EXHIBIT 99.1
GM Communications
media.gm.com
For Release:
November 6, 2007, 5:00 p.m. EST
GM to Record Non-Cash Charge for a Deferred Tax Valuation Allowance in its Third
Quarter Financial Results
DETROIT - General Motors Corp. (NYSE: GM) today announced it will record a net
non-cash charge of $39 billion for the third quarter of 2007 related to
establishing a valuation allowance against its deferred tax assets (DTAs) in
the U.S., Canada and Germany.
In accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, GM
has evaluated its DTAs quarterly to determine if valuation allowances were
required. As previously disclosed in GM's 2006 Form 10-K, GM had determined in
prior periods that a valuation allowance was not necessary for its DTAs in the
U.S., Canada or Germany based on several factors, including the degree to which
the company's three-year historical cumulative losses were attributable to
special items or charges, several of which were incurred as a result of actions
to improve future profitability; the long duration of its deferred tax assets;
and the expectation of continued strong earnings at GMAC Financial Services and
improved earnings in GM North America.
SFAS No. 109 guidelines require that a valuation allowance should now be
established due to more recent events and developments during the 2007 third
quarter. A significant negative factor was the company's three-year historical
cumulative loss in the third quarter of 2007 in the U.S., Canada and Germany on
an adjusted basis. Another significant factor was the ongoing weakness at GMAC
Financial Services related to its Residential Capital, LLC (ResCap) mortgage
business, including substantial U.S. losses incurred in 2007. Finally, the
company faces more challenging near-term automotive market conditions in the
U.S. and Germany.
2
"The establishment of a valuation allowance does not have any impact on cash,
nor does such an allowance preclude us from using our loss carryforwards or
other deferred tax assets in the future," said Fritz Henderson, GM vice chairman
and chief financial officer.
"It's also important to note that the establishment of a valuation allowance
does not reflect a change in the company's view of its long-term automotive
financial outlook," Henderson added. "GM continues to believe that its new
product introductions, combined with the new GM-UAW labor agreement, once fully
implemented, will significantly improve GM's competitive position in the U.S.
and better position the company to utilize tax benefits in the U.S.
and Canada in the future."
SFAS No. 109 requires that companies assess whether valuation allowances should
be established against their deferred tax assets based on the consideration of
all available evidence using a "more likely than not" standard. In making such
judgments, significant weight is given to evidence that can be objectively
verified. A company's current or previous losses are given more weight than its
future outlook, and a recent three-year historical cumulative loss is considered
a significant factor that is difficult to overcome.
GM will release its third quarter 2007 financial results and host an analyst and
media conference call on November 7, 2007 at 9:30 a.m. Eastern Standard Time.
Details can be found on the "calendar/events" portion of the company's investor
relation web site at:
http://www.gm.com/corporate/investor_information/cal_events.
# # #
Contacts:
Renee Rashid-Merem
Phone: 313-665-3128
Email: renee.rashid-merem@gm.com
Randy Arickx
Phone: 313-667-0006
Email: randy.c.arickx@gm.com
Forward-looking Statements
In this press release and in related comments by General Motors' management our
use of words like "expect," "anticipate," "estimate," "forecast," "initiative,"
"objective," "plan," "goal," "project," "outlook," "priorities," "target,"
"intend," "evaluate," "pursue," "seek," "may," "would," "could," "should,"
"believe," "potential," "continue," "designed," "impact," or the negative of any
of those words or similar expressions is intended to identify forward-looking
statements that represent our current judgment about possible future events. We
believe these judgments are reasonable, but GM's actual results may differ
materially due to a variety of important factors. Among other items, such
factors include: the ability of GM to realize production efficiencies, to
achieve reductions in costs as a result of the turnaround restructuring and
health care cost reductions and to implement capital expenditures at levels and
times planned by management; the pace of product introductions; market
acceptance of our new products; significant changes in the competitive
environment and the effect of competition in our markets, including on our
pricing policies; our ability to maintain adequate liquidity and financing
sources and an appropriate level of debt; changes in the existing, or the
adoption of new laws, regulations, policies, or other activities of governments,
agencies, and similar organizations where such actions may affect the
production, licensing, distribution, or sale of our products, the cost thereof
or applicable tax rates; costs and risks associated with litigation; the final
results of investigations and inquiries by the SEC and other governmental
agencies; changes in accounting principles, or their application or
interpretation, and our ability to make estimates and the assumptions underlying
the estimates, including the range of estimates for the Delphi pension benefit
guarantees, which could result in an impact on earnings; negotiations and
bankruptcy court actions with respect to Delphi's obligations to GM,
negotiations with respect to GM's obligations under the pension benefit
guarantees to Delphi employees, and GM's ability to recover any indemnity claims
against Delphi; labor strikes or work stoppages at GM or its key suppliers such
as Delphi or financial difficulties at GM's key suppliers such as Delphi;
completion of the final settlement with the UAW and UAW retirees, including
securing class certification in a form acceptable to GM, the UAW and class
counsel; completion of the final settlement with the UAW and UAW retirees,
including obtaining court approval in a form acceptable to GM, the UAW, and
class counsel; treatment of the terms of the 2006 Settlement Agreement pursuant
to the Retiree MOU in a manner acceptable to GM, the UAW and class counsel; GM's
completion of discussions with the Staff of the SEC regarding accounting
treatment with respect to the New VEBA and the post-retirement medical benefits
for the covered group as set forth in the Retiree MOU, on a basis reasonably
satisfactory to GM; shortages of and price increases for fuel; factors affecting
GMAC's results of operations and financial conditions and changes in the
residential mortgage market, especially in the nonprime sector; significant
changes in the competitive environment and the effect of competition in GMAC's
markets, including on GMAC's pricing policies; GMAC's ability to maintain
adequate financing sources; GMAC's ability to maintain an appropriate level of
debt; restrictions on the ability of GMAC's residential mortgage subsidiary to
pay dividends and prepay subordinated debt obligations to GMAC; changes in the
residual value of off-lease vehicles; changes in U.S. government-sponsored
mortgage programs or disruptions in the markets in which GMAC's mortgage
subsidiaries operate; changes in GMAC's contractual servicing rights; changes in
the credit ratings of GMAC or GM; and changes in economic conditions, commodity
prices, currency exchange rates, or political stability in the markets in which
we or GMAC operate. The most recent annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K filed by GM and GMAC
provide information about these factors, which may be revised or supplemented in
future reports to the SEC on those forms.