General Motors Financial (ACF) 10-Q 2014 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________ 

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ________________ to ________________

Commission file number 1-10667

______________________________________________ 

General Motors Financial Company, Inc.

(Exact name of registrant as specified in its charter)

Texas	75-2291093
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

801 Cherry Street, Suite 3500, Fort Worth, Texas 76102

(Address of principal executive offices, including Zip Code)

(817) 302-7000

(Registrant’s telephone number, including area code)

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  Q    No  o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  Q    No  o

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 the definitions of "large accelerated filer"; "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer ý Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  Q

As of July 24, 2014, there were 502 shares of the registrant’s common stock, par value $1.00 per share, outstanding. All of the registrant’s common stock is owned by General Motors Holdings, LLC.

GENERAL MOTORS FINANCIAL COMPANY, INC.

INDEX TO FORM 10-Q

		Page
Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income and Comprehensive Income	2
	Condensed Consolidated Statements of Cash Flows	3
	Notes to Condensed Consolidated Financial Statements	4
	Note 1 - Summary of Significant Accounting Policies	4
	Note 2 - Finance Receivables	6
	Note 3 - Restricted Cash	12
	Note 4 - Leased Vehicles	12
	Note 5 - Debt	13
	Note 6 - Variable Interest Entities	14
	Note 7 - Derivative Financial Instruments and Hedging Activities	15
	Note 8 - Fair Values of Assets and Liabilities	17
	Note 9 - Commitments and Contingencies	18
	Note 10 - Income Taxes	18
	Note 11 - Fair Values of Financial Instruments	18
	Note 12 - Segment Reporting	20
	Note 13 - Accumulated Other Comprehensive Income	21
	Note 14 - Regulatory Capital	22
	Note 15 - Guarantor Consolidating Financial Statements	22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
Part II. Other Information		46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 6.	Exhibits	47
Signature		48

Part I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

(Unaudited)

	June 30, 2014		December 31, 2013
Assets
Cash and cash equivalents	$	1,412	$	1,074
Finance receivables, net	31,545		29,282
Restricted cash	2,205		1,958
Property and equipment, net	150		132
Leased vehicles, net	4,748		3,383
Deferred income taxes	433		359
Goodwill	1,245		1,240
Related party receivables	185		129
Other assets	436		433
Total assets	$	42,359	$	37,990
Liabilities and Shareholder's Equity
Liabilities:
Secured debt	$	25,006	$	22,073
Unsecured debt	7,596		6,973
Accounts payable and accrued expenses	984		946
Deferred income	249		168
Deferred income taxes	12		87
Taxes payable	293		287
Related party taxes payable	891		643
Related party payables	432		368
Other liabilities	229		160
Total liabilities	35,692		31,705
Commitments and contingencies (Note 9)
Shareholder's equity:
Common stock, $1.00 par value per share, 1,000 shares authorized and 502 shares issued	—		—
Additional paid-in capital	4,793		4,785
Accumulated other comprehensive income	65		11
Retained earnings	1,809		1,489
Total shareholder's equity	6,667		6,285
Total liabilities and shareholder's equity	$	42,359	$	37,990

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
Revenue
Finance charge income	$	882	$	647		$	1,712	$	1,062
Leased vehicle income	238		136			438		243
Other income	71		53			138		71
Total revenue	1,191		836			2,288		1,376
Costs and expenses
Salaries and benefits	154		116			290		190
Other operating expenses	126		75			259		109
Total operating expenses	280		191			549		299
Leased vehicle expenses	179		101			335		181
Provision for loan losses	113		100			248		194
Interest expense	354		164			669		246
Acquisition and integration expenses	—		16			—		22
Total costs and expenses	926		572			1,801		942
Income before income taxes	265		264			487		434
Income tax provision	90		86			167		150
Net income	175		178			320		284
Other comprehensive income (loss)
Foreign currency translation adjustment	49		(59		)	54		(65		)
Other comprehensive income (loss), net	49		(59		)	54		(65		)
Comprehensive income	$	224	$	119		$	374	$	219

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended June 30,
	2014			2013
Net cash provided by operating activities	$	904		$	701
Cash flows from investing activities:
Purchases of consumer finance receivables, net	(6,827		)	(3,812		)
Principal collections and recoveries on consumer finance receivables	5,300			3,054
Net funding of commercial finance receivables	(297		)	(382		)
Purchases of leased vehicles, net	(1,856		)	(1,176		)
Proceeds from termination of leased vehicles	264			84
Acquisition of international operations, net of cash on hand	(46		)	(2,107		)
Purchases of property and equipment	(15		)	(4		)
Change in restricted cash	(236		)	(158		)
Change in other assets	(2		)	(2		)
Net cash used in investing activities	(3,715		)	(4,503		)
Cash flows from financing activities:
Net increase in debt (original maturities less than three months)	278			—
Borrowings and issuance of secured debt	10,722			9,085
Payments on secured debt	(8,445		)	(7,007		)
Borrowings and issuance of unsecured debt	1,472			3,022
Payments on unsecured debt	(838		)	(633		)
Repayment of debt to Ally Financial	—			(1,416		)
Capital contribution from parent	—			1,300
Debt issuance costs	(49		)	(63		)
Net cash provided by financing activities	3,140			4,288
Net increase in cash and cash equivalents	329			486
Effect of foreign exchange rate changes on cash and cash equivalents	9			(18		)
Cash and cash equivalents at beginning of period	1,074			1,289
Cash and cash equivalents at end of period	$	1,412		$	1,757

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

GENERAL MOTORS FINANCIAL COMPANY, INC.

Notes to Condensed Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Acquisition of Ally Financial International Operations

We acquired Ally Financial Inc.'s ("Ally Financial") auto finance and financial services operations in Germany, the United Kingdom (the "U.K."), Italy, Sweden, Switzerland, Austria, Belgium, the Netherlands, Greece, Spain, Chile, Colombia and Mexico on April 1, 2013. We acquired Ally Financial's auto finance and financial services operations in France and Portugal on June 1, 2013, and we acquired Ally Financial's auto finance and financial services operations in Brazil on October 1, 2013. Additionally, we have agreed to acquire Ally Financial's non-controlling 40% equity interest in GMAC-SAIC Automotive Finance Company Limited ("GMAC-SAIC"), a joint venture, which conducts auto finance operations in China. This agreement is subject to certain regulatory and other approvals and has become subject to a right of termination by either party in its sole discretion; however, we do not expect the agreement to be terminated. We consider it probable that our acquisition of Ally Financial's interest in GMAC-SAIC will occur in late 2014 or as soon as practicable thereafter. The results of operations of the acquired entities since the applicable acquisition dates are included in our financial statements for the three and six months ended June 30, 2014 and 2013.

Segment Information

We evaluate our business in two operating segments: North America ("the North America Segment") and international ("the International Segment"). The North America Segment includes our operations in the U.S. and Canada. The International Segment includes our operations in all other countries. For additional financial information regarding our business segments, see Note 12 - "Segment Reporting."

Basis of Presentation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, including certain special-purpose financing entities utilized in secured financing transactions, which are considered variable interest entities ("VIEs"). All intercompany transactions and balances have been eliminated in consolidation.

The interim period consolidated financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles ("GAAP") in the United States of America. These interim period condensed consolidated financial statements should be read in conjunction with the consolidated financial statements that are included in our Annual Report on Form 10-K filed on February 6, 2014 ("Form 10-K"). Certain prior year amounts were reclassified to conform to our current year presentation.

The condensed consolidated financial statements as of June 30, 2014, and for the three and six months ended June 30, 2014 and 2013, are unaudited and, in management’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for such interim periods. The results for interim periods are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. These estimates include, among other things, the determination of the allowance for loan losses on finance receivables, estimated recovery value on leased vehicles, goodwill, income taxes and the expected cash flows on the pre-acquisition consumer finance receivables.

Net Presentation of Cash Flows Related to Commercial Finance Receivables

Our commercial finance receivables are primarily comprised of floorplan financing to dealers.  The floorplan financing loans are repayable by the dealer within two to ten days after the dealer sells the vehicle subject to the financing. In our experience, these loans are typically repaid in less than 90 days of when the credit is extended. Furthermore, we have the unilateral ability to call the loans and receive payment within 30 days of when the credit is extended. Therefore, the presentation of the cash flows related to commercial finance receivables are reflected on the condensed consolidated statements of cash flows as "Net funding (collections) of commercial finance receivables."

We have revolving debt agreements to finance our commercial lending activities. The revolving period of these agreements ranges from 12 to 18 months; however, the terms of these financing agreements require that a borrowing base of eligible floorplan receivables, within certain concentration limits, must be maintained in sufficient amounts to support advances.  When a dealer repays a floorplan receivable to us, the amount advanced against such receivables must be repaid by us or else the equivalent amount in new receivables must be added to the borrowing base. Despite the revolving term exceeding 90 days, the actual term

4

for repayment of advances under these agreements is when we receive repayment from the dealers, which is typically within 90 days of when the credit is extended. Therefore, for 2014, the cash flows related to these revolving debt agreements are reflected on the condensed consolidated statements of cash flows as “Net increase in debt (original maturities less than three months).”

Related Party Transactions

We are the wholly-owned captive finance subsidiary of our parent, General Motors Company ("GM"). We offer loan and lease finance products through GM-franchised dealers to consumers purchasing new and certain used vehicles manufactured by GM and make commercial loans directly to GM-franchised dealers. Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on consumer loan and lease finance products. In addition, GM makes payments to us to cover certain interest payments on commercial loans. At June 30, 2014 and December 31, 2013, we had related party receivables from GM in the amount of $185 million and $129 million under these programs.

In addition, we had $90 million and $62 million due at June 30, 2014 and December 31, 2013 in loans outstanding to dealers that are consolidated by GM, in connection with our commercial lending program. Our international operations also provide financing to certain GM subsidiaries through factoring and other wholesale financing arrangements. At June 30, 2014 and December 31, 2013, $228 million and $588 million were outstanding under such arrangements, and are included in commercial finance receivables. At June 30, 2014 and December 31, 2013, we also had $432 million and $368 million of related party payables due to GM, primarily for commercial finance receivables originated but not yet funded. These payables typically settle within 30 days.

We have a tax sharing agreement with GM for our US operations, and we are obligated to pay GM for our share of the consolidated U.S. federal and certain state tax liabilities for taxable income recognized by us in any period beginning on or after October 1, 2010. Payments for the tax years 2010 through 2014 are deferred for four years from their original due date, and the total deferral amount is to not exceed $1.0 billion. The tax sharing agreement may be modified at any time by GM in its sole discretion. As of June 30, 2014 and December 31, 2013, we have recorded related party taxes payable to GM in the amount of $891 million and $643 million.

We have a $600 million credit facility with GM ("GM Related Party Credit Facility"). There were no advances outstanding under the GM Related Party Credit Facility at June 30, 2014 or December 31, 2013.

Recently Adopted Accounting Principles

On January 1, 2014 we adopted Accounting Standards Update (ASU) 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” which was issued 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. The adoption of this ASU did not have a material effect on our consolidated financial statements.

Accounting Standards Not Yet Adopted

In May 2014 the Financial Accounting Standards Board issued ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers” (ASU 2014-09) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein and requires expanded disclosures. We are currently assessing the impact the adoption of ASU 2014-09 will have on our condensed consolidated financial statements.

5

Note 2. Finance Receivables

The finance receivables portfolio consists of the following (in millions): 

	June 30, 2014									December 31, 2013
	North America			International			Total			North America			International			Total
Consumer
Pre-acquisition consumer finance receivables - outstanding balance	$	584		$	255		$	839		$	931		$	363		$	1,294
Pre-acquisition consumer finance receivables - carrying value	$	510		$	245		$	755		$	826		$	348		$	1,174
Post-acquisition consumer finance receivables, collectively evaluated for impairment, net of fees(a)	10,402			12,897			23,299			9,795			11,394			21,189
Post-acquisition consumer finance receivables, individually evaluated for impairment, net of fees	992			—			992			767			—			767
	11,904			13,142			25,046			11,388			11,742			23,130
Less: allowance for loan losses - collective	(392		)	(60		)	(452		)	(365		)	(29		)	(394		)
Less: allowance for loan losses - specific	(123		)	—			(123		)	(103		)	—			(103		)
Total consumer finance receivables, net	11,389			13,082			24,471			10,920			11,713			22,633
Commercial
Commercial finance receivables, collectively evaluated for impairment, net of fees	2,373			4,653			7,026			1,975			4,627			6,602
Commercial finance receivables, individually evaluated for impairment, net of fees	—			88			88			—			98			98
	2,373			4,741			7,114			1,975			4,725			6,700
Less: allowance for loan losses - collective	(17		)	(18		)	(35		)	(17		)	(27		)	(44		)
Less: allowance for loan losses - specific	—			(5		)	(5		)	—			(7		)	(7		)
Total commercial finance receivables, net	2,356			4,718			7,074			1,958			4,691			6,649
Total finance receivables, net	$	13,745		$	17,800		$	31,545		$	12,878		$	16,404		$	29,282

________________

(a) Amounts reported for International include $1.1 billion and $1.0 billion of direct-financing leases at June 30, 2014 and December 31, 2013.

Consumer Finance Receivables

Our consumer finance receivables are reported in two portfolios: pre-acquisition and post-acquisition. The pre-acquisition consumer finance receivables portfolio consists of (i) finance receivables originated in North America prior to our merger with GM, all of which were considered to have had deterioration in credit quality, and (ii) finance receivables that were considered to have had deterioration in credit quality that were acquired with the international operations. The pre-acquisition consumer portfolio will decrease over time with the amortization of the acquired receivables.

The post-acquisition consumer finance receivables portfolio consists of (i) finance receivables originated in North America since our merger with GM, (ii) finance receivables originated in the international operations since the applicable acquisition dates and (iii) finance receivables that were considered to have had no deterioration in credit quality that were acquired with the international operations. The post-acquisition consumer portfolio will grow over time as we originate new receivables.

6

Pre-acquisition Consumer Finance Receivables

Following is a summary of activity in our pre-acquisition consumer finance receivables portfolio (in millions):

	Six Months Ended June 30,
	2014									2013
	North America			International			Total			North America			International			Total
Pre-acquisition consumer finance receivables - outstanding balance, beginning of period	$	931		$	363		$	1,294		$	2,162		$	—		$	2,162
Pre-acquisition consumer finance receivables - carrying value, beginning of period	$	826		$	348		$	1,174		$	1,958		$	—		$	1,958
International operations acquisition	—			—			—			—			1,569			1,569
Principal collections and other	(308		)	(126		)	(434		)	(641		)	(264		)	(905		)
Change in carrying value adjustment	(8		)	27			19			(38		)	8			(30		)
Foreign currency translation	—			(4		)	(4		)	—			(41		)	(41		)
Balance at end of period	$	510		$	245		$	755		$	1,279		$	1,272		$	2,551

We review our pre-acquisition portfolio 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. During the six months ended June 30, 2014 and 2013, as a result of improvements in the credit performance of the North America pre-acquisition portfolio, expected cash flows increased by $33 million and $54 million. We transferred the amount of excess cash flows from the non-accretable difference to accretable yield. This excess will be amortized through finance charge income over the remaining life of the portfolio. As a result of the decrease in the pre-acquisition portfolio through amortization, the amount of excess cash flows transferred to accretable yield and subsequently amortized through finance charge income has decreased.

A summary of the activity in the accretable yield on the pre-acquisition consumer finance receivables portfolios is as follows (in millions):

	Three Months Ended June 30,
	2014									2013
	North America			International			Total			North America			International			Total
Balance at beginning of period	$	174		$	55		$	229		$	371		$	—		$	371
International operations acquisition	—			—			—			—			249			249
Accretion of accretable yield	(41		)	(13		)	(54		)	(79		)	(53		)	(132		)
Transfer from non-accretable difference	—			—			—			6			—			6
Foreign currency translation	—			2			2			—			(12		)	(12		)
Balance at end of period	$	133		$	44		$	177		$	298		$	184		$	482

	Six Months Ended June 30,
	2014									2013
	North America			International			Total			North America			International			Total
Balance at beginning of period	$	181		$	74		$	255		$	404		$	—		$	404
International operations acquisition	—			—			—			—			249			249
Accretion of accretable yield	(81		)	(30		)	(111		)	(160		)	(53		)	(213		)
Transfer from non-accretable difference	33			—			33			54			—			54
Foreign currency translation	—			—			—			—			(12		)	(12		)
Balance at end of period	$	133		$	44		$	177		$	298		$	184		$	482

Post-acquisition Consumer Finance Receivables

7

We generally purchase consumer finance contracts from auto dealers without recourse, and accordingly, the dealer has no liability to us if the consumer defaults on the contract. Depending upon the contract structure and consumer credit attributes, we may pay dealers a participation fee or we may charge dealers a non-refundable acquisition fee when purchasing individual finance contracts. We also have subvention programs with GM and other new vehicle manufacturers, under which the manufacturers provide us cash payments in order for us to offer lower interest rates on consumer finance contracts we purchase. We record the amortization of participation fees and subvention and accretion of acquisition fees to finance charge income using the effective interest method.

Following is a summary of activity in our post-acquisition consumer finance receivables portfolio (in millions):

	Six Months Ended June 30,
	2014									2013
	North America			International			Total			North America			International			Total
Post-acquisition consumer finance receivables, net of fees - beginning of period	$	10,562		$	11,394		$	21,956		$	8,831		$	—		$	8,831
International operations acquisition	—			—			—			—			5,422			5,422
Loans purchased	2,917			4,128			7,045			2,710			1,117			3,827
Charge-offs	(349		)	(66		)	(415		)	(248		)	—			(248		)
Principal collections and other	(1,736		)	(2,888		)	(4,624		)	(1,346		)	(594		)	(1,940		)
Foreign currency translation	—			329			329			—			(12		)	(12		)
Balance at end of period	$	11,394		$	12,897		$	24,291		$	9,947		$	5,933		$	15,880

A summary of the activity in the allowance for consumer loan losses is as follows (in millions):

	Three Months Ended June 30,
	2014									2013
	North America			International			Total			North America			International		Total
Balance at beginning of period	$	491		$	46		$	537		$	382		$	—	$	382
Provision for loan losses	89			33			122			80			8		88
Charge-offs	(157		)	(34		)	(191		)	(116		)	—		(116		)
Recoveries	92			15			107			69			—		69
Balance at end of period	$	515		$	60		$	575		$	415		$	8	$	423

	Six Months Ended June 30,
	2014									2013
	North America			International			Total			North America			International		Total
Balance at beginning of period	$	468		$	29		$	497		$	345		$	—	$	345
Provision for loan losses	193			66			259			169			8		177
Charge-offs	(349		)	(66		)	(415		)	(248		)	—		(248		)
Recoveries	203			31			234			149			—		149
Balance at end of period	$	515		$	60		$	575		$	415		$	8	$	423

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Consumer Credit Quality

We use proprietary scoring systems in the underwriting process 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 our proprietary scoring system, we consider other individual consumer factors, such as employment history, financial stability, and capacity to pay. At the time of loan origination, substantially all of our international consumers have the equivalent of prime credit scores. In the North America Segment, however, our consumer finance receivables are predominantly sub-prime. A summary of the credit risk profile by FICO score band, determined at origination, of the consumer finance receivables in the North America Segment is as follows (dollars in millions):

	June 30, 2014				December 31, 2013
	Amount		Percent		Amount		Percent
FICO Score less than 540	$	3,723	31.1	%	$	3,511	30.6	%
FICO Score 540 to 599	5,707		47.6		5,435		47.3
FICO Score 600 to 659	2,293		19.1		2,277		19.8
FICO Score 660 and greater	255		2.2		270		2.3
Balance at end of period(a)	$	11,978	100.0	%	$	11,493	100.0	%

_________________ 

(a) Balance at the end of the period is the sum of pre-acquisition consumer finance receivables-outstanding balance and post-acquisition consumer finance receivables, net of fees for North America Segment.

In addition we review the credit quality of all of our consumer finance receivables based on consumer payment activity. A consumer account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Consumer finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the consumer defaults on the payment terms of the contract. The following is a summary of the contractual amounts of consumer finance receivables, which is not significantly different than recorded investment, that are (i) more than 30 days delinquent, not yet in repossession, and (ii) in repossession, but not yet charged off (dollars in millions):

	June 30,
	2014								2013
	North America		International		Total		Percent of Contractual Amount Due		North America		International		Total		Percent of Contractual Amount Due
31 - 60 days	$	756	$	130	$	886	3.5	%	$	601	$	44	$	645	3.4	%
Greater than 60 days	255		133		388		1.6		208		45		253		1.4
	1,011		263		1,274		5.1		809		89		898		4.8
In repossession	35		5		40		0.1		31		4		35		0.2
	$	1,046	$	268	$	1,314	5.2	%	$	840	$	93	$	933	5.0	%

The accrual of finance charge income has been suspended on $626 million and $642 million of consumer finance receivables (based on contractual amount due) as of June 30, 2014 and December 31, 2013.

Impaired Consumer Finance Receivables - TDRs

Consumer finance receivables in the post-acquisition portfolio that become classified as troubled debt restructurings ("TDRs") are separately assessed for impairment. A specific allowance is estimated based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. The financial effects of the accounts that become classified as TDRs result in an impairment charge recorded as part of the provision for loan losses. Accounts that become classified as TDRs because of a payment deferral still accrue interest at the contractual rate and an additional fee is collected (where permitted) at each time of deferral and recorded as a reduction of accrued interest. No interest or fees are forgiven on a payment deferral to a customer and therefore, there are no additional financial effects of deferred loans becoming classified as TDRs. Accounts in Chapter 13 bankruptcy would have already been placed on non-accrual; therefore, there are no additional financial effects from these loans becoming classified as TDRs. As of June 30, 2014, the outstanding balance of consumer finance receivables in the International Segment determined to be TDRs was insignificant; therefore, the following information is presented with regard to the TDRs in the North America Segment only.

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The outstanding recorded investment for consumer finance receivables that are considered to be TDRs and the related allowance is presented below (in millions):

	June 30, 2014			December 31, 2013
Outstanding recorded investment	$	992		$	767
Less: allowance for loan losses	(123		)	(103		)
Outstanding recorded investment, net of allowance	$	869		$	664
Unpaid principal balance	$	1,009		$	779

Finance charge income from loans classified as TDRs is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not classified as TDRs. Additional information about loans classified as TDRs is presented below (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Average recorded investment	$	928	$	403	$	875	$	345
Finance charge income recognized	$	30	$	15	$	59	$	25

The following table provides information on consumer loans at the time they became classified as TDRs (dollars in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	Number of Accounts	Amount		Number of Accounts	Amount		Number of Accounts	Amount		Number of Accounts	Amount
Recorded investment	12,135	$	213	8,966	$	164	22,247	$	388	15,948	$	290

A redefault is when an account meets the requirements for evaluation under our charge-off policy (See Note 1 - "Summary of Significant Accounting Policies" in our Form 10-K for additional information). The unpaid principal balance, net of recoveries, of loans that redefaulted during the reporting period and were within 12 months or less of being modified as a TDR were $11 million and $5 million for the three months ended June 30, 2014 and 2013, and $20 million and $10 million for the six months ended June 30, 2014 and 2013.

Commercial Finance Receivables

Following is a summary of activity in our commercial finance receivables portfolio (in millions):

	Six Months Ended June 30,
	2014							2013
	North America		International			Total		North America		International			Total
Commercial finance receivables, net of fees - beginning of period	$	1,975	$	4,725		$	6,700	$	560	$	—		$	560
International operations acquisition	—		—			—		—		3,990			3,990
Net funding (collections) of commercial finance receivables	397		(56		)	341		609		(175		)	434
Charge-offs	—		—			—		—		—			—
Foreign currency translation	1		72			73		—		(23		)	(23		)
Balance at end of period	$	2,373	$	4,741		$	7,114	$	1,169	$	3,792		$	4,961

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A summary of the activity in the allowance for commercial loan losses is as follows (in millions):

	Three Months Ended June 30,
	2014								2013
	North America		International			Total			North America		International		Total
Balance at beginning of period	$	16	$	33		$	49		$	11	$	—	$	11
Provision for loan losses	1		(10		)	(9		)	1		11		12
Charge-offs	—		—			—			—		—		—
Recoveries	—		—			—			—		1		1
Balance at end of period	$	17	$	23		$	40		$	12	$	12	$	24

	Six Months Ended June 30,
	2014								2013
	North America		International			Total			North America		International		Total
Balance at beginning of period	$	17	$	34		$	51		$	6	$	—	$	6
Provision for loan losses	—		(11		)	(11		)	6		11		17
Charge-offs	—		—			—			—		—		—
Recoveries	—		—			—			—		1		1
Balance at end of period	$	17	$	23		$	40		$	12	$	12	$	24

Commercial Credit Quality

We extend wholesale credit to dealers primarily in the form of approved lines of credit to purchase new vehicles as well as used vehicles. Each commercial lending request is evaluated, taking into consideration the borrower's financial condition and the underlying collateral for the loan.

We use proprietary models to assign each dealer a risk rating. These models use historical performance data to identify key factors about a dealer that we consider significant in predicting a dealer's ability to meet its financial obligations. We also consider numerous other financial and qualitative factors including capitalization and leverage, liquidity and cash flow, profitability and credit history. 

We regularly review our models to confirm the continued business significance and statistical predictability of the factors and update the models to incorporate new factors or other information that improves statistical predictability. In addition, we verify the existence of the assets collateralizing the receivables by physical audits of vehicle inventories, which are performed with increased frequency for higher risk (i.e., Groups III, IV, V and VI) dealers. We perform a credit review of each dealer at least annually and adjust the dealer's risk rating, if necessary.

Performance of our commercial finance receivables is evaluated based on our internal dealer risk rating analysis, as payment for wholesale receivables is generally not required until the dealer has sold the vehicle inventory. Wholesale and dealer loan receivables with the same dealer customer share the same risk rating.

A summary of the credit risk profile by dealer grouping of the commercial finance receivables is as follows (in millions):

			June 30, 2014		December 31, 2013
Group I	-	Dealers with superior financial metrics	$	754	$	598
Group II	-	Dealers with strong financial metrics	1,633		1,588
Group III -	-	Dealers with fair financial metrics	2,365		2,174
Group IV -	-	Dealers with weak financial metrics	1,539		1,622
Group V	-	Dealers warranting special mention due to potential weaknesses	615		488
Group VI -	-	Dealers with loans classified as substandard, doubtful or impaired	208		230
Balance at end of period			$	7,114	$	6,700

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The credit lines for Group VI dealers are suspended and no further funding is extended to these dealers. 

At June 30, 2014 and December 31, 2013, 99.8% of our commercial finance receivables were current with respect to payment status.

Impaired Commercial Finance Receivables

We consider a loan impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of impairment is based on expected proceeds, including the estimated amount of future cash flows and/or the fair value of underlying collateral, compared to the recorded investment of the loan. A specific allowance for losses is established in the amount of any measured impairment.

Commercial finance receivables classified as TDRs are assessed for impairment and included in our allowance for credit losses based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. For receivables where foreclosure is probable, the fair value of the collateral is used to estimate the specific impairment. At June 30, 2014 and December 31, 2013, there were no outstanding commercial finance receivables classified as TDRs.

Note 3.    Restricted Cash

The following table summarizes the components of restricted cash (in millions):

	June 30, 2014						December 31, 2013
	North America		International		Total		North America		International		Total
Securitization notes payable	$	1,014	$	390	$	1,404	$	890	$	208	$	1,098
Revolving credit facilities	79		258		337		62		415		477
Other	50		414		464		26		357		383
Total restricted cash	$	1,143	$	1,062	$	2,205	$	978	$	980	$	1,958

Restricted cash securitization notes payable and revolving credit facilities is comprised of funds deposited as collateral required in restricted cash accounts to support securitization transactions or funds deposited in restricted cash accounts to provide additional collateral for borrowings under revolving credit facilities. Additionally, these funds include monthly collections from borrowers that have not yet been used for repayment of debt.

In the North America Segment, restricted cash other is comprised of cash deposited to support derivative transactions. In the International Segment, restricted cash other is primarily comprised of deposits in Brazil held in escrow pending resolution of tax and civil litigation.

Note 4. Leased Vehicles

Our operating lease program is offered primarily in the North America Segment. As of June 30, 2014 and December 31, 2013, the amount of leased vehicles accounted for as operating leases in the International Segment is insignificant; therefore, the following information regarding our leased vehicles is presented on a consolidated basis.

Following is a summary of our leased vehicles (in millions):

	June 30, 2014			December 31, 2013
Leased vehicles	$	6,528		$	4,684
Manufacturer incentives	(936		)	(659		)
	5,592			4,025
Less: accumulated depreciation	(844		)	(642		)
Leased vehicles, net	$	4,748		$	3,383

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A summary of the changes in our leased vehicles is as follows (in millions):

	Six Months Ended June 30,
	2014			2013
Balance at beginning of period	$	4,025		$	1,976
International operations acquisition	—			9
Leased vehicles purchased	2,322			1,454
Leased vehicles returned - end of term	(469		)	(106		)
Leased vehicles returned - default	(24		)	(9		)
Manufacturer incentives	(274		)	(197		)
Foreign currency translation	12			(46		)
Balance at end of period	$	5,592		$	3,081

As of June 30, 2014 and December 31, 2013, our Canada subsidiary was servicing $192 million and $303 million of leased vehicles for a third party.

The following table summarizes minimum rental payments due to us as lessor under operating leases (in millions):

	Years Ending December 31,
	2014		2015		2016		2017		2018		2019
Minimum rental payments under operating leases	$	702	$	898	$	662	$	262	$	43	$	2

Note 5. Debt

Debt consists of the following (in millions):

	June 30, 2014						December 31, 2013
	North America		International		Total		North America		International		Total
Secured
Revolving credit facilities	$	2,703	$	5,888	$	8,591	$	1,678	$	7,322	$	9,000
Securitization notes payable	11,847		4,568		16,415		10,801		2,272		13,073
Total secured	$	14,550	$	10,456	$	25,006	$	12,479	$	9,594	$	22,073
Unsecured
Senior notes	$	4,376	$	—	$	4,376	$	4,000	$	—	$	4,000
Credit facilities	—		2,430		2,430		—		2,370		2,370
Other unsecured debt	—		790		790		—		603		603
Total unsecured	$	4,376	$	3,220	$	7,596	$	4,000	$	2,973	$	6,973

Secured Debt

Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by variable interest entities, as further discussed in Note 6 - "Variable Interest Entities." This debt is repayable only from proceeds related to the underlying pledged finance receivables and lease related assets.

During the six months ended June 30, 2014, we entered into $445 million in new revolving credit facilities and issued $5.0 billion in securitization notes payable.

We are required to hold funds in restricted cash accounts to provide additional collateral for borrowings under certain of our secured credit facilities. Additionally, certain of our secured credit facilities contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios (portfolio net loss and delinquency ratios and pool level cumulative net loss ratios) as well as limits on deferment levels. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements,

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restrict our ability to obtain additional borrowings under these agreements and/or remove us as servicer. As of June 30, 2014, we were in compliance with all covenants related to our credit facilities.

Unsecured Debt

Unsecured debt consists primarily of senior notes we have issued in the North America Segment, as well as credit facilities and other unsecured debt in the International Segment.

At June 30, 2014, we had $4.0 billion of senior notes issued by our top-tier holding company that mature from 2016 through 2023 and have interest rates that range from 2.75% to 6.75%. All of these senior notes may be redeemed, at our option, in whole or in part, at any time before maturity at the redemption prices set forth in the indentures that govern the senior notes, plus accrued and unpaid interest, to the redemption date. In addition, if a change of control occurs, as that term is defined in the indentures that govern the senior notes, prior to us being rated "investment grade" by at least two of three listed rating agencies, the holders of these senior notes will have the right, subject to certain conditions, to require us to repurchase their senior notes at a purchase price equal to 101% of the aggregate principal amount of senior notes repurchased plus accrued and unpaid interest, as of the date of repurchase. These senior notes are guaranteed solely by AmeriCredit Financial Services, Inc. ("AFSI"); none of our other subsidiaries are guarantors of these senior notes. See Note 15 - "Guarantor Consolidating Financial Statements" for further discussion.

On July 10, 2014, our top-tier holding company issued an additional $1.5 billion in senior notes, of which $700 million are due July 2017 and $800 million are due July 2019. Interest rates on the respective tranches are 2.63% and 3.50%, payable semiannually. Terms are substantially the same as those of senior notes previously issued. We intend to use the net proceeds from this offering for general corporate purposes.

The indentures that govern the senior notes issued by our top-tier holding company provide for customary events of default, including nonpayment, failure to comply with covenants or other agreements in the indentures, if any subsidiary guarantee shall cease to be in full force and effect or any guarantor shall deny or disaffirm its obligations under its subsidiary guarantee, and certain events of bankruptcy or insolvency. If any event of default occurs and is continuing with respect to a series of senior notes, the trustee or the holders of at least 25% in principal amount of the then outstanding senior notes of such series may declare all of the senior notes of such series to be due and payable immediately. As of June 30, 2014, we were in compliance with all covenants related to our senior notes.

In May 2014 our Canadian subsidiary issued C$400 million of 3.25% senior notes through a private placement in Canada. The notes are due in May 2017 with interest payable semiannually. Similar to the senior notes issued by our top-tier holding company, these notes are guaranteed by AFSI. We intend to use the net proceeds from this offering for general corporate purposes.

The International Segment issues unsecured debt through credit facilities with banks and other non-bank funding instruments. During the six months ended June 30, 2014, we entered into $171 million of new unsecured committed credit facilities.

Note 6.    Variable Interest Entities

Securitizations and credit facilities

The following table summarizes the assets and liabilities of our consolidated VIEs related to securitization and credit facilities (in millions):

	June 30, 2014		December 31, 2013
Restricted cash	$	1,741	$	1,523
VIE assets	$	27,173	$	23,584
VIE liabilities	$	22,371	$	19,448

The assets of the VIEs and the restricted cash we hold serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to us or our other assets, with the exception of customary representation and warranty repurchase provisions and indemnities we provide as the servicer. We are not required and do not currently intend to provide additional financial support to these VIEs. While these subsidiaries are included in our consolidated financial statements, these subsidiaries are separate legal entities and their assets are legally owned by them and not available to our creditors.

In addition, we entered into interest rate swaps and caps with certain special-purpose entities ("SPEs") that issue variable rate debt against fixed rate securitized assets. Under the terms of these swaps, the SPEs are obligated to pay us a fixed rate of interest on certain payment dates in exchange for receiving a floating rate of interest on notional amounts equal to the outstanding balance

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of the secured debt. This arrangement enables the SPEs to mitigate the interest rate risk inherent in issuing variable rate debt that is secured by fixed rate securitized assets, as required to maintain ratings on such securitizations. See Note 7 - "Derivative Financial Instruments and Hedging Activities" for further discussion.

Other VIEs

We consolidate certain operating entities that provide auto finance and financial services, which we do not control through a majority voting interest. We manage these entities and maintain a controlling financial interest in them and are exposed to the risks of ownership through contractual arrangements. The majority voting interests in these entities are indirectly wholly-owned by our parent, GM. Prior to December 2013, the voting interests in these entities were indirectly wholly-owned by us. At June 30, 2014 and December 31, 2013, total assets of these entities were $4.0 billion and $3.9 billion, which were comprised primarily of cash and cash equivalents and finance receivables; and total liabilities were $3.2 billion and $3.0 billion, which were comprised primarily of debt, accounts payable (primarily trade) and accrued liabilities. In the six months ended June 30, 2014 total revenue recorded by these entities was $118 million and net income was $21 million. In the three months ended June 30, 2014 total revenue recorded by these entities was $60 million and net income was $11 million. These amounts are stated prior to intercompany eliminations and include amounts related to securitization and credit facilities held by consolidated VIEs. Liabilities recognized as a result of consolidating these entities generally do not represent claims against us or our other subsidiaries and assets recognized generally are for the benefit of these entities operations and cannot be used to satisfy our or our subsidiaries obligations.

Transfers of finance receivables to non-VIEs

Under certain debt agreements, we transfer finance receivables to third-party banks, which are not considered VIEs.  These transfers do not meet the criteria to be considered sales; therefore, the finance receivables and the related debt are included in our condensed consolidated financial statements.  Any collections received on the transferred receivables are available only for the repayment of the related debt.  As of June 30, 2014 and December 31, 2013, $2.9 billion and $2.8 billion in finance receivables had been transferred in secured funding arrangements to third-party banks, to which $2.7 billion and $2.7 billion in secured debt was outstanding.

Note 7. Derivative Financial Instruments and Hedging Activities

Derivative swap and cap agreements consist of the following (in millions):

	June 30, 2014				December 31, 2013
	Notional		Fair Value(a)		Notional		Fair Value(a)
Assets
Interest rate swaps	$	3,800	$	17	$	2,422	$	11
Interest rate caps	2,606		7		1,398		7
Foreign currency swaps(b)	1,678		1		1,678		3
Total assets(c)	$	8,084	$	25	$	5,498	$	21
Liabilities
Interest rate swaps	$	4,858	$	34	$	4,266	$	17
Interest rate caps	2,312		8		1,206		7
Foreign currency swaps(b)	2,227		53		2,133		29
Total liabilities(d)	$	9,397	$	95	$	7,605	$	53

_________________

(a) See Note 8 - " Fair Values of Assets and Liabilities " for further discussion of fair value disclosure related to the derivatives.

(b) The foreign currency swaps relate to (i) intercompany loans denominated in foreign currencies (notional balances on the intercompany loans of €674 million, £423 million and 208kr million have been translated to USD) and (ii) a £350 million cross-currency swap for a securitization in the International Segment.

(c) Included in other assets on the condensed consolidated balance sheets.

(d) Included in other liabilities on the condensed consolidated balance sheets.

As appropriate, we purchase interest rate cap agreements to limit floating rate exposures on certain of our revolving secured debt. We also utilize interest rate swap agreements to convert floating rate exposures on certain of our revolving debt or on securities issued in securitization transactions to fixed rates, thereby hedging the variability in interest expense paid.

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We provided loans denominated in foreign currencies (euro, British pound and Swedish krona) to certain of our international entities for the equivalent of $1.7 billion. We purchase foreign currency swaps to hedge against any valuation change in the loans due to changes in foreign exchange rates.

The following table presents information on the effect of derivative instruments on the condensed consolidated statements of income and comprehensive income (in millions):

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Non-designated hedges:
Interest rate contracts(a)	$	1		$	(3	)	$	(9	)	$	(3	)
Foreign currency derivatives(b)	(26		)	(12		)	(42		)	(12		)
	$	(25	)	$	(15	)	$	(51	)	$	(15	)

_________________

(a) Gains (losses) recognized in earnings are included in interest expense.

(b) The losses for the three and six months ended June 30, 2014 are substantially offset by translation gains (included in operating expenses) related to the foreign currency-denominated loans described above.

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Note 8. Fair Values of Assets and Liabilities

Refer to Note 10 - "Fair Values of Assets and Liabilities" to the consolidated financial statements in our Form 10-K for further discussion of valuation techniques and fair value measurement levels.

Assets and liabilities itemized below were measured at fair value on a recurring basis, using either the market approach (i), the cost approach (ii) or the income approach (iii) (in millions):

	June 30, 2014
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
	Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Assets/ Liabilities At Fair Value
Assets
Money market funds(i)(a)	$	2,284	$	—	$	—	$	2,284
Derivatives not designated as hedging instruments:
Interest rate swaps(iii)	—		—		17		17
Interest rate caps(i)	—		7		—		7
Foreign currency swaps(i)	—		1		—		1
Total assets	$	2,284	$	8	$	17	$	2,309
Liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps(iii)	$	—	$	—	$	34	$	34
Interest rate caps(i)	—		8		—		8
Foreign currency swaps(i)	—		53		—		53
Total liabilities	$	—	$	61	$	34	$	95

_________________ 

(a) Excludes cash in banks of $1.3 billion.

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	December 31, 2013
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
	Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Assets/ Liabilities At Fair Value
Assets
Money market funds(i)(a)	$	1,452	$	—	$	—	$	1,452
Derivatives not designated as hedging instruments:
Interest rate swaps(iii)	—		—		11		11
Interest rate caps(i)	—		7		—		7
Foreign currency swaps(i)	—		3		—		3
Total assets	$	1,452	$	10	$	11	$	1,473
Liabilities
Derivatives not designated as hedging instruments:
Interest rate swaps(iii)	$	—	$	—	$	17	$	17
Interest rate caps(i)	—		7		—		7
Foreign currency swaps(i)	—		29		—		29
Total liabilities	$	—	$	36	$	17	$	53

_________________ 

(a) Excludes cash in banks of $1.6 billion.

The tables below present a reconciliation for interest rate swap agreements measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in millions):

	Three Months Ended June 30,
	2014					2013
	Assets		Liabilities			Assets			Liabilities
Balance at beginning of period	$	8	$	(20	)	$	—		$	—
Total realized and unrealized gains included in earnings	9		(19		)	2			(4		)
Purchases	—		—			7			(18		)
Settlements	—		5			(2		)	2
Balance at end of period	$	17	$	(34	)	$	7		$	(20	)

	Six Months Ended June 30,
	2014					2013
	Assets		Liabilities			Assets			Liabilities
Balance at beginning of period	$	11	$	(17	)	$	—		$	—
Total realized and unrealized gains included in earnings	6		(26		)	2			(4		)
Purchases	—		—			7			(18		)
Settlements	—		9			(2		)	2
Balance at end of period	$	17	$	(34	)	$	7		$	(20	)

Note 9. Commitments and Contingencies

Guarantees of Indebtedness

The payments of principal and interest on senior notes issued by our top-tier holding company are guaranteed by AFSI. As of June 30, 2014 and December 31, 2013, the par value of these senior notes was $4.0 billion . See Note 15 - "Guarantor Consolidating Financial Statements" for further discussion.

Legal Proceedings

As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against us could take the form of class action complaints by consumers and certain legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We establish reserves for legal claims when payments associated with the claims become probable and the payments can be reasonably estimated. Given the inherent difficulty of predicting the outcome of litigation and regulatory matters, it is generally very difficult to predict what the eventual outcome will be, and when the matter will be resolved. The actual costs of resolving legal claims may be higher or lower than any amounts reserved for the claims.

Other Administrative Tax Matters

We accrue non-income tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they will be charged against income at that time.

In evaluating indirect tax matters, we take into consideration factors such as our historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. We reevaluate and update our accruals as matters progress over time. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably to us and could require us to make expenditures for which we estimate the aggregate risk to be a range of up to $98 million.

Note 10.     Income Taxes

For interim income tax reporting we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. 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.

Our effective income tax rate was 34.0% and 34.3% for the three and six months ended June 30, 2014. Our effective income tax rate was 32.7% and 34.6% for the three and six months ended June 30, 2013.

Note 11. Fair Values of Financial Instruments

Fair values are based on estimates using present value or other valuation techniques in cases where quoted market prices are not available. Those techniques are significantly affected by the assumptions used, including the discount rate and the estimated timing and amount of future cash flows. Therefore, the estimates of fair value may differ substantially from amounts that ultimately may be realized or paid at settlement or maturity of the financial instruments and those differences may be material. Disclosures about fair value of financial instruments exclude certain financial instruments and all non-financial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of our company.

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Estimated fair values, carrying values and various methods and assumptions used in valuing our financial instruments are set forth below (in millions):

			June 30, 2014				December 31, 2013
		Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets:
Cash and cash equivalents	(a)	1	$	1,412	$	1,412	$	1,074	$	1,074
Finance receivables, net	(b)	3	$	31,545	$	31,922	$	29,282	$	29,301
Restricted cash	(a)	1	$	2,205	$	2,205	$	1,958	$	1,958
Interest rate swap agreements	(c)	3	$	17	$	17	$	11	$	11
Interest rate cap agreements purchased	(d)	2	$	7	$	7	$	7	$	7
Foreign currency swap agreements	(d)	2	$	1	$	1	$	3	$	3
Financial liabilities:
Secured debt
North America	(e)	2	$	14,550	$	14,660	$	12,479	$	12,565
International	(f)	2	$	7,067	$	7,083	$	5,113	$	5,113
International	(g)	3	$	3,389	$	3,403	$	4,481	$	4,492
Unsecured debt
North America	(h)	2	$	4,376	$	4,524	$	4,000	$	4,106
International	(i)	2	$	2,946	$	2,946	$	1,282	$	1,282
International	(g)	3	$	274	$	281	$	1,691	$	1,690
Interest rate swap agreements	(c)	3	$	34	$	34	$	17	$	17
Interest rate cap agreements sold	(d)	2	$	8	$	8	$	7	$	7
Foreign currency swap agreements	(d)	2	$	53	$	53	$	29	$	29

_________________

(a) Cash and cash equivalents and restricted cash bear interest at market rates; therefore, carrying value is considered to be a reasonable estimate of fair value.

(b) The fair value of the consumer finance receivables in the North America Segment is estimated based upon forecasted cash flows on the receivables discounted using a pre-tax weighted average cost of capital. The fair value of the consumer finance receivables in the International Segment is estimated based on forecasted cash flows on the receivables discounted using current origination rates for similar type loans. Commercial finance receivables generally have variable interest rates and maturities of one year or less. Therefore, the carrying value is considered to be a reasonable estimate of fair value.

(c) The fair values of the interest rate swap agreements are estimated by discounting future net cash flows expected to be settled using current risk-adjusted rates.

(d) The fair values of the interest rate cap agreements and foreign currency swap agreements are based on quoted market prices.

(e) Secured debt in the North America Segment is comprised of revolving credit facilities, publicly-issued secured debt, and privately-issued secured debt. For revolving credit facilities with variable rates of interest and terms of one year or less, carrying value is considered to be a reasonable estimate of fair value. The fair value of the publicly and privately issued secured term debt is based on quoted market prices, when available. If quoted market prices are not available, the market value is estimated using quoted market prices of similar securities.

(f) The level 2 secured debt in the International Segment has terms of one year or less, or has been priced within the last six months; therefore, par value is considered to be a reasonable estimate of fair value.

(g) The fair value of level 3 secured debt and unsecured debt in the International Segment is estimated by discounting future net cash flows expected to be settled using current risk-adjusted rates.

(h) The fair value of unsecured debt in the North America Segment is based on quoted market prices in thinly-traded markets.

(i) The level 2 unsecured debt in the International Segment has terms of one year or less; therefore, par value is considered to be a reasonable estimate of fair value.

The fair value of our consumer finance receivables is based on observable and unobservable inputs within a discounted cash flow model. Those unobservable 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

19

receivables which is the basis for the calculation of the series of cash flows that derive the fair value of the portfolio. For the North America Segment, the series of cash flows is calculated and discounted using a weighted average cost of capital using unobservable debt and equity percentages, an unobservable cost of equity and an observable cost of debt based on companies with a similar credit rating and maturity profile. For the International Segment, the series of cash flows is calculated and discounted using current interest rates. Macroeconomic factors could affect the credit performance of our portfolio and therefore could potentially impact the assumptions used in our cash flow model.

Note 12. Segment Reporting

We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: the North America Segment (consisting of operations in the U.S. and Canada) and the International Segment (consisting of operations in all other countries). Our chief operating decision maker evaluates the operating results and performance of our business based on these operating segments. The management of each segment is responsible for executing our strategies.

For segment reporting purposes only, interest expense related to the senior notes has been allocated based on targeted leverage for each segment. Interest expense in excess of the targeted overall leverage is reflected in the "Corporate" column below. In addition, the interest income on $1.7 billion in intercompany loans provided to the international operations is presented in the "Corporate" column below.

All inter-segment balances and transactions have been eliminated. Key operating data for our operating segments were as follows (in millions):

	Three Months Ended June 30, 2014
	North America		International		Corporate			Eliminations			Total
Total revenue	$	691	$	500	$	15		$	(15	)	$	1,191
Operating expenses, including leased vehicle expenses	310		149		—			—			459
Provision for loan losses	90		23		—			—			113
Interest expense	104		248		17			(15		)	354
Income before income taxes	$	187	$	80	$	(2	)	$	—		$	265

	Three Months Ended June 30, 2013
	North America		International		Corporate		Eliminations			Total
Total revenue	$	588	$	248	$	14	$	(14	)	836
Operating expenses, including leased vehicle expenses	203		89		—		—			292
Provision for loan losses	81		19		—		—			100
Interest expense	91		81		6		(14		)	164
Acquisition and integration expenses	—		16		—		—			16
Income before income taxes	$	213	$	43	$	8	$	—		$	264

	Six Months Ended June 30, 2014
	North America		International		Corporate			Eliminations			Total
Total revenue	$	1,327	$	961	$	31		$	(31	)	2,288
Operating expenses, including leased vehicle expenses	584		300		—			—			884
Provision for loan losses	193		55		—			—			248
Interest expense	196		462		42			(31		)	669
Income before income taxes	$	354	$	144	$	(11	)	$	—		$	487

20

	Six Months Ended June 30, 2013
	North America		International		Corporate		Eliminations			Total
Total revenue	$	1,128	$	248	$	14	$	(14	)	1,376
Operating expenses, including leased vehicle expenses	391		89		—		—			480
Provision for loan losses	175		19		—		—			194
Interest expense	173		81		6		(14		)	246
Acquisition and integration expenses	—		22		—		—			22
Income before income taxes	$	389	$	37	$	8	$	—		$	434

	June 30, 2014						December 31, 2013
	North America		International		Total		North America		International		Total
Finance receivables, net	$	13,745	$	17,800	$	31,545	$	12,878	$	16,404	$	29,282
Total assets	$	21,977	$	20,382	$	42,359	$	19,094	$	18,896	$	37,990

Note 13. Accumulated Other Comprehensive Income (Loss)

A summary of changes in accumulated other comprehensive income (loss) is as follows (in millions):

	Three Months Ended June 30,
	2014		2013
Defined benefit plans, net:
Balance at beginning of period	$	3	$	—
Unrealized gain on subsidiary pension	—		—
Balance at end of period	3		—
Foreign currency translation adjustment:
Balance at beginning of period	13		(9		)
Translation gain (loss)	49		(59		)
Balance at end of period	62		(68		)
Total accumulated other comprehensive income (loss)	$	65	$	(68	)

	Six Months Ended June 30,
	2014		2013
Defined benefit plans, net:
Balance at beginning of period	$	3	$	—
Unrealized gain on subsidiary pension	—		—
Balance at end of period	3		—
Foreign currency translation adjustment:
Balance at beginning of period	8		(3		)
Translation gain (loss)	54		(65		)
Balance at end of period	62		(68		)
Total accumulated other comprehensive income (loss)	$	65	$	(68	)

21

Note 14. Regulatory Capital

The International Segment includes the operations of certain stand-alone entities that operate in local markets as either banks or regulated finance companies that are subject to regulatory restrictions. These regulatory restrictions, among other things, require that these entities meet certain minimum capital requirements and may restrict dividend distributions and ownership of certain assets. We were in compliance with all regulatory requirements at June 30, 2014. Total assets of our regulated international banks and finance companies were approximately $12.5 billion and $12.1 billion at June 30, 2014 and December 31, 2013.

Note 15. Guarantor Consolidating Financial Statements

The payment of principal and interest on senior notes issued by our top-tier holding company is currently guaranteed solely by AFSI (the "Guarantor") and none of our other subsidiaries (the "Non-Guarantor Subsidiaries"). The separate financial statements of the Guarantor are not included herein because the Guarantor is a 100% owned consolidated subsidiary and is unconditionally liable for the obligations represented by the senior notes. A subsidiary guarantee can be released under customary circumstances, including (i) the subsidiary is sold or sells all of its assets; (ii) the subsidiary is declared "unrestricted" for covenant purposes; (iii) the subsidiary's guarantee of other indebtedness is terminated or released; (iv) the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied; (v) the rating on the parent's debt securities is changed to investment grade; or (vi) the parent's debt securities are converted or exchanged into equity securities.

The consolidating financial statements present consolidating financial data for (i) General Motors Financial Company, Inc. (on a parent only basis), (ii) the Guarantor, (iii) the combined Non-Guarantor Subsidiaries, (iv) an elimination column for adjustments to arrive at the information for the parent company and our subsidiaries on a consolidated basis and (v) the parent company and our subsidiaries on a consolidated basis as of June 30, 2014 and December 31, 2013, and for the three and six months ended June 30, 2014 and 2013.

Investments in subsidiaries are accounted for by the parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are therefore reflected in the parent company's investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions.

22

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

June 30, 2014

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.		Guarantor			Non- Guarantors		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—	$	699		$	713	$	—		$	1,412
Finance receivables, net	—		609			30,936		—			31,545
Restricted cash	—		30			2,175		—			2,205
Property and equipment, net	—		6			144		—			150
Leased vehicles, net	—		—			4,748		—			4,748
Deferred income taxes	20		—			612		(199		)	433
Goodwill	1,095		—			150		—			1,245
Related party receivables	—		18			167		—			185
Other assets	62		2			377		(5		)	436
Due from affiliates	3,116		—			—		(3,116		)	—
Investment in affiliates	7,388		3,594			—		(10,982		)	—
Total assets	$	11,681	$	4,958		$	40,022	$	(14,302	)	$	42,359
Liabilities and Shareholder's Equity
Liabilities:
Secured debt	$	—	$	—		$	25,006	$	—		$	25,006
Unsecured debt	4,000		—			3,596		—			7,596
Accounts payable and accrued expenses	49		137			803		(5		)	984
Deferred income	—		—			249		—			249
Deferred taxes liabilities	—		199			12		(199		)	12
Taxes payable	74		—			219		—			293
Related party taxes payable	891		—			1		(1		)	891
Related party payable	—		—			432		—			432
Other liabilities	—		18			211		—			229
Due to affiliates	—		677			2,438		(3,115		)	—
Total liabilities	5,014		1,031			32,967		(3,320		)	35,692
Shareholder's equity:
Common stock	—		—			698		(698		)	—
Additional paid-in capital	4,793		79			3,400		(3,479		)	4,793
Accumulated other comprehensive income	65		(5		)	81		(76		)	65
Retained earnings	1,809		3,853			2,876		(6,729		)	1,809
Total shareholder's equity	6,667		3,927			7,055		(10,982		)	6,667
Total liabilities and shareholder's equity	$	11,681	$	4,958		$	40,022	$	(14,302	)	$	42,359

23

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2013

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors			Eliminations			Consolidated
Assets
Cash and cash equivalents	$	—		$	395		$	679		$	—		$	1,074
Finance receivables, net	—			612			28,670			—			29,282
Restricted cash	—			20			1,938			—			1,958
Property and equipment, net	—			5			127			—			132
Leased vehicles, net	—			—			3,383			—			3,383
Deferred income taxes	1			—			358			—			359
Goodwill	1,095			—			145			—			1,240
Related party receivables	29			—			100			—			129
Other assets	74			5			358			(4		)	433
Due from affiliates	3,754			863			—			(4,617		)	—
Investment in affiliates	6,994			3,565			—			(10,559		)	—
Total assets	$	11,947		$	5,465		$	35,758		$	(15,180	)	$	37,990
Liabilities and Shareholder's Equity
Liabilities:
Secured debt	$	—		$	—		$	22,073		$	—		$	22,073
Unsecured debt	4,000			—			2,973			—			6,973
Accounts payable and accrued expenses	101			133			716			(4		)	946
Deferred income	—			—			168			—			168
Deferred taxes payable	(28		)	161			(46		)	—			87
Taxes payable	83			—			204			—			287
Related party taxes payable	643			—			1			(1		)	643
Related party payable	—			—			368			—			368
Other liabilities	—			14			146			—			160
Due to affiliates	863			1,474			2,280			(4,617		)	—
Total liabilities	5,662			1,782			28,883			(4,622		)	31,705
Shareholder's equity:
Common stock	—			—			532			(532		)	—
Additional paid-in capital	4,785			79			3,833			(3,912		)	4,785
Accumulated other comprehensive income (loss)	11			(8		)	24			(16		)	11
Retained earnings	1,489			3,612			2,486			(6,098		)	1,489
Total shareholder's equity	6,285			3,683			6,875			(10,558		)	6,285
Total liabilities and shareholder's equity	$	11,947		$	5,465		$	35,758		$	(15,180	)	$	37,990

24

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended June 30, 2014

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income	$	—		$	39		$	843	$	—		$	882
Leased vehicle income	—			—			238		—			238
Other income	20			104			42		(95		)	71
Equity in income of affiliates	189			153			—		(342		)	—
	209			296			1,123		(437		)	1,191
Costs and expenses
Salaries and benefits	—			63			91		—			154
Other operating expenses	(6		)	41			153		(62		)	126
Total operating expenses	(6		)	104			244		(62		)	280
Leased vehicle expenses	—			—			179		—			179
Provision for loan losses	—			75			38		—			113
Interest expense	44			8			335		(33		)	354
	38			187			796		(95		)	926
Income before income taxes	171			109			327		(342		)	265
Income tax (benefit) provision	(4		)	(16		)	110		—			90
Net income	$	175		$	125		$	217	$	(342	)	$	175
Comprehensive income	$	224		$	148		$	267	$	(415	)	$	224

25

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Three Months Ended June 30, 2013

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income	$	—		$	30		$	617	$	—		$	647
Leased vehicle income	—			—			136		—			136
Other income	35			83			81		(146		)	53
Equity in income of affiliates	187			158			—		(345		)	—
	222			271			834		(491		)	836
Costs and expenses
Salaries and benefits	—			54			62		—			116
Other operating (income) expenses	(5		)	(24		)	104		—			75
Total operating expenses	(5		)	30			166		—			191
Leased vehicle expenses	—			—			101		—			101
Provision for loan losses	—			60			40		—			100
Interest expense	50			54			206		(146		)	164
Acquisition and integration expenses	—			—			16		—			16
	45			144			529		(146		)	572
Income before income taxes	177			127			305		(345		)	264
Income tax (benefit) provision	(1		)	(13		)	100		—			86
Net income	$	178		$	140		$	205	$	(345	)	$	178
Comprehensive income	$	119		$	146		$	150	$	(296	)	$	119

26

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 2014

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income	$	—		$	69		$	1,643	$	—		$	1,712
Leased vehicle income	—			—			438		—			438
Other income	40			231			80		(213		)	138
Equity in income of affiliates	359			269			—		(628		)	—
	399			569			2,161		(841		)	2,288
Costs and expenses
Salaries and benefits	—			116			174		—			290
Other operating (income) expenses	(5		)	74			314		(124		)	259
Total operating expenses	(5		)	190			488		(124		)	549
Leased vehicle expenses	—			—			335		—			335
Provision for loan losses	—			135			113		—			248
Interest expense	99			19			640		(89		)	669
	94			344			1,576		(213		)	1,801
Income before income taxes	305			225			585		(628		)	487
Income tax (benefit) provision	(15		)	(16		)	198		—			167
Net income	$	320		$	241		$	387	$	(628	)	$	320
Comprehensive income	$	374		$	244		$	442	$	(686	)	$	374

27

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING STATEMENT OF INCOME

Six Months Ended June 30, 2013

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors		Eliminations			Consolidated
Revenue
Finance charge income	$	—		$	69		$	993	$	—		$	1,062
Leased vehicle income	—			—			243		—			243
Other income	49			124			128		(230		)	71
Equity in income of affiliates	300			304			—		(604		)	—
	349			497			1,364		(834		)	1,376
Costs and expenses
Salaries and benefits	—			102			88		—			190
Other operating (income) expenses	(2		)	(49		)	160		—			109
Total operating expenses	(2		)	53			248		—			299
Leased vehicle expenses	—			—			181		—			181
Provision for loan losses	—			127			67		—			194
Interest expense	71			89			316		(230		)	246
Acquisition and integration expenses	—			—			22		—			22
	69			269			834		(230		)	942
Income before income taxes	280			228			530		(604		)	434
Income tax (benefit) provision	(4		)	(27		)	181		—			150
Net income	$	284		$	255		$	349	$	(604	)	$	284
Comprehensive income	$	219		$	262		$	288	$	(550	)	$	219

28

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2014

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors			Eliminations			Consolidated
Net cash provided by operating activities	$	205		$	141		$	558		$	—		$	904
Cash flows from investing activities:
Purchases of consumer finance receivables, net	—			(2,924		)	(6,546		)	2,643			(6,827		)
Principal collections and recoveries on consumer finance receivables	—			(100		)	5,400			—			5,300
Proceeds from sale of consumer finance receivables, net	—			2,643			—			(2,643		)	—
Net collections (funding) of commercial finance receivables	—			256			(553		)	—			(297		)
Purchases of leased vehicles, net	—			—			(1,856		)	—			(1,856		)
Proceeds from termination of leased vehicles	—			—			264			—			264
Acquisition of international operations, net of cash on hand	(46		)	—			—			—			(46		)
Purchases of property and equipment	—			(2		)	(13		)	—			(15		)
Change in restricted cash	—			(9		)	(227		)	—			(236		)
Change in other assets	—			—			(2		)	—			(2		)
Net change in investment in affiliates	(5		)	243			—			(238		)	—
Net cash (used in) provided by investing activities	(51		)	107			(3,533		)	(238		)	(3,715		)
Cash flows from financing activities:
Net increase in debt (original maturities less than three months)	—			—			278			—			278
Borrowings and issuance of secured debt	—			—			10,722			—			10,722
Payments on secured debt	—			—			(8,445		)	—			(8,445		)
Borrowings and issuance of unsecured debt	—			—			1,472			—			1,472
Payments on unsecured debt	—			—			(838		)	—			(838		)
Net capital contributions	26			—			(264		)	238			—
Debt issuance costs	—			—			(49		)	—			(49		)
Net change in due from/due to affiliates	(180		)	56			124			—			—
Net cash (used in) provided by financing activities	(154		)	56			3,000			238			3,140
Net increase in cash and cash equivalents	—			304			25			—			329
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			9			—			9
Cash and cash equivalents at beginning of period	—			395			679			—			1,074
Cash and cash equivalents at end of period	$	—		$	699		$	713		$	—		$	1,412

29

GENERAL MOTORS FINANCIAL COMPANY, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended June 30, 2013

(In millions)

(Unaudited)

	General Motors Financial Company, Inc.			Guarantor			Non- Guarantors			Eliminations			Consolidated
Net cash provided by operating activities	$	86		$	184		$	431		$	—		$	701
Cash flows from investing activities:
Purchases of consumer finance receivables, net	—			(2,695		)	(4,222		)	3,105			(3,812		)
Principal collections and recoveries on consumer finance receivables	—			1			3,053			—			3,054
Proceeds from sale of consumer finance receivables, net	—			3,105			—			(3,105		)	—
Net funding of commercial finance receivables	—			(1,080		)	(769		)	1,467			(382		)
Proceeds from sale of commercial finance receivables, net	—			1,467			—			(1,467		)	—
Purchases of leased vehicles, net	—			—			(1,176		)	—			(1,176		)
Proceeds from termination of leased vehicles	—			—			84			—			84
Acquisition of international operations, net of cash on hand	(2,547		)	(863		)	440			863			(2,107		)
Purchases of property and equipment	—			—			(4		)	—			(4		)
Change in restricted cash	—			—			(158		)	—			(158		)
Change in other assets	—			(10		)	8			—			(2		)
Net change in investment in affiliates	(29		)	(97		)	—			126			—
Net cash used in by investing activities	(2,576		)	(172		)	(2,744		)	989			(4,503		)
Cash flows from financing activities:
Borrowings and issuance of secured debt	1,100			—			7,985			—			9,085
Payments on secured debt	(1,100		)	—			(5,907		)	—			(7,007		)
Borrowings and issuance of unsecured debt	2,500			—			522			—			3,022
Payments on unsecured debt	—			—			(633		)	—			(633		)
Repayment of debt to Ally Financial	—			—			(1,416		)	—			(1,416		)
Capital contribution from parent	1,300			—			—			—			1,300
Debt issuance costs	(29		)	—			(34		)	—			(63		)
Net capital contribution to subsidiaries	—			—			130			(130		)	—
Net change in due from/due to affiliates	(1,281		)	(211		)	2,354			(862		)	—
Net cash provided (used in) by financing activities	2,490			(211		)	3,001			(992		)	4,288
Net increase (decrease) in cash and cash equivalents	—			(199		)	688			(3		)	486
Effect of foreign exchange rate changes on cash and cash equivalents	—			—			(21		)	3			(18		)
Cash and cash equivalents at beginning of period	—			1,252			37			—			1,289
Cash and cash equivalents at end of period	$	—		$	1,053		$	704		$	—		$	1,757

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Item 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

We are a global provider of automobile finance solutions, and we operate in the market as the wholly-owned captive finance subsidiary of our parent, GM. We conduct our business generally in two segments, in North America and internationally in Europe and Latin America. The North America Segment includes operations in the U.S. and Canada. The International Segment includes operations in Austria, Belgium, Brazil, Chile, Colombia, France, Germany, Greece, Italy, Mexico, the Netherlands, Portugal, Spain, Sweden, Switzerland and the U.K. Additionally, we have agreed to acquire Ally Financial's non-controlling 40% equity interest in GMAC-SAIC Automotive Finance Company Limited ("GMAC-SAIC"), a joint venture, which conducts auto finance operations in China. This agreement is subject to certain regulatory and other approvals and has become subject to a right of termination by either party in its sole discretion; however, we do not expect the agreement to be terminated. We consider it probable that our acquisition of Ally Financial's interest in GMAC-SAIC will occur in late 2014 or as soon as practicable thereafter.

North America Operations

Consumer

Our automobile finance programs in the North America Segment include sub-prime lending and full credit spectrum leasing and to a more limited extent, prime lending. Our sub-prime lending program is designed to serve customers who have limited access to automobile financing through banks and credit unions. Our typical borrowers have experienced prior credit difficulties or have limited credit histories and generally have credit bureau scores ranging from 500 to 700. We generally charge higher rates than those charged by banks and credit unions and we also expect to sustain a higher level of defaults than these other automobile financing sources.

We are currently seeking to expand our prime lending programs in North America and anticipate that prime lending will become an increasing percentage of our originations and consumer portfolio balance over time.

We focus our marketing activities on automobile dealerships. We are selective in choosing the dealers with whom we conduct business and primarily pursue GM and non-GM manufacturer-franchised dealerships with new and used car operations; however, we also conduct business with a limited number of independent dealerships. We generally finance new GM vehicles, moderately-priced new vehicles from other manufacturers, and later-model, low-mileage used vehicles.

Our leasing product is offered through GM-franchised dealers and primarily targets prime consumers leasing new GM vehicles. We seek to provide competitive alternatives to existing marketplace lease offerings in GM-franchised dealers.

Our origination platform provides specialized focus on marketing our financing programs and underwriting loans and leases. Responsibilities are segregated so that the sales group markets our programs and products to our dealer customers, while the underwriting group focuses on underwriting, negotiating and closing loans and leases. In the U.S. our sales and underwriting groups are further segregated with separate teams servicing GM dealers and non-GM dealers, allowing us to continue efficient service for our non-GM dealers under the "AmeriCredit" brand while providing GM-franchised dealers the broader loan, lease and commercial lending products we offer under the "GM Financial" brand.

We utilize a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of our consumer demographic and portfolio databases consisting of data which we have collected in more than 20 years of operating history. Credit scoring is used to differentiate credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor contract pricing and structure. In addition to our proprietary credit scoring system, we utilize other underwriting guidelines in our underwriting process to help us further evaluate the credit risk of our consumer financing activities.

Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining the security interests in the financed vehicles, monitoring physical damage insurance coverage of the financed vehicles, and arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate. Our activities also include managing an end-of-term process for consumers purchasing or returning leased vehicles.

Commercial

Our commercial lending offerings consist of loans to finance the purchase of vehicle inventory, also known as wholesale or floorplan financing, as well as dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital and to purchase and/or finance dealership real estate.

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Each dealer is assigned a risk rating based on various factors, including, but not limited to, collateral analysis, capital sufficiency, operating performance, financial outlook and credit and payment history, if available. The risk rating indicates the pricing for and guides the management of the account. We monitor the level of borrowing under each dealer's account daily. Our commercial loan servicing activities include dealership customer service, account maintenance, exception processing, credit line monitoring and adjustment and insurance monitoring.

International Operations

Consumer

We primarily employ an indirect-to-consumer model similar to the one we use in the North America Segment. Our consumer lending programs focus on financing prime quality consumers purchasing new GM vehicles. In many of the countries in which we operate, we also offer financial leases and a lease/retail hybrid product that includes a balloon payment at expiration, at which time the consumer may elect to make the payment, refinance or return the vehicle. We also offer finance-related insurance products through third parties, such as credit life, gap and extended warranty coverage. We finance primarily new automobiles, although we also finance used automobiles. In most of the countries in which we operate, similar to our underwriting process in the North America Segment, we utilize a proprietary credit scoring system to differentiate consumer credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor loan and lease pricing and structure.

Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining the security interest in the financed vehicle, monitoring physical damage insurance coverage of the financed vehicle, and arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate.

Commercial

Commercial products offered to dealer customers include new and used vehicle inventory financing, inventory insurance, working capital and capital improvement loans. Other commercial products include fleet financing and storage center financing. In addition, we provide training to dealer employees to help them maximize the value of these finance and insurance products. We utilize a proprietary underwriting system for commercial lending that has been refined through decades of experience in managing economic cycles. This process involves assigning a risk rating to each dealer based on our due diligence of various factors, including, but not limited to, collateral analysis, capital sufficiency, operating performance, financial outlook and credit and payment history, if available. The underwriting processes are performed in commercial lending centers located in Mexico, Brazil and Germany, the management of which operates independently of in-country sales and servicing operations. Our commercial loan servicing activities include dealership customer service, account maintenance and monitoring, exception processing, credit line monitoring and adjustment and insurance monitoring.

Financing

We primarily finance our loan, lease and commercial origination volume through the use of our secured and unsecured bank lines, through public and private securitization transactions where such markets are developed, through the issuance of senior notes and, to a lesser extent in Latin America, through public markets including the issuance of commercial paper and other financing programs.

We seek to fund our operations through local sources of funding to minimize currency and country risk. As such, the mix of funding sources varies from country to country, based on the characteristics of our receivables and the relative development of debt capital and securitization markets in each country. Our Latin American operations are entirely funded locally. Our European operations obtain most of their funding from local sources, but also borrow funds from affiliated companies.

In addition to our bank lines and securitization programs, GM provides us with financial resources through a tax sharing agreement, which effectively defers up to $1.0 billion in taxes that we would otherwise be required to pay to GM over time, and through the $600 million GM Related Party Credit Facility.

Additionally, we have a sub-limit of $4.0 billion available to borrow under GM's three-year $5.5 billion secured revolving credit facility. Our borrowings under this facility are limited by GM's ability to also borrow under the facility. If we borrow under this facility, we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business.

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RESULTS OF OPERATIONS

Three Months Ended June 30, 2014as compared to

Three Months Ended June 30, 2013

Average Earning Assets:

Average earning assets were as follows (dollars in millions):

	Three Months Ended June 30,
	2014						2013						2014 vs. 2013 Change
	North America		International		Total		North America		International		Total		Amount		%
Average consumer finance receivables	$	11,847	$	12,827	$	24,674	$	11,323	$	6,957	$	18,280	$	6,394	35.0	%
Average commercial finance receivables	2,287		4,755		7,042		1,059		3,515		4,574		2,468		54.0	%
Average finance receivables	14,134		17,582		31,716		12,382		10,472		22,854		8,862		38.8	%
Average leased vehicles, net	4,169		1		4,170		2,410		7		2,417		1,753		72.5	%
Average earning assets	$	18,303	$	17,583	$	35,886	$	14,792	$	10,479	$	25,271	$	10,615	42.0	%

In the North America Segment, average consumer finance receivables increased $524 million from June 30, 2013 to June 30, 2014, primarily because loan originations exceeded portfolio liquidations through payments and defaults. We purchased $1.5 billion and $1.4 billion of consumer finance receivables for the three months ended June 30, 2014 and 2013. The average new consumer loan size increased to $22,929 for the three months ended June 30, 2014 from $21,796 for the three months ended June 30, 2013. The average annual percentage rate for consumer finance receivables purchased during the three months ended June 30, 2014 decreased to 12.3% from 13.1% for the three months ended June 30, 2013, primarily due to pricing adjustments driven by the impact of subvention programs.

In the North America Segment, average commercial finance receivables increased $1.2 billion from June 30, 2013 to June 30, 2014, primarily due to the continued ramp-up in business since the introduction of our commercial lending platform in April 2012 and dealer conquests and related origination growth in the business since that time.

Average leased vehicles, net, increased $1.8 billion from June 30, 2013 to June 30, 2014. We purchased $1.5 billion and $834 million of leased vehicles for the three months ended June 30, 2014 and 2013. The increase in leased vehicles purchased was a result of GM's overall increased market penetration in leases and a 38% increase in our share of GM's lease business.

The increase in average finance receivables in the International Segment is primarily due to the addition of the consumer and commercial receivables portfolios in Brazil, which were acquired October 1, 2013, as well as growth in U.K. consumer finance receivables.

Revenue:

Revenues were as follows (dollars in millions):

	Three Months Ended June 30,
	2014						2013						2014 vs. 2013 Change
	North America		International		Total		North America		International		Total		Amount		%
Finance charge income:
Consumer finance receivables	$	420	$	356	$	776	$	426	$	143	$	569	$	207	36.4	%
Commercial finance receivables	$	19	$	87	$	106	$	9	$	69	$	78	$	28	35.9	%
Leased vehicle income	$	237	$	1	$	238	$	134	$	2	$	136	$	102	75.0	%
Other income	$	15	$	56	$	71	$	19	$	34	$	53	$	18	34.0	%

In the North America Segment, finance charge income on consumer finance receivables was flat for the three months ended June 30, 2014, compared to the three months ended June 30, 2013. Increased finance charge income resulting from the increase

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in average consumer finance receivables was offset by a decrease in effective yield. The effective yield on our consumer finance receivables decreased to 14.2% for the three months ended June 30, 2014, from 15.1% for the three months ended June 30, 2013, primarily due to a decrease in the average annual percentage rate on new originations as well as a reduced yield impact from the accretion on the pre-acquisition portfolio. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average consumer finance receivables. The effective yield, as a percentage of average consumer finance receivables, is higher than the contractual rates of our auto finance contracts because the effective yield includes, in addition to the contractual rates and fees, the impact of excess cash flows transferred from non-accretable difference to accretable yield, which impact has decreased over time with the amortization of the pre-acquisition portfolio. The difference between the effective yield and the contractual rates will continue to decrease as the pre-acquisition portfolio amortizes.

The increase in commercial finance charge income reflects the increase in the average commercial finance receivables portfolio.

Leased vehicle income increased by 75.0% to $238 million for the three months ended June 30, 2014 from $136 million for the three months ended June 30, 2013, due to the increased size of the leased asset portfolio.

The increase in revenue for the International Segment is primarily due to the addition of the consumer and commercial receivables portfolios in Brazil, which were acquired October 1, 2013.

Costs and Expenses:

Costs and expenses were as follows (dollars in millions):

	Three Months Ended June 30,
	2014						2013						2014 vs. 2013 Change
	North America		International		Total		North America		International		Total		Amount			%
Operating expenses	$	133	$	147	$	280	$	104	$	87	$	191	$	89		46.6	%
Leased vehicle expenses	$	177	$	2	$	179	$	99	$	2	$	101	$	78		77.2	%
Provision for loan losses	$	90	$	23	$	113	$	81	$	19	$	100	$	13		13.0	%
Interest expense(a)	$	128	$	226	$	354	$	104	$	60	$	164	$	190		115.9	%
Acquisition and integration expenses	$	—	$	—	$	—	$	—	$	16	$	16	$	(16	)	(100.0	)%

_________________ 

(a) Amounts do not reflect allocation of senior note interest expense, and therefore do not agree with amounts presented in Note 12 - "Segment Reporting" in our consolidated financial statements in this Form 10-Q.

Operating Expenses

In the North America Segment, operating expenses increased by $29 million for the three months ended June 30, 2014, compared to the three months ended June 30, 2013, primarily due to the growth in earning assets. Our operating expenses are predominantly related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. These expenses represented 76.4% and 76.8% of total operating expenses for the three months ended June 30, 2014 and 2013.

The increase in operating expenses for the International Segment is primarily due to the acquisition of the operations in Brazil, which were acquired October 1, 2013.

Operating expenses as an annualized percentage of average earning assets were 3.1% for the three months ended June 30, 2014 and 2013.

Leased Vehicle Expenses

Leased vehicle expenses increased by 77.2% to $179 million for the three months ended June 30, 2014, from $101 million for the three months ended June 30, 2013, due to the increased size of the leased asset portfolio in the North America Segment. Our leased vehicle expenses are predominantly related to depreciation of leased assets.

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Provision for Loan losses

Provisions for consumer finance receivable loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the consumer finance receivables portfolio. The provision for loan losses recorded for the three months ended June 30, 2014 and 2013 reflects inherent losses on receivables originated during these periods and changes in the amount of inherent losses on post-acquisition finance receivables originated in prior periods. In the North America Segment, the provision for consumer loan losses increased to $89 million for the three months ended June 30, 2014 from $80 million for the three months ended June 30, 2013, as a result of the increase in the size of the consumer finance receivables portfolio. As an annualized percentage of average post-acquisition consumer finance receivables, the provision for loan losses was 3.2% and 3.3% for the three months ended June 30, 2014 and 2013.

The provision for loan losses on commercial finance receivables in the North America Segment was $1 million for the three months ended June 30, 2014 and 2013.

The increase in the provision for loan losses for the International Segment is primarily due to the acquisition of the operations in Brazil, which were acquired October 1, 2013, partially offset by improved credit performance in Europe.

Interest Expense

In the North America Segment, interest expense increased to $128 million for the three months ended June 30, 2014, from $104 million for the three months ended June 30, 2013. The increase was primarily as a result of an increase in average debt outstanding to $17.9 billion for the three months ended June 30, 2014, from $14.3 billion for the three months ended June 30, 2013. The increase in debt was due to funding requirements for growth in the loan and lease portfolio, as well as for the acquisition of the international operations. The effective rate of interest on our debt was 2.9% for the three months ended June 30, 2014 and 2013.

The increase in interest expense for the International Segment is primarily due to the acquisition of the operations in Brazil, which were acquired October 1, 2013.

Acquisition and Integration Expenses

The acquisition and integration expenses for the three months ended June 30, 2013 represent advisory, legal and professional fees and other costs related to the acquisition of the international operations.

Taxes

Our consolidated effective income tax rate was 34.0% and 32.7% for the three months ended June 30, 2014 and 2013.

Other Comprehensive Income

Foreign Currency Translation Adjustment

Consolidated foreign currency translation adjustments of $49 million and $(59) million for three months ended June 30, 2014 and 2013, were included in other comprehensive income. Most of the entities acquired with the international operations acquisition use functional currencies other than the U.S. dollar. The translation adjustment is due to the change in the values of our international currency-denominated assets and liabilities resulting from changes in the value of the U.S. dollar in relation to international currencies for the three months ended June 30, 2014 and 2013.

35

Six Months Ended June 30, 2014as compared to

Six Months Ended June 30, 2013

Average Earning Assets:

Average earning assets were as follows (dollars in millions):

	Six Months Ended June 30,
	2014						2013						2014 vs. 2013 Change
	North America		International		Total		North America		International		Total		Amount		%
Average consumer finance receivables	$	11,691	$	12,406	$	24,097	$	11,200	$	3,615	$	14,815	$	9,282	62.7	%
Average commercial finance receivables	2,158		4,715		6,873		882		1,725		2,607		4,266		163.6	%
Average finance receivables	13,849		17,121		30,970		12,082		5,340		17,422		13,548		77.8	%
Average leased vehicles, net	3,867		2		3,869		2,150		4		2,154		1,715		79.6	%
Average earning assets	$	17,716	$	17,123	$	34,839	$	14,232	$	5,344	$	19,576	$	15,263	78.0	%

In the North America Segment, average consumer finance receivables increased $491 million from June 30, 2013 to June 30, 2014, primarily because loan originations exceeded portfolio liquidation through payments and defaults. We purchased $2.9 billion and $2.7 billion of consumer finance receivables in the North America Segment for the six months ended June 30, 2014 and 2013. The average new consumer loan size increased to $22,200 for the six months ended June 30, 2014 from $21,429 for the six months ended June 30, 2013. The average annual percentage rate for consumer finance receivables purchased during the six months ended June 30, 2014 decreased to 12.7% from 13.4% for the six months ended June 30, 2013, primarily due to pricing adjustments driven by the impact of subvention programs.

In the North America Segment, average commercial finance receivables increased $1.3 billion from June 30, 2013 to June 30, 2014, primarily due to the continued ramp-up in business since the introduction of our commercial lending platform in April 2012 and dealer conquests and related origination growth in the business since that time.

Average leased vehicles, net, increased $1.7 billion from June 30, 2013 to June 30, 2014. We purchased $2.3 billion and $1.5 billion of leased vehicles for the six months ended June 30, 2014 and 2013. The increase in leased vehicles purchased was a result of GM's overall increased market penetration in leases and an increase of 8% in our share of GM's business.

The increase in the average earning assets for the International Segment is primarily due to the acquisition of the majority of the international operations on April 1, 2013, and the operations in Brazil, which were acquired October 1, 2013.

Revenue:

Revenues were as follows (dollars in millions):

	Six Months Ended June 30,
	2014						2013						2014 vs. 2013 Change
	North America		International		Total		North America		International		Total		Amount		%
Finance charge income:
Consumer finance receivables	$	825	$	684	$	1,509	$	835	$	143	$	978	$	531	54.3	%
Commercial finance receivables	$	34	$	169	$	203	15		69		$	84	$	119	141.7	%
Leased vehicle income	$	436	$	2	$	438	241		2		$	243	$	195	80.2	%
Other income	$	32	$	106	$	138	37		34		$	71	$	67	94.4	%

In the North America Segment, finance charge income on consumer finance receivables was flat for the six months ended June 30, 2014, compared to the six months ended June 30, 2013. Increased finance charge income resulting from the increase in average consumer finance receivables was offset by a decrease in effective yield. The effective yield on our consumer finance receivables decreased to 14.2% for the six months ended June 30, 2014, from 15.0% for the six months ended June 30, 2013, primarily due to a decrease in the average annual percentage rate on new originations as well as a reduced yield impact from the

36

accretion on the pre-acquisition portfolio. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average consumer finance receivables. The effective yield, as a percentage of average consumer finance receivables, is higher than the contractual rates of our auto finance contracts because the effective yield includes, in addition to the contractual rates and fees, the impact of excess cash flows transferred from non-accretable difference to accretable yield, which impact has decreased over time with the amortization of the pre-acquisition portfolio. The difference between the effective yield and the contractual rates will continue to decrease as the pre-acquisition portfolio amortizes.

The increase in commercial finance charge income reflects the increase in the average commercial finance receivables portfolio.

Leased vehicle income increased by 80.2% to $438 million for the six months ended June 30, 2014 from $243 million for the six months ended June 30, 2013, due to the increased size of the leased asset portfolio.

The increase in revenue for the International Segment is primarily due to the acquisition of the majority of the international operations on April 1, 2013, and the operations in Brazil, which were acquired October 1, 2013.

Costs and Expenses:

Costs and expenses were as follows (dollars in millions):

	Six Months Ended June 30,
	2014						2013						2014 vs. 2013 Change
	North America		International		Total		North America		International		Total		Amount			%
Operating expenses	$	251	$	298	$	549	$	212	$	87	$	299	$	250		83.6	%
Leased vehicle expenses	$	333	$	2	$	335	179		2		$	181	$	154		85.1	%
Provision for loan losses	$	193	$	55	$	248	175		19		$	194	$	54		27.8	%
Interest expense(a)	$	248	$	421	$	669	186		60		$	246	$	423		172.0	%
Acquisition and integration expenses	$	—	$	—	$	—	—		22		$	22	$	(22	)	(100.0	)%

_________________ 

(a) Amounts do not reflect allocation of senior note interest expense, and therefore do not agree with amounts presented in Note 12 - "Segment Reporting" in our consolidated financial statements in this Form 10-Q.

Operating Expenses

In the North America Segment, operating expenses increased by $39 million for the six months ended June 30, 2014, compared to the six months ended June 30, 2013, primarily due to the growth in earning assets. Our operating expenses are predominantly related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. These expenses represented 75.8% and 72.8% of total operating expenses for the six months ended June 30, 2014 and 2013.

The increase in operating expenses for the International Segment is primarily due to the acquisition of the majority of the international operations on April 1, 2013, and the operations in Brazil, which were acquired October 1, 2013.

Operating expenses as an annualized percentage of average earning assets were 3.2% for the six months ended June 30, 2014 compared to 3.1% for the six months ended June 30, 2013.

Leased Vehicle Expenses

Leased vehicle expenses increased by 85.1% to $335 million for the six months ended June 30, 2014, from $181 million for the six months ended June 30, 2013, due to the increased size of the leased asset portfolio. Our leased vehicle expenses are predominantly related to depreciation of leased assets.

Provision for Loan losses

Provisions for consumer finance receivable loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the consumer finance receivables portfolio. The provision for loan losses recorded for the six months ended June 30, 2014 and 2013 reflects inherent losses on receivables originated during these periods and changes in the amount of inherent losses on post-acquisition finance receivables originated in prior periods. In the North America Segment, the provision for consumer loan losses increased to $193 million for the six months ended June 30, 2014 from $169 million for the six months ended June 30, 2013, as a result of the increase in the size of the consumer finance receivables portfolio. As an annualized percentage of average post-acquisition consumer finance receivables, the provision for loan losses was 3.5% and 3.6% for the six months ended June 30, 2014 and 2013.

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The provision for loan losses on commercial finance receivables was insignificant for the six months ended June 30, 2014 and $6 million for the six months ended June 30, 2013.

The increase in the provision for loan losses for the International Segment is primarily due to the acquisition of the majority of the international operations on April 1, 2013, and the operations in Brazil, which were acquired October 1, 2013.

Interest Expense

In the North America Segment, interest expense increased to $248 million for the six months ended June 30, 2014, from $186 million for the six months ended June 30, 2013. The increase was primarily as a result of an increase in average debt outstanding to $17.3 billion for the six months ended June 30, 2014, from $12.8 billion for the six months ended June 30, 2013. The increase in debt was due to funding requirements for growth in the loan and lease portfolio, as well as for the acquisition of the international operations. The effective rate of interest on our debt was 2.9% for the six months ended June 30, 2014 and 2013.

The increase in interest expense for the International Segment is primarily due to the acquisition of the majority of the international operations on April 1, 2013, and the operations in Brazil, which were acquired October 1, 2013.

Acquisition and Integration Expenses

The acquisition and integration expenses for the six months ended June 30, 2013 represent advisory, legal and professional fees and other costs related to the acquisition of the international operations.

Taxes

Our consolidated effective income tax rate was 34.3% and 34.6% for the six months ended June 30, 2014 and 2013.

Other Comprehensive Income

Foreign Currency Translation Adjustment

Consolidated foreign currency translation adjustments of $54 million and $(65) million for six months ended June 30, 2014 and 2013, were included in other comprehensive income. Most of the entities acquired with the international operations acquisition use functional currencies other than the U.S. dollar. The translation adjustment is due to the change in the values of our international currency-denominated assets and liabilities resulting from changes in the value of the U.S. dollar in relation to international currencies for the six months ended June 30, 2014 and 2013.

CREDIT QUALITY

Consumer Finance Receivables

In the North America Segment, we primarily provide financing in relatively high-risk markets, and therefore anticipate a corresponding high level of delinquencies and charge-offs. In the International Segment, the consumer financing we provide is generally to borrowers with prime credit and considered lower-risk; therefore, we expect correspondingly lower levels of delinquencies and charge-offs than in our North America Segment.

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The following tables present certain data related to the consumer finance receivables portfolio (dollars in millions, except where noted):

	June 30, 2014									December 31, 2013
	North America			International			Total			North America			International			Total
Pre-acquisition consumer finance receivables - outstanding balance	$	584		$	255		$	839		$	931		$	363		$	1,294
Pre-acquisition consumer finance receivables - carrying value	$	510		$	245		$	755		$	826		$	348		$	1,174
Post-acquisition consumer finance receivables, net of fees	11,394			12,897			24,291			10,562			11,394			21,956
	11,904			13,142			25,046			11,388			11,742			23,130
Less: allowance for loan losses	(515		)	(60		)	(575		)	(468		)	(29		)	(497		)
Total consumer finance receivables, net	$	11,389		$	13,082		$	24,471		$	10,920		$	11,713		$	22,633
Number of outstanding contracts	737,660			1,345,869			2,083,529			725,797			1,224,845			1,950,642
Average amount of outstanding contracts (in dollars)(a)	$	16,238		$	9,772		$	12,061		$	15,835		$	9,599		$	11,919
Allowance for loan losses as a percentage of post-acquisition consumer finance receivables, net of fees	4.5		%	0.5		%	2.4		%	4.4		%	0.3		%	2.3		%

_________________ 

(a) Average amount of outstanding contract consists of pre-acquisition consumer finance receivables - outstanding balance and post-acquisition consumer finance receivables, net of fees, divided by number of outstanding contracts.

The allowance for loan losses for the North America Segment as a percentage of post-acquisition consumer finance receivables, net of fees, has increased due to normalizing credit trends with moderately higher defaults and delinquencies. The allowance for the acquired international receivables was eliminated in acquisition accounting at the acquisition dates. As a result, the allowance at June 30, 2014 for the International Segment represents an estimate of losses inherent in only the receivables originated since the acquisition dates. The allowance for losses for the International Segment will grow over time as the post-acquisition loan balance grows. However, the allowance for losses for the International Segment is expected to be much less than that for the North America Segment due to the higher credit quality of its originations.

Delinquency

The following is a summary of the contractual amounts of consumer finance receivables, which is not materially different than recorded investment, that are (i) more than 30 days delinquent, not yet in repossession, and (ii) in repossession, but not yet charged off (dollars in millions):

	June 30,
	2014								2013
	North America		International		Total				North America		International		Total
	Amount		Amount		Amount		Percent of Contractual Amount Due		Amount		Amount		Amount		Percent of Contractual Amount Due
31 - 60 days	$	756	$	130	$	886	3.5	%	$	601	$	44	$	645	3.4	%
Greater than 60 days	255		133		388		1.6		208		45		253		1.4
	1,011		263		1,274		5.1		809		89		898		4.8
In repossession	35		5		40		0.1		31		4		35		0.2
	$	1,046	$	268	$	1,314	5.2	%	$	840	$	93	$	933	5.0	%

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. Delinquencies may vary from period to period based upon the average credit scores in the portfolio which reflects our underwriting strategies and risk tolerance, the average age or seasoning of the portfolio, seasonality within the

39

calendar year and economic factors. Our target customer base in the North America Segment is predominantly sub-prime; therefore, a relatively high percentage of accounts become delinquent at some point in the life of a loan and there is a high rate of account movement between current and delinquent status in the portfolio.

Delinquencies inthe North America Segment increased to 8.4% at June 30, 2014 from 7.1% at June 30, 2013, consistent with a greater concentration of loans with lower average credit scores at June 30, 2014 and normalizing credit trends. Our customer base in the International Segment is primarily prime; therefore, delinquency levels are much lower, with 2.0% and 1.2% in delinquencies at June 30, 2014 and 2013. The increase in delinquencies from June 30, 2013 is due to the acquisition of Brazil.

Deferrals

Due to the lower-risk nature of the consumer base in the International Segment, it is unnecessary to offer deferrals as frequently as in the North America Segment, which leads to an immaterial overall level of deferrals in the International Segment. Therefore, the following information regarding deferrals is presented for consumer finance receivables in the North America Segment only.

In accordance with our policies and guidelines, we, at times, offer payment deferrals to consumers, whereby the consumer is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferments that may be granted. Additionally, we generally limit the granting of deferments on new accounts until a requisite number of payments have been received.

Due to the nature of our consumer base in the North America Segment and policies and guidelines of the deferral program, which policies and guidelines have not changed materially in several years, approximately 50% to 60% of accounts historically comprising the consumer finance receivables in the North America Segment receive a deferral at some point in the life of the account.

An account for which all delinquent payments are deferred or paid in a deferment transaction is classified as current at the time the deferment is granted and therefore is not included as a delinquent account. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account.

Contracts receiving a payment deferral as an average quarterly percentage of average consumer finance receivables outstanding were 6.3% for the three months ended June 30, 2014 and 2013 and 6.1% for six months ended June 30, 2014 and 2013.

The following is a summary of deferrals in the North America Segment as a percentage of consumer finance receivables outstanding:

	June 30, 2014		December 31, 2013
Never deferred	75.1	%	74.7	%
Deferred:
1-2 times	21.0		21.6
3-4 times	3.9		3.7
Total deferred	24.9		25.3
Total	100.0	%	100.0	%

We evaluate the results of our deferment strategies based upon the amount of cash installments that are collected on accounts after they have been deferred versus the extent to which the collateral underlying the deferred accounts has depreciated over the same period of time. Based on this evaluation, we believe that payment deferrals granted according to our policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.

Changes in deferment levels do not have a direct impact on the ultimate amount of consumer finance receivables charged off by us. However, the timing of a charge-off may be affected if the previously deferred account ultimately results in a charge-off. To the extent that deferrals impact the ultimate timing of when an account is charged off, historical charge-off ratios, loss confirmation periods and cash flow forecasts for loans classified as TDRs used in the determination of the adequacy of our allowance for loan losses are also impacted. Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the portfolio and therefore increase the allowance for loan losses and related provision for loan losses. Changes in these ratios and periods are considered in determining the appropriate level of allowance for loan losses and related provision for loan losses.

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Troubled Debt Restructurings

See Note 2 - "Finance Receivables" to our condensed consolidated financial statements in this Form 10-Q for further discussion of TDRs.

Credit Losses - non-U.S. GAAP measure

We analyze portfolio performance of both the pre- and post-acquisition finance receivables portfolios on a combined basis. This information allows us and investors the ability to analyze credit loss trends in the combined portfolio. Additionally, information on credit losses, on a combined basis, facilitates comparisons of current and historical results.

The following is a reconciliation of charge-offs on the post-acquisition portfolio to credit losses on the combined portfolio (in millions):

	Three Months Ended June 30,
	2014						2013
	North America(a)		International		Total		North America(a)		International		Total
Charge-offs	$	157	$	34	$	191	$	116	$	—	$	116
Adjustments to reflect write-offs of the contractual amounts on the pre-acquisition portfolio	15		2		17		36		5		41
Total credit losses	$	172	$	36	$	208	$	152	$	5	$	157

_________________ 

(a) Total credit losses in the North America Segment is comprised of the sum of repossession credit losses and mandatory credit losses.

	Six Months Ended June 30,
	2014						2013
	North America(a)		International		Total		North America(a)		International		Total
Charge-offs	$	349	$	66	$	415	$	248	$	—	$	248
Adjustments to reflect write-offs of the contractual amounts on the pre-acquisition portfolio	39		5		44		89		5		94
Total credit losses	$	388	$	71	$	459	$	337	$	5	$	342

_________________ 

(a) Total credit losses in the North America Segment is comprised of the sum of repossession credit losses and mandatory credit losses.

The following table presents credit loss data (which includes charge-offs on the post-acquisition portfolio and write-offs of contractual amounts on the pre-acquisition portfolios) with respect to our consumer finance receivables portfolio (dollars in millions):

	Three Months Ended June 30,
	2014									2013
	North America			International(a)			Total			North America			International(a)			Total
Repossession credit losses	$	170		$	36		$	206		$	151		$	5		$	156
Less: recoveries	(105		)	(16		)	(121		)	(94		)	—			(94		)
Mandatory credit losses(b)	2			—			2			1			—			1
Net credit losses	$	67		$	20		$	87		$	58		$	5		$	63
Net annualized credit losses as a percentage of average consumer finance receivables(c)	2.3		%	0.6		%	1.4		%	2.1		%	0.3		%	1.4		%
Recoveries as a percentage of gross repossession credit losses	61.5		%							62.2		%

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	Six Months Ended June 30,
	2014									2013
	North America			International(a)			Total			North America			International(a)			Total
Repossession credit losses	$	387		$	71		$	458		$	339		$	5		$	344
Less: recoveries	(233		)	(33		)	(266		)	(208		)	—			(208		)
Mandatory credit losses(b)	1			—			1			(2		)	—			(2		)
Net credit losses	$	155		$	38		$	193		$	129		$	5		$	134
Net annualized credit losses as a percentage of average consumer finance receivables(c)	2.7		%	0.6		%	1.6		%	2.3		%	0.3		%	1.8		%
Recoveries as a percentage of gross repossession credit losses	60.1		%							61.2		%

_________________ 

(a) Repossession credit losses for the International Segment represent the write-down of defaulted receivables to net realizable value. As a result, a calculation of recoveries as a percentage of gross repossession credit losses is not meaningful.

(b) Mandatory credit losses represent accounts 120 days delinquent in the post-acquisition portfolio that are charged off in full, with no recovery amounts realized at time of charge-off, net of any subsequent recoveries as well as the net write-down of consumer finance receivables in repossession to the net realizable value of the repossessed vehicle when the repossessed vehicle is legally available for sale.

(c) Average consumer finance receivables are defined as the average receivable balance excluding the carrying value adjustment.

Net credit losses as a percentage of average consumer finance receivables outstanding may vary from period to period based upon the average credit scores in the portfolio which reflects our underwriting strategies and risk tolerance, the average age or seasoning of the portfolio and economic conditions.

Commercial Finance Receivables

The following table presents certain data related to the commercial finance receivables portfolio (dollars in millions):

	June 30, 2014									December 31, 2013
	North America			International			Total			North America			International			Total
Commercial finance receivables, net of fees	$	2,373		$	4,741		$	7,114		$	1,975		$	4,725		$	6,700
Less: allowance for loan losses	(17		)	(23		)	(40		)	(17		)	(34		)	(51		)
Total commercial finance receivables, net	$	2,356		$	4,718		$	7,074		$	1,958		$	4,691		$	6,649
Number of dealers	367			2,241			2,608			309			2,646			2,955
Average carrying amount per dealer	$	6		$	2		$	3		$	6		$	2		$	2
Allowance for loan losses as a percentage of commercial finance receivables, net of fees	0.7		%	0.5		%	0.6		%	0.9		%	0.7		%	0.8		%

Commercial finance receivables are assessed for impairment and any required allowance for credit losses is recorded based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. For receivables where foreclosure is probable, the fair value of the collateral is used to estimate the specific impairment. At June 30, 2014 and December 31, 2013, there were no outstanding commercial finance receivables classified as TDRs.

There were no charge-offs of commercial finance receivables for the three or six months ended June 30, 2014 and 2013. At June 30, 2014 and December 31, 2013, 99.8% of our commercial finance receivables were current with respect to payment status.

Leased Vehicles

At June 30, 2014 and 2013, 98.3% and 99.2% of our leases were current with respect to payment status. Leased vehicles returned as a result of a default were $13 million and $5 million for the three months ended June 30, 2014 and 2013 and $24 million and $9 million for the six months ended June 30, 2014 and 2013.

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LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of cash are finance charge income, leasing income, servicing fees, net distributions from secured debt facilities, including securitizations, secured and unsecured borrowings, net proceeds from senior notes transactions and collections and recoveries on finance receivables. Our primary uses of cash are purchases of consumer finance receivables and leased vehicles, the funding of commercial finance receivables, funding credit enhancement requirements in connection with securitizations and secured facilities, repayment of secured and unsecured debt, operating expenses, interest costs, capital expenditures and business acquisitions.

We used cash of $6.8 billion and $3.8 billion for the purchase of consumer finance receivables for the six months ended June 30, 2014 and 2013. We used cash of $1.9 billion and $1.2 billion for the purchase of leased vehicles for the six months ended June 30, 2014 and 2013. We used cash of $0.3 billion and $0.4 billion for the funding of commercial finance receivables, net of collections, for the six months ended June 30, 2014 and 2013. We used cash of $3.5 billion for the acquisition of the international operations and repayment of debt to Ally Financial for the six months ended June 30, 2013.

In the North America Segment, our purchase and funding of receivables and lease vehicles were financed initially utilizing cash and borrowings on our secured and unsecured credit facilities and senior notes. Subsequently, our strategy is to obtain long-term financing for consumer and commercial finance receivables and leased vehicles through securitization transactions.

In the International Segment, our purchase and funding of receivables are typically financed with borrowings on secured and unsecured credit facilities. In certain countries where the debt capital and securitization markets are sufficiently developed, such as in Germany and the U.K., we obtain permanent financing through securitization transactions.

Liquidity

Our available liquidity consists of the following (in millions):

	June 30, 2014		December 31, 2013
Cash and cash equivalents(a)	$	1,412	$	1,074
Borrowing capacity on unpledged eligible assets	1,803		1,650
Borrowing capacity on committed unsecured lines of credit	990		615
Borrowing capacity on GM Related Party Credit Facility	600		600
Available liquidity	$	4,805	$	3,939

_________________

(a) Includes $681 million and $659 million in unrestricted cash outside of the U.S. at June 30, 2014 and December 31, 2013. This cash is considered to be indefinitely invested based on specific plans for reinvestment of these earnings.

The increase in available liquidity reflects an increase in cash and cash equivalents resulting from the issuance of C$400 million in senior notes in May 2014. In addition, borrowing capacity on committed unsecured lines of credit increased as a result of the addition of new facilities as well as lower utilization as of June 30, 2014.

We have the ability to borrow up to $4.0 billion against GM's three-year $5.5 billion secured revolving credit facility. Our borrowings under the facility are limited by GM's ability to borrow the entire amount available under the facility. Therefore we may be able to borrow up to $4.0 billion or may be unable to borrow depending on GM's borrowing activity. If we do borrow under the facility we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business. Neither we, nor any of our subsidiaries, guarantee any obligations under this facility and none of our subsidiaries' assets secure this facility.

Credit Facilities

In the normal course of business, in addition to using our available cash, we utilize borrowings under our credit facilities, which may be secured or structured as securitizations, or may be unsecured, and we repay these borrowings as appropriate under our cash management strategy.

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As of June 30, 2014, credit facilities consist of the following (in millions):

Facility Type	Facility Amount		Advances Outstanding
Revolving consumer asset-secured facilities(a)	$	14,544	$	6,633
Revolving commercial asset-secured facilities(b)	3,043		1,984
Total secured	$	17,587	$	8,617
Unsecured committed facilities	1,386		396
Unsecured uncommitted facilities(c)	—		2,035
Total unsecured	$	1,386	$	2,431
GM Related Party Credit Facility	600		—
Total	$	19,573	$	11,048
Acquisition accounting discount			(27		)
			$	11,021

_________________

(a) Includes revolving credit facilities backed by consumer finance receivables and leases.

(b) Includes revolving credit facilities backed by loans to dealers for floorplan financing.

(c) The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them; therefore, we do not include available capacity on these facilities in our liquidity. We had $352 million in unused borrowing capacity on these facilities as of June 30, 2014.

See Note 5 - "Debt" to our condensed consolidated financial statements in this Form 10-Q for further discussion of the terms of our revolving credit facilities.

We are required to hold funds in restricted cash accounts to provide additional collateral for borrowings under certain of our secured credit facilities. Additionally, our secured credit facilities contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios (portfolio net loss and delinquency ratios, and pool level cumulative net loss ratios) as well as limits on deferment levels. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements, restrict our ability to obtain additional borrowings under these agreements and/or remove us as servicer. As of June 30, 2014, we were in compliance with all covenants related to our credit facilities.

Securitization Notes Payable

We seek to finance our consumer and commercial finance receivables and leases through public and private term securitization transactions, where the debt capital and securitization markets are sufficiently developed, such as in the U.S., Germany and the U.K. The proceeds from the transactions were primarily used to repay borrowings outstanding under our revolving credit facilities.

A summary of securitization notes payable is as follows (in millions):

Year of Transaction	Maturity Date (a)			Original Issuance Amounts					Note Balance At June 30, 2014
2007	June 2018			$	76				$	65
2010	July 2017	-	April 2018	$	200	-	$	850	399
2011	July 2018	-	December 2019	$	551	-	$	1,000	1,348
2012	June 2016	-	July 2020	$	193	-	$	1,300	4,585
2013	July 2015	-	October 2021	$	227	-	$	1,107	5,394
2014	March 2019	-	March 2022	$	562	-	$	1,400	4,634
Total active securitizations									16,425
Acquisition accounting discount									(10		)
									$	16,415

_________________ 

(a) Maturity dates represent legal final maturity of issued notes. The notes are expected to be paid based on amortization of the finance receivables pledged.

44

Our securitizations utilize special purpose entities which are also VIEs that meet the requirements to be consolidated in our financial statements. See Note 6 - "Variable Interest Entities" to our condensed consolidated financial statements in this Form 10-Q for further discussion.

Senior Notes and Other Unsecured Debt

We also access the public capital markets through the issuance of unsecured debt. In the North America Segment, we periodically issue senior unsecured notes. At June 30, 2014 we had $4.4 billion in senior unsecured notes outstanding.

Subsequent to June 30, 2014, our top-tier holding company issued an additional $1.5 billion in senior notes, of which $700 million are due July 2017 and $800 million are due July 2019. Interest rates on the respective tranches are 2.63% and 3.50%, payable semiannually. We intend to use the net proceeds from this offering for general corporate purposes.

In the International Segment, particularly in Latin America, we issue other unsecured debt through commercial paper offerings and other non-bank funding instruments. At June 30, 2014 we had $790 million of this type of unsecured debt outstanding.

FORWARD-LOOKING STATEMENTS

This report contains several "forward-looking statements." Forward-looking statements are those that use words such as "believe," "expect," "anticipate," "intend," "plan," "may," "likely," "should," "estimate," "continue," "future" and/or other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2013. It is advisable not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.

The following factors are among those that may cause actual results to differ materially from historical results or from the forward-looking statements:

• our ability to close the acquisition of Ally Financial's equity interest in auto finance and financial services operations in China and operate that business successfully;

• changes in general economic and business conditions;

• GM's ability to sell new vehicles that we finance in the markets we serve in North America, Europe and Latin America;

• interest rate and currency fluctuations;

• our financial condition and liquidity, as well as future cash flows and earnings;

• competition;

• the effect, interpretation or application of new or existing laws, regulations, court decisions and accounting pronouncements;

• the availability of sources of financing;

• the level of net charge-offs, delinquencies and prepayments on the loans and leases we originate;

• the viability of GM-franchised dealers that are commercial loan customers;

• the prices at which used cars are sold in the wholesale auction markets; and

• changes in business strategy, including acquisitions and expansion of product lines and credit risk appetite.

If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our exposure to interest rate risk since December 31, 2013. See Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in our Form 10-K.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

45

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 Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) at June 30, 2014. Based on this evaluation required by paragraph (b) of Rules 13a-15 and 15d-15, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2014.

Changes in Internal Control Over Financial Reporting

There were no changes made in our internal control over financial reporting during the quarter ended June 30, 2014, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations Inherent in all Controls

Our management, including the CEO and CFO, recognize that the disclosure controls and internal controls (discussed above) cannot prevent all errors or all attempts at fraud. Any controls system, no matter how well crafted and operated, can only provide reasonable, and not absolute, assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in any control system, no evaluation or implementation of a control system can provide complete assurance that all control issues and all possible instances of fraud have been or will be detected.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

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. There have been no material changes to the Risk Factors disclosed in our Form 10-K.

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Item 6. Exhibits

31.1	Officers' Certifications of Periodic Report pursuant to Section 302 of Sarbanes-Oxley Act of 2002	Filed Herewith
32.1	Officers' Certifications of Periodic Report pursuant to Section 906 of 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 Presentation Linkbase Document	Furnished with this Report

__________

* Submitted electronically with this Report.

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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 thereunto duly authorized.

			General Motors Financial Company, Inc.
			(Registrant)
Date:	July 24, 2014	By:	/S/    CHRIS A. CHOATE
			(Signature)
			Chris A. Choate
			Executive Vice President and
			Chief Financial Officer

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