Meritor Acquisition and 2022 Financial Results
Table of Contents
Related Party Transactions
In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our
joint ventures and our joint ventures may sell products and components to unrelated parties. Joint venture transfer prices may differ from normal selling prices. Certain joint
venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value. Sales to nonconsolidated equity investees
were $1.2 billion, $1.7 billion and $1.3 billion for the years ended December 31, 2022, 2021 and 2020, respectively. Related party sales in 2022 were down primarily due to
lower sales in China due to COVID shutdowns and the acquisition of Cummins Westport, Inc. (Westport JV). Accounts receivable from nonconsolidated equity investees are
presented on the face of our Consolidated Balance Sheets. Purchases from nonconsolidated equity investees were $1.8 billion, $1.8 billion and $1.3 billion for the years ended
December 31, 2022, 2021 and 2020, respectively, and accounts payable to nonconsolidated equity investees were $292 million and $227 million at December 31, 2022, and
2021, respectively.
Government Assistance
From time to time, we receive assistance from government agencies primarily related to two areas (1) expense reimbursement and funding grants in the form of cash in
conjunction with research and development projects and (2) incentives primarily related to investments in new or existing facilities. The grants and related projects range in term
from 1 to 6 years. Generally, the grant awards for research are payable to us when we achieve specific milestones or deliverables. Certain grant awards are subject to audit,
whereby non-compliance may result in a refund to the government agency. Grants related to investments supporting facilities are typically in the form of reimbursement for
capital assets or expenses such as training the employees at those facilities.
We recognize grant awards related to research and development as an offset of the related research and development expenditure when the awards become payable upon us
meeting a specific milestone or deliverable. We recognize grant awards for reimbursement of capital as a reduction in value of the related fixed asset. We recognize grants for
reimbursement of training or other expenses as an offset to the related expense. For the year ended December 31, 2022, government grants did not have a material impact on
our financial statements as a whole and we did not have any individually material grant awards.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In November 2021, the Financial Accounting Standards Board (FASB) issued a standard related to the disclosure of government assistance received by an entity. Under the new
standard, entities are required to disclose (1) the types of assistance received, (2) accounting for the assistance and (3) impact of the assistance in the financial statements. We
adopted the new standard on January 1, 2022, on a prospective basis, and it did not have a material impact on our financial statements. See Government Assistance above for
additional information.
NOTE 2. ACQUISITIONS
Acquisitions for the year ended December 31, 2022, were as follows.
Entity Acquired (Dollars in millions)
Siemens Commercial Vehicles
Propulsion (Siemens CVP)
Meritor, Inc.
Jacobs Vehicle Systems
Westport JV
Date of
Acquisition
Additional
Percent Interest
Acquired
Payments to
Former Owners
Acquisition
Related Debt
Retirements
Total Purchase
Consideration (1)
Goodwill
Acquired
Intangibles
Recognized(2)
11/30/22
100%
$
08/03/22
100%
04/08/22
02/07/22
100%
50%
187
2,613
345
S
248
187
2,861
$
70
S
894
345
108
106
1,610
164
42
42
20
(1) The newly consolidated entities were accounted for as business combinations. On the date of acquisition, Meritor, Inc. was included in the Components and New Power segments, Siemens
CVP was included in the New Power segment, Jacobs Vehicle Systems was included in the Components segment and Westport JV was included in the Engine segment.
(2) Intangible assets acquired in the business combination were mostly customer, technology and trade name related.
Siemens CVP
On November 30, 2022, we acquired Siemens' Commercial Vehicles Propulsion business for approximately $87 million, subject to working capital and other customary
adjustments. This business develops, designs and produces electric drive systems including electric motors, inverters, software and related services for the commercial vehicle
markets. This acquisition is included in our New Power segment. This acquisition added key capabilities in direct drive and transmission-based remote mount electric motors,
inverters, software and related services that are critical elements in the next generation of electric powertrain, which will accelerate our ability to offer global customers a wider
array of electrified product solutions across commercial vehicle applications.
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