26. Other provisions

Changes in Other provisions are as follows:

(€ million)At December 31, 2012ChargeUtilizationRelease to
At 31, 2013 December
Warranty and technical assistance provision802680(614)(25)(37)806
Restructuring provision13421(93)(2)-60
Investment provision5----5
Other risks1,7073,271(3,008)(44)(31)1,895
Total Other provisions2,.6483,972(3,715)(71)(68)2,766

In 2013, the negative effect of exchange rate differences amounts to €125 million (negative effect of €33 million in 2012).

The warranty and technical assistance provision represents management’s best estimate of commitments given by the Group for contractual, legal or constructive obligations arising from product warranties given for a specified period of time which begins at the date of delivery to the customer. This estimate has been calculated considering past experience and specific contractual terms. This provision also includes management’s best estimate of the costs that are expected to be incurred in connection with product defects that could result in a larger recall of vehicles. This provision for risks is developed through an assessment of reported damages or returns on a case-by-case basis.

The restructuring provision comprises the estimated amount of benefits payable to employees on termination in connection with restructuring plans amounting to €54 million at December 31, 2013 (€117 million at December 31, 2012), costs for exit activities amounting to €1 million at December 31, 2013 (nil at December 31, 2012) and other costs totaling €5 million at December 31, 2013 (€17 million at December 31, 2012).

The total balance at December 31, 2013 relates to restructuring programs of the following segments (in € million): Trucks and Commercial Vehicles 53 (117 at December 31, 2012), Agricultural and Construction Equipment 4 (10 at December 31, 2012) and Powertrain 3 (7 at December 31, 2012).

The provision for other risks represents the amounts set aside by the individual companies of the Group principally in connection with contractual and commercial risks and disputes. The more significant balances of these provisions are as follows: 

(€ million)At December 31, 2013At December 31, 2012
Sales incentives971909
Legal proceedings and other disputes415350
Commercial risks339323
Environmental risks3334
Other reserves for risk and charges13791
Total Other risks1,8951,707

A description of these follows:

  • Sales incentives - these provisions relate to sales incentives that are offered on a contractual basis to the dealer networks and primarily given if the dealers achieve a specific cumulative level of sales transactions during the calendar year. This provision is estimated based on information available for the sales made by the dealers during the calendar year.
  • Legal proceedings and other disputes - this provision represents management’s best estimate of the liability to be recognized by the Group with regard to:
    • Legal proceedings arising in the ordinary course of business with dealers, customers, suppliers or regulators (such as contractual, patent or antitrust disputes).
    • Legal proceedings involving claims with active and former employees.
    • Legal proceedings involving different tax authorities.

None of these provisions is individually significant. Each Group company recognizes a provision for legal proceedings when it is deemed probable that the proceedings will result in an outflow of resources. In determining their best estimate of the probable liability, each Group company assesses its legal proceedings on a case-by-case basis to estimate the probable losses that typically arise from events of the type giving rise to the liability. Their estimate takes into account, as applicable, the views of legal counsel and other experts, the experience of the company and others in similar situations and the company’s intentions with regard to further action in each proceeding. CNH Industrial’s consolidated provision combines the individual provisions established by each of the Group’s companies.

  • Commercial risks - this provision includes the amount of obligations arising in connection with the sale of products and services such as maintenance contracts. An accrual is made when the expected costs to complete the services under these contracts exceed the revenues expected to be realized.
  • Environmental risks – this provision represents management’s best estimate of the Group’s probable environmental obligations. Amounts included in the estimate comprise direct costs to be incurred in connection with environmental obligations associated with current or formerly owned facilities and sites. This provision also includes costs related to claims on environmental matters.