UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-100420549
Form 10-K
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þ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20172020
OR
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¨
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-34960
GENERAL MOTORS COMPANY
(Exact name of registrant as specified in its charter)
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Delaware | 27-0756180 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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| 300 Renaissance Center, | Detroit, | Michigan | | 48265 | -3000 |
(Address of principal executive offices) | (Zip Code) |
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STATE OF DELAWARE | 27-0756180 |
(313) 667-1500 (State or other jurisdiction of incorporation or organization)
| (I.R.S. Employer
Identification No.)
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300 Renaissance Center, Detroit, Michigan | 48265-3000 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area codecode)
(313) 667-1500Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | GM | New York Stock Exchange |
Warrants (expiring July 10, 2019) | New York Stock Exchange | |
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Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ☑ No ¨☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨☐ No þ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its company Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ☑ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smallfiler,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ☑ Accelerated filer ¨☐ Non-accelerated filer ¨☐ Smaller reporting company ¨ ☐Emerging growth company ¨☐
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ ☐No þ☑
The aggregate market value of the voting stock held by non-affiliates of the registrant (assuming only for purposes of this computation that directors and executive officers may be affiliates) was approximately $51.2$36.1 billion as of June 30, 2017.2020.
As of January 30, 2018 the number of29, 2021 there were 1,440,912,820 shares outstanding of common stock was 1,402,630,363 shares.outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement related to the Annual Stockholders Meeting to be filed subsequently are incorporated by reference into Part III of this Form 10-K.
INDEX
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PART I |
Item 1. | Business | |
Item 1A. | Risk Factors | |
Item 1B. | Unresolved Staff Comments | |
Item 2. | Properties | |
Item 3. | Legal Proceedings | |
Item 4. | Mine Safety Disclosures | |
PART II |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |
Item 6. | Selected Financial Data | |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 8. | Financial Statements and Supplementary Data | |
| Consolidated Income Statements | |
| Consolidated Statements of Comprehensive Income | |
| Consolidated Balance Sheets | |
| Consolidated Statements of Cash Flows | |
| Consolidated Statements of Equity | |
| Notes to Consolidated Financial Statements | |
| Note 1. | Nature of Operations and Basis of Presentation | |
| Note 2. | Significant Accounting Policies | |
| Note 3. | Discontinued OperationsRevenue | |
| Note 4. | Marketable and Other Securities | |
| Note 5. | GM Financial Receivables and Transactions | |
| Note 6. | Inventories | |
| Note 7. | Equipment on Operating Leases | |
| Note 8. | Equity in Net Assets of Nonconsolidated Affiliates | |
| Note 9. | Property | |
| Note 10. | Acquisition of Business | |
| Note 11. | Goodwill and Intangible Assets | |
| Note 12.11. | Variable Interest Entities | |
| Note 13.12. | Accrued and Other Liabilities | |
| Note 14.13. | Automotive and GM Financial Debt | |
| Note 15.14. | Derivative Financial Instruments | |
| Note 16.15. | Pensions and Other Postretirement Benefits | |
| Note 17.16. | Commitments and Contingencies | |
| Note 18.17. | Income Taxes | |
| Note 19.18. | Restructuring and Other Initiatives | |
| Note 19. | Interest Income and Other Non-Operating Income | |
| Note 20. | Stockholders’ Equity and Noncontrolling Interests | |
| Note 21. | Earnings Per Share | |
| Note 22. | Discontinued Operations | |
| Note 23. | Stock Incentive Plans | |
| Note 23.24. | Supplementary Quarterly Financial Information (Unaudited)Segment Reporting | |
| Note 24. | Segment Reporting | |
| Note 25. | Supplemental Information for the Consolidated Statements of Cash Flows | |
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| Note 26. | Subsequent Event | |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | |
Item 9A. | Controls and Procedures | |
Item 9B. | Other Information | |
PART III |
Item 10. | Directors, Executive Officers and Corporate Governance | |
Item 11. | Executive Compensation | |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |
Item 13. | Certain Relationships and Related Transactions, and Director Independence | |
Item 14. | Principal Accountant Fees and Services | |
PART IV |
Item 15. | ExhibitsExhibit and Financial Statement Schedules | |
Item 16. | Form 10-K Summary | |
Signatures | | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
PART I
Item 1. Business
General Motors Company (sometimes referred to as we, our, us, ourselves, the Company, General Motors, or GM) was incorporated as a Delaware corporation in 2009. We design, build and sell cars, trucks, crossovers, cars and automobile parts worldwide. Cruise is our global segment responsible for the development and commercialization of autonomous vehicle technology. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial). Except for per share amounts or as otherwise specified, amounts presented within tables are stated in millions.
On July 31, 2017, we closed the sale of the Opel and Vauxhall businesses and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot, S.A. (PSA Group). On October 31, 2017, we closed the sale of the European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. The European Business was previously reported as our GM Europe (GME) segment and part of GM Financial. The European Business is presented as discontinued operations in our consolidated financial statements for all periods presented. The assets and liabilities of the European Business are presented as held for sale in our consolidated financial statements as of December 31, 2016. Unless otherwise indicated, information in this report relates to our continuing operations.
Segment Reporting Data During the three months ended December 31, 2017, we changed our automotive segments as a result of changes in our organizational structure and the evolution of our business resulting from the sale of the Opel/Vauxhall Business and the various strategic actions taken in the GM International Operations (GMIO) region. As a result, our GM South America (GMSA) and GMIO operating segments are now reported as one, combined reportable international segment, GM International (GMI). Our GM North America (GMNA) and GM Financial segments were not impacted. All periods presented have been recast to reflect the changes. Operating segment data and principal geographic area data for the years ended December 31, 2017, 2016 and 2015 are summarized in Note 24 to our consolidated financial statements.
Automotive Our automotive operations meet the demands of our customers through our automotive segments: GMNAGM North America (GMNA) and GMI.GM International (GMI). GMNA meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet and GMC brands. GMI primarily meets the demands of customers outside North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet, GMC and Holden brands. We also have equity ownership stakes in entities that meet the demands of customers in other countries, primarily in China, with vehicles developed, manufactured and/or marketed under the Baojun, Buick, Cadillac, Chevrolet Jiefang and Wuling brands.
In addition to the vehicles we sell through our dealer network to retail customers, we also sell vehicles directly or through our dealer network to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Our customers can obtain a wide range of aftersale vehicle services and products through our dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.
Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Note 24 to our consolidated financial statements for financial information about our segments.
Competitive Position and Vehicle Sales The principal factors that determine consumer vehicle preferences in the markets in which we operate include overall vehicle design, price, quality, available options, safety, reliability, fuel economy and functionality. Market leadership in individual countries in which we compete varies widely.
We present both wholesale and retailtotal vehicle sales data to assist in the analysis of our revenue and our market share. Wholesale vehicle sales data which representsconsists of sales directly to GM's dealers and others, includingdistributors as well as sales to fleet customers, is the measure thatU.S. Government and excludes vehicles sold by our joint ventures. Wholesale vehicle sales data correlates to our revenue recognized from the sale of vehicles, which is the largest component of Automotive net sales and revenue. Wholesale vehicle sales exclude vehicles sold by joint ventures. In the year ended December 31, 2017 39%2020, 30.5% of our wholesale vehicle sales volume was generated outside the U.S. The following table summarizes total wholesale vehicle sales of new vehicles by automotive segment (vehicles in thousands):
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| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
GMNA(a) | 3,511 |
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| 73.5 | % |
| 3,958 |
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| 75.9 | % |
| 3,558 |
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| 72.2 | % |
GMI(b) | 1,267 |
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| 26.5 | % |
| 1,255 |
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| 24.1 | % |
| 1,372 |
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| 27.8 | % |
Total | 4,778 |
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| 100.0 | % |
| 5,213 |
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| 100.0 | % |
| 4,930 |
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| 100.0 | % |
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Discontinued operations | 696 |
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| | 1,199 |
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| | 1,140 |
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__________ | |
(a) | Wholesale vehicle sales related to transactions with the European Business were insignificant for the years ended December 31, 2017, 2016 and 2015. |
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| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
GMNA | 2,707 | | | 80.3 | % | | 3,214 | | | 76.4 | % | | 3,555 | | | 75.5 | % |
GMI | 663 | | | 19.7 | % | | 995 | | | 23.6 | % | | 1,152 | | | 24.5 | % |
Total | 3,370 | | | 100.0 | % | | 4,209 | | | 100.0 | % | | 4,707 | | | 100.0 | % |
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
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(b) | Wholesale vehicle sales include 131, 128 and 181 vehicles related to the transactions with the European Business for the years ended December 31, 2017, 2016 and 2015. |
RetailTotal vehicle sales data which representsrepresents: (1) retail sales (i.e., sales to end customers based upon the good faith estimates of management, includingconsumers who purchase new vehicles from dealers or distributors); (2) fleet sales, such as sales to fleet customers, does not correlate directly to the revenue we recognize during the period. However retail vehicle sales data is indicative of the underlying demand for ourlarge and small businesses, governments, and daily rental car companies; and (3) vehicles used by dealers in their businesses, including courtesy transportation vehicles. Market share information is based primarily on retail vehicle sales volume. In countries where retail vehicle sales data is not readily available, other data sources such as wholesale or forecast volumes are used to estimate retail vehicle sales to end customers.
RetailTotal vehicle sales data includes all sales by joint ventures on a total vehicle basis, not based on theour percentage of ownership interest in the joint venture. Certain joint venture agreements in China allow for the contractual right to report vehicle sales of non-GM trademarked vehicles by those joint ventures. Retailventures, which are included in the total vehicle sales we report for China. While total vehicle sales data includes vehicles used by dealers under courtesy transportation programs and vehicles sold throughdoes not correlate
GENERAL MOTORS COMPANY AND SUBSIDIARIES
directly to the dealer registration channel, primarily in Europe. This sales channel consists primarilyrevenue we recognize during a particular period, we believe it is indicative of dealer demonstrator, loaner and self-registered vehicles which are not eligible to be sold as new vehicles after being registered by dealers. Certain fleet sales that are accountedthe underlying demand for as operating leases are included in retailour vehicles. Total vehicle sales at the time of delivery to daily rental car companies. data represents management's good faith estimate based on sales reported by GM's dealers, distributors, and joint ventures, commercially available data sources such as registration and insurance data, and internal estimates and forecasts when other data is not available.
The following table summarizes industry and GM total industry retailvehicle sales or estimated sales where retail sales volume is not available, of vehicles and our related competitive position by geographic region (vehicles in thousands):
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| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Industry | | GM | | Market Share | | Industry | | GM | | Market Share | | Industry | | GM | | Market Share |
North America | | | | | | | | | | | | | | | | | |
United States | 14,924 | | | 2,547 | | | 17.1 | % | | 17,499 | | | 2,887 | | | 16.5 | % | | 17,721 | | | 2,954 | | | 16.7 | % |
Other | 2,798 | | | 377 | | | 13.5 | % | | 3,645 | | | 480 | | | 13.2 | % | | 3,839 | | | 536 | | | 14.0 | % |
Total North America | 17,722 | | | 2,924 | | | 16.5 | % | | 21,144 | | | 3,367 | | | 15.9 | % | | 21,560 | | | 3,490 | | | 16.2 | % |
Asia/Pacific, Middle East and Africa | | | | | | | | | | | | | | | | | |
China(a) | 24,922 | | | 2,901 | | | 11.6 | % | | 25,398 | | | 3,094 | | | 12.2 | % | | 26,519 | | | 3,645 | | | 13.7 | % |
Other | 17,986 | | | 533 | | | 3.0 | % | | 21,457 | | | 584 | | | 2.7 | % | | 22,258 | | | 557 | | | 2.5 | % |
Total Asia/Pacific, Middle East and Africa | 42,908 | | | 3,434 | | | 8.0 | % | | 46,855 | | | 3,678 | | | 7.9 | % | | 48,777 | | | 4,202 | | | 8.6 | % |
South America | | | | | | | | | | | | | | | | | |
Brazil | 2,057 | | | 338 | | | 16.4 | % | | 2,787 | | | 476 | | | 17.1 | % | | 2,566 | | | 434 | | | 16.9 | % |
Other | 1,101 | | | 132 | | | 12.0 | % | | 1,531 | | | 193 | | | 12.6 | % | | 1,925 | | | 256 | | | 13.3 | % |
Total South America | 3,158 | | | 470 | | | 14.9 | % | | 4,318 | | | 669 | | | 15.5 | % | | 4,491 | | | 690 | | | 15.4 | % |
Total in GM markets | 63,788 | | | 6,828 | | | 10.7 | % | | 72,317 | | | 7,714 | | | 10.7 | % | | 74,828 | | | 8,382 | | | 11.2 | % |
Total Europe | 14,795 | | | 1 | | | — | % | | 19,021 | | | 4 | | | — | % | | 18,928 | | | 4 | | | — | % |
Total Worldwide(b) | 78,583 | | | 6,829 | | | 8.7 | % | | 91,338 | | | 7,718 | | | 8.5 | % | | 93,756 | | | 8,386 | | | 8.9 | % |
United States | | | | | | | | | | | | | | | | | |
Cars | 3,366 | | | 239 | | | 7.1 | % | | 4,632 | | | 389 | | | 8.4 | % | | 5,206 | | | 560 | | | 10.7 | % |
Trucks | 4,055 | | | 1,257 | | | 31.0 | % | | 4,494 | | | 1,332 | | | 29.7 | % | | 4,215 | | | 1,360 | | | 32.3 | % |
Crossovers | 7,503 | | | 1,051 | | | 14.0 | % | | 8,373 | | | 1,166 | | | 13.9 | % | | 8,300 | | | 1,034 | | | 12.5 | % |
Total United States | 14,924 | | | 2,547 | | | 17.1 | % | | 17,499 | | | 2,887 | | | 16.5 | % | | 17,721 | | | 2,954 | | | 16.7 | % |
China(a) | | | | | | | | | | | | | | | | | |
SGMS | | | 1,407 | | | | | | | 1,482 | | | | | | | 1,749 | | | |
SGMW | | | 1,494 | | | | | | | 1,612 | | | | | | | 1,896 | | | |
Total China | 24,922 | | | 2,901 | | | 11.6 | % | | 25,398 | | | 3,094 | | | 12.2 | % | | 26,519 | | | 3,645 | | | 13.7 | % |
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| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
| Industry |
| GM |
| Market Share |
| Industry |
| GM |
| Market Share |
| Industry |
| GM |
| Market Share |
North America |
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United States | 17,567 |
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| 3,002 |
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| 17.1 | % |
| 17,886 |
|
| 3,043 |
|
| 17.0 | % |
| 17,864 |
|
| 3,082 |
|
| 17.3 | % |
Other | 3,981 |
|
| 574 |
|
| 14.4 | % |
| 3,993 |
|
| 587 |
|
| 14.7 | % |
| 3,666 |
|
| 530 |
|
| 14.5 | % |
Total North America(a) | 21,548 |
|
| 3,576 |
|
| 16.6 | % |
| 21,879 |
|
| 3,630 |
|
| 16.6 | % |
| 21,530 |
|
| 3,612 |
|
| 16.8 | % |
Asia/Pacific, Middle East and Africa |
|
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|
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China(b) | 28,250 |
|
| 4,041 |
|
| 14.3 | % |
| 28,274 |
|
| 3,914 |
|
| 13.8 | % |
| 25,050 |
|
| 3,730 |
|
| 14.9 | % |
Other(c) | 21,067 |
|
| 629 |
|
| 3.0 | % |
| 20,599 |
|
| 720 |
|
| 3.5 | % |
| 21,391 |
|
| 899 |
|
| 4.2 | % |
Total Asia/Pacific, Middle East and Africa(a) | 49,317 |
|
| 4,670 |
|
| 9.5 | % |
| 48,873 |
|
| 4,634 |
|
| 9.5 | % |
| 46,441 |
|
| 4,629 |
|
| 10.0 | % |
South America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil | 2,239 |
|
| 394 |
|
| 17.6 | % |
| 2,050 |
|
| 346 |
|
| 16.9 | % |
| 2,568 |
|
| 388 |
|
| 15.1 | % |
Other | 1,927 |
|
| 275 |
|
| 14.3 | % |
| 1,623 |
|
| 237 |
|
| 14.6 | % |
| 1,619 |
|
| 257 |
|
| 15.9 | % |
Total South America(a) | 4,166 |
|
| 669 |
|
| 16.1 | % |
| 3,673 |
|
| 583 |
|
| 15.9 | % |
| 4,187 |
|
| 645 |
|
| 15.4 | % |
Total in GM markets | 75,031 |
|
| 8,915 |
|
| 11.9 | % |
| 74,425 |
|
| 8,847 |
|
| 11.9 | % |
| 72,158 |
|
| 8,886 |
|
| 12.3 | % |
Total Europe | 19,149 |
|
| 685 |
|
| 3.6 | % |
| 18,620 |
|
| 1,161 |
|
| 6.2 | % |
| 17,463 |
|
| 1,099 |
|
| 6.3 | % |
Total Worldwide(d) | 94,180 |
|
| 9,600 |
|
| 10.2 | % |
| 93,045 |
|
| 10,008 |
|
| 10.8 | % |
| 89,621 |
|
| 9,985 |
|
| 11.1 | % |
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cars | 6,145 |
|
| 709 |
|
| 11.5 | % |
| 6,897 |
|
| 890 |
|
| 12.9 | % |
| 7,475 |
|
| 931 |
|
| 12.5 | % |
Trucks | 5,039 |
|
| 1,328 |
|
| 26.4 | % |
| 4,911 |
|
| 1,325 |
|
| 27.0 | % |
| 4,675 |
|
| 1,274 |
|
| 27.2 | % |
Crossovers | 6,383 |
|
| 965 |
|
| 15.1 | % |
| 6,078 |
|
| 828 |
|
| 13.6 | % |
| 5,714 |
|
| 877 |
|
| 15.4 | % |
Total United States | 17,567 |
|
| 3,002 |
|
| 17.1 | % |
| 17,886 |
|
| 3,043 |
|
| 17.0 | % |
| 17,864 |
|
| 3,082 |
|
| 17.3 | % |
China(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SGMS |
|
|
| 1,906 |
|
|
|
|
|
|
|
| 1,806 |
|
|
|
|
|
|
|
| 1,711 |
|
|
|
|
SGMW and FAW-GM |
|
|
| 2,135 |
|
|
|
|
|
|
|
| 2,108 |
|
|
|
|
|
|
|
| 2,019 |
|
|
|
|
Total China | 28,250 |
|
| 4,041 |
|
| 14.3 | % |
| 28,274 |
|
| 3,914 |
|
| 13.8 | % |
| 25,050 |
|
| 3,730 |
|
| 14.9 | % |
____________________
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(a) | Sales of Opel/Vauxhall outside of Europe were insignificant in the years ended December 31, 2017, 2016 and 2015. |
(a) Includes sales by our Automotive China Joint Ventures (Automotive China JVs): SAIC General Motors Sales Co., Ltd. (SGMS) and SAIC GM Wuling Automobile Co., Ltd. (SGMW).
2(b) Cuba, Iran, North Korea, Sudan and Syria are subject to broad economic sanctions. Accordingly these countries are excluded from industry sales data and corresponding calculation of market share.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
| |
(b) | Our China sales include the Automotive China JVs SAIC General Motors Sales Co., Ltd. (SGMS), SAIC GM Wuling Automobile Co., Ltd. (SGMW) and FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM). In the three months ended March 31, 2017 we began using estimated vehicle registrations data as the basis for calculating industry volume and market share in China. In the years ended December 31, 2016 and 2015 wholesale volumes were used for Industry, GM and Market Share. Our retail sales in China were 3,871 and 3,613 in the years ended December 31, 2016 and 2015. |
| |
(c) | Includes Industry and GM sales in India and South Africa. As of December 31, 2017 we have ceased sales of Chevrolet for the domestic markets in India and South Africa.
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(d) | We do not currently export vehicles to Cuba, Iran, North Korea, Sudan or Syria. Accordingly these countries are excluded from industry sales data and corresponding calculation of market share.
|
In the year ended December 31, 20172020, we estimate we hadwere the largest market share leader in North America and South America, and the number three market share in the Asia/Pacific, Middle East and Africa region, which included the number two market share in China.America. Refer to the Overview"Overview" section in Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)Part II, Item 7. MD&A for discussion on changes in market share by region.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
As discussed above, total vehicle sales and market share data provided in the table above includes both fleet vehicle sales and sales to retail customers.vehicles. Certain fleet transactions, particularly sales to daily rental car companies, are generally less profitable than retail sales to retailend customers. A significant portion of the sales to daily rental car companies are recorded as operating leases under U.S. GAAP with no recognition of revenue at the date of initial delivery due to guaranteed repurchase obligations. The following table summarizes estimated fleet sales and those sales as a percentage of total retail vehicle sales (vehicles in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
GMNA | 493 | | | 741 | | | 740 | |
GMI | 351 | | | 498 | | | 478 | |
Total fleet sales | 844 | | | 1,239 | | | 1,218 | |
| | | | | |
Fleet sales as a percentage of total vehicle sales | 12.4 | % | | 16.1 | % | | 14.5 | % |
|
| | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
GMNA | 691 |
|
| 707 |
|
| 795 |
|
GMI | 541 |
|
| 527 |
|
| 468 |
|
Total fleet sales | 1,232 |
|
| 1,234 |
|
| 1,263 |
|
|
|
|
|
|
|
|
|
|
Fleet sales as a percentage of total retail vehicle sales | 13.8 | % |
| 13.9 | % |
| 14.2 | % |
The following table summarizes United States fleet sales (vehicles in thousands):
|
| | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Daily rental sales | 282 |
| | 327 |
| | 400 |
|
Other fleet sales | 296 |
| | 269 |
| | 278 |
|
Total fleet sales | 578 |
| | 596 |
| | 678 |
|
Product Pricing Several methods are used to promote our products, including the use of dealer, retail and fleet incentives such as customer rebates and finance rate support. The level of incentives is dependent upon the level of competition in the markets in which we operate and the level of demand for our products.
Cyclical and Seasonal Nature of Business Retail sales areThe market for vehicles is cyclical and productiondepends in part on general economic conditions, credit availability and consumer spending. Vehicle markets are also seasonal. Production varies from month to month. Vehicle model changeovers occur throughout the year as a result of new market entries. The market for vehicles depends in part on general economic conditions, credit availability and consumer spending.
Relationship with Dealers We market vehicles and automotive parts worldwide primarily through a network of independent authorized retail dealers. These outlets include distributors, dealers and authorized sales, service and parts outlets.
The following table summarizes the number of authorized dealerships:dealerships were 4,697 in GMNA and 7,661 in GMI at December 31, 2020.
|
| | | | | | | | |
| December 31, 2017 | | December 31, 2016 | | December 31, 2015 |
GMNA | 4,809 |
| | 4,857 |
| | 4,886 |
|
GMI | 7,641 |
| | 8,598 |
| | 9,177 |
|
Total | 12,450 |
| | 13,455 |
| | 14,063 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We and our joint ventures enter into a contract with each authorized dealer agreeing to sell to the dealer one or more specified product lines at wholesale prices and granting the dealer the right to sell those vehicles to retail customers from an approved location. Our dealers often offer more than one GM brand at a single dealership in a number of our markets. Authorized dealers offer parts, accessories, service and repairs for GM vehicles in the product lines that they sell using GM parts and accessories. Our dealers are authorized to service GM vehicles under our limited warranty program, and those repairs are made only with GM parts. Our dealers generally provide their customers with access to credit or lease financing, vehicle insurance and extended service contracts provided by GM Financial and other financial institutions.
The quality of GM dealerships and our relationship with our dealers and distributors are critical to our success asgiven that dealers maintain the primary sales and service interface with the end consumer of our products. In addition to the terms of our contracts with our dealers, we are regulated by various country and state franchise laws and regulations that may supersede those contractual terms and impose specific regulatory requirements and standards for initiating dealer network changes, pursuing terminations for cause and other contractual matters.
Research, Product and Business Development and Intellectual Property Costs for research, manufacturing engineering, product engineering and design and development activities primarily relate primarily to developing new products or services or improving existing products or services, including activities related to vehicle and greenhouse gas (GHG) emissions control, improved fuel economy, electrification, autonomous vehicles, and the safety of drivers and passengers, and urban mobility.passengers. Research and development expenses were $7.3$6.2 billion, $6.6$6.8 billion and $6.0$7.8 billion in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
Product Development The Product Development organization is responsible for designing and integrating vehicle and powertrainpropulsion components while aiming to maximize part sharing across multiple vehicle segments. Global teams in Design, Program Management, Component & Subsystem Engineering, Product Integrity, Safety, Propulsion Systems and Purchasing & Supply Chain collaborate to meet customer requirements and maximize global economies of scale.
Our global vehicle architecture development is headquartered at our Global Technical Center in Warren, Michigan. Cross-segment part sharing is an essential enabler to optimize our Vehicle Set Strategy, designed to reducecurrent vehicle portfolio, as we expect that more than 75% of our overall number of global sales volume will come from five vehicle architectures to four major vehicle sets. As we implement the four vehicle sets, weby mid-decade. We will continue to leverage our current architecture portfolio to accommodate our customers around the world while achieving our financial goals.
Hybrid, Plug-In, Extended Range and Battery Electric Vehicles We have committed to an all-electric future and are investing in multiple technologies offering increasing levels of vehicle electrification including eAssist, plug-in hybrid, full hybrid, extended range andwith a core focus on zero emission battery electric vehicles that areas part of our long-term strategy to reduce petroleum consumption and GHG emissions. We currently offer seventhe Chevrolet Bolt EV, which has an
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Environmental Protection Agency (EPA)-estimated range of 259 miles on a full charge with the 2020 model year. We have also announced our all-new Ultium battery electric architecture capable of more than 400 miles of GM-estimated range on a full charge that will launch on the upcoming GMC Hummer EV in 2021, followed by the Cadillac LYRIQ in 2022 and additional models in the U.S. featuring some form of electrificationby 2025. This new platform will be flexible, allowing quick response to customer preferences with a shorter design and continuedevelopment lead time compared to develop plug-in hybridour internal combustion engine vehicles. Ultium will be leveraged across multiple brands and vehicle sizes, styles and drive configurations. Our new electric vehicle technologyassembly facilities will include Detroit-Hamtramck Assembly, renamed "Factory ZERO". In January 2020, we announced a $2.2 billion investment in our Factory ZERO assembly plant, which is being re-tooled into a fully-dedicated electric vehicle facility to produce the GMC Hummer EV, Cruise Origin, a shared self-driving vehicle, and extended rangeother electric vehicles. In October 2020, we also announced a $2.0 billion investment in our Spring Hill Manufacturing facility in Tennessee, where we will build the Cadillac LYRIQ. In addition, we have announced plans to mass-produce battery cells for these and other future battery electric vehicles such asat Ultium Cells LLC (an equally owned joint venture with LG Chem, Ltd.) in Lordstown, Ohio.
To support mass market adoption of electric vehicles, we are working to ensure that our customers will have access to comprehensive charging solutions. For personal vehicles, this means strategically addressing charging needs at home, the workplace and in public locations. For fleet vehicles, this means turnkey charging solutions and fleet and facility energy management services. We have announced collaborative work with several charge network operators to filter real-time data on their respective networks and charge station health into our Energy Assist feature within the myChevrolet app, currently available to Chevrolet Volt and Bolt EV. EV drivers.
In October 2017January 2021, we announced our plansa new business, BrightDrop, which will offer an ecosystem of electric first-to-last mile products, software and services designed to launch more than 20 new Zero Emission Vehicles (ZEVs) in global markets by 2023, including two in the next 18 months.
Car-help delivery and Ride-Sharing Our car-sharing brand Maven gives customers access to highly personalized, on-demand mobility services. Maven is available in 18 cities across the U.S. and Canada and has started first pilot operations in Australia. Maven offers three different types of consumer and commercial services. Maven Gig allows members to earn money on their own terms by providing a vehicle that can be used tologistics companies deliver goods or ride-sharing services provided by Lyft, Inc. (Lyft) and Uber Technologies Inc. Maven City offers vehicles with dedicated parking spots for easy city driving withmore efficiently. In addition, we plan to invest approximately CAD $1.0 billion to convert our CAMI manufacturing plant in Ingersoll, Ontario to produce the cost of gas orBrightDrop EV600 electric charging included. Vehicles are available by the hour, day, week or month. Maven Home provides on-site car sharing for residential communities. Through December 31, 2017 Maven has accumulated over 230 million miles driven, 5 million all-electric miles driven, 114,000 reservations and has 104,000 members.cargo van.
Autonomous Technology We seeexpect autonomous technology leadingto lead to a future of zero congestion,crashes, zero emissions and zero crashes, since morecongestion. We believe that building all-electric vehicles with autonomous capabilities integrated from the beginning, rather than 90%through retrofits, is the most efficient way to unlock the tremendous potential societal benefits of crashes are causedself-driving cars. In January 2020, the Cruise Origin was unveiled by driver error, accordingCruise which is being co-developed by GM, Cruise and Honda Motor Company, Ltd. (Honda). The Cruise Origin will be built on General Motors’ all-new modular architecture, powered by the Ultium battery system. In October 2020, Cruise received a permit from the California Department of Motor Vehicles to remove back-up drivers from Cruise AV test vehicles in San Francisco and subsequently began truly driverless testing. Also in October 2020, GM and Cruise announced they will file an exemption petition with the National Highway Traffic Safety Administration (NHTSA). We are among seeking regulatory approval for the leaders inOrigin’s deployment, and have withdrawn an earlier exemption petition that was limited to the industry with significant global real-world experience in delivering connectivity, safety and security services to millions of customers through OnStar, LLC (OnStar) and advanced safety features that areCruise AVs derived from the building blocks to more advanced automation features that are driving our leadership position in the development of autonomous technology. An example of advanced automation is Super Cruise, a hands-free driving customer convenience feature that is available on the 2018 Cadillac CT6 sedan.
We are actively testing autonomous vehicles on public roads in San Francisco, California; Scottsdale, Arizona; and Warren, Michigan. Additionally, we plan to develop an integrated network of on-demand autonomous vehicles in the U.S.Chevrolet Bolt platform. In November
GENERAL MOTORS COMPANY AND SUBSIDIARIES
2017January 2021, we announced that Microsoft Corporation (Microsoft) will join us and other investors in a $2.2 billion investment in Cruise. Cruise may continue to opportunistically seek additional funding in this round in 2021. Given the potential of all-electric self-driving vehicles to help save lives, reshape our growing fleetcities and reduce emissions, the goal of test vehicles will accumulate a significant number of miles in 2018, and based on our current rate of change we expect commercial launch at scale in dense urban environments in 2019.Cruise is to deliver its self-driving services as soon as possible, with safety being the gating metric.
Alternative Fuel Vehicles We believe alternative fuels offer significant potential to reduce petroleum consumption and resulting GHG emissions in the transportation sector. By leveraging experience and capability developed around these technologies in our global operations, we continue to develop FlexFuel vehicles that can run on ethanol-gasoline blend fuels as well as technologies that support compressed natural gas and liquefied petroleum gas.
We offer a variety ofseveral 2021 model year FlexFuel vehicles in the U.S. for the 2018 model yearand Canada to retail and commercialfleet customers capable of operating on gasoline, E85 ethanol or any combination of the two. In Brazil, a substantial majority of vehicles sold are FlexFuel vehicles capable of running on high ethanol blends. We also market FlexFuel vehicles in other global markets where biofuels are in the marketplace. We support the development of biodiesel blend fuels, which are alternative diesel fuels produced from renewable sources.
Hydrogen Fuel Cell Technology Another part of our long-term strategy to reducetoward electrification and the reduction of petroleum consumption and GHG emissions is our commitment to the development of our Hydrotec hydrogen fuel cell technology. Our Chevrolet EquinoxWe believe hydrogen fuel cells will play an important role in many automotive applications, such as commercial vehicles, where customers will derive additional benefits from the ability to refuel quickly, extended range, and suitability for heavier payloads and central refueling of large fleets. GM is also evaluating promising fuel cell end-use applications for aerospace, stationary backup power and mobile power. In addition, GM and Honda, through their long-term strategic alliance to collaborate in research and advanced engineering efforts on fuel cell systems, are developing and commercializing fuel cell systems with production scheduled for the early 2020s. In January 2021, we announced an agreement to supply our Hydrotec fuel cell power cubes to Navistar for use in its production model fuel cell electric vehicle demonstration programs, such as Project Driveway, have accumulatedvehicle.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
OnStar and Vehicle Connectivity We offer OnStar and connected services to more than 322 million miles of real-world driving. These programs are helping us identify consumerconnected vehicles globally through subscription-based and infrastructure needs to understand the business case for potential production of vehicles with this technology.complimentary services. We are exploring non-traditional automotive uses for fuel cells in several areas, including demonstrations withamong the U.S. Army and U.S. Navy.
We signed a co-development agreement and established a nonconsolidated JV with Honda Motor Company in 2016 for a next-generation fuel cell system and hydrogen storage technologies, aiming for the 2020 timeframe for commercialization. The collaboration expects to succeed by sharing expertise, economies of scale and common sourcing strategies and builds upon GM's and Honda Motor Company's strengths as leaders in hydrogen fuel cell technology.
OnStar OnStar is a wholly-owned subsidiary of GM serving more than 7 million subscribers. OnStar is a provider ofthe industry with significant global real-world experience in delivering connected safety, security and mobility solutionsservices and advanced information technologysafety features. OnStar provides safety and is available on the majority of our 2018 model year vehicles. OnStar's keysecurity services includefor retail and fleet customers, including automatic crash response, emergency services, roadside assistance, crisis assist, stolen vehicle assistance remote door unlock,and turn-by-turn navigation,navigation. We also offer a variety of connected services, including mobile applications for owners to remotely control certain vehicle features and electric vehicle owners to locate charging stations, on-demand vehicle diagnostics, hands-free callingGM Smart Driver, GM Marketplace in-vehicle commerce, Amazon Alexa in-vehicle voice, connected navigation, SiriusXM with 360L and 4G LTE wireless connectivity. We also offer Super Cruise, the industry's first hands-free driver assistance feature for enabled roads, which is powered by vehicle connectivity by means of a Super Cruise subscription. The Super Cruise plan enables real-time GPS and mapping updates and connects the vehicle to an OnStar emergency advisor for situations in which a driver is non-responsive to escalating alerts. Super Cruise will be expanded to be included on 22 models by 2023. Additionally, we have announced plans to integrate Google's Voice Assistant, navigation and app ecosystem into GM infotainment systems beginning in 2021.
Intellectual Property We generateare constantly innovating and hold a significant number of patents, copyrights, trade secrets and other intellectual property that protect those innovations in a numbernumerous countries. While no single piece of countries in connection with the operation of our business. While none of these patents areintellectual property is individually material to our business as a whole, these patents areour intellectual property is important to our operations and continued technological development. WeAdditionally, we hold a number of trademarks and service marks that are very important to our identity and recognition in the marketplace.
Raw Materials, Services and Supplies We purchase a wide variety of raw materials, parts, supplies, energy, freight, transportation and other services from numerous suppliers to manufacture our products. The raw materials primarily include steel, aluminum, resins, copper, lead and platinum groupprecious metals. We have not experienced any significant shortages of raw materials and normally do not carry substantial inventories of suchthese raw materials in excess of levels reasonably required to meet our production requirements. Costs are expected to remain elevated due to the price of commodities and the continuing existence of tariffs. We purchase systems, components and parts from suppliers. A global semiconductor supply shortage is having wide-ranging effects across multiple industries, particularly the automotive industry. Refer to Item 1A. Risk Factors for further discussion of this risk.
In some instances, we purchase systems, components, parts and supplies from a single source and may be at an increased risk for supply disruptions. The inability or unwillingness of these sources to supplyprovide us with parts and supplies could have a material adverse effect on our production capacity. Refer to Item 1A. Risk Factors for further discussion of these risks. Combined purchases from our two largest suppliers have beenwere approximately 12%11% of our total purchases in each of the years ended December 31, 2017, 20162020 and 2015.2019, and approximately 12% of our total purchases in the year ended December 31, 2018. Refer to Item 1A. Risk Factors for further discussion of these risks.
Environmental and Regulatory Matters
Automotive Criteria Emissions Control WeOur products are subject to laws and regulations globally that require us to control certain non-GHG automotive emissions, including vehicle and engine exhaust emission standards, vehicle evaporative emission standards and onboard diagnostic (OBD) system requirements. Advanced OBD systems are used to identify and diagnose problems with emission control systems. Problems detected by the OBD system and other in-use compliance monitoring activities may increase warranty costs and the likelihood of recall. Emission and OBD requirements have become more stringent as a result of lower emissionstricter standards and new diagnostic requirements whichthat have come into force in many markets around the world, driven by policy priorities such as air quality, energy security and climate change, often with very little harmonization of the regulations.harmonization. While we believe all of our products are designed and manufactured
GENERAL MOTORS COMPANY AND SUBSIDIARIES
in material compliance with substantially all vehicle emissions requirements, regulatory authorities may conduct ongoing evaluations of the emissions compliance of products from all manufacturers. This includes vehicle emissions testing, including CO2 and nitrogen oxide emissions testing, and review of emission control designs and strategies.
The U.S. federal government, through the EPA, imposes stringent exhaust and evaporative emission control requirements on vehicles sold in the U.S., and various state governments impose additional emission requirements established by California. Canada’s federal government vehicle emission requirements are generally aligned with the U.S. federal requirements. Each model year we must obtain certification for each test group that our vehicles will meet emission requirements from the U.S. Environmental Protection Agency (EPA) before we can sell vehicles in the U.S. and Canada, and from the The California Air Resources Board (CARB) before we can sell vehicles in California and other states that have adopted the California emissions requirements.
CARB's latest emission requirements include morelikewise imposes stringent exhaust emission and evaporative emission standards. These emission control standards including an increase in ZEVs which must be offered for sale in California. CARB has adopted 2018 model year and later requirements for increasing volumes of ZEVs to achieve GHG as well as criteria pollutant emission reductions to help achieve the state's long-term GHG reduction goals. The Canadian Province of Quebec also plans to adopt ZEV requirements starting with the 2018 model year largely based on California program requirements. There is a possibility that additional jurisdictions could adopt ZEV requirements in the future. The EPA has adopted similar exhaust emission and evaporative emission standards which began a multi-year phase-in with the 2017 model year, but do not include ZEV requirements. These new requirements will alsolikely increase the time and mileage periods over which manufacturers are responsible for a vehicle's emission performance.
The Clean Air Act permits states that have areas with air quality compliance issues to adopt the California emission standards in lieu of the federal requirements. ThirteenFourteen states currentlyand the District of Columbia have theseadopted California emission standards, and there is a possibility that additional U.S. jurisdictions could adopt California emission requirements in effectthe future.
The Canadian federal government's current vehicle pollutant emission requirements are generally aligned with U.S. federal requirements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Each model year we must obtain certification that our vehicles and 10heavy-duty engines will meet emission requirements of these 13the EPA before we can sell vehicles in the U.S. and Canada, and of CARB before we can sell vehicles in California and other states that have adopted the ZEVCalifornia emission requirements.
In 2019, certain areas within China implementedbegan implementation of the China 5 emission standard nationwide at the beginning of 2017. China 5 is more stringent than the previous program on all levels including overall emission requirements and the time and mileage period for which vehicles need to meet China 5 level performance. China will implement a unique China 6 emission standard that(China 6) requirements. China 6 combines elements of both European Union (EU) and U.S. standards includes more stringent emission requirements and increases the time and mileage periods over which manufacturers are responsible for a vehicle's emission performance. Nationwide implementation of China 6a for new registrations is expectedoccurred in July 2020 for China 6aJanuary 2021, and July 2023 for the more stringent China 6b standard. However, localities can pull ahead China 6 requirements if certain criteria are met. Some cities may implement China 6is expected to be implemented in July 2023. For additional information, refer to Item 1A. Risk Factors.
Brazil has approved a set of national emissions standards referred to as early as January 2019.
In South America certain countries follow the U.S. test procedures,L7, to be implemented in 2022, and L8, to be implemented from 2025 onward. L7 standards include exhaust tailpipe gases, durability for emissions, evaporative emissions and noise limits, additional OBD requirements and others followa phase-in for onboard refueling vapor recovery systems. L8 standards include real drive emission targets for real driving emissions and reduce corporate exhaust limits every two years until 2031. Some of the European Union test procedures, standards and OBD requirements are aligned with different levelsthose of stringency. Brazil implemented national L6 standards for light diesel vehicles in 2012 and OBD installation for light diesel vehicles in 2015. L6 standards for light gasoline vehicles were implemented in 2015 for all models.the EPA.
As a result of the sale of the Opel/Vauxhall Business, GM’s vehicle presence in Europe will beis smaller, but GM may still be affected by actions taken by regulators related both to productsOpel/Vauxhall vehicles sold before the sale of the Opel/Vauxhall Business and future products sold byas well as to other vehicles GM continues to sell in Europe. For example, in Germany, a number of automotive manufacturers, including our former German subsidiary, have participated in continuing discussions with German and European Union authorities concerning emissions control systems. In the European Union,EU, increased scrutiny of compliance with emissions standards may result in changes to these standards, including implementation of “real world driving”real driving emissions (RDE) tests, as well as stricter interpretations or redefinition of these standards and more rigorous enforcement. This may leadFor example, our former German subsidiary has participated in continuing discussions with German and European authorities concerning emissions control systems. For additional information, refer to increased costs, penalties, and lack of certainty relatedNote 22 to product portfolio planning, negative publicity or reputation impact for us. In the long-term, we expect that the European Commission will continue devising regulatory requirements on the emission test cycle, RDE, low temperature testing, fuel evaporation and OBD.our consolidated financial statements.
Automotive Fuel Economy and Greenhouse Gas EmissionsIn theU.S., NHTSA promulgates and enforces Corporate Average Fuel Economy (CAFE) standards for three separate fleets: domestically produced cars, imported cars and light-duty trucks. Manufacturers are subject to substantial civil penalties if they fail to meet the applicable CAFE standard in any model year, after taking into accountconsidering all available credits for the preceding five model years, and expected credits for the three succeeding model years.years and credits obtained from other manufacturers. In addition to federal CAFE reporting,standards, the EPA promulgates and enforces GHG emission standards, which are effectively fuel economy standards because the majority of vehicle GHG emissions are carbon dioxide emissions that are emitted in direct proportion to the resultamount of fuel combustion. consumed by a vehicle. In March 2020, the EPA and NHTSA issued a rule setting fuel economy and GHG emissions standards for the light-duty vehicles through the 2026 model year, which is currently being challenged through litigation. On January 25, 2021, President Biden issued Executive Order 13990, directing the EPA and NHTSA to, by July 2021, consider publishing a proposed rule suspending, revising, or rescinding those standards, and has also permitted the Department of Justice to seek to stay or dispose of litigation challenging those standards. The EPA and NHTSA also regulate the fuel efficiency and GHG emissions of medium- and heavy-duty vehicles, imposing more stringent standards over time.
In addition, CARB has asserted the right to promulgate and enforce its own state GHG standards for motor vehicles, and other states have asserted the right to adopt the CaliforniaCARB's standards. However, CARB has agreedregulations previously stated that compliance with the federal EPA light duty GHGlight-duty program is deemed compliance with CARB standards. However, on December 12, 2018, CARB amended this regulation to bestate that, in the event the EPA were to alter federal GHG stringency, which it now has, compliance with the EPA's GHG emissions standards will no longer be deemed compliance with CARB's separate requirements. In September 2019, NHTSA and the EPA issued a rule asserting that California is preempted from regulating GHG emissions, which is currently being challenged through litigation. As a result, depending on the outcome of the federal CAFE and GHG rulemakings and related litigation and the finality of CARB's regulatory amendment, in the future GM might be required to meet California GHG standards that are different than the EPA standards.
CARB has also imposed the requirement that increasing percentages of Zero Emission Vehicles (ZEVs) must be sold in California. The Clean Air Act permits states to adopt California emission standards, and 11 have adopted the ZEV requirements. In September 2019, the EPA revoked the waiver it had granted to California that permitted its ZEV program, and NHTSA also asserted preemption of California's ZEV program. Both the EPA and NHTSA's actions are currently being challenged through litigation. Depending on the 2025 model year.outcome of that litigation, there is a possibility that additional U.S. jurisdictions could adopt California ZEV requirements in the future.
On January 25, 2021, President Biden issued Executive Order 13990, directing EPA and NHTSA to, by April 2021, consider publishing a proposed rule suspending, revising, or rescinding EPA and NHTSA's September 2019 actions, and has also permitted the Department of Justice to stay or dispose of litigation related to preemption of state GHG and ZEV standards. On
GENERAL MOTORS COMPANY AND SUBSIDIARIES
February 1, 2021, the Department of Justice filed a motion seeking to hold these preemption cases in abeyance pending implementation of Executive Order 13990.
In Canada, light- and heavy-duty GHG regulations are currently patterned after the EPA GHG emissions standards. However, the Canadian government is conducting a mid-term review of its 2022 to 2025 model year light-duty GHG standards and there is an increased risk that future Canadian light-duty GHG regulations may not be aligned with the revised EPA regulations. In addition, the Canadian province of Quebec has ZEV requirements regulating the 2018 to 2025 model years largely based on California program requirements. The province of British Columbia also finalized similar ZEV regulations in July 2020 that cover the 2020 to 2039 model years. There is also the risk that the federal government or other provinces in Canada may pursue the implementation of additional ZEV requirements in the future.
China has two fuel economy requirements for passenger vehicles: an individual vehicle pass-fail type approval requirement and a fleet average fuel consumption requirement. TheWith a focus on the fleet average program, the current China Phase 4 fleet average fuel consumption requirement, is effective from 2016-2020. China Phase 4which went into effect in 2016, is based on curb weight with full compliance to 5.0L/100 km required by 2020. China Phase 4 has continued subsidies for plug-in hybrid, battery electric and fuel cell vehicles.vehicles, which are referred to as New Energy Vehicles (NEVs). Subsidies for NEV have been extended to the end of 2022. China Phase 5 is currently beinghas been developed with a planned start in 2021 withand full compliance to 4.0L/100kmis required by 2025. In addition, China recently announced the details of the New Energy Vehicle Mandate. Thishas established an NEV Mandate that will require passenger car manufacturers to produce a certain volume of plug-in hybrid, battery electric and fuel cells vehiclesNEVs to generate "credits" equivalent to 10%credits in 2019 and 12% in 2020.beyond to offset internal combustion engine vehicle production volume. The number of credits per car is based on the level of E-rangeelectric range and energy efficiency.efficiency, with the goal of increasing NEV volume penetrations. Uncommitted NEV credits may be used to assist compliance with the fleet average fuel consumption requirement. China has issued NEV credit targets between 2019 and 2023 and is setting new NEV credit targets aiming at further increasing volumes of NEVs in 2024 and 2025.
In Brazil, the Secretary of Industry and Development promulgates and enforces CAFE standards and has enforced a new CAFE program for the period October 2020 to September 2026 and October 2026 to September 2032 for light-duty and mid-size trucks and sport utility vehicles (SUVs), including diesel vehicles, imposing more stringent standards for each period.
Regulators in other jurisdictions have already adopted or are developing fuel economy or carbon dioxide regulations. If regulators in these jurisdictions seek to impose and enforce emission standards that are misaligned with market conditions, we may be forced to take various actions to increase market support programs for more fuel-efficientcertain vehicles and curtail production of certain high-performance cars, trucks and sport utility vehicles (SUVs)others in order to achieve compliance. We regularly evaluate our current and future product plans and strategies for compliance with fuel economy and GHG regulations.
Industrial Environmental ControlOur operations are subject to a wide range of environmental protection laws including those regulating air emissions, water discharge, waste management and environmental cleanup. Certain environmental statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Under certain circumstances these laws impose joint and several liability as well as liability for related damages to natural resources.
To mitigate the effects of our worldwide operations on the environment, we are converting as many of our worldwide operations as possible to landfill-free operations which reducesembracing sustainability programs focused on reducing GHG emissions, associated withwater consumption and discharge and waste disposal. At December 31, 2017, 80 (or approximately 50%)2020, 81% of waste materials generated in our manufacturing operations were landfill-free. Additionally, 63 of our non-manufacturing operations are landfill-free. At our landfill-free manufacturing operations approximately 95% of waste materialsfacilities across the globe are composted, reused or recycled and approximately 4% are converted to energy at waste-to-energy facilities. In 2017 werecycled. We estimate that our waste reduction program diverted 1.51.0 million metric tons of waste from landfill, resultinglandfills in approximately 6.62020, and resulted in 4.6 million metric tons of GHG emissions avoided in global manufacturing operations, including construction, demolition and remediation wastes.operations.
In addition to minimizingreducing our impact on the environment, our landfill-free program and total waste reduction commitments generate revenueincome from the sale of production by-products, reduce our use of material, reduce our carbon footprintraw materials and help to reduce the risks and financial liabilities associated with waste disposal.
We continue to search for waysour efforts to increase our use of renewable energy, and improve our energy efficiency and work to drive growth and scale of renewables. We haveare committed to meeting the electricity needs of our operations worldwide with renewable energy by 2050. At2035, pulling forward our previous commitment by five years, and plan to be carbon neutral by 2040 in our global products and operations, supported by a commitment to science-based targets. In addition to our carbon goals, the company worked with the Environmental Defense Fund to develop a shared vision of an all-electric future and an aspiration to eliminate tailpipe emissions from new light-duty vehicles by 2035. Through December 31, 20172020, we had implemented projects orand signed renewable energy contracts globally that had increasedbrought our total renewable energy capacity to over 400 megawatts.one gigawatt by 2023, which represents approximately 60% of our U.S. electricity use and over 40% of our global electricity use. In 2017 GM2019, we executed two 100our largest
GENERAL MOTORS COMPANY AND SUBSIDIARIES
green tariff to date with DTE Energy Company, sourcing 300,000 megawatt windhours of renewable energy that will begin supplying us in early 2021. Additionally, in 2020 we executed our largest power purchase agreementsagreement to matchdate, with 180 megawatts of solar electricity supplying our Ohio and Indiana manufacturing plant load when each of these projects come onlineU.S. operations starting in 2018.2023. We continue to seek opportunities for a diversified renewable energy portfolio including wind, solar, and landfill gas. In 20172020, Energy Star certified three of ourtwo assembly plants, one in Canada through Natural Resources Canada and 17one in the U.S. as well as five buildings in the U.S. for superior energy management. We also met the EPA Energy Star Challenge for Industry (EPA Challenge) at eightsix additional sites globallyby reducing energy intensity an average of 18%14% at these sites.sites within three years. To meet the EPA Challenge, industrial sites must reduce energy intensity by 10% within a five year period. In total, 7169 GM-owned manufacturing sites have met the EPA Challenge, with many sites achieving the goal multiple times.times for a total of 129 recognitions. Additionally, we received recognition from the U.S. Department of Energy (DOE) of 50001 Ready status for 25 facilities. The U.S. DOE 50001 Ready program is a self-guided approach for facilities to establish an energy management system and self-attest to the structure of ISO 50001, a voluntary global standard for energy management systems in industrial, commercial and institutional facilities. These sustainability efforts minimizereduce our utilityoperational expenses and are part of our approach to addressing climate change through setting a GHG emissionsimprove the sustainability of our operations by aligning our business strategy with aggressive environmental goals and reduction target,targets, collecting accurate data, following our business plan and publicly reporting progress against our target.targets.
Chemical Regulations We continually monitor the implementation of chemical regulations to maintain compliance and evaluate their effect on our business, suppliers and the automotive industry.
Globally, governmental agencies continue to introduce new legislation and regulations related to the selection and use of chemicals by mandating broad prohibitions or restrictions and implementing green chemistry, life cycle analysis and product stewardship initiatives. These initiatives give broad regulatory authority to ban or restrict the use of certain chemical substances and potentially affect automobile manufacturers' responsibilities for vehicle components at the end of a vehicle's life, as well as chemical selection for product development and manufacturing. Global treaties and initiatives such as the Stockholm, Basel and Rotterdam Conventions on Chemicals and Waste and the Minamata Convention on Mercury, are driving chemical regulations across signatory countries. In addition, more global jurisdictions are establishing substance standards with regard to Vehicle Interior Air Quality.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Chemical regulations are increasing in North America. In June 2016, the U.S. enacted theEPA is moving forward with risk analysis and management of high priority chemicals under the authority of the 2016 Lautenberg Chemical Safety for the 21st21st Century Act, and several U.S. states have chemical management regulations that grantscan affect vehicle design such as the EPA increased authority to regulateCalifornia and restrict chemicalWashington laws banning the use of copper in the U.S. and is expected to increase the level of regulation of chemicals in vehicles.brake friction material. Chemical restrictions in Canada continue to steadily progress rapidly as a result of Environment and Climate Change Canada's Chemical Management Plan to assess existing substances and implement risk management controls on any chemical deemed toxic.
China prohibits the use of several chemical substances in vehicles. There are also various regulations in China stipulating the requirements for chemical management. Among other things, these regulations catalogue and restrict the use, and the import and export of various chemical substances. The failure of our joint venture partners or our suppliers to comply with these regulations could disrupt production in China or prevent our joint venture partners from selling the affected products in the China market.
These emerging laws and regulations will potentially lead to increases in costs and supply chain complexity. We believe that we are materially in compliance with substantially all of these requirements or expect to be materially in compliance by the required dates.
Vehicle SafetyIn the
U.S. theRequirements The National Traffic and Motor Vehicle Safety Act of 1966 (the Safety Act) regulates the vehicles and items of motor vehicle equipment that we manufacture and sell. The Safety Act prohibits the sale in the United States of any new vehicle or equipment in the U.S. that does not conform to applicable federal motor vehicle safety standards established by NHTSA. Meeting or exceeding the NHTSA. Ifmany safety standards is costly as global compliance and non-governmental assessment requirements continue to evolve and grow more complex, and lack harmonization globally. The Safety Act further requires that if we or NHTSA determine that either a vehicle or an item of vehicle equipment does not comply with a safety standard, or ifthat vehicle or equipment contains a vehicle defect createsthat poses an unreasonable safety risk, the manufacturer is requiredwe must conduct a safety recall to notify owners and provide a remedy. We are required to report certain information relating to certain customer complaints, warranty claims, field reports and notices and claims involving property damage, injuries and fatalitiesremedy that condition in the U.S. and claims involving fatalities outsideaffected vehicles. Should we or NHTSA determine a safety defect or noncompliance issue exists with respect to any of our vehicles, the U.S. We are also required to report certain information concerning safety recalls and other safetycost of such recall campaigns outsidecould be substantial.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Other National Requirements Outside of the U.S.
Outside the U.S., many countries have established vehicle safety standards and regulations and are likely to adopt additional, more stringent requirements in the future. The European General Safety Regulation has introduced UN-ECE regulations, which are required for the European Type Approval process. Globally, governments generally have been adopting UN-ECE based regulations with some variations to address local concerns. Any difference between North American and UN-ECE based regulations can add complexity and costs to vehicle development, and we continue to support efforts to harmonize regulations to reduce complexity. New safety and recall regulations often haverequirements in various countries around the same purpose asworld, including in China, Brazil, and Gulf Cooperation Council countries, also may add substantial costs and complexity to our safety and field action activities globally. In Canada, vehicle regulatory requirements are currently aligned with U.S. regulations; however, under the Canadian Motor Vehicle Safety Act, recall thresholds are different and the Minister of Transport has broad powers to order manufacturers to submit a notice of defect or non-compliance when the Minister considers it to be in the interest of safety. Further, various governments are beginning to mandate e-Call and other features that can be market-specific and add complexity and increase our cost of compliance globally.
Crash Test Ratings and New Car Assessment Programs Organizations in various regions around the world, including in the U.S. standards but may differ in their requirements, rate and test procedures, addingcompare motor vehicles through various New Car Assessment Programs (NCAPs) to provide consumers and businesses with additional information about the safety of new vehicles. NCAPs use crash tests and other evaluations that are different than what is required by applicable regulations, and use stars to rate vehicle safety, with five stars awarded for the highest rating and one for the lowest. Achieving high NCAP ratings, which can vary by country and region, can add complexity and cost to regulatory compliance.vehicles.
Automotive Financing - GM Financial GM Financial is our global captive automotive finance company and our global provider of automobile finance solutions. GM Financial conducts its business in North America, South America and through a joint ventureventures in China.
GM Financial provides retail loan and lease lending across the credit spectrum. Additionally, GM Financial offers commercial lending products to dealers that includeincluding floorplan financing, which is lending to finance new and used vehicle inventory financinginventory; and dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. Other commercial lending products include financing for parts and accessories, dealer fleets and storage centers.
In North America, GM Financial's retail automobile finance programs include full credit spectrumFinancial offers a sub-prime lending and leasing.program. The sub-prime lending program is primarily offered to consumers with a FICO scoresscore or its equivalent of less than 620 who have limited access to automobile financing through banks and credit unions and is expected to sustain a higher level of credit losses than prime lending. The leasing product is offered through our franchised dealers and primarily targets prime consumers leasing new vehicles.
GM Financial has expanded its leasing and prime lending programs through our franchised dealers, and as a result, leasing and prime lending have become a larger percentage of originations and the retail portfolio balance.
Internationally GM Financial’s retail automobile finance programs focus on financing new GM vehicles and select used vehicles.
Generally GM Financialgenerally seeks to fund its operations in each country through local sources to minimize currency and country risk. GM Financial primarily finances its loan, lease and commercial origination volume through the use of secured and unsecured credit facilities, through securitization transactions where such markets are developed and through the issuance of unsecured debt in publicthe capital markets.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Human Capital The foundation of GM’s business is our vision – a world with zero crashes, zero emissions and zero congestion. Our people are our most valuable asset, and we must continue to attract and retain the best talent in the world in order to achieve this vision. As a result, we strive to create a Workplace of Choice to attract, retain and develop top talent by adhering to a responsible employer philosophy, which includes, among other things, commitments to create job opportunities, pay workers fairly, ensure safety and well-being, and promote diversity, equity and inclusion. Fundamental to these commitments are our company values.
Our eight GM behaviors are the foundation of our culture; and how we behave encompasses key measures of our performance, including the visible ways we conduct ourselves as we work with one another.
Diversity, equity and inclusion At GM, we are committed to fostering a culture of diversity, equity and inclusion. In every moment, we must decide what we can do – individually and collectively – to drive meaningful deliberate change. GM’s unwavering position includes a commitment to inclusion, an unequivocal condemnation of intolerance, and a commitment to stand up against injustice. Our ability to meet the needs of a diverse and global customer base is tied closely to the behaviors of the people within our company, which is why we are committed to fostering a culture that celebrates our differences.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Based on these longstanding values, our Chairman and CEO, Mary Barra, chairs an Inclusion Advisory Board (IAB) of 11 internal and external leaders who guide our work to improve diversity and inclusion in our company. The purpose of the IAB is to consult with GM’s Senior Leadership Team with the long-term goal of inspiring the company to be inclusive through our words, deeds and culture.
We also have a number of programs and partnerships aimed at enhancing our culture of inclusion throughout the company. For example, we have 11 voluntary, employee-led resource groups that provide a forum for diverse employees and allies from a variety of different backgrounds to share experiences and express concerns. Each group also works to attract new talent to our company and offers employees opportunities to support our company’s diversity initiatives within the community.
In addition, we are expanding our partnerships with organizations aimed at supporting our ongoing efforts to increase the representation of women and minorities in our workplace. Through our participation in the OneTen organization and Business Roundtable Multiple Pathways initiative, for example, we are specifically aiming to build more robust pipelines for skills-based hiring into our company. Working in concert with local organizations, such efforts are intended to create new pathways to employment for individuals without four-year degrees, provide training opportunities for advancement, and create a more flexible and inclusive talent pipeline.
Develop and Retain Talented People Today, we compete for talent against other automotive companies and, increasingly, against businesses in other sectors, such as technology. To win and keep talent, we must provide a workplace culture that encourages employee behaviors aligned with our values, fulfills their long-term individual aspirations and achieves full engagement.In furtherance of this goal, we invest significant resources to retain and develop our talent. In addition to mentoring and networking opportunities, we offer a vast array of career development resources to help develop, grow and enable employees to make the most of their careers at GM. Such resources include, among other things, the Technical Education Program, which offers our employees an opportunity to complete corporate strategically aligned degrees and certificate programs at leading universities, our Learning Management System with access to ongoing learning resources to augment and enrich employees’ professional development and Percipio Resources, which provides our employees with access to a full range of videos, books, and eBooks to develop and enhance skills. Employees in some of our technical roles also have the opportunity to participate in the GM Technical Learning University — a training and upskilling program designed to expand and update the technical prowess of our workforce.
Safety and well-being The safety and well-being of our employees is also a critical component of our ability to transform the future of personal mobility. At GM, we pride ourselves on our commitment to live values that return people home safely – Every Person, Every Site, Every Day. Our unwavering commitment to safety is manifested through empowering employees to “Speak Up for Safety” through various means without fear of retaliation. The well-being of our employees is equally as important to entice and stimulate creativity and innovation. In addition to traditional healthcare, paid time off, paid parental leave, wellness programs, flextime scheduling and telecommuting arrangements and retirement benefits, including a 401(k) matching program, GM offers a variety of benefits and resources to support employees physical and mental health, including on-site fitness facilities and a health concerns hotline, which help us both attract talent and reap the benefits of a healthier workforce.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Employees At December 31, 20172020, we employed 103,000 (57%approximately 87,000 (56%) hourly employees and 77,000 (43%approximately 68,000 (44%) salaried employees. At December 31, 2017 51,000 (50%2020, approximately 46,000 (49%) of our U.S. employees were represented by unions, a majority of which were represented by the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW). The following table summarizes worldwide employment (in thousands):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | |
| December 31, 20172020 |
GMNAGMNA(a) | 124112 |
|
GMI | 4734 |
|
GM Financial | 9 |
|
Total Worldwide | 180155 |
|
| |
U.S. - Salaried | 5248 |
|
U.S. - Hourly | 5146 |
|
__________
(a)Includes Cruise.
Information About our Executive Officers of the Registrant As of February 6, 201810, 2021, the names and ages of our executive officers and their positions with GM are as follows:
|
| | | | | | | | | | | | | |
Name (Age) | | Present GM Position (Effective Date) | | Positions Held During the Past Five Years (Effective Date) |
Mary T. Barra (56)(59) | | Chairman and Chief Executive Officer (2016) | |
|
Julian Blissett (54) | | Executive Vice President and President, GM China (2020) | | Senior Vice President, International Operations (2019) Vice President, Executive Shanghai GM (2014) |
Stephen K. Carlisle (58) | | Executive Vice President and President, North America (2020) | | Senior Vice President and President, Cadillac (2018) President and Managing Director, GM Canada (2015) |
Craig B. Glidden (63) | | Executive Vice President and General Counsel (2015) | | |
Christopher T. Hatto (50) | | Vice President, Global Business Solutions and Chief Accounting Officer (2020) | | Vice President, Controller and Chief Accounting Officer (2018) Chief Financial Officer, U.S. Sales Operations (2016) |
Paul A. Jacobson (49) | | Executive Vice President and Chief Financial Officer (2020) | | Delta Air Lines, Executive Vice President — Chief Financial Officer (2013) |
Gerald Johnson (58) | | Executive Vice President, Global Manufacturing (2019) | | Vice President, North America Manufacturing and Labor Relations (2017) Vice President of Operational Excellence (2014) |
Randall D. Mott (64) | | Executive Vice President, Global Information Technology and Chief Information Officer (2019) | | Senior Vice President, Global Information Technology and Chief Information Officer (2013) |
Douglas L. Parks (59) | | Executive Vice President, Global Product Development, Purchasing and Supply Chain (2019) | | Vice President, Autonomous and Electric Vehicles (2017) Vice President, Autonomous Technology and Vehicle Execution (2016) |
Mark L. Reuss (57) | | President (2019) | | Chief Executive OfficerVice President and Member of the Board of Directors (2014)President, Global Product Development Group and Cadillac (2018)
Executive Vice President, Global Product Development, Purchasing & Supply Chain (2013)(2014) |
Daniel Ammann (45)Matthew Tsien (60) | | President (2014) | | Executive Vice President and Chief FinancialTechnology Officer (2013) |
Alan S. Batey (54)(2020) | | Executive Vice President and President, North America (2014) | | Senior Vice President, Global Chevrolet and Brand Chief and U.S. Sales and Marketing (2013) |
Alicia Boler-Davis (48) | | Executive Vice President, Global Manufacturing (2016) | | Senior Vice President, Global Connected Customer Experience (2014)
Vice President, Global Quality and U.S. Customer Experience (2012)
|
Carel Johannes de Nysschen (57) | | Executive Vice President and President, Cadillac (2014) | | Infiniti Motor Company, President (2012) |
Barry L. Engle (54) | | Executive Vice President and President, GM International (2018) | | Executive Vice President and President, South America (2015)
Agility Fuel Systems, CEO (2011)
|
Craig B. Glidden (60) | | Executive Vice President and General Counsel (2015) | | LyondellBasell, Executive Vice President and Chief Legal Officer (2009) |
Mark L. Reuss (54) | | Executive Vice President, Global Product Development, Purchasing & Supply Chain (2014) | | Executive Vice President and President, North America (2013) |
Charles K. Stevens III (58) | | Executive Vice President and Chief Financial Officer (2014) | | Chief Financial Officer, GM North America (2010)
Interim Chief Financial Officer, GM South America (2011)
|
Matthew Tsien (57) | | Executive Vice President and President, GM China (2014) | | GM Consolidated International Operations Vice President, Planning, Program Management & Strategic Alliances China (2012) |
Thomas S. Timko (49) | | Vice President, Global Business Solutions and Chief Accounting Officer (2017) | | Vice President, Controller and Chief Accounting Officer (2013) |
There are no family relationships between any of the officers named above and there is no arrangement or understanding between any of the officers named above and any other person pursuant to which he or she was selected as an officer. Each of the officers named above was elected by the Board of Directors to hold office until the next annual election of officers and until his or her successor is elected and qualified or until his or her earlier resignation or removal. The Board of Directors elects the officers immediately following each annual meeting of the stockholders and may appoint other officers between annual meetings.
Website Access to Our Reports Our internet website address is www.gm.com. In addition to the information about us and our subsidiaries contained in this 20172020 Form 10-K, information about us can be found on our website including information on our corporate governance principles and practices. Our Investor Relations website at www.gm.com/investorshttps://investor.gm.com contains a significant
GENERAL MOTORS COMPANY AND SUBSIDIARIES
amount of information about us, including financial and other information for investors. We encourage investors to visit our website, as we frequently update and post new information about our company on our website and it is possible that this information could be deemed to be material information. Our website and information included in or linked to our website are not part of this 20172020 Form 10-K.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act), are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC). The public may read and copy the materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally the SEC maintains an internet sitea website that contains reports, proxy and information statements, and other information. The address of the SEC's website is information regarding our filings at http://www.sec.gov.
* * * * * * *
Item 1A. Risk Factors
We have listed below (notthe most material risk factors applicable to us. These risk factors are not necessarily in the order of importance or probability of occurrence) the most significant risk factors applicableoccurrence:
Risks related to us:our competition and strategy
If we do not deliver new products, services and customer experiences in response to new participantsincreased competition and changing consumer preferences in the automotive industry, our business could suffer. We believe that the automotive industry will continue to experience significant and continued change in the coming years.years, particularly as traditional automotive original equipment manufacturers (OEMs) shift resources to the development of electric vehicles. In addition to our traditional competitors, we must also be responsive to the entrance of non-traditional participants in the automotive industry. Industry participants are seeking to disruptdisrupting the historic business model of theour industry through the introduction of new technologies, new products, or services, new business models or newdirect-to-consumer sales channels, methods of travel.transportation and vehicle ownership. It is strategically significanta strategic imperative that we leadsucceed in driving the technological disruption occurring in our industry.industry, including consumer adoption of electric vehicles and commercialization of autonomous vehicles. To successfully execute our long-term strategy, we must continue to develop new products and services, including products and services that are outside of our historically core business, such as autonomous and electric vehicles, data monetizationdigital services and transportation as a service. The process of designing and developing new technology, products and services is complex, costly and uncertain and requires extensive capital investment and the ability to retain and recruit talent. In some cases the technologies that we plan to employ are not yet commercially practical and depend on significant future technological advances by us and by our suppliers.best talent. There can be no assurance that advances in technology will occur in a timely or feasible way, or that others will not acquire similar or superior technologies sooner than we do, or that we will acquire technologies on an exclusive basis or at a significant price advantage. If we do not accurately predict,adequately prepare for and respond to new kinds of technological innovations, market developments and changing customer needs, our sales, profitability and long-term competitiveness may be harmed.
Our ability to maintain profitability is dependent upon our ability to timely fund and introduce new and improved vehicle models, including electric vehicles, that are able to attract a sufficient number of consumers.We operate in a very competitive industry with market participants routinely introducing new and improved vehicle models and features designed to meet rapidly evolving consumer expectations. Producing new and improved vehicle models, competitively and preservingincluding electric vehicles, that preserve our reputation for designing, building and selling safe, high qualityhigh-quality cars and trucks is critical to our long-term profitability. Successful launches of our new vehicles are critical to our short-term profitability.
It The new vehicle development process generally takes two years or more, to design and develop a new vehicle, and a number of factors may lengthen that time period. Because of this product development cycle and the various elements that may contribute to consumers’ acceptance of new vehicle designs, including competitors’ product introductions, technological innovations, fuel prices, general economic conditions, infrastructure and changes in quality, safety, reliability and styling demands and preferences, an initial product concept or design may not result in a vehicle that generates sales in sufficient quantities and at high enough prices to be profitable. Our high proportion of fixed costs, both due to our significant investment in property, plant and equipment as well as other requirements of our collective bargaining agreements, which limit our flexibility to adjust personnel costs to changes in demands for our products, may further exacerbate the risks associated with incorrectly assessing demand for our vehicles.
Our near-term profitability is dependent upon the success of crossovers,our current line of full-size SUVs and full-size pick-uppickup trucks.While we offer a balanced and complete portfolio of small, mid-size and large cars, crossovers, SUVs and trucks, and we generallyhave announced significant plans to design, build and sell a broad portfolio of electric vehicles, we currently recognize higher profit margins on our crossovers, SUVs and trucks. Our near-term success is dependent upon our ability to sell higher margin vehicles in sufficient volumes. Any near-term shift in consumer preferences toward smaller, more fuel efficientfuel-efficient vehicles, whether as a result of increases in the price of oil or any sustained shortage of oil, including as a result of global political instability, concerns about climate change or other reasons, could weaken the demand for our higher margin vehicles. More stringent fuel economy regulations could also impact our ability to sell these vehicles.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We must successfully addressoperate in a highly competitive industry that has excess manufacturing capacity, and attempts by our competitors to sell more vehicles could have a significant negative effect on our vehicle pricing, market share and operating results.The global automotive industry is highly competitive in terms of the quality, innovation, new technologies, pricing, fuel economy, reliability, safety, customer service and financial services offered. Additionally, overall manufacturing capacity in the industry far exceeds current demand. Many manufacturers, including GM, have relatively high fixed labor costs as well as limitations on their ability to close facilities and reduce fixed costs. In light of such excess capacity and high fixed costs, many industry participants have attempted to sell more vehicles by providing subsidized financing or leasing programs, offering marketing incentives or reducing vehicle prices. As a result, we may be required to offer similar incentives that may result in vehicle prices that do not offset cost increases or the impact of adverse currency fluctuations, which could affect our profitability. Our competitors may also seek to benefit from economies of scale by consolidating or entering into other strategic agreements such as alliances or joint ventures intended to enhance their competitiveness.
Manufacturers in countries that have lower production costs, such as China and India, have become competitors in key emerging markets and have announced their intention to export their products to established markets as a low-cost alternative to established entry-level automobiles. In addition, foreign governments may decide to implement tax and other policies that favor their domestic manufacturers at the expense of international manufacturers, including GM and its joint venture partners. These actions have had, and are expected to continue to have, a significant negative effect on our vehicle pricing, market share and operating results.
Our long-term strategy is dependent upon our ability to deliver a broad portfolio of electric vehicles that will drive consumer adoption. The production and profitable sale of electric vehicles has become increasingly important to our long-term business as we accelerate our transition to an all-electric future. In 2020, we announced the commitment of $27 billion in investments in electric and autonomous vehicle technologies through 2025, with plans to launch 30 new electric vehicle models globally in that timeframe. Our electric vehicle strategy is dependent on our ability to deliver a broad portfolio of electric vehicles; reduce the costs associated with the manufacture and sale of electric vehicles; increase vehicle range and the energy density of our batteries; license and monetize our proprietary platforms; develop new software and services; and leverage our scale, manufacturing capabilities and synergies with existing internal combustion engine vehicles. We anticipate that electric vehicle sales will become increasingly important to our business. The inability to reduce the costs associated with the manufacture and saleIn addition, consumer adoption of electric vehicles will be critical to the success of our strategy. Consumer adoption of electric vehicles could be impacted by numerous factors, including the breadth of the portfolio of electric vehicles available; perceptions about electric vehicle features, quality, safety, performance and cost relative to internal combustion engine vehicles; the range over which electric vehicles may negatively impactbe driven on a full battery charge; availability of high fuel-economy internal combustion engine vehicles; volatility in the cost of fuel; government regulations and economic incentives; and the proliferation of a robust, open-standard electric vehicle charging ecosystem. If we are unable to successfully deliver on our earningselectric vehicle strategy, it could materially and adversely affect our results of operations, financial condition.condition and growth prospects.
Our autonomous vehicle strategy is dependent upon our ability to successfully mitigate unique technological, operational, and regulatory risks.In recent years, we announced significant investments in autonomous vehicle technologies, including in GM Cruise Holdings LLC (Cruise Holdings), our majority-owned subsidiary that is responsible for the development and commercialization of autonomous vehicle technology. Our autonomous vehicle operations are capital intensive and subject to a variety of risks inherent with the development of new technologies, including our ability to continue to develop self-driving software and hardware, such as Light Detection and Ranging (LiDAR) sensors and other components; access to sufficient capital, including with respect to additional Softbank funding; risks related to the manufacture of purpose-built autonomous vehicles; and significant competition from both established automotive companies and technology companies, some of which may have more resources and capital to devote to autonomous vehicle technologies than we do. In addition, we currentlyface risks related to the commercial deployment of autonomous vehicles on our targeted timeline or at all, including consumer acceptance, achievement of adequate safety and other performance standards and compliance with uncertain, evolving and potentially conflicting federal and state or provincial regulations. To the extent accidents, cybersecurity breaches or other adverse events associated with our autonomous driving systems occur, we could be subject to liability, government scrutiny and further regulation, and it could deter consumer adoption of autonomous vehicle technology. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.
Risks related to our operations
The COVID-19 pandemic may disrupt our business and operations, which could materially adversely impact our business, financial condition, liquidity and results of operations. Pandemics, epidemics or disease outbreaks in the U.S. or globally may disrupt our business, which could materially affect our results of operations, financial condition, liquidity and future expectations. The COVID-19 outbreak has caused significant disruption to the global economy, including the automotive industry, and has had a material impact on our business as discussed in detail in Part II, Item 7. MD&A. However, the full extent to which the COVID-19 pandemic will impact our operations will depend on future developments, including the duration and severity of the outbreak, any subsequent outbreaks and the timing and efficacy of any available vaccines. Future developments are highly uncertain and cannot be predicted with confidence and may adversely impact our global supply chain and global manufacturing operations and cause us to again suspend our operations in the U.S. and elsewhere. In particular, if
GENERAL MOTORS COMPANY AND SUBSIDIARIES
benefit from certain governmentCOVID-19 continues to spread or re-emerges, particularly in North America where our profits are most concentrated, resulting in a prolonged period of travel, commercial, social and economic incentives supportingother similar restrictions, we could experience among other things: (1) global supply disruptions; (2) labor disruptions; (3) an inability to manufacture; (4) an inability to sell to our customers; (5) a decline in showroom traffic and customer demand during and following the developmentpandemic; (6) customer defaults on automobile loans and adoption of electric vehicles. The benefits from these incentives could be reduced, eliminated or exhausted, which may negatively affect ourleases; (7) lower than expected pricing on vehicles sold at auction; and (8) an impaired ability to sell electric vehiclesaccess credit and the capital markets. We may also be subject to enhanced legal risks, including potential litigation related to the COVID-19 pandemic.We also have substantial cash requirements going forward, including: (1) ongoing cash costs including payments associated with previously announced vehicle recalls, the settlements of multi-district litigation and other recall-related contingencies, payments to service debt and other long-term obligations, including mandatory contributions to our pension plans; and (2) capital expenditures and payments for engineering and product development activities. Our ability to meet these cash requirements may be negatively impacted by the ongoing COVID-19 pandemic. Any resulting financial impact cannot be reasonably estimated at this time, but the COVID-19 pandemic could have a material impact on our business, financial condition and results of operations going forward. For a further discussion of the impact of the COVID-19 pandemic on our liquidity, refer to the “Liquidity and Capital Resources” section in sufficient quantities and at high enough prices to be profitable.Part II, Item 7. MD&A.
Our business is highly dependent upon global automobile market sales volume, which can be volatile. Because we have a high proportion of relatively fixed structural costs, small changes in sales volume can have a disproportionately large effect on our profitability. A number of economic and market conditions drive changes in new vehicle sales, including real estate values,the availability and prices of used vehicles, levels of unemployment, availability of affordable financing, fluctuations in the cost of fuel, consumer confidence, real estate values, political unrest, the occurrence of a contagious disease or illness, including COVID-19 (see “The COVID-19 pandemic may disrupt our business and operations, which could materially adversely impact our business, financial condition, liquidity and results of operations” in this Item 1A, Risk Factors), barriers to trade and other global economic conditions. For a discussion of economic and market trends, see the Overview"Overview" section ofin Part II, Item 7. We cannot predict future economic and market conditions with certainty.MD&A.
Our significant business in China subjects us to unique operational, competitive and regulatory risksrisks. Maintaining a strong position in the Chinese market is a key component of our global growth strategy. Our business in China is subject to aggressive competition from many of the largest global manufacturers and numerous domestic manufacturers. As the size of the Chinesemanufacturers as well as non-traditional market continuesparticipants, such as domestic technology companies. In addition, our success in China depends upon our ability to increase we anticipate that additional competitors, both international and domestic, will seek to enter the Chineseadequately address unique market and that existing market participants will act aggressivelyconsumer preferences driven by advancements related to increase their market share.electric vehicles, infotainment and other new technologies. Our ability to fully deploy our technologies in China may be impacted by evolving laws and regulations in the U.S. and China. Increased competition, increased U.S.-China trade restrictions and weakening economic conditions in China, among other things, may result in price reductions, reduced sales, profitability and margins, and challenges to gain or hold market share.
In addition, to increased competition, Chinese regulators have announcedimplemented increasingly aggressive “green” policy initiatives requiring OEMs to reduce the average emissions and average fuel consumption of their products and to achieve quotas for the sale of electric vehicles.vehicles, which have challenging lead times.
Certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates the scope of our foreign investments and business conducted within China. In order to maintain access to the Chinese market, we may be required to comply with significant technical and other regulatory requirements that are unique to the Chinese market, at times with challenging lead-timelead times to implement such requirements. These actions may increase the cost of doing business in China and reduce our profitability.
A significant amount of our operations are conducted by joint ventures that we cannot operate solely for our benefit. Many of our operations, primarily in China and Korea as well as our battery manufacturing operations with LG Chem, are carried out by joint ventures. In joint ventures we share ownership and management of a company with one or more parties who may not have the same goals, strategies, priorities or resources as we do and may compete with us outside the joint venture. Joint ventures are intended to be operated for the equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions that must further take into consideration our partners' interests. In joint ventures we are required to foster our relationships with our co-owners as well as promote the overall success of the joint venture, and if a co-owner changes, relationships deteriorate or strategic objectives diverge, our success in the joint venture may be materially adversely affected. The benefits from a successful joint venture are shared among the co-owners, therefore we do not receive all the benefits from our successful joint ventures.
In addition, because we share ownership and management with one or more parties, we may have limited control over the actions of a joint venture, particularly when we own a minority interest. As a result, we may be unable to prevent misconduct or other violations of applicable laws or other misconduct by a joint venture.venture or the failure to satisfy contractual obligations by one or more parties. Moreover, a joint venture may not follow the same requirements regarding compliance, internal controls and internal control over financial reporting that we follow. To the extent another party makes decisions that negatively impact the joint venture or internal control issues arise within the joint venture, we may have to take responsive or other actionactions, or we may be subject to penalties, fines or other relatedpunitive actions for these activities.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The international scale and footprint of our operations exposesexpose us to additional risks. We manufacture, sell and service products globally and rely upon aan integrated global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture our products. Our global operations subject us to extensive domestic and foreign legal and regulatory requirements, and a variety of other political, economic and regulatory risks including: (1) changes in government leadership; (2) changes in labor, employment, tax, privacy, environmental and other laws, regulations or regulationsgovernment policies impacting our overall business model or practices or restricting our ability to manufacture, purchase or sell products consistent with market demand and our business objectives; (3) political pressures to change any aspect of our business model or practices andor that impair our ability to source raw materials, services, components, systems and parts, or manufacture products on competitive terms in a manner consistent with our current practice; changes in tax laws;business objectives; (4) political instability, civil unrest or government controls over certain sectors; (5) political and economic tensions between governments and changes in international trade policies, including restrictions on the repatriation of dividends or in the export of technology, especially between China and the U.S. and China,; (6) more detailed inspections or new or higher tariffs, for example, on products imported into or exported from Mexico into the U.S.;, including under Section 232 of the Trade Expansion Act of 1962, Section 301 of the U.S. Trade Act of 1974, or other trade measures; (7) new barriers to entry or domestic preference procurement requirements, including changes to, or withdrawals from or impediments to implementing free trade agreements (for example, the North American Free Trade Agreement or NAFTA)United States-Mexico-Canada Agreement), or preferences of foreign nationals for domestically manufactured products; (8) changes in foreign currency exchange rates, particularly in Brazil and Argentina, and interest rates; (9) economic downturns in foreign countries or geographic regions where we have significant operations, significant changes in conditions in the countries in which we operate with the effect of
GENERAL MOTORS COMPANY AND SUBSIDIARIES
competition from new market entrants;operate; (10) differing local product preferences and product requirements, including government certification requirements related to, among other things, fuel economy, vehicle emissions and safety; (11) impact of changes to and compliance with U.S. and other foreign countries’ export controls, economic sanctions and economic sanctions;other similar measures; (12) liabilities resulting from U.S. and foreign laws and regulations, including, but not limited to, those related to the Foreign Corrupt Practices Act and certain other anti-corruption laws; (13) differing labor regulations, requirements and union relationships; (14) differing dealer and franchise regulations and relationships; (15) difficulties in obtaining financing in foreign countries for local operations.operations; and (16) natural disasters, public health crises, including the occurrence of a contagious disease or illness, such as COVID-19 (see “The COVID-19 pandemic may disrupt our business and operations, which could materially adversely impact our business, financial condition, liquidity and results of operations” in this Item 1A, Risk Factors), and other catastrophic events.
Any significant disruption at one of our manufacturing facilities could disrupt our production schedule. We assemble vehicles at various facilities around the world. TheseOur facilities are typically designed to produce particular models for particular geographic markets. No single facility is designed to manufacture our full range of vehicles. In some cases, certain facilities produce products, systems, components and parts that disproportionately contribute a greater degree to our profitability than others.others and create significant interdependencies among manufacturing facilities around the world. Should these or other facilities become unavailable either temporarily or permanently for any number of reasons, including labor disruptions, the occurrence of a contagious disease or illness, such as COVID-19 (see “The COVID-19 pandemic may disrupt our business and operations, which could materially adversely impact our business, financial condition, liquidity and results of operations” in this Item 1A, Risk Factors), or catastrophic weather events, the inability to manufacture thereat the affected facility may result in harm to our reputation, increased costs, lower revenues and the loss of customers. In particular, substantially all of our hourly employees are represented by unions and covered by collective bargaining agreements that must be negotiated from time-to-time, often at the local facility level, which increases our risk of work stoppages. We may not be able to easily shift production to other facilities or to make up for lost production. Any new facility needed to replace an inoperable manufacturing facility would need to comply with the necessary regulatory requirements, need to satisfy our specialized manufacturing requirements and require specialized equipment. Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage available or any losses which may be excluded under our insurance policies.
Any disruption in our suppliers'suppliers’ operations could disrupt our production schedule. Our automotive operations are dependent upon the continued ability of our suppliers to deliver the systems, components, raw materials and parts that we need to manufacture our products. Our use of “just-in-time” manufacturing processes allows us to maintain minimal inventory quantities of systems, components, raw materials and parts.inventory. As a result, our ability to maintain production is dependent upon our suppliers delivering sufficient quantities of systems, components, raw materials and parts on time to meet our production schedules. In some instances, we purchase systems, components, raw materials and parts that are ultimately derivederived from a single source and may be at an increased risk for supply disruptions. Disputes,Any number of factors, including labor disruptions, catastrophic weather events, the occurrence of a contagious disease or illness, such as COVID-19 (see “The COVID-19 pandemic may disrupt our business and operations, which could materially adversely impact our business, financial condition, liquidity and results of operations” in this Item 1A, Risk Factors), contractual or other disputes, unfavorable economic or industry conditions, delivery delays or other performance problems or financial difficulties or solvency problems, withcould disrupt our suppliers, including Takata Corporation (Takata), which may be exacerbated by the cost of remediating quality issues with these items, couldsuppliers’ operations and lead to uncertainty in our supply chain or cause supply disruptions for us, which could, in turn, disrupt our operations, including the production of certain of our higher margin vehicles. WhereIf the COVID-19 pandemic continues to spread or re-emerges and results in a prolonged period of travel, commercial, social and other similar restrictions, we could experience continued and/or additional global supply disruptions. If we experience supply disruptions, we may not be able to develop alternate sourcing quickly. Any disruption of our production schedule caused by an unexpected shortage of systems, components, raw materials or parts even for a relatively short period of time could cause us to alter production schedules or suspend production entirely.entirely, which could cause a loss of revenues, which would adversely affect our operations.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
In particular, a global semiconductor supply shortage is having wide-ranging effects across multiple industries, particularly the automotive industry, and it has impacted multiple suppliers that incorporate semiconductors into the parts they supply to us. As a result, the semiconductor supply shortage has had, and will continue to have, an impact on our vehicle production, and we anticipate it will have a material impact on our performance in 2021.
High prices of raw materials or other inputs used by us and our suppliers could negatively impact our profitability. Increases in prices for raw materials or other inputs that we and our suppliers use in manufacturing products, systems, components and parts, such as steel, precious metals, non-ferrous metals, including aluminum, copper and plastic partscritical minerals or other similar raw materials, may lead to higher production costs for parts, components and components.vehicles. Changes in trade policies and tariffs, fluctuations in supply and demand and other economic and political factors may continue to create pricing pressure for raw materials and other inputs. This could, in turn, negatively impact our future profitability because we may not be able to pass all of those costs on to our customers or require our suppliers to absorb such costs.
We operatemay continue to restructure our operations in the U.S. and various other countries and initiate additional cost reduction actions, but we may not succeed in doing so. Since 2017, we have undertaken restructuring actions to lower our operating costs in response to difficult market and operating conditions in various parts of the world, including the U.S., Canada, Korea, Southeast Asia, India, Australia and New Zealand and Europe. As we continue to assess our performance throughout our regions, we may take additional restructuring actions to rationalize our operations, which may result in material asset write-downs or impairments and reduce our profitability in the periods incurred. In addition, we are continuing to implement a highly competitive industry that has excess manufacturing capacitynumber of operating effectiveness initiatives to improve productivity and attempts byreduce costs. In addition, these restructuring actions subject us to increased risks of labor unrest or strikes, supplier, dealer, or other third-party litigation, regulator claims or proceedings, negative publicity and business disruption. Failure to realize anticipated savings or benefits from our competitors to sell more vehiclesrestructuring and/or cost reduction actions could have a significant negativematerial adverse effect on our vehicle pricing, market sharebusiness, liquidity and operating results. The global automotive industry is highly competitivecash flows.
Risks related to our intellectual property, cybersecurity, information technology and overall manufacturing capacity in the industry far exceeds demand. Many manufacturers have relatively high fixed labor costs as well as significant limitations on their ability to close facilities and reduce fixed costs. Many of our competitors have responded to these relatively high fixed costs by providing subsidized financing or leasing programs, offering marketing incentives or reducing vehicle prices. As a result, we are not necessarily able to set our prices to offset higher costs of marketing incentives, commodity or other cost increases, or the impact of adverse currency fluctuations. Our competitors may also seek to benefit from economies of scale by consolidating or entering into other strategic agreements such as alliances intended to enhance their competitiveness.data management practices
Domestic manufacturers in lower cost countries, such as China and India, have become competitors in key emerging markets and announced their intention to export their products to established markets as a low cost alternative to established entry-level automobiles. In addition, foreign governments may decide to implement tax and other policies that favor their domestic manufacturers at the expense of international manufacturers, including GM and its joint venture partners. These actions have had, and are expected to continue to have, a significant negative effect on our vehicle pricing, market share and operating results.
Competitors may independently develop products and services similar to ours, and there are no guarantees that GM'sGM’s intellectual property rights would prevent competitors from independently developing or selling those productproducts and services. There may be instances where, notwithstanding our intellectual property position, competitive products or services may impact the value of our brands and other intangible assets, and our business may be adversely affected. Moreover, although GM takes
GENERAL MOTORS COMPANY AND SUBSIDIARIES
reasonable steps to maintain the confidentiality of GM proprietary information, there can be no assurance that such efforts will completely deter or prevent misappropriation or improper use of our technology. We sometimes face attempts to gain unauthorized access to our information technology networks and systems for the purpose of improperly acquiring our trade secrets or confidential business information. The theft or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position. In addition, we may be the target of patent enforcement of patentsactions by third parties, including aggressive and opportunistic enforcement claims by non-practicing entities. Regardless of the merit of such claims, responding to infringement claims can be expensive and time-consuming. Although we have taken steps to mitigate such risks, if we are found to infringehave infringed any third-party intellectual property rights, we could be required to pay substantial damages, or we could be enjoined from offering some of our products and services.
Security breaches and other disruptions to information technology systems and networked products, including connected vehicles, owned or maintained by us, GM Financial, or third-party vendors or suppliers on our behalf, could interfere with our operations and could compromise the confidentiality of private customer data or our proprietary information. We rely upon information technology systems and manufacture networked products, some of which are managed by third-parties,third parties, to process, transmit and store electronic information, and to manage or support a variety of our business processes, activities and products. Additionally, we and GM Financial collect and store sensitive data, including intellectual property and proprietary business information proprietary business information(including that of our dealers and suppliers,suppliers), as well as personally identifiable information of our customers and employees, in data centers and on information technology networks.networks (including networks that may be controlled or maintained by third parties). The secure operation of these systems and products, and the processing and maintenance of the information processed by these systems and products, is critical to our business operations and strategy. Further, customers using our systems rely on the security of our infrastructure, including hardware and other elements provided by third parties, to ensure the reliability of our products and the protection of their data. Despite security measures and business continuity plans, these systems and products may be vulnerable to damage, disruptions or shutdowns caused by attacks by hackers, computer viruses, malware (including “ransomware”), phishing attacks or breaches due to errors or malfeasance by employees, contractors and others who have access to these systems and products. The occurrence of any of these events could compromise the confidentiality, operational integrity and accessibility of these systems and products.products and the data that resides within them. Similarly, such an occurrence could result in the compromise or loss of the information processed by these systems and products. Such events could result in, among other things, the loss of proprietary data, interruptions or delays in our business operations and damage to our reputation. In addition, such events could result in legalincrease the risk of claims alleging that we are non-
GENERAL MOTORS COMPANY AND SUBSIDIARIES
compliant with applicable laws or proceedings,regulations, subjecting us to potential liability or regulatory penalties and related costs under laws protecting the privacy of personal information; disrupt our operations; or reduce the competitive advantage we hope to derive from our investment in advanced technologies. We have experienced such events in the past and, although past events were immaterial, future events may occur and may be material.
Portions of our information technology systems also may experience interruptions, delays or cessations of service or produce errors due to regular maintenance efforts, such as systems integration or migration work that takes place from time to time. We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time-consuming, disruptive and resource intensive. Such disruptions could adversely impact our ability to design, manufacture and sell products and services, and interrupt other business processes.
Security breaches and other disruptions of our in-vehicle systems could impact the safety of our customers and reduce confidence in GM and our products. Our vehicles contain complex information technology systems. These systems control various vehicle functions including engine, transmission, safety, steering, navigation, acceleration, braking, window and door lock functions. We have designed, implemented and tested security measures intended to prevent unauthorized access to these systems. However, hackers have reportedly attempted, and may attempt in the future, to gain unauthorized access to modify, alter and use such systems to gain control of, or to change, our vehicles’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the vehicle. Any unauthorized access to or control of our vehicles or their systems or any loss of data could adversely impact the safety of our customers or result in legal claims or proceedings, liability or regulatory penalties. New laws, such as the new data law in Massachusetts that would permit third-party access to vehicle data and related systems, could expose our vehicles and vehicle systems to third-party access without appropriate security measures in place, leading to new safety and security risks for our customers and reducing customer trust and confidence in our products. In addition, regardless of their veracity, reports of unauthorized access to our vehicles or their systems or data could negatively affect our brand and harm our reputation, which could impact our business prospects, financial condition and operating results.
Our enterprise data practices, including the collection, use, sharing, and security of the Personal Identifiable Information of our customers, employees and suppliers, are subject to increasingly complex, restrictive and punitive regulations in all key market regions. Under these regulations, the failure to maintain compliant data practices could result in consumer complaints and regulatory inquiry, resulting in civil or criminal penalties, as well as brand impact or other harm to our business. In addition, increased consumer sensitivity to real or perceived failures in maintaining acceptable data practices could damage our reputation and deter current and potential users or customers from using our products and services. Because many of these laws are new, there is little clarity as to their interpretation, as well as a lack of precedent for the scope of enforcement. The cost of compliance with these laws and regulations will be high and is likely to increase in the future. For example, the California Consumer Protection Act became effective in 2020, obligating companies to quickly respond to consumer requests to delete, disclose and stop selling personal information of California residents, with significant fines for noncompliance. Other U.S. states are considering similar laws, with some considering private rights of action for consumers that would allow consumers to bring claims directly against GM for mishandling their data. In Europe in 2020, the Court of Justice for the EU invalidated mechanisms for transferring personal information out of the EU, leading to a wave of potential new barriers for data sharing between the EU and, among other countries, the U.S. In Canada, both the federal government and certain provinces have also proposed new legislation imposing significant and unprecedented obligations, fines and liabilities regarding data handling. Overcoming these new barriers is likely to increase our costs and drive new complexity in our operations.
Risks related to government regulations and litigation
Our operations and products are subject to extensive laws, governmental regulations and policies, including those related to vehicle emissions, fuel economy standards and greenhouse gas emissions, that can significantly increase our costs and affect how we do business. We are significantly affected by governmental regulations on a global basis that can increase costs related to the production of our vehicles and affect our product portfolio.portfolio, particularly regulations relating to emissions, fuel economy standards and greenhouse gas emissions. Meeting or exceeding many of these regulations is costly and often technologically challenging, with respect to mandated emissions and fuel economyespecially because the standards especially where standards mayare not be harmonized across jurisdictions. We anticipate that the number and extent of these and other regulations, laws and policies, and the related costs and changes to our product portfolio, may increase significantly in the future.future, primarily out of concern for the environment (including concerns about global climate change and its impact). These government regulatory requirements, among others, could significantly affect our plans for global product development and, given the uncertainty surrounding enforcement and regulatory definitions and interpretations, may result in substantial costs, including civil or criminal penalties. In addition, an evolving but un-harmonized emissions and fuel economy regulatory framework may limit or dictate the types of vehicles we sell and where we sell them, which can affect revenue.our revenues. Refer to the "Environmental“Environmental and Regulatory Matters"Matters” section of Item 1. Business for further information on these regulatory and environmental requirements. We also expect that manufacturers will continue to be subject to increased scrutiny from regulators globally.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We expect that to comply with fuel economy and emission control requirements, we will be required to sell a significant volume of electric vehicles, as well asand potentially develop and implement new technologies for conventional internal combustion engines, all at increased cost levels.costs. There are limits on our ability to achieve fuel economy improvements over a given time frame, however.primarily relating to the cost and effectiveness of available technologies, lack of sufficient consumer acceptance of new technologies and of changes in vehicle mix, lack of willingness of consumers to absorb the additional costs of new technologies, the appropriateness (or lack thereof) of certain technologies for use in particular vehicles, the widespread availability (or lack thereof) of supporting infrastructure for new technologies and the human, engineering and financial resources necessary to deploy new technologies across a wide range of products and powertrains in a short time. There is no
GENERAL MOTORS COMPANY AND SUBSIDIARIES
assurance that we will be able to produce and sell vehicles that use such new technologies on a profitable basis or that our customers will purchase such vehicles in the quantities necessary for us to comply with these regulatory programs.
In the current uncertain regulatory framework, environmental liabilities for which we may be responsible and that are not reasonably estimable could be substantial. Alleged violations of safety, fuel economy or emissions standards could result in legal proceedings, the recall of one or more of our products, negotiated remedial actions, fines, restricted product offerings or a combination of any of those items. Any of these actions could have substantiala material adverse effectseffect on our operations, including facility idling, reduced employment, increased costs and loss of revenue.
Many
In addition, many of our advanced technologies, including autonomous vehicles, present novel issues with which domestic and foreign regulators have only limited experience, and will be subject to evolving regulatory frameworks. Any current or future regulations in these areas could impact whether and how these technologies are designed and integrated into our products, and may ultimately subject us to increased costs and uncertainty.
We could be materially adversely affected by unusual or significant litigation, governmental investigations or other proceedings. We are subject to legal proceedings involving various issues, including product liability lawsuits, class action litigations alleging product defects, emissions litigation (both in the U.S. and elsewhere), stockholder litigation, labor and employment litigation in various countries (including U.S., Canada, Korea and Brazil), claims and actions arising from restructurings, divestitures of operations and assets and proceedings related to the Ignition Switch Recall. In addition, we are subject to governmental proceedings and investigations. A negative outcome in one or more of these legal proceedings could result in the imposition of damages, including punitive damages, substantial fines, significant reputational harm, civil lawsuits and criminal penalties, interruptions of business, modification of business practices, equitable remedies and other sanctions against us or our personnel as well as significant legal and other costs. In addition, we may become obligatedFor a further discussion of these matters refer to issue upNote 16 to 30 million shares of our common stock (subject to adjustment to take into account stock dividends, stock splits and other transactions) to the Motors Liquidation Company GUC Trust (GUC Trust) under a provision of the Amended and Restated Master Sale and Purchase Agreement between us and General Motors Corporation and certain of its subsidiaries in the event that allowed general unsecured claims against the GUC Trust, as estimated by the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court), exceed $35.0 billion. At December 31, 2017, the Bankruptcy Court estimated that allowed general unsecured claims were approximately $31.9 billion.consolidated financial statements.
If, in the discretion of the U.S. Attorney’s Office for the Southern District of New York (the U.S. Attorney's Office), we do not comply with the terms of the Deferred Prosecution Agreement (the DPA), the U.S. Attorney's Office may prosecute us for charges alleged by the U.S. Attorney's Office including those relating to faulty ignition switches. On September 17, 2015 we announced that we entered into the DPA with the U.S. Attorney's Office regarding its investigation of the events leading up to certain recalls announced in February and March of 2014 relating to faulty ignition switches. Under the DPA, we consented to, among other things, the filing of a two-count information (the Information) in the U.S. District Court for the Southern District of New York (the Southern District) charging GM with a scheme to conceal material facts from a government regulator and wire fraud. We pled not guilty to the charges alleged in the Information. The DPA further provides that, in the event the U.S. Attorney's Office determines during the period of deferral of prosecution (or any extensions thereof) that we have violated any provision of the DPA, including violating any U.S. federal law or our obligation to cooperate with and assist the independent monitor (the Monitor), the U.S. Attorney's Office may, in its discretion, either prosecute us on the charges alleged in the Information or impose an extension of the period of deferral of prosecution of up to one additional year. Under such circumstance, the U.S. Attorney's Office would be permitted to rely upon the admissions we made in the DPA and would benefit from our waiver of certain procedural and evidentiary defenses. Such a criminal prosecution could subject us to penalties.
The costs and effect on our reputation of product safety recalls and alleged defects in products and services could materially adversely affect our business. Government safety standards require manufacturers to remedy certain product safety defects through recall campaigns.campaigns and vehicle repurchases. Under these standards, we could be subject to civil or criminal penalties or may incur various costs, including significant costs for free repairs.repairs made at no cost to the consumer. At present, the costs we incur in connection with these recalls typically include the cost of the part being replaced and labor to remove and replace the defective part. The costs to complete a recall or customer satisfaction action could be exacerbated to the extent that such action relates to a global platform. Concerns about the safety of our products, including advanced technologies like autonomous vehicles, whether raised internally or by regulators or consumer advocates, and whether or not based on scientific evidence or supported by data, can result in product delays, recalls, lost sales, governmental investigations, regulatory action, private claims, lawsuits and settlements and reputational damage. These circumstances can also result in damage to brand image, brand equity and consumer trust in the Company’sour products and ability to lead the disruption occurring in the automotive industry.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We currently source a variety of systems, components, raw materials and parts including but not limited to air bag inflators, from third parties. From time to time these items may have performance quality or reputationalquality issues that could harm our reputation and cause us to incur significant costs. For example,costs, particularly if the affected items relate to global platforms or involve defects that are identified years after production. Our ability to recover costs associated with recalls or other campaigns caused by parts or components purchased from suppliers may be limited by the suppliers’ financial condition or a number of other reasons or defenses.
We may incur additional tax expense or become subject to additional tax exposure. We are subject to the tax laws and regulations of the U.S. and numerous other jurisdictions in which we do business. Many judgments are required in determining our worldwide provision for income taxes and other tax liabilities, and we are currently conducting recalls for certain Takata air bag inflators usedregularly under audit by the U.S. Internal Revenue Service and other tax authorities, which may not agree with our tax positions. In addition, our tax liabilities are subject to other significant risks and uncertainties, including those arising from potential changes in somelaws and regulations in the countries in which we do business, the possibility of adverse determinations with respect to the application of existing laws, changes in our business or structure and changes in the valuation of our prior model year vehicles. Further recalls, if any, thatdeferred tax assets and liabilities. Any unfavorable resolution of these and other uncertainties may be required to remediate Takata air bag inflators in our vehicles could have a materialsignificant adverse impact on our business.
For a further discussiontax rate and results of these matters referoperations. If our tax expense were to Note 17 toincrease, or if the ultimate determination of our consolidated financial statements.
We may continue to restructure or divest our operationstaxes owed is for an amount in various countries, but we may not succeed in doing so. In 2017, we announced significant restructuring and cost reduction actions to lowerexcess of amounts previously accrued, our operating costs in response to difficult marketresults, cash flows and operating conditions in various parts of the world. As we continue to assess our performance throughout our regions, we may take additional restructuring actions to rationalize our operations, which may result in impairments and reduce our profitability in the periods incurred. In addition, we may not realize anticipated savings or benefits from past or future cost reduction actions in full or in part or within the time periods we expect. We are also subject to the risks of labor unrest, negative publicity and business disruption in connection with our cost reduction actions. Failure to realize anticipated savings or benefits from our cost reduction actions could have a material adverse effect on our business, prospects, financial condition liquidity, results of operations and cash flows.could be adversely affected.
Our future competitiveness and ability
Risks related to achieve long-term profitability depends on our ability to control our costs, which requires us to successfully implement operating effectiveness initiatives throughout our operations. We are continuing to implement a number of operating effectiveness initiatives to improve productivity and reduce costs. Our future competitiveness depends upon our continued success in implementing these initiatives throughout our operations. While some of the elements of cost reduction are within our control, others, such as interest rates or return on investments, which influence our expense for pensions, depend more on external factors, and there can be no assurance that such external factors will not materially adversely affect our ability to reduce our costs. Reducing costs may prove difficult due to our focus on increasing advertising and our belief that engineering and other expenses necessary to improve the performance, safety and customer satisfaction of our vehicles and to continue to innovate our technology, product and service offerings to meet changing customer needs and market developments are likely to increase.Automotive Financing - GM Financial
We rely on GM Financial to provide financial services to our customers and dealers and customers in a majority of the markets in which we sell vehicles. globally. GM Financial faces a number of business, economic and financial risks that could impair its access to capital and negatively affect its business and operations, andwhich in turn could impede its ability to provide leasing and financing to retail consumerscustomers and commercial lending to our dealers to support additional sales of our vehicles. We rely on GM Financial in North America, South America and China to support leasing and sales of our vehicles to consumers requiring vehicle financing and also to provide commercial lending to our dealers. Any reduction in GM Financial'sFinancial’s ability to provide such financial services would negatively affect our efforts to support additional sales of our vehicles and expand our market penetration among consumerscustomers and dealers.
As
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The primary factors that could adversely affect GM Financial’s business and operations and reduce its ability to provide financing services at competitive rates include the sufficiency, availability and cost of sources of financing, including credit facilities, securitization programs and secured and unsecured debt issuances; the performance of loans and leases in its portfolio, which could be materially affected by charge-offs, delinquencies and prepayments; wholesale auction values of used vehicles; vehicle return rates and the residual value performance on vehicles GM Financial leases to customers; fluctuations in interest rates and currencies; competition for customers from commercial banks, credit unions and other financing and leasing companies; and changes to regulation, supervision, enforcement and licensing across various jurisdictions.
In addition, a substantial portion of GM Financial’s indebtedness bears interest at variable interest rates, primarily based on USD-LIBOR. The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. It is unknown whether any banks will continue to voluntarily submit rates for the calculation of LIBOR, or whether LIBOR will continue to be published by its administrator based on these submissions or on any other basis, after 2021. At this time, it is not possible to predict the effect that these developments or any discontinuance, modification or other reforms may have on LIBOR, other benchmarks or floating–rate debt instruments, including GM Financial’s floating–rate debt. Any such discontinuance, modification, alternative reference rates or other reforms may materially adversely affect interest rates on GM Financial’s current or future indebtedness. There is a risk that the discontinuation of LIBOR will impact GM Financial's ability to manage interest rate risk effectively without an adequate replacement.
Further, as an entity operating in the financial services sector, GM Financial is required to comply with a wide variety of laws and regulations that may be costly to adhere to and may affect our consolidated operating results. Compliance with these laws and regulations requires that GM Financial maintain forms, processes, procedures, controls and the infrastructure to support these requirements, and these laws and regulations often create operational constraints both on GM Financial’s ability to implement servicing procedures and on pricing. Laws in the financial services industry are designed primarily for the protection of consumers. The failure to comply with these laws could result in significant statutory civil and criminal penalties, monetary damages, attorneys’ fees and costs, possible revocation of licenses and damage to reputation, brand and valued customer relationships.
The primary factors that could adversely affect GM Financial's business and operations and reduce its ability
Risks related to provide financing services at competitive rates include the availability of borrowings under its credit facilities to fund its retail and commercial finance activities; its ability to access a variety of financing sources including the asset-backed securities market and other secured and unsecured debt markets; the performance of loans and leases in its portfolio, which could be materially affected by delinquencies, defaults or prepayments; wholesale auction values of used vehicles; higher than expected vehicle return rates and the residual value performance on vehicles GM Financial leases to customers; fluctuations in interest rates and currencies; and changes to regulation, supervision and licensing across various jurisdictions, including new regulations or sanctions imposed in the U.S. by the Department of Justice, SEC and Consumer Financial Protection Bureau.defined benefit pension plans
Our defined benefit pension plans are currently underfunded and our pension funding requirements could increase significantly due to a reduction in funded status as a result of a variety of factors, including weak performance of financial markets, declining interest rates, changes in laws or regulations, or changes in assumptions or investments that do not achieve
GENERAL MOTORS COMPANY AND SUBSIDIARIES
adequate returns. Our employee benefit plans currently hold a significant amount of equity and fixed income securities. A detailed description of the investment funds and strategies and our potential funding requirements are disclosed in Note 1615 to our consolidated financial statements, which also describes significant concentrations of risk to the plan investments.
Our future funding requirements for our U.S. defined benefit pension plans depend upon the future performance of assets placed in trusts for these plans, the level of interest rates used to determine funding levels, the level of benefits provided for by the plans and any changes in laws and regulations. Future funding requirements generally increase if the discount rate decreases or if actual asset returns are lower than expected asset returns, assuming other factors are held constant. We estimate future contributions to these plans using assumptions with respect to these and other items. Changes to those assumptions could have a significant effect on future contributions.
There are additional risks due to the complexity and magnitude of our investments. Examples include implementation of significant changes in investment policy, insufficient market liquidity in particular asset classes and the inability to quickly rebalance illiquid and long-term investments.
Factors whichthat affect future funding requirements for our U.S. defined benefit plans generally affect the required funding for non-U.S. plans. Certain plans outside the U.S. do not have assets and therefore the obligation is funded as benefits are paid. If local legal authorities increase the minimum funding requirements for our non-U.S. plans, we could be required to contribute more funds.funds, which could negatively affect our liquidity and financial condition.
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Item 1B. Unresolved Staff Comments
NoneNone.
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
Item 2. Properties
At December 31, 20172020, we had over 100 locations in the U.S. (excluding our automotive financing operations and dealerships), which are primarily for manufacturing, assembly, distribution, warehousing, engineering and testing. We, our subsidiaries or associated companies in which we own an equity interest own most of these properties and/or lease a portion of these properties. Leased properties are primarily composed of warehouses and administration, engineering and sales offices.
We have manufacturing, assembly, distribution, office or warehousing operations in 3529 countries, including equity interests in associated companies, which perform manufacturing, assembly or distribution operations. The major facilities outside the U.S., which are principally vehicle manufacturing and assembly operations, are located in Argentina, Brazil, Canada, China, Colombia, Ecuador, Mexico and South Korea, Thailand and Vietnam.Korea.
GM Financial owns or leases facilities for administration and regional credit centers. GM Financial has 3937 facilities, of which 2724 are located in the U.S. The major facilities outside the U.S. are located in Brazil, Canada, China and Mexico.
* * * * * * *
Item 3. Legal Proceedings
Refer to theThe discussion in the Litigation-Relatedunder "Litigation-Related Liability and Tax Administrative Matters sectionMatters" in Note 1716 to our consolidated financial statements for information relating to legal proceedings.is incorporated by reference into this Part I - Item 3.
* * * * * * *
Item 4. Mine Safety Disclosures
Not applicableapplicable.
* * * * * * *
PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information Shares of our common stock are publicly traded on the New York Stock Exchange. The following table summarizesExchange under the quarterly price ranges of our common stock based on high and low prices from intraday trades on the New York Stock Exchange:symbol "GM".
|
| | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 |
| High | | Low | | High | | Low |
First quarter | $ | 38.55 |
| | $ | 33.79 |
| | $ | 33.54 |
| | $ | 26.69 |
|
Second quarter | $ | 35.40 |
| | $ | 31.92 |
| | $ | 33.41 |
| | $ | 27.34 |
|
Third quarter | $ | 40.69 |
| | $ | 34.45 |
| | $ | 32.87 |
| | $ | 27.52 |
|
Fourth quarter | $ | 46.76 |
| | $ | 40.70 |
| | $ | 37.74 |
| | $ | 30.21 |
|
Holders At January 30, 201829, 2021, we had 1.4 billion issued and outstanding shares of common stock held by 511471 holders of record.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Stock Performance Graph The following graph compares the performance of our common stock into the three months ended March 31, 2014. It is anticipated that dividends on our common stock will continue to be declaredStandard & Poor's 500 Stock Index and paid quarterly. However the declaration of any dividend on our common stock is a matter to be acted upon by our Board of Directors in its sole discretion. Any dividend will be paid out of funds legally available for that purpose. Our payment of dividends in the future, as described further in "Liquidity and Capital Resources" in MD&A, will depend on business conditions, our financial condition, earnings, liquidity and capital requirements and other factors. Refer to Item 6. Selected Financial Data for cash dividends declared on our common stockDow Jones Automobile & Parts Titans 30 Index for the years endedlast five years. It assumes $100 was invested on December 31, 2017, 2016 and 2015.2015, with dividends being reinvested.
The following table summarizes stock performance graph data points in dollars:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years ended December 31, |
| 2015 | | 2016 | | 2017 | | 2018 | | 2019 | | 2020 |
General Motors Company | $100 | | $107 | | $132 | | $112 | | $128 | | $148 |
S&P 500 Stock Index | $100 | | $112 | | $136 | | $130 | | $171 | | $203 |
Dow Jones Automobile & Parts Titans 30 Index | $100 | | $98 | | $118 | | $93 | | $106 | | $160 |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Purchases of Equity Securities The following table summarizes our purchases of common stock in the three months ended December 31, 2017:2020:
|
| | | | | | | | | | | |
| Total Number of Shares Purchased(a) | | Weighted Average Price Paid per Share | | Total Number of Shares Purchased Under Announced Programs(b) | | Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs |
October 1, 2017 through October 31, 2017 | 16,530,750 |
| | $ | 44.72 |
| | 16,381,375 |
| | $4.3 billion |
November 1, 2017 through November 30, 2017 | 18,779,333 |
| | $ | 43.53 |
| | 16,141,363 |
| | $3.6 billion |
December 1, 2017 through December 31, 2017 | 1,631,403 |
| | $ | 42.97 |
| | 1,550,706 |
| | $3.5 billion |
Total | 36,941,486 |
| | $ | 44.04 |
| | 34,073,444 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number of Shares Purchased(a) | | Weighted Average Price Paid per Share | | Total Number of Shares Purchased Under Announced Programs(b) | | Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs |
October 1, 2020 through October 31, 2020 | 38,520 | | | $ | 30.97 | | | — | | | $3.3 billion |
November 1, 2020 through November 30, 2020 | 26,509 | | | $ | 45.06 | | | — | | | $3.3 billion |
December 1, 2020 through December 31, 2020 | 29,198 | | | $ | 41.62 | | | — | | | $3.3 billion |
Total | 94,227 | | | $ | 38.23 | | | — | | | |
__________
| |
(a) | Shares purchased include authorized shares that were a part of our stock repurchase plan. In addition, shares purchased consist of shares retained by us for the payment of the exercise price upon the exercise of warrants and shares delivered by employees or directors to us for the payment of taxes resulting from issuance of common stock upon the vesting of Restricted Stock Units (RSUs), Performance Stock Units (PSUs) and Restricted Stock Awards (RSAs) relating to compensation plans. In June 2017 our shareholders approved the 2017 Long Term Incentive Plan which authorizes awards of stock options, stock appreciation rights, RSAs, RSUs, PSUs or other stock-based awards to selected employees, consultants, advisors, and non-employee Directors of the Company. Refer to Note 22 to our consolidated financial statements for additional details on employee stock incentive plans and Note 20 to our consolidated financial statements for additional details on warrants outstanding. |
| |
(b) | In January 2017 we announced that our Board of Directors had authorized the purchase of up to an additional $5 billion of our common stock with no expiration date. |
(a) Shares purchased consist of shares delivered by employees or directors to us for the payment of taxes resulting from issuance of common stock upon the vesting of Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) relating to compensation plans. In June 2017 our shareholders approved the 2017 Long Term Incentive Plan, which authorizes awards of stock options, stock appreciation rights, RSUs, PSUs or other stock-based awards to selected employees, consultants, advisors, and non-employee Directors of the Company. Refer to Note 23 to our consolidated financial statements for additional details on employee stock incentive plans.
(b) In January 2017, we announced that our Board of Directors had authorized the purchase of up to an additional $5.0 billion of our common stock with no expiration date.
* * * * * * *
Item 6.Selected Financial Data
Not applicable.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | |
| At and for the Years Ended December 31, |
2017 | | 2016 | | 2015 | | 2014 | | 2013 |
Income Statement Data: | | | | | | | | | |
Total net sales and revenue | $ | 145,588 |
| | $ | 149,184 |
| | $ | 135,725 |
| | $ | 137,958 |
| | $ | 138,792 |
|
Income from continuing operations(a)(b) | $ | 330 |
| | $ | 9,269 |
| | $ | 9,590 |
| | $ | 4,525 |
| | $ | 5,960 |
|
Basic earnings per common share – continuing operations(a)(b) | $ | 0.23 |
| | $ | 6.12 |
| | $ | 6.09 |
| | $ | 2.06 |
| | $ | 3.16 |
|
Diluted earnings per common share – continuing operations(a)(b) | $ | 0.22 |
| | $ | 6.00 |
| | $ | 5.89 |
| | $ | 1.95 |
| | $ | 2.76 |
|
Dividends declared per common share | $ | 1.52 |
| | $ | 1.52 |
| | $ | 1.38 |
| | $ | 1.20 |
| | $ | — |
|
Balance Sheet Data: | | | | | | | | | |
Total assets(c) | $ | 212,482 |
| | $ | 221,690 |
| | $ | 194,338 |
| | $ | 177,311 |
| | $ | 166,231 |
|
Automotive notes and loans payable | $ | 13,502 |
| | $ | 10,560 |
| | $ | 8,535 |
| | $ | 9,084 |
| | $ | 6,815 |
|
GM Financial notes and loans payable | $ | 80,717 |
| | $ | 64,563 |
| | $ | 45,479 |
| | $ | 29,304 |
| | $ | 22,174 |
|
Total equity | $ | 36,200 |
| | $ | 44,075 |
| | $ | 40,323 |
| | $ | 36,024 |
| | $ | 43,174 |
|
_________
| |
(a) | In the year ended December 31, 2017 we recorded tax expense of $7.3 billion related to U.S. tax reform legislation, $2.3 billion related to the establishment of a valuation allowance against deferred tax assets that will no longer be realizable as a result of the sale of the Opel/Vauxhall Business, and charges of $460 million related to restructuring actions in India and South Africa. In the year ended December 31, 2015 we recorded the reversal of deferred tax asset valuation allowances of $3.9 billion in Europe and recorded charges related to the Ignition Switch Recall Compensation Program (Compensation Program) and for various legal matters of approximately $1.6 billion. In the year ended December 31, 2014 we recorded charges of approximately $2.8 billion in Automotive cost of sales related to recall campaigns and courtesy transportation, a catch-up adjustment of $0.9 billion related to the change in estimate for recall campaigns and a charge of $0.4 billion related to the Compensation Program. |
| |
(b) | In December 2014 we redeemed all of the remaining shares of our Series A Preferred Stock for $3.9 billion, which reduced Income from continuing operations by $0.8 billion. In September 2013 we purchased 120 million shares of our Series A Preferred Stock held by the UAW Retiree Medical Benefits Trust (New VEBA) for $3.2 billion, which reduced Income from continuing operations by $0.8 billion. |
| |
(c) | Total assets includes assets held for sale of $20.6 billion, $20.0 billion, $17.8 billion, and $16.1 billion at December 31, 2016 through 2013, respectively. |
* * * * * * *
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)MD&A should be read in conjunction with the accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. "Risk Factors"Risk Factors for a discussion of these risks and uncertainties. The discussion of our financial condition and results of operations for the year ended December 31, 2018 included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019 is incorporated by reference into this MD&A.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Non-GAAP Measures Unless otherwise indicated, our non-GAAP measures discussed in this MD&A are related to our continuing operations and not our discontinued operations or our assets and liabilities held for sale.operations. Our non-GAAP measures includeinclude: earnings before interest and taxes (EBIT)-adjusted, presented net of noncontrolling interests,interests; earnings before income taxes (EBT)-adjusted for our GM Financial segment; earnings per share (EPS)-diluted-adjusted,-diluted-adjusted; effective tax rate-adjusted (ETR-adjusted),; return on invested capital-adjusted (ROIC-adjusted) and adjusted automotive free cash flow. Our calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S. GAAP measures.
These non-GAAP measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions to understand operating performance without regard to items we do not consider a component of our core operating performance. Furthermore, these non-GAAP measures allow investors the opportunity to measure and monitor our performance against our externally communicated targets and evaluate the investment decisions being made by management to improve ROIC-adjusted. Management uses these measures in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes. Further, our Board of Directors uses certain of these and other measures as key metrics to determine management performance under our performance-based compensation plans. For these reasons we believe these non-GAAP measures are useful for our investors.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
EBIT-adjusted EBIT-adjusted is presented net of noncontrolling interests and is used by management and can be used by investors to review our consolidated operating results because it excludes automotive interest income, automotive interest expense and income taxes as well as certain additional adjustments that are not considered part of our core operations. Examples of adjustments to EBIT include but are not limited to impairment charges related to goodwill; impairment charges on long-lived assets and other exit costs resulting from strategic shifts in our operations or discrete market and business conditions; costs arising from the ignition switch recall and related legal matters; and certain currency devaluations associated with hyperinflationary economies. For EBIT-adjusted and our other non-GAAP measures, once we have made an adjustment in the current period for an item, we will also adjust the related non-GAAP measure in any future periods in which there is an impact from the item. Our corresponding measure for our GM Financial segment is EBT-adjusted because interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment.
Core EBIT-adjusted Beginning in 2018, we intend to report a Core EBIT-adjusted metric. Core EBIT-adjusted will be used by management and can be used by investors to review our core consolidated operating results. Core EBIT-adjusted begins with EBIT-adjusted and excludes the EBIT-adjusted results of our autonomous vehicle operations, including Cruise Automation Inc. (Cruise), Maven and our investment in Lyft.
EPS-diluted-adjusted EPS-diluted-adjusted is used by management and can be used by investors to review our consolidated diluted EPS results on a consistent basis. EPS-diluted-adjusted is calculated as net income attributable to common stockholders-diluted less income (loss) from discontinued operations on an after-tax basis, adjustments noted above for EBIT-adjusted gains or losses on the extinguishment of debt obligations on an after-tax basis and certain income tax adjustments divided by weighted-average common shares outstanding-diluted. Examples of income tax adjustments include the establishment or reversal of significant deferred tax asset valuation allowances.
ETR-adjusted ETR-adjusted is used by management and can be used by investors to review the consolidated effective tax rate for our core operations on a consistent basis. ETR-adjusted is calculated as Income tax expense less the income tax related to the adjustments noted above for EBIT-adjusted and the income tax adjustments noted above for EPS-diluted-adjusted divided by Income before income taxes less adjustments. When we provide an expected adjusted effective tax rate, we do not provide an expected effective tax rate because the U.S. GAAP measure may include significant adjustments that are difficult to predict.
ROIC-adjusted ROIC-adjusted is used by management and can be used by investors to review our investment and capital allocation decisions. We define ROIC-adjusted as EBIT-adjusted for the trailing four quarters divided by ROIC-adjusted average net assets, which is considered to be the average equity balances adjusted for average automotive debt and interest liabilities, exclusive of capitalfinance leases; average automotive net pension and other postretirement benefits (OPEB) liabilities; and average automotive net income tax assets during the same period. Adjustments to the average equity balances exclude assets and liabilities classified as either assets held for sale or liabilities held for sale.
Adjusted automotive free cash flow Adjusted automotive free cash flow is used by management and can be used by investors to review the liquidity of our automotive operations and to measure and monitor our performance against our capital allocation program and evaluate our automotive liquidity against the substantial cash requirements of our automotive operations. We measure adjusted automotive free cash flow as automotive operating cash flow from continuing operations less capital expenditures adjusted for management actions. Management actions primarily related to strengthening our balance sheet,can include voluntary events such as prepayments of debt and discretionary
GENERAL MOTORS COMPANY AND SUBSIDIARIES
contributions to employee benefit plans.plans or nonrecurring specific events such as a closure of a facility that are considered special for EBIT-adjusted purposes. Refer to the “Liquidity and Capital Resources” section of this MD&A for our reconciliationadditional information.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Core adjusted automotive free cash flow Beginning in 2018, we intend to report a Core adjusted automotive free cash flow metric. Core adjusted automotive free cash flow will be used by management and can be used by investors to review the liquidity of our automotive operations and to measure and monitor our performance against our capital allocation program and evaluate our automotive liquidity against the substantial cash requirements of our automotive operations. Core adjusted automotive free cash flow begins with adjusted automotive free cash flow and excludes the cash flows of our autonomous vehicle operations, including Cruise, Maven and our investment in Lyft.
The following table reconciles Net income (loss) attributable to stockholders under U.S. GAAP to EBIT-adjusted:
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Net income (loss) attributable to stockholders | $ | (3,864 | ) |
| $ | 9,427 |
|
| $ | 9,687 |
|
(Income) loss from discontinued operations, net of tax | 4,212 |
|
| 1 |
|
| (25 | ) |
Income tax expense (benefit) | 11,533 |
|
| 2,739 |
|
| (1,219 | ) |
Gain on extinguishment of debt | — |
|
| — |
|
| (449 | ) |
Automotive interest expense | 575 |
|
| 563 |
|
| 423 |
|
Automotive interest income | (266 | ) |
| (182 | ) |
| (167 | ) |
Adjustments |
|
|
|
|
|
GMI restructuring(a) | 460 |
|
| — |
|
| 297 |
|
Venezuela-related matters(b) | 80 |
|
| — |
|
| 720 |
|
Ignition switch recall and related legal matters(c) | 114 |
|
| 300 |
|
| 1,785 |
|
Russia exit costs(d) | — |
| | — |
| | 438 |
|
Other | — |
|
| — |
|
| (41 | ) |
Total adjustments | 654 |
|
| 300 |
|
| 3,199 |
|
EBIT-adjusted | $ | 12,844 |
|
| $ | 12,848 |
|
| $ | 11,449 |
|
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Net income attributable to stockholders | $ | 6,427 | | | $ | 6,732 | | | $ | 8,014 | |
Loss from discontinued operations, net of tax | — | | | — | | | 70 | |
Income tax expense | 1,774 | | | 769 | | | 474 | |
| | | | | |
Automotive interest expense | 1,098 | | | 782 | | | 655 | |
Automotive interest income | (241) | | | (429) | | | (335) | |
Adjustments | | | | | |
GMI restructuring(a) | 683 | | | — | | | 1,138 | |
Ignition switch recall and related legal matters(b) | (130) | | | — | | | 440 | |
Cadillac dealer strategy(c) | 99 | | | — | | | — | |
Transformation activities(d) | — | | | 1,735 | | | 1,327 | |
GM Brazil indirect tax recoveries(e) | — | | | (1,360) | | | — | |
FAW-GM divestiture(f) | — | | | 164 | | | — | |
| | | | | |
Total adjustments | 652 | | | 539 | | | 2,905 | |
EBIT-adjusted | $ | 9,710 | | | $ | 8,393 | | | $ | 11,783 | |
________
| |
(a) | This adjustment was excluded because of a strategic decision to rationalize our core operations by exiting or significantly reducing our presence in various international markets to focus resources on opportunities expected to deliver higher returns. The adjustment primarily consists of asset impairments, sales incentives, inventory provisions, dealer restructuring, employee separations and other contract cancellation costs in India, South Africa, and Thailand. |
| |
(b) | In the year ended December 31, 2017 this adjustment was excluded because we ceased operations and terminated employment relationships in Venezuela.In the year ended December 31, 2015 this adjustment was excluded because of the devaluation of the Venezuela Bolivar Fuerte (BsF) and our inability to transact to obtain U.S. Dollars.
|
| |
(c) | These adjustments were excluded because of the unique events associated with the ignition switch recall. These events included the creation of the Compensation Program, as well as various investigations, inquiries and complaints from constituents.
|
| |
(d) | These adjustments were excluded because of our decision to exit the Russia market in 2015. The Russia exit costs primarily consisted of sales incentives, dealer restructuring and other contract cancellation costs and asset impairments. |
(a)These adjustments were excluded because of a strategic decision to rationalize our core operations by exiting or significantly reducing our presence in various international markets to focus resources on opportunities expected to deliver higher returns. The adjustments primarily consist of dealer restructurings, asset impairments, inventory provisions and employee separation charges in Australia, New Zealand, Thailand and India in the year ended December 31, 2020 and employee separation charges, asset impairments and supplier claims in Korea in the year ended December 31, 2018.
(b)These adjustments were excluded because of the unique events associated with the ignition switch recall, which included various investigations, inquiries and complaints from constituents.
(c)This adjustment was excluded because it relates to strategic activities to transition certain Cadillac dealers from the network as part of Cadillac's electric vehicle strategy.
(d)These adjustments were excluded because of a strategic decision to accelerate our transformation for the future to strengthen our core business, capitalize on the future of personal mobility, and drive significant cost efficiencies. The adjustments primarily consist of accelerated depreciation, supplier-related charges, pension and other curtailment charges and employee-related separation charges in the year ended December 31, 2019 and primarily employee separation charges and accelerated depreciation in the year ended December 31, 2018.
(e)This adjustment was excluded because of the unique events associated with decisions rendered by the Superior Judicial Court of Brazil resulting in retrospective recoveries of indirect taxes.
(f)This adjustment was excluded because we divested our joint venture FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM), as a result of a strategic decision by both shareholders, allowing us to focus our resources on opportunities expected to deliver higher returns.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The following table reconciles diluted earnings (loss) per common share under U.S. GAAP to EPS-diluted-adjusted:
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
| Amount |
| Per Share |
| Amount |
| Per Share |
| Amount |
| Per Share |
Diluted earnings (loss) per common share | $ | (3,880 | ) |
| $ | (2.60 | ) |
| $ | 9,427 |
|
| $ | 6.00 |
|
| $ | 9,686 |
|
| $ | 5.91 |
|
Diluted (earnings) loss per common share – discontinued operations | 4,212 |
|
| 2.82 |
|
| 1 |
|
| — |
|
| (25 | ) |
| (0.02 | ) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt | — |
|
| — |
|
| — |
|
| — |
|
| (449 | ) |
| (0.27 | ) |
All other adjustments(a) | 654 |
|
| 0.44 |
|
| 300 |
|
| 0.19 |
|
| 3,199 |
|
| 1.95 |
|
Total adjustments | 654 |
|
| 0.44 |
|
| 300 |
|
| 0.19 |
|
| 2,750 |
|
| 1.68 |
|
Tax effect on adjustments(b) | (208 | ) |
| (0.14 | ) |
| (114 | ) |
| (0.07 | ) |
| (201 | ) |
| (0.13 | ) |
Tax adjustments(c) | 9,099 |
|
| 6.10 |
|
| — |
|
| — |
|
| (4,001 | ) |
| (2.44 | ) |
EPS-diluted-adjusted | $ | 9,877 |
|
| $ | 6.62 |
|
| $ | 9,614 |
|
| $ | 6.12 |
|
| $ | 8,209 |
|
| $ | 5.00 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Amount | | Per Share | | Amount | | Per Share | | Amount | | Per Share |
Diluted earnings per common share | $ | 6,247 | | | $ | 4.33 | | | $ | 6,581 | | | $ | 4.57 | | | $ | 7,916 | | | $ | 5.53 | |
Diluted loss per common share – discontinued operations | — | | | — | | | — | | | — | | | 70 | | | 0.05 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Adjustments(a) | 652 | | | 0.46 | | | 539 | | | 0.38 | | | 2,905 | | | 2.03 | |
Tax effect on adjustments(b) | (70) | | | (0.05) | | | (188) | | | (0.13) | | | (416) | | | (0.29) | |
Tax adjustments(c) | 236 | | | 0.16 | | | — | | | — | | | (1,111) | | | (0.78) | |
EPS-diluted-adjusted | $ | 7,065 | | | $ | 4.90 | | | $ | 6,932 | | | $ | 4.82 | | | $ | 9,364 | | | $ | 6.54 | |
________
| |
(a) | Refer to the reconciliation of Net income (loss) attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of MD&A for adjustment details.
|
| |
(b) | The tax effect of each adjustment is determined based on the tax laws and valuation allowance status of the jurisdiction to which the adjustment relates.
|
| |
(c) | In the year ended December 31, 2017 these adjustments consist of the tax expense of $7.3 billion related to U.S. tax reform legislation and the establishment of a valuation allowance against deferred tax assets of $2.3 billion that will no longer be realizable as a result of the sale of the Opel/Vauxhall Business, partially offset by tax benefits related to tax settlements. In the year ended December 31, 2015 these adjustments primarily consist of the tax benefit related to the valuation allowance reversal in Europe. These adjustments were excluded because impacts of tax legislation and valuation allowances are not considered part of our core operations.
|
(a) Refer to the reconciliation of Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of the MD&A for adjustment details.
(b) The tax effect of each adjustment is determined based on the tax laws and valuation allowance status of the jurisdiction to which the adjustment relates.
(c) In the year ended December 31, 2020, the adjustment consists of tax expense related to the establishment of a valuation allowance against deferred tax assets in Australia and New Zealand. This adjustment was excluded because significant impacts of valuation allowances are not considered part of our core operations. In the year ended December 31, 2018, the adjustment consists of: (1) a non-recurring tax benefit related to foreign earnings; and (2) tax effects related to U.S. tax reform legislation.
The following table reconciles our effective tax rate under U.S. GAAP to ETR-adjusted:
| | | Years Ended December 31, | | Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 | | 2020 | | 2019 | | 2018 |
| Income before income taxes |
| Income tax expense |
| Effective tax rate |
| Income before income taxes |
| Income tax expense |
| Effective tax rate |
| Income before income taxes |
| Income tax expense (benefit) |
| Effective tax rate | | Income before income taxes | | Income tax expense | | Effective tax rate | | Income before income taxes | | Income tax expense | | Effective tax rate | | Income before income taxes | | Income tax expense | | Effective tax rate |
Effective tax rate | $ | 11,863 |
|
| $ | 11,533 |
|
| 97.2 | % |
| $ | 12,008 |
|
| $ | 2,739 |
|
| 22.8 | % |
| $ | 8,371 |
|
| $ | (1,219 | ) |
| (14.6 | )% | Effective tax rate | $ | 8,095 | | | $ | 1,774 | | | 21.9 | % | | $ | 7,436 | | | $ | 769 | | | 10.3 | % | | $ | 8,549 | | | $ | 474 | | | 5.5 | % |
Adjustments(a) | 654 |
|
| 208 |
|
|
|
| 300 |
|
| 114 |
|
|
|
| 2,750 |
|
| 201 |
|
|
| Adjustments(a) | 652 | | | 70 | | | 545 | | | 188 | | | 2,946 | | | 416 | | |
Tax adjustments(b) |
|
| (9,099 | ) |
|
|
|
|
| — |
|
|
|
|
|
| 4,001 |
|
|
| Tax adjustments(b) | | (236) | | | — | | | 1,111 | | |
ETR-adjusted | $ | 12,517 |
|
| $ | 2,642 |
|
| 21.1 | % |
| $ | 12,308 |
|
| $ | 2,853 |
|
| 23.2 | % |
| $ | 11,121 |
|
| $ | 2,983 |
|
| 26.8 | % | ETR-adjusted | $ | 8,747 | | | $ | 1,608 | | | 18.4 | % | | $ | 7,981 | | | $ | 957 | | | 12.0 | % | | $ | 11,495 | | | $ | 2,001 | | | 17.4 | % |
__________
| |
(a) | Refer to the reconciliation of Net income (loss) attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of MD&A for adjustment details. |
| |
(b) | Refer to the reconciliation of diluted earnings (loss) per common share under U.S. GAAP to EPS-diluted-adjusted within this section of MD&A for adjustment details. |
(a) Refer to the reconciliation of Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of the MD&A for adjustment details. Net income attributable to noncontrolling interests for these adjustments is included in the years ended December 31, 2019 and 2018. The tax effect of each adjustment is determined based on the tax laws and valuation allowance status of the jurisdiction to which the adjustment relates.
(b) Refer to the reconciliation of diluted earnings per common share under U.S. GAAP to EPS-diluted-adjusted within this section of the MD&A for adjustment details.
We define return on equity (ROE) as Net income (loss) attributable to stockholders for the trailing four quarters divided by average equity for the same period. Management uses average equity to provide comparable amounts in the calculation of ROE. The following table summarizes the calculation of ROE (dollars in billions):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Net income (loss) attributable to stockholders | $ | 6.4 | | | $ | 6.7 | | | $ | 8.0 | |
Average equity(a) | $ | 43.3 | | | $ | 43.7 | | | $ | 37.4 | |
ROE | 14.9 | % | | 15.4 | % | | 21.4 | % |
_______
(a) Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in Net income (loss) attributable to stockholders.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Net income (loss) attributable to stockholders | $ | (3.9 | ) |
| $ | 9.4 |
|
| $ | 9.7 |
|
Average equity | $ | 42.2 |
|
| $ | 43.6 |
|
| $ | 37.0 |
|
ROE | (9.2 | )% |
| 21.6 | % |
| 26.2 | % |
The following table summarizes the calculation of ROIC-adjusted (dollars in billions):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
| | | Years Ended December 31, | | Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 | | 2020 | | 2019 | | 2018 |
EBIT-adjusted(a) | $ | 12.8 |
|
| $ | 12.8 |
|
| $ | 11.4 |
| EBIT-adjusted(a) | $ | 9.7 | | | $ | 8.4 | | | $ | 11.8 | |
Average equity | $ | 42.2 |
|
| $ | 43.6 |
|
| $ | 37.0 |
| |
Add: Average automotive debt and interest liabilities (excluding capital leases) | 11.6 |
|
| 9.9 |
|
| 8.0 |
| |
Average equity(b) | | Average equity(b) | $ | 43.3 | | | $ | 43.7 | | | $ | 37.4 | |
Add: Average automotive debt and interest liabilities (excluding finance leases) | | Add: Average automotive debt and interest liabilities (excluding finance leases) | 27.8 | | | 14.9 | | | 14.4 | |
Add: Average automotive net pension & OPEB liability | 21.0 |
|
| 22.0 |
|
| 25.8 |
| Add: Average automotive net pension & OPEB liability | 17.6 | | | 16.7 | | | 18.3 | |
Less: Average automotive net income tax asset | (29.3 | ) |
| (32.8 | ) |
| (33.0 | ) | Less: Average automotive net income tax asset | (24.0) | | | (23.5) | | | (22.7) | |
ROIC-adjusted average net assets | $ | 45.5 |
|
| $ | 42.7 |
|
| $ | 37.8 |
| ROIC-adjusted average net assets | $ | 64.7 | | | $ | 51.8 | | | $ | 47.4 | |
ROIC-adjusted | 28.2 | % |
| 30.1 | % |
| 30.3 | % | ROIC-adjusted | 15.0 | % | | 16.2 | % | | 24.9 | % |
________
(a) Refer to the reconciliation of Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of the MD&A.
(b) Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in EBIT-adjusted.
Overview Our vision for the future is a world with zero crashes, zero emissions and zero congestion, which guides our growth-focused investment in electrification, self-driving vehicles and new products and services. The all-electric future we are building integrates our technology, scale and manufacturing expertise to drive growth, profitability and deliver world-class customer interactions. Our strategy includes product leadership in electric vehicles and autonomous vehicles, continued leadership in trucks and SUVs, and developing and monetizing new software and services. We will execute our strategy with a diverse team and a steadfast commitment to good citizenship through sustainable operations and a leading health and safety culture.
| | | | | |
| |
(a) | Refer to the reconciliation of Net income (loss) attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of MD&A. |
| |
| |
| |
| |
The COVID-19 pandemic and government actions and measures taken to prevent its spread continue to affect our operations. In response to COVID-19, we previously suspended the majority of our global manufacturing operations and our Automotive China JVs’ manufacturing operations. By May 2020, we had resumed our global manufacturing operations. Government-imposed restrictions on businesses, operations and travel and the related economic uncertainty have impacted demand for our vehicles in most of our global markets. During the first half of 2020, we executed a number of austerity measures, including aggressive actions to reduce costs and preserve liquidity, such as limiting advertising and other third-party spending, suspending our dividend on common shares, deferring salaried employee compensation and delaying non-critical projects, including certain future product programs. As production has returned to normal levels, the majority of the austerity measures we put into place have normalized. The extent of COVID-19’s impact on our future operations, liquidity and the demand for our products will depend upon, among other things, the duration and severity of the outbreak or subsequent outbreaks, related government responses, such as required physical distancing or restrictions on business operations and travel, the pace of recovery of economic activity and the impact to consumers, the effectiveness of available vaccines and any potential supply disruptions, all of which are uncertain and difficult to predict in light of the rapidly evolving landscape. Refer to Part I, Item 1A. Risk Factors for a full discussion of the risks associated with the COVID-19 pandemic. Overview Our management team
The automotive industry and GM are currently experiencing a global semiconductor supply shortage. The supply shortage has adopted a strategic plan to transform GMimpacted multiple suppliers that incorporate semiconductors into the world's most valued automotive company. Our plan includes several majorparts they supply to us. We expect the semiconductor supply shortage will have a short-term impact on our business. We do not expect this shortage to impact our growth and electric vehicle initiatives, that we anticipate will redefine the future of personal mobility through our zero crashes, zero emissions, zero congestion vision while also strengthening the core of our business: earning customers for life by delivering winning vehicles, leading the industry in quality and safety and improving the customer ownership experience; leading in technology and innovation, including electrification, autonomous, data monetization and connectivity; growing our brands; making tough, strategic decisions about which markets and products in which we will investcontinue prioritizing full-size trucks, SUVs and compete; building profitable adjacent businesses and targeting 10% core margins on an EBIT-adjusted basis.electric vehicles. Refer to Part I, Item 1A. Risk Factors for further discussion of these risks.
In addition to our EBIT-adjusted margin improvement goal, our overall financial targets include total annual operational and functional cost savings of $6.5 billion through 2018 compared to 2014 costs, of which approximately $5.5 billion has been realized as of December 31, 2017, and which will more than offset our planned incremental investments in brand building, engineering and technology as we launch new products; and execution of our capital allocation program as described in the "Liquidity and Capital Resources" section of this MD&A.
For the year ending December 31, 20182021, we expect EPS-diluted and EPS-diluted-adjusted of between $4.50 and $5.25, Net income attributable to be instockholders of between $6.8 billion and $7.6 billion and EBIT-adjusted of between $10.0 billion and $11.0 billion, inclusive of the mid-six dollar range.impact of the semiconductor supply shortage. We do not consider the potential future impact of adjustments on our expected financial results. We expect coreestimate the short-term semiconductor supply shortage to have a net EBIT-adjusted and core adjusted automotive free cash flowimpact of approximately $1.5 billion to be$2.0 billion in line with 2017. Core consiststhe year ending December 31, 2021.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The following table reconciles expected Net income attributable to stockholders under U.S. GAAP to expected EBIT-adjusted (dollars in billions):
| | | | | |
| Year Ending December 31, 2021 |
Net income attributable to stockholders | $ 6.8-7.6 |
Income tax expense | 2.2-2.4 |
| |
Automotive interest expense, net | 1.0 | |
EBIT-adjusted(a) | $ 10.0-11.0 |
________
(a)We do not consider the potential future impact of adjustments on our autonomous vehicle operations, including Cruise, Maven car sharing entities, and our investment in Lyft.expected financial results.
We also face continuing challenges from a market, operating and regulatory standpointchallenges in a number ofseveral countries across the globe due to, among other factors, weak economic conditions, competitive pressures, our product portfolio offerings, heightened emissions standards, labor disruptions, foreign exchange volatility, rising material prices, evolving trade policy and political uncertainty. As a result of these conditions, we continue to strategically assess our performance and ability to achieve acceptable returns on our invested capital. Refer to Item1A.Part I, Item 1A. Risk Factors for a discussion of these challenges.
In November 2018, we announced plans to accelerate steps to improve our overall business performance, including the reorganization of global product development staffs, the realignment of manufacturing capacity in response to market-related volume declines in passenger cars and a reduction of our salaried workforce. We achieved $4.5 billion in cost savings primarily from reductions in Automotive and other cost of sales and Automotive and other selling, general and administrative expense in our consolidated financial statements, inclusive of $0.2 billion of savings related to the wind-down of Holden sales, design and engineering operations and sale of our vehicle and powertrain manufacturing facilities in Thailand. We previously announced plans to reduce capital expenditures from approximately $8.5 billion to approximately $7.0 billion on a normalized run-rate basis. As a result of re-timing 2020 spending due to pandemic-related austerity measures into 2021 and a strategic decision to accelerate investments in our all-electric future beginning in 2021, we expect that our annual capital expenditures will exceed $7.0 billion through at least 2023. As we continue to assess our performance and the needs of our evolving business, additional restructuring and rationalization actions could be required. These actions may be required or determination may be made that the carrying amount of our long-lived assets may not be recoverable in certain of these countries. Such a determination maycould give rise to future asset impairments or other charges, which may have a material impact on our results of operations.operating results.
GMNAIn the year ended December 31, 2017 industryIndustry sales in North America were 21.5 million units representing a decrease of 1.5% compared to the corresponding period in 2016. U.S. industry sales were 17.617.7 million units in the year ended December 31, 2017.
In2020, representing a decrease of 16.2% compared to the corresponding period in 2019. U.S. industry sales were 14.9 million units in the year ended December 31, 20172020, representing a decrease of 14.7% compared to the corresponding period in 2019. As described above, the COVID-19 pandemic has resulted in a contraction of total North America industry volumes in 2020. Dealer inventory remains constrained for several critical vehicles, including our full-size trucks.
Our total vehicle sales in the U.S., our largest market in North America, totaled 3.0were 2.5 million units for a market share of 17.1%, in the year ended December 31, 2020, representing an increase of 0.10.6 percentage points compared to the corresponding period in 2016.2019. We continue to lead the U.S. industry in market share.
As discussed above, in response to COVID-19, we suspended production across our manufacturing facilities in March 2020. By May 2020, we had resumed critical manufacturing operations and reached normalized production levels in June 2020. We continue to follow physical distancing guidance, enhanced deep cleaning procedures and provide personal protective equipment to protect our employees.
We achieved EBIT-adjusted margins of 10.7% on continued strength of U.S. industry light vehicle sales, key product launches and continued focus on overall cost savings. Based on our current cost structure, we estimate GMNA’sGMNA's breakeven point at the U.S. industry level to be in the range of 10.0 to 11.0 million units. We expectThe extent of COVID-19's impact on industry volumes in 2021 will ultimately depend upon, among other things, the duration and severity of the outbreak or subsequent outbreaks, related government responses, the pace of recovery of economic activity and the impact to sustain an EBIT-adjusted marginconsumers, the effectiveness of 10%available vaccines and any potential supply disruptions, all of which are uncertain and difficult to predict in 2018 on continued strengthlight of U.S. industry light vehicle sales, favorable mix of full-size trucks and crossovers relative to passenger cars, key product launches and continued focus on overall cost savings.the rapidly evolving landscape.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
GMIIn the year ended December 31, 2017 China industry sales were 28.3 million units and our market share was 14.3%. We continue to see strength in sales of our Cadillac and Baojun passenger vehicles and SUVs, as well as positive momentum in Chevrolet sales driven by new product launches. Wuling sales were impacted by the market shift away from mini commercial vehicles. In the year ended December 31, 2017 our Automotive China JVs generated equity income of $2.0 billion. We expect low industry growth in 2018 and continuation of pricing pressures, which will continue to pressure margins. We continue to expect equal to increased vehicleIndustry sales in 2018 driven by new launches and expect to sustain strong China equity income by focusing on improvements in vehicle mix, cost efficiencies, and downstream performance optimization.
Many markets across the region continue to improve led by increases in Argentina and Brazil leading to industry sales of 25.2were 24.9 million units representing an increase of 4.0% in the year ended December 31, 20172020, representing a decrease of 1.9% compared to the corresponding period in 2016. In2019. Our total vehicle sales in China were 2.9 million units for a market share of 11.6% in the year ended December 31, 2017 our retail sales totaled 1.3 million units leading to a market share of 5.1%,2020, representing a decrease of 0.30.5 percentage points compared to the corresponding period in 2016.2019. While we have observed a recovery of the market as the impact of the COVID-19 pandemic in China subsides, the ongoing global macro-economic impact of COVID-19 and geopolitical tensions may continue to place pressure on China's
GENERAL MOTORS COMPANY AND SUBSIDIARIES
automotive industry. Our Automotive China JVs generated equity income of $0.5 billion in the year ended December 31, 2020. Although a continuation of a competitive industry, pricing pressures and a more challenging regulatory environment related to emissions, fuel consumption and new energy vehicles will continue to place pressure on our operations in China, we will continue to build upon our strong brands, network, and partnerships in China as well as continue to drive improvements in vehicle mix and cost.
Outside of China, industry sales were 21.1 million units in the year ended December 31, 2020, representing a decrease of 18.0% compared to the corresponding period in 2019, primarily due to the global macroeconomic impact of COVID-19. Our total vehicle sales were 1.0 million units for a market share of 4.7% in the year ended December 31, 2020, representing a decrease of 0.1 percentage points compared to the corresponding period in 2019.
In May 2017 we announced severalthe year ended December 31, 2020, restructuring actions in GMI which were primarily related to the withdrawalwind-down of Chevrolet fromHolden sales, design and engineering operations in Australia and New Zealand, with cessation of Holden vehicle sales by 2021, the Indiansale of our vehicle and South African markets at the end of 2017powertrain manufacturing facilities in Thailand, and the transitionexecution of a binding term sheet to sell our South African manufacturing operations to Isuzu Motors.facilities in India. These actions occurred as a resultwere taken to strengthen the Company's core business and focus investment on other opportunities that will derive the greatest returns for shareholders and support investment in future technologies. We recorded charges of a strategic decision$0.7 billion in the year ended December 31, 2020. We also recorded deferred tax charges of $0.2 billion in the year ended December 31, 2020. The charges were primarily considered special for EBIT-adjusted, EPS-diluted-adjusted and adjusted automotive free cash flow purposes. We intend to focus resources on opportunities expectedcontinue to deliver higher returns.provide servicing and spare parts to customers for an extended period of time in Australia, New Zealand, Thailand and India. Refer to Note 1918 to our consolidated financial statements for additional information related to these restructuring actions. In May 2017 we deconsolidated
Cruise We are actively testing our business in Venezuela which resulted in a charge of $0.1 billion during the year ended December 31, 2017.
GM Korea Company (GM Korea) entered into a collectively bargained wage agreement which was ratified by its union in January 2018. The impact of the agreement was not material to our consolidated financial statements.
We have had recent discussions with key stakeholders in GM Korea, including its minority owners and union, regarding the need to improve GM Korea's financial and operational performance. As we strategically assess our performance and the manner in which we operate in Korea and certain other countries, additional restructuring and rationalization actions may be required and may have a material impact on our results of operations.
CorporateBeginning in 2012 through January 30, 2018, we purchased an aggregate of 504 million shares of our outstanding common stock for $16.2 billion.
The Ignition Switch Recall has led to various inquiries, investigations, subpoenas, requests for information and complaints from agencies or other representatives of U.S., federal, state and Canadian governments. In addition these and other recalls have resulted in a number of claims and lawsuits. Such lawsuits and investigations could in the future result in the imposition of material damages, fines, civil consent orders, civil and criminal penalties or other remedies. Refer to Note 17 to our consolidated financial statements for additional information.
Takata Matters In May 2016 NHTSA issued an amended consent order requiring Takata to file defect information reports (DIRs) for previously unrecalled front airbag inflators that contain phased-stabilized ammonium nitrate-based propellant without a moisture absorbing desiccant on a multi-year, risk-based schedule through 2019 impacting tens of millions ofautonomous vehicles produced by numerous automotive manufacturers. NHTSA concluded that the likely root cause of the rupturing of the airbag inflators is a function of time, temperature cycling and environmental moisture.
Although we do not believe there is a safety defect at this time in any unrecalled GM vehicles within scope of the Takata DIRs, in cooperation with NHTSA we filed Preliminary DIRs on May 27, 2016, updated as of June 13, 2016, covering 2.5 million of certain of our GMT900 vehicles, which are full-size pick-up trucks and SUVs. On November 15, 2016, we filed a petition for inconsequentiality and request for deferral of determination regarding those GMT900 vehicles. On November 28, 2016, NHTSA granted GM’s deferral request in connection with this petition. The deferral provides GM until August 31, 2017 to present evidence and analysis that our vehicles do not pose an unreasonable risk to motor vehicle safety.
We filed a second set of Preliminary DIRs for certain GMT900 vehicles on January 10, 2017. These January 2017 DIRs are consistent with GM’s May 2016 DIRs. On the same day, we also filed a second petition for inconsequentiality and deferral of decision with respect to the vehicles subject to our January 2017 DIRs. On January 18, 2017, NHTSA consolidated our first and second petitions for inconsequentiality and will rule on both at the same time.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
On August 25, 2017, we filed a supplemental brief in support of our petitions that provided NHTSA with the results of our long-term study and testing and the basis for our determination that the inflators in these vehicles do not present an unreasonable risk to safety and that no repair should ultimately be required. In our brief, we requested that NHTSA grant our petitions or, in the alternative, grant an additional deferral period to provide time for further testing.
We filed a third set of Preliminary DIRs for certain GMT900 vehicles on January 9, 2018. These January 2018 DIRs are consistent with GM's May 2016 DIRs and January 2017 DIRs. On the same day, we also filed a third petition for inconsequentiality with respect to the vehicles subject to our January 2018 DIRs.
We believe these vehicles are currently performing as designed and ongoing testing continues to support the belief that the vehicles' unique design and integration mitigates against inflator propellant degradation and rupture risk. For example, the airbag inflators used in the vehicles are a variant engineered specifically for our vehicles, and include features such as greater venting, unique propellant wafer configurations, and machined steel end caps. The inflators are packaged in the instrument panel in such a way as to minimize exposure to moisture from the climate control system. Also, these vehicles have features that minimize the maximum temperature to which the inflator will be exposed, such as larger interior volumes and standard solar absorbing windshields and side glass.
Accordingly, no warranty provision has been made for any repair associated with our vehicles subject to the Preliminary DIRs and amended consent order. However, in the event we are ultimately obligated to repair the vehicles subject to current or future Takata DIRs under the amended consent order in the U.S., we estimate a reasonably possible impact to GM of approximately $1.0 billion.
GM is engaged in discussions with regulators outside the U.S. with respect to Takata inflators. There are differences in vehicle and inflator design between the relevant vehicles sold internationally and those sold in the U.S. WeGated by safety and regulation, we continue to gather and analyze evidence about these inflators and to share our findings with regulators. We were required to recall certainmake significant progress towards commercialization of a network of on-demand autonomous vehicles sold outside of the U.S. in the three months ended September 30, 2017 to replace Takata inflators in these vehicles. Additional recalls, if any, could be material to our results of operations and cash flows. We continue to monitor the international situation.U.S.
On June 26, 2017, Takata filed for bankruptcy protection in the United States and Japan. Over the past several months, a group of global automakers, including GM, have had discussions with Takata and Key Safety Systems, Inc. regarding a potential transaction involving the sale of Takata's business. GM has not experienced any supply interruptions arising from Takata initiating formal insolvency proceedings and anticipates that Takata will continue an uninterrupted supply of component parts to GM during the insolvency proceedings. GM continues to monitor Takata’s financial and operational performance and to develop alternative and contingent supplies to attempt to mitigate prospective threats to the supply of components.
PSA Group Transaction On July 31, 2017 we closed the sale of our Opel/Vauxhall Business to PSA Group and on October 31, 2017 we closed the sale of the Fincos to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A.
The net consideration paid at closing for the European Business was $2.5 billion, consisting of (1) $2.2 billion in cash; and (2) $0.8 billion in warrants in PSA Group; partially offset by (3) the $0.5 billion de-risking premium payment made to PSA Group for assuming certain underfunded pension liabilities. In addition, we agreed to sell the shares of PSA Group received upon exercise of the warrants within 35 days after exercise. The purchase price is subject to certain working capital adjustments as provided in the Master Agreement (the Agreement).
The total charge from the sale of the European Business was $6.2 billion, net of tax, of which $3.9 billion is recorded in Income (loss) from discontinued operations, net of tax, and $2.3 billion was treated as an adjustment to both EPS-diluted-adjusted and ETR-adjusted. The charge relates to: (1) $4.3 billion of deferred tax assets that will no longer be realizable or that transferred to PSA Group; (2) $1.5 billion related to previously deferred pension losses and payment of the de-risking premium to PSA Group for its assumption of certain underfunded pension liabilities; (3) a pre-tax disposal loss of $0.5 billion as a result of the sale of the Fincos, which includes the recognition of $0.2 billion of foreign currency translation losses; (4) a pre-tax charge of $0.4 billion for the cancellation of production programs resulting from the convergence of vehicle platforms between the European Business and PSA Group; and (5) other costs to support the separation of operations to be provided for a period of time following closing; partially offset by proceeds.
Our wholly owned subsidiary (the Seller) has agreed to indemnify PSA Group for certain losses resulting from any inaccuracy of the representations and warranties or breaches of our covenants included in the Agreement and for certain other liabilities, including emissions and product liabilities. The Company has entered into a guarantee for the benefit of PSA Group and pursuant
GENERAL MOTORS COMPANY AND SUBSIDIARIES
to which the Company has agreed to guarantee the Seller's obligation to indemnify PSA Group. Certain of these indemnification obligations are subject to time limitations, thresholds and/or caps as to the amount of required payments. We are currently unable to estimate any reasonably possible overall amounts or range of loss that may result from claims made under these indemnities, if any.
PSA Group has provided a number of working capital and other adjustments under the Agreement and other ancillary agreements, many of which are customary in these types of transactions. We currently believe that post-closing adjustments under the Agreement, if any, would not have a material impact on our results of operations.
We retained net underfunded pension liabilities of $6.8 billion owed primarily to current pensioners and former employees of the European Business with vested pension rights. PSA Group assumed, pursuant to the Agreement, approximately $3.1 billion of net underfunded pension liabilities primarily with respect to active employees of the Opel/Vauxhall Business, and during the three months ended September 30, 2017 the Seller made payments of $3.4 billion in respect of these assumed liabilities, which includes pension funding payments for active employees and the de-risking premium payment discussed above. At closing we drew upon our three-year unsecured revolving credit facility to fund these payments. We issued debt securities thereafter to repay the draw on our credit facility. As part of the retained pension liabilities described above, we retained the U.K. defined benefit pension plans in existence at signing related to the Opel/Vauxhall Business, including responsibility for service cost accruals through the closing date.
We have agreed to purchase from and supply to PSA Group certain vehicles for a period of time following closing and not to engage in certain competing businesses in Europe for a period of three years.
Refer to Note 3 to our consolidated financial statements for additional information.
Contingently Issuable SharesUnder the Amended and Restated Master Sale and Purchase Agreement between us and Motors Liquidation Company we may be obligated to issue additional shares (Adjustment Shares) of our common stock in the event that allowed general unsecured claims against the GUC Trust, as estimated by the Bankruptcy Court, exceed $35.0 billion. Refer to Note 17 to our consolidated financial statements for a description of the contingently issuable Adjustment Shares.
Automotive Financing - GM Financial Summary and Outlook GM Financial has expanded its leasing and prime lending programs in North America; therefore, leasing and prime lending have become a larger percentage of the originations and retail portfolio balance. During 2017 we saw used car prices in the U.S. decline approximately 5% as compared to 2016. For 2018, an increasing supply of used vehicles resulting from off-lease returns will continue to pressure used car prices. As a result, we expect a further decline in used car prices in the U.S. between 5% and 6% in 2018 as compared to 2017. GM Financial continues to expect pre-tax income to double from 2014 earnings of $0.8 billion once full captive penetration levels are achieved on a consistent basis. The following table summarizes the residual value as well as the number of units included in GM Financial equipment on operating leases, net by vehicle type (units in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Residual Value |
| Units |
| Percentage |
| Residual Value |
| Units |
| Percentage |
Cars | $ | 5,701 |
|
| 450 |
|
| 27.2 | % |
| $ | 5,240 |
|
| 420 |
|
| 31.7 | % |
Trucks | 7,173 |
|
| 285 |
|
| 17.3 | % |
| 5,231 |
|
| 224 |
|
| 16.9 | % |
Crossovers | 13,723 |
|
| 818 |
|
| 49.5 | % |
| 10,349 |
|
| 604 |
|
| 45.7 | % |
SUVs | 3,809 |
|
| 99 |
|
| 6.0 | % |
| 2,791 |
|
| 75 |
|
| 5.7 | % |
Total | $ | 30,406 |
|
| 1,652 |
|
| 100.0 | % |
| $ | 23,611 |
|
| 1,323 |
|
| 100.0 | % |
GM Financial's retail penetration in North America grew to approximately 37% in the year ended December 31, 2017 from approximately 33% in 2016 as a result of the expanded leasing and lending programs. In the year ended December 31, 2017 GM Financial's revenue consisted of leased vehicle income of 71%, retail finance charge income of 23%, and commercial finance charge income of 3%. We believe that offering a comprehensive suite of financing products will generate incremental sales of our vehicles, drive incremental GM Financial earnings and help support our sales throughout various economic cycles. GM Financial's leasing program is exposed to residual values, which are heavily dependent on used vehicle prices. Used vehicle prices increased approximately 3% in 2020 compared to 2019, primarily due to low new vehicle inventory, largely driven by the suspension of manufacturing operations as a result of the COVID-19 pandemic, creating strong demand for used vehicles, which resulted in gains on terminations of leased vehicles of $1.3 billion in GM Financial interest, operating and other expenses in the year ended December 31, 2020, compared to gains of $0.7 billion in the corresponding period in 2019. Further, vehicles sold during 2020 were carried at lower net book values, resulting from increased depreciation rates recorded in anticipation of reduced residual values throughout 2020. In 2021, GM Financial expects used vehicle prices to decline by an amount in the low single digits on a percentage basis as compared to 2020 levels as supply and demand dynamics normalize. The following table summarizes the estimated residual value based on GM Financial's most recent estimates and the number of units included in GM Financial Equipment on operating leases, net by vehicle type (units in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Residual Value | | Units | | Percentage | | Residual Value | | Units | | Percentage |
Crossovers | $ | 16,334 | | | 964 | | | 65.5 | % | | $ | 15,950 | | | 972 | | | 60.5 | % |
Trucks | 7,455 | | | 275 | | | 18.7 | % | | 7,256 | | | 288 | | | 18.0 | % |
SUVs | 3,435 | | | 92 | | | 6.3 | % | | 3,917 | | | 108 | | | 6.7 | % |
Cars | 1,949 | | | 140 | | | 9.5 | % | | 3,276 | | | 238 | | | 14.8 | % |
Total | $ | 29,173 | | | 1,471 | | | 100.0 | % | | $ | 30,399 | | | 1,606 | | | 100.0 | % |
GM Financial's penetration of our retail sales in the U.S. increased to 45% in the year ended December 31, 2020 from 43% in 2019. Penetration levels vary depending on incentive financing programs available and competing third-party financing products in the market. GM Financial's prime loan originations as a percentage of total loan originations in North America increased to 73% in 2020 from 68% in 2019. In the year ended December 31, 2020, GM Financial's revenue consisted of leased vehicle income of 69%, retail finance charge income of 26%, and commercial finance charge income of 3%.
Consolidated Results We review changes in our results of operations under five categories: volume, mix, price, cost and other. Volume measures the impact of changes in wholesale vehicle volumes driven by industry volume, market share and changes in dealer stock levels. Mix measures the impact of changes to the regional portfolio due to product, model, trim, country and option
GENERAL MOTORS COMPANY AND SUBSIDIARIES
country and option penetration in current year wholesale vehicle volumes. Price measures the impact of changes related to Manufacturer’s Suggested Retail Price and various sales allowances. Cost includes primarily:primarily includes: (1) material and freight; (2) manufacturing, engineering, advertising, administrative and selling and warranty expense; and (3) non-vehicle related activity. Other primarily includes primarily foreign exchange and non-vehicle related automotive revenues as well as equity income or loss from our nonconsolidated affiliates. Refer to the regional sections of this MD&A for additional information.
Total Net Sales and Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
2020 | | 2019 | | | % | | | Volume | | Mix | | Price | | Other | |
| | | | | | (Dollars in billions) |
GMNA | $ | 96,733 | | | $ | 106,366 | | | $ | (9,633) | | | (9.1) | % | | | $ | (15.1) | | | $ | 2.7 | | | $ | 3.3 | | | $ | (0.5) | | |
GMI | 11,586 | | | 16,111 | | | (4,525) | | | (28.1) | % | | | $ | (4.4) | | | $ | 1.2 | | | $ | 0.5 | | | $ | (1.8) | | |
Corporate | 350 | | | 220 | | | 130 | | | 59.1 | % | | | | | | | | | $ | 0.1 | | |
Automotive | 108,669 | | | 122,697 | | | (14,028) | | | (11.4) | % | | | $ | (19.6) | | | $ | 3.9 | | | $ | 3.8 | | | $ | (2.2) | | |
Cruise | 103 | | | 100 | | | 3 | | | 3.0 | % | | | | | | | | | $ | — | | |
GM Financial | 13,831 | | | 14,554 | | | (723) | | | (5.0) | % | | | | | | | | | $ | (0.7) | | |
Eliminations/reclassifications | (118) | | | (114) | | | (4) | | | (3.5) | % | | | | | $ | — | | | | | $ | — | | |
Total net sales and revenue | $ | 122,485 | | | $ | 137,237 | | | $ | (14,752) | | | (10.7) | % | | | $ | (19.6) | | | $ | 3.9 | | | $ | 3.8 | | | $ | (2.9) | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
2017 | | 2016 | | | % | | | Volume | | Mix | | Price | | Other |
| | | | | | (Dollars in billions) |
GMNA | $ | 111,345 |
| | $ | 119,113 |
| | $ | (7,768 | ) | | (6.5 | )% | | | $ | (12.2 | ) | | $ | 3.5 |
| | $ | 0.6 |
| | $ | 0.3 |
|
GMI | 21,920 |
| | 20,943 |
| | 977 |
| | 4.7 | % | | | $ | 0.2 |
|
| $ | 0.2 |
|
| $ | 0.6 |
| | $ | — |
|
Corporate | 342 |
| | 149 |
| | 193 |
| | n.m. |
| | |
|
| |
|
| |
|
| | $ | 0.2 |
|
Automotive | 133,607 |
| | 140,205 |
| | (6,598 | ) | | (4.7 | )% | | | $ | (12.0 | ) | | $ | 3.7 |
| | $ | 1.3 |
| | $ | 0.5 |
|
GM Financial | 12,151 |
| | 8,983 |
| | 3,168 |
| | 35.3 | % | | |
|
| |
|
| |
|
| | $ | 3.2 |
|
Eliminations | (170 | ) | | (4 | ) | | (166 | ) | | n.m. |
| | |
|
| |
|
| |
|
| | $ | (0.2 | ) |
Total net sales and revenue | $ | 145,588 |
| | $ | 149,184 |
| | $ | (3,596 | ) | | (2.4 | )% | | | $ | (12.0 | ) | | $ | 3.7 |
| | $ | 1.3 |
| | $ | 3.5 |
|
Refer to the regional sections of this MD&A for additional information on volume, mix and price.
Automotive and Other Cost of Sales
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
| 2020 | | 2019 | | | % | | | Volume | | Mix | | Cost | | Other |
| | | | | | (Dollars in billions) |
GMNA | $ | 83,886 | | | $ | 94,582 | | | $ | 10,696 | | | 11.3 | % | | | $ | 11.0 | | | $ | (2.2) | | | $ | 1.8 | | | $ | — | |
GMI | 12,515 | | | 14,967 | | | 2,452 | | | 16.4 | % | | | $ | 4.0 | | | $ | (0.9) | | | $ | (1.6) | | | $ | 1.0 | |
Corporate | 310 | | | 81 | | | (229) | | | n.m. | | | | | | | $ | (0.2) | | | $ | — | |
Cruise | 829 | | | 1,026 | | | 197 | | | 19.2 | % | | | | | | | $ | 0.2 | | | |
Eliminations | (1) | | | (5) | | | (4) | | | (80.0) | % | | | | | $ | — | | | $ | — | | | |
Total automotive and other cost of sales | $ | 97,539 | | | $ | 110,651 | | | $ | 13,112 | | | 11.8 | % | | | $ | 15.0 | | | $ | (3.1) | | | $ | 0.2 | | | $ | 1.0 | |
________
n.m. = not meaningful
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
2016 | | 2015 | | | % | | | Volume | | Mix | | Price | | Other |
| | | | | | (Dollars in billions) |
GMNA | $ | 119,113 |
| | $ | 106,744 |
| | $ | 12,369 |
| | 11.6 | % | | | $ | 10.8 |
| | $ | 0.7 |
| | $ | 1.7 |
| | $ | (0.8 | ) |
GMI | 20,943 |
| | 22,970 |
| | (2,027 | ) | | (8.8 | )% | | | $ | (1.7 | ) |
| $ | 0.2 |
|
| $ | 1.2 |
| | $ | (1.7 | ) |
Corporate | 149 |
| | 150 |
| | (1 | ) | | (0.7 | )% | | |
|
| |
|
| |
|
| | $ | — |
|
Automotive | 140,205 |
| | 129,864 |
| | 10,341 |
| | 8.0 | % | | | $ | 9.1 |
| | $ | 0.9 |
| | $ | 2.9 |
| | $ | (2.5 | ) |
GM Financial | 8,983 |
| | 5,867 |
| | 3,116 |
| | 53.1 | % | | |
|
| |
|
| |
|
| | $ | 3.1 |
|
Eliminations | (4 | ) | | (6 | ) | | 2 |
| | 33.3 | % | | |
|
| |
|
| |
|
| | $ | — |
|
Total net sales and revenue | $ | 149,184 |
| | $ | 135,725 |
| | $ | 13,459 |
| | 9.9 | % | | | $ | 9.1 |
| | $ | 0.9 |
| | $ | 2.9 |
| | $ | 0.7 |
|
Automotive Cost of Sales
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
| 2017 | | 2016 | | | % | | | Volume | | Mix | | Cost | | Other |
|
| | | | | (Dollars in billions) |
GMNA | $ | 92,765 |
| | $ | 99,690 |
| | $ | 6,925 |
| | 6.9 | % | | | $ | 8.7 |
| | $ | (2.7 | ) | | $ | 1.2 |
| | $ | (0.3 | ) |
GMI | 21,449 |
| | 20,426 |
| | (1,023 | ) | | (5.0 | )% | | | $ | (0.1 | ) | | $ | (0.5 | ) | | $ | (0.1 | ) | | $ | (0.3 | ) |
Corporate | 818 |
| | 387 |
| | (431 | ) | | n.m. |
| | |
|
| | $ | — |
| | $ | (0.6 | ) | | $ | 0.2 |
|
Eliminations | (163 | ) | | (4 | ) | | 159 |
| | n.m. |
| | |
|
| |
|
| | $ | 0.2 |
| | $ | — |
|
Total automotive cost of sales | $ | 114,869 |
| | $ | 120,499 |
| | $ | 5,630 |
| | 4.7 | % | | | $ | 8.6 |
| | $ | (3.1 | ) | | $ | 0.6 |
| | $ | (0.4 | ) |
________
n.m. = not meaningful
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
| 2016 | | 2015 | | | % | | | Volume | | Mix | | Cost | | Other |
| | | | | | (Dollars in billions) |
GMNA | $ | 99,690 |
| | $ | 88,880 |
| | $ | (10,810 | ) | | (12.2 | )% | | | $ | (7.6 | ) | | $ | (1.9 | ) | | $ | (1.7 | ) | | $ | 0.4 |
|
GMI | 20,426 |
| | 23,694 |
| | 3,268 |
| | 13.8 | % | | | $ | 1.4 |
| | $ | (0.6 | ) | | $ | 0.9 |
| | $ | 1.6 |
|
Corporate | 387 |
| | 426 |
| | 39 |
| | 9.2 | % | | |
|
| |
|
| | $ | (0.1 | ) | | $ | 0.1 |
|
Eliminations | (4 | ) | | (5 | ) | | (1 | ) | | (20.0 | )% | | |
|
| |
|
| | $ | — |
| |
|
|
Total automotive cost of sales | $ | 120,499 |
| | $ | 112,995 |
| | $ | (7,504 | ) | | (6.6 | )% | | | $ | (6.2 | ) | | $ | (2.6 | ) | | $ | (0.9 | ) | | $ | 2.2 |
|
The most significant element of our Automotive and other cost of sales is material cost, which makes up approximately two-thirds of the total amount. The remaining portion includes labor costs, depreciation and amortization, engineering, freight and product warranty and recall campaigns.
Factors whichthat most significantly influence a region's profitability are industry volume, market share, and the relative mix of vehicles (cars, trucks, crossovers)(trucks, crossovers, cars) sold. Variable profit is a key indicator of product profitability. Variable profit is defined as revenue less material cost, freight, the variable component of manufacturing expense and warranty and recall-related costs. Vehicles with higher selling prices generally have higher variable profit. Refer to the regional sections of this MD&A for additional information on volume and mix.
In the year ended December 31, 20172020, favorable Cost was primarily due primarily to: (1) charges of $1.7 billion primarily related to accelerated depreciation and supplier-related charges resulting from transformation activities in 2019; (2) favorable cost of $1.5 billion primarily due to the impact of COVID-19, inclusive of the suspension of production and austerity measures as well as cost savings associated with transformation activities and savings related to the wind-down of Holden sales, design and engineering operations and sale of our vehicle and powertrain manufacturing facilities in Thailand; and (3) decreased warranty costs of $1.4 billion; (2) decreased employee related costs of $0.8 billion; (3) decreased material and freight costs of $0.7$0.3 billion related to carryover vehicles;parts and accessories sales; partially offset by (4) decreased restructuring costsa benefit of $1.4 billion related to UAW cash severance incentive programthe retrospective recoveries of $0.2 billionindirect taxes in 2016 that did not recurBrazil in 2017; partially offset by2019; (5) increased material and freight costs of $1.4$0.9 billion; (6) charges of $0.7 billion
GENERAL MOTORS COMPANY AND SUBSIDIARIES
primarily related to vehicles launched within the last twelve months incorporating significant exterior and/or interior changes (Majors); (6) increased engineering costs of $0.7 billion;dealer restructuring charges, property and intangible asset impairments, inventory provisions and employee separation charges in Australia, New Zealand, Thailand and India; and (7) chargesincreased costs of $0.4 billion relatedprimarily due to restructuring actions in Indiathe Takata Corporation (Takata) recall of $1.1 billion partially offset by decreased other campaign and South Africa.warranty-related costs. In the year ended December 31, 2017 unfavorable2020 favorable Other was due primarily to the foreign currency effect of $0.4 billion due toresulting from the strengtheningweakening of the Brazilian Real and other currencies against the U.S. Dollar.
Automotive and Other Selling, General and Administrative Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Year Ended 2020 vs. 2019 Change | | |
| | |
| 2020 | | 2019 | | 2018 | | Favorable/ (Unfavorable) | | % | | | | |
Automotive and other selling, general and administrative expense | $ | 7,038 | | | $ | 8,491 | | | $ | 9,650 | | | $ | 1,453 | | | 17.1 | % | | | | |
In the year ended December 31, 2016 unfavorable Cost was2020, Automotive and other selling, general and administrative expense decreased primarily due primarily to: (1) increasedto decreased advertising and other costs of $2.3$1.4 billion primarily manufacturing, engineering, depreciation and amortization and warranty which arerelated to the impact of COVID-19, inclusive of launch costs; partially offset by (2) decreased materialausterity measures and freight costs of $2.3 billion related to carryover vehicles, partially offset by increased materialcost savings associated with transformation activities.
Interest Income and freight costs of $1.3 billion related to Majors; and (3) impairments of $0.4 billion related to Thailand and Venezuela in 2015. Other Non-operating Income, net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Year Ended 2020 vs. 2019 Change |
| |
| 2020 | | 2019 | | 2018 | | Favorable/ (Unfavorable) | | % |
Interest income and other non-operating income, net | $ | 1,885 | | | $ | 1,469 | | | $ | 2,596 | | | $ | 416 | | | 28.3 | % |
In the year ended December 31, 2016 favorable Other was due primarily to the foreign currency effect of $2.0 billion due primarily to the BsF devaluation in 2015 and the weakening of the Argentine Peso, Canadian Dollar2020, Interest income and other currencies against the U.S. Dollar; and costs relatednon-operating income, net increased primarily due to our exit in Russiaincreased non-service pension income of $0.2 billion in 2015.
Automotive Selling, General and AdministrativeIncome Tax Expense
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Year Ended 2020 vs. 2019 Change |
| |
| 2020 | | 2019 | | 2018 | | Favorable/ (Unfavorable) | | % |
Income tax expense | $ | 1,774 | | | $ | 769 | | | $ | 474 | | | $ | (1,005) | | | n.m. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Year Ended 2017 vs. 2016 Change | | Year Ended 2016 vs. 2015 Change |
| | |
| 2017 |
| 2016 |
| 2015 |
| Favorable/ (Unfavorable) |
| % |
| Favorable/ (Unfavorable) |
| % |
Automotive selling, general and administrative expense | $ | 9,575 |
|
| $ | 10,354 |
|
| $ | 11,888 |
|
| $ | 779 |
|
| 7.5 | % |
| $ | 1,534 |
|
| 12.9 | % |
________
n.m. = not meaningful
In the year ended December 31, 2017 Automotive selling, general and administrative expense decreased due primarily to decreased advertising costs of $0.4 billion and a decrease in net charges of $0.2 billion for legal related matters related to the ignition switch recall.
In the year ended December 31, 2016 Automotive selling, general and administrative expense decreased due primarily to a net decrease in charges of $1.5 billion for matters related to the ignition switch recall and favorable net foreign currency effect of $0.2 billion due primarily to the weakening of various currencies against the U.S. Dollar.
Income Tax Expense (Benefit)
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Year Ended 2017 vs. 2016 Change | | Year Ended 2016 vs. 2015 Change |
| | |
| 2017 | | 2016 | | 2015 | | Favorable/ (Unfavorable) | | % | | Favorable/ (Unfavorable) | | % |
Income tax expense (benefit) | $ | 11,533 |
|
| $ | 2,739 |
|
| $ | (1,219 | ) |
| $ | (8,794 | ) |
| n.m. |
| $ | (3,958 | ) |
| n.m. |
________
n.m. = not meaningful
In the year ended December 31, 20172020, Income tax expense increased primarily due primarily to the $7.3 billion tax expense related to U.S. tax reform legislation and the establishment of a $2.3 billionchanges in valuation allowance, related to the sale of Opel/Vauxhall Business, partially offset by tax benefits related to tax settlements and foreign dividends.
In the year ended December 31, 2016 Income tax expense increased due primarily to the absence of the 2015 income tax benefit from the release of European valuation allowances of $3.9 billion and an increase in income tax expense of $0.6 billion due primarily to an increase in pre-tax income; partially offset by $0.6 billion inincome, and the absence of U.S. tax benefits related tofrom foreign currency losses.activity.
For the year ended December 31, 20172020 our ETR-adjusted was 21.1%, and we18.4%. We expect theour adjusted effective tax rate to be similarapproximately 24% for the year ending December 31, 2018.2021.
Refer to Note 1817 to our consolidated financial statements for additional information related to Income tax expense (benefit) including information on U.S. tax reform legislation.expense.
GM North America
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
| 2020 | | 2019 | | | % | | | Volume | | Mix | | Price | | Cost | | Other |
| | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 96,733 | | | $ | 106,366 | | | $ | (9,633) | | | (9.1) | % | | | $ | (15.1) | | | $ | 2.7 | | | $ | 3.3 | | | | | $ | (0.5) | |
EBIT-adjusted | $ | 9,071 | | | $ | 8,204 | | | $ | 867 | | | 10.6 | % | | | $ | (4.1) | | | $ | 0.5 | | | $ | 3.3 | | | $ | 1.3 | | | $ | (0.1) | |
EBIT-adjusted margin | 9.4 | % | | 7.7 | % | | 1.7 | % | | | | | | | | | | | | | |
| (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | 2,707 | | | 3,214 | | | (507) | | | (15.8) | % | | | | | | | | | | | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Discontinued Operations
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Year Ended 2017 vs. 2016 Change | | Year Ended 2016 vs. 2015 Change |
| | |
| 2017 | | 2016 | | 2015 | | Favorable/ (Unfavorable) | | % | | Favorable/ (Unfavorable) | | % |
Income (loss) from discontinued operations, net of tax | $ | (4,212 | ) |
| $ | (1 | ) |
| $ | 25 |
|
| $ | (4,211 | ) |
| n.m. |
| $ | (26 | ) |
| n.m. |
________
n.m. = not meaningful
GMNA Total Net Sales and Revenue In the year ended December 31, 2017 Income (loss) from discontinued operations, net of tax, decreased due primarily to a disposal loss of $3.9 billion, net of tax, primarily related to deferred tax assets that transferred to PSA Group, previously deferred pension losses and payment of the de-risking premium to PSA Group for its assumption of certain underfunded pension liabilities and the loss as a result of the sale of the Fincos.
GM North America
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| Favorable/ (Unfavorable) |
|
| | | Variance Due To |
| 2017 |
| 2016 |
|
| % | | | Volume | | Mix | | Price | | Cost | | Other |
|
|
|
|
| | | (Dollars in billions) |
Total net sales and revenue | $ | 111,345 |
|
| $ | 119,113 |
|
| $ | (7,768 | ) |
| (6.5 | )% | | | $ | (12.2 | ) | | $ | 3.5 |
| | $ | 0.6 |
| |
|
| | $ | 0.3 |
|
EBIT-adjusted | $ | 11,889 |
|
| $ | 12,388 |
|
| $ | (499 | ) |
| (4.0 | )% | | | $ | (3.5 | ) | | $ | 0.9 |
| | $ | 0.6 |
| | $ | 1.8 |
| | $ | (0.3 | ) |
EBIT-adjusted margin | 10.7 | % |
| 10.4 | % |
| 0.3 | % |
|
|
| | | | | | | | | | | |
| (Vehicles in thousands) |
|
|
| | | | | | | | | | | |
Wholesale vehicle sales | 3,511 |
|
| 3,958 |
|
| (447 | ) |
| (11.3 | )% | | | | | | | | | | | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| Favorable/ (Unfavorable) |
|
| | | Variance Due To |
| 2016 |
| 2015 |
|
| % | | | Volume | | Mix | | Price | | Cost | | Other |
|
|
|
|
| | | (Dollars in billions) |
Total net sales and revenue | $ | 119,113 |
|
| $ | 106,744 |
|
| $ | 12,369 |
|
| 11.6 | % | | | $ | 10.8 |
| | $ | 0.7 |
| | $ | 1.7 |
| |
|
| | $ | (0.8 | ) |
EBIT-adjusted | $ | 12,388 |
|
| $ | 11,354 |
|
| $ | 1,034 |
|
| 9.1 | % | | | $ | 3.2 |
| | $ | (1.2 | ) | | $ | 1.7 |
| | $ | (2.2 | ) | | $ | (0.4 | ) |
EBIT-adjusted margin | 10.4 | % |
| 10.6 | % |
| (0.2 | )% |
|
|
| | | | | | | | | | | |
| (Vehicles in thousands) |
|
|
| | | | | | | | | | | |
Wholesale vehicle sales | 3,958 |
|
| 3,558 |
|
| 400 |
|
| 11.2 | % | | | | | | | | | | | |
GMNA Total Net Sales and Revenue In the year ended December 31, 20172020, Total net sales and revenue decreased primarily due primarily to: (1) decreased net wholesale volumes associated withacross most vehicle lines as a decrease in Chevrolet passenger car sales and a decrease in off-lease rental car sales;result of suspending production due to the COVID-19 pandemic, partially offset by (2) favorable mixlost production volumes associated with a decreasethe UAW strike in 2019; and (2) unfavorable Other primarily due to decreased sales of Chevrolet passenger carsparts and decreased volumes of off-lease rental car sales; (3) favorable pricing for Majors of $1.4 billion, partially offset by unfavorable pricing for carryover vehicles of $0.8 billion; and (4) favorable Otheraccessories due primarily to the foreign currency effect resulting from the strengthening of the Canadian Dollar against the U.S. Dollar.
In the year ended December 31, 2016 Total net salesCOVID-19 pandemic and revenue increased due primarily to: (1) increased net wholesale volumes reflecting our strategic decision to reduce daily rental activity, strong retail demand for the Chevrolet Malibu and Spark, full-size trucks and SUVs and the Buick Envision; (2) favorable pricing for Majors of $1.8 billion; and (3) favorable mix associated with full-size trucks and SUVs and a reduction in rental car activities, partially offset by the Chevrolet Malibu and Spark; partially offset by (4) unfavorable Other due primarily to the foreign currency effect resulting from the weakening of the Mexican Peso and Canadian Dollar against the U.S. Dollar.Dollar; partially offset by (3) favorable price primarily due to full-size SUVs, pickup trucks and crossover vehicles; and (4) favorable mix associated with decreased sales of passenger cars and crossover vehicles, improved mix associated with our new full-size pickup trucks, partially offset by decreased sales of full-size SUVs.
GMNA EBIT-Adjusted The most significant factors whichthat influence profitability are industry volume and market share. While not as significant as industry volume and market share, another factor affecting profitability is the relative mix of vehicles sold. Trucks, crossovers and cars sold currently have a variable profit of approximately 180%160%, 55%60% and 15%30% of our GMNA portfolio on a weighted-average basis.
In the year ended December 31, 20172020, EBIT-adjusted decreasedincreased primarily due primarily to: (1) decreased net wholesale volumes;favorable price; (2) favorable Cost due to savings in advertising, manufacturing, engineering and (2) unfavorable Other due primarilyother administrative and selling of $2.1 billion, inclusive of the suspension of production and austerity measures in response to the foreign currency effect resulting from the weakening of the Mexican Peso against the U.S. Dollar; partially offset by (3) favorable Cost including decreased warranty costs of $1.4 billion, decreased material and freight costs related to carryover vehicles of $0.7 billion, decreased other employee related costs of $0.7 billion, decreased advertising costs of $0.3 billion and decreased restructuring charges of $0.2 billion related to the 2016 UAW cash severance incentive program,COVID-19 pandemic as well as transformation activities; partially offset by increased material costs for Majorsand freight cost of $1.3$0.7 billion, and increased engineering costs of $0.3 billion; (4) favorable mix; and (5) favorable pricing.
In$0.4 billion primarily due to the year ended December 31, 2016 EBIT-adjusted increased due primarily to: (1) increased net wholesale volumes; and (2) favorable pricing;Takata recall of $1.1 billion partially offset by decreased other campaigns and warranty-related costs; and (3) unfavorable Cost including increased material costs for Majors of $1.1 billion, restructuring charges of $0.2 billion related to the UAW cash severance incentive program and increased other costs of $2.8 billion primarily engineering, depreciation and amortization, manufacturing, warranty and marketing which are inclusive of launch costs,favorable mix; partially offset by favorable material and freight costs related to carryover vehicles of $2.0 billion; (4) unfavorable mix associated with the Chevrolet Malibu, Volt and Spark, partially offset by full-size trucks and SUVs and a reduction in rental car activities; and (5) unfavorable Other due primarily to the foreign currency effect resulting from the weakening of the Mexican Peso and Canadian Dollar against the U.S. Dollar.decreased net wholesale volumes.
GM International
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
| 2020 | | 2019 | | | % | | | Volume | | Mix | | Price | | Cost | | Other |
| | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 11,586 | | | $ | 16,111 | | | $ | (4,525) | | | (28.1) | % | | | $ | (4.4) | | | $ | 1.2 | | | $ | 0.5 | | | | | $ | (1.8) | |
EBIT (loss)-adjusted | $ | (528) | | | $ | (202) | | | $ | (326) | | | n.m. | | | $ | (0.5) | | | $ | 0.3 | | | $ | 0.6 | | | $ | 0.2 | | | $ | (0.9) | |
EBIT (loss)-adjusted margin | (4.6) | % | | (1.3) | % | | (3.3) | % | | | | | | | | | | | | | |
Equity income — Automotive China | $ | 512 | | | $ | 1,132 | | | $ | (620) | | | (54.8) | % | | | | | | | | | | | |
EBIT (loss)-adjusted — excluding Equity income | $ | (1,040) | | | $ | (1,334) | | | $ | 294 | | | 22.0 | % | | | | | | | | | | | |
| (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | 663 | | | 995 | | | (332) | | | (33.4) | % | | | | | | | | | | | |
n.m. = not meaningful
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| Favorable/ (Unfavorable) |
|
| | | Variance Due To |
| 2017 |
| 2016 |
|
| % | | | Volume | | Mix | | Price | | Cost | | Other |
|
|
|
|
| | | (Dollars in billions) |
Total net sales and revenue | $ | 21,920 |
|
| $ | 20,943 |
|
| $ | 977 |
|
| 4.7 | % | | | $ | 0.2 |
|
| $ | 0.2 |
|
| $ | 0.6 |
|
|
|
| $ | — |
|
EBIT-adjusted | $ | 1,300 |
|
| $ | 767 |
|
| $ | 533 |
|
| 69.5 | % | | | $ | — |
|
| $ | (0.3 | ) |
| $ | 0.6 |
|
| $ | 0.3 |
|
| $ | (0.2 | ) |
EBIT-adjusted margin | 5.9 | % |
| 3.7 | % |
| 2.2 | % |
|
|
| | | | | | | | | | | |
Equity income — Automotive China | $ | 1,976 |
|
| $ | 1,973 |
|
| $ | 3 |
|
| 0.2 | % | | | | | | | | | | | |
EBIT (loss)-adjusted — excluding Equity income | $ | (676 | ) |
| $ | (1,206 | ) |
| $ | 530 |
|
| 43.9 | % | | | | | | | | | | | |
| (Vehicles in thousands) |
|
|
| | | | | | | | | | | |
Wholesale vehicle sales | 1,267 |
|
| 1,255 |
|
| 12 |
|
| 1.0 | % | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | Favorable/ (Unfavorable) | | | | | Variance Due To |
| 2016 | | 2015 | | | % | | | Volume | | Mix | | Price | | Cost | | Other |
| | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 20,943 |
| | $ | 22,970 |
| | $ | (2,027 | ) | | (8.8 | )% | | | $ | (1.7 | ) |
| $ | 0.2 |
|
| $ | 1.2 |
|
|
|
| $ | (1.7 | ) |
EBIT-adjusted | $ | 767 |
| | $ | 665 |
| | $ | 102 |
| | 15.3 | % | | | $ | (0.3 | ) |
| $ | (0.5 | ) |
| $ | 1.1 |
|
| $ | 0.5 |
|
| $ | (0.7 | ) |
EBIT-adjusted margin | 3.7 | % | | 2.9 | % | | 0.8 | % | | | | | | | | | | | | | |
Equity income — Automotive China | $ | 1,973 |
| | $ | 2,057 |
| | $ | (84 | ) | | (4.1 | )% | | | | | | | | | | | |
EBIT (loss)-adjusted —excluding Equity income | $ | (1,206 | ) | | $ | (1,392 | ) | | $ | 186 |
| | 13.4 | % | | | | | | | | | | | |
| (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | 1,255 |
| | 1,372 |
| | (117 | ) | | (8.5 | )% | | | | | | | | | | | |
The vehicle sales of our Automotive China JVs are not recorded in Total net sales and revenue. The results of our joint ventures are recorded in Equity income, which is included in EBIT-adjustedEBIT (loss)-adjusted above.
GMI Total Net Sales and Revenue In the year ended December 31, 2017 Total net sales and revenue increased due primarily to: (1) favorable pricing related to carryover vehicles in Argentina and Brazil and in Egypt to mitigate the impact of the weakening Egyptian Pound against the U.S. Dollar; (2) favorable mix driven by the increased sales of Chevrolet Cruze in Brazil and Argentina; and (3) increased wholesale volumes associated with the Chevrolet Onix in Brazil and Argentina, partially offset by decreased wholesale volumes across multiple product lines in Asia/Pacific, the Middle East and Africa; (4) flat Other due primarily to the foreign currency effect resulting from the strengthening of the Brazilian Real and Korean Won against the U.S. Dollar, offset by the depreciation of the Argentinian Peso and Egyptian Pound against the U.S. Dollar and decreased parts and accessories sales in the Middle East.
In the year ended December 31, 20162020, Total net sales and revenue decreased primarily due primarily to: (1) decreased wholesale volumes across multiple product linesprimarily due to lower industry volumes due to the COVID-19 pandemic primarily in Egypt, South Africa, the Middle East, BrazilAmerica and Venezuela, partially offset by increased saleslower volumes in Asia/Pacific inclusive of the Chevrolet Sparkwind-down of our vehicle sales operations in Australia, New Zealand and Malibu in Korea and the Middle East; andThailand; (2) unfavorable Other of $1.7 billionprimarily due primarily to the foreign currency effect resulting from the weakening of all currenciesthe Brazilian Real and Argentine Peso against the U.S. Dollar and decreased components, parts and accessories sales; partially offset by (3) favorable mix primarily in Brazil; and (4) favorable pricing across South America,multiple vehicle lines in Argentina and Brazil.
GMI EBIT (loss)-Adjusted In the Egyptian Poundyear ended December 31, 2020, EBIT (loss)-adjusted increased primarily due to: (1) unfavorable volume; (2) unfavorable Other primarily due to decreased equity income and South African Randthe foreign currency effect resulting from the weakening of the Brazilian Real and Argentine Peso against the U.S. Dollar; partially offset by (3) favorable pricing related to carryover vehicles duepricing; (4) favorable mix primarily to high inflation in Argentina.
GMI EBIT-Adjusted In the year ended December 31, 2017 EBIT-adjusted increased due primarily to: (1) favorable pricing;Brazil and (2)Asia/Pacific; and (5) favorable Cost primarily due to decreased employeeadvertising and engineering expenses, inclusive of savings related coststo the wind-down of Holden sales, design and selling, generalengineering operations and administrative expenses across the region;sale of our vehicle and powertrain manufacturing facilities in Thailand, partially offset by (3) unfavorable mix driven by decreased high-margin sales in the Middle East.increased material cost.
In the year ended December 31, 2016 EBIT-adjusted increased due primarily to: (1) favorable pricing; and (2) favorable Cost due to lower engineering expenses and material and freight performance related to carryover vehicles; partially offset by (3) unfavorable mix due primarily to the lack of vehicle sales in Venezuela and decreased sales of full-size trucks and SUVs in the Middle East as a result of a weaker economy due to low oil prices; and (4) unfavorable Other due primarily to the foreign currency effect resulting from the weakening of all currencies across South America, the Egyptian Pound and South African Rand against the U.S. Dollar.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We view the Chinese market as important to our global growth strategy and are employing a multi-brand strategy led by our Buick, Chevrolet and Cadillac brands.strategy. In the coming years we plan to leverage our global architectures to increase the number of product offerings under the Buick, Chevrolet and Cadillac brands in China and continue to grow our business under the local Baojun and Wuling brands, with Baojun seizing the growth opportunities in less developed cities and markets.brands. We operate in the Chinese market through a number of joint ventures and maintaining good relationsstrong relationships with our joint venture partners which are affiliated with the Chinese government, is an important part of our China growth strategy.
The following tables summarizetable summarizes certain key operational and financial data for the Automotive China JVs (vehicles in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Wholesale vehicle sales including vehicles exported to markets outside of China | 3,029 | | | 3,244 | | | 4,030 | |
Total net sales and revenue | $ | 38,736 | | | $ | 39,123 | | | $ | 50,316 | |
Net income | $ | 1,239 | | | $ | 2,258 | | | $ | 3,992 | |
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Cash and cash equivalents | $ | 8,980 | | | $ | 6,257 | |
Debt | $ | 313 | | | $ | 109 | |
Cruise
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Wholesale vehicles including vehicles exported to markets outside of China | 4,140 |
| | 4,013 |
| | 3,794 |
|
Total net sales and revenue | $ | 50,065 |
| | $ | 47,150 |
| | $ | 44,959 |
|
Net income | $ | 3,984 |
| | $ | 4,117 |
| | $ | 4,290 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change | | |
| 2020 | | 2019 | | 2018 | | Favorable/ (Unfavorable) | | % | | | | |
Total net sales and revenue(a) | $ | 103 | | | $ | 100 | | | $ | — | | | $ | 3 | | | 3.0 | % | | | | |
EBIT (loss)-adjusted | $ | (887) | | | $ | (1,004) | | | $ | (728) | | | $ | 117 | | | 11.6 | % | | | | |
|
| | | | | | | |
| December 31, 2017 | | December 31, 2016 |
Cash and cash equivalents | $ | 9,202 |
| | $ | 8,197 |
|
Debt | $ | 381 |
| | $ | 246 |
|
(a) Reclassified to Interest income and other non-operating income, net in our consolidated income statement in each of the years ended December 31, 2020 and 2019.
GM Financial
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2017 vs. 2016 Change | | 2016 vs. 2015 Change |
| 2017 |
| 2016 |
| 2015 | | Amount |
| % |
| Amount |
| % |
Total revenue | $ | 12,151 |
|
| $ | 8,983 |
|
| $ | 5,867 |
| | $ | 3,168 |
|
| 35.3 | % |
| $ | 3,116 |
|
| 53.1 | % |
Provision for loan losses | $ | 757 |
|
| $ | 644 |
|
| $ | 603 |
| | $ | 113 |
|
| 17.5 | % |
| $ | 41 |
|
| 6.8 | % |
Earnings before income taxes-adjusted | $ | 1,196 |
|
| $ | 763 |
|
| $ | 679 |
| | $ | 433 |
|
| 56.7 | % |
| $ | 84 |
|
| 12.4 | % |
| (Dollars in billions) |
Average debt outstanding | $ | 74.9 |
|
| $ | 54.8 |
|
| $ | 36.2 |
| | $ | 20.1 |
|
| 36.7 | % |
| $ | 18.6 |
|
| 51.4 | % |
Effective rate of interest paid | 3.4 | % |
| 3.6 | % |
| 4.0 | % | | (0.2 | )% |
|
|
|
| (0.4 | )% |
|
|
|
GM Financial Revenue Cruise EBIT (Loss)-Adjusted In the year ended December 31, 2017 Total revenue increased due2020, EBIT (loss)-adjusted decreased primarily to increased leased vehicle income of $2.7 billion due to a larger lease portfolio and increased finance charge incomereduction in developmental costs as we progress towards the commercialization of $0.4 billion due to growtha network of on-demand autonomous vehicles in the retail and commercial finance receivables portfolios.U.S., partially offset by an increase in administrative expense.
GM Financial
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change | | |
| 2020 | | 2019 | | 2018 | | Amount | | % | | | | |
Total revenue | $ | 13,831 | | | $ | 14,554 | | | $ | 14,016 | | | $ | (723) | | | (5.0) | % | | | | |
Provision for loan losses | $ | 881 | | | $ | 726 | | | $ | 642 | | | $ | 155 | | | 21.3 | % | | | | |
EBT-adjusted | $ | 2,702 | | | $ | 2,104 | | | $ | 1,893 | | | $ | 598 | | | 28.4 | % | | | | |
Average debt outstanding (dollars in billions) | $ | 91.4 | | | $ | 91.2 | | | $ | 85.1 | | | $ | 0.2 | | | 0.2 | % | | | | |
Effective rate of interest paid | 3.3 | % | | 4.0 | % | | 3.8 | % | | (0.7) | % | | | | | | |
GM Financial Revenue In the year ended December 31, 20162020, Total revenue increaseddecreased primarily due primarily to increaseddecreased leased vehicle income of $3.1$0.5 billion primarily due to a larger lease portfolio.decrease in the size of the leased vehicle portfolio and decreased investment income of $0.1 billion resulting from a decline in benchmark interest rates.
GM Financial Earnings Before Income Taxes-Adjusted EBT-Adjusted In the year ended December 31, 2017 Earnings before income taxes-adjusted2020, EBT-adjusted increased primarily due primarily to: (1) increased net leased vehicle income of $0.8 billion due primarily to a larger lease portfolio; and (2) increased finance charge income; partially offset by (3) increaseddecreased interest expense of $0.6 billion due to an increasea lower effective rate of interest on debt resulting from a decline in average debt outstanding.
In the year ended December 31, 2016 Earnings before income taxes-adjusted increased due primarily to: (1) increasedbenchmark interest rates; (2) decreased leased vehicle expenses net of decreased leased vehicle income of $0.8$0.3 billion primarily due primarily to increased leased vehicle termination gains, due to the outperformance of used vehicle prices compared to residual value estimates and a larger leasedecrease in the size of the leased vehicle portfolio; partially offset by (2)(3) increased interest expenseprovision for loan losses of $0.5$0.2 billion primarily due to an increase in average debt outstanding; and (3) increased operating expensesexpected charge-offs as a result of $0.2 billion.the forecasted economic impact of the COVID-19 pandemic, inclusive of new CECL standard impacts.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Liquidity and Capital Resources We believe thatAs described in the “Overview” section of this MD&A, the COVID-19 pandemic has had a material impact on our current levelfinancial results and it may have a material impact on future periods, including our cash flows from operating activities and liquidity. The extent of cashthe impact of COVID-19 on our liquidity will depend upon, among other things, the duration and cash equivalents, marketable securitiesseverity of the outbreak or subsequent outbreaks, related government responses, such as required physical distancing or restrictions on business operations and availabilitytravel, the pace of recovery of economic activity and the impact to consumers, the effectiveness of available vaccines and any potential supply disruptions, all of which are uncertain and difficult to predict. Refer to Part I, Item 1A. Risk Factors for a full discussion of the risks associated with the COVID-19 pandemic.
During 2020, to preserve financial flexibility in light of the uncertainty in global markets resulting from the COVID-19 pandemic, we borrowed $15.9 billion under our revolving credit facilities, will beextended a portion of our revolving credit facilities for an additional year, issued $4.0 billion in senior unsecured notes and entered into a new unsecured 364-day, $2.0 billion revolving credit facility. We repaid all amounts drawn under the revolving credit facilities as of December 31, 2020. See the "Automotive Liquidity" section of this MD&A for additional information on these liquidity actions.
Despite the uncertainty resulting from the COVID-19 pandemic, we believe our current levels of cash, cash equivalents, and marketable debt securities, available borrowing capacity under our revolving credit facilities and other liquidity actions currently available to us are sufficient to meet our liquidity needs. We expect to have substantial cash requirements going forward which we plan to fund through total available liquidity and cash flows generated from operations and future debt issuances.requirements. We also maintain access to the capital markets and may issue debt or equity securities, from time to time, which may provide an additional source of liquidity. We have substantial cash requirements going forward, which we plan to fund through our total available liquidity, cash flows from operating activities and additional liquidity measures, if determined to be necessary.
The following summarizes aggregated information about our material short and long-term cash requirements from our known contractual and other obligations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| 2021 | | 2022-2023 | | 2024-2025 | | 2026 and after | | Total |
Automotive debt | $ | 1,199 | | | $ | 2,619 | | | $ | 2,618 | | | 11,260 | | | 17,696 | |
Automotive Financing debt | 35,742 | | | 34,579 | | | 14,417 | | | 7,277 | | | 92,015 | |
| | | | | | | | | |
Automotive interest payments(a) | 947 | | | 1,807 | | | 1,532 | | | 8,439 | | | 12,725 | |
Automotive Financing interest payments(b) | 2,072 | | | 2,329 | | | 955 | | | 443 | | | 5,799 | |
| | | | | | | | | |
Operating lease obligations | 266 | | | 436 | | | 312 | | | 498 | | | 1,512 | |
| | | | | | | | | |
Material | 2,496 | | | 1,593 | | | 71 | | | 18 | | | 4,178 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
__________
(a)Amounts include automotive interest payments based on contractual terms and current interest rates on our debt and finance lease obligations. Automotive interest payments based on variable interest rates were determined using the interest rate in effect at December 31, 2020.
(b)GM Financial interest payments were determined using the interest rate in effect at December 31, 2020 for floating rate debt and the contractual rates for fixed rate debt. GM Financial interest payments on floating rate tranches of the securitization notes payable were converted to a fixed rate based on the floating rate plus any expected hedge payments.
Our known current material uses of cash include, among other possible demands: (1) capital expenditures of approximately $9.0 billion to $10.0 billion in 2021 in addition to payments for engineering and product development activities; (2) payments associated with previously announced vehicle recalls, the settlements of the multi-district litigation and any other recall-related contingencies; and (3) payments to service debt and other long-term obligations, including discretionary and mandatory contributions to our pension plans. Our material future uses of cash, which may vary from time to time based on market conditions and other factors, are focused on the three objectives:objectives of our capital allocation program: (1) reinvest ingrow our business;business at an average target ROIC-adjusted rate of 20% or greater; (2) maintain a strong investment-grade balance sheet;sheet, including a target average automotive cash balance of $18 billion; and (3) after the first two objectives are met, return available cash to shareholders. Our known future material uses of cash include, among other possible demands: (1)senior management evaluates our capital expenditures of approximately $8.5 billion annually as well as payments for engineeringallocation program on an ongoing basis and product
GENERAL MOTORS COMPANY AND SUBSIDIARIES
development activities; (2) payments associated with previously announced vehicle recalls,recommends any modifications to the settlements of the multidistrict litigation and any other recall-related contingencies; (3) paymentsprogram to service debt and other long-term obligations, including discretionary and mandatory contributions to our pension plans; (4) dividend payments on our common stock that are declared by our Board of Directors; and (5) payments to purchase shares of our common stock authorized by our Board of Directors.Directors, not less than once annually.
Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. Risk Factors, some of which are outside of our control.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We continue to monitor and evaluate opportunities to strengthen our competitive position over the long-termlong term while maintaining a strong investment-grade balance sheet. These actions may include opportunistic payments to reduce our long-term obligations, as well as the possibility of acquisitions, dispositions, investments with joint venture partners and strategic alliances that we believe would generate significant advantages and substantially strengthen our business. These actions may negatively impact our liquidity in the short term.
Our senior management evaluates our capital allocation program on an ongoing basis and recommends any modifications to the program to our Board of Directors, not less than once annually. Management reaffirmed and our Board of Directors approved the capital allocation program, which includes reinvesting in our business at an average target ROIC-adjusted rate of 20% or greater, maintaining a strong investment-grade balance sheet, including a target cash balance of $18 billion, and returning available cash to shareholders.
As part of our capital allocation program,In January 2017, we announced in January 2016 that our Board of Directors had authorized a program to purchase up to $4 billion of our common stock before the end of 2017, which was completed in the three months ended September 30, 2017. We also announced in January 2017 that our Board of Directors had authorized the purchase of up to an additional $5$5.0 billion of our common stock with no expiration date, subsequent to completing the remaining portionas part of the previously announced programs. We completed $1.5 billion of the $5 billion program in the three months ended December 31, 2017. From inception of the program in 2015 through January 30, 2018 we had purchased an aggregate of 299 million shares of our outstanding common stock under our common stock repurchase program. We have completed $1.7 billion of the $5.0 billion program for $10.5 billion. In the year endedthrough December 31, 2017,2020.
Cash flows occur amongst our Automotive, Cruise and GM Financial operations that are eliminated when we returned totalconsolidate our cash flows. Such eliminations include, among other things, collections by Automotive on wholesale accounts receivables financed by dealers through GM Financial, payments between Automotive and GM Financial for accounts receivables transferred by Automotive to shareholdersGM Financial, loans to Automotive from GM Financial, dividends issued by GM Financial to Automotive and Automotive cash injections in Cruise. The presentation of $6.7 billion, consistingAutomotive liquidity, Cruise liquidity and GM Financial liquidity presented below includes the impact of dividends paid on our common stock and purchases of our common stock.cash transactions amongst the sectors that are ultimately eliminated in consolidation.
In August 2017 we issued $3.0 billion in aggregate principal amount of senior unsecured notes and used the net proceeds to repay the $3.0 billion drawn on our three-year unsecured revolving credit facility to fund the payments to PSA Group, or one or more pension funding vehicles, for the assumed net underfunded pension liabilities in connection with the sale of the Opel/Vauxhall Business. Refer to Note 14 to our consolidated financial statements for additional information on the senior unsecured notes.
Automotive Liquidity Total available liquidity includes cash, cash equivalents, marketable debt securities and funds available under credit facilities. The amount of available liquidity is subject to intra-month and seasonal fluctuations and includes balances held by various business units and subsidiaries worldwide that are needed to fund their operations.
We manage our liquidity primarily at our treasury centers as well as at certain of our significant consolidated overseas subsidiaries. Approximately Over 90% of our cash and marketable debt securities were managed within North America and at our regional treasury centers at December 31, 2017.2020. We have used and will continue to use other methods including intercompany loans to utilize these funds across our global operations as needed.
Our cash equivalents and marketable debt securities balances are primarily denominated in U.S. Dollars and include investments in U.S. government and agency obligations, foreign government securities, time deposits, corporate debt securities and mortgage and asset-backed securities. Our investment guidelines, which we may change from time to time, prescribe certain minimum credit worthiness thresholds and limit our exposures to any particular sector, asset class, issuance or security type. The majority of our current investments in debt securities are with A/A2 or better rated issuers.
We use credit facilities as a mechanism to provide additional flexibility in managing our global liquidity. TheAt December 31, 2019, the total size of our credit facilities was $14.5$17.5 billion, at December 31, 2017 and 2016, which consisted principally of our two primarythree revolving credit facilities. We didIn May 2020, as an additional source of available liquidity, we entered into a fourth facility, increasing the size of our credit facilities to $18.5 billion. These facilities consist of a three-year, $4.0 billion facility that includes a letter of credit sub-facility of $1.1 billion, a five-year, $10.5 billion facility, a three-year, $2.0 billion transformation facility and a 364-day, $2.0 billion revolving credit facility entered into in May 2020. Total borrowing capacity under our automotive credit facilities does not include a 364-day, $2.0 billion facility designated for exclusive use by GM Financial.
In April 2020, we renewed our 364-day, $2.0 billion facility designated for exclusive use by GM Financial for an additional 364-day term and extended $3.6 billion of the three-year, $4.0 billion facility for an additional year expiring in April 2022. The remaining portion will expire in April 2021, unless extended. As part of the extension of the three-year, $4.0 billion facility, we agreed not to execute any share repurchases while we have any outstanding borrowings under the revolving credit facilities, except for the three-year, $2.0 billion transformation facility. In addition, we are restricted from paying dividends on our common shares if outstanding borrowings under the revolving credit facilities exceed $5.0 billion, with the exception of the three-year, $2.0 billion transformation facility.
In 2020, we borrowed $3.4 billion against our primarythree-year, $4.0 billion facility, $2.0 billion against our three-year, $2.0 billion transformation facility and $10.5 billion against our five-year, $10.5 billion facility. We repaid all amounts drawn under the revolving credit facilities butas of December 31, 2020. We had letters of credit outstanding under our sub-facility of $0.4$0.3 billion and $0.2 billion at December 31, 20172020 and 2016.2019.
If available capacity permits, GM Financial hadhas access to our revolving credit facilities, except for the three-year, $2.0 billion transformation facility and the new 364-day $2.0 billion facility. GM Financial did not have borrowings outstanding against our revolving credit facilities at December 31, 20172020 and 2016 but did not borrow against them.2019. Refer to Note 1413 to our consolidated financial statements for additional information on credit facilities. At December 31, 2017 and 2016 weWe had intercompany loans from GM Financial of $0.4 billion and $0.3$0.5 billion at
GENERAL MOTORS COMPANY AND SUBSIDIARIES
December 31, 2020 and 2019, which primarily consisted primarily of commercial loans to dealers we consolidate, and we had no intercompany loans to GM Financial. Refer to Note 5 of our consolidated financial statements for additional information.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Assenior unsecured notes with a meansweighted average interest rate of 6.11% and maturity dates ranging from 2023 to access2027. The notes are governed by a sixth supplemental indenture and the strong liquidity available insame base indenture that governs our China JVs, from time to time,existing notes, which contains terms and covenants customary for these types of securities, including a limitation on the amount of certain secured debt we may borrowincur. The net proceeds from our joint ventures tothe issuance of these senior unsecured notes provide additional liquidityfinancial flexibility and will be used for general corporate purposes. In August 2020, we repaid $0.5 billion of our floating rate senior unsecured debt upon maturity.
Several of our loan facilities, including our revolving credit facilities, require compliance with certain financial and operational covenants as well as regular reporting to supportlenders. We have reviewed our operationscovenants in effect as of December 31, 2020 and capital investment. In the three months ending March 31, 2018,determined we are in compliance and expect to borrow approximately $1.3remain in compliance in the future.
GM Financial's Board of Directors declared and paid dividends of $0.8 billion and $0.4 billion on its common stock in 2020 and 2019. Future dividends from SAIC General Motors Corp., Ltd. (SGM) pursuant toGM Financial will depend on a short-term unsecured note payable.number of factors including business and economic conditions, its financial condition, earnings, liquidity requirements and leverage ratio.
The following table summarizes our automotive available liquidity (dollars in billions):
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Cash and cash equivalents | $ | 11.2 |
|
| $ | 9.8 |
|
Marketable securities | 8.3 |
|
| 11.8 |
|
Available liquidity(a) | 19.6 |
|
| 21.6 |
|
Available under credit facilities(b) | 14.1 |
|
| 14.2 |
|
Total automotive available liquidity(a) | $ | 33.6 |
|
| $ | 35.8 |
|
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Automotive cash and cash equivalents | $ | 14.2 | | | $ | 13.4 | |
Marketable debt securities | 8.1 | | | 3.9 | |
Automotive cash, cash equivalents and marketable debt securities | 22.3 | | | 17.3 | |
Cruise cash and cash equivalents(a) | 0.8 | | | 2.3 | |
Cruise marketable debt securities(a) | 0.9 | | | 0.3 | |
Available liquidity | 24.0 | | | 19.9 | |
Available under credit facilities | 18.2 | | | 17.3 | |
Total available liquidity | $ | 42.2 | | | $ | 37.2 | |
__________
| |
(a) | Amounts do not add due to rounding. |
| |
(b) | Excludes outstanding letters of credit of $0.2 billion at December 31, 2016 under our primary credit facilities which were transferred to PSA Group at closing. |
(a)Amounts are designated exclusively for the use of Cruise. Refer to Note 20 to our consolidated financial statements for further details.
The following table summarizes the changes in our automotiveAutomotive available liquidity (dollars(excluding Cruise, dollars in billions):
|
| | | |
| Year Ended December 31, 2017 |
Operating cash flow | $ | 13.9 |
|
Capital expenditures | (8.4 | ) |
Dividends paid and payments to purchase common stock | (6.7 | ) |
Net cash used in investing activities – discontinued operations(a) | (3.6 | ) |
Issuance of senior unsecured notes | 3.0 |
|
Other non-operating | (0.4 | ) |
Total change in automotive available liquidity | $ | (2.2 | ) |
__________
| | | | | |
| Year Ended December 31, 2020 |
Operating cash flow | $ | 7.5 | |
Capital expenditures | (5.3) | |
Dividends paid and payments to purchase common stock | (0.6) | |
Issuance of senior unsecured notes | 4.0 | |
Repayment of senior unsecured notes | (0.5) | |
| |
(a)Other non-operating(a) | Consists primarily of payments to PSA Group, or one or more pension funding vehicles, of $3.4 billion for the assumed net underfunded pension liabilities(0.1) | |
Increase in connection with the sale of the Opel/Vauxhall Business, which includes pension funding payments for active employees and the de-risking premium payment of $455 million, partially offset by proceeds.available credit facilities | 0.9 | |
Total change in automotive available liquidity | $ | 5.9 | |
__________
(a)Amount includes $0.5 billion of net payments on other debt including finance leases and several other insignificant items, partially offset by $0.6 billion of proceeds from the sale of our remaining shares in Lyft.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Automotive Cash Flow (Dollars in Billions)billions)
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change |
| 2020 | | 2019 | | 2018 | |
Operating Activities
| | | | | | | |
Income from continuing operations | $ | 5.0 | | | $ | 5.8 | | | $ | 7.1 | | | $ | (0.8) | |
Depreciation, amortization and impairment charges | 5.5 | | | 6.7 | | | 6.1 | | | (1.2) | |
Pension and OPEB activities | (1.6) | | | (1.5) | | | (3.4) | | | (0.1) | |
Working capital | (1.7) | | | (2.2) | | | 0.7 | | | 0.5 | |
Accrued and other liabilities and income taxes | (1.4) | | | (1.5) | | | 1.9 | | | 0.1 | |
Other | 1.7 | | | 0.1 | | | (0.7) | | | 1.6 | |
Net automotive cash provided by operating activities | $ | 7.5 | | | $ | 7.4 | | | $ | 11.7 | | | $ | 0.1 | |
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2017 vs. 2016 Change |
| 2016 vs. 2015 Change |
| 2017 |
| 2016 |
| 2015 | |
|
Operating Activities
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Income (loss) from continuing operations | $ | (0.8 | ) |
| $ | 8.6 |
|
| $ | 9.0 |
| | $ | (9.4 | ) |
| $ | (0.4 | ) |
Depreciation, amortization and impairments charges | 5.7 |
|
| 5.1 |
|
| 5.2 |
| | 0.6 |
|
| (0.1 | ) |
Pension and OPEB activities | (2.6 | ) |
| (4.2 | ) |
| (1.5 | ) | | 1.6 |
|
| (2.7 | ) |
Working capital | 1.8 |
|
| 2.2 |
|
| 0.3 |
| | (0.4 | ) |
| 1.9 |
|
Equipment on operating leases | (0.3 | ) |
| 0.8 |
|
| 0.5 |
| | (1.1 | ) |
| 0.3 |
|
Accrued and other liabilities | (2.3 | ) |
| 1.0 |
|
| (1.0 | ) | | (3.3 | ) |
| 2.0 |
|
Income taxes | 10.9 |
| | 2.1 |
|
| (2.0 | ) |
| 8.8 |
|
| 4.1 |
|
GM Financial dividend | 0.6 |
|
| — |
|
| — |
|
| 0.6 |
|
| — |
|
Other | 0.9 |
|
| (1.1 | ) |
| 0.2 |
| | 2.0 |
|
| (1.3 | ) |
Net automotive cash provided by operating activities | $ | 13.9 |
|
| $ | 14.5 |
|
| $ | 10.7 |
| | $ | (0.6 | ) |
| $ | 3.8 |
|
In the year ended December 31, 20172020, the decreaseincrease in Net automotive cash provided by operating activities was primarily due primarily to unfavorable impacts from: to: (1) decreased Income (loss) from continuing operations partially offset bypayments of $1.1 billion in the add back of $7.3 billion
GENERAL MOTORS COMPANY AND SUBSIDIARIES
as a result of U.S. tax reform legislation and the establishment of a $2.3 billion valuation allowanceprior year related to the sale of the Opel/Vauxhall Business;transformation activities; (2) a decrease in Accrued and other liabilities due to increased sales allowance payments;working capital; (3) a decrease in Equipment on operating leases due to an increase in units out to daily rental car companies; and (4) a decrease in Working capital due to lower production volumes, partially offset by accelerated cash receiptshigher dividends received from GM Financial of $0.4 billion; and (4) several other external sources totaling $0.5 billion;insignificant items; partially offset by (5) discretionary contributionsunwind of $2.0sales incentives of $1.8 billion; and (6) lower dividends received from our nonconsolidated affiliates of $0.7 billion.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change | | |
| 2020 | | 2019 | | 2018 | | |
Investing Activities | | | | | | | | | |
Capital expenditures | $ | (5.3) | | | $ | (7.5) | | | $ | (8.7) | | | $ | 2.2 | | | |
Acquisitions and liquidations of marketable securities, net(a) | (3.6) | | | 2.4 | | | 2.3 | | | (6.0) | | | |
GM investment in Cruise | — | | | (0.7) | | | (1.1) | | | 0.7 | | | |
Other | 0.1 | | | 0.2 | | | (0.2) | | | (0.1) | | | |
Net automotive cash used in investing activities | $ | (8.8) | | | $ | (5.6) | | | $ | (7.7) | | | $ | (3.2) | | | |
__________
(a)Amount includes $0.6 billion made toand $0.3 billion of proceeds from the sale of our U.S. hourly pension planshares in Lyft in the year ended December 31, 2016; 2020 and (6) an increase in Other due to several insignificant items.2019.
In the year ended December 31, 20162020, capital expenditures decreased primarily due to the increasedelay of non-critical projects, including certain future product programs, in Netresponse to the COVID-19 pandemic. Cash used in acquisitions and liquidations of marketable securities, net increased due to the increased purchases of marketable securities with proceeds from the issuance of debt in response to the COVID-19 pandemic and increased liquidations of marketable securities for strike-related liquidity needs during 2019.
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change |
| 2020 | | 2019 | | 2018 | |
Financing Activities
| | | | | | | |
| | | | | | | |
Net proceeds (payments) from short-term debt | $ | (0.5) | | | $ | 0.5 | | | $ | (1.4) | | | $ | (1.0) | |
Issuance of senior unsecured notes | 4.0 | | | — | | | 2.1 | | | 4.0 | |
Repayment of senior unsecured notes | (0.5) | | | — | | | — | | | (0.5) | |
Dividends paid and payments to purchase common stock | (0.6) | | | (2.2) | | | (2.3) | | | 1.6 | |
Proceeds from KDB investment in GM Korea | — | | | — | | | 0.7 | | | — | |
Other | (0.3) | | | (0.4) | | | (0.6) | | | 0.1 | |
Net automotive cash provided by (used in) financing activities | $ | 2.1 | | | $ | (2.1) | | | $ | (1.5) | | | $ | 4.2 | |
| | | | | | | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Adjusted Automotive Free Cash Flow We measure adjusted automotive free cash flow as automotive operating cash flow from continuing operations less capital expenditures adjusted for management actions. For the year ended December 31, 2020, net automotive cash provided by operating activities under U.S. GAAP was due$7.5 billion, capital expenditures were $5.3 billion and adjustments for management actions, primarily to: (1) an increase in Income taxes due primarilyrelated to the reversal of valuation allowances in 2015; (2) an increase in Accrued and other liabilities due primarily to an increase in sales incentives of $1.6 billion; (3) an increase in Working capital due primarily to increased accounts payable due to increased production volumes and decreased inventories due to lower repurchased rental car activity; partially offset by (4) a decrease in Pension and OPEB activities due primarily to discretionary contributions of $2.0 billion made to our U.S. hourly pension plan inGMI restructuring, were $0.3 billion. For the year ended December 31, 20162019, net automotive cash provided by operating activities under U.S. GAAP was $7.4 billion, capital expenditures were $7.5 billion and pension income from the refinementadjustments for management actions, primarily related to the discount rate methodology for service and interest cost; and (5) a decrease in Other due primarily to foreign exchange and an increase in deposits.transformation activities, were $1.2 billion.
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2017 vs. 2016 Change |
| 2016 vs. 2015 Change |
| 2017 |
| 2016 |
| 2015 |
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures | $ | (8.4 | ) |
| $ | (8.3 | ) |
| $ | (6.7 | ) |
| $ | (0.1 | ) |
| $ | (1.6 | ) |
Acquisitions and liquidations of marketable securities, net | 3.5 |
|
| (3.7 | ) |
| 0.9 |
|
| 7.2 |
|
| (4.6 | ) |
Investment in Lyft | — |
| | (0.5 | ) | | — |
| | 0.5 |
| | (0.5 | ) |
Acquisition of Cruise | — |
| | (0.3 | ) | | — |
| | 0.3 |
| | (0.3 | ) |
Other | 0.2 |
|
| 0.2 |
|
| — |
|
| — |
|
| 0.2 |
|
Net automotive cash used in investing activities | $ | (4.7 | ) |
| $ | (12.6 | ) |
| $ | (5.8 | ) |
| $ | 7.9 |
|
| $ | (6.8 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2017 vs. 2016 Change | | 2016 vs. 2015 Change |
| 2017 | | 2016 | | 2015 | | |
Financing Activities
|
|
|
|
|
|
|
|
|
|
Issuance of senior unsecured notes | $ | 3.0 |
|
| $ | 2.0 |
|
| $ | — |
|
| $ | 1.0 |
|
| $ | 2.0 |
|
Payments to purchase common stock | (4.5 | ) |
| (2.5 | ) |
| (3.5 | ) |
| (2.0 | ) |
| 1.0 |
|
Dividends paid | (2.2 | ) |
| (2.3 | ) |
| (2.2 | ) |
| 0.1 |
|
| (0.1 | ) |
Other | (0.5 | ) |
| (0.3 | ) |
| (0.1 | ) |
| (0.2 | ) |
| (0.2 | ) |
Net automotive cash used in financing activities | $ | (4.2 | ) |
| $ | (3.1 | ) |
| $ | (5.8 | ) |
| $ | (1.1 | ) |
| $ | 2.7 |
|
Adjusted Automotive Free Cash Flow (Dollars in Billions)
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Net automotive cash provided by operating activities – continuing operations | $ | 13.9 |
|
| $ | 14.5 |
|
| $ | 10.7 |
|
Less: capital expenditures – continuing operations | (8.4 | ) |
| (8.3 | ) |
| (6.7 | ) |
Adjustments | | | | | |
Discretionary U.S. pension plan contributions | — |
|
| 2.0 |
|
| — |
|
U.K. pension plan contribution(a) | 0.2 |
| | — |
| | — |
|
GM Financial dividend(a) | (0.6 | ) | | — |
| | — |
|
Total adjustments | (0.4 | ) | | 2.0 |
| | — |
|
Adjusted automotive free cash flow – continuing operations(b) | 5.2 |
|
| 8.2 |
|
| 4.0 |
|
Net automotive cash used in operating activities – discontinued operations | — |
|
| (0.1 | ) |
| (0.7 | ) |
Less: capital expenditures – discontinued operations | (0.7 | ) |
| (1.1 | ) |
| (1.0 | ) |
Adjusted automotive free cash flow(b) | $ | 4.5 |
|
| $ | 6.9 |
|
| $ | 2.3 |
|
__________
| |
(a) | These cash flows were excluded because they resulted from the sale of the European Business.
|
| |
(b) | Amounts do not add due to rounding. |
Status of Credit Ratings We receive ratings from four independent credit rating agencies: DBRS Limited (DBRS), Fitch Ratings (Fitch), Moody's Investor Service (Moody's) and Standard & Poor's (S&P). All four credit rating agencies currently rate our corporate credit at investment grade. The following table summarizes our credit ratings at January 30, 2018:
|
| | | | | | | | | | | | | | | | | | | | | | |
| Corporate | | Revolving Credit Facilities | | Senior Unsecured | | Outlook |
DBRS Limited | BBB | | BBB | | N/A | | StableNegative |
Fitch | BBBBBB- | | BBBBBB- | | BBBBBB- | | Stable |
Moody's | Investment Grade | | Baa2 | | Baa3 | | StableNegative |
S&P | BBB | | BBB | | BBB | | StableNegative |
Rating actions taken
Cruise Liquidity
The changes in our Cruise available liquidity in the year ended December 31, 2020 were primarily driven by eachoperating cash flow. In January 2021, Cruise Holdings issued Class G Preferred Shares in exchange for $2.2 billion from Microsoft and other investors, including $1.0 billion from General Motors Holdings LLC. Refer to Note 26 to our consolidated financial statements for additional information. When Cruise's autonomous vehicles are ready for commercial deployment, Softbank Vision Fund (AIV M2), L.P. (The Vision Fund) is obligated to purchase additional convertible preferred shares (Cruise Preferred Shares) for $1.35 billion.
Cruise Cash Flow (Dollars in billions)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change | | |
| 2020 | | 2019 | | 2018 | | |
Net cash used in operating activities | $ | (0.8) | | | $ | (0.8) | | | $ | (0.6) | | | $ | — | | | |
Net cash used in investing activities | $ | (0.7) | | | $ | (0.3) | | | $ | (0.1) | | | $ | (0.4) | | | |
Net cash provided by financing activities | $ | — | | | $ | 1.1 | | | $ | 3.0 | | | $ | (1.1) | | | |
In the year ended December 31, 2020, Net cash provided by financing activities decreased primarily due to a reduction in the issuance of the credit rating agencies from January 1, 2017 through January 30, 2018 were as follows: (1) Moody’s upgraded our revolving credit facilities rating to Baa2 from Baa3, and revised their outlook to Stable from Positive in January 2017. Also in January 2017 our senior unsecured bonds were upgraded to Baa3 from Ba1 and remain notched below our revolving credit facilities rating; (2) S&P upgraded our corporate rating, revolving credit facilities rating and senior unsecured rating to BBB from BBB- and revised their outlook to Stable from Positive in January 2017; and (3) Fitch upgraded our corporate rating, revolving credit facilities rating and senior unsecured rating to BBB from BBB– and revised their outlook to Stable from Positive in June 2017.preferred shares.
Automotive Financing – GM Financial Liquidity GM Financial's primary sources of cash are finance charge income, leasing income and proceeds from the sale of terminated leased vehicles, servicing fees, net distributions from secured debtcredit facilities, including securitizations, secured and unsecured borrowings and collections and recoveries on finance receivables. GM Financial's primary uses of cash are purchases of retail finance receivables and leased vehicles, the funding of commercial finance receivables, repayment or repurchases of secured and unsecured debt, funding credit enhancement requirements in connection with securitizations and secured debtcredit facilities, interest costs, operating expenses and interest costs. GM Financial continues to monitor and evaluate opportunities to optimize its liquidity position and the mix of its debt between secured and unsecured debt. In September 2017 GM Financial issued $1.0 billion of Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series A, $0.01 par value, with a liquidation preference of $1,000 per share.dividend payments. The following table summarizes GM Financial's available liquidity (dollars in billions):
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Cash and cash equivalents | $ | 5.1 | | | $ | 3.3 | |
Borrowing capacity on unpledged eligible assets | 19.0 | | | 17.5 | |
Borrowing capacity on committed unsecured lines of credit | 0.5 | | | 0.3 | |
Borrowing capacity on revolving credit facility, exclusive to GM Financial | 2.0 | | | 2.0 | |
Total GM Financial available liquidity | $ | 26.6 | | | $ | 23.1 | |
38
|
| | | | | | | |
| December 31, 2017 | | December 31, 2016 |
Cash and cash equivalents | $ | 4.3 |
| | $ | 2.8 |
|
Borrowing capacity on unpledged eligible assets | 12.5 |
| | 8.3 |
|
Borrowing capacity on committed unsecured lines of credit | 0.1 |
| | 0.1 |
|
Available liquidity | $ | 16.9 |
| | $ | 11.2 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
In the year ended December 31, 20172020, available liquidity increased primarily due primarily to an increase in cash and additional netcash equivalents and available borrowing capacity on new and renewed secured credit facilities,unpledged eligible assets, resulting from the issuance of securitizations,securitization transactions, unsecured debt and preferred stock. GM Financial structures liquidity to support at least six months of GM Financial's expected net cash outflows, including new originations, without access to new debt financing transactions or other capital markets activity.
GM Financial has the abilityaccess to borrow up to $1.0$16.5 billion againstof our three-year, $4.0 billion revolving credit facility and upfacilities with exclusive access to $3.0the 364-day, $2.0 billion against our five-year, $10.5 billion revolving credit facility. Refer to the "Automotive Liquidity" section of this MD&A for additional details. We have a support agreement with GM Financial which, among other things, establishes commitments of funding from us to GM Financial. This agreement also provides that we will continue to own all of GM Financial’s outstanding voting shares so long as any unsecured debt securities remain outstanding at GM Financial. In addition, we are required to use our commercially reasonable efforts to ensure GM Financial remains a subsidiary borrower under our corporate revolving credit facilities.
Credit Facilities In the normal course of business, in addition to using its available cash, GM Financial utilizes borrowings under its credit facilities, which may be secured or unsecured, and GM Financial repays these borrowings as appropriate under its cash management strategy. At December 31, 20172020, secured, committed unsecured and uncommitted unsecured credit facilities totaled $26.0$26.2 billion, $0.1$0.5 billion and $2.4$1.5 billion with advances outstanding of $4.7$3.7 billion, an insignificant amount and $2.4$1.5 billion.
GM Financial Cash Flow (Dollars in Billions)billions)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, | | 2020 vs. 2019 Change | | |
| 2020 | | 2019 | | 2018 | | |
Net cash provided by operating activities | $ | 8.0 | | | $ | 8.1 | | | $ | 7.4 | | | $ | (0.1) | | | |
Net cash used in investing activities | $ | (9.3) | | | $ | (5.0) | | | $ | (17.5) | | | $ | (4.3) | | | |
Net cash provided by (used in) financing activities | $ | 2.4 | | | $ | (3.5) | | | $ | 11.1 | | | $ | 5.9 | | | |
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2017 vs. 2016 Change |
| 2016 vs. 2015 Change |
| 2017 |
| 2016 |
| 2015 |
|
|
Net cash provided by operating activities | $ | 6.5 |
|
| $ | 4.7 |
|
| $ | 2.7 |
|
| $ | 1.8 |
|
| $ | 2.0 |
|
Net cash used in investing activities | $ | (21.9 | ) |
| $ | (23.7 | ) |
| $ | (21.2 | ) |
| $ | 1.8 |
|
| $ | (2.5 | ) |
Net cash provided by financing activities | $ | 16.1 |
|
| $ | 19.1 |
|
| $ | 17.9 |
|
| $ | (3.0 | ) |
| $ | 1.2 |
|
In the years ended December 31, 2017 and 2016 Net cash provided by operating activities increased due primarily to an increase in net leased vehicle income, partially offset by increased interest expense and operating expenses.
In the year ended December 31, 20172020, Net cash provided by operating activities decreased primarily due to: (1) a decrease in leased vehicle income of $0.5 billion; and (2) a decrease in derivative collateral posting activities of $0.1 billion; partially offset by (3) a decrease in interest paid of $0.5 billion.
In the year ended December 31, 2020, Net cash used in investing activities decreasedincreased primarily due primarily to: (1) increased proceeds from the terminationpurchases of leased vehiclesfinance receivables of $4.1$4.9 billion; and (2) increaseddecreased collections and recoveries on retail finance receivables of $3.0$0.7 billion; andpartially offset by (3) decreased purchases of leased vehicles of $0.3 billion; partially offset by (4) increased net purchases of retail finance receivables of $5.5$1.2 billion.
In the year ended December 31, 2016 Net cash used in investing activities increased due primarily to: (1) increased purchases of leased vehicles of $4.4 billion; and (2) increased purchases and funding of finance receivables of $1.9 billion; partially offset by (3) increased proceeds from the termination of leased vehicles of $1.5 billion; (4) increased collections on finance receivables of $1.4 billion; and (5) prior year impact of cash used for the acquisition of the equity interest in SAIC-GMAC of $0.9 billion.
In the year ended December 31, 2017 Net cash provided by financing activities decreased due primarily to an increase in repayments of $12.4 billion and a special dividend payment to GM of $0.6 billion, partially offset by an increase in borrowings of $9.0 billion and the issuance of preferred stock of $1.0 billion.
In the year ended December 31, 20162020, Net cash provided by financing activities increased primarily due primarily to a netto: (1) an increase in borrowings.borrowings of $22.2 billion; and (2) issuance of preferred stock of $0.5 billion; partially offset by (3) an increase in debt repayments of $16.4 billion; and (4) an increase in dividend payments of $0.4 billion.
Off-Balance Sheet ArrangementsWe do not currently utilize off-balance sheet securitization arrangements. All trade or finance receivables and related obligations subject to securitization programs are recorded on our consolidated balance sheets at December 31, 2017 and 2016. Refer to Note 17 of our consolidated financial statements for detailed information related to guarantees we have provided and for our noncancelable operating lease obligations.
Contractual Obligations and Other Long-Term LiabilitiesWe have minimum commitments under contractual obligations, including purchase obligations. A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including fixed or minimum quantities to be purchased or fixed minimum price provisions and the approximate timing of the transaction. Based on these definitions, the following table includes only those contracts which include fixed or minimum obligations. The majority of our purchases are not included in the table as they are made under purchase orders which are requirements based and accordingly do not specify minimum quantities. The
GENERAL MOTORS COMPANY AND SUBSIDIARIES
following table summarizes aggregated information about our outstanding contractual obligations and other long-term liabilities at December 31, 2017:
|
| | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| 2018 |
| 2019-2020 |
| 2021-2022 |
| 2023 and after |
| Total |
Automotive debt | $ | 2,252 |
|
| $ | 553 |
|
| $ | 54 |
|
| $ | 10,423 |
|
| $ | 13,282 |
|
Automotive Financing debt | 24,502 |
|
| 33,185 |
|
| 13,125 |
|
| 10,477 |
|
| 81,289 |
|
Capital lease obligations | 276 |
|
| 187 |
|
| 68 |
|
| 188 |
|
| 719 |
|
Automotive interest payments(a) | 693 |
|
| 1,209 |
|
| 1,147 |
|
| 8,452 |
|
| 11,501 |
|
Automotive Financing interest payments(b) | 2,373 |
|
| 2,802 |
|
| 1,319 |
|
| 1,144 |
|
| 7,638 |
|
Postretirement benefits(c) | 243 |
|
| 268 |
|
| 3 |
|
| — |
|
| 514 |
|
Operating lease obligations, net | 222 |
|
| 377 |
|
| 231 |
|
| 206 |
|
| 1,036 |
|
Other contractual commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Material | 1,090 |
|
| 522 |
|
| 147 |
|
| 144 |
|
| 1,903 |
|
Marketing | 840 |
|
| 441 |
|
| 54 |
|
| 31 |
|
| 1,366 |
|
Rental car repurchases | 2,113 |
|
| — |
|
| — |
|
| — |
|
| 2,113 |
|
Other | 1,056 |
|
| 612 |
|
| 100 |
|
| 246 |
|
| 2,014 |
|
Total contractual commitments(d) | $ | 35,660 |
|
| $ | 40,156 |
|
| $ | 16,248 |
|
| $ | 31,311 |
|
| $ | 123,375 |
|
| | | | | | | | | |
Non-contractual benefits(e) | $ | 269 |
| | $ | 648 |
| | $ | 858 |
| | $ | 9,696 |
| | $ | 11,471 |
|
__________
| |
(a) | Amounts include automotive interest payments based on contractual terms and current interest rates on our debt and capital lease obligations. Automotive interest payments based on variable interest rates were determined using the interest rate in effect at December 31, 2017. |
| |
(b) | GM Financial interest payments were determined using the interest rate in effect at December 31, 2017 for floating rate debt and the contractual rates for fixed rate debt. GM Financial interest payments on floating rate tranches of the securitization notes payable were converted to a fixed rate based on the floating rate plus any expected hedge payments. |
| |
(c) | Amounts include OPEB payments under the current U.S. contractual labor agreements through 2019 and Canada labor agreements through 2021. These agreements are generally renegotiated in the year of expiration. Amounts do not include pension funding obligations, which are discussed in Note 16 to our consolidated financial statements. |
| |
(d) | Amounts do not include future cash payments for long-term purchase obligations and other accrued expenditures (unless specifically listed in the table above) which were recorded in Accounts payable or Accrued liabilities at December 31, 2017. |
| |
(e) | Amounts include all expected future payments for both current and expected future service at December 31, 2017 for OPEB obligations for salaried and hourly employees extending beyond the current North American union contract agreements, workers' compensation and extended disability benefits. Amounts do not include pension funding obligations, which are discussed inNote 16 to our consolidated financial statements.
|
The table above does not reflect product warranty and related liabilities, certified pre-owned extended warranty and free maintenance of $9.1 billion and unrecognized tax benefits of $1.6 billion due to the uncertainty regarding the future cash outflows potentially associated with these amounts.
Critical Accounting Estimates Accounting estimates are an integral part of theThe consolidated financial statements. These estimates requirestatements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the periods presented. We believe the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. Refer to Note 2 to our consolidated financial statements for our significant accounting policies related to our critical accounting estimates.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Product Warranty and Recall Campaigns The estimates related to product warranties are established using historical information on the nature, frequency and average cost of claims of each vehicle line or each model year of the vehicle line and assumptions about future activity and events. When little or no claims experience exists for a model year or a vehicle line, the estimate is based on comparable models.
We accrue the costs related to product warranty at the time of vehicle sale and we accrue the estimated cost of recall campaigns when they are probable and estimable, which is generally at the time of sale.
The estimates related to recall campaigns accrued at the time of vehicle sale are established by applying a paid loss approach that considers the number of historical recall campaigns and the estimated cost for each recall campaign. These estimates consider the nature, frequency and magnitude of historical recall campaigns, and use key assumptions including the number of historical periods and the weighting of historical data in the reserve studies. Costs associated with recall campaigns not accrued at the time of vehicle sale are estimated based on the estimated cost of repairs and the estimated vehicles to be repaired. Depending on part availability and time to complete repairs we may, from time to time, offer courtesy transportation at no cost to our customers. These estimates are re-evaluated on an ongoing basis and based on the best available information. Revisions are made when necessary based on changes in these factors.
The estimated amount accrued for recall campaigns at the time of vehicle sale is most sensitive to the estimated number of recall events, the number of vehicles per recall event, the assumed number of vehicles that will be brought in by customers for repair (take rate) and the cost per vehicle for each recall event. The estimated cost of a recall campaign that is accrued on an individual basis is most sensitive to our estimated assumed take rate that is primarily developed based on our historical take rate experience. A 10% increase in the estimated take rate for all recall campaigns would increase the estimated cost by approximately $0.4 billion.
Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing estimates, changes in our assumptions could materially affect our results of operations.
Sales Incentives The estimated effect of sales incentives offered to dealers and end customers is recorded as a reduction of Automotive net sales and revenue at the time of sale. There may be numerous types of incentives available at any particular time. Incentive programs are generally specific to brand, model or sales region and are for specified time periods, which may be extended. Significant factors used in estimating the cost of incentives include type of program, forecasted sales volume, product mix, and the rate of customer acceptance of incentive programs, all of which are estimated based on historical experience and assumptions concerning future customer behavior and market conditions. A change in any of these factors affecting the estimate could have a significant effect on recorded sales incentives. A 10% increase in the cost of incentives would increase the sales incentive liability by approximately $0.3 billion. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time, which could affect the revenue previously recognized in Automotive net sales and revenue.
GM Financial Allowance for Loan Losses The GM Financial retail finance receivables portfolio consists of smaller-balance, homogeneous loans that are carried at amortized cost, net of allowance for loan losses. The allowance for loan losses on retail finance receivables reflects net credit losses expected to be incurred over the remaining life of the retail finance receivables, which have a weighted average remaining life of approximately two years. We forecast net credit losses based on relevant information about past events, current conditions and forecast economic performance. We believe that the allowance is adequate to cover expected credit losses on the retail finance receivables; however, because the allowance for loan losses is based on estimates, there can be no assurance that the ultimate charge-off amount will not exceed such estimates or that our credit loss assumptions will not increase.
GM Financial incorporates assumptions about forecast charge-off recovery rates and overall economic performance in its allowance estimate. Used vehicle prices rebounded in the second half of 2020 after decreasing in March and April 2020, and recoveries outperformed the forecast. Therefore, GM Financial increased its recovery rate forecast as of December 31, 2020. Each 5% relative decrease/increase in the forecast recovery rates could increase/decrease our allowance for loan losses by approximately $0.1 billion.
GM Financial updated its forecast of economic performance in March 2020, following the onset of the COVID-19 pandemic, and has continued to monitor and update the forecast through December 31, 2020. At December 31, 2020, the weightings applied to the economic forecast scenarios considered resulted in an allowance for loan losses on the retail finance receivables portfolio of $1.9 billion. Using different possible weightings that GM Financial could apply to the economic forecast scenarios
GENERAL MOTORS COMPANY AND SUBSIDIARIES
result in an allowance for loan losses ranging from $1.8 billion to $2.0 billion. Actual economic data and recovery rates that are lower than those forecasted by GM Financial could result in an increase to the allowance for loan losses.
The GM Financial commercial finance receivables portfolio consists of floorplan financing as well as dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, and to purchase and/or finance dealership real estate. The allowance for loan losses on commercial finance receivables is also based on estimates that, effective January 1, 2020, include historical loss experience for the consolidated portfolio, as well as the forecast for industry vehicle sales. There can be no assurance that the ultimate charge-off amount will not exceed such estimates or that GM Financial's credit loss assumptions will not increase.
Valuation of GM Financial Equipment on Operating Lease Assets and Residuals GM Financial has investments in leased vehicles recorded as operating leases, which relate to vehicle leases to retail customers with lease terms that typically range from two to five years. At lease inception an estimate is made of the expected residual value at the end of the lease term. The expected residual value is based on third-party data that considers various data points and assumptions, including, but not limited to, recent auction values, the expected future volume of returning leased vehicles, used vehicle prices, manufacturer incentive programs and fuel prices. Realization of the residual values is dependent on the future ability to market the vehicles under prevailing market conditions. The customer is obligated to make payments during the lease term for the difference between the purchase price and the contract residual value plus a money factor. However, since the customer is not obligated to purchase the vehicle at the end of the contract, GM Financial is exposed to a risk of loss to the extent the customer returns the vehicle prior to or at the end of the lease term and the value of the vehicle is lower than the residual value estimated at lease inception.
The following table summarizes vehicles included in GM Financial equipment on operating leases, net (vehicles in thousands):
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Crossovers | 964 | | | 972 | |
Trucks | 275 | | | 288 | |
SUVs | 92 | | | 108 | |
Cars | 140 | | | 238 | |
Total | 1,471 | | | 1,606 | |
At December 31, 2020, the estimated residual value of GM Financial's leased vehicles was $29.2 billion. Depreciation reduces the carrying value of each leased asset in GM Financial's operating lease portfolio over time from its original acquisition value to its expected residual value at the end of the lease term.
GM Financial updated the residual value estimates on the operating lease portfolio to reflect the decrease in forecasted used vehicle prices in March 2020, following the onset of the COVID-19 pandemic, and has continued to monitor and update the residual value estimates through December 31, 2020. Used vehicle prices rebounded in the second half of 2020 after decreasing in March and April 2020, and sales proceeds on terminated leased vehicles outperformed the residual value estimates during the year ended December 31, 2020. Accordingly, GM Financial increased the residual value estimates at December 31, 2020, which will result in a prospective decrease in the depreciation rate over the remaining term of the leased vehicle portfolio. If used vehicle prices decrease, GM Financial would increase depreciation expense and/or record an impairment charge on the lease portfolio. If an impairment exists, GM Financial would determine any shortfall in recoverability of the leased vehicle asset groups by year, make and model. Recoverability is calculated as the excess of: (1) the sum of remaining lease payments plus estimated residual value; over (2) leased vehicles, net less deferred revenue. Alternatively, if used vehicle prices outperform GM Financial's latest estimates, it may record gains on sales of off-lease vehicles and/or decreased depreciation expense.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The following table illustrates the effect of a 1% relative change in the estimated residual values at December 31, 2020, which could increase or decrease depreciation expense over the remaining term of the leased vehicle portfolio, holding all other assumptions constant (dollars in millions):
| | | | | | | |
| Impact to Depreciation Expense | | |
2021 | $ | 198 | | | |
2022 | 72 | | | |
2023 | 21 | | | |
2024 and thereafter | 1 | | | |
Total | $ | 292 | | | |
Changes to residual values are rarely simultaneous across all maturities and segments, and also may impact return rates. If a decrease in residual values is concentrated among specific asset groups, the decrease could result in an immediate impairment charge. GM Financial reviewed the leased vehicle portfolio for indicators of impairment and determined that no impairment indicators were present at December 31, 2020 and 2019.
Used vehicle prices increased approximately 3% in 2020 compared to 2019, primarily due to low new vehicle inventory, largely driven by the suspension of manufacturing operations as a result of the COVID-19 pandemic, creating strong demand for used vehicles. In 2021, GM Financial expects used vehicle prices to decline by an amount in the low single digits on a percentage basis compared to 2020 levels as supply and demand dynamics normalize.
Pension and OPEB Plans Our defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected long-term rate of return on plan assets, a discount rate, mortality rates of participants and expectation of mortality improvement. Our pension obligations include Korean statutory pension payments that are valued on a walk away basis. The expected long-term rate of return on U.S. plan assets that is utilized in determining pension expense is derived from periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks using standard deviations and correlations of returns among the asset classes that comprise the plans' asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
In December 20172020, an investment policy study was completed for the U.S. pension plans. As a result of changes to our capital market assumptions, primarily those related to the fixed income asset class, the weighted-average long-term rate of return on assets increaseddecreased from 6.2%5.9% at December 31, 20162019 to 6.6%5.6% at December 31, 2017. The assumption change related to the fixed income asset class is expected to increase the return on assets by $0.3 billion in 2018.2020. The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to the U.S. plans.
Another key assumption in determining net pension and OPEB expense is the assumed discount rate used to discount plan obligations. We estimate the assumed discount rate for U.S. plans using a cash flow matching approach, which uses projected cash flows matched to spot rates along a high quality corporate bond yield curve to determine the weighted-average discount rate for the calculation of the present value of cash flows. We apply the individual annual yield curve rates instead of the assumed discount rate to determine the service cost and interest cost, which more specifically links the cash flows related to service cost and interest cost to bonds maturing in their year of payment.
We have reviewed theThe Society of Actuaries (SOA) issued mortality improvement tables published by the Society of Actuaries in the three months ended December 31, 2017 and determined that our current assumptions are appropriate to measure2020. We incorporated these SOA mortality improvement tables into our December 31, 20172020 measurement of U.S. pension planand OPEB plans' benefit obligations. The change in these assumptions decreased the December 31, 2020 U.S. pension and OPEB plans’ obligations by $0.7 billion.
Significant differences in actual experience or significant changes in assumptions may materially affect the pension obligations. The effects of actual results differing from assumptions and the changing of assumptions are included in unamortized net actuarial gains and losses that are subject to amortization to pension expense over future periods. The unamortized pre-tax actuarial loss on our pension plans was $4.0$8.4 billion and $3.8$6.7 billion at December 31, 20172020 and 2016.2019. The year-over-year change is primarily due to thea decrease in discount rates partially offset by assumption changes and the increase in actual return on assets. At December 31, 2017 $2.4 billionhigher than expected asset returns.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The underfunded status of the U.S. pension plans decreased by $1.4 billionremained unchanged in the year ended December 31, 2017 to $5.82020 at $5.4 billion primarily due primarily to: (1) the unfavorable effect of a decrease in discount rates of $5.6 billion; and (2) service and interest costs of $1.9 billion; partially offset by (3) a favorable effect of actual returns on plan assets of $6.5 billion; (2) other favorable changes including contributions, demographic gains and assumption changes of $0.4 billion; partially offset by (3) an unfavorable effect due to a decrease in the discount rate of $3.2$6.6 billion; and (4) servicechanges in mortality improvement assumptions and interest costdemographic gains of $2.3$0.9 billion.
The following table illustrates the sensitivity to a change in certain assumptions for the pension plans, holding all other assumptions constant:
| | | U.S. Plans(a) | | Non-U.S. Plans(a) | | U.S. Plans(a) | | Non-U.S. Plans(a) |
| Effect on 2018 Pension Expense | | Effect on December 31, 2017 PBO | | Effect on 2018 Pension Expense | | Effect on December 31, 2017 PBO | | Effect on 2021 Pension Expense | | Effect on December 31, 2020 PBO | | Effect on 2021 Pension Expense | | Effect on December 31, 2020 PBO |
25 basis point decrease in discount rate | -$100 | | +$1,780 | | +$17 | | +$688 | 25 basis point decrease in discount rate | -$81 | | +$1,707 | | -$1 | | +$669 |
25 basis point increase in discount rate | +$90 | | -$1,700 | | -$12 | | -$652 | 25 basis point increase in discount rate | +$103 | | -$1,634 | | +$1 | | -$634 |
25 basis point decrease in expected rate of return on assets | +$150 | | N/A | | +$35 | | N/A | 25 basis point decrease in expected rate of return on assets | +$142 | | N/A | | +$32 | | N/A |
25 basis point increase in expected rate of return on assets | -$150 | | N/A | | -$35 | | N/A | 25 basis point increase in expected rate of return on assets | -$142 | | N/A | | -$32 | | N/A |
__________
| |
(a) | The sensitivity does not include the effects of the individual annual yield curve rates applied for the calculation of the service and interest cost. |
(a)The sensitivity does not include the effects of the individual annual yield curve rates applied for the calculation of the service and interest cost.
Refer to Note 1615 to our consolidated financial statements for additional information on pension contributions, investment strategies, assumptions, the change in benefit obligations and related plan assets, pension funding requirements and future net benefit payments. Refer to Note 2 to our consolidated financial statements for a discussion of the inputs used to determine fair value for each significant asset class or category.
Valuation of Deferred Tax Assets The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors. Our accounting for the valuation of deferred tax assets represents our best estimate of future events. Changes in our current estimates due to unanticipated market conditions and governmental legislative actions or events, could have a material effect on our ability to utilize deferred tax assets.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
At December 31, 2017 total deferred tax assets were $30.7 billion and valuation allowances against those deferred tax assets were $6.7 billion. Refer to Note 1817 to our consolidated financial statements for additional information on the composition of these valuation allowances and for information on the impact of U.S. tax reform legislation.allowances.
Valuation of GM Financial Equipment on Operating Leases Assets and Residuals GM Financial has investments in leased vehicles recorded as operating leases, which relate to vehicle leases to retail customers with lease terms which typically range from two to five years. At the beginning of the lease an estimate is made of the expected residual value at the end of the lease term. The expected residual value is based on third-party data which considers inputs including recent auction values, the expected future volume of returning leased vehicles, used car prices, manufacturer incentive programs and fuel prices. The customer is obligated to make payments during the term of the lease for the difference between the purchase price
Forward-Looking Statements This report and the contract residual value plus a money factor. Sinceother reports filed by us with the customer is not obligated to purchase the vehicle at the end of the contract, we are exposed to a risk of loss to the extent the customer returns the vehicle at the end of the lease term and the value of the vehicle is below the expected residual value estimated at the inception of the lease.
The following table summarizes vehicles included in GM Financial equipment on operating leases, net (vehicles in thousands):
|
| | | | | |
| December 31, 2017 |
| December 31, 2016 |
Cars | 450 |
|
| 420 |
|
Trucks | 285 |
|
| 224 |
|
Crossovers | 818 |
|
| 604 |
|
SUVs | 99 |
|
| 75 |
|
Total | 1,652 |
|
| 1,323 |
|
At December 31, 2017 the estimated residual value of our leased assets at the end of the lease term was $30.4 billion. We periodically review the adequacy of the depreciation rates. If we believe that the expected residual values of the leased assets have changed, we revise the depreciation rate to ensure the net investment in the operating leases reflects the revised estimate of expected residual value at the end of the lease term. Such adjustments to the depreciation rate would result in a change in depreciation expense on leased assets which is recorded prospectively on a straight-line basis. The following table illustrates the effect of a 1% change in the estimated residual values at December 31, 2017, which would increase or decrease depreciation expense over the remaining term of our operating lease portfolio, holding all other assumptions constant:
|
| | | |
| Impact to Depreciation Expense |
Cars | $ | 57 |
|
Trucks | 72 |
|
Crossovers | 137 |
|
SUVs | 38 |
|
Total | $ | 304 |
|
We also evaluate the carrying value of the operating leases aggregated by vehicle make, year and model into leased asset groups, check for indicators of impairment and test for impairment to the extent necessary in accordance with applicable accounting standards. A leased asset group is considered impaired if impairment indicators exist and the undiscounted expected future cash flows (including the expected residual value) are lower than the carrying value of the asset group. We believe no impairment indicators existed during 2017, 2016 or 2015.
Product Warranty and Recall Campaigns The estimates related to product warranties are established using historical information on the nature, frequency and average cost of claims of each vehicle line or each model year of the vehicle line and assumptions about future activity and events. When little or no claims experience exists for a model year or a vehicle line, the estimate is based on comparable models.
In GMNA we primarily accrue the costs for recall campaigns at the time of vehicle sale. In the other regions, there is not sufficient historical data to support the application of an actuarial-based estimation technique and the estimated costs are accrued at the time when they are probable and reasonably estimable, which typically occurs once it is determined a specific recall campaign is needed and announced.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The estimates related to recall campaigns accrued at the time of vehicle sale are established by applying a frequency times severity approach that considers the number of recall campaigns, the number of vehicles per recall campaign, the assumed number of vehicles that will be brought in by customers for repair (take rate) and the cost per vehicle for each recall campaign. These estimates consider the nature, frequency and magnitude of historical recall campaigns. Costs associated with recall campaigns not accrued at the time of vehicle sale are estimated based on the estimated cost of repairs and the estimated vehicles to be repaired. Depending on part availability and time to complete repairs we may,SEC from time to time, offer courtesy transportation at no cost to our customers. These estimates are re-evaluated on an ongoing basisas well as statements incorporated by reference herein and based on the best available information. Revisions are made when necessary based on changes in these factors.
The estimated amount accrued for recall campaigns at the time of vehicle sale is most sensitive to the estimated number of recall events, the number of vehicles per recall event, the take rate, and the cost per vehicle for each recall event. The estimated cost of a recall campaign that is accrued on an individual basis is most sensitive to our estimated assumed take rate that is primarily developed based on our historical take rate experience. A 10% increase in the estimated take rate for all recall campaigns would increase the estimated cost by approximately $0.3 billion.
Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing estimates, changes in our assumptions could materially affect our results of operations.
Sales Incentives The estimated effect of sales incentives offered to dealers and end customers is recorded as a reduction of Automotive net sales and revenue at the later of the time of sale or announcement of an incentive program to dealers. There may be numerous types of incentives available at any particular time, including a choice of incentives for a specific model. Incentive programs are generally brand specific, model specific or sales region specific and are for specified time periods, which may be extended. Significant factors used in estimating the cost of incentives include the volume of vehicles that will be affected by the incentive programs offered by product, the product mix, the rate of customer acceptance of any incentive program and the likelihood that an incentive program will be extended, all of which are estimated based on historical experience and assumptions concerning customer behavior and future market conditions. When an incentive program is announced, the number of vehicles in dealer inventory eligible for the incentive program is determined and a reduction of Automotive net sales and revenue is recorded in the period in which the program is announced. If the actual number of affected vehicles differs from this estimate, or if a different mix of incentives is actually paid, the reduction in Automotive net sales and revenue due to incentives could be affected. There are a multitude of inputs affecting the calculation of the estimate for sales incentives and an increase or decrease in any of these variables could have a significant effect on recorded sales incentives. On January 1, 2018, the date of our adoption of Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09), sales incentives began to be recorded at the time of sale rather than at the later of sale or announcement. This change affected our processes for estimating and recording sales incentives. Refer to Note 2 to our consolidated financial statements for additional information on the adoption ASU 2014-09.
Forward-Looking Statements In this 2017 Form 10-K and in reports we subsequently file and have previously filed with the SEC on Forms 10-K and 10-Q and file or furnish on Form 8-K, and in related comments by our management, we usemay include "forward-looking statements" within the meaning of the U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements represent our current judgment about possible future events and are often identified by words like “aim,” “anticipate,” “appears,” “approximately,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “priorities,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or the negative of any of those words or similar expressions to identify forward-looking statements that represent our current judgment about possible future events.expressions. In making these statements, we rely on assumptions and analysis based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we consider appropriate under the circumstances. We believe these judgments are reasonable, but these statements are not guarantees of any future events or financial results, and our actual results may differ materially due to a variety of important factors, both positive and negative.many of which are beyond our control. These factors, which may be revised or supplemented in subsequent reports onwe file with the SEC, Forms 10-Q and 8-K, include, among others, the following: (1) our ability to deliver new products, services and customer experiences in response to new participantsincreased competition and changing consumer preferences in the automotive industry; (2) our ability to timely fund and introduce new and improved vehicle models, including electric vehicles, that are able to attract a sufficient number of consumers; (3) the success of our crossovers, SUVs and full-size pick-uppickup trucks; (4) our ability to reduce the costs associated with the manufacture and sale of electric vehicles; (5) global automobile market sales volume, which can be volatile; (6) our significant business in China which subjects us to unique operational, competitive and regulatory risks; (7) our joint ventures, which we cannot operate solely for our benefit and over which we may have limited control; (8) the international scale and footprint of our operations which exposes us to a variety of political, economic and regulatory risks, including the risk of changes in government leadership and laws (including tax laws), economic tensions between governments and changes in international trade policies, new barriers to entry and changes to or withdrawals from free trade agreements, changes in foreign exchange rates, economic downturns in foreign countries, differing local product preferences and product requirements, compliance with U.S. and foreign countries' export controls and economic sanctions, differing labor
GENERAL MOTORS COMPANY AND SUBSIDIARIES
regulations and difficulties in obtaining financing in foreign countries; (9) any significant disruption at one of our manufacturing facilities could disrupt our production schedule; (10) the ability of our suppliers to deliver parts, systems and components without disruption and at such times to allow us to meet production schedules; (11) prices of raw materials used by us and our suppliers; (12) our highly competitive industry, which is characterized by excess manufacturing capacity and the use of incentives, and the introduction of new and improved vehicle models by our competitors; (5) our ability to deliver a broad portfolio of electric vehicles and drive increased consumer adoption; (6) the unique technological, operational, regulatory and competitive risks related to the timing and commercialization of autonomous vehicles; (7) the ongoing COVID-19 pandemic; (8) global automobile market sales volume, which can be volatile; (9) our significant business in China, which is subject to unique operational, competitive, regulatory and economic risks; (10) our joint ventures, which we cannot operate solely for our benefit and over which we may have limited control; (11) the international scale and footprint of our operations, which exposes us to a variety of unique political, economic,
GENERAL MOTORS COMPANY AND SUBSIDIARIES
competitive and regulatory risks, including the risk of changes in government leadership and laws (including labor, tax and other laws), political instability and economic tensions between governments and changes in international trade policies, new barriers to entry and changes to or withdrawals from free trade agreements, public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 pandemic, changes in foreign exchange rates and interest rates, economic downturns in the countries in which we operate, differing local product preferences and product requirements, changes to and compliance with U.S. and foreign countries' export controls and economic sanctions, differing labor regulations, requirements and union relationships, differing dealer and franchise regulations and relationships, and difficulties in obtaining financing in foreign countries; (12) any significant disruption, including any work stoppages, at any of our manufacturing facilities; (13) the ability of our suppliers to deliver parts, systems and components without disruption and at such times to allow us to meet production schedules; (14) prices of raw materials used by us and our suppliers; (15) our ability to successfully and cost-effectively restructure our operations in the U.S. and various other countries and initiate additional cost reduction actions with minimal disruption; (16) the possibility that competitors may independently develop products and services similar to ours, and there are no guaranteesor that our intellectual property rights wouldare not sufficient to prevent competitors from independently developing or selling those products or services; (14)(17) our ability to manage risks related to security breaches and other disruptions to our vehicles, information technology networkssystems and networked products, including connected vehicles and in-vehicle systems; (15)(18) our ability to comply with increasingly complex, restrictive and punitive regulations relating to our enterprise data practices, including the collection, use, sharing and security of the Personal Identifiable Information of our customers, employees, or suppliers; (19) our ability to comply with extensive laws, regulations and regulationspolicies applicable to our industry,operations and products, including those regardingrelating to fuel economy and emissions; (16)emissions and autonomous vehicles; (20) costs and risks associated with litigation and government investigations; (17) our ability to comply with(21) the terms of the DPA; (18) the costcosts and effect on our reputation of product safety recalls and alleged defects in products and services; (19) our ability to successfully and cost-effectively restructure our operations in various countries with minimal disruption; (20) our ability to realize production efficiencies and to achieve reductions in costs; (21)(22) any additional tax expense or exposure; (23) our continued ability to develop captive financing capability through GM Financial; and (22)(24) any significant increasesincrease in our pension expense or projected pension contributions resulting from changes in the value of plan assets or the discount rate applied to value the pension liabilities or mortality or other assumption changes. Afunding requirements. For a further list and descriptiondiscussion of these risks, uncertainties and other factors can be found in this 2017 Form 10-Krisks and our subsequent filings with the SEC.uncertainties, refer to Part I, Item 1A. Risk Factors.
We caution readers not to place undue reliance on forward-looking statements. WeForward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors, that affect the subject of these statements, except where we are expressly required to do so by law.
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Item 7A.Quantitative and Qualitative Disclosures About Market Risk
The overall financial risk management program is under the responsibility of the Chief Financial Officer with support from the Financial Risk Council, which reviews and, where appropriate, approves strategies to be pursued to mitigate these risks. The Financial Risk Council comprises members of our management and functions under the oversight of the Audit Committee and Finance Committee of the Board of Directors. The Audit Committee and Finance Committee assist and guide the Board of Directors in its oversight of our financial and risk management strategies. A risk management control framework is utilized to monitor the strategies, risks and related hedge positions in accordance with the policies and procedures approved by the Financial Risk Council. Our financial risk management policy is designed to protect against risk arising from extreme adverse market movements on our key exposures.
Automotive The following analyses provide quantitative information regarding exposure to foreign currency exchange rate risk, and interest rate risk and equity price risk. Sensitivity analysis is used to measure the potential loss in the fair value of financial instruments with exposure to market risk. The models used assume instantaneous, parallel shifts in exchange rates and interest rate yield curves. For options and other instruments with nonlinear returns, models appropriate to these types of instruments are utilized to determine the effect of market shifts. There are certain shortcomings inherent in the sensitivity analyses presented, primarily due primarily to the assumption that interest rates change in a parallel fashion and that spot exchange rates change instantaneously. In addition, the analyses are unable to reflect the complex market reactions that normally would arise from the market shifts modeled and do not contemplate the effects of correlations between foreign currency pairs,exposures and offsetting long-short positions in currency pairs or other exposures, such as interest rates, which may significantly reduce the potential loss in value.
Foreign Currency Exchange Rate Risk We have foreign currency exposures related to buying, selling and financing in currencies other than the functional currencies of our operations. At December 31, 20172020, our most significant foreign currency exposures were between the U.S. Dollar/Canadian Dollar, U.S. Dollar/Mexican Peso, Euro/U.S. Dollar, U.S. Dollar/Chinese Yuan, Australian Dollar/U.S. Dollar and U.S. Dollar/Argentinethe Canadian Dollar, Korean Won, Euro, Chinese Yuan, Brazilian Real and Mexican Peso. Derivative instruments such as foreign currency forwards, swaps and options are primarily used primarily to hedge
GENERAL MOTORS COMPANY AND SUBSIDIARIES
exposures with respect to forecasted revenues, costs and commitments denominated in foreign currencies. Such contracts had remaining maturities of up to 12 months at December 31, 2017.2020.
The net fair value liability of financial instruments with exposure to foreign currency risk was $0.8$0.9 billion and $1.4 billion at December 31, 20172020 and 2016.2019. These amounts are calculated utilizing a population of foreign currency exchange derivatives and foreign currency denominated debt and exclude the offsetting effect of foreign currency cash, cash equivalents and other assets. The potential loss in fair value for such financial instruments from a 10% adverse change in all quoted foreign currency exchange rates would have been $0.1 billion and $0.2 billion at December 31, 20172020 and 2016.2019.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We are exposed to foreign currency risk due to the translation and remeasurement of the results of certain international operations into U.S. Dollars as part of the consolidation process. We had foreign currency derivatives in asset positions with notional amounts of $2.8$2.2 billion and $5.3 billion and in liability positions with notional amounts of $1.2 billion and $0.5$5.1 billion at December 31, 20172020 and 2016.2019. The fair value of these derivative financial instruments was insignificant. Fluctuations in foreign currency exchange rates can therefore create volatility in the results of operations and may adversely affect our financial condition.
The following table summarizes the amounts of automotive foreign currency translation and transaction and remeasurement (gains) losses:
| | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 |
Translation losses recorded in Accumulated other comprehensive loss | $ | 387 | | | $ | 32 | |
Transaction and remeasurement (gains) losses recorded in earnings | $ | 209 | | | $ | (77) | |
|
| | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 |
Translation (gains) losses recorded in Accumulated other comprehensive loss | $ | (275 | ) | | $ | 176 |
|
Transaction and remeasurement losses recorded in earnings | $ | 43 |
| | $ | 225 |
|
Interest Rate Risk We are subject to market risk from exposure to changes in interest rates related to certain financial instruments, primarily debt, capitalfinance lease obligations and certain marketable debt securities. We did not have any interest rate swap positions to manage interest rate exposures in our automotive operations at December 31, 20172020 and 2016.2019. The fair value liability of debt and capitalfinance leases was $15.1$21.6 billion and $11.4$15.9 billion at December 31, 20172020 and 2016.2019. The potential increase in fair value resulting from a 10% decrease in quoted interest rates would have been $0.7 billion and $0.5$0.6 billion at December 31, 20172020 and 2016. 2019.
We had marketable debt securities of $8.3$9.0 billion and $11.8$4.2 billion classified as available-for-sale at December 31, 20172020 and 2016.2019. The potential decrease in fair value from a 50 basis point increase in interest rates would have had an insignificant effect at December 31, 20172020 and 2016.2019.
Equity Price Risk We are subject to equity price risk due to market price volatility primarily related to our investment in PSA warrants. The fair value of investments with exposure to equity price risk was $1.2 billion and $1.5 billion at December 31, 2020 and 2019. Our investment in PSA warrants is valued based on a Black-Scholes formula. We estimate that a 10% adverse change in quoted security prices in PSA Group would impact our investment by $0.1 billion at December 31, 2020 and 2019.
Automotive Financing - GM Financial
Interest Rate Risk Fluctuations in market interest rates can affect GM Financial's gross interest rate spread, which is the difference between interest earned on finance receivables and interest paid on debt. GM Financial is exposed to interest rate risks as financial assets and liabilities have different characteristics that may impact financial performance. These differences may include tenor, yield, re-pricing timing, and prepayment expectations. Typically retail finance receivables and leases purchased by GM Financial bearearn fixed interest rates and are funded by variable or fixed rate debt. Commercialcommercial finance receivables originated by GM Financial bearearn variable interest rates and are funded byinterest. GM Financial funds its business with variable or fixed rate debt. The variable rate debt is subject to adjustments to reflect prevailing market interest rates. To help mitigate interest rate risk or mismatched funding, GM Financial may employ hedging strategies to lock in the interest rate spread.hedging.
Fixed interest rate receivables purchased by Quantitative Disclosure GM Financial may be pledged to secure borrowings under its credit facilities. Amounts borrowed under these credit facilities bear interest at variable rates that are subject to frequent adjustments to reflect prevailing market interest rates. To protect the interest rate spread within each credit facility, GM Financial is contractually required to enter into interest rate cap agreements in connection with borrowings under its credit facilities.
In GM Financial's securitization transactions it can transfer fixed rate finance receivables to securitization trusts that, in turn, sell either fixed rate or floating rate securities to investors. Derivative financial instruments, such as interest rate swaps and caps, are used to manage the gross interest rate spread on the floating rate transactions.
Quantitative Disclosure We have historically presented a quantitative measure of our interest rate risk in a tabular disclosure of our interest-sensitive assets and liabilities. With the expansion of our International and North America Asset Liability Committees in 2015 to incorporate more asset-liability management strategies, we now measuremeasures the sensitivity of ourits net interest income to changes in interest rates by using interest rate scenarios that assume a hypothetical, instantaneous parallel shift of one hundred basis points in all interest rates across all maturities, as well as a base case that assumes that rates perform at the current market forward curve. However, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in our analysis. Therefore, the actual impact to economic value of equitynet interest income could be higher or lower than the results detailed in
GENERAL MOTORS COMPANY AND SUBSIDIARIES
the table below. These interest rate scenarios are purely hypothetical and do not represent our view of future interest rate movements.
Under these interest rate scenarios, we areAt December 31, 2020, GM Financial was asset-sensitive, meaning that we expect more assets than liabilities were expected to re-price within the next twelve months. During a period of rising interest rates, the interest earned on our assets willwould increase more than the interest paid on our debt,liabilities, which would initially increase our net interest income. During a period of falling interest rates, we would expect
GENERAL MOTORS COMPANY AND SUBSIDIARIES
our net interest income would be expected to initially decrease. At December 31, 2019, GM Financial was liability-sensitive, meaning that more liabilities than assets were expected to re-price within the next twelve months. During a period of rising interest rates, the interest paid on liabilities would increase more than the interest earned on assets, which would initially decrease net interest income. During a period of falling interest rates, net interest income would be expected to initially increase.
GM Financial's net interest income sensitivity increased in 2020 as compared to 2019 primarily due to an increased proportion of rate sensitive asset exposure relative to rate sensitive liability exposure. GM Financial's hedging strategies approved by its global asset liability committee are used to manage interest rate risk within policy guidelines. The following table presents ourGM Financial's net interest income sensitivity to interest rate movement:
| | | Years Ended December 31, | | Years Ended December 31, |
| 2017 | | 2016 | | 2020 | | 2019 |
One hundred basis points instantaneous increase in interest rates | $ | 19.4 |
| | $ | (43.9 | ) | One hundred basis points instantaneous increase in interest rates | $ | 29.7 | | | $ | (4.6) | |
One hundred basis points instantaneous decrease in interest rates(a) | $ | (19.4 | ) | | $ | 43.9 |
| One hundred basis points instantaneous decrease in interest rates(a) | $ | (29.7) | | | $ | 4.6 | |
__________
| |
(a) | (a) Net interest income sensitivity given a one hundred basis point decrease in interest rates requires an assumption of negative interest rates in markets where existing interest rates are below one percent. |
Additional Model Assumptions The sensitivity analysis presented is ourGM Financial's best estimate of the effect of the hypothetical interest rate scenarios; however, our actual results could differ. OurThe estimates are also based on assumptions including the amortization and prepayment of the finance receivable portfolio, originations of finance receivables and leases, refinancing of maturing debt, replacement of maturing derivatives and exercise of options embedded in debt and derivatives. OurThe prepayment projections are based on historical experience. If interest rates or other factors change, our actual prepayment experience could be different than projected.
Foreign Currency Exchange Rate Risk GM Financial is exposed to foreign currency risk due to the translation and remeasurement of the results of certain international operations into U.S. Dollars as part of the consolidation process. Fluctuations in foreign currency exchange rates can therefore create volatility in the results of operations and may adversely affect GM Financial's financial condition.
GM Financial primarily finances its receivables and leased assets with debt in the same currency. When a different currency is used GM Financial may use foreign currency swaps to convert substantially all of its foreign currency debt obligations to the local currency of the receivables and leaseleased assets to minimize any impact to earnings. As a result, GM Financial believes its market risk exposure relating to changes in currency exchange rates at December 31, 2020 was insignificant.
GM Financial had foreign currency swaps in asset positions with notional amounts of $2.8$7.6 billion and an insignificant amount and in liability positions with notional amounts of an insignificant amount and $0.8$6.2 billion at December 31, 20172020 and 2016.2019. The net fair value of these derivative financial instruments was insignificant.an asset of $0.4 billion and an insignificant amount at December 31, 2020 and 2019.
The following table summarizes GM Financial's foreign currency translation and transaction and remeasurement (gains) losses:
| | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 |
Translation (gains) losses recorded in Accumulated other comprehensive loss | $ | 82 | | | $ | (5) | |
Transaction and remeasurement gains, net recorded in earnings | $ | (6) | | | $ | (8) | |
|
| | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 |
Translation (gains) losses recorded in Accumulated other comprehensive loss | $ | (474 | ) | | $ | 144 |
|
Transaction and remeasurement losses recorded in earnings | $ | 9 |
| | $ | 4 |
|
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholdersShareholders and the Board of Directors of General Motors Company:Company
Opinion on Internal Control overthe Financial ReportingStatements
We have audited the internal control over financial reportingaccompanying consolidated balance sheets of General Motors Company and subsidiaries (the "Company")Company) as of December 31, 2017,2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control –- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(2013 framework) and our report dated February 10, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
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| Product warranty and recall campaigns |
Description of the matter | As discussed in Note 12 to the financial statements, the liabilities for product warranty and recall campaigns amount to $8.2 billion at December 31, 2020. The Company accrues for costs related to product warranty at the time of vehicle sale and accrues the estimated cost of recall campaigns when they are probable and estimable, which is generally at the time of sale. |
| Auditing these liabilities involved a high degree of subjectivity in evaluating management’s estimates, due to the size, uncertainties, and potential volatility related to the estimated liabilities. Management’s estimates consider historical claims experience, including the nature, frequency, and average cost of claims of each vehicle line or each model year of the vehicle line, and the key assumptions of historical data being predictive of future activity and events, in particular, the number of historical periods used and the weighing of historical data in the reserve studies. |
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How we addressed the matter in our audit | We evaluated the design and tested the operating effectiveness of internal controls over the Company’s product warranty and recall campaign processes. We tested internal controls over management’s review of the valuation models and significant assumptions for product warranty and recall including the warranty claims forecasted based on the frequency and average cost per warranty claim for product warranty, and the cost estimates related to recall campaigns. Our audit also included the evaluation of controls that address the completeness and accuracy of the data utilized in the valuation models. |
| Our audit procedures related to product warranty and recall campaigns also included, among others, evaluating the Company’s estimation methodology, the related significant assumptions and underlying data, and performing analytical procedures to corroborate cost per vehicle based on historical claims data. Furthermore, we performed sensitivity analyses to evaluate the significant judgments made by management, including cost estimates to evaluate the impact on reserves from changes in assumptions. We performed analysis over the vehicle lines and model years that had little or no claims experience to ensure the vehicle and model substitutions are comparable. We also involved actuarial specialists to evaluate the methodologies and assumptions, and to test the actuarial calculations used by the Company. |
| Sales incentives |
Description of the matter | Automotive sales and revenue represents the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or providing services, which is net of dealer and customer sales incentives the Company expects to pay. As discussed in Note 2 to the financial statements, provisions for dealer and customer incentives are recorded as a reduction to Automotive net sales and revenue at the time of vehicle sale. The liabilities for dealer and customer allowances, claims and discounts amount to $7.3 billion at December 31, 2020. |
| Auditing the estimate of sales incentives involved a high degree of judgment. Significant factors used by the Company in estimating its liability for retail incentives include type of program, forecasted sales volumes, product mix, and the rate of customer acceptance of incentive programs, all of which are estimated based on historical experience and assumptions concerning future customer behavior and market conditions. The Company’s estimation model reflects the best estimate of the total incentive amount that the Company reasonably expects to pay at the time of sale. The estimated cost of incentives is forward-looking, and could be materially affected by future economic and market conditions. |
How we addressed the matter in our audit | We evaluated the design and tested the operating effectiveness of internal controls over the Company’s sales incentive process, including management’s review of the estimation model, the significant assumptions (e.g., incentive cost per unit, customer take rate, and market conditions), and the data inputs used in the model.
Our audit procedures included, among others, the performance of analytical procedures to develop an independent range of the liability for retail incentives as of the balance sheet date. Our independent range was developed for comparison to the Company’s recorded liability, and is based on historical claims, forecasted spend, and the specific vehicle mix of current dealer stock. In addition, we performed sensitivity analyses over the cost per unit assumption developed by management to evaluate the impact on the liability resulting from a change in the assumption. Lastly, we assessed management’s forecasting process by performing quarterly hindsight analyses to assess the adequacy of prior forecasts. |
| Valuation of GM Financial Equipment on Operating Leases |
Description of the matter | GM Financial has recorded investments in vehicles leased to retail customers under operating leases. As discussed in Note 2 to the financial statements, at the beginning of the lease, management establishes an expected residual value for each vehicle at the end of the lease term. The Company’s estimated residual value of leased vehicles at the end of lease term was $29.2 billion as of December 31, 2020. |
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| Auditing management’s estimate of the residual value of leased vehicles involved a high degree of judgment. Management’s estimate is based, in part, on third-party data which considers inputs including recent auction values and significant assumptions regarding the expected future volume of leased vehicles that will be returned to the Company, used car prices, manufacturer incentive programs and fuel prices. Realization of the residual values is dependent on the future ability to market the vehicles under future prevailing market conditions. |
How we addressed the matter in our audit | We evaluated the design and tested the operating effectiveness of the Company’s controls over the lease residual estimation process, including controls over management’s review of residual value estimates obtained from the Company’s third-party provider and other significant assumptions.
Our procedures also included, among others, independently recalculating depreciation related to equipment on operating leases and performing sensitivity analyses related to significant assumptions. We also performed hindsight analyses to assess the propriety of management’s estimate of residual values, as well as tested the completeness and accuracy of data from underlying systems and data warehouses that are used in the estimation models. |
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/s/ ERNST & YOUNG LLP |
|
We have served as the Company's auditor since 2017. |
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Detroit, Michigan |
February 10, 2021 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of General Motors Company
Opinion on Internal Control over Financial Reporting
We have audited General Motors Company and subsidiaries’ internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, theGeneral Motors Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.the COSO criteria.
We also have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statementsbalance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, cash flows and equity for each of the yearthree years in the period ended December 31, 2017, of2020, and the Companyrelated notes and our report dated February 6, 201810, 2021 expressed an unqualified opinion on those financial statements.thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control overOver Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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/s/ ERNST & YOUNG LLP |
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/s/ DELOITTE & TOUCHE LLP Detroit, Michigan |
Detroit, Michigan |
February 6, 201810, 2021 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of General Motors Company:
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of General Motors Company and subsidiaries (the "Company") as of December 31, 2017 and 2016, the related Consolidated Statements of Income, Comprehensive Income, Cash Flows, and Equity for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity withaccounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 6, 2018 expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
|
|
/s/ DELOITTE & TOUCHE LLP
|
Detroit, Michigan |
February 6, 2018 |
We have served as the Company's auditor since 1918.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Item 8.Financial Statements and Supplementary Data
CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Net sales and revenue | | | | | |
Automotive | $ | 108,673 | | | $ | 122,697 | | | $ | 133,045 | |
GM Financial | 13,812 | | | 14,540 | | | 14,004 | |
Total net sales and revenue (Note 3) | 122,485 | | | 137,237 | | | 147,049 | |
Costs and expenses | | | | | |
Automotive and other cost of sales | 97,539 | | | 110,651 | | | 120,656 | |
GM Financial interest, operating and other expenses | 11,274 | | | 12,614 | | | 12,298 | |
Automotive and other selling, general and administrative expense | 7,038 | | | 8,491 | | | 9,650 | |
| | | | | |
Total costs and expenses | 115,851 | | | 131,756 | | | 142,604 | |
Operating income | 6,634 | | | 5,481 | | | 4,445 | |
Automotive interest expense | 1,098 | | | 782 | | | 655 | |
Interest income and other non-operating income, net (Note 19) | 1,885 | | | 1,469 | | | 2,596 | |
| | | | | |
Equity income (Note 8) | 674 | | | 1,268 | | | 2,163 | |
Income before income taxes | 8,095 | | | 7,436 | | | 8,549 | |
Income tax expense (Note 17) | 1,774 | | | 769 | | | 474 | |
Income from continuing operations | 6,321 | | | 6,667 | | | 8,075 | |
Loss from discontinued operations, net of tax (Note 22) | 0 | | | 0 | | | 70 | |
Net income | 6,321 | | | 6,667 | | | 8,005 | |
Net loss attributable to noncontrolling interests | 106 | | | 65 | | | 9 | |
Net income attributable to stockholders | $ | 6,427 | | | $ | 6,732 | | | $ | 8,014 | |
| | | | | |
Net income attributable to common stockholders | $ | 6,247 | | | $ | 6,581 | | | $ | 7,916 | |
| | | | | |
Earnings per share (Note 21) | | | | | |
Basic earnings per common share – continuing operations | $ | 4.36 | | | $ | 4.62 | | | $ | 5.66 | |
Basic loss per common share – discontinued operations | $ | 0 | | | $ | 0 | | | $ | 0.05 | |
Basic earnings per common share | $ | 4.36 | | | $ | 4.62 | | | $ | 5.61 | |
Weighted-average common shares outstanding – basic | 1,433 | | | 1,424 | | | 1,411 | |
| | | | | |
Diluted earnings per common share – continuing operations | $ | 4.33 | | | $ | 4.57 | | | $ | 5.58 | |
Diluted loss per common share – discontinued operations | $ | 0 | | | $ | 0 | | | $ | 0.05 | |
Diluted earnings per common share | $ | 4.33 | | | $ | 4.57 | | | $ | 5.53 | |
Weighted-average common shares outstanding – diluted | 1,442 | | | 1,439 | | | 1,431 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Net sales and revenue |
|
|
|
|
|
Automotive | $ | 133,449 |
|
| $ | 140,205 |
|
| $ | 129,864 |
|
GM Financial | 12,139 |
|
| 8,979 |
|
| 5,861 |
|
Total net sales and revenue | 145,588 |
|
| 149,184 |
|
| 135,725 |
|
Costs and expenses |
|
|
|
|
|
Automotive cost of sales | 114,869 |
|
| 120,499 |
|
| 112,995 |
|
GM Financial interest, operating and other expenses | 11,128 |
|
| 8,369 |
|
| 5,304 |
|
Automotive selling, general and administrative expense | 9,575 |
|
| 10,354 |
|
| 11,888 |
|
Total costs and expenses | 135,572 |
|
| 139,222 |
|
| 130,187 |
|
Operating income | 10,016 |
|
| 9,962 |
|
| 5,538 |
|
Automotive interest expense | 575 |
|
| 563 |
|
| 423 |
|
Interest income and other non-operating income, net | 290 |
|
| 327 |
|
| 614 |
|
Gain on extinguishment of debt | — |
|
| — |
|
| 449 |
|
Equity income (Note 8) | 2,132 |
|
| 2,282 |
|
| 2,193 |
|
Income before income taxes | 11,863 |
|
| 12,008 |
|
| 8,371 |
|
Income tax expense (benefit) (Note 18) | 11,533 |
|
| 2,739 |
|
| (1,219 | ) |
Income from continuing operations | 330 |
|
| 9,269 |
|
| 9,590 |
|
Income (loss) from discontinued operations, net of tax (Note 3) | (4,212 | ) |
| (1 | ) |
| 25 |
|
Net income (loss) | (3,882 | ) |
| 9,268 |
|
| 9,615 |
|
Net loss attributable to noncontrolling interests | 18 |
|
| 159 |
|
| 72 |
|
Net income (loss) attributable to stockholders | $ | (3,864 | ) |
| $ | 9,427 |
|
| $ | 9,687 |
|
| | | | | |
Net income (loss) attributable to common stockholders | $ | (3,880 | ) | | $ | 9,427 |
| | $ | 9,687 |
|
| | | | | |
Earnings per share (Note 21) | | | | | |
Basic earnings per common share – continuing operations | $ | 0.23 |
|
| $ | 6.12 |
|
| $ | 6.09 |
|
Basic earnings (loss) per common share – discontinued operations | $ | (2.88 | ) |
| $ | — |
|
| $ | 0.02 |
|
Basic earnings (loss) per common share | $ | (2.65 | ) |
| $ | 6.12 |
|
| $ | 6.11 |
|
Weighted-average common shares outstanding – basic | 1,465 |
| | 1,540 |
| | 1,586 |
|
| | | | | |
Diluted earnings per common share – continuing operations | $ | 0.22 |
|
| $ | 6.00 |
|
| $ | 5.89 |
|
Diluted earnings (loss) per common share – discontinued operations | $ | (2.82 | ) |
| $ | — |
|
| $ | 0.02 |
|
Diluted earnings (loss) per common share | $ | (2.60 | ) |
| $ | 6.00 |
|
| $ | 5.91 |
|
Weighted-average common shares outstanding – diluted | 1,492 |
| | 1,570 |
| | 1,640 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Net income | $ | 6,321 | | | $ | 6,667 | | | $ | 8,005 | |
Other comprehensive income, net of tax (Note 20) | | | | | |
Foreign currency translation adjustments and other | (523) | | | (6) | | | (715) | |
| | | | | |
| | | | | |
Defined benefit plans | (1,795) | | | (2,122) | | | (221) | |
| | | | | |
Other comprehensive loss, net of tax | (2,318) | | | (2,128) | | | (936) | |
Comprehensive income | 4,003 | | | 4,539 | | | 7,069 | |
Comprehensive loss attributable to noncontrolling interests | 92 | | | 76 | | | 15 | |
Comprehensive income attributable to stockholders | $ | 4,095 | | | $ | 4,615 | | | $ | 7,084 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Net income (loss) | $ | (3,882 | ) |
| $ | 9,268 |
|
| $ | 9,615 |
|
Other comprehensive income (loss), net of tax (Note 20) |
|
|
|
|
|
Foreign currency translation adjustments and other | 747 |
|
| (384 | ) |
| (955 | ) |
Defined benefit plans | 570 |
|
| (969 | ) |
| 1,011 |
|
Other comprehensive income (loss), net of tax | 1,317 |
|
| (1,353 | ) |
| 56 |
|
Comprehensive income (loss) | (2,565 | ) |
| 7,915 |
|
| 9,671 |
|
Comprehensive loss attributable to noncontrolling interests | 20 |
|
| 218 |
|
| 53 |
|
Comprehensive income (loss) attributable to stockholders | $ | (2,545 | ) |
| $ | 8,133 |
|
| $ | 9,724 |
|
Reference should be made to the notes to consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts) | | | December 31, 2017 | | December 31, 2016 | | December 31, 2020 | | December 31, 2019 |
ASSETS | | | | ASSETS | | | |
Current Assets | | | | Current Assets | |
Cash and cash equivalents | $ | 15,512 |
| | $ | 12,574 |
| Cash and cash equivalents | $ | 19,992 | | | $ | 19,069 | |
Marketable securities (Note 4) | 8,313 |
| | 11,841 |
| |
Accounts and notes receivable (net of allowance of $278 and $212) | 8,164 |
| | 8,700 |
| |
GM Financial receivables, net (Note 5; Note 12 at VIEs) | 20,521 |
| | 16,127 |
| |
Marketable debt securities (Note 4) | | Marketable debt securities (Note 4) | 9,046 | | | 4,174 | |
| Accounts and notes receivable (net of allowance of $224 and $201) | | Accounts and notes receivable (net of allowance of $224 and $201) | 8,035 | | | 6,797 | |
GM Financial receivables, net (Note 5; Note 11 at VIEs) | | GM Financial receivables, net (Note 5; Note 11 at VIEs) | 26,209 | | | 26,601 | |
Inventories (Note 6) | 10,663 |
| | 11,040 |
| Inventories (Note 6) | 10,235 | | | 10,398 | |
Equipment on operating leases, net (Note 7) | 1,106 |
| | 1,110 |
| |
Other current assets (Note 4; Note 12 at VIEs) | 4,465 |
| | 3,633 |
| |
Current assets held for sale (Note 3) | — |
| | 11,178 |
| |
Other current assets (Note 4; Note 11 at VIEs) | | Other current assets (Note 4; Note 11 at VIEs) | 7,407 | | | 7,953 | |
| Total current assets | 68,744 |
| | 76,203 |
| Total current assets | 80,924 | | | 74,992 | |
Non-current Assets | | | | Non-current Assets | |
GM Financial receivables, net (Note 5; Note 12 at VIEs) | 21,208 |
| | 17,001 |
| |
| GM Financial receivables, net (Note 5; Note 11 at VIEs) | | GM Financial receivables, net (Note 5; Note 11 at VIEs) | 31,783 | | | 26,355 | |
Equity in net assets of nonconsolidated affiliates (Note 8) | 9,073 |
| | 8,996 |
| Equity in net assets of nonconsolidated affiliates (Note 8) | 8,406 | | | 8,562 | |
Property, net (Note 9) | 36,253 |
| | 32,603 |
| Property, net (Note 9) | 37,632 | | | 38,750 | |
Goodwill and intangible assets, net (Note 11) | 5,849 |
| | 6,149 |
| |
Equipment on operating leases, net (Note 7; Note 12 at VIEs) | 42,882 |
| | 34,342 |
| |
Deferred income taxes (Note 18) | 23,544 |
| | 33,172 |
| |
Other assets (Note 4; Note 12 at VIEs) | 4,929 |
| | 3,849 |
| |
Non-current assets held for sale (Note 3) | — |
| | 9,375 |
| |
Goodwill and intangible assets, net (Note 10) | | Goodwill and intangible assets, net (Note 10) | 5,230 | | | 5,337 | |
| Equipment on operating leases, net (Note 7; Note 11 at VIEs) | | Equipment on operating leases, net (Note 7; Note 11 at VIEs) | 39,819 | | | 42,055 | |
Deferred income taxes (Note 17) | | Deferred income taxes (Note 17) | 24,136 | | | 24,640 | |
Other assets (Note 4; Note 11 at VIEs) | | Other assets (Note 4; Note 11 at VIEs) | 7,264 | | | 7,346 | |
| Total non-current assets | 143,738 |
| | 145,487 |
| Total non-current assets | 154,270 | | | 153,045 | |
Total Assets | $ | 212,482 |
| | $ | 221,690 |
| Total Assets | $ | 235,194 | | | $ | 228,037 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | | Current Liabilities | |
Accounts payable (principally trade) | $ | 23,929 |
| | $ | 23,333 |
| Accounts payable (principally trade) | $ | 19,928 | | | $ | 21,018 | |
Short-term debt and current portion of long-term debt (Note 14) | | | | |
Short-term debt and current portion of long-term debt (Note 13) | | Short-term debt and current portion of long-term debt (Note 13) | |
Automotive | 2,515 |
| | 1,060 |
| Automotive | 1,276 | | | 1,897 | |
GM Financial (Note 12 at VIEs) | 24,450 |
| | 22,737 |
| |
Accrued liabilities (Note 13) | 25,996 |
| | 25,893 |
| |
Current liabilities held for sale (Note 3) | — |
| | 12,158 |
| |
GM Financial (Note 11 at VIEs) | | GM Financial (Note 11 at VIEs) | 35,637 | | | 35,503 | |
Accrued liabilities (Note 12) | | Accrued liabilities (Note 12) | 23,069 | | | 26,487 | |
| Total current liabilities | 76,890 |
| | 85,181 |
| Total current liabilities | 79,910 | | | 84,905 | |
Non-current Liabilities | | | | Non-current Liabilities | |
Long-term debt (Note 14) | | | | |
Long-term debt (Note 13) | | Long-term debt (Note 13) | |
Automotive | 10,987 |
| | 9,500 |
| Automotive | 16,193 | | | 12,489 | |
GM Financial (Note 12 at VIEs) | 56,267 |
| | 41,826 |
| |
Postretirement benefits other than pensions (Note 16) | 5,998 |
| | 5,803 |
| |
Pensions (Note 16) | 13,746 |
| | 15,264 |
| |
Other liabilities (Note 13) | 12,394 |
| | 12,415 |
| |
Non-current liabilities held for sale (Note 3) | — |
| | 7,626 |
| |
GM Financial (Note 11 at VIEs) | | GM Financial (Note 11 at VIEs) | 56,788 | | | 53,435 | |
Postretirement benefits other than pensions (Note 15) | | Postretirement benefits other than pensions (Note 15) | 6,277 | | | 5,935 | |
Pensions (Note 15) | | Pensions (Note 15) | 12,902 | | | 12,170 | |
Other liabilities (Note 12) | | Other liabilities (Note 12) | 13,447 | | | 13,146 | |
| Total non-current liabilities | 99,392 |
| | 92,434 |
| Total non-current liabilities | 105,607 | | | 97,175 | |
Total Liabilities | 176,282 |
| | 177,615 |
| Total Liabilities | 185,517 | | | 182,080 | |
Commitments and contingencies (Note 17) | | |
|
| |
Commitments and contingencies (Note 16) | | Commitments and contingencies (Note 16) | 0 | | 0 |
Equity (Note 20) | | | | Equity (Note 20) | |
| Common stock, $0.01 par value | 14 |
| | 15 |
| Common stock, $0.01 par value | 14 | | | 14 | |
Additional paid-in capital | 25,371 |
| | 26,983 |
| Additional paid-in capital | 26,542 | | | 26,074 | |
Retained earnings | 17,627 |
| | 26,168 |
| Retained earnings | 31,962 | | | 26,860 | |
Accumulated other comprehensive loss | (8,011 | ) | | (9,330 | ) | Accumulated other comprehensive loss | (13,488) | | | (11,156) | |
Total stockholders’ equity | 35,001 |
| | 43,836 |
| Total stockholders’ equity | 45,030 | | | 41,792 | |
Noncontrolling interests | 1,199 |
| | 239 |
| Noncontrolling interests | 4,647 | | | 4,165 | |
Total Equity | 36,200 |
| | 44,075 |
| Total Equity | 49,677 | | | 45,957 | |
Total Liabilities and Equity | $ | 212,482 |
| | $ | 221,690 |
| Total Liabilities and Equity | $ | 235,194 | | | $ | 228,037 | |
Reference should be made to the notes to consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Cash flows from operating activities | | | | | |
Income from continuing operations | $ | 6,321 | | | $ | 6,667 | | | $ | 8,075 | |
Depreciation and impairment of Equipment on operating leases, net | 7,178 | | | 7,332 | | | 7,604 | |
Depreciation, amortization and impairment charges on Property, net | 5,637 | | | 6,786 | | | 6,065 | |
Foreign currency remeasurement and transaction (gains) losses | 203 | | | (85) | | | 168 | |
Undistributed earnings of nonconsolidated affiliates, net | 524 | | | 585 | | | (141) | |
Pension contributions and OPEB payments | (851) | | | (985) | | | (2,069) | |
Pension and OPEB income, net | (765) | | | (484) | | | (1,280) | |
Provision (benefit) for deferred taxes | 925 | | | (133) | | | (112) | |
Change in other operating assets and liabilities (Note 25) | (399) | | | (3,789) | | | (1,376) | |
Other operating activities | (2,103) | | | (873) | | | (1,678) | |
| | | | | |
| | | | | |
Net cash provided by operating activities | 16,670 | | | 15,021 | | | 15,256 | |
Cash flows from investing activities | | | | | |
Expenditures for property | (5,300) | | | (7,592) | | | (8,761) | |
Available-for-sale marketable securities, acquisitions | (16,204) | | | (4,075) | | | (2,820) | |
| | | | | |
Available-for-sale marketable securities, liquidations | 11,941 | | | 6,265 | | | 5,108 | |
| | | | | |
| | | | | |
Purchases of finance receivables, net | (30,090) | | | (24,538) | | | (25,671) | |
Principal collections and recoveries on finance receivables | 19,726 | | | 22,005 | | | 17,048 | |
Purchases of leased vehicles, net | (15,233) | | | (16,404) | | | (16,736) | |
Proceeds from termination of leased vehicles | 13,399 | | | 13,302 | | | 10,864 | |
Other investing activities | (65) | | | 138 | | | 39 | |
Net cash used in investing activities – continuing operations | (21,826) | | | (10,899) | | | (20,929) | |
Net cash provided by investing activities – discontinued operations (Note 22) | 0 | | | 0 | | | 166 | |
Net cash used in investing activities | (21,826) | | | (10,899) | | | (20,763) | |
Cash flows from financing activities | | | | | |
Net increase (decrease) in short-term debt | 277 | | | (312) | | | 1,186 | |
Proceeds from issuance of debt (original maturities greater than three months) | 78,527 | | | 36,937 | | | 43,801 | |
Payments on debt (original maturities greater than three months) | (72,663) | | | (39,156) | | | (33,323) | |
| | | | | |
Proceeds from issuance of subsidiary preferred and common stock (Note 20) | 492 | | | 457 | | | 2,862 | |
Dividends paid | (669) | | | (2,350) | | | (2,242) | |
Other financing activities | (412) | | | (253) | | | (830) | |
| | | | | |
| | | | | |
Net cash provided by (used in) financing activities | 5,552 | | | (4,677) | | | 11,454 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (222) | | | 2 | | | (299) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 174 | | | (553) | | | 5,648 | |
| | | | | |
Cash, cash equivalents and restricted cash at beginning of period | 22,943 | | | 23,496 | | | 17,848 | |
Cash, cash equivalents and restricted cash at end of period | $ | 23,117 | | | $ | 22,943 | | | $ | 23,496 | |
| | | | | |
| | | | | |
| | | | | |
Significant Non-cash Investing and Financing Activity | | | | | |
Non-cash property additions – continuing operations | $ | 2,300 | | | $ | 2,837 | | | $ | 3,813 | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Cash flows from operating activities |
|
|
|
|
|
Income from continuing operations | $ | 330 |
|
| $ | 9,269 |
|
| $ | 9,590 |
|
Depreciation, amortization and impairment charges | 12,261 |
|
| 9,819 |
|
| 7,487 |
|
Foreign currency remeasurement and transaction losses | 52 |
|
| 229 |
|
| 806 |
|
Undistributed earnings of nonconsolidated affiliates, net | (132 | ) |
| (15 | ) |
| (145 | ) |
Pension contributions and OPEB payments | (1,636 | ) |
| (3,454 | ) |
| (1,587 | ) |
Pension and OPEB (income) expense, net | (934 | ) |
| (769 | ) |
| 83 |
|
Provision (benefit) for deferred taxes | 10,880 |
|
| 2,228 |
|
| (2,046 | ) |
Change in other operating assets and liabilities (Note 25) | (3,015 | ) |
| 580 |
|
| (1,208 | ) |
Other operating activities | (468 | ) |
| (894 | ) |
| (370 | ) |
Net cash provided by operating activities – continuing operations | 17,338 |
|
| 16,993 |
|
| 12,610 |
|
Net cash used in operating activities – discontinued operations | (10 | ) |
| (386 | ) |
| (841 | ) |
Net cash provided by operating activities | 17,328 |
|
| 16,607 |
|
| 11,769 |
|
Cash flows from investing activities |
|
|
|
|
|
Expenditures for property | (8,453 | ) |
| (8,384 | ) |
| (6,813 | ) |
Available-for-sale marketable securities, acquisitions | (5,503 | ) |
| (15,182 | ) |
| (8,113 | ) |
Trading marketable securities, acquisitions | — |
|
| (262 | ) |
| (1,250 | ) |
Available-for-sale marketable securities, liquidations | 9,007 |
|
| 10,871 |
|
| 8,463 |
|
Trading marketable securities, liquidations | — |
|
| 872 |
|
| 1,758 |
|
Acquisition of companies/investments, net of cash acquired | (41 | ) |
| (804 | ) |
| (927 | ) |
Purchases of finance receivables, net | (19,325 | ) |
| (14,378 | ) |
| (13,888 | ) |
Principal collections and recoveries on finance receivables | 12,578 |
|
| 9,899 |
|
| 8,548 |
|
Purchases of leased vehicles, net | (19,180 | ) |
| (19,495 | ) |
| (15,096 | ) |
Proceeds from termination of leased vehicles | 6,667 |
|
| 2,554 |
|
| 1,095 |
|
Other investing activities | 178 |
|
| 162 |
|
| 15 |
|
Net cash used in investing activities – continuing operations | (24,072 | ) |
| (34,147 | ) |
| (26,208 | ) |
Net cash used in investing activities – discontinued operations (Note 3) | (3,500 | ) |
| (1,496 | ) |
| (1,502 | ) |
Net cash used in investing activities | (27,572 | ) |
| (35,643 | ) |
| (27,710 | ) |
Cash flows from financing activities |
|
|
|
|
|
Net decrease in short-term debt | (140 | ) |
| (282 | ) |
| (61 | ) |
Proceeds from issuance of debt (original maturities greater than three months) | 52,187 |
|
| 42,036 |
|
| 31,547 |
|
Payments on debt (original maturities greater than three months) | (33,592 | ) |
| (20,727 | ) |
| (13,469 | ) |
Payments to purchase common stock | (4,492 | ) |
| (2,500 | ) |
| (3,520 | ) |
Proceeds from issuance of GM Financial preferred stock | 985 |
|
| — |
|
| — |
|
Dividends paid | (2,233 | ) |
| (2,368 | ) |
| (2,242 | ) |
Other financing activities | (305 | ) |
| (163 | ) |
| (159 | ) |
Net cash provided by financing activities – continuing operations | 12,410 |
|
| 15,996 |
|
| 12,096 |
|
Net cash provided by financing activities – discontinued operations | 174 |
|
| 1,081 |
|
| 1,512 |
|
Net cash provided by financing activities | 12,584 |
|
| 17,077 |
|
| 13,608 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 348 |
|
| (213 | ) |
| (1,524 | ) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 2,688 |
|
| (2,172 | ) |
| (3,857 | ) |
Cash, cash equivalents and restricted cash at beginning of period | 15,160 |
|
| 17,332 |
|
| 21,189 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 17,848 |
|
| $ | 15,160 |
|
| $ | 17,332 |
|
| | | | | |
Cash, cash equivalents and restricted cash – continuing operations at end of period (Note 4) | $ | 17,848 |
|
| $ | 14,487 |
|
| $ | 16,588 |
|
Cash, cash equivalents and restricted cash – discontinued operations at end of period | $ | — |
|
| $ | 673 |
|
| $ | 744 |
|
Significant Non-cash Investing and Financing Activity |
|
|
|
|
|
|
|
|
Non-cash property additions – continuing operations | $ | 3,996 |
|
| $ | 3,897 |
|
| $ | 3,970 |
|
Non-cash property additions – discontinued operations | $ | — |
|
| $ | 868 |
|
| $ | 706 |
|
Non-cash business acquisition – continuing operations (Note 10) | $ | — |
|
| $ | 290 |
|
| $ | — |
|
Non-cash proceeds on sale of discontinued operations (Note 3) | $ | 808 |
|
| $ | — |
|
| $ | — |
|
Reference should be made to the notes to consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(In millions)
| | | | | | | | | | | | | | | | Common Stockholders’ | | Noncontrolling Interests | | Total Equity |
| Common Stockholders’ |
| Noncontrolling Interests |
| Total Equity | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | |
Common Stock |
| Additional Paid-in Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| |
Balance at January 1, 2015 | $ | 16 |
|
| $ | 28,937 |
|
| $ | 14,577 |
|
| $ | (8,073 | ) |
| $ | 567 |
|
| $ | 36,024 |
| |
Balance at January 1, 2018 | | Balance at January 1, 2018 | $ | 14 | | | $ | 25,371 | | | $ | 17,627 | | | $ | (8,011) | | | $ | 1,199 | | | $ | 36,200 | |
Adoption of accounting standards | | Adoption of accounting standards | — | | | — | | | (1,046) | | | (98) | | | — | | | (1,144) | |
Net income | — |
|
| — |
|
| 9,687 |
|
| — |
|
| (72 | ) |
| 9,615 |
| Net income | — | | | — | | | 8,014 | | | — | | | (9) | | | 8,005 | |
Other comprehensive income | — |
|
| — |
|
| — |
|
| 37 |
|
| 19 |
|
| 56 |
| |
Other comprehensive loss | | Other comprehensive loss | — | | | — | | | — | | | (930) | | | (6) | | | (936) | |
Purchase of common stock | (1 | ) |
| (1,745 | ) |
| (1,774 | ) |
| — |
|
| — |
|
| (3,520 | ) | Purchase of common stock | 0 | | | (91) | | | (99) | | | — | | | — | | | (190) | |
Exercise of common stock warrants | — |
|
| 46 |
|
| — |
|
| — |
|
| — |
|
| 46 |
| |
Issuance of subsidiary preferred and common stock (Note 20) | | Issuance of subsidiary preferred and common stock (Note 20) | — | | | — | | | — | | | — | | | 2,862 | | | 2,862 | |
Stock based compensation | — |
|
| 369 |
|
| (31 | ) |
| — |
|
| — |
|
| 338 |
| Stock based compensation | — | | | 287 | | | 0 | | | — | | | — | | | 287 | |
Cash dividends paid on common stock | — |
|
| — |
|
| (2,174 | ) |
| — |
|
| — |
|
| (2,174 | ) | Cash dividends paid on common stock | — | | | — | | | (2,144) | | | — | | | — | | | (2,144) | |
Dividends declared or paid to noncontrolling interests | — |
|
| — |
|
| — |
|
| — |
|
| (75 | ) |
| (75 | ) | |
Dividends to noncontrolling interests | | Dividends to noncontrolling interests | — | | | — | | | — | | | — | | | (169) | | | (169) | |
Other | — |
|
| — |
|
| — |
|
| — |
|
| 13 |
|
| 13 |
| Other | — | | | (4) | | | (30) | | | — | | | 40 | | | 6 | |
Balance at December 31, 2015 | 15 |
|
| 27,607 |
|
| 20,285 |
|
| (8,036 | ) |
| 452 |
|
| 40,323 |
| |
Balance at December 31, 2018 | | Balance at December 31, 2018 | 14 | | | 25,563 | | | 22,322 | | | (9,039) | | | 3,917 | | | 42,777 | |
Net income | — |
|
| — |
|
| 9,427 |
|
| — |
|
| (159 | ) |
| 9,268 |
| Net income | — | | | — | | | 6,732 | | | — | | | (65) | | | 6,667 | |
Other comprehensive loss | — |
|
| — |
|
| — |
|
| (1,294 | ) |
| (59 | ) |
| (1,353 | ) | Other comprehensive loss | — | | | — | | | — | | | (2,117) | | | (11) | | | (2,128) | |
Issuance of common stock | — |
|
| 290 |
|
| — |
|
| — |
|
| — |
|
| 290 |
| |
Purchase of common stock | — |
|
| (1,320 | ) |
| (1,180 | ) |
| — |
|
| — |
|
| (2,500 | ) | |
Exercise of common stock warrants | — |
|
| 89 |
|
| — |
|
| — |
|
| — |
|
| 89 |
| |
| Issuance of subsidiary preferred stock (Note 20) | | Issuance of subsidiary preferred stock (Note 20) | — | | | — | | | — | | | — | | | 457 | | | 457 | |
Stock based compensation | — |
|
| 317 |
|
| (27 | ) |
| — |
|
| — |
|
| 290 |
| Stock based compensation | — | | | 409 | | | (34) | | | — | | | — | | | 375 | |
Cash dividends paid on common stock | — |
|
| — |
|
| (2,337 | ) |
| — |
|
| — |
|
| (2,337 | ) | Cash dividends paid on common stock | — | | | — | | | (2,165) | | | — | | | — | | | (2,165) | |
Dividends declared or paid to noncontrolling interests | — |
|
| — |
|
| — |
|
| — |
|
| (31 | ) |
| (31 | ) | |
Dividends to noncontrolling interests | | Dividends to noncontrolling interests | — | | | — | | | — | | | — | | | (166) | | | (166) | |
Other | — |
|
| — |
|
| — |
|
| — |
|
| 36 |
|
| 36 |
| Other | — | | | 102 | | | 5 | | | — | | | 33 | | | 140 | |
Balance at December 31, 2016 | 15 |
|
| 26,983 |
|
| 26,168 |
|
| (9,330 | ) |
| 239 |
|
| 44,075 |
| |
Net loss | — |
|
| — |
|
| (3,864 | ) |
| — |
|
| (18 | ) |
| (3,882 | ) | |
Other comprehensive income | — |
|
| — |
|
| — |
|
| 1,319 |
|
| (2 | ) |
| 1,317 |
| |
Balance at December 31, 2019 | | Balance at December 31, 2019 | 14 | | | 26,074 | | | 26,860 | | | (11,156) | | | 4,165 | | | 45,957 | |
Adoption of accounting standards (Note 2) | | Adoption of accounting standards (Note 2) | — | | | — | | | (660) | | | — | | | — | | | (660) | |
Net income | | Net income | — | | | — | | | 6,427 | | | — | | | (106) | | | 6,321 | |
Other comprehensive loss | | Other comprehensive loss | — | | | — | | | — | | | (2,332) | | | 14 | | | (2,318) | |
Purchase of common stock | (1 | ) |
| (2,063 | ) |
| (2,428 | ) |
| — |
|
| — |
|
| (4,492 | ) | Purchase of common stock | — | | | (57) | | | (33) | | | — | | | — | | | (90) | |
Exercise of common stock warrants | — |
|
| 43 |
|
| — |
|
| — |
|
| — |
|
| 43 |
| |
Issuance of GM Financial preferred stock | — |
|
| — |
|
| — |
|
| — |
|
| 985 |
|
| 985 |
| |
Issuance of subsidiary preferred stock (Note 20) | | Issuance of subsidiary preferred stock (Note 20) | — | | | — | | | — | | | — | | | 544 | | | 544 | |
Stock based compensation | — |
|
| 468 |
|
| (34 | ) |
| — |
|
| — |
|
| 434 |
| Stock based compensation | — | | | 525 | | | (10) | | | — | | | — | | | 515 | |
Cash dividends paid on common stock | — |
|
| — |
|
| (2,215 | ) |
| — |
|
| — |
|
| (2,215 | ) | Cash dividends paid on common stock | — | | | — | | | (545) | | | — | | | — | | | (545) | |
Dividends declared or paid to noncontrolling interests | — |
|
| — |
|
| — |
|
| — |
|
| (18 | ) |
| (18 | ) | |
Dividends to noncontrolling interests | | Dividends to noncontrolling interests | — | | | — | | | — | | | — | | | (46) | | | (46) | |
Other | — |
|
| (60 | ) |
| — |
|
| — |
|
| 13 |
|
| (47 | ) | Other | — | | | 0 | | | (77) | | | — | | | 76 | | | (1) | |
Balance at December 31, 2017 | $ | 14 |
|
| $ | 25,371 |
|
| $ | 17,627 |
|
| $ | (8,011 | ) |
| $ | 1,199 |
|
| $ | 36,200 |
| |
Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 14 | | | $ | 26,542 | | | $ | 31,962 | | | $ | (13,488) | | | $ | 4,647 | | | $ | 49,677 | |
Reference should be made to the notes to consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. 1. Nature of Operations and Basis of Presentation
General Motors Company was incorporated as a Delaware corporation in 2009. We design, build and sell cars, trucks, crossovers, cars and automobile parts worldwide.worldwide and are investing in and growing an autonomous vehicle business. We also provide automotive financing services through GM Financial. We analyze the results of our continuing operations through the following segments: GMNA, GMI, Cruise and GM Financial. Cruise is our global segment responsible for the development and commercialization of autonomous vehicle technology. Nonsegment operations and Maven, our ride- and car-sharing business, are classified as Corporate. Corporate includes certain centrally recorded income and costs such as interest, income taxes, corporate expenditures including autonomous vehicle-related engineering costs and certain nonsegment specificnonsegment-specific revenues and expenses.
On July 31, 2017 we closed the sale of our Opel and Vauxhall businesses and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot, S.A. (PSA Group). On October 31, 2017 we closed the sale of our European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. The European Business is presented as discontinued operations in our consolidated financial statements for all periods presented. The assets and liabilities of the European Business are presented as held for sale in our consolidated financial statements as of December 31, 2016. Unless otherwise indicated, information in these notes to the consolidated financial statements relates to our continuing operations. Refer to Note 3 for additional details regarding the disposal of the European Business.
Principles of Consolidation The consolidated financial statements are prepared in conformity with U.S. GAAP. All intercompany balances and transactions have been eliminated in consolidation. Except for per share amounts or as otherwise specified, amounts presented within tables are stated in millions.
Principles of Consolidation We consolidate entities that we control due to ownership of a majority voting interest and we consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met.All intercompany balances and transactions have been eliminated in consolidation. Our share of earnings or losses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over the operating and financial decisions of the affiliate. We use the cost method of accounting if we are not able to exercise significant influence over the operating and financial decisions of the affiliate.
Use of Estimates in the Preparation of the Financial Statements Accounting estimates are an integral part of the consolidated financial statements. These estimates require the use of judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.
GM Financial The amounts presented for GM Financial have been adjusted to include the effect of our tax attributes on GM Financial's deferred tax positions and provision for income taxes, which are not applicable to GM Financial on a stand-alone basis, and to eliminate the effect of transactions between GM Financial and the other members of the consolidated group. Accordingly, the amounts presented will differ from those presented by GM Financial on a stand-alone basis.
Note 2.Significant Accounting Policies
The accounting policies that follow are utilized by our automotive, and automotive financing and Cruise operations, unless otherwise indicated. We adopted Accounting Standards Update (ASU) 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13) on January 1, 2020 on a modified retrospective basis. As such, the comparative information in prior periods was not restated and continues to be reported under the accounting standards in effect for those periods. The accounting policies that follow for Marketable Debt Securities, Accounts and Notes Receivable and GM Financial Receivables that were affected by the adoption of ASU 2016-13 became effective on January 1, 2020.
Revenue Recognition
Automotive Automotive net sales and revenue primarily consistrepresents the amount of revenue generated fromconsideration to which we expect to be entitled in exchange for vehicle, parts and accessories and services and other sales. The consideration recognized represents the amount received, typically shortly after the sale of vehicles. Vehicle sales are recorded when title and risks and rewards of ownership have passed to our customers. For the majority of our automotive sales this occurs when a vehicle is released to the carrier responsible for transporting it to a dealer and when collectability is reasonably assured. Vehicle sales are recorded when the vehicle is delivered to the dealer in most remaining cases. Provisions for recurring or announcedcustomer, net of estimated dealer and customer sales incentives we reasonably expect to pay. Significant factors in determining our estimates of incentives include forecasted sales volume, product mix and leasing incentives, consistingthe rate of allowancescustomer acceptance of incentive programs, all of which are estimated based on historical experience and rebates,assumptions concerning future customer behavior and market conditions. Subsequent adjustments to incentive estimates are recordedpossible as reductionsfacts and circumstances change over time. A portion of the consideration received is deferred for separate performance obligations, such as maintenance and vehicle connectivity, that will be provided to Automotive net sales and revenueour customers at the time of vehicle sale. All other incentives, allowances and rebates related to vehicles previously sold are recorded as reductions to Automotive net sales and revenue when announced.a future date. Taxes assessed by various government entities, such as sales, use and value-added taxes, collected at the time of the vehicle sale are excluded from Automotive net sales and revenue. Costs for shipping and handling activities that occur after control of the vehicle transfers to the dealer are recognized at the time of sale and presented in Automotive and other cost of sales.
Vehicle, Parts and Accessories For the majority of vehicle and accessories sales, our customers obtain control and we recognize revenue when the vehicle transfers to the dealer, which generally occurs when the vehicle is released to the carrier responsible for transporting it to a dealer. Revenue, net of estimated returns, is recognized on the sale of parts upon delivery to
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
the customer. When our customers have a right to return eligible parts and accessories, we consider the returns in our estimation of the transaction price.
Vehicle salesTransfers to daily rental car companies are accounted for as sales, with guaranteedrevenue recognized at the time of transfer. We defer revenue for remarketing obligations, record a residual value guarantee and reflect a liability for amounts expected to be paid once the remarketing services are complete at the time of certain transfers and recognize deferred revenue in earnings upon completion of the remarketing service. Transfers containing a substantive repurchase obligationsobligation are accounted for as operating leases. Estimated lease revenueleases and rental income is recorded ratablyrecognized over the estimated term of the lease based onlease. Our total exposure to vehicle repurchase obligations is reduced to the difference betweenextent vehicles are able to be resold to a third party.
Used Vehicles Proceeds from the auction of vehicles returned from daily rental car companies and vehicles utilized by our employees are recognized in Automotive net sales proceeds and the guaranteed repurchase amount. The difference between the costrevenue upon transfer of control of the vehicle to the customer and estimated residualthe related vehicle carrying value is depreciated onrecognized in Automotive and other cost of sales.
Services and Other Services and other revenue primarily consists of revenue from vehicle-related service arrangements and after-sale services such as maintenance, OnStar, vehicle connectivity and extended service warranties. For those service arrangements that are bundled with a straight-line basis over the estimated termvehicle sale, a portion of the lease.revenue from the sale is allocated to the service component and recognized as deferred revenue within Accrued liabilities or Other liabilities. We recognize revenue for bundled services and services sold separately as services are performed, typically over a period of up to seven years.
Automotive Financing - GM Financial Finance charge income earned on finance receivables is recognized using the effective interest method. Fees and commissions received (including incentive payments) received and direct costs of originating loans are deferred and amortized over the term of the related finance receivables using the effective interest method and are removed from the consolidated balance sheets when the related finance receivables are sold,fully charged off or paid in full. Accrual of finance charge income on retail finance receivables is generally suspended on accounts that are more than 60 days delinquent, accounts in bankruptcy and accounts in repossession. Payments received on nonaccrual loans are first applied to any fees due, then to any interest due and then any remaining amounts are recordedapplied to principal. Interest accrual generally resumes once an account has received payments bringing the delinquency to less than 60 days past due. Accrual of finance charge income on commercial finance receivables is generally suspended on accounts that are more than 90 days delinquent, upon receipt of a bankruptcy notice from a borrower, or where reasonable doubt exists about the full collectability of contractually agreed upon principal and interest. Payments received on nonaccrual loans are first applied to principal. Interest accrual resumes once an account has received payments bringing the account fully current and collection of contractual principal and interest is reasonably assured (including amounts previously charged off).
Income from operating lease assets, which includes lease origination fees, net of lease origination costs, and incentives, is recorded as operating lease revenue on a straight-line basis over the term of the lease agreement. Gains or losses realized upon disposition of off-lease assets including any payments received from lessees upon lease termination, are included in GM Financial interest, operating and other.
Advertising and Promotion Expenditures Advertising and promotion expenditures, which are expensed as incurred in Automotive and other selling, general and administrative expense, were $4.3$2.7 billion, $4.6$3.7 billion and $4.4$4.0 billion in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
Research and Development Expenditures Research and development expenditures, which are expensed as incurred in Automotive and other cost of sales, were $7.3$6.2 billion, $6.6$6.8 billion and $6.0$7.8 billion in the years ended December 31, 2017, 20162020, 2019 and 2015.2018. We enter into cost sharing arrangements with third parties or nonconsolidated affiliates for product-related research, engineering, design and development activities. Cost sharing payments and fees related to these arrangements are presented in Automotive and other cost of sales.
Cash Equivalents and Restricted Cash Cash equivalents are defined as short-term, highly-liquid investments with original maturities of 90 days or less. Certain operating agreements require us to post cash as collateral. Cash and cash equivalents subject to contractual restrictions and not readily available are classified as restricted cash. We are required to post cash as collateral as part of certain agreements that we enter into as part of our operations. Restricted cash is invested in accordance with the terms of the underlying agreements and include amounts related to various deposits, escrows and other cash collateral. Restricted cash is included in Other current assets and Other assets in the consolidated balance sheets.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Fair Value Measurements A three-level valuation hierarchy, based upon observable and unobservable inputs, is used for fair value measurements. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions based on the best evidence available. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices for identical instruments in active markets; Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose significant inputs are observable; and Level 3 – Instruments whose significant inputs are unobservable. Financial instruments are transferred in and/or out of Level 1, 2 or 3 at the beginning of the accounting period in which there is a change in the valuation inputs.
Marketable Debt Securities We generally classify marketable debt securities as available-for-sale or trading.available-for-sale. Various factors, including turnover of holdings and investment guidelines, are considered in determining the classification of securities. Available-for-sale debt securities are recorded at fair value with non-credit related unrealized gains and losses recorded net of related income taxes in Accumulated other comprehensive loss until realized. Trading securitiesNon-credit related unrealized losses are recorded at fair value with changes in fair valuereclassified to Interest income and other non-operating income, net if we intend to sell the security or it is more likely than not that we will be required to sell the security before the recovery of the unrealized loss. Credit losses are recorded in Interest income and other non-operating income, net. An evaluation is made quarterly to determine if any portion of unrealized losses recorded in Accumulated other comprehensive loss needs to be reclassified.
We determine realized gains and losses for all debt securities using the specific identification method.
Wemethod and measure the fair value of our marketable debt securities using a market approach where identical or comparable prices are available and an income approach in other cases. If quoted market prices are not available, fair values of securities are determined using
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
prices from a pricing service, pricing models, quoted prices of securities with similar characteristics or discounted cash flow models. These prices represent non-binding quotes. Our pricing service utilizes industry-standard pricing models that consider various inputs. We conduct an annual review of our pricing service and believe the prices received from our pricing service are a reliable representation of exit prices.
An evaluation is made quarterly to determine if unrealized losses related to non-trading investments in securities are other-than-temporary. Factors considered include the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and the intent to sell or likelihood to be forced to sell the security before any anticipated recovery.
Accounts and Notes Receivable Accounts and notes receivable primarily consists of amounts that are due and payable from our customers for the sale of vehicles, parts, and accessories. We evaluate the collectability of receivables each reporting period and record an allowance for doubtful accounts representingto present the net amount expected to be collected on our estimate of probable losses.receivables. Additions to the allowance are charged to bad debt expense reported in Automotive and other selling, general and administrative expense and were insignificant in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
GM Financial Receivables Finance receivables are carried at amortized cost, net of allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover expected credit losses on the finance receivables. For retail finance receivables, GM Financial uses a combination of forecasting models and management judgmentstatic pool modeling techniques to determine the collective allowance for loan losses.losses expected over the remaining life of the receivables, which is supplemented by management judgment. The modeling techniques incorporate reasonable and supportable forecasts of economic conditions over the expected remaining life of the finance receivables. The economic forecasts incorporate factors which vary by region that GM Financial believes will have the largest impact on expected losses, including unemployment rates, interest rate spreads, disposable personal income and growth rates in gross domestic product.
Troubled debt restructurings (TDRs) are grouped separately for purposes of measuring the allowance. The allowance for TDRs uses static pool modeling techniques like non-TDR retail finance receivables to determine the expected loss amount. The expected cash flows of the receivables are then discounted at the original weighted average effective interest rate of the pool. Factors that are considered when estimating the collective allowance include historical delinquency migration to loss, probability of default and loss given default. The loss confirmation period is a key assumption within the models and represents the average amount of time from when a loss event first occurs to when the receivable is charged off. GM Financial also considersfor TDRs are based on an evaluation of overall portfolio credit quality based on various indicators.
Retail finance receivables that become classified as troubled debt restructurings (TDRs) are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate.historical and current information, which may be supplemented by management judgment. Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs.
RetailCommercial finance receivables are generally charged off in the month in which the account becomes 120 days contractually delinquent ifcarried at amortized cost, net of allowance for loan losses and amounts held under a cash management program. GM Financial has not yet recorded a repossession charge-off. A charge-off generally representsestablishes the difference betweenallowance for loan losses based on historical loss experience, as well as the estimated netforecast for industry vehicle sales, proceeds andwhich is the amount ofeconomic indicator believed to have the contract, including accrued interest.largest impact on expected losses.
Inventories Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less cost to sell, and considers general market and economic conditions, periodic reviews of current profitability of vehicles, product warranty costs and the effect of current and expected incentive offers at the balance sheet date.estimated sales incentives. Net realizable value for off-lease and other vehicles is current auction sales proceeds less disposal and warranty costs. Productive material, supplies, work in process and service parts are reviewed to determine if inventory quantities are in excess of forecasted usage or if they have become obsolete.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Equipment on Operating Leases Equipment on operating leases, net is reported at cost, less accumulated depreciation and impairment, net of origination fees or costs and lease incentives. Estimated income from operating lease assets, which includes lease origination fees, net of lease origination costs, is recorded as operating lease revenue on a straight-line basis over the term of the lease agreement. Leased vehicles are depreciated on a straight-line basis to an estimated residual value over the term of the lease agreements.
Equipment on operating leases, net consists of vehicle leases to retail customers with lease terms of two to five years and vehicles leasedvehicle sales to rental car companies with lease terms that are expected to be repurchased in an average of seven months. We are exposed to changes in the residual values of these assets. The residual values represent estimates of the values of the leased vehicles at the end of the lease contractsagreements and are determined based on forecasted auction proceeds when there is a reliable basis to make such a determination. Realization of the residual values is dependent on the future ability to market the vehicles under prevailing market conditions. The adequacy of the estimate of the residual value is evaluated over the life of the leasearrangement and adjustments may be made to the extent the expected value of the vehicle at lease termination changes. Adjustments may be in the form of revisions to the depreciation rate or recognition of an impairment charge. ImpairmentA lease vehicle asset group is determined to existbe impaired if an impairment indicator exists and the expected future cash flows, which include estimated residual values, are lower than the carrying amount of a leasedthe vehicle asset group. If the carrying amount
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
is considered impaired an impairment charge is recorded for the amount by which the carrying amount exceeds fair value of the leased vehicle asset group. Fair value is determined primarily using the anticipated cash flows, including estimated residual values.
In our automotive operations when a leased vehicle that is accounted for as a lease is returned the asset is reclassified from Equipment on operating leases, net to Inventories at the lower of cost or estimated selling price, less costs to sell.net realizable value. Upon disposition, proceeds are recorded in Automotive net sales and revenue and costs are recorded in Automotive and other cost of sales. In our automotive finance operations when a leased vehicle is returned or repossessed the asset is recorded in Other assets at the lower of amortized cost or estimated selling price, less costs to sell.net realizable value. Upon disposition a gain or loss is recorded in GM Financial interest, operating and other expenses for any difference between the net book value of the leased asset and the proceeds from the disposition of the asset.
Depreciation expense and impairment charges related to Equipment on operating leases, net are recorded in Automotive cost of sales or GM Financial interest, operating and other expenses.
Valuation of Cost and Equity Method Investments When events and circumstances warrant, equity investments accounted for under the cost or equity method of accounting are evaluated for impairment. An impairment charge is recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other-than-temporary. Impairment charges related to equity method investments are recorded in Equity income. Impairment charges related to costEquity investments that are not accounted for under the equity method investmentsof accounting are measured at fair value with changes in fair value recorded in Interest income and other non-operating income, net.
Property, net Property, plant and equipment, including internal use software, is recorded at cost. Major improvements that extend the useful life or add functionality are capitalized. The gross amount of assets under capitalfinance leases is included in property, plant and equipment. Expenditures for repairs and maintenance are charged to expense as incurred. We depreciate depreciable property using the straight-line method. Leasehold improvements are amortized over the period of lease or the life of the asset, whichever is shorter. The amortization of the assets under capitalfinance leases is included in depreciation expense. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are eliminated and any resulting gain or loss is recorded in earnings. Impairment charges related to property are recorded in Automotive and other cost of sales, Automotive and other selling, general and administrative expense or GM Financial interest, operating and other expenses.
Special Tools Special tools represent product-specific powertrainpropulsion and non-powertrainnon-propulsion related tools, dies, molds and other items used in the vehicle manufacturing process. Expenditures for special tools are recorded at cost and are capitalized. We amortize special tools over their estimated useful lives using the straight-line method or an accelerated amortization method based on their historical and estimated production volume. Impairment charges related to special tools are recorded in Automotive and other cost of sales.
Goodwill Goodwill is not amortized but rather tested for impairment annually on October 1 orand when events occur or circumstances change that would triggerwarrant such a review. A multi-stepThe impairment test entails an assessment of qualitative factors to determine whether it is more likely than not that an impairment exists. If it is more likely than not that an impairment exists, then a quantitative impairment test is used to identify potential goodwill impairment.performed. Impairment exists when the carrying amount of goodwilla reporting unit exceeds its implied fair value. Because the fair value of goodwill can be measured only as a residual amount and cannot be determined directly we calculate the implied goodwill for those reporting units failing Step 1 in the same manner that goodwill is recognized in a business combination pursuant to Accounting Standards Codification (ASC) 805.
Intangible Assets, net Intangible assets, excluding goodwill, primarily include brand names, technology and intellectual property, customer relationships and dealer networks. Intangible assets are amortized on a straight-line or an accelerated method of amortization over their estimated useful lives. An accelerated amortization method reflecting the pattern in which the asset will be consumed is utilized if that pattern can be reliably determined. We consider the period of expected cash flows and underlying data used to measure the fair value of the intangible assets when selecting a useful life. Amortization of developed technology and intellectual property is recorded in Automotive and other cost of sales. Amortization of brand names, customer relationships and our dealer networks is recorded in Automotive and other selling, general and administrative expense or GM Financial interest, operating and other expenses. Impairment charges, if any, related to intangible assets are recorded in Automotive and other selling, general and administrative expense or Automotive and other cost of sales.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Valuation of Long-Lived Assets The carrying amount of long-lived assets and finite-lived intangible assets to be held and used in the business is evaluated for impairment when events and circumstances warrant. If the carrying amount of a long-lived asset group is considered impaired, a loss is recorded based on the amount by which the carrying amount exceeds fair value. Product-specific long-lived asset groups and non-product specific long-lived assets are separately tested for impairment on an asset group basis. Fair value is determined using either the market or sales comparison approach, cost approach or anticipated cash flows
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
discounted at a rate commensurate with the risk involved. Long-lived assets to be disposed of other than by sale are considered held for use until disposition.
Pension and OPEB Plans
Attribution, Methods and Assumptions The cost of benefits provided by defined benefit pension plans is recorded in the period employees provide service. The cost of pension plan amendments that provide for benefits already earned by plan participants is amortized over the expected period of benefit which may be the duration of the applicable collective bargaining agreement specific to the plan, the expected future working lifetime or the life expectancy of the plan participants.
The cost of medical, dental, legal service and life insurance benefits provided through postretirement benefit plans is recorded in the period employees provide service. The cost of postretirement plan amendments that provide for benefits already earned by plan participants is amortized over the expected period of benefit which may be the average period to full eligibility or the average life expectancy of the plan participants.
An expected return on plan asset methodology is utilized to calculate future pension expense for certain significant funded benefit plans. A market-related value of plan assets methodology is also utilized that averages gains and losses on the plan assets over a period of years to determine future pension expense. The methodology recognizes 60% of the difference between the fair value of assets and the expected calculated value in the first year and 10% of that difference over each of the next four years.
The discount rate assumption is established for each of the retirement-related benefit plans at their respective measurement dates. In the U.S. we use a cash flow matching approach that uses projected cash flows matched to spot rates along a high qualityhigh-quality corporate bond yield curve to determine the present value of cash flows to calculate a single equivalent discount rate. Effective 2016 we applied theWe apply individual annual yield curve rates instead of the single equivalent discount rate to determine the service cost and interest cost for our pension and OPEB plans. This refinementplans to more specifically linkslink the cash flows related to service cost and interest cost to bonds maturing in their year of payment.
The benefit obligation for pension plans in Canada, the U.K. and Germany represents 92%93% of the non-U.S. pension benefit obligation at December 31, 2017.2020. The discount rates for plans in Canada, the U.K. and Germany are determined using a cash flow matching approach similar tolike the U.S.
Plan Asset Valuation Due to the lack of timely available market information for certain investments in the asset classes described below as well as the inherent uncertainty of valuation, reported fair values may differ from fair values that would have been used had timely available market information been available.
Common and Preferred Stock Common and preferred stock for which market prices are readily available at the measurement date are valued at the last reported sale price or official closing price on the primary market or exchange on which they are actively traded and are classified in Level 1. Such equity securities for which the market is not considered to be active are valued via the use of observable inputs, which may include among others, the use of adjusted market prices last available, bids or last available sales prices and/or other observable inputs and are classified in Level 2. Common and preferred stock classified in Level 3 are privately issued securities or other issues that are valued via the use of valuation models using significant unobservable inputs that generally consider among others, aged (stale) pricing, earnings multiples, discounted cash flows and/or other qualitative and quantitative factors.
Debt Securities Valuations for debt securities are based on quotations received from independent pricing services or from dealers who make markets in such securities. Debt securities priced via pricing services that utilize matrix pricing which considers readily observable inputs such as the yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices, are classified in Level 2. Debt securities that are typically priced by dealers and pricing services via the use of proprietary pricing models which incorporate significant unobservable inputs are classified in Level 3. These inputs
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
primarily consist of yield and credit spread assumptions, discount rates, prepayment curves, default assumptions and recovery rates.
Investment Funds, Private Equity and Debt Investments and Real Estate Investments Investment funds, private equity and debt investments and real estate investments are valued based on the Net Asset Value (NAV) per Share (or its equivalent) as a practical expedient to estimate fair value due to the absence of readily available market prices.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
NAV's are provided by the respective investment sponsors or investment advisers and are subsequently reviewed and approved by management. In the event management concludes a reported NAV does not reflect fair value or is not determined as of the financial reporting measurement date, we will consider whether and when deemed necessary to make an adjustment at the balance sheet date. In determining whether an adjustment to the external valuation is required, we will review material factors that could affect the valuation, such as changes in the composition or performance of the underlying investments or comparable investments, overall market conditions, expected sale prices for private investments which are probable of being sold in the short-term and other economic factors that may possibly have a favorable or unfavorable effect on the reported external valuation.
Stock Incentive Plans Our stock incentive plans include RSUs, RSAs,Restricted Stock Awards (RSAs), PSUs, stock options and awards that may be settled in our stock, options.the stock of our subsidiaries or in cash. We measure and record compensation expense based on the fair value of ourGM or Cruise's common stock on the date of grant for RSUs, RSAs and PSUs with performance conditions and the grant date fair value, of stock options and PSUs with market conditions are determined utilizing a lattice model or the Black-Scholes formula. Compensation costformula, for awards that do not have an established accounting grant date is based on the fair value of our common stock at the end of each reporting period.options and PSUs. We record compensation cost for service-based RSUs, RSAs, PSUs and service-based stock options on a straight-line basis over the entire vesting period, or for retirement eligible employees over the requisite service period.RSUs granted in stock of Cruise vest upon satisfaction of both a service condition and a liquidity condition, defined as a change in control transaction or the consummation of an initial public offering. Compensation costs for RSUs granted in stock of Cruise will be recorded when the liquidity condition is met.Compensation cost for awards that do not have an established accounting grant date, but for which the service inception date has been established, or are settled in cash is based on the fair value of GM or Cruise's common stock at the end of each reporting period. We use the graded vesting method to record compensation cost for stock options with market conditions over the lesser of the vesting period or the time period an employee becomes eligible to retain the award at retirement. The liability for stock incentive plan awards settled in cash is remeasured to fair value at the end of each reporting period.
Product Warranty and Recall Campaigns The estimated costs related to product warranties are accrued at the time products are sold and are charged to Automotive and other cost of sales. These estimates are established using historical information on the nature, frequency and average cost of claims of each vehicle line or each model year of the vehicle line and assumptions about future activity and events. Revisions are made when necessary and are based on changes in these factors.
The estimated costs related to recall campaigns are accrued when probable and estimable, which is generally accrued at the time of vehicle sale insale. In GMNA, we estimate the costs related to recall campaigns by applying a frequency times severitypaid loss approach that considers the number of historical recall campaigns the number of vehicles per recall campaign,and the estimated number of vehicles to be repaired and the cost per vehicle for each recall campaign. The estimated costs associated with recall campaigns in other geographical regions are accrued when probable and estimabledetermined using the estimated costs of repairs and the estimated number of vehicles to be repaired. Costs associated with recall campaigns are charged to Automotive and other cost of sales. Revisions are made when necessary based on changes in these factors.
Income Taxes The liability method is used in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recorded in the results of operations in the period that includes the enactment date under the law.
We establish valuation allowances for deferred tax assets based on a more likely than not standard. Deferred income tax assets are evaluated quarterly to determine if valuation allowances are required or should be adjusted. We establish valuation allowances for deferred tax assets based on a more likely than not standard. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted also considers all available positive and negative evidence factors. It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. We utilize a rolling three years of actual and current year results as the primary measure of cumulative losses in recent years.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Income tax expense (benefit) for the year is allocated between continuing operations and other categories of income such as Other comprehensive income (loss). In periods in which there is a pre-tax loss from continuing operations and pre-tax income in another income category, the tax benefit allocated to continuing operations is determined by taking into account the pre-tax income of other categories. We record Global Intangible Low Tax Income (GILTI) as a current period expense when incurred.
We record uncertain tax positions on the basis of a two-step process whereby we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position, and for those tax positions that meet the more likely than not criteria, we recognize the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. We record interest and penalties on uncertain tax positions in Income tax expense (benefit).
Foreign Currency Transactions and Translation The assets and liabilities of foreign subsidiaries that use the local currency as their functional currency are translated to U.S. Dollars based on the current exchange rate prevailing at each balance sheet date
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
and any resulting translation adjustments are included in Accumulated other comprehensive loss. The assets and liabilities of foreign subsidiaries whose local currency is not their functional currency are remeasured from their local currency to their functional currency and then translated to U.S. Dollars. Revenues and expenses are translated into U.S. Dollars using the average exchange rates prevailing for each period presented. The financial statements of any foreign subsidiary that has been identified as having a highly inflationary economy are remeasured as if the functional currency were the U.S. Dollar.
Gains and losses arising from foreign currency transactions and the effects of remeasurements discussed in the preceding paragraph are recorded in Automotive and other cost of sales and GM Financial interest, operating and other expenses unless related to Automotive debt, which are recorded in Interest income and other non-operating income, net. Foreign currency transaction and remeasurement losses were $52$203 million, $229gains of $85 million and $806losses of $168 million in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
Derivative Financial Instruments Derivative financial instruments are recognized as either assets or liabilities at fair value. The accounting for changes in the fair value of each derivative financial instrument depends on whether it has been designated and qualifies as an accounting hedge, as well as the type of hedging relationship identified. Derivative instruments are not used for trading or speculative purposes.
Automotive We utilize options, swaps and forward contracts to manage foreign currency and commodity price and interest rate risks.risk. The change in fair value of option and forward contracts not designated as hedges is recorded in Interest income and other non-operating income, net. Cash flows for all derivative financial instruments are classified in cash flows from operating activities.
Certain foreign currency and commodity forward contracts have been designated as cash flow hedges. The risk being hedged is the foreign currency and commodity price risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the effective portion of changes in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in Automotive cost of sales when the hedged item affects earnings. Any ineffective portion is recorded in Automotive cost of sales in the period of remeasurement.
We estimate the fair value of the PSA warrants using a Black-Scholes formula. The significant inputs to the model include the PSA stock price and the estimated dividend yield.The estimated dividend yield is adjusted based on the terms of the Agreement. Under the terms of the Agreement upon exercise of the warrants we We are entitled to receive any dividends declared by PSA between the issuance date andthrough the conversion date.date upon exercise of the warrants. Gains or losses as a result of the change in the fair value of the PSA warrants are recorded in Interest income and other non-operating income, net.
Automotive Financing - GM Financial GM Financial utilizes interest rate derivative instruments to manage interest rate risk and foreign currency derivative instruments to manage foreign currency risk. The change in fair value of the derivative instruments not designated as hedges is recorded in GM Financial interest, operating and other expenses. Cash flows for all derivative financial instruments are classified in cash flows from operating activities.
Certain interest rate and foreign currency swap agreements have been designated as fair value hedges of fixed-rate debt.hedges. The risk being hedged is the risk of changes in the fair value of the hedged debt attributable to changes in the benchmark interest rate.rate or the risk of changes in fair value attributable to changes in foreign currency exchange rates. If the swap has been designated as a fair value hedge, the changes in the fair value of the hedged debtitem are recorded in GM Financial interest, operating and other expenses. The change in fair value of the related derivative (excluding accrued interest)hedge is also recorded in GM Financial interest, operating and other expenses.
Certain interest rate swap and foreign currency swap agreements have been designated as cash flow hedges. The risk being hedged is the interest rate and foreign currency and interest rate risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the effective portion of changeschange in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in GM Financial interest, operating and other expenses along with the earnings effect of the hedged item when the hedged item affects earnings. Any ineffective portion is recorded in GM Financial interest, operating and other expensesChanges in the periodfair value of remeasurement.
Accounting Standards Not Yet Adopted In May 2014 the Financial Accounting Standards Board (FASB) issued ASU 2014-09, which requires us to recognize revenue when a customer obtains control rather than when we have transferred substantially all risks and rewards of a good or service and requires expanded disclosures. ASU 2014-09, as amended, became effective for us on January 1, 2018. ASU 2014-09 affected the amount and timing of certain revenue related transactions primarily resultingamounts excluded from the earlier recognitionassessment of certain sales incentives and fixed fee technology arrangements. Upon adoption of ASU 2014-09 sales incentiveseffectiveness are recorded atcurrently in earnings and are presented in the timesame income statement line as the earnings effect of sale rather than at the later of sale or announcement and fixed fee technology arrangements are recognized when access to intellectual property is granted instead of over the contract period. Certain transactions with daily rental car companies may also qualify to be accounted for as a sale as opposed to the current accounting as an operating lease. We
hedged item.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
adopted the provisions of ASU 2014-09 on a modified retrospective basis through a cumulative adjustment to Equity. The adoption impact of ASU 2014-09 will be a reduction to Equity of approximately $1.0 billion effectiveRecently Adopted Accounting Standards Effective January 1, 2018.
In January 2016 the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in Net income and which updates certain presentation and disclosure requirements. ASU 2016-01 became effective for us beginning January 1, 2018 and required a cumulative-effect adjustment for certain items upon adoption. The adoption of ASU 2016-01 was not material to our consolidated financial statements.
In February 2016 the FASB issued ASU 2016-02, "Leases" (ASU 2016-02), which requires us as the lessee to recognize most leases on the balance sheet thereby resulting in the recognition of lease assets and liabilities for those leases currently classified as operating leases. The accounting for leases where2020, we are the lessor remains largely unchanged. ASU 2016-02 is effective for us beginning January 1, 2019 with early adoption permitted. We are continuing to assess the impact of ASU 2016-02 as we proceed with implementation activities to permit adoption on January 1, 2019. We expect the primary impact to our consolidated financial position upon adoption will be the recognition, on a discounted basis, of our minimum commitments under noncancelable operating leases on our consolidated balance sheets resulting in the recording of right of use assets and lease obligations. Our current minimum commitments under noncancelable operating leases are disclosed in Note 17.
In June 2016 the FASB issuedadopted ASU 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), thatwhich requires entities to use a new impairment model based on expected losses. Under this new model an entity would recognize an impairment allowance equal to its current estimate ofexpected credit losses on financial assets measured at amortized cost. ASU 2016-13 is effective for us beginning January 1, 2020 with early adoption permitted. Credit(CECL) rather than incurred losses. Estimated credit losses under the new model willCECL consider relevant information about past events, current conditions and reasonable and supportable forecasts that affect the collectability of financial assets, resulting in recognition of lifetime expected credit losses at initial recognition of the related asset. We adopted ASU 2016-13 on a modified retrospective basis by recognizing an after-tax cumulative-effect adjustment to the opening balance of Retained earnings of $660 million, inclusive of $643 million related to GM Financial. The application of ASU 2016-13 increased our allowance for loan losses related to GM Financial upon loan origination as comparedreceivables, net by $801 million and had an insignificant impact to our current accounting that recognizes credit losses as incurred. We are currently evaluating new processes to calculate credit losses in accordance with ASU 2016-13 that, once completed, will determine the impact on our consolidated financial statements which at the date of adoption will increase the allowance for credit losses withfor Accounts and notes receivable and no adoption impact to Marketable debt securities on our consolidated balance sheets.
Effective July 1, 2020, we adopted ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04), which provides optional expedients and exceptions for applying U.S. GAAP if certain criteria are met to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued, on a resulting negative adjustment to Retained earnings.
In August 2016prospective basis. We do not believe the FASB issued ASU 2016-15, "Statementdiscontinuance of Cash Flows (Topic 230), ClassificationLIBOR will be a significant event for our Automotive arrangements. A substantial portion of Certain Cash Receipts and Payments" (ASU 2016-15), clarifying guidanceGM Financial’s indebtedness bears interest at variable interest rates, primarily based on the classification of certain cash receipts and payments in the statement of cash flows.USD-LIBOR. The adoption of, and future elections under, ASU 2016-15 on January 1, 2018 did2020-04 are not expected to have a material impact on our consolidated financial statements.statements as the standard will ease, if warranted, the requirements for accounting for the future effects of the rate reform. We continue to monitor the impact the discontinuance of LIBOR or another reference rate will have on GM Financial's contracts, hedging relationships and other transactions.
In March 2017
Note 3. Revenue
The following table disaggregates our revenue by major source for revenue generating segments:
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| Year Ended December 31, 2020 |
| GMNA | | GMI | | Corporate | | Total Automotive | | Cruise | | GM Financial | | Eliminations/ Reclassifications | | Total |
Vehicle, parts and accessories | $ | 92,749 | | | $ | 10,593 | | | $ | 1 | | | $ | 103,343 | | | $ | — | | | $ | — | | | $ | 0 | | | $ | 103,343 | |
Used vehicles | 875 | | | 115 | | | 20 | | | 1,010 | | | — | | | — | | | 0 | | | 1,010 | |
Services and other | 3,109 | | | 878 | | | 329 | | | 4,316 | | | 103 | | | — | | | (99) | | | 4,320 | |
Automotive net sales and revenue | 96,733 | | | 11,586 | | | 350 | | | 108,669 | | | 103 | | | — | | | (99) | | | 108,673 | |
Leased vehicle income | — | | | — | | | — | | | — | | | — | | | 9,530 | | | 0 | | | 9,530 | |
Finance charge income | — | | | — | | | — | | | — | | | — | | | 3,996 | | | (1) | | | 3,995 | |
Other income | — | | | — | | | — | | | — | | | — | | | 305 | | | (18) | | | 287 | |
GM Financial net sales and revenue | — | | | — | | | — | | | — | | | — | | | 13,831 | | | (19) | | | 13,812 | |
Net sales and revenue | $ | 96,733 | | | $ | 11,586 | | | $ | 350 | | | $ | 108,669 | | | $ | 103 | | | $ | 13,831 | | | $ | (118) | | | $ | 122,485 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| GMNA | | GMI | | Corporate | | Total Automotive | | Cruise | | GM Financial | | Eliminations/ Reclassifications | | Total |
Vehicle, parts and accessories | $ | 101,346 | | | $ | 14,931 | | | $ | 0 | | | $ | 116,277 | | | $ | — | | | $ | — | | | $ | 0 | | | $ | 116,277 | |
Used vehicles | 1,896 | | | 123 | | | 0 | | | 2,019 | | | — | | | — | | | 0 | | | 2,019 | |
Services and other | 3,124 | | | 1,057 | | | 220 | | | 4,401 | | | 100 | | | — | | | (100) | | | 4,401 | |
Automotive net sales and revenue | 106,366 | | | 16,111 | | | 220 | | | 122,697 | | | 100 | | | — | | | (100) | | | 122,697 | |
Leased vehicle income | — | | | — | | | — | | | — | | | — | | | 10,032 | | | 0 | | | 10,032 | |
Finance charge income | — | | | — | | | — | | | — | | | — | | | 4,071 | | | (7) | | | 4,064 | |
Other income | — | | | — | | | — | | | — | | | — | | | 451 | | | (7) | | | 444 | |
GM Financial net sales and revenue | — | | | — | | | — | | | — | | | — | | | 14,554 | | | (14) | | | 14,540 | |
Net sales and revenue | $ | 106,366 | | | $ | 16,111 | | | $ | 220 | | | $ | 122,697 | | | $ | 100 | | | $ | 14,554 | | | $ | (114) | | | $ | 137,237 | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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| Year Ended December 31, 2018 |
| GMNA | | GMI | | Corporate | | Total Automotive | | | | GM Financial | | Eliminations | | Total |
Vehicle, parts and accessories | $ | 107,217 | | | $ | 17,980 | | | $ | 20 | | | $ | 125,217 | | | | | $ | — | | | $ | (62) | | | $ | 125,155 | |
Used vehicles | 3,215 | | | 175 | | | 0 | | | 3,390 | | | | | — | | | (36) | | | 3,354 | |
Services and other | 3,360 | | | 993 | | | 183 | | | 4,536 | | | | | — | | | 0 | | | 4,536 | |
Automotive net sales and revenue | 113,792 | | | 19,148 | | | 203 | | | 133,143 | | | | | — | | | (98) | | | 133,045 | |
Leased vehicle income | — | | | — | | | — | | | — | | | | | 9,963 | | | 0 | | | 9,963 | |
Finance charge income | — | | | — | | | — | | | — | | | | | 3,629 | | | (8) | | | 3,621 | |
Other income | — | | | — | | | — | | | — | | | | | 424 | | | (4) | | | 420 | |
GM Financial net sales and revenue | — | | | — | | | — | | | — | | | | | 14,016 | | | (12) | | | 14,004 | |
Net sales and revenue | $ | 113,792 | | | $ | 19,148 | | | $ | 203 | | | $ | 133,143 | | | | | $ | 14,016 | | | $ | (110) | | | $ | 147,049 | |
Revenue is measured as the FASB issued ASU 2017-07, "Compensation – Retirement Benefits (Topic 715), Improvingamount of consideration we expect to receive in exchange for transferring goods or providing services. Adjustments to sales incentives for previously recognized sales were insignificant during the Presentationyears ended December 31, 2020, 2019 and 2018.
Contract liabilities in our Automotive segments primarily consist of Net Periodic Pension Costmaintenance, extended warranty and Net Periodic Postretirement Benefit Cost" (ASU 2017-07),other service contracts of $2.4 billion and $2.2 billion at December 31, 2020 and 2019, which requires thatare included in Accrued liabilities and Other liabilities. We recognized revenue of $1.1 billion and $1.5 billion related to contract liabilities during the service cost componentyears ended December 31, 2020 and 2019. We expect to recognize revenue of net periodic pension$1.2 billion, $503 million and OPEB (income) expense be presented$759 million in the same income statement line itemyears ending December 31, 2021, 2022 and thereafter related to contract liabilities at December 31, 2020.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Note 4. Marketable and Other Securities
The following table summarizes the fair value of cash equivalents and marketable debt securities, which approximates cost:
| | | | | | | | | | | | | | | | | |
| Fair Value Level | | December 31, 2020 | | December 31, 2019 |
Cash and cash equivalents | | | | | |
Cash and time deposits(a) | | | $ | 8,010 | | | $ | 6,828 | |
Available-for-sale debt securities | | | | | |
U.S. government and agencies | 2 | | 1,370 | | | 1,484 | |
Corporate debt | 2 | | 3,476 | | | 5,863 | |
Sovereign debt | 2 | | 2,051 | | | 2,123 | |
Total available-for-sale debt securities – cash equivalents | | | 6,897 | | | 9,470 | |
Money market funds | 1 | | 5,085 | | | 2,771 | |
Total cash and cash equivalents(b) | | | $ | 19,992 | | | $ | 19,069 | |
Marketable debt securities | | | | | |
U.S. government and agencies | 2 | | $ | 1,771 | | | $ | 226 | |
Corporate debt | 2 | | 3,630 | | | 2,932 | |
Mortgage and asset-backed | 2 | | 632 | | | 681 | |
Sovereign debt | 2 | | 3,013 | | | 335 | |
Total available-for-sale debt securities – marketable securities(c) | | | $ | 9,046 | | | $ | 4,174 | |
Restricted cash | | | | | |
Cash and cash equivalents | | | $ | 269 | | | $ | 292 | |
Money market funds | 1 | | 2,856 | | | 3,582 | |
Total restricted cash | | | $ | 3,125 | | | $ | 3,874 | |
| | | | | |
Available-for-sale debt securities included above with contractual maturities(d) | | | | | |
Due in one year or less | | | $ | 12,533 | | | |
Due between one and five years | | | 2,778 | | | |
| | | | | |
| | | | | |
Total available-for-sale debt securities with contractual maturities | | | $ | 15,311 | | | |
__________
(a) Includes $248 million that is designated exclusively to fund capital expenditures in GM Korea Company (GM Korea) at December 31, 2019. NaN amount was designated exclusively to fund GM Korea capital expenditures at December 31, 2020.
(b) Includes $761 million and $2.3 billion in Cruise at December 31, 2020 and 2019.
(c) Includes $943 million and $266 million in Cruise at December 31, 2020 and 2019.
(d) Excludes mortgage- and asset-backed securities of $632 million at December 31, 2020 as other employee compensation costs, whilethese securities are not due at a single maturity date.
Proceeds from the sale of available-for-sale debt securities sold prior to maturity were $1.9 billion, $4.5 billion and $4.3 billion in the years ended December 31, 2020, 2019 and 2018. Net unrealized gains and losses on available-for-sale debt securities were insignificant in the years ended December 31, 2020, 2019 and 2018. Cumulative unrealized gains and losses on available-for-sale debt securities were insignificant at December 31, 2020 and 2019.
We liquidated our remaining components of net periodic pensionshares in Lyft in the six months ended June 30, 2020. We recorded an insignificant unrealized loss in the years ended December 31, 2020 and OPEB (income) expense are to be presented outside operating income. ASU 2017-07 became effective for us on a retrospective basis on January 1, 2018 and will result in a decrease to Operating income2019, and an increase tounrealized gain of $142 million in Interest income and other non-operating income, net in the year ended December 31, 2018.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Cash and cash equivalents | $ | 19,992 | | | $ | 19,069 | |
Restricted cash included in Other current assets | 2,581 | | | 3,352 | |
Restricted cash included in Other assets | 544 | | | 522 | |
Total | $ | 23,117 | | | $ | 22,943 | |
Note 5. GM Financial Receivables and Transactions
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Retail | | Commercial(a) | | Total | | Retail | | Commercial(a) | | Total |
GM Financial receivables | $ | 51,288 | | | $ | 8,682 | | | $ | 59,970 | | | $ | 42,229 | | | $ | 11,671 | | | $ | 53,900 | |
Less: allowance for loan losses | (1,915) | | | (63) | | | (1,978) | | | (866) | | | (78) | | | (944) | |
GM Financial receivables, net | $ | 49,373 | | | $ | 8,619 | | | $ | 57,992 | | | $ | 41,363 | | | $ | 11,593 | | | $ | 52,956 | |
| | | | | | | | | | | |
Fair value of GM Financial receivables utilizing Level 2 inputs | | | | | $ | 8,619 | | | | | | | $ | 11,593 | |
Fair value of GM Financial receivables utilizing Level 3 inputs | | | | | $ | 51,645 | | | | | | | $ | 41,973 | |
__________
(a)Net of dealer cash management balances of $1.4 billion and $1.2 billion at December 31, 2020 and 2019. Under the cash management program, subject to certain conditions, a dealer may choose to reduce the amount of interest on their floorplan line by making principal payments to GM Financial in advance.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Allowance for loan losses at beginning of period | $ | 944 | | | $ | 911 | | | $ | 942 | |
Impact of adoption ASU 2016-13 (Note 2) | 801 | | | — | | | — | |
Provision for loan losses | 881 | | | 726 | | | 642 | |
Charge-offs | (1,169) | | | (1,246) | | | (1,199) | |
Recoveries | 542 | | | 551 | | | 536 | |
Effect of foreign currency | (21) | | | 2 | | | (10) | |
Allowance for loan losses at end of period | $ | 1,978 | | | $ | 944 | | | $ | 911 | |
Retail Finance Receivables GM Financial's retail finance receivable portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. A summary of the amortized cost of the retail finance receivables by FICO score or its equivalent, determined at origination, for each vintage of the retail finance receivables portfolio at December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Origination | | | | December 31, 2020 | | December 31, 2019 |
| 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | Total | | Percent | | Total | | Percent |
Prime – FICO score 680 and greater | $ | 18,685 | | | $ | 7,033 | | | $ | 4,491 | | | $ | 1,917 | | | $ | 555 | | | $ | 119 | | | | | $ | 32,800 | | | 64.0 | % | | $ | 25,400 | | | 60.1 | % |
Near-prime – FICO score 620 to 679 | 3,695 | | | 2,097 | | | 1,232 | | | 603 | | | 225 | | | 83 | | | | | 7,935 | | | 15.4 | % | | 6,862 | | | 16.3 | % |
Sub-prime – FICO score less than 620 | 3,803 | | | 2,920 | | | 1,740 | | | 1,173 | | | 610 | | | 307 | | | | | 10,553 | | | 20.6 | % | | 9,967 | | | 23.6 | % |
Retail finance receivables, net of fees | $ | 26,183 | | | $ | 12,050 | | | $ | 7,463 | | | $ | 3,693 | | | $ | 1,390 | | | $ | 509 | | | | | $ | 51,288 | | | 100.0 | % | | $ | 42,229 | | | 100.0 | % |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
GM Financial reviews the ongoing credit quality of retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, GM Financial generally has the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $714 million and $875 million at December 31, 2020 and 2019. The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of retail finance receivables for each vintage of the portfolio at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Origination | | December 31, 2020 | | December 31, 2019 |
| 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | Total | | Percent | | Total(a) | | Percent |
0-to-30 days | $ | 25,894 | | | $ | 11,591 | | | $ | 7,131 | | | $ | 3,454 | | | $ | 1,249 | | | $ | 421 | | | | | $ | 49,740 | | | 97.0 | % | | | | |
31-to-60 days | 210 | | | 325 | | | 235 | | | 170 | | | 102 | | | 61 | | | | | 1,103 | | | 2.1 | % | | $ | 1,354 | | | 3.2 | % |
Greater-than-60 days | 72 | | | 123 | | | 90 | | | 64 | | | 37 | | | 26 | | | | | 412 | | | 0.8 | % | | 542 | | | 1.3 | % |
Finance receivables more than 30 days delinquent | 282 | | | 448 | | | 325 | | | 234 | | | 139 | | | 87 | | | | | 1,515 | | | 2.9 | % | | 1,896 | | | 4.5 | % |
In repossession | 7 | | | 11 | | | 7 | | | 5 | | | 2 | | | 1 | | | | | 33 | | | 0.1 | % | | 44 | | | 0.1 | % |
Finance receivables more than 30 days delinquent or in repossession | 289 | | | 459 | | | 332 | | | 239 | | | 141 | | | 88 | | | | | 1,548 | | | 3.0 | % | | $ | 1,940 | | | 4.6 | % |
Retail finance receivables, net of fees | $ | 26,183 | | | $ | 12,050 | | | $ | 7,463 | | | $ | 3,693 | | | $ | 1,390 | | | $ | 509 | | | | | $ | 51,288 | | | 100.0 | % | | | | |
__________
(a)Represents the contractual amounts of delinquent retail finance receivables, which is not significantly different than the outstanding amortized cost for such receivables.
The outstanding amortized cost of retail finance receivables that are considered TDRs was $2.2 billion at December 31, 2020, including $301 million in nonaccrual loans.
Commercial Finance Receivables GM Financial's commercial finance receivables consist of dealer financings, primarily for inventory purchases. Proprietary models are used to assign a risk rating to each dealer. GM Financial performs periodic credit reviews of each dealership and adjusts the dealership's risk rating, if necessary. The commercial finance receivables on nonaccrual status were insignificant at December 31, 2020.
Prior to January 1, 2020, GM Financial estimated the allowance for loan losses based on an analysis of the experience of comparable commercial lenders. Effective January 1, 2020, GM Financial establishes the allowance for loan losses based on historical loss experience for the consolidated portfolio, in addition to forecast for industry vehicle sales. The updated risk rating categories are as follows:
| | | | | | | | |
Rating | | Description |
I | | Performing accounts with strong to acceptable financial metrics with at least satisfactory capacity to meet financial commitments. |
II | | Performing accounts experiencing potential weakness in financial metrics and repayment prospects resulting in increased monitoring. |
III | | Non-Performing accounts with inadequate paying capacity for current obligations and have the distinct possibility of creating a loss if deficiencies are not corrected. |
IV | | Non-Performing accounts with inadequate paying capacity for current obligations and inherent weaknesses that make collection of liquidation in full highly questionable or improbable. |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Dealers with III and IV risk ratings are subject to additional monitoring and restrictions on funding, including suspension of lines of credit and liquidation of assets. The following table summarizes the credit risk profile by dealer risk rating of commercial finance receivables at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year of Origination(a) | | December 31, 2020 | | |
| Revolving | | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | | Total | | Percent | | | | |
I | $ | 6,968 | | | $ | 510 | | | $ | 159 | | | $ | 63 | | | $ | 95 | | | $ | 43 | | | $ | 19 | | | | | $ | 7,857 | | | 90.5 | % | | | | |
II | 491 | | | 2 | | | 18 | | | 2 | | | 3 | | | 18 | | | 34 | | | | | 568 | | | 6.5 | % | | | | |
III | 203 | | | 0 | | | 8 | | | 29 | | | 2 | | | 11 | | | 0 | | | | | 253 | | | 2.9 | % | | | | |
IV | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 4 | | | | | 4 | | | 0.1 | % | | | | |
Commercial finance receivables, net of fees | $ | 7,662 | | | $ | 512 | | | $ | 185 | | | $ | 94 | | | $ | 100 | | | $ | 72 | | | $ | 57 | | | | | $ | 8,682 | | | 100.0 | % | | | | |
_________
(a)Floorplan advances comprise 97% of the total revolving balance. Dealer term loans are presented by year of origination.
Transactions with GM Financial The following table shows transactions between our Automotive segments and GM Financial. These amounts are presented in GM Financial's consolidated balance sheets and statements of income.
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Consolidated Balance Sheets(a) | | | |
Commercial finance receivables, net due from GM consolidated dealers | $ | 398 | | | $ | 478 | |
| | | |
Subvention receivable(b) | $ | 642 | | | $ | 676 | |
Commercial loan funding payable | $ | 23 | | | $ | 74 | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Consolidated Statements of Income | | | | | |
Interest subvention earned on finance receivables | $ | 679 | | | $ | 588 | | | $ | 554 | |
Leased vehicle subvention earned | $ | 3,042 | | | $ | 3,273 | | | $ | 3,274 | |
__________
(a)All balance sheet amounts are eliminated upon consolidation.
(b)Our Automotive segments made cash payments to GM Financial for subvention of $3.9 billion, $4.1 billion, and $3.8 billion in the years ended December 31, 20172020, 2019 and 2016.2018.
In August 2017 the FASB issued ASU 2017-12, "DerivativesGM Financial's Board of Directors declared and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), which simplifies the applicationpaid dividends of hedge accounting$800 million, $400 million and more closely aligns hedge accounting with companies' risk management strategies thereby making more hedging strategies eligible for hedge accounting. ASU 2017-12 permits hedge accounting for specific risks in hedging relationships involving nonfinancial risk and interest rate risk. The simplifications to the application of hedge accounting may result$375 million on its common stock in the future expansion of our use of hedge accounting. ASU 2017-12 became effective for us on January 1,years ended December 31, 2020, 2019 and 2018. ASU 2017-12 expanded disclosure requirements and required a cumulative-effect adjustment for certain items upon adoption. The adoption of ASU 2017-12 was not material to our consolidated financial statements.
Note 6.Inventories
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Total productive material, supplies and work in process | $ | 5,117 | | | $ | 4,713 | |
Finished product, including service parts | 5,118 | | | 5,685 | |
Total inventories | $ | 10,235 | | | $ | 10,398 | |
Note 3. Discontinued Operations
On March 5, 2017 we entered into the Agreement to sell our European Business to PSA Group. On July 31, 2017 we closed the sale of our Opel/Vauxhall Business to PSA Group and on October 31, 2017 we closed the sale of the Fincos to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
The net consideration paid at closing for the European Business was $2.5 billion, consisting of (1) $2.2 billion in cash; and (2) $808 million in warrants in PSA Group; partially offset by (3) the $455 million de-risking premium payment made to PSA Group for assuming certain underfunded pension liabilities. The warrants are not exercisable for five years and do not include any governance or voting rights with respect to PSA Group. In addition, we agreed to sell the shares of PSA Group received upon exercise of the warrants within 35 days after exercise. The purchase price is subject to certain working capital adjustments as provided in the Agreement.
The total charge from the sale of the European Business was $6.2 billion, net of tax, of which $3.9 billion is recorded in Income (loss) from discontinued operations, net of tax, and $2.3 billion is recorded in Income tax expense. The charge relates to: (1) $4.3 billion of deferred tax assets that will no longer be realizable or that transferred to PSA Group; (2) $1.5 billion related to previously deferred pension losses and payment of the de-risking premium to PSA Group for its assumption of certain underfunded pension liabilities; (3) a pre-tax disposal loss of $525 million as a result of the sale of the Fincos, which includes the recognition of $197 million of foreign currency translation losses; (4) a pre-tax charge of $421 million for the cancellation of production programs resulting from the convergence of vehicle platforms between the European Business and PSA Group; and (5) other insignificant costs to support the separation of operations to be provided for a period of time following closing; partially offset by proceeds.
Refer to Note 17 to our consolidated financial statements for further details related to the working capital adjustments and indemnity provided by the Seller to PSA Group.
We retained net underfunded pension liabilities of $6.8 billion owed primarily to current pensioners and former employees of the European Business with vested pension rights. PSA Group assumed, pursuant to the Agreement, approximately $3.1 billion of net underfunded pension liabilities primarily with respect to active employees of the Opel/Vauxhall Business, and during the year ended December 31, 2017 the Seller made payments to PSA Group, or one or more pension funding vehicles, of $3.4 billion in respect of these assumed liabilities, which includes pension funding payments for active employees and the de-risking premium payment of $455 million discussed above. At closing we drew upon our three-year unsecured revolving credit facility to fund these payments. We issued debt securities, as described in Note 14, thereafter to repay the amount drawn on our credit facility. As part of the retained pension liabilities described above, we retained the U.K. defined benefit pension plans in existence at signing related to the Opel/Vauxhall Business, including responsibility for service cost accruals through the closing date. Those plans with active participants closed to future accrual as of July 30, 2017. Any future service cost accruals on and from the closing date will be the responsibility of PSA Group.
We have agreed to purchase from and supply to PSA Group certain vehicles for a period of time following closing. During the year ended December 31, 2017 Total net sales and revenue of $853 million and purchases and expenses of $218 million related to transactions with the Opel/Vauxhall Business that would have been eliminated in consolidation prior to the sale of the Opel/Vauxhall Business were included in continuing operations. During the year ended December 31, 2017 cash payments were $242 million and cash receipts of $1.2 billion were recorded in Net cash provided by operating cash flows - continuing operations related to transactions with the Opel/Vauxhall Business.
The following tablesummarizes the results of the European Business operations:
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Automotive net sales and revenue | $ | 11,257 |
|
| $ | 19,704 |
|
| $ | 19,075 |
|
GM Financial net sales and revenue | 466 |
|
| 552 |
|
| 573 |
|
Total net sales and revenue | 11,723 |
|
| 20,256 |
|
| 19,648 |
|
Automotive cost of sales | 11,049 |
|
| 18,894 |
|
| 18,343 |
|
GM Financial interest, operating and other expenses | 342 |
|
| 423 |
|
| 429 |
|
Automotive selling, general, and administrative expense | 813 |
|
| 1,356 |
|
| 1,517 |
|
Other income and (expense) items | (72 | ) |
| 93 |
|
| (12 | ) |
Loss from discontinued operations before taxes | 553 |
|
| 324 |
|
| 653 |
|
Loss on sale of discontinued operations before taxes(a)(b) | 2,176 |
|
| — |
|
| — |
|
Total loss from discontinued operations before taxes | 2,729 |
|
| 324 |
|
| 653 |
|
Income tax expense (benefit)(b)(c) | 1,483 |
|
| (323 | ) |
| (678 | ) |
Income (loss) from discontinued operations, net of tax | $ | (4,212 | ) |
| $ | (1 | ) |
| $ | 25 |
|
__________
| |
(a) | Includes contract cancellation charges associated with the disposal for the year ended December 31, 2017. |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
| |
(b) | Total loss on sale of discontinued operations, net of tax was $3.9 billion for the year ended December 31, 2017. |
| |
(c) | Includes $2.0 billion of deferred tax assets that transferred to PSA Group in the year ended December 31, 2017. |
The following tablesummarizes the assets and liabilities of the European Business at December 31, 2016:
|
| | | |
| December 31, 2016 |
Current Assets |
|
|
Cash and cash equivalents | $ | 386 |
|
Accounts and notes receivable, net | 938 |
|
GM Financial receivables, net | 5,938 |
|
Inventories | 2,748 |
|
Equipment on operating leases, net | 786 |
|
Other current assets | 382 |
|
Total current assets held for sale | 11,178 |
|
Non-current Assets |
|
GM Financial receivables, net | 3,723 |
|
Property, net | 3,217 |
|
Deferred income taxes | 1,920 |
|
Other assets | 515 |
|
Total non-current assets held for sale | 9,375 |
|
Total Assets Held for Sale | $ | 20,553 |
|
|
|
Current Liabilities |
|
Accounts payable (principally trade) | $ | 3,628 |
|
Short-term debt and current portion of long-term debt |
|
Automotive | 107 |
|
GM Financial | 5,124 |
|
Accrued liabilities | 3,299 |
|
Total current liabilities held for sale | 12,158 |
|
Non-current Liabilities |
|
Long-term debt |
|
Automotive | 85 |
|
GM Financial | 4,189 |
|
Pensions | 2,687 |
|
Other liabilities | 665 |
|
Total non-current liabilities held for sale | 7,626 |
|
Total Liabilities Held for Sale | $ | 19,784 |
|
Note 4. Marketable Securities
The following table summarizes the fair value of cash equivalents and marketable securities which approximates cost:
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | |
| Fair Value Level |
| December 31, 2017 |
| December 31, 2016 |
Cash and cash equivalents |
|
|
|
|
|
Cash, cash equivalents and time deposits |
|
| $ | 6,962 |
|
| $ | 5,692 |
|
Available-for-sale securities |
|
|
|
|
|
|
|
U.S. government and agencies | 2 |
| 750 |
|
| 1,158 |
|
Corporate debt | 2 |
| 3,032 |
|
| 2,524 |
|
Money market funds | 1 |
| 2,814 |
|
| 1,801 |
|
Sovereign debt | 2 |
| 1,954 |
|
| 1,399 |
|
Total available-for-sale securities – cash equivalents |
|
| 8,550 |
|
| 6,882 |
|
Total cash and cash equivalents |
|
| $ | 15,512 |
|
| $ | 12,574 |
|
Marketable securities |
|
|
|
|
|
|
|
U.S. government and agencies | 2 |
| $ | 3,310 |
|
| $ | 5,886 |
|
Corporate debt | 2 |
| 3,665 |
|
| 3,611 |
|
Mortgage and asset-backed | 2 |
| 635 |
|
| 197 |
|
Sovereign debt | 2 |
| 703 |
|
| 2,147 |
|
Total available-for-sale securities – marketable securities |
|
| $ | 8,313 |
|
| $ | 11,841 |
|
Restricted cash |
|
|
|
|
|
|
|
Cash, cash equivalents and time deposits |
|
| $ | 219 |
|
| $ | 248 |
|
Available-for-sale securities, primarily money market funds | 1 |
| 2,117 |
|
| 1,665 |
|
Total restricted cash |
|
| $ | 2,336 |
|
| $ | 1,913 |
|
|
|
|
|
|
|
|
|
Available-for-sale securities included above with contractual maturities(a) |
|
|
|
|
|
|
|
Due in one year or less |
|
| $ | 8,539 |
|
|
|
|
Due between one and five years |
|
| 4,875 |
|
|
|
|
Total available-for-sale securities with contractual maturities |
|
| $ | 13,414 |
|
|
|
|
__________
| |
(a) | Excludes mortgage and asset-backed securities. |
Sales proceeds from investments classified as available-for-sale and sold prior to maturity were $5.6 billion, $8.5 billion and $7.9 billion in the years ended December 31, 2017, 2016 and 2015. Net unrealized gains and losses on available-for-sale securities and realized gains and losses on trading securities were insignificant in the years ended December 31, 2017, 2016 and 2015. Cumulative unrealized gains and losses on available-for-sale securities were insignificant at December 31, 2017 and 2016.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Cash and cash equivalents | $ | 15,512 |
|
| $ | 12,574 |
|
Restricted cash included in Other current assets | 1,745 |
|
| 1,382 |
|
Restricted cash included in Other assets | 591 |
|
| 531 |
|
Total | $ | 17,848 |
|
| $ | 14,487 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Note 5. GM Financial Receivables |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Retail |
| Commercial |
| Total |
| Retail |
| Commercial |
| Total |
Finance receivables, collectively evaluated for impairment, net of fees | $ | 30,486 |
|
| $ | 9,935 |
|
| $ | 40,421 |
|
| $ | 24,480 |
|
| $ | 7,506 |
|
| $ | 31,986 |
|
Finance receivables, individually evaluated for impairment, net of fees | 2,228 |
|
| 22 |
|
| 2,250 |
|
| 1,920 |
|
| 27 |
|
| 1,947 |
|
GM Financial receivables | 32,714 |
|
| 9,957 |
|
| 42,671 |
|
| 26,400 |
|
| 7,533 |
|
| 33,933 |
|
Less: allowance for loan losses | (889 | ) |
| (53 | ) |
| (942 | ) |
| (765 | ) |
| (40 | ) |
| (805 | ) |
GM Financial receivables, net | $ | 31,825 |
|
| $ | 9,904 |
|
| $ | 41,729 |
|
| $ | 25,635 |
|
| $ | 7,493 |
|
| $ | 33,128 |
|
| | | | | | | | | | | |
Fair value of GM Financial receivables | | | | | $ | 41,735 |
| | | | | | $ | 33,181 |
|
We estimate the fair value of retail finance receivables using observable and unobservable Level 3 inputs within a cash flow model. The inputs reflect assumptions regarding expected prepayments, deferrals, delinquencies, recoveries and charge-offs of the loans within the portfolio. The cash flow model produces an estimated amortization schedule of the finance receivables. The projected cash flows are then discounted to derive the fair value of the portfolio. Macroeconomic factors could affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in our cash flow model. A substantial majority of our commercial finance receivables have variable interest rates. The carrying amount, a Level 2 input, is considered to be a reasonable estimate of fair value.
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Allowance for loan losses at beginning of period | $ | 805 |
|
| $ | 749 |
|
| $ | 668 |
|
Provision for loan losses | 757 |
|
| 644 |
|
| 603 |
|
Charge-offs | (1,173 | ) |
| (1,137 | ) |
| (969 | ) |
Recoveries | 552 |
|
| 542 |
|
| 469 |
|
Effect of foreign currency | 1 |
|
| 7 |
|
| (22 | ) |
Allowance for loan losses at end of period | $ | 942 |
|
| $ | 805 |
|
| $ | 749 |
|
The allowance for loan losses on retail and commercial finance receivables included a collective allowance of $611 million, $525 million and $524 million and a specific allowance of $331 million, $280 million and $225 million at December 31, 2017, 2016 and 2015.
Retail Finance Receivables We use proprietary scoring systems in the underwriting process that measure the credit quality of retail finance receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO scores or their equivalent) and contract characteristics. We also consider other factors such as employment history, financial stability and capacity to pay. Subsequent to origination we review the credit quality of retail finance receivables based on customer payment activity. While we have historically focused on consumers with lower than prime credit scores, we have expanded our prime lending programs. At December 31, 2017 and 2016 33% and 41% of retail finance receivables were from consumers with sub-prime credit scores, which are defined as FICO scores or equivalent scores of less than 620 at the time of loan origination.
We purchase retail finance contracts from automobile dealers without recourse, and accordingly, the dealer has no liability to GM Financial if the consumer defaults on the contract. Finance receivables are collateralized by vehicle titles and GM Financial has the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract.
An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $778 million and $798 million at December 31, 2017 and 2016. The following table summarizes the contractual amount of delinquent retail finance receivables, which is not significantly different than the recorded investment of the retail finance receivables:
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Amount |
| Percent of Contractual Amount Due |
| Amount |
| Percent of Contractual Amount Due |
31-to-60 days delinquent | $ | 1,334 |
|
| 4.1 | % |
| $ | 1,220 |
|
| 4.6 | % |
Greater-than-60 days delinquent | 559 |
|
| 1.7 | % |
| 532 |
|
| 2.0 | % |
Total finance receivables more than 30 days delinquent | 1,893 |
|
| 5.8 | % |
| 1,752 |
|
| 6.6 | % |
In repossession | 27 |
|
| — | % |
| 47 |
|
| 0.2 | % |
Total finance receivables more than 30 days delinquent or in repossession | $ | 1,920 |
|
| 5.8 | % |
| $ | 1,799 |
|
| 6.8 | % |
Retail finance receivables classified as TDRs and individually evaluated for impairment were $2.2 billion and $1.9 billion and the allowance for loan losses included $328 million and $276 million of specific allowances on these receivables at December 31, 2017 and 2016.
Commercial Finance Receivables Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. A proprietary model is used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The commercial finance receivables on non-accrual status were insignificant at December 31, 2017 and 2016. The following table summarizes the credit risk profile by dealer risk rating of the commercial finance receivables:
|
| | | | | | | | |
|
| December 31, 2017 | | December 31, 2016 |
Group I | – Dealers with superior financial metrics | $ | 1,915 |
| | $ | 1,372 |
|
Group II | – Dealers with strong financial metrics | 3,465 |
| | 2,526 |
|
Group III | – Dealers with fair financial metrics | 3,239 |
| | 2,598 |
|
Group IV | – Dealers with weak financial metrics | 997 |
| | 613 |
|
Group V | – Dealers warranting special mention due to elevated risks | 260 |
| | 334 |
|
Group VI | – Dealers with loans classified as substandard, doubtful or impaired | 81 |
|
| 90 |
|
|
| $ | 9,957 |
| | $ | 7,533 |
|
Note 6.Inventories
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Total productive material, supplies and work in process | $ | 4,203 |
|
| $ | 5,008 |
|
Finished product, including service parts | 6,460 |
|
| 6,032 |
|
Total inventories | $ | 10,663 |
|
| $ | 11,040 |
|
Note 7. Equipment on Operating Leases
Equipment on operating leases primarily consists of leases to retail customers that are recorded as operating leases and vehicle sales to daily rental car companies with a guaranteed repurchase obligation.
|
| | | | | | | |
| December 31, 2017 | | December 31, 2016 |
Equipment on operating leases | $ | 53,947 |
| | $ | 41,851 |
|
Less: accumulated depreciation | (9,959 | ) | | (6,399 | ) |
Equipment on operating leases, net(a) | $ | 43,988 |
| | $ | 35,452 |
|
__________
| |
(a) | Includes $42.9 billion and $34.3 billionof GM Financial. The current portion of GM Financial equipment on operating leases, net in the years ended December 31, 2017 and 2016. |
Depreciation expense related to equipment on operating leases net was $6.7 billion, $4.7 billion and $2.5 billionis included in the years ended December 31, 2017, 2016 and 2015.
Other current assets.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Equipment on operating leases | $ | 50,000 | | | $ | 53,081 | |
Less: accumulated depreciation | (10,181) | | | (10,989) | |
Equipment on operating leases, net | $ | 39,819 | | | $ | 42,092 | |
At December 31, 2020, the estimated residual value of our leased assets at the end of the lease term was $29.2 billion.
Depreciation expense related to Equipment on operating leases, net was $7.2 billion, $7.3 billion and $7.5 billion in the years ended December 31, 2020, 2019 and 2018.
The following table summarizes minimum rentallease payments due to GM Financial on leases to retail customers:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total |
Lease receipts under operating leases | $ | 6,142 | | | $ | 3,783 | | | $ | 1,441 | | | $ | 112 | | | $ | 2 | | | $ | 0 | | | $ | 11,480 | |
|
| | | | | | | | | | | | | | | | | | | |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
Minimum rental receipts under operating leases | $ | 6,848 |
| | $ | 4,530 |
| | $ | 1,759 |
| | $ | 189 |
| | $ | 12 |
|
Note 8. Equity in Net Assets of Nonconsolidated Affiliates
Nonconsolidated affiliates are entities in which we maintain an equity ownership interest is maintained and for which we use the equity method of accounting is used due to our ability to exert significant influence over decisions relating to their operating and financial affairs. Revenue and expenses of our joint ventures are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity income.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Automotive China equity income | $ | 512 | | | $ | 1,132 | | | $ | 1,981 | |
Other joint ventures equity income | 162 | | | 136 | | | 182 | |
Total Equity income | $ | 674 | | | $ | 1,268 | | | $ | 2,163 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Automotive China equity income | $ | 1,976 |
|
| $ | 1,973 |
|
| $ | 2,057 |
|
Other joint ventures equity income | 156 |
|
| 309 |
|
| 136 |
|
Total Equity income | $ | 2,132 |
|
| $ | 2,282 |
|
| $ | 2,193 |
|
Investments in Nonconsolidated Affiliates
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Automotive China carrying amount | $ | 6,599 | | | $ | 7,044 | |
Other investments carrying amount | 1,807 | | | 1,518 | |
Total equity in net assets of nonconsolidated affiliates | $ | 8,406 | | | $ | 8,562 | |
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Automotive China carrying amount | $ | 7,832 |
|
| $ | 7,859 |
|
Other investments carrying amount | 1,241 |
|
| 1,137 |
|
Total equity in net assets of nonconsolidated affiliates | $ | 9,073 |
|
| $ | 8,996 |
|
The carrying amount of our investments in certain joint ventures exceeded our share of the underlying net assets by $4.3$4.2 billion at December 31, 20172020 and 20162019 primarily due primarily to goodwill from the application of fresh-start reporting and the purchase of additional interests in nonconsolidated affiliates.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes our direct ownership interests in our China JVs:
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Automotive China JVs | | | |
SAIC General Motors Corp., Ltd. (SGM) | 50 | % | | 50 | % |
Pan Asia Technical Automotive Center Co., Ltd. | 50 | % | | 50 | % |
SAIC General Motors Sales Co., Ltd. | 49 | % | | 49 | % |
SAIC GM Wuling Automobile Co., Ltd. (SGMW) | 44 | % | | 44 | % |
Shanghai OnStar Telematics Co., Ltd. (Shanghai OnStar) | 40 | % | | 40 | % |
SAIC GM (Shenyang) Norsom Motors Co., Ltd. (SGM Norsom) | 25 | % | | 25 | % |
SAIC GM Dong Yue Motors Co., Ltd. (SGM DY) | 25 | % | | 25 | % |
SAIC GM Dong Yue Powertrain Co., Ltd. (SGM DYPT) | 25 | % | | 25 | % |
Other joint ventures | | | |
SAIC-GMAC Automotive Finance Company Limited (SAIC-GMAC) | 35 | % | | 35 | % |
SAIC-GMF Leasing Co., Ltd. | 35 | % | | 35 | % |
|
| | | | | |
| December 31, 2017 | | December 31, 2016 |
Automotive China JVs | | | |
SAIC General Motors Corp., Ltd. (SGM) | 50 | % | | 50 | % |
FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM) | 50 | % | | 50 | % |
Pan Asia Technical Automotive Center Co., Ltd. | 50 | % | | 50 | % |
SAIC General Motors Sales Co., Ltd. | 49 | % | | 49 | % |
SAIC GM Wuling Automobile Co., Ltd. (SGMW) | 44 | % | | 44 | % |
Shanghai OnStar Telematics Co., Ltd. (Shanghai OnStar) | 40 | % | | 40 | % |
SAIC GM (Shenyang) Norsom Motors Co., Ltd. (SGM Norsom) | 25 | % | | 25 | % |
SAIC GM Dong Yue Motors Co., Ltd. (SGM DY) | 25 | % | | 25 | % |
SAIC GM Dong Yue Powertrain Co., Ltd. (SGM DYPT) | 25 | % | | 25 | % |
Shanghai Chengxin Used Car Operation and Management Co., Ltd. (Shanghai Chengxin Used Car) | — | % | | 33 | % |
Other joint ventures | | | |
SAIC-GMAC | 35 | % | | 35 | % |
SGM is a joint venture we established with Shanghai Automotive Industry Corporation (SAIC) (50%). SGM has interests in three3 other joint ventures in China: SGM Norsom, SGM DY and SGM DYPT. These three3 joint ventures are jointly held by SGM (50%), SAIC (25%) and ourselves. These four4 joint ventures are engaged in the production, import and sale of a range of products under the Buick, Chevrolet and Cadillac brands. SGM also has interests in Shanghai OnStar (20%), SAIC-GMAC (20%) and SAIC-GMACSAIC-GMF Leasing Co., Ltd. (20%). Shanghai Automotive Group Finance Company Ltd., a subsidiary of SAIC, owns 45% of SAIC-GMAC. SAIC Financial Holdings Company, a subsidiary of SAIC, owns 45% of SAIC-GMF Leasing Co., Ltd.
Summarized Financial Data of Nonconsolidated Affiliates
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Automotive China JVs | | Others | | Total | | Automotive China JVs | | Others | | Total |
Summarized Balance Sheet Data | | | | | | | | | | | |
Current assets | $ | 17,604 | | | $ | 16,844 | | | $ | 34,448 | | | $ | 14,035 | | | $ | 13,319 | | | $ | 27,354 | |
Non-current assets | 14,875 | | | 8,634 | | | 23,509 | | | 14,484 | | | 6,680 | | | 21,164 | |
Total assets | $ | 32,479 | | | $ | 25,478 | | | $ | 57,957 | | | $ | 28,519 | | | $ | 19,999 | | | $ | 48,518 | |
| | | | | | | | | | | |
Current liabilities | $ | 25,633 | | | $ | 14,808 | | | $ | 40,441 | | | $ | 21,256 | | | $ | 11,588 | | | $ | 32,844 | |
Non-current liabilities | 1,163 | | | 6,654 | | | 7,817 | | | 968 | | | 5,017 | | | 5,985 | |
Total liabilities | $ | 26,796 | | | $ | 21,462 | | | $ | 48,258 | | | $ | 22,224 | | | $ | 16,605 | | | $ | 38,829 | |
| | | | | | | | | | | |
Noncontrolling interests | $ | 824 | | | $ | 1 | | | $ | 825 | | | $ | 847 | | | $ | 1 | | | $ | 848 | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Summarized Operating Data | | | | | |
Automotive China JVs' net sales | $ | 38,736 | | | $ | 39,123 | | | $ | 50,316 | |
Others' net sales | 1,850 | | | 1,815 | | | 1,721 | |
Total net sales | $ | 40,586 | | | $ | 40,938 | | | $ | 52,037 | |
| | | | | |
Automotive China JVs' net income | $ | 1,239 | | | $ | 2,258 | | | $ | 3,992 | |
Others' net income | 436 | | | 477 | | | 536 | |
Total net income | $ | 1,675 | | | $ | 2,735 | | | $ | 4,528 | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
Summarized Financial Data of Nonconsolidated Affiliates
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Automotive China JVs |
| Others |
| Total |
| Automotive China JVs |
| Others |
| Total |
Summarized Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
Current assets | $ | 17,370 |
|
| $ | 13,484 |
|
| $ | 30,854 |
|
| $ | 17,325 |
|
| $ | 8,383 |
|
| $ | 25,708 |
|
Non-current assets | 14,188 |
|
| 3,409 |
|
| 17,597 |
|
| 12,712 |
|
| 5,991 |
|
| 18,703 |
|
Total assets | $ | 31,558 |
|
| $ | 16,893 |
|
| $ | 48,451 |
|
| $ | 30,037 |
|
| $ | 14,374 |
|
| $ | 44,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities | $ | 22,642 |
|
| $ | 12,255 |
|
| $ | 34,897 |
|
| $ | 21,428 |
|
| $ | 7,277 |
|
| $ | 28,705 |
|
Non-current liabilities | 1,639 |
|
| 1,903 |
|
| 3,542 |
|
| 1,393 |
|
| 3,898 |
|
| 5,291 |
|
Total liabilities | $ | 24,281 |
|
| $ | 14,158 |
|
| $ | 38,439 |
|
| $ | 22,821 |
|
| $ | 11,175 |
|
| $ | 33,996 |
|
| | | | | | | | | | | |
Noncontrolling interests | $ | 871 |
| | $ | 1 |
| | $ | 872 |
| | $ | 856 |
| | $ | 1 |
| | $ | 857 |
|
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Summarized Operating Data |
|
|
|
|
|
Automotive China JVs' net sales | $ | 50,065 |
|
| $ | 47,150 |
|
| $ | 44,959 |
|
Others' net sales | 2,542 |
|
| 2,412 |
|
| 3,571 |
|
Total net sales | $ | 52,607 |
|
| $ | 49,562 |
|
| $ | 48,530 |
|
| | | | | |
Automotive China JVs' net income | $ | 3,984 |
|
| $ | 4,117 |
|
| $ | 4,290 |
|
Others' net income | 648 |
|
| 378 |
|
| 435 |
|
Total net income | $ | 4,632 |
|
| $ | 4,495 |
|
| $ | 4,725 |
|
Transactions with Nonconsolidated Affiliates Our nonconsolidated affiliates are involved in various aspects of the development, production and marketing of cars, trucks, crossovers, cars and automobile parts. We enter into transactions with certain nonconsolidated affiliates to purchase and sell component parts and vehicles. The following tables summarize transactions with and balances related to our nonconsolidated affiliates:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Automotive sales and revenue | $ | 235 | | | $ | 199 | | | $ | 406 | |
Automotive purchases, net | $ | 165 | | | $ | 1,065 | | | $ | 1,155 | |
Dividends received | $ | 1,198 | | | $ | 1,852 | | | $ | 2,022 | |
Operating cash flows | $ | 1,473 | | | $ | 913 | | | $ | 657 | |
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Accounts and notes receivable, net | $ | 954 | | | $ | 1,007 | |
Accounts payable | $ | 494 | | | $ | 369 | |
Undistributed earnings | $ | 1,594 | | | $ | 2,118 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Automotive sales and revenue | $ | 923 |
| | $ | 889 |
| | $ | 1,745 |
|
Automotive purchases, net | $ | 674 |
| | $ | 803 |
| | $ | 7 |
|
Dividends received | $ | 2,000 |
| | $ | 2,120 |
| | $ | 2,047 |
|
Operating cash flows | $ | 2,321 |
| | $ | 2,512 |
| | $ | 3,853 |
|
|
| | | | | | | |
| December 31, 2017 | | December 31, 2016 |
Accounts and notes receivable, net | $ | 780 |
| | $ | 807 |
|
Accounts payable | $ | 534 |
| | $ | 553 |
|
Undistributed earnings | $ | 2,184 |
| | $ | 2,172 |
|
Note 9. Property
| | | | | | | | | | | | | | | | | |
| Estimated Useful Lives in Years | | December 31, 2020 | | December 31, 2019 |
Land | | | $ | 1,339 | | | $ | 1,302 | |
Buildings and improvements | 5-40 | | 9,671 | | | 9,705 | |
Machinery and equipment | 3-27 | | 30,013 | | | 29,814 | |
Special tools | 1-13 | | 20,851 | | | 23,586 | |
Construction in progress | | | 3,581 | | | 3,042 | |
Total property | | | 65,455 | | | 67,449 | |
Less: accumulated depreciation | | | (27,823) | | | (28,699) | |
Total property, net | | | $ | 37,632 | | | $ | 38,750 | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | |
| Estimated Useful Lives in Years | | December 31, 2017 | | December 31, 2016 |
Land |
| | $ | 1,647 |
| | $ | 1,587 |
|
Buildings and improvements | 5-40 | | 7,471 |
| | 6,217 |
|
Machinery and equipment | 3-27 | | 23,915 |
| | 21,613 |
|
Special tools | 1-13 | | 21,113 |
| | 19,359 |
|
Construction in progress |
| | 6,188 |
| | 4,493 |
|
Total property | | | 60,334 |
| | 53,269 |
|
Less: accumulated depreciation | | | (24,081 | ) | | (20,666 | ) |
Total property, net | | | $ | 36,253 |
| | $ | 32,603 |
|
The amount of capitalized software included in Property, net was $1.2 billion and $1.1$1.3 billion at December 31, 20172020 and 2016.2019. The amount of interest capitalized and excluded from Automotive interest expense related to Property, net was insignificant in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
| | | Years Ended December 31, | | Years Ended December 31, |
| 2017 | | 2016 | | 2015 | | 2020 | | 2019 | | 2018 |
Depreciation and amortization expense | $ | 4,966 |
| | $ | 4,622 |
| | $ | 3,904 |
| Depreciation and amortization expense | $ | 5,354 | | | $ | 6,541 | | | $ | 5,347 | |
Impairment charges | $ | 199 |
| | $ | 68 |
| | $ | 628 |
| Impairment charges | $ | 86 | | | $ | 7 | | | $ | 466 | |
| Capitalized software amortization expense(a) | $ | 459 |
| | $ | 458 |
| | $ | 374 |
| Capitalized software amortization expense(a) | $ | 457 | | | $ | 452 | | | $ | 424 | |
__________
(a) Included in depreciation and amortization expense.
| |
(a) | Included in depreciation and amortization expense. |
Note 10. Acquisition of Business
On May 12, 2016 we acquired all of the outstanding capital stock of Cruise, an autonomous vehicle technology company, to further accelerate our development of autonomous vehicles. The deal consideration at closing was $581 million, of which $291 million was paid in cash and approximately $290 million was paid through the issuance of new common stock. The fair value of the common stock issued was determined based on the closing price of our common stock on May 12, 2016. In conjunction with the acquisition, we entered into other agreements that will result in future costs contingent upon the continued employment of key individuals and additional performance-based awards contingent upon the achievement of specific technology and commercialization milestones.
Of the total consideration, $130 million was allocated to intangible assets, primarily in-process research and development with an indefinite life until fully developed and commercialized, $39 million was allocated to deferred tax liabilities, net of other assets, and $490 million was allocated to non-tax-deductible goodwill in Corporate primarily related to the synergies expected to arise as a result of the acquisition.
Note 11.10. Goodwill and Intangible Assets
Goodwill of $1.9 billion consisted of $1.3 billion and $1.4 billion recorded in GM Financial, primarily related to its North America reporting unit, and $490$567 million and $504 million included in CorporateCruise at December 31, 20172020 and 2016.2019. The COVID-19 pandemic has caused material disruption to businesses, resulting in an economic slowdown. The economic and social uncertainty resulting from the COVID-19 pandemic indicated that it was more likely than not that a goodwill impairment existed at March 31, 2020 for GM Financial's North America reporting unit. Therefore, at March 31, 2020, we performed an event-driven goodwill impairment test for GM Financial's North America reporting unit and determined no goodwill impairment existed.
70
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Gross Carrying Amount |
| Accumulated Amortization |
| Net Carrying Amount |
| Gross Carrying Amount |
| Accumulated Amortization |
| Net Carrying Amount |
Technology and intellectual property | $ | 8,092 |
|
| $ | 7,735 |
|
| $ | 357 |
|
| $ | 8,399 |
|
| $ | 7,940 |
|
| $ | 459 |
|
Brands | 4,302 |
|
| 1,044 |
|
| 3,258 |
|
| 4,311 |
|
| 921 |
|
| 3,390 |
|
Dealer network, customer relationships and other | 1,310 |
|
| 933 |
|
| 377 |
|
| 1,356 |
|
| 912 |
|
| 444 |
|
Total intangible assets | $ | 13,704 |
|
| $ | 9,712 |
|
| $ | 3,992 |
|
| $ | 14,066 |
|
| $ | 9,773 |
|
| $ | 4,293 |
|
Our amortization expense related to intangible assets was $278 million, $325 million, and $324 million in the years ended December 31, 2017, 2016 and 2015.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
The fair value of GM Financial's North America reporting unit at March 31, 2020 was determined based on valuation techniques using the best available information, primarily discounted cash flow projections. We make significant assumptions and estimates about the extent and timing of future cash flows. There can be no assurance that anticipated financial results will be achieved. Under multiple scenarios, including fully weighting the downside cash flow scenario, the estimated fair value of GM Financial's North America reporting unit at March 31, 2020 exceeded its carrying amount. Since our goodwill impairment analysis at March 31, 2020, we performed a qualitative assessment of goodwill impairment by evaluating our economic performance, outlook and other events and circumstances and noted no indicators that would warrant further quantitative testing of goodwill impairment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Technology and intellectual property | $ | 762 | | | $ | 542 | | | $ | 220 | | | $ | 734 | | | $ | 533 | | | $ | 201 | |
Brands | 4,300 | | | 1,444 | | | 2,856 | | | 4,298 | | | 1,285 | | | 3,013 | |
Dealer network, customer relationships and other | 981 | | | 737 | | | 244 | | | 966 | | | 702 | | | 264 | |
Total intangible assets | $ | 6,043 | | | $ | 2,723 | | | $ | 3,320 | | | $ | 5,998 | | | $ | 2,520 | | | $ | 3,478 | |
Our amortization expense related to intangible assets was $144 million, $202 million, and $247 million in the years ended December 31, 2020, 2019 and 2018.
Amortization expense related to intangible assets is estimated to be approximately $175$160 million in each of the next five years.
Note 12.11. Variable Interest Entities
Consolidated VIEs
Automotive Financing - GM Financial
GM Financial uses special purpose entities (SPEs) that are considered VIEs to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing relatedleasing-related assets transferred to the VIEs (Securitized Assets). GM Financial determined that it is the primary beneficiary of the SPEs because the servicing responsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs and the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets of the VIEs serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors.
The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs:
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Restricted cash – current | $ | 2,190 | | | $ | 2,202 | |
Restricted cash – non-current | $ | 449 | | | $ | 441 | |
GM Financial receivables, net of fees – current | $ | 17,211 | | | $ | 19,081 | |
GM Financial receivables, net of fees – non-current | $ | 15,107 | | | $ | 15,921 | |
GM Financial equipment on operating leases, net | $ | 16,322 | | | $ | 14,464 | |
GM Financial short-term debt and current portion of long-term debt | $ | 20,450 | | | $ | 23,952 | |
GM Financial long-term debt | $ | 18,974 | | | $ | 15,819 | |
| | | |
|
| | | | | | | |
| December 31, 2017 | | December 31, 2016 |
Restricted cash – current | $ | 1,740 |
| | $ | 1,302 |
|
Restricted cash – non-current | $ | 527 |
| | $ | 478 |
|
GM Financial receivables, net of fees – current | $ | 15,141 |
| | $ | 12,437 |
|
GM Financial receivables, net of fees – non-current | $ | 12,944 |
| | $ | 11,917 |
|
GM Financial equipment on operating leases, net | $ | 22,222 |
| | $ | 19,341 |
|
GM Financial short-term debt and current portion of long-term debt | $ | 18,972 |
| | $ | 17,526 |
|
GM Financial long-term debt | $ | 20,356 |
| | $ | 16,659 |
|
GM Financial recognizes finance charge, leased vehicle and fee income on the Securitized Assets and interest expense on the secured debt issued in a securitization transaction and records a provision for loan losses to recognize probable loan losses inherent inexpected over the remaining life of the finance receivables.
71
Note 13. Accrued and Other Liabilities |
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Accrued liabilities |
|
|
|
Dealer and customer allowances, claims and discounts | $ | 8,523 |
|
| $ | 8,847 |
|
Deposits primarily from rental car companies | 2,113 |
|
| 2,023 |
|
Deferred revenue | 3,400 |
|
| 2,695 |
|
Product warranty and related liabilities | 2,994 |
|
| 3,236 |
|
Payrolls and employee benefits excluding postemployment benefits | 2,594 |
|
| 2,915 |
|
Other | 6,372 |
|
| 6,177 |
|
Total accrued liabilities | $ | 25,996 |
|
| $ | 25,893 |
|
Other liabilities |
|
|
|
|
|
Deferred revenue | $ | 2,887 |
|
| $ | 2,285 |
|
Product warranty and related liabilities | 5,338 |
|
| 5,833 |
|
Employee benefits excluding postemployment benefits | 680 |
|
| 899 |
|
Postemployment benefits including facility idling reserves | 574 |
|
| 757 |
|
Other | 2,915 |
|
| 2,641 |
|
Total other liabilities | $ | 12,394 |
|
| $ | 12,415 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
Nonconsolidated VIEs
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
Product Warranty and Related Liabilities | | | | | |
Warranty balance at beginning of period | $ | 9,069 |
| | $ | 8,550 |
| | $ | 8,871 |
|
Warranties issued and assumed in period – recall campaigns | 678 |
| | 899 |
| | 878 |
|
Warranties issued and assumed in period – product warranty | 2,123 |
| | 2,338 |
| | 2,108 |
|
Payments | (3,129 | ) | | (3,375 | ) | | (3,670 | ) |
Adjustments to pre-existing warranties | (495 | ) | | 636 |
| | 578 |
|
Effect of foreign currency and other | 86 |
| | 21 |
| | (215 | ) |
Warranty balance at end of period | $ | 8,332 |
| | $ | 9,069 |
| | $ | 8,550 |
|
We estimateNonconsolidated VIEs principally include automotive related operating entities to which we provided financial support to ensure that our reasonably possible losssupply needs for production are met or are not disrupted. Our variable interests in excessthese nonconsolidated VIEs include equity investments, accounts and loans receivable, committed financial support and other off-balance sheet arrangements. The carrying amounts of amounts accrued for recall campaignsassets and liabilities related to beour nonconsolidated VIEs were insignificant at December 31, 2017.2020 and 2019. Our maximum exposure to loss as a result of our involvement with these VIEs was $1.2 billion, inclusive of $776 million in committed capital contributions to Ultium Cells LLC at December 31, 2020, and an insignificant amount at December 31, 2019. We currently lack the power through voting or similar rights to direct the activities of these entities that most significantly affect their economic performance.
Note 12. Accrued and Other Liabilities
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Accrued liabilities | | | |
Dealer and customer allowances, claims and discounts | $ | 7,300 | | | $ | 10,402 | |
Deferred revenue | 3,132 | | | 3,234 | |
Product warranty and related liabilities | 3,048 | | | 2,987 | |
Payrolls and employee benefits excluding postemployment benefits | 1,864 | | | 1,969 | |
Other | 7,725 | | | 7,895 | |
Total accrued liabilities | $ | 23,069 | | | $ | 26,487 | |
| | | |
Other liabilities | | | |
Deferred revenue | $ | 2,715 | | | $ | 2,962 | |
Product warranty and related liabilities | 5,193 | | | 4,811 | |
Operating lease liabilities | 969 | | | 1,010 | |
Employee benefits excluding postemployment benefits | 822 | | | 704 | |
Postemployment benefits including facility idling reserves | 739 | | | 633 | |
Other | 3,009 | | | 3,026 | |
Total other liabilities | $ | 13,447 | | | $ | 13,146 | |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Product Warranty and Related Liabilities | | | | | |
Warranty balance at beginning of period | $ | 7,798 | | | $ | 7,590 | | | $ | 8,332 | |
Warranties issued and assumed in period – recall campaigns | 1,628 | | | 745 | | | 665 | |
Warranties issued and assumed in period – product warranty | 1,773 | | | 2,001 | | | 2,143 | |
Payments | (2,986) | | | (3,012) | | | (2,903) | |
Adjustments to pre-existing warranties | 41 | | | 455 | | | (464) | |
Effect of foreign currency and other | (12) | | | 19 | | | (183) | |
Warranty balance at end of period | $ | 8,242 | | | $ | 7,798 | | | $ | 7,590 | |
In the three months ended December 31, 2020, we recorded an accrual of $1.1 billion, which represents our current estimate of the expected costs of complying with the recall related to the Takata passenger-side inflators in certain GMT900 vehicles, which are full-size pickup trucks and SUVs. This accrual is reflected in Warranties issued and assumed in period – recall campaigns in the table above. Refer to Note 1716 for reasonably possible lossesadditional information on Takata matters.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Note 14. 13. Debt
Automotive The following table presents debt in our automotive operations:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Secured debt | $ | 303 | | | $ | 332 | | | $ | 167 | | | $ | 165 | |
Unsecured debt | 16,929 | | | 20,988 | | | 13,909 | | | 15,247 | |
Finance lease liabilities | 237 | | | 256 | | | 310 | | | 516 | |
Total automotive debt(a) | $ | 17,469 | | | $ | 21,576 | | | $ | 14,386 | | | $ | 15,928 | |
| | | | | | | |
Fair value utilizing Level 1 inputs | | | $ | 19,826 | | | | | $ | 13,628 | |
Fair value utilizing Level 2 inputs | | | $ | 1,750 | | | | | $ | 2,300 | |
| | | | | | | |
| | | | | | | |
Available under credit facility agreements(b) | | | $ | 18,222 | | | | | $ | 17,285 | |
Weighted-average interest rate on outstanding short-term debt(c) | | | 3.8 | % | | | | 4.9 | % |
Weighted-average interest rate on outstanding long-term debt(c) | | | 5.6 | % | | | | 5.4 | % |
__________
(a)Includes net discount and debt issuance costs of $540 million at December 31, 2020 and 2019.
(b)Excludes our 364-day, $2.0 billion facility designated for exclusive use by GM Financial.
(c)Includes coupon rates on debt denominated in various foreign currencies and interest free loans.
Unsecured debt primarily consists of revolving credit facilities and senior notes. In March 2020, we borrowed: (1) $3.4 billion against our three-year, $4.0 billion facility; (2) $2.0 billion against our three-year, $3.0 billion facility, which reduced to $2.0 billion in May 2020 (three-year, $2.0 billion transformation facility); and (3) $10.5 billion against our five-year, $10.5 billion facility with maturity dates ranging from 2021 to 2023. We repaid all amounts drawn under the revolving credit facilities as of December 31, 2020. We did not have any borrowings against our revolving credit facilities at December 31, 2019.
In April 2020, we renewed our 364-day, $2.0 billion facility dedicated for exclusive use by GM Financial Debt
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Secured debt | $ | 204 |
|
| $ | 108 |
|
Unsecured debt | 12,579 |
|
| 9,742 |
|
Capital leases | 719 |
|
| 710 |
|
Total automotive debt(a) | $ | 13,502 |
|
| $ | 10,560 |
|
|
|
|
|
|
|
Fair value utilizing Level 1 inputs | $ | 13,202 |
|
| $ | 9,515 |
|
Fair value utilizing Level 2 inputs | 1,886 |
|
| 1,884 |
|
Fair value of automotive debt | $ | 15,088 |
|
| $ | 11,399 |
|
| | | |
Available under credit facility agreements | $ | 14,067 |
| | $ | 14,181 |
|
Interest rate range on outstanding debt(b) | 0.0-21.8% |
| | 0.0-18.0% |
|
Weighted-average interest rate on outstanding short-term debt(b) | 4.7 | % | | 10.7 | % |
Weighted-average interest rate on outstanding long-term debt(b) | 5.2 | % | | 5.2 | % |
__________
| |
(a) | Includes net discount and debt issuance costs of $499 million and $491 million at December 31, 2017 and 2016. |
| |
(b) | Includes coupon rates on debt denominated in various foreign currencies and interest free loans and the impact of reclassification of $1.5 billion of senior unsecured notes from long-term to short-term in the year ended December 31, 2017. |
for an additional 364-day term and extended $3.6 billion of the three-year, $4.0 billion facility for an additional year expiring in April 2022. The fair valueremaining portion will expire in April 2021, unless extended. As part of automotive debt measured utilizing Level 1 inputs was based on quoted prices in active marketsthe extension of the three-year, $4.0 billion facility, we agreed not to execute any share repurchases while we have any outstanding borrowings under the revolving credit facilities, except for identical instruments that a market participant can access at the measurement date. The fair value of automotive debt measured utilizing Level 2 inputs was based on a discounted cash flow model using observable inputs. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread basedthree-year, $2.0 billion transformation facility. In addition, we are restricted from paying dividends on our senior unsecured notes that is intended to represent our nonperformance risk. We obtaincommon shares if outstanding borrowings under the benchmark yield curves and yields on unsecured notes from independent sources that are widely used inrevolving credit facilities exceed $5.0 billion, with the financial industry. At December 31, 2017 and December 31, 2016exception of the fair value of automotive debt exceeded its carrying amount due primarily to a decrease in bond yields compared to yields at the time of issuance.three-year, $2.0 billion transformation facility.
In August 2017May 2020, we issued $3.0$4.0 billion in aggregate principal amount of senior unsecured notes with an initiala weighted average interest rate of 4.5%6.11% and maturity dates ranging from 20202023 to 2048.2027. The indentures governing these notes containare governed by a sixth supplemental indenture and the same base indenture that governs our existing notes, which contains terms and covenants customary ofto these types of securities, including a limitation on the amount of certain secured debt we may incur. The net proceeds from the issuance of these senior unsecured notes wereprovide additional financial flexibility and will be used to repay the $3.0for general corporate purposes. In May 2020, we entered into a new unsecured 364-day, $2.0 billion drawn on our three-year unsecured revolving credit facility in the three months ended September 30, 2017 to fund the payments to PSA Group, or one or more pension funding vehicles, for the assumed net underfunded pension liabilities in connection with the saleas an additional source of the Opel/Vauxhall Business as described in Note 3.available liquidity. In August 2020, we repaid $500 million of our floating rate senior unsecured debt upon maturity.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
|
| | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Carrying Amount |
| Fair Value |
| Carrying Amount |
| Fair Value |
Secured debt | $ | 39,887 |
|
| $ | 39,948 |
|
| $ | 35,087 |
|
| $ | 35,162 |
|
Unsecured debt | 40,830 |
|
| 41,989 |
|
| 29,476 |
|
| 30,045 |
|
Total GM Financial debt | $ | 80,717 |
|
| $ | 81,937 |
|
| $ | 64,563 |
|
| $ | 65,207 |
|
| | | | | | | |
Fair value utilizing Level 2 inputs | | | $ | 79,623 |
| | | | $ | 62,951 |
|
Fair value utilizing Level 3 inputs | | | $ | 2,314 |
| | | | $ | 2,256 |
|
GM Financial The fair valuefollowing table presents debt of GM Financial debt measured utilizing Level 2 inputs was based on quoted market prices for identical instruments and if unavailable, quoted market prices of similar instruments. For debt with original maturity or revolving period of 18 months or less par value is considered to be a reasonable estimate of fair value. The fair value of GM Financial debt measured utilizing Level 3 inputs was based on the discounted future net cash flows expected to be settled using current risk-adjusted rates.Financial:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Secured debt | $ | 39,982 | | | $ | 40,380 | | | $ | 39,959 | | | $ | 40,160 | |
Unsecured debt | 52,443 | | | 54,568 | | | 48,979 | | | 50,239 | |
Total GM Financial debt | $ | 92,425 | | | $ | 94,948 | | | $ | 88,938 | | | $ | 90,399 | |
| | | | | | | |
Fair value utilizing Level 2 inputs | | | $ | 92,922 | | | | | $ | 88,481 | |
Fair value utilizing Level 3 inputs | | | $ | 2,026 | | | | | $ | 1,918 | |
Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged Securitized Assets.assets. Refer to Note 1211 for additional information on GM Financial's involvement with VIEs. GM Financial is required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under certain secured credit facilities. The weighted-average interest rate on secured debt was 2.37%1.89% at December 31, 2017.2020. The revolving credit facilities have maturity dates ranging from 20182021 to 20232026 and securitization notes payable have maturity dates ranging from 20192021 to 2025.2028. At the end of the revolving period, if not renewed, the debt of revolving credit facilities will amortize over a defined period. In the year ended December 31, 2017 we entered into new or2020, GM Financial renewed revolving credit facilities with a total net additional borrowing capacity of $2.9$21.1 billion which had substantially the same terms as existing debt and we issued $22.4$24.6 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.10%1.17% and maturity dates ranging from 20192021 to 2025.2028.
Unsecured debt consists of senior notes, credit facilities and other unsecured debt. Senior notes outstanding at December 31, 2017 are due beginning in 2018 through 20272020 have maturity dates ranging from 2021 to 2030 and have a weighted-average interest rate of 3.27%3.25%. In the year ended December 31, 2017 we2020, GM Financial issued $12.7$9.2 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 2.85% and maturity dates ranging from 2019 to 2027.
In January 2018 we issued $1.65 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 3.26%2.93% and maturity dates ranging from 2023 to 2028.2030.
EachIn January 2021, GM Financial issued $2.5 billion in senior notes with a weighted average interest rate of the revolving credit facilities1.69% and the indentures governingmaturity dates ranging from 2026 to 2031. In January 2021, GM Financial'sFinancial issued CAD $500 million in senior notes contain terms and covenants including limitations on GM Financial's ability to incur certain liens.with an interest rate of 1.75% due in 2026.
The terms of advances onUnsecured credit facilities and other unsecured debt have original maturities of up to four years. The weighted-average interest rate on these credit facilities and other unsecured debt was 7.28%2.47% at December 31, 2017.2020.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Automotive interest expense | $ | 1,098 | | | $ | 782 | | | $ | 655 | |
Automotive Financing - GM Financial interest expense | 3,023 | | | 3,641 | | | 3,225 | |
Total interest expense | $ | 4,121 | | | $ | 4,423 | | | $ | 3,880 | |
74
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Automotive interest expense | $ | 575 |
|
| $ | 563 |
|
| $ | 423 |
|
Automotive Financing - GM Financial interest expense | 2,566 |
|
| 1,972 |
|
| 1,460 |
|
Total interest expense | $ | 3,141 |
|
| $ | 2,535 |
|
| $ | 1,883 |
|
The following table summarizes contractual maturities including capital leases at December 31, 2017:
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
|
| | | | | | | | | | | |
| Automotive |
| Automotive Financing(a) |
| Total |
2018 | $ | 2,528 |
|
| $ | 24,502 |
|
| $ | 27,030 |
|
2019 | 154 |
|
| 18,489 |
|
| 18,643 |
|
2020 | 586 |
|
| 14,696 |
|
| 15,282 |
|
2021 | 59 |
|
| 7,802 |
|
| 7,861 |
|
2022 | 63 |
|
| 5,323 |
|
| 5,386 |
|
Thereafter | 10,611 |
|
| 10,477 |
|
| 21,088 |
|
| $ | 14,001 |
|
| $ | 81,289 |
|
| $ | 95,290 |
|
________
| |
(a) | Secured debt, credit facilities and other unsecured debt are based on expected payoff date. Senior notes principal amounts are based on maturity. |
At December 31, 2017 future interest payments on automotive capital lease obligations were $280 million. GM Financial had no capital lease obligationsThe following table summarizes contractual maturities including finance leases at December 31, 2017.2020:
| | | | | | | | | | | | | | | | | |
| Automotive | | Automotive Financing | | Total |
2021 | $ | 1,276 | | | $ | 35,742 | | | $ | 37,018 | |
2022 | 137 | | | 19,312 | | | 19,449 | |
2023 | 2,593 | | | 15,267 | | | 17,860 | |
2024 | 86 | | | 7,808 | | | 7,894 | |
2025 | 2,578 | | | 6,609 | | | 9,187 | |
Thereafter | 11,339 | | | 7,277 | | | 18,616 | |
| $ | 18,009 | | | $ | 92,015 | | | $ | 110,024 | |
Compliance with Debt Covenants Several of our loan facilities, including our revolving credit facilities, require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. SomeCertain of GM Financial’s secured and unsecured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. GM Financial’s unsecured debt obligations contain covenants including limitations on GM Financial's ability to incur certain liens. Failure to meet certain of these requirements may result in a covenant violation or an event of default depending on the terms of the agreement. An event of default may allow lenders to declare amounts outstanding under these agreements immediately due and payable, to enforce their interests against collateral pledged under these agreements or restrict our ability or GM Financial's ability to obtain additional borrowings. No technical defaults or covenant violations existed at December 31, 2017.2020.
Note 15.14. Derivative Financial Instruments
Automotive The following table presents the notional amounts based on asset or liability positions of derivative financial instruments in our automotive operations:
| | | | | | | | | Fair Value Level | | December 31, 2020 | | December 31, 2019 |
| Fair Value Level | | December 31, 2017 |
| December 31, 2016 | |
Derivatives designated as hedges(a) | | | | | |
Assets | | | | | |
Cash flow hedges | | | | | |
Foreign currency | 2 | | $ | — |
|
| $ | 803 |
| |
Commodity | 2 | | — |
|
| 106 |
| |
Total assets | | $ | — |
|
| $ | 909 |
| |
Derivatives not designated as hedges(a) | | | | | Derivatives not designated as hedges(a) | | | | | |
Assets | | | | | |
Foreign currency | 2/3 | | $ | 2,834 |
|
| $ | 4,483 |
| Foreign currency | 2 | | $ | 2,195 | | | $ | 5,075 | |
Commodity | 2 | | 606 |
|
| 1,061 |
| Commodity | 2 | | 341 | | | 806 | |
PSA Warrants(b) | 2 | | 48 |
| | — |
| PSA Warrants(b) | 2 | | 49 | | | 45 | |
Total assets | | $ | 3,488 |
|
| $ | 5,544 |
| |
Liabilities | | | | | |
Foreign currency | 2/3 | �� | $ | 1,188 |
|
| $ | 470 |
| |
Commodity | 2 | | — |
|
| 181 |
| |
Total liabilities | | $ | 1,188 |
|
| $ | 651 |
| |
Total derivative financial instruments | | Total derivative financial instruments | | $ | 2,585 | | | $ | 5,926 | |
__________
| |
(a) | The fair value of these derivative instruments at December 31, 2017 and 2016 and the gains/losses included in our consolidated income statements and statements of comprehensive income for the years ended December 31, 2017, 2016 and 2015 were insignificant. |
| |
(b) | The fair value of the PSA warrants was $764 million at December 31, 2017. |
(a)The fair value of these derivative instruments at December 31, 2020 and 2019 and the gains/losses included in our consolidated income statements for the years ended December 31, 2020, 2019 and 2018 were insignificant, unless otherwise noted.
(b)The fair value of the PSA warrants located in Other assets was $1.1 billion and $964 million at December 31, 2020 and 2019. We recorded gains in Interest income and other non-operating income, net of $139 million, $154 million and $116 million for the years ended December 31, 2020, 2019 and 2018. As a result of the merger of PSA Group and Fiat Chrysler Automobiles N.V. on January 16, 2021, our 39.7 million warrants in PSA Group will convert into 69.2 million common shares of Stellantis N.V. upon exercise. These warrants will continue to be governed by the same terms and conditions that were applicable prior to the merger.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
GM Financial The following table presents the notionalgross fair value amounts based on asset or liability positions of GM Financial's derivative financial instruments:instruments and the associated notional amounts:
|
| | | | | | | | | |
| Fair Value Level | | December 31, 2017 | | December 31, 2016 |
Derivatives designated as hedges(a) | | | | | |
Assets | | | | | |
Fair value hedges – interest rate swaps | 2 | | $ | 1,250 |
| | $ | — |
|
Cash flow hedges | | | | | |
Interest rate swaps | 2/3 | | 2,177 |
|
| 3,070 |
|
Foreign currency | 2 | | 1,574 |
|
| — |
|
Total cash flow hedges | | | 3,751 |
|
| 3,070 |
|
Total assets | | | $ | 5,001 |
|
| $ | 3,070 |
|
Liabilities | | | | | |
Fair value hedges – interest rate swaps(b) | 2 | | $ | 9,860 |
|
| $ | 7,700 |
|
Cash flow hedges | | | | | |
Interest rate swaps | 2/3 | | — |
|
| 500 |
|
Foreign currency | 2 | | — |
|
| 791 |
|
Total cash flow hedges | | | — |
|
| 1,291 |
|
Total liabilities | | | $ | 9,860 |
|
| $ | 8,991 |
|
Derivatives not designated as hedges(a) | | | | | |
Assets | | | | | |
Interest rate swaps(c) | 2/3 | | $ | 38,741 |
|
| $ | 7,959 |
|
Interest rate caps and floors | 2 | | 16,840 |
|
| 9,698 |
|
Foreign currency | 2 | | 1,201 |
|
| — |
|
Total assets | | | $ | 56,782 |
|
| $ | 17,657 |
|
Liabilities | | | | | |
Interest rate swaps | 2/3 | | $ | 8,404 |
|
| $ | 6,170 |
|
Interest rate caps and floors | 2 | | 17,953 |
|
| 12,146 |
|
Total liabilities | | | $ | 26,357 |
|
| $ | 18,316 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Level | | December 31, 2020 | | December 31, 2019 |
| | | | Notional | | Fair Value of Assets | | Fair Value of Liabilities | | Notional | | Fair Value of Assets | | Fair Value of Liabilities |
Derivatives designated as hedges(a) | | | | | | | | | | | | | | |
Fair value hedges | | | | | | | | | | | | | | |
Interest rate swaps | | 2 | | $ | 10,064 | | | $ | 463 | | | $ | 13 | | | $ | 9,458 | | | $ | 234 | | | $ | 23 | |
Foreign currency swaps | | 2 | | 1,958 | | | 128 | | | 9 | | | 1,796 | | | 22 | | | 71 | |
Cash flow hedges | | | | | | | | | | | | | | |
Interest rate swaps | | 2 | | 921 | | | 0 | | | 27 | | | 590 | | | 0 | | | 6 | |
Foreign currency swaps | | 2 | | 5,626 | | | 278 | | | 47 | | | 4,429 | | | 40 | | | 119 | |
Derivatives not designated as hedges(a) | | | | | | | | | | | | | | |
Interest rate contracts | | 2 | | 110,997 | | | 954 | | | 576 | | | 92,400 | | | 340 | | | 300 | |
Total derivative financial instruments(b) | | | | $ | 129,566 | | | $ | 1,823 | | | $ | 672 | | | $ | 108,673 | | | $ | 636 | | | $ | 519 | |
__________
| |
(a) | The fair value of these derivative instruments at December 31, 2017 and 2016 and the gains/losses included in our consolidated income statements and statements of comprehensive income for the years ended December 31, 2017, 2016 and 2015 were insignificant. |
| |
(b) | The fair value of these derivative instruments was $290 million and $276 million at December 31, 2017 and 2016. |
| |
(c) | The fair value of these derivative instruments was $260 million and insignificant at December 31, 2017 and 2016. |
(a)The gains/losses included in our consolidated income statements and statements of comprehensive income for the years ended December 31, 2020, 2019 and 2018 were insignificant, unless otherwise noted. Amounts accrued for interest payments in a net receivable position are included in Other assets. Amounts accrued for interest payments in a net payable position are included in Other liabilities.
(b)GM Financial held $728 million and $210 million of collateral from counterparties available for netting against GM Financial's asset positions, and posted an insignificant amount of collateral to counterparties available for netting against GM Financial's liability positions at December 31, 2020 and 2019.
The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves.
The following amounts were recorded in the consolidated balance sheets related to items designated and qualifying as hedged items in fair value hedging relationships:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Carrying Amount of Hedged Items | | Cumulative Amount of Fair Value Hedging Adjustments(a) | | Carrying Amount of Hedged Items | | Cumulative Amount of Fair Value Hedging Adjustments(a) |
Short-term unsecured debt | $ | 4,858 | | | $ | (69) | | | $ | 996 | | | $ | 4 | |
Long-term unsecured debt | 18,457 | | | (670) | | | 19,401 | | | (81) | |
GM Financial unsecured debt | $ | 23,315 | | | $ | (739) | | | $ | 20,397 | | | $ | (77) | |
__________
(a)Includes $200 million of unamortized gains and an insignificant amount of amortization remaining on hedged items for which hedge accounting has been discontinued at December 31, 2020 and 2019.
Note 16.15. Pensions and Other Postretirement Benefits
Employee Pension and Other Postretirement Benefit Plans
Defined Benefit Pension Plans Defined benefit pension plans covering eligible U.S. hourly employees (hired prior to October 2007) and Canadian hourly employees (hired prior to October 2016) generally provide benefits of negotiated, stated amounts for each year of service and supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the defined benefit pension plans covering eligible U.S. (hired prior to January 1, 2001) and Canadian salaried employees and employees in certain other non-U.S. locations are generally based on years of service and compensation history. Accrual of defined pension benefits ceased in 2012 for U.S. and Canadian salaried employees. There is also an unfunded nonqualified pension plan primarily covering primarily U.S. executives for service prior to January 1, 2007 and it is based on an “excess plan” for service after that date.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
The funding policy for qualified defined benefit pension plans is to contribute annually not less than the minimum required by applicable laws and regulations or to directly pay benefit payments where appropriate. In the year ended December 31, 20172020 all legal funding requirements were met. In the year ended December 31, 2016 we made a discretionary contribution to our U.S. hourly pension plan of $2.0 billion. The following table summarizes contributions made to the defined benefit pension plans:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
U.S. hourly and salaried | $ | 68 | | | $ | 83 | | | $ | 76 | |
Non-U.S. | 396 | | | 532 | | | 1,624 | |
Total | $ | 464 | | | $ | 615 | | | $ | 1,700 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
U.S. hourly and salaried | $ | 77 |
|
| $ | 2,054 |
|
| $ | 95 |
|
Non-U.S. | 1,153 |
|
| 1,022 |
|
| 1,108 |
|
Total | $ | 1,230 |
|
| $ | 3,076 |
|
| $ | 1,203 |
|
We expect to contribute approximately $70 million to our U.S. non-qualified plans and approximately $900$500 million to our non-U.S. pension plans in 2018.2021.
Based on our current assumptions, over the next five years we expect no0 significant mandatory contributions to our U.S. qualified pension plans and mandatory contributions totaling $1.2 billion$366 million to our CanadaU.K. and U.K.Canada pension plans.
Other Postretirement Benefit Plans Certain hourly and salaried defined benefit plans provide postretirement medical, dental, legal service and life insurance to eligible U.S. and Canadian retirees and their eligible dependents. Certain other non-U.S. subsidiaries have postretirement benefit plans, although most non-U.S. employees are covered by government sponsored or administered programs. We made contributions to the U.S. OPEB plans of $323$343 million, $335$326 million and $340$325 million in the years ended December 31, 2017, 20162020, 2019 and 2015.2018. Plan participants' contributions were insignificant in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
Defined Contribution Plans We have defined contribution plans for eligible U.S. salaried and hourly employees that provide discretionary matching contributions. Contributions are also made to certain non-U.S. defined contribution plans. We made contributions to our defined contribution plans of $650$573 million, $589$537 million and $530$617 million in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
Significant Plan Amendments, Benefit Modifications and Related Events
Other Remeasurements The Society of Actuaries (SOA)SOA issued new mortality improvement tables in the three months ended December 31, 2017. These did not result in any2020. We incorporated these SOA mortality improvement tables into the December 31, 2020 measurement of our U.S. pension and OPEB plans' benefit obligations. The change in our currentthese assumptions to measure ourdecreased the December 31, 20172020 U.S. pension plan obligations.and OPEB plans' obligations by $686 million. We incorporated the mortality improvement tables issued by the SOA in the three months ended December 31, 2016 that lowered life expectancies2018, and thereby indicatedupdated our base mortality assumptions in the amount of estimated aggregate benefit payments to our U.S. pension plans' participants was decreasing. This change in assumption decreased the December 31, 20162018 U.S. pension and OPEB plans' obligations by $888$264 million.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Pension and OPEB Obligations and Plan Assets
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 | | Year Ended December 31, 2019 |
| Pension Benefits | | Global OPEB Plans | | Pension Benefits | | Global OPEB Plans |
| U.S. | | Non-U.S. | | | U.S. | | Non-U.S. | |
Change in benefit obligations | | | | | | | | | | | |
Beginning benefit obligation | $ | 64,684 | | | $ | 21,398 | | | $ | 6,304 | | | $ | 61,190 | | | $ | 19,904 | | | $ | 5,744 | |
Service cost | 177 | | | 133 | | | 19 | | | 179 | | | 120 | | | 17 | |
Interest cost | 1,716 | | | 362 | | | 173 | | | 2,264 | | | 456 | | | 220 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Actuarial losses | 4,757 | | | 1,506 | | | 551 | | | 6,444 | | | 1,653 | | | 641 | |
Benefits paid | (4,600) | | | (1,132) | | | (408) | | | (4,753) | | | (1,234) | | | (395) | |
Foreign currency translation adjustments | 0 | | | 870 | | | (3) | | | 0 | | | 561 | | | 54 | |
| | | | | | | | | | | |
Curtailments, settlements and other | (266) | | | (2,330) | | | 20 | | | (640) | | | (62) | | | 23 | |
Ending benefit obligation | 66,468 | | | 20,807 | | | 6,656 | | | 64,684 | | | 21,398 | | | 6,304 | |
Change in plan assets | | | | | | | | | | | |
Beginning fair value of plan assets | 59,239 | | | 14,961 | | | 0 | | | 56,102 | | | 13,528 | | | 0 | |
Actual return on plan assets | 6,635 | | | 1,573 | | | 0 | | | 8,454 | | | 1,669 | | | 0 | |
Employer contributions | 68 | | | 396 | | | 387 | | | 83 | | | 532 | | | 370 | |
| | | | | | | | | | | |
Benefits paid | (4,600) | | | (1,132) | | | (408) | | | (4,753) | | | (1,234) | | | (395) | |
Foreign currency translation adjustments | 0 | | | 389 | | | 0 | | | 0 | | | 668 | | | 0 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Settlements and other | (265) | | | (2,341) | | | 21 | | | (647) | | | (202) | | | 25 | |
Ending fair value of plan assets | 61,077 | | | 13,846 | | | 0 | | | 59,239 | | | 14,961 | | | 0 | |
Ending funded status | $ | (5,391) | | | $ | (6,961) | | | $ | (6,656) | | | $ | (5,445) | | | $ | (6,437) | | | $ | (6,304) | |
Amounts recorded in the consolidated balance sheets | | | | | | | | | | | |
Non-current assets | $ | 0 | | | $ | 980 | | | $ | 0 | | | $ | 0 | | | $ | 698 | | | $ | 0 | |
Current liabilities | (66) | | | (364) | | | (379) | | | (68) | | | (342) | | | (369) | |
Non-current liabilities | (5,325) | |
| (7,577) | | | (6,277) | | | (5,377) | | | (6,793) | | | (5,935) | |
Net amount recorded | $ | (5,391) | | | $ | (6,961) | | | $ | (6,656) | | | $ | (5,445) | | | $ | (6,437) | | | $ | (6,304) | |
Amounts recorded in Accumulated other comprehensive loss | | | | | | | | | | | |
Net actuarial loss | $ | (3,256) | | | $ | (5,123) | | | $ | (1,823) | | | $ | (1,980) | | | $ | (4,688) | | | $ | (1,364) | |
Net prior service (cost) credit | 11 | | | (60) | | | 20 | | | 14 | | | (78) | | | 27 | |
Total recorded in Accumulated other comprehensive loss | $ | (3,245) | | | $ | (5,183) | | | $ | (1,803) | | | $ | (1,966) | | | $ | (4,766) | | | $ | (1,337) | |
In the years ended December 31, 2020 and 2019, the actuarial losses on the benefit obligations were primarily due to decreases in discount rates for all plans.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Year Ended December 31, 2016 |
| Pension Benefits |
| Global OPEB Plans |
| Pension Benefits |
| Global OPEB Plans |
| U.S. |
| Non-U.S. |
|
| U.S. |
| Non-U.S. |
|
Change in benefit obligations |
|
|
|
|
|
|
|
|
|
|
|
Beginning benefit obligation | $ | 68,827 |
|
| $ | 21,156 |
|
| $ | 6,180 |
|
| $ | 71,486 |
|
| $ | 21,008 |
|
| $ | 6,066 |
|
Service cost | 203 |
|
| 180 |
|
| 19 |
|
| 220 |
|
| 255 |
|
| 18 |
|
Interest cost | 2,145 |
|
| 473 |
|
| 202 |
|
| 2,212 |
|
| 527 |
|
| 201 |
|
Actuarial losses | 2,885 |
|
| 561 |
|
| 311 |
|
| 416 |
|
| 1,328 |
|
| 230 |
|
Benefits paid | (5,067 | ) |
| (1,369 | ) |
| (426 | ) |
| (5,507 | ) |
| (1,458 | ) |
| (400 | ) |
Foreign currency translation adjustments | — |
|
| 1,953 |
|
| 78 |
|
| — |
|
| (445 | ) |
| 45 |
|
Curtailments, settlements and other | (543 | ) |
| (165 | ) |
| 10 |
|
| — |
|
| (59 | ) |
| 20 |
|
Ending benefit obligation | 68,450 |
|
| 22,789 |
|
| 6,374 |
|
| 68,827 |
|
| 21,156 |
|
| 6,180 |
|
Change in plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning fair value of plan assets | 61,622 |
|
| 12,799 |
|
| — |
|
| 61,072 |
|
| 12,794 |
|
| — |
|
Actual return on plan assets | 6,549 |
|
| 1,025 |
|
| — |
|
| 4,004 |
|
| 750 |
|
| — |
|
Employer contributions | 77 |
|
| 1,153 |
|
| 406 |
|
| 2,054 |
|
| 1,022 |
|
| 378 |
|
Benefits paid | (5,067 | ) |
| (1,369 | ) |
| (426 | ) |
| (5,507 | ) |
| (1,458 | ) |
| (400 | ) |
Foreign currency translation adjustments | — |
|
| 1,007 |
|
| — |
|
| — |
|
| (229 | ) |
| — |
|
Settlements and other | (542 | ) |
| (120 | ) |
| 20 |
|
| (1 | ) |
| (80 | ) |
| 22 |
|
Ending fair value of plan assets | 62,639 |
|
| 14,495 |
|
| — |
|
| 61,622 |
|
| 12,799 |
|
| — |
|
Ending funded status | $ | (5,811 | ) |
| $ | (8,294 | ) |
| $ | (6,374 | ) |
| $ | (7,205 | ) |
| $ | (8,357 | ) |
| $ | (6,180 | ) |
Amounts recorded in the consolidated balance sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets | $ | — |
|
| $ | 67 |
|
| $ | — |
|
| $ | — |
|
| $ | 91 |
|
| $ | — |
|
Current liabilities | (71 | ) |
| (355 | ) |
| (376 | ) |
| (73 | ) |
| (316 | ) |
| (377 | ) |
Non-current liabilities | (5,740 | ) |
| (8,006 | ) |
| (5,998 | ) |
| (7,132 | ) |
| (8,132 | ) |
| (5,803 | ) |
Net amount recorded | $ | (5,811 | ) |
| $ | (8,294 | ) |
| $ | (6,374 | ) |
| $ | (7,205 | ) |
| $ | (8,357 | ) |
| $ | (6,180 | ) |
Amounts recorded in Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gain (loss) | $ | 114 |
|
| $ | (4,163 | ) |
| $ | (1,186 | ) |
| $ | 55 |
|
| $ | (3,852 | ) |
| $ | (901 | ) |
Net prior service (cost) credit | 23 |
|
| (26 | ) |
| 55 |
|
| 27 |
|
| (30 | ) |
| 54 |
|
Total recorded in Accumulated other comprehensive loss | $ | 137 |
|
| $ | (4,189 | ) |
| $ | (1,131 | ) |
| $ | 82 |
|
| $ | (3,882 | ) |
| $ | (847 | ) |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The following table summarizes the total accumulated benefit obligations (ABO), the ABO and fair value of plan assets for defined benefit pension plans with ABO in excess of plan assets, and the PBOprojected benefit obligation (PBO) and fair value of plan assets for defined benefit pension plans with PBO in excess of plan assets:
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
ABO | $ | 66,448 | | | $ | 20,721 | | | $ | 64,669 | | | $ | 21,319 | |
Plans with ABO in excess of plan assets | | | | | | | |
ABO | $ | 66,448 | | | $ | 12,042 | | | $ | 64,669 | | | $ | 10,996 | |
Fair value of plan assets | $ | 61,077 | | | $ | 4,185 | | | $ | 59,239 | | | $ | 3,940 | |
Plans with PBO in excess of plan assets | | | | | | | |
PBO | $ | 66,468 | | | $ | 12,128 | | | $ | 64,684 | | | $ | 11,079 | |
Fair value of plan assets | $ | 61,077 | | | $ | 4,186 | | | $ | 59,239 | | | $ | 3,940 | |
|
| | | | | | | | | | | | | | | |
| December 31, 2017 | | December 31, 2016 |
| U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
ABO | $ | 68,437 |
| | $ | 22,650 |
| | $ | 68,813 |
| | $ | 20,836 |
|
Plans with ABO in excess of plan assets | | | | | | | |
ABO | $ | 68,437 |
| | $ | 21,679 |
| | $ | 68,813 |
| | $ | 20,172 |
|
Fair value of plan assets | $ | 62,639 |
| | $ | 13,408 |
| | $ | 61,622 |
| | $ | 12,046 |
|
Plans with PBO in excess of plan assets | | | | | | | |
PBO | $ | 68,450 |
| | $ | 21,822 |
| | $ | 68,827 |
| | $ | 20,458 |
|
Fair value of plan assets | $ | 62,639 |
| | $ | 13,411 |
| | $ | 61,622 |
| | $ | 12,009 |
|
The following table summarizes the components of net periodic pension and OPEB expense along with the assumptions used to determine benefit obligations:
| |
| Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Year Ended December 31, 2020 | | Year Ended December 31, 2019 | | Year Ended December 31, 2018 |
| Pension Benefits | | Global OPEB Plans | | Pension Benefits | | Global OPEB Plans | | Pension Benefits | | Global OPEB Plans | | Pension Benefits | | Global OPEB Plans | | Pension Benefits | | Global OPEB Plans | | Pension Benefits | | Global OPEB Plans |
| U.S. |
| Non-U.S. |
|
| U.S. |
| Non-U.S. |
|
| U.S. |
| Non-U.S. |
| | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | |
Components of expense | | | | | | | | | | | | | | | | | | Components of expense | | | | | | | | | | | | | | | | | |
Service cost | $ | 315 |
|
| $ | 199 |
|
| $ | 19 |
|
| $ | 381 |
|
| $ | 273 |
|
| $ | 18 |
|
| $ | 406 |
|
| $ | 306 |
|
| $ | 24 |
| Service cost | $ | 251 | | | $ | 145 | | | $ | 19 | | | $ | 393 | | | $ | 132 | | | $ | 17 | | | $ | 330 | | | $ | 163 | | | $ | 20 | |
Interest cost | 2,145 |
|
| 473 |
|
| 202 |
|
| 2,212 |
|
| 527 |
|
| 201 |
|
| 2,754 |
|
| 689 |
|
| 238 |
| Interest cost | 1,716 | | | 362 | | | 173 | | | 2,264 | | | 456 | | | 220 | | | 2,050 | | | 464 | | | 195 | |
Expected return on plan assets | (3,677 | ) |
| (750 | ) |
| — |
|
| (3,778 | ) |
| (733 | ) |
| — |
|
| (3,896 | ) |
| (794 | ) |
| — |
| Expected return on plan assets | (3,267) | | | (675) | | | 0 | | | (3,483) | | | (786) | | | 0 | | | (3,890) | | | (825) | | | 0 | |
Amortization of net actuarial (gains) losses | (6 | ) |
| 157 |
|
| 23 |
|
| (25 | ) |
| 137 |
|
| 19 |
|
| 8 |
|
| 188 |
|
| 37 |
| |
Curtailments, settlements and other(a) | (37 | ) |
| 8 |
|
| (5 | ) |
| (4 | ) |
| 16 |
|
| (13 | ) |
| (4 | ) |
| 141 |
|
| (14 | ) | |
Amortization of net actuarial losses | | Amortization of net actuarial losses | 16 | | | 171 | | | 74 | | | 11 | | | 122 | | | 30 | | | 10 | | | 144 | | | 54 | |
Curtailments, settlements and other | | Curtailments, settlements and other | 17 | | | 241 | | | (8) | | | 21 | | | 142 | | | (23) | | | (19) | | | 43 | | | (19) | |
Net periodic pension and OPEB (income) expense | $ | (1,260 | ) |
| $ | 87 |
|
| $ | 239 |
|
| $ | (1,214 | ) |
| $ | 220 |
|
| $ | 225 |
|
| $ | (732 | ) |
| $ | 530 |
|
| $ | 285 |
| Net periodic pension and OPEB (income) expense | $ | (1,267) | | | $ | 244 | | | $ | 258 | | | $ | (794) | | | $ | 66 | | | $ | 244 | | | $ | (1,519) | | | $ | (11) | | | $ | 250 | |
Weighted-average assumptions used to determine benefit obligations(b) | | | | | | | | | | | | | | | | | | |
Weighted-average assumptions used to determine benefit obligations(a) | | Weighted-average assumptions used to determine benefit obligations(a) | | | | | | | | | | | | | | | | | |
Discount rate | 3.53 | % | | 2.66 | % | | 3.52 | % | | 3.92 | % | | 2.88 | % | | 3.93 | % | | 4.06 | % | | 3.36 | % | | 4.13 | % | Discount rate | 2.37 | % | | 1.62 | % | | 2.53 | % | | 3.20 | % | | 2.16 | % | | 3.24 | % | | 4.22 | % | | 2.86 | % | | 4.19 | % |
Weighted-average assumptions used to determine net expense(b) | | | | | | | | | | | | | | | | | | |
Weighted-average assumptions used to determine net expense(a) | | Weighted-average assumptions used to determine net expense(a) | |
Discount rate | 3.35 | % | | 2.94 | % | | 3.39 | % | | 3.36 | % | | 3.14 | % | | 3.49 | % | | 3.73 | % | | 3.30 | % | | 3.83 | % | Discount rate | 2.84 | % | | 2.80 | % | | 3.00 | % | | 3.92 | % | | 3.36 | % | | 4.07 | % | | 3.19 | % | | 2.99 | % | | 3.29 | % |
Expected rate of return on plan assets | 6.23 | % | | 5.82 | % | | N/A |
| | 6.33 | % | | 6.07 | % | | N/A |
| | 6.38 | % | | 6.32 | % | | N/A |
| Expected rate of return on plan assets | 5.88 | % | | 4.96 | % | | N/A | | 6.37 | % | | 5.76 | % | | N/A | | 6.61 | % | | 6.09 | % | | N/A |
_________
| |
(a) | The curtailment charges recorded in the year ended December 31, 2015 were due primarily to the GM Canada hourly pension plan that was remeasured as a result of a voluntary separation program. |
| |
(b) | The rate of compensation increase does not have a significant effect on our U.S. pension and OPEB plans. |
(a) The rate of compensation increase and the cash balance interest crediting rates do not have a significant effect on our U.S. pension and OPEB plans.
The non-service cost components of the net periodic pension and OPEB income are presented in Interest income and other non-operating income, net. Refer to Note 19 for additional information.
U.S. pension plan service cost includes administrative expenses and Pension Benefit Guarantee Corporation premiums which were insignificant, in$214 million and $121 million for the years ended December 31, 2017, 20162020, 2019 and 2015.2018. Weighted-average assumptions used to determine net expense are determined at the beginning of the period and updated for remeasurements. Non-U.S. pension plan administrative expenses included in service cost were insignificant in the years ended December 31, 2017, 20162020, 2019 and 2015.2018.
Estimated amounts to be amortized from Accumulated other comprehensive loss into net periodic benefit cost inIn the year endingthree months ended December 31, 2018 based on December 31, 2017 plan measurements are $166 million, consisting primarily2020, we completed a $1.5 billion annuity purchase for salaried retirees in Canada. This resulted in a non-operating pension settlement charge of amortization$130 million.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Assumptions
Investment Strategies and Long-Term Rate of Return Detailed periodic studies are conducted by our internal asset management group as well as outside actuaries and are used to determine the long-term strategic mix among asset classes, risk mitigation strategies and the expected long-term return on asset assumptions for the U.S. pension plans. The U.S. study includes a review of alternative asset allocation and risk mitigation strategies, anticipated future long-term performance and risk of the individual asset classes that comprise the plans' asset mix. Similar studies are performed for the significant non-U.S. pension plans with the assistance of outside actuaries and asset managers. While the studies incorporate data from recent plan performance and historical returns, the expected long-termrate of return on plan asset assumptions are determined based onassets represents our estimate of long-term prospective rates of return.
We continue to pursue various options to fund and de-risk our pension plans, including continued changes to the pension asset portfolio mix to reduce funded status volatility. The strategic asset mix and risk mitigation strategies for the plans are tailored specifically for each plan. Individual plans have distinct liabilities, liquidity needs and regulatory requirements. Consequently there are different investment policies set by individual plan fiduciaries. Although investment policies and risk mitigation strategies may differ among plans, each investment strategy is considered to be appropriate in the context of the specific factors affecting each plan.
In setting new strategic asset mixes, consideration is given to the likelihood that the selected asset mixes will effectively fund the projected pension plan liabilities, while aligning with the risk tolerance of the plans' fiduciaries. The strategic asset mixes for U.S. defined benefit pension plans are increasingly designed to satisfy the competing objectives of improving funded positions (market value of assets equal to or greater than the present value of the liabilities) and mitigating the possibility of a deterioration in funded status.
Derivatives may be used to provide cost effective solutions for rebalancing investment portfolios, increasing or decreasing exposure to various asset classes and for mitigating risks, primarily interest rate, equity and currency risks. Equity and fixed income managers are permitted to utilize derivatives as efficient substitutes for traditional securities. Interest rate derivatives may be used to adjust portfolio duration to align with a plan's targeted investment policy and equity derivatives may be used to protect equity positions from downside market losses. Alternative investment managers are permitted to employ leverage, including through the use of derivatives, which may alter economic exposure.
In December 20172020, an investment policy study was completed for the U.S. pension plans. As a result of changes to our capital market assumptions, the weighted-average long-term rate of return on assets increaseddecreased from 6.2%5.9% at December 31, 20162019 to 6.6%5.6% at December 31, 2017.2020. The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to the U.S. plans.
Target Allocation Percentages The following table summarizes the target allocations by asset category for U.S. and non-U.S. defined benefit pension plans:
| |
| December 31, 2017 |
| December 31, 2016 | | December 31, 2020 | | December 31, 2019 |
| U.S. |
| Non-U.S. |
| U.S. |
| Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
Equity | 15 | % |
| 18 | % |
| 15 | % |
| 21 | % | Equity | 12 | % | | 16 | % | | 12 | % | | 14 | % |
Debt | 61 | % |
| 56 | % |
| 61 | % |
| 51 | % | Debt | 64 | % | | 66 | % | | 64 | % | | 67 | % |
Other(a) | 24 | % |
| 26 | % |
| 24 | % |
| 28 | % | Other(a) | 24 | % | | 18 | % | | 24 | % | | 19 | % |
Total | 100 | % |
| 100 | % |
| 100 | % |
| 100 | % | Total | 100 | % | | 100 | % | | 100 | % | | 100 | % |
__________
| |
(a) | (a) Primarily includes private equity, real estate and absolute return strategies which mainly consist of hedge funds. |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Assets and Fair Value Measurements The following tables summarize the fair value of U.S. and non-U.S. defined benefit pension plan assets by asset class:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
U.S. Pension Plan Assets | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Common and preferred stocks | $ | 7,429 | | | $ | 0 | | | $ | 1 | | | $ | 7,430 | | | $ | 6,232 | | | $ | 19 | | | $ | 1 | | | $ | 6,252 | |
Government and agency debt securities(a) | 0 | | | 13,231 | | | 0 | | | 13,231 | | | 0 | | | 13,843 | | | 0 | | | 13,843 | |
Corporate and other debt securities | 0 | | | 26,475 | | | 0 | | | 26,475 | | | 0 | | | 24,809 | | | 0 | | | 24,809 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other investments, net(b)(c) | (834) | | | (8) | | | 427 | | | (415) | | | (47) | | | 25 | | | 401 | | | 379 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net plan assets subject to leveling | $ | 6,595 | | | $ | 39,698 | | | $ | 428 | | | 46,721 | | | $ | 6,185 | | | $ | 38,696 | | | $ | 402 | | | 45,283 | |
Plan assets measured at net asset value | | | | | | | | | | | | | | | |
Investment funds | | | | | | | 7,534 | | | | | | | | | 7,031 | |
Private equity and debt investments | | | | | | | 3,137 | | | | | | | | | 2,951 | |
Real estate investments | | | | | | | 3,061 | | | | | | | | | 3,484 | |
Total plan assets measured at net asset value | | | | | | | 13,732 | | | | | | | | | 13,466 | |
Other plan assets, net(d) | | | | | | | 624 | | | | | | | | | 490 | |
Net plan assets | | | | | | | $ | 61,077 | | | | | | | | | $ | 59,239 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
U.S. Pension Plan Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and preferred stocks | $ | 8,892 |
|
| $ | 17 |
|
| $ | 2 |
|
| $ | 8,911 |
|
| $ | 8,288 |
|
| $ | 35 |
|
| $ | 3 |
|
| $ | 8,326 |
|
Government and agency debt securities(a) | — |
|
| 12,116 |
|
| — |
|
| 12,116 |
|
| — |
|
| 11,374 |
|
| — |
|
| 11,374 |
|
Corporate and other debt securities | — |
|
| 26,122 |
|
| — |
|
| 26,122 |
|
| — |
|
| 25,452 |
|
| — |
|
| 25,452 |
|
Other investments, net | 552 |
|
| 119 |
|
| 395 |
|
| 1,066 |
|
| 486 |
|
| 288 |
|
| 403 |
|
| 1,177 |
|
Net plan assets subject to leveling | $ | 9,444 |
|
| $ | 38,374 |
|
| $ | 397 |
|
| 48,215 |
|
| $ | 8,774 |
|
| $ | 37,149 |
|
| $ | 406 |
|
| 46,329 |
|
Plan assets measured at net asset value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment funds |
|
|
|
|
|
|
|
|
| 6,632 |
|
|
|
|
|
|
|
|
|
|
| 6,509 |
|
Private equity and debt investments |
|
|
|
|
|
|
|
|
| 3,539 |
|
|
|
|
|
|
|
|
|
|
| 4,012 |
|
Real estate investments |
|
|
|
|
|
|
|
|
| 3,351 |
|
|
|
|
|
|
|
|
|
|
| 3,634 |
|
Total plan assets measured at net asset value |
|
|
|
|
|
|
|
|
| 13,522 |
|
|
|
|
|
|
|
|
|
|
| 14,155 |
|
Other plan assets, net(b) |
|
|
|
|
|
|
|
|
| 902 |
|
|
|
|
|
|
|
|
|
|
| 1,138 |
|
Net plan assets |
|
|
|
|
|
|
|
|
| $ | 62,639 |
|
|
|
|
|
|
|
|
|
|
| $ | 61,622 |
|
| | | | December 31, 2020 | | December 31, 2019 |
| | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Non-U.S. Pension Plan Assets | | Non-U.S. Pension Plan Assets | | | | | | | | | | | | | | | |
| Common and preferred stocks | | Common and preferred stocks | $ | 572 | | | $ | 0 | | | $ | 0 | | | $ | 572 | | | $ | 489 | | | $ | 1 | | | $ | 0 | | | $ | 490 | |
Government and agency debt securities(a) | | Government and agency debt securities(a) | 0 | | | 3,178 | | | 0 | | | 3,178 | | | 0 | | | 3,927 | | | 0 | | | 3,927 | |
Corporate and other debt securities | | Corporate and other debt securities | 0 | | | 2,762 | | | 0 | | | 2,762 | | | 0 | | | 3,230 | | | 0 | | | 3,230 | |
| Other investments, net(b)(e) | | Other investments, net(b)(e) | 31 | | | (79) | | | 127 | | | 79 | | | (5) | | | (107) | | | 248 | | | 136 | |
| |
| December 31, 2017 |
| December 31, 2016 | |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |
Non-U.S. Pension Plan Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Common and preferred stocks | $ | 578 |
|
| $ | 1 |
|
| $ | 6 |
|
| $ | 585 |
|
| $ | 978 |
|
| $ | 3 |
|
| $ | — |
|
| $ | 981 |
| |
Government and agency debt securities(a) | — |
|
| 3,853 |
|
| — |
|
| 3,853 |
|
| — |
|
| 3,221 |
|
| — |
|
| 3,221 |
| |
Corporate and other debt securities | — |
|
| 2,566 |
|
| — |
|
| 2,566 |
|
| — |
|
| 2,040 |
|
| 3 |
|
| 2,043 |
| |
Other investments, net | 23 |
|
| 149 |
|
| 438 |
|
| 610 |
|
| 37 |
|
| 153 |
|
| 429 |
|
| 619 |
| |
Net plan assets subject to leveling | $ | 601 |
|
| $ | 6,569 |
|
| $ | 444 |
|
| 7,614 |
|
| $ | 1,015 |
|
| $ | 5,417 |
|
| $ | 432 |
|
| 6,864 |
| Net plan assets subject to leveling | $ | 603 | | | $ | 5,861 | | | $ | 127 | | | 6,591 | | | $ | 484 | | | $ | 7,051 | | | $ | 248 | | | 7,783 | |
Plan assets measured at net asset value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Plan assets measured at net asset value | | | | | | | | | | | | |
Investment funds |
|
|
|
|
|
|
|
|
| 5,346 |
|
|
|
|
|
|
|
|
|
|
| 4,428 |
| Investment funds | | 5,870 | | | 5,608 | |
Private equity and debt investments |
|
|
|
|
|
|
|
|
| 570 |
|
|
|
|
|
|
|
|
|
|
| 546 |
| Private equity and debt investments | | 489 | | | 511 | |
Real estate investments |
|
|
|
|
|
|
|
|
| 1,097 |
|
|
|
|
|
|
|
|
|
|
| 1,092 |
| Real estate investments | | 917 | | | 982 | |
Total plan assets measured at net asset value |
|
|
|
|
|
|
|
|
| 7,013 |
|
|
|
|
|
|
|
|
|
|
| 6,066 |
| Total plan assets measured at net asset value | | 7,276 | | | 7,101 | |
Other plan assets (liabilities), net(b) |
|
|
|
|
|
|
|
|
| (132 | ) |
|
|
|
|
|
|
|
|
|
| (131 | ) | |
Other plan assets (liabilities), net(d) | | Other plan assets (liabilities), net(d) | | (21) | | | 77 | |
Net plan assets |
|
|
|
|
|
|
|
|
| $ | 14,495 |
|
|
|
|
|
|
|
|
|
|
| $ | 12,799 |
| Net plan assets | | $ | 13,846 | | | $ | 14,961 | |
__________
| |
(a) | Includes U.S. and sovereign government and agency issues. |
| |
(b) | Cash held by the plans, net of amounts receivable/payable for unsettled security transactions and payables for investment manager fees, custody fees and other expenses. |
(a)Includes U.S. and sovereign government and agency issues.
(b)Includes net derivative assets (liabilities).
(c)Level 1 Other investments, net includes derivative liabilities approximating $1.0 billion related to equity option and futures contracts at December 31, 2020.
(d)Cash held by the plans, net of amounts receivable/payable for unsettled security transactions and payables for investment manager fees, custody fees and other expenses.
(e)Level 2 Other investments, net includes Canadian reverse repurchase agreements.
The activity attributable to U.S. and non-U.S. Level 3 defined benefit pension plan investments was insignificant in the years ended December 31, 20172020 and 2016.2019.
Investment Fund Strategies Investment funds include hedge funds, funds of hedge funds, equity funds and fixed income funds. Hedge funds and funds of hedge funds managers typically seek to achieve their objectives by allocating capital across a broad array of funds and/or investment managers. Equity funds invest in U.S. common and preferred stocks as well as similar equity securities issued by companies incorporated, listed or domiciled in developed and/or emerging market countries. Fixed income funds include investments in high quality funds and, to a lesser extent, high yield funds. High quality fixed income funds invest in government securities, investment-grade corporate bonds and mortgage and asset-backed securities. High yield fixed income funds invest in high yield fixed income securities issued by corporations which are rated below investment grade. Other investment funds also included in this category primarily represent multi-strategy funds that invest in broadly diversified portfolios of equity, fixed income and derivative instruments.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Private equity and debt investments primarily consist of investments in private equity and debt funds. These investments provide exposure to and benefit from long-term equity investments in private companies, including leveraged buy-outs, venture capital and distressed debt strategies.
Real estate investments include funds that invest in entities which are primarily engaged in the ownership, acquisition, development, financing, sale and/or management of income-producing real estate properties, both commercial and residential. These funds typically seek long-term growth of capital and current income that is above average relative to public equity funds.
Significant Concentrations of Risk The assets of the pension plans include certain investment funds, private equity and debt investments and real estate investments. Investment managers may be unable to quickly sell or redeem some or all of these investments at an amount close or equal to fair value in order to meet a plan's liquidity requirements or to respond to specific events such as deterioration in the creditworthiness of any particular issuer or counterparty.
Illiquid investments held by the plans are generally long-term investments that complement the long-term nature of pension obligations and are not used to fund benefit payments when currently due. Plan management monitors liquidity risk on an ongoing basis and has procedures in place that are designed to maintain flexibility in addressing plan-specific, broader industry and market liquidity events.
The pension plans may invest in financial instruments denominated in foreign currencies and may be exposed to risks that the foreign currency exchange rates might change in a manner that has an adverse effect on the value of the foreign currency denominated assets or liabilities. Forward currency contracts may be used to manage and mitigate foreign currency risk.
The pension plans may invest in debt securities for which any change in the relevant interest rates for particular securities might result in an investment manager being unable to secure similar returns upon the maturity or the sale of securities. In addition, changes to prevailing interest rates or changes in expectations of future interest rates might result in an increase or decrease in the fair value of the securities held. Interest rate swaps and other financial derivative instruments may be used to manage interest rate risk.
Benefit Payments Benefits for most U.S. pension plans and certain non-U.S. pension plans are paid out of plan assets rather than our Cash and cash equivalents. The following table summarizes net benefit payments expected to be paid in the future, which include assumptions related to estimated future employee service:
| | | | | | | | | | | | | | | | | |
| Pension Benefits | | Global OPEB Plans |
| U.S. Plans | | Non-U.S. Plans | |
2021 | $ | 4,821 | | | $ | 1,172 | | | $ | 379 | |
2022 | $ | 4,614 | | | $ | 1,070 | | | $ | 374 | |
2023 | $ | 4,495 | | | $ | 1,038 | | | $ | 369 | |
2024 | $ | 4,387 | | | $ | 1,015 | | | $ | 364 | |
2025 | $ | 4,278 | | | $ | 1,000 | | | $ | 361 | |
2026 - 2030 | $ | 19,469 | | | $ | 4,673 | | | $ | 1,761 | |
|
| | | | | | | | | | | |
| Pension Benefits | | Global OPEB Plans |
| U.S. Plans | | Non-U.S. Plans | |
2018 | $ | 5,288 |
| | $ | 1,458 |
| | $ | 379 |
|
2019 | $ | 5,053 |
| | $ | 1,323 |
| | $ | 374 |
|
2020 | $ | 4,895 |
| | $ | 1,302 |
| | $ | 368 |
|
2021 | $ | 4,758 |
| | $ | 1,276 |
| | $ | 365 |
|
2022 | $ | 4,639 |
| | $ | 1,233 |
| | $ | 362 |
|
2023 - 2027 | $ | 21,553 |
| | $ | 5,759 |
| | $ | 1,817 |
|
Note 17.16. Commitments and Contingencies
Litigation-Related Liability and Tax Administrative Matters In the normal course of our business, we are named from time to time as a defendant in various legal actions, including arbitrations, class actions and other litigation. We identify below the material individual proceedings and investigations in connection with whichwhere we believe a material loss is reasonably possible or probable. We accrue for matters when we believe that losses are probable and can be reasonably estimated. At December 31, 20172020 and 2016,2019, we had accruals were $930 million andof $1.2 billion and were recorded$1.3 billion in Accrued liabilities and Other liabilities. In many proceedings,matters, it is inherently difficult to determine whether any loss is probable or even reasonably possible or to estimate the size or range of the possible loss. Accordingly an adverse outcomeoutcomes from such proceedings could exceed the amounts accrued by an amount that could be material to our results of operations or cash flows in any particular reporting period.
Proceedings Related to Ignition Switch Recall and Other Recalls In 2014 we announced various recalls relating to safety and other matters. Those recalls included recalls to repair ignition switches that could under certain circumstances
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
unintentionally move from the “run” position to the “accessory” or “off” position with a corresponding loss of power, which could in turn prevent airbags from deploying in the event of a crash.
Appellate Litigation Regarding Successor Liability Ignition Switch Claims In 2016, the U.S. Court of Appeals for the Second Circuit held that the 2009 order of the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) approving the sale of substantially all of the assets of Motors Liquidation Company (MLC) to GM free and clear of, among other things, claims asserting successor liability for obligations owed by MLC could not be enforced to bar claims against GM asserted by either plaintiffs who purchased used vehicles after the sale or against purchasers who asserted claims relating to the ignition switch defect, including pre-sale personal injury claims and economic-loss claims.
Economic-Loss Claims We are aware of over 100 putative class actions pendingthat were filed against GM in various courts in the U.S. and CanadaCanadian courts alleging that consumers who purchased or leased vehicles manufactured by GM or Motors Liquidation Company (formerly known as General Motors Corporation)MLC had been economically harmed by one or more of the 2014 recalls and/or the underlying vehicle conditions associated with those recalls (economic-loss cases). In general, these economic-loss cases seek recovery for purported compensatory damages, such as alleged benefit-of-the-bargain damages or damages related to alleged diminution in value of the vehicles, as well as punitive damages, injunctive relief and other relief. There is also a civil action brought by the Arizona Attorney General relating to the 2014 recalls that seeks civil penalties and injunctive relief for alleged violations of state laws.
Many of the pending U.S. economic-loss claims have been transferred to, and consolidated in, a single federal court, the U.S. District Court for the Southern District.District of New York (Southern District). These plaintiffs have asserted economic-loss claims under federal and state laws, including claims relating to recalled vehicles manufactured by GM and claims asserting successor liability relating to certain recalled vehicles manufactured by Motors Liquidation Company. The Southern District has dismissed various of these claims, including claims under the Racketeer Influenced and Corrupt Organization Act, claims for recovery for alleged reduction in the value of their vehicles due to damage to GM’s reputation and brand as a result of the ignition switch matter, and claims of plaintiffs who purchased a vehicle before GM came into existence in July 2009. The Southern District also dismissed certain state law claims at issue.MLC.
In August 2017, the Southern District granted our motion to dismiss the successor liability claims of plaintiffs in seven7 of the sixteen16 states at issue on the motion and called for additional briefing to decide whether Plaintiffs'plaintiffs' claims can proceed in the other
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
nine 9 states. In December 2017, the Southern District granted GM's motion and dismissed the plaintiffs' successor liability claims of plaintiffs in an additional state, but found that there are genuine issues of material fact that prevent summary judgment for GM in eight8 other states. In January 2018, GM moved for reconsideration of certain portions of the Southern District's December 2017 summary judgment ruling. That motion was granted in April 2018, dismissing plaintiffs' successor liability claims in any state where New York law applies.
In September 2018, the Southern District granted our motion to dismiss claims for lost personal time (in 41 out of 47 jurisdictions) and certain unjust enrichment claims, but denied our motion to dismiss plaintiffs' economic loss claims in 27 jurisdictions under the "manifest defect" rule.
In August 2019, the Southern District granted our motion for summary judgment on plaintiffs’ economic loss “benefit of the bargain” damage claims (the August 2019 Opinion). The Southern District held that plaintiffs’ conjoint analysis-based damages model failed to establish that plaintiffs suffered difference-in-value damages and without such evidence, plaintiffs’ difference-in-value damage claims fail under the laws of all three bellwether states: California, Missouri and Texas. Later in August 2019, the bellwether plaintiffs filed a motion requesting that the Southern District reconsider its summary judgment decision or allow an interlocutory appeal if reconsideration is denied. In December 2019, the Southern District denied plaintiffs' motion for reconsideration of the August 2019 Opinion, but granted the plaintiffs' motion for certification of an interlocutory appeal. On April 1, 2020, the Second Circuit Court of Appeals (the Second Circuit) granted the bellwether plaintiffs' petition seeking leave to appeal the August 2019 Opinion. On April 15, 2020, the bellwether plaintiffs and GM filed a Stipulation to withdraw the appeal from the Second Circuit based on the class settlement agreement described below.
In September 2019, GM filed an updated motion for summary judgment on plaintiffs’ remaining economic loss claims that were not addressed in the Southern District’s August 2019 Opinion and renewed its evidentiary motion seeking to strike the opinions of plaintiff’s expert on plaintiffs’ alleged “lost time” damages associated with having the recall repairs performed.
In March 2020, GM, plaintiffs and the MLC GUC Trust (GUC Trust) reached a settlement agreement (Class Settlement Agreement) to resolve on a national basis the economic loss claims of the proposed settlement class and proposed sub-classes, consisting of consumers who purchased or leased GM vehicles covered by the 7 2014 safety recalls at issue in the Southern District and the Bankruptcy Court. The proposed Class Settlement Agreement provides a common fund of approximately $120 million for settlement class members, of which GM will fund approximately $70 million and the GUC Trust will fund the remaining $50 million. GM will also pay attorneys’ fees and costs that may be awarded by the Southern District to plaintiffs’ counsel up to a maximum of $35 million. In April 2020, the Avoidance Action Trust (AAT), GM and plaintiffs reached a
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
tentative settlement under which the AAT will pay an insignificant amount and will be added as a settling party to the Class Settlement Agreement. During April and May 2020, the Southern District entered orders granting preliminary approval of the Class Settlement Agreement.
In December 2020, the Southern District conducted a final fairness hearing and issued an order granting final approval of the Class Settlement Agreement in its entirety. The order granting final approval became final, effective and binding in January 2021. The deadline for class members to file claims is April 2021.
Contingently Issuable Shares Under the Amended and Restated Master Sale and Purchase Agreement between GM and MLC, GM was obligated to issue Adjustment Shares of our common stock if allowed general unsecured claims against the GUC Trust, as estimated by the Bankruptcy Court, exceed $35.0 billion.
In March 2020, in conjunction with the Class Settlement Agreement, the GUC Trust filed a motion in the Bankruptcy Court seeking approval to enter into and take actions necessary to execute the Class Settlement Agreement, and seeking Bankruptcy Court authorization permitting the GUC Trust to distribute $300 million of GUC Trust assets to its unitholders and entry into a mutual release agreement with GM that would release GM from any and all claims, including any that would require GM to issue any Adjustment Shares. Bankruptcy Court approval of the GUC Trust motion is a condition precedent to preliminary approval of the Class Settlement Agreement by the Southern District. In April 2020, the Bankruptcy Court entered an order approving the GUC Trust's motion in its entirety. In May 2020, the approval and the mutual release agreement became binding and enforceable and GM was fully released from its potential Adjustment Shares obligation.
Personal Injury Claims We also are aware of severalless than one hundred active personal injury actions, exclusive of matters subject to settlements in principal, pending in various courts in the U.S. and Canada alleging injury or death as a result of defects that may be the subject of the 2014 recalls (personal injury cases).recalls. In general, these cases seek recovery for purported compensatory damages, punitive damages andand/or other relief. Since 2016, several bellwether trials of personal injurythese cases have taken place in the Southern District and in a Texas state court, which is administering a Texas state multi-district litigation. None of these trials resulted in a finding of liability against GM.
Appellate Litigation Regarding Successor Liability Ignition Switch Claims In 2015 the Bankruptcy Court issued a decision precluding claims against us based upon pre-sale accidents, claims based upon the acts or conduct by Motors Liquidation Company and claims asserting successor liability for obligations owed by Motors Liquidation Company (successor liability claims), except for claims asserting liabilities that had been expressly assumed by us in the Amended and Restated Master Sale and Purchase Agreement, and certain claims arising solely out of our own independent post-sale acts.
In 2016 the United States Court of Appeals for the Second Circuit (Second Circuit) held that the Bankruptcy Court's 2009 order approving the sale of substantially all of the assets of Motors Liquidation Company to GM free and clear of, among other things, successor liability claims could not be enforced to bar claims against GM asserted by either plaintiffs who purchased used vehicles after the sale or against purchasers who asserted claims relating to the ignition switch defect, including pre-sale personal injury claims and economic-loss claims. In 2017, the United States Supreme Court denied our petition for certiorari. Certain of these pre-sale claims were resolved through GM's Compensation Program. Plaintiffs asserting pre-sale claims related to the ignition switch defect that were not resolved by the Compensation Program must still establish their right to assert successor liability claims and demonstrate that their claims have merit.
Contingently Issuable Shares Under the Amended and Restated Master Sale and Purchase Agreement between us and Motors Liquidation Company we may be obligated to issue Adjustment Shares of our common stock in the event that allowed general unsecured claims against the GUC Trust, as estimated by the Bankruptcy Court, exceed $35.0 billion. The maximum number of shares issuable is 30 million shares (subject to adjustment to take into account stock dividends, stock splits and other transactions). At December 31, 2017, the Bankruptcy Court estimated that allowed general unsecured claims were approximately $31.9 billion. In August 2017, a group of plaintiffs’ attorneys alleged that they had entered into an agreement to settle “late claims” against the GUC Trust (i.e., claims filed after the deadline established by the Bankruptcy Court). Although the Bankruptcy Court ruled in January 2018 that the alleged agreement was not binding or enforceable, litigation continues over whether late claims can be asserted against the GUC Trust. If such late claims are allowed by the Bankruptcy Court and if such late claims are allowed in certain aggregate amounts sought by plaintiffs, then GM may be required to issue Adjustment Shares to the GUC Trust. We are currently unable to estimate any reasonably possible loss or range of loss that may result from this matter.
Securities and Derivative Matters In a putative shareholder class action filed in the United States District Court for the Eastern District of Michigan (Eastern District) on behalf of purchasers of our common stock from November 17, 2010 to July 24, 2014, the lead plaintiff alleged that GM and several current and former officers and employees made material misstatements and omissions relating to problems with the ignition switch and other matters in SEC filings and other public statements. In 2016 the Eastern District entered a judgment approving a class-wide settlement of the class action for $300 million. One shareholder filed an appeal of the decision approving the settlement. The United States Court of Appeals for the Sixth Circuit affirmed the judgment approving the settlement in November 2017. The objector subsequently filed petitions for rehearing and for en banc review before the entire Sixth Circuit. Both of those petitions remain pending.
Three shareholder derivative actions against certain current and former GM directors and officers are pending in the Eastern District. In two of those actions, the Eastern District has stayed GM's deadline to respond pending the decision of the Delaware Supreme Court in an unrelated case concerning a potentially dispositive legal issue. The court is still considering a motion to dismiss in the other action. Two derivative actions filed in the Circuit Court of Wayne County, Michigan, which have been consolidated, are also stayed pending disposition of the federal derivative actions.
Government Matters In connection with the 2014 recalls, we have from time to time received subpoenas and other requests for information related to investigations by agencies or other representatives of U.S. federal, state and the Canadian governments. Various governmental actions were conclusively resolved in 2017, including an investigation by the SEC, the investigations into consumer protection claims by 49 state attorneys general and the litigation initiated by the Orange County District Attorney. GM
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is cooperating with all reasonable pending requests for information. Any existing governmental matters or investigations could in the future result in the imposition of damages, fines, civil consent orders, civil and criminal penalties or other remedies.
Deferred Prosecution Agreement In September 2015, GM entered into the DPA with the U.S. Attorney's Office regarding its investigation of the events leading up to certain recalls regarding faulty ignition switches.
Under the DPA we consented to the filing of the Information in the Southern District charging GM with a scheme to conceal material facts from a government regulator, in violation of Title 18, United States Code, Section 1001, and wire fraud, in violation of Title 18, United States Code, Section 1343. We have pled not guilty to the charges alleged in the Information. Pursuant to the DPA we paid the United States $900 million as a financial penalty.
Pursuant to the DPA, the U.S. Attorney’s Office agreed to recommend to the Southern District that prosecution of GM on the Information be deferred for three years. The U.S. Attorney’s Office also agreed that if we are in compliance with all of our obligations under the DPA, the U.S. Attorney’s Office will, within 30 days after the expiration of the period of deferral (including any extensions thereto), seek dismissal with prejudice of the Information. The DPA further provides that, in the event the U.S. Attorney’s Office determines during the period of deferral of prosecution (or any extensions thereof) that we have violated any provision of the DPA, the U.S. Attorney’s Office may in its discretion either prosecute GM on the charges alleged in the Information or impose an extension of the period of deferral of prosecution of up to one additional year, but in no event will the total term of the deferral-of-prosecution period under the DPA exceed four years.
In the DPA, we also agreed to retain the Monitor for a period of three years to review and assess our policies, practices or procedures related to statements about motor vehicle safety, the provision of information to those responsible for recall decisions, recall processes and addressing known defects in certified pre-owned vehicles. The U.S. Attorney's Office has the authority to lengthen the Monitor's term up to one year if the U.S. Attorney's Office determines that GM has violated the DPA. Likewise, the U.S. Attorney's Office may shorten the Monitor's term if the U.S. Attorney's Office determines that a monitor is no longer necessary. GM is required to pay the compensation and expenses of the Monitor and of the persons hired under his authority. The Monitor commenced his term in November 2015.
The total amount accrued for the 2014 recalls at December 31, 20172020, reflects amounts for a combination of settled but unpaid matters, and for the remaining unsettled investigations, claims and/or lawsuits relating to the ignition switch recalls and other related recalls to the extent that such matters are probable and can be reasonably estimated. The amounts accrued for those unsettled investigations, claims, and/or lawsuits represent a combination of our best single point estimates where determinable and, where no such single point estimate is determinable, our estimate of the low end of the range of probable loss with regard to such matters, if that is determinable. We believe it is probable that we will incur additional liabilities beyond what has already been accrued for at least a portion of the remaining matters, whether through settlement or judgment; however, we are currently unable to estimate an overall amount or range of loss because these matters involve significant uncertainties, including the legal theory or the nature of the investigations, claims and/or lawsuits, the complexity of the facts, the lack of documentation available with respect to particular cases or groups of cases, the results of any investigation or litigation and the timing of resolution of the investigation or litigations, including any appeals. We will continue to consider resolution of pending matters involving ignition switch recalls and other recalls where it makes sense to do so.
GM Korea Wage Litigation We areGM Korea is party to litigation withcurrent and former hourly employees of GM Korea in the appellate court and Incheon District Court in Incheon, Korea. The group actions, which in the aggregate involve more than 10,000 employees, allege that GM Korea failed to include bonuses and certain allowances in its calculation of Ordinary Wages due under Korean regulations. In 2012 the Seoul High Court (an intermediate levelintermediate-level appellate court) affirmed a decision in one of these group actions involving five5 GM Korea employees which was contrary to GM Korea's position. GM Korea appealed to the Supreme Court of the Republic of Korea (Supreme(Korean Supreme Court). In 2014 the Korean Supreme Court largely agreed with GM Korea's legal arguments and remanded the case to the Seoul High Court for consideration consistent with earlier Korean Supreme Court precedent holding that while fixed bonuses should be included in the calculation of Ordinary Wages, claims for retroactive application of this rule would be barred under certain circumstances. In 2015, on reconsideration, the Seoul High Court held in GM Korea's favor, after which the plaintiffs appealed to the Korean Supreme Court. In 2014July 2020, the Korean Supreme Court held in GM KoreaKorea's favor. In light of this decision, we believe the probability that we will incur a material loss is remote and its labor union agreed to include bonuses and certain allowances in Ordinary Wages retroactive to March 1, 2014. Therefore our accrual related to these group actions was reclassified from a contingent liability to the Pensions liability. Wewe estimate our reasonably possible loss in excess of amounts accrued to be approximately $592 millionis insignificant at December 31, 2017.2020.
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GM Korea is also party to litigation with current and former salaried employees over allegations relating to ordinary wages regulation. In September 2017, the Seoul High Court issued a ruling concerning two salary casesOrdinary Wages regulation and another salaried worker case.
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Among other things, the Seoul High Court held that there was no agreement between GM Korea and its salaried workers regarding whether to include fixed bonuses in the calculation of ordinary wages. As a result,Ordinary Wages. In 2017, the Seoul High Court held that certain workers are not barred from filing retroactive wage claims. GM Korea appealed this ruling to the SeoulKorean Supreme Court. At December 31, 2017 we identifiedThe Korean Supreme Court has not yet rendered a decision. We estimate our reasonably possible loss for salary cases in excess of the amounts accrued ofto be approximately $185 million.$190 million at December 31, 2020. Both the scope of claims asserted and GM Korea's assessment of any or all of the individual claim elements may change if new information becomes available.available or the legal or regulatory frameworks change.
GM Korea is also party to litigation with current and former subcontract workers over allegations that they are entitled to the same wages and benefits provided to full-time employees, and to be hired as full-time employees. In May 2018 and September 2020, the Korean labor authorities issued adverse administrative orders finding that GM Korea must hire certain current subcontract workers as full-time employees. GM Korea appealed the May 2018 order and plans to appeal the September 2020 order. In June 2020, the Seoul High Court ruled against GM Korea in one of the subcontract worker claims. GM Korea has appealed this decision to the Korean Supreme Court. At December 31, 2020, our accrual covering certain asserted claims and claims that we believe are probable of assertion and for which liability is probable was approximately $240 million. We estimate the reasonably possible loss in excess of amounts accrued for other current subcontract workers who may assert similar claims to be approximately $120 million at December 31, 2020. We are currently unable to estimate any possible loss or range of loss that may result from additional claims that may be asserted by former subcontract workers.
GM Brazil Indirect Tax ClaimIn March 2017,2019, the SupremeSuperior Court of Brazil issued a decision concluding thatrendered favorable decisions on three cases brought by GM Brazil challenging whether a certain state value addedvalue-added tax should not be included in the calculation of federal gross receiptsreceipts taxes. The decision reduces GM Brazil’s gross receipts tax prospectively and, potentially, retrospectively. The retrospectiveThose decisions granted the Company the right to recover, is under judicial review. Ifthrough offset of federal tax liabilities, certain amounts collected by the government between August 2001 and February 2017. As a result, GM Brazil recorded pre-tax recoveries of $1.4 billion in Automotive and other cost of sales in the year ended December 31, 2019. Realization of these recoveries depends on the timing of administrative approvals and generation of federal tax liabilities eligible for offset. The Brazilian IRS has filed a Motion of Clarification on this matter with the Brazilian Supreme Court, of Brazil grants retrospective recoverywhich motion is awaiting decision. In addition, we estimate potential recoveries of upexpect third parties to $1.4 billion. However, given the remaining uncertainty regarding the ultimate judicial resolution of this matter, we are unable to assess the likelihood of any favorable outcome at this time. We have not recorded any amounts relating to the retrospective nature of this matter.
PSA Group Transaction Our wholly owned subsidiary (The Seller) has agreed to indemnify PSA Group for certain losses resulting from any inaccuracymake claims on some or all of the representations and warranties or breaches of our covenants included in the Agreement and for certain other liabilities including emissions and product liabilities. The Company has entered into a guarantee for the benefit of PSA Group and pursuantpre-tax recoveries, against which GM intends to which the Company has agreed to guarantee the Seller's obligation to indemnify PSA Group. Certain of these indemnification obligations are subject to time limitations, thresholds and/or caps as to the amount of required payments. We are currently unable to estimate any reasonably possible overall amounts or range of loss that may result from claims made under these indemnities, if any.defend.
PSA Group has provided a number of working capital and other adjustments under the Agreement and other ancillary agreements, many of which are customary in these types of transactions. We currently believe that post-closing adjustments under the Agreement, if any, would not have a material impact on our results of operations.
Other Litigation-Related Liability and Tax Administrative Matters Various other legal actions, including class actions, governmental investigations, claims and proceedings, are pending against us or our related companies or joint ventures, including matters arising out of alleged product defects; employment-related matters; product and workplace safety, vehicle emissions including CO2 and nitrogen oxide, fuel economy and related governmental regulations; product warranties; financial services; dealer, supplier and other contractual relationships; government regulations relating to payments to foreign companies; government regulations relating to competition issues; tax-related matters not subject to the provision of ASCAccounting Standards Codification 740, Income Taxes (indirect tax-related matters); product design, manufacture and performance; consumer protection laws; and environmental protection laws, including laws regulating air emissions, water discharges, waste management and environmental remediation.remediation from stationary sources.
There are several putative class actions pending against GM in federal courts in the U.S. and in the Provincial Courts in Canada alleging that various vehicles sold, including model year 2011-2016 Duramax Diesel Chevrolet Silverado and GMC Sierra vehicles, violate federal, state and stateforeign emission standards. We are unable to estimate any reasonably possible loss or range of loss that may result from these actions. GM has also facesfaced a series of additional lawsuits based primarily on allegations in the Duramax suit,U.S. based on these allegations, including putative shareholder class actions claiming violations of federal securities law.law and a shareholder demand lawsuit. The securities and shareholder demand lawsuits have been voluntarily stayeddismissed by the plaintiffs. At this stage of these proceedings, we are unable to provide an evaluation of the likelihood that a loss will be incurred or an estimate of the amounts or range of possible loss.plaintiffs in those actions.
We believe that appropriate accruals have been established for losses that are probable and can be reasonably estimated. It is possible that the resolution of one or more of these matters could exceed the amounts accrued in an amount that could be material to our results of operations. We also from time to time receive subpoenas and other inquiries or requests for information from agencies or other representatives of U.S. federal, state and foreign governments on a variety of issues.
Indirect tax-related matters are being litigated globally pertaining to value added taxes, customs, duties, sales, property taxes and other non-income tax related tax exposures. The various non-U.S. labor-related matters include claims from current and former employees related to alleged unpaid wage, benefit, severance and other compensation matters. Certain administrative proceedings are indirect tax-related and may require that we deposit funds in escrow or provide an alternative form of security which may range from $250 million to $650 million at December 31, 2017.security. Some of the matters may involve compensatory, punitive or other treble damage claims, environmental remediation programs or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that could not be reasonably estimated at December 31, 2017.2020. We believe that appropriate accruals have been established for losses that are
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probable and can be reasonably estimated. For indirect tax-related matters we estimate our reasonably possible loss in excess of amounts accrued to be up to approximately $1.0 billion$750 million at December 31, 2017.2020.
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Takata Matters In May 2016, NHTSA issued an amended consent order requiring Takata to file DIRsdefect information reports (DIRs) for previously unrecalled front airbag inflators that contain phased-stabilized ammonium nitrate-based propellant without a moisture absorbing desiccant on a multi-year, risk-based schedule through 2019 impacting tens of millions of vehicles produced by numerous automotive manufacturers. NHTSA concluded that the likely root cause of the rupturing of the airbag inflators is a function of time, temperature cycling and environmental moisture.
Although we do not believe there is a safety defect at this time in any unrecalled GM vehicles within scope of the Takata DIRs, inIn cooperation with NHTSA we filed Preliminary DIRs on May 27, 2016, updated as of June 13, 2016, covering 2.5 million of certain of our GMT900 vehicles, which are full-size pick-uppickup trucks and SUVs. On November 15, 2016 we filed a petition for inconsequentialitySUVs, and request for deferral of determination regarding those GMT900 vehicles. On November 28, 2016 NHTSA granted GM's deferral request in connection with this petition. The deferral provided GM until August 31, 2017 to present evidence and analysis that our vehicles do not pose an unreasonable risk to motor vehicle safety.
We filed a second set of Preliminary DIRs for certain GMT900 vehicles on January 10, 2017. These January 2017 DIRs are consistent with GM’s May 2016 DIRs. On the same day, we also filed a second petition for inconsequentiality and deferral of decision with respect to the vehicles subject to our January 2017 DIRs. On January 18, 2017, NHTSA consolidated our first and second petitions for inconsequentiality and will rule on both at the same time.
On August 25, 2017, we filed a supplemental brief in support of our petitions that provided NHTSA with the results of our long-term study and testing and the basis for our determination that the inflators in these vehicles do not present an unreasonable risk to safety and that no repair should ultimately be required. In our brief, we requested that NHTSA grant our petitions or, in the alternative, grant an additional deferral period to provide time for further testing.
We filed a third set of Preliminary DIRs for certain GMT900 vehicles on January 9, 2018. These January 2018 DIRs are consistent with GM's May 2016 DIRs and January 2017 DIRs. On the same day, we also filed a third petition for inconsequentiality with respect to the vehicles subject to our January 2018those Preliminary DIRs.
We believe these vehicles are currently performing as designed and ongoing testing continuesIn November 2020, NHTSA denied GM's petitions for inconsequentiality relating to support the beliefTakata passenger-side inflators in certain GMT900 vehicles. NHTSA has directed that the vehicles' unique design and integration mitigates against inflator propellant, degradation and rupture risk. For example,we replace the airbag inflators used in the vehicles are a variant engineered specifically for ourin question, and we have decided not to contest NHTSA's decision. While we have already begun the process of executing the recall, given the number of vehicles and include features such as greater venting, unique propellant wafer configurations, and machined steel end caps. The inflators are packagedin this population, the recall will take several years to be completed.
Accordingly, in the instrument panel in suchthree months ended December 31, 2020, we recorded a way as to minimize exposure to moisture fromwarranty accrual of $1.1 billion for the climate control system. Also, these vehicles have features that minimizeexpected costs of complying with the maximum temperature to which the inflator will be exposed, such as larger interior volumes and standard solar absorbing windshields and side glass.recall remedy.
Accordingly, no warranty provision has been made for any repair associated with our vehicles subject to the Preliminary DIRs and amended consent order. However, in the event we are ultimately obligated to repair the vehicles subject to current or future Takata DIRs under the amended consent order in the U.S., we estimate a reasonably possible impact to GM of approximately $1.0 billion.
GM is engaged in discussions with regulatorshas recalled certain vehicles sold outside of the U.S. with respect to replace Takata inflators.inflators in those vehicles. There are significant differences in vehicle and inflator design between the relevant vehicles sold internationally and those sold in the U.S. We continue to gather and analyze evidence about these inflators and to share our findings with regulators. We were required to recall certain vehicles sold outside of the U.S. in the three months ended September 30, 2017 to replace Takata inflators in these vehicles. Additional recalls, if any, could be material to our results of operations and cash flows. We continue to monitor the international situation.
Through January 30, 2018 weThere are aware of oneseveral putative class action pendingactions that have been filed against GM, including in the federal courtcourts in the U.S., one putative class actionin the Provincial Courts in Canada, and in Mexico and three putative class actions pending in various Provincial Courts in CanadaIsrael, arising out of allegations that airbag inflators manufactured by Takata are defective. At this early stage of these proceedings, we are unable to provide an evaluation of the likelihood that a loss will be incurred or an estimate of the amounts or range of possible loss. On August 16, 2017, the bankruptcy court hearing the Takata bankruptcy entered an order staying all Takata related litigation against automotive manufacturers, including GM, through February 2018.
Product Liability With respect to product liability claims (other than claims relating to the ignition switch recalls discussed above) involving our and General Motors Corporation products, we believe that any judgment against us for actual damages will be adequately covered by ourWe recorded accruals and, where applicable, excess liability insurance coverage. In addition we indemnify
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dealers for certain product liability related claims including products sold by General Motors Corporation's dealers. At December 31, 2017 and 2016 liabilities of $595$589 million and $656$544 million were recorded in Accrued liabilities and Other liabilities at December 31, 2020 and 2019, for the expected cost of all known product liability claims, plus an estimate of the expected cost for product liability claims that have already been incurred and are expected to be filed in the future for which we are self-insured. It is reasonably possible that our accruals for product liability claims may increase in future periods in material amounts, although we cannot estimate a reasonable range of incremental loss based on currently available information. Other than claims relating to the ignition switch recalls discussed above, we believe that any judgment against us involving our and MLC products for actual damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage.
Guarantees We enter into indemnification agreements for liability claims involving products manufactured primarily by certain joint ventures. We also provide vehicle repurchase guarantees and payment guarantees on commercial loans outstanding with third parties such as dealers. These guarantees terminate in years ranging from 20182021 to 20322026 or upon the occurrence of specific events or are ongoing. We believe that the related potential costs incurred are adequately covered andby our recorded accruals, which are insignificant. The maximum liability, calculated as future undiscounted payments was $5.1mainly based on vehicles sold to date were $3.1 billion and $4.3$2.6 billion for these guarantees at December 31, 20172020 and 2016,2019, the majority of which relaterelates to the indemnification agreements.
We provide payment guarantees on commercial loans outstanding with third parties such as dealers. In some instances certain assets of the party or our payables to the party whose debt or performance we have guaranteed may offset, to some degree, the amount of any potential future payments. We are also exposed to residual value guarantees associated with certain guarantees. Our payablessales to the party whose debt or performance we have guaranteed may also reduce the amount of certain guarantees. If vehicles are required to be repurchased under vehicle repurchase obligations, the total exposure would be reduced to the extent vehicles are able to be resold to another dealer.rental car companies.
We periodically enter into agreements that incorporate indemnification provisions in the normal course of business. It is not possible to estimate our maximum exposure under these indemnifications or guarantees due to the conditional nature of these obligations. Insignificant amounts have been recorded for such obligations as the majority of them are not probable or estimable at this time and the fair value of the guarantees at issuance was insignificant. Refer to Note 22 for additional information on our indemnification obligations to PSA Group under the Master Agreement (the Agreement).
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Credit Cards Credit card programs offer rebates that can be applied primarily against the purchase or lease of our vehicles. At December 31, 20172020 and 20162019, our redemption liability was insignificant, our deferred revenue was $283$252 million and $286$253 million, and qualified cardholders had rebates available, net of deferred program revenue, of $1.5$1.3 billion and $1.9$1.4 billion. Our redemption liability and deferred revenue are recorded in Accrued liabilities and Other liabilities.
Noncancelable Operating LeasesThe following table summarizes Our portfolio of leases primarily consists of real estate office space, manufacturing and warehousing facilities, land and equipment. Certain leases contain escalation clauses and renewal or purchase options, and generally our minimum commitmentsleases have no residual value guarantees or material covenants. We exclude leases with a term of one year or less from our balance sheet, and do not separate non-lease components from our real estate leases.
Rent expense under noncancelableoperating leases was $317 million and $354 million in the years ended December 31, 2020 and 2019. Prior to adoption of ASU 2016-02, "Leases", rent expense under operating leases was $300 million in the year ended December 31, 2018. Variable lease costs were insignificant in the years ended December 31, 2020 and 2019. At December 31, 2020 and 2019, operating lease right of use assets in Other assets were $1.0 billion and $1.1 billion, operating lease liabilities in Accrued liabilities were $209 million and $239 million and non-current operating lease liabilities in Other liabilities were $969 million and $1.0 billion. Operating lease right of use assets obtained in exchange for lease obligations were $222 million and $497 million in the years ended December 31, 2020 and 2019. Our undiscounted future lease obligations related to operating leases having initial terms in excess of one year primarilyare $251 million, $205 million, $196 million, $151 million, $122 million and $437 million for property:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| Thereafter |
Minimum commitments(a) | $ | 284 |
|
| $ | 268 |
|
| $ | 222 |
|
| $ | 189 |
|
| $ | 123 |
|
| $ | 372 |
|
Sublease income | (62 | ) |
| (63 | ) |
| (50 | ) |
| (43 | ) |
| (38 | ) |
| (166 | ) |
Net minimum commitments | $ | 222 |
|
| $ | 205 |
|
| $ | 172 |
|
| $ | 146 |
|
| $ | 85 |
|
| $ | 206 |
|
__________
| |
(a) | Certain leases contain escalation clauses and renewal or purchase options. |
Rental expense underthe years 2021, 2022, 2023, 2024, 2025 and thereafter, with imputed interest of $184 million as of December 31, 2020. The weighted average discount rate was 4.0% and 4.2% and the weighted-average remaining lease term was 7.4 years and 7.2 years at December 31, 2020 and 2019. Payments for operating leases was $284 million, $270included in Net cash provided by (used in) operating activities were $309 million and $317$337 million in the years ended December 31, 2017, 20162020 and 2015.2019. Lease agreements that have not yet commenced were $150 million at December 31, 2020.
Note 18.17. Income Taxes
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
U.S. income | $ | 6,881 | | | $ | 3,826 | | | $ | 4,433 | |
Non-U.S. income | 540 | | | 2,342 | | | 1,953 | |
Income before income taxes and equity income | $ | 7,421 | | | $ | 6,168 | | | $ | 6,386 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
U.S. income | $ | 8,399 |
|
| $ | 9,989 |
|
| $ | 6,994 |
|
Non-U.S. income (loss) | 1,332 |
|
| (263 | ) |
| (816 | ) |
Income before income taxes and equity income | $ | 9,731 |
|
| $ | 9,726 |
|
| $ | 6,178 |
|
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Current income tax expense (benefit) | | | | | |
U.S. federal | $ | 84 | | | $ | 42 | | | $ | (104) | |
U.S. state and local | 272 | | | 102 | | | 113 | |
Non-U.S. | 493 | | | 758 | | | 577 | |
Total current income tax expense | 849 | | | 902 | | | 586 | |
Deferred income tax expense (benefit) | | | | | |
U.S. federal | 632 | | | (145) | | | (578) | |
U.S. state and local | (15) | | | 3 | | | 250 | |
Non-U.S. | 308 | | | 9 | | | 216 | |
Total deferred income tax expense (benefit) | 925 | | | (133) | | | (112) | |
Total income tax expense | $ | 1,774 | | | $ | 769 | | | $ | 474 | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Current income tax expense (benefit) |
|
|
|
|
|
U.S. federal | $ | 18 |
|
| $ | (126 | ) |
| $ | 5 |
|
U.S. state and local | 83 |
|
| 65 |
|
| 5 |
|
Non-U.S. | 552 |
|
| 572 |
|
| 817 |
|
Total current income tax expense | 653 |
|
| 511 |
|
| 827 |
|
Deferred income tax expense (benefit) |
|
|
|
|
|
|
|
|
U.S. federal | 7,831 |
|
| 1,865 |
|
| 1,735 |
|
U.S. state and local | (187 | ) |
| 264 |
|
| 243 |
|
Non-U.S. | 3,236 |
|
| 99 |
|
| (4,024 | ) |
Total deferred income tax expense (benefit) | 10,880 |
|
| 2,228 |
|
| (2,046 | ) |
Total income tax expense (benefit) | $ | 11,533 |
|
| $ | 2,739 |
|
| $ | (1,219 | ) |
Provisions are made for estimated U.S. and non-U.S. income taxes which may be incurred on the reversal of our basis differences in investments in foreign subsidiaries and corporate joint ventures not deemed to be indefinitely reinvested. Taxes have not been provided on basis differences in investments primarily as a result of earnings in foreign subsidiaries which are deemed indefinitely reinvested of $2.8 billion and $2.4$3.2 billion at December 31, 20172020 and 2016.2019. Additional basis differences related to investments in nonconsolidated China JVs exist of $4.1 billion at December 31, 20172020 and 20162019 as a result of fresh-start reporting. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable. The non-U.S. deferred income tax benefit in the year ended December 31, 2015 relates primarily to the release
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| | | Years Ended December 31, | | Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 | | 2020 | | 2019 | | 2018 |
Income tax expense at U.S. federal statutory income tax rate | $ | 3,406 |
|
| $ | 3,404 |
|
| $ | 2,162 |
| Income tax expense at U.S. federal statutory income tax rate | $ | 1,558 | | | $ | 1,295 | | | $ | 1,341 | |
State and local tax expense | (76 | ) |
| 190 |
|
| 173 |
| State and local tax expense | 219 | | | 117 | | | 282 | |
Non-U.S. income taxed at other than 35% | (145 | ) |
| (61 | ) |
| 37 |
| |
U.S. tax on Non-U.S. income | (941 | ) |
| (894 | ) |
| (151 | ) | |
Non-U.S. income taxed at other than the U.S. federal statutory tax rate | | Non-U.S. income taxed at other than the U.S. federal statutory tax rate | (1) | | | 166 | | | 90 | |
U.S. tax impact on Non-U.S. income and activities | | U.S. tax impact on Non-U.S. income and activities | (160) | | | (197) | | | (822) | |
Change in valuation allowances | 2,712 |
|
| 237 |
|
| (3,554 | ) | Change in valuation allowances | 370 | | | (233) | | | 1,695 | |
Change in tax laws | 7,194 |
|
| 147 |
|
| 29 |
| Change in tax laws | 0 | | | (122) | | | (134) | |
Research and manufacturing incentives | (313 | ) |
| (266 | ) |
| (367 | ) | |
General business credits and manufacturing incentives | | General business credits and manufacturing incentives | (366) | | | (420) | | | (695) | |
Capital loss expiration | | Capital loss expiration | 0 | | | 0 | | | 107 | |
Settlements of prior year tax matters | (256 | ) |
| (46 | ) |
| — |
| Settlements of prior year tax matters | (18) | | | 0 | | | (188) | |
Realization of basis differences in affiliates | — |
|
| (94 | ) |
| — |
| Realization of basis differences in affiliates | (12) | | | 0 | | | (59) | |
German statutory approval of net operating losses | | German statutory approval of net operating losses | 0 | | | 0 | | | (990) | |
Foreign currency remeasurement | 23 |
|
| (2 | ) |
| 209 |
| Foreign currency remeasurement | (7) | | | 74 | | | 19 | |
Financial penalty under the DPA(a) | — |
|
| — |
|
| 315 |
| |
Other adjustments | (71 | ) |
| 124 |
|
| (72 | ) | Other adjustments | 191 | | | 89 | | | (172) | |
Total income tax expense (benefit) | $ | 11,533 |
|
| $ | 2,739 |
|
| $ | (1,219 | ) | |
Total income tax expense | | Total income tax expense | $ | 1,774 | | | $ | 769 | | | $ | 474 | |
_________
| |
(a) | Refer to Note 17 for additional information on the DPA. |
Deferred Income Tax Assets and Liabilities Deferred income tax assets and liabilities at December 31, 20172020 and 20162019 reflect the effect of temporary differences between amounts of assets, liabilities and equity for financial reporting purposes and the bases of such assets, liabilities and equity as measured based on tax laws, as well as tax loss and tax credit carryforwards. The following table summarizes the components of temporary differences and carryforwards that give rise to deferred tax assets and liabilities:
| | | | | | | | | | | |
| December 31, 2020 | | December 31, 2019 |
Deferred tax assets | | | |
Postretirement benefits other than pensions | $ | 1,742 | | | $ | 1,695 | |
Pension and other employee benefit plans | 2,999 | | | 2,968 | |
Warranties, dealer and customer allowances, claims and discounts | 5,538 | | | 6,299 | |
| | | |
U.S. capitalized research expenditures | 6,763 | | | 6,035 | |
U.S. operating loss and tax credit carryforwards(a) | 7,254 | | | 8,686 | |
Non-U.S. operating loss and tax credit carryforwards(b) | 7,216 | | | 6,731 | |
Miscellaneous | 3,479 | | | 1,965 | |
Total deferred tax assets before valuation allowances | 34,991 | | | 34,379 | |
Less: valuation allowances | (9,095) | | | (8,135) | |
Total deferred tax assets | 25,896 | | | 26,244 | |
Deferred tax liabilities | | | |
Property, plant and equipment | 1,670 | | | 1,565 | |
Intangible assets | 744 | | | 763 | |
Total deferred tax liabilities | 2,414 | | | 2,328 | |
Net deferred tax assets | $ | 23,482 | | | $ | 23,916 | |
_________
(a) At December 31, 2020, U.S. operating loss and tax credit carryforwards of $7.1 billion expire by 2040 if not utilized and the remaining balance of $137 million may be carried forward indefinitely.
(b) At December 31, 2020, Non-U.S. operating loss and tax credit carryforwards of $1.3 billion expire by 2040 if not utilized and the remaining balance of $5.9 billion may be carried forward indefinitely.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
|
| | | | | | | |
| December 31, 2017 |
| December 31, 2016 |
Deferred tax assets |
|
|
|
Postretirement benefits other than pensions | $ | 1,948 |
|
| $ | 2,720 |
|
Pension and other employee benefit plans | 3,285 |
|
| 5,141 |
|
Warranties, dealer and customer allowances, claims and discounts | 5,675 |
|
| 8,074 |
|
Property, plant and equipment | — |
|
| 397 |
|
U.S. capitalized research expenditures | 4,413 |
|
| 6,127 |
|
U.S. operating loss and tax credit carryforwards(a) | 8,578 |
|
| 8,987 |
|
Non-U.S. operating loss and tax credit carryforwards(b) | 5,103 |
|
| 4,406 |
|
Miscellaneous | 1,697 |
|
| 1,733 |
|
Total deferred tax assets before valuation allowances | 30,699 |
|
| 37,585 |
|
Less: valuation allowances | (6,690 | ) |
| (3,908 | ) |
Total deferred tax assets | 24,009 |
|
| 33,677 |
|
Deferred tax liabilities |
|
|
|
|
|
Property, plant and equipment | 418 |
|
| — |
|
Intangible assets | 735 |
|
| 1,027 |
|
Total deferred tax liabilities | 1,153 |
|
| 1,027 |
|
Net deferred tax assets | $ | 22,856 |
|
| $ | 32,650 |
|
_________
| |
(a) | At December 31, 2017 U.S. operating loss and tax credit carryforwards of $8.6 billion expire by 2037 if not utilized. |
| |
(b) | At December 31, 2017 Non-U.S. operating loss and tax credit carryforwards of $925 million expire by 2037 if not utilized and the remaining balance of $4.2 billion may be carried forward indefinitely. |
Valuation Allowances During the yearyears endedDecember 31, 2017 there was a $2.3 billion increase in the valuation allowance related to deferred tax assets that will no longer be realizable as a result of the sale of the Opel/Vauxhall Business as described in Note 3. At December 31, 20172020 and 2019, valuation allowances against deferred tax assets of $6.7$9.1 billion and $8.1 billion were comprised of cumulative losses, credits and tax credits,other timing differences, primarily in Germany, Spain and South Korea.
At December 31, 2016 valuation allowances against deferred tax assets of $3.9 billion were comprised of cumulative losses and tax credits, primarily in Spain, South Korea and certain U.S. states.
Uncertain Tax Positions The following table summarizes activity of the total amounts of unrecognized tax benefits:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Balance at beginning of period | $ | 775 | | | $ | 1,341 | | | $ | 1,557 | |
Additions to current year tax positions | 435 | | | 18 | | | 292 | |
Additions to prior years' tax positions | 26 | | | 13 | | | 264 | |
Reductions to prior years' tax positions | (132) | | | (501) | | | (244) | |
Reductions in tax positions due to lapse of statutory limitations | (3) | | | (8) | | | (38) | |
Settlements | (10) | | | (93) | | | (450) | |
Other | (5) | | | 5 | | | (40) | |
Balance at end of period | $ | 1,086 | | | $ | 775 | | | $ | 1,341 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Beginning balance | $ | 1,182 |
|
| $ | 1,337 |
|
| $ | 1,705 |
|
Additions to current year tax positions | 160 |
|
| 49 |
|
| 53 |
|
Additions to prior years' tax positions | 448 |
|
| 96 |
|
| 114 |
|
Reductions to prior years' tax positions | (195 | ) |
| (192 | ) |
| (349 | ) |
Reductions in tax positions due to lapse of statutory limitations | (44 | ) |
| (103 | ) |
| (119 | ) |
Settlements | (11 | ) |
| (1 | ) |
| (3 | ) |
Other | 17 |
|
| (4 | ) |
| (64 | ) |
Ending balance | $ | 1,557 |
|
| $ | 1,182 |
|
| $ | 1,337 |
|
At December 31, 20172020 and 20162019 there were $390$851 million and $682$539 million of unrecognized tax benefits that if recognized would favorably affect our effective tax rate in the future. In the years ended December 31, 2017, 20162020, 2019 and 20152018 income tax related interest and penalties were insignificant. At December 31, 20172020 and 20162019 we had liabilities of $152$92 million and $160$117 million for income tax related interest and penalties.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
At December 31, 20172020 it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits in the next twelve months.
Other Matters Income tax returns are filed in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. We have open tax years from 20072011 to 20172020 with various significant tax jurisdictions. Tax authorities may have the ability to review and adjust net operating loss or tax credit carryforwards that were generated prior to these periods if utilized in an open tax year. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. Given the global nature of our operations there is a risk that transfer pricing disputes may arise.
The Tax Cuts and Jobs Act (the Tax Act) was signed into law on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation and included reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system and imposition of a tax on deemed repatriated earnings of foreign subsidiaries. We recognized the tax effects of the Tax Act in the year ended December 31, 2017 and recorded $7.3 billion in tax expense which relates almost entirely to the remeasurement of deferred tax assets to the 21% tax rate. Upon completion of our 2017 U.S. income tax return in 2018 we may identify additional remeasurement adjustments to our recorded deferred tax assets. We will continue to assess our provision for income taxes as future guidance is issued but do not currently anticipate significant revisions will be necessary. Any such revisions will be treated in accordance with the measurement period guidance outlined in Staff Accounting Bulletin No. 118.
Note 19.18. Restructuring and Other Initiatives
We have executed various restructuring and other initiatives and we may execute additional initiatives in the future, if necessary, to streamline manufacturing capacity and reduce other costs to improve the utilization of remaining facilities. To the extent these programs involve voluntary separations, no liabilities area liability is generally recorded untilat the time offers to employees are accepted. To the extent these programs provide separation benefits in accordance with pre-existing agreements, a liability is recorded once the amount is probable and reasonably estimable. If employees are involuntarily terminated, a liability is generally recorded at the communication date. Related charges are recorded in Automotive and other cost of sales and Automotive and other selling, general and administrative expense.
The following table summarizes the reserves and charges related to restructuring and other initiatives, including postemployment benefit reserves and charges:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Balance at beginning of period | $ | 564 | | | $ | 1,122 | | | $ | 227 | |
Additions, interest accretion and other | 565 | | | 629 | | | 1,637 | |
Payments | (678) | | | (1,101) | | | (600) | |
Revisions to estimates and effect of foreign currency | (99) | | | (86) | | | (142) | |
Balance at end of period | $ | 352 | | | $ | 564 | | | $ | 1,122 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Balance at beginning of period | $ | 268 |
|
| $ | 383 |
|
| $ | 627 |
|
Additions, interest accretion and other | 330 |
|
| 412 |
|
| 545 |
|
Payments | (315 | ) |
| (490 | ) |
| (360 | ) |
Revisions to estimates and effect of foreign currency | (56 | ) |
| (37 | ) |
| (429 | ) |
Balance at end of period | $ | 227 |
|
| $ | 268 |
|
| $ | 383 |
|
In the year ended December 31, 2017 restructuring and other initiatives primarily include restructuring actions announced in the three months ended June 30, 2017 in GMI. These actions related primarily to the withdrawal of Chevrolet from the Indian and South African markets at the end of 2017 and the transition of our South Africa manufacturing operations to Isuzu Motors. We intend to continue manufacturing vehicles in India for sale to certain export markets. We recorded charges of $460 million in GMI primarily consisting of $297 million of asset impairments, sale incentives, inventory provisions and other charges, not reflected in the table above, and $163 million of dealer restructurings, employee separations and other contract cancellation costs, which are reflected in the table above. We completed these programs in GMI in 2017.
Other GMI restructuring programs reflected in the table above include separation and other programs in Australia, Korea and India and the withdrawal of the Chevrolet brand from Europe. Collectively, these programs had a total cost of $892 million since inception in 2013 through the completion of the programs in the year ended December 31, 2017.
In the year ended December 31, 2016 restructuring and other initiatives related primarily to charges of $240 million in the three months ended March 31, 2016 in GMNA related to the cash severance incentive program to qualified U.S. hourly employees under our 2015 labor agreement with the UAW and insignificant costs for separation and other programs in Australia, Korea and India and the withdrawal of Chevrolet brand from Europe.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
In the year ended December 31, 2020, restructuring and other initiatives primarily included actions in GMI related to the wind-down of Holden sales, design and engineering operations in Australia and New Zealand, the sale of our vehicle and powertrain manufacturing facilities in Thailand and the execution of a binding term sheet to sell our manufacturing facility in India. We recorded charges of $683 million in the year ended December 31, 2020, primarily consisting of $360 million in dealer restructurings, employee separations and supplier claim charges, which are reflected in the table above, and $323 million in property and intangible asset impairments, inventory provisions, sales allowances and other charges, not reflected in the table above. We also recorded a $236 million charge to Income tax expense due to the establishment of a valuation allowance against deferred tax assets in Australia and New Zealand in the year ended December 31, 2020. We incurred $197 million in net cash outflows resulting from these restructuring actions primarily for dealer restructuring payments and employee separation payments, which includes proceeds of $143 million from the sale of our manufacturing facilities in Thailand, in the year ended December 31, 2020. Holden and Thailand programs were substantially complete at December 31, 2020.
In the year ended December 31, 20152019, restructuring and other initiatives primarily included actions related to our announced transformation activities, which include unallocation of products to certain manufacturing facilities and other employee separation programs. We recorded charges of $1.8 billion, primarily toin GMNA, in the reversalyear ended December 31, 2019 consisting of $1.3 billion primarily in non-cash accelerated depreciation and pension curtailment and other charges, not reflected in the U.S. Supplemental Unemployment Benefit Plan accrual for temporary layoff benefitstable above, and $535 million primarily in supplier-related charges and employee-related separation charges, which are reflected in the table above. We recorded charges of $317$1.3 billion, primarily in GMNA, in the year ended December 31, 2018 consisting of $1.0 billion in employee separations and other charges, which are reflected in the table above, and $301 million primarily in non-cash accelerated depreciation, not reflected in the table above. These programs have a total cost since inception of $3.1 billion and were complete at December 31, 2019. We incurred $333 million and $1.1 billion in cash outflows resulting from a plan amendmentthese restructuring actions, primarily for employee separation payments and supplier-related payments in the 2015 UAW Agreementyears ended December 31, 2020 and 2019. The cash outflows were substantially complete at December 31, 2020.
In the year ended December 31, 2018, restructuring and other initiatives in GMNAGMI primarily included the closure of a facility and costs incurredother restructuring actions in Korea and employee separation programs. We recorded charges of $324 million$1.0 billion related to the separationKorea, net of noncontrolling interests. These charges consisted of $537 million in non-cash asset impairments and other charges, not reflected in the table above, and $495 million in employee separation charges, which are reflected in the table above. We incurred $775 million in cash outflows resulting from these Korea restructuring actions, primarily for employee separations and statutory pension payments in the year ended December 31, 2018. These programs in Australia, Korea, Thailand, Indonesia, Indiawere substantially complete at December 31, 2018.
Note 19.Interest Income and the exit of Russia and the withdrawal of the Chevrolet brand from Europe.Other Non-Operating Income
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Non-service pension and OPEB income | $ | 1,095 | | | $ | 797 | | | $ | 1,665 | |
Interest income | 241 | | | 429 | | | 335 | |
Licensing agreements income | 211 | | | 165 | | | 296 | |
Revaluation of investments | 265 | | | 80 | | | 258 | |
Other | 73 | | | (2) | | | 42 | |
Total interest income and other non-operating income, net | $ | 1,885 | | | $ | 1,469 | | | $ | 2,596 | |
Note 20. Stockholders’ Equity and Noncontrolling Interests
Preferred and Common Stock We have 2.0 billion shares of preferred stock and 5.0 billion shares of common stock authorized for issuance. At December 31, 20172020 and 20162019 we had 1.4 billion0 shares of preferred stock and 1.51.4 billion shares of common stock issued and outstanding.
Common Stock Holders of our common stock are entitled to dividends at the sole discretion of our Board of Directors. Our dividends declared per common share were $1.52,$0.38, $1.52 and $1.38$1.52 and our total dividends paid on common stock were $545 million, $2.2 billion $2.3 billion and $2.2$2.1 billion for the years ended December 31, 2017, 20162020, 2019 and 2015.2018. Holders of common stock are entitled to one1 vote per share on all matters submitted to our stockholders for a vote. The liquidation rights of holders of our common stock are secondary to the payment or provision for payment of all our debts and liabilities and to holders of our preferred stock, if any such shares are then outstanding.
90
In the years ended December 31, 2017, 2016 and 2015 we
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
We purchased 120 million, 77 million and 1023 million shares of our outstanding common stock for $4.5 billion, $2.5 billion$90 million and $3.5 billion as$100 million in the years ended December 31, 2020 and 2018. We did not purchase shares of our outstanding common stock in the year ended December 31, 2019. Shares repurchased were part of the common stock repurchase program announced in March 2015, which our Board of Directors increased and extended in January 2016 and January 2017.
Warrants At December 31, 20162018 we had 4215 million warrants outstanding that we issued in July 2009. The warrants arehave expired but were exercisable at any time prior to July 10, 2019 at an exercise price of $18.33 per share. We had 22 million warrants outstanding at December 31, 2017.
GM Financial Preferred Stock In September 20172020, GM Financial issued $1.0 billion$500 million of Fixed-to-Floating RateFixed-Rate Reset Cumulative Perpetual Preferred Stock, Series A,C, $0.01 par value, with a liquidation preference of $1,000 per share. Dividends will be paid semi-annually when declared starting March 30, 2021 at a fixed rate of 5.70%. The preferred stock is classified as noncontrolling interests in our consolidated financial statements.
In 2018, GM Financial issued $500 million of Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series B, $0.01 par value, with a liquidation preference of $1,000 per share. Dividends will beare paid semi-annually when declared, startingwhich started March 30, 20182019 at a fixed rate of 5.75%6.50%. The preferred stock is classified as noncontrolling interests in our consolidated financial statements.
Cruise Preferred Shares In 2019, Cruise Holdings issued $1.2 billion of Cruise Class F Preferred Shares, including $687 million to General Motors Holdings LLC. All proceeds related to the Cruise Class F Preferred Shares are designated exclusively for working capital and general corporate purposes of Cruise. The Cruise Class F Preferred Shares participate pari passu with holders of Cruise Holdings common stock in any dividends declared. The Cruise Class F Preferred Shares have the right to vote on the election of one director, who is elected by the vote of a majority of the Cruise Holdings common stock and the Cruise Class F Preferred Shares. Prior to an initial public offering, the holders of Cruise Class F Preferred Shares are restricted from transferring the Cruise Class F Preferred Shares until May 7, 2023. The Cruise Class F Preferred Shares convert into common stock of Cruise Holdings, at specified exchange ratios, upon occurrence of an initial public offering. The Cruise Class F Preferred Shares are entitled to receive the greater of their carrying value or approximately $58a pro-rata share of any proceeds or distributions upon the occurrence of a merger, sale, liquidation, or dissolution of Cruise Holdings. The Cruise Class F Preferred Shares are classified as noncontrolling interests in our consolidated financial statements.
In 2018, Cruise Holdings issued $900 million annuallyof Cruise Preferred Shares to an affiliate of The Vision Fund which subsequently assigned such shares to The Vision Fund. Immediately prior to the issuance of the Cruise Preferred Shares, we invested $1.1 billion in Cruise Holdings. When Cruise's autonomous vehicles are ready for commercial deployment, The Vision Fund is obligated to purchase additional Cruise Preferred Shares for $1.35 billion. All proceeds are designated exclusively for working capital and general corporate purposes of Cruise. Dividends are cumulative and accrue at an annual rate of 7.0% and are payable quarterly in cash or in-kind, at Cruise's discretion. The Cruise Preferred Shares are also entitled to participate in Cruise dividends above a defined threshold. Prior to an initial public offering, The Vision Fund is restricted from transferring the first 10Cruise Preferred Shares until June 28, 2025. The Cruise Preferred Shares are classified as noncontrolling interests in our consolidated financial statements.
Cruise Common SharesIn 2018, Cruise Holdings issued $750 million of Class E Common Shares to Honda. All proceeds are designated exclusively for working capital and general corporate purposes of Cruise. At the later of October 3, 2025 or the termination of the commercial agreements between Cruise Holdings and Honda, Cruise Holdings can call all, but not less than all of the Class E Common Shares at an amount equal to the then fair value of Cruise Holdings. The Class E Common Shares are classified as noncontrolling interests in our consolidated financial statements.
GM Korea Preferred Shares In 2018, the Korea Development Bank (KDB) purchased $720 million of GM Korea's Class B Preferred Shares (GM Korea Preferred Shares). Dividends on the GM Korea Preferred Shares are cumulative and accrue at an annual rate of 1.0%. GM Korea can call the preferred shares at their original issue price six years afterfrom the date of issuance after which,and once called, the preferred shares can be converted into common shares of GM Korea at the option of the holder. The GM Korea Preferred Shares are classified as noncontrolling interests in our consolidated financial statements. The KDB investment proceeds can only be used for purposes of funding capital expenditures in GM Korea. In conjunction with the GM Korea Preferred Share issuance we agreed to provide GM Korea future funding, if the notes haveneeded, not been redeemed, dividends will be paid based on a floating rate.to exceed $2.8 billion through December 31, 2027, inclusive of $2.0 billion of planned capital expenditures through 2027.
The following table summarizes the significant components of Accumulated other comprehensive loss:
91
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Foreign Currency Translation Adjustments |
|
|
|
|
|
|
|
|
Balance at beginning of period | $ | (2,355 | ) |
| $ | (2,034 | ) |
| $ | (1,064 | ) |
Other comprehensive income (loss) and noncontrolling interests before reclassification adjustment, net of tax(a)(b) | 560 |
|
| (317 | ) |
| (1,168 | ) |
Reclassification adjustment, net of tax(a)(c) | 189 |
|
| (4 | ) |
| 198 |
|
Other comprehensive income (loss), net of tax(a) | 749 |
|
| (321 | ) |
| (970 | ) |
Balance at end of period | $ | (1,606 | ) |
| $ | (2,355 | ) |
| $ | (2,034 | ) |
Defined Benefit Plans |
|
|
|
|
|
Balance at beginning of period | $ | (6,968 | ) |
| $ | (5,999 | ) |
| $ | (7,006 | ) |
Other comprehensive income (loss) and noncontrolling interests before reclassification adjustment(b) | (798 | ) |
| (1,546 | ) |
| 813 |
|
Tax expense (benefit) | (98 | ) |
| (459 | ) |
| 41 |
|
Other comprehensive income (loss) and noncontrolling interests before reclassification adjustment, net of tax(b) | (700 | ) |
| (1,087 | ) |
| 772 |
|
Reclassification adjustment, net of tax(a)(d) | 1,270 |
|
| 118 |
|
| 235 |
|
Other comprehensive income (loss), net of tax | 570 |
|
| (969 | ) |
| 1,007 |
|
Balance at end of period | $ | (6,398 | ) |
| $ | (6,968 | ) |
| $ | (5,999 | ) |
__________
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
| |
(a) | The income tax effect was insignificant in the years ended December 31, 2017, 2016 and 2015. |
| |
(b) | The noncontrolling interests are insignificant in the years ended December 31, 2017, 2016 and 2015. |
| |
(c) | The reclassification adjustment for the year ended December 31, 2015 is related to the exit of Russia and is included in Automotive cost of sales. |
| |
(d)
| $1.2 billion is included in the loss on sale of the Opel/Vauxhall Business in the year ended December 31, 2017. An insignificant amount is included in the computation of periodic pension and OPEB (income) expense in the years ended December 31, 2017, 2016 and 2015. |
The following table summarizes the significant components of Accumulated other comprehensive loss:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Foreign Currency Translation Adjustments | | | | | |
Balance at beginning of period | $ | (2,278) | | | $ | (2,250) | | | $ | (1,606) | |
Other comprehensive loss and noncontrolling interests before reclassification adjustment, net of tax and impact of adoption of accounting standards(a)(b) | (480) | | | (56) | | | (664) | |
Reclassification adjustment, net of tax(a) | 23 | | | 28 | | | 20 | |
Other comprehensive loss, net of tax(a) | (457) | | | (28) | | | (644) | |
Balance at end of period | $ | (2,735) | | | $ | (2,278) | | | $ | (2,250) | |
Defined Benefit Plans | | | | | |
Balance at beginning of period | $ | (8,859) | | | $ | (6,737) | | | $ | (6,398) | |
Other comprehensive loss and noncontrolling interests before reclassification adjustment, net of impact of adoption of accounting standards(b) | (2,661) | | | (2,769) | | | (580) | |
Tax benefit | 444 | | | 463 | | | 100 | |
Other comprehensive loss and noncontrolling interests before reclassification adjustment, net of tax and impact of adoption of accounting standards(b) | (2,217) | | | (2,306) | | | (480) | |
Reclassification adjustment, net of tax(a) | 422 | | | 184 | | | 141 | |
Other comprehensive loss, net of tax | (1,795) | | | (2,122) | | | (339) | |
Balance at end of period(c) | $ | (10,654) | | | $ | (8,859) | | | $ | (6,737) | |
__________
(a) The income tax effect was insignificant in the years ended December 31, 2020, 2019 and 2018.
(b) The noncontrolling interests are insignificant in the years ended December 31, 2020, 2019 and 2018.
(c) Primarily consists of unamortized actuarial loss on our defined benefit plans.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Note 21. Earnings Per Share
Basic and diluted earnings (loss) per share are computed by dividing Net income (loss) attributable to common stockholders by the weighted-average common shares outstanding in the period. Diluted earnings (loss) per share is computed by giving effect to all potentially dilutive securities that are outstanding.
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2017 |
| 2016 |
| 2015 |
Basic earnings per share |
|
|
|
|
|
Income from continuing operations(a) | $ | 348 |
|
| $ | 9,428 |
|
| $ | 9,662 |
|
Less: cumulative dividends on GM Financial preferred stock | (16 | ) |
| — |
|
| — |
|
Income from continuing operations attributable to common stockholders | 332 |
|
| 9,428 |
|
| 9,662 |
|
Income (loss) from discontinued operations, net of tax | (4,212 | ) |
| (1 | ) |
| 25 |
|
Net income (loss) attributable to common stockholders | $ | (3,880 | ) |
| $ | 9,427 |
|
| $ | 9,687 |
|
|
|
|
|
|
|
Weighted-average common shares outstanding | 1,465 |
|
| 1,540 |
|
| 1,586 |
|
|
|
|
|
|
|
Basic earnings per common share – continuing operations | $ | 0.23 |
|
| $ | 6.12 |
|
| $ | 6.09 |
|
Basic earnings (loss) per common share – discontinued operations | $ | (2.88 | ) |
| $ | — |
|
| $ | 0.02 |
|
Basic earnings (loss) per common share | $ | (2.65 | ) |
| $ | 6.12 |
|
| $ | 6.11 |
|
Diluted earnings per share |
|
|
|
|
|
Income from continuing operations attributable to common stockholders – diluted(a) | $ | 332 |
|
| $ | 9,428 |
|
| $ | 9,661 |
|
Income (loss) from discontinued operations, net of tax – diluted | $ | (4,212 | ) |
| $ | (1 | ) |
| $ | 25 |
|
Net income (loss) attributable to common stockholders – diluted | $ | (3,880 | ) |
| $ | 9,427 |
|
| $ | 9,686 |
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding – basic | 1,465 |
|
| 1,540 |
|
| 1,586 |
|
Dilutive effect of warrants and awards under stock incentive plans | 27 |
|
| 30 |
|
| 54 |
|
Weighted-average common shares outstanding – diluted | 1,492 |
|
| 1,570 |
|
| 1,640 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share – continuing operations | $ | 0.22 |
|
| $ | 6.00 |
|
| $ | 5.89 |
|
Diluted earnings (loss) per common share – discontinued operations | $ | (2.82 | ) |
| $ | — |
|
| $ | 0.02 |
|
Diluted earnings (loss) per common share | $ | (2.60 | ) |
| $ | 6.00 |
|
| $ | 5.91 |
|
| | | | | |
Potentially dilutive securities(b) | — |
| | — |
| | 72 |
|
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Basic earnings per share | | | | | |
Income from continuing operations | $ | 6,427 | | | $ | 6,732 | | | $ | 8,084 | |
Less: cumulative dividends on subsidiary preferred stock | (180) | | | (151) | | | (98) | |
Income from continuing operations attributable to common stockholders | 6,247 | | | 6,581 | | | 7,986 | |
Loss from discontinued operations, net of tax | 0 | | | 0 | | | 70 | |
Net income attributable to common stockholders | $ | 6,247 | | | $ | 6,581 | | | $ | 7,916 | |
| | | | | |
Weighted-average common shares outstanding | 1,433 | | | 1,424 | | | 1,411 | |
| | | | | |
Basic earnings per common share – continuing operations | $ | 4.36 | | | $ | 4.62 | | | $ | 5.66 | |
Basic loss per common share – discontinued operations | $ | 0 | | | $ | 0 | | | $ | 0.05 | |
Basic earnings per common share | $ | 4.36 | | | $ | 4.62 | | | $ | 5.61 | |
Diluted earnings per share | | | | | |
Income from continuing operations attributable to common stockholders – diluted | $ | 6,247 | | | $ | 6,581 | | | $ | 7,986 | |
Loss from discontinued operations, net of tax – diluted | $ | 0 | | | $ | 0 | | | $ | 70 | |
Net income attributable to common stockholders – diluted | $ | 6,247 | | | $ | 6,581 | | | $ | 7,916 | |
| | | | | |
Weighted-average common shares outstanding – basic | 1,433 | | | 1,424 | | | 1,411 | |
Dilutive effect of warrants and awards under stock incentive plans | 9 | | | 15 | | | 20 | |
Weighted-average common shares outstanding – diluted | 1,442 | | | 1,439 | | | 1,431 | |
| | | | | |
Diluted earnings per common share – continuing operations | $ | 4.33 | | | $ | 4.57 | | | $ | 5.58 | |
Diluted loss per common share – discontinued operations | $ | 0 | | | $ | 0 | | | $ | 0.05 | |
Diluted earnings per common share | $ | 4.33 | | | $ | 4.57 | | | $ | 5.53 | |
| | | | | |
Potentially dilutive securities(a) | 7 | | | 7 | | | 9 | |
__________
| |
(a) | Net of Net (income) loss attributable to noncontrolling interests.
|
| |
(b) | Potentially dilutive securities attributable to outstanding warrants and stock options were excluded from the computation of diluted EPS because the securities would have had an antidilutive effect. |
(a) Potentially dilutive securities attributable to outstanding stock options and RSUs were excluded from the computation of diluted EPS because the securities would have had an antidilutive effect.
Note 22. Stock Incentive PlansDiscontinued Operations
In 2017, we sold the Opel/Vauxhall Business to PSA Group. We grantalso sold the Fincos to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A.
Our wholly owned subsidiary (The Seller) agreed to indemnify PSA Group for certain employees RSUs, RSAs, PSUslosses resulting from any inaccuracy of the representations and stock options (collectively, stock incentive awards) underwarranties or breaches of our 2016 Equity Incentive Plancovenants included in the Agreement and 2017 Long-Term Incentive Plan (LTIP)for certain other liabilities, including certain emissions and priorproduct liabilities. We entered into a guarantee for the benefit of PSA Group and pursuant to which we agreed to guarantee the 2017 LTIP, under our 2014 and 2009 LTIPs. The 2017 LTIP was approved by stockholders in June 2017 and replaced the 2014 LTIP. Shares awarded under the plansSeller's obligation to indemnify PSA Group. Certain of these indemnification obligations are subject to forfeiture iftime limitations, thresholds and/or caps as to the participant leavesamount of required payments.
Although the companysale reduced our new vehicle presence in Europe, we may still be impacted by actions taken by regulators related to vehicles sold before the sale. In Germany, the Kraftfahrt-Bundesamt (KBA) issued an order in November 2019, which converted a voluntary recall initiated by Opel in 2017 and 2018 into a mandatory recall for reasons other than those permitted underallegedly failing to comply with certain emissions regulations. However, because the plans such as retirement, deathoverwhelming majority of vehicles have already received KBA-approved software calibration updates pursuant to the voluntary recall, the number of vehicles subject to the mandatory recall is insignificant. The Seller may also be obligated to indemnify PSA Group or disability.
otherwise absorb costs and expenses resulting from
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
RSU awards granted either cliff vest or ratably vest generally over a three-year service period,the foregoing as defined in the terms of each award. PSU awards vestwell as certain related potential litigation costs, settlements, judgments and potential fines. In addition, at the end ofKBA's request, the German authorities re-opened a three-year performance period, based on performance criteria determined by the Executive Compensation Committeeseparate criminal investigation related to this matter that had previously been closed with no action. At December 31, 2020, we have accrued an insignificant amount relating to these matters.
The results of the Board of Directors at the time of award. The number of shares earned may equal, exceed or be less than the targeted number of shares depending on whether the performance criteria are met, surpassed or not met. Stock options expire 10 yearsEuropean Business operations recorded in Loss from the grant date. Our performance-based stock options vest ratably over 55 months based on the performance of our common stock relative to that of a specified peer group. Our service-based stock options vest ratably over 19 months to three years.
In connection with our acquisition describeddiscontinued operations, net were $70 million in Note 10, RSAs and PSUs were granted. The RSAs vest ratably, generally over a three-year service period. The PSUs are contingent upon achievement of specific technology and commercialization milestones.
Stock Incentive Awards
|
| | | | | | | | |
| Stock Incentive Awards(a) |
| Shares | | Weighted-Average Grant Date Fair Value | | Weighted-Average Remaining Contractual Term in Years |
Units outstanding at January 1, 2017 | 55.1 |
| | $ | 19.77 |
| | 2.5 |
Granted | 16.7 |
| | $ | 26.75 |
| | |
Settled | (16.3 | ) | | $ | 24.65 |
| | |
Forfeited or expired | (2.6 | ) | | $ | 26.67 |
| | |
Units outstanding at December 31, 2017 | 52.9 |
| | $ | 21.75 |
| | 2.0 |
__________
| |
(a) | Includes the target amount of PSUs. |
Our weighted-average assumptions used to value our stock options are a dividend yield of 4.43% and 4.60%, expected volatility of 25.0% and 26.1%, a risk-free interest rate of 1.97% and 2.00%, and an expected option life of 5.84 and 6.59 years for options issued during the years ended December 31, 2017 and 2015. There were no stock options issued during the year ended December 31, 2016.
Total compensation expense related to the above awards2018. There was $585 million, $627 million and $422 million0 income or loss from discontinued operations in the years ended December 31, 2017, 20162020 and 2015.2019.
At December 31, 2017 the total unrecognized compensation expenseWe continue to purchase from and supply to PSA Group certain vehicles, parts and engineering services for nonvested equity awards granted was $278 million. This expense is expected to be recorded over a weighted-average period of 1.7 years. The total fair value of stock incentive awards vested was $421 million, $325 million and $228 million intime following the years ended December 31, 2017, 2016 and 2015.
Note 23. Supplementary Quarterly Financial Information (Unaudited)
sale. The following tables summarize supplementary quarterly financial information:table summarizes transactions with the Opel/Vauxhall Business:
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
Net sales and revenue(a) | $ | 144 | | | $ | 1,129 | | | $ | 1,939 | |
Purchases and expenses(a) | $ | 392 | | | $ | 825 | | | $ | 1,422 | |
Cash payments(b) | $ | 630 | | | $ | 975 | | | $ | 1,849 | |
Cash receipts(b) | $ | 252 | | | $ | 1,408 | | | $ | 2,310 | |
|
| | | | | | | | | | | | | | | |
| 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter |
2017 | | | | | | | |
Total net sales and revenue | $ | 37,266 |
| | $ | 36,984 |
| | $ | 33,623 |
| | $ | 37,715 |
|
Automotive gross margin | $ | 5,081 |
| | $ | 4,786 |
| | $ | 3,955 |
| | $ | 4,758 |
|
Income (loss) from continuing operations | $ | 2,686 |
| | $ | 2,433 |
| | $ | 114 |
| | $ | (4,903 | ) |
(Loss) from discontinued operations, net of tax | $ | (69 | ) | | $ | (770 | ) | | $ | (3,096 | ) | | $ | (277 | ) |
Net income (loss) attributable to stockholders | $ | 2,608 |
| | $ | 1,660 |
| | $ | (2,981 | ) | | $ | (5,151 | ) |
Basic earnings (loss) per common share – continuing operations | $ | 1.78 |
| | $ | 1.62 |
| | $ | 0.08 |
| | $ | (3.46 | ) |
Basic (loss) per common share – discontinued operations | $ | (0.05 | ) | | $ | (0.51 | ) | | $ | (2.14 | ) | | $ | (0.19 | ) |
Diluted earnings (loss) per common share – continuing operations | $ | 1.75 |
| | $ | 1.60 |
| | $ | 0.08 |
| | $ | (3.46 | ) |
Diluted (loss) per common share – discontinued operations | $ | (0.05 | ) | | $ | (0.51 | ) | | $ | (2.11 | ) | | $ | (0.19 | ) |
__________
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
In the three months ended June 30, 2017, September 30, 2017 and December 31, 2017, we collectively recorded a total charge of $6.2 billion as a result of the sale of the European Business, of which $3.9 billion is recorded(a) Included in Income (loss) from discontinued operations, net of tax, and $2.3 billion is related to Income tax expense. In the three months ended December 31, 2017, the Company recorded a $7.3 billion tax expense related to the U.S. tax reform legislation.continuing operations.
(b) Included in Net cash provided by operating activities.
|
| | | | | | | | | | | | | | | |
| 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter |
2016 | | | | | | | |
Total net sales and revenue | $ | 33,016 |
| | $ | 37,383 |
| | $ | 38,889 |
| | $ | 39,896 |
|
Automotive gross margin | $ | 4,405 |
| | $ | 5,305 |
| | $ | 5,391 |
| | $ | 4,605 |
|
Income from continuing operations | $ | 1,923 |
| | $ | 2,744 |
| | $ | 2,707 |
| | $ | 1,895 |
|
Income (loss) from discontinued operations, net of tax | $ | 8 |
| | $ | 106 |
| | $ | 5 |
| | $ | (120 | ) |
Net income attributable to stockholders | $ | 1,953 |
| | $ | 2,866 |
| | $ | 2,773 |
| | $ | 1,835 |
|
Basic earnings per common share – continuing operations | $ | 1.25 |
| | $ | 1.78 |
| | $ | 1.79 |
| | $ | 1.29 |
|
Basic earnings (loss) per common share – discontinued operations | $ | 0.01 |
| | $ | 0.07 |
| | $ | — |
| | $ | (0.08 | ) |
Diluted earnings per common share – continuing operations | $ | 1.23 |
| | $ | 1.74 |
| | $ | 1.76 |
| | $ | 1.27 |
|
Diluted earnings (loss) per common share – discontinued operations | $ | 0.01 |
| | $ | 0.07 |
| | $ | — |
| | $ | (0.08 | ) |
Note 24. Segment Reporting23. Stock Incentive Plans
GM Stock Incentive Awards We report segment information consistent withgrant to certain employees RSUs, RSAs, PSUs and stock options (collectively, stock incentive awards) under our 2016 Equity Incentive Plan and 2020 Long-Term Incentive Plan (LTIP) and prior to the way2020 LTIP, under our 2017 and 2014 LTIP. The 2020 LTIP was approved by stockholders in June 2020. Any new awards granted after the chief operating decision maker evaluates the operating results and performanceapproval of the Company. During2020 LTIP in June 2020 will be issued under the three months ended December 31,2020 LTIP. To the extent any shares remain available for issuance under the 2017 we changed our automotive segmentsLTIP, the 2016 Equity Incentive Plan, and/or the 2014 LTIP, such shares will only be used to settle outstanding awards that were previously granted under such plans prior to June 2020. Shares awarded under the plans are subject to forfeiture if the participant leaves the company for reasons other than those permitted under the plans such as retirement, death or disability.
RSU awards granted either cliff vest or ratably vest generally over a resultthree-year service period, as defined in the terms of changes in our organizational structure andeach award. PSU awards vest at the evolutionend of our business resultinga three-year performance period, based on performance criteria determined by the Executive Compensation Committee of the Board of Directors at the time of award. The number of shares earned may equal, exceed or be less than the targeted number of shares depending on whether the performance criteria are met, surpassed or not met. Stock options expire 10 years from the sale ofgrant date. Our performance-based stock options vest ratably over 55 months based on the Opel/Vauxhall Business and the various strategic actions taken in the GMIO region. As a result, our GMSA and GMIO operating segments are now reported as one, combined reportable international segment, GMI. Our GMNA and GM Financial segments were not impacted. All periods presented have been recast to reflect the changes.
We analyze the results of our business through the following segments: GMNA, GMI and GM Financial. As discussed in Note 3, the European Business is presented as discontinued operations and is excluded from our segment results for all periods presented. The European Business was previously reported as our GME segment and part of GM Financial. The chief operating decision maker evaluates the operating results and performance of our automotive segments through earnings before interestcommon stock relative to that of a specified peer group. Our service-based stock options vest ratably over 19 months to three years.
In connection with our acquisition of Cruise Automation, Inc. in May 2016, RSAs and income taxes-adjusted, which is presented netPSUs in common shares of noncontrolling interests.GM were granted to employees of Cruise Holdings. The chief operating decision maker evaluates GM Financial through earnings before income taxes-adjusted because interest incomeRSAs vest ratably, generally over a three-year service period. The PSUs are contingent upon achievement of specific technology and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Each segment has a manager responsible for executing our strategic initiatives. Our automotive manufacturing operations are integrated within the segments, benefit from broad-based trade agreements and are subject to regulatory requirements. While not all vehicles within a segment are individually profitable on a fully allocated cost basis, those vehicles attract customers to dealer showrooms and help maintain sales volumes for other, more profitable vehicles and contribute towards meeting required fuel efficiency standards. As a result of these and other factors, we do not manage our business on an individual brand or vehicle basis.
Substantially all of the cars, trucks, crossovers and automobile parts produced are marketed through retail dealers in North America and through distributors and dealers outside of North America, the substantial majority of which are independently owned. In addition to the products sold to dealers for consumer retail sales, cars, trucks and crossovers are also sold to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Fleet sales are completed through the dealer network and in some cases directly with fleet customers. Retail and fleet customers can obtain a wide range of after-sale vehicle services and products through the dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.
GMNA meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet and GMC brands. GMI primarily meets the demands of customers outside North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet, GMC, and Holden brands. We also have equity ownership stakes in entities that meet the demands of customers in other countries, primarily China, with vehicles developed, manufactured and/or marketed under the Baojun, Buick, Cadillac, Chevrolet, Jiefang and Wuling brands.
commercialization milestones.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ——– (Continued)
| | | | | | | | | | | | | | | | | |
| Shares (in millions) | | Weighted-Average Grant Date Fair Value | | Weighted-Average Remaining Contractual Term in Years |
Units outstanding at January 1, 2020 | 41.5 | | | $ | 19.17 | | | 0.9 |
Granted | 13.3 | | | $ | 22.50 | | | |
Settled | (13.5) | | | $ | 19.31 | | | |
Forfeited or expired | (2.7) | | | $ | 27.23 | | | |
Units outstanding at December 31, 2020(a) | 38.6 | | | $ | 19.84 | | | 0.9 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
__________
(a) Includes the target amount of PSUs.
Our automotive operations'weighted-average assumptions used to value our stock options are a dividend yield of 4.25%, 3.90% and 3.69%, expected volatility of 26.2%, 28.0% and 28.0%, a risk-free interest incomerate of 1.44%, 2.62% and interest2.73%, and an expected option life of 5.97, 6.00 and 5.98 years for options issued during the years ended December 31, 2020, 2019 and 2018. The expected volatility is based on the average of the implied volatility of publicly traded options for our common stock.
Total compensation expense Maven, legacy costs from the Opel/Vauxhall Business (primarily pension costs), corporate expenditures including autonomous vehicle-related engineering and other costs and certain nonsegment specific revenues and expenses are recorded centrally in Corporate. Corporate assets consist primarily of cash and cash equivalents, marketable securities, our investment in Lyft, goodwill, intangibles, Maven vehicles and intercompany balances. Retained net underfunded pension liabilities related to the European Business are alsoabove awards was $351 million, $456 million and $316 million in the years ended December 31, 2020, 2019 and 2018.
At December 31, 2020, the total unrecognized compensation expense for nonvested equity awards granted was $213 million. This expense is expected to be recorded over a weighted-average period of 1.3 years. The total fair value of stock incentive awards vested was $275 million, $287 million and $317 million in Corporate. All intersegment balancesthe years ended December 31, 2020, 2019 and transactions have been eliminated in consolidation.2018.
The following tables summarize key financial information by segment:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Year Ended December 31, 2017 |
| GMNA |
| GMI |
| Corporate |
| Eliminations |
| Total Automotive |
| GM Financial |
| Eliminations |
| Total |
Net sales and revenue | $ | 111,345 |
|
| $ | 21,920 |
|
| $ | 342 |
|
|
|
|
| $ | 133,607 |
|
| $ | 12,151 |
|
| $ | (170 | ) |
| $ | 145,588 |
|
Earnings (loss) before interest and taxes-adjusted | $ | 11,889 |
|
| $ | 1,300 |
|
| $ | (1,534 | ) |
|
|
|
| $ | 11,655 |
|
| $ | 1,196 |
|
| $ | (7 | ) |
| $ | 12,844 |
|
Adjustments(a) | $ | — |
|
| $ | (540 | ) |
| $ | (114 | ) |
|
|
| | $ | (654 | ) | | $ | — |
| | $ | — |
| | (654 | ) |
Automotive interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 266 |
|
Automotive interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (575 | ) |
Net (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (18 | ) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,863 |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,533 | ) |
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 330 |
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,212 | ) |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18 |
|
Net loss attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (3,864 | ) |
Equity in net assets of nonconsolidated affiliates | $ | 68 |
|
| $ | 7,818 |
|
| $ | — |
|
| $ | — |
|
| $ | 7,886 |
|
| $ | 1,187 |
|
| $ | — |
|
| $ | 9,073 |
|
Total assets | $ | 99,846 |
|
| $ | 27,712 |
|
| $ | 31,267 |
|
| $ | (42,750 | ) |
| $ | 116,075 |
|
| $ | 97,251 |
|
| $ | (844 | ) |
| $ | 212,482 |
|
Expenditures for property | $ | 7,704 |
|
| $ | 607 |
|
| $ | 48 |
|
| $ | — |
|
| $ | 8,359 |
|
| $ | 94 |
|
| $ | — |
|
| $ | 8,453 |
|
Depreciation and amortization | $ | 4,654 |
|
| $ | 708 |
|
| $ | 33 |
|
| $ | (1 | ) |
| $ | 5,394 |
|
| $ | 6,573 |
|
| $ | — |
|
| $ | 11,967 |
|
Impairment charges | $ | 78 |
|
| $ | 211 |
|
| $ | 5 |
|
| $ | — |
|
| $ | 294 |
|
| $ | — |
|
| $ | — |
|
| $ | 294 |
|
Equity income | $ | 8 |
|
| $ | 1,951 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,959 |
|
| $ | 173 |
|
| $ | — |
|
| $ | 2,132 |
|
__________
| |
(a) | Consists of charges of $460 million related to restructuring actions in India and South Africa in GMI; charges of $80 million associated with the deconsolidation of Venezuela in GMI and charges of $114 million for legal related matters related to the ignition switch recall in Corporate. |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Year Ended December 31, 2016 |
| GMNA |
| GMI |
| Corporate |
| Eliminations |
| Total Automotive |
| GM Financial |
| Eliminations |
| Total |
Net sales and revenue | $ | 119,113 |
|
| $ | 20,943 |
|
| $ | 149 |
|
|
|
|
| $ | 140,205 |
|
| $ | 8,983 |
|
| $ | (4 | ) |
| $ | 149,184 |
|
Earnings (loss) before interest and taxes-adjusted | $ | 12,388 |
|
| $ | 767 |
|
| $ | (1,073 | ) |
|
|
|
| $ | 12,082 |
|
| $ | 763 |
|
| $ | 3 |
|
| $ | 12,848 |
|
Adjustments(a) | $ | — |
|
| $ | — |
|
| $ | (300 | ) |
|
|
|
| $ | (300 | ) |
| $ | — |
|
| $ | — |
|
| (300 | ) |
Automotive interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 182 |
|
Automotive interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (563 | ) |
Net (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (159 | ) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 12,008 |
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,739 | ) |
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,269 |
|
Loss from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1 | ) |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 159 |
|
Net income attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 9,427 |
|
Equity in net assets of nonconsolidated affiliates | $ | 74 |
|
| $ | 7,978 |
|
| $ | — |
|
| $ | — |
|
| $ | 8,052 |
|
| $ | 944 |
|
| $ | — |
|
| $ | 8,996 |
|
Total assets(b) | $ | 103,879 |
|
| $ | 27,273 |
|
| $ | 39,042 |
|
| $ | (35,139 | ) |
| $ | 135,055 |
|
| $ | 87,947 |
|
| $ | (1,312 | ) |
| $ | 221,690 |
|
Expenditures for property | $ | 7,338 |
|
| $ | 943 |
|
| $ | 12 |
|
| $ | (2 | ) |
| $ | 8,291 |
|
| $ | 93 |
|
| $ | — |
|
| $ | 8,384 |
|
Depreciation and amortization | $ | 4,292 |
|
| $ | 702 |
|
| $ | 19 |
|
| $ | (5 | ) |
| $ | 5,008 |
|
| $ | 4,678 |
|
| $ | — |
|
| $ | 9,686 |
|
Impairment charges | $ | 65 |
|
| $ | 68 |
|
| $ | — |
|
| $ | — |
|
| $ | 133 |
|
| $ | — |
|
| $ | — |
|
| $ | 133 |
|
Equity income | $ | 159 |
|
| $ | 1,971 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,130 |
|
| $ | 152 |
|
| $ | — |
|
| $ | 2,282 |
|
__________
| |
(a) | Consists of a net charge of $300 million for legal related matters related to the ignition switch recall. |
| |
(b) | Assets in Corporate and GM Financial include assets classified as held for sale. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Year Ended December 31, 2015 |
| GMNA |
| GMI |
| Corporate |
| Eliminations |
| Total Automotive |
| GM Financial |
| Eliminations |
| Total |
Net sales and revenue | $ | 106,744 |
|
| $ | 22,970 |
|
| $ | 150 |
|
|
|
|
| $ | 129,864 |
|
| $ | 5,867 |
|
| $ | (6 | ) |
| $ | 135,725 |
|
Earnings (loss) before interest and taxes-adjusted | $ | 11,354 |
|
| $ | 665 |
|
| $ | (1,248 | ) |
|
|
|
| $ | 10,771 |
|
| $ | 679 |
|
| $ | (1 | ) |
| $ | 11,449 |
|
Adjustments(a) | $ | 47 |
|
| $ | (1,461 | ) |
| $ | (1,785 | ) |
|
|
|
| $ | (3,199 | ) |
| $ | — |
|
| $ | — |
|
| (3,199 | ) |
Automotive interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 167 |
|
Automotive interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (423 | ) |
Gain on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 449 |
|
Net (loss) attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (72 | ) |
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,371 |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,219 |
|
Income from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 9,590 |
|
Income from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25 |
|
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 72 |
|
Net income attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 9,687 |
|
Equity in net assets of nonconsolidated affiliates | $ | 94 |
|
| $ | 8,115 |
|
| $ | — |
|
| $ | — |
|
| $ | 8,209 |
|
| $ | 986 |
|
| $ | — |
|
| $ | 9,195 |
|
Total assets(b) | $ | 92,651 |
|
| $ | 27,351 |
|
| $ | 31,335 |
|
| $ | (21,916 | ) |
| $ | 129,421 |
|
| $ | 66,081 |
|
| $ | (1,164 | ) |
| $ | 194,338 |
|
Expenditures for property | $ | 5,697 |
|
| $ | 982 |
|
| $ | 66 |
|
| $ | (5 | ) |
| $ | 6,740 |
|
| $ | 73 |
|
| $ | — |
|
| $ | 6,813 |
|
Depreciation and amortization | $ | 3,755 |
|
| $ | 707 |
|
| $ | 16 |
|
| $ | (3 | ) |
| $ | 4,475 |
|
| $ | 2,278 |
|
| $ | — |
|
| $ | 6,753 |
|
Impairment charges | $ | 370 |
|
| $ | 364 |
|
| $ | — |
|
| $ | — |
|
| $ | 734 |
|
| $ | — |
|
| $ | — |
|
| $ | 734 |
|
Equity income | $ | 20 |
|
| $ | 2,057 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,077 |
|
| $ | 116 |
|
| $ | — |
|
| $ | 2,193 |
|
__________
| |
(a) | Consists primarily of costs related to the Russia exit of $438 million in GMI, which is net of noncontrolling interests; asset impairment charges of $297 million related to our Thailand subsidiaries in GMI; Venezuela currency devaluation and asset impairment charges of $720 million in GMI; charges related to the ignition switch recall including the Compensation Program of $195 million and various settlements and legal related matters of approximately $1.6 billion in Corporate; and other of $41 million. |
| |
(b) | Assets in Corporate and GM Financial include assets classified as held for sale. |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Automotive revenue is attributed to geographic areas based on the country of sale. GM Financial revenue is attributedCruise Stock Incentive Awards In addition to the geographic area whereawards noted above, RSUs were granted to Cruise employees in common shares of Cruise Holdings in the financing is originated. The following table summarizes information concerning principal geographic areas:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Years Ended December 31, |
| 2017 | | 2016 | | 2015 |
| Net Sales and Revenue | | Long-Lived Assets | | Net Sales and Revenue | | Long-Lived Assets | | Net Sales and Revenue | | Long-Lived Assets |
Automotive | | | | | | | | | | | |
U.S. | $ | 100,674 |
| | $ | 24,473 |
| | $ | 110,661 |
| | $ | 22,241 |
| | $ | 100,082 |
| | $ | 21,091 |
|
Non-U.S. | 32,775 |
| | 12,715 |
| | 29,544 |
| | 11,258 |
| | 29,782 |
| | 9,649 |
|
GM Financial | | | | | | | | | | | |
U.S. | 10,489 |
| | 40,674 |
| | 7,462 |
| | 32,506 |
| | 4,357 |
| | 18,501 |
|
Non-U.S. | 1,650 |
| | 2,467 |
| | 1,517 |
| | 2,050 |
| | 1,504 |
| | 1,749 |
|
Total consolidated | $ | 145,588 |
| | $ | 80,329 |
| | $ | 149,184 |
| | $ | 68,055 |
| | $ | 135,725 |
| | $ | 50,990 |
|
No individual countryyears ended December 31, 2020, 2019 and 2018. Stock options were granted in common shares of Cruise Holdings in the years ended December 31, 2019 and 2018. There were 0 Cruise stock options granted in the year ended December 31, 2020. These awards were granted under the 2018 Employee Incentive Plan approved by Cruise Holdings' Board of Directors in August 2018. Shares awarded under the plan are subject to forfeiture if the participant leaves the company for reasons other than those permitted under the U.S. represented more than 10%plan. Stock options vest ratably over four to 10 years, as defined in the terms of our total Net saleseach award. Stock options expire 10 years from the grant date. RSU awards granted vest upon the satisfaction of both a service condition and revenuea liquidity condition. The service condition for the majority of these awards is satisfied over four years. The liquidity condition is satisfied upon the earlier of the date of a change in control transaction or Long-lived assets.the consummation of an initial public offering.
Total compensation expense related to Cruise Holdings’ share-based awards was insignificant for the years ended December 31, 2020, 2019 and 2018. NaN share-based compensation expense had been recognized for the RSUs because the liquidity condition described above was not met at December 31, 2020, 2019 and 2018. Total unrecognized compensation expense for Cruise Holdings’ nonvested equity awards granted was $863 million at December 31, 2020, which was primarily comprised of the RSUs for which the liquidity condition had not been met. Total units outstanding were 79.3 million at December 31, 2020. The expense related to stock options is expected to be recorded over a weighted-average period of 7.1 years. The timing of the expense related to RSUs will depend upon the date of the satisfaction of the liquidity condition.
Note 24. Segment Reporting
We analyze the results of our business through the following reportable segments: GMNA, GMI, Cruise and GM Financial. The European Business is presented as discontinued operations and is excluded from our segment results for all periods presented. The European Business was previously reported as our GM Europe segment and part of GM Financial. The chief operating decision-maker evaluates the operating results and performance of our automotive segments and Cruise through EBIT-adjusted, which is presented net of noncontrolling interests. The chief operating decision-maker evaluates GM Financial through EBT-adjusted because interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Each segment has a manager responsible for executing our strategic initiatives. While not all vehicles within a segment are individually profitable on a fully allocated cost basis, those vehicles attract customers to dealer showrooms and help maintain sales volumes for other, more profitable vehicles and contribute towards meeting required fuel efficiency standards. As a result of these and other factors, we do not manage our business on an individual brand or vehicle basis.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Substantially all of the trucks, crossovers, cars and automobile parts produced are marketed through retail dealers in North America and through distributors and dealers outside of North America, the substantial majority of which are independently owned. In addition to the products sold to dealers for consumer retail sales, trucks, crossovers and cars are also sold to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Fleet sales are completed through the dealer network and in some cases directly with fleet customers. Retail and fleet customers can obtain a wide range of after-sale vehicle services and products through the dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.
GMNA meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet and GMC brands. GMI primarily meets the demands of customers outside North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet, GMC, and Holden brands. We also have equity ownership stakes in entities that meet the demands of customers in other countries, primarily China, with vehicles developed, manufactured and/or marketed under the Baojun, Buick, Cadillac, Chevrolet and Wuling brands. Cruise is our global segment responsible for the development and commercialization of autonomous vehicle technology, and includes autonomous vehicle-related engineering and other costs.
Our automotive interest income and interest expense, legacy costs from the Opel/Vauxhall Business (primarily pension costs), corporate expenditures and certain nonsegment specific revenues and expenses are recorded centrally in Corporate. Corporate assets primarily consist of cash and cash equivalents, marketable debt securities, PSA warrants and intercompany balances. Retained net underfunded pension liabilities related to the European Business are also recorded in Corporate. All intersegment balances and transactions have been eliminated in consolidation.
The following tables summarize key financial information by segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Year Ended December 31, 2020 |
| GMNA | | GMI | | Corporate | | Eliminations | | Total Automotive | | Cruise | | GM Financial | | Eliminations/Reclassifications | | Total |
Net sales and revenue | $ | 96,733 | | | $ | 11,586 | | | $ | 350 | | | | | $ | 108,669 | | | $ | 103 | | | $ | 13,831 | | | $ | (118) | | | $ | 122,485 | |
Earnings (loss) before interest and taxes-adjusted | $ | 9,071 | | | $ | (528) | | | $ | (634) | | | | | $ | 7,909 | | | $ | (887) | | | $ | 2,702 | | | $ | (14) | | | $ | 9,710 | |
Adjustments(a) | $ | (99) | | | $ | (683) | | | $ | 130 | | | | | $ | (652) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | (652) | |
Automotive interest income | | | | | | | | | | | | | | | | | 241 | |
Automotive interest expense | | | | | | | | | | | | | | | | | (1,098) | |
Net (loss) attributable to noncontrolling interests | | | | | | | | | | | | | | | | | (106) | |
Income before income taxes | | | | | | | | | | | | | | | | | 8,095 | |
Income tax expense | | | | | | | | | | | | | | | | | (1,774) | |
Income from continuing operations | | | | | | | | | | | | | | | | | 6,321 | |
Loss from discontinued operations, net of tax | | | | | | | | | | | | | | | | | 0 | |
Net loss attributable to noncontrolling interests | | | | | | | | | | | | | | | | | 106 | |
Net income attributable to stockholders | | | | | | | | | | | | | | | | | $ | 6,427 | |
Equity in net assets of nonconsolidated affiliates | $ | 242 | | | $ | 6,583 | | | $ | 0 | | | $ | 0 | | | $ | 6,825 | | | $ | 0 | | | $ | 1,581 | | | $ | 0 | | | $ | 8,406 | |
Goodwill and intangibles | $ | 2,346 | | | $ | 806 | | | $ | 0 | | | $ | 0 | | | $ | 3,152 | | | $ | 735 | | | $ | 1,343 | | | $ | 0 | | | $ | 5,230 | |
Total assets | $ | 114,137 | | | $ | 23,019 | | | $ | 39,933 | | | $ | (57,464) | | | $ | 119,625 | | | $ | 3,625 | | | $ | 113,410 | | | $ | (1,466) | | | $ | 235,194 | |
Expenditures for property | $ | 4,501 | | | $ | 729 | | | $ | 21 | | | $ | 0 | | | $ | 5,251 | | | $ | 15 | | | $ | 34 | | | $ | 0 | | | $ | 5,300 | |
Depreciation and amortization | $ | 4,739 | | | $ | 624 | | | $ | 25 | | | $ | 0 | | | $ | 5,388 | | | $ | 43 | | | $ | 7,245 | | | $ | 0 | | | $ | 12,676 | |
Impairment charges | $ | 20 | | | $ | 99 | | | $ | 0 | | | $ | 0 | | | $ | 119 | | | $ | 20 | | | $ | 0 | | | $ | 0 | | | $ | 139 | |
Equity income | $ | 17 | | | $ | 510 | | | $ | 0 | | | $ | 0 | | | $ | 527 | | | $ | 0 | | | $ | 147 | | | $ | 0 | | | $ | 674 | |
__________
(a) Consists of restructuring charges related to Cadillac dealer strategy in GMNA; restructuring and other charges primarily in Australia, New Zealand, Thailand and India in GMI; and ignition switch-related legal matters in Corporate.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Year Ended December 31, 2019 |
| GMNA | | GMI | | Corporate | | Eliminations | | Total Automotive | | Cruise | | GM Financial | | Eliminations/Reclassifications | | Total |
Net sales and revenue | $ | 106,366 | | | $ | 16,111 | | | $ | 220 | | | | | $ | 122,697 | | | $ | 100 | | | $ | 14,554 | | | $ | (114) | | | $ | 137,237 | |
Earnings (loss) before interest and taxes-adjusted | $ | 8,204 | | | $ | (202) | | | $ | (691) | | | | | $ | 7,311 | | | $ | (1,004) | | | $ | 2,104 | | | $ | (18) | | | $ | 8,393 | |
Adjustments(a) | $ | (1,618) | | | $ | 1,081 | | | $ | (2) | | | | | $ | (539) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | (539) | |
Automotive interest income | | | | | | | | | | | | | | | | | 429 | |
Automotive interest expense | | | | | | | | | | | | | | | | | (782) | |
Net (loss) attributable to noncontrolling interests | | | | | | | | | | | | | | | | | (65) | |
Income before income taxes | | | | | | | | | | | | | | | | | 7,436 | |
Income tax expense | | | | | | | | | | | | | | | | | (769) | |
Income from continuing operations | | | | | | | | | | | | | | | | | 6,667 | |
Loss from discontinued operations, net of tax | | | | | | | | | | | | | | | | | 0 | |
Net loss attributable to noncontrolling interests | | | | | | | | | | | | | | | | | 65 | |
Net income attributable to stockholders | | | | | | | | | | | | | | | | | $ | 6,732 | |
Equity in net assets of nonconsolidated affiliates | $ | 84 | | | $ | 7,023 | | | $ | 0 | | | $ | 0 | | | $ | 7,107 | | | $ | 0 | | | $ | 1,455 | | | $ | 0 | | | $ | 8,562 | |
Goodwill and intangibles | $ | 2,459 | | | $ | 888 | | | $ | 1 | | | $ | 0 | | | $ | 3,348 | | | $ | 634 | | | $ | 1,355 | | | $ | 0 | | | $ | 5,337 | |
Total assets | $ | 109,290 | | | $ | 24,969 | | | $ | 32,365 | | | $ | (50,244) | | | $ | 116,380 | | | $ | 4,230 | | | $ | 108,881 | | | $ | (1,454) | | | $ | 228,037 | |
Expenditures for property | $ | 6,305 | | | $ | 1,096 | | | $ | 84 | | | $ | 0 | | | $ | 7,485 | | | $ | 60 | | | $ | 47 | | | $ | 0 | | | $ | 7,592 | |
Depreciation and amortization | $ | 6,112 | | | $ | 533 | | | $ | 46 | | | $ | (2) | | | $ | 6,689 | | | $ | 21 | | | $ | 7,350 | | | $ | 0 | | | $ | 14,060 | |
Impairment charges | $ | 15 | | | $ | 7 | | | $ | 0 | | | $ | 0 | | | $ | 22 | | | $ | 36 | | | $ | 0 | | | $ | 0 | | | $ | 58 | |
Equity income (loss) | $ | 8 | | | $ | 1,123 | | | $ | (29) | | | $ | 0 | | | $ | 1,102 | | | $ | 0 | | | $ | 166 | | | $ | 0 | | | $ | 1,268 | |
__________
(a) Consists of restructuring and other charges related to transformation activities of $1.6 billion in GMNA and $115 million in GMI; a benefit of $1.4 billion related to the retrospective recoveries of indirect taxes in Brazil; partially offset by losses of $164 million related to the FAW-GM divestiture in GMI.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Year Ended December 31, 2018 |
| GMNA | | GMI | | Corporate | | Eliminations | | Total Automotive | | Cruise | | GM Financial | | Eliminations | | Total |
Net sales and revenue | $ | 113,792 | | | $ | 19,148 | | | $ | 203 | | | | | $ | 133,143 | | | $ | 0 | | | $ | 14,016 | | | $ | (110) | | | $ | 147,049 | |
Earnings (loss) before interest and taxes-adjusted | $ | 10,769 | | | $ | 423 | | | $ | (570) | | | | | $ | 10,622 | | | $ | (728) | | | $ | 1,893 | | | $ | (4) | | | $ | 11,783 | |
Adjustments(a) | $ | (1,236) | | | $ | (1,212) | | | $ | (457) | | | | | $ | (2,905) | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | (2,905) | |
Automotive interest income | | | | | | | | | | | | | | | | | 335 | |
Automotive interest expense | | | | | | | | | | | | | | | | | (655) | |
Net (loss) attributable to noncontrolling interests | | | | | | | | | | | | | | | | | (9) | |
Income before income taxes | | | | | | | | | | | | | | | | | 8,549 | |
Income tax expense | | | | | | | | | | | | | | | | | (474) | |
Income from continuing operations | | | | | | | | | | | | | | | | | 8,075 | |
Loss from discontinued operations, net of tax | | | | | | | | | | | | | | | | | (70) | |
Net loss attributable to noncontrolling interests | | | | | | | | | | | | | | | | | 9 | |
Net loss attributable to stockholders | | | | | | | | | | | | | | | | | $ | 8,014 | |
Equity in net assets of nonconsolidated affiliates | $ | 75 | | | $ | 7,761 | | | $ | 24 | | | $ | 0 | | | $ | 7,860 | | | $ | 0 | | | $ | 1,355 | | | $ | 0 | | | $ | 9,215 | |
Goodwill and intangibles | $ | 2,623 | | | $ | 928 | | | $ | 1 | | | $ | 0 | | | $ | 3,552 | | | $ | 671 | | | $ | 1,356 | | | $ | 0 | | | $ | 5,579 | |
Total assets | $ | 109,763 | | | $ | 24,911 | | | $ | 31,694 | | | $ | (50,690) | | | $ | 115,678 | | | $ | 3,195 | | | $ | 109,953 | | | $ | (1,487) | | | $ | 227,339 | |
Expenditures for property | $ | 7,784 | | | $ | 883 | | | $ | 21 | | | $ | (2) | | | $ | 8,686 | | | $ | 15 | | | $ | 60 | | | $ | 0 | | | $ | 8,761 | |
Depreciation and amortization | $ | 4,995 | | | $ | 562 | | | $ | 50 | | | $ | (3) | | | $ | 5,604 | | | $ | 7 | | | $ | 7,531 | | | $ | 0 | | | $ | 13,142 | |
Impairment charges | $ | 55 | | | $ | 466 | | | $ | 6 | | | $ | 0 | | | $ | 527 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 527 | |
Equity income | $ | 8 | | | $ | 1,972 | | | $ | 0 | | | $ | 0 | | | $ | 1,980 | | | $ | 0 | | | $ | 183 | | | $ | 0 | | | $ | 2,163 | |
__________
(a) Consists of restructuring and other charges related to transformation activities of $1.2 billion in GMNA; charges of $1.2 billion related to restructuring actions in Korea and other countries in GMI; and of $440 million for ignition switch-related legal matters and other insignificant charges in Corporate.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Automotive revenue is attributed to geographic areas based on the country of sale. GM Financial revenue is attributed to the geographic area where the financing is originated. The following table summarizes information concerning principal geographic areas:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Years Ended December 31, |
| 2020 | | 2019 | | 2018 |
| Net Sales and Revenue | | Long-Lived Assets | | Net Sales and Revenue | | Long-Lived Assets | | Net Sales and Revenue | | Long-Lived Assets |
Automotive | | | | | | | | | | | |
U.S. | $ | 89,204 | | | $ | 24,932 | | | $ | 97,887 | | | $ | 25,401 | | | $ | 104,413 | | | $ | 25,625 | |
Non-U.S. | 19,469 | | | 12,516 | | | 24,810 | | | 13,190 | | | 28,632 | | | 13,263 | |
GM Financial | | | | | | | | | | | |
U.S. | 12,227 | | | 36,773 | | | 12,727 | | | 39,509 | | | 12,169 | | | 41,334 | |
Non-U.S. | 1,585 | | | 3,230 | | | 1,813 | | | 2,772 | | | 1,835 | | | 2,476 | |
Total consolidated | $ | 122,485 | | | $ | 77,451 | | | $ | 137,237 | | | $ | 80,872 | | | $ | 147,049 | | | $ | 82,698 | |
No individual country other than the U.S. represented more than 10% of our total net sales and revenue or long-lived assets.
Note 25. Supplemental Information for the Consolidated Statements of Cash Flows
The following table summarizes the sources (uses) of cash provided by Change in other operating assets and liabilities and Cash paid for income taxes and interest:
| | | | | | | | | | | | | | | | | |
Change in other operating assets and liabilities | Years Ended December 31, |
2020 | | 2019 | | 2018 |
Accounts receivable | $ | (1,341) | | | $ | (563) | | | $ | 492 | |
Wholesale receivables funded by GM Financial, net | 2,744 | | | 663 | | | (2,606) | |
Inventories | (104) | | | (761) | | | 399 | |
Automotive equipment on operating leases | 53 | | | 274 | | | 748 | |
Change in other assets | 68 | | | (1,550) | | | (529) | |
Accounts payable | 42 | | | (492) | | | (537) | |
Income taxes payable | 130 | | | 213 | | | (75) | |
Accrued and other liabilities | (1,991) | | | (1,573) | | | 732 | |
Total | $ | (399) | | | $ | (3,789) | | | $ | (1,376) | |
| | | | | |
Cash paid for income taxes and interest | | | | | |
Cash paid for income taxes, net | $ | 719 | | | $ | 689 | | | $ | 660 | |
Cash paid for interest (net of amounts capitalized) – Automotive | $ | 1,011 | | | $ | 739 | | | $ | 656 | |
Cash paid for interest (net of amounts capitalized) – GM Financial | 2,947 | | | 3,475 | | | 2,941 | |
Total cash paid for interest (net of amounts capitalized) | $ | 3,958 | | | $ | 4,214 | | | $ | 3,597 | |
Note 26. Subsequent Event
|
| | | | | | | | | | | |
| Years Ended December 31, |
2017 |
| 2016 |
| 2015 |
Accounts receivable | $ | 1,402 |
|
| $ | (1,249 | ) |
| $ | (16 | ) |
Wholesale receivables funded by GM Financial, net | (2,099 | ) |
| (2,184 | ) |
| (820 | ) |
Inventories | 440 |
|
| (75 | ) |
| (1,209 | ) |
Automotive equipment on operating leases | (263 | ) |
| 785 |
|
| 520 |
|
Change in other assets | 108 |
|
| (939 | ) |
| (572 | ) |
Accounts payable | (362 | ) |
| 3,195 |
|
| 1,658 |
|
Income taxes payable | (3 | ) |
| (162 | ) |
| 88 |
|
Accrued and other liabilities | (2,238 | ) |
| 1,209 |
|
| (857 | ) |
Total | $ | (3,015 | ) |
| $ | 580 |
|
| $ | (1,208 | ) |
Cash paid for income taxes and interest |
|
|
|
|
|
|
|
|
Cash paid for income taxes | $ | 656 |
|
| $ | 676 |
|
| $ | 740 |
|
Cash paid for interest (net of amounts capitalized) – Automotive | $ | 501 |
|
| $ | 460 |
|
| $ | 333 |
|
Cash paid for interest (net of amounts capitalized) – GM Financial | 2,571 |
|
| 1,761 |
|
| 1,204 |
|
Total cash paid for interest (net of amounts capitalized) | $ | 3,072 |
|
| $ | 2,221 |
|
| $ | 1,537 |
|
In January 2021, Cruise Holdings issued Class G Preferred Shares in exchange for $2.2 billion from Microsoft and other investors, including $1.0 billion from General Motors Holdings LLC. As a result, Cruise Holdings has fallen below the ownership threshold required for inclusion in our U.S. consolidated income tax returns. In the three months ended March 31, 2021, we will establish a valuation allowance of approximately $350 million against deferred tax assets that may not be realizable. In addition, we, Cruise Holdings and Microsoft entered into a long-term strategic relationship to accelerate the commercialization of self-driving vehicles with Microsoft being the preferred cloud provider.
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
NoneNone.
* * * * * * *
Item 9A. Controls and Procedures
Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported
GENERAL MOTORS COMPANY AND SUBSIDIARIES
within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.disclosures.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) atas of December 31, 2017. Based on this evaluation2020 as required by paragraph (b) of Rules 13a-15 or 15d-15,15d-15. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2017.2020.
Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. GAAP. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, misstatements due to error or fraud may not be prevented or detected on a timely basis.
Our management performed an assessment of the effectiveness of our internal control over financial reporting at December 31, 2017,2020, utilizing the criteria discussed in the “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. The objective of this assessment was to determine whether our internal control over financial reporting was effective atas of December 31, 2017.2020. Based on management's assessment, we have concluded that our internal control over financial reporting was effective atas of December 31, 2017.2020.
The effectiveness of our internal control over financial reporting has been audited by DeloitteErnst & ToucheYoung LLP, an independent registered public accounting firm, as stated in its report which is included herein.
Changes in Internal Control over Financial Reporting There have not been any changes in our internal control over financial reporting during the three months ended December 31, 20172020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. However, due to the COVID-19 pandemic, we are monitoring our control environment with increased vigilance to ensure changes as a result of physical distancing are addressed and all increased risks are mitigated. For additional information refer to Part I, Item 1A. Risk Factors.
|
| | |
/s/ MARY T. BARRA | | /s/ CHARLES K. STEVENS III |
Mary T. Barra
Chairman and Chief Executive Officer
| | Charles K. Stevens III
Executive Vice President and Chief Financial Officer
|
February 6, 2018 | | February 6, 2018 |
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Item 9B.Other Information
NoneNone.
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
PART III
Items 10, 11, 12, 13 and 14
Information required by Items 10, 11, 12, 13 and 14 of this Form 10-K is incorporated by reference from our definitive Proxy Statement for our 20182021 Annual Meeting of Stockholders, which will be filed with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of the 20172020 fiscal year, all of which information is hereby incorporated by reference in, and made part of, this Form 10-K, except disclosure of our executive officers, which is included in Part I, Item 1 of this report.
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
PART IV
ITEM 15. ExhibitsExhibit and Financial Statement Schedules
| |
(a) | 1. All Financial Statements and Supplemental Information |
(a)1. All Financial Statements and Supplemental Information
2. Financial Statement Schedules
All financial statement schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements and notes thereto in Item 8.
3. Exhibits
(b)Exhibits
|
| | | | | | | | | |
Exhibit Number | | Exhibit Name | | |
1.12.1 | | Underwriting Agreement, dated August 2, 2017, by and among General Motors Company, as issuer, and Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein, incorporated herein by reference to Exhibit 1.1 to the Current Report on Form 8-K of General Motors Company filed August 8, 2017 | | Incorporated by Reference |
2.1 | | | | Incorporated by Reference |
3.12.2 | | | | Incorporated by Reference |
2.3 | | | | Incorporated by Reference |
3.1 | | | | Incorporated by Reference |
3.2 | | | | Incorporated by Reference |
3.34.1 | | | | Incorporated by Reference |
3.44.2 | |
| | Incorporated by Reference |
4.1 | | | | Incorporated by Reference |
4.24.3 | |
| | Incorporated by Reference |
4.34.4 | | | | Incorporated by Reference |
4.44.5 | | Third Supplemental Indenture, dated as of February 23, 2016, to the Indenture, dated as of September 27, 2013, between General Motors Company, as issuer, and The Bank of New York Mellon, as Trustee, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of General Motors Company filed February 23, 2016
| | Incorporated by Reference |
4.54.6 | | Fourth Supplemental Indenture, dated as of August 7, 2017, to the Indenture, dated as of September 27, 2013, between General Motors Company, as issuer, and The Bank of New York Mellon, as Trustee, incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of General Motors Company filed August 8, 2017
| | Incorporated by Reference |
4.64.7 | | Calculation Agency Agreement,Fifth Supplemental Indenture, dated as of August 7, 2017September 10, 2018, to the Indenture, dated as of September 27, 2013, between General Motors Company, as issuer, and theThe Bank of New York Mellon, as calculation agent,Trustee, incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of General Motors Company filed August 8, 2017September 10, 2018
| | Incorporated by Reference |
10.14.8 | | Sixth Supplement Indenture, dated as of May 12, 2020, to the Indenture. dated as of September 27, 2013, between General Motors Company, as issuer, and The Bank of New York Mellon, as Trustee, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of General Motors Company filed May 12, 2020 | | Incorporated by Reference |
4.9 | | | | Incorporated by Reference |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
| | | | | | | | | | | | | | |
Exhibit Number | | Exhibit Name | | |
10.1 | | Stockholders Agreement, dated as of October 15, 2009 between,among General Motors Company, the United States Department of the Treasury, Canada GEN Investment Corporation (fka 7176384 Canada Inc.), the UAW Retiree Medical Benefits Trust, and, for limited purposes, General Motors LLC, incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of General Motors Company filed November 16, 2009 | | Incorporated by Reference |
10.2* | | Equity Registration Rights Agreement, dated as of October 15, 2009, between General Motors Company, the United States Department of Treasury, Canada GEN Investment Corporation (fka 7176384 Canada Inc.), the UAW Retiree Medical Benefits Trust, Motors Liquidation Company, and, for limited purposes, General Motors LLC, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Motors Liquidation Company filed October 21, 2009 | | Incorporated by Reference |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | |
Exhibit Number | | Exhibit Name | | |
10.3* | | | | Incorporated by Reference |
10.4* | | | | Incorporated by Reference |
10.5*10.3* | | | | Incorporated by Reference |
10.6* | | | | Incorporated by Reference |
10.7* | | | | Incorporated by Reference |
10.8*10.4* | |
| | Incorporated by Reference |
10.9*10.5* | |
| | Incorporated by Reference |
10.10* | |
| | Incorporated by Reference |
10.11* | |
| | Incorporated by Reference |
10.12* | |
| | Incorporated by Reference |
10.13*10.6* | | | | Incorporated by Reference |
10.7* | | | | Incorporated by Reference |
10.14*10.8* | | | | Incorporated by Reference |
10.15*10.9* | | | | Incorporated by Reference |
10.1610.10* | | Amended and Restated Warrant Agreement, dated as of October 16, 2009, between General Motors Company and U.S. Bank National Association, as Warrant Agent, including a Form of Warrant Certificate attached as Exhibit D thereto, relating to warrants with a $55 original ($18.33 after stock split) exercise price and a July 10, 2019 expiration date,2017 Short-Term Incentive Plan, incorporated herein by reference to Exhibit 10.3010.25 to the Annual Report on Form 10-K of General Motors Company filed April 7, 2010February 6, 2018 | | Incorporated by Reference |
10.17†10.11* | | | | Incorporated by Reference |
10.12* | | | | Incorporated by Reference |
10.13* | | | | Incorporated by Reference |
10.14* | | | | Incorporated by Reference |
10.15* | | | | Incorporated by Reference |
10.16* | | | | Incorporated by Reference |
10.17* | | | | Incorporated by Reference |
10.18* | | | | Incorporated by Reference |
10.19* | | | | Incorporated by Reference |
10.20* | | | | Incorporated by Reference |
10.21* | | | | Filed Herewith |
10.22* | | | | Filed Herewith |
10.23* | | | | Filed Herewith |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
| | | | | | | | | | | | | | |
Exhibit Number | | Exhibit Name | | |
10.24* | | | | Filed Herewith |
10.25† | | | | Incorporated by Reference |
10.18†10.26 | | | | Incorporated by Reference |
10.27 | | | | Incorporated by Reference |
10.28 | | | | Incorporated by Reference |
10.29† | | Third Amended and Restated 3-Year Revolving Credit Agreement, dated as of May 26, 2016,April 18, 2018, among General Motors Company, General Motors Financial Company, Inc., GM EuropeGlobal Treasury Company AB,Centre Limited, General Motors do Brasil Ltda., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed April 20, 2018 | | Incorporated by Reference |
10.30 | | Amendment No. 1, dated April 24, 2020, to the Third Amended and Restated 3-Year Revolving Credit Agreement, dated April 18, 2018, among General Motors Company, General Motors Financial Company, Inc., General Motors do Brazil Ltda., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of General Motors Company filed June 2, 2016April 27, 2020 | | Incorporated by Reference |
10.19†10.31† | | SecondThird Amended and Restated 5-Year Revolving Credit Agreement, dated as of May 26, 2016,April 18, 2018, among General Motors Company, General Motors Financial Company, Inc., GM Global Treasury Centre Limited, General Motors do Brasil Ltda., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of General Motors Company filed April 20, 2018 | | Incorporated by Reference |
10.32† | | | | Incorporated by Reference |
10.33† | | Second Amended and Restated 364-Day Revolving Credit Agreement, dated as of April 14, 2020, among General Motors Company, General Motors Financial Company, Inc., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of General Motors Company filed June 2, 2016 | | Incorporated by Reference |
10.20 | | | | Incorporated by Reference |
10.21* | | | | Incorporated by Reference |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
10.34 | | | | |
Exhibit Number | | Exhibit Name | | |
10.22* | | Form of364-Day Revolving Credit Agreement, dated May 13, 2020, by and among General Motors Company, Restricted Stock Unit Award Agreement under the 2014 Long-Term Incentive Plan, incorporated herein subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q10.1 of General Motors Company filed April 21, 2016 | | Incorporated by Reference |
10.23* | | | | Incorporated by Reference |
10.24* | | | | Incorporated by Reference |
10.25* | |
| | Filed Herewith |
10.26* | |
| | Incorporated by Reference |
10.27* | |
| | Incorporated by Reference |
10.28*10.35 | |
| | Incorporated by Reference |
10.2921 | | | | Incorporated by Reference |
10.30 | |
| | Incorporated by Reference |
10.31 | | | | Filed Herewith |
12 | | | | Filed Herewith |
16.1 | |
| | Incorporated by Reference |
21 | | | | Filed Herewith |
23.123 | | | | Filed Herewith |
24 | | | | Filed Herewith |
31.1 | | | | Filed Herewith |
31.2 | | | | Filed Herewith |
32 | | | | Furnished with this Report |
101.INS101 | | XBRL Instance DocumentThe following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) the Consolidated Income Statements, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Equity and (vi) Notes to the Consolidated Financial Statements | | Filed Herewith |
101.SCH | | XBRL Taxonomy Extension Schema Document | | Filed Herewith |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | Filed Herewith |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | Filed Herewith |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document | | Filed Herewith |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document | | Filed Herewith |
_________
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | |
†Exhibit Number | | Exhibit Name | | |
104 | | The cover page from the Company's Annual Report on Form 10-K for the year ended December 31, 2020, formatted as Inline XBRL and contained in Exhibit 101 | | Filed Herewith |
_________
| | | | | |
† | Certain confidential portions have been omitted pursuant to a granted request for confidential treatment, which has been separately filed with the SEC. |
* | Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to Item 15(b) of this Report.
|
** | The Company agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon request.
|
* * * * * * *
Item 16. Form 10-K Summary
NoneNone.
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | | | | | | | | | |
| | GENERAL MOTORS COMPANY (Registrant)
| |
| | By: | /s/ MARY T. BARRA | |
| | | Mary T. Barra
Chairman and Chief Executive Officer | |
Date: | February 6, 201810, 2021 | | | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 6th10th day of February 20182021 by the following persons on behalf of the registrant and in the capacities indicated, including a majority of the directors.
| | | | | | | | |
Signature | | Title |
| | |
/s/ MARY T. BARRA | | Chairman and Chief Executive Officer |
Mary T. Barra | | |
| | |
Signature | | Title |
| | |
/s/ MARY T. BARRAPAUL A. JACOBSON | | Chairman and Chief Executive Officer |
Mary T. Barra | | |
| | |
/s/ CHARLES K. STEVENS III | | Executive Vice President and Chief Financial Officer |
Charles K. Stevens IIIPaul A. Jacobson | | |
| | |
/s/ THOMAS S. TIMKOCHRISTOPHER T. HATTO | | Vice President, Global Business Solutions and Chief Accounting Officer |
Thomas S. TimkoChristopher T. Hatto | | Accounting Officer |
| | |
/s/ THEODORE M. SOLSO* | | Lead Director |
Theodore M. Solso | | |
| | |
/s/ LINDA R. GOODEN* | | Director |
Linda R. Gooden | | |
| | |
/s/ JOSEPH JIMENEZ* | | Director |
Joseph Jimenez | | |
| | |
/s/ JANE L. MENDILLO* | | Director |
Jane L. Mendillo | | |
| | |
/s/ ADMIRAL MICHAEL G. MULLEN, USN (ret.)* | | Director |
Admiral Michael G. Mullen, USN (ret.) | | |
| | |
/s/ JAMES J. MULVA* | | Director |
James J. Mulva | | |
| | |
/s/ PATRICIA F. RUSSO* | | Director |
Patricia F. Russo | | |
| | |
/s/ THOMAS M. SCHOEWE* | | Director |
Thomas M. Schoewe | | |
| | |
/s/ CAROL M. STEPHENSON* | | Director |
Carol M. Stephenson | | |
|
| | |
*By: | /s/ RICK HANSENWESLEY G. BUSH* | | Director |
Wesley G. Bush | Rick Hansen | |
| Attorney-in-Fact | |
/s/ LINDA R. GOODEN* | | Director |
Linda R. Gooden | | |
| | |
/s/ JOSEPH JIMENEZ* | | Director |
Joseph Jimenez | | |
| | |
/s/ JANE L. MENDILLO* | | Director |
Jane L. Mendillo | | |
| | |
/s/ JUDITH A. MISCIK* | | Director |
Judith A. Miscik | | |
| | |
/s/ PATRICIA F. RUSSO* | | Director |
Patricia F. Russo | | |
| | |
/s/ THOMAS M. SCHOEWE* | | Director |
Thomas M. Schoewe | | |
| | |
/s/ CAROL M. STEPHENSON* | | Director |
Carol M. Stephenson | | |
| | |
/s/ DEVIN N. WENIG* | | Director |
Devin N. Wenig | | |
| | | | | | | | |
*By: | /s/ CHRISTOPHER T. HATTO | |
| Christopher T. Hatto | |
| Attorney-in-Fact | |