Note 22 Restructuring and related expenses

Restructuring-related activities

In 2012 and 2011, the Company executed minor restructuring-related activities and incurred charges of $180 million and $164 million, respectively, which were mainly recorded in “Total cost of sales”.

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($ in millions)

2012

2011

Employee severance costs

92

83

Estimated contract settlement, loss order and other costs

72

53

Inventory and long-lived asset impairments

16

28

Total

180

164

At December 31, 2012 and 2011, the balance of restructuring and related liabilities is primarily included in “Provisions and other current liabilities”.

Cost take-out program

In December 2008, the Company announced a two-year cost take-out program that aimed to sustainably reduce the Company’s cost of sales and general and administrative expenses. As of December 31, 2010, the Company had substantially completed the cost take-out program.

The Company recorded the following expenses under this program:

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($ in millions)

Cumulative costs incurred up to December 31, 2010

2010

Employee severance costs

536

95

Estimated contract settlement, loss order and other costs

230

98

Inventory and long-lived asset impairments

70

20

Total

836

213

These expenses were recorded as follows:

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($ in millions)

Cumulative costs incurred up to December 31, 2010

2010

Total cost of sales

475

110

Selling, general and administrative expenses

143

36

Other income (expense), net

218

67

Total

836

213

Expenses incurred under the program, per operating segment, were as follows:

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($ in millions)

Cumulative costs incurred up to December 31, 2010

2010

Power Products

122

44

Power Systems

139

48

Discrete Automation and Motion

256

35

Low Voltage Products

114

36

Process Automation

183

44

Corporate and Other

22

6

Total

836

213

The most significant individual exit plans within this program related to the reorganization of the Company’s Robotics business, the downsizing of the former Automation Products business in France and Germany, as well as the Power Systems business in Germany.