DANA INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (in millions of dollars) (Form 10-K)


Discussion and analysis of our results of operations pertaining to 2020 compared
to 2019 not included in this Form 10-K can be found in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of our
Annual Report on Form 10-K for the year ended December 31, 2020. The following
discussion and analysis of our financial condition and results of operations
should be read in conjunction with the financial statements and accompanying
notes in Item 8.



Management Overview



We are a global provider of high-technology products to virtually every major
vehicle manufacturer in the world. We also serve the stationary industrial
market. Our technologies include drive systems (axles, driveshafts,
transmissions, and wheel and track drives); motion systems (winches, slew
drives, and hub drives); electrodynamic technologies (motors, inverters,
software and control systems, battery-management systems, and fuel cell plates);
sealing solutions (gaskets, seals, cam covers, and oil pan modules);
thermal-management technologies (transmission and engine oil cooling, battery
and electronics cooling, charge air cooling, and thermal-acoustical protective
shielding); and digital solutions (active and passive system controls and
descriptive and predictive analytics). We serve our global light vehicle,
medium/heavy vehicle and off-highway markets through four business units - Light
Vehicle Drive Systems (Light Vehicle), Commercial Vehicle Drive and Motion
Systems (Commercial Vehicle), Off-Highway Drive and Motion Systems (Off-Highway)
and Power Technologies, which is the center of excellence for sealing and
thermal-management technologies that span all customers in our on-highway and
off-highway markets. We have a diverse customer base and geographic footprint
which minimizes our exposure to individual market and segment declines. In 2021,
47% of our sales came from North American operations and 53% from operations
throughout the rest of the world. Our sales by operating segment were Light
Vehicle - 42%, Commercial Vehicle - 17%, Off-Highway - 29% and Power
Technologies - 12%.



Operational and strategic initiatives



Our enterprise strategy builds on our strong technology foundation and leverages
our resources across the organization while driving a customer-centric focus,
expanding our global markets, and delivering innovative solutions as we evolve
into the era of vehicle electrification.



Central to our strategy is leveraging our core operations. This foundational
element enables us to infuse strong operational disciplines throughout the
strategy, making it practical, actionable, and effective. It enables us to
capitalize on being a major drive systems supplier across all three end mobility
markets. We are achieving improved profitability by actively seeking synergies
across our engineering, purchasing, and manufacturing base. We have strengthened
the portfolio by acquiring critical assets, and we are utilizing our physical
and intellectual capital to amplify innovation across the enterprise. Leveraging
these core elements can further expand the cost efficiencies of our common
technologies and deliver a sustainable competitive advantage for Dana.



Driving customer centricity continues to be at the heart of who we are. Putting
our customers at the center of our value system is firmly embedded in our
culture and is driving growth by focusing on customer relationships and
providing value to our customers. These relationships are strengthened as we are
physically located where we need to be in order to provide unparalleled service,
and we are prioritizing our customers' needs as we engineer solutions that
differentiate their products, while making it easier to do business with Dana by
digitizing their experience. Our customer-centric focus has uniquely positioned
us to win more than our fair share of new business and capitalize on future
customer outsourcing initiatives.



Expanding global markets means utilizing our global capabilities and presence to
further penetrate growth markets, focusing on Asia due to its position as the
largest mobility market in the world with the highest market growth rate as well
as its lead in the adoption of new energy vehicles. We are investing across
various avenues to increase our presence in Asia Pacific by forging new
partnerships, expanding inorganically, and growing organically. We continue to
operate in this region through wholly owned and joint ventures with local market
partners. We have recently made acquisitions that have augmented our footprint
in the region, specifically in India and China. All the while, we have been
making meaningful organic investments to grow with existing and new customers,
primarily in Thailand, India, and China. These added capabilities have enabled
us to target the domestic Asia Pacific markets and utilize the capacity for
export to other global markets. We continue to enhance and expand our global
footprint, optimizing it to capture growth across all of our end markets.



Delivering innovative solutions enables us to capitalize on market growth trends
as we evolve our core technology capabilities. We are also focused on enhancing
our physical products with digital content to provide smart systems, and we see
an opportunity to become a digital systems provider by delivering software as a
service to our traditional end customers. This focus on delivering solutions
based on our core technology is leading to new business wins and increasing our
content per vehicle. We have made significant investments - both organically and
inorganically - allowing us to move to the next phase, which is to Lead electric
propulsion.



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Over the last several years we continue to deliver on our goal to accelerate
vehicle electrification through both core Dana technologies and targeted
strategic acquisitions and are positioned today to lead the market. The
nine recent investments in electrodynamic expertise and technologies combined
with Dana's longstanding mechatronics capabilities has allowed us to develop and
deliver fully integrated e-Propulsion systems that are power-dense and achieve
optimal efficiency through the integration of the components that we offer due
to our mechatronics capabilities. With recent electric vehicle program awards,
we are well on our way to achieving our growth objectives in this emerging
market.



The development and implementation of our enterprise strategy is positioning
Dana to grow profitably due to increased customer focus as we leverage our core
capabilities, expand into new markets, develop and commercialize new
technologies, including for electric vehicles.



Capital Structure Initiatives


In addition to investing in our business, we plan to prioritize a balanced allocation of capital while maintaining a strong financial position. As part of our balanced allocation approach, we continue to favor investment grade metrics with the aim of further strengthening our balance sheet.



Shareholder return actions - When evaluating capital structure initiatives, we
balance our growth opportunities and shareholder value initiatives with
maintaining a strong balance sheet and access to capital. Our strong financial
position has enabled us to simplify our capital structure while providing
returns to our shareholders in the form of cash dividends and a reduction in the
number of shares outstanding. Through the first quarter of 2020, we had declared
and paid quarterly common stock dividends for thirty-three consecutive quarters.
In response to the COVID pandemic, we temporarily suspended the declaration and
payment of dividends to common shareholders and the repurchase of common stock
under our $200 common stock share repurchase program. With the impacts of the
COVID pandemic largely behind us we resumed the declaration and payment of
quarterly common stock dividends during the first quarter of 2021. In addition,
we resumed the repurchase of common shares using $23 of cash to repurchase
common shares under the program in 2021. The share repurchase program expires on
December 31, 2023, and $127 remains available for future share repurchases as of
December 31, 2021.



Financing actions - We have taken advantage of competitive debt markets,
eliminating our secured debt and extending and restructuring our senior note
maturity schedule. Our current portfolio of unsecured senior notes is structured
such that no more than $400 of senior notes comes due in any calendar year, with
no maturities until the second quarter of 2025. In addition, we increased our
revolving credit facility to $1,150 and extended its maturity to March 25, 2026.
See Note 14 to our consolidated financial statements in Item 8 for additional
information.



Other Initiatives



Aftermarket opportunities - We have a global group dedicated to identifying and
developing aftermarket growth opportunities that leverage the capabilities
within our existing businesses - targeting increased future aftermarket sales.
Powered by recognized brands such as Dana®, Spicer®, Spicer Electrified™, Victor
Reinz®, Glaser®, GWB®, Thompson®, Tru-Cool®, SVL®, and Transejes™, Dana delivers
a broad range of aftermarket solutions - including genuine, all makes, and value
lines - servicing passenger, commercial and off-highway vehicles across the
globe.



Selective acquisitions - Although transformational opportunities like the GKN
plc driveline business transaction that we pursued in 2018 will be considered
when strategically and economically attractive, our acquisition focus is
principally directed at "bolt-on" or adjacent acquisition opportunities that
have a strategic fit with our existing core businesses, particularly
opportunities that support our enterprise strategy and enhance the value
proposition of our product offerings. Any potential acquisition will be
evaluated in the same manner we currently consider customer program
opportunities and other uses of capital - with a disciplined financial approach
designed to ensure profitable growth and increased shareholder value.



Acquisitions



Over the past several years we have actively grown our electric vehicle
capabilities through multiple acquisitions, positioning us to deliver complete
e-Propulsion systems with in-house electrodynamics. Our acquisitions of TM4 Inc.
(TM4), S.M.E. S.p.A. (SME), Prestolite E-Propulsion Systems (Beijing) Limited
(PEPS), Ashwoods Innovations Limited (Ashwoods), Oerlikon Drive Systems,
Nordresa Motors, Inc., Rational Motion GmbH and Pi Innovo Holding Limited have
enhanced our portfolio of core technologies including e-motors, power inverters,
software and controls, and advance mechatronics. Our strategic partner,
Hydro-Québec, owns 45% redeemable noncontrolling interests in TM4, SME, PEPS and
Ashwoods. See Note 2 and Note 9 to our consolidated financial statements in Item
8 for additional information.



Segments



We manage our operations globally through four operating segments. Our Light
Vehicle and Power Technologies segments primarily support light vehicle original
equipment manufacturers (OEMs) with products for light trucks, SUVs, CUVs, vans
and passenger cars. The Commercial Vehicle segment supports the OEMs of
on-highway commercial vehicles (primarily trucks and buses), while our
Off-Highway segment supports OEMs of off-highway vehicles (primarily wheeled
vehicles used in construction, mining and agricultural applications).



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Trends in Our Markets



We serve our customers in three core global end markets: light vehicle,
primarily full frame trucks and SUVs; commercial vehicle, including medium-and
heavy-duty trucks and busses; and off-highway, including construction, mining,
and agriculture equipment.



Each of our end-markets has unique cyclical dynamics and market drivers. These
cycles are impacted by periods of investment where end-user vehicle fleets are
refreshed or expanded in reaction to demand usage patterns, regulatory changes,
or when the age of vehicles in service reach their useful life. Key market
drivers include regional economic growth rates; industrial output; commodity
production and pricing; and residential and nonresidential construction rates.
Our multi-market coverage and broad customer base help provide stability across
the cycles while mitigating secular variability. In 2020, all of our end-markets
were impacted to varying degrees by the COVID pandemic, which initially resulted
in lower demand driven by production shutdowns related to virus mitigation
efforts in the regions we serve. During 2021, we generally saw improvement
across all of our end markets despite production levels being muted by continued
global supply chain disruptions driven in part by transportation inefficiencies
and labor, commodity and semiconductor chip shortages.



Light vehicle markets - Our driveline business is weighted more heavily to the
truck and SUV segments of the light-vehicle market versus the passenger-car
segment. Our vehicle content is greater on rear-wheel drive, four-wheel drive,
and all-wheel drive vehicles, as well as hybrid and electric vehicles. The
impact of the COVID pandemic in 2020 saw the global light-truck market contract
by 13% from 2019 levels. During 2021, light-truck markets improved across all
regions and were up 5% on a global basis compared to 2020. The outlook for the
full year of 2022 reflects global light-truck production to be up 10%, with
growth across all regions, exhibiting a strong rebound returning to at or above
2019 levels as production constraints continue to ease, inventory returns to
more normal levels, and constrained customer demand is fulfilled.



Commercial vehicle markets - Our primary business is driveline systems for
medium and heavy-duty trucks and busses, including the emerging market for
hybrid and electric vehicles. Key regional markets are North America, South
America (primarily Brazil) and Asia Pacific. The Class-8 truck market in North
America peaked at 345,000 trucks produced in 2019. Production of Class-8 trucks
in 2020 was 38% below the record production in 2019 due to normal cycle dynamics
and the impact of COVID. During 2021, production of Class-8 trucks increased 20%
over 2020 as the impacts of COVID lessened and the economy exhibited
improvement. The outlook for 2022 is for stronger demand with production up 22%
over the prior year driven by continued improving economic outlook and cyclical
growth.



Medium-duty truck production in North America experienced a 20% year- over-year
decline from 2019 to 2020, primarily due to COVID. During 2021, production
increased a modest 3% over 2020. The outlook for 2022 is for a 13% increase in
production over the prior year. Outside of North America, production of
medium-and heavy-duty trucks in South America declined 22% in 2020 due to COVID
and deteriorating economic conditions. During 2021, production increased 76%
over 2020 as the region recovered from the impact of the pandemic and the age of
existing vehicles drove a replacement cycle for new trucks. The outlook for
South America is for a modest 3% reduction in production from the prior year as
local economic conditions remain relatively stable. In contrast to the rest of
the world, Asia Pacific, driven by China, did not experience lower truck
production in 2020, but output slowed by 8% in 2021 as production matched lower
demand, primarily driven by India where the recovery from the pandemic was been
slower than in China. The 2022 outlook for Asia Pacific is for a 6% reduction in
production from the prior year as the Indian market recovery continues to lag.



Off-highway markets - Our off-highway business has a large presence outside of
North America, with 65% of its 2021 sales coming from products manufactured in
Europe; however, a large portion of these products are utilized in vehicle
production outside the region. The construction equipment segment of the
off-highway market is closely related to global economic growth and
infrastructure investment. This segment has experienced a 5% market contraction,
which began in late 2018 and further accelerated due to COVID, with 2020
production ending down an additional 10%. The global construction market began
to rebound in 2021 with production up 12% over 2020. The 2022 outlook has
production demand in the global construction market showing continued strength
with production increasing by 10% over the prior year. End-user investment in
the mining equipment segment is driven by prices for commodity products produced
by underground mining. The global mining equipment market has been mostly stable
over the past several years as industry participants have maintained vehicle
inventory levels to match commodity output, and this trend is expected to
continue in 2022. The agriculture equipment market is the third of our key
off-highway segments.  Like the underground mining segment, investment in
agriculture equipment is primarily driven by prices for farm commodities.
Continued low farm commodity prices drove a 7% reduction in production in 2020.
Farm subsidies in response to the global pandemic drove a 10% increase in
production during 2021. The outlook for 2022 is for end-market demand to improve
by 6% compared to the prior year, as farm subsidies are expected to continue to
bolster the commodity market and drive the replacement of aging equipment.



Foreign currency - With 55% of our 2021 sales coming from outside the U.S.,
international currency movements can have a significant effect on our sales and
results of operations. The euro zone countries and China accounted for 50% and
10% of our 2021 non-U.S. sales, respectively, while Brazil and India each
accounted for 9%. Although sales in South Africa are less than 5% of our
non-U.S. sales, the rand has been volatile and significantly impacted sales from
time to time. International currencies strengthened against the U.S. dollar in
2021, increasing 2021 sales by $138. A stronger euro, Chinese renminbi, British
pound and South African rand more than offset a weaker Brazilian real.



Argentina has experienced significant inflationary pressures the past few years,
contributing to significant devaluation of its currency among other economic
challenges. Our Argentine operation supports our Light Vehicle operating
segment. Our sales in Argentina for 2021 of approximately $116 are 1% of our
consolidated sales and our net asset exposure related to Argentina was
approximately $33, including $12 of net fixed assets, at December 31, 2021.
During the second quarter of 2018, we determined that Argentina's economy met
the GAAP definition of a highly inflationary economy. In assessing Argentina's
economy as highly inflationary we considered its three-year cumulative inflation
rate along with other factors. As a result, effective July 1, 2018, the U.S.
dollar is the functional currency for our Argentine operations, rather than the
Argentine peso. Beginning July 1, 2018, peso-denominated monetary assets and
liabilities are remeasured into U.S. dollars using current Argentine peso
exchange rates with resulting translation gains or losses included in results of
operations. Nonmonetary assets and liabilities are remeasured into U.S. dollar
using historic Argentine peso exchange rates. Reference is made to Note 1 of
our consolidated financial statements in Item 8 for additional information.


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Commodity costs - The cost of our products may be significantly impacted by
changes in raw material commodity prices, the most important to us being those
of various grades of steel, aluminum, copper, brass and rare earth materials.
The effects of changes in commodity prices are reflected directly in our
purchases of commodities and indirectly through our purchases of products such
as castings, forgings, bearings, batteries and component parts that include
commodities. Most of our major customer agreements provide for the sharing of
significant commodity price changes with those customers based on the movement
in various published commodity indexes. Where such formal agreements are not
present, we have historically been successful implementing price adjustments
that largely compensate for the inflationary impact of material costs. Material
cost changes will customarily have some impact on our financial results as
customer pricing adjustments typically lag commodity price changes. Commodity
prices increased significantly during 2021, reducing year-over-year earnings by
approximately $367. Material recovery and other pricing actions increased
year-over-year earnings by $223 in 2021.



Sales, earnings and cash flow outlook


                                           2022
                                          Outlook             2021           2020           2019
Sales                                $9,625 - $10,125      $    8,945     $    7,106     $    8,620
Adjusted EBITDA                        $900 - $1,000       $      795     $      593     $    1,019
Net cash provided by operating
activities                            ~7.0% of sales       $      158     $      386     $      637
Discretionary pension
contributions                               $-             $        -     $        -     $       61
Purchases of property, plant and
equipment                             ~4.0% of sales       $      369     $      326     $      426
Adjusted Free Cash Flow               ~3.0% of sales       $     (211 )   $       60     $      272




Adjusted EBITDA and adjusted free cash flow are non-GAAP financial measures. See
the Non-GAAP Financial Measures discussion below for definitions of our non-GAAP
financial measures and reconciliations to the most directly comparable U.S.
generally accepted accounting principles (GAAP) measures. We have not provided a
reconciliation of our adjusted EBITDA outlook to the most comparable GAAP
measure of net income. Providing net income guidance is potentially misleading
and not practical given the difficulty of projecting event driven transactional
and other non-core operating items that are included in net income, including
restructuring actions, asset impairments and certain income tax adjustments. The
accompanying reconciliations of these non-GAAP measures with the most comparable
GAAP measures for the historical periods presented are indicative of the
reconciliations that will be prepared upon completion of the periods covered by
the non-GAAP guidance.



Our 2022 sales outlook is $9,625 to $10,125, reflecting improving global market
demand and $400 of net new business backlog. Based on our current sales and
exchange rate outlook for 2022, we expect overall stability in international
currencies with a modest headwind to sales. At sales levels in our current
outlook for 2022, a 5% movement on the euro would impact our annual sales by
approximately $140. A 5% change on the Chinese renminbi, Indian rupee
or Brazilian real rates would impact our annual sales in each of those countries
by approximately $25. At our current sales outlook for 2022, we expect full year
2022 adjusted EBITDA to approximate $900 to $1,000. Adjusted EBITDA Margin is
expected to be 9.6%, a 70 basis-point improvement over 2021, reflecting higher
margin net new business and a modest benefit from material recovery and other
pricing actions as commodity costs begin to abate toward the end of the year,
being partially offset by increased investment to support our electrification
strategy. We expect to generate adjusted free cash flow of approximately $310,
or 3% of sales for 2022, reflecting the benefit of year-over-year higher
adjusted EBITDA and lower year-over-year use of cash for working capital. We
anticipate capital spending will be flat in comparison with 2021.



Among our operational and strategic initiatives are increased focus on and
investment in product technology - delivering products and technology that are
key to bringing solutions to issues of paramount importance to our customers.
Our success on this front is measured, in part, by our sales backlog - net new
business received that will be launching in the future and adding to our base
annual sales. This backlog excludes replacement business and represents
incremental sales associated with new programs for which we have received formal
customer awards. At December 31, 2021, our sales backlog of net new business for
the 2022 through 2024 period was $800. We expect to realize $400 of our sales
backlog in 2022, with incremental sales backlog of $200 being realized in both
2023 and 2024. Our sales backlog is evenly balanced between electric-vehicle and
traditional ICE-vehicle content.



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                       Consolidated Results of Operations


Summary of Consolidated Operating Results (2021 vs. 2020)


                                             2021                           2020
                                                    % of                           % of          Increase/
                                   Dollars        Net Sales       Dollars        Net Sales      (Decrease)
Net sales                         $    8,945                     $    7,106                     $     1,839
Cost of sales                          8,108            90.6 %        6,485            91.3 %         1,623
Gross margin                             837             9.4 %          621             8.7 %           216
Selling, general and
administrative expenses                  460             5.1 %          421             5.9 %            39
Amortization of intangibles               14                             13                               1
Restructuring charges, net                                               34                             (34 )
Impairment of goodwill                                                  (51 )                            51
Other income (expense), net               32                             22                              10
Earnings before interest and
income taxes                             395                            124                             271
Loss on extinguishment of debt           (29 )                           (8 )                           (21 )
Interest income                            9                              9                               -
Interest expense                         131                            138                              (7 )
Earnings (loss) before income
taxes                                    244                            (13 )                           257
Income tax expense                        72                             58                              14
Equity in earnings of
affiliates                                28                             20                               8
Net income (loss)                        200                            (51 )                           251
Less: Noncontrolling interests
net income                                14                             10                               4
Less: Redeemable noncontrolling
interests net loss                       (11 )                          (30 )                            19
Net income (loss) attributable
to the parent company             $      197                     $      (31 )                   $       228




Sales - The following table shows changes in our sales by geographic region.



                                                                    Amount of Change Due To
                                       Increase/       Currency            Acquisitions         Organic
            2021          2020        (Decrease)        Effects           (Divestitures)         Change
North
America   $   4,230     $   3,602     $       628     $        10       $                9     $      609
Europe        2,836         2,209             627             107                        2            518
South
America         590           358             232             (13 )                                   245
Asia
Pacific       1,289           937             352              34                      (39 )          357
Total     $   8,945     $   7,106     $     1,839     $       138       $              (28 )   $    1,729




Sales in 2021 were $1,839 higher than in 2020. Stronger international currencies
increased sales by $138, principally due to a stronger euro, Chinese renminbi,
British pound and South African rand, partially offset by a weaker Brazilian
real. The organic sales increase of $1,729, or 24%, resulted from improved
overall market demand and the conversion of sales backlog. Pricing actions,
including material commodity price and inflationary cost adjustments, increased
sales by $223.



The North America organic sales increase of 17% was driven principally by
stronger light-, medium- and heavy-duty truck production volumes, higher-light
vehicle engine production levels and the conversion of sale backlog. Full-frame
light-truck production was up 13%, Classes 5-7 were up 3% and Class 8 was up 20%
compared with 2020. Light-vehicle engine production was up 2% compared with
2020. Excluding currency effects and the impact of acquisitions, sales in Europe
were up 23% compared with 2020. With our significant Off-Highway presence in the
region, stronger construction/mining and agricultural markets were a major
factor. Organic sales of this operating segment were up 28% compared with
2020. Excluding currency effects, sales in South America increased 68% compared
to 2020 due primarily to improved light- and medium/heavy-duty truck production.
Light-truck production was up 35% and medium/heavy-truck production was up 76%
in 2021. Excluding currency effects and the impact of divestitures, sales in
Asia Pacific increased 38% compared to 2020 due to improved light-truck
production and stronger construction/mining and agricultural markets.
Light-truck production was up 4% in 2021. The global semiconductor chip shortage
impacted our 2021 sales as customers of some of our more significant programs
were forced to take down time during the last nine months of the year.



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Cost of sales and gross margin - Cost of sales for 2021 increased $1,623, or 25%
when compared to 2020. Cost of sales as a percent of sales was 70 basis points
lower than in the previous year. Incremental margins provided by increased sales
volumes were partially offset by higher year-over-year commodity costs of $367,
higher standard and premium freight costs of $61 and incremental investment in
electrification initiatives. Commodity cost increases are being driven by higher
prices for certain grades of steel and aluminum. Year-over-year freight costs
increases are primarily due to higher freight rates, driven by container
shortages and port congestions due to pandemic-related operational disruptions,
and the incurrence of premium freight to support customer demand levels.
Continued material cost savings and supplier recoveries provided a partial
offset, reducing costs of sales by approximately $129.



Gross margin of $837 for 2021 increased $216 from 2020. Gross margin as a
percent of sales was 9.4% in 2021, 70 basis points higher than in 2020.
The improvement in gross margin as a percent of sales was driven principally by
the cost of sales factors referenced above. Gross margin during 2021
was negatively impacted by costs associated with continued global supply chains
disruptions and operational inefficiencies driven by labor shortages at certain
of our facilities and customer down time resulting from the global semiconductor
chip shortage. In addition, gross margin during 2021 was negatively impacted by
material cost recovery mechanisms with our customers lagging material cost
increases charged by our suppliers by approximately 90 days.



Selling, general and administrative expenses (SG&A) - SG&A expenses in 2021 were
$460 (5.1% of sales) as compared to $421 (5.9% of sales) in 2020. SG&A expenses
were $39 lower in 2020 primarily due to lower salaried employee wage and
benefits expenses and professional fees resulting from austerity measures taken
in response to the COVID pandemic.



Amortization of intangible assets – The amortization expense was $14 in 2021 and $13 in 2020.



Restructuring charges, net - Restructuring charges of $34 in 2020 were comprised
of severance and benefit costs primarily related to headcount reductions across
our operations in response to the COVID pandemic and exit costs related to
previously announced actions. See Note 4 of our consolidated financial
statements in Item 8 for additional information.



Impairment of goodwill - During the first quarter of 2020, we recorded a $51
goodwill impairment charge. See Note 3 of our consolidated financial statements
in Item 8 for additional information.



Other income (expenses), net – The following table presents the main components of other income (expenses), net.



                                                                2021      

2020

Non-service cost components of pension and OPEB costs           $ (10 )   $ (10 )
Government grants and incentives                                   16       

14

Foreign exchange gain                                               2       

8

Strategic transaction expenses                                    (13 )     (20 )
Gain (loss) on investment in Hyliion                              (20 )     

33

Loss on disposal group held for sale                               (7 )
Loss on de-designation of fixed-to-fixed cross currency swaps      (9 )
Gain on sale leaseback                                             66
Other, net                                                          7        (3 )
Other income (expense), net                                     $  32     $  22






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Strategic transaction expenses relate primarily to costs incurred in connection
with acquisition and divestiture related activities, including costs to complete
the transaction and post-closing integration costs. Strategic transaction
expenses in 2021 were primarily attributable to our pursuit of the acquisition
of a portion of the thermal-management business of Modine Manufacturing Company
and certain other strategic initiatives. Strategic transaction expenses in
2020 were primarily attributable to the acquisition of ODS and Nordresa and
certain other strategic initiatives. We held convertible notes receivable from
our investment in Hyliion Inc. On October 1, 2020, Hyliion Inc. completed its
merger with Tortoise Acquisition Corp. The business combination resulted in the
combined company being renamed Hyliion Holdings Corp. (Hyliion), with its common
stock being listed on the New York Stock Exchange under the ticker symbol HYLN.
Effective with the completed merger, our notes receivable were converted into
2,988,229 common shares of HYLN. Our investment in Hyliion was included in
noncurrent marketable securities and carried at fair value with changes in fair
value included in net income. During the third quarter of 2021, we sold all of
our Hyliion shares. We had previously entered into fixed-to-fixed cross currency
swaps as a hedge against our June 2026 Notes. In June 2021, we redeemed all of
the June 2026 Notes and de-designated the fixed-to-fixed cross currency swaps.
In conjunction with our acquisition of ODS, we acquired a controlling financial
interest in a joint venture in China. We were required to divest our interest in
this joint venture as it violates competitive restrictions of another of our
China joint venture shareholder agreements. During the first quarter of 2021, we
recorded an impairment charge of $7, as we determined the carrying value of the
disposal group exceeded its fair value less costs to sell. We completed the
disposal of this business in April 2021. During December 2021, we completed a
sale-leaseback transaction on three of our U.S. manufacturing facilities. We
received proceeds of $77 from the sale of the properties, which had carrying
values totaling $11, resulting in a $66 gain on the sale transaction. See Note
19 of our consolidated financial statements in Item 8 for additional
information.



Loss on extinguishment of debt - During May 2021, we redeemed our December 2024
Notes. We incurred redemption premiums of $8 in connection with these repayments
and wrote off $3 of previously deferred financing costs associated with the
December 2024 Notes. These charges were partially offset by the recognition of
$3 related to an unamortized fair value adjustment associated with a
fixed-to-floating interest rate swap that was terminated in 2015. On June 10,
2021, in connection with the issuance of our July 2029 Notes, we redeemed all of
our June 2026 Notes. We incurred redemption premiums of $12 in connection with
these repayments and wrote off $4 of previously deferred financing costs
associated with the June 2026 Notes. On November 30, 2021, in connection with
the issuance of our February 2032 Notes, we fully paid down our Term B Facility.
We wrote off $5 of previously deferred financing costs associated with the Term
B Facility. On June 19, 2020, in connection with the issuance of our June 2028
Notes, we terminated our $500 bridge facility and wrote off $5 of deferred fees
associated with the bridge facility. On December 31, 2020, we fully paid down
our Term A Facility. We wrote off $3 of previously deferred financing costs
associated with the Term A Facility. See Note 14 of our consolidated financial
statements in Item 8 for additional information.



Interest income and interest expense - Interest income was $9 in both 2021 and
2020. Interest expense decreased from $138 in 2020 to $131 in 2021 due to lower
average debt levels in 2021. See Note 14 of our consolidated financial
statements in Item 8 for additional information. Average effective interest
rates, inclusive of amortization of debt issuance costs, approximated 5.1% in
2021 and 5.0% in 2020.



Income tax expense - Income taxes were an expense of $72 and $58 in 2021 and
2020. During 2021, we recognized tax expense of $46 to record valuation
allowance in the US due to reduced income projections.  We also recognized tax
benefit of $46 for the release of valuation allowances in several foreign
jurisdictions based on recent history of profitability and increased income
projections.  The contrast of these two positions is representative of the
jurisdictional mix of results and relative attributes. We also recognized tax
expense of $18 related to the expiration of federal tax credits. During 2020, we
recognized tax expense of $60 for additional valuation allowances in foreign
jurisdictions due to reduced income projections. We also recognized a benefit of
$26 for the release of valuation allowance in a subsidiary in Australia, based
on recent history of profitability and increased income projections. In
conjunction with the completion of the intercompany sale of certain assets to a
non-U.S. affiliate, net tax expense of $12 was recorded, including the
corresponding foreign derived intangible income benefit. For the year, we also
recognized tax benefits of $37 related to tax actions that adjusted federal tax
credits. A pre-tax goodwill impairment charge of $51 with an associated income
tax benefit of $1 was recorded. See Note 18 to our consolidated financial
statements in Item 8 for additional information.



Equity in earnings of affiliates - Net earnings from equity investments was
$28 in 2021 and $20 in 2020. Equity in earnings from Dongfeng Dana Axle Co.,
Ltd. (DDAC) was $22 in 2021 and $15 in 2020. On December 16, 2020, we sold a
portion of our ownership interest in ROC-Spicer, Ltd. (ROC-Spicer) to China
Motor Corporation, reducing our ownership interest in ROC-Spicer to 50%. In
conjunction with the decrease in our ownership interest, the ROC-Spicer
shareholders agreement was amended, eliminating our controlling financial
interest in ROC-Spicer. Our retained investment in ROC-Spicer is being accounted
for by applying the equity method. Equity in earnings of ROC-Spicer was $3 in
2021. Equity in earnings from Bendix Spicer Foundation Brake, LLC (BSFB) was $4
in 2020. On October 1, 2020 we sold our 20% ownership interest in BSFB to Bendix
Commercial Vehicle Systems LLC. See Note 22 of our consolidated financial
statements in Item 8 for additional information.



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Segment operating results (2021 vs. 2020)


Light Vehicle



                                              Segment
                                Segment       EBITDA
                    Sales       EBITDA        Margin
2020               $ 3,038     $     239           7.9 %
Volume and mix         649           134
Divestitures           (24 )          (2 )
Performance             80           (99 )
Currency effects        30             2
2021               $ 3,773     $     274           7.3 %




Light Vehicle sales in 2021, exclusive of currency effects and the impact of
divestitures, were 24% higher than 2020 reflecting improved global markets and
the conversion of sales backlog. Year-over-year North America full-frame
light-truck production increased 13% while light-truck production in Europe,
South America and Asia Pacific increased 2%, 35% and 4%, respectively. Net
customer pricing and cost recovery actions further increased year-over-year
sales by $66. The global semiconductor chip shortage impacted our 2021 sales as
customers of some of our more significant programs were forced to take down time
during the last nine months of the year.



Light Vehicle segment EBITDA increased by $35 in 2021. Higher sales volumes
provided a year-over-year benefit of $134 (20.6% incremental margin). The
year-over-year performance-related earnings decrease was driven by commodity
cost increases of $167, higher standard freight costs of $25, operational
inefficiencies of $15, union ratification bonuses of $10, benefits of the CARES
Act and austerity measures taken in response to the COVID pandemic during 2020
not repeating in 2021 of $5 and $8, respectively, higher program launch costs of
$7 and higher warranty costs of $13. Partially offsetting these
performance-related decreases were material cost savings and supplier recoveries
of $73, net customer pricing and material cost recovery actions of $66, lower
premium freight costs of $10 and lower incentive compensation of $2.



Commercial Vehicle



                                                       Segment
                                         Segment       EBITDA
                             Sales       EBITDA        Margin
2020                        $ 1,185     $      40           3.4 %
Volume and mix                  263            68
Acquisition / Divestiture        (5 )          (2 )
Performance                      83           (59 )
Currency effects                  6             1
2021                        $ 1,532     $      48           3.1 %




Commercial Vehicle sales in 2021, exclusive of currency effects and the impact
of acquisitions and divestitures, were 29% higher than 2020 reflecting
mixed global markets and the conversion of sales backlog. Year-over-year North
America Class 8 production was up 20% and Classes 5-7 production was up 3%.
Year-over-year medium/heavy-truck production in Europe and South America were up
13% and 76%, respectively. Asia Pacific medium/heavy-truck production was down
8% compared to 2020. Net customer pricing and cost recovery actions further
increased year-over-year sales by $86.



Commercial Vehicle segment EBITDA increased by $8 in 2021. Higher sales volumes
provided a year-over-year benefit of $68 (25.9% incremental margin). The
year-over-year performance-related earnings decrease was driven by commodity
cost increases of $95, operational inefficiencies of $32, higher standard and
premium freight costs of $22, benefits of the CARES Act and austerity measures
taken in response to the COVID pandemic during 2020 not repeating in 2021 of $2
and $9, respectively, union ratification bonuses of $3, and higher warranty
costs of $1. Partially offsetting these performance-related decreases were net
customer pricing and material cost recovery actions of $86, material cost
savings of $17 and lower incentive compensation of $2.



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Off-Highway



                                              Segment
                                Segment       EBITDA
                    Sales       EBITDA        Margin
2020               $ 1,966     $     230          11.7 %
Volume and mix         482           116
Acquisition              1            (1 )
Performance             69             -
Currency effects        75             8
2021               $ 2,593     $     353          13.6 %




Off-Highway sales in 2021, exclusive of currency effects and the impact of
acquisitions, were 28% higher than 2020 reflecting improved global markets and
the conversion of sales backlog. Year-over-year global construction/mining and
agricultural equipment markets reflected marked improvement with global
production increasing 12% and 10%, respectively, over 2020. Net customer pricing
and cost recovery actions further increased year-over-year sales by $61.



Off-Highway segment EBITDA increased by $123 in 2021. Higher sales volumes
provided a year-over-year benefit of $116 (24.1% incremental margin). The
year-over-year performance-related earnings increase driven by net customer
pricing and material cost recovery actions of $61, material cost savings of $31,
operational efficiencies of $16 and lower incentive compensation of $3 were
offset by higher commodity costs of $78, higher standard and premium freight
costs of $14, benefits of the CARES Act and austerity measures taken in response
to the COVID pandemic during 2020 not repeating in 2021 of $1 and $13,
respectively, higher warranty costs of $3 and union ratification bonuses of $2.



Power Technologies



                                              Segment
                                Segment       EBITDA
                    Sales       EBITDA        Margin
2020               $   917     $      94          10.3 %
Volume and mix          87            34
Performance             16            (8 )
Currency effects        27             3
2021               $ 1,047     $     123          11.7 %




Power Technologies primarily serves the light-vehicle market but also sells
product to the medium/heavy-truck and off-highway markets. Net of currency
effects, sales for 2021 were 11% higher than 2020, reflecting generally improved
global markets and the conversion of sales backlog. Year-over-year North
America, South America and Asia Pacific light-vehicle engine production was up
2%, 9% and 3%, respectively, compared to 2020. Year-over-year light-vehicle
engine production in Europe was down 5% compared to 2020. Net customer pricing
and cost recovery actions further increased year-over-year sales by $10.



Power Technologies segment EBITDA increased by $29 in 2021. Higher sales volumes
provided a year-over-year benefit of $34 (39.1% incremental margin). The
year-over-year performance-related earnings decrease was driven by commodity
cost increases of $27, higher standard and premium freight costs of $10,
benefits of the CARES Act and austerity measures taken in response to the COVID
pandemic during 2020 not repeating in 2021 of $2 and $9, respectively, union
ratification bonuses of $3 and higher incentive compensation of $1. Partially
offsetting these performance-related decreases were operational efficiencies of
$21, net customer pricing and material cost recovery actions of $10, material
costs savings of $8 and lower warranty costs of $5.



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Non-GAAP Financial Measures



Adjusted EBITDA



We have defined adjusted EBITDA as net income (loss) before interest, income
taxes, depreciation, amortization, equity grant expense, restructuring expense,
non-service cost components of pension and other postretirement benefits (OPEB)
costs and other adjustments not related to our core operations (gain/loss on
debt extinguishment, pension settlements, divestitures, impairment, etc.).
Adjusted EBITDA is a measure of our ability to maintain and continue to invest
in our operations and provide shareholder returns. We use adjusted EBITDA in
assessing the effectiveness of our business strategies, evaluating and pricing
potential acquisitions and as a factor in making incentive compensation
decisions. In addition to its use by management, we also believe adjusted EBITDA
is a measure widely used by securities analysts, investors and others to
evaluate financial performance of our company relative to other Tier 1
automotive suppliers. Adjusted EBITDA should not be considered a substitute for
earnings before income taxes, net income or other results reported in accordance
with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures
reported by other companies.



The following table provides a reconciliation of net income (loss) to adjusted
EBITDA.



                                                                 2021      2020
Net income (loss)                                                $ 200     $ (51 )
Equity in earnings of affiliates                                    28      

20

Income tax expense (benefit)                                        72      

58

Earnings (loss) before income taxes                                244       (13 )
Depreciation and amortization                                      389       365
Restructuring charges, net                                                    34
Interest expense, net                                              122       129
Loss on extinguishment of debt                                      29      

8

(Gain) loss on investment in Hyliion                                20       (33 )
Loss on disposal group held for sale                                 7

Loss on de-designation of fixed-to-fixed currency swaps 9 Gain on sale-leaseback

                                             (66 )
Impairment of goodwill                                                      

51

Pension settlement charge
Acquisition related inventory adjustments
Other*                                                              41        52
Adjusted EBITDA                                                  $ 795     $ 593



* Other includes stock-based compensation expense, non-service cost items of

pension and OPEB costs, strategic transaction expenses and other items.

See Note 21 to our Consolidated Financial Statements in Section 8 for additional information.

  details.



Free cash flow and adjusted free cash flow



We have defined free cash flow as cash provided by operating activities less
purchases of property, plant and equipment. We have defined adjusted free cash
flow as cash provided by operating activities excluding discretionary pension
contributions less purchases of property, plant and equipment. We believe these
measures are useful to investors in evaluating the operational cash flow of the
company inclusive of the spending required to maintain the operations. Free cash
flow and adjusted free cash flow are not intended to represent nor be an
alternative to the measure of net cash provided by operating activities reported
in accordance with GAAP. Free cash flow and adjusted free cash flow may not be
comparable to similarly titled measures reported by other companies.



The following table reconciles net cash provided by operating activities to adjusted free cash flow.



                                              2021       2020

Net cash flow generated by operating activities $158 $386
Acquisitions of property, plant and equipment (369 ) (326 ) Free cash flow

                                 (211 )       60
Discretionary pension contribution                -          -
Adjusted free cash flow                      $ (211 )   $   60




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Liquidity


The following table provides a reconciliation of cash and cash equivalents to liquidity, a non-GAAP measure, as of December 31, 2021:



Cash and cash equivalents                              $   268
Less: Deposits supporting obligations                       (1 )
Available cash                                             267
Additional cash availability from Revolving Facility     1,129
Marketable securities                                       17
Total liquidity                                        $ 1,413




Cash deposits are maintained to provide credit enhancement for certain
agreements and are reported as part of cash and cash equivalents. For most of
these deposits, the cash may be withdrawn if a comparable security is provided
in the form of letters of credit. Accordingly, these deposits are not considered
to be restricted. Marketable securities are included as a component of liquidity
as these investments can be readily liquidated at our discretion. We had
availability of $1,129 at December 31, 2021 under our Revolving Facility after
deducting $21 of outstanding letters of credit.



The components of our December 31, 2021 consolidated cash balance were as
follows:



                                                   U.S.           Non-U.S.          Total
Cash and cash equivalents                      $          3     $        168     $        171
Cash and cash equivalents held as deposits                                 1                1
Cash and cash equivalents held at less than
wholly-owned subsidiaries                                 3               93               96
Consolidated cash balance                      $          6     $        262     $        268




A portion of the non-U.S. cash and cash equivalents is utilized for working
capital and other operating purposes. Several countries have local regulatory
requirements that restrict the ability of our operations to repatriate this
cash. Beyond these restrictions, there are practical limitations on repatriation
of cash from certain subsidiaries because of the resulting tax withholdings and
subsidiary by-law restrictions which could limit our ability to access cash and
other assets.


At March 25, 2021we amended our credit and guarantee agreement, increasing the revolving facility to $1,150 and extend its maturity to March 25, 2026.



At December 31, 2021, we were in compliance with the covenants of our financing
agreements. Under the Revolving Facility and our senior notes, we are required
to comply with certain incurrence-based covenants customary for facilities of
these types. The incurrence-based covenants in the Revolving Facility permit us
to, among other things, (i) issue foreign subsidiary indebtedness, (ii) incur
general secured indebtedness subject to a pro forma first lien net leverage
ratio not to exceed 1.50:1.00 in the case of first lien debt and a pro forma
secured net leverage ratio of 2.50:1.00 in the case of other secured debt and
(iii) incur additional unsecured debt subject to a pro forma total net leverage
ratio not to exceed 3.50:1.00, tested at the time of incurrence. We may also
make dividend payments in respect of our common stock as well as certain
investments and acquisitions subject to a pro forma total net leverage ratio of
2.75:1.00. In addition, the Revolving Facility is subject to a financial
covenant requiring us to maintain a first lien net leverage ratio not to exceed
2.00:1.00. The indentures governing the senior notes include other
incurrence-based covenants that may subject us to additional specified
limitations.



From time to time, depending upon market, pricing and other conditions, as well
as our cash balances and liquidity, we may seek to acquire our senior notes or
other indebtedness or our common stock through open market purchases, privately
negotiated transactions, tender offers, exchange offers or otherwise, upon such
terms and at such prices as we may determine (or as may be provided for in the
indentures governing the notes), for cash, securities or other consideration. In
addition, we may enter into sale-leaseback transactions related to certain of
our real estate holdings and factor receivables. There can be no assurance that
we will pursue any such transactions in the future, as the pursuit of any
alternative will depend upon numerous factors such as market conditions, our
financial performance and the limitations applicable to such transactions under
our financing and governance documents.



The principal sources of liquidity available for our future cash requirements
are expected to be (i) cash flows from operations, (ii) cash and cash
equivalents on hand and (iii) borrowings from our Revolving Facility. We believe
that our overall liquidity and operating cash flow will be sufficient to meet
our anticipated cash requirements for capital expenditures, working capital,
debt obligations and other commitments during the next twelve months. While
uncertainty surrounding the current economic environment could adversely impact
our business, based on our current financial position, we believe it is unlikely
that any such effects would preclude us from maintaining sufficient liquidity.



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Cash Flow



                                                              2021            2020

Cash provided by (used for) changes in working capital $ (455 ) $47
Other operating cash flows

                                  613      

339

Net cash provided by operating activities                          158      

386

Net cash used in investing activities                             (293 )          (327 )
Net cash provided by (used in) financing activities               (127 )           (12 )
Net increase (decrease) in cash, cash equivalents and
restricted cash                                            $      (262 )   $        47



The table above summarizes our consolidated statement of cash flows.



Operating activities - Exclusive of working capital, other cash provided by
operations was $613 during 2021 compared to $339 during 2020. The year-over-year
increase is primarily attributable to higher operating earnings and lower
year-over-year cash paid for interest and strategic transaction expenses of $20
and $7, respectively. The decrease in cash paid for interest resulted from
refinancing transactions in 2021 changing the timing of interest payments on our
senior notes.



Working capital used cash of $455 in 2021 and provided cash of $47 in 2020. Cash
of $189 and $66 was used to finance receivables in 2021 and 2020, respectively.
The higher level of cash used to finance receivables in 2021 is due to higher
year-over-year fourth quarter sales driven by strong heavy-vehicles markets.
Cash of $471 was used to fund higher inventory levels during 2021, while cash of
$69 was generated by lower inventory levels in 2020. We are carrying higher
levels of inventory in 2021 to mitigate continued global-supply-chain
disruptions as well as labor shortages at certain of our facilities, ensuring
continuous supply for our customers. The cash generated by lower inventory
levels in 2020 was due primarily to actions taken to reduce inventory levels,
preserving working capital, in response to the COVID pandemic. Increases in
accounts payable and other net liabilities provided cash of $205 and $44 in 2021
and 2020, respectively. The increase in accounts payable and other net
liabilities in 2021 was principally driven by higher raw material purchases in
the third and fourth quarters.



Investing activities - Expenditures for property plant and equipment were $369
and $326 in 2021 and 2020. During 2020, capital spending was delayed where and
when appropriate in response to the COVID pandemic. During December 2021, we
completed a sale-leaseback transaction on three of our U.S. manufacturing
facilities receiving proceeds of $77 from the sale of the properties. During
2020, we paid $17 to acquire a 49% noncontrolling financial interest in Pi
Innovo. During 2021, we paid $17, net of cash acquired, to acquire an additional
51% interest in Pi Innovo. The acquisition of the additional ownership interest
provides us with a 100% ownership interest in Pi Innovo. During 2020, we paid $8
to acquire Curtis' 35.4% ownership interest in Ashwoods. The acquisition of
Curtis' interest in Ashwoods, along with our existing ownership interest in
Ashwoods, provided us with a controlling financial interest in Ashwoods. During
2021, we acquired a 1% ownership interest in Switch Mobility Limited for
$18. During 2020, we sold our 20% ownership interest in Bendix Spicer Foundation
Brake, LLC (BSFB) for $50, consisting of $21 in cash, a note receivable of $25
and deferred proceeds of $4. During 2021, we received $29 in settlement of the
note receivable and deferred proceeds from the BSFB transaction. During 2021, we
sold all of our Hyliion shares for $29. During 2020, purchases of marketable
securities were largely funded by proceeds from sales and maturities of
marketable securities. During 2021, we dedesignated the fixed-to-fixed cross
currency swaps associated with our June 2026 Notes and settled certain of the
fixed-to-fixed cross currency swaps resulting in a net cash outflow of $22.



Financing activities - During 2021, we completed the issuance of €325 of our
July 2029 Notes, $400 of our September 2030 Notes and $350 of our February 2032
Notes, paying financing costs of $16. Also during 2021, we redeemed all $375 of
our June 2026 Notes and all $425 of our December 2024 Notes, paying redemption
premiums of $21. During 2021, we fully paid down our Term B Facility, making
principal payments of $349. During 2021, we paid financing costs of $2 to amend
our credit and guaranty agreement, increasing the Revolving Facility to $1,150
and extending its maturity to March 25, 2026. During 2020, we completed the
issuance of $400 of our June 2028 Notes and the issuance of an additional $100
of our November 2027 Notes, paying financing costs of $8. During 2020, we
entered into a $500 bridge facility, paying financing costs of $5. We
subsequently terminated the bridge facility. During 2020 we fully paid down
our Term A Facility, making principal payments of $474. We used $58 and $15 for
dividend payments to common stockholders during 2021 and 2020. We used cash of
$23 to repurchase common shares under our share repurchase program in 2021.
During the second quarter of 2020, we temporarily suspended the declaration and
payment of dividends to common stockholders and temporarily suspended the
repurchase of common stock under our existing common stock repurchase program in
response to the global COVID pandemic.  Distributions to noncontrolling
interests totaled $15 and $11 in 2021 and 2020. During 2020, Hydro-Québec paid
us $7 to acquire an indirect 45% redeemable noncontrolling interest in
Ashwoods. Hydro-Québec contributed $14 and $4 to the strategic joint venture in
2021 and 2020. During 2021, we sold a portion of our ownership interest in Tai
Ya Investment (HK) Co., Limited (Tai Ya) to China Motor Corporation, reducing
our ownership interest in Tai Ya to 50%. In conjunction with the decrease in our
ownership interest, the Tai Ya shareholders agreement was amended, eliminating
our controlling financial interest in Tai Ya. Upon our loss of control, we
deconsolidated Tai Ya, including $6 of cash and cash equivalents. During 2020,
we sold a portion of our ownership interest in ROC-Spicer, Ltd. (ROC-Spicer) to
China Motor Corporation, reducing our ownership interest in ROC-Spicer to 50%.
In conjunction with the decrease in our ownership interest, the ROC-Spicer
shareholders agreement was amended, eliminating our controlling financial
interest in ROC-Spicer. Upon our loss of control, we deconsolidated ROC-Spicer,
including $14 of cash and cash equivalents.



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Off-balance sheet arrangements



In connection with the divestiture of our Structural Products business in 2010,
leases covering three U.S. facilities were assigned to a U.S. affiliate of the
new owner, Metalsa S.A. de C.V. (Metalsa). Under the terms of the sale
agreement, we guarantee the affiliate's performance under the leases, which run
through June 2025, including approximately $6 of annual payments. In the event
of a required payment by Dana as guarantor, we are entitled to pursue full
recovery from Metalsa of the amounts paid under the guarantee and to take
possession of the leased property.



Contractual Obligations


We are obligated to make future cash payments in fixed amounts under various agreements. The following table summarizes our main contractual obligations as of December 31, 2021.



                                                                    Payments Due by Period
Contractual Cash Obligations        Total         2022         2023 - 2024       2025 - 2026       After 2026
Long-term debt(1)                 $   2,365     $       1     $          35     $         409     $      1,920
Interest payments(2)                    801           112               229               213              247
Operating leases(3)                     356            52                75                59              170
Financing leases(4)                      77            10                16                11               40
Unconditional purchase
obligations(5)                          239           226                13                 -                -
Pension contribution(6)                  17            17
Retiree health care benefits(7)          43             5                 9                 8               21
Uncertain income tax
positions(8)                              -
Total contractual cash
obligations                       $   3,898     $     423     $         377     $         700     $      2,398

_________________________________________________________

Remarks:

(1) Principal payments on long-term debt.

(2) Interest payments are based on the long-term debt in place at December 31, 2021

and the interest rates applicable to these bonds.

(3) Operating lease obligations, including interest, relating to real estate,

manufacturing and material handling equipment, vehicles and other assets.

(4) Finance lease obligations, including interest, related to real estate and

manufacturing and handling equipment.

(5) Unconditional purchase obligations consist of commitments

the procurement of fixed assets, the purchase of raw materials and the

the performance of other contractual obligations.

(6) This amount represents the estimated minimum required contributions for 2022 to our

global defined benefit pension plans. We did not estimate the pension

contributions beyond 2022 due to the significant impact that the return of the plan

assets and changes in discount rates could have on these amounts.

(7) This amount represents estimated payments under our retiree healthcare program

programs. Obligations under retiree health care programs are not fixed

commitments and will vary depending on various factors, including the level

participant utilization and inflation. Our estimates of payments to

made in the future, consider recent payment trends and some of our

actuarial assumptions.

(8) We are unable to reasonably estimate the timing of payments related to

uncertain tax positions because the timing of settlement is uncertain. the

the table above does not reflect unrecognized tax benefits the 31st of December,

2021 from $126. See Note 18 to our consolidated financial statements under Item 8

    for additional discussion.



AT December 31, 2021we maintained cash balances of $1 on deposit with financial institutions primarily to support property insurance policy deductibles, certain employee pension obligations, and specific government-approved environmental remediation efforts.


Contingencies



For a summary of litigation and other contingencies, see Note 16 of our
consolidated financial statements in Item 8. Based on information available to
us at the present time, we do not believe that any liabilities beyond the
amounts already accrued that may result from these contingencies will have a
material adverse effect on our liquidity, financial condition or results of
operations.



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Critical Accounting Estimates



The preparation of our consolidated financial statements in accordance with GAAP
requires us to use estimates and make judgments and assumptions about future
events that affect the reported amounts of assets, liabilities, revenue,
expenses and the related disclosures. Considerable judgment is often involved in
making these determinations. Critical estimates are those that require the most
difficult, subjective or complex judgments in the preparation of the financial
statements and the accompanying notes. We evaluate these estimates and judgments
on a regular basis. We believe our assumptions and estimates are reasonable and
appropriate. However, the use of different assumptions could result in
significantly different results and actual results could differ from those
estimates. The following discussion of accounting estimates is intended to
supplement the Summary of Significant Accounting Policies presented as Note 1 of
our consolidated financial statements in Item 8.



Income taxes - Accounting for income taxes is complex, in part because we
conduct business globally and therefore file income tax returns in numerous tax
jurisdictions. Significant judgment is required in determining the income tax
provision, uncertain tax positions, deferred tax assets and liabilities and the
valuation allowances recorded against our net deferred tax assets. A valuation
allowance is provided when, in our judgment based upon available information, it
is more likely than not that a portion of such deferred tax assets will not be
realized. To make this assessment, we consider the historical and projected
future taxable income or loss by tax jurisdiction. We consider all components of
comprehensive income and weigh the positive and negative evidence, putting
greater reliance on objectively verifiable historical evidence than on
projections of future profitability that are dependent on actions that have not
taken place as of the assessment date. We also consider changes to historical
profitability of actions that occurred through the date of assessment and
objectively verifiable effects of material forecasted events that would have a
sustained effect on future profitability, as well as the effect on historical
profits of nonrecurring events. We also incorporate the changes to historical
and prospective income from tax planning strategies that are prudent and
feasible.



In the ordinary course of business, there are many transactions and calculations
where the ultimate tax determination is less than certain. We are regularly
under audit by the various applicable tax authorities. Although the outcome of
tax audits is always uncertain, we believe that we have appropriate support for
the positions taken on our tax returns and that our annual tax provisions
include amounts sufficient to pay assessments, if any, upon final determination
by the taxing authorities. Nonetheless, the amounts ultimately paid, if any,
upon resolution of the issues raised by the taxing authorities may differ
materially from the amounts accrued for each year. See additional discussion of
our deferred tax assets and liabilities in Note 18 of our consolidated financial
statements in Item 8.



Retiree benefits - Accounting for pension benefits and other postretirement
benefits (OPEB) involves estimating the cost of benefits to be provided well
into the future and attributing that cost to the time period each employee
works. These plan expenses and obligations are dependent on assumptions
developed by us in consultation with our outside advisers such as actuaries and
other consultants and are generally calculated independently of funding
requirements. The assumptions used, including inflation, discount rates,
investment returns, life expectancies, turnover rates, retirement rates, future
compensation levels and health care cost trend rates, have a significant impact
on plan expenses and obligations. These assumptions are regularly reviewed and
modified when appropriate based on historical experience, current trends and
future outlook. Changes in one or more of the underlying assumptions could
result in a material impact to our consolidated financial statements in any
given period. If actual experience differs from expectations, our financial
position and results of operations in future periods could be affected.



Mortality rates are based in part on the company's plan experience and actuarial
estimates. The inflation assumption is based on an evaluation of external market
indicators, while retirement and turnover rates are based primarily on actual
plan experience. Health care cost trend rates are developed based on our actual
historical claims experience, the near-term outlook and an assessment of likely
long-term trends. For our largest plans, discount rates are based upon the
construction of a yield curve which is developed based on a subset of
high-quality fixed-income investments (those with yields between the 40th and
90th percentiles). The projected cash flows are matched to this yield curve and
a present value developed which is then calibrated to develop a single
equivalent discount rate. Pension benefits are funded through deposits with
trustees that satisfy, at a minimum, the applicable funding regulations. For our
largest defined benefit pension plans, expected investment rates of return are
based on input from the plans' investment advisers regarding our expected
investment portfolio mix, historical rates of return on those assets, projected
future asset class returns, the impact of active management and long-term market
conditions and inflation expectations. We believe that the long-term asset
allocation on average will approximate the targeted allocation and we regularly
review the actual asset allocation to periodically re-balance the investments to
the targeted allocation when appropriate. OPEB and the majority of our non-U.S.
pension benefits are funded as they become due.



Actuarial gains or losses may result from changes in assumptions or when actual
experience is different from that which was expected. Under the applicable
standards, those gains and losses are not required to be immediately recognized
in our results of operations as income or expense, but instead are deferred as
part of AOCI and amortized into our results of operations over future periods.



U.S. retirement plans - Our U.S. defined benefit pension plans comprise 66% of
our consolidated defined benefit pension obligations at December 31, 2021. These
plans are frozen and no service-related costs are being incurred. Changes in our
net obligations are principally attributable to changing discount rates and the
performance of plan assets. In October 2017, upon authorization by the Dana
Board of Directors, we commenced the process of terminating one of our U.S.
defined benefit pension plans. During the second quarter of 2019, payments were
made from plan assets to those plan participants that elected to take the
lump-sum payout option. In June 2019, we entered into (a) a definitive
commitment agreement by and among Dana, Athene Annuity and Life Company (Athene)
and State Street Global Advisors, as independent fiduciary to the plan, and (b)
a definitive commitment agreement by and among Dana, Companion Life Insurance
Company (Companion) and State Street Global Advisors, as independent fiduciary
to the plan. Pursuant to the definitive commitment agreements, the plan
purchased group annuity contracts that irrevocably transferred to the insurance
companies the remaining future pension benefit obligations of the plan. Plan
participant's benefits are unchanged as a result of the termination. We
contributed $59 to the plan prior to the purchase of the group annuity
contracts. The purchase of group annuity contracts was then funded directly by
the assets of the plan in June 2019. By irrevocably transferring the obligations
to Athene and Companion, we reduced our unfunded pension obligation by
approximately $165 and recognized a pre-tax pension settlement charge of $256 in
2019.



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Rising discount rates decrease the present value of future pension obligations -
a 25 basis point increase in the discount rate would decrease our U.S. pension
liability by about $18. As indicated above, when establishing the expected
long-term rate of return on our U.S. pension plan assets, we consider historical
performance and forward looking return estimates reflective of our portfolio mix
and investment strategy. Based on the most recent analysis of projected
portfolio returns, we concluded that the use of a 4.0% expected return in
2022 is appropriate for our U.S. pension plans. See Note 12 to our consolidated
financial statements in Item 8 for information about the investing and
allocation objectives related to our U.S. pension plan assets.



We use a full yield curve approach to estimate the service (where applicable)
and interest components of the annual cost of our pension and other
postretirement benefit plans. This method estimates interest and service expense
using the specific spot rates, from the yield curve, that relate to projected
cash flows. We believe this method is a more precise measurement of interest and
service costs by improving the correlation between the projected cash flows and
the corresponding interest rates. The determination of the projected benefit
obligation at year end is unchanged.



At December 31, 2021, we have $129 of unrecognized losses relating to our U.S.
pension plans. Actuarial gains and losses, which are primarily the result of
changes in the discount rate and other assumptions and differences between
actual and expected asset returns, are deferred in AOCI and amortized to expense
following the corridor approach. We use the average remaining service period of
active participants unless almost all of the plan's participants are inactive,
in which case we use the average remaining life expectancy of inactive
participants.



Based on the current funding status of our we plans, we do not expect to make any contributions in 2022.

See Note 12 to our Consolidated Financial Statements in Section 8 for additional discussion of our pension plan and OPEB obligations.



Acquisitions - From time to time, we make strategic acquisitions that have a
material impact on our consolidated results of operations or financial position.
We allocate the purchase price of acquired businesses to the identifiable
tangible and intangible assets acquired, liabilities assumed and any redeemable
noncontrolling interests or noncontrolling interests based upon their estimated
fair values as of the acquisition date. We determine the estimated fair values
using information available to us and engage independent third-party valuation
specialists when necessary. Estimating fair values can be complex and subject to
significant business judgment. We believe the assumptions and estimates we have
made in the past have been reasonable and appropriate, they are based, in part,
on historical experience and information obtained from management of the
acquired companies and are inherently uncertain. Critical estimates in valuing
certain of the intangible assets we have acquired include, but are not limited
to, future expected cash flows from product sales, customer contracts and
acquired technologies, and discount rates. The discount rates used to discount
expected future cash flows to present value are typically derived from a
weighted-average cost of capital analysis and adjusted to reflect inherent
risks. Unanticipated events and circumstances may occur that could affect either
the accuracy or validity of such assumptions, estimates or actual results.
Generally, we have, if necessary, up to one year from the acquisition date to
finalize our estimates of acquisition date fair values.



Redeemable noncontrolling interests - Redeemable noncontrolling interests
reflected as of the balance sheet date are the greater of the redeemable
noncontrolling interest balances adjusted for comprehensive income items and
distributions or the redemption values. Redeemable noncontrolling interest
adjustments of redemption value are recorded in retained earnings. We estimate
the fair value of the redemption value using an income based approach based on
discounted cash flow projections.  In determining fair value using discounted
cash flow projections, we make significant assumptions and estimates about the
extent and timing of future cash flows, including revenue growth rates,
projected EBITDA, discount rates, and terminal growth rates. See additional
discussion of redeemable noncontrolling interests in Note 9 of our consolidated
financial statements in Item 8.



Goodwill and other indefinite-lived intangible assets - Our goodwill and other
indefinite-lived intangible assets are tested for impairment annually as of
October 31 for all of our reporting units, and more frequently if events or
circumstances warrant such a review. We make significant assumptions and
estimates about the extent and timing of future cash flows, including revenue
growth rates, projected gross margins, discount rates, and exit earnings
multiples. The cash flows are estimated over a significant future period of
time, which makes those estimates and assumptions subject to a high degree of
uncertainty. Our utilization of market valuation models requires us to make
certain assumptions and estimates regarding the applicability of those models to
our assets and businesses. We use our internal forecasts, which we update
quarterly, to make our cash flow projections. These forecasts are based on our
knowledge of our customers' production forecasts, our assessment of market
growth rates, net new business, material and labor cost estimates, cost recovery
agreements with customers and our estimate of savings expected from our
restructuring activities.



The most likely factors that would significantly impact our forecasts are
changes in customer production levels and loss of significant portions of our
business. We believe that the assumptions and estimates used in the assessment
of the goodwill and other indefinite-lived intangible assets as of October 31,
2021 were reasonable.



Long-lived assets with definite lives - We perform impairment assessments on our
property, plant and equipment and our definite-lived intangible assets whenever
events and circumstances indicate that the carrying amounts of the assets may
not be recoverable. When indications are present, we compare the estimated
future undiscounted net cash flows of the operations to which the assets relate
to the carrying amounts of such assets. We utilize the cash flow projections
discussed above for property, plant and equipment and amortizable intangibles.
We group the assets and liabilities at the lowest level for which identifiable
cash flows are largely independent of the cash flows of other assets and
liabilities and evaluate the asset group against the undiscounted future cash
flows using the life of the primary assets. If the carrying amounts of the
long-lived assets are not recoverable from future cash flows and exceed their
fair value, an impairment loss is recognized to reduce the carrying amounts of
the long-lived assets to their fair value. Fair value is determined based on
discounted cash flows, third-party appraisals or other methods that provide
appropriate estimates of value. Determining whether a triggering event has
occurred, performing the impairment analysis and estimating the fair value of
the assets require numerous assumptions and a considerable amount of management
judgment.



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Investments in affiliates - We had aggregate investments in affiliates of
$174 at December 31, 2021 and $152 at December 31, 2020. We monitor our
investments in affiliates for indicators of other-than-temporary declines in
value on an ongoing basis in accordance with GAAP. If we determine that an
other-than-temporary decline in value has occurred, we recognize an impairment
loss, which is measured as the difference between the recorded carrying value
and the fair value of the investment. Fair value is generally determined using
the discounted cash flows (an income approach) or guideline public company (a
market approach) methods.



Warranty - Costs related to product warranty obligations are estimated and
accrued at the time of sale with a charge against cost of sales. Warranty
accruals are evaluated and adjusted as appropriate based on occurrences giving
rise to potential warranty exposure and associated experience. Warranty accruals
and adjustments require significant judgment, including a determination of our
involvement in the matter giving rise to the potential warranty issue or claim,
our contractual requirements, estimates of units requiring repair and estimates
of repair costs. If actual experience differs from expectations, our financial
position and results of operations in future periods could be affected.



Contingency reserves - We have numerous other loss exposures, such as product
liability and warranty claims and matters involving litigation. Establishing
loss reserves for these matters requires the use of estimates and judgment
regarding risk of exposure and ultimate liability. Product liability and
warranty claims are generally estimated based on historical experience and the
estimated costs associated with specific events giving rise to potential field
campaigns or recalls. In the case of legal contingencies, estimates are made of
the likely outcome of legal proceedings and potential exposure where reasonably
determinable based on the information presently known to us. New information and
other developments in these matters could materially affect our recorded
liabilities.

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