UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-Q
|
| |
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2013March 31, 2014
OR
|
| |
¨ | 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)
|
| |
STATE OF DELAWARE | 27-0756180 |
(State or other jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| |
300 Renaissance Center, Detroit, Michigan | 48265-3000 |
(Address of Principal Executive Offices) | (Zip Code) |
(313) 556-5000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
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 corporate 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
As of October 25, 2013April 17, 2014 the number of shares outstanding of common stock was 1,388,973,7101,603,718,400 shares.
Website Access to Company's Reports
General Motors Company's internet website address is www.gm.com. Our annual report 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 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.
INDEX
|
| | | |
| | | Page |
PART I - Financial Information | |
Item 1. | Condensed Consolidated Financial Statements | |
| Condensed Consolidated Income Statements (Unaudited) | |
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | |
| Condensed Consolidated Balance Sheets (Unaudited) | |
| Condensed Consolidated Statements of Equity (Unaudited) | |
| Condensed Consolidated Statements of Cash Flows (Unaudited) | |
| Notes to Condensed Consolidated Financial Statements | |
| Note 1. | Nature of Operations and Basis of Presentation | |
| Note 2. | Acquisition of BusinessesMarketable Securities | |
| Note 3. | Marketable SecuritiesGM Financial Receivables, net | |
| Note 4. | GM Financial Receivables, netInventories | |
| Note 5. | Inventories | |
| Note 6. | Equity in Net Assets of Nonconsolidated Affiliates | |
| Note 6. | Variable Interest Entities | |
| Note 7. | GoodwillShort-Term and Intangible Assets, netLong-Term Debt | |
| Note 8. | Product Warranty and Related Liabilities | |
| Note 8.9. | Variable Interest EntitiesPensions and Other Postretirement Benefits | |
| Note 9.10. | Depreciation, AmortizationCommitments and Impairment ChargesContingencies | |
| Note 10. | Debt | |
| Note 11. | Product Warranty LiabilityIncome Taxes | |
| Note 12. | Restructuring and Other Initiatives | |
| Note 13. | Stockholders' Equity | |
| Note 12.14. | Pensions and Other Postretirement Benefits | |
| Note 13. | Derivative Financial Instruments and Risk ManagementEarnings Per Share | |
| Note 14. | Commitments and Contingencies | |
| Note 15. | Income Taxes | |
| Note 16. | Restructuring and Other Initiatives | |
| Note 17. | Stockholders' Equity | |
| Note 18. | Earnings Per Share | |
| Note 19. | Stock Incentive Plans | |
| Note 20. | Segment Reporting | |
| Note 21. | Subsequent Event | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
PART II - Other Information | |
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 6. | Exhibits | |
Signature | | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts)
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Net sales and revenue | | | | | | | | | | |
Automotive | $ | 38,120 |
| | $ | 37,062 |
| | $ | 112,704 |
| | $ | 111,517 |
| $ | 36,315 |
| | $ | 36,344 |
|
GM Financial | 863 |
| | 514 |
| | 2,238 |
| | 1,432 |
| 1,093 |
| | 540 |
|
Total | 38,983 |
| | 37,576 |
| | 114,942 |
| | 112,949 |
| |
Total net sales and revenue | | 37,408 |
| | 36,884 |
|
Costs and expenses | | | | | | | | | | |
Automotive cost of sales | 33,166 |
| | 32,735 |
| | 99,607 |
| | 98,323 |
| |
Automotive cost of sales (Note 8) | | 34,127 |
| | 32,617 |
|
GM Financial operating and other expenses | 625 |
| | 311 |
| | 1,556 |
| | 827 |
| 875 |
| | 356 |
|
Automotive selling, general and administrative expense | 2,876 |
| | 2,849 |
| | 8,753 |
| | 8,684 |
| 2,941 |
| | 2,952 |
|
Goodwill impairment charges (Note 7) | 60 |
| | 78 |
| | 60 |
| | 695 |
| |
Total costs and expenses | 36,727 |
| | 35,973 |
| | 109,976 |
| | 108,529 |
| 37,943 |
| | 35,925 |
|
Operating income | 2,256 |
| | 1,603 |
| | 4,966 |
| | 4,420 |
| |
Operating income (loss) | | (535 | ) | | 959 |
|
Automotive interest expense | 65 |
| | 128 |
| | 217 |
| | 356 |
| 103 |
| | 91 |
|
Interest income and other non-operating income (loss), net | (82 | ) | | 318 |
| | 340 |
| | 732 |
| |
Gain (loss) on extinguishment of debt (Note 10) | 2 |
| | — |
| | (238 | ) | | (18 | ) | |
Income before income taxes and equity income | 2,111 |
| | 1,793 |
| | 4,851 |
| | 4,778 |
| |
Income tax expense (Note 15) | 842 |
| | 357 |
| | 1,993 |
| | 814 |
| |
Equity income, net of tax (Note 6) | 436 |
| | 418 |
| | 1,420 |
| | 1,141 |
| |
Interest income and other non-operating income, net | | 89 |
| | 171 |
|
Equity income (Note 5) | | 605 |
| | 555 |
|
Income before income taxes | | 56 |
| | 1,594 |
|
Income tax expense (benefit) (Note 11) | | (224 | ) | | 409 |
|
Net income | 1,705 |
| | 1,854 |
| | 4,278 |
| | 5,105 |
| 280 |
| | 1,185 |
|
Net (income) loss attributable to noncontrolling interests | 12 |
| | (21 | ) | | 28 |
| | (111 | ) | |
Net income attributable to noncontrolling interests | | (67 | ) | | (10 | ) |
Net income attributable to stockholders | $ | 1,717 |
| | $ | 1,833 |
| | $ | 4,306 |
| | $ | 4,994 |
| $ | 213 |
| | $ | 1,175 |
|
| | | | |
Net income attributable to common stockholders | $ | 698 |
| | $ | 1,476 |
| | $ | 2,857 |
| | $ | 3,967 |
| $ | 125 |
| | $ | 865 |
|
| | | | | | | | | | |
Earnings per share (Note 18) | | | | | | | | |
Earnings per share (Note 14) | | | | |
Basic | | | | | | | | | | |
Basic earnings per common share | $ | 0.50 |
| | $ | 0.94 |
| | $ | 2.07 |
| | $ | 2.53 |
| $ | 0.08 |
| | $ | 0.63 |
|
Weighted-average common shares outstanding | 1,386 |
| | 1,570 |
| | 1,378 |
| | 1,570 |
| 1,587 |
| | 1,372 |
|
Diluted | | | | | | | | | | |
Diluted earnings per common share | $ | 0.45 |
| | $ | 0.89 |
| | $ | 1.82 |
| | $ | 2.38 |
| $ | 0.06 |
| | $ | 0.58 |
|
Weighted-average common shares outstanding | 1,681 |
| | 1,663 |
| | 1,672 |
| | 1,675 |
| 1,691 |
| | 1,507 |
|
| | | | |
Dividends declared per common share | | $ | 0.30 |
| | $ | — |
|
Reference should be made to the notes to condensed consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| | | Three Months Ended | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Net income | $ | 1,705 |
| | $ | 1,854 |
| | $ | 4,278 |
| | $ | 5,105 |
| $ | 280 |
| | $ | 1,185 |
|
Other comprehensive income (loss), net of tax | | | | | | | | |
Other comprehensive income (loss), net of tax (Note 13) | | | | |
Foreign currency translation adjustments | (154 | ) | | 7 |
| | (397 | ) | | (45 | ) | (98 | ) | | 263 |
|
Cash flow hedging losses, net | — |
| | — |
| | — |
| | (2 | ) | |
Unrealized gains (losses) on securities, net | 201 |
| | (11 | ) | | 183 |
| | (151 | ) | 3 |
| | (13 | ) |
Defined benefit plans, net | 9 |
| | (715 | ) | | 271 |
| | (657 | ) | 67 |
| | 183 |
|
Other comprehensive income (loss), net of tax | 56 |
| | (719 | ) | | 57 |
| | (855 | ) | (28 | ) | | 433 |
|
Comprehensive income | 1,761 |
| | 1,135 |
| | 4,335 |
| | 4,250 |
| 252 |
| | 1,618 |
|
Comprehensive (income) loss attributable to noncontrolling interests | 15 |
| | (31 | ) | | 42 |
| | (119 | ) | |
Comprehensive income attributable to noncontrolling interests | | (64 | ) | | (2 | ) |
Comprehensive income attributable to stockholders | $ | 1,776 |
| | $ | 1,104 |
| | $ | 4,377 |
| | $ | 4,131 |
| $ | 188 |
| | $ | 1,616 |
|
Reference should be made to the notes to condensed consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
(Unaudited)
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
ASSETS | | | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | $ | 20,355 |
| | $ | 18,422 |
| $ | 19,426 |
| | $ | 20,021 |
|
Marketable securities (Note 3) | 8,215 |
| | 8,988 |
| |
Restricted cash and marketable securities (Note 3) | 959 |
| | 686 |
| |
Accounts and notes receivable (net of allowance of $325 and $311) | 11,067 |
| | 10,395 |
| |
GM Financial receivables, net (Note 4)(including SPE receivables of $9,089 and $3,444; Note 8) | 11,010 |
| | 4,044 |
| |
Inventories (Note 5) | 15,357 |
| | 14,714 |
| |
Marketable securities (Note 2) | | 8,716 |
| | 8,972 |
|
Restricted cash and marketable securities (Note 2) | | 1,288 |
| | 1,247 |
|
Accounts and notes receivable (net of allowance of $344 and $344) | | 11,734 |
| | 8,535 |
|
GM Financial receivables, net (Note 3)(including receivables at VIEs of $10,158 and $10,001; Note 6) | | 15,055 |
| | 14,278 |
|
Inventories (Note 4) | | 14,837 |
| | 14,039 |
|
Equipment on operating leases, net | 2,559 |
| | 1,782 |
| 3,432 |
| | 2,398 |
|
Deferred income taxes | 9,868 |
| | 9,429 |
| 10,590 |
| | 10,349 |
|
Other current assets | 1,774 |
| | 1,536 |
| 1,747 |
| | 1,662 |
|
Total current assets | 81,164 |
| | 69,996 |
| 86,825 |
| | 81,501 |
|
Non-current Assets | | | | | | |
Restricted cash and marketable securities (Note 3) | 676 |
| | 682 |
| |
GM Financial receivables, net (Note 4)(including SPE receivables of $10,604 and $6,458; Note 8) | 12,222 |
| | 6,954 |
| |
Equity in net assets of nonconsolidated affiliates (Note 6) | 7,897 |
| | 6,883 |
| |
Restricted cash and marketable securities (Note 2) | | 906 |
| | 829 |
|
GM Financial receivables, net (Note 3)(including receivables at VIEs of $11,197 and $11,216; Note 6) | | 14,866 |
| | 14,354 |
|
Equity in net assets of nonconsolidated affiliates (Note 5) | | 8,747 |
| | 8,094 |
|
Property, net | 26,247 |
| | 24,196 |
| 26,367 |
| | 25,867 |
|
Goodwill (Note 7) | 1,953 |
| | 1,973 |
| |
Intangible assets, net (Note 7) | 6,364 |
| | 6,809 |
| |
GM Financial equipment on operating leases, net (including SPE assets of $1,685 and $540; Note 8) | 3,100 |
| | 1,649 |
| |
Goodwill | | 1,563 |
| | 1,560 |
|
Intangible assets, net | | 5,442 |
| | 5,668 |
|
GM Financial equipment on operating leases, net (including assets at VIEs of $2,679 and $1,803; Note 6) | | 3,726 |
| | 3,383 |
|
Deferred income taxes | 26,020 |
| | 27,922 |
| 22,840 |
| | 22,736 |
|
Other assets | 2,896 |
| | 2,358 |
| 2,324 |
| | 2,352 |
|
Total non-current assets | 87,375 |
| | 79,426 |
| 86,781 |
| | 84,843 |
|
Total Assets | $ | 168,539 |
| | $ | 149,422 |
| $ | 173,606 |
| | $ | 166,344 |
|
LIABILITIES AND EQUITY | | | | | | |
Current Liabilities | | | | | | |
Accounts payable (principally trade) | $ | 27,242 |
| | $ | 25,166 |
| $ | 27,715 |
| | $ | 23,621 |
|
Short-term debt and current portion of long-term debt (Note 10) | | | | |
Automotive (including certain debt at VIEs of $187 and $228; Note 8) | 1,786 |
| | 1,748 |
| |
GM Financial (including certain debt at VIEs of $8,435 and $3,770; Note 8) | 9,653 |
| | 3,770 |
| |
Short-term debt and current portion of long-term debt (Note 7) | | | | |
Automotive (including certain debt at VIEs of $193 and $219; Note 6) | | 522 |
| | 564 |
|
GM Financial (including certain debt at VIEs of $10,204 and $10,088; Note 6) | | 14,327 |
| | 13,594 |
|
Accrued liabilities | 23,882 |
| | 23,308 |
| 26,658 |
| | 24,633 |
|
Total current liabilities | 62,563 |
| | 53,992 |
| 69,222 |
| | 62,412 |
|
Non-current Liabilities | | | | | | |
Long-term debt (Note 10) | | | | |
Automotive (including certain debt at VIEs of $77 and $122; Note 8) | 6,662 |
| | 3,424 |
| |
GM Financial (including certain debt at VIEs of $9,712 and $5,608; Note 8) | 14,022 |
| | 7,108 |
| |
Postretirement benefits other than pensions (Note 12) | 6,855 |
| | 7,309 |
| |
Pensions (Note 12) | 27,030 |
| | 27,420 |
| |
Long-term debt (Note 7) | | | | |
Automotive (including certain debt at VIEs of $24 and $23; Note 6) | | 6,687 |
| | 6,573 |
|
GM Financial (including certain debt at VIEs of $10,241 and $9,330; Note 6) | | 16,231 |
| | 15,452 |
|
Postretirement benefits other than pensions (Note 9) | | 5,814 |
| | 5,897 |
|
Pensions (Note 9) | | 19,171 |
| | 19,483 |
|
Other liabilities and deferred income taxes | 14,046 |
| | 13,169 |
| 13,641 |
| | 13,353 |
|
Total non-current liabilities | 68,615 |
| | 58,430 |
| 61,544 |
| | 60,758 |
|
Total Liabilities | 131,178 |
| | 112,422 |
| 130,766 |
| | 123,170 |
|
Commitments and contingencies (Note 14) |
|
| |
|
| |
Equity (Note 17) | | | | |
Preferred stock, $0.01 par value | | | | |
Series A | 3,109 |
| | 5,536 |
| |
Series B | 4,855 |
| | 4,855 |
| |
Commitments and contingencies (Note 10) | |
|
| |
|
|
Equity (Note 13) | | | | |
Series A preferred stock, $0.01 par value | | 3,109 |
| | 3,109 |
|
Common stock, $0.01 par value | 14 |
| | 14 |
| 16 |
| | 15 |
|
Additional paid-in capital | 23,878 |
| | 23,834 |
| 28,778 |
| | 28,780 |
|
Retained earnings | 12,903 |
| | 10,057 |
| 13,457 |
| | 13,816 |
|
Accumulated other comprehensive loss | (7,981 | ) | | (8,052 | ) | (3,138 | ) | | (3,113 | ) |
Total stockholders’ equity | 36,778 |
| | 36,244 |
| 42,222 |
| | 42,607 |
|
Noncontrolling interests | 583 |
| | 756 |
| 618 |
| | 567 |
|
Total Equity | 37,361 |
| | 37,000 |
| 42,840 |
| | 43,174 |
|
Total Liabilities and Equity | $ | 168,539 |
| | $ | 149,422 |
| $ | 173,606 |
| | $ | 166,344 |
|
Reference should be made to the notes to condensed consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions)
| | | Series A Preferred Stock | | Series B Preferred Stock | | Common Stockholders’ | | Noncontrolling Interests | | Total Equity | Series A Preferred Stock | | Series B Preferred Stock | | 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 December 31, 2011 | $ | 5,536 |
| | $ | 4,855 |
| | $ | 16 |
| | $ | 26,391 |
| | $ | 7,183 |
| | $ | (5,861 | ) | | $ | 871 |
| | $ | 38,991 |
| |
Balance at December 31, 2012 | | $ | 5,536 |
| | $ | 4,855 |
| | $ | 14 |
| | $ | 23,834 |
| | $ | 10,057 |
| | $ | (8,052 | ) | | $ | 756 |
| | $ | 37,000 |
|
Net income | — |
| | — |
| | — |
| | — |
| | 4,994 |
| | — |
| | 111 |
| | 5,105 |
| — |
| | — |
| | — |
| | — |
| | 1,175 |
| | — |
| | 10 |
| | 1,185 |
|
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | (863 | ) | | 8 |
| | (855 | ) | |
Other comprehensive income | | — |
| | — |
| | — |
| | — |
| | — |
| | 441 |
| | (8 | ) | | 433 |
|
Exercise of common stock warrants | — |
| | — |
| | — |
| | 4 |
| | — |
| | — |
| | — |
| | 4 |
| — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
Stock based compensation | — |
| | — |
| | — |
| | 48 |
| | — |
| | — |
| | — |
| | 48 |
| — |
| | — |
| | — |
| | (59 | ) | | — |
| | — |
| | — |
| | (59 | ) |
Cash dividends paid on Series A Preferred Stock and cumulative dividends on Series B Preferred Stock | — |
| | — |
| | — |
| | — |
| | (644 | ) | | — |
| | — |
| | (644 | ) | — |
| | — |
| | — |
| | — |
| | (215 | ) | | — |
| | — |
| | (215 | ) |
Dividends declared or paid to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (38 | ) | | (38 | ) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (15 | ) | | (15 | ) |
Other | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 18 |
| | 18 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5 |
| | 5 |
|
Balance at September 30, 2012 | $ | 5,536 |
| | $ | 4,855 |
| | $ | 16 |
| | $ | 26,443 |
| | $ | 11,533 |
| | $ | (6,724 | ) | | $ | 970 |
| | $ | 42,629 |
| |
Balance at March 31, 2013 | | $ | 5,536 |
| | $ | 4,855 |
| | $ | 14 |
| | $ | 23,776 |
| | $ | 11,017 |
| | $ | (7,611 | ) | | $ | 748 |
| | $ | 38,335 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2012 | $ | 5,536 |
| | $ | 4,855 |
| | $ | 14 |
| | $ | 23,834 |
| | $ | 10,057 |
| | $ | (8,052 | ) | | $ | 756 |
| | $ | 37,000 |
| |
Net income (loss) | — |
| | — |
| | — |
| | — |
| | 4,306 |
| | — |
| | (28 | ) | | 4,278 |
| |
Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | 71 |
| | (14 | ) | | 57 |
| |
Purchase and cancellation of Series A Preferred Stock | (2,427 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2,427 | ) | |
Balance at December 31, 2013 | | $ | 3,109 |
| | | | $ | 15 |
| | $ | 28,780 |
| | $ | 13,816 |
| | $ | (3,113 | ) | | $ | 567 |
| | $ | 43,174 |
|
Net income | | — |
| | | | — |
| | — |
| | 213 |
| | — |
| | 67 |
| | 280 |
|
Other comprehensive loss | | — |
| | | | — |
| | — |
| | — |
| | (25 | ) | | (3 | ) | | (28 | ) |
Exercise of common stock warrants | — |
| | — |
| | — |
| | 3 |
| | — |
| | — |
| | — |
| | 3 |
| — |
| | | | 1 |
| | 9 |
| | — |
| | — |
| | — |
| | 10 |
|
Stock based compensation | — |
| | — |
| | — |
| | 27 |
| | — |
| | — |
| | — |
| | 27 |
| — |
| | | | — |
| | (11 | ) | | (3 | ) | | — |
| | — |
| | (14 | ) |
Cash dividends paid on Series A Preferred Stock, charge related to purchase of Series A Preferred Stock and cumulative dividends on Series B Preferred Stock | — |
| | — |
| | — |
| | — |
| | (1,460 | ) | | — |
| | — |
| | (1,460 | ) | |
Cash dividends paid on Common Stock | | — |
| | | | — |
| | — |
| | (481 | ) | | — |
| | — |
| | (481 | ) |
Cash dividends paid on Series A Preferred Stock | | — |
| | | | — |
| | — |
| | (88 | ) | | — |
| | — |
| | (88 | ) |
Dividends declared or paid to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (82 | ) | | (82 | ) | — |
| | | | — |
| | — |
| | — |
| | — |
| | (30 | ) | | (30 | ) |
Other | — |
| | — |
| | — |
| | 14 |
| | — |
| | — |
| | (49 | ) | | (35 | ) | — |
| | | | — |
| | — |
| | — |
| | — |
| | 17 |
| | 17 |
|
Balance at September 30, 2013 | $ | 3,109 |
| | $ | 4,855 |
| | $ | 14 |
| | $ | 23,878 |
| | $ | 12,903 |
| | $ | (7,981 | ) | | $ | 583 |
| | $ | 37,361 |
| |
Balance at March 31, 2014 | | $ | 3,109 |
| | | | $ | 16 |
| | $ | 28,778 |
| | $ | 13,457 |
| | $ | (3,138 | ) | | $ | 618 |
| | $ | 42,840 |
|
Reference should be made to the notes to condensed consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Net cash provided by operating activities | $ | 9,572 |
| | $ | 9,824 |
| $ | 1,976 |
| | $ | 819 |
|
Cash flows from investing activities | | | |
| |
|
Expenditures for property | (5,780 | ) | | (6,004 | ) | (1,759 | ) | | (1,940 | ) |
Available-for-sale marketable securities, acquisitions | (4,247 | ) | | (3,818 | ) | (891 | ) | | (564 | ) |
Trading marketable securities, acquisitions | (3,214 | ) | | (4,867 | ) | (302 | ) | | (1,773 | ) |
Available-for-sale marketable securities, liquidations | 2,777 |
| | 8,923 |
| 1,055 |
| | 985 |
|
Trading marketable securities, liquidations | 5,311 |
| | 5,313 |
| 332 |
| | 3,727 |
|
Acquisition of companies, net of cash acquired | (2,111 | ) | | (34 | ) | |
Proceeds from sale of business units/investments, net of cash disposed | (65 | ) | | 18 |
| — |
| | (82 | ) |
Increase in restricted cash and marketable securities | (694 | ) | | (506 | ) | (281 | ) | | (174 | ) |
Decrease in restricted cash and marketable securities | 961 |
| | 1,096 |
| 159 |
| | 188 |
|
Purchases and funding of finance receivables | (18,011 | ) | | (4,941 | ) | |
Purchases of finance receivables | | (3,300 | ) | | (1,609 | ) |
Principal collections and recoveries on finance receivables | 16,137 |
| | 3,349 |
| 2,639 |
| | 1,096 |
|
Purchases of leased vehicles, net | (1,733 | ) | | (837 | ) | (620 | ) | | (478 | ) |
Proceeds from termination of leased vehicles | 142 |
| | 36 |
| 123 |
| | 37 |
|
Decrease (increase) in notes receivable | 90 |
| | (2,038 | ) | |
Other investing activities | (152 | ) | | 29 |
| 8 |
| | 77 |
|
Net cash used in investing activities | (10,589 | ) | | (4,281 | ) | (2,837 | ) | | (510 | ) |
Cash flows from financing activities | | | |
| |
|
Net increase (decrease) in short-term debt | 69 |
| | (221 | ) | |
Net increase in short-term debt | | 384 |
| | 550 |
|
Proceeds from issuance of debt (original maturities greater than three months) | 21,068 |
| | 7,930 |
| 5,683 |
| | 3,042 |
|
Payments on debt (original maturities greater than three months) | (13,714 | ) | | (5,267 | ) | (4,764 | ) | | (1,184 | ) |
Payments to purchase stock | (2,438 | ) | | — |
| |
Dividends paid (including charge related to purchase of Series A Preferred Stock) | (1,519 | ) | | (679 | ) | |
Dividends paid | | (571 | ) | | (218 | ) |
Other financing activities | (147 | ) | | (40 | ) | (14 | ) | | (23 | ) |
Net cash provided by financing activities | 3,319 |
| | 1,723 |
| 718 |
| | 2,167 |
|
Effect of exchange rate changes on cash and cash equivalents | (369 | ) | | (17 | ) | (452 | ) | | (255 | ) |
Net increase in cash and cash equivalents | 1,933 |
| | 7,249 |
| |
Net increase (decrease) in cash and cash equivalents | | (595 | ) | | 2,221 |
|
Cash and cash equivalents at beginning of period | 18,422 |
| | 16,071 |
| 20,021 |
| | 18,422 |
|
Cash and cash equivalents at end of period | $ | 20,355 |
| | $ | 23,320 |
| $ | 19,426 |
| | $ | 20,643 |
|
Supplemental cash flow information: | | | | | | |
Non-cash property additions | $ | 3,326 |
| | $ | 3,861 |
| $ | 1,485 |
| | $ | 1,673 |
|
Reference should be made to the notes to condensed consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Basis of Presentation
General Motors Company is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors,” or “GM.” General Motors Corporation is sometimes referred to in this Quarterly Report on Form 10-Q, for the periods on or before July 9, 2009, as “Old GM.”
We design, build and sell cars, trucks and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial).
We analyze the results of our business through our five segments: GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO), GM South America (GMSA) and GM Financial. Nonsegment operations are classified as Corporate. Corporate includes certain centrally recorded income and costs, such as interest, income taxes and corporate expenditures and certain nonsegment specific revenues and expenses.
As discussed in Notes 8 and 10 we announced recalls of approximately 7 million vehicles and recorded recall-related charges of approximately $1.3 billion in the three months ended March 31, 2014.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, composed of normal recurring adjustments, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 20122013 (2013 Form 10-K) as filed with the SEC. Certain prior year amounts were reclassified to conform to our current year presentation.
In the three months ended March 31, 2014 we changed our managerial and financial reporting structure to reclassify the results of our Russian subsidiaries previously reported in our GMIO segment to our GME segment. We have retrospectively revised the segment presentation for all periods presented.
Recently Adopted Accounting Principles
On January 1, 20132014 we adopted Accounting Standards Update (ASU) 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." This ASU does not change current requirements for reporting net income or other comprehensive income in financial statements; rather, it requires certain disclosures of the amount of reclassifications of items from other comprehensive income to net income by component. The related disclosures are presented in Note 17.
Accounting Standards Not Yet Adopted
In July 2013 the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” to eliminate diversity in practice. This ASU requires that companies net their unrecognized tax benefits against all same-jurisdiction net operating losses or tax credit carryforwards that would be used to settle the position with a tax authority. This new guidance is effective prospectively for annual reporting periods beginning on or after December 15, 2013 and interim periods therein. The adoption of this ASU willdid not have a materialan effect on our consolidated financial statements because it aligns with our current presentation.statements.
Note 2.Acquisition of Businesses
Acquisition of Certain Ally Financial International Operations
In November 2012 GM Financial entered into a definitive agreement with Ally Financial, Inc. (Ally Financial) to acquire 100% of the outstanding equity interests in the top level holding companies of its automotive finance and financial services operations in Europe and Latin America and a separate agreement to acquire Ally Financial’s non-controlling equity interest in GMAC-SAIC Automotive Finance Company Limited (GMAC-SAIC), which conducts automotive finance and other financial services in China.
On April 1, 2013 GM Financial completed the acquisition of Ally Financial's European and Latin American automotive finance operations except for France, Portugal and Brazil; and on June 1, 2013 it completed the acquisition of Ally Financial's automotive finance operations in France and Portugal. The aggregate consideration for these acquisitions was $2.6 billion, subject to certain closing adjustments, of which $65 million was paid upon the closing of the acquisition of Ally Financial's Brazilian automotive finance operations described below. Acquisition-related costs were insignificant. In addition GM Financial repaid loans of $1.4 billion that were assumed as part of the acquisitions. GM Financial recorded the fair value of the assets acquired and liabilities
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
assumed on the acquisition dates. Certain amounts previously presented related to the acquisitions have been, and will continue to be, updated as a result of closing adjustments.
The following table summarizes the aggregate consideration and the assets acquired and liabilities assumed at the acquisition dates before eliminations for net intercompany receivables of approximately $300 million (dollars in millions):
|
| | | |
Cash | $ | 440 |
|
Restricted cash | 525 |
|
Finance receivables | 10,969 |
|
Other assets, including identifiable intangible assets | 255 |
|
Secured and unsecured debt | (8,926 | ) |
Other liabilities | (722 | ) |
Identifiable net assets acquired | 2,541 |
|
Goodwill resulting from the acquisitions | 56 |
|
Aggregate consideration | $ | 2,597 |
|
The fair value of finance receivables was determined using a discounted cash flow approach. The contractual cash flows were adjusted for estimated prepayments, defaults, recoveries, finance charge income and servicing costs and discounted using a discount rate commensurate with risks and maturity inherent in the finance contracts. The contractually required payments receivable, cash flows expected to be collected and fair value for finance receivables acquired with deteriorated credit quality at the acquisition date were $799 million, $728 million and $601 million. The contractually required payments receivable, cash flows not expected to be collected and fair value for other acquired finance receivables were $11.2 billion, $170 million and $10.4 billion. The fair value of secured and unsecured debt was determined using quoted market prices when available and a discounted cash flow approach when not available.
We recorded goodwill in the amount of $56 million for the excess of the aggregate consideration over the fair value of the individual assets acquired and liabilities assumed and such amount is primarily attributed to the value of the incremental GM Financial business expected. The recorded goodwill is subject to further adjustment, pending the closing of the acquisition of the remaining international operations as well as any potential adjustments resulting from the finalization of closing balance sheet audits. Valuations and assumptions pertaining to income taxes are subject to change as additional information is obtained during the measurement period. All of the goodwill was assigned to the GM Financial segment and will be assigned to reporting units, which will be determined pending completion of the remaining acquisitions. The goodwill is not tax deductible.
The results of the acquired European and Latin American automotive finance operations are included in GM Financial's results beginning April 1, 2013 and the results of the acquired operations in France and Portugal are included in GM Financial's results beginning June 1, 2013. The following table summarizes the actual amounts of revenue and earnings included in our condensed consolidated financial statements as well as certain pro forma revenue and earnings of the combined entity had these acquisitions occurred as of January 1, 2012, without consideration of historical transactions between the acquired operations and us, as it is impracticable to obtain such information (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | |
| Certain Ally Operations Amounts Included in Results | | Pro Forma-Combined |
| Three Months Ended September 30, 2013 | | Nine Months Ended September 30, 2013 | | Three Months Ended September 30, 2012 | | Nine Months Ended |
| | | September 30, 2013 | | September 30, 2012 |
Total net sales and revenue | $ | 245 |
| | $ | 493 |
| | $ | 37,820 |
| | $ | 115,202 |
| | $ | 113,742 |
|
Net income attributable to stockholders | $ | 50 |
| | $ | 104 |
| | $ | 1,866 |
| | $ | 4,356 |
| | $ | 5,151 |
|
On October 1, 2013 GM Financial completed the acquisition of Ally Financial's automotive finance operations in Brazil for consideration of $611 million, subject to certain closing adjustments. Refer to Note 21 for further detail regarding the acquisition of Ally Financial's automotive finance operations in Brazil. The acquisition of Ally Financial's equity interest in GMAC-SAIC is subject to certain regulatory and other approvals and is expected to close in 2014. GM Financial expects to pay approximately $900 million to close this acquisition subject to certain closing adjustments.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Acquisition of SAIC GM Investment Limited
In September 2012 we agreed with SAIC Motor Hong Kong Investment Limited to settle a promissory note due from SAIC GM Investment Limited, the holding company of General Motors India Private Limited and Chevrolet Sales India Private Limited (collectively HKJV) to us in exchange for HKJV's issuance of 257 million Class B shares. As a result we obtained control of HKJV with an 86% interest and consolidated HKJV effective September 1, 2012. We recognized a gain of $51 million of which $50 million was recorded in Equity income, net of tax. In addition we invested $125 million in HKJV and acquired 186 million Class A shares, which increased our interest in HKJV to 90.8%.
Note 3.2. Marketable Securities
We measure the fair value of our marketable securities using a market approach where identical or comparable prices are available and an income approach in other cases. We obtain the majority of the prices used in this valuation from a pricing service. Our pricing service utilizes industry standard pricing models that consider various inputs, including benchmark yields, reported trades, broker/dealer quotes, issuer spreads and benchmark securities as well as other relevant economic measures. We conduct an annual review of valuations provided by our pricing service, which includes discussion and analysis of the inputs used by the pricing service to provide prices for the types of securities we hold. These inputs include prices for comparable securities, bid/ask quotes, interest rate yields and prepayment spreads. Based on our review we believe the prices received from our pricing service are a reliable representation of exit prices.
The following table summarizes information regarding marketable securities (dollars in millions):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | | | | | | | |
| | | September 30, 2013 | | December 31, 2012 |
| Fair Value Level | | | | Fair Value | | | | Fair Value |
| | Cost | | | Cost | |
Cash and cash equivalents | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
U.S. government and agencies | 2 | | $ | 832 |
| | $ | 832 |
| | $ | 4,190 |
| | $ | 4,190 |
|
Sovereign debt | 2 | | 1,091 |
| | 1,091 |
| | — |
| | — |
|
Certificates of deposit | 2 | | 846 |
| | 846 |
| | 120 |
| | 120 |
|
Money market funds | 1 | | 1,433 |
| | 1,433 |
| | 1,799 |
| | 1,799 |
|
Corporate debt | 2 | | 6,768 |
| | 6,768 |
| | 3,102 |
| | 3,102 |
|
Total available-for-sale securities | | | $ | 10,970 |
| | 10,970 |
| | $ | 9,211 |
| | 9,211 |
|
Trading securities | | | | | | | | | |
Sovereign debt | 2 | | | | — |
| | | | 1,408 |
|
Corporate debt | 2 | | | | 25 |
| | | | — |
|
Total trading securities | | | | | 25 |
| | | | 1,408 |
|
Total marketable securities classified as cash equivalents | | | | | 10,995 |
| | | | 10,619 |
|
Cash, cash equivalents and time deposits | | | | | 9,360 |
| | | | 7,803 |
|
Total cash and cash equivalents | | | | | $ | 20,355 |
| | | | $ | 18,422 |
|
Marketable securities - current | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
U.S. government and agencies | 2 | | $ | 3,321 |
| | $ | 3,322 |
| | $ | 1,231 |
| | $ | 1,231 |
|
Sovereign debt | 2 | | 22 |
| | 22 |
| | 30 |
| | 30 |
|
Certificates of deposit | 2 | | — |
| | — |
| | 10 |
| | 10 |
|
Corporate debt | 2 | | 1,821 |
| | 1,821 |
| | 2,313 |
| | 2,318 |
|
Interest in GM Korea mandatorily redeemable preferred shares | 2 | | 21 |
| | 23 |
| | 142 |
| | 177 |
|
Equity | 1 | | — |
| | — |
| | — |
| | 21 |
|
Total available-for-sale securities | | | $ | 5,185 |
| | 5,188 |
| | $ | 3,726 |
| | 3,787 |
|
Trading securities | | | | | | | | | |
Sovereign debt | 2 | | | | 3,027 |
| | | | 5,201 |
|
Total trading securities | | | | | 3,027 |
| | | | 5,201 |
|
Total marketable securities - current | | | | | 8,215 |
| | | | 8,988 |
|
Marketable securities - non-current | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
Investment in Peugeot S.A. | 1 | | $ | 179 |
| | 409 |
| | $ | 179 |
| | 179 |
|
Total marketable securities - non-current | | | $ | 179 |
| | 409 |
| | $ | 179 |
| | 179 |
|
Total marketable securities | | | | | $ | 8,624 |
| | | | $ | 9,167 |
|
Restricted cash and marketable securities | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
Money market funds | 1 | | $ | 856 |
| | $ | 856 |
| | $ | 933 |
| | $ | 933 |
|
Sovereign debt | 2 | | 20 |
| | 21 |
| | 23 |
| | 24 |
|
Other | 2 | | 13 |
| | 13 |
| | 175 |
| | 175 |
|
Total marketable securities classified as restricted cash and marketable securities | | | $ | 889 |
| | 890 |
| | $ | 1,131 |
| | 1,132 |
|
Restricted cash and cash equivalents and time deposits | | | | | 745 |
| | | | 236 |
|
Total restricted cash and marketable securities | | | | | $ | 1,635 |
| | | | $ | 1,368 |
|
9 |
| | | | | | | | | | | | | | | | | |
| | | March 31, 2014 | | December 31, 2013 |
| Fair Value Level | | | | Fair Value | | | | Fair Value |
| | Cost | | | Cost | |
Cash and cash equivalents | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
U.S. government and agencies | 2 | | $ | 1,744 |
| | $ | 1,744 |
| | $ | 1,437 |
| | $ | 1,437 |
|
Sovereign debt | 2 | | 330 |
| | 330 |
| | 515 |
| | 515 |
|
Money market funds | 1 | | 1,144 |
| | 1,144 |
| | 1,262 |
| | 1,262 |
|
Corporate debt | 2 | | 7,582 |
| | 7,582 |
| | 7,598 |
| | 7,598 |
|
Total available-for-sale securities | | | $ | 10,800 |
| | 10,800 |
| | $ | 10,812 |
| | 10,812 |
|
Trading securities - corporate debt | 2 | | | | 51 |
| | | | 25 |
|
Total marketable securities classified as cash equivalents | | | | | 10,851 |
| | | | 10,837 |
|
Cash, cash equivalents and time deposits | | | | | 8,575 |
| | | | 9,184 |
|
Total cash and cash equivalents | | | | | $ | 19,426 |
| | | | $ | 20,021 |
|
Marketable securities | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
U.S. government and agencies | 2 | | $ | 5,132 |
| | $ | 5,133 |
| | $ | 5,343 |
| | $ | 5,344 |
|
Corporate debt | 2 | | 1,891 |
| | 1,895 |
| | 1,867 |
| | 1,869 |
|
Sovereign debt | 2 | | 42 |
| | 42 |
| | 22 |
| | 22 |
|
Total available-for-sale securities | | | $ | 7,065 |
| | 7,070 |
| | $ | 7,232 |
| | 7,235 |
|
Trading securities - sovereign debt | 2 | | | | 1,646 |
| | | | 1,737 |
|
Total marketable securities | | | | | $ | 8,716 |
| | | | $ | 8,972 |
|
Restricted cash and marketable securities | | | | | | | | | |
Available-for-sale securities | | | | | | | | | |
Money market funds | 1 | | $ | 1,353 |
| | $ | 1,353 |
| | $ | 897 |
| | $ | 897 |
|
Other | 2 | | 22 |
| | 23 |
| | 34 |
| | 35 |
|
Total marketable securities classified as restricted cash and marketable securities | | | $ | 1,375 |
| | 1,376 |
| | $ | 931 |
| | 932 |
|
Restricted cash and cash equivalents and time deposits | | | | | 818 |
| | | | 1,144 |
|
Total restricted cash and marketable securities | | | | | $ | 2,194 |
| | | | $ | 2,076 |
|
We are required to post cash and marketable securities as collateral for certain agreements that we enter into as part of our operations. Cash and marketable securities subject to contractual restrictions and not readily available are classified as Restricted cash and marketable securities. Restricted cash and marketable securities are invested in accordance with the terms of the underlying agreements and include amounts related to securitizations, escrows and other cash collateral requirements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Sales proceeds from investments classified as available-for-sale and sold prior to maturity were $917736 million and $737386 million in the three months ended March 31, 2014 and September 30,2013. Cumulative unrealized gains and losses on available-for-sale securities were insignificant at March 31, 2014 and December 31, 2013 and 2012net unrealized gains and $2.6 billion and $1.7 billionlosses on trading securities were insignificant in the ninethree months ended September 30, 2013March 31, 2014 and 2012.
2013. The following table summarizes the amortized cost and the fair value of investments classified as available-for-sale by contractual maturity at September 30, 2013March 31, 2014 (dollars in millions):
|
| | | | | | | |
| Amortized Cost | | Fair Value |
Due in one year or less | $ | 12,911 |
| | $ | 12,920 |
|
Due after one year through five years | 1,844 |
| | 1,839 |
|
Total contractual maturities of available-for-sale securities | $ | 14,755 |
| | $ | 14,759 |
|
Cumulative net unrealized gains on available-for-sale securities were $234 million and $62 million at September 30, 2013 and December 31, 2012. Net unrealized gains (losses) on trading securities were $75 million and $187 million in the three months ended September 30, 2013 and 2012 and $(34) million and $128 million in the nine months ended September 30, 2013 and 2012. Unrealized losses on trading securities are primarily related to the remeasurement of Canadian Dollar (CAD) denominated securities. |
| | | | | | | |
| Amortized Cost | | Fair Value |
Due in one year or less | $ | 14,864 |
| | $ | 14,866 |
|
Due after one year through five years | 1,879 |
| | 1,883 |
|
Total available-for-sale securities with contractual maturities | $ | 16,743 |
| | $ | 16,749 |
|
Note 4.3. GM Financial Receivables, net
In the three months ended June 30, 2013 GM Financial acquired certain international operations in Europe and Latin America from Ally Financial that conduct consumer and commercial lending activities. All of these loans were made on a secured basis. 7
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
As thea result of our October 2010 acquisition of GM Financial and GM Financial's acquisition of certain of the Ally Financial Inc. (Ally Financial) international operations in the year ended December 31, 2013, finance receivables are reported in two portfolios: pre-acquisition and post-acquisition portfolios. The pre-acquisition finance receivables portfolio consists of finance receivables that were considered to have had deterioration in credit quality at the time they were acquired with the acquisitionacquisitions of GM Financial or the acquisition ofand the Ally Financial international operations. The pre-acquisition portfolio will decrease over time with the amortization of the acquired receivables. The post-acquisition finance receivables portfolio consists of finance receivables that were considered to have had no deterioration in credit quality at the time they were acquired with the acquisition of the Ally Financial international operations and finance receivables originated since the acquisitions of GM Financial and the Ally Financial international operations. The post-acquisition portfolio is expected to grow over time as GM Financial originates new receivables.
The following table summarizes the components of consumer and commercial finance receivables, net (dollars in millions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
| Consumer | | Commercial | | Total | | Consumer | | Commercial | | Total | Consumer | | Commercial | | Total | | Consumer | | Commercial | | Total |
Pre-acquisition finance receivables, outstanding amount | $ | 1,599 |
| | $ | — |
| | $ | 1,599 |
| | $ | 2,162 |
| | $ | — |
| | $ | 2,162 |
| $ | 1,028 |
| | $ | — |
| | $ | 1,028 |
| | $ | 1,294 |
| | $ | — |
| | $ | 1,294 |
|
Pre-acquisition finance receivables, carrying amount | $ | 1,452 |
| | $ | — |
| | $ | 1,452 |
| | $ | 1,958 |
| | $ | — |
| | $ | 1,958 |
| $ | 930 |
| | $ | — |
| | $ | 930 |
| | $ | 1,174 |
| | $ | — |
| | $ | 1,174 |
|
Post-acquisition finance receivables, net of fees | 17,665 |
| | 4,611 |
| | 22,276 |
| | 8,831 |
| | 560 |
| | 9,391 |
| 23,094 |
| | 6,483 |
| | 29,577 |
| | 21,956 |
| | 6,050 |
| | 28,006 |
|
Finance receivables | 19,117 |
| | 4,611 |
| | 23,728 |
| | 10,789 |
| | 560 |
| | 11,349 |
| 24,024 |
| | 6,483 |
| | 30,507 |
| | 23,130 |
| | 6,050 |
| | 29,180 |
|
Less: allowance for loan losses | (467 | ) | | (29 | ) | | (496 | ) | | (345 | ) | | (6 | ) | | (351 | ) | (537 | ) | | (49 | ) | | (586 | ) | | (497 | ) | | (51 | ) | | (548 | ) |
GM Financial receivables, net | $ | 18,650 |
| | $ | 4,582 |
| | $ | 23,232 |
| | $ | 10,444 |
| | $ | 554 |
| | $ | 10,998 |
| $ | 23,487 |
| | $ | 6,434 |
| | $ | 29,921 |
| | $ | 22,633 |
| | $ | 5,999 |
| | $ | 28,632 |
|
| | | | | | | | | | | | |
Fair value of GM Financial receivables, net | | | | | $ | 23,366 |
| | | | | | $ | 11,313 |
| | | | | $ | 30,397 |
| | | | | | $ | 28,668 |
|
Of the total allowance for loan losses in the above table, $372$466 million and $266427 million were current at September 30, 2013March 31, 2014 and December 31, 2012.2013.
GM Financial determined the fair value of consumer finance receivables using observable and unobservable 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 which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. The series of cash flows is calculated and discounted using a weighted-average cost of capital using unobservable debt and equity percentages, an
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
unobservable cost of equity and an observable cost of debt based on companies with a similar credit rating and maturity profile as the portfolio. Macroeconomic factors could negatively affect the credit performance of the portfolio and therefore could potentially affect the assumptions used in GM Financial's cash flow model. Substantially allA substantial majority of commercial finance receivables either have variable interest rates and maturities of one year or less, or were acquired or originated within the past year.less. Therefore, the carrying amount is considered to be a reasonable estimate of fair value.
GM Financial reviews its pre-acquisition finance receivables portfolios for differences between contractual cash flows and the cash flows expected to be collected to determine if the difference is attributable, at least in part, to credit quality. In the nine months ended September 30, 2013 and 2012 as a result of improvements in credit performance of the pre-acquisition finance receivables, GM Financial transferred the amount of excess cash flows from the non-accretable difference to accretable yield. GM Financial will recognize this excess as finance charge income over the remaining life of the portfolio.
The following table summarizes the activity for accretable yield (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Balance at beginning of period | $ | 394 |
| | $ | 628 |
| | $ | 404 |
| | $ | 737 |
|
Ally Financial international operations acquisition | | |
|
| | 127 |
| |
|
|
Accretion of accretable yield | (85 | ) | | (123 | ) | | (269 | ) | | (402 | ) |
Transfer from non-accretable difference | 19 |
| | — |
| | 73 |
| | 170 |
|
Effect of foreign currency | 1 |
| | — |
| | (6 | ) | | — |
|
Balance at end of period | $ | 329 |
| | $ | 505 |
| | $ | 329 |
| | $ | 505 |
|
The following table summarizes activity for the allowance for loan losses on consumer and commercial finance receivables (dollars in millions):
| | | Three Months Ended(a) | | Nine Months Ended(a) | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Balance at beginning of period | $ | 447 |
| | $ | 249 |
| | $ | 351 |
| | $ | 179 |
| $ | 548 |
| | $ | 351 |
|
Provision for loan losses | 117 |
| | 78 |
| | 311 |
| | 188 |
| 135 |
| | 94 |
|
Charge-offs | (171 | ) | | (82 | ) | | (419 | ) | | (186 | ) | (224 | ) | | (132 | ) |
Recoveries | 103 |
| | 46 |
| | 253 |
| | 110 |
| 127 |
| | 80 |
|
Balance at end of period | $ | 496 |
| | $ | 291 |
| | $ | 496 |
| | $ | 291 |
| $ | 586 |
| | $ | 393 |
|
________
| |
(a) | The balances and activity of the allowance for commercial loan losses included in the amounts at and for the three and nine months ended September 30, 2013 and 2012 were insignificant. |
The balances and activity of the allowance for commercial loan losses included in the above table at and in the three months ended March 31, 2014 and 2013 were insignificant.
Credit Quality
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Consumer Finance Receivables
GM Financial uses proprietary scoring systems that measure the credit quality of the receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score), and contract characteristics. In addition to GM Financial's proprietary scoring systems GM Financial considers other individual consumer factors such as employment history, financial stability and capacity to pay. Subsequent to origination GM Financial reviews the credit quality of retail receivables based on customer payment activity. At the time of loan origination substantially all of GM Financial's international consumers have prime credit scores. In North America sub-prime is typically defined as a loan with a borrower that has a FICO score of less than 620. At September 30, 2013March 31, 2014 88%89% of the consumer finance receivables in North America were from consumers with FICO scores less than 620.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. At September 30, 2013March 31, 2014 and December 31, 20122013 the accrual of finance charge income has been suspended on delinquent consumer finance receivables with contractual amounts due of $550$545 million and $503642 million.
GM Financial purchases consumer 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.
The following table summarizes the contractual amount of delinquent contracts, which is not materiallysignificantly different than the recorded investment of the consumer finance receivables (dollars in millions):
| | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
| Amount | | Percent of Contractual Amount Due | | Amount | | Percent of Contractual Amount Due | Amount | | Percent of Contractual Amount Due | | Amount | | Percent of Contractual Amount Due |
Delinquent contracts | | | | | | | | | | | | | | |
31-to-60 days | $ | 739 |
| | 3.8 | % | | $ | 561 |
| | 5.2 | % | $ | 717 |
| | 3.1 | % | | $ | 477 |
| | 4.3 | % |
Greater-than-60 days | 291 |
| | 1.5 | % | | 204 |
| | 1.9 | % | 336 |
| | 1.4 | % | | 169 |
| | 1.5 | % |
Total finance receivables more than 30 days delinquent | 1,030 |
| | 5.3 | % | | 765 |
| | 7.1 | % | 1,053 |
| | 4.5 | % | | 646 |
| | 5.8 | % |
In repossession | 45 |
| | 0.3 | % | | 38 |
| | 0.3 | % | 38 |
| | 0.1 | % | | 32 |
| | 0.3 | % |
Total finance receivables more than 30 days delinquent or in repossession | $ | 1,075 |
| | 5.6 | % | | $ | 803 |
| | 7.4 | % | $ | 1,091 |
| | 4.6 | % | | $ | 678 |
| | 6.1 | % |
Impaired Finance Receivables - Troubled Debt Restructurings
Consumer finance receivables in the post-acquisition portfolio that become classified as troubled debt restructurings (TDRs) because of payment deferral or other reasons 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.
The following table summarizes the outstanding recorded investment for consumer finance receivables that are considered to be TDRs and the related allowance (dollars in millions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Outstanding recorded investment | $ | 633 |
| | $ | 228 |
| $ | 864 |
| | $ | 767 |
|
Less: allowance for loan losses | (88 | ) | | (32 | ) | (104 | ) | | (103 | ) |
Outstanding recorded investment, net of allowance | $ | 545 |
| | $ | 196 |
| $ | 760 |
| | $ | 664 |
|
| | | | |
Unpaid principal balance | $ | 642 |
| | $ | 232 |
| $ | 880 |
| | $ | 779 |
|
Commercial Finance Receivables
GM Financial's commercial finance receivables consist of dealer financings.financings, primarily for inventory purchases. A proprietary model is used to assign a risk rating to each dealer. A credit review of each dealer is performed at least annually, and if necessary, the dealer's risk rating is adjusted on the basis of the review. At September 30, 2013March 31, 2014 and December 31, 20122013 the commercial finance receivables or loans on non-accrual status were insignificant.
The following table summarizes the credit risk profile by dealer grouping of the commercial finance receivables (dollars in millions):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
receivables on non-accrual status were insignificant. The following table summarizes the credit risk profile by dealer grouping of the commercial finance receivables (dollars in millions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Group I - Dealers with strong to superior financial metrics | $ | 394 |
| | $ | 99 |
| $ | 570 |
|
| $ | 549 |
|
Group II - Dealers with fair to favorable financial metrics | 1,088 |
| | 278 |
| 1,524 |
|
| 1,460 |
|
Group III - Dealers with marginal to weak financial metrics | 1,543 |
| | 171 |
| 2,210 |
|
| 1,982 |
|
Group IV - Dealers with poor financial metrics | 1,058 |
| | 12 |
| 1,517 |
|
| 1,462 |
|
Group V - Dealers warranting special mention due to potential weaknesses | 360 |
| | | 443 |
|
| 385 |
|
Group VI - Dealers with loans classified as substandard, doubtful or impaired | 168 |
| | | 219 |
| | 212 |
|
| $ | 4,611 |
| | $ | 560 |
| $ | 6,483 |
|
| $ | 6,050 |
|
The credit lines for Group VI dealers are suspended and no further funding is extended to these dealers.
Note 5.4. Inventories
The following table summarizes the components of Inventories (dollars in millions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Productive material, supplies and work in process | $ | 6,718 |
| | $ | 6,560 |
| $ | 6,442 |
| | $ | 5,872 |
|
Finished product, including service parts | 8,639 |
| | 8,154 |
| 8,395 |
| | 8,167 |
|
Total inventories | $ | 15,357 |
| | $ | 14,714 |
| $ | 14,837 |
| | $ | 14,039 |
|
Note 6.5. Equity in Net Assets of Nonconsolidated Affiliates
Nonconsolidated affiliates are entities in which an equity ownership interest is maintained and for which the equity method of accounting is used, due to the ability to exert significant influence over decisions relating to their operating and financial affairs.
Sales and income of our China JVsjoint ventures (China JVs) are not consolidated into our financial statements; rather, our proportionate share of the earnings of each joint venture is reflected as Equity income, net of tax.
income. There have been no significant ownership changes in our China JVs since December 31, 2013. The following table summarizes information regarding Equity income net of tax (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
China joint ventures (China JVs) | $ | 425 |
| | $ | 371 |
| | $ | 1,391 |
| | $ | 1,121 |
|
Others | 11 |
| | 47 |
| | 29 |
| | 20 |
|
Total equity income, net of tax | $ | 436 |
| | $ | 418 |
| | $ | 1,420 |
| | $ | 1,141 |
|
|
| | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
China JVs | $ | 595 |
| | $ | 548 |
|
Others | 10 |
| | 7 |
|
Total equity income | $ | 605 |
| | $ | 555 |
|
We did not receive anyreceived no dividends from nonconsolidated affiliates in the three months ended September 30, 2013 and 2012 andMarch 31, 2014. We received dividends from nonconsolidated affiliates of $1.6 billion and $1.4 billion68 million in the ninethree months ended March 31, September 30, 2013 and 2012. At September 30, 2013March 31, 2014 and December 31, 20122013 we had undistributed earnings including dividends declared but not received of $1.52.4 billion and $1.71.8 billion related to our nonconsolidated affiliates.
Investment in China JVs
There have been no significant ownership changes in our China JVs since December 31, 2012.
Shanghai General Motors Corporation Ltd. (SGM) is a joint venture established by Shanghai Automotive Industry Corporation (50%) and us (50%). In September 2012 we purchased a 1% interest in SGM for a total consideration of $119 million, increasing our ownership interest in SGM to 50%. The transaction was accounted for by applying the equity method of accounting. The consideration exceeded our proportionate share of the 1% interest in SGM net assets by $82 million, which consists of plant, property and equipment, intangible assets and goodwill of $8 million, $36 million and $38 million.
Transactions with Nonconsolidated Affiliates
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Nonconsolidated affiliates are involved in various aspects of the development, production and marketing of cars, trucks and automobile parts. We purchase component parts and vehicles from certain nonconsolidated affiliates for resale to dealers. We also sell component parts and vehicles to certain nonconsolidated affiliates. The following tables summarize the effects of transactions with nonconsolidated affiliates (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Results of operations | | | | | | | |
Automotive sales and revenue | $ | 599 |
| | $ | 568 |
| | $ | 1,900 |
| | $ | 1,873 |
|
Automotive purchases, net | $ | 239 |
| | $ | 98 |
| | $ | 614 |
| | $ | 407 |
|
Interest income and other non-operating income, net | $ | 9 |
| | $ | 11 |
| | $ | 16 |
| | $ | 174 |
|
|
| | | | | | | |
| September 30, 2013 | | December 31, 2012 |
Financial position | | | |
Accounts and notes receivable, net | $ | 520 |
| | $ | 1,668 |
|
Accounts payable | $ | 278 |
| | $ | 167 |
|
Deferred revenue and customer deposits | $ | 38 |
| | $ | 46 |
|
|
| | | | | | | |
| Nine Months Ended |
| September 30, 2013 | | September 30, 2012 |
Cash flows | | | |
Operating | $ | 3,015 |
| | $ | 3,030 |
|
Investing | $ | (12 | ) | | $ | (38 | ) |
Note 7.Goodwill and Intangible Assets, net
Goodwill
The following table summarizes the changes in the carrying amounts of Goodwill (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GMNA | | GME | | GMIO | | GMSA | | Total Automotive | | GM Financial | | Total |
Balance at January 1, 2013 | $ | — |
| | $ | — |
| | $ | 549 |
| | $ | 146 |
| | $ | 695 |
| | $ | 1,278 |
| | $ | 1,973 |
|
Impairment charges | — |
| | — |
| | (60 | ) | | — |
| | (60 | ) | | — |
| | (60 | ) |
Goodwill from business combinations(a) | — |
| | — |
| | — |
| | 10 |
| | 10 |
| | 56 |
| | 66 |
|
Effect of foreign currency and other | — |
| | — |
| | (14 | ) | | (12 | ) | | (26 | ) | | — |
| | (26 | ) |
Balance at September 30, 2013 | $ | — |
| | $ | — |
| | $ | 475 |
| | $ | 144 |
| | $ | 619 |
| | $ | 1,334 |
| | $ | 1,953 |
|
| | | | | | | | | | | | | |
Accumulated impairment charges at December 31, 2012 | $ | (26,399 | ) | | $ | (3,072 | ) | | $ | (426 | ) | | $ | — |
| | $ | (29,897 | ) | | $ | — |
| | $ | (29,897 | ) |
Accumulated impairment charges at September 30, 2013 | $ | (26,399 | ) | | $ | (3,072 | ) | | $ | (486 | ) | | $ | — |
| | $ | (29,957 | ) | | $ | — |
| | $ | (29,957 | ) |
________
| |
(a) | Refer to Note 2 for additional information concerning the acquisition of the Ally Financial international operations.
|
In the three months ended September 30, June 30 and March 31, 2013 and 2012 we performed event-driven goodwill impairment tests for our GM Korea Company (GM Korea) reporting unit as the fair value of GM Korea continues to be below its carrying amount due to ongoing economic weakness in certain markets to which GM Korea exports as well as higher raw material costs and unfavorable foreign currency exchange rates. The event-driven impairment tests resulted in Goodwill impairment charges of $60 million, $78 million and $27 million within our GMIO segment in the three months ended September 30, 2013, September
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
30, 2012 and March 31, 2012. Our GME reporting unit had a negative carrying amount and because of deterioration in the business outlook for GME that resulted in a reduction in the fair value of certain tax attributes and an increase in the fair value of estimated employee benefit obligations at March 31, 2012, we recorded a Goodwill impairment charge of $590 million, after which GME's Goodwill balance was $0.
When performing our goodwill impairment testing, the fair values of our reporting units were determined based on valuation techniques using the best available information, primarily discounted cash flow projections. We make significant assumptions and estimates, which utilized Level 3 measures, about the extent and timing of future cash flows, growth rates, market share and discount rates that represent unobservable inputs into our valuation methodologies. Our fair value estimates for event-driven impairment tests assume the achievement of the future financial results contemplated in our forecasted cash flows and there can be no assurance that we will realize that value.
|
| | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
Results of operations | | | |
Automotive sales and revenue | $ | 783 |
| | $ | 594 |
|
Automotive purchases, net | $ | 105 |
| | $ | 179 |
|
Cash flows | | | |
Operating | $ | 541 |
| | $ | 401 |
|
In December 2012 we entered into a product development agreement with Peugeot S.A. to collaborate on the development of certain vehicle platforms, components and modules. As a result of this agreement, in the three months ended March 31, 2013 we acquired the rights to certain intellectual property and technology for total consideration of $642 million. Consideration of $201 million was paid in cash in May 2013 with the remaining consideration to be paid in cash or in-kind exchanges by May 2018. The acquired rights were recorded at the present value of the total payments to be made as technology and intellectual property of $594 million and is being amortized over 10 years.
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Financial position | | | |
Accounts and notes receivable, net | $ | 850 |
| | $ | 756 |
|
Accounts payable | $ | 154 |
| | $ | 183 |
|
Note 8.6. Variable Interest Entities
Consolidated VIEs
Automotive
Variable interest entities (VIEs) that we do not control through a majority voting interest that are consolidated because we are the primary beneficiary include certain vehicle assembling, manufacturing and selling venture arrangements, the most significant of which is GM Egypt. At September 30, 2013Certain voting and December 31, 2012: (1) Total assetsother rights permit us to direct those activities of these VIEs were $492 million and $436 million, which were composed of Cash and cash equivalents, Accounts and notes receivable, net, Inventories and Property, net; and (2) Total liabilities were $309 million and $254 million, which were composed of Accounts payable (principally trade) and Accrued liabilities. In the three months ended September 30, 2013 and 2012 Total net sales and revenue recorded by these VIEs were $226 million and $284 million and Net income was $13 million and $25 million. In the nine months ended September 30, 2013 and 2012 Total net sales and revenue recorded by these VIEs were $720 million and $746 million and Net income was $51 million and $32 million. These amounts are stated prior to intercompany eliminations.GM Egypt that most significantly affect its economic performance. Liabilities recognized as a result of consolidating VIEs generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of the VIEs' operations and cannot be used to satisfy our obligations. The following tables summarize the carrying amounts of assets and liabilities and amounts recorded in earnings related to these VIEs stated prior to intercompany eliminations (dollars in millions):
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Total assets(a) | $ | 567 |
| | $ | 564 |
|
Total liabilities(b) | $ | 392 |
| | $ | 395 |
|
________
| |
(a) | Composed primarily of Cash and cash equivalents, Accounts and notes receivable, net, Inventories and Property, net. |
| |
(b) | Composed primarily of Accounts payable (principally trade) and Accrued liabilities. |
|
| | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
Total net sales and revenue | $ | 312 |
| | $ | 236 |
|
Net income | $ | 27 |
| | $ | 18 |
|
GM Korea Company (GM Korea) and HKJVGeneral Motors India Private Limited and Chevrolet Sales India Private Limited (collectively GM India) are non-wholly owned consolidated subsidiaries that we control through a majority voting interest. They are also VIEs because in the future they may require additional subordinated financial support. At September 30, 2013 and December 31, 2012 the combinedCombined creditors of GM Korea's and HKJV'sGM India's liabilities, which were composed of short-term and long-term debt, of $264217 million and $368242 million, which were composed of short-term debt, current derivative liabilities at March 31, 2014 and long-term debt,December 31, 2013, do not have recourse to our general credit.
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 the cash flows related to finance receivables and leasing related assets transferred by GM Financial to the VIEs (Securitized Assets). GM Financial holds variable interests in the VIEs that could potentially be significant to the VIEs. GM
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Financial determined that they are the primary beneficiary of the SPEs because: (1) 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 (2) 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 and liabilities of the VIEs are included in GM Financial's condensed consolidated balance sheets.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs prior to intercompany eliminations (dollars in millions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Restricted cash | $ | 1,350 |
| | $ | 744 |
| $ | 1,676 |
| | $ | 1,523 |
|
Securitized assets | $ | 21,761 |
| | $ | 10,442 |
| |
Securitized Assets | | $ | 24,651 |
| | $ | 23,584 |
|
Securitization notes payable and other credit facilities | $ | 18,147 |
| | $ | 9,378 |
| $ | 20,445 |
| | $ | 19,448 |
|
Restricted cash represents collections from the underlying Securitized Assets and certain reserve accounts held as credit enhancement for securitizations held by GM Financial for the benefit of the noteholders. Except for acquisition accounting adjustments, which are not recorded in SPE trusts, GM Financial recognizes finance charge income, leased vehicle income and other income on the Securitized Assets and interest expense on the secured debt issued by the SPEs. GM Financial also maintains an allowance for estimated probable credit losses on the Securitized Assets.securitized receivables. Cash pledged to support the secured borrowings is deposited to a restricted cash account and recorded as restricted cash, which is invested in highly liquid securities with original maturities of 90 days or less.
The assets of the VIEs and the restricted cash held by GM Financial serve as the sole source of repayment for the asset-backed securities issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or theirits 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 condensed consolidated financial statements, these subsidiaries are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors.
Nonconsolidated VIEs
Automotive
VIEs that are not consolidated include certain vehicle assembling, manufacturing and selling venture arrangements and other automotive related entities to which we provided financial support including HKJV prior to September 2012 and Ally Financial. We concluded these entities are VIEs because they do not have sufficient equity at risk or may require additional subordinated financial support. We currently lack the power or authority through voting or similar rights to direct thosethe activities of these entities that most significantly affect their economic performance. Our variable interests in these nonconsolidated VIEs include accounts and notes receivable, equity in net assets, guarantees and financial support, some of which were provided to certain current or previously divested suppliers in order to ensure that supply needs for production were not disrupted due to a supplier's liquidity concerns or possible shutdowns.
At September 30, 2013 The following table summarizes the carrying amounts of assets and December 31, 2012 our variable interests in these VIEs included: (1) Total assets of $174 million and $351 million, which were composed of Accounts and notes receivable, net, and Equity in net assets of nonconsolidated affiliates; (2) Total liabilities of $851 million and $1.9 billion, which were composed of Accounts payable (principally trade), Short-term debt and current portion of long-term debt, Accrued liabilities and Other liabilities; and (3) Total off-balance sheet arrangements of $126 million and $32 million, which were composed of loan commitments and other liquidity arrangements. The amount of total off-balance sheet arrangements at September 30, 2013 includes contractual commitments under an agreement with a supplier that became a VIErelated to these VIEs (dollars in January 2013. millions):
|
| | | | | | | |
| March 31, 2014 | | December 31, 2013 |
Total assets(a) | $ | 188 |
| | $ | 169 |
|
Total liabilities(b) | $ | 971 |
| | $ | 838 |
|
Off-balance sheet arrangements(c) | $ | 90 |
| | $ | 115 |
|
________
| |
(a) | Composed primarily of Equity in net assets of nonconsolidated affiliates. |
| |
(b) | Composed primarily of Accrued liabilities. |
| |
(c) | Composed of commitments and other liquidity arrangements. |
The maximum exposure to loss for total assets approximated the carrying amount at September 30, 2013March 31, 2014 and December 31, 20122013. Refer to Note 1410 for additional information on our maximum exposure to loss under agreements with Ally Financial.
Fair Value of Ally Financial Common StockNote 7.Short-Term and Long-Term Debt
At September 30, 2013 and December 31, 2012 we held a 9.9% common equity ownership in Ally Financial. Our entire equity ownership is held indirectly through an independent trust which has the sole authority to vote the shares and was required to dispose of all Ally Financial common stock by December 24, 2013. In October 2013 the Federal Reserve agreed to extend the date by which the shares must be divested by the trust from December 2013 to December 2015. We can cause the trustee to return any Ally Financial common stock to us to hold directly, so long as our directly held voting and total common equity interests remain below 10.0%.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
The following table summarizes the carrying amount and estimated fair value of Ally Financial common stock measured using Level 3 inputs (dollars in millions):
|
| | | | | | | |
| September 30, 2013 | | December 31, 2012 |
Carrying amount | $ | 397 |
| | $ | 399 |
|
Fair value | $ | 866 |
| | $ | 1,268 |
|
We estimated the fair value of Ally Financial common stock using a market approach that applies the average price to tangible book value multiples of comparable companies to the consolidated Ally Financial tangible book value. The significant inputs used in our fair value analyses included Ally Financial's financial statements, financial statements and price to tangible book value multiples of comparable companies in the banking and finance industry, and the effects of certain Ally Financial shareholder rights.
Note 9.Depreciation, Amortization and Impairment Charges
The following table summarizes depreciation, amortization and impairment charges related to Property, net, Equipment on operating leases, net and GM Financial equipment on operating leases, net (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Depreciation and amortization of long-lived assets | $ | 1,049 |
| | $ | 994 |
| | $ | 2,919 |
| | $ | 2,811 |
|
Impairment charges of long-lived assets | $ | 1 |
| | $ | 7 |
| | $ | 37 |
| | $ | 61 |
|
Depreciation of equipment on operating leases | $ | 201 |
| | $ | 124 |
| | $ | 451 |
| | $ | 321 |
|
Impairment charges of equipment on operating leases | $ | 25 |
| | $ | 27 |
| | $ | 134 |
| | $ | 157 |
|
The following table summarizes equipment on operating leases to daily rental car companies measured at fair value utilizing Level 3 inputs on a nonrecurring basis (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Fair value measures | $ | 439 |
| | $ | 720 |
| | $ | 1,233 |
| | $ | 2,266 |
|
Impairment of vehicles leased to daily rental car companies with guaranteed repurchase obligations is determined to exist if the expected cash flows are lower than the carrying amount of the vehicle. We have multiple, distinct portfolios of vehicles leased to rental car companies and may have multiple impairments within a period. Expected cash flows include all estimated net revenue and costs associated with the sale to daily rental car companies through disposal at auction. The fair value measurements are determined, reviewed and approved on a monthly basis by personnel with appropriate knowledge of transactions with daily rental car companies and auction transactions. The carrying amount of the related assets at September 30, 2013 and 2012 may no longer equal the fair value as the fair value presented is as of the date the impairment charge was recorded during the period presented.
The following table summarizes the significant quantitative unobservable inputs and assumptions used in the fair value measurement of Equipment on operating leases, net (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | |
| | | | | Three Months Ended | | Nine Months Ended |
| Valuation Technique | | Significant Unobservable Input | | September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Impaired equipment on operating leases | Cash flow | | Estimated net revenue | | $ | 451 |
| | $ | 735 |
| | $ | 1,263 |
| | $ | 2,320 |
|
| | | Estimated costs | | $ | 476 |
| | $ | 762 |
| | $ | 1,397 |
| | $ | 2,477 |
|
Note 10.Debt
Automotive
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
The following table summarizes the carrying amount and fair value of debt (dollars in millions):
| |
| September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Carrying amount | $ | 8,448 |
| | $ | 5,172 |
| $ | 7,209 |
| | $ | 7,137 |
|
Fair value(a) | $ | 8,028 |
| | $ | 5,298 |
| $ | 7,001 |
| | $ | 6,837 |
|
________
| |
(a) | The fair value of debt included $6.8 billion and $4.1 billion measured utilizing Level 2 inputs at September 30, 2013 and December 31, 2012. The fair value of debt included $1.2 billion measured utilizing Level 3 inputs at September 30, 2013 and December 31, 2012.
|
The fair value of debt was measured utilizing Level 2 fair value measurements utilizeinputs at March 31, 2014 and December 31, 2013 consisting of quoted market prices and if unavailable, a discounted cash flow model. The valuation is reviewed internally by personnel with appropriate expertise in valuation methodologies. This model utilizes observable inputs such as contractual repayment terms and benchmark yield curves, plus a spread based on our senior unsecured notes that is intended to represent our nonperformance risk for secured or unsecured obligations. We estimate our nonperformance risk using our corporate credit rating, the ratings on our senior unsecured notes and on our secured revolver, yields on traded bonds of companies with comparable credit ratings and risk profiles.risk. We acquire the benchmark yield curves and nonperformance risk spreadyields on unsecured notes from independent sources that are widely used in the financial industry. In certain circumstances we adjust the valuation of debt for additional nonperformance risk or potential prepayment probability scenarios. We may use a probability weighting of prepayment scenarios when the stated rate exceeds market rates and the instrument contains prepayment features. The prepayment scenarios are adjusted to reflect the views of market participants. The fair value measurements subject to additional adjustments for nonperformance risk or prepayment have been categorized within Level 3.
Senior Unsecured Notes
In September 2013 we issued $4.5$4.5 billion in aggregate principal amount of senior unsecured notes comprising $1.5 billion of 3.5% notes due in 2018, $1.5 billion of 4.875% notes due in 2023 and $1.5 billion of 6.25% notes due in 2043.notes. These notes contain terms and covenants customary of these types of securities including limitations on the amount of thecertain secured debt we may issue.
In connection with the issuance of these notes, we entered into a registration rights agreement that requires us to file a registration statement with the SEC for an exchange offer with respect to the senior notes. If the registration statement has not been declared effective by the SEC within 365 days after the closing date of the debt issuance, if we fail to consummate the exchange offer within 30 business days after such target effective date or if the registration statement ceases to remain effective, we will be required to pay additional interest of 0.25% per annum for the first 90 day period following such event and an additional 0.25% per annum for each subsequent 90 day period prior to the consummation of the exchange offer up to a maximum additional interest rate of 0.5% per annum.
Wholesale FinancingTechnical Defaults and Covenant Violations
Wholesale financing represents arrangements, primarilySeveral of our loan facilities require compliance with Ally Financial, where cash is receivedcertain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Failure to meet certain of these requirements may result in advancea covenant violation or an event of default depending on the terms of the final saleagreement. An event of vehicles, partsdefault may allow lenders to declare amounts outstanding under these agreements immediately due and accessoriespayable, to enforce their interests against collateral pledged under these agreements or restrict our dealers or ultimate customer. These obligations typically settle through the saleability to obtain additional borrowings. A foreign subsidiary was not in compliance with certain financial covenants under its $75 million term loan facility. We are evaluating alternatives to cure this financial covenant issue and delivery of our products and generally do not require cash outflows to settle. Following the acquisition of Ally Financial's international operations in April 2013, most of the wholesale financing balance classified as debt became intercompany debt and was eliminated in consolidation, resulting in a decrease to our automotive debt balance of $682 million.
Gains and Losses on Extinguishment of Debt
In October 2013 we made a payment of $1.2 billion to prepay the Canadian Health Care Trust notes which had a carrying value of $1.2 billion and were recordedincluded this liability in Short-term debt and current portion of long-term debt at September 30,March 31, 2014 and December 31, 2013. As a result we recorded a gain on extinguishment of debt of approximately $25 million in October 2013.
In the nine months ended September 30, 2013 we prepaid and retired debt obligations with a total carrying amount of $532 million and recorded a net loss on extinguishment of debt of $238 million which primarily represented the unamortized debt discount on GM Korea's mandatorily redeemable preferred stock of $240 million.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
In March 2012 we prepaid and retired a debt obligation of $39 million. We recorded a loss on extinguishment of debt of $18 million, which primarily represented the unamortized debt discount, in the nine months ended September 30, 2012.
Automotive Financing - GM Financial
The following table summarizes the carrying amount and fair value of debt (dollars in millions):
| | | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
| | Carrying Amount | | Fair Value(a) | | Carrying Amount | | Fair Value(a) | Carrying Amount | | Fair Value(a) | | Carrying Amount | | Fair Value(a) |
Secured | | | | | | | | | | | | | | | |
Revolving credit facilities | | $ | 6,090 |
| | $ | 6,109 |
| | $ | 354 |
| | $ | 354 |
| $ | 8,983 |
| | $ | 8,961 |
| | $ | 9,000 |
| | $ | 8,995 |
|
Securitization notes payable(b) | | 12,357 |
| | 12,446 |
| | 9,024 |
| | 9,171 |
| 14,403 |
| | 14,521 |
| | 13,073 |
| | 13,175 |
|
Total secured | | 18,447 |
| | 18,555 |
| | 9,378 |
| | 9,525 |
| 23,386 |
| | 23,482 |
| | 22,073 |
| | 22,170 |
|
Unsecured | | | | | | | | | | | | | | | |
Senior notes | | 4,000 |
| | 4,153 |
| | 4,000 |
| | 4,106 |
|
Bank lines and other unsecured debt | | 1,228 |
| | 1,228 |
| |
|
| |
|
| 3,172 |
| | 3,164 |
| | 2,973 |
| | 2,972 |
|
Senior notes | | 4,000 |
| | 4,011 |
| | 1,500 |
| | 1,620 |
| |
Total unsecured | | 5,228 |
| | 5,239 |
| | 1,500 |
| | 1,620 |
| 7,172 |
| | 7,317 |
| | 6,973 |
| | 7,078 |
|
Total GM Financial debt | | $ | 23,675 |
| | $ | 23,794 |
| | $ | 10,878 |
| | $ | 11,145 |
| $ | 30,558 |
| | $ | 30,799 |
| | $ | 29,046 |
| | $ | 29,248 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
________
| |
(a) | The fair value of debt included $21.4$25.2 billion and $11.1$23.0 billion measured utilizing Level 2 inputs at September 30, 2013 and December 31, 2012$5.6 billion and $2.4$6.2 billion measured utilizing Level 3 inputs at September 30,March 31, 2014 and December 31, 2013. For revolving credit facilities with variable interest rates and maturities of one year or less, the carrying amount is considered to be a reasonable estimate of fair value. The fair value of other secured debt and the unsecured debt is based on quoted market prices, when available. If quoted market prices are not available, the market value is estimated by discounting future net cash flows expected to be paid using current risk-adjusted rates. |
| |
(b) | Includes a private securitizationsecuritizations that GM Financial used observable and unobservable inputs to estimate fair value. Unobservable inputs are related to the structuring of the debt into various classes, which is based on public securitizations issued during the same time frame. Observable inputs are used by obtaining active prices based on the securitization debt issued during the same time frame. These observable inputs are then used to create expected market prices (unobservable inputs), which are then applied to the debt classes in order to estimate fair value which would approximate market value. |
The following table summarizes the expected scheduled principal and interest payments under our contractual debt obligations at September 30, 2013 (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | Thereafter | | Total |
Secured Debt | | $ | 3,672 |
| | $ | 6,334 |
| | $ | 4,239 |
| | $ | 2,686 |
| | $ | 1,217 |
| | $ | 299 |
| | $ | 18,447 |
|
Unsecured Debt | | 724 |
| | 306 |
| | 166 |
| | 1,032 |
| | 1,000 |
| | 2,000 |
| | 5,228 |
|
Interest | | 152 |
| | 451 |
| | 308 |
| | 211 |
| | 143 |
| | 196 |
| | 1,461 |
|
| | $ | 4,548 |
| | $ | 7,091 |
| | $ | 4,713 |
| | $ | 3,929 |
| | $ | 2,360 |
| | $ | 2,495 |
| | $ | 25,136 |
|
Secured Debt
The revolving credit facilities have revolving periods ranging from one to threetwo years. At the end of the revolving period, if the facilities are not renewed, the debt will amortize over periods ranging up to sixseven years. Most of the secured debt was issued by VIEs and it is repayable only from proceeds related to the underlying pledged finance receivables and leases. Refer to Note 86 for additional information relating to GM Financial's involvement with VIEs. Weighted-average interest rates are both fixed and variable, ranging from 0.9%0.7% to 7.7%12.6% at September 30, 2013.March 31, 2014.
Securitization notes payable represents debt issued by GM Financial through securitization transactions. In the ninethree months ended September 30, 2013March 31, 2014 GM Financial entered into two revolving credit facilities secured by commercial finance receivables for a commitment of $1.3 billion in aggregate. The facilities each have a one-year revolving period and have interest rates of 0.7% and 1.3% as of September 30, 2013. In the nine months ended September 30, 2013 GM Financial also issued securitization notes payable of $4.7$2.8 billion, with a weighted-average interest rate of 1.6%1.3% maturing on various dates through 2021.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
At September 30, 2013 revolving credit facilities of $4.8 billion and securitization notes payable of $1.9 billion resulted from the acquisition of Ally Financial international operations.2022.
Unsecured Debt
Senior notes outstanding at March 31, 2014 are due beginning in 2016 through 2023 and have interest rates that range from 2.75% to 6.75%.
The maturity dates of bank lines which were assumed in the acquisition of Ally Financial's international operations, range up to threefour years. If not renewed, any balance outstanding under these bank lines is either immediately due in full or else will amortize over a defined period. Interest rates on unsecured bank lines ranged from 0.5%1.0% to 9.0%13.9% at September 30, 2013.
In May 2013 GM Financial issued and sold $2.5 billion in aggregate principal amount of senior notes due in 2016 through 2023 with interest rates that range from 2.75% to 4.25%. Senior notes outstanding at September 30, 2013 are due beginning in 2016 through 2023 and have interest rates that range from 2.75% to 6.75%.March 31, 2014.
Note 11.8. Product Warranty Liability
and Related Liabilities
The following table summarizes activity for policy, product warranty, recall campaigns and recall campaign liabilitiescourtesy transportation (dollars in millions):
| | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Balance at beginning of period | $ | 7,204 |
| | $ | 6,600 |
| $ | 7,601 |
| | $ | 7,633 |
|
Warranties issued and assumed in period | 2,409 |
| | 2,594 |
| |
Warranties issued and assumed in period - recall campaigns and courtesy transportation | | 1,386 |
| | 154 |
|
Warranties issued and assumed in period - policy and warranty | | 634 |
| | 705 |
|
Payments | (2,304 | ) | | (2,583 | ) | (769 | ) | | (824 | ) |
Adjustments to pre-existing warranties | 75 |
| | 510 |
| (3 | ) | | (32 | ) |
Effect of foreign currency and other | (186 | ) | | 47 |
| (11 | ) | | (65 | ) |
Balance at end of period | $ | 7,198 |
| | $ | 7,168 |
| $ | 8,838 |
| | $ | 7,571 |
|
In the three months ended March 31, 2014 we recorded charges of approximately $1.3 billion comprising: (1) approximately $680 million for 2.6 million vehicles to repair ignition switches that could result in a loss of electrical power under certain circumstances that may prevent front airbags from deploying in the event of a crash; to fix ignition lock cylinders that could allow removal of the ignition key while the engine is running, leading to possible rollaway or crash; and to provide courtesy transportation to owners of affected vehicles; (2) approximately $340 million for 1.9 million vehicles to replace either the power steering motor, the steering column, the power steering motor control unit or a combination of the steering column and the power steering motor control unit as the electric power steering could fail under certain circumstances; (3) approximately $185 million for 1.3 million
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
vehicles prone to non-deployment of the side impact restraints if vehicles are not serviced when the Service Air Bag warning light is illuminated; and (4) approximately $70 million for 1.2 million vehicles for other matters.
Note 12.9. Pensions and Other Postretirement Benefits
We continue to pursue various options to fund and derisk our pension plans, including continued changes to the pension asset portfolio mix to reduce funded status volatility.
Net Periodic Pension and OPEB (Income) Expense
The following tables summarizetable summarizes the components of net periodic pension and other postretirement benefits (OPEB) (income) expense (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2013 | | Three Months Ended September 30, 2012 |
| Pension Benefits | | Other Benefits | | Pension Benefits | | Other Benefits |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
Service cost | $ | 98 |
| | $ | 116 |
| | $ | 6 |
| | $ | 3 |
| | $ | 164 |
| | $ | 104 |
| | $ | 5 |
| | $ | 5 |
|
Interest cost | 710 |
| | 251 |
| | 54 |
| | 15 |
| | 1,031 |
| | 277 |
| | 59 |
| | 15 |
|
Expected return on plan assets | (891 | ) | | (204 | ) | | — |
| | — |
| | (1,281 | ) | | (218 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | (1 | ) | | 4 |
| | (28 | ) | | (4 | ) | | — |
| | — |
| | (29 | ) | | (4 | ) |
Recognized net actuarial loss | 2 |
| | 56 |
| | 21 |
| | 2 |
| | — |
| | 9 |
| | 13 |
| | 2 |
|
Curtailments, settlements and other (gains) losses | (3 | ) | | (4 | ) | | (83 | ) | | — |
| | 54 |
| | 8 |
| | — |
| | 11 |
|
Net periodic pension and OPEB (income) expense | $ | (85 | ) | | $ | 219 |
| | $ | (30 | ) | | $ | 16 |
| | $ | (32 | ) | | $ | 180 |
| | $ | 48 |
| | $ | 29 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2013 | | Nine Months Ended September 30, 2012 |
| Pension Benefits | | Other Benefits | | Pension Benefits | | Other Benefits |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
Service cost | $ | 296 |
| | $ | 309 |
| | $ | 19 |
| | $ | 10 |
| | $ | 485 |
| | $ | 302 |
| | $ | 17 |
| | $ | 13 |
|
Interest cost | 2,128 |
| | 757 |
| | 164 |
| | 43 |
| | 3,191 |
| | 830 |
| | 176 |
| | 47 |
|
Expected return on plan assets | (2,672 | ) | | (618 | ) | | — |
| | — |
| | (3,946 | ) | | (653 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | (3 | ) | | 14 |
| | (87 | ) | | (11 | ) | | (1 | ) | | — |
| | (87 | ) | | (9 | ) |
Recognized net actuarial loss | 5 |
| | 156 |
| | 67 |
| | 5 |
| | 1 |
| | 26 |
| | 39 |
| | 5 |
|
Curtailments, settlements and other (gains) losses | 2 |
| | (1 | ) | | (83 | ) | | — |
| | 31 |
| | 50 |
| | — |
| | 11 |
|
Net periodic pension and OPEB (income) expense | $ | (244 | ) | | $ | 617 |
| | $ | 80 |
| | $ | 47 |
| | $ | (239 | ) | | $ | 555 |
| | $ | 145 |
| | $ | 67 |
|
Significant Plan Amendments, Benefit Modifications and Related Events
U.S. Salaried Defined Benefit Life Insurance Plan
In September 2013 we amended the U.S. salaried life insurance plan effective January 1, 2014 to eliminate benefits for retirees and eligible employees retiring on or after August 1, 2009. The remeasurement, settlement and curtailment resulted in a decrease in the OPEB liability of $319 million, a decrease in the net pre-tax actuarial loss component of Accumulated other comprehensive loss of $236 million and a pre-tax gain of $83 million.
U.S. Salaried Defined Benefit Pension Plan
In January 2012 we amended the U.S. salaried pension plan to cease the accrual of additional benefits effective September 30, 2012. This amendment resulted in a curtailment which decreased the pension liability and decreased the net pre-tax actuarial loss component of Accumulated other comprehensive loss by $309 million in the three months ended March 31, 2012. Active plan participants started receiving additional contributions in the defined contribution plan in October 2012.
In August 2012 the salaried pension plan was amended to divide the plan to create a new legally separate defined benefit plan primarily for active and terminated vested participants. The underlying benefits offered to the plans' participants were unchanged, however the plan split resulted in a remeasurement. The remeasurement on August 1, 2012 increased the pension liability and the net pre-tax actuarial loss component of Accumulated other comprehensive loss by $654 million, due primarily to a decrease in the discount rate from 4.21% to 3.37% on a weighted-average basis, partially offset by actual asset returns in excess of expected amounts.
In August 2012 lump-sum pension distributions were made to retired salaried plan participants who elected to receive a lump-sum payment instead of their annuity. These distributions resulted in a partial plan settlement necessitating a plan remeasurement on August 31, 2012. The settlement resulted in a pre-tax loss of $54 million. The effect on our financial condition was insignificant.
Canadian Salaried Defined Benefit Plans
In June 2012 we amended the Canadian salaried pension plan to cease the accrual of additional benefits effective December 31, 2012 and provide active employees a lump-sum distribution option at retirement. The remeasurement, amendments and offsetting curtailment increased the pension liability by $84 million. Active plan participants started receiving additional contributions in the defined contribution plan starting in January 2013.
We also amended the Canadian salaried retiree healthcare plan to eliminate post-65 healthcare benefits for employees retiring on or after July 1, 2014. In conjunction with this change we amended the plan to offer either a monthly monetary payment or an annual lump-sum cash payment to a defined contribution plan for health care in lieu of the benefit coverage provisions formerly provided under the healthcare plan. These amendments decreased the OPEB liability by $28 million.
Remeasurements
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
In the three months ended March 31, 2012 certain pension plans in GME were remeasured as part of our goodwill impairment testing, resulting in an increase of $150 million in the pension liability and a pre-tax increase in the net actuarial loss component of Accumulated other comprehensive loss. Refer to Note 7 for additional information on our goodwill impairment.
Note 13.Derivative Financial Instruments and Risk Management
Automotive
Derivatives and Hedge Accounting
In accordance with our risk management policy we enter into a variety of foreign currency exchange rate and commodity derivative contracts to manage our exposure to fluctuations in certain foreign currency exchange rates and commodity prices. At September 30, 2013 and December 31, 2012 our derivative instruments consisted primarily of forward contracts and options, none of which were designated in hedging relationships.
We manage our counterparty credit risk by monitoring the credit ratings of our counterparties and by requiring them to post collateral in certain circumstances. We are also required to post collateral to our counterparties. We are not subject to any covenants requiring the maintenance of certain credit rating levels or credit risk ratios that would require the posting of collateral in the event that such covenants are violated. Master netting agreements are entered into with counterparties that include a provision to allow the set-off of certain amounts in order to manage counterparty credit risk.
At September 30, 2013 and December 31, 2012no collateral was provided to counterparties; however, we have received collateral from counterparties related to certain derivative instruments. The potential effect from offsetting those derivative assets and liabilities that are subject to master netting agreements was insignificant.
Fair Value of Derivatives
Our policy is to present derivative assets and liabilities on a gross basis. The following table summarizes fair value measurements of our derivative instruments measured on a recurring basis (dollars in millions): |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2014 | | Three Months Ended March 31, 2013 |
| Pension Benefits | | Other Benefits | | Pension Benefits | | Other Benefits |
| U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans | | U.S. Plans | | Non-U.S. Plans |
Service cost | $ | 95 |
| | $ | 93 |
| | $ | 3 |
| | $ | 2 |
| | $ | 99 |
| | $ | 99 |
| | $ | 7 |
| | $ | 3 |
|
Interest cost | 765 |
| | 262 |
| | 55 |
| | 13 |
| | 709 |
| | 254 |
| | 55 |
| | 14 |
|
Expected return on plan assets | (978 | ) | | (219 | ) | | — |
| | — |
| | (891 | ) | | (209 | ) | | — |
| | — |
|
Amortization of prior service cost (credit) | (1 | ) | | 5 |
| | (1 | ) | | (3 | ) | | (1 | ) | | 5 |
| | (29 | ) | | (4 | ) |
Amortization of net actuarial (gains) losses | (23 | ) | | 39 |
| | 3 |
| | (1 | ) | | 2 |
| | 49 |
| | 23 |
| | 2 |
|
Curtailments, settlements and other (gains) losses | (2 | ) | | 2 |
| | — |
| | — |
| | 42 |
| | 4 |
| | — |
| | — |
|
Net periodic pension and OPEB (income) expense | $ | (144 | ) | | $ | 182 |
| | $ | 60 |
| | $ | 11 |
| | $ | (40 | ) | | $ | 202 |
| | $ | 56 |
| | $ | 15 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Derivative Assets | | Derivative Liabilities |
| Notional | | Current(a) | | Non-Current(b) | | Total | | Level 2 | | Level 3 | | Current(c) | | Non-Current(d) | | Total | | Level 2 |
September 30, 2013 | $ | 9,920 |
| | $ | 60 |
| | $ | 89 |
| | $ | 149 |
| | $ | 44 |
| | $ | 105 |
| | $ | 5 |
| | $ | 2 |
| | $ | 7 |
| | $ | 7 |
|
December 31, 2012 | $ | 10,751 |
| | $ | 144 |
| | $ | 22 |
| | $ | 166 |
| | $ | 129 |
| | $ | 37 |
| | $ | 26 |
| | $ | 1 |
| | $ | 27 |
| | $ | 27 |
|
________
|
| | | | | | | | | | | | | | | |
(a) | Recorded in Other current assets. | | | | | | | | | | | | | | |
| |
(b) | Recorded in Other assets. |
| |
(c) | Recorded in Accrued liabilities. |
| |
(d) | Recorded in Other liabilities and deferred income taxes. |
We measure the fair value of our portfolio of foreign currency, commodity and embedded derivatives using industry accepted models. The significant Level 2 inputs used in the valuation of our derivatives include spot rates, forward rates, volatility and interest rates. These inputs are obtained from pricing services, broker quotes and other sources.
We are party to agreements in which pricing is affected by movements in commodity prices or currency exchange rates. Therefore we determined these agreements to be derivatives or have embedded derivatives for accounting purposes. The valuations of these derivatives use Level 3 inputs. Unobservable inputs include volume commitments, vehicle mix and forward commodity prices.
The valuations are performed, reviewed and approved by personnel with appropriate expertise in valuation methodologies. For certain derivatives we compare our own valuations with valuations prepared by independent outside parties.
We had derivative instruments measured using Level 3 inputs with balances of $105 million and $38 million at September 30, 2013 and 2012, which included gains of $40 million and $74 million in the three and nine months ended September 30, 2013, and losses of $13 million and $102 million in the three and nine months ended September 30, 2012.
Gains (Losses) on Derivatives
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
The following table summarizes derivative gains (losses) recorded in Interest income and other non-operating income (loss), net (dollars in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Total gains (losses) recorded in earnings | $ | (12 | ) | | $ | 4 |
| | $ | 2 |
| | $ | (102 | ) |
Automotive Financing - GM Financial
GM Financial is exposed to market risks arising from adverse changes in interest rates due to floating interest rate exposure on its credit facilities and on certain securitization notes payable and manages this exposure with interest rate swaps and caps. GM Financial had interest rate derivatives in asset positions with notional amounts of $4.4 billion and $775 million at September 30, 2013 and December 31, 2012. GM Financial had interest rate derivatives in liability positions with notional amounts of $5.5 billion and $775 million at September 30, 2013 and December 31, 2012. The fair value of these derivative financial instruments was insignificant.
In connection with the closing of the acquisition of the Ally Financial international operations, GM Financial provided loans denominated in foreign currencies (Euro, British Pound and Swedish Krona) to an acquired entity for the equivalent of $1.5 billion. In March 2013 GM Financial entered into foreign currency exchange swaps to hedge against any valuation change in the loan due to changes in foreign currency exchange rates. At September 30, 2013 the foreign currency exchange swaps in asset and liability positions had notional amounts of $1.5 billion. In addition, in connection with the acquisition, GM Financial assumed a cross-currency swap related to a European securitization, which had a notional amount of $534 million at September 30, 2013. The fair value of the foreign currency exchange swaps was insignificant. Refer to Note 2 for additional information on the acquisition.
Note 14.10. Commitments and Contingencies
The following tables summarize information related to Commitments and contingencies (dollars in millions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
| Liability Recorded | | Maximum Liability(a) | | Liability Recorded | | Maximum Liability(a) | Liability Recorded | | Maximum Liability(a) | | Liability Recorded | | Maximum Liability(a) |
Guarantees | | | | | | | | | | | | | | |
Third party commercial loans and other obligations(b) | $ | 87 |
| | $ | 14,858 |
| | $ | 168 |
| | $ | 22,496 |
| $ | 21 |
| | $ | 9,395 |
| | $ | 51 |
| | $ | 15,616 |
|
Other product-related claims | $ | 53 |
| | $ | 1,160 |
| | $ | 51 |
| | $ | 1,040 |
| $ | 57 |
| | $ | 1,348 |
| | $ | 54 |
| | $ | 1,317 |
|
________
| |
(a) | Calculated as future undiscounted payments. |
| |
(b) | Includes liabilities recorded of $106 million and $1510 million and maximum liabilities of $14.69.2 billion and $22.115.3 billion related to Ally Financial repurchase obligations at September 30, 2013March 31, 2014 and December 31, 20122013. |
| | | Liability Recorded | Liability Recorded |
| September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Other litigation-related liability and tax administrative matters | $ | 1,861 |
| | $ | 1,728 |
| $ | 1,290 |
| | $ | 1,227 |
|
Product liability | $ | 649 |
| | $ | 601 |
| $ | 702 |
| | $ | 690 |
|
Environmental liability | $ | 155 |
| | $ | 166 |
| $ | 151 |
| | $ | 154 |
|
Guarantees
We provide payment guarantees on commercial loans outstanding with third parties such as dealers or rental car companies. These guarantees either expire in 2018 or are ongoing. We determined the fair value ascribed to the guarantees at inception and subsequent to inception to be insignificant based on the credit worthiness of the third parties. In March 2014 a new agreement was signed with Ally that removed the repurchase obligation for vehicles invoiced after December 31, 2013. The existing repurchase obligation for vehicles invoiced prior to December 31, 2013 is maintained until December 31, 2014 at which time repurchase obligations will expire for all vehicles.
We have agreements with third parties that guarantee the fulfillment of certain suppliers' commitments and other obligations. These guarantees expire in 20132014 through 2016 or are ongoing, or upon the occurrence of specific events.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
In some instances certain assets of the party whose debt or performance we have guaranteed may offset, to some degree, the cost of the guarantee. The offset of certain of our payables to guaranteed parties may also offset certain guarantees, if triggered. 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.
In connection with certain divestitures of assets or operating businesses, we have entered into agreements indemnifying certain buyers and other parties with respect to environmental conditions and other closure costs pertaining to real property we owned. 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. ImmaterialInsignificant 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.
In addition to the guarantees and indemnifying agreements previously discussed, we indemnify dealers for certain product liability related claims as subsequently discussed.
With respect to other product-related claims involving products manufactured by certain joint ventures, we believe that costs incurred are adequately covered by recorded accruals. These guarantees terminate in years ranging from 2020 to 2026.2027.
Other Litigation-Related Liability and Tax Administrative Matters
Various legal actions, governmental investigations, claims and proceedings are pending against us including matters arising out of alleged product defects; employment-related matters; governmental regulations relating to safety, emissions and fuel economy; product warranties; financial services; dealer, supplier and other contractual relationships; tax-related matters not recorded pursuant to Accounting Standards Codification (ASC) 740, "Income Taxes" (indirect tax-related matters); and environmental matters.
With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which we believe that losses are probable and can be reasonably estimated, the majority of which are associated with non-U.S. labor-relatedindirect tax-related matters as well as indirectnon-U.S. labor-related matters. Indirect tax-related matters.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. Indirect tax-related matters are being litigated globally pertaining to value added taxes, customs, duties, sales taxes, property taxes and other non-income tax related tax exposures. Certain South American administrative proceedings are indirect tax-related and may require that we deposit funds in escrow. Escrow deposits may range from $500 million to $600800 million. 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 September 30, 2013.March 31, 2014. We believe that appropriate accruals have been established for such matters based on information currently available. Reserves for litigation losses are recorded in Accrued liabilities and Other liabilities and deferred income taxes. Litigation is inherently unpredictable however; and unfavorable resolutions could occur. Accordingly it is possible that an adverse outcome from such proceedings could exceed the amounts accrued in an amount that could be material to our financial condition, results of operations and cash flows in any particular reporting period.
Proceedings Related to Ignition Switch Recall
In the three months ended March 31, 2014 we announced a recall to repair ignition switches that under certain circumstances could unintentionally move from the “run” position to the “accessory” or “off” position with a corresponding loss of power, which in turn may prevent front airbags from deploying in the event of a crash. The recall includes approximately 2.6 million Chevrolet Cobalt, HHR, Pontiac G5, Pursuit, Solstice, and Saturn ION and Sky vehicles.
Through April 22, 2014 we are aware of 55 putative class actions have been filed against GM in various U.S. District Courts since the recall announcement alleging that consumers have been economically harmed by the recall and/or the underlying vehicle condition. In the aggregate, these cases seek recovery for compensatory damages, including for alleged diminution in value of the vehicles, punitive damages and injunctive and other relief. Additionally, through April 22, 2014, five putative class actions have been filed in various Provincial Courts in Canada seeking similar relief.
On March 21, 2014 a putative shareholder class action was filed in the United States District Court for the Eastern District of Michigan against GM and various current and former officers of GM (Piov. General Motors Company et al) on behalf of purchasers of GM securities from November 17, 2010 through March 10, 2014. The complaint alleges that defendants made material
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
misstatements and omissions relating to problems with the ignition switch in SEC filings. The plaintiff seeks unspecified monetary damages, interest and attorneys’ fees and costs.
On March 28, 2014 a shareholder derivative action was filed in the United States District Court for the Eastern District of Michigan against certain current and former GM directors (Hockstein v. Barra et al). The complaint alleges breach of fiduciary duty by GM’s directors in connection with monitoring, remediation and disclosure of the issues underlying the ignition switch recall. On April 9, 2014 a similar shareholder derivative action was filed in the Circuit Court for Wayne County Michigan against the same defendants (Bekkerman v. Barra et al). This complaint also alleges breach of fiduciary duty by GM’s directors in connection with monitoring, remediation and disclosure of the issues underlying the ignition switch recall. The plaintiffs in both these cases seek to recover on behalf of GM amounts spent by GM as a result of the defendants’ alleged failure to timely identify and correct the ignition switch defect and of the alleged failure to make accurate and timely public disclosure. On April 16, 2014 a third shareholder derivative action was filed in the Circuit Court for Wayne County Michigan against current and certain former directors (Wietschiner et al v. Barra et al) alleging breach of fiduciary duty and waste of corporate assets by reason of failure to exercise oversight with respect to vehicle safety generally and in connection with the ignition switch recall specifically. Plaintiffs seek damages caused by the alleged breaches and an order compelling implementation of various policies and corporate governance practices. On April 23, 2014 a similar shareholder derivative action was filed in the United States District Court for the Eastern District of Michigan against certain current and former GM directors (The Police Retirement System of St. Louis v. Barra et al). This complaint also alleges breach of fiduciary duty and waste of corporate assets by reason of failure to exercise oversight with respect to vehicle safety generally and in connection with the ignition switch recall specifically. The plaintiffs in this case also seek damages caused by the alleged breaches and an order compelling implementation of various policies and corporate governance practices.
On or about April 11, 2014 an action was initiated in the United States District Court for the Northern District of Georgia alleging a motor vehicle accident on July 22, 2009 involving a 2003 Saturn ION which resulted in catastrophic injuries to the driver (Alexina H. Van Pelt et al v. General Motors LLC). According to the complaint, the subject accident resulted from the failure of the vehicle’s ignition switch due to the condition which prompted the ignition switch recall. Plaintiffs further allege that GM intentionally and fraudulently concealed facts relating to the ignition switch from plaintiff, the public and the National Highway Traffic Safety Administration (NHTSA) over a lengthy period. Based on these allegations, the complaint asserts causes of action based on strict products liability, negligence, breach of implied warranty, fraud and fraudulent concealment, and the Federal and Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiffs seek compensatory damages, treble damages, punitive damages and attorney’s fees and costs.
GM intends to vigorously defend all of these cases.
We are also the subject of various inquiries, investigations, subpoenas and requests for information from the U.S. Attorney’s Office for the Southern District of New York, Congress, NHTSA, the SEC, and a state attorney general in connection with our recent recalls. We are investigating these matters internally and believe we are cooperating fully with all requests, notwithstanding NHTSA’s recent fines for failure to respond. Such investigations could in the future result in the imposition of damages, fines or civil and criminal penalties.
We are currently unable to estimate a range of reasonably possible loss for the lawsuits and investigations because these matters involve significant uncertainties at these early stages. These uncertainties include the legal theory or the nature of the claims as well as the complexity of the facts. Although we cannot estimate a reasonable range of loss based on currently available information, the resolution of these matters could have a material adverse effect on our financial position, results of operations or cash flows.
GM Korea Wage Litigation
Commencing on or about September 29, 2010 current and former hourly employees of GM Korea filed eight separate group actions in the Incheon District Court in Incheon, Korea. The cases, which in 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 the Presidential Decree of the Korean Labor Standards Act. On November 23, 2012 the Seoul High Court (an intermediate level appellate court) issued a decision affirming a decision of the Incheon District Court in a case involving five GM Korea employees which was contrary to GM Korea's position in all of these cases. GM Korea believes the decision of the Seoul High Court is incorrect and has appealed to the Supreme Court of the Republic of Korea and initiated a constitutional challenge to the adverse interpretation of the relevant statute. At September 30, 2013March 31, 2014 we have an accrual of 84324 billion South Korean Won (equivalent to $784 million) in connection with$23 million) related to these cases. We do not believe we have anyestimate our reasonably possible loss, as defined by ASC 450, “Contingencies,” in excess of the amount of the accrual.amounts accrued to be 621 billion South Korean Won (equivalent to $584 million) at March 31, 2014. We are also party to litigation with current and former salarysalaried employees over allegations relating to Ordinary Wage regulation, although the issues differ due to differences between hourly and salaried benefit design. For those cases,Wages regulation. At March 31, 2014 we have identified a reasonably possible loss in excess of amounts accruedthe amount of our accrual of 164171 billion South Korean Won (equivalent to $153161 million). Both the scope of claims asserted and GM Korea's assessment of any or all of the individual claim elements may
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Both the scope of claims asserted and GM Korea's assessment of any or all of individual claim elements may change if new information becomes available. These cases are currently pending before various district courts in Korea and the Supreme Court of the Republic of Korea.
GMCL Dealers' Claim
On February 12, 2010 a claim was filed in the Ontario Superior Court of Justice against General Motors of Canada Limited (GMCL) on behalf of a purported class of over 200 former GMCL dealers (the Plaintiff Dealers) which had entered into wind-down agreements with GMCL. In May 2009 in the context of the global restructuring of the business and the possibility that GMCL might be required to initiate insolvency proceedings, GMCL offered the Plaintiff Dealers the wind-down agreements to assist with their exit from the GMCL dealer network and to facilitate winding down their operations in an orderly fashion by December 31, 2009 or such other date as GMCL approved but no later than on October 31, 2010. The Plaintiff Dealers allege that the Dealer Sales and Service Agreements were wrongly terminated by GMCL and that GMCL failed to comply with certain disclosure obligations, breached its statutory duty of fair dealing and unlawfully interfered with the Plaintiff Dealers' statutory right to associate in an attempt to coerce the Plaintiff Dealers into accepting the wind-down agreements. The Plaintiff Dealers seek damages and assert that the wind-down agreements are rescindable. The Plaintiff Dealers' initial pleading makes reference to a claim “not exceeding” CADCanadian Dollar (CAD) $750 million, without explanation of any specific measure of damages. On March 1, 2011 the court approved certification of a class for the purpose of deciding a number of specifically defined issues including: (1) whether GMCL breached its obligation of "good faith" in offering the wind-down agreements; (2) whether GMCL interfered with the Plaintiff Dealers' rights of free association; (3) whether GMCL was obligated to provide a disclosure statement and/or disclose more specific information regarding its restructuring plans in connection with proffering the wind-down agreements; and (4) assuming liability, whether the Plaintiff Dealers can recover damages in the aggregate (as opposed to proving individual damages). On June 22, 2011 the court granted GMCL permission to appeal the class certification decision. On March 26, 2012 the Ontario Superior Court dismissed GMCL's appeal of the class certification order. Accordingly the case will proceed as a class action. A number of former dealers have opted out of participation in the litigation, leaving 181 dealers in the certified class. Trial of the class issues is scheduled to commence in the third quarter of 2014. The current prospects for liability are uncertain, but because liability is not deemed probable we have no accrual relating to this litigation. We cannot estimate the range of reasonably possible loss in the event of liability as the case presents a variety of different legal theories, none of which GMCL believes are valid.
UAW Claim
On April 6, 2010 the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW) filed suit against us in the U.S. District Court for the Eastern District of Michigan claiming that we breached an obligation to contribute $450 million to the UAW Retiree Medical Benefits Trust. The UAW alleges that we were contractually required to make this contribution. The reasonably possible loss is $450 million, which isOn December 10, 2013 the amount claimed. We believe thatcourt granted our motion for summary judgment and dismissed the claim is without merit and we have no accrual relating to this litigation. We believe the UAW's claim is barredclaims asserted by the 2009 UAW, Retiree Settlement Agreement approved by the U.S. Bankruptcy Court for the Southern District of New York (Bankruptcy Court). We also maintainholding that Delphi Corporation's bankruptcy plan of reorganization did not fulfill the applicable conditions of the relevant agreement is unambiguous and thereforedoes not require the payment would not be due even in the absence of the 2009sought. The UAW Retiree Settlement Agreement.
Nova Scotia Claims Litigation
We are a participating party-in-interest in proceedings pending in the Bankruptcy Court to adjudicate claims in the Old GM bankruptcy arising from certain securities issued by General Motors Nova Scotia Finance Company (Nova Scotia Finance), an Old GM subsidiary which we did not acquire in 2009 (Nova Scotia Claims Litigation). Although the current proceedings involve no claims against us, they present issues which, depending upon their resolution, could result in future claims against GMCL. In previous periods, we have disclosed a potential liability associated with these issues of approximately $900 million. In September 2013 the parties to the Nova Scotia Claims Litigation and GMCL executed a settlement agreement to resolve the disputes within the scope of the litigation. Pursuant to the agreement, GMCL will pay $50 million to, or as directed by, the Trustee of Nova Scotia Finance and we (including our subsidiaries and affiliates) will be released from all claims relating to Nova Scotia Finance, the Nova Scotia Claims Litigation, and the transactions at issue in the litigation. We have an accrual in the amount of the consideration provided for in the settlement agreement. The settlement agreement has been approved by the Bankruptcy Court. Although the settlement agreement remains subject to approval by the courts of Nova Scotia,appealed. At this juncture we believe it will be approved and that the prospects for liability relating toon the claims asserted in this matter are remote.
Product Liability
With respect to product liability claims involving our and General Motors Corporation products, we believe that any judgment against us for actual damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage. Although punitive damages are claimed in excesssome of these lawsuits and such claims are inherently unpredictable, accruals incorporate historic experience with these types of claims. In addition we indemnify dealers for certain product liability related claims including products sold by General Motors Corporation. We monitor actual claims experience and make periodic adjustments to our estimates. In light of recent vehicle recalls 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.
Liabilities have been recorded in Accrued liabilities and Other liabilities and deferred income taxes for the expected cost of all known product liability claims plus an estimate of the current accrualexpected cost for product liability claims that have already been incurred and are remote.expected to be filed in the future for which we are self-insured.
Environmental Liability
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
Automotive operations, like operations of other companies engaged in similar businesses, are subject to a wide range of environmental protection laws, including laws regulating air emissions, water discharges, waste management and environmental
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
remediation. Liabilities have been recorded primarily in Other liabilities and deferred income taxes for the expected costs to be paid over the periods of remediation for the applicable sites, which typically range from five to 30 years.
The final outcome of environmental matters cannot be predicted with certainty at this time. Subsequent adjustments to initial estimates are recorded as necessary based upon additional information obtained. In future periods new laws or regulations, advances in remediation technologies and additional information about the ultimate remediation methodology to be used could significantly change our estimates. It is possible that the resolution of one or more environmental matters could exceed the amounts accrued in an amount that could be material to our financial condition, results of operations and cash flows. At September 30, 2013March 31, 2014 we estimate the remediation losses could range from $120 million to $230 million.
Other Matters
Brazil Excise Tax Incentive
In October 2012 the Brazilian government issued a decree which increased an excise tax rate by 30 percentage points, but also provided an offsetting tax incentive that requires participating companies to meet certain criteria, such as local investment and fuel efficiency standards. Participating companies that fail to meet the required criteria are subject to clawback provisions and fines. At September 30, 2013March 31, 2014 we believe it is reasonably assured that the program requirements will be met based on the current business model and available technologies.
GME Planned Spending Guarantee
As part of our Opel/Vauxhall restructuring plan agreed to with European labor representatives we have committed to achieving specified milestones associated with planned spending from 2011 to 2014 on certain product programs. If we failhad failed to accomplish the requirements set out under the agreement we will bewould have been required to pay certain amounts up to Euro 265 million for each of those years, and/or interest on those amounts, to our employees. Certain inventoryIn April 2014 we reached an agreement with a carrying amount of $189 million and $186 million at September 30, 2013 and December 31, 2012 was pledged as collateral under the agreement. Through September 30, 2013 spending was sufficient to meet the current requirements underEuropean labor representatives terminating the agreement and the specifiedas all milestones have been accomplished. Management has the intent and believes it has the ability to meet the future requirements under the agreement.or will be met timely in 2014.
India Tavera Emissions Compliance
We have identifieddetermined there was an emissions compliance issue with thecertain Tavera models produced in India. We have self-reported this issue in the three months ended September 30, 2013 to local government authorities and will cooperate with any review they may conduct. It is too earlyare continuing to determinecooperate. We developed a solution, and while the final impact this issue will have onwas not safety related, we voluntarily recalled the Company orvehicles to serve our Indian operations.customers.
Note 15.11. Income Taxes
For interim income tax reporting we estimate our annual effective tax rate and apply it to our year to date ordinary income (loss). Tax jurisdictions with a projected or year to date loss for which a tax benefit cannot be realized are excluded. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.
In the three months ended September 30,March 31, 2014 income tax benefit of $224 million primarily resulted from tax benefits related to deductions taken for stock investments in non-U.S. affiliates and tax audit settlements. In the three months ended March 31, 2013 and 2012 income tax expense of $842$409 million and $357 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation. In the nine months ended September 30, 2013 and 2012 income tax expense of $2.0 billion and $814 million primarily resulted from tax expense attributable to entities included in our effective tax rate calculation, partially offset by tax benefit related to the U.S. research credit legislated in the three months ended March 31, 2013. The income tax expense increased in the three and nine months ended September 30, 2013 due primarily to U.S. and Canada entities having full valuation allowances on deferred tax assets in 2012, which also caused the effective tax rate in the three and nine months ended September 30, 2012 to be lower than the applicable statutory tax rate. We have open tax years from 2005 to 20122013 with various significant tax jurisdictions.
It is reasonably possible uncertain tax positions will be resolved in the next twelve months resulting in a tax benefit of up to approximately $500 million. Resolution of tax-related matters and ultimate audit settlements are subject to significant uncertainty
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
pertaining to both amount and timing; therefore, actual decreases to uncertain tax benefits, if any, may differ significantly from our current estimate.
Note 16.12. Restructuring and Other Initiatives
We have previously executed various restructuring and other initiatives, and we plan to execute additional initiatives in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing global automotive production and to improve the utilization of remaining facilities. To the extent these programs involve voluntary separations, no liabilities are generally recorded until offers to employees are accepted. If employees are involuntarily terminated, a liability is generally recorded at the communication date. Related charges are recorded in Automotive cost of sales and Automotive selling, general and administrative expenseexpense.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
The following tables summarize the reserves related to restructuring and other initiatives and charges by segment, including postemployment benefit reserves and charges (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | |
| GMNA | | GME | | GMIO | | GMSA | | Total |
Balance at January 1, 2013 | $ | 653 |
| | $ | 590 |
| | $ | 39 |
| | $ | 38 |
| | $ | 1,320 |
|
Additions, interest accretion and other | 27 |
| | 35 |
| | 2 |
| | 22 |
| | 86 |
|
Payments | (58 | ) | | (116 | ) | | (26 | ) | | (12 | ) | | (212 | ) |
Revisions to estimates | 13 |
| | — |
| | (1 | ) | | — |
| | 12 |
|
Effect of foreign currency | (6 | ) | | (14 | ) | | — |
| | 1 |
| | (19 | ) |
Balance at March 31, 2013 | 629 |
| | 495 |
| | 14 |
| | 49 |
| | 1,187 |
|
Additions, interest accretion and other | 12 |
| | 31 |
| | 15 |
| | 12 |
| | 70 |
|
Payments | (56 | ) | | (80 | ) | | (13 | ) | | (34 | ) | | (183 | ) |
Revisions to estimates | (16 | ) | | (2 | ) | | — |
| | — |
| | (18 | ) |
Effect of foreign currency | (10 | ) | | 6 |
| | (1 | ) | | (2 | ) | | (7 | ) |
Balance at June 30, 2013 | 559 |
| | 450 |
| | 15 |
| | 25 |
| | 1,049 |
|
Additions, interest accretion and other | 9 |
| | 11 |
| | 54 |
| | 12 |
| | 86 |
|
Payments | (38 | ) | | (43 | ) | | (47 | ) | | (17 | ) | | (145 | ) |
Revisions to estimates | (8 | ) | | (13 | ) | | — |
| | — |
| | (21 | ) |
Effect of foreign currency | 7 |
| | 18 |
| | — |
| | — |
| | 25 |
|
Balance at September 30, 2013(a) | $ | 529 |
| | $ | 423 |
| | $ | 22 |
| | $ | 20 |
| | $ | 994 |
|
27 |
| | | | | | | | | | | | | | | | | | | |
| GMNA | | GME | | GMIO | | GMSA | | Total |
Balance at January 1, 2014 | $ | 497 |
| | $ | 503 |
| | $ | 333 |
| | $ | 16 |
| | $ | 1,349 |
|
Additions, interest accretion and other | 10 |
| | 191 |
| | 48 |
| | 49 |
| | 298 |
|
Payments | (30 | ) | | (106 | ) | | (21 | ) | | (51 | ) | | (208 | ) |
Revisions to estimates | — |
| | 2 |
| | (4 | ) | | — |
| | (2 | ) |
Effect of foreign currency | (6 | ) | | — |
| | 2 |
| | (1 | ) | | (5 | ) |
Balance at March 31, 2014(a) | $ | 471 |
| | $ | 590 |
| | $ | 358 |
| | $ | 13 |
| | $ | 1,432 |
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
| | | GMNA | | GME | | GMIO | | GMSA | | Total | GMNA | | GME | | GMIO | | GMSA | | Total |
Balance at January 1, 2012 | $ | 884 |
| | $ | 687 |
| | $ | 1 |
| | $ | 12 |
| | $ | 1,584 |
| |
Balance at January 1, 2013 | | $ | 653 |
| | $ | 590 |
| | $ | 39 |
| | $ | 38 |
| | $ | 1,320 |
|
Additions, interest accretion and other | 100 |
| | 31 |
| | 3 |
| | 2 |
| | 136 |
| 27 |
| | 35 |
| | 2 |
| | 22 |
| | 86 |
|
Payments | (86 | ) | | (192 | ) | | — |
| | (8 | ) | | (286 | ) | (58 | ) | | (116 | ) | | (26 | ) | | (12 | ) | | (212 | ) |
Revisions to estimates | (12 | ) | | (2 | ) | | — |
| | — |
| | (14 | ) | 13 |
| | — |
| | (1 | ) | | — |
| | 12 |
|
Effect of foreign currency | 8 |
| | 16 |
| | — |
| | — |
| | 24 |
| (6 | ) | | (14 | ) | | — |
| | 1 |
| | (19 | ) |
Balance at March 31, 2012 | 894 |
| | 540 |
| | 4 |
| | 6 |
| | 1,444 |
| |
Additions, interest accretion and other | 16 |
| | 56 |
| | 27 |
| | 73 |
| | 172 |
| |
Payments | (123 | ) | | (43 | ) | | (5 | ) | | (13 | ) | | (184 | ) | |
Revisions to estimates | — |
| | (7 | ) | | — |
| | — |
| | (7 | ) | |
Effect of foreign currency | (8 | ) | | (26 | ) | | — |
| | 1 |
| | (33 | ) | |
Balance at June 30, 2012 | 779 |
| | 520 |
| | 26 |
| | 67 |
| | 1,392 |
| |
Additions, interest accretion and other | 9 |
| | 53 |
| | 4 |
| | 14 |
| | 80 |
| |
Payments | (42 | ) | | (47 | ) | | (15 | ) | | (23 | ) | | (127 | ) | |
Revisions to estimates | (63 | ) | | (6 | ) | | (1 | ) | | — |
| | (70 | ) | |
Effect of foreign currency | 15 |
| | 8 |
| | 1 |
| | — |
| | 24 |
| |
Balance at September 30, 2012(a) | $ | 698 |
| | $ | 528 |
| | $ | 15 |
| | $ | 58 |
| | $ | 1,299 |
| |
Balance at March 31, 2013(a) | | $ | 629 |
| | $ | 495 |
| | $ | 14 |
| | $ | 49 |
| | $ | 1,187 |
|
________
| |
(a) | The remaining cash payments related to these reserves for restructuring and other initiatives, including temporary layoff benefits of $346352 million and $364349 million at September 30, 2013March 31, 2014 and 20122013 for GMNA, primarily relate to postemployment benefits. |
Three and Nine Months Ended March 31, 2014
GME recorded charges, interest accretion and other and revisions to estimates primarily related to our plan to terminate all vehicle and transmission production at our Bochum, Germany facility by the end of 2014. Through March 31, 2014 the active separation programs related to Germany had a total cost of $381 million. We expect to complete these programs in 2014 and incur additional charges of $485 million. In total, 3,740 employees will be affected by these programs.
GMIO recorded charges, interest accretion and other and revisions to estimates for separation programs in Australia, Korea and Chevrolet Europe locations. Through March 31, 2014 the separation programs related to Australia, Korea and Chevrolet Europe locations had a total cost of September 30,$363 million and had affected a total of 3,350 employees. We expect to complete these programs in 2017 and incur additional restructuring and other charges of $540 million.
GMSA recorded charges, interest accretion and other primarily for active separation programs in Brazil and Venezuela. Through March 31, 2014 the active separation programs related to Brazil and Venezuela had a total cost of $149 million.
Three Months Ended March 31, 2013
GMNA recorded charges, interest accretion and other and revisions to estimates primarily related to cash severance incentive programs for skilled trade U.S. hourly employees and service cost for hourly layoff benefits.employees.
Due to the expected closure of the Oshawa Consolidated Plant in December 2016, impacted employees will be eligible for a voluntary restructuring separation incentive program in accordance with the existing collective bargaining agreement that provides cash and a car voucher. This may range up to $70 million and will be included in our restructuring liability, net of existing liabilities, upon irrevocable acceptance by both parties.
GME recorded charges, interest accretion and other and revisions to estimates for previously announced separation and early retirement programs. Through September 30,March 31, 2013 the active separation programs related to Germany and the United Kingdom had a total cost of $64$82 million and had affected a total of 250550 employees. We expect to complete these programs in 2013 and incur an additional $100 million, which will affect an additional 390 employees.
GMIO recorded charges, interest accretion and other and revisions to estimates for separation programs in Korea and Australia. Through September 30, 2013 the active separation programs related to Korea and Australia had a total cost of $88 million and had affected a total of 850 employees.
GMSA recorded charges for active separation programs. Through September 30, 2013 the active separation programs related to Brazil had a total cost of $103 million which we expect to complete by December 31, 2013.
Three and Nine Months Ended September 30, 2012
GMNA recorded charges, interest accretion and other and revisions to estimates related to our 2011 UAW labor agreement and increased production capacity utilization in Canada. Our 2011 UAW labor agreement included cash severance incentive programs which were completed at March 31, 2012 for skilled trade U.S. hourly employees. A total of 1,400 skilled trade U.S. hourly employees participated in these programs at a total cost of $99 million and was recorded upon irrevocable acceptances by both parties. Substantially all of the program cost was recorded in the three months ended March 31, 2012.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
GME recorded charges, interest accretion and other and revisions to estimates primarily related to previously announced separation and early retirement programs in Germany. Through September 30, 2012 the separation programs had a total cost of $313 million and affected a total of 1,900 employees.
GMIO recorded charges and interest accretion and other for previously announced separation programs in Korea.
GMSA recorded charges for employee separation costs related to a separation program in Brazil.
Note 17.13. Stockholders' Equity
Preferred and Common Stock
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
We have 2.0 billion shares of preferred stock and 5.0 billion shares of common stock authorized for issuance. We had 156 million shares of Series A Preferred Stock issued and outstanding at September 30,March 31, 2014 and December 31, 2013, and 276 million shares issued1.6 billion and outstanding at December 31, 2012. We had 100 million shares of Series B Preferred Stock and 1.41.5 billion shares of common stock issued and outstanding at September 30, 2013March 31, 2014 and December 31, 2012.2013.
In September 2013 we purchased 120 million shares of Series A Preferred Stock held by the New VEBA at a price equal to 108.1% of the aggregate liquidation amount for $3.2 billion. We recorded a loss for the difference between the carrying amount of the Series A Preferred Stock purchasedThe following table summarizes dividends paid on our preferred and the consideration paid, which reduced Net income attributable to common stockholders by $816 million. The remaining outstanding shares of Series A Preferred Stock is redeemable by us on or after December 31, 2014. If all of the remaining Series A Preferred Stock was redeemed or purchased at its par value, Net income available to common stockholders would be reduced by a charge of $800 million. stock (dollars in millions):
|
| | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
Common stock | $ | 481 |
| | $ | — |
|
Series A Preferred Stock(a) | $ | 88 |
| | $ | 155 |
|
Series B Preferred Stock(b) | | | $ | 60 |
|
_____
| |
(a) | In September 2013 we purchased 120 million shares (or 43.5% of the total shares outstanding) of our Series A Preferred Stock. |
| |
(b) | On December 1, 2013 all outstanding shares of our Series B Preferred Stock were converted into shares of our common stock. |
Accumulated Other Comprehensive Loss
The following table summarizes the components of Accumulated other comprehensive loss (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
| Pre-Tax Amount | | Tax Expense (Benefit) | | Net Amount | | Pre-Tax Amount | | Tax Expense (Benefit) | | Net Amount |
Foreign Currency Translation Adjustments | | | | | | | | | | | |
Balance at beginning of period | $ | (592 | ) | | $ | 22 |
| | $ | (614 | ) | | $ | 112 |
| | $ | 11 |
| | $ | 101 |
|
Other comprehensive income (loss) | (104 | ) | | (6 | ) | | (98 | ) | | 263 |
| | — |
| | 263 |
|
Other comprehensive income attributable to noncontrolling interests | 3 |
| | — |
| | 3 |
| | 8 |
| | — |
| | 8 |
|
Balance at end of period | $ | (693 | ) | | $ | 16 |
| | $ | (709 | ) | | $ | 383 |
| | $ | 11 |
| | $ | 372 |
|
Unrealized Gains on Securities, Net | | | | | | | | | | | |
Balance at beginning of period | $ | 11 |
| | $ | 9 |
| | $ | 2 |
| | $ | 63 |
| | $ | 22 |
| | $ | 41 |
|
Other comprehensive income before reclassification adjustment | 6 |
| | 2 |
| | 4 |
| | 3 |
| | (3 | ) | | 6 |
|
Reclassification adjustment | (1 | ) | | — |
| | (1 | ) | | (19 | ) | | — |
| | (19 | ) |
Other comprehensive income (loss) | 5 |
| | 2 |
| | 3 |
| | (16 | ) | | (3 | ) | | (13 | ) |
Balance at end of period | $ | 16 |
| | $ | 11 |
| | $ | 5 |
| | $ | 47 |
| | $ | 19 |
| | $ | 28 |
|
Defined Benefit Plans, Net | | | | | | | | | | | |
Balance at beginning of period | $ | 935 |
| | $ | 3,436 |
| | $ | (2,501 | ) | | $ | (7,794 | ) | | $ | 400 |
| | $ | (8,194 | ) |
Other comprehensive loss before reclassification adjustment - prior service cost or credit | 2 |
| | 7 |
| | (5 | ) | | (3 | ) | | — |
| | (3 | ) |
Other comprehensive income before reclassification adjustment - actuarial gains or losses | 10 |
| | (18 | ) | | 28 |
| | 152 |
| | 11 |
| | 141 |
|
Reclassification adjustment - prior service cost or credit(a) | 22 |
| | 7 |
| | 15 |
| | (29 | ) | | (11 | ) | | (18 | ) |
Reclassification adjustment - actuarial gains or losses(a) | 24 |
| | (5 | ) | | 29 |
| | 76 |
| | 13 |
| | 63 |
|
Other comprehensive income | 58 |
| | (9 | ) | | 67 |
| | 196 |
| | 13 |
| | 183 |
|
Balance at end of period | $ | 993 |
| | $ | 3,427 |
| | $ | (2,434 | ) | | $ | (7,598 | ) | | $ | 413 |
| | $ | (8,011 | ) |
Accumulated Other Comprehensive Loss | | | | | | | | | | | |
Balance at beginning of period | $ | 354 |
| | $ | 3,467 |
| | $ | (3,113 | ) | | $ | (7,619 | ) | | $ | 433 |
| | $ | (8,052 | ) |
Other comprehensive income (loss) before reclassification adjustment | (86 | ) | | (15 | ) | | (71 | ) | | 415 |
| | 8 |
| | 407 |
|
Reclassification adjustment | 45 |
| | 2 |
| | 43 |
| | 28 |
| | 2 |
| | 26 |
|
Other comprehensive income (loss) | (41 | ) | | (13 | ) | | (28 | ) | | 443 |
| | 10 |
| | 433 |
|
Other comprehensive income attributable to noncontrolling interests | 3 |
| | — |
| | 3 |
| | 8 |
| | — |
| | 8 |
|
Balance at end of period | $ | 316 |
| | $ | 3,454 |
| | $ | (3,138 | ) | | $ | (7,168 | ) | | $ | 443 |
| | $ | (7,611 | ) |
________
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | |
| Pre-Tax Amount | | Tax Expense (Benefit) | | Net Amount |
Foreign Currency Translation Adjustments | | | | | |
Balance at January 1, 2013 | $ | 112 |
| | $ | 11 |
| | $ | 101 |
|
Other comprehensive loss | (406 | ) | | (9 | ) | | (397 | ) |
Other comprehensive loss attributable to noncontrolling interests | 14 |
| | — |
| | 14 |
|
Balance at September 30, 2013 | $ | (280 | ) | | $ | 2 |
| | $ | (282 | ) |
Unrealized Gains (Losses) on Securities, Net | | | | | |
Balance at January 1, 2013 | $ | 63 |
| | $ | 22 |
| | $ | 41 |
|
Other comprehensive income (loss) before reclassification adjustment | 200 |
| | (7 | ) | | 207 |
|
Reclassification adjustment | (31 | ) | | (7 | ) | | (24 | ) |
Other comprehensive income (loss) | 169 |
| | (14 | ) | | 183 |
|
Balance at September 30, 2013 | $ | 232 |
| | $ | 8 |
| | $ | 224 |
|
Defined Benefit Plans, Net | | | | | |
Balance at January 1, 2013 | $ | (7,794 | ) | | $ | 400 |
| | $ | (8,194 | ) |
Other comprehensive income before reclassification adjustment | 246 |
| | 109 |
| | 137 |
|
Reclassification adjustment - prior service credit(a) | (87 | ) | | (34 | ) | | (53 | ) |
Reclassification adjustment - actuarial loss(a) | 220 |
| | 33 |
| | 187 |
|
Other comprehensive income | 379 |
| | 108 |
| | 271 |
|
Balance at September 30, 2013 | $ | (7,415 | ) | | $ | 508 |
| | $ | (7,923 | ) |
Accumulated Other Comprehensive Loss | | | | | |
Balance at January 1, 2013 | $ | (7,619 | ) | | $ | 433 |
| | $ | (8,052 | ) |
Other comprehensive income (loss) before reclassification adjustment | 40 |
| | 93 |
| | (53 | ) |
Reclassification adjustment | 102 |
| | (8 | ) | | 110 |
|
Other comprehensive income | 142 |
| | 85 |
| | 57 |
|
Other comprehensive loss attributable to noncontrolling interests | 14 |
| | — |
| | 14 |
|
Balance at September 30, 2013 | $ | (7,463 | ) | | $ | 518 |
| | $ | (7,981 | ) |
________
| |
(a) | Included in the computation of net periodic pension and OPEB (income) expense. Refer to Note 129 for additional information. |
Note 18.14. Earnings Per Share
Basic and diluted earnings per share are computed by dividing Net income attributable to common stockholders by the weighted-average common shares outstanding in the period. Diluted earnings per share is computed by giving effect to all potentially dilutive securities that are outstanding.
The following table summarizes basic and diluted earnings per share (in millions, except for per share amounts):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
| | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Basic earnings per share | | | | | | | | | | |
Net income attributable to stockholders | $ | 1,717 |
| | $ | 1,833 |
| | $ | 4,306 |
| | $ | 4,994 |
| $ | 213 |
| | $ | 1,175 |
|
Less: cumulative dividends on preferred stock and charge related to purchase of preferred stock(a) | (1,019 | ) | | (215 | ) | | (1,449 | ) | | (644 | ) | |
Less: cumulative dividends on preferred stock(a) | | (88 | ) | | (215 | ) |
Less: undistributed earnings allocated to Series B Preferred Stock participating security | — |
| | (142 | ) | | — |
| | (383 | ) |
|
| | (95 | ) |
Net income attributable to common stockholders | $ | 698 |
| | $ | 1,476 |
| | $ | 2,857 |
| | $ | 3,967 |
| $ | 125 |
| | $ | 865 |
|
| | | | |
Weighted-average common shares outstanding - basic | 1,386 |
| | 1,570 |
| | 1,378 |
| | 1,570 |
| 1,587 |
| | 1,372 |
|
Basic earnings per common share | $ | 0.50 |
| | $ | 0.94 |
| | $ | 2.07 |
| | $ | 2.53 |
| $ | 0.08 |
| | $ | 0.63 |
|
Diluted earnings per share | | | | | | | | | | |
Net income attributable to stockholders | $ | 1,717 |
| | $ | 1,833 |
| | $ | 4,306 |
| | $ | 4,994 |
| $ | 213 |
| | $ | 1,175 |
|
Add: preferred dividends to holders of Series B Preferred Stock | 59 |
| | — |
| | 179 |
| | — |
| |
Less: cumulative dividends on preferred stock and charge related to purchase of preferred stock(a) | (1,019 | ) | | (215 | ) | | (1,449 | ) | | (644 | ) | |
Less: cumulative dividends on preferred stock(a) | | (88 | ) | | (215 | ) |
Less: undistributed earnings allocated to Series B Preferred Stock participating security | — |
| | (135 | ) | | — |
| | (361 | ) |
|
| | (87 | ) |
Less: earnings adjustment for dilutive stock compensation rights
| | (17 | ) | | — |
|
Net income attributable to common stockholders | $ | 757 |
| | $ | 1,483 |
| | $ | 3,036 |
| | $ | 3,989 |
| $ | 108 |
| | $ | 873 |
|
Weighted-average shares outstanding - diluted | | | | | | | | |
Weighted-average common shares outstanding - diluted | | | | |
Weighted-average common shares outstanding - basic | 1,386 |
| | 1,570 |
| | 1,378 |
| | 1,570 |
| 1,587 |
| | 1,372 |
|
Dilutive effect of warrants | 152 |
| | 88 |
| | 144 |
| | 101 |
| 97 |
| | 134 |
|
Dilutive effect of conversion of Series B Preferred Stock | 140 |
| | — |
| | 148 |
| | — |
| |
Dilutive effect of restricted stock units (RSUs) | 3 |
| | 5 |
| | 2 |
| | 4 |
| 7 |
| | 1 |
|
Weighted-average common shares outstanding - diluted | 1,681 |
| | 1,663 |
| | 1,672 |
| | 1,675 |
| 1,691 |
| | 1,507 |
|
| | | | |
Diluted earnings per common share | $ | 0.45 |
| | $ | 0.89 |
| | $ | 1.82 |
| | $ | 2.38 |
| $ | 0.06 |
| | $ | 0.58 |
|
________
| |
(a) | Includes earned but undistributedundeclared dividends of $15 million and $26 million on our Series A Preferred Stock in the three months ended March 31, 2014 and 2013 and $20 million on our Series B Preferred Stock in the three and nine months ended September 30, 2013 and 2012.March 31, 2013. |
Our Series B Preferred Stock iswas a participating security and requiresthat required the application of the more dilutive of the two-class or if-converted method to calculate earnings per share when the applicable market value of our common stock iswas below or above the range of $33.00 to $39.60 per common share. We arewere required to use the if-converted method to calculate earnings per share when the applicable market value of our common stock iswas within this range. The applicable market value of our common stock is the average closing prices over the 40 consecutive trading day period ending on the third trading day immediately preceding the reporting period end date. Under the two-class method, which we applied in the three-months ended March 31, 2013, undistributed earnings arewere allocated to common stock and the Series B Preferred Stock according to their respective participation rights in undistributed earnings, as if all the earnings for the period had been distributed, resulting in a lower basic and diluted earnings per share amount. The calculation of the applicable market value at the date of our financial statements will apply to the current quarter and the year to date periods presented, irrespective of the applicable market value computed during the prior quarters. Our calculation of earnings per share will vary from period to period depending on whether the two-class or if-converted method is required.
In the three and nine months ended September 30,March 31, 2014 and 2013 the applicable market value of our common stock was within the range of $33.00 to $39.60 per common share and, as such, we applied the if-converted method for purposes of calculating diluted earnings per share. The dilutive effect of the Series B Preferred Stock was determined by assuming conversion of the securities at the beginning of the period resulting in an increase to the weighted-average common shares outstanding and an increase to Net income attributable to common stockholders from adding the accumulated dividends on our Series B Preferred Stock. The impact on diluted earnings per share was an increase of $0.03 and $0.11 for the three and nine months ended September 30, 2013 using the if-converted as compared to the two-class method. In the three and nine months ended September 30, 2012 we were required to use the two-class method for calculating basic and diluted earnings per share because the applicable market value of our common stock was below $33.00 per common share.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
In the three and nine months ended September 30, 2013 and 2012 warrants to purchase 46 million shares were not included in the computation of diluted earnings per share because the warrants' exercise price was greater than the average market price of the common shares.
Note 19.Stock Incentive Plans
Long-Term Incentive Plan
We granted 7 million RSUs valued at the grant date fair value of our common stock in the nine months ended September 30, 2013 and 2012. Substantially all of these awards vest over a three-year service period, as defined in the terms of each award. Our policy is to issue new shares upon settlement of RSUs.
The 2013 awards granted to the Top 25 highest compensated employees will settle on the second and third anniversary dates of grant in 25% increments consistent with the terms of the 2009 Long-Term Incentive Plan. The awards for the Next 75 highest compensated employees will settle on the second and third anniversary dates of grant. The awards to the non-Top 100 highest compensated employees will settle on the first, second and third anniversary dates of grant. Vesting and subsequent settlement will generally occur based upon employment at the end of each specified service period.
The 2012 awards granted to the Top 25 highest compensated employees will settle on the second or third anniversary dates of grant in 25% increments consistent with the terms of the 2009 Long-Term Incentive Plan. The awards for the non-Top 25 highest compensated employees will vest and settle on the second and third anniversary dates of grant. Vesting and subsequent settlement will generally occur based upon employment at the end of each specified service period.
Salary StockPlan
In the nine months ended September 30, 2013 and 2012 a portion of each participant's salary accrued on each salary payment date converted to RSUs on a quarterly basis. In March 2012 we amended the plan to provide for cash settlement of awards and reclassified $97 million from Additional paid-in capital to Accrued liabilities and Other liabilities and deferred income taxes. Prior to this amendment it was our policy to issue new shares upon settlement of these awards. In June 2013 we amended the plan to provide for cash or share settlement of awards based on election by the participant. The liability for these awards continues to be remeasured to fair value at the end of each reporting period.
RSUs
The following table summarizes information about the RSUs under our stock incentive plans (RSUs in millions):
|
| | | | | | | | |
| Shares | | Weighted- Average Grant Date Fair Value | | Weighted-Average Remaining Contractual Term in Years |
RSUs outstanding at January 1, 2013 | 26.9 |
| | $ | 23.06 |
| | 0.7 |
Granted | 8.4 |
| | $ | 28.48 |
| | |
Settled | (15.3 | ) | | $ | 20.61 |
| | |
Forfeited or expired | (1.0 | ) | | $ | 27.04 |
| | |
RSUs outstanding at September 30, 2013 | 19.0 |
| | $ | 27.18 |
| | 1.3 |
| | | | | |
RSUs unvested and expected to vest at September 30, 2013 | 10.5 |
| | $ | 27.78 |
| | 1.9 |
RSUs vested and payable at September 30, 2013 | 7.8 |
| | $ | 26.35 |
| | — |
The following table summarizes compensation expense recorded for our stock incentive plans (dollars in millions):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Compensation expense | $ | 85 |
| | $ | 79 |
| | $ | 226 |
| | $ | 206 |
|
Income tax benefit | $ | 28 |
| | $ | — |
| | $ | 73 |
| | $ | — |
|
At September 30, 2013 the total unrecognized compensation expense for nonvested equity awards was $202 million. This expense is expected to be recorded over a weighted-average period of 1.9 years.
The total fair value of RSUs that vested in the nine months ended September 30, 2013 and 2012 was $288 million and $108 million.
In the nine months ended September 30, 2013 total payments of $76 million were made to settle 2.6 million RSUs under stock incentive plans. Payments made in the nine months ended September 30, 2012 were insignificant.
Note 20.15. Segment Reporting
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
We analyze the results of our business through our five segments: GMNA, GME, GMIO, GMSA and GM Financial. The chief operating decision maker evaluates the operating results and performance of our automotive segments through Income (loss) before interest and income taxes, as adjusted for additional amounts, which areis presented net of noncontrolling interests, and evaluates GM Financial through income before income taxes.taxes, as adjusted for additional amounts. Each segment has a manager responsible for executing our strategies. Our automotive manufacturing operations are integrated within the segments, benefit from broad-based trade agreements and are subject to regulatory requirements, such as Corporate Average Fuel Economy regulations. While not all vehicles within a segment are individually profitable on a fully allocated cost basis, those vehicles are needed in our product mix in order to attract customers to dealer showrooms and to maintain sales volumes for other, more profitable vehicles. Because of these and other factors, we do not manage our business on an individual brand or vehicle basis.
In the three months ended March 31, 2013 we changed our managerial and financial reporting structure to measure our reportable segments revenue and profitability based on the geographic area in which we sell vehicles to third party customers. We record certain transactions between our automotive and finance segments as intersegment activity and eliminate them in consolidation. The new reporting structure provides clearer profit and revenue visibility across geographic areas and identifies our profitability at the point of sale. Previously, it was based on the geographic area in which the vehicles originated and our managerial and financial reporting structure included intercompany sales and cost of sales in our segment results. Certain expenses such as engineering, warranty, recall campaigns and selling, general and administrative are allocated to the geographic area in which the vehicle is sold to third party customers. We have retrospectively revised the segment presentation for all periods presented.
Substantially all of the cars, trucks and 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 and trucks are also sold to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. Sales to fleet customers are completed through the network of dealers and in some cases sold directly to fleet customers. Retail and fleet customers can obtain a wide range of aftersale vehicle services and products through the dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.
GMNA primarily meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the following four brands:
|
| | | |
• Buick | • Cadillac | • Chevrolet | • GMC |
The demands of customers outside of North America are primarily met with vehicles developed, manufactured and/or marketed under the following brands:
|
| | | |
• Buick | • Chevrolet | • Holden | • Vauxhall |
• Cadillac | • GMC | • Opel | |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
At September 30, 2013March 31, 2014 we also had equity ownership stakes directly or indirectly in entities through various regional subsidiaries, primarily in Asia. These companies design, manufacture and market vehicles under the following brands:
|
| | | |
• Alpheon | • Buick | • Chevrolet | • Wuling |
• Baojun | • Cadillac | • Jiefang | |
Our automotive operations' interest income and interest expense are recorded centrally in Corporate. All intersegment balances and transactions have been eliminated in consolidation.
The following tables summarize key financial information by segment (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Three Months Ended September 30, 2013 |
| GMNA | | GME | | GMIO | | GMSA | | Corporate | | Eliminations | | Total Automotive | | GM Financial | | Eliminations | | Total |
Sales | | | | | | | | | | | | | | | | | | | |
External customers | $ | 23,506 |
| | $ | 4,858 |
| | $ | 5,336 |
| | $ | 4,381 |
| | $ | 39 |
| | | | $ | 38,120 |
| | $ | — |
| | $ | — |
| | $ | 38,120 |
|
GM Financial revenue | — |
| | — |
| | — |
| | — |
| | — |
| | | | — |
| | 867 |
| | (4 | ) | | 863 |
|
Intersegment | 2 |
| | — |
| | — |
| | — |
| | — |
| | | | 2 |
| | — |
| | (2 | ) | | — |
|
Total net sales and revenue | $ | 23,508 |
| | $ | 4,858 |
| | $ | 5,336 |
| | $ | 4,381 |
| | $ | 39 |
| | | | $ | 38,122 |
| | $ | 867 |
| | $ | (6 | ) | | $ | 38,983 |
|
| | | | | | | | | | | | | | | | | | | |
Income (loss) before interest and taxes-adjusted | $ | 2,187 |
| | $ | (214 | ) | | $ | 299 |
| | $ | 284 |
| | $ | (161 | ) | | | | $ | 2,395 |
| | $ | 239 |
| | $ | 3 |
| | $ | 2,637 |
|
Adjustments(a) | $ | — |
| | $ | — |
| | $ | (48 | ) | | $ | — |
| | — |
| | | | $ | (48 | ) | | — |
| | $ | — |
| | (48 | ) |
Corporate interest income | | | | | | | | | 32 |
| | | | | |
|
| | $ | 1 |
| | 33 |
|
Automotive interest expense | | | | | | | | | 65 |
| | | | | |
|
| | $ | — |
| | 65 |
|
Gain on extinguishment of debt | | | | | | | | | 2 |
| | | | | | — |
| | | | 2 |
|
Income (loss) before income taxes | | | | | | | | | (192 | ) | | | | | | 239 |
| | | | 2,559 |
|
Income tax expense | | | | | | | | | 756 |
| | | | | | 85 |
| | $ | 1 |
| | 842 |
|
Net income (loss) attributable to stockholders | | | | | | | | | $ | (948 | ) | | | | | | $ | 154 |
| | | | $ | 1,717 |
|
| | | | | | | | | | | | | | | | | | | |
Total assets | $ | 92,876 |
| | $ | 11,274 |
| | $ | 25,594 |
| | $ | 12,327 |
| | $ | 23,929 |
| | $ | (27,761 | ) | | $ | 138,239 |
| | $ | 32,000 |
| | $ | (1,700 | ) | | $ | 168,539 |
|
________
| |
(a) | Consists of Goodwill impairment charges of $48 million in GMIO, which is presented net of noncontrolling interests.
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2013 |
| GMNA | | GME | | GMIO | | GMSA | | Corporate | | Total Automotive | | GM Financial | | Eliminations | | Total |
Sales | | | | | | | | | | | | | | | | | |
External customers | $ | 69,974 |
| | $ | 14,830 |
| | $ | 15,406 |
| | $ | 12,380 |
| | $ | 114 |
| | $ | 112,704 |
| | $ | — |
| | $ | — |
| | $ | 112,704 |
|
GM Financial revenue | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,243 |
| | (5 | ) | | 2,238 |
|
Intersegment | 8 |
| | — |
| | — |
| | — |
| | — |
| | 8 |
| | — |
| | (8 | ) | | — |
|
Total net sales and revenue | $ | 69,982 |
| | $ | 14,830 |
| | $ | 15,406 |
| | $ | 12,380 |
| | $ | 114 |
| | $ | 112,712 |
| | $ | 2,243 |
| | $ | (13 | ) | | $ | 114,942 |
|
| | | | | | | | | | | | | | | | | |
Income (loss) before interest and taxes-adjusted | $ | 5,577 |
| | $ | (499 | ) | | $ | 1,022 |
| | $ | 300 |
| | $ | (397 | ) | | $ | 6,003 |
| | $ | 673 |
| | $ | 3 |
| | $ | 6,679 |
|
Adjustments(a) | $ | (1 | ) | | $ | 1 |
| | $ | 43 |
| | $ | (157 | ) | | — |
| | $ | (114 | ) | | — |
| | $ | — |
| | (114 | ) |
Corporate interest income | | | | | | | | | 192 |
| | | |
|
| | $ | (3 | ) | | 189 |
|
Automotive interest expense | | | | | | | | | 219 |
| | | |
|
| | $ | (2 | ) | | 217 |
|
Loss on extinguishment of debt | | | | | | | | | 238 |
| | | | — |
| | | | 238 |
|
Income (loss) before income taxes | | | | | | | | | (662 | ) | | | | 673 |
| | | | 6,299 |
|
Income tax expense | | | | | | | | | 1,760 |
| | | | 232 |
| | $ | 1 |
| | 1,993 |
|
Net income (loss) attributable to stockholders | | | | | | | | | $ | (2,422 | ) | | | | $ | 441 |
| | | | $ | 4,306 |
|
________
| |
(a) | Consists of Venezuela currency devaluation of $162 million in GMSA, the acquisition of GM Korea preferred shares of $67 million and Goodwill impairment charges of $48 million in GMIO, which is presented net of noncontrolling interests, and net pension settlement charges and income related to various insurance recoveries, net, of $29 million.
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
| | | For the Three Months Ended September 30, 2012 | At and For the Three Months Ended March 31, 2014 |
| GMNA | | GME | | GMIO | | GMSA | | Corporate | | Total Automotive | | GM Financial | | Eliminations | | Total | GMNA | | GME | | GMIO | | GMSA | | Corporate | | Eliminations | | Total Automotive | | GM Financial | | Eliminations | | Total |
Sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
External customers | $ | 22,347 |
| | $ | 4,702 |
| | $ | 5,722 |
| | $ | 4,275 |
| | $ | 16 |
| | $ | 37,062 |
| | $ | — |
| | $ | — |
| | $ | 37,062 |
| $ | 24,404 |
| | $ | 5,620 |
| | $ | 3,230 |
| | $ | 3,025 |
| | $ | 36 |
| | | | $ | 36,315 |
| | $ | — |
| | $ | — |
| | $ | 36,315 |
|
GM Financial revenue | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 514 |
| | — |
| | 514 |
| — |
| | — |
| | — |
| | — |
| | — |
| | | | — |
| | 1,097 |
| | (4 | ) | | 1,093 |
|
Total net sales and revenue | $ | 22,347 |
| | $ | 4,702 |
| | $ | 5,722 |
| | $ | 4,275 |
| | $ | 16 |
| | $ | 37,062 |
| | $ | 514 |
| | $ | — |
| | $ | 37,576 |
| $ | 24,404 |
| | $ | 5,620 |
| | $ | 3,230 |
| | $ | 3,025 |
| | $ | 36 |
| | | | $ | 36,315 |
| | $ | 1,097 |
| | $ | (4 | ) | | $ | 37,408 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Income (loss) before interest and taxes-adjusted | $ | 1,715 |
| | $ | (487 | ) | | $ | 761 |
| | $ | 159 |
| | $ | (51 | ) | | $ | 2,097 |
| | $ | 200 |
| | $ | (1 | ) | | $ | 2,296 |
| $ | 557 |
| | $ | (284 | ) | | $ | 252 |
| | $ | (156 | ) | | $ | (123 | ) | | | | $ | 246 |
| | $ | 221 |
| | $ | (1 | ) | | $ | 466 |
|
Adjustments(a) | $ | — |
| | $ | — |
| | $ | (62 | ) | | $ | — |
| | — |
| | $ | (62 | ) | | — |
| | $ | — |
| | (62 | ) | $ | — |
| | $ | — |
| | $ | (9 | ) | | $ | (419 | ) | | $ | — |
| | | | $ | (428 | ) | | $ | 1 |
| | $ | — |
| | (427 | ) |
Corporate interest income | | | | | | | | | 84 |
| | | | | | | | 84 |
| | | | | | | | | | | | | | | | | | | 53 |
|
Automotive interest expense | | | | | | | | | 128 |
| | | | | | | | 128 |
| | | | | | | | | | | | | | | | | | | (103 | ) |
Income (loss) before income taxes | | | | | | | | | (95 | ) | | | | 200 |
| | | | 2,190 |
| |
Income tax expense | | | | | | | | | 286 |
| | | | 71 |
| | | | 357 |
| |
Net income (loss) attributable to stockholders | | | | | | | | | $ | (381 | ) | | | | $ | 129 |
| | | | $ | 1,833 |
| |
Net income attributable to noncontrolling interests | | | | | | | | | | | | | | | | | | | | 67 |
|
Income before income taxes | | | | | | | | | | | | | | | | | | | | $ | 56 |
|
| | | | | | | | | | | | | | | | | | | | |
Total assets | | $ | 94,538 |
| | $ | 12,339 |
| | $ | 22,885 |
| | $ | 11,136 |
| | $ | 28,377 |
| | $ | (33,668 | ) | | $ | 135,607 |
| | $ | 40,079 |
| | $ | (2,080 | ) | | $ | 173,606 |
|
Depreciation, amortization and impairment of long-lived assets and finite-lived intangible assets | | $ | 1,092 |
| | $ | 109 |
| | $ | 114 |
| | $ | 101 |
| | $ | 16 |
| | $ | (1 | ) | | $ | 1,431 |
| | $ | 176 |
| | $ | — |
| | $ | 1,607 |
|
________
| |
(a) | Consists of Venezuela currency devaluation of $419 million in GMSA and other of $8 million. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At and For the Three Months Ended March 31, 2013 |
| GMNA | | GME | | GMIO | | GMSA | | Corporate | | Eliminations | | Total Automotive | | GM Financial | | Eliminations | | Total |
Sales | | | | | | | | | | | | | | | | | | | |
External customers | $ | 22,979 |
| | $ | 5,272 |
| | $ | 4,366 |
| | $ | 3,691 |
| | $ | 36 |
| | | | $ | 36,344 |
| | $ | — |
| | $ | — |
| | $ | 36,344 |
|
GM Financial revenue | — |
| | — |
| | — |
| | — |
| | — |
| | | | — |
| | 540 |
| | — |
| | 540 |
|
Total net sales and revenue | $ | 22,979 |
| | $ | 5,272 |
| | $ | 4,366 |
| | $ | 3,691 |
| | $ | 36 |
| | | | $ | 36,344 |
| | $ | 540 |
| | $ | — |
| | $ | 36,884 |
|
| | | | | | | | | | | | | | | | | | | |
Income (loss) before interest and taxes-adjusted | $ | 1,414 |
| | $ | (152 | ) | | $ | 472 |
| | $ | (38 | ) | | $ | (110 | ) | | | | $ | 1,586 |
| | $ | 180 |
| | $ | — |
| | $ | 1,766 |
|
Adjustments(a) | $ | (38 | ) | | $ | 1 |
| | $ | 24 |
| | $ | (157 | ) | | $ | — |
| | | | $ | (170 | ) | | $ | — |
| | $ | — |
| | (170 | ) |
Corporate interest income | | | | | | | | | | | | | | | | | | | 79 |
|
Automotive interest expense | | | | | | | | | | | | | | | | | | | (91 | ) |
Net income attributable to noncontrolling interests | | | | | | | | | | | | | | | | | | | 10 |
|
Income before income taxes | | | | | | | | | | | | | | | | | | | $ | 1,594 |
|
| | | | | | | | | | | | | | | | | | | |
Total assets | $ | 89,474 |
| | $ | 10,910 |
| | $ | 24,805 |
| | $ | 12,067 |
| | $ | 19,218 |
| | $ | (20,856 | ) | | $ | 135,618 |
| | $ | 18,924 |
| | $ | (767 | ) | | $ | 153,775 |
|
Depreciation, amortization and impairment of long-lived assets and finite-lived intangible assets | $ | 926 |
| | $ | 115 |
| | $ | 198 |
| | $ | 130 |
| | $ | 16 |
| | $ | — |
| | $ | 1,385 |
| | $ | 84 |
| | $ | (4 | ) | | $ | 1,465 |
|
_______
| |
(a) | Consists of Goodwill impairment chargesVenezuela currency devaluation of $62162 million in GMIO, which is presented netGMSA and other of noncontrolling interests.$8 million. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2012 |
| GMNA | | GME | | GMIO | | GMSA | | Corporate | | Total Automotive | | GM Financial | | Eliminations | | Total |
Sales | | | | | | | | | | | | | | | | | |
External customers | $ | 67,075 |
| | $ | 15,489 |
| | $ | 16,653 |
| | $ | 12,259 |
| | $ | 41 |
| | $ | 111,517 |
| | $ | — |
| | $ | — |
| | $ | 111,517 |
|
GM Financial revenue | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,432 |
| | — |
| | 1,432 |
|
Intersegment | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | — |
| | 1 |
| | — |
|
Total net sales and revenue | $ | 67,074 |
| | $ | 15,489 |
| | $ | 16,653 |
| | $ | 12,259 |
| | $ | 41 |
| | $ | 111,516 |
| | $ | 1,432 |
| | $ | 1 |
| | $ | 112,949 |
|
| | | | | | | | | | | | | | | | | |
Income (loss) before interest and taxes-adjusted | $ | 5,248 |
| | $ | (1,175 | ) | | $ | 1,909 |
| | $ | 328 |
| | $ | (310 | ) | | $ | 6,000 |
| | $ | 598 |
| | $ | (1 | ) | | $ | 6,597 |
|
Adjustments(a) | $ | — |
| | $ | (590 | ) | | $ | (84 | ) | | $ | — |
| | — |
| | $ | (674 | ) | | — |
| | $ | — |
| | (674 | ) |
Corporate interest income | | | | | | | | | 259 |
| | | | | | | | 259 |
|
Automotive interest expense | | | | | | | | | 356 |
| | | | | | | | 356 |
|
Loss on extinguishment of debt | | | | | | | | | 18 |
| | | | — |
| | | | 18 |
|
Income (loss) before income taxes | | | | | | | | | (425 | ) | | | | 598 |
| | | | 5,808 |
|
Income tax expense | | | | | | | | | 560 |
| | | | 254 |
| | | | 814 |
|
Net income (loss) attributable to stockholders | | | | | | | | | $ | (985 | ) | | | | $ | 344 |
| | | | $ | 4,994 |
|
________
|
| | | | | | | | | | | | | | | | | |
(a) | Consists of Goodwill impairment charges of $590 million in GME and $84 million in GMIO, which is presented net of noncontrolling interests.
| | | | | | | | | | | | | | | | |
Note 21.Subsequent Event
Acquisition of Certain Ally Financial International Operations
On October 1, 2013 GM Financial completed the acquisition of Ally Financial's automotive finance operations in Brazil for $611 million, subject to certain closing adjustments.
GM Financial will record the fair value of the assets acquired and liabilities assumed on October 1, 2013, the date GM Financial obtained control of the operations, and include the results of their operations and cash flows in their consolidated financial statements from that date forward.
The following table summarizes certain pro forma financial information for us and the acquired Brazil operations that closed in October had this acquisition occurred as of the first day in the periods presented, without consideration of historical transactions between the acquired operations and us, as it is impracticable to obtain such information (dollars in millions):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)
|
| | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Total net sales and revenue | $ | 39,175 |
| | $ | 37,758 |
| | $ | 115,517 |
| | $ | 113,509 |
|
Net income attributable to stockholders | $ | 1,743 |
| | $ | 1,850 |
| | $ | 4,385 |
| | $ | 5,018 |
|
It is not possible to reasonably estimate the nature and amount of any potential goodwill or the value of identifiable intangible assets at this time because the valuation of the assets acquired and liabilities assumed was not completed at the date of the issuance of our condensed consolidated financial statements.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General Motors Company is sometimes referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company,” “General Motors” or “GM.”
Basis of Presentation
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying condensed consolidated financial statements and the consolidated financial statements and notes thereto included in our Annual Report on2013 Form 10-K, for the year ended December 31, 2012 (2012 Form 10-K), as filed with the Securities and Exchange Commission (SEC).SEC.
In the three months ended March 31, 20132014 we changed our managerial and financial reporting structure to measurereclassify the results of our reportable segments revenue and profitability based on the geographic areaRussian subsidiaries previously reported in which we sell vehiclesour GMIO segment to third party customers.our GME segment. We have retrospectively revised the segment presentation for all periods presented. Refer to Note 20 to our condensed consolidated financial statements for additional information on this change.
Wholesale vehicle sales data, which represents sales directly to dealers and others, is the measure that correlates vehicle sales to our revenue from the sale of vehicles, which is the largest component of automotive Net sales and revenue. Wholesale vehicle sales exclude vehicles produced by unconsolidated joint ventures. Retail vehicle sales data, which represents estimated sales to the end customer, including fleets, does not correlate directly to the revenue we recognize during the period. However, retail vehicle sales data is indicative of the underlying demand for our vehicles, is the basis for our market share, and is based upon the good faith estimates of management and includes all sales by joint ventures on a total vehicle basis, not based on the percentage of ownership in the joint venture. Market share information is based primarily on retail vehicle sales volume, but estimates may be used where retail vehicle sales volume is not available.
Overview
Automotive
Our vision is to design, build and sell the world's best vehicles. We offer a global vehicle portfolio of cars, crossovers and trucks. We are committed to leadership in vehicle design, quality, reliability, telematics and infotainment and safety, as well as to developing key energy efficiency and diversity and advanced propulsion technologies, including electric vehicles. Our business is diversified across products and geographic markets. We meet the local sales and service needs of our retail and fleet customers with a global network of independent dealers. In the ninethree months ended September 30, 2013, 56.1%March 31, 2014, 52.5% of our wholesale vehicle sales volume was generated outside the U.S.
Even though our Net income decreased from $1.2 billion to $0.3 billion, we had strong financial results in the three months ended March 31, 2014 excluding the impact of recall-related charges. GMNA and our consolidated international operations are consistent with our expectations, while Europe and China are outperforming our expectations. However, we experienced weaker performance in GMSA due to the challenging environment in Venezuela and Brazil.
We analyze the results of our automotive business through our four geographically-based segments:
GM North America (GMNA)GMNA
GMNA has sales, manufacturing and distribution operations in the U.S., Canada and Mexico and sales and distribution operations in Central America and the Caribbean. GMNA represented 50.7%55.0% of our wholesale vehicle sales volume in the ninethree months ended September 30, 2013March 31, 2014 and we had the largest market share, based upon retail vehicle sales, in North America at 17.0%16.5%. In the three months ended March 31, 2014 GMNA retail vehicle sales decreased by two percent compared with a year ago. Combined Chevrolet, Buick and Cadillac passenger car sales increased two percent. Truck sales, which include pickups, vans and large SUVs, decreased five percent. We achieved record average transaction prices (ATPs) in the United States, according to J.D. Power PIN estimates, due in large measure to a $5,000 year over year increase in full-size pickup ATPs. Pursuant to our plan our mix of crew cab and premium-contented pickup trucks is higher today than a year ago.
GM Europe (GME)
Customer safety and satisfaction were the major reasons for the recall of approximately 7 million vehicles announced during the first quarter. These recalls included: (1) approximately 2.6 million vehicles to repair ignition switches that could result in a loss of electrical power under certain circumstances that may prevent front airbags from deploying in the event of a crash and to fix ignition lock cylinders that could allow removal of the ignition key while the engine is running, leading to possible rollaway or crash; (2) approximately 1.9 million vehicles to replace either the power steering motor, the steering column, the power steering motor control unit or a combination of the steering column and the power steering motor control unit as the electric power steering
GENERAL MOTORS COMPANY AND SUBSIDIARIES
could fail under certain circumstances; (3) approximately 1.3 million vehicles prone to non-deployment of the side impact restraints if vehicles are not serviced when the Service Air Bag warning light is illuminated; and (4) approximately 1.2 million vehicles for other matters. In the three months ended March 31, 2014 we recorded charges of approximately $1.3 billion primarily for the estimated costs of parts and labor to repair these vehicles and for courtesy transportation. Although it is still early, it appears we have not experienced a meaningful impact to our Net sales and revenue as a result of our recent recall actions. We began repairing vehicles in early April and consistent with our recent communication to NHTSA, our plan is to produce enough repair parts by October 2014 to have the ability to repair the majority of vehicles impacted by the ignition switch and ignition cylinder recalls. Refer to the "GM North America" section of MD&A for additional information on all of the recalls we announced in 2014.
Customer safety and satisfaction remain high priorities for us. Our Chevrolet, Buick, GMC and Cadillac brands all rank in the top five of all automotive brands in the J.D. Power 2014 U.S. Customer Service Index with Cadillac and Buick taking the top spots in their respective categories. In addition two of our vehicle models were the only midsize SUVs to earn 2014 Top Safety Pick+ ratings from the Insurance Institute for Highway Safety.
GME
GME has sales, manufacturing and distribution operations across Western and Central Europe. GME's wholesale vehicle sales volume, which in addition toEastern, Western and Central Europe includes Eastern Europe (includingincluding Russia and the other members of the Commonwealth of Independent States among others)States. GME's wholesale vehicle sales volume represented 16.3%19.8% of our wholesale vehicle sales volume in the ninethree months ended September 30, 2013.March 31, 2014. In the ninethree months ended September 30, 2013March 31, 2014 we estimate we had the number four market share, based upon retail vehicle sales, in Europe at 8.4%7.3%. GM International Operations (GMIO) distributes Chevrolet brand vehicles in Europe. These vehicles are reported withinOur European operations continue to show signs of improvement underscored by our first Opel and Vauxhall market share increase in 14 years in 2013. This market share increase was partially driven by the successful launches of the Opel Mokka, ADAM and Cascada during 2013.
In an effort to rationalize our manufacturing footprint in GME we reached agreement with the labor union in Germany to terminate all vehicle and transmission production at our Bochum, Germany facility by the end of 2014. Affected employees will be eligible for Europe, but wholesale vehicle sales volumea voluntary restructuring separation program. Restructuring charges will be recorded primarily through 2014. Refer to Note 12 to our condensed consolidated financial statements for additional information.
Due to the recent deterioration in the Russian Ruble, along with other market factors, we are currently strategically assessing our Russian operations. Should further deterioration in the outlook for the market or the finalization of the strategic reviews and related recommended actions affect our ability to generate sufficient cash flows we may be required to test certain long-lived assets for recoverability. The estimate of charges, if any, is recorded by GMIO.subject to significant uncertainty and highly dependent on decisions not yet taken.
GMIO
We continue to strategically assess our performance and the manner in which we operate in certain countries which may require us to test certain long-lived assets for recoverability in the near term. The estimate of charges, if any, is subject to significant uncertainty and highly dependent on finalization of our strategic assessments.
GMIO has sales, manufacturing and distribution operations in Asia/Pacific, the Middle East Africa and Eastern Europe (including Russia and the other members of the Commonwealth of Independent States among others).Africa. GMIO represented 16.3%11.0% of our wholesale vehicle sales volume in the ninethree months ended September 30, 2013.March 31, 2014. The Asia/Pacific, Middle East and Africa region is our largest region by retail vehicle sales volume and represented 39.3%46.5% of our global retail vehicle sales volume in the ninethree months ended September 30, 2013.March 31, 2014. In the ninethree months ended September 30, 2013March 31, 2014 we estimate we had the number two market share, based upon retail vehicle sales, in Asia/Pacific, Middle East and Africa at 9.5%10.0%. In the
GENERAL MOTORS COMPANY AND SUBSIDIARIES
nine three months ended September 30, 2013March 31, 2014 we estimate we had market share of 14.5%, based upon retail vehicle sales,15.2% in China. GMIO recordsChina and sold 919,000 vehicles, a 12.6% increase over the wholesale unit volume and financial results of Chevrolet brand vehicles that it distributes and sells in Europe.comparable period last year.
GM South America (GMSA)
GMSA
GMSA has sales, manufacturing, distribution and/or financing operations in Brazil, Argentina, Colombia, Ecuador and Venezuela as well as sales and distribution operations in Bolivia, Chile, Paraguay, Peru and Uruguay. GMSA represented 16.7%14.2% of our wholesale vehicle sales volume in the ninethree months ended September 30, 2013. In the nine months ended September 30, 2013 GMSAMarch 31, 2014 and derived 63.6%69.2% of its wholesale vehicle sales volume from Brazil. In the ninethree months ended September 30, 2013March 31, 2014 we estimate we had the number onetwo market share, based upon retail vehicle sales, in South America at 17.4%16.3% and the number three market share, based upon retail vehicle sales, in Brazil at 17.1%16.8%.
Alliance with Peugeot S.A. (PSA)
In February 2012 we entered into an agreement with PSA to create a long-term and broad-scale global strategic alliance that is expected to leverage the combined strengths and capabilities of the two companies, contribute to our profitability and improve our competitiveness in Europe. Our ability to achieve these improvements is subject to numerous uncertainties including but not limited to PSA's current efforts to obtain additional funding and future investors. In March 2012 we acquired a seven percent equity stake in PSA. In June 2012 we entered into a long-term exclusive service agreement with Gefco, a wholly-owned subsidiary of PSA, to provide logistics services in Europe beginning in 2013. In December 2012 PSA sold its controlling interest in Gefco to an unrelated third party; however, the sale has no impact on the long-term exclusive service agreement. In December 2012 we entered into a product development agreement with PSA to collaborate on the development of certain vehicle platforms, components and modules. As a result of this agreement, in the three months ended March 31, 20132014 we acquiredrecorded devaluation charges related to a change in the rights to certain intellectual propertyexchange rate we use for remeasuring our Venezuelan subsidiaries’ non-U.S. Dollar denominated monetary assets and technology for total consideration of $0.6 billion. We are assessing certain programs that were originally contemplated underliabilities from the product development agreement and future changes may result in significant adjustments to amounts previously recorded. Refer to Note 7Venezuela official
to our condensed consolidated financial statements for details regarding the acquisition of these rights.26
Restructuring Activities and Special Attrition Programs, Labor Agreements and Benefit Plan Changes
We have previously executed various restructuring and other initiatives, and we planTable of ContentsGENERAL MOTORS COMPANY AND SUBSIDIARIES
exchange rate to execute additional initiatives in the future, if necessary, in order to align manufacturing capacity and other costs with prevailing global automotive production and to improve the utilizationrate determined by an auction process conducted by Venezuela’s Complementary System of remaining facilities.
In March and April 2013 we finalized labor agreements in Germany and Spain, which will limit or eliminate labor cost increases at our facilities in those countries in 2013 and for the next several years.Foreign Currency Administration (SICAD I). In addition to currency controls already in place, the Venezuelan government announced pricing controls that, taken with other initiatives, require us to closely monitor and consider our active restructuring programsability to maintain a controlling financial interest in Germany we plan to terminate all vehicle and transmission production at our Bochum, Germany facility by the end of 2014. Based on the voluntary severance packages offered to transmission production employees in October 2013, the Bochum closure will likely result in significant cash and non-cash charges over the next year. We are in negotiation with the labor union to finalize the terms of any severance program to be offered to vehicle production employees. The estimate of charges is subject to significant uncertainties and highly dependent upon decisions not yet finalized.
Venezuelan subsidiaries. Refer to Note 12 to our condensed consolidated financial statementsthe "GM South America" section of MD&A for details regarding benefit plan changes and Note 16 for details regarding restructuring activities and other initiatives.additional information.
Wholesale and Retail Vehicle Sales
We present both wholesale and retail vehicle sales data to assist in the analysis of our revenue and our market share. Worldwide market share and retail vehicle sales data exclude the markets of Cuba, Iran, North Korea, Sudan and Syria. The joint venture agreements with SAIC-GM-Wuling Automobile Co., Ltd. (SGMW) and FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM) allow for significant rights as a member as well as the contractual right to report SGMW and FAW-GM joint venture retail vehicle sales in China.
The following table summarizes total wholesale vehicle sales of new vehicles by automotive segment (vehicles in thousands):
GENERAL MOTORS COMPANY AND SUBSIDIARIES
| | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | | September 30, 2012 | | March 31, 2014 | | March 31, 2013 |
GMNA | 775 |
| | 49.2 | % | | 773 |
| | 49.2 | % | | 2,413 |
| | 50.7 | % | | 2,381 |
| | 49.9 | % | 807 |
| | 55.0 | % | | 829 |
| | 53.4 | % |
GME | 253 |
| | 16.0 | % | | 254 |
| | 16.2 | % | | 778 |
| | 16.3 | % | | 810 |
| | 17.0 | % | 291 |
| | 19.8 | % | | 275 |
| | 17.6 | % |
GMIO | 267 |
| | 16.9 | % | | 274 |
| | 17.5 | % | | 778 |
| | 16.3 | % | | 812 |
| | 17.0 | % | 162 |
| | 11.0 | % | | 217 |
| | 14.0 | % |
GMSA | 282 |
| | 17.9 | % | | 268 |
| | 17.1 | % | | 793 |
| | 16.7 | % | | 770 |
| | 16.1 | % | 208 |
| | 14.2 | % | | 233 |
| | 15.0 | % |
Worldwide | 1,577 |
| | 100.0 | % | | 1,569 |
| | 100.0 | % | | 4,762 |
| | 100.0 | % | | 4,773 |
| | 100.0 | % | 1,468 |
| | 100.0 | % | | 1,554 |
| | 100.0 | % |
The following table summarizes total industry retail sales volume, or estimated sales volume where retail sales volume is not available, of new vehicles of domestic and foreign makes and the related competitive position by geographic region (vehicles in thousands):
| | | Vehicle Sales(a)(b)(c) Three Months Ended | | Vehicle Sales(a)(b)(c) Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
| Industry | | GM | | GM as a % of Industry | | Industry | | GM | | GM as a % of Industry | | Industry | | GM | | GM as a % of Industry | | Industry | | GM | | GM as a % of Industry | Industry | | GM | | GM as a % of Industry | | Industry | | GM | | GM as a % of Industry |
North America | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United States | 4,031 |
| | 697 |
| | 17.3 | % | | 3,702 |
| | 652 |
| | 17.6 | % | | 12,000 |
| | 2,117 |
| | 17.6 | % | | 11,128 |
| | 1,968 |
| | 17.7 | % | 3,814 |
| | 650 |
| | 17.0 | % | | 3,757 |
| | 665 |
| | 17.7 | % |
Other | 818 |
| | 111 |
| | 13.6 | % | | 778 |
| | 107 |
| | 13.8 | % | | 2,393 |
| | 332 |
| | 13.9 | % | | 2,293 |
| | 316 |
| | 13.8 | % | 702 |
| | 95 |
| | 13.6 | % | | 728 |
| | 96 |
| | 13.3 | % |
Total North America | 4,849 |
| | 808 |
| | 16.7 | % | | 4,479 |
| | 759 |
| | 16.9 | % | | 14,393 |
| | 2,450 |
| | 17.0 | % | | 13,421 |
| | 2,284 |
| | 17.0 | % | 4,516 |
| | 745 |
| | 16.5 | % | | 4,485 |
| | 761 |
| | 17.0 | % |
Europe | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United Kingdom | 718 |
| | 78 |
| | 10.8 | % | | 642 |
| | 74 |
| | 11.6 | % | | 2,038 |
| | 232 |
| | 11.4 | % | | 1,847 |
| | 212 |
| | 11.5 | % | 777 |
| | 85 |
| | 11.0 | % | | 685 |
| | 80 |
| | 11.7 | % |
Germany | 789 |
| | 61 |
| | 7.7 | % | | 799 |
| | 59 |
| | 7.4 | % | | 2,434 |
| | 185 |
| | 7.6 | % | | 2,591 |
| | 200 |
| | 7.7 | % | 782 |
| | 57 |
| | 7.2 | % | | 737 |
| | 54 |
| | 7.3 | % |
Russia | 724 |
| | 68 |
| | 9.4 | % | | 793 |
| | 80 |
| | 10.1 | % | | 2,086 |
| | 189 |
| | 9.1 | % | | 2,240 |
| | 217 |
| | 9.7 | % | 606 |
| | 54 |
| | 8.8 | % | | 630 |
| | 57 |
| | 9.0 | % |
Other | 2,265 |
| | 181 |
| | 8.0 | % | | 2,200 |
| | 158 |
| | 7.2 | % | | 7,488 |
| | 579 |
| | 7.7 | % | | 7,801 |
| | 587 |
| | 7.5 | % | 2,483 |
| | 142 |
| | 5.7 | % | | 2,369 |
| | 144 |
| | 6.1 | % |
Total Europe | 4,496 |
| | 388 |
| | 8.6 | % | | 4,434 |
| | 372 |
| | 8.4 | % | | 14,046 |
| | 1,186 |
| | 8.4 | % | | 14,479 |
| | 1,216 |
| | 8.4 | % | 4,648 |
| | 338 |
| | 7.3 | % | | 4,421 |
| | 335 |
| | 7.6 | % |
Asia/Pacific, Middle East and Africa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
China(d) | 5,116 |
| | 745 |
| | 14.6 | % | | 4,448 |
| | 665 |
| | 14.9 | % | | 15,952 |
| | 2,312 |
| | 14.5 | % | | 14,189 |
| | 2,082 |
| | 14.7 | % | 6,052 |
| | 919 |
| | 15.2 | % | | 5,418 |
| | 816 |
| | 15.1 | % |
Other(d) | 4,568 |
| | 185 |
| | 4.0 | % | | 4,635 |
| | 193 |
| | 4.2 | % | | 14,114 |
| | 534 |
| | 3.8 | % | | 14,192 |
| | 566 |
| | 4.0 | % | |
Other | | 5,198 |
| | 203 |
| | 3.9 | % | | 5,136 |
| | 214 |
| | 4.2 | % |
Total Asia/Pacific, Middle East and Africa | 9,684 |
| | 930 |
| | 9.6 | % | | 9,083 |
| | 857 |
| | 9.4 | % | | 30,066 |
| | 2,847 |
| | 9.5 | % | | 28,380 |
| | 2,648 |
| | 9.3 | % | 11,250 |
| | 1,122 |
| | 10.0 | % | | 10,554 |
| | 1,030 |
| | 9.8 | % |
South America | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Brazil | 981 |
| | 171 |
| | 17.4 | % | | 1,072 |
| | 183 |
| | 17.1 | % | | 2,780 |
| | 476 |
| | 17.1 | % | | 2,789 |
| | 474 |
| | 17.0 | % | 813 |
| | 137 |
| | 16.8 | % | | 830 |
| | 141 |
| | 17.0 | % |
Other | 551 |
| | 102 |
| | 18.5 | % | | 518 |
| | 102 |
| | 19.6 | % | | 1,643 |
| | 294 |
| | 17.9 | % | | 1,560 |
| | 313 |
| | 20.0 | % | 480 |
| | 74 |
| | 15.4 | % | | 532 |
| | 94 |
| | 17.6 | % |
Total South America | 1,532 |
| | 273 |
| | 17.8 | % | | 1,590 |
| | 285 |
| | 17.9 | % | | 4,423 |
| | 770 |
| | 17.4 | % | | 4,349 |
| | 786 |
| | 18.1 | % | 1,293 |
| | 211 |
| | 16.3 | % | | 1,362 |
| | 235 |
| | 17.2 | % |
Total Worldwide | 20,561 |
| | 2,398 |
| | 11.7 | % | | 19,587 |
| | 2,273 |
| | 11.6 | % | | 62,928 |
| | 7,252 |
| | 11.5 | % | | 60,629 |
| | 6,933 |
| | 11.4 | % | 21,707 |
| | 2,416 |
| | 11.1 | % | | 20,822 |
| | 2,361 |
| | 11.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
United States | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cars | 1,930 |
| | 271 |
| | 14.0 | % | | 1,784 |
| | 261 |
| | 14.6 | % | | 5,826 |
| | 827 |
| | 14.2 | % | | 5,503 |
| | 813 |
| | 14.8 | % | 1,787 |
| | 265 |
| | 14.8 | % | | 1,858 |
| | 257 |
| | 13.8 | % |
Trucks | 1,062 |
| | 245 |
| | 23.1 | % | | 992 |
| | 234 |
| | 23.5 | % | | 3,124 |
| | 740 |
| | 23.7 | % | | 2,916 |
| | 677 |
| | 23.2 | % | 1,012 |
| | 207 |
| | 20.4 | % | | 943 |
| | 228 |
| | 24.2 | % |
Crossovers | 1,040 |
| | 181 |
| | 17.5 | % | | 926 |
| | 158 |
| | 17.0 | % | | 3,051 |
| | 551 |
| | 18.1 | % | | 2,709 |
| | 478 |
| | 17.6 | % | 1,015 |
| | 178 |
| | 17.5 | % | | 956 |
| | 180 |
| | 18.8 | % |
Total United States | 4,031 |
| | 697 |
| | 17.3 | % | | 3,702 |
| | 652 |
| | 17.6 | % | | 12,000 |
| | 2,117 |
| | 17.6 | % | | 11,128 |
| | 1,968 |
| | 17.7 | % | 3,814 |
| | 650 |
| | 17.0 | % | | 3,757 |
| | 665 |
| | 17.7 | % |
________
| |
(a) | North America vehicle sales primarily represent sales to the end customer. Europe, Asia/Pacific, Middle East and Africa and South America vehicle sales primarily represent estimated sales to the end customer. In countries where end customer data is not readily available other data sources, such as wholesale or forecast volumes, are used to estimate vehicle sales. |
| |
(b) | Certain fleet sales that are accounted for as operating leases are included in vehicle sales at the time of delivery to the daily rental car companies. |
| |
(c) | Vehicle sales data may include rounding differences. |
| |
(d) | The joint venture vehicle sales presented in the following table are included in our retail vehicle sales. Vehicle sales for SAIC GM Investment Limited, the holding company of General Motors India Private Limited and Chevrolet Sales India Private Limited (collectively HKJV) are included in the three and nine months ended September 30, 2013. Refer to Note 2 to our condensed consolidated financial statements for additional information on the acquisition of HKJV.
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
North America vehicle sales primarily represent sales to the end customer. Europe, Asia/Pacific, Middle East and Africa and South America vehicle sales primarily represent estimated sales to the end customer. In countries where end customer data is not readily available other data sources, such as wholesale or forecast volumes, are used to estimate vehicle sales. Certain fleet sales that are accounted for as operating leases are included in vehicle sales at the time of delivery to the daily rental car companies. The vehicle sales at our China JVs presented in the following table are included in our retail vehicle sales (vehicles in thousands): |
| | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Joint venture sales in China | | | | | | | |
SAIC General Motors Sales Co., Ltd. (SGMS) | 368 |
| | 327 |
| | 1,111 |
| | 967 |
|
SGMW and FAW-GM | 376 |
| | 336 |
| | 1,198 |
| | 1,111 |
|
Joint venture sales in India | | | | | | | |
HKJV |
|
| | 15 |
| |
| | 64 |
|
|
| | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
SAIC General Motors Sales Co., Ltd. | 422 |
| | 382 |
|
SGMW and FAW-GM | 497 |
| | 434 |
|
Automotive Financing - GM Financial
General MotorsGM Financial Company, Inc. (GM Financial) is a global provider of automobile financing solutions. GM Financial specializessolutions specializing in purchasing retail automobile installment sales contracts originated by GM and non-GM franchised and select independent dealers in connection with the sale of used and new automobiles. GM Financial also offers a lease products throughfinancing product for new GM dealerships in connection with the marketing of new automobilesvehicles and also providesa commercial lending programs to GM dealers.program for GM-franchised dealerships. GM Financial primarily generates revenue and cash flows through the purchase, retention, securitization and servicing of finance receivables.receivables and leased assets. GM Financial earns finance charge income on finance receivables and pays interest expense on borrowings under its secured and unsecured credit facilities. GM Financial periodically transfers receivables and pledges lease-related assets to securitization trusts that issue asset-backed securities to investors. The securitization trusts are special purpose entities that are also variable interest entities that meetcompleted the requirements to be consolidated in the financial statements.
Automotive Financing Strategy
Our automotive financing strategy centers on ensuring that our dealers and customers have consistently available, transparent and competitive financing options throughout the business and credit cycles. We believe that by having our own capabilities in key financing segmentsacquisitions of the market we will be able to achieve more competition from other financing market participants, which we believe improves pricing and service to our dealers and retail customers. We achieve this through our captive finance capabilities at GM Financial and through operating relationships with financial institutions. Historically Ally Financial, Inc. (Ally Financial) provided a majority of the financing for our dealers and a significant portion of the financing for our customers in the U.S., Canada and other major international markets where we operate. Ally Financial continues to be the largest U.S. third party provider of financing for our dealers and customers. We have added relationships with other financial institutions including arrangements to provide incentivized retail financing to our customers in the U.S., Canada, United Kingdom and Australia. GM Financial continues to expand its business in targeted areas that it views as strategic and to otherwise evaluate opportunities in specific segments of the automotive financing market.
In November 2012 GM Financial entered into agreements with Ally Financial to acquire Ally Financial's automotive finance and financial services businesses in Europe and Latin America. Additionally in November 2012 GM Financial entered into a share transfer agreement with Ally FinancialAmerica during 2013 and expects to acquire Ally Financial's equity interest in GMAC-SAIC Automotive Finance Company Limited (GMAC-SAIC) that conducts automotive finance and financial services operations in China. The purchases will allow GM Financial to support our dealers in markets comprising 80% of our global sales. The combined consideration will be approximately $4.1 billion.
In April 2013 GM Financial completedcomplete the acquisition of Ally Financial's European and Latin American automotive finance operations except for France, Portugal and Brazil;joint venture in June 2013 it completed the acquisition of Ally Financial's automotive finance operationsChina in France and Portugal; and in October 2013 it completed the acquisition of Ally Financial's automotive finance operations in Brazil. The aggregate consideration for these acquisitions was $3.2 billion, subject to certain closing adjustments. In addition GM Financial repaid loans of $1.4 billion that were assumed as part of the acquisition.2014.
GM Financial's acquisition of Ally Financial's equity interest in GMAC-SAIC is subject to certain regulatory and other approvals, and is expected to close in 2014. GM Financial expects to pay approximately $0.9 billion to close this acquisition subject to certain closing adjustments. Refer to Notes 2 and 21 to our condensed consolidated financial statements for additional information on these acquisitions.
In April 2012 GM Financial commenced commercial lending activities in the U.S. centered on floor plan financing of dealer vehicle inventory and dealer loans to finance dealer sites, facilities, facility improvements and working capital. In 2013 GM Financial expanded the commercial lending program to Canada and to Europe and Latin America through its acquisition of certain of Ally Financial's automotive finance operations discussed previously. These loans are made on a secured basis.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Consolidated Results
Total Net Sales and Revenue
(Dollars in Millions)
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Three Months Ended 2014 vs. 2013 | | | Variance Due To |
September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change | March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| | Amount | | % | | Amount | | % | (Dollars in millions) | | | | | (Dollars in billions) |
Automotive | $ | 38,120 |
| | $ | 37,062 |
| | $ | 112,704 |
| | $ | 111,517 |
| | $ | 1,058 |
| | 2.9 | % | | $ | 1,187 |
| | 1.1 | % | $ | 36,315 |
| | $ | 36,344 |
| | $ | (29 | ) | | (0.1 | )% | | | $ | (1.6 | ) | | $ | 0.4 |
| | $ | 1.8 |
| | $ | (0.7 | ) | | $ | (0.1 | ) |
GM Financial | 863 |
| | 514 |
| | 2,238 |
| | 1,432 |
| | 349 |
| | 67.9 | % | | 806 |
| | 56.3 | % | 1,093 |
| | 540 |
| | 553 |
| | 102.4 | % | | | — |
| | — |
| | — |
| | 0.6 |
| | 0.6 |
|
Total net sales and revenue | $ | 38,983 |
| | $ | 37,576 |
| | $ | 114,942 |
| | $ | 112,949 |
| | $ | 1,407 |
| | 3.7 | % | | $ | 1,993 |
| | 1.8 | % | $ | 37,408 |
| | $ | 36,884 |
| | $ | 524 |
| | 1.4 | % | | | $ | (1.6 | ) | | $ | 0.4 |
| | $ | 1.8 |
| | $ | (0.1 | ) | | $ | 0.5 |
|
In the three months ended September 30, 2013March 31, 2014 Automotive Total net sales and revenue remained flat and the components of revenue changed due primarily to: (1) decreased wholesale volumes in GMIO of $0.9 billion, GMNA of $0.5 billion and GMSA of $0.4 billion, partially offset by increased wholesale volume in GME of $0.3 billion; and (2) Other of $0.7 billion due primarily to unfavorable net foreign currency effect of $0.8 billion related to the weakening of the Brazilian Real, Argentinian Peso, CAD, and Australian Dollar against the U.S Dollar; partially offset by (3) favorable pricing effect in GMNA of $1.7 billion and GMSA of $0.2 billion; partially offset by unfavorable pricing in GME of $0.1 billion; and (4) favorable mix in GMNA of $0.2 billion, GME of $0.1 billion and GMSA of $0.1 billion.
In the three months ended March 31, 2014 GM Financial Total net sales and revenue increased due primarily to: (1) favorable vehicle mixincreased finance charge income of $0.8 billion; (2) favorable vehicle pricing of $0.8 billion; (3) increased GM Financial revenue of $0.3$0.4 billion including $0.2 billion relateddue to growth in the portfolio resulting from the acquisition of the Ally Financial'sFinancial international operations; (4)and (2) increased other revenue of $0.3 billion due primarily to increases in OnStar and parts and accessories revenue; and (5) increased wholesale volumesleased vehicle income of $0.1 billion due to an increaseincreased size of 8,000 vehicles (or 0.5%) primarily in GMSA and GMNA, driven by increased industry demand, partially offset by decreases in GMIO in the Middle East and South East Asia; partially offset by (6) unfavorable foreign currency effect of $0.8 billion due to the weakening of major currencies against the U.S. Dollar.
In the nine months ended September 30, 2013 Total net sales and revenue increased due primarily to: (1) favorable vehicle mix of $1.5 billion; (2) favorable vehicle pricing of $1.0 billion; (3) increased GM Financial revenue of $0.8 billion including $0.5 billion related to the acquisition of Ally Financial's international operations; and (4) increased other revenue of $0.4 billion due primarily to increases in OnStar and parts and accessories revenue; partially offset by (5) unfavorable foreign currency effect of $1.6 billion due to the weakening of major currencies against the U.S. Dollar; and (6) decreased wholesale volumes of $0.1 billion due to a decrease of 11,000 vehicles (or 0.2%) primarily in GMIO in both the Middle East and Chevrolet brand vehicles in Europe and GME due to a weak European economy, partially offset by an increase from the consolidation of HKJV effective September 2012 and increases in GMNA and GMSA, driven by increased industry demand.leased asset portfolio.
Automotive Cost of Sales
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Three Months Ended 2014 vs. 2013 | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change | March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % | | | Volume | | Mix | | Other | | Total |
| | Amount | | % | | Amount | | % | (Dollars in millions) | | | | | (Dollars in billions) |
Automotive cost of sales | $ | 33,166 |
| | $ | 32,735 |
| | $ | 99,607 |
| | $ | 98,323 |
| | $ | 431 |
| | 1.3 | % | | $ | 1,284 |
| | 1.3 | % | $ | 34,127 |
| | $ | 32,617 |
| | $ | (1,510 | ) | | (4.6 | )% | | | $ | 1.2 |
| | $ | (0.7 | ) | | $ | (2.0 | ) | | $ | (1.5 | ) |
Automotive gross margin | $ | 4,954 |
| | $ | 4,327 |
| | $ | 13,097 |
| | $ | 13,194 |
| | $ | 627 |
| | 14.5 | % | | $ | (97 | ) | | (0.7 | )% | $ | 2,188 |
| | $ | 3,727 |
| | $ | (1,539 | ) | | (41.3 | )% | | | | | | | | | |
In the three months ended September 30, 2013 Automotive cost of sales increased due primarily to: (1) increased material and freight costs of $0.3 billion; (2) unfavorable vehicle mix of $0.3 billion; (3) increased various other costs of $0.2 billion; (4) increased costs of $0.1 billion related to the increased wholesale vehicle sales; and (5) increased engineering cost of $0.1 billion; partially offset by (6) favorable foreign currency effect of $0.3 billion due to the weakening of major currencies against the U.S. Dollar; and (7) reduction in unfavorable policy and warranty adjustments of $0.3 billion.
In the nine months ended September 30, 2013March 31, 2014 Automotive cost of sales increased due primarily to: (1) unfavorable vehicle mix in GMNA of $1.8 billion; (2) increased manufacturing costs of $0.4$0.3 billion, to support new vehicle launches; and (3) decreased U.S. pension incomeGMIO of $0.2 billion; partially offset by (4) decreased policy and warranty expense of $0.7 billion; (5) favorable foreign currency effect of $0.4 billion, due to the weakening of major currencies against the U.S. Dollar and the devaluation of the Bolivar Fuerte (BsF); and (6) decreased costsGME of $0.1 billion related to decreased wholesale volume.
Automotive Selling, General and Administrative Expense
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
Automotive selling, general and administrative expense | $ | 2,876 |
| | $ | 2,849 |
| | $ | 8,753 |
| | $ | 8,684 |
| | $ | 27 |
| | 0.9 | % | | $ | 69 |
| | 0.8 | % |
GENERAL MOTORS COMPANY AND SUBSIDIARIES
In the three and nine months ended September 30, 2013 Automotive selling, general and administrative expense remained flat.
Goodwill Impairment Charges
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
Goodwill impairment charges | $ | 60 |
| | $ | 78 |
| | $ | 60 |
| | $ | 695 |
| | $ | (18 | ) | | (23.1 | )% | | $ | (635 | ) | | (91.4 | )% |
In the three months ended September 30, 2013 Goodwill impairment charges remained flat due to Goodwill impairment charges of $0.1 billion recorded in the GM Korea Company (GM Korea) reporting unit in the three months ended September 30, 2013 and 2012.
In the nine months ended September 30, 2013 Goodwill impairment charges decreased due to Goodwill impairment charges of $0.1 billion in the GM Korea reporting unit compared to $0.6 billion and $0.1 billion in the GME and GM Korea reporting units recorded in the nine months ended September 30, 2012.
Automotive Interest Expense
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
Automotive interest expense | $ | 65 |
| | $ | 128 |
| | $ | 217 |
| | $ | 356 |
| | $ | (63 | ) | | (49.2 | )% | | $ | (139 | ) | | (39.0 | )% |
In the three and nine months ended September 30, 2013 Automotive interest expense decreased due primarily to lower average automotive debt outstanding resulting from the redemption of GM Korea preferred shares in December 2012 and April 2013.
Interest Income and Other Non-Operating Income (Loss), net
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
Interest income and other non-operating income (loss), net | $ | (82 | ) | | $ | 318 |
| | $ | 340 |
| | $ | 732 |
| | $ | (400 | ) | | n.m. | | $ | (392 | ) | | (53.6 | )% |
________
n.m. = not meaningful
In the three months ended September 30, 2013 Interest income and other non-operating loss, net was $0.1 billion compared to Interest income and other non-operating income, net of $0.3 billion in the three months ended September 30, 2012 due primarily to: (1) unfavorable foreign currency effect of $0.2 billion; and (2) decreased interest income of $0.1 billion.
In the nine months ended September 30, 2013 Interest income and other non-operating income, net decreased due primarily to: (1) decreased rental income of $0.1 billion; (2) decreased exclusivity fee paid by GMAC LLC of $0.1 billion; (3) decreased interest incomeGMSA of $0.1 billion; and (4) unfavorable foreign currency transaction and remeasurement loss(2) Other of $0.1 billion.
Income Tax Expense
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
Income tax expense | $ | 842 |
| | $ | 357 |
| | $ | 1,993 |
| | $ | 814 |
| | $ | 485 |
| | 135.9 | % | | $ | 1,179 |
| | 144.8 | % |
In the three and nine months ended September 30, 2013 Income tax expense increased$2.0 billion due primarily to the inclusion of U.S. and Canada entities in our tax expense calculation resulting from the release of their valuation allowances in the year ended December 31, 2012.
Equity Income, Net of Tax
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
China joint ventures (China JVs) | $ | 425 |
| | $ | 371 |
| | $ | 1,391 |
| | $ | 1,121 |
| | $ | 54 |
| | 14.6 | % | | $ | 270 |
| | 24.1 | % |
Others | 11 |
| | 47 |
| | 29 |
| | 20 |
| | (36 | ) | | (76.6 | )% | | 9 |
| | 45.0 | % |
Total equity income, net of tax | $ | 436 |
| | $ | 418 |
| | $ | 1,420 |
| | $ | 1,141 |
| | $ | 18 |
| | 4.3 | % | | $ | 279 |
| | 24.5 | % |
In the three months ended September 30, 2013 Equity income, net of tax remained flat.
In the nine months ended September 30, 2013 Equity income, net of tax increased due primarily to an increase in the earnings of the SGMS and SGMW China JVs.
GM North America
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 23,508 |
| | $ | 22,347 |
| | $ | 1,161 |
| | 5.2 | % | | | $ | 0.1 |
| | $ | 0.4 |
| | $ | 0.6 |
| | $ | 0.1 |
| | $ | 1.2 |
|
EBIT-adjusted | $ | 2,187 |
| | $ | 1,715 |
| | $ | 472 |
| | 27.5 | % | | | $ | — |
| | $ | 0.4 |
| | $ | 0.6 |
| | $ | (0.5 | ) | | $ | 0.5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 69,982 |
| | $ | 67,074 |
| | $ | 2,908 |
| | 4.3 | % | | | $ | 0.8 |
| | $ | 1.2 |
| | $ | 0.7 |
| | $ | 0.2 |
| | $ | 2.9 |
|
EBIT-adjusted | $ | 5,577 |
| | $ | 5,248 |
| | $ | 329 |
| | 6.3 | % | | | $ | 0.2 |
| | $ | 0.3 |
| | $ | 0.7 |
| | $ | (0.9 | ) | | $ | 0.3 |
|
GMNA Total Net Sales and Revenue
In the three months ended September 30, 2013 Total net sales and revenue increased due primarily to: (1) favorable vehicle pricing; (2) favorable vehicle mix; and (3) increased wholesale volumes of 2,000 vehicles (or 0.3%).
In the nine months ended September 30, 2013 Total net sales and revenue increased due primarily to: (1) favorable vehicle mix; (2) increased wholesale volumes of 32,000 vehicles (or 1.4%) due to increased industry demand and successful recent vehicle launches such as the Buick Encore, Cadillac ATS, Chevrolet Silverado, Chevrolet Spark, and GMC Sierra; and (3) favorable vehicle pricing.
GMNA EBIT-Adjusted
In the three months ended September 30, 2013 earnings before interest and taxes (EBIT)-adjusted increased due primarily to: (1) favorable vehicle pricing; and (2) favorable net vehicle mix; partially offset by (3) Other of $0.5 billion due primarily to increased material and freight costs of $0.5 billion; and increased engineering expense of $0.2 billion; partially offset by a reduction in unfavorable warranty and policy adjustments of $0.3 billion.
In the nine months ended September 30, 2013 EBIT-adjusted increased due primarily to: (1) favorable vehicle pricing; (2) favorable net vehicle mix; and (3) increased wholesale volumes; partially offset by (4) Other of $0.9 billion due primarily to increased material and freight costs of $0.5 billion; increased manufacturing expense, including new launches, of $0.4 billion; increased depreciation and amortization expense of $0.2 billion; decreased U.S. pension income of $0.2 billion due to settlement of the salaried retiree pension plan in 2012; and increased engineering expense of $0.2 billion; partially offset by a reduction in unfavorable warranty and policy adjustments of $0.6 billion.
GM Europe
GENERAL MOTORS COMPANY AND SUBSIDIARIES
to policy and warranty recall campaign actions in GMNA of $1.3 billion in 2014; increased material and freight cost including new launches in GMNA of $1.0 billion; and restructuring related charges in GME of $0.2 billion; partially offset by favorable net foreign currency effect of $0.2 billion due primarily to the weakening of the Brazilian Real, CAD and Australian Dollar against the U.S Dollar; partially offset by the Venezuela Bolivar Fuerte (BsF) devaluation; partially offset by (3) decreased wholesale volumes in GMIO of $0.7 billion, GMNA of $0.4 billion and GMSA of $0.3 billion; partially offset by increased wholesale volume in GME of $0.2 billion.
GM Financial Operating and Other Expenses
(Dollars in Millions)
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | Favorable/ (Unfavorable) | | % |
GM Financial operating and other expenses | $ | 875 |
| | $ | 356 |
| | $ | (519 | ) | | (145.8 | )% |
In the three months ended March 31, 2014 GM Financial operating and other expenses increased due primarily to: (1) increased interest expense of $0.2 billion due to higher average debt outstanding and effective rate of interest; (2) increased operating expenses of $0.2 billion due to the acquisition of the Ally Financial international operations; and (3) increased leased vehicle expenses of $0.1 billion due to the increased size of leased asset portfolio.
Automotive Selling, General and Administrative Expense
(Dollars in Millions)
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % |
Automotive selling, general and administrative expense | $ | 2,941 |
| | $ | 2,952 |
| | $ | 11 |
| | 0.4 | % |
In the three months ended March 31, 2014 Automotive selling, general and administrative expense remained flat.
Automotive Interest Expense
(Dollars in Millions)
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % |
Automotive interest expense | $ | 103 |
| | $ | 91 |
| | $ | (12 | ) | | (13.2 | )% |
In the three months ended March 31, 2014 Automotive interest expense remained flat.
Interest Income and Other Non-Operating Income, net
(Dollars in Millions)
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % |
Interest income and other non-operating income, net | $ | 89 |
| | $ | 171 |
| | $ | (82 | ) | | (48.0 | )% |
In the three months ended March 31, 2014 Interest income and other non-operating income, net decreased due primarily to: (1) insurance recoveries in 2013 that did not recur in 2014; and (2) decreased interest income.
Equity Income
(Dollars in Millions)
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % |
China JVs | $ | 595 |
| | $ | 548 |
| | $ | 47 |
| | 8.6 | % |
Others | 10 |
| | 7 |
| | 3 |
| | 42.9 | % |
Total equity income | $ | 605 |
| | $ | 555 |
| | $ | 50 |
| | 9.0 | % |
In the three months ended March 31, 2014 Equity income increased due primarily to an increase in earnings of our China JVs.
Income Tax Expense (Benefit)
(Dollars in Millions)
|
| | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % |
Income tax expense (benefit) | $ | (224 | ) | | $ | 409 |
| | $ | 633 |
| | n.m. |
__________
n.m. = not meaningful
In the three months ended March 31, 2014 we had income tax benefit compared to income tax expense in the three months ended March 31, 2013 due primarily to: (1) reduced tax expense attributable to entities in our effective tax rate calculation of $0.6 billion; and (2) other tax benefits related to deductions taken for stock investments in non-U.S. affiliates and tax audit settlements of $0.2 billion; partially offset by (3) the U.S. research credit legislated of $0.2 billion recorded in the three months ended March 31, 2013.
Reconciliation of Consolidated, Automotive and GM Financial Segment Results
Non-GAAP Measures
Management believes earnings before interest and taxes (EBIT)-adjusted provides meaningful supplemental information regarding our automotive segments' operating results because it excludes interest income, interest expense and income taxes as well as certain additional adjustments. Management believes income before income taxes-adjusted provides meaningful supplemental information regarding GM Financial's operating results. GM Financial uses a separate measure from our automotive operations because management believes interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Examples of adjustments to EBIT and GM Financial's income before income taxes include impairment charges related to goodwill, other long-lived assets under certain circumstances and certain investments; gains or losses on the settlement/extinguishment of obligations; and gains or losses on the sale of non-core investments.
Management believes free cash flow and adjusted free cash flow provide meaningful supplemental information regarding the liquidity of our automotive operations and our ability to generate sufficient cash flow above those required in our business to sustain our operations. We measure free cash flow as cash flow from operations less capital expenditures. We measure adjusted free cash flow as free cash flow adjusted for management actions, primarily related to strengthening our balance sheet, such as accrued interest on prepayments of debt and voluntary contributions to employee benefit plans.
Management believes these measures allow it to readily view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions. We believe these non-GAAP measures are useful in allowing for greater transparency of our core operations and are therefore used by management in its financial and operational decision-making. Management does not consider the excluded items when assessing and measuring the operational and financial performance of the organization, its management teams and when making decisions to allocate resources, such as capital investment, among business units and for internal reporting and as part of its forecasting and budgeting processes.
While management believes that these non-GAAP measures provide useful information, they are not operating measures under U.S. GAAP and there are limitations associated with their use. 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 in isolation from, or as a substitute for, other measures such as Net income, Income before income taxes or operating cash flow. Due to these limitations, these non-GAAP measures are used as supplements to U.S. GAAP measures.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The following table summarizes the reconciliation of our automotive segments' EBIT-adjusted and GM Financial's income before income taxes-adjusted to Income before income taxes and provides supplemental detail of the adjustments, which are presented net of noncontrolling interests (dollars in millions):
|
| | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
Automotive | | | | | | | |
EBIT-adjusted | | | | | | | |
GMNA | $ | 557 |
| | 226.4 | % | | $ | 1,414 |
| | 89.2 | % |
GME | (284 | ) | | (115.4 | )% | | (152 | ) | | (9.6 | )% |
GMIO | 252 |
| | 102.4 | % | | 472 |
| | 29.8 | % |
GMSA | (156 | ) | | (63.4 | )% | | (38 | ) | | (2.4 | )% |
Corporate | (123 | ) | | (50.0 | )% | | (110 | ) | | (7.0 | )% |
Total automotive EBIT-adjusted | 246 |
| | 100.0 | % | | 1,586 |
| | 100.0 | % |
Adjustments | (428 | ) | | | | (170 | ) | | |
Corporate interest income | 53 |
| | | | 79 |
| | |
Automotive interest expense | (103 | ) | | | | (91 | ) | | |
Net income attributable to noncontrolling interests | 67 |
| | | | 10 |
| | |
Automotive Financing | | | | | | | |
GM Financial income before income taxes-adjusted | 221 |
| | | | 180 |
| | |
Adjustments | 1 |
| | | | — |
| | |
Consolidated | | | | | | | |
Eliminations | (1 | ) | | | | — |
| | |
Income before income taxes | $ | 56 |
| | | | $ | 1,594 |
| | |
Our automotive operations' interest income and interest expense are recorded centrally in Corporate; therefore, there are no reconciling items for our automotive operating segments between EBIT-adjusted and Income before income taxes.
In the three months ended March 31, 2014 adjustments to EBIT consisted of Venezuela currency devaluation of $419 million in GMSA and other of $8 million.
In the three months ended March 31, 2013 adjustments to EBIT consisted of Venezuela currency devaluation of $162 million in GMSA and other of $8 million.
GM North America
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Variance Due To |
| March 31, 2014 | | March 31, 2013 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 24,404 |
| | $ | 22,979 |
| | $ | 1,425 |
| | 6.2 | % | | | $ | (0.5 | ) | | $ | 0.2 |
| | $ | 1.7 |
| | $ | — |
| | $ | 1.4 |
|
EBIT-adjusted | $ | 557 |
| | $ | 1,414 |
| | $ | (857 | ) | | (60.6 | )% | | | $ | (0.1 | ) | | $ | (0.1 | ) | | $ | 1.7 |
| | $ | (2.4 | ) | | $ | (0.9 | ) |
| (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | 807 | | 829 |
| | (22 | ) | | (2.7 | )% | | | | | | | | | | | |
GMNA Total Net Sales and Revenue
In the three months ended March 31, 2014 Total net sales and revenue increased due primarily to: (1) favorable vehicle pricing related to recent vehicle launches such as Chevrolet Silverado, Chevrolet Tahoe, GMC Sierra and GMC Yukon; and (2) favorable mix due primarily to changes in Chevrolet Tahoe, Chevrolet Impala, Chevrolet Sonic and Chevrolet Spark, partially offset by decreases in Cadillac Escalade related to the vehicle launch cadence; partially offset by (3) decreased wholesale volumes due to decreased market share.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
GMNA EBIT-Adjusted
In the three months ended March 31, 2014 EBIT-adjusted decreased due primarily to: (1) decreased wholesale volumes due to decreased market share; (2) unfavorable mix due primarily to decreases in Cadillac Escalade related to the vehicle launch cadence, partially offset by Chevrolet Tahoe; and (3) unfavorable Other of $2.4 billion due primarily to policy and warranty recall campaign actions in 2014 of $1.3 billion, as subsequently described; and increased material and freight costs, including new launches, of $1.0 billion; partially offset by (4) favorable vehicle pricing related to recent vehicle launches such as Chevrolet Silverado, Chevrolet Tahoe, GMC Sierra and GMC Yukon.
Recall Campaigns
In the three months ended March 31, 2014 we experienced a significant increase in the number of vehicles subject to recall in North America resulting in incremental charges for the estimated costs of parts and labor to repair these vehicles and courtesy transportation for certain recalls. Currently there are approximately 7 million vehicles subject to recalls announced during this period. This reflects the results of our ongoing comprehensive safety review, additional engineering analysis and our overall commitment to customer satisfaction.
In the three months ended March 31, 2014 we announced a recall to repair ignition switches in vehicles that we are no longer producing that under certain circumstances could result in a loss of electrical power that may prevent front airbags from deploying in the event of a crash. It was originally estimated that approximately 800,000 vehicles were equipped with ignition switches needing repair. These vehicles include model years 2005–2007 Chevrolet Cobalt, 2007 Pontiac G5 and 2005–2006 Pursuit. In the three months ended December 31, 2013 we recorded approximately $40 million in Automotive cost of sales to cover the repairs as these costs were considered probable and estimable at that time. In the three months ended March 31, 2014 we expanded this recall by approximately 1.8 million additional vehicles for the same issue. These vehicles, consisting of model years 2008–2010 Chevrolet Cobalt, model years 2006–2011 HHR, model years 2008–2010 Pontiac G5, model years 2006–2010 Solstice, model years 2003–2007 Saturn ION and model years 2007–2010 Sky, were not included in the initial recall. In the three months ended March 31, 2014 we recorded approximately $90 million in Automotive cost of sales to repair these vehicles and approximately $270 million in Automotive cost of sales to provide courtesy transportation to owners of affected vehicles. These recalls, relating to ignition switches, are collectively referred to as the “Ignition Switch Recall”. Refer to Note 10 to our condensed consolidated financial statements for litigation associated with the Ignition Switch Recall. A second repair was added to these vehicles as a result of the comprehensive review described below to fix ignition lock cylinders that could allow removal of the ignition key while the engine is running, leading to possible rollaway or crash. In the three months ended March 31, 2014 we recorded approximately $320 million in Automotive cost of sales to repair ignition lock cylinders.
As a result of the Ignition Switch Recall senior leadership initiated a comprehensive review and engineering analysis to identify any additional issues which could potentially result in safety or satisfaction concerns for our customers. As part of our normal process and a result of these reviews we announced the following additional recall campaigns in the three months ended March 31, 2014:
Approximately 1.9 million vehicles were recalled to replace either the power steering motor, the steering column, the power steering motor control unit or a combination of the steering column and the power steering motor control unit as the electric power steering could fail under certain circumstances — model years 2004–2006, 2008–2009 Chevrolet Malibu, model years 2004–2006 Malibu Maxx, model years 2006–2010 HHR, model years 2005–2010 Cobalt, model years 2008–2009 Saturn Aura, model years 2003–2007 ION, model years 2007–2010 Pontiac G5, model years 2005–2006, 2008–2009 G6 and model years 2005–2006 Pursuit and G4. We recorded approximately $340 million in Automotive cost of sales to repair these vehicles.
Approximately 1.3 million vehicles were recalled that are prone to non-deployment of the side impact restraints if vehicles are not serviced when the Service Air Bag warning light is illuminated — model years 2008–2013 Buick Enclave and GMC Acadia, model years 2009–2013 Chevrolet Traverse and model years 2008–2010 Saturn Outlook. We recorded approximately $185 million in Automotive cost of sales to repair these vehicles.
Approximately 1.2 million vehicles were recalled for other matters — certain model years 2009–2014 Chevrolet Express and GMC Savana, model years 2011–2014 Chevrolet Cruze, model year 2014 Chevrolet Silverado 1500 and GMC Sierra 1500 and model year 2015 Chevrolet Suburban, Tahoe, GMC Yukon and Cadillac Escalade. We recorded approximately $70 million in Automotive cost of sales to repair these vehicles.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
In total we recorded approximately $1.3 billion for the above-described actions in the three months ended March 31, 2014. The following table summarizes the activity for customer satisfaction campaigns, safety recalls, non-compliance recalls and special coverage in GMNA, including courtesy transportation (dollars in millions):
|
| | | | | | | |
| Three Months Ended |
| March 31, 2014 | | March 31, 2013 |
Balance at beginning of period | $ | 761 |
| | $ | 851 |
|
Additions | 1,333 |
| | 115 |
|
Payments | (110 | ) | | (115 | ) |
Adjustments to prior periods | (19 | ) | | 11 |
|
Balance at end of period | $ | 1,965 |
| | $ | 862 |
|
Based on the per vehicle part and labor cost, number of vehicles impacted and the expected number of vehicles to be repaired we believe the amounts recorded are adequate to cover the costs of these recall campaigns.
In response to these developments we are conducting an in-depth review of the Ignition Switch Recall and our overall recall processes. We hired a former U.S. Attorney to conduct an internal investigation of the Ignition Switch Recall and to provide recommendations to improve our recall processes. One measure we have taken in connection with this recall is the creation and appointment of a new Global Vice President of Vehicle Safety. This executive is responsible for the safety development of our vehicle systems, confirmation and validation of safety performance, as well as post-sale safety activities, including recalls. We also created a new Global Product Integrity organization within Global Product Development with the goal of executing the highest levels of safety performance across all of our vehicles. We hired an external consultant to explore and evaluate options in our response to accidents involving the Ignition Switch Recall vehicles. The result of this review could have a material adverse impact on our financial position, results of operations or cash flows.
We are also actively engaging customers and servicing vehicles affected by the Ignition Switch Recall. We are in the process of notifying affected customers to schedule an appointment with their dealers as replacement parts are available. We began repairing vehicles in early April using parts that have undergone a 100 percent end-of-line quality inspection. Consistent with our recent communication to NHTSA, our plan is to produce enough repair parts by October 2014 to have the ability to repair the majority of vehicles impacted by the ignition switch and ignition cylinder recalls.
The Ignition Switch Recall has led to various governmental investigations and inquiries including a subpoena from the U.S. Attorney for the Southern District of New York, and investigations by the NHTSA, Congress and the SEC. In addition, the Ignition Switch Recall and the other recalls described above have resulted in a number of claims and lawsuits. Refer to Item 1. Legal Proceedings for additional information.
GM Europe
During the second half of 2011 and continuing intothrough 2013, the European automotive industry has beenwas severely affected by the ongoing sovereign debt crisis, high unemployment and a lack of consumer confidence coupled with overcapacity. European automotive industry sales to retail and fleet customers were 14 million vehiclesbegan to improve in the ninethree months ended September 30,December 31, 2013 representing a 3.0% decrease compared to the corresponding period in 2012. This trend continued with industry sales to retail and fleet customers of 5 million vehicles in the three months ended March 31, 2014 representing a 5.1% increase compared to the corresponding period in 2013.
Outlook
We have formulated a planare continuing to implement various strategic actions to strengthen our operations and increase our competitiveness. The key areas of the planactions include investments in our product portfolio, a revised brand strategy, significant management changes and reducing material, development and production costs, including restructuring activities, and further leveraging synergies from the alliance between us and PSA.activities. The success of our planthese actions will depend on a combination of our ability to execute the actions contemplated, as well asand external factors which are outside of our control. We believe it is likely that adverse economic conditions and their effect onDespite recent positive industry trends, we do not expect the European automotive industry will notto improve significantly in the foreseeable future andnear term; however, we expect to continue to incur lossesbreak even in the region as a result.GME by mid-decade.
GME Total Net Sales and Revenue and EBIT (Loss)-Adjusted
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 4,858 |
| | $ | 4,702 |
| | $ | 156 |
| | 3.3 | % | | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 0.2 |
| | $ | 0.2 |
|
EBIT (loss)-adjusted | $ | (214 | ) | | $ | (487 | ) | | $ | 273 |
| | 56.1 | % | | | $ | — |
| | $ | (0.1 | ) | | $ | — |
| | $ | 0.4 |
| | $ | 0.3 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 14,830 |
| | $ | 15,489 |
| | $ | (659 | ) | | (4.3 | )% | | | $ | (0.6 | ) | | $ | (0.1 | ) | | $ | (0.2 | ) | | $ | 0.2 |
| | $ | (0.7 | ) |
EBIT (loss)-adjusted | $ | (499 | ) | | $ | (1,175 | ) | | $ | 676 |
| | 57.5 | % | | | $ | (0.1 | ) | | $ | (0.3 | ) | | $ | (0.2 | ) | | $ | 1.3 |
| | $ | 0.7 |
|
GME Total Net Sales and Revenue
In the three months ended September 30, 2013 Total net sales and revenue increased due primarily to Other of $0.2 billion due primarily to favorable net foreign currency effect of $0.1 billion.
In the nine months ended September 30, 2013 Total net sales and revenue decreased due primarily to: (1) decreased wholesale volumes of 32,000 vehicles (or 4.0%) due to the weak European economy; (2) unfavorable vehicle pricing primarily resulting from increased incentive support associated with difficult market conditions; and (3) unfavorable net vehicle mix due to lower proportion of higher priced vehicles; partially offset by (4) Other of $0.2 billion due primarily to favorable net foreign currency effect of $0.1 billion.
GME EBIT (Loss)-Adjusted
In the three months ended September 30, 2013 EBIT (loss)-adjusted decreased due primarily to: (1) Other of $0.4 billion due primarily to decreased manufacturing costs of $0.2 billion mainly due to decreased depreciation expense due to asset impairments in December 2012, which decreased the depreciable base; favorable material and freight costs of $0.1 billion; and a favorable net effect of changes in the fair value of an embedded foreign currency derivative asset of $0.1 billion associated with a long-term supply agreement; partially offset by (2) unfavorable net vehicle mix.
In the nine months ended September 30, 2013 EBIT (loss)-adjusted decreased due primarily to: (1) Other of $1.3 billion due primarily to decreased manufacturing costs of $0.4 billion mainly due to decreased depreciation expense due to asset impairments in December 2012, which decreased the depreciable base; decreased engineering expenses of $0.2 billion; favorable material and freight costs of $0.2 billion; and a favorable net effect of changes in the fair value of an embedded foreign currency derivative asset of $0.2 billion associated with a long-term supply agreement; partially offset by (2) unfavorable net vehicle mix; (3) unfavorable vehicle pricing; and (4) decreased wholesale volumes.
GM International Operations
Outlook
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Variance Due To |
| March 31, 2014 | | March 31, 2013 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 5,620 |
| | $ | 5,272 |
| | $ | 348 |
| | 6.6 | % | | | $ | 0.3 |
| | $ | 0.1 |
| | $ | (0.1 | ) | | $ | — |
| | $ | 0.3 |
|
EBIT (loss)-adjusted | $ | (284 | ) | | $ | (152 | ) | | $ | (132 | ) | | (86.8 | )% | | | $ | 0.1 |
| | $ | — |
| | $ | (0.1 | ) | | $ | (0.1 | ) | | $ | (0.1 | ) |
| (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | 291 | | 275 |
| | 16 |
| | 5.8 | % | | | | | | | | | | | |
GME Total Net Sales and Revenue
In the three months ended March 31, 2014 Total net sales and revenue increased due primarily to (1) increased wholesale volumes associated with higher demand in Germany, the United Kingdom and Spain; and (2) favorable vehicle mix due to increased sales of higher priced vehicles; partially offset by (3) unfavorable vehicle pricing primarily resulting from increased incentive support associated with competitive market conditions.
GME EBIT (Loss)-Adjusted
In the three months ended March 31, 2014 EBIT (loss)-adjusted increased due primarily to: (1) unfavorable price effects; and (2) Other of $0.1 billion due primarily to restructuring related charges of $0.2 billion partially offset by material performance; partially offset by (3) increased wholesale volumes.
GM International Operations
We are currentlyaddressing many of the challenges in the process ofour GMIO operations and have strategically assessingassessed the manner in which we operate in certain countries within GMIO, including our cost structure, the level of local sourcing, the level of investment in the product portfolio, the allocation of production activity to the existing manufacturing base and our brand strategy. TheThese strategic reviews are also consideringconsidered the potential effects that may result from recent and forecasted deterioration in local market conditions. Should further deterioration in the outlook for these countries and/or the finalization of theconditions would have on our operations. While we are continuing our strategic reviewsassessments, we have taken certain actions and the related recommended actions impact our ability to generate sufficient cash flows we may be required to record material impairmentsincurred impairment and other charges. The estimate of charges is subject to significant uncertainties and highly dependent upon decisions not yet taken.in 2013.
Focus on Chinese Market
We view the Chinese market as important to our global growth strategy and are employing a multi-brand strategy, led by our Buick and Chevrolet brands. In the coming years, we plan to increasingly leverage our global architectures to increase the number of nameplates under the Buick, Chevrolet and Cadillac brands in China and continue to grow our business under the Baojun, Jiefang and Wuling brands. We operate in the Chinese market through a number of joint ventures and maintaining good relations with our joint venture partners, which are affiliated with the Chinese government, is an important part of our China growth strategy.
The following tables summarize certain key operational and financial data for the China JVs (dollars in millions, vehicles in thousands):
| | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Total wholesale vehicles(a) | 761 |
| | 692 |
| | 2,374 |
| | 2,144 |
| 934 |
| | 841 |
|
Market share in China | 14.5 | % | | 14.9 | % | | 14.5 | % | | 14.6 | % | 15.2 | % | | 15.1 | % |
Total net sales and revenue | $ | 9,413 |
| | $ | 7,945 |
| | $ | 28,406 |
| | $ | 24,215 |
| $ | 11,107 |
| | $ | 9,745 |
|
Net income | $ | 881 |
| | $ | 769 |
| | $ | 2,897 |
| | $ | 2,363 |
| $ | 1,239 |
| | $ | 1,144 |
|
________
| |
(a) | Including vehicles exported to markets outside of China. |
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Cash and cash equivalents | $ | 6,236 |
| | $ | 5,522 |
| $ | 8,071 |
| | $ | 6,606 |
|
Debt | $ | 134 |
| | $ | 123 |
| $ | 155 |
| | $ | 151 |
|
GMIO Total Net Sales and Revenue and EBIT-Adjusted
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 5,336 |
| | $ | 5,722 |
| | $ | (386 | ) | | (6.7 | )% | | | $ | (0.1 | ) | | $ | 0.1 |
| | $ | (0.1 | ) | | $ | (0.3 | ) | | $ | (0.4 | ) |
EBIT-adjusted | $ | 299 |
| | $ | 761 |
| | $ | (462 | ) | | (60.7 | )% | | | $ | — |
| | $ | (0.1 | ) | | $ | (0.1 | ) | | $ | (0.3 | ) | | $ | (0.5 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 15,406 |
| | $ | 16,653 |
| | $ | (1,247 | ) | | (7.5 | )% | | | $ | (0.6 | ) | | $ | — |
| | $ | (0.2 | ) | | $ | (0.4 | ) | | $ | (1.2 | ) |
EBIT-adjusted | $ | 1,022 |
| | $ | 1,909 |
| | $ | (887 | ) | | (46.5 | )% | | | $ | (0.1 | ) | | $ | (0.4 | ) | | $ | (0.2 | ) | | $ | (0.2 | ) | | $ | (0.9 | ) |
GMIO Total Net Sales and Revenue
In the three months ended September 30, 2013 Total net sales and revenue decreased due primarily to: (1) decreased wholesale volumes of 20,000 vehicles (or 7.4%) primarily in Middle East and South East Asia partially offset by an increase from the consolidation of HKJV effective September 2012 resulting in an inclusion of 12,000 wholesale vehicle sales (or 4.5%); (2) unfavorable pricing due to increased incentive support associated with strong competition; and (3) Other of $0.3 billion due
GENERAL MOTORS COMPANY AND SUBSIDIARIES
primarily to unfavorable net foreign currency effect due to the weakening of the Australian DollarGMIO Total Net Sales and the South Africa Rand against the U.S. Dollar of $0.2 billion,Revenue and decrease in components, parts and accessories revenue of $0.1 billion; partially offset by (4) favorable vehicle mix.EBIT-Adjusted
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | Variance Due To |
| March 31, 2014 | | March 31, 2013 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 3,230 |
| | $ | 4,366 |
| | $ | (1,136 | ) | | (26.0 | )% | | | $ | (0.9 | ) | | $ | — |
| | $ | — |
| | $ | (0.2 | ) | | $ | (1.1 | ) |
EBIT-adjusted | $ | 252 |
| | $ | 472 |
| | $ | (220 | ) | | (46.6 | )% | | | $ | (0.2 | ) | | $ | (0.2 | ) | | $ | — |
| | $ | 0.2 |
| | $ | (0.2 | ) |
| (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | 162 | | 217 |
| | (55 | ) | | (25.3 | )% | | | | | | | | | | | |
In the nine months ended September 30, 2013GMIO Total net salesNet Sales and revenue decreased due primarily to: (1) decreased wholesale volumes of 92,000 vehicles (or 11.3%) primarily in Middle East and Chevrolet brand vehicles in Europe partially offset by an increase from the consolidation of HKJV effective September 2012 resulting in an inclusion of 57,000 wholesale vehicle sales (or 7.0%); (2) unfavorable pricing due to increased incentive support associated with strong competition; and (3) Other of $0.4 billion due primarily to unfavorable net foreign currency effect due to the weakening of the Australian Dollar and the South Africa Rand against the U.S. Dollar of $0.3 billion; and decreased sales of components, parts and accessories of $0.2 billion.Revenue
The vehicle sales of our China JVs are not reflected in Total net sales and revenue. The results of our joint ventures are recorded in Equity income, net of tax.income. Our investment in China JVs increased by $1.0$0.6 billion in the ninethree months ended September 30, 2013March 31, 2014 as a result of our share in China JVs earningsearnings.
In the three months ended March 31, 2014 Total net sales and revenue decreased due primarily to: (1) decreased wholesale volumes primarily in the Middle East and Chevrolet brand vehicles in Europe; and (2) Other of $1.4$0.2 billion partially offset by dividends declareddue primarily to unfavorable net foreign currency effect due to the weakening of $0.4 billion.the Australian Dollar, South Africa Rand and the Thai Baht against the U.S. Dollar.
GMIO EBIT-Adjusted
In the three months ended September 30, 2013March 31, 2014 EBIT-adjusted decreased due primarily to: (1) unfavorable net vehicle mix;wholesale volumes; and (2) unfavorable pricing; and (3) Other of $0.3 billion due primarily to unfavorable manufacturing costs of $0.2 billion; lower sales of components, parts and accessories of $0.1 billion; and unfavorable net foreign currency effect of $0.1 billion; partially offset by favorable material and freight cost of $0.1 billion.
In the nine months ended September 30, 2013 EBIT-adjusted decreased due primarily to: (1) unfavorable net vehicle mix; (2) unfavorable pricing;partially offset by (3) unfavorable net wholesale volumes; and (4) Other of $0.2 billion due primarily to unfavorablefavorable manufacturing costs of $0.4 billion; unfavorable net foreign currency effect of $0.2 billion; and a decrease in sales of components, parts and accessories of $0.1 billion; partially offset by favorable material and freight cost of $0.3 billion; and increased equity income, net of tax of $0.3 billion, from our interest in the increased net income of our China JVs.depreciation.
GM South America
Venezuelan Operations
Our Venezuelan subsidiaries utilizefunctional currency is the U.S. Dollar as their functional currency because of the hyperinflationary status of the Venezuelan economy. The Venezuelan government has foreign exchange control regulations which make it more difficult to convert BsF to U.S. Dollars. These regulations affect our Venezuelan subsidiaries' ability to pay non-BsF denominated obligations that do not qualify to be processed by the Venezuelan currency exchange agency at the official exchange rates.
The aggregate net assets denominated in BsF and other currencies at September 30, 2013 and December 31, 2012 were $900 million and $940 million which included monetary assets of $1.9 billion and $1.6 billion and monetary liabilities of $1.3 billion and $1.1 billion. At September 30, 2013 and December 31, 2012 other consolidated entities had receivables from our Venezuelan subsidiaries denominated in other currencies of $374 million and $224 million. The total amounts pending government approval for settlement at September 30, 2013 and December 31, 2012 were BsF 3.5 billion (equivalent to $607 million) and BsF 2.2 billion (equivalent to $523 million), for which some requests have been pending from 2007.
InEffective February 13, 2013 the Venezuelan government announced thatset the official fixed exchange rate of the BsF 4.3at BsF 6.3 to $1.00 changedfrom BsF 4.3 to BsF 6.3 to $1.00 effective February 13, 2013.$1.00. The devaluation requiredresulted in a charge of $0.2 billion recorded in Automotive cost of sales in the three months ended March 31, 2013 from the remeasurement of our Venezuelan subsidiaries' non-U.S. Dollar denominated monetary assets and liabilities. The remeasurement charge was treated as an adjustment for EBIT-adjusted reporting purposes.
Effective March 31, 2014 we changed the exchange rate we use for remeasuring our Venezuelan subsidiaries’ non-U.S. Dollar denominated monetary assets and liabilities from the Venezuela official exchange rate to the rate determined by an auction process conducted by Venezuela’s SICAD I. At March 31, 2014 the SICAD I exchange rate was BsF 10.7 to $1.00. The devaluation resulted in a charge of $0.2$0.4 billion recorded in Automotive cost of sales in the three months ended March 31, 2013.2014. We changed the exchange rate we use because we believe the SICAD I rate is the most representative rate to be used for remeasurement, as the official rate will increasingly be reserved only for the settlement of U.S. Dollar denominated obligations related to the purchases of “essential goods and services” and future dividends will likely not be paid at the official rate. However, to date, we have not transacted at the SICAD I rate. The non-U.S. Dollar denominated assets and liabilities of our Venezuelan subsidiaries may be impacted by periodic auctions in SICAD I rates which may have a material impact to the results of operations in Venezuela in future quarters. The remeasurement charge was treated as an adjustment for EBIT-adjusted reporting purposes.
We believe it is possible that the Venezuelan government may further devalue the official exchange rate of BsF against the U.S. Dollar in the future. If the BsF were further devalued further,from the SICAD I exchange rate of BSF 10.7 to $1.00, it would result in a charge to our income statement in the period of devaluation. Based on our September 30, 2013March 31, 2014 net monetary assets, a furthercharge of approximately $0.1 billion would result for every 10% devaluation of the BsF by 1.40 BsF to $1.00 would result in a charge of approximately $0.1 billion.
The Venezuelan government is in the process of finalizing a new pricing law that would regulate the net sales price of new and used vehicles, as well as parts and accessories. It is possible a new pricing regulation will be enacted in the near term which could have a material impact on our Venezuelan operations.BsF.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The Venezuelan government has foreign exchange control regulations that make it difficult to convert BsF to U.S. Dollar which affect our Venezuelan subsidiaries’ ability to pay non-BsF denominated obligations and to pay dividends. The total amounts pending government approval for settlement in U.S. Dollar at March 31, 2014 and December 31, 2013 were BsF 3.9 billion (equivalent to $0.6 billion) and BsF 3.7 billion (equivalent to $0.6 billion). These amounts include requests in the amount of BsF 0.6 billion (equivalent to $0.1 billion) that have been pending from 2007. Our Venezuelan subsidiaries' net assets were $0.5 billion at March 31, 2014, including net monetary assets of $0.6 billion. At March 31, 2014 other consolidated entities had receivables from our Venezuelan subsidiaries denominated in other currencies of $0.4 billion.
In January 2014 the Venezuela government enacted a law limiting sale prices and establishing a maximum margin of 30% above a defined cost structure. At this time it is unclear based on the current regulations how this new law may affect our current vehicle and parts and accessories sale pricing structure. These regulations, when considered with foreign exchange process, other governmental policies impacting labor force reductions and other circumstances in Venezuela, may impact our ability to fully benefit from and maintain our controlling financial interest in our Venezuelan subsidiaries. The financial impact on our operations in Venezuela of these events and associated ongoing restrictions are uncertain.
GMSA Total Net Sales and Revenue and GMSA EBIT-AdjustedEBIT (Loss)-Adjusted
| | | Three Months Ended | | | Variance Due To | Three Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total | March 31, 2014 | | March 31, 2013 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) | (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 4,381 |
| | $ | 4,275 |
| | $ | 106 |
| | 2.5 | % | | | $ | 0.2 |
| | $ | 0.2 |
| | $ | 0.3 |
| | $ | (0.6 | ) | | $ | 0.1 |
| $ | 3,025 |
| | $ | 3,691 |
| | $ | (666 | ) | | (18.0 | )% | | | $ | (0.4 | ) | | $ | 0.1 |
| | $ | 0.2 |
| | $ | (0.6 | ) | | $ | (0.7 | ) |
EBIT-adjusted | $ | 284 |
| | $ | 159 |
| | $ | 125 |
| | 78.6 | % | | | $ | — |
| | $ | 0.2 |
| | $ | 0.3 |
| | $ | (0.4 | ) | | $ | 0.1 |
| |
EBIT (loss)-adjusted | | $ | (156 | ) | | $ | (38 | ) | | $ | (118 | ) | | n.m. |
| | | $ | (0.1 | ) | | $ | — |
| | $ | 0.2 |
| | $ | (0.2 | ) | | $ | (0.1 | ) |
| | (Vehicles in thousands) | | | | | | | | | | | | | |
Wholesale vehicle sales | | 208 | | 233 |
| | (25 | ) | | (10.7 | )% | | | | | | | | | | | |
__________
n.m. = not meaningful
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | Variance Due To |
| September 30, 2013 | | September 30, 2012 | | Favorable / (Unfavorable) | | % | | | Volume | | Mix | | Price | | Other | | Total |
| (Dollars in millions) | | | | | (Dollars in billions) |
Total net sales and revenue | $ | 12,380 |
| | $ | 12,259 |
| | $ | 121 |
| | 1.0 | % | | | $ | 0.3 |
| | $ | 0.4 |
| | $ | 0.6 |
| | $ | (1.2 | ) | | $ | 0.1 |
|
EBIT-adjusted | $ | 300 |
| | $ | 328 |
| | $ | (28 | ) | | (8.5 | )% | | | $ | — |
| | $ | 0.2 |
| | $ | 0.6 |
| | $ | (0.8 | ) | | $ | — |
|
GMSA Total Net Sales and Revenue
In the three months ended September 30, 2013March 31, 2014 Total net sales and revenue increaseddecreased due primarily to: (1) favorable vehicle pricing primarilydecreased wholesale volumes due to high inflationindustry decline mainly in VenezuelaBrazil and Argentina; (2) increased wholesale volumes of 14,000 vehicles (or 5.2%) primarily driven by higher industry volume in Argentina and the refreshed product portfolio in Brazil; and (3) favorable vehicle mix due to increased sales of Chevrolet Trailblazer, Chevrolet Captiva, Chevrolet Orlando and Chevrolet S10; partially offset by (4)(2) Other of $0.6 billion due primarily to unfavorable net foreign currency effect due to the strengthening of the U.S. Dollar against all currencies across the Brazilian Real and Argentinian Peso and the devaluationregion of the BsF of $0.6 billion.
In the nine months ended September 30, 2013 Total net sales and revenue increased due primarily to: (1)$0.5 billion; partially offset by (3) favorable vehicle pricing due primarily due to high inflation in VenezuelaArgentina; and Argentina; (2)(4) favorable vehicle mix due to increased sales of the Chevrolet Trailblazer, Chevrolet Captiva, Chevrolet OrlandoTracker and Chevrolet S10;S-10.
GMSA EBIT (Loss)-Adjusted
In the three months ended March 31, 2014 EBIT (loss)-adjusted increased due primarily to: (1) unfavorable net wholesale volumes; and (3) increased wholesale volumes of 24,000 vehicles (or 3.1%) primarily driven by higher industry volume in Argentina and the refreshed product portfolio in Brazil; partially offset by (4)(2) Other of $1.2$0.2 billion due primarily to unfavorable net foreign currency effect due to the strengthening of the U.S. Dollar against all currencies across the Brazilian Real and Argentinian Peso and the devaluationregion of the BsF of $1.3 billion.
GMSA EBIT-Adjusted
In the three months ended September 30, 2013 EBIT-adjusted increased due primarily to: (1) favorable vehicle pricing; and (2) favorable net vehicle mix;$0.3 billion; partially offset by (3) Other of $0.4 billion duefavorable vehicle pricing primarily to unfavorable net foreign currency effect due to the strengthening of the U.S. Dollar against the Brazilian Real and Argentinian Peso and the devaluation of the BsF of $0.4 billion.
In the nine months ended September 30, 2013 EBIT-adjusted remained flat due primarily to: (1) favorable vehicle pricing; and (2) favorable net vehicle mix; offset by (3) Other of $0.8 billion due primarily to unfavorable net foreign currency effect due to the strengthening of the U.S. Dollar against the Brazilian Real and Argentinian Peso and the devaluation of the BsF of $0.7 billion; and a non-recurring bargain gain of $50 million on the purchase of GMAC de Venezuela CAhigh inflation in the corresponding period of 2012 .Argentina.
GM Financial
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | | | | | | | | | |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | | 2013 vs. 2012 Change | | 2012 vs. 2011 Change | Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| | Amount | | % | | Amount | | % | March 31, 2014 | | March 31, 2013 | | Increase/ (Decrease) | | % |
| (Dollars in millions) | (Dollars in millions) |
GM Financial revenue | $ | 867 |
| | $ | 514 |
| | $ | 2,243 |
| | $ | 1,432 |
| | $ | 353 |
| | 68.7 | % | | $ | 811 |
| | 56.6 | % | $ | 1,097 |
| | $ | 540 |
| | $ | 557 |
| | 103.1 | % |
Income before income taxes | $ | 239 |
| | $ | 200 |
| | $ | 673 |
| | $ | 598 |
| | $ | 39 |
| | 19.5 | % | | $ | 75 |
| | 12.5 | % | |
Provision for loan losses | | $ | 135 |
| | $ | 94 |
| | $ | 41 |
| | 43.6 | % |
Income before income taxes-adjusted | | $ | 221 |
| | $ | 180 |
| | $ | 41 |
| | 22.8 | % |
| (Dollars in billions) | (Dollars in billions) |
Average debt outstanding | $ | 23.2 |
| | $ | 9.8 |
| | $ | 18.7 |
| | $ | 9.1 |
| | $ | 13.4 |
| | 136.7 | % | | $ | 9.6 |
| | 105.5 | % | $ | 29.3 |
| | $ | 11.2 |
| | $ | 18.1 |
| | 161.6 | % |
Effective rate of interest paid | 2.9 | % | | 3.0 | % | | 3.0 | % | | 3.0 | % | | (0.1 | )% | |
|
| | — | % | |
|
| 4.4 | % | | 3.0 | % | | 1.4 | % | |
|
|
GENERAL MOTORS COMPANY AND SUBSIDIARIES
GM Financial Revenue
In the three months ended September 30, 2013March 31, 2014 GM Financial revenue increased due primarily to: (1) increased finance charge income of $0.4 billion, due to growth in the portfolio resulting from the acquisition of the Ally Financial international operations; and (2) increased leased vehicle income of $0.1 billion, due to the increased size of the leased asset portfolio.
GM Financial Income Before Income Taxes-Adjusted
In the three months ended March 31, 2014 Income before income taxes-adjusted increased due primarily to: (1) increased revenue of $0.6 billion; offset by (2) increased interest expenses of $0.2 billion due to higher average debt outstanding and effective rate of interest; (3) increased operating expenses of $0.2 billion due to the acquisition of Ally Financial international operations; and (2) increased lease income of $0.1 billion due to a larger lease portfolio.
In the nine months ended September 30, 2013 GM Financial revenue increased due primarily to: (1) increased revenue of $0.5 billion due to the acquisition of Ally Financial international operations; (2) increased lease income of $0.2 billion due to a larger lease portfolio; and (3) increased finance charge income of $0.1 billion due to a larger loan portfolio balance.
GM Financial Income Before Income Taxes
In the three months ended September 30, 2013 Income before income taxes remained flat due primarily to: (1) increased finance income of $0.2 billion due to a larger loan portfolio as a result of the purchase of Ally Financial international operations; offset by (2) increased interest expense of $0.1 billion due to an increase in average debt outstanding as a result of the purchase of Ally Financial international operations; and (3) increased operating expenses of $0.1 billion as a result of the purchase of Ally Financial international operations.
In the nine months ended September 30, 2013 Income before income taxes increased due primarily to: (1) increased finance income of $0.5 billion due to a larger loan portfolio mainly as a result of the purchase of Ally Financial international operations; offset by (2) increased interest expense of $0.2 billion due to an increase in average debt outstanding as a result of the purchase of Ally Financial international operations; (3) increased operating expenses of $0.2 billion as a result of the purchase of Ally Financial international operations; and (4) increased provision for loan lossesleased vehicle expenses of $0.1 billion due to a larger loanthe increased size of the leased asset portfolio.
Corporate
(Dollars in Millions)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 | 2013 vs. 2012 Change | | 2013 vs. 2012 Change |
| | | Amount | | % | | Amount | | % |
Net loss attributable to stockholders | $ | (948 | ) | | $ | (381 | ) | | $ | (2,422 | ) | | $ | (985 | ) | | $ | (567 | ) | | 148.8 | % | | $ | (1,437 | ) | | 145.9 | % |
|
| | | | | | | | | | | | | | |
| Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| March 31, 2014 | | March 31, 2013 | | Favorable/ (Unfavorable) | | % |
EBIT (loss)-adjusted | $ | (123 | ) | | $ | (110 | ) | | $ | (13 | ) | | 11.8 | % |
Corporate Net Loss Attributable to Stockholders
In the three months ended September 30, 2013 Net loss attributable to stockholders increased due primarily to: (1) an increase in income tax expense of $0.5 billion due primarily to the inclusion of U.S. and Canada entities in our tax expense calculation resulting from the release of their valuation allowances in the year ended DecemberMarch 31, 2012; and (2) a $0.1 billion unfavorable net foreign currency effect.
In the nine months ended September 30, 2013 Net loss attributable to stockholders increased due primarily to: (1) an increase in income tax expense of $1.2 billion due primarily to the inclusion of U.S. and Canada entities in our tax expense calculation resulting from the release of their valuation allowances in the year ended December 31, 2012; and (2) a loss on the extinguishment of debt of $0.2 billion due to the acquisition of the remaining balance of GM Korea's preferred shares.2014 EBIT (loss)-adjusted remained flat.
Liquidity and Capital Resources
Liquidity Overview
We believe that our current level of cash and cash equivalents, marketable securities and availability under our secured revolving credit facilities will be sufficient to meet our liquidity needs. However we expect to have substantial cash requirements going forward which we plan to fund through total available liquidity and cash flows generated from operations. We also maintain access to the capital markets, which may provide an additional source of liquidity. Our known material future uses of cash, which may vary from time to time based on market conditions and other factors, are centered around three objectives: (1) reinvest in our business; (2) continue to strengthen our balance sheet and competitive position; and (3) return cash to shareholders. Our known future material uses of cash include, among other possible demands: (1) reinvestment in our business through capital expenditures of approximately $8$7.5 billion annually as well as engineering and product development activities; (2) payments associated with recently announced vehicle recalls; (3) payments for previously announced restructuring activities; (4) acquiring Ally Financial international operations, as subsequently discussed,Financial's equity interests in GMAC-SAIC Automotive Finance Company Limited for approximately $0.9 billion; (3)$0.9 billion; (5) payments to service debt and other long-term obligations; and (4)(6) payments relating to our Series A Preferred Stock dividends and to purchase the remaining outstanding shares of our Series A Preferred Stock with a liquidation amount of $3.9 billion once the shares become redeemable on or after December 31, 2014.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Our liquidity plans are subject to a number of risks and uncertainties, including those described in the “Risk Factors” section of our 20122013 Form 10-K, some of which are outside our control. Macroeconomic conditions could limit our ability to successfully execute our business plans and therefore adversely affect our liquidity plans.
Recent Management Initiatives
We continue to monitor and evaluate opportunities to strengthen our balance sheet and competitive position.position over the long-term. These actions may include opportunistic payments to reduce our long-term obligations while maintaining minimal financial leverage as well as the possibility of acquisitions, dispositions and strategic alliances that we believe would generate significant advantages and substantially strengthen our business. These actions may include additional loans, investments with our joint venture partners or the acquisitions of certain operations or ownership stakes in outside businesses. These actions may negatively impact our liquidity in the short-term.
In November 2012 GM Financial entered into agreements with Ally Financialshort-term including the payments related to acquire Ally Financial's automotive finance and financial services businesses in Europe and Latin America and Ally Financial's equity interests in GMAC-SAIC for approximately $4.1 billion. GM Financial has completed the acquisitions of Ally Financial's European and Latin American automotive finance operations for $3.2 billion, of which $3.2 billion has been paid. Refer to Automotive Financing Strategy in this MD&A for additional information on these acquisitions.
In April 2013 GM Korea made a payment of $0.7 billion to acquire, prior to the mandatory redemption date, the remaining balance of GM Korea's mandatorily redeemable preferred shares that had a carrying amount of $0.5 billion. We recorded the difference of $0.2 billion as a loss on extinguishment of debt.
In September 2013 we issued $4.5 billion in aggregate principal amount of senior unsecured notes comprising $1.5 billion of 3.5% notes due in 2018, $1.5 billion of 4.875% notes due in 2023 and $1.5 billion of 6.25% notes due in 2043. We used proceeds from the issuance of these notes to purchase 120 million shares of our Series A Preferred Stock from the New VEBA for a total price of $3.2 billion, which was equal to 108.1% of their aggregate liquidation amount. The Series A Preferred Stock accrues cumulative dividends at a 9% annual rate. We recorded a loss for the difference between the carrying amount of the Series A Preferred Stock purchased of $2.4 billionrecent recalls and the consideration paid of $3.2 billion, which reduced Net income attributable to common stockholders by $0.8 billion.
In October 2013 we used proceeds from the issuance of the senior unsecured notes to make a payment of $1.2 billion to prepay notes issued to the Canadian Health Care Trust (HCT) which had a carrying value of $1.2 billion and were recorded in Short-term debt and current portion of long-term debt at September 30, 2013. The HCT notes accrued interest at a 7% annual rate. This transaction and the purchase of the Series A preferred Stock from the New VEBA lowered our overall cost of funding as the senior unsecured notes carry a lower interest rate than the dividends on the Series A Preferred Stock and the interest rate on the HCT notes.related litigation.
Automotive
Available Liquidity
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Total available liquidity includes cash, cash equivalents, current marketable securities and funds available under credit facilities. At September 30, 2013March 31, 2014 our available liquidity was $37.3$37.4 billion,, including funds available under credit facilities of $10.5 billion.$10.4 billion. 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. Available liquidity held within North America and at our regional treasury centers represented approximately 85%86% of our available liquidity at September 30, 2013.March 31, 2014. A portion of our available liquidity includes amounts deemed indefinitely reinvested in our foreign subsidiaries. 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 securities balances include investments in U.S. government and agency obligations, foreign government securities, time deposits and certificates of deposit and corporate debt securities, and are primarily denominated in U.S. Dollars. We expect to maintain a sufficient amount of Canadian Dollar (CAD) denominated cash investments to offset certain
GENERAL MOTORS COMPANY AND SUBSIDIARIES
CAD denominated liabilities, which primarily relate to pension and other postretirement benefits liabilities. These cash investments will incur foreign currency exchange gains or losses based on the movement of the CAD in relation to the U.S. Dollar and will therefore reduce our net CAD foreign currency exchange exposure. We held cash investments in CAD denominated securities of $3.0 billion at September 30, 2013. These funds continue to be available to fund our normal ongoing operations and are included in our available liquidity.
Our investment guidelines, which we may change from time to time, prescribe certain minimum credit worthiness standardsthresholds and limit our exposures to any particular sector, asset class, issuance or security type. Substantially all of our current investments in debt securities are with A/A2 or better rated issuers. We actively monitor and manage our liquidity exposure to Europe which is related primarily to short-term bank deposits and short-term debt securities of high-quality European issuers.
We use credit facilities as a mechanism to provide additional flexibility in managing our global liquidity and to fund working capital needs at certain of our subsidiaries. The total size of our credit facilities was $11.311.1 billion and $11.411.2 billion at September 30, 2013March 31, 2014 and December 31, 2012.2013. Our primary borrowing capacity under credit facilities comes from our secured revolving credit facilities consisting of a three-year $5.5 billion facility maturing in 2015 and a five-year, $5.5 billion facility maturing in 2017. We have not borrowed against these facilities, but have amounts in use under the letter of credit sub-facility of $0.6 billion. GM Financial has the access to the three-year facility, but has not borrowed against the three-year facility.it.
The following table summarizes our automotive liquidity (dollars in millions)billions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Cash and cash equivalents | $ | 18,599 |
| | $ | 17,133 |
| $ | 18.3 |
| | $ | 18.9 |
|
Marketable securities | 8,215 |
| | 8,988 |
| 8.7 |
| | 9.0 |
|
Available liquidity | 26,814 |
| | 26,121 |
| 27.0 |
| | 27.9 |
|
Available under credit facilities | 10,512 |
| | 11,119 |
| 10.4 |
| | 10.4 |
|
Total available liquidity | $ | 37,326 |
| | $ | 37,240 |
| $ | 37.4 |
| | $ | 38.3 |
|
In the nine months ended September 30, 2013 total available liquidity increased by $0.1 billion due primarily to: (1) automotive free cash flow of $2.5 billion; partially offset by (2) a capital contribution to GM Financial of $1.3 billion in support of the acquisition of Ally Financial international operations; (3) reductions in amounts available under credit facilities of $0.6 billion due to letters of credit issued under our secured revolving credit facilities and the termination of a facility in GMIO; and (4) unfavorable net foreign currency effects of $0.4 billion.
Cash Flow
The following table summarizes the changes in our automotive available liquidity (dollars in billions):
|
| | | |
| Three Months Ended March 31, 2014 |
Operating cash flow | $ | 2.0 |
|
Capital expenditures | (1.8 | ) |
Dividends paid | (0.6 | ) |
Effect of foreign currency | (0.5 | ) |
Total change in available liquidity | $ | (0.9 | ) |
Cash Flow
The following tables summarize automotive cash flows from operating, investing and financing activities (dollars in millions)billions):
|
| | | | | | | |
| Nine Months Ended |
| September 30, 2013 | | September 30, 2012 |
Net cash provided by operating activities | $ | 8,269 |
| | $ | 9,145 |
|
Net cash used in investing activities | $ | (4,911 | ) | | $ | (2,121 | ) |
Net cash used in financing activities | $ | (243 | ) | | $ | (774 | ) |
Operating Activities
In the nine months ended September 30, 2013 net cash provided by operating activities decreased by $0.9 billion due primarily to: (1) lower net income excluding non-cash charges relating to depreciation, amortization and impairment charges of $1.7 billion; (2) unfavorable movements in dealer and customer allowances of $0.7 billion; (3) unfavorable daily rental car activities including customer deposits of $0.4 billion; and (4) unfavorable movements in warranty of $0.3 billion; partially offset by (5) favorable changes in working capital of $1.4 billion; and (6) other changes of $0.8 billion due primarily to deferred taxes.
Investing Activities
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | | | | |
| Three Months Ended |
Operating Activities
| March 31, 2014 | | March 31, 2013 |
Net income | $ | 0.1 |
| | $ | 1.1 |
|
Depreciation, amortization and impairments | 1.4 |
| | 1.4 |
|
Pension and OPEB activities | (0.2 | ) | | (0.2 | ) |
Working capital | 0.4 |
| | (1.0 | ) |
Other | 0.3 |
| | (0.8 | ) |
Cash flows from operating activities | $ | 2.0 |
| | $ | 0.5 |
|
Favorable changes in working capital related to increases in accounts payable activity outpacing increases in accounts receivable. Favorable changes in other are primarily related to provisions for product warranty liabilities and daily rental car activity.
|
| | | | | | | |
| Three Months Ended |
Investing Activities
| March 31, 2014 | | March 31, 2013 |
Capital expenditures | $ | (1.8 | ) | | $ | (1.9 | ) |
Liquidations of marketable securities, net | 0.2 |
| | 2.4 |
|
Other | 0.1 |
| | — |
|
Cash flows from investing activities | $ | (1.5 | ) | | $ | 0.5 |
|
The favorable cash effect from net liquidations in marketable securities in the ninethree months ended September 30,March 31, 2013 net cash used in investing activities increased by $2.8 billion due primarily to: (1) purchases in excess of maturities of marketable securities of $4.9 billion as we invested in securities with longer maturitieswas related to rebalancing our investment portfolio as part of efforts to rebalance our investment portfolioliquidity management in the normal course of business; partially offset by (2) a short-term loan of $2.0 billion made to our U.S. salaried pension plan as part of annutization actions takenbusiness that did not recur at the same level in 2012; and (3) decreased capital expenditures of $0.2 billion.the three months ended March 31, 2014.
Financing Activities |
| | | | | | | |
| Three Months Ended |
Financing Activities
| March 31, 2014 | | March 31, 2013 |
Dividends paid | $ | (0.6 | ) | | $ | (0.2 | ) |
Cash flows from financing activities | $ | (0.6 | ) | | $ | (0.2 | ) |
In the ninethree months ended September 30, 2013 net cash used in financing activities decreased byMarch 31, 2014 a common stock dividend of $0.5 billion due primarily to: (1) proceeds from debt of $4.9 billion including $4.5 billion raised fromwas paid which was the issuance of senior unsecured notes;first common stock dividend that we have declared and (2) net increase in short-term debt facilities with maturities less than 90 days of $0.3 billion; partially offset by (3) purchase of Series A Preferred Stock held by the New VEBA for $3.2 billion; and (4) increase in debt payments of $1.3 billion including the prepayment of GM Korea's preferred shares of $0.7 billion.paid.
Free Cash Flow and Adjusted Free Cash Flow
The following table summarizes automotive free cash flow and adjusted free cash flow (dollars in millions)billions):
| | | Nine Months Ended | Three Months Ended |
| September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 |
Operating cash flow | $ | 8,269 |
| | $ | 9,145 |
| $ | 2.0 |
| | $ | 0.5 |
|
Less: capital expenditures | (5,770 | ) | | (5,993 | ) | (1.8 | ) | | (1.9 | ) |
Free cash flow | 2,499 |
| | 3,152 |
| 0.2 |
| | (1.4 | ) |
Adjustments for voluntary management actions | 71 |
| | — |
| |
Adjustments | | — |
| | 0.1 |
|
Adjusted free cash flow | $ | 2,570 |
| | $ | 3,152 |
| $ | 0.2 |
| | $ | (1.3 | ) |
In the nine months ended September 30, 2013 adjustments for voluntary management actionsAdjustments to free cash flow included pension contributions of $0.1 billion related to the previously announced annuitization of the U.S. salaried pension plan.
Other Liquidity Matters
Status of Credit Ratings
We receive ratings from four independent credit rating agencies: DBRS Limited, Fitch Ratings (Fitch), Moody's Investor Service (Moody's) and Standard & Poor's (S&P). DBRS Limited and Moody's rate our corporate credit at investment grade while Fitch and S&P currently rate our corporate credit at non-investment grade. The following table summarizes our credit ratings at October 25, 2013:
|
| | | | | | | | |
Rating Agency | | Corporate | | Secured Revolving
Credit Facility
| | Senior
Unsecured
| | Outlook |
DBRS Limited | | BBB (low) | | N/A | | N/A | | Stable |
Fitch | | BB+ | | BBB- | | BB+ | | Positive |
Moody's | | Investment Grade | | Baa2 | | Ba1 | | Stable |
S&P | | BB+ | | BBB | | BB+ | | Positive |
Rating actions taken by each ofplan in the credit rating agencies from January 1, 2013 through October 25, 2013 were as follows:
Fitch: September 2013 - Assigned a senior unsecured rating of BB+. August 2013 - Upgraded their outlook to positive from stable.
Moody’s: September 2013 - Upgraded corporate rating to an investment grade rating of Baa3 from Ba1, assigned a senior unsecured rating of Ba1 and changed their outlook to stable from positive.
S&P: September 2013 - Assigned a senior unsecured rating of BB+ and upgraded their outlook to positive from stable.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We continue to pursue investment grade status from all of the credit rating agencies by maintaining a balance sheet with minimal financial leverage and demonstrating continued operating performance. Achieving investment grade status will provide us with greater financial flexibility, lower our cost of borrowing and may release collateral from certain agreements including our secured revolving credit facility.three months ended March 31, 2013.
Automotive Financing - GM Financial
Liquidity Overview
GM Financial's primary sources of cash are finance charge income, leasing income, servicing fees, net distributions from secured debt, borrowings under secured and unsecured debt, collections and recoveries on finance receivables and net proceeds from senior notes transactions.transactions and collections and recoveries
GENERAL MOTORS COMPANY AND SUBSIDIARIES
on finance receivables. GM Financial's primary uses of cash are purchases of finance receivables and leased assets,vehicles, funding of commercial finance receivables, business acquisitions, repayment of secured and unsecured debt, funding credit enhancement requirements for secured debt, operating expenses and operating expenses.interest costs. GM Financial continues to monitor and evaluate opportunities to optimize its liquidity position and the mix of its debt, which could include future opportunistic repayments or borrowings.debt.
Available Liquidity
The following table summarizes GM Financial's available liquidity (dollars in millions)billions):
| | | September 30, 2013 | | December 31, 2012 | March 31, 2014 | | December 31, 2013 |
Cash and cash equivalents | $ | 1,756 |
| | $ | 1,289 |
| $ | 1.2 |
| | $ | 1.1 |
|
Borrowing capacity on unpledged eligible assets | 1,905 |
| | 1,349 |
| 1.4 |
| | 1.6 |
|
Borrowing capacity on committed unsecured lines of credit | 249 |
| | — |
| 0.6 |
| | 0.6 |
|
Available liquidity | $ | 3,910 |
| | $ | 2,638 |
| $ | 3.2 |
| | $ | 3.3 |
|
The increasedecrease in available liquidity is due primarily to the net increasedecrease of $1.0 billion resulting from the Ally Financial international operations acquisition, as well as the addition of commercial loan-secured credit facilities, which had $0.2 billion in borrowing capacity asunpledged eligible assets partially offset by an increase of September 30, 2013.$0.1 billion in cash and cash equivalents.
GM Financial has the ability to borrow up to $4.0 billion against our three-year $5.5 billion secured revolving credit facility. GM Financial's borrowings underfacility subject to available capacity and borrowing base restrictions. In the facility are limited by our ability to borrow the entire amount available under the facility. Thereforeevent GM Financial may be able to borrow up to $4.0 billion or may be unable to borrow depending on our borrowing activity. If GM Financial does borrow underborrows against the facility, it expectsis expected such borrowings would be short-term in nature. NeitherThe facility is not guaranteed or secured by any GM Financial nor any of its subsidiaries, guarantee any obligations under this facility and none of its subsidiaries' assets secure this facility.
In connection with the acquisition of certain of Ally Financial's European and Latin American automotive finance operations except for Brazil, GM Financial received a capital contribution from us of $1.3 billion and utilized $2.6 billion of its liquidity. These acquisitions increased finance receivables by $11.0 billion and secured and unsecured debt by $8.9 billion. Subsequent to September 30, 2013 GM Financial utilized an additional $0.7 billion of its own liquidity to complete the acquisition of Ally Financial's European and Latin American operations including Brazil.or subsidiaries.
Cash Flow
The following table summarizes GM Financial cash flows from operating, investing and financing activities (dollars in millions)billions):
| | | Nine Months Ended | Three Months Ended | | Three Months Ended 2014 vs. 2013 |
| September 30, 2013 | | September 30, 2012 | March 31, 2014 | | March 31, 2013 | | Amount | | % |
Net cash provided by operating activities | $ | 1,303 |
| | $ | 679 |
| $ | 0.4 |
| | $ | 0.3 |
| | $ | 0.1 |
| | 36.2 | % |
Net cash used in investing activities | $ | (5,678 | ) | | $ | (2,160 | ) | $ | (1.7 | ) | | $ | (1.0 | ) | | $ | (0.7 | ) | | 64.9 | % |
Net cash provided by financing activities | $ | 3,562 |
| | $ | 2,497 |
| $ | 1.3 |
| | $ | 2.4 |
| | $ | (1.1 | ) | | (44.3 | )% |
Operating Activities
GENERAL MOTORS COMPANY AND SUBSIDIARIES
In the ninethree months ended September 30, 2013March 31, 2014 net cash provided by operating activities increased by $0.6 billion due primarily to the acquisitionsacquisition of Ally Financial international operations.
Investing Activities
In the ninethree months ended September 30, 2013March 31, 2014 net cash used in investing activities increased by $3.5 billion due primarily to: (1) increased fundingpurchases of commercial finance receivables of $11.1 billion$2.1 billion; and purchase of consumer finance receivables of $2.0 billion; (2) net cash payment of $2.1 billion madeincrease in the current period on the acquisitions of Ally Financial international operations; (3) increased purchasepurchases of leased vehicles of $0.9$0.1 billion; partially offset by (4)(3) increased collections and recoveries on finance receivables of $12.8$1.5 billion.
Financing Activities
In the ninethree months ended September 30, 2013March 31, 2014 net cash provided by financing activities increased by $1.1 billiondecreased due primarily to the increased borrowings under secured and unsecuredpayments on debt and issuance of senior notes of $8.3$3.6 billion partially offset by the increased proceeds from issuance of debt repayment of $5.8 billion and the repayment of $1.4 billion in certain debt assumed as part of the Ally Financial international operations acquisitions.$2.6 billion.
Guarantees Provided to Third Parties
We have provided guarantees related to the residual value of operating leases, certain suppliers' commitments, certain product-related claims and third party commercial loans and other obligations. The maximum potential obligation under these commitments was $16.010.7 billion and $23.516.9 billion at September 30, 2013March 31, 2014 and December 31, 20122013.
Refer to Note 1410 to our condensed consolidated financial statements for additional information on guarantees we have provided.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Critical Accounting Estimates
General
The condensed consolidated financial statements 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 that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates requiring adjustments to these balances in future periods. The critical accounting estimates that affect the condensed consolidated financial statements and the judgments and assumptions used are consistent with those described in the MD&A section in our 20122013 Form 10-K.10-K, as supplemented by the subsequent discussion of Policy, Product Warranty and Recall Campaigns.
Non-GAAP MeasuresPolicy, Product Warranty and Recall Campaigns
Management believes EBIT-adjusted provides meaningful supplemental information regarding our automotive segments' operating results because it excludes interest income, interest expense and income taxes as well as certain additional adjustments. Such adjustments include impairment chargesThe estimated costs related to goodwillpolicy and certain investments, gains or lossesproduct warranties are accrued at the time products are sold. Estimated costs related to product recalls based on a formal campaign soliciting return of that product are accrued when they are deemed to be probable and can be reasonably estimated. These estimates are established using historical information on the settlement/extinguishmentnature, frequency and average cost of obligationsclaims of each vehicle line or each model year of the vehicle line and gainsassumptions about future activity and events. When little or lossesno claims experience exists for a model year or a vehicle line, the estimate is based on comparable models. These estimates are re-evaluated on an ongoing basis and based on the salebest available information, revisions are made when necessary. We consider trends of non-core investments.
Management believes free cash flowclaims and adjusted free cash flow provide meaningful supplemental information regarding the liquidity oftake action to improve vehicle quality and minimize claims. Depending on part availability and time to complete repairs we may, from time-to-time, offer courtesy transportation at no cost to our automotive operations and our ability to generate sufficient cash flow above those required in our business to sustain our operations. We measure free cash flow as cash flow from operations less capital expenditures. We measure adjusted free cash flow as free cash flow adjusted for certain voluntary management actions, primarily related to strengthening our balance sheet.
Management believes these measures allow it to readily view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions. We believe these non-GAAP measures are useful in allowing for greater transparency of our core operations and are therefore used by management in its financial and operational decision-making. Management does not consider the excluded items when assessing and measuring the operational and financial performance of the organization, its management teams and when making decisions to allocate resources, such as capital investment, among business units and for internal reporting and as part of its forecasting and budgeting processes.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
While management believes that these non-GAAP measures provide useful information, they are not operating measures under U.S. GAAP and there are limitations associated with their use. Our calculation of these non-GAAP measures may not be completely 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 in isolation from, or as a substitute for, other measures such as Net income, Net income attributable to stockholders or operating cash flow. Due to these limitations, these non-GAAP measures are used as supplements to U.S. GAAP measures.
Management believes income before income taxes provides meaningful supplemental information regarding GM Financial's operating results. GM Financial uses a separate measure from our automotive operations because management believes interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment.
customers.
The following table summarizesestimated cost of a recall campaign is based on the reconciliationper unit part and labor cost, number of units impacted and the assumed number of vehicles that will be brought in by customers for repair (take rate), with the overall accrued amount being most sensitive to our automotive segments' EBIT-adjusted and GM Financial's income before income taxes to Net income attributable to stockholders and provide supplemental detail of the adjustments, which are presented net of noncontrolling interests (dollars in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2013 | | September 30, 2012 | | September 30, 2013 | | September 30, 2012 |
Automotive | | | | | | | | | | | | | | | |
EBIT-adjusted | | | | | | | | | | | | | | | |
GMNA | $ | 2,187 |
| | 91.3 | % | | $ | 1,715 |
| | 81.7 | % | | $ | 5,577 |
| | 92.9 | % | | $ | 5,248 |
| | 87.5 | % |
GME | (214 | ) | | (9.0 | )% | | (487 | ) | | (23.2 | )% | | (499 | ) | | (8.3 | )% | | (1,175 | ) | | (19.6 | )% |
GMIO | 299 |
| | 12.5 | % | | 761 |
| | 36.3 | % | | 1,022 |
| | 17.0 | % | | 1,909 |
| | 31.8 | % |
GMSA | 284 |
| | 11.9 | % | | 159 |
| | 7.6 | % | | 300 |
| | 5.0 | % | | 328 |
| | 5.5 | % |
Corporate | (161 | ) | | (6.7 | )% | | (51 | ) | | (2.4 | )% | | (397 | ) | | (6.6 | )% | | (310 | ) | | (5.2 | )% |
Total automotive EBIT-adjusted | 2,395 |
| | 100.0 | % | | 2,097 |
| | 100.0 | % | | 6,003 |
| | 100.0 | % | | 6,000 |
| | 100.0 | % |
Adjustments | (48 | ) | | | | (62 | ) | | | | (114 | ) | | | | (674 | ) | | |
Corporate interest income | 33 |
| | | | 84 |
| | | | 189 |
| | | | 259 |
| | |
Automotive interest expense | 65 |
| | | | 128 |
| | | | 217 |
| | | | 356 |
| | |
Gain (Loss) on extinguishment of debt | 2 |
| | | | — |
| | | | (238 | ) | | | | (18 | ) | | |
Automotive Financing | | | | | | | | | | | | | | | |
GM Financial income before income taxes | 239 |
| | | | 200 |
| | | | 673 |
| | | | 598 |
| | |
Consolidated | | | | | | | | | | | | | | | |
Eliminations | 3 |
| | | | (1 | ) | | | | 3 |
| | | | (1 | ) | | |
Income tax expense | 842 |
| | | | 357 |
| | | | 1,993 |
| | | | 814 |
| | |
Net income attributable to stockholders | $ | 1,717 |
| | | | $ | 1,833 |
| | | | $ | 4,306 |
| | | | $ | 4,994 |
| | |
Our automotive operations interest and income taxes are recorded centrally in Corporate; therefore, there are no reconciling items forestimated assumed take rate that is primarily developed based on our automotive operating segments between EBIT-adjusted and Net income attributable to stockholders.
historical take-rate experience. In the three months ended September 30, 2013March 31, 2014 we recorded a charge of $1.3 billion for the estimated cost of recall campaigns. A 10% increase in the estimated take rate would increase the estimated cost by approximately $100 million. We believe the amounts recorded are adequate to cover the costs of these recall campaigns.
Actual experience could differ from the amounts estimated requiring adjustments to EBIT consistedthese liabilities in future periods. Due to the uncertainty and potential volatility of Goodwill impairment chargesthe factors contributing to developing estimates, changes in our assumptions could materially affect our results of $48 million in GMIO, which is presented net of noncontrolling interests.
In the nine months ended September 30, 2013 adjustments to EBIT consisted of Venezuela currency devaluation of $162 million in GMSA, the acquisition of GM Korea preferred shares of $67 million and Goodwill impairment charges of $48 million in GMIO, which is presented net of noncontrolling interests, and net pension settlement charges and income related to various insurance recoveries, net, of $29 million.
In the three months ended September 30, 2012 adjustments to EBIT consisted of Goodwill impairment charges of $62 million in GMIO, which is presented net of noncontrolling interests.
In the nine months ended September 30, 2012 adjustments to EBIT consisted of Goodwill impairment charges of $590 million in GME and $84 million in GMIO, which is presented net of noncontrolling interests.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Accounting Standards Not Yet Adopted
Accounting standards not yet adopted are discussed in Note 1 to our condensed consolidated financial statements.operations.
Forward-Looking Statements
In this report 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 use words like “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,” “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. In making these statements we rely on assumptions and analyses 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 events or financial results, and our actual results may differ materially due to a variety of important factors, both positive and negative. These factors, which may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K, include among others the following:
Our ability to realize production efficiencies and to achieve reductions in costs as a result of our restructuring initiatives and labor modifications;
Our ability to maintain quality control over our vehicles and avoid material vehicle recalls;recalls and the cost and effect on our reputation and products;
Our ability to maintain adequate liquidity and financing sources including as required to fund our planned significant investment in new technology;
Our ability to realize successful vehicle applications of new technology;
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Shortages of and increases or volatility in the price of oil, including as a result of political instability in the Middle East and African nations;
Our ability to continue to attract customers, particularly for our new products, including cars and crossover vehicles;
Availability of adequate financing on acceptable terms to our customers, dealers, distributors and suppliers to enable them to continue their business relationships with us;
The ability of our suppliers to deliver parts, systems and components without disruption and at such times to allow us to meet production schedules;
Our ability to manage the distribution channels for our products;
Our ability to successfully restructure our European and consolidated international operations;
The continued availability of both wholesale and retail financing from Ally Financial and its affiliates and other finance companies in markets in which we operate to support our ability to sell vehicles, which is dependent on those entities' ability to obtain funding and their continued willingness to provide financing;
Our continued ability to develop captive financing capability, including GM Financial;
GM Financial's ability to successfully integrate certain Ally Financial international operations;
Overall strength and stability of the automotive industry, both in the U.S. and in global markets, particularly Europe;
Continued economic instability or poor economic conditions in the U.S., Europe and other global markets, including the credit markets, or changes in economic conditions, commodity prices, housing prices, foreign currency exchange rates or political stability in the markets in which we operate;
Significant changes in the competitive environment, including the effect of competition and excess manufacturing capacity in our markets, on our pricing policies or use of incentives and the introduction of new and improved vehicle models by our competitors;
Significant changes in economic, political and market conditions in China, including the effect of competition from new market entrants, on our vehicle sales and market position in China;
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations particularly laws, regulations and policies relating to vehicle safety including recalls, and including where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates;
Costs and risks associated with litigation;litigation and government investigations including those related to our recent recalls;
Significant increases in our pension expense or projected pension contributions resulting from changes in the value of plan assets, the discount rate applied to value the pension liabilities or other assumption changes; and
Changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, which could have an effect on earnings.
We caution readers not to place undue reliance on forward-looking statements. 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.
* * * * * * *
Item 3.Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes in our exposure to market risk since December 31, 2012.2013. Refer to Item 7A inof our 20122013 Form 10-K.
* * * * * * *
Item 4. Controls and Procedures
Disclosure Controls and Procedures
GENERAL MOTORS COMPANY AND SUBSIDIARIES
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported 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.
Our management, with the participation of our Chairman and CEO and Executive Vice President 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) at September 30, 2013.March 31, 2014. Based on this evaluation required by paragraph (b) of Rules 13a-15 or 15d-15, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2013.March 31, 2014.
Changes in Internal Controls
There have not been any changes in internal control over financial reporting during the three months ended September 30, 2013March 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The discussion in the following paragraphs describe material legal proceedings that arose in the three months ended March 31, 2014. Refer to our 20122013 Form 10-K as updatedfor a full description of our material pending legal proceedings.
Proceedings Related to Ignition Switch Recall
In the three months ended March 31, 2014 we announced a recall to repair ignition switches that under certain circumstances could unintentionally move from the “run” position to the “accessory” or “off” position with a corresponding loss of power, which in our Form 10-Qturn may prevent front airbags from deploying in the event of a crash. The recall includes approximately 2.6 million Chevrolet Cobalt, HHR, Pontiac G5, Pursuit, Solstice, and Saturn ION and Sky vehicles. Refer to the “Recall Campaigns” section of MD&A for additional information.
Through April 22, 2014 we are aware of 55 putative class actions have been filed against GM in various U.S. District Courts since the recall announcement alleging that consumers have been economically harmed by the recall and/or the underlying vehicle condition. In the aggregate, these cases seek recovery for compensatory damages, including for alleged diminution in value of the vehicles, punitive damages and injunctive and other relief. Additionally, through April 22, 2014, five putative class actions have been filed in various Provincial Courts in Canada seeking similar relief.
On March 21, 2014 a putative shareholder class action was filed in the United States District Court for the period ended June 30, 2013. There have been noEastern District of Michigan against GM and various current and former officers of GM (Piov. General Motors Company et al) on behalf of purchasers of GM securities from November 17, 2010 through March 10, 2014. The complaint alleges that defendants made material changesmisstatements and omissions relating to problems with the ignition switch in SEC filings. The plaintiff seeks unspecified monetary damages, interest and attorneys’ fees and costs.
On March 28, 2014 a shareholder derivative action was filed in the period ending September 30, 2013United States District Court for the Eastern District of Michigan against certain current and former GM directors (Hockstein v. Barra et al). The complaint alleges breach of fiduciary duty by GM’s directors in connection with monitoring, remediation and disclosure of the issues underlying the ignition switch recall. On April 9, 2014 a similar shareholder derivative action was filed in the Circuit Court for Wayne County Michigan against the same defendants (Bekkerman v. Barra et al). This complaint also alleges breach of fiduciary duty by GM’s directors in connection with monitoring, remediation and disclosure of the issues underlying the ignition switch recall. The plaintiffs in both these cases seek to recover on behalf of GM amounts spent by GM as a result of the defendants’ alleged failure to timely identify and correct the ignition switch defect and of the alleged failure to make accurate and timely public disclosure. On April 16, 2014 a third shareholder derivative action was filed in the Circuit Court for Wayne County Michigan against current and certain former directors (Wietschiner et al v. Barra et al) alleging breach of fiduciary duty and waste of corporate assets by reason of failure to exercise oversight with respect to vehicle safety generally and in connection with the ignition switch recall specifically. Plaintiffs seek damages caused by the alleged breaches and an order compelling implementation of various policies and corporate governance practices. On April 23, 2014 a similar shareholder derivative action was filed in the United States District Court for the Eastern District of Michigan against certain current and former GM directors (The Police Retirement System of St. Louis v. Barra et al). This complaint also alleges breach of fiduciary duty and waste of corporate assets by reason of failure to exercise oversight with respect to vehicle safety generally and in connection with the ignition switch recall specifically. The plaintiffs in this case also seek damages caused by the alleged breaches and an order compelling implementation of various policies and corporate governance practices.
On or about April 11, 2014 an action was initiated in the United States District Court for the Northern District of Georgia alleging a motor vehicle accident on July 22, 2009 involving a 2003 Saturn ION which resulted in catastrophic injuries to the Legal Proceedings discloseddriver (Alexina H. Van Pelt et al v. General Motors LLC). According to the complaint, the subject accident resulted from the failure of the vehicle’s ignition switch due to the condition which prompted the ignition switch recall. Plaintiffs further allege that GM intentionally and fraudulently concealed facts relating to the ignition switch from plaintiff, the public and the NHTSA over a lengthy period. Based on these allegations, the complaint asserts causes of action based on strict products liability, negligence, breach of implied warranty, fraud and fraudulent concealment, and the Federal and Georgia Racketeer Influenced and Corrupt Organizations Act. Plaintiffs seek compensatory damages, treble damages, punitive damages, and attorney’s fees and costs.
GM intends to vigorously defend all of these cases.
We are also the subject of various inquiries, investigations, subpoenas and requests for information from the U.S. Attorney’s
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Office for the Southern District of New York, Congress, NHTSA, the SEC, and a state attorney general in connection with our 2012 Form 10-K.recent recalls. We are investigating these matters internally and believe we are cooperating fully with all requests, notwithstanding NHTSA’s recent fines for failure to respond. Such investigations could in the future result in the imposition of damages, fines or civil and criminal penalties.
* * * * * * *
Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by these risk factors. Therethe factors subsequently described.
Other than as subsequently discussed, there have been no material changes to the Risk Factors disclosed in our 2013 Form 10-K. While we describe each risk separately, some of these risks are interrelated and certain risks could trigger the applicability of other risks subsequently described.
The costs and effect on our reputation of product recalls could materially adversely affect our business.
From time to time we recall our products to address performance, compliance or safety-related issues. 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 and may also include costs of courtesy transportation. Product recalls can harm our reputation and cause us to lose customers, particularly if those recalls cause consumers to question the safety or reliability of our products. Conversely, not issuing a recall or not issuing a recall on a timely basis can harm our reputation and cause us to lose customers. Any costs incurred or lost sales caused by our past or future product recalls could materially adversely affect our business. The Ignition Switch Recall has resulted in government inquiries and private litigation and our sales and reputation could suffer. We are currently facing NHTSA, U.S. Attorney for the Southern District of New York, Congressional and a state inquiry related to the Ignition Switch Recall, including how it occurred, its consequences and our responses. If we are unable to effectively maintain our reputation as a result of a failure to promptly implement safety measures, such as recalls when necessary, vehicle unit sales and/or sale prices may decrease, which could materially adversely affect our financial condition, results of operations and cash flows.
We could be materially adversely affected by a negative outcome in unusual or significant litigation, governmental investigations or other legal proceedings.
We are subject to legal proceedings in respect of various issues, including product liability lawsuits, shareholder litigation and governmental investigations, including class actions related to the Ignition Switch Recall, such as a lawsuit for the lost value of cars affected by the Ignition Switch Recall. At this point we are unable to predict the duration, scope, developments in, results of, or consequences of the internal investigations and the government's investigation. Such investigations could in the future result in the imposition of damages, substantial fines, civil and criminal penalties, interruptions of business, modification of business practices, equitable remedies, and other sanctions against us or our personnel. Because the matters are ongoing, there can be no assurance as to how the resulting consequences, if any, may impact our business, reputation, consolidated financial condition, results of operations or cash flow. We cannot currently estimate the potential liability, damages or range of potential loss as a result of the legal proceedings and governmental investigations. For a further discussion of these matters, please see Item 1. Legal Proceedings and Note 10 to our condensed consolidated financial statements.
Our ability to maintain profitability over the long-term is dependent upon our ability to introduce new and improved vehicle models that are able to attract a sufficient number of consumers.
Our ability to maintain profitability over the long-term depends on our ability to entice consumers to consider our products when purchasing a new vehicle. The automotive industry, particularly in the U.S., is very competitive with market participants including new participants routinely introducing new and improved vehicle models designed to meet consumer expectations, and in the past our competitors have been very successful in persuading customers that previously purchased our products to purchase their vehicles instead. Producing new and improved vehicle models on a basis competitive with the models introduced by our competitors and preserving our reputation for designing, building and selling safe and high quality cars that meet customer preferences is critical to our long-term profitability. We will launch a substantial number of new vehicles in 2014. A successful launch of our new vehicles is critical to our short-term profitability.
GENERAL MOTORS COMPANY AND SUBSIDIARIES
The pace of our development and introduction of new and improved vehicles depends on our ability to implement successfully improved technological innovations in design, engineering and manufacturing, which requires extensive capital investment and the ability to retain and recruit new talent. In some cases the technologies that we plan to employ, such as hydrogen fuel cells and advanced battery technology, are not yet commercially practical and depend on significant future technological advances by us and by our suppliers. There can be no assurance that our competitors and others pursuing similar technologies and other competing technologies will not acquire similar or superior technologies sooner than we do or on an exclusive basis or at a significant price advantage. If we are unable to achieve these goals, we may not be able to maintain profitability over the long-term.
We are subject to extensive governmental laws, regulations and policies including safety, fuel economy, and greenhouse gas emissions, the enforcement of which or changes to existing ones, may have a significant effect on how we do business.
We are affected significantly by governmental regulations that can increase costs related to the production of our vehicles and affect our product portfolio. We anticipate that the number and extent of these regulations, and the related costs and changes to our product lineup, will increase significantly in the future. In the U.S. and Europe, for example, governmental regulation is driven primarily by concerns about the environment (including greenhouse gas emissions), vehicle safety, fuel economy and energy security. These government regulatory requirements could significantly affect our plans for global product development and may result in substantial costs, including civil penalties. They may also result in limits on the types of vehicles we sell and where we sell them, which can affect revenue.
In the U.S. automotive safety standards are regulated by the NHTSA, whose regulators require that automotive manufacturers implement safety measures such as recalls for vehicles that do not or may not comply with relevant safety standards. Due to these regulations, we could be subject to civil penalties or may incur various costs including significant costs for free repairs, if we are required to, or voluntarily decide to, implement safety measures such as a recall. For example, we are currently facing NHTSA, U.S. Attorney for the Southern District of New York, Congressional and a state inquiry related to the Ignition Switch Recall that may result in the imposition of fines or other penalties including criminal sanctions.
In the U.S. vehicle fuel economy and greenhouse gas emissions are regulated under a harmonized national program administered by the NHTSA and the Environmental Protection Agency. The agencies have set coordinated fuel economy and greenhouse emission standards through the 2025 model year for light duty vehicles and through the 2018 model year for heavy duty trucks. California, which has set its own greenhouse gas emission standards through its AB 1493 Rules, has agreed to accept compliance with the national program as compliance with its state program.
We are committed to meeting or exceeding these U.S. regulatory requirements, and our product plan of record projects compliance with the anticipated national program through the 2021 model year. The standards for the 2022 through 2025 model years may be adjusted as a result of a mid-term review by the agencies. Therefore we believe it is premature to project compliance with possible standards for those years. We expect that to comply with these standards we will be required to sell a significant volume of hybrid electric vehicles, as well as implement new technologies for conventional internal combustion engines, all at increased cost levels. There is no assurance that we will be able to produce and sell vehicles that use such 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.
The European Union (EU) passed legislation, effective in April 2009, that began regulating vehicle CO20122 Form 10-K.emissions in 2012. The legislation sets a target of a fleet average of 95 grams per kilometer for 2020, with the requirements for each manufacturer based on the weight of the vehicles it sells. Additional measures have been proposed or adopted in Europe to regulate features such as tire rolling resistance, vehicle air conditioners, tire pressure monitors, gear shift indicators and others. At the national level 17 EU Member States have adopted some form of fuel consumption or carbon dioxide-based vehicle taxation system, which could result in specific market requirements for us to introduce technology earlier than is required for compliance with the EU emissions standards.
Other governments around the world, such as Canada, China, Brazil, Mexico and South Korea are also creating or have new policies to address these same issues. As in the U.S. these government policies could significantly affect our plans for product development. Due to these regulations we could be subject to sizable civil penalties or have to restrict product offerings drastically to remain in compliance. The regulations will result in substantial costs, which could be difficult to pass through to our customers, and could result in limits on the types of vehicles we sell and where we sell them, which could affect our operations, including facility closings, reduced employment, increased costs and loss of revenue.
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities for Cash
No shares of common stock were purchased for cash in the three months ended September 30, 2013.March 31, 2014.
Other Purchases of Equity Securities
The following table summarizes our non-cash purchases of common stock in each of the three months ended September 30, 2013:March 31, 2014:
|
| | | | | | | | | | |
| Total Number of Shares Purchased(a) | | Average Price Paid per Share | | Total Number of Shares Purchased Under the Program | | Approximate Dollar Value of Shares That May Yet be Purchased Under the Program |
July 1, 2013 through July 31, 2013 | 82,751 |
| | $ | 33.35 |
| | N/A | | N/A |
August 1, 2013 through August 31, 2013 | 2,298 |
| | $ | 36.13 |
| | N/A | | N/A |
September 1, through September 30, 2103 | 1,151 |
| | $ | 34.89 |
| | N/A | | N/A |
Total | 86,200 |
| | $ | 33.44 |
| | | | |
|
| | | | | | | | | | |
| Total Number of Shares Purchased(a) | | Average Price Paid per Share | | Total Number of Shares Purchased Under the Program | | Approximate Dollar Value of Shares That May Yet be Purchased Under the Program |
January 1, 2014 through January 31, 2014 | 34,209,607 |
| | $ | 40.43 |
| | N/A | | N/A |
February 1, 2014 through February 28, 2014 | 2,470,411 |
| | $ | 37.86 |
| | N/A | | N/A |
March 1, 2014 through March 31, 2014 | 4,041,033 |
| | $ | 35.60 |
| | N/A | | N/A |
Total | 40,721,051 |
| | $ | 39.80 |
| | | | |
________
N/A = not applicable
| |
(a) | Represents shares of common stock retained by us for the payment of the exercise price upon the exercise of warrants and shares of common stock delivered by employees or directors back to us for the payment of taxes resulting from issuance of common stock upon the vesting of Restricted Stock UnitsRSUs and Restricted Stock Awards relating to compensation plans and shares of common stock retained by us for the payment of the exercise price upon the exercise of warrants.plans. Refer to Note 19 to our condensed consolidated financial statements for additional details on employee stock incentive plansNotes 21 and Note 2423 to our consolidated financial statements in our 20122013 Form 10-K for additional details on warrants issued. issued and employee stock incentive plans. |
* * * * * * *
Item 6. Exhibits
GENERAL MOTORS COMPANY AND SUBSIDIARIES
|
| | | | |
Exhibit Number | | Exhibit Name | | |
10.1 | | Amendment to Warrant Agreements between General Motors Company Short Term Incentive Plan, as Amended August 19, 2013and U.S. Bank National Association amending exhibits 10.21, 10.22 and 10.23 to the Annual Report on Form 10-K of General Motors Company filed February 6, 2014 | | Filed Herewith |
10.212 | | General Motors Company SalaryComputation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Plan, as Amended June 5, 2013 | | Filed Herewith |
10.3 | | General Motors Company 2009 Long-Term Incentive Plan, as Amended August 19, 2013 | | Filed Herewith |
10.4 | | General Motors Company Common Stock ProspectusDividends for Salary Stock Plan and 2009 Long-Term Incentive Planthe Quarter Ended March 31, 2014 | | Filed Herewith |
31.1 | | Section 302 Certification of the Chief Executive Officer | | Filed Herewith |
31.2 | | Section 302 Certification of the Chief Financial Officer | | Filed Herewith |
32 | | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | Furnished with this Report |
101.INS* | | XBRL Instance Document | | Furnished with this Report |
101.SCH* | | XBRL Taxonomy Extension Schema Document | | Furnished with this Report |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document | | Furnished with this Report |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document | | Furnished with this Report |
101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document | | Furnished with this Report |
101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document | | Furnished with this Report |
________
| |
* | Submitted electronically with this Report. |
* * * * * * *
GENERAL MOTORS COMPANY AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
| | | | |
| | GENERAL MOTORS COMPANY (Registrant)
| |
| | By: | /s/ THOMAS S. TIMKO | |
| | | Thomas S. Timko, Vice President, Controller and Chief Accounting Officer | |
Date: | October 30, 2013April 24, 2014 | | | |