NET PROPERTY AND LEASE COMMITMENTS
Net Property
Net property includes land, buildings and land improvements, machinery and equipment, tooling, and other assets that we use in our normal operations. These assets are recorded at cost, net of accumulated depreciation and impairments. We capitalize new assets when we expect to use the asset for more than one year. Routine maintenance and repair costs are expensed when incurred.
Property and equipment are depreciated primarily using the straight-line method over the estimated useful life of the asset. Useful lives range from 3 years to 36 years. The estimated useful lives generally are 14.5 years for machinery and equipment, 3 years for software (8 years for mainframe and client based software), 30 years for land improvements, and 36 years for buildings. Tooling generally is amortized over the expected life of a product program using a straight-line method. If the expected production volumes for major product programs associated with tooling decline significantly, we accelerate the amortization reflecting the rate of decline.
Net property was as follows (in millions):
|
| | | | | | | |
Automotive Sector | December 31,
2013 | | December 31,
2012 |
Land | $ | 440 |
| | $ | 423 |
|
Buildings and land improvements | 10,325 |
| | 10,249 |
|
Machinery, equipment and other | 34,830 |
| | 35,040 |
|
Software | 2,069 |
| | 1,813 |
|
Construction in progress | 2,110 |
| | 1,783 |
|
Total land, plant and equipment and other | 49,774 |
| | 49,308 |
|
Accumulated depreciation | (31,476 | ) | | (32,835 | ) |
Net land, plant and equipment and other | 18,298 |
| | 16,473 |
|
Tooling, net of amortization | 9,194 |
| | 8,340 |
|
Total Automotive sector | 27,492 |
| | 24,813 |
|
Financial Services sector (a) | 124 |
| | 129 |
|
Total Company | $ | 27,616 |
| | $ | 24,942 |
|
__________
| |
(a) | Included in Financial Services other assets on our sector balance sheet. |
Automotive sector property-related expenses for the years ended December 31 were as follows (in millions):
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Depreciation and other amortization | $ | 2,110 |
| | $ | 1,794 |
| | $ | 1,759 |
|
Tooling amortization | 1,954 |
| | 1,861 |
| | 1,774 |
|
Total | $ | 4,064 |
| | $ | 3,655 |
| | $ | 3,533 |
|
| | | | | |
Maintenance and rearrangement | $ | 1,422 |
| | $ | 1,352 |
| | $ | 1,431 |
|
Conditional Asset Retirement Obligations
We accrue for costs related to legal obligations to perform certain activities in connection with the retirement, abandonment, or disposal of our assets for which the fair value can be reasonably estimated. These conditional asset retirement obligations relate to the estimated costs for asbestos abatement and the removal of other regulated building materials.
NOTE 12. NET PROPERTY AND LEASE COMMITMENTS (Continued)
The liability for our conditional asset retirement obligations which are recorded in Other liabilities and deferred revenue was as follows (in millions):
|
| | | | | | | |
| December 31,
2013 | | December 31,
2012 |
Beginning balance | $ | 267 |
| | $ | 266 |
|
Liabilities settled | (5 | ) | | (8 | ) |
Revisions to estimates | (16 | ) | | 9 |
|
Ending balance | $ | 246 |
| | $ | 267 |
|
Lease Commitments
We lease land, buildings, and equipment under agreements that expire over various contractual periods. Minimum non-cancellable operating lease commitments at December 31, 2013 were as follows (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | 2015 | | 2016 | | 2017 | | 2018 | | Thereafter | | Total |
Automotive sector | $ | 199 |
| | $ | 168 |
| | $ | 128 |
| | $ | 95 |
| | $ | 58 |
| | $ | 134 |
| | $ | 782 |
|
Financial Services sector | 47 |
| | 43 |
| | 38 |
| | 28 |
| | 17 |
| | 18 |
| | 191 |
|
Total Company | $ | 246 |
| | $ | 211 |
| | $ | 166 |
| | $ | 123 |
| | $ | 75 |
| | $ | 152 |
| | $ | 973 |
|
Operating lease expense for the years ended December 31 was as follows (in millions):
|
| | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
Automotive sector | $ | 411 |
| | $ | 404 |
| | $ | 416 |
|
Financial Services sector | 105 |
| | 106 |
| | 124 |
|
Total Company | $ | 516 |
| | $ | 510 |
| | $ | 540 |
|
