L:\secdraft\version3\mar_97.doc 3
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number 1-143
GENERAL MOTORS CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 38-0572515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
100 Renaissance Center, Detroit, Michigan 48243-7301
3044 West Grand Boulevard, Detroit, Michigan 48202-3091
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
As of March 31, 1997, there were outstanding 729,110,513 shares of the
issuer's $1-2/3 par value common stock and 100,903,169 shares of Class H $0.10
par value common stock.
- 1 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income for the Three Months Ended
March 31, 1997 and 1996 3
Consolidated Balance Sheets as of March 31, 1997,
December 31, 1996 and March 31, 1996 4
Condensed Consolidated Statements of Cash Flows for the Three
Months
Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
Part II - Other Information (Unaudited)
Item 1. Legal Proceedings 23
Item 6. Exhibits and Reports on Form 8-K 25
Signature 25
Exhibit 11 Computation of Earnings Per Share Attributable to Common
Stocks for the Three Months Ended March 31, 1997 and 1996 26
Exhibit 12 Computation of Ratios of Earnings to Fixed Charges for
the Three Months Ended March 31, 1997 and 1996 28
Exhibit 99 Hughes Electronics Corporation and Subsidiaries Consolidated
Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations 29
Exhibit 27 Financial Data Schedule (for SEC information only)
- 2 -
PART I
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1997 1996
(Dollars in Millions
Except Per Share Amounts)
Net sales and revenues
Manufactured products $37,440 $34,658
Financial services 3,197 3,179
Other income (Note 4) 1,623 1,403
------- -------
Total net sales and revenues 42,260 39,240
------ ------
Costs and expenses
Cost of sales and other operating charges,
exclusive of items listed below 31,030 30,130
Selling, general, and administrative expenses 3,591 3,070
Depreciation and amortization expenses 3,065 2,972
Interest expense 1,461 1,421
Plant closing expense (Note 7) 80 -
Other deductions (Note 4) 248 414
-------- --------
Total costs and expenses 39,475 38,007
------ ------
Income from continuing operations before income taxes 2,785 1,233
Income taxes 989 433
------ -------
Income from continuing operations 1,796 800
Income from discontinued operations (Note 3) - 219
--------- -------
Net income 1,796 1,019
Dividends on preference stocks 20 20
------ -------
Earnings on common stocks $1,776 $999
===== ===
Earnings attributable to common stocks (Note 10)
$1-2/3 par value from continuing operations $1,717 $704
Income from discontinued operations - 10
------- ----
Net earnings attributable to $1-2/3 par value $1,717 $714
===== ===
Income from discontinued operations attributable to
Class E - $209
===== ===
Net earnings attributable to Class H $59 $76
== ==
Average number of shares of common stocks outstanding (in millions)
$1-2/3 par value 747 755
Class E - 463
Class H 100 97
Earnings per share attributable to common stocks (Note 10)
$1-2/3 par value from continuing operations $2.30 $0.93
Income from discontinued operations - 0.01
------ ----
Net earnings attributable to $1-2/3 par value $2.30 $0.94
==== ====
Income from discontinued operations attributable to
Class E $ - $0.45
==== ====
Net earnings attributable to Class H $0.59 $0.78
==== ====
Cash dividends per share of common stocks
$1-2/3 par value $0.50 $0.40
Class E $ - $0.15
Class H $0.25 $0.24
Reference should be made to the notes to consolidated financial statements.
- 3 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, March 31,
1997 Dec. 31, 1996
(Unaudited) 1996 (Unaudited)
(Dollars in Millions)
ASSETS
Cash and cash equivalents $10,061 $14,063 $7,901
Other marketable securities 10,168 8,199 5,419
------ ------- -------
Total cash and marketable securities 20,229 22,262 13,320
Finance receivables - net 62,202 57,550 59,092
Accounts and notes receivable
(less allowances) 6,976 6,557 6,663
Inventories (less allowances) (Note 5) 12,851 11,898 12,376
Net assets of discontinued operations - - 5,245
Contracts in process (less advances and
progress payments) 2,661 2,507 2,709
Deferred income taxes 20,138 19,510 20,164
Equipment on operating leases (less accumulated
depreciation) 30,127 30,112 27,771
Property
Real estate, plants, and equipment 69,191 69,770 68,097
Less accumulated depreciation (41,037) (41,298) (41,252)
------ ------ ------
Net real estate, plants, and equipment 28,154 28,472 26,845
Special tools - net 8,850 9,032 8,294
------- ------- -------
Total property 37,004 37,504 35,139
Intangible assets - net 12,737 12,691 10,295
Other assets - net 21,134 21,551 19,056
-------- -------- --------
Total assets $226,059 $222,142 $211,830
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable (principally trade) $14,014 $14,221 $11,515
Notes and loans payable 88,111 85,300 80,299
Deferred income taxes 4,119 3,207 3,117
Postretirement benefits other than pensions
(Note 6) 43,607 43,190 42,015
Pensions 7,814 7,599 6,203
Other liabilities and deferred credits 45,589 45,207 44,659
-------- -------- --------
Total liabilities 203,254 198,724 187,808
Stockholders' equity
Preference stocks 1 1 1
Common stocks
$1-2/3 par value (Note 9; issued, 729,805,298;
756,619,625; and 756,621,525 shares) 1,216 1,261 1,261
Class E (Note 3; issued, 487,568,555 shares
at March 31, 1996) - - 49
Class H (Note 2; issued, 101,108,669;
100,075,000; and 98,154,411 shares) 10 10 10
Capital surplus (principally additional
paid-in capital) 17,689 19,189 19,114
Retained earnings 7,511 6,137 7,782
------- ------- -------
Subtotal 26,427 26,598 28,217
Minimum pension liability adjustment (3,490) (3,490) (4,742)
Accumulated foreign currency translation
adjustments (475) (113) 118
Net unrealized gains on investments in
certain debt and equity securities 343 423 429
------- -------- --------
Total stockholders' equity 22,805 23,418 24,022
------ ------ ------
Total liabilities and stockholders'
equity $226,059 $222,142 $211,830
Reference should be made to the notes to consolidated financial statements.
- 4 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Net cash provided by operating activities $4,097 $941
----- ---
Cash flows from investing activities
Expenditures for property (1,807) (2,098)
Investments in other marketable securities
- acquisitions (11,603) (5,107)
Investments in other marketable securities
- liquidations 10,107 5,220
Finance receivables - acquisitions (37,475) (39,145)
Finance receivables - liquidations 26,848 33,812
Proceeds from sales of finance receivables 5,538 5,876
Operating leases - acquisitions (5,527) (4,201)
Operating leases - liquidations 4,124 2,744
Other 512 359
------ ------
Net cash used in investing activities (9,283) (2,540)
----- -----
Cash flows from financing activities
Net increase (decrease) in loans payable 2,484 (2,343)
Increase in long-term debt 4,207 4,307
Decrease in long-term debt (3,329) (2,823)
Proceeds from issuing common stocks 206 190
Repurchases of common stocks (1,761) -
Cash dividends paid to stockholders (422) (421)
Proceeds from the sale of minority interest
in DIRECTV(R) - 138
----- ------
Net cash provided by (used in) financing activities 1,385 (952)
----- ------
Effect of exchange rate changes on cash and cash
equivalents (201) (73)
Net cash used in continuing operations (4,002) (2,624)
Net cash provided by discontinued operations - 29
Net decrease in cash and cash equivalents (4,002) (2,595)
Cash and cash equivalents at beginning of the period 14,063 10,496
Cash and cash equivalents at end of the period $10,061 $7,901
====== =====
Reference should be made to the notes to consolidated financial statements.
- 5 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. The consolidated financial statements include the
accounts of General Motors Corporation (hereinafter referred to as the
Corporation) and domestic and foreign subsidiaries that are more than 50% owned,
principally General Motors Acceptance Corporation and Subsidiaries (GMAC) and
Hughes Electronics Corporation and Subsidiaries (Hughes) (collectively referred
to as General Motors or GM). In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a fair
presentation have been included. The results for interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the full year. For further information, refer to the consolidated
financial statements and notes thereto included in the GM 1996 Annual Report on
Form 10-K filed with the Securities and Exchange Commission.
Certain amounts for 1996 were reclassified to conform with the 1997
classifications.
Note 2. Hughes Transactions
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. The transactions would include the tax-free
spin-off of the Hughes defense business to holders of GM's $1-2/3 par value and
Class H common stocks, followed immediately by the tax-free merger of that
business with Raytheon Company. The spin-off will not be proposed in a manner
that would result in the recapitalization of Class H common stock into $1-2/3
par value common stock at a 120% exchange ratio, as currently provided for under
certain circumstances in the GM Restated Certificate of Incorporation, as
amended. At the same time, Delco Electronics, the automotive electronics
subsidiary of Hughes, would be transferred from Hughes to GM's Delphi Automotive
Systems unit. Finally, GM's Class H common stock would be recapitalized into a
GM tracking stock linked to the telecommunications and space business of Hughes.
No assurance can be given that the above transactions will be completed;
however, management of GM and Hughes and GM's Board of Directors expect to
solicit stockholders' approval of the planned transactions in late 1997, after
certain conditions are satisfied.
In September 1996, Hughes and PanAmSat Corporation entered into an agreement
to merge their respective satellite service operations into a new publicly-held
company. Hughes would contribute its Galaxy satellite services business in
exchange for a 71.5% interest in the new company. Current PanAmSat stockholders
would receive a 28.5% interest in the new company and $1.5 billion in cash. The
transaction is expected to close during the second quarter of 1997.
Note 3. EDS Split-Off
On June 7, 1996, GM split-off Electronic Data Systems Corporation (EDS) to
former GM Class E stockholders on a tax-free basis for U.S. federal income tax
purposes. The financial data related to EDS for the 1996 first quarter are
classified as discontinued operations. The GM unaudited consolidated financial
statements for 1997 exclude the assets, liabilities and operating results of
EDS.
EDS systems and other contracts revenues from outside customers included in
income from discontinued operations totaled $2,405 million for the three month
period ended March 31, 1996. Income from discontinued operations of $219 million
for the three month period ended March 31, 1996 is reported net of income tax
expense of $123 million.
- 6 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Note 4. Other Income and Other Deductions
Other income and other deductions consisted of the following (in millions):
Three Months Ended
March 31,
1997 1996
Other income
Nonfinancing interest $466 $373
Insurance premiums 255 243
Claims and commissions 121 195
Income from sales of receivables programs 128 128
Mortgage servicing and processing fees 171 106
Insurance capital and investment gains 137 76
Mortgage investment and other income 130 83
VW Settlement (1) 88 -
Gain on sale of interest in DIRECTV(R)(2) - 120
Equity in net earnings of associates 23 43
Other 104 36
----- ------
Total other income $1,623 $1,403
===== =====
Other deductions
Provision for financing losses $130 $155
Insurance losses and loss adjustment expenses 139 143
Other (21) 116
---- ---
Total other deductions $248 $414
=== ===
(1) During 1997, an agreement with Volkswagen A.G. (VW) that settled a civil
lawsuit GM brought against VW resulted in a pre-tax gain of $88 million,
after deducting certain legal expenses ($55 million after-tax or $0.07 per
share of $1-2/3 par value common stock).
(2) During 1996, the sale of a 2.5% interest in DIRECTV to AT&T resulted in a
pre-tax gain of $120 million ($72 million after-tax or $0.07 per share of
$1-2/3 par value common stock and $0.18 per share of Class H common stock).
Note 5. Inventories
Major classes of inventories were as follows (in millions):
March 31, Dec. 31, March 31,
1997 1996 1996
Productive material, work in process,
and supplies $6,801 $6,590 $7,147
Finished product, service parts, etc. 6,050 5,308 5,229
------- ------- -------
Total inventories (less allowances) $12,851 $11,898 $12,376
====== ====== ======
Note 6. Postretirement Benefits Other Than Pensions
GM has disclosed in the consolidated financial statements certain amounts
associated with estimated future postretirement benefits other than pensions and
characterized such amounts as "accumulated postretirement benefit obligations,"
"liabilities," or "obligations." Notwithstanding the recording of such amounts
and the use of these terms, GM does not admit or otherwise acknowledge that such
amounts or existing postretirement benefit plans of GM (other than pensions)
represent legally enforceable liabilities of GM.
Note 7. Plant Closings and Restructuring
GM previously recorded charges to realign its North American plant capacity
and to provide for a reduction of Hughes' worldwide employment, a major
facilities consolidation, and a reevaluation of certain non-strategic
businesses.
The following table summarizes the activity in the GM plant closings
(excluding environmental) and Hughes restructuring reserves for the period from
January 1, 1997 to March 31, 1997 (in millions):
Balance at January 1, 1997 $1,397
1997 first quarter charges against reserves (44)
Interest expense 16
------
Balance at March 31, 1997 $1,369
=====
- 7 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
Note 7. Plant Closings and Restructuring (concluded)
Separate from the plant closings reserve, during the first quarter of 1997 GM
recorded a pre-tax plant closing charge of $80 million ($50 million after-tax or
$0.07 per share of $1-2/3 par value common stock) to provide for postemployment
benefit costs of $34 million, asset writedowns, including costs of disposal, of
$21 million, environmental clean-up costs of $19 million, and other costs of $6
million to be incurred in connection with the decision to cease production at
Delphi Interior and Lighting Systems' Trenton, N.J. plant during the 1998
calendar year.
GM and Hughes periodically evaluate the adequacy of reserve balances and
estimated future expenditures, including assumptions used and the period over
which costs are expected to be incurred.
Note 8. Contingent Matters
Hughes has maintained a suit against the U.S. Government since September 1973
regarding the Government's infringement and use of a Hughes patent (the
"Williams Patent") covering "Velocity Control and Orientation of a Spin
Stabilized Body," principally satellites. On June 17, 1994, the U.S. Court of
Claims awarded Hughes damages of $114 million. Because Hughes believed that the
record supported a higher royalty rate, it appealed that decision. The U.S.
Government contending that the award was too high, also appealed. On June 19,
1996, the Court of Appeals for the Federal Circuit affirmed the decision of the
Court of Claims which awarded Hughes $114 million in damages, together with
interest. The U.S. Government petitioned the Court of Appeals for the Federal
Circuit for a rehearing. That petition was denied in October 1996. The U.S.
Government then filed a petition with the U.S. Supreme Court seeking certiorari.
On April 21, 1997 the U.S. Supreme Court, citing a recent decision it had
rendered in a separate patent matter, remanded Hughes' suit over the Williams
Patent back to the Court of Appeals along with patent cases involving other
parties then pending before the U. S. Supreme Court, in order to have the Court
of Appeals determine whether the results of prior proceedings in those cases are
consistent with the U.S. Supreme Court's recent decision in such other matter.
The previous liability decision of the Court of Claims in the Williams Patent
matter, and its $114 million damage award to Hughes, currently remain in effect
pending reconsideration by the Court of Appeals. Hughes is unable to estimate
the duration of this reconsideration process. While no amount has been recorded
in the financial statements of Hughes to reflect the $114 million award
or the interest accumulating thereon, a resolution of this matter could
result in a gain that would be material to the earnings of General Motors
attributable to Class H common stock.
The Corporation and its subsidiaries are subject to potential liability under
government regulations and various claims and legal actions which are pending or
may be asserted against them. Some of the pending actions purport to be class
actions. The aggregate ultimate liability of the Corporation and its
subsidiaries under these government regulations, and under these claims and
actions, was not determinable at March 31,1997. After discussion with counsel,
it is the opinion of management that such liability is not expected to have a
material adverse effect on the Corporation's consolidated operations or
financial position.
Note 9. Common Stock Repurchases
During the first quarter of 1997, GM used approximately $1.6 billion to
acquire more than 27 million shares of GM $1-2/3 par value common stock under
the Corporation's $2.5 billion stock repurchase program announced in January
1997. GM also used approximately $200 million to repurchase shares of $1-2/3 par
value common stock for certain employee benefit plans.
Note 10. Earnings Per Share Attributable to Common Stocks
Earnings per share attributable to each class of GM common stock was
determined based on the attribution of earnings to each such class of common
stock for the period divided by the weighted average number of common shares for
each such class outstanding during the period, respectively. Common stock
equivalents were not included in the calculation of earnings per share
attributable to common stocks, as they were not material. In February 1997,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, and SFAS No. 129,
Disclosure of Information about Capital Structure. SFAS No. 128 specifies the
computation, presentation and disclosure requirements for earnings per share
for entities with publicly-held common stock or potential common stock.
SFAS No. 129 requires an entity to explain the permanent rights and privileges
of outstanding securities. GM has determined that the impact of adopting these
new accounting standards will require it to provide additional information in
its consolidated financial statements concerning basic and diluted earnings per
share. The effects of adopting these new accounting standards will not be
material to GM's consolidated financial statements, when adopted in the fourth
quarter of 1997, as required.
- 8 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Concluded
(Unaudited)
Note 10. Earnings Per Share Attributable to Common Stocks (concluded)
Net earnings attributable to $1-2/3 par value common stock for the period
represent the earnings attributable to all GM common stocks for the period,
reduced by the Available Separate Consolidated Net Income (ASCNI) of Hughes
and EDS (Note 3) for the period.
Net earnings attributable to Class H common stock for the period represent
the ASCNI of Hughes for the period. The ASCNI of Hughes for any quarterly
period represents the separate consolidated net income of Hughes for such
period, excluding the effects of purchase accounting adjustments arising at
the time of the Corporation's acquisition of Hughes, calculated for such period
and multiplied by a fraction, the numerator of which is a number equal to the
weighted average number of shares of Class H common stock outstanding during the
quarter (100 million during the first quarter of 1997) and the denominator of
which was 400 million during the first quarter of 1997. The comparable numerator
and denominator for the first quarter of 1996 was 97 million and 400 million,
respectively.
During the time that EDS was an indirect wholly-owned subsidiary of the
Corporation, net earnings attributable to Class E common stock for the period
represented the ASCNI of EDS for such period. The ASCNI of EDS for any quarterly
period represented the separate consolidated net income of EDS for such period,
excluding the effects of purchase accounting adjustments relating to the
Corporation's acquisition of EDS, calculated for each such quarterly period
and multiplied by a fraction, the numerator of which represented the
weighted average number of shares of Class E common stock outstanding during
the period (463 million for the first quarter of 1996) and the denominator of
which was 484 million for the first quarter of 1996.
* * * * * *
- 9 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the MD&A
included in the General Motors (GM) 1996 Annual Report on Form 10-K (the 1996
Form 10-K), the Hughes Electronics Corporation (Hughes) consolidated financial
statements and MD&A for the period ended December 31, 1996, included as Exhibit
99 to the 1996 Form 10-K, the GMAC Annual Report on Form 10-K for the period
ended December 31, 1996, the Hughes consolidated financial statements and MD&A
for the period ended March 31, 1997, included as Exhibit 99 to this GM 1997
Quarterly Report on Form 10-Q for the period ended March 31, 1997, and the GMAC
Quarterly Report on Form 10-Q for the period ended March 31, 1997, filed with
the Securities and Exchange Commission.
The disaggregated financial results for GM's automotive sectors (GM's North
American Operations (GM-NAO), Delphi Automotive Systems (Delphi) and GM's
International Operations (GMIO)) have been prepared using a management approach,
which is consistent with the basis and manner in which GM management internally
disaggregates financial information for the purposes of assisting in making
internal operating decisions. In this regard, certain common expenses were
allocated among sectors less precisely than would be required for standalone
financial information prepared in accordance with generally accepted accounting
principles (GAAP) and certain expenses (primarily certain U.S. taxes related to
non-U.S. operations) were included in GM's "Other" sector. The financial results
represent the historical information used by management for internal decision
making purposes; therefore, other data prepared to represent the way in which
the business will operate in the future, or data prepared on a GAAP basis, may
be materially different.
GM-NAO Financial Highlights
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Net sales and revenues $24,859 $21,683
------ ------
Pre-tax income (loss) 1,127 (517)
Income taxes (benefit) 378 (222)
Earnings of nonconsolidated affiliates 15 16
---- ----
Net income (loss) $764 $(279)
=== ===
Net profit (loss) margin (1) 3.1% (1.3)%
(1) Net profit (loss) margin represents net income (loss) as a percentage of net
sales and revenues.
Vehicle Unit Deliveries of Cars and Trucks - GM-NAO
Three Months Ended March 31,
1997 1996
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
(Units in Thousands)
United States
Cars 2,026 639 31.5% 2,050 661 32.2%
Trucks 1,693 484 28.6% 1,643 491 29.9%
----- ----- ----- ------
Total United States 3,719 1,123 30.2% 3,693 1,152 31.2%
Canada and Mexico 383 121 31.6% 329 103 31.3%
------ ------ ------ ------
Total North America 4,102 1,244 30.3% 4,022 1,255 31.2%
===== ===== ===== =====
Wholesale Sales - GM-NAO
Cars 786 657
Trucks 616 509
------ ------
Total 1,402 1,166
===== =====
- 10 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GM-NAO Financial Review
GM-NAO reported net income of $764 million for the 1997 first quarter
compared with a net loss of $279 million in the prior year quarter. The 1996
first quarter results included a $750 million after-tax unfavorable impact from
the 17 day work stoppages at two component plants in Dayton, Ohio that
temporarily shutdown 26 of 29 GM assembly plants in North America and certain
automotive component plants. Excluding the effect of these work stoppages,
GM-NAO's wholesale sales volume was essentially unchanged at approximately 1.4
million units while net income increased by $293 million or 62.2% in the 1997
first quarter compared with the 1996 first quarter. The improvement in 1997
first quarter net income was primarily due to the introduction of many new
models into the marketplace that are less costly to produce than those they
replaced, continued material cost reductions, and production efficiencies.
Net sales and revenues for the 1997 first quarter were $24.9 billion, which
represented an increase of approximately $3.2 billion or 14.6% compared with the
prior year quarter. The increase in net sales and revenues resulted from a
236,000 unit increase in wholesale sales, which primarily reflected low
wholesale sales volume in 1996 due to the 17 day work stoppages and the lower
1996 production necessary to balance U.S. vehicle inventories prior to the work
stoppages. While sales of new models are gaining strong consumer acceptance,
1997 first quarter wholesale sales volumes were somewhat constrained by
restricted availability of certain new models that are early in the launch
cycle.
Pre-tax income in the first quarter of 1997 increased by $1.6 billion
compared with the prior year quarter primarily due to increased wholesale sales
and lower manufacturing costs. Partially offsetting this increase were higher
retail incentives of $860 per unit in the 1997 first quarter compared with $598
per unit in the prior year quarter combined with increased commercial spending
to support the numerous new vehicle launches in this increasingly competitive
market.
GM vehicle deliveries in North America were 1,244,000 units, which
represented a market share of 30.3% in the 1997 first quarter compared with
31.2% in the prior year quarter.
Local union members in Oklahoma City, Oklahoma, and Pontiac, Michigan,
ceased production at two assembly plants on April 4 and April 22, 1997,
respectively, where new local union agreements have not been completed. GM is
seeking to resolve the issues which have created the work stoppages, the timing
of which is uncertain. To the extent that work stoppages disrupt the production
and shipment of vehicles, the resulting deferral or decline in revenues will
have a continuing impact on GM's results of operations. GM estimates that as of
May 15, 1997, the current work stoppages have resulted in a loss of 54,000
units of production with the related combined cost for GM-NAO, Delphi, and the
Delco Electronics unit of Hughes totaling approximately $225 million after
taxes or $0.31 per share of $1-2/3 par value common stock. These estimated
costs do not consider the effect of recoveries that may occur through production
increases that GM is likely to pursue in future periods. The extent of such
recoveries may be substantial depending on the timeliness of the resolutions of
these work stoppages.
- 11 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Delphi Financial Highlights
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Net sales and revenues $6,664 $6,189
----- -----
Pre-tax income 238 122
Income taxes 72 47
Earnings of nonconsolidated affiliates 14 4
---- ---
Net income $180 $79
=== ==
Net profit margin (1) 2.7% 1.3%
(1) Net profit margin represents net income as a percentage of net sales and
revenues.
Delphi Financial Review
Delphi reported net income of $180 million for the 1997 first quarter
compared with $79 million in the prior year quarter. The first quarter 1997
results included a plant closing charge of $50 million after-tax or $0.07 per
share of $1-2/3 par value common stock ($80 million pre-tax), related to the
announcement that Delphi Interior and Lighting Systems will cease production at
its Trenton, N.J. plant during the 1998 calendar year. The 1996 first quarter
net income included a $120 million unfavorable after-tax impact from the 17 day
work stoppages previously discussed.
Net sales and revenues for the 1997 first quarter were $6.7 billion, which
represented an increase of $475 million or 7.7% compared with the prior year
quarter. Including total sales from nonconsolidated joint ventures, Delphi's
1997 first quarter sales to customers outside the GM-NAO vehicle groups
increased compared to the 1996 first quarter and represented approximately 35%
of total sales.
Pre-tax income in the first quarter of 1997 increased by $116 million
compared with the prior year quarter primarily due to higher production volume
at GM-NAO and lower material costs. Reduced manufacturing costs, due in part to
the sale of four Delphi plants in 1996, also contributed to the increase in
pre-tax income and to the net profit margin more than doubling to 2.7% for the
1997 first quarter compared with 1.3% in the prior year quarter.
On January 16, 1997, GM and Hughes announced a series of planned transactions
that would include the transfer of Delco Electronics from Hughes to GM's Delphi
unit. See the Hughes Transactions section on page 19 for additional information.
Currently, Delphi is the principal supplier of automotive components and
systems to GM-NAO. Delphi's sales of automotive components and systems today is
highly dependent on GM production of vehicles in North America, the level of
Delphi-supplied content per GM-NAO vehicle, the price of such automotive
components and systems, and the competitiveness of Delphi's product offerings.
Delphi's strategy is to minimize its dependence on GM-NAO sales by growing its
automotive component and systems sales globally and by expanding its non-GM-NAO
sales base in North America. The global automotive component and systems market
is also highly competitive which has led Delphi to refine its strategy to focus
on profitable growth, as well as increased market share through technology
leadership, quality, cost control and responsiveness.
- 12 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMIO Financial Highlights
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Net sales and revenues $8,283 $8,997
----- -----
Pre-tax income 476 577
Income taxes 164 170
Earnings of nonconsolidated affiliates 5 25
----- -----
Net income
GM Europe 149 285
Other International 168 147
--- ---
Total net income $317 $432
=== ===
Net profit margin (1) 3.8% 4.8%
(1) Net profit margin represents total net income as a percentage of net sales
and revenues.
Vehicle Unit Deliveries of Cars and Trucks - GMIO
Three Months Ended March 31,
1997 1996
GM as GM as
a % of a % of
Industry GM Industry Industry GM Industry
(Units in Thousands)
International
Europe 4,496 466 10.4% 4,497 489 10.9%
Latin America, Africa,
and the Middle East 1,013 162 16.0% 932 160 17.1%
Asia and Pacific 3,826 4.2% 3,599 158 4.4%
----- --- ----- ---
Total International 9,335 788 8.4% 9,028 807 8.9%
===== === ===== ===
Wholesale Sales - GMIO
Cars 554 588
Trucks 229 204
--- ---
Total 783 792
=== ===
GMIO Financial Review
GMIO's 1997 first quarter net income was $317 million or 3.8% of net sales
and revenues compared with $432 million or 4.8% of net sales and revenues in the
prior year quarter. The decrease in 1997 first quarter net income was primarily
due to lower net income for GM Europe (GME).
Net sales and revenues for the 1997 first quarter decreased by 7.9% to $8.3
billion compared with $9 billion in the prior year quarter, while pre-tax income
was $476 million in the first quarter of 1997 compared with $577 million in the
prior year quarter. The decreases in net sales and revenues and pre-tax income
were primarily due to lower wholesale sales volumes in the intensely competitive
European market, partially offset by higher wholesale sales in Latin America.
Net income for GME totaled $149 million in the 1997 first quarter, including
a $55 million after-tax gain related to a settlement agreement with Volkswagen
A.G.(VW), compared with $285 million in the prior year quarter. The lower 1997
first quarter net income was due to lower net sales and revenues and higher
sales incentives across Europe. Lower earnings from nonconsolidated affiliates
also contributed to the decrease in 1997 first quarter net income, which
included increased engineering and commercial expenses at Saab related to the
launch of the all-new 9-5 models in Europe later in 1997.
Net income from the remainder of GMIO's operations, which include the Latin
American and Asia and Pacific Operations, totaled $168 million in the first
quarter of 1997 compared with $147 million in the prior year quarter. The
increased 1997 first quarter net income resulted from higher wholesale sales
volumes in Latin America.
During the first quarter of 1997, GM and Shanghai Automotive Industry Corp.
signed joint venture contracts to manufacture 100,000 Buicks annually in China.
GM also announced plans to construct a third assembly facility in Brazil to
capitalize on volume growth in Latin American markets.
- 13 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
General Motors Acceptance Corporation (GMAC) Financial Highlights
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Financing revenue
Retail and lease financing $940 $958
Operating leases 1,801 1,738
Wholesale and term loans 434 483
------ -----
Total financing revenue 3,175 3,179
Interest and discount 1,266 1,239
Depreciation on operating leases 1,158 1,151
----- -----
Net financing revenue 751 789
Other income and insurance premiums earned 932 744
------ ------
Net financing revenue and other 1,683 1,533
Expenses 1,052 1,026
----- -----
Pre-tax income 631 507
Income taxes 259 198
--- ---
Net income $372 $309
=== ===
Net income from financing operations (1) $294 $272
Net income from insurance operations 78 37
---- ----
Net income $372 $309
=== ===
Average earning assets $97,753 $92,367
Return on average equity (2) 17.8% 14.8%
(1) Includes GMAC Mortgage Group, Inc. (GMACMG).
(2) Return on average equity represents net income as a percentage of average
stockholder's equity outstanding for each month in the period.
- 14 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
GMAC Financial Review
GMAC's consolidated first quarter net income for 1997 totaled $372 million, a
20% increase over the first quarter of 1996. Higher earnings from mortgage
operations and continued strong net interest margins in the U.S. and Canada were
the major contributors to the 8% increase in net income from financing
operations over comparable 1996 results.
Net income from insurance operations totaled $78 million in the first quarter
of 1997 compared with $37 million for the first quarter of 1996. The 110%
improvement over last year was predominantly attributable to a significant
increase in realized capital gains. Earnings from insurance operations also
benefited from improved underwriting results from multiple product lines.
During the three months ended March 31, 1997, GMAC financed 32.1% of new GM
vehicle retail deliveries in the U.S., up from 30.9% during the same period last
year. Retail financing rate incentives sponsored by GM were the primary
contributors to the higher penetration of retail financing over the prior year
period.
In the United States, wholesale inventory financing was provided on 841,000
and 720,000 new GM vehicles, representing 67.9% and 69.5% of GM sales to dealers
during the first quarter of 1997 and 1996, respectively. During the first
quarter of 1996, U.S. wholesale unit financing was reduced by a temporary
interruption of GM North American vehicle production during the latter half of
March 1996, which resulted from parts shortages caused by the 17 day work
stoppages previously discussed. The decline in U.S. wholesale financing market
share reflects the continued competitive pressures in this market segment.
Total financing revenue for the first quarter of 1997 totaled $3.2 billion, a
slight decline of $4 million compared with the first quarter of 1996. Lower
revenues for retail and wholesale financing were substantially offset by higher
income from operating leases in the U.S. and Canada. Other income and insurance
premiums earned totaled $932 million and $744 million for the quarters ended
March 31, 1997 and 1996, respectively. The 25% improvement was predominantly
attributable to higher revenues from mortgage operations and an increase in
realized capital gains from insurance operations.
GMAC's worldwide cost of borrowing for the first quarter of 1997 averaged
6.27%, a decrease of 47 basis points from the first quarter of 1996. Total
borrowing costs for U.S. operations averaged 6.31% for the first quarter of 1997
compared with 6.64% for the same period in 1996. The improvements over the first
quarter of 1996 were attributable to a greater proportion of floating rate debt
during 1997. As a result of the lower borrowing costs substantially offsetting
the effect of a 10% increase in average borrowings, interest and discount
expense approximated $1.3 billion for the first quarter of 1997, only 2% higher
than the first quarter of 1996.
Expenses for the first quarter of 1997 approximated $1.1 billion, a 3%
increase over the first quarter of 1996. The higher costs were primarily
attributable to increased business activities associated with growth of the
mortgage operations, which were partially offset by favorable reductions in the
provision for financing losses and insurance losses and loss adjustment
expenses.
- 15 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Highlights
Three Months Ended
March 31,
1997 1996
(Dollars in Millions
Except Per Share Amounts)
Net sales
Outside customers $2,766 $2,439
GM and affiliates 1,363 1,175
----- -----
Total net sales 4,129 3,614
Other income-net 24 123
------ ------
Total revenues 4,153 3,737
----- -----
Pre-tax income 315 472
Income taxes 110 191
--- ---
Net income $205 $281
=== ===
Earnings Used for Computation of Available Separate
Consolidated Net Income (1) $235 $312
Net earnings attributable to Class H common stock on a
per share basis $0.59 $0.78
Cash dividends per share of Class H common stock $0.25 $0.24
(1) Excludes amortization of GM purchase accounting adjustments of $31 million
for the first quarters of 1997 and 1996 related to GM's acquisition of
Hughes Aircraft Company.
Segment Highlights
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Telecommunications and Space
Revenues $1,023 $936
Net sales $1,019 $821
Operating profit (1) $7 $75
Operating profit margin (2) 0.7% 9.1%
Automotive Electronics
Revenues $1,447 $1,272
Net sales $1,434 $1,260
Operating profit (1) $146 $159
Operating profit margin (2) 10.2% 12.6%
Aerospace and Defense Systems
Revenues $1,647 $1,512
Net sales $1,645 $1,502
Operating profit (1) $173 $158
Operating profit margin (2) 10.5% 10.5%
(1) Operating profit represents net sales less total costs and expenses
other than interest expense and amortization of purchase accounting
adjustments related to GM's acquisition of Hughes Aircraft Company.
(2) Operating profit margin represents operating profit as a percentage of
net sales.
- 16 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Hughes Financial Review
Hughes Electronics reported net income of $205 million for the first quarter
of 1997 compared with $281 million for the first quarter of 1996. Excluding
amortization of purchase accounting adjustments related to GM's acquisition of
Hughes Aircraft Company, Hughes' Earnings Used for Computation of Available
Separate Consolidated Net Income was $235 million for the first quarter of 1997
compared with $312 million for the same period in 1996. Excluding the 1996 first
quarter $72 million after-tax gain ($0.18 per share) from the sale of a 2.5%
equity interest in DIRECTV(R) to AT&T, earnings for the first quarter of 1997
decreased 2.0% from the $240 million reported in the same period in 1996, or
$0.01 per share from $0.60 per share. The decline was principally due to lower
operating profit in the Telecommunications and Space and Automotive Electronics
segments, offset in part by the favorable impact of a lower effective tax rate
in the quarter.
First quarter revenues increased 11.1% between 1996 and 1997, due to revenue
increases in each of Hughes' three business segments. The 25.4% increase in
revenues in the Telecommunications and Space segment, excluding the $120 million
pre-tax gain recognized from the sale of 2.5% of DIRECTV to AT&T, was due to
continued expansion of the DIRECTV subscriber base in the United States and
Latin and South America, and increased sales of commercial and government
satellites which more than offset the impact from lower Galaxy transponder
sales. The 13.8% increase in revenues for the Automotive Electronics segment was
principally due to a 20.5% increase in GM vehicles produced in the United States
and Canada (excluding joint ventures) and a 12.2% increase in international and
non-GM sales, partially offset by a 5.9% decline in Delco-supplied electronic
content. Last year's first quarter performance was negatively impacted by the 17
day work stoppages previously discussed. The 8.9% increase in revenues from the
Aerospace and Defense Systems segment was principally due to additional revenues
resulting from the build-up of newer programs, particularly information systems
and services programs such as Desktop V, Wide Area Augmentation System, and
Hughes Air Warfare Center.
Operating profit, excluding amortization of purchase accounting adjustments
related to GM's acquisition of Hughes Aircraft Company, declined 15.7% between
the first quarter of 1996 and the first quarter of 1997. The operating profit
margin on the same basis was 7.9% for the first quarter of 1997 compared with
10.7% for the same period in 1996. The decreases were primarily a result of
lower Galaxy transponder sales, start-up operating losses from the Company's
Latin and South American DIRECTV subsidiary, Galaxy Latin America, increased
expenses resulting from the change in the amortization period for certain
DIRECTV subscriber acquisition costs, and price reductions in the Automotive
Electronics segment resulting from competitive pricing in connection with GM's
global sourcing initiative.
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. See the Hughes Transactions section on page 19
for additional information regarding the planned transactions.
- 17 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
To facilitate analysis, the following sections present the financial
statements for the Corporation's manufacturing, wholesale marketing, defense,
and electronics operations with the financing and insurance operations
(primarily GMAC) reflected on an equity basis. This is the same basis and format
used in years prior to the Corporation's adoption of SFAS No. 94, Consolidation
of All Majority-Owned Subsidiaries.
Consolidated Statements of Income With Financing and Insurance Operations on
an Equity Basis (Unaudited)
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Net sales and revenues $37,457 $34,672
------ ------
Costs and expenses
Cost of sales and other operating charges, exclusive
of items listed below 31,024 30,123
Selling, general, and administrative expenses 2,884 2,448
Depreciation and amortization expenses 1,879 1,788
Plant closing expense 80 -
-------- ----------
Total costs and expenses 35,867 34,359
------ ------
Operating income 1,590 313
Other income less income deductions 758 567
Interest expense 219 196
----- ------
Income from continuing operations before income t 2,129 684
Income taxes 730 235
------ ------
Income from continuing operations before earnings of
nonconsolidated affiliates 1,399 449
Earnings of nonconsolidated affiliates 397 351
------ ------
Income from continuing operations 1,796 800
Income from discontinued operations - 219
-------- ------
Net income $1,796 $1,019
===== =====
Net profit margin (1) 4.8% 2.3%
(1) Net profit margin represents income from continuing operations as a
percentage of net sales and revenues.
Results of Operations With Financing and Insurance Operations on an Equity
Basis
In the first quarter of 1997, GM's income from continuing operations totaled
$1.8 billion or $2.30 per share of $1-2/3 par value common stock, which
represented an increase of $1 billion compared with $800 million or $0.93 per
share of $1-2/3 par value common stock in the first quarter of 1996. GM's 1996
first quarter income from continuing operations included a $900 million
after-tax unfavorable impact from the 17 day work stoppages previously
discussed.
Highlights of first quarter financial performance by GM's major business
sectors were as follows (in millions):
Three Months Ended
March 31,
1997 1996
GM-NAO $764 $(279)
Delphi 180 79
GMIO 317 432
GMAC 372 309
Hughes 235 312
Other (72) (53)
Income from continuing operations $1,796 $800
===== ===
- 18 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Results of Operations With Financing and Insurance Operations on an Equity
Basis (concluded)
Reference should be made to the GM-NAO, Delphi, GMIO, GMAC, and Hughes
Financial Reviews that are presented on pages 10 through 17 and incorporated by
reference to supplement the information presented herein.
First quarter 1997 net sales and revenues were $37.5 billion, which
represented an increase of $2.8 billion compared with the prior year quarter.
The increase in net sales and revenues was primarily due to higher wholesale
sales in North America and Latin America, and the continued growth of Delphi and
the three Hughes business segments.
The gross margin percentage for the 1997 first quarter was 17.2% compared
with 13.1% in the prior year quarter. The 4.1% improvement in the gross margin
resulted from increased wholesale sales and favorable product mix, production of
more cost efficient new models, lower material costs, and manufacturing and
engineering efficiencies.
Selling, general, and administrative expenses increased to $2.9 billion in
the first quarter of 1997 compared with $2.4 billion in the prior year quarter
primarily due to higher consumer influence spending associated with the launches
of new vehicles and continued efforts to grow the business in all of GM's
business sectors. Depreciation and amortization expenses increased in connection
with expenditures for production and quality improvements worldwide.
The first quarter 1997 results included a pre-tax plant closing charge of $80
million related to the announcement that Delphi Interior and Lighting Systems
will cease production at its Trenton, N.J. plant during the 1998 calendar year.
Additional information regarding the 1997 plant closing charge is contained in
Note 7 to the unaudited GM consolidated financial statements.
Other income less income deductions amounted to $758 million for the 1997
first quarter compared with $567 million in the prior year quarter. The increase
of $191 million was primarily due to favorable settlements of legal claims and
higher interest income during the 1997 first quarter. The 1997 first quarter
included a $88 million pre-tax gain, after deducting certain legal expenses,
that resulted from an agreement with VW settling a civil lawsuit which GM
brought against VW. The 1996 first quarter amount included a $120 million
pre-tax gain associated with the sale of a 2.5% equity interest in DIRECTV to
AT&T.
GM completed the split-off of Electronic Data Systems Corporation (EDS) on
June 7, 1996, and accordingly, the 1996 first quarter financial results of EDS
have been reported as discontinued operations. GM's 1996 first quarter net
income, which included income from discontinued operations of $219 million,
totaled $1 billion or $0.94 per share of $1-2/3 par value common stock.
Hughes Transactions
On January 16, 1997, GM and Hughes announced a series of planned transactions
designed to address strategic challenges and unlock stockholder value in the
three Hughes business segments. The transactions would include the tax-free
spin-off of the Hughes defense business to holders of GM's $1-2/3 par value and
Class H common stocks, followed immediately by the tax-free merger of that
business with Raytheon Company. The spin-off will not be proposed in a manner
that would result in the recapitalization of Class H common stock into $1-2/3
par value common stock at a 120% exchange ratio, as currently provided for under
certain circumstances in the GM Restated Certificate of Incorporation, as
amended. At the same time, Delco Electronics, the automotive electronics
subsidiary of Hughes, would be transferred from Hughes to GM's Delphi Automotive
Systems unit. Finally, GM's Class H common stock would be recapitalized into a
GM tracking stock linked to the telecommunications and space business of Hughes.
No assurance can be given that the above transactions will be completed;
however, management of GM and Hughes and GM's Board of Directors expect to
solicit stockholders' approval of the planned transactions in late 1997, after
certain conditions are satisfied.
In September 1996, Hughes and PanAmSat Corporation entered into an agreement
to merge their respective satellite service operations into a new publicly-held
company. Hughes would contribute its Galaxy satellite services business in
exchange for a 71.5% interest in the new company. Current PanAmSat stockholders
would receive a 28.5% interest in the new company and $1.5 billion in cash. The
transaction is expected to close during the second quarter of 1997.
- 19 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets With Financing and Insurance Operations on an
Equity Basis (Unaudited)
March 31, Dec. 31, March 31,
1997 1996 1996
(Dollars in Millions)
ASSETS
Cash and cash equivalents $9,395 $13,320 $6,539
Other marketable securities 5,233 3,642 1,100
------- ------- -----
Total cash and marketable securities 14,628 16,962 7,639
Accounts and notes receivable (less allowances)
Trade 5,507 4,909 5,290
Nonconsolidated affiliates 1,844 927 2,077
Inventories (less allowances) 12,851 11,898 12,376
Net assets of discontinued operations - - 5,245
Contracts in process - net 2,661 2,507 2,709
Net equipment on operating leases 4,187 3,918 3,909
Deferred income taxes and other 3,483 3,141 5,481
------- ------- ------
Total current assets 45,161 44,262 44,726
Equity in net assets of nonconsolidated
affiliates 9,696 9,855 9,669
Deferred income taxes 20,354 20,075 17,737
Other investments and miscellaneous assets 11,594 11,391 11,844
Property - net 36,634 37,156 35,005
Intangible assets - net 12,573 12,523 10,129
-------- -------- --------
Total assets $136,012 $135,262 $129,110
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $11,379 $11,527 $9,123
Loans payable 1,306 1,214 1,779
Accrued liabilities and customer deposits 30,168 29,822 27,569
------ ------ ------
Total current liabilities 42,853 42,563 38,471
Long-term debt 5,316 5,192 4,510
Capitalized leases 191 198 163
Postretirement benefits other than pensions40,988 40,578 39,410
Pensions 6,183 5,966 5,102
Other liabilities and deferred income taxes15,956 15,742 15,829
Deferred credits 1,720 1,605 1,603
--------- --------- ---------
Total liabilities 113,207 111,844 105,088
------- ------- -------
Stockholders' equity 22,805 23,418 24,022
-------- -------- --------
Total liabilities and stockholders'
equity $136,012 $135,262 $129,110
======= ======= =======
Liquidity and Capital Resources With Financing and Insurance Operations on an
Equity Basis
GM's cash and marketable securities totaled $14.6 billion at March 31, 1997,
compared with $17 billion at December 31, 1996 and $7.6 billion at March 31,
1996. The decrease in cash and marketable securities from December 31, 1996 was
primarily due to approximately $1.6 billion of cash used to acquire over 27
million shares of $1-2/3 par value common stock under the stock repurchase
program announced in January 1997. The increase in accounts and notes receivable
from December 31, 1996 primarily reflected low receivable balances at the 1996
year end due to the seasonal nature of the business.
During the first quarter of 1997, loans payable and long-term debt increased
by $216 million to $6.6 billion at March 31, 1997 from a balance of $6.4 billion
at December 31, 1996. The increase was primarily due to increased funding for
Hughes and other worldwide growth initiatives. Net liquidity, calculated as cash
and marketable securities less the total of loans payable, long-term debt and
capitalized leases was $7.8 billion at March 31, 1997, compared with $10.4
billion at December 31, 1996 and $1.2 billion at March 31, 1996.
Book value per share of $1-2/3 par value common stock increased to $28.10 at
March 31, 1997, from $27.95 at December 31, 1996. Book value per share of Class
H common stock increased to $14.05 at March 31, 1997, from $13.97 at December
31, 1996.
- 20 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Liquidity and Capital Resources for GMAC
At March 31, 1997, GMAC owned assets and serviced automotive receivables
totaling $109.4 billion, which was $1.3 billion and $5.0 billion higher than at
December 31 and March 31, 1996, respectively. Earning assets totaled $99.5
billion at March 31, 1997 compared with $95.7 billion and $91.7 billion at
December 31 and March 31, 1996, respectively. The increase since year-end 1996
was primarily attributable to higher outstanding balances for wholesale
receivables. The greater asset levels over March 31, 1996 resulted principally
from increased wholesale finance receivables, operating lease assets and real
estate mortgages.
As of March 31, 1997, GMAC's total borrowings were $81.3 billion, compared
with $78.7 billion and $74.0 billion at December 31 and March 31, 1996,
respectively. The increased debt levels were used to fund increased earning
asset levels. GMAC's ratio of debt to total stockholder's equity at March 31,
1997 was 9.9:1 compared with 9.5:1 at December 31, 1996 and 8.9:1 at March 31,
1996.
GMAC maintains and has access to substantial bank credit facilities which
totaled $40.0 billion at March 31, 1997, compared with $40.7 billion at year-end
1996 and $40.4 billion at March 31, 1996. The unused portion of these credit
facilities totaled $31.3 billion at March 31, 1997, compared with $30.6 billion
and $31.6 billion at December 31 and March 31, 1996, respectively.
Condensed Consolidated Statements of Cash Flows With Financing and Insurance
Operations on an Equity Basis (Unaudited)
Three Months Ended
March 31,
1997 1996
(Dollars in Millions)
Net cash provided by (used in) operating activities $1,808 $(998)
----- ----
Cash flows from investing activities
Expenditures for property (1,724) (2,054)
Investments in other marketable securities
- acquisitions (6,199) (2,219)
Investments in other marketable securities
- liquidations 4,608 2,313
Operating leases - acquisitions (1,352) (1,002)
Operating leases - liquidations 1,001 1,500
Other (104) 106
------ ------
Net cash used in investing activities (3,770) (1,356)
----- ------
Cash flows from financing activities
Net increase (decrease) in loans payable 93 (407)
Increase in long-term debt 154 962
Decrease in long-term debt (30) (570)
Proceeds from issuing common stocks 206 190
Proceeds from sale of minority interest in DIRECTV - 138
Repurchases of common stocks (1,761) -
Cash dividends paid to stockholders (422) (421)
------ ---
Net cash used in financing activities (1,760) (108)
----- ----
Effect of exchange rate changes on cash and cash
equivalents (203) (75)
Net cash used in continuing operations (3,925) (2,537)
Net cash provided by discontinued operations - 29
Net decrease in cash and cash equivalents (3,925) (2,508)
Cash and cash equivalents at beginning of the period 13,320 9,047
Cash and cash equivalents at end of the period $9,395 $6,539
Cash Flows With Financing and Insurance Operations on an Equity Basis
Net cash provided by operating activities was $1.8 billion for the 1997 first
quarter compared with net cash used in operating activities of $1 billion in the
prior year quarter. The increase of $2.8 billion in cash provided by operating
activities was primarily the result of higher net income, an increase in cash
from changes in other operating assets and liabilities, and lower pension
contributions in the 1997 first quarter compared with the 1996 first quarter.
Net cash used in investing activities amounted to $3.8 billion in the 1997
first quarter compared with $1.4 billion in the prior year quarter. The increase
in net cash used in investing activities during the 1997 first quarter was
primarily attributable to a $1.7 billion net increase in investments in
marketable securities combined with a $849 million net increase in cash used for
operating leases.
- 21 -
GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Cash Flows With Financing and Insurance Operations on an Equity Basis
(concluded)
Net cash used in financing activities totaled $1.8 billion for the first
quarter of 1997 compared with $108 million for the prior year quarter. The
increase was primarily due to approximately $1.6 billion of cash used to acquire
over 27 million shares of $1-2/3 par value common stock under the stock
repurchase program. A first quarter cash dividend on $1-2/3 par value common
stock of $0.50 per share was paid on March 10, 1997. On May 5, 1997, the Board
of Directors declared a cash dividend on $1-2/3 par value common stock of $0.50
per share for the second quarter of 1997 payable June 10, 1997. This dividend
declaration raises cash dividends in the first six months of 1997 to $1.00 per
share compared with $0.80 per share in the same 1996 period.
A first quarter cash dividend on Class H common stock of $0.25 per share was
paid on March 10, 1997. On May 5, 1997, the GM Board of Directors also declared
a cash dividend of $0.25 per share on Class H common stock payable June 10,
1997. This continues the level established in the first quarter of 1997 and
raises cash dividends in the first six months of 1997 to $0.50 per share
compared with $0.48 per share in the same 1996 period.
Cash Flows for GMAC
Cash provided by operating activities totaled $2.9 billion and $1.9 billion
during the three months ended March 31, 1997 and 1996, respectively. The
increase in cash generated by operating activities was predominantly
attributable to higher amounts due to GM for vehicle shipments to dealers under
GMAC wholesale finance agreements. Cash used for investing activities during the
first quarter of 1997 totaled $5.8 billion, a $4.9 billion increase over the
same period in 1996, as a result of lower liquidations of finance receivables.
During the latter half of March 1996, vehicle production was temporarily
suspended due to the work stoppages previously discussed, which resulted in the
lower amount due to GM at March 31, 1996 as well as the reduced wholesale
acquisitions during the first quarter of 1996.
Cash provided by financing activities during the three months ended March 31,
1997 totaled $2.8 billion, compared with $1.1 billion used in financing
activities during the quarter ended March 31, 1996. Net changes in debt during
the respective quarters were the predominant contributors to the $3.9 billion
increase over last year.
Pensions
Under SFAS No. 87, Employers' Accounting for Pensions, changes in interest
rates on long-term, high quality corporate bonds, the actual return on pension
investments and various other factors would affect the unfunded pension
obligation, minimum pension liability adjustment to stockholders' equity, and
1998 pension expense. General Motors' unfunded pension obligation, minimum
pension liability adjustment to stockholders' equity, and 1998 pension expense
could be unfavorably impacted should lower than expected asset returns continue
through the remainder of the year. Conversely, year-to-year changes in the rate
of interest on long term, high quality corporate bonds would necessitate a
change in the discount rate used to calculate the actuarial present value of
pension plan obligations under SFAS No. 87. General Motors' unfunded pension
obligation, minimum pension liability adjustment to stockholders' equity, and
1998 pension expense could be favorably impacted should the 1997 year-end
interest rates stabilize at the March 31, 1997 levels.
Security Ratings
On April 24, 1997, Standard and Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc. (S&P), affirmed its security ratings of GM, GMAC,
and various overseas affiliates of GMAC. S&P also revised the ratings outlook
from stable to positive based on GM's generation of very strong overall earnings
and cash flows over the past three years, which S&P indicated reflects the
effectiveness of restructuring measures at GM's North American automotive
operations.
In addition, S&P affirmed its security ratings of Hughes and indicated that
the security ratings outlook for Hughes remains developing.
Employment and Payrolls
1997 1996
Worldwide Employment at March 31, (in thousands)
GM-NAO 242 252
Delphi 178 178
GMIO 112 109
GMAC 18 17
Hughes 88 83
Other 10 11
---- ----
Employees associated with continuing operations 648 650
=== ===
Worldwide payrolls - continuing operations (in billions $7.7 $7.5
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, and SFAS
No. 129, Disclosure of Information about Capital Structure. SFAS No. 128
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly-held common stock or potential common
stock. SFAS No. 129 requires an entity to explain the permanent rights and
privileges of outstanding securities. GM has determined that the impact of
adopting these new accounting standards will require GM to provide additional
information in its consolidated financial statements concerning basic and
diluted earnings per share. The effects of adopting these new accounting
standards will not be material to GM's consolidated financial statements, when
adopted in the fourth quarter of 1997, as required.
* * * * * *
PART II
ITEM 1. LEGAL PROCEEDINGS
(a) Material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Corporation became, or was, a party
during the quarter ended March 31, 1997 or subsequent thereto, but before the
filing of this report are summarized below.
Other Matters
With respect to the previously reported matter in which a jury in California
State Court awarded two former Hughes employees, Lane and Villalpando, a total
of $89.5 million in damages against Hughes based principally on allegations of
racial discrimination and retaliation, which award, as also previously reported,
had been reduced by the Court of Appeal to $17.33 million, the California
Supreme Court on March 19, 1997 granted Hughes' request for a review of the
$17.33 million judgment, and ordered the Court of Appeal to vacate its decision
and reconsider the case. On March 27, 1997 the Court of Appeal issued such an
order. The parties have filed briefs with the Court of Appeal and Hughes has
requested oral argument.
***
As previously reported, Hughes has maintained a suit against the U.S.
Government since September 1973 regarding the Government's infringement and use
of a Hughes patent (the "Williams Patent") covering "Velocity Control and
Orientation of a Spin Stabilized Body," principally satellites. On June 17,
1994, the U.S. Court of Claims awarded Hughes damages of $114 million. Because
Hughes believed that the record supported a higher royalty rate, it appealed
that decision. The U.S. Government contending that the award was too high, also
appealed. On June 19, 1996, the Court of Appeals for the Federal Circuit
affirmed the decision of the Court of Claims which awarded Hughes $114 million
in damages, together with interest. The U.S. Government petitioned the Court of
Appeals for the Federal Circuit for a rehearing. That petition was denied in
October 1996. The U.S. Government then filed a petition with the U.S. Supreme
Court seeking certiorari. On April 21, 1997 the U.S. Supreme Court, citing a
recent decision it had rendered in a separate patent matter, remanded Hughes'
suit over the Williams Patent back to the Court of Appeals along with patent
cases involving other parties then pending before the U. S. Supreme Court, in
order to have the Court of Appeals determine whether the results of prior
proceedings in those cases are consistent with the U.S. Supreme Court's recent
decision in such other matter. The previous liability decision of the Court of
Claims in the Williams Patent matter, and its $114 million damage award to
Hughes, currently remain in effect pending reconsideration by the Court of
Appeals. Hughes is unable to estimate the duration of this reconsideration
process. While no amount has been recorded in the financial statements of
Hughes to reflect the $114 million award or the interest accumulating
thereon, a resolution of this matter could result in a gain that would be
material to the earnings of General Motors attributable to Class H common
stock.
***
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
Three class actions have recently been filed against General Motors, as well
as a number of other vehicle manufacturers and dealers, claiming that the
front seat air bags installed in 1993 to 1997 model vehicles are defective:
Eloisa Rodriguez, et al. v. General Motors Corporation, Ford Motor Company,
Chrysler Corporation, Volvo of North America, Inc., Armadillo Motor Company,
Inc. and Wickstrom Chevrolet Co., Inc., filed on April 11, 1997, in the
District Court of Maverick County, Texas; Ellen Smith, et al. v. General
Motors Corporation, Ford Motor Corporation, Chrysler Corporation,
Sylacauga Auto Plex, et al., filed on April 25, 1997, in Circuit Court of Coosa
County, Alabama; and Frederick Lewis, et al. v. Volvo of North America,
Inc., General Motors Corporation, Ford Motor Corporation, Chrysler Motors
Corporation, and Spinato Chrysler Plymouth, Inc. dba Bergeron Volvo filed
in Civil District Court for the Parish of Orleans, Louisiana. In essence, the
complaints allege the air bags are defective because, when deployed, they are
likely to injure small-statured adults and children. The Texas and Louisiana
matters purport to be statewide classes, while the Alabama matter purports to
be a nationwide class. Before the complaint was served on GM, the Alabama state
court entered an order conditionally certifying a nationwide class but made no
determination that plaintiffs have met the requirements for maintaining the
case as a class action. GM has the right to challenge the order and will
oppose the class action status of the case. The complaints generally seek
compensatory damages and the cost of repair or replacement of the allegedly
defective air bags. Two of the matters, Louisiana and Texas, have been removed
to federal court and GM intends to seek removal of the other case. GM intends
to vigorously defend these actions.
***
There are currently 11 purported class actions alleging that certain antilock
braking systems on 1989 to 1996 light-duty GM trucks are defective. The cases,
which were filed in various federal courts in nine states, have been transferred
to and consolidated before the United States District Court for the Eastern
District of Missouri in St. Louis, Missouri, for coordinated pretrial discovery
as In Re General Motors Anti-Lock Brake Products Liability Litigation USDC,
Eastern District of Missouri, Eastern Division. No determination has been made
that the cases may be maintained as class actions. GM intends to vigorously
defend these actions.
***
As previously reported, in connection with the matter of Jacobson, et al v.
Hughes Aircraft Co., et al, plaintiffs in that action had sought to have the
U.S. Court of Appeals for the 9th Circuit enjoin Hughes and the Hughes
Non-Bargaining Retirement Plan from transferring assets, control or
administration of the Plan to any other employers or from terminating or
amending the Plan. The injunction was designed to maintain the status quo of
plan assets pending disposition of the proceedings in the suit and in doing so,
could have prevented or delayed the planned spin-off of Hughes Aircraft Company
and its subsequent merger with Raytheon. On March 14, 1997, the court denied
plaintiffs request for an injunction.
* * * * * *
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GENERAL MOTORS CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
Exhibit Number Exhibit Name Page No.
11 Computation of Earnings Per Share Attributable
to Common Stocks for the Three Months Ended
March 31,1997 and 1996 26
12 Computation of Ratios of Earnings to Fixed Charges
for the Three Months Ended March 31, 1997
and 1996 28
99 Hughes Electronics Corporation and Subsidiaries
Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and
Results of Operations 29
27 Financial Data Schedule (for SEC information only)
(b) REPORTS ON FORM 8-K.
Three reports on Form 8-K, dated January 16, 1997, January 27, 1997, and
March 12, 1997, were filed during the quarter ended March 31, 1997 reporting
matters under Item 5, Other Events, and reporting certain agreements under Item
7, Financial Statements, Pro Forma Financial Information, and Exhibits.
* * * * * *
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
(Registrant)
By
Date May 15, 1997 /s/Peter R. Bible
- ----------------- --------------------------------------
(Peter R. Bible,
Chief Accounting Officer)
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