~~2015,~~also ~~foreign~~have ~~currency~~an ~~fluctuations~~interest ~~had~~in a ~~considerable~~Turkish ~~effect~~joint onventure, ~~our~~which ~~reported~~may ~~earnings~~be affected by recent turmoil in Uthat region.S. ~~dollars~~In ~~compared~~addition, tothere ~~2014~~could be potential changes in trade agreements and new or changed tariffs in the U.S.

28Foreign currencies: Given the global nature of our operations, we are subject to fluctuations in foreign exchanges rates and there has been significant volatility in foreign currency rates.

Strategy:

Our strategy is to develop and deliver leading technology, innovation, and service capabilities which ~~results~~result in market share expansion in the OE market and aftermarket. Our strategy is designed to create sustainable global profitable growth by leveraging existing and developing new economic advantages. This strategy consists of the following:

Extending our global reach to support our OE and aftermarket customers, furthering our relationships with leading Asian OEs and strengthening market share with U.S. and European OEs.

~~During~~Our ~~2015~~company conducts business with the majority of OE/OES providers, weas ~~acquired~~well ~~TRW’s~~as ~~valvetrain~~leading ~~business~~automotive aftermarket warehouse distributors and retailers, ~~which~~around ~~adds~~the aworld. ~~completely~~Within ~~new~~the ~~product~~highly ~~line~~competitive automotive parts industry, we enjoy and seek to extend the significant advantage that comes from our ~~product~~world-class ~~portfolio,~~manufacturing and ~~strengthens~~global ~~our~~distribution ~~position~~footprint. This asfootprint aenables ~~leading~~the ~~developer~~production and ~~supplier~~delivery of ~~core~~premium ~~components~~parts ~~for~~emphasizing ~~engines~~quality, safety, and reliability virtually anywhere in the world and also supports the continual innovation of new products and technologies.

~~During~~In ~~2014~~2016, we ~~completed~~expanded the ~~purchase~~footprint of ~~certain~~our ~~assets~~Nanchang, ofChina ~~the~~sealing ~~Honeywell~~facility ~~brake~~in ~~component~~order ~~business~~to ~~and~~meet ~~the~~growing ~~Affinia~~demand ~~chassis~~from ~~business.~~our ~~The~~OEM ~~Honeywell~~customers ~~brake~~who ~~component~~must ~~acquisition~~meet ~~included~~more ~~two~~stringent ~~recently~~environmental ~~established~~regulations. ~~manufacturing~~This ~~facilities~~facility inis ~~China~~one ~~and~~of ~~Romania~~our ~~that~~most ~~substantially~~advanced ~~strengthened~~sealing ~~the~~and gasket manufacturing facilities, and ~~engineering~~supports ~~capabilities~~our ofbusiness ~~our~~towards ~~global~~greater ~~braking~~market ~~portfolio~~share and competitiveness in China. We also

continued the integration of the TRW Global Valvetrain business within our Powertrain organization, which also helps to strengthen our position as a leading supplier of core engine components. In late 2015, we opened a new state-of-the-art wiper production facility in southeastern Romania serving both OE and aftermarket customers throughout Europe. We are in the process of expanding our braking production capacity in an existing braking plant in Romania and also investing in our manufacturing footprint in Mexico, Eastern Europe, and Africa.

Assess acquisition and investment opportunities that provide product line expansion, technological advancements, geographic positioning, penetration of emerging markets (including India and China) and market share growth.

We continue to invest in the development of leading powertrain technologies for our customers. During 2016, we began mass production with our market-leading DuroGlide piston ring technology for both passenger cars and commercial trucks and are seeing rapidly growing demand from our customers. We also completed the acquisition of a filter manufacturing business in Mexico, which primarily serves the Mexican market and Beck Arnley, a provider of premium OE quality parts and fluids for foreign nameplate vehicles in North America, within our Motorparts segment during 2016.

In addition to the TRW valvetrain acquisition during 2015, we also made investments in joint ventures in India, as well as entered into two new joint ventures, one in Thailand and one in China focused on automotive aftermarket vehicle repair business. We will be the preferred supplier to the China joint venture and will provide our broad portfolio of premium-branded automotive parts for distribution through a network of repair shops. These investments position the company to capitalize on the development of the independent aftermarket in the Asia Pacific region.

Leverage the strength of our global aftermarket leading brand positions, product portfolio and range, marketing and selling expertise, and distribution and logistics capabilities.

~~The~~As ~~acquired~~we expand our distribution and service capabilities globally, we look to optimize the performance of our distribution centers (“DCs”) through enhanced efficiencies and the ~~Affinia~~world-class ~~chassis~~delivery ~~business~~performance ~~serves~~our ~~leading~~customers increasingly require. We have made investments into our U.S. ~~aftermarket~~distribution ~~customers~~network through our East and West coast distribution centers, and through the implementation of automated picking technology and a more efficient replenishment system with ~~chassis~~the ~~products~~objective of improving inventory availability and ~~broadened~~lowering costs. Recently, we made investments in our ~~product~~DC ~~offering~~network in Belgium, China and ~~customer~~announced ~~base~~plans ~~while~~to ~~also~~open ~~providing~~a ~~operational~~DC ~~synergies.~~in Hungary during 2017.

~~During~~We ~~2015,~~are wefocused ~~executed~~ on various marketing campaigns ~~for~~and significantly expanding the digital presence of our premium brands. We ~~also~~have launched a series of 'Tech First' initiatives to provide online, on-demand, and onsite technical training and support to vehicle repair technicians who use and install our products. This initiative included the opening of 'Garage Gurus,' a nationwide technical education network ~~network~~ consisting of 1012 technical support centers and a fleet of mobile training vans in major U.S. markets; a repair shop engagement program in France and Germany; and the opening of the ~~company~~Company’s first technical training and support center in China.

Aggressively pursue cost competitiveness in all business segments by continuing to drive productivity in existing operations, consolidating and relocating manufacturing operations to best cost countries, utilizing our strategic alliances, and rationalizing business resources and infrastructure.

We assess individual opportunities to execute our strategy based upon estimated sales and margin growth, cost reduction potential, internal investment returns, and other criteria, and make investment decisions on a case-by-case basis. Opportunities meeting or exceeding benchmark return criteria may be undertaken through research and development activities, acquisitions, other strategic alliances, or restructuring activities. Restructuring expenses for the year ended December 31, ~~2015~~2016 primarily related to our ~~EMEA~~Powertrain locations and were aimed at ~~(1) the reshaping of the aftermarket distribution network, (2)~~ reducing production complexities, and ~~(3)~~ reducing inefficiencies in indirect and fixed ~~costs~~cost structures.

Outlook

We expect to benefit from the effect of our synergistic acquisitions, strategic initiatives and restructuring actions initiated over the last several years through improved efficiencies and cost savings; as well as a reduction in the cash outlay and related costs directly associated with these actions. Incremental costs associated with the realignment of our North American distribution centers within our Motorparts division are expected to decline as the distribution centers reach full utilization. We also believe there are opportunities to reduce inventory levels, which increased as part of the ramp-up of these distribution centers. However, we expect further investments in our European and Asia Pacific distribution networks and information technology systems in 2016 and 2017.

Critical Accounting Estimates

Our ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements and accompanying notes as included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report on From ~~10K~~10-K have been prepared in conformity with accounting principles generally accepted in the United Sates (“U.S GAAP”). Accordingly, our significant accounting policies have been disclosed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies" of the Consolidated Financial Statements. We provide enhanced information that supplements such disclosures for accounting estimates when the estimate involves matters that are highly uncertain at the time the accounting estimate is made and different estimates or changes to an estimate could have a material effect on the reported financial position, changes in financial condition or results of operations.

29When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method it considers to be the most appropriate given the specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties. Estimates are typically based upon historical experience, current trends, contractual documentation, and other information, as appropriate. Due to the inherent

the United Sates (“U.S GAAP”). Accordingly, our significant accounting policies have been disclosed in the consolidated financial statements and accompanying notes under Note 2, “Basis of Presentation and Summary of Significant Accounting Policies." We provide enhanced information that supplements such disclosures for accounting estimates when the estimate involves matters that are highly uncertain at the time the accounting estimate is made and different estimates or changes to an estimate could have a material effect on the reported financial position, changes in financial condition or results of operations.32

When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that it considers to be the most appropriate given the specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties. Estimates are typically based upon historical experience, current trends, contractual documentation, and other information, as appropriate. Due to the inherent uncertainty involving estimates, actual results reported in the future may differ from those estimates. In preparing these financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the financial statements, giving due regard to materiality. The following summarizes our critical accounting policies.

Pension Plans and Other ~~Postemployment~~Postretirement Benefit Plans

We sponsor defined benefit pension plans and postretirement plans for certain employees and retirees around the world. Our defined benefit plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected long-term rate of return, discount rate, ~~and~~ mortality ~~and~~rates ~~mortality~~of ~~improvement~~participants, ~~rates~~and expectation of ~~plan~~mortality ~~participants~~improvement.

Differences in actual experience or changes in assumptions may materially affect the pension and postretirement plan obligations. Actual results that differ from assumptions are accumulated in net actuarial gains and losses which are subject to amortization and expensed over future periods. The unamortized pre-tax actuarial loss on our pension plans was $~~532~~544 million and $~~590~~532 million at December 31, ~~2015~~2016 and ~~2014~~2015. We expect to recognize amortization expense of $1517 million in ~~2016~~2017.

Assumptions used to calculate benefit obligations as of the end of a fiscal year directly affect the expense to be recognized in future periods. The primary assumptions affecting our accounting for ~~employee~~pension and postretirement benefits as of December 31, ~~2015~~2016 are as follows:

• Long-term rate of return on plan assets: ~~The~~In ~~required~~December ~~use~~2016, ofan ~~the~~investment ~~expected~~policy ~~long-term~~study ~~rate~~was ofcompleted ~~return~~for onthe ~~plan~~U.S. ~~assets~~pension ~~may~~plans. ~~result~~The instudy ~~recognized~~resulted ~~returns~~in ~~that~~changes ~~are~~to ~~greater~~the orexpected ~~less~~long-term ~~than~~rate ~~the~~of ~~actual~~return ~~returns~~ on ~~those plan~~ assets inand ~~any~~is ~~given~~designed ~~year.~~to ~~While~~approximate ~~the~~a ~~development~~long-term ofprospective ~~the~~rate. The long-term rate of return on assets ~~gives~~decreased ~~appropriate~~from ~~consideration~~5.65% toat ~~recent~~December ~~fund performance and historical returns~~31, ~~the~~2015 ~~assumption is designed~~ to ~~approximate~~5.55% aat ~~long-term~~December ~~prospective~~31, ~~rate~~2016. The expected long-term rate of return ~~used~~on toplan ~~calculate~~assets ~~net~~used ~~periodic~~in determining pension ~~cost~~expense isfor 6non-U.~~55%~~S. ~~for~~plans is determined in a similar manner to the U.S. plans and athe weighted average ofreturn on assets decreased from 3.5222% ~~for~~at ~~non-U~~December 31, 2015 to 3.S.05% ~~plans~~at December 31, 2016.

• Discount rate: The discount rate ~~reflects the effective yield on high quality fixed income securities available in the marketplace as of the measurement date to settle pension and postemployment benefit obligations. The discount rate~~ assumption is established at the measurement date. In the U.S., we use a cash flow matching approach that uses projected cash flows matched to spot rates along a high quality corporate yield curve to determine the present value of cash flows to calculate a single equivalent discount rate. The benefit obligation for pension plans in Belgium, France, and Germany represents 91% of the non-U.S. pension benefit obligation at December 31, ~~2015~~2016. The discount rates for these plans ~~in Belgium, France, and Germany~~ are determined using a cash flow matching approach similar to the U.S. approach.

The weighted-average discount rates used to calculate net periodic benefit cost for the ~~2015~~2016 and year-end obligations as of December 31, ~~2015~~ 2016 were as follows:

	Pension Benefits
	U.S.		Non-U.S.		Other Postretirement
	Plans		Plans		Benefits
Used to calculate net periodic benefit cost	34.8515	%	12.7772	%	34.8418	%
Used to calculate benefit obligations	43.1590	%	2.7203	%	43.1898	%

• ~~Health~~Mortality ~~care cost trend~~Assumptions: We ~~review~~have ~~external~~reviewed ~~data~~the ~~and~~mortality ~~our~~improvement ~~historical~~tables ~~trends~~published ~~for~~by ~~health~~the ~~care~~Society ~~costs~~of toActuaries ~~determine~~in the ~~health~~three ~~care~~months ~~cost~~ended ~~trend~~December ~~rate.~~31, ~~The~~2016 ~~assumed~~that ~~health~~lowered ~~care~~life ~~cost~~expectancies ~~trend~~for ~~rate~~our ~~used~~U.S. toPlans. ~~measure~~This ~~next~~change ~~year’s~~in ~~postretirement~~assumptions ~~health~~decreased ~~care~~the ~~benefits is 6~~U.~~97%~~S. ~~for~~pension ~~both health care~~ and ~~drug~~postretirement ~~costs,~~plan ~~both~~obligation ~~declining~~by to$46 ~~an ultimate trend rate of 5~~million.~~00% in 2022.~~

30• Health care cost trend: We review external data and our historical trends for health care costs to determine the health care cost trend rate. The assumed health care cost trend rate used to measure next year’s postretirement health care benefits is 6.69% for health care and drug costs, both declining to an ultimate trend rate of 5.00% in 2022.

• Mortality Assumptions: We have reviewed the mortality improvement tables published by the Society of Actuaries in the three months ended December 31, 2015 and determined our current assumptions are appropriate to measure our December 31, 2015 U.S. pension plans’ benefit obligations.33

The following table illustrates the sensitivity to a change in certain assumptions for ~~projected~~the ~~benefit~~pension ~~obligations (“PBO”)~~ and ~~associated~~ ~~expense~~postretirement plans. The changes in these assumptions have no effect on our funding requirements.

	Pension Benefits												Other PostretirementBenefits
	United States Plans						Non-U.S. Plans
	U.S. Plans						Non-U.S. Plans
	Changein 2016PensionExpense			ChangeinPBO			Change in 2016 PensionExpense			ChangeinPBO			Changein 2016Expense		ChangeinPBO
	Changein 2017PensionExpense			ChangeinPBO			Change in 2017 PensionExpense			ChangeinPBO			Changein 2017Expense		ChangeinPBO
	(Millions of Dollars)
	(in millions)
25 basis point ("bp") decrease in discount rate	$	(1	)	$	3229		$	1		$	1620		$	—	$	87
25 bp increase in discount rate	—1			(3028		)	(1		)	(1519		)	—		(76		)
25 bp decrease in return on assets rate	2			n/a			—			n/a			n/a		n/a
25 bp increase in return on assets rate	(2		)	n/a			—			n/a			n/a		n/a

The assumed health care trend rate has a significant effect on the amounts reported ~~for~~the ~~non-pension~~postretirement plans. The following table illustrates the sensitivity to a change in the assumed health care trend rate:

	Total Service andInterest Cost			APBO
	(Millions of Dollars)
	(in millions)
100 bp increase in health care cost trend rate	$	1		$	2824
100 bp decrease in health care cost trend rate	$	(1	)	$	(2421	)

Environmental Matters

Environmental remediation liabilities are recognized when a loss is probable and can be reasonably estimated. Such liabilities generally are not subject to insurance coverage. The cost of each environmental remediation is estimated by engineering, financial, and legal specialists based on current law and considers the estimated cost of investigation and remediation required and the likelihood that, where applicable, other responsible parties will be able to fulfill their legal obligations and commitments. The process of estimating environmental remediation liabilities is complex and dependent primarily on the nature and extent of historical information and physical data relating to a contaminated site, the complexity of the site, the uncertainty as to what remediation and technology will be required, and the outcome of discussions with regulatory agencies and, if applicable, other responsible parties. In future periods, new laws or regulations, advances in remediation technologies and additional information about the ultimate remediation methodology to be used could significantly change our estimates. Refer to Note 17, Commitments and Contingencies, to the ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements included herein for additional details. We cannot ensure ~~that~~ environmental requirements will not change or become more stringent over time or ~~that~~ our eventual environmental costs and liabilities will not exceed the amount of current reserves. In the event ~~that~~ such liabilities were to significantly exceed the amounts recorded, our results of operations could be materially affected.

Asset Retirement Obligations

In determining whether the fair value of asset retirement obligations ("ARO") can reasonably be estimated, we must determine if the obligation can be assessed in relation to the acquisition price of the related asset or if an active market exists to transfer the obligation. If the obligation cannot be assessed in connection with an acquisition price and if no market exists for the transfer of the obligation, we must determine if it has sufficient information upon which to estimate the obligation using expected present value techniques. This determination requires us to estimate the range of settlement dates and the potential methods of settlement, and then to assign the probabilities to the various potential settlement dates and methods. The majority of the identified ARO liabilities involve ~~Asbestos~~asbestos related cleanup. Refer to Note 17, Commitments and Contingencies, to the ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements included herein for additional details. We cannot ensure that ARO requirements will not change or become more stringent over time or that our eventual environmental costs and liabilities will not exceed the amount of current reserves. In the event that such liabilities were to significantly exceed the amounts recorded, our results of operations could be materially affected.

31Valuation of Long-Lived Assets, Definite-Lived Intangible Assets, and Expected Useful Lives

~~Valuation~~We ofmonitor ~~Long~~our long-~~Lived~~lived ~~Assets~~and definite-lived assets for impairment indicators on an ongoing basis. If impairment indicators exist, ~~Intangible~~we ~~Assets~~perform ~~and~~the ~~Investments~~required inimpairment ~~Affiliates~~analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and ~~Expected~~recognized. ~~Useful~~Even ~~Lives~~if an impairment charge is not required, a reassessment of the useful lives over which depreciation or amortization is being recognized may be appropriate based on our assessment of the recoverability of these

We monitor our long-lived and definite lived assets for impairment indicators on an ongoing basis based on projections of anticipated future cash flows, including future profitability assessments of various manufacturing sites when events and circumstances warrant such a review. If impairment indicators exist, we perform the required impairment analysis by comparing the undiscounted cash flows expected to be generated from the long-lived assets to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Even if an impairment charge is not required, a reassessment of the useful lives over which depreciation or amortization is being recognized may be appropriate based on our assessment of the recoverability of these assets. We estimate cash flows and fair value using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments, and review of appraisals. The key factors which impact our estimates are (1) future production estimates; (2) customer preferences and decisions; (3) product pricing; (4) manufacturing and material cost estimates; and (5) product life / business retention. Any differences in actual results from the estimates could result in fair values different from the estimated fair values, which could materially effect our future results of operations and financial condition. We believe the projections of anticipated future cash flows and fair value assumptions are reasonable; however, changes in assumptions underlying these estimates could affect our valuations.34

assets. We estimate cash flows and fair value using internal budgets based on recent sales data, independent automotive production volume estimates and customer commitments, and review of appraisals. The key factors which effect our estimates are (1) future production estimates; (2) customer preferences and decisions; (3) product pricing; (4) manufacturing and material cost estimates; and (5) product life / business retention. Any differences in actual results from the estimates could result in fair values different from the estimated fair values, which could materially affect our future results of operations and financial condition. We believe the projections of anticipated future cash flows and fair value assumptions are reasonable; however, changes in assumptions underlying these estimates could affect our valuations.

Goodwill and Indefinite-lived Intangible Asset Impairment Testing

We review goodwill for impairment annually, or more frequently if events or changes in circumstances indicate ~~that~~ goodwill might be impaired. We perform impairment assessments at the reporting unit level. If the fair value of the reporting unit is greater than its carrying amount ~~(step 1)~~, goodwill is not considered to be impaired and the second step is not required. However, if the fair value of the reporting unit is less than its carrying amount, the second step is performed to measure the amount of the impairment ~~loss~~, if any. The second step requires a reporting unit to compare its implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the reporting unit would recognize an impairment loss for ~~that~~the excess. Assumptions used in the discounted cash flow analysis that have the most significant effect on the estimated fair value of the Company's reporting units are the weighted average cost of capital and revenue growth-rates.

WeThe ~~perform~~Company anhas ~~annual~~nine ~~impairment~~reporting ~~analysis~~units of our trademarks and brand names annually or more frequently if events or changes in circumstances indicate the assets might be impaired. We perform quantitative assessment estimating fair values based upon the prospective stream of hypothetical after-tax royalty cost savings discounted at rates that ~~reflect~~have ~~the~~goodwill ~~rates~~as of ~~return~~December 31, ~~appropriate for these intangible assets~~2016. ~~Our~~The ~~trademarks~~following ~~and~~table ~~brand~~categorizes ~~names~~the ~~further~~Company’s ~~broken~~goodwill ~~down~~ by ~~product~~reporting ~~line.~~unit ~~The~~as ~~primary,~~of ~~and most sensitive~~October 1, ~~input~~2016 ~~utilized~~according into ~~determining~~ the ~~fair~~level ~~values~~ of ~~trademarks~~excess ~~and~~between ~~brand~~the ~~names~~reporting isunit’s ~~sales~~fair byvalue ~~product line. We Company performed a sensitivity analysis on its trademarks~~ and ~~brand~~carrying ~~names and determined that a one percentage point decrease in its projected future sales growth rates within each aftermarket product line would result in a $1 million impairment.~~value:

We perform an annual impairment analysis of our trademarks and brand names annually, or more frequently if events or changes in circumstances indicate the assets might be impaired. We perform a quantitative assessment of estimating fair values based upon the prospective stream of hypothetical after-tax royalty cost savings discounted at rates that reflect the rates of return appropriate for these intangible assets. The primary, and most sensitive, input utilized in determining the fair values of trademarks and brand names is branded product sales. The Company performed a sensitivity analysis on its trademarks and brand names and determined a one percentage point decrease in its projected future sales growth rates within each aftermarket product line would not result in additional impairment charges.

Income Taxes

Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce our deferred tax assets to the amount that is more likely than not to be realized. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.

When establishing a valuation allowance, we consider future sources of taxable income such as “future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards” and “tax planning strategies.” A tax planning strategy is defined as “an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets.” In the event we determine it is more likely than not ~~that~~ the deferred tax assets will not be realized in the future, the valuation adjustment to the deferred tax assets will be charged to earnings in the period in which we make such a determination. The valuation of deferred tax assets requires judgment and accounting for the deferred tax effect of events that have been recorded in the financial statements or in tax returns and our future projected profitability. Changes in our estimates, due to unforeseen events or otherwise, could have a material ~~impact~~effect on our financial condition and results of operations.

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified. The amount of income taxes we pay is subject to ongoing audits by federal, state, and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax

3235

potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent ~~that~~ our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We report tax-related interest and penalties as a component of income tax expense. We do not believe there is a reasonable likelihood ~~that~~ there will be a material change in the tax related balances or valuation allowance balances. However, due to the complexity of some of these uncertainties, the ultimate resolution may be materially different from the current estimate. Refer to Note 16, Income Taxes, to the ~~audited~~Consolidated ~~consolidated~~Financial ~~financial~~Statements ~~statements~~ included herein for additional information.

Non-GAAP Measures:

Management utilizes Operational EBITDA as the key performance measure of segment profitability and uses the measure in its financial and operational decision making processes;, for internal reporting;, and for planning and forecasting purposes to effectively allocate resources. Operational EBIDTA is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization), as adjusted for additional amounts. Examples of these adjustments include impairment charges related to goodwill, other long-lived assets, and investments; restructuring charges; certain gains or losses on the settlement/extinguishment of obligations; and receivable financing charges. During 2015, we modified our definition of Operational EBITDA to adjust for financing charges related to certain receivable financing programs. Comparable periods have been adjusted to conform to this definition.

Operational EBITDA presents a performance measure exclusive of capital structure and the method by which net assets were acquired, disposed of, or financed. Management believes this measure provides additional transparency into its core operations and is most reflective of the operational profitability or loss of our operating segments and reporting units. The measure also allows management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among operating segments.

Operational EBITDA should not be considered a substitute for results prepared in accordance with U.S. GAAP and should not be considered an alternative to net income, which is the most directly comparable financial measure to Operational EBITDA that is in accordance with U.S. GAAP. Operational EBITDA, as determined and measured by ~~Federal Mogul~~us, should not be compared to similarly titled measures reported by other companies.

RESULTS OF OPERATIONS

The following discussion of our results of operations should be read in connection with Items 1, 3 and 7A of this Form 10-K, as well as “Forward-Looking Statements” and Item 1.A. “Risk Factors.” These items provide additional relevant information regarding the business, our strategy, and the various industry dynamics in the OE market and the aftermarket which have a direct and significant effect on our results of operations, as well as the risks associated with our business.

Consolidated Results:

	Year Ended December 31									~~Variance~~Favorable/(Unfavorable)
	2015			2014			2013			2015 v 2014			2014 v 2013
	2016			2015			2014			2016 v 2015			2015 v 2014
	(Millions of Dollars, Except Per Share Amounts)
	(in millions)
Consolidated Statement of Operations Data
Net sales	$	7,~~419~~434		$	7,~~317~~419		$	67,~~786~~317		$	~~102~~15		$	~~531~~102
Cost of products sold	(6,~~345~~301		)	(6,~~260~~345		)	(56,~~766~~260		)	~~(85~~44		)	(~~494~~85		)
Gross profit	1,~~074~~133			1,~~057~~074			1,~~020~~057			1759			3717
Selling, general and administrative expenses	(~~794~~815		)	(~~776~~794		)	(~~719~~776		)	(1821		)	(5718		)
Goodwill and intangible impairment expense, net	(946		)	(~~120~~94		)	—(120		)	2688			~~(120~~26		)
Interest expense, net	(138		)	(120		)	(99		)	(18		)	(21		)
Restructuring charges and asset impairments, net	(44		)	(121		)	(110		)	77			(11		)
Restructuring charges and asset impairments, net	(121		)	(110		)	(29		)	(11		)	(81		)
Amortization expense	(58		)	(59		)	(49		)	1			(10		)
Amortization expense	(59		)	(49		)	(47		)	(10		)	(2		)
Other income (expense), net	21			(5		)	(11		)	26			6
Equity earnings of nonconsolidated affiliates, net of tax	56			48			34			8			14
Interest expense, net	(145		)	(138		)	(120		)	(7		)	(18		)
Loss on debt extinguishment	—			~~(24~~—		)	—(24		)	24—			~~(24~~—		)
Other income (expense), net	(5		)	(11		)	(3		)	6			(8		)
Equity earnings of nonconsolidated affiliates, net of tax	59			56			48			3			8
Income tax (expense) benefit	(3055		)	(5630		)	(56		)	26(25		)	—26
Net income (loss) from continuing operations	~~(111~~90		)	(~~161~~111		)	~~101~~(161		)	50201			~~(262~~26		)
Gain (loss) from discontinued operations, net of tax	7—			—7			~~(52~~—		)	(7		)	527
Less net income attributable to noncontrolling interests	(6		)	(7		)	(8		)	1			1
Net income (loss)	90			(104		)	(161		)	194			57
Net income (loss) attributable to Federal-Mogul	$	(110	)	$	(168	)	$	41		$	58		$	(209	)
Less net income attributable to noncontrolling interests	(8		)	(6		)	(7		)	(2		)	1
Amounts attributable to Federal-Mogul:
Net income (loss) attributable to Federal-Mogul	$	82		$	(110	)	$	(168	)	$	192		$	58
Net income (loss) from continuing operations	(117		)	(168		)	93			51			(261		)
Income (loss) from discontinued operations, net of tax	7			—			(52		)	7			52
Net income (loss)	$	(110	)	$	(168	)	$	41		$	58		$	(209	)

Comparison of Year Ended December 31, ~~2015~~2016 to Year Ended December 31, ~~2014~~2015

Sales: Consolidated net sales increased by $102 million, or 1.4%, compared to the year ended December 31, 2014. The increase over 2014 sales was primarily driven by a 10% increase in sales volumes of $743 million (which included a $657 million benefit from acquisitions) and was substantially offset by a $642 million unfavorable effect of foreign currency exchange.

~~Cost~~Consolidated ofnet ~~Sales:~~sales ~~Cost of products sold~~ increased by $8515 million compared to the year ended December 31, ~~2014~~2015. The increase was primarily driven by a ~~$645~~1.9% ~~million~~increase in ~~incremental costs related to higher~~ sales volumes ~~attributable~~of to$143 ~~acquisitions,~~million ~~and~~(which ~~partly~~included toa ~~volumes~~$91 ~~related~~million tobenefit ~~organic~~from ~~growth. This~~acquisitions) and was substantially offset by ~~the~~a $~~529~~107 million ~~favorable~~unfavorable effect of foreign currency exchange ~~and $31 million of savings from net performance~~. Net performance gains were burdened by incremental costs associated with the realignment of our North American distribution centers within our Motorparts division and strategic initiatives within both divisions.

~~Gross~~Cost ~~Profit: Gross profit as a percentage~~ of ~~sales,~~Products for the year ended December 31, 2015 was 14.5% compared to 14.4% for the year ended December 31, 2014. Gross profit increased by $17 million compared to the year ended December 31, 2014. The increase was primarily driven by the favorable effects of higher sales volumes (net of changes in mix) of $98 million, which included the effect from acquisitions, $32 million favorable effects of net performance. These favorable effects were substantially offset by the negative effects of foreign currency exchange. Sold:

~~Selling,~~Cost ~~General~~of ~~and~~products ~~Administrative~~sold ~~Expense:~~decreased ~~Selling,~~by ~~general~~$44 ~~and~~million ~~administrative~~compared ~~expenses~~to ~~(“SG&A”) as a percentage of sales, was 10.7% for~~ the year ended December 31, 2015 ~~as compared to 10~~.6% ~~for~~The ~~the~~decrease ~~year~~was ~~ended~~primarily ~~December 31,~~driven ~~2014.~~by ~~This~~$99 ~~increase~~million of ~~$18~~savings ~~million~~from isnet ~~primarily~~performance ~~attributable~~and toa ~~the~~$92 ~~addition~~million favorable effect of ~~SG&A~~foreign ~~expenses~~currency ~~associated~~exchange. ~~with~~This ~~acquisitions,~~was partially offset by ~~foreign~~the ~~exchange.~~$147 ~~Included~~million in ~~SG&A~~incremental ~~was~~costs ~~a $7 million charge~~ related to ~~the~~higher ~~bankruptcy~~sales ofvolumes ~~one~~attributable ofto ~~our~~organic ~~aftermarket~~growth ~~customers.~~and acquisitions.

~~Research~~Gross ~~and development (“R&D”) costs, including product and validation costs, of $189 million and $192 million for the years ended December 31, 2015 and December 31, 2014.~~Profit:

34Gross profit as a percentage of sales for the year ended December 31, 2016 was 15.2% compared to 14.5% for the year ended December 31, 2015. Gross profit increased by $59 million compared to the year ended December 31, 2015. The increase was primarily driven by a $78 million favorable effect of performance, offset by a $15 million negative effect of foreign currency exchange.

~~Goodwill and intangible impairment expense~~Selling, ~~net:~~General ~~Goodwill~~ and ~~intangible~~Administrative ~~asset~~Expense: impairments decreased by $26 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. During 2015, we impaired $50 million and $44 million of goodwill related to our Motorparts and Powertrain segments. During 2014, we impaired $120 million of goodwill related to our Motorparts segment.

~~Restructuring~~Selling, ~~charges~~general and ~~asset~~administrative ~~impairments:~~expenses ~~Restructuring~~(“SG&A”) ~~charges~~as ~~and~~a ~~asset~~percentage ~~impairments~~of ~~increased~~sales, bywas $11 ~~million~~.0% for the year ended December 31, ~~2015~~2016 as compared to 10.7% for the year ended December 31, ~~2014~~2015. This ~~was~~increase ~~driven~~of by$21 ~~overall~~million ~~higher~~is ~~severance~~primarily ~~and~~attributable ~~other~~to ~~charges~~an increase in marketing expenses of $3 9 million, ~~primarily~~an ~~related~~additional to$4 ~~our~~million ~~overall~~from ~~restructuring~~acquisitions, ~~efforts~~and inhigher ~~Europe~~compensation, ~~and~~including anpension ~~increase~~costs, inwhich ~~asset~~were ~~impairments~~partially ofoffset ~~$8 million,~~by ~~primarily~~favorable ~~related~~effects toof anprior ~~impairment~~year ofbad ~~assets~~debt ~~held~~charges ~~for~~of ~~sale~~$8 ~~during~~million ~~2015.~~and foreign

Amortization expense: Amortization expense increased by $10 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. During 2015, we completed the acquisition of TRW’s valvetrain business thereby adding $107 million of definite lived intangible assets which contributed to the increase in amortization expense.

Equity earnings of nonconsolidated affiliates: Equity in earnings of nonconsolidated affiliates increased by $8 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. The increase was primarily driven by increased earnings at a number of our nonconsolidated affiliates, including an initial investment in two new affiliates,

and the sale of a nonconsolidated affiliate that incurred a loss of $1 million in 2014.

Loss on Debt extinguishment: Loss on Debt extinguishment was $24 million for the year ended December 31, 2014. In 2014, we entered into a new tranche B term loan facility and a new tranche C term loan facility and repaid our existing outstanding indebtedness under previous facilities. In conjunction with the transaction, we recorded a loss on retirement of debt of $24 million, including the write-off of a portion of related debt issuance costs and debt discount.

Interest Expense, Net: Net interest expense was $138 million in the year ended December 31, 2015 compared to $120 million for the year ended December 31, 2014. This increase is primarily attributable to the realization of higher interest rates for the full year, and increased borrowings under the Replacement Revolving Facility, offset by lower amortization costs.

Other Income (Expense), Net: Other expense, net was $5 million for the year ended December 31, 2015 compared to $11 million for the year ended December 31, 2014. The primary reason for the decrease is a $6 million reduction in the amount of segmentation costs recognized for the year ended December 31, 2015 compared to the year ended December 31, 2014.

Income tax (expense) / benefit: For the year ended December 31, 2015, we recorded an income tax expense of $30 million on a loss from continuing operations before income taxes of $81 million, compared to income tax expense of $56 million on a loss from continuing operations before income taxes of $105 million for the year ended December 31, 2014.

Income tax expense for the year ended December 31, 2015 differs from the U.S. statutory rate due primarily to goodwill impairment, pre-tax losses with no tax benefits, partially offset by pre-tax income taxed at rates lower than the U.S. statutory rate, recording a valuation allowance on deferred tax assets that are believed to be not more likely than not to be realized and a tax benefit recorded related to special economic zone tax incentive.

The income tax expense for the year ended December 31, 2014 differs from the U.S. statutory rate due primarily to goodwill impairment, pre-tax income taxed at rates lower than the U.S. Statutory rate, recording a valuation allowance on deferred tax assets that are believed to be not more likely than not to be realized, income in jurisdictions with no tax expense due to offsetting valuation allowance release, partially offset by pre-tax losses with no tax benefits and a tax benefit recorded related to special economic zone tax incentive.

Gain (loss) from discontinued operation, net of tax: During the year ended December 31, 2015, we recognized a $7 million adjustment (no income tax effect) which is included in “Gain (loss) from discontinued operations, net of tax” within the consolidated statement of operations related to a 2013 divestiture of our fuel pump business.

Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013

Sales: Consolidated net sales increased by $531 million, or 8%, compared to the year ended December 31, 2014. The increase over 2013 sales was primarily driven by a 9% increase in sales volumes resulting from a $356 million benefit from acquisitions, higher demand, and organic growth, together totaling $612 million, which was partially offset by a $51 million unfavorable effect of foreign currency exchange.

Cost of Sales: Cost of products sold increased by $494 million compared to the year ended December 31, 2014. The increase was primarily driven by a $505 million increase in costs primarily related to higher sales volumes, which is partly attributable to acquisitions, and $32 million of unfavorable net performance. These costs were partially offset by the $43 million favorable effect of foreign currency exchange.

Gross Profit: Gross profit as a percentage of sales for the year ended December 31, 2014 was 14.4% of sales, for the year ended December 31, 2014 compared to 15.0% for the year ended December 31, 2013. While gross profit increased by $37 million for the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to increased sales volumes, the gross profit margin decreased primarily due to: changes in mix and pricing, and increases to strategic initiatives and unfavorable productivity.

Selling, General and Administrative Expense: Selling, general and administrative expenses (“SG&A”) as a percentage of sales, was 10.6% for the years ended December 31, 2014 and 2013. The increase of $57 million is primarily attributable to the addition of SG&A expenses associated with acquisitions. Included in SG&A were research and development (“R&D”) costs, including product and validation costs, of $192 million and $173 million for the years ended December 31, 2014 and December 31, 2013, respectively.

Goodwill and intangible impairment expense, net: Goodwill and intangible asset impairments increased by $120 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. During 2014, we impaired $120 million of goodwill related to our Motorparts segment.

Interest Expense, Net: Net interest expense was $120 million in the year ended December 31, 2014 compared to $99 million for the year ended December 31, 2013. The increase is primarily due to the increased interest rates after the refinancing of our term loans in April 2014.

Restructuring charges and asset impairments: Restructuring charges and asset impairments increased by $81 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. The increase was primarily related to higher severance and other charges of $46 million, primarily related to our overall restructuring efforts in Europe, an increase in asset impairments of $16 million, which included a $5 million impairment of a nonconsolidated affiliate, partially offset by an OPEB curtailment gain recorded in 2013 that was related to a restructuring action.

Amortization expense: Amortization expense increased by $2 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. During 2014, we completed the acquisition of certain Affinia assets and DZV bearings operations thereby adding $52 million of definite lived intangible assets which contributed to the increase in amortization expense.

Equity in earnings of nonconsolidated affiliates: Equity in earnings of nonconsolidated affiliates increased by $14 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. The increase was primarily driven by increased earnings at nonconsolidated affiliates located in the Asia and EMEA regions.

Other Expense, Net: Other expense, net was $11 million for the year ended December 31, 2014 compared to $3 million for the year ended December 31, 2013. The primary reason for the increase is the recognition of $10 million in segmentation costs during the year ended December 31, 2014.

Foreign currency exchange: We recognized $7 million in foreign currency exchange losses during the year ended December 31, 2014, compared to $10 million in foreign currency exchange losses during the year ended December 31, 2013.

Income tax (expense) / benefit: For the year ended December 31, 2014, we recorded income tax expense of $56 million on a loss from continuing operations before income taxes of $105 million, compared to income tax expense of $56 million on a loss from continuing operations before income taxes of $157 million for the year ended December 31, 2013

offsetting valuation allowance release, partially offset by pre-tax losses with no tax benefits and a tax benefit recorded related to special economic zone tax incentive.

The income tax expense for the year ended December 31, 2013 differs from the U.S. statutory rate due primarily to goodwill impairment with no tax benefit and pre-tax losses with no tax benefit, partially offset by pre-tax income taxed at rates lower than the U.S. Statutory rate, income in jurisdictions with no tax expense due to offsetting valuation allowance release, release of uncertain tax positions due to audit settlements, valuation allowance release, and a tax benefit recorded related to special economic zone tax incentive.

Gain (loss) from discontinued operation net of tax: During the year ended December 31, 2013, we recognized a $52 million loss which is included in “Gain (loss) from discontinued operations, net of tax” within the consolidated statement of operations related to the divestiture of three separate businesses.

exchange of $8 million. SG&A includes R&D costs, including product and validation costs of $192 million and $189 million for the years ended December 31, 2016 and December 31, 2015.

Goodwill and intangible impairment expense, net:

Goodwill impairment charges decreased by $88 million for the year ended December 31, 2016. In 2016, an additional impairment charge of $6 million was recorded as a result of finalizing our 2015 year-end step two goodwill impairment test during the year ended December 31, 2016 for one reporting unit. In 2015, an impairment charge of $56 million was recorded as a result of an analysis of interim impairment indicators in one reporting unit and an impairment charge of $38 million in three reporting units as a result of the annual impairment analysis. These charges were was partially offset by a $6 million reduction to a previously recognized impairment charge as a result of the completion of our 2014 year-end step two goodwill analysis during the year ended December 31, 2015.

Restructuring charges and asset impairments, net:

Restructuring charges and asset impairments, net decreased by $77 million for the year ended December 31, 2016 compared to the year ended December 31, 2015. The decreases are related to higher severance and other charges in the year ended December 31, 2015, primarily related to our restructuring efforts in EMEA and ROW aimed at optimizing our cost structure.

Amortization Expense:

Amortization expense decreased by $1 million for the year ended December 31, 2016 compared to the year ended December 31, 2015.

Other income (expense), net:

Other income (expense), net increased by $26 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015. The primary reason for the net increase is the recognition of an $7 million net gain on the sale of assets, as compared to $4 million for the year ended December 31, 2015. In addition, we recognized a loss on disposition of an equity method investment of $11 million and segmentation costs of $4 million during the year ended December 31, 2015.

Interest expense, net:

Net interest expense increased $7 million for the year ended December 31, 2016. This increase is primarily attributable to higher borrowings and interest rates under our credit facilities.

Equity earnings of nonconsolidated affiliates:

Equity in earnings of nonconsolidated affiliates increased by $3 million for the year ended December 31, 2016 compared to the year ended December 31, 2015. The increase was primarily driven by the full year effect of one of our China joint ventures included in the results for the year ended December 31, 2016.

Income tax (expense) benefit:

For the year ended December 31, 2016, we recorded income tax expense of $55 million on income from continuing operations before income taxes of $145 million, compared to income tax expense of $30 million on a loss from continuing operations before income taxes of $81 million for the year ended December 31, 2015.

Gain (loss) from discontinued operations, net of tax:

Gain (loss) from discontinued operations decreased by $7 million for the year ended December 31, 2016 compared to the year ended December 31, 2015. During 2015, we recognized a $7 million adjustment (no income tax effect) to a prior year divestiture.

Comparison of Year Ended December 31, 2015 to Year Ended December 31, 2014

Sales:

Consolidated net sales increased by $102 million compared to the year ended December 31, 2014. The increase was primarily driven by a 10.2% increase in sales volumes of $743 million (which included a $657 million benefit from acquisitions) and was substantially offset by a $642 million unfavorable effect of foreign currency exchange.

Cost of Products Sold:

Cost of products sold increased by $85 million compared to the year ended December 31, 2014. The increase was driven by a $645 million in incremental costs related to higher sales volumes attributable to acquisitions, and partly to volumes related to organic growth. This was substantially offset by the $529 million favorable effect of foreign currency exchange.

Gross Profit:

Gross profit as a percentage of sales for the year ended December 31, 2015 was 14.5% compared to 14.4% for the year ended December 31, 2014. Gross profit increased by $17 million compared to the year ended December 31, 2014. The increase was primarily driven by the favorable effects of higher sales volumes (net of changes in mix) of $98 million and net performance of $32 million offset by the negative effects of foreign currency exchange of $113 million.

Selling, General and Administrative Expense:

Selling, general and administrative expenses (“SG&A”) as a percentage of sales was 10.7% for the year ended December 31, 2015 as compared to 10.6% for the year ended December 31, 2014. This increase of $18 million is primarily attributable to the addition of SG&A expenses associated with acquisitions, partially offset by foreign exchange. Included in SG&A was a $7 million charge related to the bankruptcy of one of our aftermarket customers. Research and development (“R&D”) costs, including product and validation costs, of $189 million and $192 million for the years ended December 31, 2015 and December 31, 2014.

Goodwill and intangible impairment expense, net:

Goodwill impairment charges decreased by $26 million for the year ended December 31, 2015. During 2015, we impaired $50 million and $44 million of goodwill related to our Motorparts and Powertrain segments. During 2014, we impaired $120 million of goodwill related to our Motorparts segment.

Restructuring charges and asset impairments, net:

Net restructuring charges and asset impairments increased by $11 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. This increase is driven by overall higher severance and other charges incurred in the year ended December 31, 2015, primarily related to our overall restructuring efforts in Europe, and an impairment of assets held for sale during 2015.

Amortization expense:

Amortization expense increased by $10 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. During 2015, we completed the acquisition of TRW’s valvetrain business thereby adding $107 million of definite lived intangible assets which contributed to the increase in amortization expense.

Other Income (Expense), Net:

Other income (expense), net decreased by $6 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. The primary reason for the decrease was a $6 million reduction in the amount of segmentation costs recognized during the year ended December 31, 2015.

Interest Expense, Net:

Net interest expense increased by $18 million in the year ended December 31, 2015 compared to the year ended December 31, 2014. This increase is primarily attributable to the realization of higher interest rates for the full year, and increased borrowings under our revolving credit facilities, offset by lower amortization costs.

Loss on Debt extinguishment:

Loss on debt extinguishment decreased by $24 million for the year ended December 31, 2014 as compared to the year ended December 31, 2014. In 2014, we entered into new U.S. credit facilities and repaid our existing outstanding indebtedness under previous facilities, resulting in a loss on the retirement of debt of $24 million, including the write-off of a portion of related debt issuance costs and debt discount.

Equity earnings of nonconsolidated affiliates:

Equity in earnings of nonconsolidated affiliates increased by $8 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. The increase was primarily driven by increased earnings at a number of our nonconsolidated affiliates, including an initial investment in two new affiliates and the sale of a nonconsolidated affiliate, which incurred a loss of $1 million during the year ended December 31, 2014.

Income tax (expense) / benefit:

For the year ended December 31, 2015, we recorded an income tax expense of $30 million on a loss from continuing operations before income taxes of $81 million, compared to income tax expense of $56 million on a loss from continuing operations before income taxes of $105 million for the year ended December 31, 2014.

Gain (loss) from discontinued operation, net of tax:

Gain (loss) from discontinued operations increased by $7 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. During 2015, we recognized a $7 million adjustment (no income tax effect) to a prior year divestiture.

SEGMENT RESULTS OF OPERATIONS

Comparison of Year Ended December 31, 2016 to Year Ended December 31, 2015

2016 Sales Analysis:



Sales by Region:									Volume Increase (Decrease) by Region:
									Excluding Acquisitions			Including Acquisitions
	Powertrain		%		Motorparts		%		Powertrain	Motorparts		Powertrain	Motorparts
	(in millions)								(in millions)
North America	$	1,584	35	%	$	1,787	56	%	3	(51	)	47	(35	)
EMEA	1,997		45	%	1,154		36	%	11	(11	)	32	(11	)
ROW	882		20	%	274		8	%	75	25		84	26
	$	4,463	100	%	$	3,215	100	%	89	(37	)	163	(20	)



	Powertrain			Motorparts			Inter-segment Elimination			Total Reporting Segment
	(in millions)
2015 Sales	$	4,450		$	3,253		$	(284	)	$	7,419
External sales volumes	89			(37		)	—			52
Inter-segment sales volumes	(41		)	1			40			—
Acquisitions	74			17			—			91
Other	(52		)	31			—			(21		)
Foreign currency	(57		)	(50		)	—			(107		)
2016 Sales	$	4,463		$	3,215		$	(244	)	$	7,434

Other: Primarily represents commercial actions and customer pricing.

2016 Cost of Products Sold Analysis:



	Powertrain			Motorparts			Inter-segment Elimination			Total Reporting Segment
	(in millions)
2015 Cost of Products Sold	$	(3,913	)	$	(2,716	)	$	284		$	(6,345	)
Sales volumes / mix	(115		)	8			(40		)	(147		)
Performance	40			59			—			99
Foreign currency	59			33			—			92
2016 Cost of Products Sold	$	(3,929	)	$	(2,616	)	$	244		$	(6,301	)

Sales Volumes: The increase is primarily due to the increase in sales in our Powertrain segment.

Performance: Performance includes the benefit of favorable material and service sourcing, and productivity.

2016 Gross Profit Analysis:



	Powertrain			Motorparts			Inter-segment Elimination		Total Reporting Segment
	(in millions)
2015 Gross Profit	$	537		$	537		$	—	$	1,074
Sales volumes/mix	7			(11		)	—		(4		)
Performance and other	(12		)	90			—		78
Foreign currency	2			(17		)	—		(15		)
2016 Gross Profit	$	534		$	599		$	—	$	1,133

2016 Operational EBITDA Analysis:



	Powertrain			Motorparts			Inter-segment Elimination		Total Reporting Segment
	(in millions)
2015 Operational EBITDA^(a)	$	428		$	216		$	—	$	644
Sales volumes / mix	11			(13		)	—		(2		)
Performance	18			94			—		112
Equity earnings in nonconsolidated affiliates	5			—			—		5
Other costs^(b)	13			(16		)	—		(3		)
Foreign currency	(2		)	(10		)	—		(12		)
2016 Operational EBITDA ^(a)	$	473		$	271		$	—	$	744
^(a)Refer to “Non-GAAP Measures” in the Critical Accounting Estimates section.
^(b)Other costs include pension costs, bad debt expense, gain (loss) on sale of assets, and other compensation related costs.

Comparison of Year Ended December 31, 2015 to Year Ended December 31, 2014

2015 Sales Analysis:

Sales by Region:									Volume Increase (Decrease) by Region:
	Powertrain		%		Motorparts		%
									Excluding Acquisitions			Including Acquisitions
	(Millions of Dollars)
	Powertrain		%		Motorparts		%		Powertrain	Motorparts		Powertrain	Motorparts
North America	$	1,562	35	%	$	1,815	56	%
	(in millions)								(in millions)
EMEA	2,059		46	%	1,195		37	%
North America	$	1,562	35	%	$	1,815	56	%	13	30		145	71
ROW	829		19	%	243		7	%
EMEA	2,059		46	%	1,195		37	%	36	(18	)	279	152
	$	4,450	100	%	$	3,253	100	%
ROW	829		19	%	243		7	%	4	21		46	50
	$	4,450	100	%	$	3,253	100	%	53	33		470	273

Volume Increase (Decrease) by Region:
		Powertrain				Motorparts				Inter-segmentElimination				TotalReportingSegment
	Excluding Acquisitions														Including Acquisitions
		(in millions)
	Powertrain				%			Motorparts				%			Powertrain		%		Motorparts		%
2014 Sales		$	4,430			$	3,192			$	(305	)		$	7,317
	(Millions of Dollars)														(Millions of Dollars)
External sales volumes		53				33				—				86
North America	$	13			0.3	%		$	30			0.9	%		$	145	3.3	%	$	71	2.2	%
Inter-segment sales volumes		(15		)		(6		)		21				—
EMEA	36				0.8	%		(18		)		(0.6	)%		279		6.3	%	152		4.7	%
Acquisitions		417				240				—				657
ROW	4				0.1	%		21				0.7	%		46		1.0	%	50		1.5	%
Other		(28		)		29				—				1
	$	53			1.2	%		$	33			1.0	%		$	470	10.6	%	$	273	8.4	%
Foreign currency		(407		)		(235		)		—				(642		)
2015 Sales		$	4,450			$	3,253			$	(284	)		$	7,419

	Powertrain			Motorparts			Inter-segmentElimination			TotalReportingSegment
	(Millions of Dollars)
2014 Sales	$	4,430		$	3,192		$	(305	)	$	7,317
External sales volumes	53			33			—			86
Inter-segment sales volumes	(15		)	(6		)	21			—
Acquisitions	417			240						657
Other	(28		)	29			—			1
Foreign currency	(407		)	(235		)	—			(642		)
2015 Sales	$	4,450		$	3,253		$	(284	)	$	7,419

Other: Primarily represents commercial actions and customer pricing.

Other: Primarily represents commercial actions and pricing.

2015 Cost of Products Sold Analysis:

	Powertrain			Motorparts			Inter-segmentElimination			TotalReportingSegment
	(Millions of Dollars)
	(in millions)
2014 Cost of Products Sold	$	(3,897	)	$	(2,668	)	$	305		$	(6,260	)
Sales volumes / mix	(407		)	(217		)	(21		)	(645		)
Performance	41			(10		)	—			31
Foreign currency	350			179			—			529
2015 Cost of Products Sold	$	(3,913	)	$	(2,716	)	$	284		$	(6,345	)

Sales Volumes: The increase is primarily due to the increase in sales attributable to acquisitions.

38Performance: Performance includes costs to implement strategic initiatives, materials and service sourcing, and productivity. The Motorparts segment includes costs related to the realignment of our North American distribution network.

Performance: Represents cost savings from various initiatives in excess of the costs to implement initiatives which are primarily focused on obtaining cost efficiencies, and/or are considered to be strategic in nature. Performance also includes the benefit of favorable material and service sourcing. The Motorparts segment includes costs related to the realignment of our North American distribution network. 43

2015 Gross Profit Analysis:

	Powertrain			Motorparts			Inter-segmentElimination		TotalReportingSegment
	(Millions of Dollars)
	(in millions)
2014 Gross Profit	$	533		$	524		$	—	$	1,057
Sales volumes/mix	48			50			—		98
Sales volumes / mix	48			50			—		98
Performance and other	13			19			—		32
Foreign currency	(57		)	(56		)	—		(113		)
2015 Gross Profit	$	537		$	537		$	—	$	1,074

2015 Operational EBITDA Analysis:

	Powertrain			Motorparts			Inter-segmentElimination		TotalReportingSegment
	(Millions of Dollars)
	(in millions)
2014 Operational EBITDA(a)	$	431		$	199		$	—	$	630
Sales volumes / mix	50			32			—		82
Performance and other	(6		)	12			—		6
Performance	(6		)	12			—		6
Equity earnings in nonconsolidated affiliates	12			(1		)	—		11
Equity earnings of non-consolidated affiliates	12			(1		)	—		11
Increase in other costs	(1		)	—			—		(1		)
Other costs(b)	(1		)	—			—		(1		)
Foreign currency	(58		)	(26		)	—		(84		)
2015 Operational EBITDA (a)	$	428		$	216		$	—	$	644
2015 Operational EBITDA(a)	$	428		$	216		$	—	$	644
(a) Refer to “Non-GAAP Measures” in the Critical Accounting Estimates section above.
(a) Refer to “Non-GAAP Measures” in the Critical Accounting Estimates section.
(b) Other costs include pension costs, bad debt expense, gain (loss) on sale of assets, and other compensation related costs.

Sales volume / mix: Sales volume and mix included in Operational EBITDA includes the effects of increased selling, general, and administrative expenses attributable to acquisitions, net of adjustments to earnings that are included in Operational EBITDA. 44

Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013

2014 Sales Analysis:

Sales by Region:
	Powertrain		%		Motorparts		%
	(Millions of Dollars)
North America	$	1,478	34	%	$	1,745	55	%
EMEA	2,139		48	%	1,238		39	%
ROW	813		18	%	209		6	%
	$	4,430	100	%	$	3,192	100	%

Volume Increase (Decrease) by Region:
	Excluding Acquisitions									Including Acquisitions
	Powertrain		%		Motorparts			%		Powertrain		%		Motorparts		%
	(Millions of Dollars)									(Millions of Dollars)
North America	$	125	3.0	%	$	(34	)	(1.2	)%	$	125	3.0	%	$	93	3.2	%
EMEA	106		2.5	%	(30		)	(1.0	)%	124		3.0	%	154		5.2	%
ROW	81		1.9	%	8			0.3	%	81		1.9	%	35		1.2	%
	$	312	7.4	%	$	(56	)	(1.9	)%	$	330	7.9	%	$	282	9.6	%

	Powertrain			Motorparts			Inter-segmentElimination			TotalReportingSegment
	(Millions of Dollars)
2013 Sales	$	4,173		$	2,935		$	(322	)	$	6,786
External sales volumes	312			(56		)	—			256
Inter-segment sales volumes	(17		)	—			17			—
Acquisitions	18			338						356
Other	(29		)	(1		)	—			(30		)
Foreign currency	(27		)	(24		)	—			(51		)
2014 Sales	$	4,430		$	3,192		$	(305	)	$	7,317

Other: Primarily represents product pricing adjustments.

2014 Cost of Products Sold Analysis:

	Powertrain			Motorparts			Inter-segmentElimination			TotalReportingSegment
	(Millions of Dollars)
2013 Cost of Products Sold	$	(3,656	)	$	(2,432	)	$	322		$	(5,766	)
Sales volumes / mix	(252		)	(253		)	—			(505		)
Inter-segment sales volumes	17			—			(17		)	—
Performance	(28		)	(4		)	—			(32		)
Foreign currency	22			21			—			43
2014 Cost of Products Sold	$	(3,897	)	$	(2,668	)	$	305		$	(6,260	)

Sales Volumes: The increase is primarily due to the increase in sales attributable to higher demand and organic growth in all regions within our Powertrain division and an increase in sales attributable to acquisitions within our Motorparts division.

Performance: Represents costs to implement various initiatives which are primarily focused on obtaining cost efficiencies, and/or are considered to be strategic in nature. This also includes increases in depreciation offset by favorable materials and service sourcing. Motorparts also incurred costs related to integrating recent acquisitions.

2014 Gross Profit Analysis:

	Powertrain			Motorparts			Inter-segmentElimination		TotalReportingSegment
	(Millions of Dollars)
2013 Gross Profit	$	517		$	503		$	—	$	1,020
Sales volumes / mix	78			29			—		107
Performance and other	(57		)	(5		)	—		(62		)
Foreign currency	(5		)	(3		)	—		(8		)
2014 Gross Profit	$	533		$	524		$	—	$	1,057

2014 Operational EBITDA Analysis:

	Powertrain			Motorparts			Inter-segmentElimination		TotalReportingSegment
	(Millions of Dollars)
2013 Operational EBITDA(a)	$	381		$	217		$	—	$	598
External sales volumes / mix	82			12			—		94
Performance and other	(38		)	(16		)	—		(54		)
Equity earnings of non-consolidated affiliates	10			2			—		12
Increase / (Decrease) in other costs	(1		)	(9		)	—		(10		)
Foreign currency	(3		)	(7		)	—		(10		)
2014 Operational EBITDA(a)	$	431		$	199		$	—	$	630
(a) Refer to “Non-GAAP Measures” in the Critical Accounting Estimates section above.

Reconciliation of Operational EBITDA to Net Income (loss):

	2015			2014
	Year ended December 31,
	(Millions of Dollars)
	2016			2015
Total Operational EBITDA	$	644		$	630
	(in millions)
Powertrain	$	473		$	428
Motorparts	271			216
Total Operational EBITDA	$	744		$	644
Items required to reconcile Operational EBITDA to EBITDA:
Restructuring charges and asset impairments (a)	~~(121~~$	(44	)	~~(110~~$	(121	)
Goodwill and intangible impairment expense, net	(946		)	(~~120~~94		)
Loss on debt extinguishment	—			(24		)
Loss on sale of equity method investment	—			(11		)
Loss on sale of equity method investment	(11		)	—
Financing charges	(12		)	(9		)
Financing charges	(9		)	(6		)
Discontinued operations	—			7
Discontinued operations	7			—
Acquisition related costs	(5		)	(6		)
Acquisition related costs	(6		)	(16		)
Segmentation costs	—			(4		)
Segmentation costs	(4		)	(10		)
Other (b)	(12		)	(1		)
Other (b)	(1		)	5
EBITDA	$	665		$	405
EBITDA	405			349
Items required to reconcile EBITDA to net income (loss):
Depreciation and amortization	~~(341~~$	(375	)	~~(334~~$	(341	)
Interest expense, net	(~~138~~145		)	(~~120~~138		)
Income tax (expense) benefit	(3055		)	(5630		)
Net income (loss)	$	~~(104~~90	)	$	(~~161~~104	)

Footnotes:	~~2015~~2016			~~2014~~2015
(a) Restructuring charges and asset impairments, net:	(~~Millions~~in ~~of Dollars~~millions)
Restructuring charges related to severance and other charges, net	~~(89~~$	(27	)	$	(8689	)
Asset impairments, including impairments related to restructuring activities	(3217		)	(2432		)
Total Restructuring charges	~~(121~~$	(44	)	~~(110~~$	(121	)
(b) Other reconciling items:
Headquarters relocation costs	—			(6		)
Non-service cost components associated with U.S. based funded pension plans	$	(13	)	$	1
Non-service cost components associated with U.S. based funded pension plans	1			6
Stock appreciation rights	—			1
Stock appreciation rights	1			4
Other	1			(3		)
Other	(3		)	1
	$	(12	)	$	(1	)
	$	(1	)	$	5

4245

Liquidity and Capital Resources

Operating Activities

As summarized in the table below, net cash provided from (used by) operating activities for the years ended December 31, ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014:

	Years Ended December 31
	2015			2014			2013
	2016			2015			2014
	(Millions of Dollars)
	(in millions)
Operational cash flow before changes in operating assets and liabilities	$	~~264~~417		$	~~296~~264		$	~~318~~296
Changes in operating assets and liabilities:
Accounts receivable, net	~~(10~~111		)	(4710		)	1(47		)
Inventories, net	~~(172~~5		)	(84172		)	(2184		)
Accounts payable	187			7218			7972
Other assets and liabilities	~~(62~~6		)	41(62		)	41
Total change in operating assets and liabilities	~~(226~~129		)	(18226		)	~~100~~(18		)
Net Cash Provided From (Used by) Operating Activities	$	38		$	278		$	418
Net cash provided from (used by) operating activities	$	546		$	38		$	278

~~The~~Cash ~~decrease in cash~~ provided by operations for ~~2015~~the ~~compared~~year toended ~~2014~~December 31, ~~was~~2016 ~~primarily~~increased ~~the~~by ~~result of: a~~ $~~164~~508 million ~~increase in working capital requirements during 2015 as~~ compared to athe ~~$59~~year ~~million~~ended ~~increase~~December 31, in2015. ~~the~~The ~~prior year (the~~ increase was primarily ~~driven by higher inventory levels required to support~~ the ~~realignment~~result of the aftermarket distribution footprint); higher cash interest payments of $22 million; lower cash dividends from non-consolidated affiliates of $14 million; and a net increase in payments related to other operating expenses offset by the slight benefit of higher margins and performance improvements. :

~~The~~• ~~decrease~~an inincrease ~~cash provided by operations for 2014 compared to 2013 was primarily the result~~ of: a $5984 million ~~increase~~ in ~~working~~factored ~~capital~~receivables ~~requirements~~activity, ~~during~~qualifying ~~2014~~ as ~~compared~~sales, ~~to a $59 million decrease~~ in the ~~prior~~ year ~~(the~~ended ~~increase~~December ~~was~~31, ~~required~~2016 toversus ~~support higher sales volumes); higher cash interest payments of $34 million; lower cash dividends from non-consolidated affiliates of $8 million; a~~ the ~~slight~~year ~~benefit~~ended ofDecember ~~higher~~31, ~~margins~~2015; ~~and a net decrease in payments related to other operating expenses.~~


•	an increase in cash dividends from our nonconsolidated affiliates of $66 million;


•	a reduction of $37 million in cash contributions to our pension plans;


•	normalized working capital requirements as compared to the prior year when additional working capital was required to support the acquisition of the TRW valvetrain business in the Powertrain segment; and


•	a reduction in inventory in the year ended December 31, 2016 versus a build of inventory in the year ended December 31, 2015 driven by the integration of acquisitions and the additional investment related to the realignment of our North American distribution network during the prior period in the Motorparts segment.

Cash provided by operations for the year ended December 31, 2015 decreased by $240 million compared to the year ended December 31, 2014. The decrease was primarily the result of:


•	higher inventory levels required to support the realignment of the aftermarket distribution footprint;


•	higher cash interest payments of $22 million;


•	lower cash dividends from nonconsolidated affiliates of $14 million; and


•	a net increase in payments related to other operating expenses offset by the slight benefit of higher margins and performance improvements.

Investing Activities

As summarized in the table below, net cash provided from (used by) investing activities for the years ended December 31, 2016, 2015, ~~2014~~ and ~~2013~~2014:

	Years Ended December 31
	2015			2014			2013
	2016				2015				2014
	(Millions of Dollars)
	(in millions)
Expenditures for property, plant and equipment	(440	)		(418	)		(380	)
Expenditures for property, plant, and equipment	$	(381	)		$	(440	)		$	(418	)
Payments to acquire businesses, net of cash acquired	(~~360~~31	)	)	~~(321~~	)(360		—)		(321		)
Net proceeds associated with business dispositions	—			—			26
Capital investment in consolidated subsidiary from noncontrolling interest partner	5				—				—
Net proceeds from sale of equity method investment	15			—			—
Transfer of cash balances upon dispositions of operations held for sale	(12		)		—				—
Net proceeds from sales of property, plant and equipment	12			4			3
Net proceeds associated with business dispositions	—				15				—
Capital investment in nonconsolidated affiliate	(14	)		—			(4	)
Net proceeds from sales of property, plant, and equipment	18				12				4
Net cash provided from (used by) investing activities	(787	)		(735	)		(355	)
Net proceeds from sale of shares in consolidated subsidiary	2				—				—
Capital investment in nonconsolidated affiliate	(1		)		(14		)		—
Net cash provided from (used by) investing activities	$	(400	)		$	(787	)		$	(735	)

Capital expenditures were $~~440~~ 381 million, $~~418~~ 440 million, and $~~380~~ 418 million for the years ended December 31, 2016, 2015, ~~2014~~ and ~~2013, respectively~~2014. These capital expenditures were primarily related to investing in new facilities, upgrading existing products, continuing new product launches, and infrastructure and equipment at our facilities to support our manufacturing, distribution, and cost reduction efforts. We expect to spend between $~~390~~400 million and $440 million on capital expenditures during ~~2016~~2017, depending on timing of expenditures, as we continue to invest in our strategic priorities and growth. During the year ended December 31, 2016, we completed three acquisitions resulting in cash outflow of $31 million, primarily attributable to the filters manufacturing business in Mexico and the acquisition of Beck Arnley. In addition, we sold a disposal group that was classified as operations held for sale at December 31, 2015 resulting in a cash outflow of $12 million.

43The year ended December 31, 2015 included a payment of $360 million, net of acquired cash, to acquire certain assets of the TRW valvetrain business and proceeds from the sale of an equity method investment of $15 million.

~~During~~The ~~2015,~~year weended ~~acquired~~December ~~TRW’s~~31, ~~valvetrain business for $374 million. During~~ 2014, weincluded ~~also made total~~ payments of $321 million to acquire businesses, ~~which~~net ~~included: $15 million to acquire the DZV bearings business, including assumed debt~~ of ~~$10~~acquired ~~million; $140 million to acquire the Affinia chassis business~~cash, and exclusive of $9 million ofin contingent consideration ~~classified~~included ~~within~~in financing activities~~; $156 million to acquire the Honeywell brake component business; and $10 million related to other acquisitions~~.

During 2013, we received net proceeds of $26 million from divesting our sintered components operations located in France, our connecting rod manufacturing facility located in Canada, our camshaft foundry located in the United Kingdom, and our fuel pump business, which included an aftermarket business component and a manufacturing and research and development facility located in the United States.

Financing Activities

Cash flow provided from (used by) financing activities for the years ended December 31, ~~2015~~2016, ~~2014~~2015, and ~~2013~~2014:

	Years Ended December 31
	2015			2014			2013
	2016				2015				2014
	(Millions of Dollars)
	(in millions)
Proceeds from term loans, net of original issue discount	—$	86		~~2,589~~	$	—	—		$	2,589
Proceeds from draws on revolving line of credit	663			—			—
Principal payments on term loans	(115		)		(28		)		(2,544		)
Payment on revolving line of credit	(306	)		—			—
Proceeds from draws on revolving lines of credit	430				663				—
Principal payments on term loans	(28	)		(2,544	)		(275	)
Payments on revolving lines of credit	(419		)		(306		)		—
Debt issuance costs	—			~~(12~~	)—		(4	)	(12		)
Contingent consideration to acquire business	—			(9	)		—
Increase in other long-term debt	—				51				12
Proceeds from equity rights offering, net of related fees	250			—			500
Increase (decrease) in short-term debt	(2		)		(3		)		—
Increase in other long-term debt	51			12			2
Contingent consideration to acquire business	—				—				(9		)
Increase (decrease) in short-term debt	(3	)		—			23
Proceeds from equity rights offering, net of related fees	—				250				—
Net proceeds (remittances) on servicing of factoring arrangements	—			(1	)—		(4	)	(1		)
Net cash provided from (used by) financing activities	~~627~~$	(20	)	35	$	627	~~242~~		$	35

~~During~~For ~~2015,~~the ~~net~~year ~~borrowings~~ended ~~under~~December 31, ~~the~~2016, ~~revolving~~cash ~~line~~used ofby ~~credit~~financing ~~increased~~activities bywas $~~357~~20 million. ~~The~~This ~~revolver~~included ~~was~~net ~~used~~repayments tounder ~~fund~~ the ~~acquisition~~term loans of ~~TRW’s~~$29 ~~valvetrain~~million ~~business.~~and Wenet ~~also~~borrowings ~~issued~~under 19revolving ~~million~~lines ~~shares~~ of ~~common~~credit ~~stock~~of ~~for~~ $~~250~~11 million ~~during 2015~~.

For the year ended December 31, 2015, cash flow provided by financing activities was $627 million. This included $357 million of net borrowings on revolving lines of credit primarily for the acquisition of the TRW valvetrain business. In addition, it included a $250 million cash inflow associated with a common stock rights offering in which approximately 19 million shares of our common stock were issued in March 2015.

For the year ended December 31, 2015, cash flow provided by financing activities was $35 million. This included contingent consideration related to acquisitions, and activity related to the refinancing of our debt.

On April 15, 2014, we entered into a new tranche B term loan facility (the “New Tranche B Facility”) and a new tranche C term loan facility (the “New Tranche C Facility,” and together with the New Tranche B Facility, the “New Term Facilities”). Immediately following the closing of the New Term Facilities, we contributed all of the net proceeds from the New Facilities and repaid our existing outstanding indebtedness as a borrower under the tranche B and tranche C term loan facilities.

During 2013, we completed a $500 million common stock rights offering and made a $250 million prepayment on our tranche B term loan.

Liquidity

The following table summarizes our available liquidity:

	Years Ended December 31
	2015		2014		2013
	2016		2015		2014
	(Millions of Dollars)
	(in millions)
Cash and cash equivalents	$	~~194~~300	$	~~332~~194	$	~~761~~332
Available under credit facilities	$	170	$	516	$	550
Available under U.S. credit facilities	$	213	$	170	$	516

Our ability to maintain liquidity adequate to fund our needs depends generally on the results of our operations, spending on capital and restructuring initiatives, and the availability of financing. We believe that cash on hand, cash flow from operations, available borrowings under our ~~revolving~~ credit ~~facility~~facilities and ability to secure additional borrowings will be sufficient to fund capital expenditures and meet our operating obligations through the end of ~~2016~~2017. In the longer term, we believe that our base operating potential, supplemented by the benefits from our announced restructuring programs, will provide adequate long-term cash flows. However, there can be no assurance that such initiatives are achievable in this regard.

44In addition to the amounts detailed in the table above, we have additional availability under foreign lines of credit of $60 million and $59 million as of December 31, 2016 and 2015.

cash flows. However, there can be no assurance that such initiatives are achievable in this regard.

Off Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements, other than those described below.

Contractual Obligations and Commercial Commitments

We have the following contractual obligations and commercial commitments outstanding at December 31, ~~2015~~2016:

	2016		2017		2018		2019		2020		Thereafter		Total
	2017		2018		2019		2020		2021		Thereafter		Total
	(Millions of Dollars)
	(in millions)
Debt obligations	$	~~138~~142	$	281,050	$	~~1,037~~27	$	1925	$	191,788	$	~~1,829~~6	$	3,~~070~~038
Interest payments	~~137~~140		~~130~~135		~~130~~99		9499		9499		9511		~~680~~583
Letters of credit	40		—		—		—		—		—		40
U.S. letters of credit	—		37		—		—		—		—		37
Pension and other postemployment benefit plans	96		92		78		74		75		295		710
Pension and other postretirement benefit plans	98		79		78		80		74		298		707
Operating leases	5065		4255		3247		2641		2536		6860		~~243~~304
Total	$	~~461~~445	$	~~292~~1,356	$	~~1,277~~251	$	~~213~~245	$	~~213~~1,997	$	~~2,287~~375	$	4,~~743~~669

Accounts Receivable Factoring

We have subsidiaries in Brazil, Canada, France, Germany, Italy, and the ~~United~~U.S. ~~States~~ which are party to accounts receivable factoring and securitization facilities. Amounts factored under these facilities consist of the following:

	As of December 31
	2015		2014
	(Millions of Dollars)
Gross accounts receivable factored	$	408	$	306
Gross accounts receivable factored, qualifying as sales	401		293
Undrawn cash on factored accounts receivable	1		2



	As of December 31
	2016		2015
	(in millions)
Gross accounts receivable factored	$	487	$	408
Gross accounts receivable factored, qualifying as sales	$	485	$	401
Undrawn cash on factored accounts receivable	$	—	$	1

Proceeds from the factoring of accounts receivable qualifying as sales and expenses associated with the factoring of accounts receivable are as follows:

	Year Ended December 31
	2015			2014			2013
	2016			2015			2014
	(Millions of Dollars)
	(in millions)
Proceeds from factoring qualifying as sales	$	1,~~550~~616		$	1,~~679~~550		$	1,~~482~~679
Losses on sales of account receivables	(9$	(12	)	(6$	(9	)	(7$	(6	)

Accounts receivables factored but not qualifying as a sale were pledged as collateral and accounted for as secured borrowings and recorded in the consolidated balance sheets within “Accounts receivable, net” and “Short-term debt, including the current portion of long-term debt.”

The financing charges on sales of accounts receivable are recorded in the consolidated statements of operations within ~~other~~"Other income/ (expense), net". Where we receive a fee to service and monitor these transferred receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not recorded as a result of such activities.

Certain of the facilities contain terms that require us to share in the credit risk of the sold receivables. The maximum exposures to us associated with these certain facilities’ terms were $11 million and $17 million as of December 31, 2015 and 2014. 49

Subsequent Events

On January 1, 2016, we completed the sale of one of our subsidiaries in France.

In February 2016, we increased our borrowing capacity under our revolving line of credit by $50 million up to $600 million.

On February 3, 2016, IEP acquired a majority of the outstanding shares of Pep Boys - Manny, Moe & Jack ("Pep Boys"), a leading aftermarket provider of automotive service, tires, parts and accessories across the United States and Puerto Rico. On February 4, 2016, IEP completed the acquisition of the remaining outstanding shares of Pep Boys. Motorparts sales to Pep Boys in 2015 were approximately $5 million.

On February 29, 2016, the Company announced its receipt of a proposal from its majority shareholder, IEP to purchase the shares of Federal-Mogul common stock not owned by IEP in a merger transaction.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain global market risks, including foreign currency exchange risk, commodity price risk, and interest rate risk associated with our debt.

Direct responsibility for the execution of our market risk management strategies resides with our Treasurer’s Office and is governed by written policies and procedures. In accordance with our corporate risk management policies, we use derivative instruments, when available, such as forward contracts and options that economically hedge certain exposures (foreign currency and commodity). We do not enter into derivative transactions for speculative or trading purposes. A discussion of our accounting policies for derivative instruments is included in Note 2 of the ~~Notes to the~~ Consolidated Financial Statements.

Foreign Currency Exchange Rate Risk - We have foreign currency exposures related to buying, selling, and financing in currencies other than the local currencies in which we operate. At December 31, ~~2015~~2016, our most significant foreign currency exposures were Brazilian real, British pound, Chinese yuan renminbi, euro, Indian rupee, ~~and~~ Mexican peso, and Polish zloty. Historically, we have reduced our exposure through financial instruments (hedges) that provide offsets or limits to our exposures, which are opposite to the underlying transactions. We did not hold any foreign currency price hedge contracts at December 31, ~~2015~~2016 and December 31, ~~2014~~2015.

We are exposed to foreign currency risk due to the translation and remeasurement of the results of certain international operations into U.S. Dollars as part of the consolidation process. Fluctuations in foreign currency exchange rates can therefore create volatility in the results of operations and may adversely affect our financial condition.

The following table summarizes the amounts of foreign currency translation and transaction losses (~~dollars~~ in millions):

	Years Ended December 31,
	2015			2014
	2016			2015
Translation losses recorded in Accumulated other comprehensive income	$	237		$	248
Translation gains (losses) recorded in accumulated other comprehensive income	$	(145	)	$	(237	)
Transaction losses recorded in earnings	3			7
Transaction gains (losses) recorded in earnings	$	2		$	(3	)

Commodity Price Risk - Commodity ~~swaps/average~~ rate price forward contracts are executed to offset a portion of our exposure to the potential change in prices mainly for various non-ferrous metals used in the manufacturing of automotive components. The net fair value of our contracts was aan ~~liability~~asset of approximately $34 million and a net liability of approximately $13 million atas of December 31, ~~2015~~2016 and ~~2014~~2015. At December 31, ~~2015~~2016, we performed a sensitivity analysis to assess the effects of a ~~10%~~ten percent adverse change in commodity prices. Based upon the analysis performed, such changes would not be expected to materially affect our consolidated financial position, results of operations or cash flows.

Interest Rate Risk - Our exposure to market risk associated with changes in interest rates relate primarily to our debt obligations. At December 31, ~~2015~~2016 and ~~2014~~2015, we had approximately $3.10 billion and $23.71 billion of debt which primarily bear variable interest rates. At December 31, ~~2015~~2016 and ~~2014~~2015, we did not have any interest rate swap positions to manage interest rate exposures. Our term loans which represent approximately $2.65 billion of our debt at December 31, ~~2015~~2016, isare not sensitive to changes in market interest rate because the market rate is ~~substantially~~ below the interest rate floor within our credit agreement. Therefore, an adverse market change in interest rates of ~~10%~~ten percent would have no effect on cash flows. Our revolving ~~line~~lines of credit also ~~has~~have variable market interest rates and the effect on cash flow from a ~~10%~~ten percent adverse change in market rates would be de minimis.

Our remaining debt consists of foreign debt with primarily variable interest rates. An adverse market change in interest rates of ~~10%~~ten percent would not materially affect our consolidated financial position, results of operations or cash flows.

4750

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors ~~and Shareholders~~

Federal-Mogul Holdings ~~Corporation~~LLC

We have audited the internal control over financial reporting of Federal-Mogul Holdings ~~Corporation~~LLC (a Delaware ~~corporation~~company, fka Federal-Mogul Holdings Corporation) and subsidiaries (the “Company”) as of December 31, ~~2015~~2016, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’'s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

AIn ~~material~~our ~~weakness~~opinion, isthe aCompany ~~deficiency~~maintained, orin ~~combination~~all ofmaterial ~~control deficiencies~~respects, ineffective internal control over financial reporting, ~~such~~as ~~that there is a reasonable possibility that a material misstatement~~ of ~~the~~December company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness in the operating effectiveness of information technology general controls. More specifically31, the Company was not consistently following its processes and procedures during 2015 to execute and monitor change management controls or to restrict or monitor access to certain of its Information Technology (“IT”) systems. These processes and procedures are intended to ensure that access to financial applications and data is adequately restricted to appropriate personnel and that all changes affecting the financial applications and underlying account records are identified2016, ~~authorized,~~based ~~tested and implemented appropriately. Additionally, as a result of the deficiencies identified, there is a possibility that the effectiveness of business process controls that are dependent~~ on ~~the~~criteria ~~affected~~established ITin ~~systems or data and financial reports generated from~~ the ~~affected~~2013 ITInternal ~~systems~~Control-Integrated ~~may~~Framework beissued ~~adversely~~by ~~affected~~COSO.

InWe ~~our~~also ~~opinion~~have audited, ~~because~~in ofaccordance with the ~~effect~~standards of the ~~material~~Public ~~weakness~~Company ~~described~~Accounting ~~above~~Oversight onBoard ~~the~~(United ~~achievement~~States), of the ~~objectives~~consolidated offinancial ~~the~~statements ~~control~~of ~~criteria,~~ the Company ~~has~~as ~~not~~of ~~maintained~~and ~~effective~~for ~~internal~~the ~~control~~year ~~over~~ended ~~financial reporting as of~~ December 31, ~~2015~~2016, ~~based~~and onour ~~criteria~~report ~~established~~dated inFebruary ~~the~~22, ~~2013~~2017 ~~Internal~~expressed ~~Control-Integrated~~an ~~Framework~~unqualified ~~issued~~opinion byon ~~COSO~~those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2015. The material weakness identified above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2015 consolidated financial statements, and this report does not affect our report dated February 29, 2016 which expressed an unqualified opinion on those financial statements.

We do not express an opinion or any other form of assurance on management’s statement referring to their remediation plan and the related benefits of implementing new controls.

/s/ GRANT THORNTON LLP

Southfield, Michigan

February 29 22, ~~2016~~ 2017

4851

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors ~~and Shareholders~~

Federal-Mogul Holdings ~~Corporation~~LLC

We have audited the accompanying consolidated balance sheets of Federal-Mogul Holdings ~~Corporation~~LLC (a Delaware ~~corporation~~company, fka Federal-Mogul Holdings Corporation) and subsidiaries (the “Company”) as of December 31, ~~2015~~2016 and ~~2014~~2015, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2015~~2016. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Federal-Mogul Holdings ~~Corporation~~LLC and subsidiaries as of December 31, ~~2015~~2016 and ~~2014~~2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2015~~2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

AsWe ~~discussed~~also have audited, in ~~Note~~accordance 16with tothe standards of the ~~consolidated~~Public ~~financial~~Company ~~statements~~Accounting Oversight Board (United States), the Company’s ~~adopted~~internal ~~new~~control ~~accounting~~over ~~guidance~~financial inreporting ~~2015~~as of December 31, ~~related~~2016, tobased on criteria established in the ~~presentation~~2013 Internal Control-Integrated Framework issued by the Committee of ~~deferred~~Sponsoring ~~income~~Organizations ~~taxes~~of the Treadway Commission (COSO), and our report dated February 22, 2017 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 29, 2016 expressed an adverse opinion.

/s/ GRANT THORNTON LLP

Southfield, Michigan

February 29 22, ~~2016~~2017

4952

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

Consolidated Statements of Operations

(In millions, except per share amounts)

	Year Ended December 31
	2015			2014			2013
	2016			2015			2014
Net sales	$	7,~~419~~434		$	7,~~317~~419		$	67,~~786~~317
Cost of products sold	(6,~~345~~301		)	(6,~~260~~345		)	(56,~~766~~260		)
Gross profit	1,~~074~~133			1,~~057~~074			1,~~020~~057
Selling, general and administrative expenses	(~~794~~815		)	(~~776~~794		)	(~~719~~776		)
Goodwill and intangible impairment expense, net (Note 11)	(946		)	(~~120~~94		)	—(120		)
Restructuring charges and asset impairments, net (Note3)	(121		)	(110		)	(29		)
Restructuring charges and asset impairments, net (Note 3)	(44		)	(121		)	(110		)
Amortization expense	(59		)	(49		)	(47		)
Amortization expense (Note 11)	(58		)	(59		)	(49		)
Other income (expense), net (Note 4)	(521		)	(115		)	(311		)
Operating income (loss)	1231			(91		)	~~222~~(9		)
Interest expense, net	(~~138~~145		)	(~~120~~138		)	(99120		)
Loss on debt extinguishment	—			~~(24~~—		)	—(24		)
Equity earnings of nonconsolidated affiliates, net of tax (Note 12)	5659			4856			3448
Income (loss) from continuing operations before income taxes	~~(81~~145		)	(~~105~~81		)	~~157~~(105		)
Income tax (expense) benefit (Note 16)	(3055		)	(5630		)	(56		)
Income (loss) from continuing operations	~~(111~~90		)	(~~161~~111		)	~~101~~(161		)
Gain (loss) from discontinued operations, net of tax	7—			—7			~~(52~~—		)
Net income (loss)	~~(104~~90		)	(~~161~~104		)	49(161		)
Less net income attributable to noncontrolling interests	(68		)	(76		)	(87		)
Net income (loss) attributable to Federal-Mogul	$	~~(110~~82	)	$	(~~168~~110	)	$	41(168	)
Amounts attributable to Federal-Mogul:
Net income (loss) from continuing operations	$	~~(117~~82	)	$	(~~168~~117	)	$	93(168	)
Gain (loss) from discontinued operations, net of tax	7—			—7			~~(52~~—		)
Net income (loss)	$	~~(110~~82	)	$	(~~168~~110	)	$	41(168	)
Net income (loss) per common share attributable to Federal-Mogul
Basic and diluted:
Basic and diluted (Note 20):
Net income (loss) from continuing operations	$	(0.7149	)	$	(10.1271	)	$	0(1.7512	)
Gain (loss) from discontinued operations, net of tax	~~0.04~~—			—0.04			~~(0.42~~—		)
Net income (loss)	$	(0.6749	)	$	(10.1267	)	$	0(1.3312	)

See accompanying notes to ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

5053

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

	Year Ended December 31
	2015			2014			2013
	2016			2015			2014
Net income (loss)	$	~~(104~~90	)	$	(~~161~~104	)	$	49(161	)
Other comprehensive income (loss), net of tax (Note 18)
Foreign currency translation adjustments	(~~237~~145		)	(~~248~~237		)	(11248		)
Cash flow hedging income (loss), net	—3			(1—		)	8(1		)
Postemployment benefits	56			(282		)	223
Pension and postretirement benefits	30			56			(282		)
Other comprehensive loss, net of tax	(~~181~~112		)	(~~531~~181		)	~~220~~(531		)
Comprehensive income (loss)	(~~285~~22		)	(~~692~~285		)	~~269~~(692		)
Comprehensive income (loss) attributable to noncontrolling interests	110			(81		)	4(8		)
Comprehensive income (loss) attributable to Federal-Mogul	$	(~~286~~32	)	$	(~~684~~286	)	$	~~265~~(684	)

See accompanying notes to ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

5154

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

Consolidated Balance Sheets

(In millions, except per share amounts)

	December 31
	2015			2014
	2016			2015
ASSETS
Current assets:
Cash and equivalents	$	~~194~~300		$	~~332~~194
Accounts receivable, net	1,~~374~~238			1,~~419~~374
Inventories, net (Note 9)	1,~~342~~321			1,~~215~~342
Prepaid expenses and other current assets	~~188~~186			~~225~~188
Total current assets	3,~~098~~045			3,~~191~~098
Property, plant and equipment, net (Note 10)	2,~~353~~334			2,~~160~~353
Goodwill and other indefinite-lived intangible assets (Note 11)	~~903~~901			~~928~~903
Definite-lived intangible assets, net (Note 11)	~~404~~343			~~354~~404
Investments in nonconsolidated affiliates (Note 12)	~~296~~270			~~269~~296
Other noncurrent assets	~~184~~183			~~165~~174
TOTAL ASSETS	$	7,~~238~~076		$	7,~~067~~228
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt, including current portion of long-term debt (Note 14)	$	138		$	127
Short-term debt, including current portion of long-term debt (Note 13)	$	142		$	138
Accounts payable	~~901~~885			~~926~~901
Accrued liabilities (Note 13)	582			546
Accrued liabilities (Note 14)	554			582
Current portion of pensions and other postemployment benefits liability (Note 15)	40			46
Current portion of pensions and other postretirement benefits liability (Note 15)	37			40
Other current liabilities	~~159~~156			~~186~~159
Total current liabilities	1,~~820~~774			1,~~831~~820
Long-term debt (Note 14)	2,924			2,563
Long-term debt (Note 13)	2,883			2,914
Pensions and other postemployment benefits liability (Note 15)	1,123			1,282
Pensions and other postretirement benefits liability (Note 15)	1,076			1,123
Long-term portion of deferred income taxes (Note 16)	~~367~~366			~~389~~367
Other accrued liabilities	~~102~~97			93102
Shareholders’ equity:
Preferred stock ($0.01 par value; 90,000,000 authorized shares; none issued)	—			—
Common stock ($0.01 par value; 450,100,000 authorized shares; 170,636,151 issued shares and 169,040,651 outstanding shares as of December 31, 2015; 151,624,744 issued shares and 150,029,244 outstanding shares as of December 31, 2014)	2			2
Common stock ($0.01 par value; 450,100,000 authorized shares; 170,636,151 issued shares and 169,040,651 outstanding shares as of December 31, 2016 and 2015.	2			2
Additional paid-in capital, including warrants	2,899			2,649
Additional paid-in capital	2,899			2,899
Accumulated deficit	(~~796~~714		)	(~~686~~796		)
Accumulated other comprehensive loss (Note 18)	(1,318		)	(1,142		)
Accumulated other comprehensive loss	(1,432		)	(1,318		)
Treasury stock, at cost	(17		)	(17		)
Total Federal-Mogul shareholders’ equity	~~770~~738			~~806~~770
Noncontrolling interests	~~132~~142			~~103~~132
Total shareholders’ equity	~~902~~880			~~909~~902
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,~~238~~076		$	7,~~067~~228

See accompanying notes to ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

5255

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

Consolidated Statements of Cash Flows

(In millions)

	Year Ended December 31
	2015			2014			2013
	2016			2015			2014
Cash Provided From (Used By) Operating Activities
Net income (loss)	$	~~(104~~90	)	$	(~~161~~104	)	$	49(161	)
Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities:
Depreciation and amortization	~~341~~375			~~334~~341			~~296~~334
Goodwill and intangible impairment expense, net	946			~~120~~94			—120
Restructuring charges and asset impairments	121			110			48
Restructuring charges and asset impairments, net	44			121			110
Payments against restructuring liabilities	(5850		)	(5358		)	(2853		)
Change in pension and postretirement benefits, excluding curtailment gains	(6831		)	(7568		)	(7275		)
Equity earnings of nonconsolidated affiliates	(5659		)	(4856		)	(3448		)
Cash dividends received from non-consolidated affiliates	11			25			33
Cash dividends received from nonconsolidated affiliates	77			11			25
Loss on sale of equity method investment	11—			—11			—
Loss on debt extinguishment	—			24—			—24
OPEB curtailment gain	—			—			(19		)
Deferred tax expense (benefit)	(28		)	(17		)	20
Deferred tax expense (benefit)	(17		)	20			(2		)
Operating cash flows from discontinued operations	—			(7		)	—
Gain from discontinued operations	(7		)	—			—
Gain from sales of property, plant and equipment	(7		)	(4		)	—
Gain from sales of property, plant and equipment	(4		)	—			—
Net loss from business dispositions	—			—			47
Changes in operating assets and liabilities:
Accounts receivable, net	~~(10~~111		)	(4710		)	1(47		)
Inventories, net	~~(172~~5		)	(84172		)	(2184		)
Accounts payable	187			7218			7972
Other assets and liabilities	~~(62~~6		)	41(62		)	41
Net cash provided from (used by) operating activities	38			278			418
Net cash provided from (used by) Operating Activities	546			38			278
Cash Provided From (Used By) Investing Activities
Expenditures for property, plant and equipment	(440		)	(418		)	(380		)
Expenditures for property, plant, and equipment	(381		)	(440		)	(418		)
Payments to acquire businesses, net of cash acquired	(~~360~~31		)	(~~321~~360		)	—(321		)
Net proceeds associated with business dispositions	—			—			26
Capital investment in consolidated subsidiary from noncontrolling interest partner	5			—			—
Net proceeds from sale of equity method investment	15			—			—
Transfer of cash balances upon dispositions of operations held for sale	(12		)	—			—
Net proceeds from sales of property, plant and equipment	12			4			3
Net proceeds associated with business dispositions	—			15			—
Capital investment in nonconsolidated affiliate	(14		)	—			(4		)
Net proceeds from sales of property, plant, and equipment	18			12			4
Net cash provided from (used by) investing activities	(787		)	(735		)	(355		)
Net proceeds from sale of shares in consolidated subsidiary	2			—			—
Capital investment in nonconsolidated affiliate	(1		)	(14		)	—
Net cash provided from (used by) Investing Activities	(400		)	(787		)	(735		)
Cash Provided From (Used By) Financing Activities
Proceeds from term loans, net of original issue discount	—86			~~2,589~~—			—2,589
Proceeds from draws on revolving lines of credit	663			—			—
Principal payments on term loans	(115		)	(28		)	(2,544		)
Payments on revolving lines of credit	(306		)	—			—
Proceeds from draws on revolving lines of credit	430			663			—
Principal payments on term loans	(28		)	(2,544		)	(275		)
Payments on revolving lines of credit	(419		)	(306		)	—
Debt issuance costs	—			~~(12~~—		)	(412		)
Increase in other long-term debt	51—			1251			212
Increase (decrease) in short-term debt	(32		)	—(3		)	23—
Contingent consideration to acquire business	—			(9—		)	—(9		)
Proceeds from equity rights offering, net of related fees	~~250~~—			—250			~~500~~—
Net proceeds (remittances) on servicing of factoring arrangements	—			(1—		)	(41		)
Net cash provided from (used by) financing activities	627			35			242
Net cash provided from (used by) Financing Activities	(20		)	627			35
Effect of foreign currency exchange rate fluctuations on cash	(431		)	(74		)	(117		)
Increase (decrease) in cash and equivalents	$	~~(126~~95	)	$	(~~429~~126	)	$	~~294~~(429	)
Cash and equivalents at beginning of year	~~332~~194			~~761~~332			~~467~~761
Increase (decrease) in cash and equivalents	(126		)	(429		)	294
Plus: Cash and equivalents held for sale at January 1	12			—			—
Less: Cash and equivalents held for sale at December 31, 2015	(12		)	—			—
Increase (decrease) in cash and equivalents	95			(126		)	(429		)
Cash and equivalents at end of year	$	194		$	332		$	761
Less: Cash and equivalents held for sale at December 31	(1		)	(12		)	—
Cash and equivalents at end of year	$	300		$	194		$	332
Supplementary Disclosures:
Non-cash financing and investing activities:
Accrued property and equipment additions	$	6164		$	6061		$	5660
Other cash flow information:
Cash paid for interest	$	~~133~~139		$	~~111~~133		$	77111
Cash paid for income taxes, net of refunds of $11 million in 2015, $7 million in 2014, and $17 million in 2013	$	44		$	42		$	38
Cash paid for income taxes, net of refunds of $7 million in 2016, $11 million in 2015, and $7 million in 2014	$	67		$	44		$	42

See accompanying notes to ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

5356

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

Consolidated Statements of Shareholders’ Equity

(In millions)

	Common Stockholders'
	CommonStock		AdditionalPaid-inCapital		AccumulatedDeficit			AccumulatedOtherComprehensiveIncome (Loss)			Treasury Stock,at Cost			NoncontrollingInterests			Total
Balance at December 31, 2012	$	1	$	2,150	$	(559	)	$	(850	)	$	(17	)	$	107		$	832
Balance at December 31, 2013	$	2	$	2,649	$	(518	)	$	(626	)	$	(17	)	$	111		$	1,601
Net income (loss)	—		—		41			—			—			8			49
Other comprehensive loss, net of tax	—		—		—			224			—			(4		)	220
Equity rights offering	1		499		—			—			—						500
Balance at December 31, 2013	2		2,649		(518		)	(626		)	(17		)	111			1,601
Net income (loss)	—		—		(168		)	—			—			7			(161		)
Other comprehensive loss, net of tax	—		—		—			(516		)	—			(15		)	(531		)
Balance at December 31, 2014	2		2,649		(686		)	(1,142		)	(17		)	103			909
Acquisitions	—		—		—			—			—			28			28
Net income (loss)	—		—		(110		)	—			—			6			(104		)
Other comprehensive loss, net of tax	—		—		—			(176		)	—			(5		)	(181		)
Equity rights offering	—		250		—			—			—			—			250
Balance at December 31, 2015	$2	2	$2,899	~~2,899~~	$(796	~~(796~~	)	$(1,318	~~(1,318~~	)	$(17	~~(17~~	)	$132	~~132~~		$902	~~902~~
Net income (loss)	—		—		82			—			—			8			90
Other comprehensive loss, net of tax	—		—		—			(114		)	—			2			(112		)
Balance at December 31, 2016	$	2	$	2,899	$	(714	)	$	(1,432	)	$	(17	)	$	142		$	880

See accompanying notes to ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements.

5457

FEDERAL-MOGUL HOLDINGS ~~CORPORATION~~LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(InTabular amounts in millions, except per share amounts)

1. DESCRIPTION OF BUSINESS

Federal-Mogul Holdings ~~Corporation~~LLC ~~was~~is ~~incorporated~~a aslimited aliability ~~Delaware~~company ~~Corporation~~formed inunder ~~2014.~~the ~~The~~laws ~~Company~~of isDelaware. aOn ~~leading~~February ~~global~~14, ~~supplier~~2017, ofFederal-Mogul ~~technology~~Holdings ~~and~~Corporation ~~innovation~~was inconverted ~~vehicle~~to ~~and~~a ~~industrial~~single ~~products~~member ~~for~~limited ~~fuel~~liability ~~economy,~~company ~~emissions~~in ~~reduction,~~the U.S. and ~~safety~~changed ~~systems.~~its ~~The~~name ~~Company~~to ~~serves~~Federal-Mogul ~~the~~Holdings ~~world’s~~LLC. ~~foremost~~References ~~original~~herein ~~equipment~~to ~~manufacturers~~the (“~~OEM~~Company”) and ~~servicers (~~“~~OES~~Federal-Mogul”) ~~(collectively,~~refer ~~“OE”)~~to Federal-Mogul Holdings LLC for the period after the effective date of ~~automotive~~the conversion on February 14, ~~light~~2017, ~~medium~~Federal-Mogul ~~and~~Holdings ~~heavy-duty~~Corporation ~~commercial~~for ~~vehicles,~~the ~~off-road,~~period ~~agricultural,~~after ~~marine,~~the ~~rail~~effective date of the Reorganization (subsequently defined below) on April 15, ~~aerospace~~2014, ~~power~~and ~~generation~~Federal-Mogul ~~and~~Corporation ~~industrial~~for ~~equipment,~~the asperiod ~~well~~prior asto the ~~worldwide~~effective ~~aftermarket~~date of the Reorganization on April 15, 2014.

~~Holding~~The Company ~~Reorganization:~~is ~~On April 15, 2014, Federal-Mogul Corporation completed~~ a ~~holding~~leading ~~company~~global ~~reorganization~~supplier ~~(the “Reorganization”). As a result~~ of ~~the~~technology ~~Reorganization,~~and ~~the~~innovation ~~outstanding~~in ~~shares~~vehicle ofand ~~Federal-Mogul~~industrial ~~Corporation~~products ~~common stock were automatically converted on a one-~~for~~-one~~ ~~basis~~fuel ~~into~~economy, ~~shares~~emissions ~~of Federal-Mogul Holdings Corporation common stock~~reduction, and ~~all~~safety ~~of the stockholders of Federal-Mogul Corporation immediately prior to the Reorganization automatically became stockholders of Federal-Mogul Holdings Corporation~~systems. The ~~rights~~Company ofserves ~~stockholders~~the ofworld’s ~~Federal-Mogul~~foremost ~~Holdings~~original ~~Corporation~~equipment ~~are~~manufacturers ~~generally~~(“OEM”) ~~governed by Delaware law~~ and ~~Federal-Mogul~~servicers ~~Holdings~~(“OES”) ~~Corporation’s~~(collectively, ~~certificate~~“OE”) of ~~incorporation~~automotive, ~~and bylaws~~light, ~~which~~medium ~~are~~and ~~the same in all material respects as those of Federal~~heavy-~~Mogul~~duty ~~Corporation~~commercial ~~immediately prior to the Reorganization. In addition~~vehicles, ~~the board of directors of Federal~~off-~~Mogul~~road, ~~Holdings~~agricultural, ~~Corporation~~marine, ~~and~~rail, ~~its~~aerospace, ~~Audit~~power ~~Committee~~generation and ~~Compensation~~industrial ~~Committee~~equipment, ~~are~~as ~~composed~~well ~~of the same members~~ as the ~~board~~worldwide ~~of directors, Audit Committee, and Compensation Committee of Federal-Mogul Corporation prior to the Reorganization~~aftermarket.

~~References~~Holding ~~herein~~Company toReorganization: ~~the~~On ~~“Company~~April 15,” “2014, Federal-Mogul,” Corporation completed a holding company reorganization (the “~~we,~~Reorganization”). ~~“us~~As a result of the Reorganization,” ~~“our”~~the ~~refer~~outstanding toshares of Federal-Mogul Corporation common stock were automatically converted on a one-for-one basis into shares of Federal-Mogul Holdings Corporation common stock, and all of the ~~period~~stockholders of Federal-Mogul Corporation immediately prior to the ~~effective~~Reorganization ~~time~~automatically became stockholders of ~~the~~Federal-Mogul ~~Reorganization~~Holdings onCorporation. ~~April~~The ~~15,~~rights ~~2014~~of stockholders of Federal-Mogul Holdings Corporation were generally governed by Delaware law and Federal-Mogul Holdings Corporation's certificate of incorporation and bylaws, which were the same in all material respects as those of Federal-Mogul Corporation immediately prior to the Reorganization. In addition, the board of directors of Federal-Mogul Holdings Corporation ~~for~~and its Audit Committee and Compensation Committee were composed of the ~~period~~same ~~after~~members as the ~~effective~~board ~~time~~of directors, Audit Committee, and Compensation Committee of Federal-Mogul Corporation prior to the Reorganization.

~~Controlling~~Merger ~~Ownership~~Transaction: AsOn ofSeptember ~~December 31~~6, ~~2015~~2016, ~~Mr. Carl C.~~the ~~Icahn~~Company, ~~indirectly~~American ~~controls~~Entertainment ~~approximately~~Properties 81Corp.~~99%~~, ofa ~~the~~Delaware ~~voting~~corporation ~~power~~(“AEP”), of the Company’'s ~~capital~~parent ~~stock~~ and, bya ~~virtue~~subsidiary of ~~such~~Icahn ~~stock~~Enterprises ~~ownership~~L.P. ("IEP"), isand ~~able~~IEH toFM ~~control~~Holdings orLLC, ~~exert~~a ~~substantial~~Delaware ~~influence~~limited ~~over~~liability ~~the~~company ~~Company,~~(“Merger ~~including~~Sub”) ~~the~~entered ~~election~~into ofan ~~directors,~~Agreement ~~business strategy~~ and ~~policies,~~Plan ~~mergers~~of orMerger ~~other~~(the ~~business~~"Merger ~~combinations,~~Agreement"). ~~acquisition~~Pursuant orto ~~disposition~~the ofMerger ~~assets~~Agreement, ~~future~~and ~~issuances~~upon ofthe ~~common~~terms ~~stock~~and orsubject ~~other~~to ~~securities,~~the ~~incurrence~~conditions ofthereof, ~~debt~~Merger orSub ~~obtaining~~commenced ~~other~~a ~~sources~~cash oftender ~~financing,~~offer ~~and~~ (the ~~payment~~"Offer) ofto ~~dividends~~acquire, onsubject to the ~~Company’s~~terms ~~common~~and ~~stock.~~conditions ~~The existence~~ of athe ~~controlling~~Merger ~~stockholder~~Agreement, ~~may~~all ~~have~~of the ~~effect~~issued and outstanding shares of ~~making~~the itCompany’s ~~difficult~~common ~~for~~stock, orpar ~~may~~value ~~discourage~~$0.01 orper ~~delay~~share, anot ~~third~~already ~~party~~owned ~~from~~by ~~seeking~~IEP toaffiliates, ~~acquire~~for a ~~majority~~purchase price of ~~the~~$9.25 ~~Company’s~~per ~~outstanding~~share, ~~common~~net ~~stock,~~to ~~which~~the ~~may~~seller ~~adversely~~in ~~affect~~cash, ~~the~~without ~~market~~interest, ~~price~~less ofany ~~the~~applicable ~~stock~~tax withholding.

~~Mr. Icahn’s~~On ~~interests~~January ~~may~~3, ~~not~~2017, ~~always~~the beCompany ~~consistent~~announced ~~with~~it ~~the~~had ~~Company’s~~received ~~interests~~a orrevised ~~with~~proposal ~~the~~to ~~interests~~purchase shares of the Company’s ~~other~~common ~~stockholders.~~stock Mrfor $10. ~~Icahn~~00 ~~and~~per ~~entities~~share, ~~controlled~~an byincrease ~~him~~from ~~may~~the ~~also~~previous ~~pursue~~offer ~~acquisitions~~of or$9.25 ~~business~~in ~~opportunities~~cash ~~that~~per ~~may~~share. On orJanuary ~~may~~23, ~~not~~2017, beAEP ~~complementary~~and toMerger ~~the~~Sub ~~Company’s~~completed ~~business.~~the Toacquisition of the ~~extent~~Company ~~that~~as ~~conflicts~~all terms and conditions of ~~interest~~the ~~may~~merger ~~arise~~as ~~between~~set forth in the ~~Company~~Merger ~~and~~Agreement Mrwere satisfied. ~~Icahn~~ ~~and~~Shares ~~his~~of ~~affiliates,~~the ~~those~~Company's ~~conflicts~~stock ~~may~~are beno ~~resolved~~longer inpublicly atraded ~~manner~~as ~~adverse~~of to the ~~Company~~close orof ~~its~~business ~~other~~January ~~shareholders.~~23, 2017.

Spinoff: On January 15, 2016, the Company announced it terminated the previously announced spin-off of its Motorparts division. The Company will continue to operate with two separate, independent businesses with separate CEOs who will each report directly the Company's board of directors. The separate businesses more effectively serve their unique markets and allow each operating business to pursue its business strategy and more quickly react to its respective market conditions.

~~Deconsolidations~~Controlling Ownership: InAs ~~2012~~of December 31, ~~the~~2016, ~~Company~~Mr. Carl C. ~~began~~Icahn ~~exiting~~indirectly ~~substantially~~controlled ~~all~~approximately ~~its~~81.99% ~~activities~~of inthe ~~Venezuela~~voting ~~with~~power ~~only~~of ~~residual~~the ~~cash~~Company’s capital stock and, deby ~~minimis~~virtue ~~administrative~~of ~~costs~~such ~~remaining~~stock inownership, ~~2014. In~~is ~~the~~able ~~fourth~~to ~~quarter~~control ofor ~~2014,~~exert substantial influence over the Company, ~~concluded~~including ~~that~~ the ~~inability~~election toof ~~freely~~directors, ~~exchange~~business ~~currency~~strategy ~~between~~and ~~the~~policies, ~~Venezuelan~~mergers ~~bolivar~~or ~~currency~~other ~~and~~business ~~the~~combinations, ~~U.S.~~acquisition ~~dollar~~or ~~coupled~~disposition ~~with~~of ~~the~~assets, ~~significant~~future ~~government~~issuances ~~regulations~~of ~~and~~common ~~restrictions~~stock ~~then~~or inother ~~place~~securities, ~~severely~~incurrence ~~limited~~of ~~its~~debt ~~ability~~or toobtaining ~~manage~~other ~~and~~sources ~~control~~of ~~its~~financing, ~~Venezuelan~~and ~~operations. As~~the apayment ~~result,~~of dividends on the Company'’s ~~Venezuelan~~common ~~subsidiary~~stock. ~~was~~The ~~deconsolidated~~existence as of ~~December 31,~~a ~~2014.~~controlling ~~The~~stockholder may have the effect of ~~the~~making ~~deconsolidation~~it ~~was~~difficult afor, $2or ~~million~~may ~~dollar~~discourage ~~charge~~or ~~included~~delay, ina ~~the~~third ~~results~~party offrom ~~operations~~seeking ~~for~~to acquire a majority of the ~~year~~Company’s ~~ended~~outstanding ~~December 31~~common stock, ~~2014.~~which Inmay ~~2015,~~adversely affect the ~~Company~~market ~~had~~price noof ~~operations~~the ~~in Venezuela~~stock.

2Mr. Icahn’s interests may not always be consistent with the Company’s interests or with the interests of the Company’s other stockholders. ~~BASIS~~ OFMr. Icahn ~~PRESENTATION~~and ~~AND~~entities ~~SUMMARY~~controlled OFby ~~SIGNIFICANT~~him ~~ACCOUNTING~~may ~~POLICIES~~also pursue acquisitions or business opportunities that may or may

not be complementary to the Company’s business. To the extent that conflicts of interest may arise between the Company and Mr. Icahn and his affiliates, those conflicts may be resolved in a manner adverse to the Company or its other shareholders. As a result of the Merger Transaction and subsequent conversion, the entity indirectly owned and controlled by Mr. Icahn became the sole member of the limited liability company.

Deconsolidations: In 2012, the Company began exiting substantially all its activities in Venezuela with only residual cash and de minimis administrative costs remaining in 2014. In the fourth quarter of 2014, the Company concluded the inability to freely exchange currency between the Venezuelan bolivar currency and the U.S. dollar coupled with the significant government regulations and restrictions then in place severely limited its ability to manage and control its Venezuelan operations. As a result, the Company's Venezuelan subsidiary was deconsolidated as of December 31, 2014. The effect of the deconsolidation was a $2 million charge included in the results of operations for the year ended December 31, 2014. In 2016 and 2015, the Company had no operations in Venezuela.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The audited ~~consolidated~~Consolidated ~~financial~~Financial ~~statements~~Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Summary of Significant Accounting Policies

Principles of Consolidation: The Company consolidates into its financial statements the accounts of the Company, all wholly-owned subsidiaries, and any partially-owned subsidiary ~~that~~ the Company has the ability to control. Control generally equates to ownership percentage, whereby investments that are more than 50% owned are consolidated, investments in affiliates of 50% or less but greater than 20% are accounted for using the equity method, and investments in affiliates of 20% or less are accounted for using the cost method. See Note 12, Investment in Nonconsolidated Affiliates, for discussion regarding the Company's subsidiaries that ~~are~~were subject to regulatory control.

The Company does not consolidate any entity for which it has a variable interest based solely on power to direct the activities and significant participation in the entity’s expected results that would not otherwise be consolidated based on control through voting interests. Further, the Company’s affiliates are businesses established and maintained in connection with the Company’s operating strategy and are not special purpose entities. All intercompany transactions and balances have been eliminated.

Reclassifications: Certain reclassifications from the prior year presentation have been made to conform to the current year presentation.

Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from these estimates.

Cash and Equivalents: The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents.

Concentrations of Credit Risk: Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of accounts receivable, cash investments and derivative instruments. The Company’s customer base includes virtually every significant global light and commercial vehicle manufacturer and a large number of distributors, installers and retailers of automotive aftermarket parts. The Company’s credit evaluation process and the geographical dispersion of sales transactions help to mitigate credit risk concentration. No individual customer accounted for more than 10% of the Company’s net sales ~~during~~for ~~2015~~the ~~and~~years ~~one~~ended ~~customer~~December 31, ~~accounts~~2016, ~~for~~2015, ~~approximately~~and ~~11.2%~~2014 ofor ~~the Company’s net~~ accounts receivable ~~balance~~ as of December 31, 2016 and 2015. The Company requires placement of cash in financial institutions evaluated as highly creditworthy. See Note 7, Derivatives and Hedging Activities for further discussion related to derivatives.

Divestitures: In connection with its strategic planning process, the Company assesses its operations for market position, product technology and capability, and profitability. Those businesses determined by management not to have a sustainable competitive advantage are considered non-core and may be considered for divestiture or other exit activities. During the year ended December 31, 2013, the Company divested its sintered components operations located in France, its connecting rod manufacturing facility located in Canada, its camshaft foundry located in the United Kingdom and its fuel pump business, which included an aftermarket business component and a manufacturing and research and development facility located in the United States. These divestitures have been presented as discontinued operations in the consolidated statements of operations. See Note 6, Held for Sale and Discontinued Operations, for further details.

Trade Accounts Receivable and Allowance for Doubtful Accounts: Trade accounts receivable is stated at net realizable value, which approximates fair value. The Company does not generally require collateral for its trade accounts receivable. Accounts receivable is reduced by an allowance for amounts that may become uncollectible in the future. This estimated allowance is based primarily on management’s evaluation of specific balances as the balances become past due, the financial condition of its customers, and the Company’s historical experience of write-offs. The Company’s general policy for uncollectible accounts, if not reserved through specific examination procedures, is to reserve based upon the aging categories of accounts receivable and whether amounts are due from an original equipment manufacturer or servicer (“OE”) or aftermarket customer. Past due status is based upon the invoice date of the original amounts outstanding. Included in selling, general, and administrative (“SG&A”) expenses are bad debt expenses of $13 million, $5 million and $3 million for the years ended December 31, 2015, 2014 and 2013. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company’s allowance for doubtful accounts was $27 million and $18 million as of December 31, 2015 and 2014.

5659

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~Factoring~~based primarily on management’s evaluation of ~~Accounts~~specific ~~Receivable:~~balances as the balances become past due, the financial condition of its customers, and the Company’s historical experience of write-offs. The Company’s ~~has~~general ~~subsidiaries~~policy for uncollectible accounts, if not reserved through specific examination procedures, is to reserve based upon the aging categories of accounts receivable and whether amounts are due from an OE or aftermarket customer. Past due status is based upon the invoice date of the original amounts outstanding. Included in ~~Brazil~~selling, ~~France~~general, ~~Germany~~and administrative (“SG&A”) expenses are bad debt expenses of $5 million, ~~Italy~~$13 million, and $5 million for the ~~United~~years ~~States~~ended ~~which~~December 31, 2016, 2015, and 2014. Account balances are ~~party~~charged tooff ~~accounts~~against ~~receivable~~the ~~factoring~~allowance after all means of collection have been exhausted and ~~securitization~~the ~~facilities~~potential for recovery is considered remote. ~~Amounts~~The ~~factored~~Company’s ~~under~~allowance ~~these~~for ~~facilities~~doubtful ~~consist~~accounts was $19 million and $27 million as of ~~the~~December 31, ~~following:~~2016 and 2015.

	As of December 31
	2015		2014
Gross accounts receivable factored	$	408	$	306
Gross accounts receivable factored, qualifying as sales	401		293
Undrawn cash on factored accounts receivable	1		2

Factoring of Accounts Receivable: The Company has subsidiaries in Brazil, Canada, France, Germany, Italy and the U.S. which are party to accounts receivable factoring and securitization facilities. Amounts factored under these facilities consist of the following:



	As of December 31
	2016		2015
Gross accounts receivable factored	$	487	$	408
Gross accounts receivable factored, qualifying as sales	$	485	$	401
Undrawn cash on factored accounts receivable	$	—	$	1

Proceeds from the factoring of accounts receivable qualifying as sales and expenses associated with the factoring of accounts receivable are as follows:

	Year Ended December 31
	2015			2014			2013
	2016			2015			2014
Proceeds from factoring qualifying as sales	$	1,~~550~~616		$	1,~~679~~550		$	1,~~482~~679
Financing charges	(9		)	(6		)	(7		)
Financing charges(a)	$	(12	)	$	(9	)	$	(6	)
(a)Recorded in the consolidated statements of operations within "other income (expense), net."

Accounts receivables factored but not qualifying as a sale, as defined in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 860, Transfers and Servicing, were pledged as collateral and accounted for as secured borrowings and recorded in the consolidated balance sheets within “Accounts receivable, net” and “Short-term debt, including the current portion of long-term debt.”

~~The financing charges totaled $9 million as of December 31, 2015 and are recorded in the consolidated statements of operations within “Other income (expense), net.”~~ Where the Company receives a fee to service and monitor these transferred receivables, such fees are sufficient to offset the costs and as such, a servicing asset or liability is not recorded as a result of such activities.

~~Certain~~Inventories: ofThe Company values inventory at the ~~facilities~~lower ~~contain~~of ~~terms~~cost ~~that~~or ~~require~~market, ~~the~~with ~~Company~~cost todetermined ~~share~~on a first-in, ~~the~~first-out ~~credit~~(“FIFO”) ~~risk~~basis. Cost of ~~the~~inventory ~~sold~~includes ~~receivables~~direct materials, labor, and applicable manufacturing overhead costs. The ~~maximum~~value ~~exposures~~of toinventories ~~the~~are ~~Company~~reduced ~~associated~~for ~~with~~excess ~~these~~and ~~certain~~obsolescence ~~facilities~~based on management’s ~~terms~~review ~~were~~of ~~$11~~on-hand ~~million~~inventories compared to historical and ~~$17~~estimated ~~million~~future sales and usage. Inventory held at consignment locations is included in finished goods inventory as ofthe ~~December 31,~~Company ~~2015~~retains full title and ~~2014.~~rights to the product.

~~Inventories~~Long-Lived Assets: ~~The~~Long-lived ~~Company~~assets ~~values~~such ~~inventory~~as property, plant, and equipment are recorded at ~~the~~fair ~~lower~~value ofestablished ~~cost~~at acquisition or ~~market,~~cost ~~with~~unless ~~cost~~the ~~determined~~expected onfuture use of the assets indicate a ~~first~~lower value is appropriate. Definite-~~in,~~lived ~~first~~intangible assets have been stated at fair value established at acquisition or at cost. Long-~~out~~lived ~~(“FIFO”)~~assets ~~basis~~are periodically reviewed for impairment indicators. ~~Cost~~If ofimpairment ~~inventory~~indicators ~~includes~~exist, ~~direct~~the ~~materials~~Company performs the required analysis and records an impairment charge, ~~labor~~if required, ~~and~~in ~~applicable~~accordance ~~manufacturing~~with ~~overhead~~the ~~costs~~subsequent measurement provisions of ASC 360, Property, Plant & Equipment. ~~The~~If the carrying value of ~~inventories~~a ~~are~~long-lived ~~reduced~~asset is considered impaired, an impairment charge is recorded for ~~excess~~the ~~and~~amount ~~obsolescence~~by ~~based~~which onthe ~~management’s~~carrying ~~review~~value of onthe long-~~hand~~lived ~~inventories~~asset ~~compared~~exceeds toits ~~historical~~fair value. Depreciation and ~~estimated~~amortization ~~future~~are ~~sales~~computed ~~and~~principally ~~usage.~~by the straight-line method for financial reporting purposes.

~~Long-Lived Assets~~Goodwill: ~~Long-lived~~Goodwill ~~assets~~is ~~such~~determined as ~~property,~~the ~~plant~~excess ~~and~~of ~~equipment are recorded at~~ fair value ~~established~~over atamounts ~~acquisition~~attributable orto ~~cost~~specific ~~unless~~tangible ~~the~~and ~~expected future use of the assets indicate a lower value is appropriate. Definite-lived~~ intangible assets, ~~have~~including ~~been~~developed ~~stated~~technology atand ~~fair~~customer ~~value established at acquisition or at cost~~relationships. ~~Long-lived~~Goodwill ~~assets~~is ~~are periodically~~ reviewed for impairment ~~indicators.~~annually Ifas ~~impairment~~of ~~indicators exist~~October 1, ~~the~~or ~~Company~~more ~~performs~~frequently, ~~the~~if ~~required analysis and records an~~ impairment ~~charge,~~indicators ~~if required~~exist, in accordance with the subsequent measurement provisions of ASC ~~360,~~Topic ~~Property~~350, ~~Plant &~~Intangibles ~~Equipment.~~– IfGoodwill ~~the~~and ~~carrying~~Other. ~~value~~This ofimpairment aanalysis ~~long-lived~~compares ~~asset~~the isfair ~~considered~~values ~~impaired,~~of anthe ~~impairment~~Company’s ~~charge~~reporting isunits ~~recorded~~to ~~for~~their ~~the~~related ~~amount~~carrying byvalues. ~~which~~If ~~the~~a reporting unit’s carrying value ~~of the long-lived asset~~ exceeds its fair value., ~~Depreciation and amortization is computed principally by~~ the ~~straight-line~~Company ~~method~~must ~~for financial reporting purposes.~~

Goodwill: Goodwill is determined as the excess of fair value over amounts attributable to specific tangible and intangible assets, including developed technology and customer relationships. Goodwill is reviewed for impairment annually as of October 1, or more frequently if impairment indicators exist, in accordance with the subsequent measurement provisions of ASC Topic 350, Intangibles – Goodwill and Other. This impairment analysis compares the fair values of the Company’s reporting units to their related carrying values. If a reporting unit’s carrying value exceeds its fair value, the Company must then calculate the reporting unit’s implied fair value of goodwill and impairment charges are recorded for any excess of the goodwill carrying value over the implied fair value of goodwill. The reporting units’ fair values are based upon consideration of various valuation methodologies, including projected future cash flows discounted at rates commensurate with the risks involved, guideline transaction multiples, and multiples of current and future earnings.60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~indicators~~then ~~exist,~~calculate inthe ~~accordance~~reporting ~~with~~unit’s ~~the~~implied ~~subsequent~~fair ~~measurement~~value ~~provisions~~ of ~~ASC~~goodwill ~~Topic 350, Intangibles – Goodwill~~ and ~~Other.~~an ~~This~~ impairment ~~analysis~~charge ~~compares~~is ~~the~~recorded ~~fair~~for ~~values~~any excess of ~~these assets to~~ the ~~related~~goodwill carrying ~~values,~~value ~~and~~over ~~impairment~~the ~~charges~~implied ~~are~~fair ~~recorded~~value ~~for any excess~~ of ~~carrying~~goodwill. ~~values~~The ~~over~~reporting ~~fair~~units’ ~~values. These~~ fair values are based upon ~~the~~consideration ~~prospective~~of ~~stream~~various ofvaluation ~~hypothetical~~methodologies, ~~after-tax~~including ~~royalty~~projected ~~cost~~future ~~savings~~cash flows discounted at rates ~~that~~commensurate ~~reflect~~with the ~~rates~~risks ofinvolved, ~~return~~guideline ~~appropriate~~transaction ~~for~~multiples, ~~these~~and ~~intangible~~multiples ~~assets~~of current and future earnings.

Trademarks and Brand Names: Trademarks and brand names are stated at fair value established at acquisition or cost. These indefinite-lived intangible assets are reviewed for impairment annually as of October 1, or more frequently, if impairment indicators exist, in accordance with the subsequent measurement provisions of ASC Topic 350, Intangibles – Goodwill and Other. This impairment analysis compares the fair values of these assets to the related carrying values, and impairment charges are recorded for any excess of carrying values over fair values. These fair values are based upon the prospective stream of hypothetical after-tax royalty cost savings discounted at rates that reflect the rates of return appropriate for these intangible assets.

Pension and Other Postretirement Obligations: The cost of benefits provided by defined benefit pension and postretirement plans is recorded in the period employees provide service. Future pension expense for certain significant funded benefit plans is calculated using an expected return on plan asset methodology. The market-related value of plan assets is fair value. Actuarial gains and losses are accumulated and amortized into net income once they exceed a corridor, which is 10% of the projected benefit obligation, over the expected future working lifetime or life expectancy of the plan participants.

The discount rate assumption is established at the measurement date. In the U.S., the Company uses a cash flow matching approach that uses projected cash flows matched to spot rates along a high quality corporate yield curve to determine the present value of cash flows to calculate a single equivalent discount rate. The benefit obligation for pension plans in Belgium, France, and Germany represents 91% of the non-U.S. pension benefit obligation at December 31, ~~2015~~2016. The discount rates for these plans ~~in Belgium, France, and Germany~~ are determined using a cash flow matching approach similar to the U.S. approach.

Investments with registered investment companies, common and preferred stocks, and certain government debt securities are valued at the closing price reported on the active market on which the securities are traded.

Corporate debt securities are valued by third-party pricing sources using the multi-dimensional relational model using instruments with similar characteristics.

Hedge funds and the collective ~~trust~~trusts are valued at net asset value (NAV) per share which are provided by the respective investment sponsors or investment advisers.

Revenue Recognition: The Company records sales when products are shipped and the risks and rewards of ownership have transferred to the customer, the sales price is fixed and determinable, and the collectability of revenue is reasonably assured. Accruals for sales returns and other allowances are provided at point of sale based upon past experience. Adjustments to such returns and allowances are made as new information becomes available.

Rebates: The Company accrues for rebates pursuant to specific arrangements with certain customers, primarily in the aftermarket. Rebates generally provide for price reductions based upon the achievement of specified purchase volumes and are recorded as a reduction of sales as earned by such customers.

Sales and Sales Related Taxes: The Company collects and remits taxes assessed by various governmental authorities that are both imposed on and concurrent with revenue-producing transactions with its customers. These taxes may include, but are not limited to, sales, use, value-added, and some excise taxes. The collection of these taxes is reported on a net basis (excluded from revenues).

Shipping and Handling Costs: The Company recognizes shipping and handling costs as incurred as a component of "Cost of products sold" in the consolidated statements of operations.

Engineering and Tooling Costs: Pre-production tooling and engineering costs ~~that~~ the Company will not own and ~~that~~ will be used in producing products under long-term supply arrangements are expensed as incurred unless the supply arrangement provides the Company with the noncancelable right to use the tools, or the reimbursement of such costs is agreed to by the customer. Pre-production tooling costs ~~that are~~ owned by the Company are capitalized as part of machinery and equipment, and are depreciated over the shorter of the tool’s expected life or the duration of the related program.

Research and Development: The Company expenses research and development (“R&D”) costs as incurred. R&D expense, including product engineering and validation costs, was $~~189~~192 million, $~~192~~189 million, and $~~173~~192 million for the years ended ~~December 31, 2015, 2014 and 2013. R&D expense is recorded in the consolidated statements of operations within “Selling, general and administrative expenses.”~~

Advertising Costs: Advertising and promotion expenses for continuing operations are expensed as incurred and were $48 million, $47 million, and $41 million for the years ended December 31, 2015, 2014 and 2013. Advertising and promotion expenses are recorded in the consolidated statements of operations within “Selling, general and administrative expenses.”61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

December 31, 2016, 2015, and 2014. R&D expense is recorded in the consolidated statements of operations within “Selling, general and administrative expenses.”

Advertising Costs: Advertising and promotion expenses for continuing operations are expensed as incurred and were $57 million, $48 million, and $47 million for the years ended December 31, 2016, 2015, and 2014. Advertising and promotion expenses are recorded in the consolidated statements of operations within “Selling, general and administrative expenses.”

Restructuring: Restructuring is comprised of two types of costs: employee costs (principally termination benefits) and facility closure costs. Termination benefits are accounted for in accordance with ASC Topic 712, Compensation – Nonretirement Postemployment Benefits and are recorded when it is probable employees will be entitled to benefits and the amounts can be reasonably estimated. Estimates of termination benefits are based on the frequency of past termination benefits, the similarity of benefits under the current plan and prior plans, and the existence of statutory required minimum benefits. Termination benefits are also accounted for in accordance with ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”), for one-time termination benefits and are recorded dependent upon future service requirements. Facility closure and other costs are accounted for in accordance with ASC 420 and are recorded when the liability is incurred.

Foreign Currency Translation: Exchange adjustments related to ~~international~~foreign currency transactions and translation adjustments for ~~international~~foreign subsidiaries whose functional currency is the ~~United~~U.S. ~~States~~ dollar (principally those located in highly inflationary economies) are reflected in the consolidated statements of operations. Translation adjustments of ~~international~~foreign subsidiaries for which the local currency is the functional currency are reflected in the consolidated balance sheets as a component of “Accumulated other comprehensive loss.” Deferred taxes are not provided on translation adjustments as the earnings of the subsidiaries are considered to be permanently reinvested.

Environmental Liabilities: The Company recognizes environmental liabilities in accordance with ASC Topic 410, Asset Retirement and Environmental Obligations ("ASC 410") when a loss is probable and reasonably estimable. Such liabilities are generally not subject to insurance coverage. Engineering and legal specialists within the Company estimate each environmental obligation based on current law and existing technologies. Such estimates are based primarily upon the estimated cost of investigation and remediation required and the likelihood that other potentially responsible parties will be able to fulfill their commitments at the sites where the Company may be jointly and severally liable with such parties. The Company regularly evaluates and revises its estimates for environmental obligations based on expenditures against established accruals and the availability of additional information.

Asset Retirement Obligations: The Company records asset retirement obligations (“ARO”) in accordance with ASC 410~~, Asset Retirement and Environmental Obligations~~. The Company’s primary ARO activities relate to the removal of hazardous building materials at its facilities. The Company records AROs when liabilities are probable and amounts can be reasonably estimated.

Derivative Financial Instruments: The Company uses ~~interest rate swaps,~~ commodity forward contracts ~~and currency swaps~~ to manage volatility of underlying exposures. The Company recognizes all of its derivative instruments as either assets or liabilities at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated, and is effective, as a hedge and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation. Gains and losses related to a hedge are either recognized in income immediately to offset the gain or loss on the hedged item or are deferred and reported as a component of accumulated other comprehensive loss and subsequently recognized in earnings when the hedged item affects earnings. The change in fair value of the ineffective portion of a financial instrument, determined using the hypothetical derivative method, is recognized in earnings immediately. The gain or loss related to financial instruments ~~that are~~ not designated as hedges are recognized immediately in earnings. Cash flows related to hedging activities are included in the operating section of the consolidated statements of cash flows. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company’s objectives for holding derivatives are to minimize risks using the most effective and cost-efficient methods available.

~~Recently~~Changes ~~Issued~~in Accounting ~~Pronouncements~~Principle

In ~~May~~April ~~2014~~2015, the ~~FASB~~Financial ~~issued~~ Accounting Standards ~~Update~~Board ("~~ASU~~FASB") ~~No. 2014-9,~~issued ~~Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in~~ Accounting Standards ~~Codification~~Update ("~~ASC~~ASU") ~~605~~No. 2015-03, ~~Revenue~~Simplifying ~~Recognition. This ASU clarifies~~ the ~~principles~~Presentation ~~for~~of ~~recognizing~~Debt ~~revenue~~Issuance ~~and provides a common revenue standard for U~~Costs.S. ~~GAAP~~The ~~and~~accounting ~~International~~guidance ~~Financial~~requires ~~Reporting~~debt ~~Standards~~issuance ~~and~~costs ~~will~~related ~~require revenue~~ to bea recognized ~~when~~debt ~~promised~~liability ~~goods~~be orreported ~~services are transferred to customers~~ in ~~an amount that reflects~~ the ~~consideration~~consolidated tobalance ~~which~~sheets ~~the~~as ~~company~~a ~~expects~~direct todeduction befrom ~~entitled in exchange for those goods or services. Adoption of~~ the ~~new~~carrying ~~rules~~amount ~~could affect the timing~~ of ~~revenue~~that ~~recognition~~debt ~~for certain transactions~~liability. The ~~FASB,~~guidance ~~through the issuance of ASU No. 2015-14, approved a one year delay of the effective date and the new standard~~ is effective ~~for~~retrospectively ~~reporting periods beginning after December 15, 2017~~ and ~~permits two implementation approaches, one requiring retrospective application of~~ the ~~new~~Company ~~standard~~has ~~with~~adopted ~~restatement~~this ofguidance ~~prior~~in ~~years and one requiring prospective application of~~ the ~~new~~first ~~standard~~quarter ~~with disclosure~~ of ~~results under old standards~~2016. The ~~Company~~adoption ~~is currently evaluating the potential effects~~ of this ~~pronouncement~~accounting ~~and~~guidance to the ~~implementation~~Consolidated ~~approach~~Financial toStatements beis ~~used.~~summarized below:

5962

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This ASU is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. This ASU amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred charge. In August 2015, the FASB issued ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements: Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting to clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred in connection with line-of-credit arrangements. ASU No. 2015-15 is effective upon issuance. Upon adoption of aforementioned guidance the Company will present debt issuance costs as a direct deduction from its debt liability. The Company expects the retroactive adoption of this guidance will decrease debt by approximately $9 million as of December 31, 2015.



	December 31, 2016
Consolidated Balance Sheet	Prior Accounting Principles		Effect of Accounting Change		As Reported
Other noncurrent assets	$	190	(7	)	$	183
Long-term debt	$	2,890	(7	)	$	2,883

	December 31, 2015
Consolidated Balance Sheet	Previously Reported		Effect of Accounting Change		Recast
Other noncurrent assets	$	184	(10	)	$	174
Long-term debt	$	2,924	(10	)	$	2,914

InAdoption ~~July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement~~ of ~~Inventory.~~New ~~This~~Accounting ASU requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. ASU No. 2015-11 is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein, with early adoption permitted. The Company is currently evaluating the potential effects of this pronouncement.Standards

In 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires all deferred tax assets and liabilities, as well as related valuation allowances, to be classified as non-current rather than as current and non-current based on the classification of the related assets and liabilities. The Company adopted the provisions of this update in 2015. Accordingly, $45 million and $16 million of deferred taxes were reclassified from other current assets and other current liabilities, respectively to other long-term assets and other accrued liabilities in the accompanying consolidated balance sheet as of December 31, 2015.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-9, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU clarifies the principles for recognizing revenue and provides a common revenue standard for U.S. GAAP and International Financial Reporting Standards and will require revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The FASB, through the issuance of ASU No. 2015-14, approved a one year delay of the effective date and the new standard is effective for reporting periods beginning after December 15, 2017 and can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). The Company continues to evaluate the effect of these accounting pronouncements on its financial statements and will adopt this new guidance on January 1, 2018 using the modified retrospective application method.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This ASU requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. ASU No. 2015-11 is effective prospectively for annual periods beginning after December 15, 2016, and interim periods therein, with early adoption permitted. The Company's adoption of this guidance will not have a material effect on its financial statements.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. Under this ASU, an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The effect on earnings of changes in depreciation or amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed as of the acquisition date, must be recorded in the reporting period in which the adjustment amounts are determined rather than retrospectively. This standard is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2016. Early adoption is permitted as of annual reporting periods beginning after December 15, 2015, including interim reporting periods within those annual periods. The Company expects the adoption of this guidance will not have a material effect on its financial statements.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This update applies to all entities that present a classified statement of financial position. These amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If the guidance is applied prospectively, disclosure is made in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If the guidance is applied retrospectively, disclosure is made in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The amendments are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is allowed for any interim or annual financial statements that have not been issued. The Company has elected early to adopt this ASU for the year ended December 31, 2015 on a prospective basis. The adoption of this ASU did not have a material effect on the consolidated financial statements. 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The amendments in the ASU are effective prospectively for fiscal years beginning after December 15, 2017, and interim periods therein, with early adoption not permitted. The Company is currently evaluating the potential effects of this pronouncement.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The standard is effective for the Company beginning January 1, 2019, with early application permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently evaluating the potential effects of this pronouncement.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairments tests performed on testing dates after January 1, 2017. The Company anticipates early adoption of this ASU for goodwill impairment tests performed after January 1, 2017 and will adjust its goodwill testing procedures accordingly upon adoption.

3. RESTRUCTURING CHARGES AND ASSET IMPAIRMENTS

The Company’s restructuring activities are undertaken as necessary to execute management’s strategy and streamline operations, consolidate and take advantage of available capacity and resources, and ultimately achieve productivity improvements and net cost reductions. Restructuring activities include efforts to integrate and rationalize the Company’s businesses and to relocate ~~manufacturing~~ operations to best cost ~~manufacturing~~ locations.

The Company's restructuring charges consist primarily of employee costs (principally severance and/or termination benefits), facility closure and other costs, curtailment losses (gains) related to reductions of pension and ~~retiree~~postretirement medical benefit obligations as a result of headcount reductions, and asset impairments related to restructuring activities.

For the years ended December 31, 2016, 2015, and 2014, restructuring charges and asset impairments,net include the following:



	Year Ended December 31,
	2016									2015									2014
	Powertrain			Motorparts			Total			Powertrain			Motorparts			Total			Powertrain			Motorparts			Corporate			Total
Severance and other charges, net	$	(21	)	$	(6	)	$	(27	)	$	(33	)	$	(56	)	$	(89	)	$	(59	)	$	(26	)	$	(1	)	$	(86	)
Asset impairments related to restructuring activities	—			—			—			(1		)	(2		)	(3		)	(2		)	(1		)	—			(3		)
Total Restructuring charges	(21		)	(6		)	(27		)	(34		)	(58		)	(92		)	(61		)	(27		)	(1		)	(89		)

Other asset impairments	—			—			—			(16		)	(1		)	(17		)	(5		)	(11		)	—			(16		)
Impairment of assets held for sale	—			(17		)	(17		)	(12		)	—			(12		)	—			—			—			—
Impairment of nonconsolidated affiliate	—			—			—			—			—			—			—			(5		)	—			(5		)
Total asset impairment charges	—			(17		)	(17		)	(28		)	(1		)	(29		)	(5		)	(16		)	—			(21		)
Total restructuring charges and asset impairments	$	(21	)	$	(23	)	$	(44	)	$	(62	)	$	(59	)	$	(121	)	$	(66	)	$	(43	)	$	(1	)	$	(110	)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

	Year Ended December 31,
	2015
	Powertrain			Motorparts			Corporate			Total
Severance and other charges, net	$	(33	)	$	(56	)	$	—		$	(89	)
Asset impairments related to restructuring activities	(1		)	(2		)	—			(3		)
Total Restructuring charges	(34		)	(58		)	—			(92		)
Other asset impairments	(16		)	(1		)	—			(17		)
Impairment of assets held for sale	(12		)	—			—			(12		)
Total asset impairment charges	(28		)	(1		)	—			(29		)
Total restructuring charges and asset impairments	$	(62	)	$	(59	)	$	—		$	(121	)
	2014
	Powertrain			Motorparts			Corporate			Total
Severance and other charges, net	$	(59	)	$	(26	)	$	(1	)	$	(86	)
Asset impairments related to restructuring activities	(2		)	(1		)	—			(3		)
Total Restructuring charges	(61		)	(27		)	(1		)	(89		)
Other asset impairments	(5		)	(11		)	—			$	(16	)
Impairment of nonconsolidated affiliate	—			(5		)	—			(5		)
Total asset impairment charges	(5		)	(16		)	—			(21		)
Total restructuring charges and asset impairments	$	(66	)	$	(43	)	$	(1	)	$	(110	)
	2013
	Powertrain			Motorparts			Corporate			Total
Severance and other charges, net	$	(17	)	$	(20	)	$	(3	)	$	(40	)
Asset impairments related to restructuring activities	(1		)	—			—			(1		)
OPEB curtailment gain related to restructuring activities	—			19			—			19
Total Restructuring charges	(18		)	(1		)	(3		)	(22		)
Other asset impairments	(4		)	(2		)	(1		)	(7		)
Total restructuring charges and asset impairments	$	(22	)	$	(3	)	$	(4	)	$	(29	)

Restructuring

Estimates of restructuring charges are based on information available at the time such charges are recorded. In certain countries where the Company operates, statutory requirements include involuntary termination benefits that extend several years into the future. Accordingly, severance payments continue well past the date of termination at many international locations. Thus, restructuring programs appear to be ongoing when, ~~in fact,~~ terminations and other activities have been substantially completed.

Restructuring opportunities include potential plant closures and employee headcount reductions in various countries require consultation with various parties including, but not limited to, unions/works councils, local governments and/or customers. The consultation process can take a significant amount of time and affect the final outcome and timing. The Company's policy is to record a provision for qualifying restructuring costs in accordance with the applicable accounting guidance when the outcome of such consultations becomes probable. 64

Management expects to finance its restructuring programs through cash generated from its ongoing operations or through cash available under its existing credit facility, subject to the terms of applicable covenants. Management does not expect that the execution of these programs will have an adverse effect on its liquidity position.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Restructuring opportunities include potential plant closures and employee headcount reductions in various countries and require consultation with various parties including, but not limited to, unions/works councils, local governments, and/or customers. The ~~following~~consultation ~~table~~process iscan take a ~~summary~~significant amount of time and affect the final outcome and timing. The Company’'s ~~consolidated~~policy ~~restructuring~~is ~~liabilities~~to ~~and~~record ~~related~~a ~~activity~~provision asfor ofqualifying ~~and~~restructuring ~~for~~costs in accordance with the ~~years~~applicable ~~ended~~accounting ~~December~~guidance ~~31,~~when ~~2015,~~the ~~2014~~outcome ~~and~~of ~~2013~~such byconsultations ~~reporting~~becomes ~~segment~~probable.

	Powertrain			Motorparts			TotalReportingSegment			Corporate			TotalCompany
Balance at December 31, 2012	$	4		$	5		$	9		$	3		$	12
Provisions	20			20			40			4			44
Reversals	(3		)	—			(3		)	(1		)	(4		)
Payments	(13		)	(11		)	(24		)	(4		)	(28		)
Balance at December 31, 2013	8			14			22			2			24
Provisions	59			27			86			1			87
Reversals	—			(1		)	(1		)	—			(1		)
Payments	(27		)	(24		)	(51		)	(2		)	(53		)
Foreign currency	(4		)	—			(4		)	—			(4		)
Balance at December 31, 2014	36			16			52			1			53
Provisions	38			55			93			—			93
Reversals	(4		)	—			(4		)	—			(4		)
Payments	(35		)	(22		)	(57		)	(1		)	(58		)
Acquisitions	2			—			2			—			2
Foreign currency	(4		)	(2		)	(6		)	—			(6		)
Balance at December 31, 2015	$	33		$	47		$	80		$	—		$	80

Management expects to finance its restructuring programs through cash generated from its ongoing operations or through cash available under its existing credit facilities, subject to the terms of applicable covenants. Management does not expect the execution of these programs will have an adverse effect on its liquidity position.

The ~~$80~~following ~~million~~table ~~restructuring~~is ~~liability~~a atsummary ~~December~~of ~~31,~~the ~~2015~~Company’s ~~includes~~consolidated ~~$71~~restructuring ~~million~~liabilities ofand ~~current~~related ~~accrued~~activity ~~liabilities~~as of and $9for ~~million~~the ofyears ~~other~~ended ~~accrued~~December ~~liabilities~~31, 2016, 2015, and 2014 by reporting segment.

The following table provides a summary of the Company’s consolidated restructuring liabilities and related activity for each type of exit cost as of and for the years ended December 31, 2015, 2014 and 2013. As the table indicates, facility closure costs are typically paid within the year of incurrence.



	Powertrain			Motorparts			Total Reporting Segment			Corporate			Total Company
Balance at December 31, 2013	$	8		$	14		$	22		$	2		$	24
Provisions	59			27			86			1			87
Reversals	—			(1		)	(1		)	—			(1		)
Payments	(27		)	(24		)	(51		)	(2		)	(53		)
Foreign currency	(4		)	—			(4		)	—			(4		)
Balance at December 31, 2014	36			16			52			1			53
Provisions	38			55			93			—			93
Reversals	(4		)	—			(4		)	—			(4		)
Payments	(35		)	(22		)	(57		)	(1		)	(58		)
Acquisition	2			—			2			—			2
Foreign currency	(4		)	(2		)	(6		)	—			(6		)
Balance at December 31, 2015	33			47			80			—			80
Provisions	21			13			34			—			34
Reversals	—			(7		)	(7		)	—			(7		)
Payments	(26		)	(24		)	(50		)				(50		)
Foreign currency	—			(2		)	(2		)	—			(2		)
Balance at December 31, 2016	$	28		$	27		$	55		$	—		$	55

	EmployeeCosts			Facility Closure and Other Costs			Total
Balance at December 31, 2012	$	12		—			12
Provisions	41			3			44
Reversals	(4		)	—			(4		)
Payments	(25		)	(3		)	(28		)
Balance at December 31, 2013	24			—			24
Provisions	77			10			87
Reversals	(1		)	—			(1		)
Payments	(45		)	(8		)	(53		)
Foreign Currency	(4		)	—			(4		)
Balance at December 31, 2014	51			2			53
Provisions	85			8			93
Reversals	(4		)	—			(4		)
Payments	(49		)	(9		)	(58		)
Acquisitions	2			—			2
Foreign Currency	(6		)	—			(6		)
Balance at December 31, 2015	$	79		$	1		$	80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

~~Due~~The tofollowing ~~the~~table ~~inherent~~provides ~~uncertainty~~a ~~involved~~summary inof ~~estimating~~the Company’s consolidated restructuring ~~expenses,~~liabilities ~~actual~~and ~~amounts~~related ~~paid~~activity for ~~such~~each ~~activities~~type ~~may~~of ~~differ~~exit ~~from~~cost ~~amounts~~as ~~initially~~of ~~estimated.~~and ~~Accordingly,~~for the ~~Company~~years ~~reduced~~ended ~~its~~December ~~liability~~31, ~~previously~~2016, ~~recorded in~~ 2015, ~~2014~~ and ~~2013~~2014. byAs $4the ~~million~~table indicates, $1facility ~~million,~~closure ~~and~~costs $4are ~~million.~~typically paid within the year of incurrence.

Restructuring expenses for the year ended December 31, 2015 primarily relate to EMEA locations aimed at reducing production complexities and reducing inefficiencies in indirect and fixed costs structures. We expect to complete these programs in 2017 and incur additional restructuring and other charges of approximately $10 million. For programs previously initiated, we expect to complete these programs in 2018 and incur additional restructuring and other charges of approximately $10 million.



	Employee Costs			Facility Closure and Other Costs			Total
Balance at December 31, 2013	$	24		$	—		$	24
Provisions	77			10			87
Reversals	(1		)	—			(1		)
Payments	(45		)	(8		)	(53		)
Foreign Currency	(4		)	—			(4		)
Balance at December 31, 2014	51			2			53
Provisions	85			8			93
Reversals	(4		)	—			(4		)
Payments	(49		)	(9		)	(58		)
Acquisitions	2			—			2
Foreign Currency	(6		)	—			(6		)
Balance at December 31, 2015	79			1			80
Provisions	30			4			34
Reversals	(7		)	—			(7		)
Payments	(46		)	(4		)	(50		)
Acquisitions	—			—			—
Foreign Currency	(2		)	—			(2		)
Balance at December 31, 2016	$	54		$	1		$	55

~~See~~Restructuring ~~Note~~charges ~~15,~~and ~~Pensions~~asset ~~and~~impairments ~~Other~~for ~~Postretirement~~the ~~Benefits~~year ended December 31, ~~for~~2016 ~~further~~were ~~details~~comprised of $21 million related to the ~~2013~~Powertrain ~~OPEB~~segment ~~curtailment~~and ~~gain~~$23 million related to the Motorparts segment. The specific components of the restructuring and asset impairment charges by region are as follows:

See Note 8, Fair Value Measurements and Financial Instruments, for further details related to property, plant and equipment fair value measurements.

December 31, 2016

Fair Value
Exceeds
Carrying Value

Reporting Units 1-3

Reporting Units 4-9

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